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https://www.courtlistener.com/api/rest/v3/opinions/1541461/ | 75 B.R. 79 (1987)
In the Matter of Kenneth Douglas BROGDON a/k/a Buddy Brogdon, Debtor.
Kenneth Douglas BROGDON a/k/a Buddy Brogdon, Plaintiff,
v.
TEXAS COMMERCE BANK and Tampa Bay Federal Credit Union, Defendants.
Bankruptcy No. 86-5759, Adv. No. 87-22.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
May 28, 1987.
*80 Bernard J. Morse, Tampa, Fla., for debtor.
Michael LaBarbera, Tampa, Fla., for Tampa Bay FCU.
William C. Guerrant, Tampa, Fla., for Texas Commerce Bank.
ORDER ON MOTION FOR ORDER DIRECTING TURNOVER OF PROPERTY OF THE ESTATE
ALEXANDER L. PASKAY, Chief Judge.
THE MATTER under consideration is a Motion for Order directing Turnover of Property of the Estate, filed by Kenneth Douglas Brogdon a/k/a Buddy Brogdon (Plaintiff), the Plaintiff in the above-captioned adversary proceeding, who is the Debtor involved in this Chapter 13 case. The Court has considered the Motion, together with the record, heard arguments of counsel, and based on the undisputed record now finds and concludes as follows:
On December 9, 1986, Texas Commerce Bank (Texas Commerce) served a writ of garnishment on Tampa Bay Federal Credit Union (Tampa Bay). At the time the Writ of Garnishment was served, the Plaintiff, who was a member of Tampa Bay, had $3,198.45 on deposit with Tampa Bay. On December 10, 1986, Tampa Bay, by and through its attorney, filed its Answer to the Writ indicating that it was, in fact, indebted to the Plaintiff in the sum of $3,198.45. On December 12, 1986, the Debtor filed a Chapter 13 Petition under the Bankruptcy Code.
In due course the Debtor has made a demand on Tampa Bay for a turnover of the $3,198.45 alleging that the monies deposited were property of the estate by virtue of § 541 of the Bankruptcy Code. Tampa Bay has refused to release the funds on deposit to the Debtor. Texas Commerce claims it has a lien on the funds held by Tampa Bay by virtue of a Writ of Garnishment served on Tampa Bay on December 9, 1986.
These are the basic uncontested facts, which according to Texas Commerce validly encumber the funds held by Tampa Bay, a lien perfected prior to the commencement of the case; therefore, it should not be required to release its garnishment lien unless it receives adequate protection.
Under Florida law, which is controlling in this proceeding, any lien created by writ of garnishment takes effect on the day the writ is served. In re Demountable House Corp., 58 F.Supp. 955 (S.D.Fla.1945); In re Snedaker, 39 B.R. 41 (Bankr.S.D.Fla.1984); In re M.D.F., Inc., 39 B.R. 16 (Bankr.S.D. Fla.1984); Fla.Stat. § 77.06 (1981). Section 77.06 of the Florida Statutes provides in pertinent part as follows:
(1) Service of the writ shall make the garnishee liable for all debts due by him to the defendant and for any tangible or intangible personal property of defendant in his possession or control at the time of service of the writ or at any time between such service and the time of his answer.
Fla.Stat. § 77.06(1) (1981) (emphasis added).
Based on the foregoing, this Court is satisfied that the writ of garnishment served by Texas Commerce on Tampa Bay created a lien on Plaintiff's monies in the amount of $3,198.45 on December 9, 1986. The Motion for Order Directing Turnover of Property of the Estate should be denied without prejudice with leave granted to the Plaintiff to offer adequate protection, or in the alternative, such a determination of his claim of voidable preference alleged in Count II of his Complaint.
Accordingly, it is
*81 ORDERED, ADJUDGED AND DECREED that the Motion for Order Directing Turnover of Property of the Estate be, and the same is hereby, denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541464/ | 75 B.R. 83 (1987)
Rick STOCKHOUSE, Plaintiff,
v.
HINES MOTOR SUPPLY (WYOMING), INC. d/b/a/ Greybull Auto Supply, T. Sewell Hines, Lew B. Hines, Kathryn E. Hines, Thomas S. Hines, Jr., and Gary Hansen, Defendants.
No. C86-0445-B.
United States District Court, D. Wyoming.
June 1, 1987.
*84 Robert A. Gish, Basin, Wyo., for plaintiff.
Stephen D. Bell, Dorsey and Whitney, Billings, Mont., James H. Sperry, Worland, Wyo., for defendants.
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT
BRIMMER, Chief Judge.
This matter came before the Court on defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56. The Court, having heard the arguments of counsel, having reviewed the pleadings, and being fully advised in the premises, FINDS and ORDERS as follows:
This is an action under the antidiscrimination provisions of the Bankruptcy Code, 11 U.S.C. § 525(b). The case arises under Title 11, United States Code, and jurisdiction rests in this Court pursuant to 28 U.S.C. § 1334. Plaintiff failed to show that his discharge by defendants occurred solely because he was a debtor under Title 11 of the United States Code. Defendants' motion for summary judgment must therefore be granted.
Plaintiff was employed as a counterman at defendants' automobile parts store. Defendant Thomas Hines is an officer and director of the store. Defendant Hansen is the store manager. In January 1985, plaintiff filed for bankruptcy. Hansen fired plaintiff in February 1985. After his discharge, plaintiff sued in Wyoming District Court. The action was removed to this Court. Plaintiff alleges that his discharge violated the antidiscrimination provisions of the Bankruptcy Code, 11 U.S.C. § 525(b). He also alleged wrongful discharge and sought punitive damages. Plaintiff abandoned these claims. The only remaining question is whether plaintiff was discharged in violation of § 525(b). Defendants now move for summary judgment on that claim.
A party seeking summary judgment must show the absence of a genuine issue of material fact. Weir v. Anaconda Co., 773 F.2d 1073, 1079 (10th Cir.1985). The movant need not disprove the opposing party's evidence. Windon Third Oil and Gas Drilling Partnership v. Federal Deposit Ins. Corp., 805 F.2d 342, 346 (10th Cir. 1986) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)), cert. denied, ___ U.S. ___, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987). The movant must, however, demonstrate that no legally significant evidence supports the opposing party's claims. Id., at 345, 346.
A properly supported motion for summary judgment requires the resisting party to raise a material issue of fact. Weir v. Anaconda Co., 773 F.2d at 1081. Conclusory allegations, general denials and mere argumentation are insufficient. Pasternak v. Lear Petroleum Exploration, Inc., 790 F.2d 828, 824 (10th Cir.1986). A genuine issue of material fact instead exists only where the evidence and inferences therefrom might lead a reasonable jury to return a verdict for the nonmoving party. Carey v. United States Postal Serv., 812 F.2d 621, 623 (10th Cir.1987) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
In deciding a motion for summary judgment, the Court must assume the truth of plaintiff's assertions and resolve all inferences in his favor. Windon, 805 F.2d at 346. The Court must ask whether a fairminded jury could return a verdict for plaintiff based on the evidence presented. Defendants must therefore show that plaintiff failed to establish an essential element of his claim. Id.
The Bankruptcy Amendments and Federal Judgeship Act of 1984 provides that:
No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated *85 with such debtor or bankrupt, solely because such debtor or bankrupt
(1) is or has been a debtor under this title . . . or the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
11 U.S.C. § 525(b) (emphasis added). An essential element of a claim under this section is that the employee's insolvency, the filing of bankruptcy or the discharge of his debts is the sole reason for discriminatory treatment by an employer. In re Hopkins, 66 B.R. 828, 831 (Bankr.W.D.Ark.1986); In re Hicks, 65 B.R. 980, 983 (Bankr.W.D.Ark. 1986). See also In re Helms, 46 B.R. 150, 154 (Bankr.E.D.Mo.1985) (construing 11 U.S.C. § 525(a)). An employer may dismiss an employee for any cause unrelated to the employee's recourse to the bankruptcy laws. In re Terry, 7 B.R. 880, 881 (Bankr. E.D.Va.1980) (construing 11 U.S.C. § 362). In this case, plaintiff's claim is defeated by a showing that his bankruptcy status was not the sole reason for his termination.
To support his allegations, plaintiff first points to inconsistencies in defendants' statements. For example, defendant Hansen said that he solicited employment applications in 1984 solely to find a replacement for plaintiff. Hansen Aff. at 5. However, Hansen accepted employment applications in 1984 because another employee, Larry Collingwood, quit his job at the auto supply store. Hansen Supp.Aff. at 1-2. The inconsistency is inconsequential and does not raise an issue of material fact on the question of whether or not plaintiff was fired solely because of his bankruptcy status.
Plaintiff offered no direct evidence of discrimination. At plaintiff's wedding reception on December 15, 1984, Hansen said that plaintiff was doing an excellent job and that Hansen hoped a salary increase could be arranged for plaintiff. A. Stockhouse Aff.; C. Stockhouse Aff.; R. Stockhouse Aff. Plaintiff notes, however, that his dismissal occurred only two months later, a mere one day after the creditors' meeting in his bankruptcy proceeding. Plaintiff told Hansen of the bankruptcy proceeding in January 1985. At that time, Hansen asked if plaintiff had considered other alternatives and treated plaintiff coldly thereafter. Viewed in a light most favorable to plaintiff, the evidence supports an inference that Hansen was displeased by plaintiff's decision to seek bankruptcy but does not show that plaintiff was fired solely because he sought that protection.
Defendants submitted affidavits indicating that plaintiff was a poor employee. Plaintiff frequently failed to give customers the correct parts. P. Collingwood Aff. at 2; Good Aff. at 2. Many customers complained about him, and some took their business to other stores. Richards Aff. at 2-3; Good Aff. at 2; Chilson Aff. at 2; Richards Aff. at 2-3; P. Collingwood Aff. at 2. Defendants warned plaintiff that he would be dismissed if his performance did not improve. Hansen Aff. at 4; Stockhouse Dep. at 31. Plaintiff conceded the truth of defendants' contentions. Stockhouse Dep. at 30-31, 55, 81, 111-24. Moreover, the unrefuted evidence shows that defendants decided to replace plaintiff long before learning of the bankruptcy proceedings. Defendants did not know plaintiff petitioned for bankruptcy until after a replacement had been selected. Hansen Aff. at 4, 6. Nothing in the record suggests that defendants had a policy of dismissing employees who filed for bankruptcy. Other employees petitioned for bankruptcy and have not been fired. Micek Aff. at 1. Plaintiff failed to establish that he was dismissed solely because of his insolvency, the filing of the bankruptcy, or the discharge of his debts.
The cases support this conclusion. The employer in the case of In re Hopkins, 66 B.R. 828 (Bankr.W.D.Ark.1986), for example, discharged the debtor from her position as a bank employee after she filed for bankruptcy. The bank feared potential adverse public relations from plaintiff's employment. Id. at 831. The employer offered no evidence of poor performance. Id. at 833. The court held that the debtor's *86 discharge violated § 525(b), reasoning that "if unwarranted firings were allowed, the policy of a fresh start for the debtor would be frustrated." Id. at 832 (emphasis added). In re Hicks, 65 B.R. 980 (Bankr.W.D. Ark.1986), involved a situation where a bank employee was transferred to a different job after a newspaper article revealed that she and her husband petitioned for bankruptcy. Id. at 981. The court concluded that the debtor's transfer was based solely on the debtor's bankruptcy filing. Id. at 984. The bank gave no other reason for the transfer and failed to produce evidence that customer relations had been harmed. Id.
The unrefuted facts of this case, in contrast, show that plaintiff performed poorly and damaged customer relations. Unlike the situation in Hopkins and Hicks, defendants produced substantial evidence justifying plaintiff's discharge for reasons other than his decision to file for bankruptcy. Plaintiff failed to produce evidence from which a reasonable jury might conclude that he was discharged solely because of his insolvency, the filing of the bankruptcy, or the discharge of his debts. It is therefore
ORDERED that defendants' motion for summary judgment be, and the same hereby is, granted and that plaintiff's claim be dismissed on the merits. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541466/ | 75 B.R. 375 (1987)
In re ARROW AIR, INC., Debtor.
Bankruptcy No. 86-00340-BKC-AJC.
United States Bankruptcy Court, S.D. Florida.
June 23, 1987.
*376 Lawrence A. Kellogg, Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, Miami, Fla., for Creditors Committee of Arrow Air, Inc.
Timothy J. Norris, Weil, Gotshal & Manges, Miami, Fla., for Arrow Air, Inc.
Thomas A. Dickerson, New York City, for Terence Neilan.
MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR REHEARING AND RECONSIDERATION OF MEMORANDUM DECISION AND ORDER EXTENDING CLAIMS DEADLINE
A. JAY CRISTOL, Bankruptcy Judge.
This matter came before the Court for hearing on June 11, 1987 at 9:30 a.m. on the Creditors Committee's Motion for Rehearing and Reconsideration of Memorandum Decision and Order Extending Claims Deadline. The Creditors Committee's motion was joined in by the Debtor, and was opposed by Terence Neilan, a creditor of the Debtor's estate. The essential facts are not in dispute.
On November 11, 1986, upon motion of the Creditors Committee, the Court entered an order setting December 15, 1986 as the deadline for filing claims against the Debtor's estate. The order also approved the terms of a "Notice of Deadline for Certain Creditors to File Proofs of Claim", which the Court directed to be sent to all known creditors of the Debtor. On or before November 24, 1986, the notice was served by mail upon at least 17,000 purported creditors. Additionally, the notice was published in major daily circulation newspapers in New York, Philadelphia, San Juan, Baltimore and Boston.
Over 12,000 of the 17,000 notices were served by mail upon creditors holding claims relating to a pre-bankruptcy dispute involving the Debtor and Value Vacations, Inc. The majority of these "Value Vacations-related" claims were held by persons who had purchased charter packages to Europe offered by Value Vacations, Inc. Over 1,800 Value Vacations-related claims were timely filed on or before December 15, 1986. The total amount of these timely claims are approximately $2,330,984.89.
Neilan, who is Class Representative in a class action filed in the United States District Court for the Southern District of New York against Value Vacations, the Debtor and others, filed a class proof of claim against the Debtor on behalf of others similarly situated. The class claim was *377 disallowed by the Court in a Memorandum Decision dated May 6, 1987, 75 B.R. 372. In response to the Debtor's objection to his class claim, Neilan requested the Court to extend the claims deadline until May 30, 1987, on the basis that certain unspecified Value Vacation-related creditors supposedly had not timely received notice of the December 15, 1986 bar date. In the Memorandum Decision, the Court extended the claims bar date for 90 days, through March 16, 1987. The Creditors Committee, joined by the Debtor, has moved for rehearing and reconsideration of that portion of the Memorandum Decision which extended the claims deadline. The Committee argues that a claims bar date may not be extended after it has expired, absent a showing of excusable neglect on the part of each claimant who seeks allowance of a late filed claim. Since no excusable neglect was shown by any claimant, the Committee contends, the Court should not have retroactively extended the bar date. The Court agrees.
Bankruptcy Rule 3003(c)(3) provides that the Court may extend the time within which proofs of claim must be filed only for cause shown. The Eleventh Circuit has held that Bankruptcy Rule 3003(c)(3) must be read in para materia with Bankruptcy Rule 9006(b)(1), which allows an enlargement of an already expired period of time only if the failure to act within the prescribed time was a result of excusable neglect. In re South Atlantic Financial Corp., 767 F.2d 814, 817 (11th Cir.1985). Excusable neglect, as interpreted by the Eleventh Circuit and other courts, means that the failure to act was due solely to matters beyond the movant's control. In South Atlantic, the Eleventh Circuit stated:
Courts have interpreted "excusable neglect" under Rule 9006(b) and its identically worded predecessor, Rule 906(b), as requiring the movant to show that "`the failure to timely perform a duty was due to circumstances which were beyond the reasonable control of the person whose duty it was to perform.'" In re Gem Rail Corp. 12 B.R. 929, 931 (Bankr.E.D. Pa.1981) (quoting In re Manning, 4 B.C.D. 304, 305 (D.Conn.1978)). Thus, in In re Underground Utility Construction Co., 35 B.R. 588 (Bankr.S.D.Fla. 1983), the court held that a creditor had failed to show "excusable neglect" for filing his claim three days after the bar date where the untimely filing was a result of his failure to mail his claim to the proper address. Similarly, in In re Oakton Beach & Tennis Club Real Estate Limited Partnership, 9 B.R. 201 (Bankr.E.D.Wisc.1981), the court held that counsel's reliance on misinformation from a bankruptcy court clerk regarding his duty to file a proof of claim did not amount to excusable neglect; see also In re Horn Construction & Maintenance, Inc., 32 B.R. 87 (Bankr.S.D.Ala.1983), ("misunderstanding" between a creditor and its lawyers which caused its late filing of a proof of claim did not amount to "excusable neglect"); In re Gem Rail Corp., 12 B.R. 929, 931 (Bankr.E.D.Pa. 1981) (creditor's failure to obtain records with which to file timely proof of claim was not excusable neglect where there was no showing by creditor that records could not easily have been obtained). Courts have been most willing to find excusable neglect where the movant failed to comply with the bar date because, through no fault of its own, it had no notice of that date. See, e.g., In re Loveridge, 2 B.C.D. 1597 (Bankr.D.Conn. 1977).
767 F.2d at 817-818. See also In re F/S Communications Corp., 59 B.R. 824 (Bankr.M.D.Ga.1986).
Apart from the legal standards, there are important policy reasons underpinning the necessity for finding excusable neglect before blanketly extending the claims deadline after it has expired. Bankruptcy reorganization essentially involves settlement negotiations among a debtor and its creditors, under the watchful eye and benign control of the Bankruptcy Court. For the settlement process to work efficiently, the affected parties must negotiate with complete knowledge of the debtor's financial condition. Such knowledge is essential. Without it, negotiations would *378 exist in a vacuum, and creditors would have difficulty in assessing settlement proposals. If assessment becomes too difficult, a settlement becomes less likely because the parties are understandably wary of blindly accepting a proposal of payment to creditors of less than 100% of their claims. Thus, an essential purpose of setting a claims deadline, in this as in other reorganization cases, is to fully inform participants in the reorganization process as to the debtor's liabilities. Armed with this knowledge, proposals may be evaluated with confidence, and negotiations may proceed without being hindered by undue caution or skepticism caused by ignorance.
In this case, significant time and expense was expended in notifying potential creditors of the claims deadline. Not only were over 17,000 notices served, but also notice was dissiminated by publication in newspapers within and without the United States. That creditors received adequate notice is proven by the fact that over 5,000 claims were timely filed. Of these claims, over 1,800 were Value Vacations-related.
With the benefit of this knowledge of claims potentially allowable against the estate, the Creditor's Committee, which was extremely active in this case, and the Debtor, were able to negotiate and have confirmed a plan of reorganization. The plan calls for significant distributions to unsecured creditors, in amounts that all parties admit far exceed what would be available upon liquidation. If such distributions are reduced to less than 25% of the allowed unsecured claims, however, the Creditors Committee has the authority to declare the plan null and void.
The 90 day extension of the bar date, granted at the same time that the plan was confirmed, has allowed a significant expansion of the potential universe of claims. Thus, after the plan was negotiated, drafted, circulated, accepted and confirmed, the expected distributions to creditors may be reduced substantially. If the reduction is too drastic, it may render meaningless the efforts of everyone involved in the otherwise successful reorganization, including the Debtor, the Creditors' Committee and the Court.
The 90 day extension, with its potentially devastating impact on the Debtor's successful reorganization, was granted without any showing of excusable neglect by any holder of a late-filed claim. The burden of showing such excusable neglect is upon the person seeking to have an untimely claim allowed. See, e.g., In re Bajan Resorts, Inc, 71 B.R. 52, 54 (Bankr.D.Utah 1987). Here, even assuming that Neilan has standing[1] to show the excusable neglect of late filing Value vacations-related creditors, no such showing was made. For this reason, the motion for rehearing and reconsideration shall be granted and the claims bar date shall remain December 15, 1986.
The Court is aware that the persons holding Value Vacation-related claims are generally consumers, whose claims may not be large enough to warrant the retention of counsel. For this reason, any party objecting to such claims as being untimely shall notify the holders that they have the right to prove excusable neglect for their failure to timely file claims before December 15, 1986. Being mindful that many of the claimants do not reside within this district, the Court shall accept and consider written submissions of excusable neglect, in letter form.
Accordingly, it is hereby
ORDERED that the Memorandum Decision and Order Disallowing Claim No. 988 of Terence Neilan as Class Representative and Denying Motion for Class Certification is modified to deny Neilan's Motion to Extend the claims filing deadline; the claims bar date shall remain December 15, 1986; and all objections to Value Vacations-related claims that are based upon untimeliness shall contain a notice of the claimant's *379 right to show excusable neglect for failure to timely file.
NOTES
[1] The individual claim filed by Neilan was filed prior to the expiration of the December 15, 1986 bar date. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541469/ | 75 B.R. 575 (1987)
In re Sheldon GURST, Debtor.
PHILADELPHIA CONSUMER DISCOUNT COMPANY, Plaintiff,
v.
Sheldon GURST, Margot Gurst, Harvey Gurst, Kimberly Gurst, Defendants.
Sheldon GURST, Plaintiff,
v.
PHILADELPHIA CONSUMER DISCOUNT COMPANY, Defendant.
Bankruptcy No. 86-04726K, Adv. Nos. 86-1150K, 87-0277S.
United States Bankruptcy Court, E.D. Pennsylvania.
June 30, 1987.
*576 Irwin Trauss, Philadelphia, Pa., for debtor.
Martin N. Ghen, Doylestown, Pa., for Philadelphia Consumer Discount Co.
Edward Sparkman, Philadelphia, Pa., trustee.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
Presently before us in the instant bankruptcy case, and one of the above-captioned related adversarial proceedings are the following: (1) A Motion for Relief from the automatic stay (hereinafter referred to as "the Stay Motion") filed on February 4, 1987, by Philadelphia Consumer Discount Company (hereinafter referred to as "the Creditor") in the main case, in order that it can proceed to litigate two mortgage foreclosure actions instituted by it against the Debtor in the Court of Common Pleas of Philadelphia County at July Term, 1983, No. 4533 (hereinafter referred to as "the 1983 action"), and at January Term, 1986, No. 3870 (hereinafter referred to as "the 1986 action"); and (2) A Motion filed by the Creditor on March 3, 1987, to remand the 1983 action to the state court (hereinafter referred to as "the Remand Motion"), from which the Debtor removed it in one of the adversarial proceedings, Adversary No. 86-1150K, on October 10, 1986.
This removal was effected the day after the Debtor filed this Chapter 13 case on October 9, 1986. We should also note the presence of the other above-captioned adversarial proceeding between the parties, at Adversary No. 87-0277S, in which the Debtor, on March 20, 1987, filed a Complaint objecting to the Proofs of Claim filed by the Lender on each of the mortgages which underlie the respective foreclosure actions (This action is referred to hereinafter as "the Debtor's Complaint"). The procedural status of the Debtor's Complaint, which we hold is highly relevant to our ultimate disposition here, is set forth in an Order of May 7, 1987, in which we directed the parties to attempt to formulate a Stipulation of Facts on or before July 2, 1987, or to try the matter on July 8, 1987.
It would also unduly simplify the matter if we failed to observe that also pending in our Court is a separate bankruptcy filed by the Debtor's wife Margot (hereinafter referred to as "Margot"), at Bankr. No. 85-00480K. We previously issued a published Opinion in Margot's case in granting an Objection of the Lender to a Proof of Claim, filed by Margot regarding the obligations secured by the mortgages underlying the same state court foreclosure actions mentioned at page 2 supra,[1] in the amount of one ($.01) cent, on the grounds that the Proof of Claim was not timely filed. In re Gurst, 70 B.R. 467 (Bankr. E.D.Pa.1987), appeal docketed, C.A. No. 87-2065 (E.D.Pa.). There, we observed that the Lender, "argues, not without some logical support, that the general strategy of the Debtors is to whipsaw the Creditor by manipulation of two (2) simultaneously-pending bankruptcies."[2]Id. at 467. A Memorandum Opinion in Margot's case, denying Objections to Confirmation of her Plan by the Creditor, but determining that certain aspects of the proposed Plan must be resolved before we can confirm it, is filed this day. It is totally amazing to us how much paperwork and time of this *577 Court both of these parties have expended on Mr. and Mrs. Gurst.[3]
It is our observation that both of these Motions are intrinsically wedded not only to each other, but also to the as-yet-unresolved Debtor's Complaint, and it is the resolution of the latter which we believe must occur first if the present procedural logjam is to be dissolved.
The resolution of the Remand Motion, the principles pertinent to which we discussed at some length in our recent decision in In re United Church of the Ministers of God, 74 B.R. 271, 276-278 (Bankr. E.D.Pa.1987), in all probability will depend on the resolution of the Stay Motion. If the Lender is not going to be permitted to maintain the foreclosure action against the Debtor in state court by reason of the automatic stay, it makes no practical sense to remand the 1983 foreclosure action. As the Court observes in Pursifull v. Eakin, 814 F.2d 1501, 1505 (10th Cir.1987), "[e]ven where the court has abstained pursuant to § 1334(c), the stay granted under § 362 must be modified in order to allow the resolution of claims other than in the court with jurisdiction over the bankruptcy." While the state court action could conceivably proceed against only Margot and the co-defendants, it could not proceed against the Debtor unless the Creditor obtains relief from the stay. If the Creditor sought to proceed against the three co-defendants other than the Debtor, there would then be pending both the Debtor's complaint and the 1983 state court action, in which both the state courts and we would be simultaneous litigating virtually the same case. Although we are skeptical of the Debtor's purported concern about judicial economy in light of his counsel's ingenious capacity to make many legal actions out of what could have been two foreclosure actions tried together in the state courts or one action tried here at any time over the past three years, we must observe that, having come to this point, we cannot see how it is helpful to anyone, including the judiciary, to have two actions pending simultaneously in two different forums which involve identical factual and legal issues.
We also should note that we have some doubts as to whether a remand pursuant to 28 U.S.C. § 1334(c) would be appropriate in any event. If, as the Debtor argues, the validity of the Lender's mortgage can be attacked, then the foreclosure action takes the form of a proceeding involving "allowance or disallowance of claims" or the "determination . . . of the validity, [or] extent, . . . of liens," within the scope of 28 U.S.C. §§ 157(b)(2)(B) and (K). A foreclosure would clearly "affect . . . the liquidation of assets of the estate" or "adjustment of the debtor-creditor . . . relationship, . . . per 28 U.S.C. § 157(b)(2)(O). Thus, particularly if the contentions of the Debtor are sustained, it would appear that the foreclosure action is properly characterized as a "core proceeding." If the matter sought to be remanded is a "core proceeding," then 28 U.S.C. § 1334(c)(2) is not applicable. See United Church, supra, at 277. In any event, we question whether the following requisite elements for a § 1334(c)(2) are present: (1) a timely filing of the Remand Motion, as it was filed almost five months after the removal; (2) that the proceeding, raising issues under the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. (hereinafter referred to as "TILA"), is based upon state law; and (3) that the prospect of timely adjudication in the shorthanded Philadelphia Common Pleas Court forum has been established. See In re Futura Industries, Inc., 69 B.R. 831, 834 (items (1), (2) and (6)) (Bankr.E.D.Pa.1987).
There is, of course, also a "narrow sphere" of cases in which the bankruptcy court, in its discretion, can abstain in the interest of justice or of comity with the *578 state courts pursuant to 28 U.S.C. § 1334(c)(1). See United Church, supra, at 278; and Futura Industries, supra, 69 B.R. at 834. However, again, if the Lender is not successful in the Stay Motion, there would be no state court proceeding against the Debtor to which we could abstain or to which we could defer in the interest of comity.
Therefore, we must decide the Stay Motion before we decide the Remand Motion, because the decision in the Stay Motion may significantly impact upon the result on the Remand Motion. However, we further observe that the Stay Motion cannot be definitively resolved until we resolve the Debtor's Complaint.
The Lender suggests that, essentially, two factors entitle it to relief from the stay at this juncture: (1) The Debtor's premises, upon which the Lender seeks to foreclose, is owned by the Debtor and Margot by the entireties, and hence is purportedly not property of his estate which he can affect through his reorganization; and (2) Neither he nor any of the co-obligors have made any payments on either underlying mortgage obligation for over three years, and this substantial non-payment ipso facto justifies relief from the stay.
Regarding the first point, we cannot agree that property which the Debtor co-owns by the entireties is not within the exceedingly broad scope of "property of the estate" of the Debtor. See 11 U.S.C. § 541(a); United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05, 103 S.Ct. 2309, 2313, 76 L.Ed.2d 515; and In re Mason, 69 B.R. 876, 882-83 (Bankr.E.D.Pa.1987). Community property is expressly included within the scope of the term. 11 U.S.C. § 541(a)(2). Regarding property held by the entireties, this Court has repeatedly held that it is the entire value of such property which must be considered in determining the value of the Debtor's interest in such property. See In re Jablonski, 70 B.R. 381, 387-88 (Bankr.E.D.Pa.1987); and In re Panas, 68 B.R. 421, 422-24 (Bankr.E. D.Pa.1986). Thus, the filing of a bankruptcy in no sense severs or disassociates this property from the Debtor's estate. There is no question in our mind, then, that the status of the premises on which the Lender seeks to foreclose, being property co-held by the Debtor by the entireties, is property of the estate, and the fact that the Debtor's home is co-owned does not in any way enhance the Lender's efforts to obtain relief from the automatic stay.
On the issue of failure to make payments, the Lender cites to another decision involving the Panas debtor, In re Panas, 63 B.R. 637 (Bankr.E.D.Pa.1986).[4] There, the Debtor attempted to present evidence of value and repairs to the property which the Court both refused to admit and further stated that, had it admitted such evidence, the Court "would have accorded it very low credibility." 63 B.R. at 638.
On the other hand, here, the parties stipulated that the Debtor and Margot have in excess of $30,000.00 equity in their home and the Debtor's Complaint alleges substantial claims that the mortgage obligations in issue were validly rescinded, which, if sustained, would eliminate entirely the Lender's status as a secured creditor. See In re Tucker, Tucker v. MidPenn Consumer Discount Co., 74 B.R. 923, 932 (Bankr.E.D.Pa.1987).
We have repeatedly held that a Debtor's failure to make payments to even a creditor which indisputably is secured, while definitely a factor in determining whether a § 362(d) motion should be granted, is not the only factor to be considered. See In re Crompton, 73 B.R. 800, 809-10 (Bankr. E.D.Pa.1987); In re Tashjian, 72 B.R. 968, 973 (Bankr.E.D.Pa.1987); and In re Grant Broadcasting of Philadelphia, Inc., 71 B.R. 376, 386-89 (Bankr.E.D.Pa.1987), aff'd, 75 B.R. 819 (E.D.Pa.1987).
*579 Here, we are compelled to observe that, in additional to validly asserting that he has a large equity cushion, the Debtor is asserting a defense of rescission which, if sustained, would wipe out the Lender's secured status. Such a defense, which "`strikes at the very heart' of the validity of the Movant's secured claim," clearly can be asserted in response to a Stay Motion. In re Souders, 75 B.R. 427, 432 (Bankr. E.D.Pa.1987) (quoting In re Pappas, 55 B.R. 658, 661 (Bankr.D.Mass.1985); and United Companies Financial Corp. v. Brantley, 6 B.R. 178, 185 (Bankr.N.D.Fla. 1980)). As we pointed out in Souders, reducing a movant in a § 362(d) to unsecured status is almost certainly fatal to such a Motion. See Souders, supra, at 440; In re Ronald Perlstein Enterprises, Inc., 70 B.R. 1005, 1009-10 (Bankr.E.D.Pa.1987), appeal dismissed, C.A. No. 87-2364 (E.D. Pa., Order filed June 25, 1987); and In re Stranahan Gear Co., 67 B.R. 834, 837-38 (Bankr.E.D.Pa.1986).
The merits of the contentions of the Debtor that he has validly rescinded the obligations in issue, thus voiding the mortgages, are the centerpiece of the Debtor's Complaint. Therefore, until that Complaint is resolved, we believe that it would be precipitous to grant the Stay Motion. We shall therefore defer disposition of the Stay Motion, and the Remand Motion in turn, pending disposition of the Debtor's Complaint. This being so, prompt disposition of the Debtor's Complaint is crucial.
We therefore urge the parties to cooperate in either making good faith efforts to settle these matters, which are exhausting both the parties and the Court far beyond the degree of their actual substantive complexity,[5] or, if they are unable to do so, in presenting the merits of the Debtor's Complaint to us quickly and concisely, because we shall not rule with finality on the Stay Motion until the Debtor's Complaint is resolved. And, because the resolution of the Stay Motion is very pertinent to the Remand Motion, we shall also not rule with finality on that Motion at this time either. Rather, we shall enter the accompanying Order, continuing the automatic stay in place, but deferring final disposition on both of these Motions until after the Debtor's Complaint is resolved. Also, we are entering an Order relevant to the Debtor's Complaint requiring the parties to file Briefs on what appear to be issues of solely application of the TiLA and inter-related state law to undisputed facts therein on or before July 24, 1987, thus permitting us to decide the merits of the Debtor's Complaint as quickly as the parties will allow us to do so.
ORDER
AND NOW, this 30th day of June, 1987, upon consideration of the Stipulation of Facts and the Briefs of the parties in reference to the Motions of PHILADELPHIA CONSUMER DISCOUNT COMPANY (hereinafter referred to as "the Creditor") for relief from the automatic stay and to remand the matter in the Philadelphia Court of Common Pleas, at July Term, 1983, No. 4533, removed by the Debtor to this Court in Adversary No. 86-1150K above-captioned, it is hereby ORDERED as follows:
1. Decision on both Motions shall be deferred pending disposition of Adversary No. 87-0277S.
2. The automatic stay arising from the Debtor's bankruptcy filing, per 11 U.S.C. § 362(a), shall remain in full force and effect pending disposition of Adversary No. 87-0277S.
3. Disposition of Adversary No. 87-0277S shall proceed as per our Order of May 7, 1987, which shall remain in full force and effect. However, in addition, the parties are directed to simultaneously file and serve Briefs in support of their respective *580 positions in this matter on or before July 24, 1987.
4. No requests for continuance of the scheduling in Adversary No. 87-0277S will be allowed.
5. The original copy of the Briefs shall be filed with the Clerk of this Court and copies shall be served upon opposing counsel and delivered to the Court in chambers, on or before 4:00 P.M. on July 24, 1987.
NOTES
[1] Margot is also a party to each of the foreclosure actions. Also parties to the 1983 action are Harvey Gurst and Kimberly Gurst, apparently the son and daughter-in-law of the Debtor and Margot.
[2] Our observation was supported by the fact that the instant Debtor had originally filed another case, Bankr. No. 84-03693G, on October 23, 1984, which was dismissed on January 15, 1985. Margot then filed her case on February 8, 1985. After the Lender obtained relief from the automatic stay on July 25, 1985, as to Margot, and trial of the foreclosure actions was apparently imminent in state court, the Debtor then filed this action on October 9, 1986. See In re Gurst, supra, 70 B.R. at 467-68 at n. 1.
As we observe herein, it would seem that the Debtors could easily have brought the underlying issues, which are set forth in the Debtor's Complaint, to a head in some forum before this time, and thereby avoided the great volume of labor which both counsel and the Court have had to invest in both Gurst matters in getting to this point.
[3] As we observe at page 579 and note 4, infra, we believe that resolution of merits of the purported rescission of the mortgage transactions, presented in Adv. No. 87-0277S, will end this waste of resources. It is almost as if neither counsel is prepared to face a resolution of these issues, and thus have become involved in a procedural dance around their resolution. Our intention, speaking figuratively, is to decide Adv. No. 87-0277S on its merits and stop the music.
[4] It can be observed that Mr. Panas' status as co-owner of entireties' property was not in any sense a negative factor in the decision on the creditor's motion for relief from the stay in that case, supporting the conclusion that Judge Goldhaber would concur with our observation in response to the Creditor's first argument.
[5] Resolution of all of these matters, and most of the procedural gyrations in Margot's case, revolve around determining whether, under the TILA, the Debtor (and Margot) validly rescinded these transactions and what the impact of such recession, if valid, will be. We can only hope that our decision in Tucker, supra, where we dealt with TILA issues which were, if anything, more complex than those presented here, will serve as guidance to both parties. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541483/ | 75 B.R. 229 (1987)
In re Dale L. SETTLES and Jean E. Settles, Debtors.
Dale L. SETTLES and Jean E. Settles, Petitioners/Debtors,
v.
UNITED STATES of America, acting Through the FARMERS HOME ADMINISTRATION, United States Department of Agriculture, and Commodity Credit Corporation, Respondents/Creditors.
Bankruptcy No. 86-81252.
United States Bankruptcy Court, C.D. Illinois.
July 2, 1987.
Barry M. Barash, Barash, Stoerzbach & Henson, Galesburg, Ill., for debtors.
*230 L. Lee Smith, Asst. U.S. Atty., Peoria, Ill., for Farmers Home Admin.
Brian Holland, Bushnell, Ill., for Farmers and Merchants State Bank of Bushnell.
OPINION
WILLIAM V. ALTENBERGER, Bankruptcy Judge.
The Debtors are farmers who filed a voluntary petition under Chapter 11. Prior to their filing, the Debtors had planted their 1986 crops, which crops were growing and standing unharvested in the field at the time of their filing. In producing the crops, the Debtors, post petition, provided certain labor or expended certain funds as follows:
Hoeing $183.75
Cultivating 1,575.00
Applying Anhydrous 630.00
10% road travel and mgt. risk 744.74
Anhydrous Ammonia 2,593.54
Herbicide 160.00
_________
Total $5,887.03
_________
The Farmers Home Administration (FmHA) held a security interest on the Debtors' 1986 crops, which were ultimately turned over to FmHA. Debtors' Chapter 11 plan was subsequently confirmed. Pursuant to Section 506 of the Bankruptcy Code the Debtors now seek reimbursement from FmHA of the $5,887.03 as direct expenses which they allege were incurred on FmHA's behalf to produce the crops.
Section 506(c) of the Bankruptcy Code provides as follows:
"(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."
At the hearing on the Debtors' motion, this Court found that the Anhydrous Ammonia and Herbicide expenses fall within the scope of Section 506(c). This Court further found that the remainder of the items did not fall within the scope of Section 506(c). The purpose of this opinion is to set forth in written form the basis for this Court's denial.
At the hearing on the motion, the Debtors' testimony was that the items of hoeing, cultivating, applying anhydrous, and for road travel and management risk all involve personal labor of the Debtors and did not involve any expenditure of funds by the Debtors. This Court has consistently ruled that debtors in a Chapter 11 proceeding may not recover from a secured creditor the value of their personal labor in producing a crop which is ultimately sold and the proceeds delivered to the secured creditor. See, In re Kotter, 59 B.R. 266 (Bkrtcy.1986); In re Lindsey, 59 B.R. 168 (Bkrtcy.1986); and In re Worrell, 59 B.R. 172 (Bkrtcy.1986).
In order for the Debtors to recover these items pursuant to Section 506(c), the Debtors must prove that they were expenses which were (1) reasonable, (2) necessary, and (3) beneficial to the creditor. In the Matter of Trim-X, Inc., 695 F.2d 296 (7th Cir.1982), and In the Matter of Combined Crofts Corporation, 54 B.R. 294 (Bkrtcy.1985). A determination of whether the items meet the requirements of Section 506(c) will depend upon the facts in the particular case. See, Collier on Bankruptcy, Section 506.06.
Before discussing these three factors, the threshold question of whether all the items are in fact expenses which are subject to Section 506(c) must be addressed. The Legislative History to Section 506(c) provides as follows:
"Any time the . . . debtor in possession expends money to provide for the reasonable and necessary cost and expenses of preserving or disposing of a secured creditor's collateral, the . . . debtor in possession is entitled to recover such expenses from the secured party or from the property securing an allowed secured claim held by such party." (Emphasis added) [124 Cong.Rec. H 11,095 (Sept. 28, 1978); S 17,411 (Oct. 6, 1978).]
The items do not involve the expenditures of money. These items represent reimbursement for Debtors' labors in producing the crop. As there is no expenditure of *231 money, these are not expenses which are recoverable under Section 506(c).
Even if these items were considered to be expenses subject to Section 506(c) they would not be allowable because they do not meet all three of the requirements of Section 506(c). The brief, but unopposed, testimony of the Debtors indicates that these items were reasonable and necessary. However, the testimony did not convince the Court they were beneficial to the FmHA.
For the purpose of Section 506, it must be shown that the costs and expenses were expended primarily to benefit the creditor, and directly benefited the creditor. Indirect, uncertain, or speculative benefits are not recoverable. Incidental benefits which accrue to the creditor are generally not recoverable. In the Matter of Combined Crofts Corporation, supra. In this case, the FmHA did receive a benefit. However, the labors were expended primarily to benefit the Debtors by permitting the Debtors to continue to farm until they could successfully reorganize.
To permit the Debtors to recover from the FmHA the value of the Debtors' labors in producing the crops during the course of their reorganization would impose upon the FmHA part of the expense of the Debtors' reorganization. There is nothing in the Bankruptcy Code or its legislative history which would indicate Congress ever intended such a result.
I, THEREFORE, HOLD that the Debtors can recover from the FmHA for reasonable and necessary and beneficial costs and expenses the following:
Anhydrous Ammonia $2,593.54
Herbicide 160.00
_________
Total $2,753.54
As to the remaining items, I hold these are not recoverable from the FmHA, as they are not expenses covered by Section 506(c) and were for the primary benefit of the Debtors.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541489/ | 75 B.R. 669 (1987)
In re The GOLD STANDARD AT PENN, INC., Debtor.
Bankruptcy No. 86-02849K.
United States Bankruptcy Court, E.D. Pennsylvania.
July 13, 1987.
*670 Charles C. Coyne, Roger F. Perry, Philadelphia, Pa., for debtor.
Spencer Ervin, Jr., Philadelphia, Pa., for The Christian Ass'n of the University of Pennsylvania.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
Presently before the Court is the Debtor's Motion For Approval of the Assumption of its unexpired lease with the landlord of the premises which houses the Debtor's restaurant business pursuant to 11 U.S.C. § 365(b)(1). What we find to be unusual about the Debtor's Motion is that it not only fails to define the parameters of the default, i.e., the amount of rental arrearages *671 is not specified, but also the Debtor specifically asks that the Court not make a finding as to the amount of arrearages. Thus, the Debtor asks the Court to "merely" approve its proposed method of curing the arrearages. The landlord objects to this Motion on the basis that the Debtor has not met the requirements of § 365(b)(1). We are constrained to agree with the landlord and to deny the Debtor's Motion, although we do continue an interim Order in effect pending a determination of the arrearages, which we believe must be determined before we can make a ruling on such a Motion.
The Debtor is THE GOLD STANDARD AT PENN, INC. (hereinafter referred to as "the Debtor"), a corporation operating a restaurant located at 3601 Locust Walk, Philadelphia, Pennsylvania, on the campus of the University of Pennsylvania (hereinafter referred to as "the premises"). The Debtor, as the tenant, and the Christian Association (hereinafter referred to as "the C.A."), a non-profit corporation, as the landlord, are parties to an unexpired lease dated June 1, 1983, for a substantial portion of the premises, the subject of the within Motion. The term of the lease is for ten years with two five-year options to renew thereafter. At this point in time, there are six years remaining on the initial ten-year period.
The Debtor filed a petition under Chapter 11 of the Bankruptcy Code on June 10, 1986. On June 30, 1986, the C.A. filed a Motion for Relief from the Automatic Stay which was originally scheduled to be heard on July 30, 1986. By three separate agreements between the parties, this hearing was continued until October 20, 1986, at which time the Court heard this Motion along with the Debtor's Motion to extend the time within which to assume or reject the subject lease, which had been filed on July 28, 1986, and was also continued twice by agreement of the parties. Following the October 20, 1986, hearing on both Motions, we entered an Order: (1) granting the Debtor's Motion to extend the time in which to assume or reject the Lease until December 19, 1986; (2) directing the Debtor to make weekly rental payments of $1,750.00 as adequate protection instead of the rental payments of $1,350.00 per week which the Debtor was making; and (3) denying the C.A.'s Motion without prejudice to relist said Motion if the Debtor failed to comply with the other aspects of the Order.
On December 15, 1986, the Debtor filed the instant Motion for Approval of Assumption of the lease under certain proposed conditions. The said Motion also requested the interpretation of certain provisions of the lease and resolution of certain disputes over lease provisions. The Debtor filed therewith a proposed Order of five pages which detailed the terms under which the Debtor sought to assume the lease. On January 7, 1987, the C.A. filed its Answer objecting to the assumption of the lease on the proposed terms, asserting that (1) the Debtor was not making all payments currently due under the lease; (2) the Debtor's proposed order would impermissibly modify the terms of the lease respecting the sale of alcoholic beverages; and (3) the Debtor had failed to provide adequate assurance for payment of all arrearages in full.
In keeping with the practice of the parties in this case to agree to continuances while they attempted to resolve their differences, the original hearing date, January 7, 1987, was continued, by agreement, three times until a hearing was held on March 3, 1987. Thereafter, a briefing schedule was entered, allowing both parties the opportunity to file Briefs, the Debtor on or before March 24, 1987, and the C.A. on or before April 7, 1987, which were duly filed.
After we were prepared to render a decision, we decided to conduct a conference with the parties on June 18, 1987, to see if we could urge them to amicably resolve their differences. With the agreement of the parties, we delayed our decision to allow the parties such an opportunity to settle the matter. However, on July 6, 1987, we were informed by the C.A.'s counsel that "settlement could not be reached." Hence, it is necessary that we now proceed to make a disposition of the Debtor's Motion.
*672 The subject lease, which is of record in this case, provides for three types of payments: (1) minimum rent of $70,000.00 per year, payable in monthly installments of $5,833.33 (or $1,350.00 per week); (2) an additional amount measured by two (2%) percent of gross operating revenues and an additional two (2%) percent of liquor sales; and (3) an additional payment of $29,167.00 for rents accrued prior to the Debtor's taking possession of the premises, payable in monthly installments of $1,000.00 which were to commence on June 1, 1985. Both parties agree that neither the second nor the third type of payments cited above have ever been paid by the Debtor to the C.A. In fact, a longstanding problem has been the Debtor's failure to provide the C.A. with reliable figures and records from which the second type of payments could be calculated. Thus, both parties assert a yet undetermined amount of arrearages as the crux of the default under the lease.
We begin our task by quoting 11 U.S.C. § 365(b)(1), which governs the assumption of a lease where default has occurred:
(b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee
(A) cures, or provides adequate assurance that the trustee will promptly cure, such default;
(B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and
(C) provides adequate assurance of future performance under such contract or lease.
It is undisputed that a substantial default has occurred here and that § 365(b)(1) applies. However, it is the amount of the arrearages or the parameters of the default which is unknown. The Debtor apparently seeks to have the Court approve the assumption of the lease with no regard for the requirement of § 365(b)(1)(A). Obviously, the Debtor is not proposing to immediately cure the arrearages, especially since the amount of arrearages is disputed and it proposes to defer the determination of same. Therefore, it is difficult for the Debtor to argue that its proposal both promptly cures the default and provides adequate assurance that the default will be cured and that the C.A. will be compensated for future losses.
We believe, contrary to the Debtor's position, that it is necessary to determine the precise nature of the default first, in order to analyze whether its proposal for curing is prompt and whether adequate assurance has been given for the eventual, but necessarily "prompt," cure. This appears obvious to us because an analysis of whether the cure is prompt and whether adequate assurance has been given must be correlated to the parameters of default or amount of arrearages to be cured.[1]
Assuming arguendo that the arrearages are $50,000.00, which the Debtor suggests over the dispute of the C.A., the Debtor's Motion must be denied because the Debtor fails to make any provision for adequate assurance of a prompt cure, unless we optimistically extrapolate from the testimony of the Debtor's principal, Roger Harmon, that an increase in cash of $1,200.00 from the date of filing as compared to the end of the monthly reporting period of January, 1987, and an increase in accounts receivables of $10,800.00 for the month of January, 1987, concerning which he testified, suffice as adequate assurance for a prompt cure. We do not so find. As was succinctly stated in In re Berkshire Chemical Haulers, Inc., 20 B.R. 454, 458 *673 (Bankr.D.Mass.1982), and is a propos in the case under consideration:
This Court can envision many cases where the promise to cure a default out of future profits might be sufficiently assured as to warrant approval of such a proposal. But, in the case before the Court there is no past history of profitability, there is no competent evidence of future profitability, and the debtor's projections seem nothing more than pipe-dreams.
In fact, the Debtor herein does not offer sufficient evidence to warrant a finding that its economic situation is improving. We have no evidence of either decreased costs in the operation of its business or increased sales. As in In re R.H. Neil, Inc., 58 B.R. 969, 971 (Bankr.S.D.N.Y. 1986), the Debtor herein has not shown that it has a "reasonably demonstrable capability" to promptly cure the arrearages, which the Debtor has conceded to be at least $50,000.00.[2]
Since § 365(b)(1)(A) requires a prompt cure, the question arises as to what will constitute promptness as a matter of law. We agree with the statement that "the period of time that is considered `promptly' may vary in accordance with the circumstances on a case by case basis." In re Lawrence, 11 B.R. 44, 45 (Bankr.N.D. Ga.1981) (10 months to cure $554.10 is held prompt but court speculates that a period in excess of one year is unlikely to be considered prompt). However, we do not agree with the dicta expressed in Lawrence, as we believe that a period of time in excess of a year could be prompt depending on the circumstances. See In re Coors of North Mississippi, Inc., 27 B.R. 918 (Bankr.N.D.Miss.1983) (curing of default of between $110,000.00 and $115,000.00 within a 3-year period is a prompt cure in the circumstances presented there, particularly in light of the prospective longevity of successful business operations).
In re R/P International Technologies, 57 B.R. 869 (Bankr.S.D.Ohio 1985) (hereinafter referred to as "R/P"), is squarely on point with the case sub judice, as it involved a Chapter 11 debtor whose business was housed in a building under a lease who had fallen behind in rental payments. Wishing to continue to occupy those premises, the R/P debtor filed a motion to assume its lease, proposing to cure a stipulated arrearage of $156,000.00 over a 5-year period with interest at ten (10%) percent per annum. The R/P court squarely defined the issue as being whether this proposal met the "promptness" requirement of § 365(b)(1)(A). Noting that the proposed payment period was virtually co-extensive with the claimed life of the lease, and following the holding of Berkshire, supra, at 458, the R/P court was not satisfied as to the promptness of the cure. Id. at 873. The R/P court was also not satisfied that adequate assurance was given for the ultimate curing of the default because, while the debtor was current in its rent, it had not made the agreed-upon monthly payment on arrearages. Id.
In the instant case, assuming arguendo the existence of at least $50,000.00 arrears to be cured, the proposed repayment at the minimal rate of $250.00 per week for thirty-nine weeks per year would result in slightly more than five years, a period of time very close to being co-extensive with the remaining six-year life of the lease, not including the two five-year options to renew the lease. Although the Debtor's proposal provides that it will pay an additional four (4%) percent on its gross sales towards arrearages, there was no testimony as to the probability of its sales exceeding $75,000.00. The only evidence as to sales was the December, 1986, Operating Report showing cash sales of $49,285.34 plus collection of accounts receivables of $20,863.60 for a total of $70,225.54; and the *674 January, 1987, Operating Report showing $36,983.17 in cash sales and $14,597.44 in collected receivables for a total of $51,580.61. The evidence before us does not indicate a high likelihood that the Debtor would ever be responsible for payment of an additional four (4%) percent of gross sales towards arrearages. We note, without deciding, that such a repayment schedule without more, e.g., competent evidence of future profitability, would not appear to be a "prompt" cure.
Section 365(b)(1)(B) also requires that the Debtor compensate or provide adequate protection of prompt compensation for the actual pecuniary loss suffered by a party as a result of the default. This requirement was not addressed or raised by either party. Consequently, we shall only note its existence in passing.
In addition to curing and compensating or providing adequate assurance of promptly doing so, the Debtor must also provide adequate assurance of future performance pursuant to § 365(b)(1)(C). Although what will satisfy § 365(b)(1)(C) will vary from case to case, some possibilities can include sufficient financial backing, escrow deposits or other similar forms of security or guaranty, or even promises. In re Luce Industries, Inc., 8 B.R. 100, 107 (Bankr.S. D.N.Y.1980), rev'd on other grounds, 14 B.R. 529 (S.D.N.Y.1981). We agree with the Luce court that the assurance required "will fall considerably short of an absolute guaranty of performance." Id. Accord, In re Bygaph, Inc., 56 B.R. 596, 605 (Bankr.S.D.N.Y.1986). However, as we stated earlier, the Debtor here has not provided any specific promises resembling adequate assurance of anything.
In addition to objecting to the proposed assumption on the basis that the Debtor has failed to provide adequate assurance for payment of all arrearages in full, the C.A. has also asserted that the Debtor is not making all payments currently due under the lease, i.e., that the Debtor has defaulted in its post-petition rental obligations. This assertion is apparently not contested by the Debtor. In any event, § 365(b)(1) does apply "to both pre-petition and post-petition defaults." In re Bon Ton Restaurant & Pastry Shop, Inc., 53 B.R. 789, 793 (Bankr.N.D.Ill.1985) (citing Berkshire, supra, 20 B.R. at 457; and Luce, supra, 8 B.R. at 104). Therefore, the foregoing analysis of § 365(b)(1) is not changed by the fact of post-petition arrears.
With respect to the C.A.'s contention that the Debtor's proposal would impermissibly modify the terms of the lease respecting the sale of alcoholic beverages, our examination of the lease reveals that it contains no restrictions on the sale of alcohol. Hence, the C.A.'s objection to the assumption of the lease on this basis could not be sustained, and the Debtor may sell alcoholic beverages in keeping with the permits issued by the Pennsylvania Liquor Control Board.
We do not find it necessary to address all of the proposed terms of the Order under which the Debtor seeks approval for the assumption of the lease with the C.A. We have only addressed those terms to which the C.A. has objected or which we believed must be addressed in the Debtor's efforts to cure its default pursuant to § 365(b)(1).
In addition to denying the Debtor's Motion as it stands, we are, in our accompanying Order, also striving to obtain a determination of what the arrearages actually are and what sort of a proposal the Debtor can tender to fashion a sufficiently "prompt" cure for the default, taking into account that the practical time for requiring the Debtor to make significant additional payments must wait until September, when student patronage will render the Debtor at full financial strength.
We have intentionally fashioned the attached Order with short timelines because we have assumed that the Debtor, acting in good faith pursuant to its earlier proposed Order, has already compiled the necessary information to determine the arrearages, and may have already provided it to the C.A. In any event, we strongly believe that the Debtor has derived a significant benefit from the delay in the determination compliance to § 365(b)(1), and we do not *675 wish to accord it any further such benefits unfairly.
However, we recognize that the C.A. also had its remedy pursuant to our Order of October 20, 1986, to relist its Motion for Relief from the Automatic Stay if the Debtor's terms for assumption were unacceptable. Despite the C.A.'s stated dissatisfaction with the proposed terms of assumption, we surmise that the C.A. is not greatly distressed at the Debtor's continued occupation of the premises since it has not moved for relief. In fact, the C.A. has stated its approval of the Debtor's assumption of the lease if done pursuant to different conditions. This may not be surprising when we consider that the lease rental, as compared to the fair market rental, as per the testimony at the October 10, 1986, hearing, is quite liberal to the C.A. Thus, the C.A. is faring quite well if it receives any payments on arrearages in addition to the lease rentals compared to what it would receive (possibly less than the current rent) if the Debtor were forced to liquidate or leave the premises. Also, the C.A. acknowledged, in the October 20, 1986, hearing, that the Debtor made significant improvements to the premises, and that the relationship between the parties, given the circumstances, has remained rather cordial.
On the other hand, we cannot overlook the fact that the Debtor has accumulated a default of admittedly at least $54,000.00. It would take fifty-four months to cure this arrearage at the rate of approximately $1,000.00 per month additional rent that we shall impose upon the Debtor beginning in September, 1987, even with the 13-week "moratorium" that the Debtor requests. Moreover, in so ordering, we are not suggesting that even $1,000.00 extra monthly payments without a moratorium would effect a prompt cure, but merely that payments of at least this amount would be prerequisite.
In sum, we cannot grant the Debtor's Motion. However, we will proceed to enter an Order which will keep the Debtor in place and compel it to begin making payments which are at least in the range that it would have to make to cure the default promptly. We also set forth a schedule to resolve this matter in the fashion which we believe that 11 U.S.C. § 365(b) dictates.
ORDER
AND NOW, this 13th day of July, 1987, upon consideration of the testimony adduced and the briefs of the parties relative to the Debtor's Motion for Approval of its Assumption of an unexpired lease with the Christian Association (hereinafter referred to as the "C.A.") and the C.A.'s objection of the terms of the proposed assumption based upon the requirements of 11 U.S.C. § 365(b)(1), it is hereby ORDERED as follows:
1. The Debtor's Motion is DENIED without prejudice.
2. Through September 3, 1987, the Debtor shall continue to pay the C.A. the amount of $1,750.00 per week each Thursday pursuant to the terms of our Order dated October 20, 1986.
3. Beginning on September 10, 1987, the Debtor shall pay the C.A. the amount of $2,000.00 each Thursday pursuant to the terms of our Order of October 20, 1986.
4. The amount of arrearages under the parties' lease shall be established pursuant to the following schedule:
a. On or before July 31, 1987, the Debtor shall provide the C.A. with a schedule of total sales and sales of alcoholic beverages sold since the commencement of the lease and shall provide the C.A. with a specific statement showing all amounts which the Debtor believes to constitute arrearages under the lease, by category.
b. On or before August 12, 1987, the C.A. shall accept the amount of arrearages as stated by the Debtor or shall provide the Debtor with a specific statement showing all amounts which the C.A. believes to constitute arrearages under the lease, by category.
c. The parties shall have until August 24, 1987, to reconcile any difference between the amounts believed to constitute arrearages. In the absence of agreement, a hearing will be held on
*676 TUESDAY, AUGUST 25, 1987 at 10:00 A.M. in Court Room No. 2 (Room 3718), United States Court House, 601 Market Street, Philadelphia, PA 19106, at which time the statements provided for above, together with such additional evidence as the parties may introduce will be considered for the determination of the amount of the arrearages.
5. The Debtor shall have the right to file another Motion to Assume the Lease in issue, on or before September 18, 1987, or within seven days of the Court's determination of the arrearages after the hearing on August 25, 1987, whichever is later. If the Debtor fails to do so, the Lease shall be deemed rejected.
6. The C.A. may relist its Motion for Relief from Automatic Stay if the terms of paragraph two and three hereof are not complied with, upon the conditions set forth in paragraph one of the Order dated October 20, 1986, if it so chooses.
NOTES
[1] Therefore, were there a sufficient record made, we would be compelled to make a determination of arrearages. However, we find ourselves in a quandary because no evidence was produced from which the Court can fix the arrearages. Because we recognize that the lease is necessary for the reorganization and operation of the Debtor's business, as well as for other reasons hereinafter expressed, we will fashion an Order designed to bring this matter to a head.
[2] We must observe that the Debtor's concession that the arrearages are as low as approximately $50,000.00 is misleading for two reasons. First, the Debtor arrives at that figure by starting at an undocumented $64,000.00 figure as of June, 1986, and crediting itself for monies purportedly owed by the C.A. to the Debtor, but without specifying same. Secondly, the Debtor candidly testified that this figure, calculated in June, 1986, had not been adjusted for accruing arrearages since that date. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3036322/ | United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 04-2075
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota
Eliseo Espinoza Rios, also known as *
Fernando, * [Unpublished]
*
Appellant. *
___________
Submitted: October 22, 2004
Filed: November 8, 2004
___________
Before RILEY, McMILLIAN, and GRUENDER, Circuit Judges.
___________
PER CURIAM.
Eliseo Espinoza-Rios (Rios) appeals from the final judgment entered in the
United States District Court1 for the District of Minnesota upon appellant’s plea of
guilty to conspiring to distribute and possess with intent to distribute at least 5,000
grams of cocaine, in violation of 21 U.S.C. §§ 841(a)(1), (b)(1)(A), and 846. The
district court granted the government’s motion under 18 U.S.C. § 3553(e) and
U.S.S.G. § 5K1.1 for a downward departure based on substantial assistance, and
1
The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
sentenced Rios below the 120-month statutory minimum to 65 months imprisonment,
plus 5 years supervised release. For reversal, in a brief filed pursuant to Anders v.
California, 386 U.S. 738 (1967), counsel argues the district court erred in failing to
grant a more substantial downward departure. Rios’s displeasure with the extent of
the district court’s downward departure, however, is not reviewable. See United
States v. Dutcher, 8 F.3d 11, 12 (8th Cir. 1993).
We have also reviewed the record independently under Penson v. Ohio, 488
U.S. 75 (1988), and we find no nonfrivolous issues for appeal.
Accordingly, we affirm the judgment of the district court. We also grant
counsel’s motion to withdraw, and deny the request for substitute counsel.
______________________________
-2- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2452634/ | 680 S.W.2d 327 (1984)
STATE of Missouri, Plaintiff-Appellant,
v.
Richard D. COPELAND, Defendant-Respondent.
No. 13668.
Missouri Court of Appeals, Southern District, Division Two.
October 16, 1984.
Motion for Rehearing Overruled and to Transfer Denied November 2, 1984.
Application to Transfer Denied December 18, 1984.
*328 William J. Fleischaker, Pros. Atty., Joplin, for plaintiff-appellant.
Laurence H. Flanigan, Thad C. McCanse, William J. Lasley, Carthage, for defendant-respondent.
Motion for Rehearing Overruled and to Transfer to Supreme Court Denied November 2, 1984.
PREWITT, Chief Judge.
Defendant is charged with driving a motor vehicle while intoxicated. The state appeals from the trial court's order sustaining defendant's motion to suppress. See § 547.200, RSMo Supp.1983. At issue is whether the police's seizure without a warrant of a sample of defendant's blood from a hospital was improper under the fourth amendment to the United States Constitution and article I, § 15 of the Missouri Constitution.
A vehicular collision was reported to the Joplin Police Department at approximately 1:30 a.m. on Thursday, January 27, 1983. The traffic officer sent to investigate arrived at the scene between 1:45 and 2:00 a.m. Defendant was the only occupant of a van, one of the two vehicles involved. He was pinned in the van when the officer first observed him. The officer smelled alcohol "about the area" where defendant was and saw "Bloodymary mix, two bottles hanging out" of the van. Defendant was severely injured in the collision. He was unconscious at least part of the time until removed from the vehicle and taken to a local hospital.
The officer concluded that the collision was caused by the other vehicle crossing the centerline of the highway and going into the lane in which defendant's vehicle was traveling. The investigation did not reveal any improper driving on defendant's part. Due to their injuries the officer could not tell if either driver's ability to operate a motor vehicle was impaired by intoxicants.
Between 2:30 and 3:00 a.m., at the request of an attending physician in the emergency room at the hospital, a laboratory technician drew blood samples from defendant. Defendant was admitted to the hospital in serious condition. At approximately 9:00 a.m. a police officer went to the laboratory of the hospital and requested that he be given a sample of defendant's blood. A medical technologist gave him one of the samples. The technologist testified that the hospital's laboratory had completed its testing of the blood and after 24 hours it would have been discarded.
The state contends that the trial court erred in sustaining defendant's motion to suppress because defendant had no standing to complain that the seizure was improper as he had no reasonable and legitimate *329 expectancy of privacy in the sample of the blood; that even if defendant had standing the seizure was lawful because an authorized person consented to the seizure; and that defendant must be held to have consented to the seizure because § 577.020, RSMo Supp.1982 provides that a person operating a motor vehicle is deemed to have consented to a test of his blood. In argument the state said it did not rely on "exigent circumstances" to support the seizure.
To complain of a violation of the fourth amendment of the United States Constitution or article I of § 15 of the Missouri Constitution, defendant must have a "legitimate expectation of privacy" in the place or thing being searched. State v. McCrary, 621 S.W.2d 266, 272 (Mo. banc 1981). That is determined by a two part test. First, the defendant must have an actual subjective expectation of privacy in the place or thing searched. Second, the expectation of privacy must be "reasonable" or "legitimate". Id., 621 S.W.2d at 273.
There is no standing to complain of something voluntarily discarded, left behind, or otherwise relinquished, as a party no longer retains a reasonable expectancy of privacy with regard to it. Id., 621 S.W.2d at 273.
As defendant was seriously injured and unconscious at the time the blood was taken, his consent to the taking for medical purposes can be implied. 61 Am.Jur.2d, Physicians, Surgeons, and Other Healers, § 185, p. 314. However, that consent would be limited to medical treatment and no consent can be implied for its use for other purposes.
At the time the blood was taken, defendant had an expectancy of privacy in the contents of his blood which Missouri law recognized as legitimate. Our law prevented the results of tests of it for medical purposes from being used against him in criminal proceedings. See § 491.060(5), RSMo 1978 (since amended), as applied in Gonzenbach v. Ruddy, 645 S.W.2d 27 (Mo. App.1982), and State ex rel. Mehle v. Harper, 643 S.W.2d 643 (Mo.App.1982).[1] Those cases involved records showing the test results of blood samples, but we see no reason why blood, and test results from it, should not be treated the same.
Whether the expectation of privacy in blood or the results of tests on it has now been changed, see § 577.037.1, RSMo Supp. 1983, we do not decide as that statute was enacted after defendant's blood was taken.[2] Nor is it necessary to consider if that section might be applied to evidence of events occurring before its effective date. This discussion is concerned with the reasonable expectancy of privacy at the time of the consent and not whether the blood or results of its testing would be admissible if otherwise properly received by the police.
The blood was taken at the direction of a physician for use in testing for medical purposes and the implied consent is limited to those purposes. By consenting to the blood being taken for medical reasons, defendant has not consented to it being used for other purposes, nor has he granted to hospital personnel the right to *330 do with it as they will. Following the law and common practice, it is normally expected that a patient's disclosures to a hospital will be kept confidential. Absent legal process a hospital has a duty to release a patient's privileged information only to those authorized by the patient to receive it. Thurman v. Crawford, 652 S.W.2d 240, 242 (Mo.App.1983). It was reasonable to anticipate that when the hospital was through with the blood it would be discarded in a manner maintaining confidentiality.
The state relies extensively on People v. Dolan, 95 Misc. 2d 470, 408 N.Y.S.2d 249 (1978). Except that probable cause that the defendant was operating a vehicle under the influence of alcohol was present, the facts are similar. There, at the request of a police officer without a warrant, hospital personnel surrendered blood samples of the defendant previously taken for medical reasons.
The court in Dolan found that the defendant gave the samples without any reservation of right or interest to the blood and that he had no standing to challenge the admissibility of the test taken of it. The court determined that the blood specimen was the "joint, mutual property of defendant and the hospital" and that the hospital's consent was sufficient to authorize the police to seize it. The opinion states that its ruling is "consistent with the rule that a third party's voluntary consent is binding on an absent, nonconsenting defendant, where joint occupants share common authority over the premises or property". It concludes that "one who gives up sole and exclusive possession, control or ownership of property has, in effect, removed the constitutional talisman protecting his reasonable right of privacy". 408 N.Y.S.2d at 252.
Putting objects in someone else's purse or bag, or otherwise placing them to be carried or physically held by another or leaving items in premises with joint access may extinguish any expectation of privacy as to that object. However, an expectation of privacy still exists when information or samples are given to a hospital. Traditionally, and as provided by law, information received by a hospital from a patient related to treatment is kept confidential. Placing the goods in another's effects or on joint premises is done with knowledge that they could allow someone to search their property or enter the premises. That decision is generally not regulated by law. A hospital by custom and law is held to a higher standard of confidentiality. It can be expected that hospitals will have rules for their personnel by which they will only disclose such information with patient authorization, or as required by warrant or other court document.
We do not agree that allowing a sample of blood to be taken gives up the expectation to or the right of privacy to it or its testing. That they would be given to law enforcement personnel is not expected when blood samples are taken as an aid to medical care. For the above reasons we decline to follow Dolan.[3]
Defendant cannot be deemed to have given consent to the seizure of his blood under § 577.020, RSMo Supp.1982 (since amended). That section provides consent if the person operating the vehicle is "arrested for any offense arising out of acts which the arresting officer had reasonable grounds to believe were committed while the person was driving a motor vehicle while in an intoxicated or drugged condition." § 577.020.1, RSMo Supp.1982.
At the time the blood was drawn from him and when it was seized defendant had *331 not been arrested and there was no probable cause to believe that he had committed any offense. At best the police could only speculate that the defendant might have consumed alcoholic beverages. No containers of alcoholic beverages were in defendant's van and there was no evidence of alcohol on his breath or of improper driving on defendant's part.
Under § 577.020.1, RSMo Supp.1982, arrest upon probable cause is a prerequisite to the consent being deemed. If probable cause existed only after the blood was seized it came too late to make consent valid. To allow probable cause shown later to relate back would eliminate it as a requirement. Also, as the state acknowledges, the procedures required by that section were not followed when the blood was drawn from defendant. Thus, we need not decide whether a person must always be arrested before there is consent to having the blood taken or tested or whether defendant's physical condition affected the arrest requirement.[4]
We conclude that the trial court correctly sustained defendant's motion and affirm its order so ruling.
HOGAN, P.J., and CROW, J., concur.
MAUS, J., recused.
NOTES
[1] New Jersey has recently decided to balance a patient's interest in the confidentiality of hospital records of blood testing by requiring that a reasonable basis to believe that the operator was intoxicated be shown before they can be used. State v. Dyal, 97 N.J. 229, 478 A.2d 390 (1984).
[2] Section 577.037.1, RSMo Supp.1983 states: "Upon the trial of any person for violation of any of the provisions of section 577.005, 577.008, 577.010, or 577.012, or upon the trial of any criminal action or violations of county or municipal ordinances arising out of acts alleged to have been committed by any person while driving a motor vehicle while in an intoxicated condition, the amount of alcohol in the person's blood at the time of the act alleged as shown by any chemical analysis of the person's blood, breath, saliva or urine is admissible in evidence and the provisions of subdivision (5) of section 491.060, RSMo, shall not prevent the admissibility or introduction of such evidence if otherwise admissible. If there was ten-hundredths of one percent or more by weight of alcohol in the person's blood, this shall be prima facie evidence that the person was intoxicated at the time the specimen was taken.
[3] Dolan relies in part upon State v. Smith, 12 Wash.App. 720, 531 P.2d 843 (1975), holding a seizure of a hospital patient's clothes put in a joint area not to violate the fourth amendment. That holding has been criticized and not followed. See Commonwealth v. Silo, 480 Pa. 15, 389 A.2d 62 (1978), cert. denied, 439 U.S. 1132, 99 S. Ct. 1053, 59 L. Ed. 2d 94, reh'g denied, 440 U.S. 969, 99 S. Ct. 1522, 59 L. Ed. 2d 785 (1979). See also Morris v. Commonwealth, 208 Va. 331, 157 S.E.2d 191 (1967). (Holding that seizure of hospital patient's clothing is in violation of the rights provided by the fourth amendment to the United States Constitution.) Our holding is limited to the seizure of blood at the time taken.
[4] Missouri has not expressly eliminated the necessity of arrest for the consent of a person dead, unconscious or otherwise in a condition incapable of refusing to take a test, although they are deemed not to have withdrawn the consent. § 577.033, RSMo Supp.1982 (since amended, see RSMo Supp.1983). Some states have enacted statutes eliminating arrest as a requirement to consent, when a vehicle operator is in a condition that makes an arrest difficult or impossible. See Galvan v. State, 655 P.2d 155, 156 (Nev.1982); State v. Boner, 186 N.W.2d 161, 163 (Iowa 1971). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542040/ | 76 B.R. 85 (1987)
In re BELLE ISLE FARM, a Virginia partnership, Debtor.
BELLE ISLE COMPANY, INC., Plaintiff,
v.
BELLE ISLE FARM, Defendant.
Bankruptcy No. 87-00624-R, Adv. No. 87-0156-R.
United States Bankruptcy Court, E.D. Virginia, Richmond Division.
June 23, 1987.
*86 Benjamin C. Ackerly, Hunton & Williams, Richmond, Va., for plaintiff.
Paul D. Scanlon, Fairfax, Va., for defendant.
MEMORANDUM OPINION
BLACKWELL N. SHELLEY, Bankruptcy Judge.
This matter came before the Court on the motion for relief from stay filed April 13, 1987 by Belle Isle Company, Inc. At the conclusion of a preliminary hearing conducted on May 12, 1987, the Court set the matter for a final hearing on June 8, 1978 and directed counsel to submit briefs on the issues raised by the pleadings and the evidence adduced at the preliminary hearing. At the final hearing the Court heard oral argument. Based upon the pleadings, the evidence before the Court and the argument of counsel, the Court renders the following determinations.
Background
The debtor in this proceeding, Belle Isle Farm, a Virginia partnership ("partnership" or "debtor") filed a petition for relief under Chapter 12 of the Bankruptcy Code on March 27, 1987. The plaintiff herein, Belle Isle Company, Inc. ("Company") is a creditor of the debtor, in that the Company holds two notes, each secured by a first lien deed of trust on a parcel of real estate consisting of 450 acres of farm and wetlands in Lancaster County, Virginia ("Property") and constituting a portion of the land being farmed by the Chapter 12 debtor.
Although the debtor claims this parcel of land to be partnership property, the records of the Clerk's Office of the Circuit Court of Lancaster County show that the Property is in fact titled in the individual names of Edward G. Gruis and his wife, Rosemary N. Gruis, as tenants by the entirety with right of survivorship as at common law as to one-half undivided interest, and in the name of Henry G. Gillette, as to one-half undivided interest.
The notes which the Company holds on the Property are currently in default and the Company has moved for relief from the automatic stay to foreclose upon it. In its motion, the Company asserts as its grounds for relief that the debtor is not, in fact, a partnership under Virginia law, and that, even if it were determined to be a partnership, the Property is not partnership property subject to the provisions of the automatic stay of 11 U.S.C. § 362(a).
Findings of Fact
In 1980, Mr. and Mrs. Gruis and Mr. Gillette purchased the Property, as well as *87 another tract of land in Lancaster County, as tenants in commonthe Gruises receiving a one-half interest and Mr. Gillette a one-half interest in each tract. Contemporaneously with this transaction, Mr. and Mrs. Gruis purchased a third 74.5 acre parcel of land themselves. All three parcels together make up what is known traditionally as Belle Isle Farm. Currently, 180 acres of the 450 acres making up the Property is devoted to farming operations of the debtor.
The evidence adduced at the preliminary hearing revealed that Mrs. Gruis and Mr. Gillette made all of the operational decisions concerning the farm. Mr. Gillette performed the actual planting and harvesting of crops whereas Mrs. Gruis took an active part in the farm's management. Mr. Gruis, on the other hand, played an admittedly passive role in the conduct of farming activities. As an attorney with little background in farming, Mr. Gruis served essentially as a record keeper, dealing with matters at the administrative end of the spectrum.
Pursuant to the parties' understanding and practice, proceeds generated from the sale of farm crops were split evenly between Mr. Gillette and Mrs. Gruis, with each depositing his or her share into his or her own checking account. Mrs. Gruis testified that checks for her share of the receipts were normally made out to her, rather than to both her husband and herself. There was no account solely in the partnership name, although Mr. Gillette testified that his checks bore the printed inscription "Belle Isle Farm" above his name.
All three of the asserted general partners testified that they believed Belle Isle Farm was operated as a partnership; however, it was conceded that no partnership tax forms were ever filed with the Internal Revenue Service and that real estate taxes on the property were billed to Mr. and Mrs. Gruis and Mr. Gillette on the subject property. Likewise no partnership certificate was filed by the debtor pursuant to § 50-74 of the Virginia Code until after the filing of the Chapter 12 petition and the institution of this action.
It appears from the testimony that each of the parties intended to deal separately with his respective interest in the real property making up Belle Isle Farm. As examples, Mr. Gillette personally borrowed funds totalling $80,000 secured by deeds of trust on his one-half interest in the Property, there was no partnership accounting for proceeds from a $98,000 loan obtained by Mrs. Gruis and Mr. Gillette,[1] and when negotiations for a sale of the Property had been entered into, it was the prospective purchaser's testimony that the parties made clear to him that the Gruises and Mr. Gillette were to be dealt with as separate entities, completely independent of one another to the extent that the prospective purchaser was instructed by the Gruises to negotiate directly with Gillette about his half interest in the real estate.
No lease ever existed between the individual owners and the alleged partnership for the use of the Property, and the one parcel of land consisting of 74.5 acres, occupied in part as the residence of the Gruises, was entirely owned by them and they deny that Gillette had any interest in that parcel even though part of it was farmed by him.
Conclusions of Law
The definition of a partnership under the Uniform Partnership Act as adopted by Virginia in § 50-1 et seq. of the Virginia Code, is "an association of two or more persons to carry on as co-owners a business for profit." Va.Code § 50-6. In determining whether a partnership exists, the Partnership Act explains further that "joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property or part ownership does not of itself establish a partnership," Va.Code § 50-7(2), nor does the "sharing of gross returns . . . whether or not the persons sharing them have a joint or common right *88 to interest in any property from which the returns are derived." Va.Code § 50-7(3). The case law interpreting these provisions bears out the point that in order for a partnership to exist, more than common or joint ownership is necessary to establish a partnership. See Cooper v. Spencer, 218 Va. 541, 238 S.E.2d 805 (1977). Neither will the simple appellation of "partnership" by the alleged partners suffice to establish that a partnership exists. Kennedy v. Mullins, 155 Va. 166, 154 S.E. 568 (1930).
Although a written agreement to form a partnership is not required by Virginia law, there must be evidence of an oral agreement at the very least. See Cooper v. Knox, 197 Va. 602, 90 S.E.2d 844 (1956). Once the agreement is reached, the partnership must actually be conducted as a partnership. Cullingworth v. Pollard, 201 Va. 498, 111 S.E.2d 810 (1960). "Conducting the business as a partnership" translates to possessing a community of interest among all members and granting joint authority among all partners over the administration and control of the business and its property. Id., 201 Va. at 505, 111 S.E.2d 810.
The only evidence which this Court has before it that a partnership exists between the Gruises and Mr. Gillette is the joint ownership of the Property as tenants in common and the splitting of proceeds and expenses between Mrs. Gruis and Mr. Gillette. Clearly there was no written partnership agreement and there likewise appears to have been no oral agreement made when the farming operations of the Gruises and Mr. Gillette were begun at Belle Isle Farm in 1980.
It is apparent to this Court that no assets involved in the business dealings of these three individuals were intended to be treated as those of the partnership. The individual interests in the land were dealt with separately, there were no jointly held partnership funds and the property used in the farming operationboth real and personal was not acquired in the partnership name. The farming equipment was encumbered with a bank loan made only to Mrs. Gruis and Mr. Gillette and the funds received from the loan were expended for each of their own purposes. This conduct, coupled with the failure to file partnership tax returns and the delay in filing a partnership certificate suffices to convince this Court that Belle Isle Farm cannot be viewed as a partnership under Virginia law or for the purposes of this Chapter 12 petition.
However, even if a partnership were found to exist in this case, the Property which the Company seeks to foreclose upon simply is not partnership property. This 450-acre parcel is held by three individuals, a husband and wife owning a one-half interest, with a third individual owning the other one-half interest. It was neither acquired as tenants in co-partnership nor titled in the partnership name. Furthermore, the Property has been treated by the parties as if their interests are independent of each other. Mr. Gillette encumbered his portion of the Property to receive a personal loan. Likewise, the Gruises, independently of Mr. Gillette, have negotiated with the Company for the sale of their interest in the land. No mutual or common decisions appear to have been made with respect to the land, and apparently this is precisely what the Gruises and Mr. Gillette intended.
Clearly, the 450-acre parcel was not purchased with partnership funds; rather, the individuals in this venture paid for their separate interests in the land and there is no evidence indicating an intent to deal with the Property as if it belonged to Belle Isle Farm partnership instead of these three individuals. In addition, there is nothing in the record of this proceeding establishing either a lease of record or an otherwise informal lease arrangement with regard to the Property. If the alleged general partners had intended the real estate to be viewed as partnership property, this could have been easily accomplished by lease or deed to Belle Isle partnership from the Gruises and Mr. Gillette.
The parties are not privileged to assert the existence of a partnership where it will best suit their purposes and at the same time ignore the fundamental and basic requirements *89 relating to the use and disposition of partnership properties. See In re Decker, 295 F. Supp. 501 (W.D.Va.1969), affirmed, 420 F.2d 378 (4th Cir.1970). Therefore, the Court finding that the debtor in this proceeding is not a partnership under Virginia law, and secondly, assuming arguendo that it is, the 450-acre tract of land at issue is not partnership property, it is the opinion of this Court that the debtor, Belle Isle Farm, is not entitled to the protection afforded by the automatic stay of 11 U.S.C. § 362(a) and that the relief requested by Belle Isle Company, Inc. should be granted.
An appropriate Order will issue.
NOTES
[1] It might be noted that when this loan was negotiated the documents showed that Rosemary N. Gruis and Henry G. Gillette were partners in Belle Isle Farm. Edward G. Gruis was not included as a partner. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542055/ | 76 B.R. 62 (1987)
In re Patrick J. BURKE and Shirley A. Burke, Debtors.
Bankruptcy No. 85-166.
United States Bankruptcy Court, D. Vermont.
May 16, 1987.
Gary W. Cruickshank, Boston, Mass., for Robert MacArthur/Regenesis (Regenesis).
Joseph C. Palmisano, Barre, Vt., for Patrick and Shirley Burke (debtors).
ORDER DENYING MOTION FOR RECONSIDERATION
FRANCIS G. CONRAD, Bankruptcy Judge.
Regenesis, an unsecured creditor, moves to have us reconsider the disallowance of its late-filed claim on the grounds that it didn't have notice its claim was disputed. Because we find that Regenesis' untimely filing of its proof of claim resulted from a tactical course of conduct rather than from lack of notice, we deny its motion to reconsider the disallowance of its proof of claim.
The facts in this proceeding are derived from the case record, the pleadings, and argument of counsel.[1]
Regenesis, a Massachusetts corporation, is organized for the purpose of providing economically distressed individuals with assistance in alleviating their financial difficulties. Between June and August, 1985, *63 debtors consulted principals of Regenesis regarding an Internal Revenue Service lien. Workouts were proposed but all failed to solve the debtors' problem. On September 12, 1985, the debtors filed a voluntary Chapter 11 petition under Title 11 of the United States Code, 11 U.S.C. § 101, et seq.
Regenesis assisted the debtors with the preparation of the bankruptcy schedules. As a result of this assistance, Regenesis alleges it was under the impression that its claim for services rendered was listed in the bankruptcy schedules as undisputed, uncontingent, and liquidated. On the original schedule, filed with this Court, however, Regenesis' claim for $6,317.00 is listed as unliquidated.
Regenesis actively participated in the debtors' bankruptcy administration. They attended the first meeting of creditors held pursuant to 11 U.S.C. § 341. They raised and filed objections to a proposed sale, albeit several days late. They objected to the debtors' disclosure statement but chose not to attend the disclosure statement hearing, stating that due to geographical location and prior scheduling conflicts, neither MacArthur nor Cruickshank (Regenesis' attorney) could attend.[2]
Subsequent to the disclosure statement disapproval, the debtors filed a motion to amend Schedule A-3. The amendment changed Regenesis' claim from unliquidated to disputed. Presumably, notice of the amended schedule was the first notice Regenesis received pertaining to its proof of claim filing responsibility. In any event, Regenesis filed a proof of claim on August 22, 1986. It was disallowed as being late-filed.[3] Alleging improper notice, Regenesis filed this motion to reconsider the disallowance of its claim.
The issue before us is whether Regenesis' late-filed claim should be allowed because it had insufficient notice about the disputed status of the claim.
A creditor's knowledge that a proceeding to reorganize has been undertaken does not put a duty on them to inquire about possible Court Orders limiting the time for filing claims. City of New York v. New York, N.H. & H.R. Co., 344 U.S. 293, 73 S. Ct. 299, 97 L. Ed. 333 (1953). In City of New York, id., the United States Supreme Court held that regardless of a creditor's awareness of bankruptcy proceedings, they may assume reasonable notification before a Court may bar their claim. Accord, In re Robintech, Inc., 69 B.R. 663 (Bkrtcy.N.D.Tx.1987); Matter of Siegler Bottling Co., 65 B.R. 117 (Bkrtcy.S.D.Ohio 1986); In re Middle Plantation of Williamsburg, 36 B.R. 873, 10 C.B.C.2d 191, 11 B.C.D. 680 (Bkrtcy.E.D.Va.1984); however, we find these cases to be distinguishable from the instant proceeding.
In City of New York, supra, 344 U.S. 293, 73 S. Ct. 299, 97 L. Ed. 333 (1953) the City of New York never received a copy of the bar Order. In the proceeding at hand, Regenesis received notice of the bar date. In Robintech, supra, 69 B.R. 663 (Bkrtcy.N.D.Tx.1987), a proof of claim was filed late because of the debtor's negligence in misaddressing the notice. Citing City of New York, supra, 344 US at 297, 73 S.Ct. at 301, 97 L.Ed. at 337, the Court in Robintech, id., at 665 stated: "a creditor has the right to assume that proper, adequate and constitutional notice will be provided before its claim is forever barred." The notice to Regenesis was properly addressed, mailed, and received.
Siegler, supra, 65 B.R. 117, involved a Chapter 11 filing that did not initially reflect whether the creditor's claims were contingent, disputed, and/or unliquidated. There, the debtor reserved the right to *64 make its determination at a later date. A bar date notice was sent after the § 341 meeting. Subsequently, a Schedule A-3 was filed by the debtor that listed all claims as either contingent, unliquidated, or disputed. Based on the facts, Judge Walden held at id., 120 (that) "while it is not necessary to reach . . . a conclusion concerning Bankr.R. 3003, it is necessary for the court to direct that specific notice of their classification be given to creditors who have not otherwise filed a proof of claim . . . (and) who have not been afforded the notice demanded by due process . . ." Again, this is not analogous to the instant motion. The debtors indicated on their filed Schedule A-3 the specific status of each claim.
Regenesis is clearly not the type of creditor discussed in the cases, supra. They chartered their own fate by their tactical decision to actively participate in this case, pre-petition and post-petition, and at the same time ignored the status of their claim. They attended the § 341 meeting, at which the debtors' schedules were present. They could have asked to look at them, then and there. They objected to a sale of property and the first disclosure statement, and then chose not to attend.
During the course of this case Regenesis has shown itself to be a sophisticated and aggressive creditor. The "law presumes that the prudent creditor will make inquiry as to (sic) his duties in order to share in the distribution of a debtors (sic) estate." In re V-M Corp., 23 B.R. 952, 957 (Bkrtcy.W. D.Mi.1982). Regenesis cannot now be heard to complain about lack of due process due to their own tactics. "The fundamental requirement of due process is the opportunity to be heard at `a meaningful time and in a meaningful manner.'" Brock, Secretary of Labor v. Roadway Express, Inc., ___ U.S. ___, ___, 107 S. Ct. 1740, 1747, 95 L. Ed. 2d 239 (1987), (citing Mathews v. Eldridge, 424 U.S. 319, 333, 96 S. Ct. 893, 902, 47 L. Ed. 2d 18 [1976]). Regenesis was provided and received notice about the filing of proof of claims. This was their opportunity to protect themselves. They intentionally chose not to do so. Accordingly,
It is ORDERED that the motion of Regenesis to reconsider the disallowance of their claim is DENIED.
NOTES
[1] We have jurisdiction in this matter under 28 U.S.C. § 1334(b). This is a core matter under 28 U.S.C. § 157(b)(2)(B). This Order shall constitute findings of fact and conclusions of law under Rules of Bankruptcy Practice and Procedure Rule 7052.
[2] We took Regenesis' objection into consideration when we denied approval of the disclosure statement. Regenesis' objection showed it to be knowledgeable about bankruptcy law and procedure.
[3] As allowed by Rule, and after the § 341 meeting, we set December 20, 1985 as the last date for filing a claim. The bar notice was sent to Regenesis. Regenesis does not deny that it received the notice. Because Regenesis' claim was originally listed as disputed, it was required to file a proof of claim. See Rules of Bankruptcy Practice and Procedure Rule 3003(c)(3). See also Rule 2002(a)(8) requiring that notice of a bar date may be given not less than twenty days prior to the time set. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1734325/ | 774 So. 2d 972 (2000)
STATE of Louisiana
v.
Gregory DAVIS.
No. 2000-K-1093.
Supreme Court of Louisiana.
November 17, 2000.
Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3036339/ | Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
8-5-2008
Kloth v. So Christian Univ
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-3376
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
Nos. 07-3376 & 07-4598
___________
JOAN T. KLOTH,
Appellant
v.
SOUTHERN CHRISTIAN UNIVERSITY;
BOARD OF DIRECTORS
____________________________________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 06-cv-00244)
District Judge: Honorable Sue L. Robinson
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
July 16, 2008
Before: SLOVITER, BARRY and NYGAARD, Circuit Judges
(filed: August 5, 2008 )
_________
OPINION
_________
PER CURIAM
Pro se litigant Joan T. Kloth appeals from the dismissal of her complaint for lack
of personal jurisdiction and the denial of her motion for reconsideration by the United
States District Court for the District of Delaware. We agree with the District Court that
Kloth did not allege facts sufficient to establish personal jurisdiction over Defendants.
We will affirm.
I.
Sometime between April 2000 and September 2001, while domiciled in
Connecticut, Kloth learned about Southern Christian University’s (“SCU”) distance
learning program for obtaining a dual masters degree in Marriage and Family Therapy
and Professional Counseling. SCU, a higher education university whose main campus is
in Montgomery, Alabama, operates a “distance learning program” in which students
complete all of the course work for the program online. The program also requires
completion of a certain number of clinical hours to obtain their final degree.
Kloth contacted SCU’s Graduate Advisor for the School of Human Services who
advised her that she could complete her Masters degree in two years and one course if she
attended full-time, taking three to four courses per semester. Kloth specifically inquired
about SCU’s pending Commission on Accreditation for Marriage and Family Therapy
Education (“COAMFTE”) and whether her non-Christian affiliation was an issue and was
assured by email that the school was accredited and, by the time of her graduation, would
be COAMFTE certified. She was also assured that her religious affiliation would not be
an issue.
In January 2002, Kloth enrolled in the program and began taking courses from her
home in Connecticut, communicating with SCU’s administrators and professors by phone
2
and email. From January 2002 through February 2005, Kloth took 15 online classes.
During the spring of 2003, Kloth began searching for a training site where she could
fulfill the clinical hours she needed to complete her degree. SCU did not assist Kloth in
this process, advising her that it was the student’s sole responsibility to find a clinical site.
Although she found many sites, none would accept her—apparently because of the
distance learning aspect of her program and because of the school’s unwillingness to
communicate with the training sites.
In early 2003, Kloth informed her classmates and her professors about her Jewish
faith. As a result, she began experiencing problems with two Christian students and with
two professors who Kloth felt were disrespecting her.
In or about February 2005, Kloth moved to Delaware to continue searching for a
clinical training site as part of her required course work. Despite her repeated attempts
and large number of inquiries, Kloth was unsuccessful in finding a clinical placement.
She took two more classes online through the SCU distance learning program, but
ultimately discontinued her studies at SCU, in or about August 2005.
Kloth brought suit against SCU and its Board of Directors (collectively
“Defendants”) in the District of Delaware. She alleges that Defendants breached an
implied contract to provide her with a complete education. She also alleges discrimination
on the basis of religion, presumably in violation of Title VII of the Federal Civil Rights
Act of 1964.
3
The District Court granted Defendants’ motion to dismiss for lack of personal
jurisdiction. This appeal followed.
II.
We exercise jurisdiction pursuant to 28 U.S.C. § 1291, engaging in plenary review
of the District Court’s personal jurisdiction determination. See Yarris v. County of Del.,
465 F.3d 129, 134 (3d Cir. 2006); IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 258 (3d
Cir. 1998). We review the District Court’s denial of reconsideration for abuse of
discretion. See Alston v. Parker, 363 F.3d 229, 233 (3d Cir. 2004).
III.
For a court to exercise personal jurisdiction over a defendant, that defendant must
have sufficient “minimum contacts” with the forum state, such that subjecting the
defendant to the court’s jurisdiction “comports with traditional notions of fair play and
substantial justice.” See Toys ‘R’ Us, Inc. v. Step Two, S.A., 318 F.3d 446, 451 (3d Cir.
2003) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985); Int’l Shoe Co.
v. Wash., 326 U.S. 310, 316 (1945)). When a defendant moves to dismiss for lack of
personal jurisdiction, the plaintiff must establish at least a prima facie case for personal
jurisdiction, with all of plaintiff’s allegations taken as true and all factual disputes resolved
in her favor. See Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004).
A two-prong analysis is applied to determine whether a plaintiff has carried her
burden. First, the court considers whether service was authorized by statute, in this case
4
under Delaware’s long-arm statute, 10 Del. C. § 3104.1 IMO Indus., 155 F.3d at 258-59.
If the state statutory requirements are met, the court determines whether exercise of
jurisdiction over the nonresident defendant satisfies due process by considering whether
sufficient minimum contacts have occurred between the forum state and the defendant. Id.
at 259.
Delaware’s long-arm statute permits the exercise of personal jurisdiction over a
nonresident who, either in person or through an agent:
(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply services or things in this State;
***
(4) Causes tortious injury in the State or outside of the State by an act or omission
outside the State if the person regularly does or solicits business, engages in any
other persistent course of conduct in the State or derives substantial revenue from
services, or things used or consumed in the State; . . . .
10 Del. C. § 3104(c). Delaware courts interpret §§ 3104(c)(1), (c)(2), as specific
jurisdiction sections, requiring that some action by the defendant occur within Delaware.
See LaNuova, 513 A.2d at 768; Outokumpu Eng’g Enters., Inc. v. Kvaerner EnviroPower,
Inc., 685 A.2d 724, 729 (Del. 1996). Section 3104(c)(4) is interpreted as a general
jurisdiction provision, meaning the defendant’s contacts with the forum state may be
unrelated to the alleged injury. See LaNuova, 513 A.2d at 768.
1
The Federal Rules of Civil Procedure provide that “a federal district court may assert
personal jurisdiction over a nonresident of the state in which the court sits to the extent
authorized by the law of that state.” Provident Nat’l Bank v. Cal. Fed. Sav. & Loan
Ass’n, 819 F.2d 434, 437 (3d Cir. 1987). The Delaware long-arm statute, 10 Del. C. §
3104(c), confers jurisdiction to the maximum extent possible under the due process
clause. See LaNuova D&B S.p.A. v. Bowe Co., 513 A.2d 764, 768 (Del. 1986).
5
Kloth claims that Defendants satisfy sections (1), (2) and (4).2 Kloth does not
dispute that Defendants’ contacts with Delaware consist of Defendants’ Web site which is
accessible nationwide, Kloth’s temporary residence in Delaware during a portion of her
studies, and one other SCU student’s residence. The issue is whether these contacts are
sufficient to satisfy Delaware’s long-arm statute.
A. Specific Jurisdiction
“Specific jurisdiction exists when the claim arises from or relates to conduct
purposely directed at the forum state.” Marten v. Godwin, 499 F.3d 290, 296 (3d Cir.
2007) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 &
n.8 (1984)). Here, the District Court properly considered whether SCU’s Web site was
specifically designed to interact with residents of Delaware and concluded that Appellants
had not “purposefully availed” themselves of doing business with Delaware citizens.
(App. at A-19-20 (citing Toys “R” Us, 318 F.3d at 452).)
Kloth argues that the District Court erred in its interpretation of Zippo
Manufacturing. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1125-28 (W.D. Pa. 1997),
one of the seminal authorities regarding personal jurisdiction based upon the operation of
2
Specifically, she claims that Defendants transact business and perform services when
they deliver their educational product to students residing in Delaware. Defendants
accept student papers and tests, grade them and return them to students via the Internet.
She claims Defendants satisfy (2) because they breached the implied contract that they
had entered with her for the provision of educational services and degree award. Finally,
Kloth argues that (4) is satisfied because Defendants delivered educational services to her
in Delaware, and were aware of her residence there.
6
an Internet Web site. See Toys “R” Us, 318 F.3d at 452. The court in Zippo stressed that
whether jurisdiction is proper “depends on where on a sliding scale of commercial
interactivity the web site falls.” Id. Where a defendant is “clearly doing business through
its web site in the forum state, and where the claim relates to or arises out of use of the
web site, the Zippo court held that personal jurisdiction exists.” Id. (citing Zippo, 952 F.
Supp. at 1124). To make this determination, the Zippo court focused on whether the
interactivity of a commercial Web site reflects “purposeful availment” or intended
interaction with residents of the forum state. See id. (citation omitted). Purposeful
availment is demonstrated when a defendant “(1) directs electronic activity into the State,
(2) with the manifested intent of engaging in business or other interactions within the
State, and (3) that activity creates, in a person within the State, a potential cause of action
cognizable in the State’s courts.” Toys “R” Us, 318 F.3d at 453 (citation omitted).
Kloth claims that SCU’s Web site satisfies the test in Zippo because it is
“interactive.” Specifically, she argues that SCU’s use of a proprietary software dubbed
“Blackboard” facilitated the correspondence between Kloth, her professors and her
classmates. However, to demonstrate a prima facie case for the exercise of personal
jurisdiction, Kloth must show more than mere interactivity; she must also show that, by
using software that facilitates distance learning, SCU intended to engage in business with
student citizens of Delaware—the forum state.
Kloth’s reliance on Zippo is unavailing. The defendant in Zippo sold passwords to
7
approximately 3,000 subscribers in Pennsylvania and entered into seven contracts with
Internet access providers to furnish its services to customers in Pennsylvania. By contrast,
here there is no evidence that SCU targeted its Web site to potential students in Delaware,
nor that the school engaged in business with any one in Delaware other than Kloth and one
other student. The existence of Blackboard demonstrates only that SCU intends to allow
its students to attend classes and communicate with their classmates and professors when
they are not at SCU’s physical campus.
As the District Court observed, although SCU certainly could have foreseen that
students from Delaware, or any other state, might choose to participate in their distance
learning program because the Web site is accessible to a nationwide (indeed, global)
audience, this foreseeability alone cannot satisfy the purposeful availment requirement.
See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980) (noting that
“foreseeability” alone has never been a sufficient benchmark for personal jurisdiction
under the Due Process Clause). Thus, Kloth has failed to demonstrate a prima facie case
for the exercise of personal jurisdiction based on Delaware’s long-arm statute, §
3104(c)(1).
Subsection (c)(2) allows a court to exercise specific jurisdiction over defendants if
they contracted to provide services or things in Delaware. However, as previously noted,
there is no evidence that SCU intended to provide educational services specific to
Delaware citizens. See Mendelson v. Del. River & Bay Auth., 56 F. Supp. 2d 436, 438-49
8
(D. Del. 1999) (finding specific jurisdiction where company contracted to provide a
custom-made set of fire doors designed specifically for a Delaware ferry). In Mendelson,
the court found that the defendant “did not simply contract to supply a generic or fungible
set of mass-produced doors which could fit into any frame in any wall in any ship or
building in the nation,” but instead knew “that the doors were going to be installed in a
vessel that was going to not only be moored or anchored in the State but also transport cars
and passengers within Delaware territorial waters.” Id. Here, even assuming SCU knew
Kloth had temporarily moved to Delaware during her studies, Kloth has not proffered
evidence that SCU purposely targeted the contents of their Web site or other distance
learning materials toward Delaware citizens. Indeed, she does not dispute that she
initiated her enrollment in SCU while domiciled in Connecticut, and only moved to
Delaware on a temporary basis several years later.3 Indeed, SCU’s records show Kloth’s
address to be Connecticut during her entire enrollment. Apparently, Kloth never changed
her records to reflect her move to Delaware.
Because Kloth has not met her prima facie burden, the District Court properly
dismissed her claim for lack of personal jurisdiction pursuant to a specific jurisdiction
theory.
B. General Jurisdiction
For substantially the reasons stated by the District Court, we agree that Defendants’
3
Kloth did not contest any of the facts put forth by SCU in support of its motion to
dismiss before the District Court, nor does she do so in her brief before this Court.
9
maintenance of a Web site that posts information about the school and is accessible to
potential students in foreign jurisdictions is insufficient to subject a non-resident defendant
to general jurisdiction. See, e.g., Gehling v. St. George’s Sch. of Med., Ltd., 773 F.2d
539, 541-42 (3d Cir. 1985) (holding that St. George’s School of Medicine, a West Indies
institution, did not have a sufficient nexus to Pennsylvania to subject the school to general
jurisdiction, despite the fact that St. George’s advertised in national newspapers that
circulated in Pennsylvania; counted Pennsylvania residents among its student body; sent
school representatives to Philadelphia as part of a “media swing” intended to raise St.
George’s profile; and entered into an agreement with a Pennsylvania college to establish a
joint international program combining pre-medical studies in Pennsylvania with medical
training in Grenada); see also Gallant v. Trs. of Columbia Univ. in City of N.Y., 111 F.
Supp. 2d 638 (E.D. Pa. 2000); Park v. Oxford Univ., 35 F. Supp. 2d 1165 (N.D. Cal.
1997), aff’d, Park v. Oxford Univ., 165 F.3d 917 (9th Cir. 1998); Hardnett v. Duquesne
Univ., 897 F. Supp. 920 (D. Md. 1995); Ross v. Creighton Univ., 740 F. Supp. 1319 (N.D.
Ill. 1990), rev’d in part on other grounds, 957 F.2d 410 (7th Cir. 1992).4
Because our affirmance is based on a lack of jurisdiction, rather than on the merits,
it is without prejudice to the Appellant’s right to move in the District Court for a transfer
pursuant to 28 U.S.C. § 1406. See Goldlawr, Inc., Heiman, 369 U.S.C. 463 (1962);
4
Because Defendants do not have sufficient contacts with Delaware to meet the
requirements of Delaware’s long-arm statute, § 3104(c), we need not proceed to the
second part of the analysis, examining whether the assertion of jurisdiction comports with
the due process guarantees of the Fourteenth Amendment.
10
Schwilm v. Holbrook, 661 F.2d 12 (3d Cir. 1981). Indeed, the District Court’s conclusion
that there is no personal jurisdiction does not preclude its authority to transfer the case for
venue reasons. 28 U.S.C. § 1406(a); see also Lafferty v. St. Riel, 495 F.3d 72, 77 (3d Cir.
2007).
C. Motion for Reconsideration
Finally, we conclude that the District Court did not abuse its discretion by denying
Kloth’s motion for reconsideration. United States v. Herrold, 962 F.2d 1131, 1136 (3d
Cir. 1992). The Court’s October 17, 2007 Memorandum Order thoroughly considered
Kloth’s arguments in support of her motion and properly concluded that she had failed to
demonstrate that the new facts alleged constituted “new evidence that was not available”
when the court issued its July 16, 2007 memorandum opinion, that a change in controlling
law occurred, or that any other clear error of law or fact occurred. Max’s Seafood Café ex
rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (the purpose of a motion
for reconsideration is to “correct manifest errors of law or fact or to present newly
discovered evidence.”).
For the foregoing reasons, we will affirm the District Court’s judgment. Kloth’s
motion to file a supplemental brief is granted. Appellees’ motion to strike Kloth’s
supplemental filing is denied. Kloth’s motion to change venue is denied. Kloth’s motions
entitled “Motion to Include the Federal Education, House and Senate Bill Definitions for
Distance Learning related to the Higher Education Act” and “Motion to Include the
11
Distance Education Demonstration Project of 1998,” construed as motions to supplement
or amend her brief, are denied.
12 | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/3085690/ | AFFIRM; and Opinion filed February 27, 2014.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-01003-CR
JOSEPH AARON PEREZ, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 194th Judicial District Court
Dallas County, Texas
Trial Court Cause No. F05-26451-M
MEMORANDUM OPINION
Before Justices Lang-Miers, Myers, and Lewis
Opinion by Justice Lang-Miers
Joseph Aaron Perez appeals following his conviction for aggravated robbery with a
deadly weapon. See TEX. PENAL CODE ANN. § 29.03(a) (West 2011). The trial court assessed
punishment at forty-five years’ imprisonment. The trial court’s judgment also includes an order
that appellant pay $400 in court costs. In a single issue, appellant contends there is insufficient
evidence in the record to support the trial court’s order that he pay $400 in court costs. We
affirm the trial court’s judgment.
Appellant contends the evidence is insufficient to support the trial court’s order that he
pay $400 in court costs because the clerk’s record does not contain a bill of costs. The State
responds that the record contains sufficient evidence to support a portion of the amount of costs
assessed by the trial court.
If a criminal action is appealed, “an officer of the court shall certify and sign a bill of
costs stating the costs that have been accrued and send the bill of costs to the court to which the
action or proceeding is . . . appealed.” TEX. CODE CRIM. PROC. ANN. art. 103.006 (West 2006).
Costs may not be collected from the person charged with the costs until a written bill, containing
the items of cost, is produced and signed by the officer who charged the cost or the officer
entitled to receive payment for the cost. Id. art. 103.001.
The clerk’s record in this case does not contain a copy of the bill of costs. We, however,
ordered the Dallas County District Clerk to file a supplemental record containing a certified bill
of costs associated with this case, and the clerk did so. See TEX. R. APP. P. 34.5(c)(1) (allowing
supplementation of clerk’s record if relevant items have been omitted). Appellant’s complaint
that the evidence is insufficient to support the imposition of costs because the clerk’s record did
not contain a bill of costs is now moot. See Coronel v. State, 416 S.W.3d 550, 555 (Tex. App.––
Dallas 2013, pet. ref’d); Franklin v. State, 402 S.W.3d 894, 895 (Tex. App.—Dallas 2013, no
pet.). We overrule his first issue.
In response to the Court’s order requiring supplementation of the records, appellant filed
an objection that the bill of costs in the supplemental record is not “proper bill[s] of costs” and
the bill of costs was not filed in the trial court or brought to the trial court’s attention before costs
were entered into the judgment. The Court rejected these objections and arguments in Coronel.
See Coronel, 416 S.W.3d at 555–56. We likewise reject them here, and conclude the cost bill
contained in the supplemental clerk’s record is sufficient to support the assessment of costs in the
judgment. See id. We overrule all of appellant’s objections to the supplemental clerk’s record.
-2-
We affirm the trial court’s judgment.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
Do Not Publish
TEX. R. APP. P. 47
131003F.U05
-3-
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
JOSEPH AARON PEREZ, Appellant Appeal from the 194th Judicial District
Court of Dallas County, Texas (Tr.Ct.No.
No. 05-13-01003-CR V. F05-26451-M).
Opinion delivered by Justice Lang-Miers,
THE STATE OF TEXAS, Appellee Justices Myers and Lewis participating.
Based on the Court’s opinion of this date, the trial court’s judgment is AFFIRMED.
Judgment entered February 27, 2014.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
-4- | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1057367/ | 949 A.2d 428 (2008)
2008 VT 24
STATE of Vermont
v.
Thomas S. SHARROW.
No. 06-056.
Supreme Court of Vermont.
March 7, 2008.
*430 Thomas Donovan, Jr., Chittenden County State's Attorney, and Pamela Hall Johnson, Deputy State's Attorney, Burlington, for Plaintiff-Appellee.
Matthew F. Valerio, Defender General, Anna Saxman, Deputy Defender General, and Robert Gardner, Law Clerk (on the Brief), Montpelier, for Defendant-Appellant.
Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
SKOGLUND, J.
¶ 1. Defendant Thomas S. Sharrow appeals from a conviction for attempted second degree murder following a jury trial in Chittenden District Court. Defendant argues that he was deprived of his right to an impartial jury when the trial court refused to excuse a police officer from the jury for cause. Defendant also argues that the court made a series of erroneous evidentiary rulings. Finally, defendant argues that the trial court erred in admitting evidence of a pending criminal charge without a grant of immunity. We conclude that neither the trial court's refusal to excuse the police officer from the jury nor its failure to grant defendant immunity constituted prejudicial error, and that defendant's evidentiary arguments either lack merit or were not preserved. We therefore affirm.
¶ 2. Defendant was charged with attempted murder after an altercation between defendant and the complainant, his then-girlfriend, that took place in the early morning of October 4, 2003 resulted in her receiving six knife wounds to her head, neck, arm and back. The State's theory of the case was that defendant, upset that the complainant had called the police after he *431 broke into her apartment and assaulted her on the evening of October 3, reentered the complainant's apartment early the next morning and repeatedly stabbed her. In a motion in limine, the State sought to admit four prior incidents of misconduct to provide context for the charged incident, including a July 2003 incident that resulted in charges of aggravated domestic assault against defendant that were still pending at the time of defendant's attempted murder trial. The trial court granted the State's motion as to all four incidents.
¶ 3. Defendant's version of events was different. Defendant asserted that the stab wounds the complainant sustained were the unintended result of a violent struggle that took place after the complainant came at defendant with a knife. Defendant claims that to support his theory of self defense at trial he wanted to elicit testimony about and enter into evidence a short story that the complainant had written and shared with defendant before the charged incident in which a woman stabs her lover with a corkscrew.[1] The State filed a motion to exclude the short story. The trial court barred defendant from introducing the story into evidence or using it to cross-examine the complainant in its decision on the State's motion, but ruled that defense counsel could question defendant about the story when he testified. The trial court also allowed defendant to impeach the complainant by asking whether, in the past, she had made a false report about an ex-boyfriend. The trial court did not, however, allow defendant to ask about specifics of the alleged report.
¶ 4. During the jury draw, defendant challenged for cause a venireperson who was employed as a police officer. Defendant argued that, in the past, the prospective juror had taught some of the law enforcement personnel the State planned to call as witnesses at the police academy and had worked with some of them in his capacity as a police officer. The challenge was denied, and defendant subsequently used his second preemptory challenge to strike the prospective juror. Defendant also challenged another prospective juror for cause on the grounds that she was an auxiliary police officer currently working in a lab with two witnesses from whom the State planned to elicit technical DNA evidence. The trial court excused this prospective juror for cause for this reason.
¶ 5. Defendant first argues that the trial court's failure to excuse the first prospective juror for cause deprived him of his right to an impartial jury. The State argues that defendant has failed to preserve this argument for appellate review. Without deciding whether defendant has, in fact, preserved this argument, we hold that the trial court did not err by failing to excuse the prospective juror for cause.
¶ 6. Criminal defendants have a constitutional right to trial by an impartial jury. U.S. Const. amend. VI ("[i]n all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial by an impartial jury"); Vt. Const. ch. I, art. 10 ("in all prosecutions for criminal offenses, a person hath a right to . . . a speedy public trial by an impartial jury"); see also State v. Holden, 136 Vt. 158, 160, 385 A.2d 1092, 1094 (1978). Trial courts must safeguard *432 this right by excluding from the jury persons who evince bias against the defendant.
¶ 7. "Traditionally, challenges for cause have been divided into two categories: (1) those based on actual bias, and (2) those grounded in implied bias." United States v. Torres, 128 F.3d 38, 43 (2d Cir.1997). In Vermont, we recognize both actual (or fixed) bias and implied bias as proper grounds for challenges for cause. See e.g., State v. Grega, 168 Vt. 363, 369-70, 721 A.2d 445, 450-51 (1998) (evaluating whether juror had fixed bias); State v. Percy, 156 Vt. 468, 478-79, 595 A.2d 248, 253-54 (1990) (evaluating both whether juror had fixed bias and whether this Court should infer bias); State v. Kelly, 131 Vt. 358, 360-61, 306 A.2d 89, 90 (1973) (evaluating whether trial court should have inferred bias). Courts must sustain a party's challenge for cause where the prospective juror demonstrates fixed bias or where the law infers that the prospective juror is biased. See Percy, 156 Vt. at 478-79, 595 A.2d at 253-54. Defendant argues that the court erred by denying defendant's for-cause challenge of the prospective juror on the basis of a perceived fixed bias. In the alternative, defendant urges us to hold that the law should infer that the prospective juror is biased.
¶ 8. A prospective juror has a fixed bias when, through his or her answers to questions posed on voir dire, the potential juror evinces a state of mind inconsistent with deciding the case fairly. Id. at 478, 595 A.2d at 253; see also Jones v. Shea, 148 Vt. 307, 309, 532 A.2d 571, 573 (1987) (holding that a potential juror is subject to challenge for cause if, under examination, the juror "exposes a state of mind evincing a fixed opinion, bias, or prejudice" (quotation omitted)). A prospective juror's statement that he may have trouble putting aside his prejudices, making a decision based only on the evidence, or applying a burden of proof or law with which he disagrees indicates fixed bias. See State v. Santelli, 159 Vt. 442, 446, 621 A.2d 222, 224 (1992) (juror who stated that a refusal to take a breath test was proof positive of the defendant's guilt and that juror would not listen to the defendant's explanation as to his reasons for refusal demonstrated fixed bias); State v. McQuesten, 151 Vt. 267, 270, 559 A.2d 685, 686 (1989) (jurors who acknowledged possible inability to put aside prejudices against persons accused of driving under the influence demonstrated fixed bias); Holden, 136 Vt. at 161, 385 A.2d at 1094 (juror who "expressed her belief that a defendant had an obligation to prove his innocence" demonstrated fixed bias). And while "[k]nowing a witness does not automatically require removal of a prospective juror," a potential juror has a fixed bias when he "indicates an inclination to believe or disbelieve the testimony of someone he knows." State v. Doleszny, 146 Vt. 621, 622, 508 A.2d 693, 694 (1986). In Doleszny, for instance, we held that a prospective juror who expressed doubt concerning his ability to impartially weigh testimony of a key prosecution witness whom he knew personally demonstrated fixed bias. Id.
¶ 9. On the other hand, where a prospective juror has stated that he can judge the case fairly, or has at least failed to state that he could not, we have been reluctant to conclude that the potential juror had a fixed bias as a matter of law. In State v. Hohman, for instance, we held that a prospective juror who was familiar with an earlier trial of the defendant did not necessarily demonstrate fixed bias where she said that she could be impartial despite her knowledge. 138 Vt. 502, 511-12, 420 A.2d 852, 858 (1980), overruled on other grounds, Jones, 148 Vt. at 309, 532 *433 A.2d at 572. We have even been reluctant to hold that a potential juror's opinion that police officers are more truthful than others demonstrated fixed bias as a matter of law in cases where "[t]he juror never stated that he would automatically assume that a police officer is speaking truthfully." Percy, 156 Vt. at 480, 595 A.2d at 255. While a juror's stated confidence in his own impartiality is not dispositive of the question of fixed bias, "in the absence of an indication of bias in the record we will not upset the determination of the trial judge, based, as it was, upon the actual observation of the juror." Id. at 479, 595 A.2d at 254 (quotation omitted).
¶ 10. The record reflects that the prospective juror had been a police officer for more than twenty-five years, had taught at the police academy for thirteen years, was currently employed by the Colchester Police Department, and knew in those various capacities several of the Burlington police officers the State planned to call as witnesses. On voir dire, the prospective juror also indicated that he was familiar with domestic violence cases and taught classes about domestic violence at the police academy and elsewhere. The following exchange between defense counsel and the prospective juror took place on voir dire:
MR. GRIFFIN: . . . So, how you indicated, and I think quite honestly that you could be fair and impartial.
[PROSPECTIVE JUROR]: I think so.
MR. GRIFFIN: But you have a life experience not just in law enforcement, but certainly with some of these officers, that you've worked with side-by-side and will continue to contact with and work with after your service as jurors are over.
[PROSPECTIVE JUROR]: Yes.
MR. GRIFFIN: So, how is it that you're putting all of that out of your mind in terms of listening to the evidence?
[PROSPECTIVE JUROR]: In addition to knowing them . . . I know what needs to be proven. If it's proven, it's proven. I mean, I've been around long enough to know that there are times when you've got to be impartial. There are times when you've got to set aside and most of those officers I think are going to understand that. That if the case wasn't proven, the case wasn't proven. I have confidence in them and their work ethic, their abilities, but the bottom line is that it's got to be proven here, apart from and I would hope they hold me in the same respect if they happen to sit on one of my cases.
MR. GRIFFIN: Okay. So, despite your prior knowledge and associations and, in some cases, friendships with some of these officers, you're willing to hold them to that standard?
[PROSPECTIVE JUROR]: That's what I think they would be expecting.
. . .
MR GRIFFIN: . . . As the evidence unfolds, if you decide that in fact they blew procedure out of the water, . . . but you still may have a sense that the defendant did something wrong, are you really going to hold him to that high standard, honestly?
[PROSPECTIVE JUROR]: It's going to be tough. I know what the procedures are. I've been familiar with the practical aspects of it. I would hope that they're following that. The ends don't justify the means.
MR. GRIFFIN: Okay.
[PROSPECTIVE JUROR]: If there was something that impinged the integrity of the evidence or the gathering, then I would have an issue with that and I don't think that you'll find too many *434 that have been through my blocks that I haven't said you've got to dot your "I's" and cross your "T's," otherwise, you deal with the consequences, and if you want to take shortcuts, you deal with them.
¶ 11. The trial court is in a unique position to evaluate juror bias, and "[g]iven the special capacity of the trial judge to evaluate [fixed] bias on the part of prospective jurors, that judge's determination in this regard is accorded great deference, since `an appellate court [cannot] easily second-guess the conclusions of the decisionmaker who heard and observed the witnesses.'" Torres, 128 F.3d at 44 (quoting Rosales-Lopez v. United States, 451 U.S. 182, 188, 101 S. Ct. 1629, 68 L. Ed. 2d 22 (1981) (plurality opinion)). In fact, "[t]here are few aspects of a jury trial where we would be less inclined to disturb a trial judge's exercise of discretion, absent clear abuse, than in ruling on challenges for cause in the empanelling of a jury." United States v. Ploof, 464 F.2d 116, 118-19 n. 4 (2d Cir.1972); see also United States v. Garcia, 936 F.2d 648, 653 (2d Cir.1991).
¶ 12. We are not prepared to say that the trial court abused its broad discretion in failing to excuse the prospective juror for fixed bias on the basis of this record. In the case before us, the prospective juror repeatedly and thoughtfully stated that he would be able to maintain impartiality. Although he candidly indicated that it would be "tough" for him to decide the case if the officer-witnesses "blew procedure out of the water" in gathering evidence and he suspected defendant "did something wrong," he unequivocally and confidently reaffirmed his intention and ability to do so. The prospective juror's statements that "[t]he ends don't justify the means," and that "you deal with the consequences . . . if you want to take shortcuts" evidence an appreciation for the importance of procedure in criminal justice that we dare say likely exceeds that of many jurors. We therefore hold that the prospective juror did not demonstrate fixed bias as a matter of law; the trial court did not err by failing to excuse him.
¶ 13. Defendant makes much of the fact that the trial court cited its own confidence in the trustworthiness of officer-jurors in denying defendant's challenge to the prospective juror. However, because the record indicates that the trial court relied on the prospective juror's responses on voir dire in denying defendant's challenge, we are satisfied that the trial court exercised its discretion appropriately. Cf. Percy, 156 Vt. at 480, 595 A.2d at 255 (court did not abuse discretion by failing to excuse potential juror who expressed opinion that police officers are more truthful than others where "[t]he juror never stated that he would automatically assume that a police officer is speaking truthfully").
¶ 14. Defendant argues, in the alternative, that the trial court should have inferred that the prospective juror was biased. Implied bias is "`bias conclusively presumed as a matter of law,'" which "is attributed to a prospective juror regardless of actual partiality." Torres, 128 F.3d at 45 (quoting United States v. Wood, 299 U.S. 123, 133, 57 S. Ct. 177, 81 L. Ed. 78 (1936)). The law infers bias when, irrespective of the answers given on voir dire, the prospective juror has such a close relationship with a participant in the trial a witness, a victim, counsel, or a party that the potential juror is presumed unable to be impartial. See, e.g., Percy, 156 Vt. at 478-79, 595 A.2d at 254. The United States Court of Appeals for the Second Circuit articulates the relevant inquiry as "whether an average person in the position of the juror in controversy would be prejudiced." Torres, 128 F.3d at 45. Moreover, "in determining whether a *435 prospective juror is impliedly biased, his statements upon voir dire [about his ability to be impartial] are totally irrelevant." Id. (quotation omitted).
¶ 15. We have inferred bias where potential jurors were current patients of a doctor who was a defendant in a malpractice action despite the prospective jurors' statements that they could deliberate fairly. Jones, 148 Vt. at 309-10, 532 A.2d at 573. In Jones, we held that "th[e] powerful trust that a patient may have in his physician's professional judgment" counseled in favor of recognizing implied bias where the physician-patient relationship is ongoing. Id. at 310, 532 A.2d at 573. But see Grega, 168 Vt. at 369-70, 721 A.2d at 450-51 (upholding trial court's determination that patient-juror did not have fixed bias where her physician was a witness but not evaluating whether bias should have been implied). We have also reasoned that a prospective juror who was the mother of a secretary at the state's attorney's office and the aunt of one of the guards at a state prison was presumptively unable to be impartial where the defendant stood accused of attacking another state prison guard. Kelly, 131 Vt. at 360-61, 306 A.2d at 90. In Kelly, we reasoned that "human nature being what it is, the trial court could have well presumed that she might be unconsciously influenced by her relationships with those involved in law enforcement agencies." Id. at 361, 306 A.2d at 90.[2]
¶ 16. However, "the doctrine of implied bias is reserved for exceptional situations in which objective circumstances cast concrete doubt on the impartiality of a juror." Torres, 128 F.3d at 46 (quotation marks omitted); see also Smith v. Phillips, 455 U.S. 209, 222, 102 S. Ct. 940, 71 L. Ed. 2d 78 (1982) (O'Connor, J., concurring) ("While each case must turn on its own facts, there are some extreme situations that would justify a finding of implied bias."). Accordingly, we have refrained from inferring bias "where a juror is a former patient of a defendant-doctor in a malpractice suit," Jones, 148 Vt. at 310, 532 A.2d at 573 (emphasis added), and in cases where prospective jurors in sex-crime trials are related to victims of other sex crimes. Percy, 156 Vt. at 479-80, 595 A.2d at 254.
¶ 17. We will refrain from inferring bias in this case as well. We will not attribute to the prospective juror by virtue of his status as a former teacher, an acquaintance or an employee of a neighboring police force a per se inability to impartially judge the testimony of the officer-witnesses. The prospective juror does not stand in such a position in relation to the officer-witnesses that he likely has a "powerful trust" in their "professional judgment" analogous to the trust a patient has for her doctor. Jones, 148 Vt. at 310, 532 A.2d at 573. A former teacher, acquaintance, or member of the same profession as a witness is not so likely to trust that witness's testimony as to be automatically excludible for cause; in fact, such a prospective juror may as well have unique reasons to be wary of such witness testimony.
*436 ¶ 18. We are also cognizant of the fact that to imply bias to the prospective juror by virtue of his status as a former teacher, acquaintance or employee of a neighboring police force to the officer-witnesses would have profound implications unnecessary to protect defendants' rights to impartial juries. For instance, inferring bias to a seasoned police-academy teacher on the basis of this status alone would effectively disqualify him from jury service for any case involving police-officer witnesses. It is simply not necessary to do so in order to preserve the right to trial by impartial jury where a defendant has an opportunity to show actual bias. Cf. Smith, 455 U.S. at 216, 102 S. Ct. 940 (noting that "`[a] holding of implied bias to disqualify jurors because of their relationship with the Government is [not] permissible. . . . Preservation of the opportunity to prove actual bias is a guarantee of a defendant's right to an impartial jury.'" (quoting Dennis v. United States, 339 U.S. 162, 171-72, 70 S. Ct. 519, 94 L. Ed. 734 (1950)). We reiterate that we found the prospective juror's answers on voir dire adequate in light of precedent to sustain the trial court's discretionary decision not to excuse him for cause.
¶ 19. Defendant also complains that the court exercised its discretion inconsistently by excusing the auxiliary police officer and not the prospective juror for cause, pointing out that an auxiliary trooper is also a member of law enforcement. We see nothing inconsistent in the court's use of its discretion. The court excluded the auxiliary trooper for cause because she worked on a daily basis in the crime lab with two forensic witnesses testifying in defendant's case. As noted, the prospective juror's relationships with the officer-witnesses were more attenuated. Cf. People v. Stremmel, 258 Ill.App.3d 93, 197 Ill. Dec. 177, 630 N.E.2d 1301, 1315 (1994) (inferring juror bias where officer-juror current member of same police department as and personally knew officer-witnesses and where close case hinged on credibility of officer-witnesses); Commonwealth v. Jones, 477 Pa. 164, 383 A.2d 874, 877 (1978) (inferring juror bias where officer-juror current member of same police department as officer-witnesses); Commonwealth v. Fletcher, 245 Pa.Super. 88, 369 A.2d 307, 308-09 (1976) (same where officer-juror also knew assistant district attorney who tried the case and where officer-juror had been a victim of the type of crime charged in the past).
¶ 20. Defendant's next argument is that several of the trial court's evidentiary rulings were erroneous. In particular, defendant argues that the complainant's short story and details about the content of the false allegation she lodged against an ex-boyfriend were admissible as prior bad acts under Vermont Rule of Evidence 404(b), and were relevant to show defendant's state of mind as a part of his claim of self-defense. Defendant also argues that Rule 404(b) required the trial court to allow defendant to cross-examine the complainant about the short story.
¶ 21. Defendant did not properly preserve these evidentiary arguments. A defendant must specifically raise an issue with the trial court in order to preserve it for review on appeal. See State v. Shippee, 2003 VT 106, ¶ 10, 176 Vt. 542, 839 A.2d 566 (mem.); V.R.E. 103(a)(1). The record reveals that defense counsel did not object when the court prohibited him from eliciting testimony as to the nature of the false allegation. Neither did defendant argue to the trial court that the short story was admissible, or that cross-examination of the complainant thereon was appropriate, under Rule 404(b). Therefore, neither argument is preserved for our review. See State v. Lee, 2005 VT *437 99, ¶ 14, 178 Vt. 420, 886 A.2d 878 (defendant failed to preserve his argument that the trial court should have examined the admissibility of gun evidence under rule that prohibited evidence of other crimes to prove bad character, where defendant raised the issue for the first time on appeal).
¶ 22. Defendant also claims that the court erroneously excluded evidence that the complainant was previously convicted of punching her ex-boyfriend. Specifically, defendant argues that this bad-act evidence was also admissible to show defendant's state of mind, as a part of his claim of self defense. Defendant cites a wide range of authority for the proposition that "[w]hen a defendant is aware of the victim's past acts of violence, and evidence of these acts of violence is offered to prove the reasonableness of the defendant's use of . . . force, this evidence of the victim's specific acts is not barred." Allen v. State, 945 P.2d 1233, 1241 (Alaska Ct.App.1997). Defendant, however, does not identify any portion of the record to show that the issue was raised or ruled upon. Defendant has the burden "to produce a record which supports his position on the issues raised on appeal." Condosta v. Condosta, 142 Vt. 117, 121, 453 A.2d 1128, 1130 (1982); see also In re J.S., 153 Vt. 365, 367 n. 2, 571 A.2d 658, 659 n. 2 (1989) (quoting same). Moreover, we have read the transcripts of the proceedings below and find no evidence that defendant ever moved to admit this evidence. The State argues that defendant did not preserve this argument for appeal. We agree. Therefore, we do not address this portion of his argument.
¶ 23. Defendant's last evidentiary argument is that the trial court erred by admitting into evidence a so-called "third knife," a knife blade discovered at the scene by a domestic violence victim's advocate. In defendant's view, this evidence was not relevant within the meaning of Rule 401 because it "was obviously placed there after the crime scene had been processed and released" and because its origin was unknown.
¶ 24. When it sought admission of the knife blade, the State provided as foundation the testimony of the victim's advocate who had discovered the knife. The advocate stated that the blade had come loose and fallen when she moved a couch cushion at the crime scene two days after the altercation took place. Defendant objected to the admission of the blade on relevance grounds, asserting that the blade had been found "two days after the fact" and that there was thus insufficient proof that it had been present at the scene when the crime was committed. The court ultimately decided to admit the blade into evidence. Reasoning that knives collected from crime scenes were unquestioningly relevant, the court determined that, based on the testimony of the victim's advocate, the jury could have believed that she had discovered the blade upon moving the couch cushions.
¶ 25. We reverse similar evidentiary rulings only "when we find an abuse of . . . discretion resulting in prejudice." State v. Ovitt, 2005 VT 74, ¶ 8, 178 Vt. 605, 878 A.2d 314 (mem.). Defendant objected to the admission of the blade on relevancy grounds. "`Relevant evidence' means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." V.R.E. 401. Defendant's argument is similar to one we found persuasive in State v. Hooper, 151 Vt. 42, 557 A.2d 880 (1988). In that case, defendant challenged the court's decision to exclude evidence of semen found on the victim's body where no laboratory analysis could establish that the semen belonged to *438 the defendant. Without foundation to link the semen to the defendant, we agreed that "the presence of semen is not probative of defendant's guilt . . . or any other fact that is of consequence to the action." Id. at 47, 557 A.2d at 882.
¶ 26. The concerns present in Hooper are not at issue here. The State did create a foundation for the relevance of the blade by offering the victim's advocate's testimony. Defendant has not argued or demonstrated why the victim's advocate had reason to lie. The test of relevancy is very broad, id. at 46, 557 A.2d at 882, and covers "relevant facts . . . not limited to those formally put in issue," germane propositions, background facts, and propositions pertinent to credibility. Reporter's Notes, V.R.E. 401. We agree with the trial court that the blade had probative value. If the jury believed the victim's advocate's statement, the discovery of the knife could lend credence to the theory that the knife was the attempted-murder weapon and had been hidden by defendant. The existence of an attempted-murder weapon is relevant, and evidence of concealment is relevant to show defendant's consciousness of guilt. State v. Smith, 262 Conn. 453, 815 A.2d 1216, 1229 (2003); cf. People v. Bates, 190 Colo. 291, 546 P.2d 491, 493 (1976) (holding that evidence of flight is relevant to show consciousness of guilt). We find no error in the court's decision.
¶ 27. Finally, defendant argues that the trial court committed plain error by failing to grant him immunity for his testimony concerning the prior bad act which was the subject of a charge of domestic assault still pending at the time of trial.[3] Defendant's immunity argument fails because he has not demonstrated prejudice. Defendant has not attempted to show how the outcome of his trial would have differed had he testified with immunity. Defendant does not even contend that the defense kept any information from the jury as a result of the court's failure to grant immunity. We therefore decline to rule on defendant's immunity argument. See State v. Cyr, 169 Vt. 50, 56, 726 A.2d 488, 493 (1999) (rejecting similar argument where defendant "failed to demonstrate any plausible theory of how the outcome would have been different if he had been able to testify with immunity"); In re D.C., 157 Vt. 659, 660, 613 A.2d 191, 191-92 (1991) (mem.) (same).
Affirmed.
NOTES
[1] Defendant actually argues that he sought to enter into evidence two short stories about women stabbing their lovers. However, it is not clear from the record whether a second story was ever discovered, and defendant has not pointed to any place in the record, nor can we find any, showing that he proffered a second story. Moreover, the record suggests that the second story was written after the charged incident and was actually about a man killing his lover with a knife.
[2] According to Blackstone, it is appropriate to exclude a prospective juror for implied bias when a showing is made "`that [he] is of kin to either party within the ninth degree; that he has been arbitrator on either side; that he has an interest in the cause; that there is an action pending between him and the party; that he has taken money for his verdict; that he has formerly been a juror in the same cause; that he is the party's master, servant, counselor, steward, or attorney, or of the same society or corporation with him.'" Smith v. Phillips, 455 U.S. 209, 232, 102 S. Ct. 940, 71 L. Ed. 2d 78 (1982) (Marshall, J., dissenting) (quoting 3 W. Blackstone, Commentaries 480-81 (W. Hammond ed. 1890)).
[3] The aggravated domestic assault charge was dismissed after defendant was sentenced on the attempted murder conviction. | 01-03-2023 | 10-09-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542434/ | 947 A.2d 724 (2008)
BOROUGH OF YOUNGWOOD, Appellant
v.
PENNSYLVANIA PREVAILING WAGE APPEALS BOARD, Appellee.
No. 8 WAP 2008.
Supreme Court of Pennsylvania.
Argued April 16, 2008.
Decided June 4, 2008.
*726 Gerald William Yanity, Gerald Joseph Yanity, Yanity Law Offices, Latrobe, for Borough of Youngwood, appellant.
Stanley J.A. Laskowski, Caldwell & Kearns, P.C.; Peter Grayson Howland, Wix, Wenger & Weidner, P.C., Harrisburg, for PA State Ass'n of Tp. Sup'rs, appellant amicus curiae.
Gina S. Mekley, for Prevailing Wage Appeals Bd., appellee.
James A. Holzman, PA Dept. of Labor & Industry, Harrisburg, for Bureau Labor Law Compliance, appellee.
Joshua Martin Bloom, Pittsburgh; Irwin William Aronson, Willig, Williams & Davidson, Philadelphia, for PA State Bldg. & Trades Council, AFL-CIO, et al., appellee amici curiae.
BEFORE CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD and McCAFFERY, JJ.
OPINION
Justice McCAFFERY.
In this appeal by the Borough of Youngwood (Appellant), we are asked to determine whether Appellant's public works project, which in substantial part consisted of resurfacing portions of five borough streets in addition to other street-related work, is subject to the prevailing minimum wage requirements of the Prevailing Wage Act (Act).[1] We conclude that it is and therefore affirm the order of the Commonwealth Court.
Section 5 of the Act, 43 P.S. § 165-5, requires payment of the prevailing minimum wage[2] for "public work." "Public work" is defined as:
construction, reconstruction, demolition, alteration and/or repair work other than maintenance work, done under contract and paid for in whole or in part out of the funds of a public body where the estimated cost of the total project is in excess of twenty-five thousand dollars ($25,000), but shall not include work performed under a rehabilitation or manpower training program.
43 P.S. § 165-2(5) (emphasis added). "Maintenance work" is defined as "the repair of existing facilities when the size, type or extent of such facilities is not thereby changed or increased." 43 P.S. § 165-2(3). "Facility" or "facilities" is not defined in the Act. However, what is abundantly clear is that the primary purpose of the Act is to protect workers employed on public work projects from receiving substandard pay by ensuring that they receive prevailing minimum wages. Pennsylvania National Mutual Casualty Insurance Co. v. Department of Labor & Industry, Pennsylvania Prevailing Wage Appeals Board, 552 Pa. 385, 394, 715 A.2d 1068, 1072 (1998).
In 2005, Appellant solicited bids for a contract to perform work on several roads in its jurisdiction. The bid proposal for the project bore the title "Youngwood Borough 2005-3 Street Resurfacing and Improvement Project" (the Project). The Project had an estimated cost of $183,209, with $71,000 of the cost coming from PennDOT's Liquid Fuels Tax Funds, and the *727 remainder coming from Appellant's general fund.[3] As advertised by Appellant, the Project consisted of (1) resurfacing portions of five streets by milling approximately 11,000 square yards of cartway and paving with 1270 tons of ID#2 binder or wearing course and approximately 11,600 square yards of surface material; (2) the surface treatment of 9800 square yards of two streets; (3) minor drainage of one street; (4) patching approximately 1300 square yards of one street; (5) constructing six catch basins; (6) replacing approximately 570 linear feet of existing piping and approximately 650 linear feet of French drains; (7) raising a manhole cover with a one-inch spacer ring; and (8) additional labor to treat and finish the work. The resurfacing work involves a process called "milling," whereby between 1½" and 3½" of the existing street is "cut" or ground down prior to application of the new surface. The new surface consists of a ½" leveling course and a final course of 1½" of blacktop. However, where the existing roadway has deteriorated more significantly, as much as 2" of binder can be applied under the new surface. Milling was eventually performed on seven blocks of Appellant's streets, and a substance designed to improve the binding of layers of the new road surface, called "Petromat," was applied to particularly damaged roadways. See Final Decision and Order of the Pennsylvania Prevailing Wage Appeals Board, dated January 19, 2007 (hereinafter Board's Final Decision and Order), at 2-4, Findings of Fact Nos. 2-7.
Appellant designated the milling and repaving of the five streets as "maintenance" and not "public work" as defined by the Act. Additionally, Appellant estimated that the milling and repaving of the five streets constituted 40% of the total estimated Project cost. Appellant determined that only 11.3% of the estimated Project cost was for non-maintenance work, and that the remaining 88.7% was for maintenance work as defined by the Act. For this reason, Appellant determined that the Project did not require the payment of prevailing minimum wages, and solicited bids for the Project as a "maintenance" project not subject to the Act. A contract for the Project was awarded to the lowest responsible bidder, Pompei & Sons, on July 13, 2005.
After completion of the Project, the Bureau of Labor Law Compliance of the Department of Labor and Industry (Bureau) contacted Appellant to investigate whether Appellant had complied with the Act by accurately characterizing the nature of the Project as "maintenance work." After its investigation, the Bureau determined that the Project was principally a reconstruction project, not a maintenance one, and therefore, prevailing minimum wages should have been paid pursuant to the Act. In arriving at its determination, the Bureau specifically rejected Appellant's reliance on a publication issued by the Pennsylvania Department of Transportation (PennDOT) entitled "Policies and Procedures for the Administration of the County Liquid Fuels Tax Act of 1931 and The Liquid Fuels Tax Act 655" (Publication 9), effective January 2003. Publication 9 included the information contained in an unsigned and undated Memorandum of Understanding (MOU) prepared by PennDOT and the Department of Labor and Industry (DLI) that incorporated PennDOT's *728 interpretation of the term "maintenance" under the Act. Significant to the instant case, the MOU provided that replacement in kind of guide rail, curb, and pipes was maintenance, as was "black top paving (laid on asphalt pavement, cement concrete, or other hard surface) [u]p to three and a half inches thickness or up to 420 pounds per sq. yd." MOU at 1, submitted as Exhibit BLLC-1 at the Board hearing. The MOU further provided that if nonmaintenance items exceeded 15% of the total project cost, the project was to be treated as a non-maintenance contract.
The Bureau informed Appellant that the MOU "is no longer in use and does not reflect the prevailing wage requirements under the Act. Additionally, [Appellant] is not a party to the [MOU]." Letter from the Bureau to Appellant, dated December 30, 2005, at 3. The Bureau further noted that DLI had stopped using the MOU in January 2005, although DLI did not inform PennDOT of this fact until September or October 2005, which was after the Project had been completed. Board's Final Decision and Order at 6, Findings of Fact Nos. 20-21.
Appellant filed a grievance with the Pennsylvania Prevailing Wage Appeals Board (Board) on February 17, 2006, challenging the Bureau's determination. Following an evidentiary hearing and oral argument, the Board denied Appellant's grievance on January 19, 2007, after determining that the Project consisted principally of "alteration work," not "maintenance work," and was accordingly subject to the Act "even though some of the work, standing alone, would qualify as maintenance work." Board's Final Decision and Order at 14, Conclusions of Law Nos. 1 and 3.
Upon appeal from that decision, in an en banc opinion authored by Judge McGinley, the Commonwealth Court affirmed, determining that the "milling" and repaving of road surfaces, which constituted 40% of the Project, was activity that went well beyond "maintenance" and was, in fact, repair or construction. The court had not previously ruled on whether the milling of a roadway in anticipation of repaving is maintenance or construction, and therefore whether the activity is subject to prevailing minimum wages. Accordingly, the court began its analysis with a review of analogous case law, principally, Kulzer Roofing, Inc. v. Department of Labor & Industry, 68 Pa.Cmwlth. 642, 450 A.2d 259 (1982). In Kulzer Roofing, the court held that the re-roofing of eight buildings was repair rather than maintenance, subject to prevailing minimum wages, because the entire roof of each building was replaced, rather than simply being partially overhauled or patched. In the present matter, the court observed that under Kulzer Roofing, the replacement of an old roof with a new roof constituted a change in type, and therefore constituted "repair work," not "maintenance work" under the Act. Accordingly, the court concluded that the replacement of an old road top with a new road top is in similar manner a change in type, and therefore it was "repair work," not "maintenance work" under the Act. Borough of Youngwood v. Pennsylvania Prevailing Wage Appeals Board, 938 A.2d 1198, 1201 (Pa.Cmwlth.2007) (en banc).
The court also rejected Appellant's argument that it had justifiably relied upon the MOU, citing Borough of Ebensburg v. Prevailing Wage Appeals Board, 893 A.2d 181 (Pa.Cmwlth.2006). In that case, the borough had initiated a project to demolish and reconstruct sidewalk and curbing along a street at an estimated cost in excess of the statutory maximum exclusion of $25,000, using public funds. The MOU at issue in that controversy defined "maintenance *729 under the Act as replacement of the curb in kind but also define[d] [installation of] new curb as not maintenance." Id. at 184 (emphasis added). The MOU did not address sidewalks. However, the court noted that the Borough of Ebensburg could not rely on the MOU because "it should have been apparent to [the borough] that the MOU was a separate understanding between two Commonwealth agencies attempting to interpret a statute and that [the MOU] would not be binding in [c]ourt as to a third party." Id. at 184, n. 4.
Here, the Commonwealth Court held that Appellant's reliance on the MOU was misplaced, and stated as follows: "[Appellant], like any other municipal body, had the DLI at its disposal, and [Appellant] chose to forego communication with that agency, and instead relied on an unsigned and undated MOU to which [Appellant] was not a party. This Court does not consider such reliance justifiable." Borough of Youngwood, supra at 1202. The court further held that "just as the demolition and reconstruction of the curb in Ebensburg was found to be construction and subject to prevailing minimum wages, this Court believes that grinding away the top three and one half inches or more of roadway and the laying down of new road, adding materials like Petromat which was not included in the first iteration of the roadway, constituted non-maintenance activity subject to prevailing minimum wages under the Act." Id.[4]
We granted Appellant's petition for allowance of appeal on the following three issues:[5]
1. Whether the Commonwealth Court erred in affirming the decision of the Pennsylvania Prevailing Wage Appeals Board, which held that [Appellant's] 2005 Street Resurfacing Project[,] which included milling and road resurfacing, constituted alteration and not maintenance, and was therefore subject to the payment of prevailing minimum wages under the Act?
2. Whether the Commonwealth Court erred in finding that [Appellant] was not justified in relying upon a memorandum of understanding, promulgated by and between two state agencies, namely the *730 Department of Labor and Industry ("DLI") and its Bureau of Labor Law Compliance (the "Bureau") and the Pennsylvania Department of Transportation ("PennDOT"), and not withdrawn in writing until after the Project was completed, to determine that the 2005 Street Resurfacing Project was a maintenance project, and not a repair project?
3. Whether the Commonwealth Court erred in determining that the partial milling and repaving of certain public streets, or sections thereof, is repair work, rather than maintenance work, and is therefore subject to prevailing wage requirements, even when the size, type and extent of the roadways was not altered thereby?
On issues 1 and 3, Appellant argues that we should apply the "plain language" of Section 2(3) of the Act, 43 P.S. § 165-2(3), defining "maintenance work" as the "repair of existing facilities when the size, type or extent of such facilities is not thereby changed or increased." Appellant contends that the "size, type, or extent" of the roadways that were improved by the Project were not changed in any manner, in that they were not rebuilt, redirected, lengthened, or widened; rather, the roadways were simply resurfaced. Appellant also disagrees with the Commonwealth Court majority's conclusion that the Project resulted in a replacement of old road with new, contending that the old road never ceased to exist; it was simply "maintained" by the only generally accepted industry standard now existing: that of milling and repaving. Therefore, Appellant contends, as did the Commonwealth Court dissent, that the Project consisted to a "critical degree" of maintenance work only.[6]
Because this appeal involves statutory interpretation, we look first to the principles and rules set forth in the Statutory Construction Act of 1972. "The object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to give effect to all its provisions." 1 Pa.C.S. § 1921(a). As previously stated, this Court has already ascertained the clear intent of the Act: "[T]he primary underlying policy of the Act is to protect work[ers] employed on public work projects from [receiving] substandard pay by ensuring that they receive prevailing minimum wage[s]." Pennsylvania National Mutual, supra at 394, 715 A.2d at 1072. Indeed, the Act imposes a duty upon every public body (43 P.S. § 165-4), every contractor and subcontractor performing public work (43 P.S. § 165-6), and the Secretary of Labor and Industry (43 P.S. § 165-7) to implement by different means the specific mandate of the Act that "[n]ot less than the prevailing minimum wages as determined *731 hereunder shall be paid to all work[ers] employed on public work."[7] 43 P.S. § 165-5. There could be no clearer mandate from the General Assembly that for all public works projects under contract exceeding $25,000, prevailing wages are to be paid to the workers on those projects, except in the single narrow circumstance where the work could be considered merely "maintenance." As the Commonwealth Court has astutely held, the Act is a remedial statute; therefore, any exceptions to its remedial provisions are to be narrowly construed. DiLucente Corp. v. Pennsylvania Prevailing Wage Appeals Board, 692 A.2d 295, 299 n. 5 (Pa.Cmwlth.1997). See also Section 1928(c) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1928(c) (providing that "[a]ll . . . provisions of a statute [except those statutes enumerated in Section 1928(b), none of which would include the Act] shall be liberally construed to effect their objects and to promote justice.").
In light of these principles, Appellant's expansive interpretation of and singular focus upon 43 P.S. § 165-2(3), which defines the exception to the general provisions of the Act, are clearly inappropriate. This section defines "maintenance work" as "repair of existing facilities when the size, type or extent of such facilities is not thereby changed or increased." The Act does not define "size, type, or extent" or indicate examples of same. However, given the clear purpose of the Act to protect workers from receiving substandard wages on public works projects, these modifiers cannot be interpreted to mean that only when a structure or other facility is, through a public works project, enlarged, reduced, or replaced with an entirely new material is the project non-maintenance, *732 no matter how extensive the work.[8] Such an interpretation would be completely incompatible with the clear and significant legislative intent of ensuring that workers on public works projects be paid at least the prevailing minimum wage. The exception does not eviscerate the rule.
Further, "maintenance work" is defined by Section 2(3) of the Act as a subset of "repair." "Repair" is a component of "public work" as defined by 43 P.S. § 165-2(5). In Kulzer Roofing, supra, the Commonwealth Court observed that the word "repair" would be written out of Section 2(5) of the Act should an expansive interpretation of "maintenance work" be observed. Kulzer Roofing overruled Kitson Brothers, Inc. v. Department of Labor & Industry, 51 Pa.Cmwlth. 320, 414 A.2d 179 (1980), which had held, in relevant part, that because replacement of a roof on a facility does not change or increase the "size, type or extent" of the facility, the re-roofing project is "maintenance work" not covered by the Act. In Kulzer Roofing, the court stated:
The Act defined public work to include repair work, 43 P.S. § 165-2(5), but created a subset within the general concept of repair work which was not to be considered public work. That subset was maintenance work. Our decision in Kitson Brothers, if extended, would hold that repairs to any part of a building which did not change the type or size of the building would be maintenance work. Under such a holding, however, it is difficult for us to envision any repair, as that word is popularly recognized, which would change the size or type of a building and all repair work would therefore be included within the term "maintenance work." Such a result is unacceptable. Sections 1921(a), 1922(2) and 1933 of the Statutory Construction Act of 1972, 1 Pa.C.S. §§ 1921(a), 1922(2) and 1933, require that a statute be construed so as to give meaning to all of its terms, and, if we were to apply Kitson Brothers, the term "repair work" in [Section 2(5) of] the Act[, 43 P.S. § 165-2(5),] would be effectively rendered surplusage.
Id. at 261.[9]
Moreover, because the Act provides that "public work" includes "repair" and that the exception to "public work" (i.e., "maintenance work") includes "repair" of a specific type, it logically follows that the General Assembly intended that "maintenance work" be considered a lesser or minor form of "repair." Therefore, we hold that in construing the Act, the focus must fall principally on the Act's clear mandate that prevailing wages are to be *733 paid to workers on public works projects that meet the criteria of 43 P.S. § 165-2(5), taking into consideration that "maintenance work" is an exception to this mandate and must be narrowly construed. The linguistic construction of "maintenance work," in turn, must recognize that the Act defines "maintenance work" as a subset of "repair," and must be accordingly viewed in this narrow manner.
In the instant case, the inescapable conclusion is that the Project is subject to the prevailing minimum wage requirements of the Act. Except perhaps for the component of the Project involving the patching of one street, all components of the Project are plainly "public works" requiring the payment of prevailing minimum wages under the Act. Interpreting the Act in accordance with its plain language, the street resurfacing component of the Project, involving the physical removal of several inches of road surface, subsequent treatment of areas of the roadway, and complete resurfacing with several inches of new material, plainly involves "construction, reconstruction, demolition, alteration and/or repair work," not the minor repairs constituting "maintenance work." Accordingly, we determine that the Commonwealth Court correctly held that the Project was subject to the prevailing minimum wage requirements of the Act.
Appellant also argues, however, that the Bureau should be collaterally estopped from imposing upon Appellant the requirement that it pay prevailing wages for the Project when, to its alleged detriment, it justifiably relied on the MOU in arriving at its determination that the Project was not subject to the prevailing wage requirements of the Act. Appellant argues that it "is patently unfair" for the Bureau to require Appellant to pay additional monies now that the Project has been completed. Further, at oral argument, Appellant asserted that it "should not be punished" for relying upon a statement of understanding between two relevant administrative agencies regarding the Act's interpretation of whether street resurfacing constituted "maintenance work."
The MOU is neither a part of the Act nor a duly promulgated regulation under the Act. Moreover, the Act's focus is placed squarely on protecting workers on public works projects from receiving substandard wages, including those workers who live and/or engage in commerce in the municipalities that contract for public work projects. Although we recognize that the budgeting concerns of public bodies are highly important, the Act does not provide that its mandate to protect workers on public works projects from receiving substandard wages is to be subservient to budgeting matters. In fact, it would appear that the opposite is true. Appellant, as a public body contracting for public works projects, has an express duty under the Act to implement the Act's mandate of ensuring that workers on such projects be paid prevailing wages, not substandard wages. See 43 P.S. § 165-4. Therefore, it is irrelevant that Appellant in good faith had determined that the Project was not subject to the Act. The Act provides that the worker is not to be "punished" by payment of substandard wages. Appellant's duty, as expressly provided in the Act, is to ensure that workers are paid prevailing wages for public works. Accordingly, it is our determination that the Commonwealth Court correctly held that Appellant's argument that it had justifiably relied upon the MOU, and thus was not responsible for payment of prevailing wages, must fail.
*734 For the above reasons, the order of the Commonwealth Court is affirmed.
Justice BAER concurs in the result.
NOTES
[1] Act of August 15, 1961, P.L. 987, as amended, 43 P.S. §§ 165-1-165-17.
[2] The Secretary of Labor and Industry "shall, after consultation with the [A]dvisory [B]oard [of the Department of Labor and Industry], determine the general prevailing minimum wage rate in the locality in which the public work is to be performed for each craft or classification of all workmen needed to perform public work contracts during the anticipated term thereof. . . ." 43 P.S. § 165-7.
[3] Thus, the Project was (1) to be performed under contract; (2) to be paid for by funds of public bodies; and (3) bore an estimated cost in excess of $25,000. Accordingly, the only issue that this case raises under 43 P.S. § 165-2(5) is whether the Project consisted of "construction, reconstruction, demolition, alteration and/or repair work" or merely "maintenance work."
[4] Judge Leavitt, joined by Judge Simpson, dissented. The dissent concluded that preparing a road for new blacktop is not "repair" but, rather, "maintenance." The dissent observed that in the present case, Appellant was not replacing an old road with a new road; rather the top of the road was "milled" in preparation for the laying down of the new surface material. The dissent agreed with Appellant that this activity is similar to the process of scraping off peeling paint before putting down a new layer of paint. The dissent also concluded that milling is simply preparation for the "partial" overhaul of the road that leaves the roadbed and subsurface areas unaffected and does not increase the "size, type or extent" of the road.
The dissent further observed that the milled road continued to be used until the new surface was applied. Thus, the dissent drew a distinction with the project in Ebensburg, where the sidewalks and curbing were demolished and were thus unusable until replaced. The dissent opined that because all roads require "maintenance" in the form of periodic reapplication of a surfacing material, only where the substrata of the roadways are replaced should the roadwork be considered a repair project subject to the prevailing wage requirements of the Act.
The dissent further determined that the record showed that Appellant was not trying to evade the Act. Rather, according to the dissent, the record showed that Appellant had researched the question and had relied upon directives from Commonwealth agencies, which Appellant interpreted as indicating that the Project did not implicate the Act.
[5] However, we note that the first and third issues are essentially the same, and accordingly we shall review them as one.
[6] In making this argument, Appellant relies on the MOU contained in Publication 9, which states in pertinent part that if nonmaintenance items exceed 15% of the total project cost, the project is to be treated as a non-maintenance contract (i.e., a "public work" as defined by the Act), thus subject to prevailing minimum wages. Appellant concedes that if the resurfacing portion of the Project, consisting of 40% of the Project, is determined by us to be a "public work" rather than "maintenance" as defined by the Act, the Project is subject to the prevailing minimum wage requirements of the Act. However, nothing in the Act or in any regulation promulgated under the Act specifically provides that the prevailing wage requirements of the Act apply only when a public project consists of a particular percentage of "public work." Because our resolution of this case does not require that we decide the issue of whether a public works project requires a certain percentage of "public work" in order for the prevailing minimum wage requirements of the Act to apply, we need not address that issue now.
[7] 43 P.S. § 165-4 provides:
§ 165-4. Duty of public body
It shall be the duty of every public body which proposes the making of a contract for any project of public work to determine from the [S]ecretary [of Labor and Industry (Secretary)] the prevailing minimum wage rates which shall be paid by the contractor to the work[ers] upon such project. Reference to such prevailing minimum rates shall be published in the notice issued for the purpose of securing bids for such project of public work. Whenever any contract for a project of public work is entered into, the prevailing minimum wages as determined by the [S]ecretary shall be incorporated into and made a part of such contract and shall not be altered during the period such contract is in force.
43 P.S. § 165-6 provides:
§ 165-6. Duty of contractor
Every contractor and subcontractor shall keep an accurate record showing the name, craft and the actual hourly rate of wage paid to each work[er] employed by him in connection with public work, and such record shall be preserved for two years from date of payment. The record shall be open at all reasonable hours to the inspection of the public body awarding the contract and to the [S]ecretary.
43 P.S. § 165-7 provides:
§ 165-7. Duty of [S]ecretary
The [S]ecretary shall, after consultation with the advisory board, determine the general prevailing minimum wage rate in the locality in which the public work is to be performed for each craft or classification of all work[ers] needed to perform public work contracts during the anticipated term thereof: Provided, however, That employer and employe contributions for employe benefits pursuant to a bona fide collective bargaining agreement shall be considered an integral part of the wage rate for the purpose of determining the minimum wage rate under this act. Nothing in this act, however, shall prohibit the payment of more than the general prevailing minimum wage rate to any work[er] employed on public work. The [S]ecretary shall forthwith give notice by mail of all determinations of general prevailing minimum wage rates made pursuant to this section to any representative of any craft, any employer or any representative of any group of employers, who shall in writing request the [S]ecretary so to do.
[8] Clearly, the General Assembly did not intend the absurd result that there should be a different disposition of a prevailing wage determination where, in the one instance, a roadway is resurfaced, and in the other instance, a roadway is resurfaced and widened by one foot. It would not make sense under the Act, given its clear mandate, to treat these situations differently for purposes of whether prevailing wages should be paid, as Appellant advocates by its interpretation of "maintenance work."
[9] Since Kulzer Roofing, the Commonwealth Court has consistently held that the replacement of worn public facilities constituted "public work" subject to the prevailing wage requirements of the Act, despite the fact that the facilities were not thereby enlarged or altered by anything more than the "industry standard" of replacement materials. See, e.g., Henkels and McCoy, Inc. v. Department of Labor & Industry, 143 Pa.Cmwlth. 264, 598 A.2d 1065 (1991) (holding that the installation of a replacement telephone system utilizing existing tunnels, conduits, and telephone poles is subject to prevailing wages and is not excluded as maintenance); and Ebensburg, supra, 893 A.2d at 181 (holding that in-kind replacement of sidewalks and curbing is subject to prevailing wages and is not excluded as maintenance). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2452707/ | 680 S.W.2d 728 (1984)
13 Ark.App. 149
Robert Earl CLINKSCALE, Appellant,
v.
STATE of Arkansas, Appellee.
No. CA CR 84-81.
Court of Appeals of Arkansas, Division I.
December 12, 1984.
Rehearing Denied January 9, 1985.
*729 Wilson, Hays, O'Hara & Myers by John David Myers, North Little Rock, for appellant.
*730 Steve Clark, Atty. Gen. by Michael E. Wheeler, Asst. Atty. Gen., Little Rock, for appellee.
CLONINGER, Judge.
This appeal from appellant's criminal conviction consists of four points for reversal. We find no error on the trial court's part with respect to any of the points raised, and therefore we affirm.
Appellant was charged with theft by receiving under Ark.Stat.Ann. § 41-2206 (Repl.1977) following his arrest for the possession of a stolen gold Rolex wrist watch. The prosecutor also sought sentence enhancement under the terms provided for habitual offenders at Ark.Stat.Ann. § 41-1001.
At an omnibus hearing held before the trial, the lower court granted appellant's motion to suppress the admission of the watch as evidence on the grounds that it had been seized without a search warrant in violation of the Fourth Amendment. Two days later the trial court reconvened the omnibus hearing after the State had filed a brief requesting reconsideration of the matter. The court heard the testimony of a jeweler who said that appellant had brought the watch to his shop, claimed that it was "hot," and asked to have the serial numbers removed. The police officer who received the watch from the store manager was examined, as well. At the conclusion of the hearing the court reversed its earlier ruling and denied appellant's motion to suppress the watch.
The case was tried to a jury, and appellant was found guilty of theft by receiving. The value of the watch was determined to be in excess of $2,500, rendering the crime a class B felony pursuant to § 41-2206(5)(a). Before the jury went on to consider sentence enhancement under the habitual offender statute, the members were polled at appellant's request. During the polling, one of the defense witnesses, with the verbal encouragement of appellant, asserted that one of the jurors was a prostitute. The court admonished the jury not to allow the outburst to affect their sentencing decision, and two jurors acknowledged that their decision would indeed be affected. Appellant moved for a mistrial. The court allowed the sentencing phase to proceed and postponed consideration of the motion.
Upon its return, the jury stated that it had "agreed unanimously not to fix the sentence and to allow the judge to fix the sentence if possible." Appellant objected that the court had access to prejudicial information. The court then passed judgment under the provisions of Ark.Stat.Ann. § 43-2306 (Repl.1977), sentencing appellant to fifteen years in the Arkansas Department of Correction and assessing a $10,000 fine. From that decision this appeal arises.
Appellant argues first that the court erred in denying the defense motion to suppress the introduction into evidence of the gold Rolex watch. He claims that the seizure without a search warrant violated his Fourth Amendment rights. The court's denial of appellant's motion was grounded on two reasons: (1) when appellant, as bailor, gave the property to the jeweler, as bailee, he gave him apparent authority to act with reference to that property under the circumstances; (2) the jeweler made a telephone call to the police officer informing him that the serial numbers might soon be removed, thus justifying a warrantless seizure under exigent circumstances.
It is appellant's view that he retained an expectation of privacy in the gold watch despite any apparent authority vested in the jeweler. He relies on United States v. Butler, 495 F. Supp. 679 (E.D.Ark. 1980), a case dealing with third party consent to the warrantless search of a bureau drawer and a locked suitcase discovered in the defendant's room. The federal court held that the defendant had a reasonable expectation of privacy in the drawer and suitcase and that his father had no lawful authority to consent to the search. The court laid particular emphasis on the absence of exigent circumstances.
We believe that the circumstances of the present case distinguish it from Butler, *731 supra. Appellant's reasonable expectation of privacy in the gold watch was considerably diminished when he delivered it to a jeweler with instructions to efface the serial number and to add decorative designs. These directions entailed the shipping of the watch to New York for the requested alterations. Jewelers in both Little Rock and New York thus had access to the watch, and, while appellant's expectation of privacy may have continued, the reasonableness of the expectation cannot be said to have been of the same degree as that of the defendant in Butler. A watch openly delivered to a jeweler in a business open to the public is not the same thing as a closed bureau drawer or a locked suitcase in a private residence.
Third person authority may be based upon the fact that the third person shares with the absent target of a search a common authority over, general access to, or mutual use of the place or object sought to be inspected under circumstances that make it reasonable to believe that the third person has the right to permit the inspection in his own right and that the absent target has assumed the risk that the third party may grant this permission to others. United States v. Matlock, 415 U.S. 164, 94 S. Ct. 988, 39 L. Ed. 2d 242 (1974); United States v. Butler, supra. In the instant case, for the purposes of the bailment, appellant and the jeweler shared common authority over and general access to the watch in question. The jeweler, moreover, initiated the contact with the police, not the other way around. As manager of the shop, the jeweler was clothed with ample authority to notify the police of suspicious circumstances surrounding goods brought to his place of business. In fact, if the jeweler had followed the instruction of appellant without notifying the police, the jeweler may well have become a participant in the crime. Appellant had voluntarily surrendered the watch to the jeweler, expecting that he would do whatever would be necessary to comply with his instructions regarding the changes he wished to be made. The fact that appellant told the jeweler the watch was "hot" clearly indicates that he did not regard the issue of privacy as being of the first importance; it further supports our conclusion that appellant extended sufficient authority to the jeweler to consent to the taking of the watch by the police.
Appellant attacks the trial court's finding of exigent circumstances, contending that the time between the police officer's conversation with the jeweler and the seizure of the watch on the following day provided more than enough opportunity for the officer to obtain a warrant. Yet, as the United States Supreme Court observed in Cardwell v. Lewis, 417 U.S. 583, 94 S. Ct. 2464, 41 L. Ed. 2d 325 (1974): "The exigency may arise at any time, and the fact that the police might have obtained a warrant earlier does not negate the possibility of a current situation's necessitating prompt police action." A real danger existed in the present case that the watch seized might have been altered beyond recognition if not destroyed. Although Cardwell, supra, applied to the seizure of a car, the concept of mobility underlying the case is applicable in the present set of circumstances when a watch about to be defaced is involved.
In his second point for reversal, appellant urges that the trial court erred in admitting the watch into evidence over his objection that an inadequate chain of custody had been established. Specifically, appellant complains that a proper foundation for authentication should have included testimony regarding the handling of the watch in New York. As he puts it, a "gap" appears in the chain of custody from the time part of the watch was mailed to New York to its return to Little Rock.
Appellant's argument would have been more relevant had it addressed a break in the chain after the watch was seized. No objection was made, however, to the handling of the watch once it was in police custody. Only the dial of the watch had been sent to New York; it was mailed in a parcel bearing appellant's name and was returned in the same manner. The owner was able to identify it positively.
*732 We recently dealt with the issue of chain of custody in Meador v. State, 10 Ark.App. 325, 664 S.W.2d 878 (1984). There, a weapon introduced into evidence was not in the sheriff's possession at all times and no serial number of the receipt was available. We held that the gap in that case affected the weight to be given the evidence rather than its admissibility.
In establishing a chain of custody prior to the introduction of evidence at the trial, it is not necessary to eliminate every possibility that the evidence has been tampered with.... The issue is whether the trial court abused its discretion in determining that in reasonable probability the integrity of the evidence was not impaired and that it had not been tampered with.
In Davis v. State, 275 Ark. 264, 630 S.W.2d 1 (1982), the Arkansas Supreme Court found that there was little likelihood of tampering and no abuse of discretion when a judge admitted into evidence a fingerprint card that had been handled by some unknown person with the Federal Bureau of Investigation in Washington, D.C. As in the present case, the unknown person in another city was the only broken link in the chain. Here, as in Davis, supra, other testimony satisfied the trial court that "in reasonable probability" the evidence was genuine and had not been tampered with. We find no abuse of judicial discretion and consequently no error on this point.
Appellant's third point for reversal is that the trial court erred in refusing to grant his motion for a mistrial when two jurors declared that they would be unable to pass sentence impartially. Both jurors were reacting to the uproar caused in the courtroom by a defense witness's assertion that one of the jurors was a prostitute. It is readily apparent from a review of the record that appellant seconded the witness in her disruptive remarks:
WITNESS: Listen
DEFENDANT: Tell them. Tell them.
WITNESS, SHERRY JONES: She cannot do that because she [a juror] has worked with me before.
DEFENDANT: She can't. That's right.
WITNESS, SHERRY JONES: She is a prostitute, your Honor.
WITNESS: Your Honor, she is a prostitute.
DEFENDANT: Sit down over there. Sit down. She's pregnant.
WITNESS: Your Honor, she is a prostitute.
The significant part appellant played in the disruption that he now claims occasioned prejudicial error cannot be overlooked by this court. His behavior at the time in question is akin to invited error, and it is settled that one who is responsible for error should not be heard to complain of that for which he was responsible. Berry v. State, 278 Ark. 578, 647 S.W.2d 462 (1983); Kaestel v. State, 274 Ark. 550, 626 S.W.2d 940 (1982). In Illinois v. Allen, 397 U.S. 337, 90 S. Ct. 1057, 25 L. Ed. 2d 353 (1970), the United States Supreme Court observed that an accused cannot be permitted by his disruptive conduct to avoid being tried on the charges brought against him.
The trial court is granted a wide latitude of discretion in granting or denying a motion for mistrial. Except for an abuse of that discretion or manifest prejudice to the complaining party we will not reverse on that basis. Berry v. State, supra; Hill v. State, 275 Ark. 71, 628 S.W.2d 284, 285 (1982). A mistrial is an extreme remedy which should be used only as a last resort. Bateman v. State, 2 Ark.App. 339, 621 S.W.2d 232 (1981). Any possibility of prejudicial error was removed by the jury's action in acknowledging their inability to determine a sentence in requesting the trial court to do so in their stead.
It is this action of the jury that forms the basis for appellant's fourth point for reversal. He argues that the court erred in sentencing him upon being informed by the jury that it had unanimously decided not to pass sentence. Such a decision *733 by the jury is clearly indicative of the jurors' scrupulous avoidance of passing a sentence based upon prejudice. In addition, the trial judge stated that she had not been affected by the disturbance. Finally, the court's action was in compliance with Ark.Stat.Ann. § 41-802 (Repl.1977) and Ark.Stat.Ann. § 43-2306 (Repl.1977), which provide for the trial judge's fixing punishment in cases when "the jury fails to agree on the punishment." The trial court therefore acted within the bounds of its statutory authority.
Affirmed.
CRACRAFT, C.J., and CORBIN, J., agree. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541767/ | 949 A.2d 1286 (2008)
109 Conn.App. 74
STATE of Connecticut
v.
Shaun WILLIAMS.
No. 28521.
Appellate Court of Connecticut.
Argued April 28, 2008.
Decided July 8, 2008.
*1287 H. Owen Chace, special public defender, for the appellant (defendant).
Timothy J. Sugrue, senior assistant state's attorney, with whom, on the brief, were Gail P. Hardy, state's attorney, and John F. Fahey, senior assistant state's attorney, for the appellee (state).
McLACHLAN, GRUENDEL and MIHALAKOS, Js.
PER CURIAM.
The defendant, Shaun Williams, appeals from the judgment of conviction, rendered after a jury trial, of robbery in the first degree in violation of General Statutes § 53a-134 (a)(4), conspiracy to commit robbery in the first degree in violation of General Statutes §§ 53a-48 (a) and 53a-134 (a)(4), and larceny in the second degree in violation of General Statutes § 53a-123 (a)(3),[1] and from the judgment of the trial court finding him in violation of probation pursuant to General Statutes § 53a-32. He claims that his conviction of robbery in the first degree and larceny in the second degree violated the constitutional prohibition against double jeopardy. We affirm the judgments of the trial court.
On the morning of May 4, 2005, the victim, Denise Laureano, was walking to work at the Children's Medical Center in Hartford when a vehicle blocked her path. The defendant exited the vehicle, pointed a handgun at the victim and demanded her necklace. The victim refused. After pushing the victim to the ground, the defendant placed the handgun against her head and inside her mouth. At that moment, the defendant's accomplice exited the vehicle, approached the victim and ripped the necklace from her neck. The defendant then took the victim's cellular telephone from her person and fled the scene with his accomplice.
The defendant subsequently was arrested and tried before the jury, which found him guilty of robbery in the first degree, conspiracy to commit robbery in the first degree and larceny in the second degree. The court rendered judgment accordingly and thereafter found the defendant in violation of probation. This appeal followed.
The defendant's sole claim is that his conviction of robbery in the first degree and larceny in the second degree violated the constitutional prohibition *1288 against double jeopardy. He failed to preserve that claim at trial and now requests Golding review.[2] We conclude that no constitutional violation exists.
"The fifth amendment to the United States constitution provides in relevant part: No person shall . . . be subject for the same offense to be twice put in jeopardy of life or limb. . . . The double jeopardy clause of the fifth amendment is made applicable to the states through the due process clause of the fourteenth amendment. . . . Although the Connecticut constitution has no specific double jeopardy provision, we have held that the due process guarantees of [our state constitution] include protection against double jeopardy. . . . [T]he Double Jeopardy Clause consists of several protections: It protects against a second prosecution for the same offense after acquittal. It protects against a second prosecution for the same offense after conviction. And it protects against multiple punishments for the same offense." (Citation omitted; internal quotation marks omitted.) State v. Bletsch, 281 Conn. 5, 27, 912 A.2d 992 (2007).
The defendant's claim implicates the last of these protections, contending that his conviction of robbery in the first degree and larceny in the second degree twice punishes him for the same crime. In State v. Hudson, 14 Conn.App. 472, 476, 541 A.2d 539 (1988), this court explained that "because larceny from the person requires a taking from the victim's person as opposed to a taking from his presence or control, larceny in the second degree under § 53a-123 (a)(3) is not ordinarily a lesser included offense of robbery, the larceny component of which does not require such a taking." Relying on that precedent, we rejected the defendant's double jeopardy challenge to his conviction of robbery in the second degree and larceny in the second degree in State v. Littles, 31 Conn.App. 47, 58, 623 A.2d 500, cert. denied, 227 Conn. 902, 630 A.2d 72 (1993). Resolution of the present claim likewise is governed by that precedent. We therefore conclude that the defendant has failed to establish the existence of a clear constitutional violation.
The judgments are affirmed.
NOTES
[1] General Statutes § 53a-134 (a) provides in relevant part: "A person is guilty of robbery in the first degree when, in the course of the commission of the crime of robbery as defined in section 53a-133 or of immediate flight therefrom, he or another participant in the crime . . . (4) displays or threatens the use of what he represents by his words or conduct to be a pistol, revolver, rifle, shotgun, machine gun or other firearm. . . ."
General Statutes § 53a-48 (a) provides: "A person is guilty of conspiracy when, with intent that conduct constituting a crime be performed, he agrees with one or more persons to engage in or cause the performance of such conduct, and any one of them commits an overt act in pursuance of such conspiracy."
General Statutes § 53a-123 (a) provides in relevant part: "A person is guilty of larceny in the second degree when he commits larceny, as defined in section 53a-119, and . . . (3) the property, regardless of its nature or value, is taken from the person of another. . . ."
[2] See State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989). Under Golding, "a defendant can prevail on a claim of constitutional error not preserved at trial only if all of the following conditions are met: (1) the record is adequate to review the alleged claim of error; (2) the claim is of constitutional magnitude alleging the violation of a fundamental right; (3) the alleged constitutional violation clearly exists and clearly deprived the defendant of a fair trial; and (4) if subject to harmless error analysis, the state has failed to demonstrate harmlessness of the alleged constitutional violation beyond a reasonable doubt." (Emphasis in original.) Id. The first two questions relate to whether a respondent's claim is reviewable, and the last two relate to the substance of the actual review. State v. Jarrett, 82 Conn.App. 489, 492 n. 1, 845 A.2d 476, cert. denied, 269 Conn. 911, 852 A.2d 741 (2004). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541781/ | 76 B.R. 328 (1987)
In re McLEAN INDUSTRIES, INC., et al., Debtor.
Bankruptcy No. 86 B 12238-41.
United States Bankruptcy Court, S.D. New York.
July 29, 1987.
Milbank, Tweed, Hadley & McCloy by Alan W. Kornberg, Stephen Shimshak, Robert Drain, New York City, for debtors-in-possession.
Weil, Gotshal & Manges by Corinne Ball, Jacqueline Taubes, New York City, McCutchen, Black, Verleger & Shea by Sheldon A. Gebb, Los Angeles, Cal., for Prudential Ins. Co. of America.
White & Case by Allan L. Gropper, New York City, for the Official Unsecured Creditors Committee.
Gilmartin, Poster & Shafto by Robert L. Poster, William K. Sheehy, New York City, Special Admiralty Counsel for debtors-in-possession.
Latham & Watkins by Robert J. Rosenberg, Freehill, Hogan & Mahar by Nathan Bayer, New York City, for General Elec. Credit Corp.
HOWARD C. BUSCHMAN, III, Bankruptcy Judge.
Before us is a motion by Prudential Insurance Company of America ("Prudential"), a creditor, for relief from the automatic *329 stay, imposed by Section 362 of title 11 of the United States Code (the "Bankruptcy Code"), which would permit Prudential to foreclose on certain vessels that are the subject of alleged first preferred ship mortgages in favor of Prudential and require the Debtor to bring their challenge to those mortgages in the admiralty courts.
I.
United States Lines, Inc. ("USL" or "Debtor"), United States Lines (S.A.), Inc. ("SA"), McLean Industries, Inc. ("McLean"), and First Colony Farms, Inc. ("First Colony") each filed a petition with this Court on November 24, 1986 seeking relief under Chapter 11 of the Bankruptcy Code. On the petition date (the "filing date"), this Court consolidated the Chapter 11 cases of USL, SA, McLean and First Colony for procedural purposes only.
Prior to the filing, USL and SA had operated one of the largest container lines and cargo shipping companies in the world. They retained possession of their assets as provided for in § 1107 and § 1108 of the Bankruptcy Code. Both are in the process of winding up their shipping operations in a manner they believe will garner the most benefit for their creditors.
The facts pertaining to the instant motion are straight-forward and are hardly complex or technical. Prudential, USL, McLean and First Colony were parties to a Note Purchase Agreement and Financing and Security Agreement, dated April 12, 1978 (hereinafter the "1978 Debt Agreements"), pursuant to which USL incurred an indebtedness (principal amount of $126,859,753.54) to Prudential (the "1978 Debt"). Apparently, the outstanding principal amount of the 1978 debt on the filing date was $92,885,000. In conjunction with the 1978 Debt Agreements, USL, as owner/mortgagor, and Prudential, as mortgagee, entered into three duly perfected first preferred ship mortgages dated April 12, 1978, collateralized by eight vessels known as the Lancers. These mortgages were recorded in the Documentation Office of the Officer-in-Charge, Marine Inspection, United States Coast Guard, New York, New York, on April 12, 1978 in Book PM/331 at pages 1, 2, and 3 (collectively, the "1978 First Preferred Ship Mortgages").
In April 1983, USL borrowed approximately $114,000,000 (the "1983 Debt") from Prudential and General Electric Credit Corporation ("GECC"). The 1983 Debt was secured, inter alia, by second ship mortgages on each of the Lancers granted by USL, as owner, to United States Trust Company of New York, as indenture trustee, for the benefit of Prudential and GECC (the "Second Ship Mortgages"). At the same time, the 1978 First Preferred Ship Mortgages were amended and superseded by a duly perfected first preferred ship mortgage recorded in the Documentation Office of the Officer-in-Charge, Marine Inspection, United States Coast Guard, New York, New York, on April 21, 1983 in Book PM/368 at page 41 (the "First Ship Mortgages").
In 1986, the First Ship Mortgage was amended by a document called Amendment No. 1 to the First Preferred Ship Mortgage ("Amendment No. 1") dated April 14, 1986. In addition to adding several covenants by USL, Amendment No. 1 reflected a reduction in USL's outstanding debt, stating:
As of January 1, 1986 there remained outstanding $92,885.00 in aggregate principal amount of the 1983 Company Notes. . . .
. . . .
Section 33 of the Original Mortgage is hereby amended to read in its entirety as follows:
"For the purpose of this mortgage and the endorsement thereof on the marine document of the vessel as required by the Ship Mortgage Act, 1920, as amended, (a) the total amount is $92,885.00 (the aggregate principal amount of 1983 Company Notes and Additional Notes, if any, now outstanding) and interest and performance of mortgage covenants, and (b) the date of the maturity is October 15, 1991 and (c) the discharge amount is the same as the total amount."
*330 Contemporaneously with Amendment No. 1, several other ship mortgages securing the 1983 Debt were apparently amended in similar fashion.
As required by the Ship Mortgage Act of 1920, 46 U.S.C. § 921(a) (1968), Amendment No. 1 was recorded with the Documentation Office of the Officer-in-Charge, Marine Inspection, United States Coast Guard, at New York, New York, on April 15, 1986 in Book Volume PM/419 at page 103.
Certificates of documentation and abstract of title for each of the eight Lancers (Exhibits F (1)-(8), G(1)-(8)) were prepared and recorded. In each of these documents, the principal amount of the outstanding debt to Prudential, pursuant to the First Ship Mortgage, is stated to have been "reduced to $92,885.00" from $126,859,753.54.
Accordingly, the Debtor and Official Unsecured Creditors Committee (the "Creditors Committee") assert that Prudential's First Ship Mortgage is not valid beyond the perfected amount of $92,885.00. Notwithstanding the statement of Amendment No. 1 reproduced above, Prudential claims that the principal amount of outstanding debt was erroneously recorded and endorsed by the Coast Guard as $92,885.00. It asserts that it maintains a First Preferred Ship Mortgage in the principal amount of $92,885,000, as stated in an exhibit to Amendment No. 1, which indicates in its preliminary statement that "[a]s of January 1, 1986 there remained outstanding $92,885,000 in aggregate principal amount of the 1983 Company Notes."
Prudential's motion seeking relief from the automatic stay under Section 362(d) of the Bankruptcy Code initially sought an order permitting it to exercise its remedies in respect to the Lancers and related equipment and proceeds. A preliminary hearing was held on June 4, 1987, and pursuant to § 362(e), a final hearing was set for June 26, 1987. At the final hearing, the automatic stay was continued until after the entry of an order resolving Prudential's motion.
At the final hearing, the mortgage documents were admitted in evidence and the Debtor objected to the motion in full with respect to three of the Lancers on the ground that their sale to Sea-Land Services, Inc. ("Sea-Land"), as part of a package with other assets, was necessary to an effective reorganization. 11 U.S.C. § 362(d)(2). No evidence was presented as to that issue by any party. With respect to the other five Lancers, the Debtor stated its willingness to consent to the entry of an order for relief provided: (i) that the order retained in the bankruptcy court the ability to decide claims that the Debtors might have under 11 U.S.C. §§ 506(c), 544(a), and 551; and (ii) that the order further compel the return of proceeds from the sale of the vessels to this Court for distribution. In response, Prudential agreed that this Court should retain the ability to consider the Debtor's claims under 11 U.S.C. § 506(c) for sums expended with respect to the Lancers, but asserted that the admiralty courts should decide the other issues and distribute the proceeds.
After the close of the final hearing, the Court indicated its preference for evidence on the issue of necessity. Concurrently, the Debtor announced that it had renegotiated their arrangement with Sea-Land to provide merely for charter by Sea-Land of three of the Lancers for a six month period with an option to renew for an additional six month period. After hearing the parties, the Court ordered that the record be reopened for the purpose of taking evidence as to necessity and scheduled a hearing for July 15, 1987. On the day of the hearing, counsel for the Debtor and counsel for Prudential announced that Prudential had conceptually agreed to the charter of three Lancers to Sea-Land and to exclude those three Lancers from the instant motion. It was further agreed that the ultimate disposition of the three vessels would be treated similar to the other five vessels to be foreclosed in various U.S. admiralty courts and that the court should decide the issues raised by the Debtor. That agreement was finalized on the record on July 23, 1987.
Thus, the issues before us are whether the automatic stay is only to be modified so as to retain in the bankruptcy court, rather *331 than deferring to the admiralty court, (i) the challenge by the Debtors, supported by the Creditors Committee, to the validity under the Ship Mortgage Act of 1920 of Prudential's asserted lien of $92,885,000, in view of the power and status conferred upon debtors-in-possession and trustees by 11 U.S.C. § 544, (ii) the claim that, were Prudential's $92,885,000 lien unperfected, it may be preserved for the benefit of the estate under 11 U.S.C. § 551, and (iii) the ability to distribute the proceeds from the sale of the vessels after they are sold by the admiralty courts.
II.
As we continue to explore and map[1] the unchartered inlets and bays of maritime bankruptcy much in the manner of Champlain's marking the numerous unknown shoals and landfalls between Port Royale and Cape Cod,[2] it becomes increasingly important to identify the interplay of the bankruptcy and admiralty courts. In this we are not concerned with the desire of creditors that their rights be determined elsewhere or the desire of debtors that their rights be determined in one bankruptcy court. Rather we are concerned with the proper interplay of these systems in the construct of a particular case and in the light of the proper allocation of dispute resolution tasks.
Such concerns are usually addressed under the doctrine of primary jurisdiction. R.J. Pierce, S.A., Shapiro & P.A. Verkuil, Administrative Law & Process 208-10 (1985). That doctrine provides that a court with jurisdiction may defer resolution of a technical factual issue to an administrative agency having expertise beyond the normal competence of judges in order to preserve consistency and uniformity in regulation of the business entrusted to that agency. E.g., Far East Conference v. United States, 342 U.S. 570, 574-75, 72 S. Ct. 492, 494-95, 96 L. Ed. 576 (1952); In re McLean Industries. Inc., 70 B.R. 852, 859, 15 B.C.D. 864, 16 C.B.C.2d 645, Bankr.L.Rep. (CCH) ¶ 71,745 (Bankr.S.D.N.Y.1987). Cases such as Order of Railway Conductors v. Pitney, 326 U.S. 561, 567, 66 S. Ct. 332, 325, 90 L. Ed. 318 (1946) (intricate dispute between two unions regarding provision of services to bankrupt railroad should have been deferred by railroad reorganization court to Railway Labor Adjustment Board and court should have stayed proceedings before it pending resolution by the Board), Smith v. Hoboken R.R. Co., 328 U.S. 123, 130, 66 S. Ct. 947, 951-52, 90 L. Ed. 1123 (1946) (issue of whether a bankrupt railroad had forfeited track rights should have been deferred by railroad reorganization court to the Interstate Commerce Commission in view of statute requiring commission certificate for abandonment of tracks), Nathanson v. National Labor Relations Board, 344 U.S. 25, 30, 73 S. Ct. 80, 83-84, 97 L. Ed. 23 (1952) (liquidation of unfair labor practice claim should have been deferred by bankruptcy court to the NLRB for it to determine the appropriate remedy), and Gary Aircraft Corp. v. United States of America (In re Gary Aircraft Corp.), 698 F.2d 775 (5th Cir.1983) (claims arising from government contract should have been deferred by bankruptcy court to Board of Contract Appeals where claims were highly technical and complex), can be viewed as falling under that doctrine. In the absence of precedent, whether to defer liquidation of a claim to an agency is an issue in the court's "sound discretion." Nathanson, 344 U.S. at 30, 73 S.Ct. at 83-84.
Here, however, we are not concerned with the allocation of dispute resolution functions between court and agency. We are, instead, concerned with the degree to which the automatic stay codified in 11 U.S.C. § 362(a) is to be modified to permit Prudential to litigate elsewhere the validity of its lien with a debtor-in-possession, in light of the status and powers conveyed by 11 U.S.C. §§ 544 and 551. In determining *332 whether to vacate or modify the automatic stay in connection with entering an order for relief from the automatic stay under § 362(d), the bankruptcy court has discretion. In re McLean Industries, Inc., 74 B.R. 589, 602 (S.D.N.Y.1987). In the exercise of that discretion, several considerations obtain.
A. Jurisdictional Considerations
Primary among these considerations is the notion that the bankruptcy court has jurisdiction to adjudicate the validity of the maritime liens asserted by Prudential. E.g., Morgan Guaranty Trust Co. of N.Y. v. Hellenic Lines, 38 B.R. 987, 995, 10 C.B.C.2d 1156, Bankr.L.Rep. (CCH) ¶ 69,752 (S.D.N.Y.1984); cf. In re Modern Boats, Inc., 775 F.2d 619, 620 (5th Cir. 1985). Thus, this is not a case like Smith v. Hoboken R.R. Co., where Congress required affirmative action by an agency, or In re Prudential Lines Inc., 69 B.R. 439, 16 C.B.C.2d 383, 15 B.C.D. 445, Bankr.L. Rep. (CCH) ¶ 71,676 (Bankr.S.D.N.Y.1987), where Congress had enacted an automatic exemption for pre-petition admiralty foreclosure actions brought by the United States Maritime Administration. Instead, this is an issue within the "core" jurisdiction of the bankruptcy courts, for 28 U.S.C. § 157(b)(2)(K) provides that "determinations of the validity, extent, or priority of liens" are core matters.[3]
That this jurisdiction includes determinations pertaining to maritime liens cannot be seriously questioned. See F.R. Kennedy, Jurisdictional Problems Between Admiralty and Bankruptcy Courts, 59 Tulane L.Rev. 1183, 1201 n. 96 (1985) (collecting bankruptcy cases where the validity and priority of maritime liens has been determined by bankruptcy courts); Hellenic Lines, 38 B.R. at 995. Accordingly, Prudential does not contend that this Court lacks such power or that the admiralty courts have exclusive jurisdiction to determine the validity of a ship mortgage.
This observation might be tempered by the notion that the bankruptcy court lacks jurisdiction to liquidate personal injury claims. See In re Waterman Steamship Co., 63 B.R. 435, 436, 14 B.C.D. 884 (Bankr. S.D.N.Y.1986); 28 U.S.C. § 157(b)(2)(B), (b)(5). In a maritime case, that lack of jurisdiction assumes importance because of the inchoate maritime lien status afforded to seamen's personal injury claims. But the issue here does not involve a debtor's attempt to challenge seamen's liens.[4]
Also of concern is the unfortunate notion that the law has not yet grown to the point where other nations have afforded comity to bankruptcy proceedings, see McLean, 74 B.R. at 602 (Bankr.S.D.N.Y. June 10, 1987), and, consequently, have recognized only the decrees of admiralty courts that wipe a vessel clean of liens. Hellenic Lines, 38 B.R. at 996. Such an issue might have significance with respect to a foreign lienor not subject to personal jurisdiction. Here, however, Prudential is subject to personal jurisdiction. Thus, any judgment will be binding on it and the estate.
B. Nature of the Dispute[5]
Of more relevance to the allocation of dispute resolution is the proper use of *333 available expertise to resolve technical factual issues. In holding that the bankruptcy court should have deferred a governmental contract dispute to the Board of Contract Appeals, the court in Gary Aircraft observed that governmental contract law "tends to be technical and esoteric, and that Boards of Contract Appeals were created precisely because of the needs for expertise, speed, and uniformity in resolving government contract disputes." Gary Aircraft Corp., 698 F.2d at 784.
Here, however, the issues are not factual but legal. Indeed, the facts are seemingly undisputed and are hardly complex. Resolution of this dispute falls within the general competence of judges, and, because it concerns sections of the Bankruptcy Code, it falls within the specialized competence of bankruptcy judges.
The bankruptcy issues arise because the Debtor grounds its challenge to Prudential's asserted lien of $92,885,000 on the status given to it as debtor-in-possession by § 544(a) and seeks to preserve that lien for the benefit of the estate pursuant to § 551 of the Code. Section 544(a) provides:
(a) the trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by:
(1) 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, whether or not such a creditor exists;
(2) a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists; or
(3) 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.
Section 551 provides for preservation for the benefit of a transfer with respect to property of the estate that is avoided under § 544. Since a transfer includes the parting with an interest in property, 11 U.S.C. § 101(50), avoided liens can be preserved.
Under § 544 the avoidability of a lien is, with the exception of the exclusion of actual notice, dependent upon nonbankruptcy law. E.g., McCannon v. Marston, 679 F.2d 13, 16-17 (3rd Cir.1982); In re Velikopoljski, 54 B.R. 534 (Bankr.S.D.Fla.1985) (held debtor-in-possession may avoid a mortgage lien not perfected in accordance with the Ship Mortgage Act); Varon v. Trimble, Marshall & Goldman, P.C., et al., In re Euro-Swiss International Corp.), 33 B.R. 872, 881, 11 B.C.D. 113 (Bankr.S.D.N.Y.1983); cf. Matter of Alberto, 66 B.R. 132, 2 U.C.C. Rep. Serv. 2d (West) 1378 (Bankr.D.N.J.1985) (creditors holding mortgages on Ch. 7 debtor's yacht moved for relief from the automatic stay. The trustee sought to avoid the creditors' security interest. The court noted that the Ship Mortgage Act does not allow post-petition perfection of a mortgage. Reasoning that mortgages were not perfected until the Coast Guard endorsed them and recorded them in accordance with the Act, it held that perfection could not relate back to the date the mortgage was first delivered to *334 the Coast Guard for endorsement and recording.). Such nonbankruptcy issues may also intertwine with bankruptcy issues, at least to the extent that they concern the lack of actual notice status granted by § 544.
Pursuant to 46 U.S.C. § 921(c), a mortgage pertaining to a U.S.-flag vessel must be recorded in the office of the collector of customs at the vessel's port of documentation in order to be valid against the vessel and against any person except the mortgagor and "a person having actual knowledge thereof." The collector of customs is to record mortgages in order of receipt in books indexed to show, inter alia, the amount thereof. 46 U.S.C. § 921(b). To enjoy preferred status even as against maritime lienors, a recorded mortgage must be endorsed on the vessel's documents. 46 U.S.C. § 922.
As developed by the parties, not even the issue of validity of the First Mortgage is entirely dependent upon admiralty law. Citing cases arising under state law, e.g., Phoenix Mutual Life Ins. Co. v. Kingston Bank & Trust Co., 172 Tenn. 335, 112 S.W.2d 381, 384 (1938), Prudential contends that the recordation of a document constitutes constructive notice of all its contents. Furthermore, it asserts that a would-be creditor has a duty to examine all documents and that such duty is of particular significance under circumstances where there is an obvious mistake in the record or inconsistency in the recorded documents.
That contention gives rise to bankruptcy law considerations. Under § 544(a)(3), a debtor-in-possession is given the status of a bona fide purchaser of real property. As such, it is subject to the type of constructive notice, see, e.g., Euro Swiss, that Prudential claims on this point, and in its additional assertion, that notice could be gleaned from examination of Exhibit A to Amendment No. 1. As noted, that exhibit states that $92,885,000 of principal remained outstanding with respect to the notes issued in 1983, notwithstanding the statement in Amendment No. 1 that the mortgage secures $92,885.00 in principal. But this case does not concern real property, and Prudential has not briefed the issue of whether such constructive notice defeats a claim of an execution creditor that was secured by USL upon the filing of its reorganization petition. As noted, § 921(a) of the Shipping Act excepts, in this respect, only "a person having actual knowledge thereof" and § 544(a)(2) confers the status of an execution creditor "without regard to any knowledge of the trustee or of any creditor." Understandably, Prudential does not assert that this issue raises a need for admiralty expertise.
In addition, the Debtor and Creditors Committee essentially contend that the purpose of an amendment is to revise a document. Amendment No. 1 states that the purpose of the mortgage is to secure payment of $92,885.00 which is stated to be the outstanding amount. Accordingly, they assert that any potential creditor could justifiably believe that the outstanding mortgage lien amounted to $92,885.00 on November 24, 1986 when the petition was filed, and that the mistake was not so obvious as to put potential creditors on notice to examine other recorded documents.
Prudential responds that the actual notice requirement of § 921(a) is met by examination of the public record and the documents aboard the Lancers. It relies on cases upholding ship mortgages containing obligations not shown on the face of the Coast Guard "index" documents. See, e.g., Southland Financial Corp. v. Oil Screw Mary Evelyn, 248 F. Supp. 520 (E.D.La. 1965) (future advances); General Electric Credit Corp. v. Oil Screw Triton VI, 712 F.2d 991 (5th Cir.1983) (attorneys' fees). In turn, Debtor and Creditors Committee note the difference between such items as future advances and attorneys' fees and a statement of the principal due on the obligation secured by a mortgage. They add that Amendment No. 1, recorded on April 1, 1986 and entered in the general index of each vessel, described the amount secured by the First Mortgage as "reduced to $92,885.00." That same amount was then endorsed by the Coast Guard on the Certificates of Documentation of each of the vessels as the reduced total amount of the First Mortgage, as amended. Accordingly, *335 to them, the First Mortgage is not perfected beyond the sum of $92,885.00. They thus assert that the First Ship Mortgage does not enjoy preferred status for a higher amount since proper recordation is a prerequisite to preferred status. To this, they add the assertion that a statutory requirement of indexing mandates proper recordation since inquiring parties are usually expected to consult the index rather than the actual instrument on file. In re Himmelstein, 5 B.C.D. 288 (Bankr.D.N. J.1979) (mortgage omitting parcels of land considered to be unrecorded as to omitted parcels).
In response Prudential notes that the index and certificates fail to reflect the filing of a partial satisfaction of its First Mortgage in the amount of $126 million. Citing THE FAVORITE, 120 F.2d 899 (2d Cir.1941), it states that the lack of a filed partial satisfaction left the original mortgage intact. Here, however, the original mortgage was, after all, amended. The Debtor and Creditors Committee note that the reduction to $92,885 stated on the certificates conveys the same message as a partial satisfaction. Furthermore, it would appear that all THE FAVORITE decided is that a preferred ship mortgage remains such after maturity. See 120 F.2d at 902.
Resolution of these issues obviously requires no expertise beyond the general competence of judges. Nor is such expertise required to resolve Prudential's assertion that its First Ship Mortgage, as amended by Amendment No. 1, substantially complied with the provisions of the Ship Mortgage Act of 1920 and must be upheld in full.
It is generally said that the recordation and endorsement requirements of the Ship Mortgage Act are to be strictly construed. See Port Welcome Cruises, Inc. v. S.S. Bay Belle, 215 F. Supp. 72, 78 (D.Md.1963) ("[s]trict compliance with the Act as a matter of jurisdiction is required"); accord, e.g., Morse Dry Dock & Repair Co. v. Steamship No. Star, 271 U.S. 552, 46 S. Ct. 589, 70 L. Ed. 1082 (1926) (lien for repairs held to take precedence over a prior preferred ship mortgage which had not been endorsed at the time of repairs); THE EMMA GILES, 15 F. Supp. 502, 504 (D.Md. 1936); THE OCEAN VIEW, 21 F.2d 875 (D.Md.1927). As stated by a principal commentary, "The Mortgage Act outdoes the worst of the old-fashioned state chattel mortgage acts in its insistence on formalities of execution and in the detail of its recording mechanics." G. Gilmore & C.L. Black, The Law of Admiralty, § 9-52, at 706-07 (2d ed. 1975).
Nevertheless, courts have upheld the validity of ship mortgages under the doctrine of substantial compliance, in the face of minor discrepancies or error not prejudicing third parties. See, e.g., Seattle First National Bank v. Bluewater Partnership, 772 F.2d 565 (9th Cir.1985) (bank met minimum statutory requirements to qualify as a trustee); Merchant's National Bank of Mobile v. The Ward Rig. No. 7, 634 F.2d 952 (5th Cir.1981) (4-day discrepancy in mortgage date); Morgan Guaranty Trust Co. v. Hellenic Lines Limited, 621 F. Supp. 198 (S.D.N.Y.1985) (irregularity in the oath and swearing of individuals, where notaries had witnesses to the execution of mortgages and signed each acknowledgement); Suburban Trust v. Oil Screw Teddy Bear, 1975 A.M.C. 1668 (M.D.Fla.1975) (discrepancy as to date on which mortgage was executed); Lake Jackson State Bank v. Oil Screw Kingfish Too, 240 F. Supp. 450 (S.D.Texas 1965) (minor errors in affidavit of good faith); Gulf Coast Marine Ways v. The J.R. Hardee, 107 F. Supp. 379 (S.D.Texas 1952) (minor error in affidavit of good faith, with no claims of injury or actual fraud).
Analysis of this issue will require, inter alia, consideration of whether the First Ship Mortgage, as amended by Amendment No. 1, is to be found in "substantial compliance" with the Ship Mortgage Act of 1920 as that doctrine has been interpreted insofar as a mortgage lien of $92,885,000 is asserted, and in view of the intervening lien status granted to the debtor-in-possession by § 544(a) of the Bankruptcy Code. The Velikopoljski and Alberto courts did not reach this issue, for in those cases the mortgagees failed to record the mortgages.
*336 Of the cases cited by Prudential, none deals directly with the issue. Only certain dicta in Port Welcome Cruises, Inc. v. S.S. Bay Belle, bears on the issue. There, the amount of the mortgage was stated to be $1,500,000 on both the documents of the collection of customs of the port of documentation of the ship and on the vessel's documents. Due to a subsequent partial failure of consideration, the debt was reduced to $1,300,000. In holding the mortgage valid, the court stated, "The existence of a lesser lien amount than shown on the documents of the ship, when not the fault of the mortgagee, in no way harms subsequent lienors. If anything, it may help them if the proceeds from a sale of the property is in excess of this amount." Id. at 82.
To the Debtor and the Creditors Committee Port Welcome Cruises is distinguishable from the case at bar in that here the recorded documents state the lesser amount, and Prudential, as mortgagee, signed them.
More significantly, they assert that substantial compliance cannot be found if the effect is to change the amount reflected by Amendment No. 1. They observe that a recorded document that allegedly understates the amount of a ship mortgage by some $92 million can hardly be said to be in substantial compliance. Moreover, they claim that the estate is to be sorely prejudiced, for to now find such a document to substantially comply with the requirements of the Ship Mortgage Act would defeat the right to preserve that mortgage for the estate that was gained upon the filing of the Debtor's bankruptcy petition.
They further assert that any such finding would impermissibly constitute a reformation of Amendment No. 1. On this score, they at least imply that the substantial compliance doctrine rests on the absence of prejudice to others. They add that reformation should not be ordered in the face of an intervening lien. E.g., Sky Harbor, Inc. v. Jenner, 164 Colo. 470, 435 P.2d 894 (1968); North East Indep. School Dist. v. Aldridge, 528 S.W.2d 341 (Tex.Civ. App.1975); Eastern Kentucky Production Credit Ass'n v. Scott, 247 S.W.2d 983 (Ky. 1952). Accordingly, they rely on several cases holding that a deed or other recorded document cannot be reformed against a trustee in bankruptcy or debtor-in-possession given the lien creditor status provided by § 544(a) of the Bankruptcy Code. See, e.g., In re Cunninghan, 48 B.R. 509, 512 (Bankr.M.D.Tenn.1985); In re Dlott, 43 B.R. 789, 793-94 (Bankr.D.Mass.1983); In re Robinson, 38 B.R. 255, 257 (Bankr.D. Maine 1984); In re Pribish, 25 B.R. 403, 404 (Bankr.D.Maine 1982); In re Hunt, 18 B.R. 504 (Bankr.E.D.Tenn.1982); In re Himmelstein, 5 B.C.D. 288, 1 C.B.C.2d 13 (Bankr.D.N.J.1979).
It is thus apparent that application of even the doctrine of substantial compliance involves no resolution of complex and highly technical factual issues, and the doctrine itself brings into play bankruptcy issues through consideration of that doctrine in light of the purpose of § 544(a) of the Bankruptcy Code and the status it confers.
In addition, the dispute involving § 551 of the Bankruptcy Code involves purely bankruptcy issues. GECC asserts that Prudential's First Ship Mortgage can be found valid only in the amount of $92,885. It claims that the Second Ship Mortgage held by it slides down to fill the gap. The Debtor and Creditors Committee assert that § 551 governs and clearly calls for lien preservation.
C. Resolution
Notwithstanding the nonfactual nature of the nonbankruptcy issues, the presence of bankruptcy issues, and the lack of need for specialized expertise, Prudential claims that this case is like Prudential Lines, where this court held that 11 U.S.C. § 362(b)(12) is self-executing and stated that:
the vacatur of the automatic stay [pursuant to 11 U.S.C. § 362(b)(12)] revests the admiralty court with jurisdiction to foreclose the debtor's interests. Upon sale, the rights of a debtor to a vessel are extinguished. What remains are the proceeds to be distributed. As to that § 362(b)(12) permits the admiralty court, in light of its specialized nature and expertise, . . . to rank maritime liens, hold a sale of a vessel when appropriate under *337 principles of maritime law and distribute the proceeds of such a sale only to maritime lien claimants and the holders of valid ship mortgages and security interests.
69 B.R. at 451 (citations omitted).
To say that this statement resolves the issue here is to beg the question. Nothing in Prudential Lines indicates that the grant of relief from the automatic stay requires that only the admiralty court determine a debtor's challenge to the validity of maritime liens and whether they can be preserved for the estate under applicable bankruptcy principles.[6] Indeed, where validity is to be tested at least in part by bankruptcy principles, as appears to be the case here, it makes no sense to deflect that resolution to the admiralty court.
Nevertheless, Prudential argues that, regardless of the outcome here, the validity of the lien must be tried in eight admiralty courts upon foreclosure of each of the Lancers, because maritime lienors might challenge the preferred status of the First Ship Mortgage as amended by Amendment No. 1. This assertion ignores the Debtor's claim that the $92,885,000 mortgage can be preserved pursuant to § 551 of the Bankruptcy Code for the benefit of the estate if found to be unperfected. Thus, if the Debtor prevails, it would appear that the validity issue need not be addressed in those eight foreclosure proceedings. Conversely, if Prudential prevails, it will have the benefit of a decision that it can present to the admiralty courts in eight foreclosure proceedings. In this it will not be significantly prejudiced. A decision in any one of the eight foreclosure proceedings may not be binding on other foreclosure actions absent joinder of all maritime lien claimants on all vessels. Prudential will seemingly have to present a decision of those courts to the others and argue that it should be followed. If it prevails here, Prudential should be able to do the same thing.
Retaining resolution of the debtor's challenge to the lien claimed by Prudential is, moreover, fully consistent with Judge Sweet's reasoning in Hellenic Lines. In addressing the allocation of dispute resolution between the admiralty and bankruptcy courts, Judge Sweet focused on the task to be performed. He observed that, given the broader recognition of admiralty court decrees selling vessels free and clear of liens, that function might best be performed by it, while no such concerns arose with respect to bankruptcy jurisdiction over freight. 38 B.R. at 995-96.
Determination of the validity of Prudential's alleged lien and whether it may be preserved for the benefit of the estate, pursuant to maritime law, bankruptcy principles and state law doctrines, similarly raises no practical need for determination by the admiralty court as opposed to the bankruptcy court. Indeed, given the bankruptcy issues involved, it appears that they should be first determined by a "judge having expertise in bankruptcy law. There is no assurance that a better initial determination would be made by a district court." Salomon v. Kaiser (In re Kaiser). 722 F.2d 1574, 1581 (2d Cir.1983).
In addition, it is to be remembered that the bankruptcy courts are often called upon to assess the validity of liens and security interests under a variety of laws which are often considered by state and other federal courts. See, e.g., NYNEX BISC. v. Beker Industries Corp. (In re Beker Industries Corp.), 69 B.R. 937, 3 *338 U.C.C. Rep.Serv.2d (Callaghan) 1105 (Bankr. S.D.N.Y.1987). It makes no sense to refer all such issues to other courts. The admiralty courts, moreover, while experienced in handling admiralty matters, are district judges sitting in admiralty. District judges handle all matters of federal jurisdiction. The validity of liens is a core matter within the jurisdiction of the bankruptcy courts; absent application of the traditional grounds for abstention or, as in Gary Aircraft, the presence of complex and technical factual issues requiring examination by a body with expertise, they, like all federal courts, have "the unflagging duty to exercise" their jurisdiction. Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 1246, 47 L. Ed. 2d 483 (1976); In re Cobham Enterprises, Inc., 62 B.R. 191, 195 (Bankr.S.D.N.Y.1986). The order for relief is thus to provide for this Court's retention of this dispute.
III.
Accordingly, we now turn to the Debtor's assertion that this Court should only modify the automatic stay, retaining jurisdiction over claims that the Debtor may have under 11 U.S.C. § 506(c) and the distribution of proceeds from the vessels in order to make sure that it obtains recovery "from the property" standing as collateral. 11 U.S.C. § 506(c). Prudential, relying on the legislative history to 11 U.S.C. § 506(c), 124 Cong.Rec. H11,095, H11,111, H11,112 (Sept. 28, 1978), claims that it will make good any final judgment rendered under 11 U.S.C. § 506(c), and, therefore, this Court need not retain the proceeds. It further states that it has no objection to a provision retaining in this Court the ability to determine whether the Debtors may recover under § 506(c).
In the present posture of this case where the Debtor asserts that it will soon be commencing an adversary proceeding contesting the validity of Prudential's lien and seeking to preserve it for the benefit of the estate and an adversary proceeding seeking to charge Prudential with § 506(c) costs, we see no need to resolve the disposition of proceeds issue at this time. The admiralty process will not be completed overnight. Proceeds from the five vessels will be held by the admiralty courts pending resolution of seamen's and other liens. Meanwhile, the parties can try the perfection and preservation issues here. If the Debtor does not prevail, its § 506(c) claims will resume significance and they too can be tried. What court eventually distributes the proceeds from the foreclosed vessels would seem, at this stage, to be of little moment and can be determined later. All that need be done now is (i) modify the automatic stay in order to retain resolution of the issue, rather than vacate it, (ii) require the Debtor to formalize its claims in the near future by filing the requisite pleadings so that they can be handled in advance of, or contemporaneously with, the forthcoming admiralty court proceedings and (iii) preclude distribution of vessel proceeds by the admiralty courts pending further order of this court.
The foregoing constitutes this Court's findings of fact and conclusions of law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
SETTLE ORDER.
NOTES
[1] See In re McLean Industries, Inc. et al., 74 B.R. 589, 590, 596 (Bankr. S.D.N.Y.1987); In re Prudential Lines Inc., 69 B.R. 439, 16 C.B.C.2d 383, 15 B.C.D. 445, Bankr.L.Rep. (CCH) ¶ 71,676 (Bankr.S.D.N.Y.1987).
[2] See S.E. Morison, Samuel de Champlain Father of New France 71-89 (Little Brown & Co. 1972).
[3] As Judge Friendly observed, "There appears to be no doubt that a bankruptcy court can be constitutionally vested with power to resort to its judgment in determining what constitutes satisfaction of the claims of creditors." In re Penn Central Corp., 384 F. Supp. 895, 950 (Regional Rail Reorg.Ct.1974). Numerous precedents indicate the power of the bankruptcy courts, even under the summary jurisdiction of the former Bankruptcy Act, to determine the validity of maritime liens. F.R. Kennedy, Jurisdictional Problems Between Admiralty and Bankruptcy Courts, 59 Tulane L.Rev. 1183, 1199-1201 (1985).
[4] Prudential argues that it is unfair to retain jurisdiction over the question of the validity of its lien because it, as arresting party with respect to the Lancers, will have to pay out certain expenses and it will have to contest the assertion of seamen's liens, without knowing whether its lien is valid. It, however, faces the same choice were the admiralty courts to determine the issue and offers no reason why any relief granted to the Debtor, should it prevail on the issue, cannot be conditioned on the Debtor reimbursing it for those expenses and the expenses of contesting liens asserted to have a higher priority.
[5] In this section, no conclusions of law are drawn with respect to the matters that will be raised in the adversary proceeding that will have to be brought by the Debtor to set aside Prudential's lien in excess of $92,885.00. Nor are all of the contentions of the parties stated. We attempt only to canvass the principal points made and to put them in a legal context in order to set forth the nature of the dispute. GECC concurred with the Debtor and Creditor's Committee on several points regarding Prudential's mortgage lien; on these points it is not necessary to distinguish which party asserted which position.
[6] There was no issue in Prudential Lines concerning the validity of a maritime lien. All that is stated therein is that the admiralty court could rank such liens and implicitly determine their validity under maritime law principles. Nor can anything more be drawn from our statement in McLean, 74 B.R. at 602 (1987), that it was held in Prudential Lines "that issues of validity and ranking of maritime liens fell within the expertise of the admiralty courts and should generally be left to them upon the end of the ninety-day stay of MarAd foreclosure actions provided in 11 U.S.C. § 362(b)(12)." Congress, in providing an automatic exception to the automatic stay in favor of MarAd by enacting § 362(b)(12), did not require the bankruptcy court to determine, in those instances, whether, as provided in § 362(d), the order for relief should vacate or modify the automatic stay. That is precisely the issue here. Moreover, the quoted statement only refers to general practice and not to the instance before us where the challenge to validity rests on and impacts bankruptcy principles and where the facts are neither technical nor complex. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541788/ | 76 B.R. 597 (1987)
In re Doris Laverne JACKSON f/k/a Rogers, Debtor.
Doris Laverne JACKSON f/k/a Rogers, Plaintiff,
v.
SECURITY FEDERAL SAVINGS AND LOAN ASSOCIATION and L.R. "Bob" La Roche, Defendants.
Bankruptcy No. 286-20600, Adv. No. 287-2022.
United States Bankruptcy Court, N.D. Texas, Amarillo Division.
August 13, 1987.[*]
Edward P. Oubre, Amarillo, Tex., for plaintiff.
Norman Gutzmer, Miller & Herring, Amarillo, Tex., for La Roche.
Tracey L. Noblitt, Gibson, Ochsner & Adkins, Amarillo, Tex., for Security Federal.
Tim Truman, Fort Worth, Tex., Trustee.
MEMORANDUM OF OPINION
JOHN C. AKARD, Bankruptcy Judge.
Doris Laverne Jackson (Debtor) seeks to set aside the foreclosure sale of her homestead as a fraudulent transfer under § 548(a)(2) of the Bankruptcy Code.[1]
*598 Facts
Security Federal Savings & Loan Association (Security Federal) held a valid perfected lien on the Debtor's home at 2108 Seminole, Amarillo, Texas. As a result of a default in the payments on the note secured by said lien,[2] Security Federal caused the property to be sold at Substitute Trustee's Sale on November 4, 1986. The property was sold to L.R. La Roche (La Roche) for the sum of $14,000.00. The property was conveyed to him by Substitute Trustee's Deed dated November 4, 1986 and recorded in the Deed Records of Potter County, Texas on November 10, 1986. The parties stipulated that the foreclosure sale was in proper form and that the price bid at the sale fully satisfied the note held by Security Federal.
The Debtor filed for relief under Chapter 13 of the Bankruptcy Code on December 5, 1986, claiming the house at 2108 Seminole as her homestead. Her Schedules listed total assets of $45,379.31 including this property valued at $32,500.00 and 48 months of delinquent child support due from her former husband in the amount of $7,200.00. The Court doubts the collectibility of the delinquent child support and when that, together with this property, is deducted, she had $5,679.31 in assets. Her scheduled secured liabilities were $49,140.13 including a disputed liability to La Roche of $32,500.00 and $12,919.05 to Security Federal, leaving her other secured debts at approximately $3,700.00. Unsecured claims debts were approximately $4,000.00.
The Debtor introduced without objection two appraisals of this property by William P. Kerr, a real estate broker of Amarillo, Texas. One of them, based on three comparable sales, indicated the market value of this property to be $32,000.00 on February 23, 1987. The other statement by Mr. Kerr, based on three other properties which he considered comparable, found the market value of this property to be $30,000.00 on February 23, 1987. The relevant time is the date of foreclosure, November 4, 1986, but these appraisals are sufficiently close in time to give an indication of the value of the property on that date. There was no indication that the value of the property had drastically changed between November 4, 1986 and February 23, 1987. Testimony at the hearing indicated that La Roche valued the property at $32,000.00 a few days after the foreclosure sale.
Statute
In pertinent part, § 548 reads as follows:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily
....
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation....[3]
A transfer is defined in § 101(50) as follows: "`transfer' means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the debtor's equity of redemption...." (Emphasis added.)
*599 If the Court sets aside a transfer under § 548, then § 550 provides:
(a) ... [T]he trustee may recover, for the benefit of the estate, the property transferred, or if the court so orders, the value of such property, from
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made....
Discussion
The facts of this case are almost a copy of those in Durrett v. Washington National Insurance Co., 621 F.2d 201 (5th Cir. 1980).[4]See also Abramson v. Lakewood Bank & Trust Co., 647 F.2d 547 (5th Cir. 1981), cert. denied, 454 U.S. 1164, 102 S. Ct. 1038, 71 L. Ed. 2d 320 (1982) and Willis, supra n. 3.
In the case at Bar the transfer (foreclosure)[5] occurred approximately one month prior to the filing of the Chapter 13 petition. The Debtor received less than reasonably equivalent value in exchange for the transfer. The lowest appraisal submitted indicated a value of $30,000.00 while the bid at the foreclosure sale was $14,000.00, or approximately 47% of the fair market value. The Schedules filed by the Debtor clearly indicate that she was made insolvent as a result of this foreclosure.
In argument, La Roche's counsel noted that purchasing property at a foreclosure sale entails certain risks.[6] La Roche argued that whatever price was bid at the foreclosure sale should be considered as the fair market value because of these risks. In Durrett, the Fifth Circuit suggested that a sale could not be set aside if the price bid at the foreclosure sale was more than 70% of the fair market value. Undoubtedly, this 30% "cushion" was used to give the purchaser at foreclosure some discount for the risks of making a purchase at such a sale in addition to eliminating minor differences of opinion as to fair market value.[7]
Security Federal argued that the Debtor's action is against the transferee at the foreclosure sale (La Roche) and not against the transferor (Security Federal). This argument overlooks the clear language of § 550 which provides that the Trustee may recover the property or the value thereof from "the entity for whose benefit such transfer was made." Clearly the transfer was for the benefit of Security Federal since it caused the foreclosure sale and received the funds generated as a result of that sale.[8]
Security Federal asserts that the statement in Durrett that the purchaser at the foreclosure sale and the Debtor "are the only parties now interested in the case," means that Security Federal can retain the funds which it received at the foreclosure sale and that the Debtor's arguments are solely with the purchaser at the sale. 621 F.2d at 203. This Court does not so construe Durrett. That language simply states that those are the only parties who actively participated in the case before the Fifth Circuit. To allow a lender to escape all liability when a third party purchases at a foreclosure sale would be to shift the liability from a knowledgeable lender to a perhaps unsuspecting purchaser at a foreclosure sale and could lead to the use of "straw man" purchasers. Security Federal caused the foreclosure sale and benefited from it; it cannot receive the benefits of that sale without its liabilities.
*600 Conclusion
The foreclosure sale of November 4, 1986 is void. Security Federal shall reinstate the Debtor's loan with the same monthly payments and terms and provisions as existed prior to the foreclosure, with delinquent payments to be cured through the Chapter 13 Plan pursuant to § 1332(b)(3). Marshall v. Spindale Savings and Loan Assn. (In re Marshall), 15 B.R. 738 (Bankr. W.D.N.C.1981).
The Court does not have sufficient evidence before it to determine rights as between Security Federal and La Roche. Security Federal will be required to reimburse La Roche sums which it received for its benefit (including principal, interest, costs and attorney's fees), but these and any other matters which cannot be settled between the parties must await the filing of a Proof of Claim or appropriate pleadings.
Order accordingly.
NOTES
[*] This Memorandum shall constitute Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052.
[1] The Bankruptcy Code is 11 U.S.C. § 101 et seq. References to Section numbers are to Sections in the Bankruptcy Code.
[2] Pleadings by Security Federal indicate that the default was $982.95 at the time of the foreclosure.
[3] The parties concede that the Debtor in a Chapter 13 proceeding may exercise the avoiding powers of a Trustee. Willis v. Borg-Warner Acceptance Corp. (In re Willis), 48 B.R. 295 (D.C.S. D.Texas 1985).
[4] The decision in Durrett was confirmed by the 1984 Amendments to the Bankruptcy Code and, in particular, by the inclusion of the foreclosure of the Debtor's equity of redemption in the definition of a transfer.
[5] Under Texas law, there is no right of redemption following a foreclosure under a Deed of Trust. Thus, the "debtor's equity of redemption" was foreclosed on November 4, 1986.
[6] Certainly one of those risks is the possibility of having the sale set aside under § 548.
[7] It is not necessary to review the various methods of calculating the percentage described in Willis supra at 300-301.
[8] The Court finds the value of the property on the date of foreclosure to be $32,000.00. If Security Federal would prefer to pay that value to the Debtor rather than accepting the solution which the Court suggests, then the Court will consider the matter. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541615/ | 949 A.2d 849 (2008)
195 N.J. 418
STATE
v.
GADDY.
No. C-825 September Term 2007, 62,310
Supreme Court of New Jersey.
April 17, 2008.
Petition for Certification. Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541678/ | 75 B.R. 102 (1987)
In re CONSOLIDATED SOUTHEASTERN GROUP, INC., f/k/a Sunbelt Western Steers, Inc., Debtor.
Bankruptcy No. A85-01201.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
June 11, 1987.
*103 Frank W. Scroggins, Scroggins & Brizendine, Atlanta, Ga., for debtor.
Shepherd L. Howell, Archer & Howell, Cartersville, Ga., for City of Cartersville.
ORDER
STACEY W. COTTON, Bankruptcy Judge.
The City of Cartersville, Georgia filed an objection to debtor's Plan of Reorganization. At the hearing on May 4, 1987, the parties agreed that the real issue was the treatment to be accorded the $6,566.37 claim of the City of Cartersville. Debtor's plan has classified and proposes to treat this claim as an unsecured claim. The parties agreed that the facts are not in dispute and to submit the matter on briefs.
It is stipulated that the claim of the city in the sum of $6,566.37 is for unpaid utilities and that this claim was not reduced to judgment and recorded in the appropriate general execution docket, prior to the filing of the debtor's Chapter 11 case. The debtor contends that with regard to personal property a lien must be filed before it takes effect. Debtor held no real property.
CONCLUSIONS OF LAW
The City Charter of the City of Cartersville, Georgia, approved by the legislature of the State of Georgia, provides that if any of the charges, rates, fairs, or fees for utilities are not paid, such shall constitute a lien against the property of the person served, and said lien shall be enforceable in the same manner and with the same remedies as a lien for city property taxes. A copy of the appropriate City Charter section is attached to the claimant's proof of claim.
Concerning a lien for taxes, the City Charter provides that a lien shall exist against all property upon which city taxes are levied . . . which shall be superior to all other liens except that it shall have equal dignity with those of the federal, state, or county taxes.
The City contends that its claim has a secured status by virtue of the lien on the property of the debtor even though the lien was not reduced to judgment and entered of record prior to bankruptcy. Under Georgia law taxes constitute a lien against the property whether that lien is recorded or not. O.C.G.A. Section 48-5-28. See also, generally, 2 G. Pindar Georgia Real Estate Law and Procedure Sections 26-83 through Section 26-85 (3rd ed. 1986).
The parties have stipulated that the City's claim arose from the use of utilities. This is not a tax as contemplated by Section 507 of the Bankruptcy Code. As noted by debtor's counsel in his brief, the Ninth Circuit in the case of In re Lorber Industries of California, Inc., 675 F.2d 1062, 1066 (9th Cir.1982), stated as follows:
[T]he elements which characterize an exaction of a `tax' within the meaning of said Section 64, sub. a(4) are as follows:
(a) An involuntary pecuniary burden, regardless of name, laid upon individuals or property;
(b) Imposed by, or under authority of the legislature;
(c) For public purposes, including the purposes of defraying expenses of government or undertakings authorized by it;
(d) Under the police or taxing power of the state.
Federal law defines "tax" for priority purposes and the determination of whether a governmental claim is a tax under the Bankruptcy Code is, therefore, a federal question. See In re Smith Jones, Inc., 36 B.R. 408 (Bankr.D.Minn.1984). If the fee or tax results from a voluntary undertaking for private benefit, such as city water or sewer rents, it is not a tax entitled to priority status, but instead is simply a charge for services rendered. See In re Adams, 40 B.R. 545 (E.D.Pa.1984); In re Payne, 27 B.R. 809 (Bankr.D.Kan. 1983).
Although the City argues otherwise, the special treatment of utilities under the City Charter is very similar to that accorded sales and use taxes under Georgia law. As the Lorber court held, "user fees", such as the City's utility charges, are not taxes *104 and do not constitute claims entitled to priority.
The City contends that its utility bill has a secured lien status, the same as a tax bill, by virtue of the City Charter passed by the State Legislature. (Ga. Acts 1974, 3697, 3698). As a secured creditor, the City's claim should be treated as a "Class 1" creditor under the plan and the debt should be paid in full, as are the other tax claims.
The City, however, ignores the fact that the lien granted by its charter is unrecorded. A similar question has been certified by the Eleventh Circuit to the Supreme Court of Georgia in Abney v. Cox Enterprises (In re Fulton Air Service, Inc.), 777 F.2d 1521 (11th Cir.1985). The question certified for resolution was, "May a trustee in bankruptcy, as a bona fide purchaser, avoid unrecorded tax liens?". The Supreme Court of Georgia, whose opinion was adopted by the Eleventh Circuit, stated as follows:
As between the State which has the right to record its liens for sales and use taxes and withholding taxes, thereby protecting itself against all purchasers, and a bona fide purchaser who has no means of protecting himself, fairness requires us to favor the bona fide purchaser.
254 Ga. 649, 651, 333 S.E.2d 581 (1985); 777 F.2d at 1523-Appendix.
Both the Georgia Supreme Court and the Eleventh Circuit held, therefore, that a trustee in bankruptcy, as a bona fide purchaser under 11 U.S.C. Section 554(a)(3) may avoid the state's unrecorded tax lien for sales and use tax and withholding taxes. Similarly, this Chapter 11 debtor, exercising the rights and powers of a trustee pursuant to Section 1107(a) of the Bankruptcy Code, may avoid the unrecorded lien for utility services asserted by the City. The unrecorded utility lien of the City is unperfected as against the debtor in possession exercising the bona fide purchaser rights and powers of a trustee under Section 1107(a) and Section 544(a)(3). Accordingly, it is
ORDERED that the claim of the City of Cartersville for unpaid utilities is properly classified and treated by the debtor's plan as an unsecured claim and the objections of the City are DENIED.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541679/ | 949 A.2d 442 (2008)
2008 VT 38
In re S.W., L.F., T.B., K.F. & K.F., Juveniles.
No. 07-345.
Supreme Court of Vermont.
March 14, 2008.
*443 Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
ENTRY ORDER
¶ 1. Mother appeals the family court's order terminating her parental rights with respect to her five children. Father appeals the same order with respect to his child with mother, S.W. Upon review of the record, we conclude that the evidence supports the family court's findings, which, in turn, support the court's conclusions and termination order. Accordingly, we affirm.
¶ 2. Mother was the primary care giver for the children, who were born between May 1994 and September 2000. Mother has a history of physical and mental health problems, and has spent considerable time hospitalized or incarcerated. Before moving to Vermont in the early fall of 2004, mother and the children resided in Pittsfield, Massachusetts with, at different times, the children's maternal grandmother, one of their maternal aunts, or father and his children. In October 2004, not long after mother and the children moved to Vermont, the Department for Children and Families (DCF) filed petitions alleging that the children were without proper care and supervision (CHINS). The Department tried to help mother obtain suitable housing and enroll the children in school, but she did not cooperate. In late November 2004, the family court placed the children in state custody, where they have remained ever since. Mother attended a *444 December 2004 hearing, but shortly thereafter returned to Massachusetts, where she was hospitalized and later incarcerated.
¶ 3. The children were adjudicated CHINS in early 2005 based on mother's admissions of neglect. The case plan goal at the time was to return the children to mother. Father had not been conclusively identified as the father of one of the children until the fall of 2006, and was never considered a placement option because of his lengthy and repeated incarceration. The family court issued a disposition order in April 2005 continuing custody with DCF, adopting the goal of reunification with mother, and ordering DCF to make an active effort to coordinate with Massachusetts, where mother was living at the time, on the possibility of transferring the children to that state for placement.
¶ 4. In the late fall of 2005, DCF changed its case plan goal to adoption and filed a petition to terminate parental rights with respect to all five children. The termination hearing was held over seven days between March and June 2007. Mother attended all but the last day of the hearing. Following the hearing, the family court concluded by clear and convincing evidence that there had been a substantial change of circumstances and that the children's best interests dictated that mother's and father's parental rights be terminated. Both mother and father appeal that order. Mother argues that: (1) DCF failed to make reasonable efforts to comply with the family court's disposition order requiring the Department to look into the possibility of placing the children in Massachusetts; (2) the family court's denial of her second counsel's repeated attempts to withdraw deprived her of effective assistance of counsel; and (3) the court failed to give her direct notice of the last day of the termination hearing. For his part, father argues that the court's conclusion that he would not be able to provide parental care within a reasonable period of time was not supported by essential findings. We reject each of these arguments, which we address in turn.
¶ 5. Mother first argues that DCF failed to use reasonable efforts to comply with the family court's disposition order requiring the Department to actively seek placement of the children in Massachusetts. We conclude that the record supports the family court's determination that DCF made reasonable efforts in that regard. In its disposition order, the family court expressed concern that the children were in separate placements and that DCF appeared to believe that the children's family should be principally responsible for seeking placement of the children in Massachusetts. The court stated that the children needed to be together as much as possible and that placement in Massachusetts near their extended family was in their best interest. The court emphasized, however, that it did not mean to imply that mother and her extended family had no obligation to pursue placement in Massachusetts. The court indicated that the family needed to make the necessary contacts with the appropriate Massachusetts agency and to express their desire to care for the children and to follow the case plan. In the end, the court ordered DCF to make an "active effort" to coordinate with Massachusetts on the possibility of placing the children in Massachusetts, even if not a kinship placement.
¶ 6. Following the termination proceedings in which a different judge presided, the family court considered whether DCF had made reasonable efforts to comply with the disposition order. The court found that DCF followed through "completely" with respect to that order by pursuing both foster and kinship placements *445 in Massachusetts. As the court found and mother acknowledges, the Massachusetts agency informed DCF that it would not consider a placement with mother's extended family, given their history with the agency, and that it was unable to locate a foster home for the children in the Pittsfield area, given the number of the children and their extensive needs. The court noted that the Massachusetts agency closed its interstate case on the children in July 2005, meaning that the children would have to stay in Vermont as long as they remained in state custody. These unchallenged findings support the court's conclusion that DCF fulfilled its obligations under the disposition order by making reasonable efforts to establish a Massachusetts placement.
¶ 7. Next, mother argues that she was entitled to, but denied, effective assistance of counsel when the family court refused to allow her second attorney to withdraw. Because mother has failed: (1) to make any showing that her counsel was ineffective or that she was prejudiced by any ineffectiveness on his part, or (2) to demonstrate that the family court abused its discretion by denying her second attorney's motion to withdraw, we need not determine whether, or under what circumstances, a party may claim ineffective assistance of counsel in a termination proceeding. See In re A.D.T., 174 Vt. 369, 374-75, 817 A.2d 20, 25 (2002) (declining "to decide whether, and under what circumstances, a parent may raise an ineffective-assistance-of-counsel claim in a termination proceeding").
¶ 8. Approximately four months after DCF filed its termination petition, the family court allowed mother's first counsel to withdraw from the case. Two months later, her second counsel filed a motion to withdraw, citing a lack of communication. The court denied the motion, finding that the problem appeared to be mother's unavailability, which could continue irrespective of whether it assigned new counsel. The attorney continued to represent mother at hearings, but told the court that he was not getting clear instructions from his client. Several months later, following completion of the first three days of the termination hearing, mother's attorney again moved to withdraw, stating that he had not communicated productively with mother and that there was a breakdown in client trust. The attorney indicated that he was unsure whether mother wanted him to withdraw, but that he wanted to withdraw because he did not think that he should have to deal with the animosity that mother had directed toward him at times. In response, mother stated that she just needed to sit down with her attorney and be clear about how they want to proceed to get her kids back. After listening to mother and her attorney, the court denied the motion. The court acknowledged that this is a difficult and emotional case, and that the attorney-client relationship had gone through some difficult patches because of mother's emotional duress. Nevertheless, the court concluded that this was not a case in which the client had consistently berated the attorney to the point where he could not fulfill his duty to advocate zealously on her behalf.
¶ 9. On appeal, mother fails to demonstrate, or even argue, that the court abused its discretion in so ruling. See State v. Stanley, 2007 VT 64, ¶ 12, 182 Vt. ___, 933 A.2d 184 (mem.) (noting that a decision whether to grant a motion to substitute counsel is left to the trial court's sound discretion); State v. Ahearn, 137 Vt. 253, 262-63, 403 A.2d 696, 703 (1979) (noting that an indigent defendant has no right to counsel of his choice, and that the trial court has discretion to substitute new counsel upon consideration of the relevant *446 factors). Moreover, other than citing the family court's denial of her attorney's motion to withdraw, mother makes no showing either that her counsel was ineffective or that any ineffectiveness on his part was prejudicial in that it affected the outcome of the proceeding. Cf. In re M.B., 162 Vt. 229, 236-37, 647 A.2d 1001, 1004 (1994) (noting that father failed to specify how his trial court's presumed ineffectiveness prejudiced his case sufficiently to create a reasonable probability of a different outcome).
¶ 10. Mother's final argument is that In re M.T., 2006 VT 114, 180 Vt. 643, 912 A.2d 456 (mem.), mandates reversal because the family court failed to notify her directly of the last day of the termination hearing, which she did not attend. We find no error. In M.T., 2006 VT 114, ¶ 12, 180 Vt. 643, 912 A.2d 456, although DCF had sent the mother letters notifying her of a termination hearing and the court had directly notified the mother's attorney of the hearing, we reversed and remanded the termination decision, holding that the family court was required "to provide direct notice of a pending termination petition and hearing to the parents of children who are the subject of the petition, in addition to the parents' attorneys." We refused to presume (1) that the mother would necessarily recognize the full import of the proceeding without the court itself directly sending her notice, or (2) that notice from the attorney with whom she was feuding would sufficiently convey the gravity of the situation. Id.
¶ 11. In this case, after receiving notice directly from the court, mother attended the first six days of the termination hearing. She did not attend the last day of the hearing, which had been continued, but the court directly notified her and her attorney of that hearing date. When mother failed to appear on the final day of the hearing, the family court called as a witness the court clerk, who testified that she had sent two notices of the hearing date to mother at mother's last known address, and that neither letter had been returned as undeliverable. The clerk testified that she had attempted to call mother, but that the phone had been temporarily disconnected, so she sent a letter by overnight mail informing mother of the hearing and providing her with information concerning arrangements that had been made for mother's transportation to Vermont and lodging here. Based on this testimony, the court found that it had provided mother with direct notice of the hearing, as required by M.T. The court stated that it would give mother an opportunity to re-open the final day of the proceeding if she could later demonstrate that she was incarcerated or hospitalized and unable to attend the hearing or notify the court of her predicament.
¶ 12. On appeal, mother argues because there was no proof that she actually received direct notice from the court of the last day of the termination hearing the court's termination decision must be reversed. We disagree. The evidence supported the court's findings that it had sent direct notice of the hearing to mother at her last known address and that the notice had not been returned as undeliverable. Our holding in M.T. requires nothing more.
¶ 13. For his part, father argues that because the family court did not make findings on DCF's failure to explore his recommended kinship placement with his sister, and erroneously found that his sister declined to assume care over S.W., its termination decision with respect to him cannot stand. According to father, DCF's inaction impaired his ability to provide S.W. with proper care through his sister or mother. We find no merit to this argument. The issues in this termination proceeding *447 were whether there had been a substantial change of circumstances and, if so, whether the best interests of the children warranted termination of parental rights. With respect to father, the court noted that since S.W. had come into state custody, father had been arrested, convicted, and incarcerated for felony drug distribution his twentieth arrest in the previous fifteen years. The court also found that father had not seen S.W. for a few years before she was placed in state custody, and that his visits with her since then had been brief. Noting that father had spent seven of the previous ten years in jail, the court concluded that he had not played a constructive role in his daughter's life. The record supports these unchallenged findings and conclusions. In considering DCF's termination petition with respect to father, the court was not required to make findings on the potential parental fitness of his sister or mother. In short, father's derivative-fitness argument is unavailing.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541683/ | 75 B.R. 505 (1987)
In re W.L. BRADLEY COMPANY, INC., Debtor.
Bankruptcy No. 86-01936G.
United States Bankruptcy Court, E.D. Pennsylvania.
June 17, 1987.
*506 Jeffrey M. Chebot, Philadelphia, Pa., for movant, Sunkist Growers, Inc.
Kevin W. Walsh, Adelman Lavine Krasny Gold & Levin, Philadelphia, Pa., for debtor, W.L. Bradley Co.
OPINION
BRUCE FOX, Bankruptcy Judge:
The debtor, W.L. Bradley Co., Inc., filed a voluntary petition under chapter 11 of the Bankruptcy Code on April 18, 1986. Prior to its filing, the debtor was engaged in the business of wholesale distribution of fruits and vegetables. It terminated its business operations on or about March 24, 1986, shortly before its bankruptcy filing.
On December 22, 1986, Sunkist Growers, Inc. ("Sunkist") filed a motion "for relief from the automatic stay under section 362(a) and for turnover of property not part of debtor's estate; and for abandonment and possession of trust corpus under section 554(b) and for interest and attorneys' fees." In its motion, Sunkist asserted *507 that it holds a perfected interest as a trust beneficiary in the amount of $72,361.02 in a nonsegregated, floating trust pursuant to the Perishable Agricultural Commodities Act, as amended, 7 U.S.C. § 499e(c) ("PACA"). Attached to the motion were various invoices evidencing Sunkist's sale of citrus fruit to the debtor in early 1986 and certain notices Sunkist sent to the U.S. Department of Agriculture ("USDA") and the debtor in an effort to perfect the alleged PACA trust. Since Sunkist has not been paid for the fruit, its motion requested that the court order the debtor to make immediate payment of the $72,361.02, plus prejudgment and post-judgment interest, and schedule a hearing for the purpose of awarding Sunkist attorney's fees and costs. The debtor filed an answer to the motion, denying most of Sunkist's factual averments and raising a number of affirmative defenses.
A hearing on Sunkist's motion was held and, at that time, Sunkist advised the court that it would not press any claim for trust status for four of the nine invoices at issue.[1] As a result, the parties agreed that the sum in dispute amounts to $37,585.90.[2] After the conclusion of testimony, the parties also agreed that if the court upheld Sunkist's status as a PACA trust claimant, its request for interest, attorney's fees and costs would be considered at a later hearing.
Based on the findings of fact and conclusions of law set forth below, I hold that: (1) pursuant to PACA, the debtor is holding $37,585.90 in trust for Sunkist; (2) Sunkist is entitled to relief from the automatic stay; and (3) the debtor should be required to promptly pay the trust funds to Sunkist.[3]
FINDINGS OF FACT
1. The debtor filed a voluntary petition under chapter 11 of the Bankruptcy Code on April 18, 1986.
2. Prior to its bankruptcy filing, the debtor was engaged in the business of wholesale distribution of fruits and vegetables and ceased doing business on or about March 24, 1986.
3. The debtor received no income other than from the operation of its business of wholesale distribution of fruits and vegetables during the two years preceding the filing of its bankruptcy petition.
4. In the year and one half period prior to its bankruptcy filing, the debtor engaged in approximately 225 business transactions with Sunkist.
5. The debtor is obligated to Sunkist in the amount of $37,585.90, for citrus fruits purchased by the debtor under the terms and conditions of the following invoices:
Invoice Date Invoice
Number Shipped Date Amount
21-10192 3/6/86 3/15/86 $6,600.00
02-36216 3/17/86 3/26/86 $8,738.70
02-36217 3/17/86 3/27/86 $7,808.00
02-35963 3/13/87 3/28/86 $5,737.50
02-36484 3/19/86 3/28/86 $8,825.25[4]
6. Each invoice reflects fruit ordered by the debtor from Sunkist and sold by Sunkist to the debtor. The debtor received all of the ordered fruit.
7. Payment under each invoice was due ten days after the invoice date.
8. Sunkist sent the debtor and the USDA notice of intent to preserve trust benefits, pursuant to PACA, under the sales invoices as follows: *508
Invoice Date of Notice Date of Notice
Number to Debtor filed with USDA
21-10192 3/14/86 3/17/86
02-36216 4/7/86 4/10/86
02-36217 4/7/86 4/10/86
02-35963 4/7/86 4/10/86
02-36484 4/7/86 4/10/86
9. To date, the debtor has not paid Sunkist for the citrus fruit supplied under the sales invoices described in paragraph 5 above.
10. The debtor is also obligated to Sunkist in the amount of $34,865.12 for citrus fruits purchased by the debtor under the terms and conditions of four invoices numbered 20-10261, 45-10809, 45-10860, 02-35963 ("the second group of invoices").
11. With respect to the second group of invoices, Sunkist filed notices of intent to preserve trust benefits with the USDA pursuant to PACA which represented that the notices were being filed within forty days of the invoice date and thirty days of the payment due date.
12. The actual invoices which comprise the second group contain information inconsistent with that set forth in the notices sent to the USDA by Sunkist. Specifically, a comparison of the notices with the actual invoices suggests that the notices were filed more than forty days after the invoice date and more than thirty days after the payment due date.
13. Based on the information contained in invoices comprising the second group, the debtor asserted before this court that the trust notices were not timely under PACA. Sunkist thereupon withdrew its request for trust status with respect to the second group of invoices.
14. Although it has conducted no business since filing its chapter 11 bankruptcy, the debtor still holds a license to engage in its prepetition activities from the USDA under PACA.
15. As of December 17, 1986, the debtor maintained $150,344.86 on deposit in an insured money market account with Fidelity Bank.
16. The funds in the money market account constitute a commingled fund of proceeds from sales of perishable agricultural products.
17. The debtor's prospects for reorganization are dependent upon collecting an account receivable owed by Joseph Russo, who himself is a bankruptcy debtor in the United States Bankruptcy Court for the Southern District of New York. Litigation on the claim has been commenced in the New York court.
18. As of the date of trial, debtor's bankruptcy filing, the only expenditure from the debtor's money market account has been a single $60.00 disbursement in connection with the Russo litigation in New York.[5]
19. The debtor is aware of another creditor, Gwin, White & Prince, which claims the status of a trust beneficiary under PACA.
20. On its schedules, the debtor has listed priority claims in excess of $10,000.00 and a secured claim in the amount of $250,000.00.
21. The debtor believes that if it is required to pay Sunkist and Gwin, White & Prince the amounts they are demanding as PACA trust claimants, all of the debtor's funds on hand will be consumed and the debtor will be unable to consummate a plan of reorganization.
DISCUSSION AND CONCLUSIONS OF LAW
Sunkist's claim in this matter is derived from the amendments to PACA enacted by Congress in 1984. Before discussing the legal issues arising in the case sub judice, it is helpful to first briefly outline the purpose of the PACA trust provisions and the manner in which they operate.
In amending PACA in 1984, Congress made a finding that financing arrangements, which allow purchasers of perishable agricultural commodities who have not yet paid for the commodities to give lenders a security interest in the purchased fruit and vegetables, constitute a "burden on commerce" and are "contrary to the *509 public interest." 7 U.S.C. § 499e(c)(1). The legislative history explains:
Sellers of agricultural commodities are often located thousands of miles from their customers. Sales transactions must be made quickly or they are not made at all. . . . Under such conditions, it is often difficult to make credit checks, conditional sales agreements, and take other traditional safeguards.
. . . . .
Many [buyers], in the ordinary course of their business transactions, operate on bank loans secured by [their] inventories, proceeds or assigned receivables from sales of perishable agricultural commodities, giving the lender a secured position in the case of insolvency. Under present law, sellers of fresh fruits and vegetables are unsecured creditors and receive litle protection in any suit for recovery of damages where a buyer has failed to make payment as required by the contract.
In recent years, produce sellers have been subjected to increased instances of buyers failure to pay and slow payments.
H.R. No. 98-543, 98th Cong., 1st Sess. 3 (1983) ("House Report"), U.S.Code Cong. & Admin.News 1984, pp. 405, 406.
To deal with this perceived problem, Congress amended PACA "to increase the legal protection for unpaid sellers and suppliers of perishable agricultural commodities until full payment of sums due have been received by them" in the form of a non-segregated, floating trust that applies to the commodities, products derived therefrom and any receivable or proceeds from their sale in the hands of the buyer. Id. at 1. The statutory authority for the trust is codified at 7 U.S.C. § 499e(c)(2).[6] As one court has explained, an unpaid obligation "becomes a trust obligation of the [buyer], prior to and superior to any lien or security interest in inventory held by the dealer's secured lender." In re Prange Foods, Corp., 63 B.R. 211, 214 (Bankr.W.D.Mich. 1986). The legislative history expressly notes that the PACA trust was modeled on the trust amendments to the Packers and Stockyards Act ("PSA") enacted in 1976, see 7 U.S.C. § 196. House Report at 4. As a result, courts have looked to decisions under the PSA trust amendments for guidance in construing the PACA trust provisions. See In re Monterey House, Inc., 71 B.R. 244 (Bankr.S.D.Tex.1986); In re Fresh Approach, Inc., 51 B.R. 412 (Bankr.N.D. Tex.1985) (Fresh Approach II).
The statutory trust operates in favor of "all unpaid suppliers or sellers of such commodities or agents involved in the transaction." 7 U.S.C. § 499e(c)(2). In order to perfect its status as trust beneficiary, a seller, supplier or agent must file a notice of its trust claim with the USDA within thirty days after payment has fallen due. 7 C.F.R. § 46.46(g). Once the seller has perfected its status, it has no obligation to trace the assets to which its trust applies. The trust is "floating" and applies to all of the buyer's produce related inventory and proceeds thereof, regardless whether the trust beneficiary or another seller was the source of the inventory and proceeds thereof. House Report at 5; Fresh Approach II, 51 B.R. at 422; In re Fresh Approach, Inc., 48 B.R. 926, 931 (Bankr.N.D.Tex.1985) (Fresh Approach I). See also 7 C.F.R. § 46.46(c).
With these principles in mind, I turn to the four main arguments raised by the debtor in opposition to Sunkist's request for relief.[7]
*510 A. Sunkist's Eligibility As a PACA Trust Claimant
The debtor's lead argument in opposition to Sunkist's motion is that Sunkist has not established that it is eligible to be a PACA trust claimant. The statute creates a trust "for the benefit of all unpaid suppliers or sellers of . . . commodities or agents involved in the transaction. . . ." 7 U.S.C. § 499e(c)(2). The evidence at trial established that the debtor and Sunkist entered into contracts for the purchase of citrus fruit. There was also some evidence that suggested the fruit was actually packed and shipped by entities other than Sunkist, although Sunkist's name was on the fruit itself and the cartons used for shipping. Based on this record, the debtor argues that Sunkist has not sufficiently established its role in the transaction, or its relationship to the other entities that were apparently involved, to warrant a finding that it is a supplier, seller or agent under PACA.
The terms "supplier," "seller" and "agent" are not defined in the statute, rendering their interpretation somewhat more difficult. It is also troubling that Sunkist did not better explicate its role in the transactions at issue. Nevertheless, I conclude that Sunkist has properly invoked the trust provisions of PACA.
When, as here, a statute does not define a term, courts will presume that the legislative purpose is expressed by the ordinary meaning of the words used. Russello v. United States, 464 U.S. 16, 21, 104 S. Ct. 296, 299, 78 L. Ed. 2d 17 (1983); Diamond v. Diehr, 450 U.S. 175, 182, 101 S. Ct. 1048, 1054, 67 L. Ed. 2d 155 (1981). Under this canon of statutory construction, there can be little doubt that Sunkist is a seller or a supplier under PACA. While Sunkist's exact role in the marketing chain may not be fully clear, record establishes that Sunkist entered into contracts to sell the fruit to the debtor and was the "seller" in the transaction. Also, in the ordinary usage of the term, Sunkist "supplied" the fruit to the debtor.
The legislative history confirms that the use of the common meaning of the statutory terms will effectuate Congress' intent:
In the marketing of perishable agricultural commodities, there are many varied business arrangements resulting in the movement of these commodities from the farm to shipping point and to destination markets and ultimately the consumer. They include but are not limited to consignments, joint ventures, and grower agency arrangements. In a joint venture, it is common for one of the joint ventures to gain ownership, possession or control of the goods for the purpose of marketing the goods. In that situation, a trust relationship arises as between the joint venture partner which has marketing responsibility and all other joint venturers. Another trust relationship [sic] is established in the person or entity which gains ownership, possession or control of the goods from the joint venturers.
. . . . .
As each supplier, seller, or agent transfers ownership, possession, or control of perishable agricultural commodities to a commission merchant, dealer, or broker, such supplier, seller, or agent will automatically become a participant in the trust.
House Report at 5, U.S.Code Cong. & Admin.News 1984, p. 408.
The import of the passage quoted above is that Sunkist may have legal obligations to other entities from which it may have obtained the fruit it sold to the debtor; those obligations may even be in the form of a trust. However, Sunkist's relationships with other entities do not detract from its seller/supplier relationship with the debtor or its status as a PACA trust beneficiary with respect to the debtor. In short, the debtor's implicit argument[8] that *511 some entity other than Sunkist is the sole, proper PACA trust beneficiary is unwarranted. It is therefore unnecessary to ascertain the precise nature of Sunkist's relationship with other companies which may have been involved in the packing and shipping of the subject fruit to the debtor.
B. The Validity of the Trust Notice Filed for Invoice Number 21-10192
As set forth in Finding of Fact Nos. 5, 7, invoice number 21-10192 shows a shipping date of March 6, 1986, an invoice date of March 15, 1986 and therefore a payment due date of March 25, 1986. Sunkist sent its notice of intent to preserve trust benefits to the USDA on March 14, 1986 and the notice was received there on March 17, 1986, eight days before payment was due. Findings of Fact Nos. 7, 8.
PACA provides:
The unpaid supplier, seller, or agent shall lose the benefits of such trust unless such person has given written notice of intent to preserve the benefits of the trust to the commission merchant, dealer, or broker and has filed such notice with the Secretary within thirty calendar days (i) after expiration of the time prescribed by which payment must be made as set forth in regulations issued by the Secretary (ii) after expiration of such other time by which payment must be made, as the parties have expressly agreed to in writing before entering into the transaction, or (iii) after the time the supplier, seller, or agent has received notice that the payment instrument promptly presented for payment has been dishonored.
7 U.S.C. § 499e(c)(3) (emphasis added); accord, 7 C.F.R. § 46.46(g).
Placing great emphasis on the use of the word "after," the debtor argues that Sunkist did not preserve its status as a trust beneficiary because its notice was filed before the expiration of the time deadline for payment of the invoice. In response, Sunkist asserts that it has satisfied the literal requirement of the statute and regulations, i.e., its notice was on file with the USDA within thirty days after the payment had fallen due. In effect, the debtor requests that the court construe the statute to require strict, technical compliance with at least one reading of its terms; Sunkist, on the other hand, would have the court construe the statutory and regulatory provisions as imposing no "ripeness" requirement for filing a notice, but only a limitations period. There are no cases under PACA or PSA on this issue.
While the answer to the question posed by the parties is not clear cut, I conclude that Sunkist's interpretation of the statute and regulation is the better of the two. Initially, I fail to see what policy goal is served by invalidating a trust notice filed before the buyer's payment is in default. If the filing of the notice actually created the trust, a requirement that the seller await some time period could have some practical, industry-wide significance. However, as the court explained in Fresh Approach II, "the beneficial interest arises, by operation of law, upon delivery to a dealer of qualifying produce, and said interest exists unless and until either the claim is satisfied or the beneficiary fails to take the neessary steps to perfect." 51 B.R. at 423. Thus, the trust seems to arise upon delivery rather than upon the failure to make timely payment. Conversely, I am unaware of any practical difficulties (other than increased paperwork for the contracting parties and the USDA) if a "premature" filing were found valid. Finally, I am guided by the general legislative intent to establish increased protection and an effective remedy for sellers, suppliers and agents. I will therefore, resolve any ambiguity in favor of Sunkist. Cf. Pennsylvania Agricultural Cooperative Marketing Association v. Ezra Martin Co., 495 F. Supp. 565 (M.D.Pa.1980) (PSA is to be *512 construed liberally to prevent economic harm to its intended beneficiaries). In sum, the statutory use of the word, "after," marks the beginning of the thirty day period and does not prohibit an early filing.
C. The Debtor's Allegation of Unclean Hands and Request for Equitable Subordination
As explained earlier, Sunkist withdrew at trial its claim of trust status for four invoices in response to the debtor's assertion in this court that Sunkist's notices to the USDA of its intent to preserve trust benefits for those four invoices were not timely under 7 U.S.C. § 499e(c)(3) and 7 C.F.R. § 46.46(g). Based on this sequence of events, the debtor suggests that Sunkist notices to the USDA misrepresented the facts and argues that the court should deny Sunkist all the relief it requests.
The debtor invokes the equitable doctrine that a party seeking relief must come into court in good faith and with clean hands. E.g., Ciba-Geigy Corp. v. Bolar Pharmaceutical Co., 747 F.2d 844 (3d Cir.1984), cert. denied, 471 U.S. 1137, 105 S. Ct. 2678, 86 L. Ed. 2d 696 (1985); American Bell, Inc. v. Federation of Telephone Workers, 736 F.2d 879 (3d Cir.1984); In re Midwest Processing Co., 41 B.R. 90 (D.N.D.1984). In the alternative, the debtor invokes the doctrine of equitable subordination, see 11 U.S.C. § 510(c)(1), which may be applied when: (1) the claimant has engaged in inequitable conduct; (2) the misconduct has resulted in injury to other creditors or has conferred an unfair advantage on the claimant; (3) equitable subordination would not otherwise be inconsistent with the provisions of the Bankruptcy Code. E.g., In re Multiponics, Inc., 622 F.2d 709 (5th Cir.1980); In re Mobile Steel Co., 563 F.2d 692 (5th Cir.1977); In re Americana Apparel, Inc., 55 B.R. 160 (Bankr.E.D.Pa.1985). 3 Collier on Bankruptcy ¶ 510.05[1], [2] (15th ed. 1987) ("Collier").
The debtor's argument fails due to insufficient evidence. The debtor established only that the information on the challenged invoices differed from the information sent to the USDA. There are many possible explanations for the discrepancies, including error and oversight. From the bare discrepancies only, the debtor requests that the court infer that Sunkist's conduct was intentional and fraudulent. I cannot do so. Compare Silver v. Nelson, 610 F. Supp. 505 (W.D.La.1985) (fraud is never presumed and may not be inferred from circumstances which at most create only suspicion); In re Brown, 419 F. Supp. 199 (E.D.Va.1975) (fraud is never presumed but must be proved by clear and convincing evidence); In re Fritts, 26 B.R. 43 (Bankr. E.D.Tenn.1982) (same as Brown) with Quintel Corp., N.V. v. Citibank, N.A., 606 F. Supp. 898 (S.D.N.Y.1985) (intent to defraud may be inferred from circumstantial evidence where there is sufficient supporting evidence).
In evaluating Sunkist's good faith, I note also that Sunkist attached copies of all of the invoices upon which the challenged trust claims were based to its motion in this court. It thus appears that Sunkist made no effort to conceal the particulars of the four withdrawn trust claims from either the debtor or the court. Moreover, the debtor has not shown any injury has resulted to any party in interest from the alleged misrepresentations. In these circumstances, I decline to invoke either the doctrine of unclean hands or equitable subordination to deny Sunkist the relief it has requested.
D. The Relationship of PACA to the Bankruptcy Code
Next, the debtor argues that the fundamental principle of equality of distribution embodied in the Bankruptcy Code must override the trust provisions of PACA. The debtor asserts that nothing in PACA dictates that PACA claims be accorded preferred status in a bankruptcy proceeding and submits that those courts which have uniformly construed PACA "to the detriment and exclusion of the bankruptcy legislation" are misguided. Debtor's Memorandum of Law at 25.[9]
*513 This argument is easily rejected. The legislative history of the Bankruptcy Code itself expresses Congress' intent to honor statutory trust provisions such as that found in PACA.
[11 U.S.C. § 541] and proposed 11 U.S.C. § 545 also will not affect various statutory provisions that give a creditor of the debtor a lien that is valid outside as well as inside bankruptcy, or that creates a trust fund for the benefit of a creditor of the debtor. See Packers and Stockyards Act § 206, 7 P.S. § 196.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 368 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6324.
There is no reason to believe that Congress' intent to respect the PSA trust provision is not equally applicable to PACA. Moreover, while there is no express reference in PACA's legislative history to the earlier Bankruptcy Code, it is obvious that a buyer's bankruptcy filing would be among the circumstances which would result in late payment or no payment at all to sellers, suppliers or agents. Accord, In re Prange Foods, Corp., 63 B.R. at 218 n. 4; 49 Fed.Reg. 45735, 45738 (Nov. 20, 1984) (explanatory note to PACA trust regulations states that if buyer files a bankruptcy, trust assets are not to be considered part of the bankruptcy estate).
In short, the Bankruptcy Code principle of equality of distribution was created by Congress and it is within Congress' province to create exceptions to the principle. Congress has done so, for certain statutory trusts arising under federal law. I see no reason to conclude that the statutory rights of a PACA seller, supplier or agent should be nullified simply because the buyer files a bankruptcy petition.
E. Relief
The preceding discussion dictates the conclusion that $37,585.90 of the funds in the debtor's money market account are being held in trust for Sunkist. As the corpus of a trust in favor of a non-debtor beneficiary, those funds are not property of the debtor's estate. 11 U.S.C. § 541(d). In re Monterey House, Inc.; Fresh Approach II. Nevertheless, Sunkist concedes that it must obtain relief from the automatic stay in order to take action to obtain payment from the debtor of the trust proceeds. See 11 U.S.C. § 362(a)(3) (stays act to obtain property of the estate or property from the estate); 2 Collier ¶ 362.04[3], at 362-34. (automatic stay protects property "in the possession of the estate"). In this case, Sunkist not only seeks relief from stay, but also an order directing the debtor to deliver the funds.[10] In response, the debtor argues that the trust funds are adequately protected and it should be allowed to continue to use the funds, particularly since it may not be able to reorganize without the use of the money.
I conclude that Sunkist is entitled to relief from stay and immediate payment from the debtor. My decision is based on the legislative purpose in the enactment of the PACA trust provision, which was to "assur[e] . . . that raw products will be paid for promptly." House Report at 4. As the *514 court cogently explained in Fresh Approach II:
It must be remembered that PACA was not enacted to protect those in Debtor's shoes, but rather to prevent the chaos and disruption in the flow of perishable agricultural commodities sure to result from an industry-wide proliferation of unpaid obligations. While in isolation, this may seem a harsh course to follow, in the macroeconomic sense PACA serves to ensure continuity of payment and therefore survival of the industry. Congress has plainly decided it would be less disastrous to risk the liquidation of a single purchaser than to threaten the entire production chain with insolvency. It is not the function of this Court to pass upon the wisdom of that decision.
51 B.R. at 420.
Given the clear expression of legislative intent, I cannot grant the debtors request for permission to continue to use the trust funds and to pay the trust obligation in full through a plan of reorganization. Fresh Approach II; see In re Monterey House; cf. In re Dieckhaus Stationers of King of Prussia, Inc., 73 B.R. 969 (Bankr.E.D.Pa. 1987) (immediate payment of administrative expense claim ordered because 11 U.S.C. § 365(d)(4) expresses legislative intent that trustee be required to pay nonresidential real property lease obligations "on time" pending assumption or rejection of the lease).[11]
An order in accordance with this opinion will be entered.[12]
ORDER
AND NOW, this 17 day of June, 1987, upon consideration of the motion of Sunkist Growers, Inc. ("Sunkist") for relief from the automatic stay under section 362(a) and for turnover of property not part of debtor's estate and for abandonment and possession of trust corpus under section 554(b) and for interest and attorney's fees, the debtor's response thereto and after notice and hearing, it is ORDERED that:
1. The motion for relief from stay is granted.
2. The debtor shall promptly pay Sunkist the sum of $37,585.90.
3. A hearing will be held on July 27, 1987, to consider Sunkist's request for payment of interest and attorney's fees, at 10 A.M.
NOTES
[1] With respect to those four invoices, the debtor had challenged Sunkist's claim on the ground, inter alia, that Sunkist had not perfected its trust status in a timely manner.
[2] At the hearing, the debtor made clear that it does not dispute that it received the shipments of fruit and that their price was $37,585.90. It disputes only whether Sunkist should be accorded PACA trust claimant status.
[3] As a result of this decision, it is unnecessary to rule on Sunkist's motion for abandonment under 11 U.S.C. § 554(b).
[4] The sum of these invoices is $37,709.45. The parties agree that the present indebtedness is only $37,585.90, apparently due to the application of a credit in favor of the debtor.
[5] Since trial, a small administrative expense claim has been allowed.
[6] 7 U.S.C. § 499e(c)(2) provides, in pertinent part:
Perishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities or products, shall be held by such commission merchant, dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities or agents involved in the transaction, until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers, sellers, or agents. . . .
[7] The debtor also argues that Sunkist's perfection of its PACA trust claims constitutes an avoidable preference, see 11 U.S.C. § 547, devoting two pages of its twenty eight page memorandum to the issue. Based on the analysis set forth in Fresh Approach II, 51 B.R. at 422-24, I reject the debtor's argument. See also 11 U.S.C. § 547(c).
[8] The debtor explicitly argues that entities which are only "agents" or "sellers" were not intended by Congress as trust beneficiaries; i.e., that the only intended beneficiaries are growers of perishable agricultural commodities. Both the plain language of the statute and the legislative history lead me to reject this theory. See 7 U.S.C. § 499e(c)(2) (referring to unpaid suppliers or sellers or agents); House Report at 5, U.S.Code Cong. & Admin.News 1984, p. 408. ("It is intended that the amount claimable against the trust by a seller supplier, including a grower will be the net amount due him after allowable deductions for expenses or advances of the buyer, grower's agent, commission merchant, or receiver.").
[9] The debtor also suggests that a PACA trust "is nothing more or less then [sic] an undisclosed and secret priority" as to other creditors and bona fide purchasers. Debtor's Memorandum of Law at 24. This argument is hard to fathom since notice of the trust is given to both the buyer (the debtor herein) and to the USDA. Moreover, the legislative history expressly notes:
[T]he statutory trust requirements will not be a burden to the lending institutions. They will be known to and considered by prospective lenders in extending credit. . . . Prompt payment should generate trade confidence and new business which yields increased cash and receivables, the prime security factors to the money lender.
House Report at 4, U.S.Code Cong. & Admin. News 1984, p. 407.
[10] Sunkist's motion could have been limited to a request for relief from stay for the purpose of instituting an action against the debtor in federal district court. See 7 U.S.C. § 499e(c)(4) (providing for federal jurisdiction of actions by trust beneficiaries to enforce payment from the trust). By requesting payment, Sunkist sought relief which, arguably, should have been instituted by adversary proceeding. See Bankr.Rule 7001(1). Since the debtor has not objected to the procedure, trial has been completed and the matter has been under advisement for a few months, I deem it equitable to consider Sunkist's demand for payment on its merits. See In re Stern, 70 B.R. 472, 473 n. 1. (Bankr.E.D.Pa. 1987).
[11] Therefore, I need not determine whether the debtor has provided Sunkist with adequate protection in this case. Nor do I decide if a bankruptcy trustee is obliged to deliver trust property to the beneficiary upon demand for trusts other than those created by PACA. Compare Georgia Pacific Corp. v. Sigma Service Corp., 712 F.2d 962, 968 (5th Cir.1983) (stating, in dictum, that bankruptcy court has power "to recognize the [trust beneficiary's] equitable interest . . . or to issue protective order prohibiting or conditioning its use, if a cash equivalent, but then holding that funds impressed with a constructive trust must be paid to the beneficiary) (emphasis added), cited in, Matter of Quality Holstein Leasing, 752 F.2d 1009, 1012 (5th Cir.1985) with In re N.S. Garrott & Sons, 772 F.2d 462, 467 (8th Cir.1985) (where, under state law, debtor holds property subject to a constructive trust with a duty to reconvey the property to the rightful owner, the estate will generally hold the property subject to the same restriction).
[12] The motion for relief from stay is a core proceeding. 28 U.S.C. § 157(b)(2)(G). To the extent Sunkist also seeks to compel immediate payment of the trust proceeds, this case is functionally equivalent to a proceeding to determine whether the debtor may use cash collateral, see 11 U.S.C. § 363(c)(2); In re Sacerdote, 74 B.R. 487 (Bankr.E.D.Pa. 1987), which is also a core matter. See 28 U.S.C. § 157(b)(2)(M). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541503/ | 75 B.R. 466 (1987)
In re GORDON CAR AND TRUCK RENTAL, INC., Debtor.
GORDON CAR AND TRUCK RENTAL, INC., Plaintiff,
v.
AMERICAN MOTORS LEASING CORPORATION, AMC Leasing Corporation and Bank of Utica, Defendants.
Bankruptcy No. 85-00709, Adv. No. 86-0104.
United States Bankruptcy Court, N.D. New York.
June 15, 1987.
Brett W. Martin, Utica, N.Y., for debtor.
Menter, Rudin & Trivelpiece, P.C., Albany, N.Y., for American Motors Leasing Corp. and AMC Leasing Corp.; Jonathan D. Deily, of counsel.
Penberthy, Kelly & Walthall, P.C., Utica, N.Y., for Bank of Utica; William W. Kelly, of counsel.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
STEPHEN D. GERLING, Bankruptcy Judge.
On August 18, 1986, Gordon Car and Truck Rental, Inc. ("Debtor") commenced this adversary proceeding against American Motors Leasing Corporation and AMC Leasing Corporation (collectively "AMC"). The action sought a declaration of AMC's security interest, if any, in certain automobile and truck franchise/license agreements ("licenses") entered into between the *467 Debtor and Avis-Rent-A-Car System, Inc. ("Avis"). By Order dated October 29, 1986, the Bank of Utica ("Bank") was permitted to intervene as a party defendant, as it also claimed a security interest in the licenses. The Bank subsequently moved for summary judgment, and AMC moved to dismiss each of Debtor's causes of action, and the Bank's cross-claims. The parties have stipulated to having the Court render final determination on the merits of all outstanding claims to the licenses.
FINDINGS OF FACT
The Debtor was at one time the Avis franchisee for the cities of Binghamton, Corning, Elmira, Ithaca, and Utica, New York. The Debtor had operated the business pursuant to the licenses with Avis since at least 1956.[1]
At some point, the Debtor began leasing the motor vehicles used in its business from AMC, and entered into at least four separate "Master Fleet. Vehicle Lease Agreements" ("Master Fleet Agreements") with that party.[2] Sometime in March, 1984, the Debtor executed an "Addendum" to each existing Master Fleet Agreement which read:
As further security for the performance of this lease, Lessee [Debtor] hereby grants, assigns and conveys to Lessor [AMC] a continuing security interest in any and all proceeds, accounts and general intangibles (as defined in the Uniform Commercial Code) now existing or hereafter arising as a result of the rental, lease or use by [Debtor] of any or all of the vehicles leased hereunder.
AMC had drafted and prepared the Addendum. By letter dated March 12, 1984, Debtor forwarded to AMC the executed Addendum, together with executed financing statements (UCC-1). The financing statements were presumably filed with the offices of the Clerk of Oneida County, New York, and the New York Secretary of State.[3]
On July 22, 1985, AMC commenced suit against Debtor in the New York Supreme Court, Oneida County, seeking money damages in the amount of $565,466.63 due to Debtor's alleged breach of the Master Fleet Agreements.[4] Also on that date, the Honorable Edward S. Conway, Justice of the New York Supreme Court at Albany, New York, entered an order to show cause and temporary restraining notice in AMC's favor against Debtor. This order required Debtor and other individuals to show cause why an order should not be entered directing seizure of vehicles, proceeds, accounts, and general intangibles, pursuant to § 7102 of New York's Civil Practice Law and Rules (McKinney 1980) ("CPLR"). This order specifically restrained Debtor from in any way alienating or encumbering its interest in "any franchise, operating agreement, or lease and the proceeds thereof".
On the original return date of July 31, 1985, Justice Donald H. Miller of the New York Supreme Court entered a conditional seizure order on AMC's behalf. The order was to be effective five days hence in order to allow the parties room to negotiate. On August 7, 1985 the parties returned before Justice Miller, who amended the earlier seizure order to make it effective August 9, 1985 at 3:30 p.m.
By August 15, 1985, AMC had yet to exercise its rights under the seizure order, and Debtor's Board of Directors held a meeting to consider the corporation's future. An AMC representative attended the meeting, and raised the claim of a security interest in the licenses. Debtor's counsel *468 avers this was the first time AMC ever sought to include the licenses within the collateral identified in the Addendum. For reasons unknown, AMC's representative was given possession of the original licenses for "safekeeping". Presumably, the transfer was made with the understanding that Debtor reserved its rights to dispute AMC's security interest in the licenses.
On August 27, 1985, the Debtor executed and mailed to AMC a verified answer to AMC's amended complaint. However, it is possible that AMC had already entered a default judgment against the Debtor on August 26, 1985.[5] On August 28, 1985 the Debtor filed its petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101-1330 ("Code").
By Memorandum-Decision dated January 16, 1986, the Court ordered AMC to return the original license agreements to the Debtor, as the documents were property of the bankruptcy estate. The licenses were then subsequently assigned to Robert Castle at the close of an auction sale on October 8, 1986, and the sale proceeds placed in escrow.
The Bank's claimed security interest in the licenses allegedly arises as a result of a security agreement with Debtor dated September 15, 1977. Pursuant to this security agreement, the Bank was granted security interests in
All motor vehicles, equipment, machinery, furniture, fixtures, tools, and inventory now owned or hereafter acquired. All accounts receivable now owned or hereafter created.
The Bank perfected its security interest by filing financing statements with the New York Department of State on October 11, 1977 (continued August 19, 1982), and with the Clerk of Oneida County, New York on October 12, 1977 (continued August 2, 1982).
CONCLUSIONS OF LAW
1. The Bank did not have a security interest in the licenses, or the sale proceeds thereof.
2. AMC did not have a security interest in the licenses, or the sale proceeds thereof.
3. The Bank is not entitled to an administrative priority or super priority claim against the Debtor's estate at this juncture.
I. NATURE OF THE COLLATERAL
As between AMC and the Bank, the crux of this decision turns upon the definition to be given the licenses for the purpose of collateral status under the New York version of the Uniform Commercial Code, N.Y.U.C.C. §§ 1-101 to 13-105 (McKinney 1964 & Supp.1987) ("N.Y.U.C.C."). The Bank contends the licenses are "accounts", while AMC argues the documents are "general intangibles".
N.Y.U.C.C. § 9-106 provides the following pertinent definitions:
"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, whether or not it has been earned by performance. "General intangibles" means any personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, and money. All rights to payment earned or unearned under a charter or other contract involving the use or hire of vessel and all rights incident to the charter or contract are accounts.
This section had been revised by legislative amendment in 1977. L.1977, c. 866, § 10. The legislature's action reflected a *469 change which had been made in the Official Text of the Uniform Commercial Code ("U.C.C.") in 1972. As the "Draftmen's Statement of Reasons for 1972 Changes in Official Text", U.C.C. § 9-106 (1972) makes clear:
The term "contract right" has been eliminated as unnecessary. As indicated by a sentence now being eliminated from Section 9-306(1), "contract right" was thought of as an "account" before the right to payment became unconditional by performance by the creditor. But the distinction between "account" and "contract right" was not used in the Article except in subsection (2) to Section 9-318 on the right of original parties to modify an assigned contract, and that subsection has been re-drafted to preserve the distinction without needing the term "contract right". The term has been trouble-some in creating a "proceeds" problem where a contract right becomes an "account" by performance; in the Code's former denial that there could be any right in an account until it came into existence (former Section 9-204(a)(d), not withstanding a security interest in the pre-existing contract right; and in the danger of inadequate description in financing statements by claiming "accounts" or "general intangibles" when before performance they should have been described as "contract rights"; and in other respects.
"Money" is expressly excluded from the catch-all definition, "general intangible", to preclude any possible reading that a security interest in money may be perfected by filing.
The Bank has confused the licenses with other contracts which are for the sale or lease of goods, or the rendition of services. The 1977 amendments to the N.Y.U.C.C. were not designed to erase the distinction between the discrete collateral species of "accounts" and "general intangibles". Rather, the legislature sought to eradicate the obscure distinction made between certain rights stemming from contracts for the sale or lease of goods or rendition of services, and the monies generated therefrom. As the Draftmen's Comment, supra, notes, secured parties desiring an interest in all rights arising from such an agreement often found themselves at a loss because certain of those rights (heretofore designated as "contract rights") had not matured to the form of right defined as an "account". This distinction was previously recognized in New York:
An "account" under the Code is the next thing to money in the till,. . . . A "contract right" is also concerned only with money payments and is one degree less definite: the contract exists but since the goods are not delivered or the services are not yet rendered, the money is not yet due and it is not an "account." The value of the contract right may be diminished by the prospects of non-fulfillment of the conditions, but it is nonetheless a species of property which may now be assigned. Cooper v. Douglass, 44 Barb. 409 (1864); Seamon v. Federated Films, Inc., 142 N.Y.S.2d 324 (1955); Cf. Rockmore v. Lehman, 129 F.2d 802 (2d Cir. 1942). "General intangibles" is a term by which the Code leaves room for expansion of recognition of commercially significant assets as assignable property.
N.Y.U.C.C. § 9-106, New York Annotations.
In sum, an "account" was (and is) a right earned by performance under an agreement for goods sold or leased, or services rendered.
In any event, the licenses did not give Debtor a "right to payment for goods sold or leased or for services rendered". The cases cited by the Bank are simply not germane to the fundamental point that the licenses, although themselves written contracts, are not "contract rights" as were formerly defined by the N.Y.U.C.C.
Indeed, the very source cited by the Bank recognizes the distinction. Hawkland, 8 UNIFORM COMMERCIAL CODE SERIES, § 9-102:02, 211-13.[6] If the *470 Bank's contention were accepted, it would necessarily follow under the present N.Y.U.C.C. that the licenses are themselves "accounts". Such an interpretation flies in the face of general commercial practice, and as shall be seen, with those authorities which have drafted, commented upon, and interpreted U.C.C. § 9-106.
The Draftmen's Comment to the 1972 version of the U.C.C. supplements the statutory definition of "general intangibles" by stating the term:
. . . brings under this Article miscellaneous types of contractual rights and other personal property which are used or may become customarily used as commercial security. Examples are good will, literary rights, and rights to performance. Other examples are copyrights, trademarks and patents . . .
See also N.Y.U.C.C. § 9-106, New York Annotations.
By definition, "general intangibles" are items of personal property which are not "accounts" (or for that matter, "contract rights").
The licenses are "general intangibles", granting as they do contractual rights not involving the sale or lease of goods, or the rendering of services. Thus, it has been held that the franchise agreements for the operation of certain automobile dealerships constitute "general intangibles". Hengalo Enterprises, Inc. v. Sun Bank of Miami, Inc. (In re Hengalo Enterprises, Inc.), 51 B.R. 54 (Bankr.S.D.Fla. 1985). In a similar context, liquor licenses, as property under U.C.C. § 9-102, have been held to be "general intangibles" for purposes of U.C.C. § 9-106. See e.g. Bogus v. American Nat. Bank of Cheyenne, 401 F.2d 458 (10th Cir.1968); Paramount Finance Co. v. United States, 379 F.2d 543, 544-45 (6th Cir.1967); Gibson v. Alaska Alcoholic Beverage Control Board, 377 F.Supp. 151, 153 (D.Alaska 1974). The relatively rare clam dredging license has also been classified in this collateral category. First Pennsylvania Bank, N.A. v. Wildwood Clam Co., 535 F.Supp. 266, 268 (E.D. Pa.1982).
The cases cited by Bank support rather than detract from the proposition that the Avis licenses are general intangibles. In the case of Crichton v. Himlie Properties, Inc. (In re Himlie Properties, Inc.), 36 B.R. 32 (Bankr.W.D.Wash.1983), the court held that debtor's contracts (denoted as "Seller's Assignment of Contract & Deed"), executed in behalf of various creditors were "general intangibles", rather than "contract rights" or "accounts". The bankruptcy court noted that "the vendor's (assignor's) right to payment did not depend upon any future performance. The only duty assumed by the assignee was to deliver title to the vendee at the time of final payment. Clearly, this formality is not the type of future performance contemplated by the U.C.C. [as a `contract right']." Id., 36 B.R. at 35. The bankruptcy court had previously indicated that as the subject contracts did not involve the sale or lease of goods or the rendition of services, the collateral could not be classified as "accounts". Id., 36 B.R. at 34.
Similarly, the case of Burger King Corp. v. Rovine Corp. (In re Rovine Corp.), 6 B.R. 661 (Bankr.W.D.Tenn.1980) is inopposite as the primary concern was whether the plaintiff could enforce a covenant not to compete contained in a franchise agreement which the Debtor had rejected as an executory contract pursuant to Code § 365(d). The plaintiff argued that the franchise agreement was not, for bankruptcy purposes, an executory contract, but rather was a license.
The bankruptcy court agreed that franchises and licenses bore marked similarities, but noted that the former evidenced a continuing undertaking between the contracting parties "to cooperate in the operation of the franchised business and to insure that the license or franchise will not be infringed upon by third parties." Id., 6 *471 B.R. at 666. But again, the seminal point is that such an agreement is clearly not considered the norm for the sale or lease of goods or the provision of services as contemplated by the U.C.C.
The licenses herein were general intangibles as defined by the N.Y.U.C.C. Thus, while a creditor may utilize the general categories of collateral to describe the property in which it desires an interest, any improper or imprecise characterization will defeat a claimed security interest. This is so as the security agreement of the parties must be reasonably specific in identifying the collateral subject to the security interest. Commercial Trading Co., Inc. vs. Bassin (Matter of Laminated Veneers Co., Inc.), 471 F.2d 1124, 1125 (2d Cir.1973); Lettinga v. Agristror Credit Corp., 686 F.2d 442, 448 (6th Cir.1982); cf. Gulf National Bank v. Franke (Matter of Katz), 563 F.2d 766 (5th Cir.1977) (per curiam) (imprecise description used in financing statement). Consistent with general, common law principles of contract construction, a court will not alter the clear language employed by the parties to a security agreement, Selby v. England (Matter of California Pump & Manuf. Co.), 588 F.2d 717, 719 (9th Cir.1978), nor interpret away or supplement the obvious meaning of printed words. State Bank of Albany v. United States (Matter of Riss Tanning Corp., 468 F.2d 1211, 1213 (2d Cir.1972).
Consequently, the Bank's claimed security interest, limited as it is to "accounts receivable", is not applicable to the licenses or the proceeds of the sale of these documents.
II. AMC'S CLAIMED INTEREST
The latter principles expressed above similarly apply to AMC's claimed security interest in the licenses. For present purposes, the relevant language of the Addendum grants AMC an interest in Debtor's "general intangibles" ". . . now existing or hereafter arising as a result of the rental, lease or use by [Debtor] of any or all of the vehicles leased hereunder." As noted, the Master Fleet Agreements to which the foregoing was appended had been in existence for at least twenty months prior to the granting of the security interest. Also, the Debtor had operated under the licenses for a considerable time prior to the date of the first lease contract with AMC. Again, general principles of construction mandate that the operative language of a security agreement be construed against the party responsible for its use. Doyle v. Northrop Corp., 455 F.Supp. 1318, 1329 (D.N.J.1978); Sun-Gro Plant Food, Inc. v. Lair (Matter of Lair), 39 B.R. 460, 461 (Bankr.W.D.Mo.1984); Lader's Tiffany Feed & Supply Co. v. Kohl (Matter of Kohl), 18 B.R. 670, 671-72 (Bankr.W.D.Wis.1982).
The use of the phrase "now existing or hereafter arising as a result of", in the Addendum, without a comma preceding the coordinating participle "or", clearly reveals the parties' intention that AMC be granted a security interest in those stated general categories of collateral which either were in existence due to the rental, lease or use of automobiles under the already executed Master Lease Agreements, or which would arise in the future as a result of these agreements. The Court's interpretation of the AMC prepared document is the most reasonable under the circumstances. If the parties intended to grant AMC a security interest in general intangibles such as the licenses, then there was no reason for AMC to include the modifying language which refers to the Master Lease Agreements. AMC could have simply worded the Addendum to provide for the creation of a security interest in "all of the Debtor's existing general intangibles, and those hereafter created," and ignored any mention of its contracts with the Debtor. AMC's pointed reference to the existing Master Fleet Agreements in the Addendum clearly indicates that general intangibles like the licenses, existing prior to and independent of the execution of the Master Fleet Agreements, were not to be included in the ambit of the security agreement.
AMC urges the following interpretation of the Addendum. A security interest was granted in any of Debtor's existing proceeds, accounts and general intangibles as *472 of the date of the Addendum's execution, but only those proceeds, accounts and general intangibles which arose as a result of the Master Fleet Agreements after that date. This tortured reading of the Addendum leads to ludicrous results. The three general collateral categories (proceeds, accounts, and general intangibles) are referenced together. The Court is aware that AMC believes the Avis licenses are part of the "general intangibles" delineated in the Addendum, but what of the accounts and proceeds? Did AMC design the Addendum to grant a security interest in existing accounts and proceeds of any undefined good the Debtor sold or leased, or service it provided, or only those accounts and proceeds which were in existence or would thereafter arise as a result of the Master Fleet Agreements. The use of the term "proceeds" must be tied to some defined collateral source, and here it is the Master Fleet Agreements. Similarly, AMC's claim to a security interest in general intangibles must be restricted only to those "existing or hereafter arising as a result of" the same contracts.
AMC cannot expand the scope of the controlling language of its Addendum for the same reasons the Bank cannot transmute a readily identifiable "general intangible" into an "account". The principle that the language of security agreements is to be interpreted as written was recognized by the Ninth Circuit Court of Appeals in First Mississippi Corp. v. Vogel (In re American Bioculture, Inc.), 631 F.2d 640, 641 (9th Cir.1980). Hence the creditor was denied a security interest in the Debtor's foreign patents where the security agreement referenced only "United States Patents". Where a security agreement specified that a security interest was granted in furniture, fixtures, and inventory at a particular location, it was held that a security interest in similar items did not arise when the debtor moved to a new location. In re Freeman, 33 B.R. 234, 235 (Bankr.C.D.Cal. 1983). Similarly, the description of collateral as "all of the Debtor's farm and ranch machinery and equipment" was held not to include construction equipment owned by the Debtor. Central Iowa Production Credit Asso. v. DeSchamp (In re DeSchamp), 44 B.R. 517, 520 (Bankr.N.D.Iowa 1984).
While these cases admittedly involve security agreements and collateral dissimilar from those under consideration, they illustrate the generally accepted view that judicial inquiry should first concern whether the written description may be reasonably construed to include the disputed property, followed by an examination of the parties' intentions that the description include the property. See e.g. In re Shop-N-Go of Maine, Inc., 38 B.R. 731 (Bankr.D.Me. 1984); But see Mitchell v. Shepard Mall State Bank, 324 F.Supp. 1029, 1032 (D.Okla.1971) aff'd 458 F.2d 700 (10th Cir. 1972)(analysis of description is a question of law). The language employed by AMC in the addendum is not ambiguous. A straight-forward reading of the document leads to the pellucid interpretation that the Avis licenses are not, nor were they intended to be, a proper subject of the security interest granted.
III. APPLICATION OF THE DOCTRINE OF RES JUDICATA
AMC contends the doctrine of res judicata forestalls the Court from inquiring into the validity of its security interest in the licenses. AMC argues that by virtue of the seizure order entered by Justice Miller, the findings of fact contained therein, and Debtor's (and/or Bank's) failure to appeal therefrom, its interest is unassailable. AMC is in error on a number of fundamental points, for
`[a]lthough the CPLR provision governing the preliminary seizure of the property effects a number of changes in the former practice, it nevertheless remains clear that the seizure or replevying of the property need not occur at the outset of the proceeding, but may be instigated by the plaintiff after the action has been commenced and before a final judgment has been rendered. Of course, the seizure of property in advance of judgment is not a final determination of the right thereto. In fact, the property may be reclaimed or impounded under *473 express provisions of the statutes. 23 N.Y.Jur.2d Conversion § 133 (1982) (emphasis added; footnotes omitted).
The state court seizure order was interlocutory in nature,[7] being as it were merely a provisional remedy. The underlying and substantive grounds of the relief sought by AMC in the state suit were simply not resolved as a result of the order's entry. A primary element in the invocation of the doctrine of res judicata is the presence of a final judgment. Kaplan v. Ruggieri, 574 F.Supp. 631, 633, (E.D.N.Y.1983), aff'd, 742 F.2d 1436, (2d Cir.) cert. denied, 469 U.S. 835, 105 S.Ct. 128, 83 L.Ed.2d 70 (1984). Acha v. Beame, 570 F.2d 57, 62 (2d Cir. 1978); Crane Co. v. American Standard, Inc., 490 F.2d 332, 339 (2d Cir.1973), on remand, 439 F.Supp. 945 (S.D.N.Y.1977). Interlocutory decrees or judgments cannot support the res judicata defense. Sterling Drug, Inc. v. Weinberger, 509 F.2d 1236, 1240 (2d Cir.1975); Aghnides v. Aghnides, 159 N.Y.S.2d 343, aff'd, 4 A.D.2d 498, 167 N.Y.S.2d 201 (N.Y.App.Div., 1st Dep't 1957), appeal denied 5 A.D.2d 767 (N.Y. App.Div. 1st Dep't), appeal denied, 4 N.Y.2d 676, 173 N.Y.S.2d 1025, 149 N.E.2d 358, U.S. cert. denied, 358 U.S. 823, 79 S.Ct. 36, 3 L.Ed.2d 63 (1958); Diaz v. Indian Head, Inc., 686 F.2d 558, 562-63 (7th Cir.1982); United States v. Stonehill, 420 F.Supp. 46, 52 (C.D.Cal.1976), aff'd in part, rev'd in part, 702 F.2d 1288 (9th Cir.1983), cert. denied, 465 U.S. 1079, 104 S.Ct. 1440, 79 L.Ed. 761 (1984); Aristocrat Health Club of Hartford, Inc. v. Chaucer, 451 F.Supp. 210, 214 (D.Conn.1978). A judgment is on the merits if it completely disposes of the underlying cause of action, or determines that the plaintiff has no cause of action. Cromwell v. County of Sac, 94 U.S. 351, 352-53, 24 L.Ed. 195 (1877); Harper Plastics, Inc. v. Amoco Chemicals Corp., 657 F.2d 939, 943 (7th Cir.1981); Saylor v. Lindsley, 391 F.2d 965, 968 (2d Cir.1968), on remand, 302 F.Supp. 1174 (S.D.N.Y.1969).
Justice Miller's order did not fully and completely resolve the dispute between AMC and Debtor. The language employed in the findings portion of the seizure order (a document prepared by AMC's counsel) respecting the alleged security interest, curiously fails to use the specific language of limitation utilized in the Addendum. The Court is not bound to give deference to such a determination, and will not do so.
As noted above, AMC may have had a default judgment entered against Debtor in the state court proceedings shortly before the filing of the bankruptcy petition. The Court can only speculate on this point, as competent evidence of such an action has not been presented for consideration. Indeed, the only evidence of such an occurrence is the unsigned, unfiled photocopy of a statement of judgment and notice of entry attached to Debtor's counsel's affidavit of December 9, 1986. AMC has never before raised the existence of a default judgment against Debtor, as evidenced by the complete lack of such an allegation during these proceedings, as well as those occurring during consideration of Debtor's action for the return of the licenses pursuant to Code § 542.[8] In any event, the Court observes that the clerk of the New York Supreme Court would have had authority to enter a default judgment only where the claim was for a sum certain. CPLR § 3215. AMC did not pray for a declaration of its rights in the licenses, and in any event, default judgment upon entry by the clerk could not have ensued had it done so.[9]
*474 IV. BANK'S CLAIM OF ADMINISTRATIVE PRIORITY
As alternative relief set forth in its Motion for Summary Judgment filed January 23, 1987, the Bank sought Court approval of its claim for an administrative priority. In sum, the Bank alleges that Debtor has "apparently" used pre-petition accounts receivable for post-petition operations which "materially assisted in preserving and maximizing Debtor's estate for the benefit of all creditors . . .". This claim was not raised by the Bank in either its Motion to Intervene, nor in its responsive pleadings filed in connection with Debtor's adversary proceeding.
The request is not properly before the Court for consideration, and even if it were, the Bank's own Motion for Summary Judgment makes clear that sufficient questions of material fact are so far unresolved as to make summary judgment inappropriate. Should the Bank believe itself entitled to an administrative priority claim, it may avail itself of the relief and procedures set forth in Code § 502, § 503 and Fed.R. Bank.P. 9014.
CONCLUSION
The Debtor's interest in the proceeds generated by the sale of the Avis franchise license agreements is free and clear of the secured claim interests of either the Bank or AMC. The Bank does not have an interest in the licenses as the documents are "general intangibles" as defined by N.Y.U.C.C. § 9-106, and its security agreement with Debtor does not cover such collateral. AMC does not have an interest in the licenses for its security agreement with Debtor limited its interest in "general intangibles" to those which existed or thereafter arose as a result of the underlying Master Fleet Agreements. Finally, the Bank's claim for an administrative priority claim is not properly before the Court, and is in any event not the appropriate subject for summary judgment.
IT IS SO ORDERED.
NOTES
[1] Debtor began operations in Utica under Avis license in 1956, and in Binghamton in 1960. In 1965, operations in Elmira and Ithaca commenced. The Corning branch business started in 1969.
[2] Dated on or about January 8, 1980, January 9, 1981, March 16, 1982, and July 1982.
[3] The quality of the photocopies of these documents provided the Court make it impossible to determine the place of filing. Further, these financing statements indicate they cover property described as "See Attached", without reference to an additional document. The Court can only presume that a copy of the Addendum was also filed with each document.
[4] AMC amended its verified complaint on August 7, 1985, and served Debtor's counsel the same date.
[5] Attached as Exhibit J to the affidavit of Debtor's counsel dated December 9, 1986, is a photocopy of a letter from AMC's attorneys stating that a judgment had been docketed against Debtor in the state court proceedings on August 26, 1985. Also attached is a photocopy of a statement for judgment and a notice of entry which is not signed by a clerk of the New York Supreme Court, nor does it contain a stamp indicating that it was filed in the office of the appropriate clerk. Whether a default judgment was entered or not, AMC has at all times during the course of these proceedings referenced its claim to a security interest in the licenses upon the order of seizure which allegedly contains a finding of fact that AMC was secured in all proceeds, accounts and general intangibles . . . existing as of March 12, 1984 or thereafter acquired by the Debtor, without reference to the Master Fleet Agreements.
[6] "Under the 1972 Code, the definition of accounts is sufficiently broad to include within it contract rights, so long as they relate to the sale or lease of goods or the rendering of services. . . . Where the receivable arises other than from the sale or lease of goods or rendering of services, or the contract that will give rise to the receivable is other than for the sale or lease of goods or the rendering of services, the resulting right to payment is not an account, but is a general intangible." (emphasis added).
[7] "Interlocutory. Provisional; interim; temporary; not final. Something intervening between the commencement and the end of a suit which decides some point or matter, but is not a final decision of the whole controversy." BLACK'S LAW DICTIONARY (5th ed.1979).
[8] See In re Gordon Car & Truck Rental, Inc., 65 B.R. 371, Memorandum-Decision (Bankr.N.D.N. Y.1986) (Gerling, B.J.).
[9] "If several claims are pleaded and any one of them demands such relief as would require an application to the court, the clerk cannot enter the default even if one or several of the other claims asserted is for a `sum certain.' See Geer, Dubois & Co. v. O.M. Scott & Sons Co., 25 A.D.2d 423, 266 N.Y.S.2d 580, 1st Dep't 1966. . . .
When the action is not for money only the clerk cannot enter a default judgment. This would apply to all of the equitable actions and to those law actions which seek relief other than money only, such as ejectment and replevin." Siegel, PRACTICE COMMENTARIES, C3215:2, CPLR § 3215. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541508/ | 75 B.R. 770 (1987)
In re DISTRIGAS CORPORATION, Debtor.
Bankruptcy No. 85-1082-HL.
United States Bankruptcy Court, D. Massachusetts.
April 2, 1987.
*771 Joseph I. Schindler, Friedman & Atherton, Boston, Mass., Trustee.
Shearman & Sterling, New York City, and Peter A. Fine, Choate, Hall & Stewart, Boston, Mass., for Sonatrach.
C. Hall Swaim and Lisa A. Miller, Hale & Dorr, Boston, Mass., for DOMAC.
MEMORANDUM
HAROLD LAVIEN, Bankruptcy Judge.
In this Chapter 7 bankruptcy proceeding, the trustee, as joined by Societe Nationale Pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures ("Sonatrach"), seeks to have the claim of Distrigas of Massachusetts Corporation ("DOMAC") disallowed under 11 U.S.C. § 502(b)(1).
BACKGROUND
On September 30, 1985, Distrigas Corporation (the "Debtor") filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Chapter 11 case was converted to one under Chapter 7 by Court order dated October 29, 1986. The debtor appealed the Bankruptcy Court's conversion order to the District Court of Massachusetts, which affirmed on December 15, 1986. The debtor thereafter appealed the District Court's order to the First Circuit Court of Appeals. That appeal is pending.
Prior to the commencement of this bankruptcy proceeding, the debtor imported liquified natural gas ("LNG") under a long term contract with Sonatrach, the national energy company of Algeria, and immediately transferred such LNG to DOMAC. DOMAC then sold the LNG to various utilities. These various sales took place under authorization and tariffs established by the Federal Energy Regulatory Commission ("FERC") under the Natural Gas Act, 15 U.S.C. 717, et seq.
As part of its bankruptcy petition, the debtor submitted a Statement of Liabilities. Listed thereon was DOMAC as an unsecured creditor, in the amount of $262,732.10, on the basis of a "purchase gas cost adjustment credit."[1] The debtor filed an amendment to its schedules reflecting an increased unsecured debt to DOMAC since the time of the original filing totalling $523,251.07, due to subsequent freight adjustments *772 regarding 1985 shipments of LNG.
DOMAC makes the unsubstantiated assertion that pursuant to the purchase gas adjustment regulations of FERC, it is entitled to the excess monies the debtor collected from it over the amount payable by the debtor to Sonatrach, the $523,251.07 figure.
FINDINGS OF FACT
Prior to the commencement of this bankruptcy proceeding, the debtor purchased LNG from Sonatrach, under a long term contract. Upon the arrival of the LNG in Everett, Massachusetts, the debtor transferred title of the LNG to DOMAC, pursuant to a "requirements contract" between these two entities. The transfer of Algerian LNG from the debtor to DOMAC, was the debtor's sole business activity, a pass-through transaction upon which it realized no profit. DOMAC maintained the facilities at Everett for reception and storage of the gas and sold the LNG to customers in New England, New York, and New Jersey.
Debtor and DOMAC are both wholly owned subsidiaries of the Cabot Corporation. Debtor was incorporated in 1969 with a total capitalization of $1,000; DOMAC was incorporated under a different name in 1971 with a total capitalization of $1,000. DOMAC's main asset is the Everett, Massachusetts LNG terminal. Debtor has no assets other than $12,400,000 which it owes to Sonatrach for LNG it received in 1985 and some land in New Jersey which, under a stipulation to resolve an environmental problem, is being transferred to Koppers Company. Both corporations maintain offices at the same address. Their phone numbers are answered by the same person and with the phrase, "Cabot Corporation." They call themselves "the Distrigas/DOMAC enterprise" whose only business is the importation for sale and resale of Algerian LNG. They share the same directors and officers.
Debtor has no employees of its own but, rather, has all corporate services performed for it by employees of DOMAC. A formal record of the "debts" owed by one company to the other was not maintained. The companies use their letterhead interchangeably. In some instances, the companies view their legal obligations as the same. Both companies are represented by the same counsel.
The debtor has imported no LNG since the 1985 shipment. Other than the present claimant, the debtor has no creditors except Sonatrach, attorney fees, and the State of New Jersey whose claim has been settled by stipulation.
LEGAL DISCUSSION
The "allowance or disallowance of claims against the estate . . ." are core proceedings. 28 U.S.C. § 157(b)(2)(B).
The ability of the bankruptcy judge to rule on claims against the estate is central to the bankruptcy system. In re Werth, 54 B.R. 619, 623 (D.Colo., 1985).
The court may inquire into the conscionability of a claim, In re Elkins-Dell, 253 F.Supp. 864, 867, 869 (E.D.Penn.1966), it has full power to inquire into any claim asserted against the estate and to disallow it if the claim is without lawful existence. Peter v. Litton, 308 U.S. 295, 305, 60 S.Ct. 238, 244, 84 L.Ed.2d 281 (1939).
In re Werth, supra, 623. Some courts have utilized a two-step approach, analyzing claims first on legal grounds, and then, equitably.
The bankruptcy court must first determine that the claim is cognizable as a legal obligation when viewed within the context of nonbankruptcy and bankruptcy laws, and second that the effect of the allowance of the claim in the bankruptcy proceedings would be just and fair in relation to other creditors' under principles of equity jurisprudence.
In re Beverages International, Ltd., 50 B.R. 273, 279 (Bankr.Mass.1985) quoting A. DeNatale and P. Abram, The Doctrine of Equitable Subordination as Applied to Nonmanagement Creditors, 40 Business Lawyer No. 2, 417, 419 (1985).
A party objecting to a claim has the initial burden of presenting factual evidence tending to defeat the prima facie *773 validity of a proof of claim, but not the burden of ultimate persuasion. 11 U.S.C. § 502(a); L. King, 3 Collier on Bankruptcy, ¶ 502.01, 502-17. The burden of persuasion always remains on the claimant and, therefore, once there is evidence as to the invalidity of the claim, the burden rests on the claimant. Id., 502-18. That is the case, here.
Sonatrach asserts, in support of the Chapter 7 trustee's objection, that under Massachusetts law, DOMAC and the debtor are alter egos and, therefore, DOMAC's claim is unenforceable because it represents at best, a "debt" that the debtor owes itself. Neither the debtor nor DOMAC can claim with credibility that they are not one and the same. They have the same address, directors, officers, telephones answered by the same person, and the same counsel. In fact, except as holder of FERC import license, the debtor performs no real business function separate from DOMAC, which provides all the employees and services. Unless the left hand is independent of the right hand, there is no arms-length negotiating. Or, for that matter, any negotiating at all unless Charlie McCarthy is independent of Edgar Bergen. In Massachusetts, one corporation may be deemed the alter ego of another:
(a) when there is active and direct participation by the representatives of one corporation, apparently exercising some form of pervasive control, in the activities of another and there is some fraudulent or injurious consequence of the intercorporate relationship, or (b) when there is a confused intermingling of activity of two or more corporations engaged in a common enterprise with substantial disregard of the separate nature of the corporate entities, or serious ambiguity about the manner and capacity in which the various corporations and their respective representatives are acting.
My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 233 N.E.2d 748, 752 (1968). The law of this District emphasizes that a determination of two related corporations as alter egos must include, among other things, "an element of injustice or fundamental unfairness." See, In re WJM, Inc., 65 B.R. 531 (Bankr.Mass., 1986), aff'd., Bankruptcy Appeal No. 86-3180-MA, slip op. (December 30, 1986), citing DeWitt Truck Brokers v. W. Ray Fleming Fruit Co., 540 F.2d 681, 683, 687 (4th Cir.1976). Therefore, in determining whether or not to disregard the corporate entity, the factors of "pervasive control" or "confused intermingling" must be considered in terms of "injurious consequences."
Applying the law to the facts, it becomes extremely clear that there has been both pervasive control by these two companies over each other and a confused intermingling of their activities. Some of the aforementioned facts leading to a determination of pervasive control and confused intermingling of the corporations are the failure of the companies to observe corporate formalities (i.e., absence of formal financial book-keeping for intracorporate transactions, and the corporate services of one company being performed by employees of the other company); the sameness of counsel, directors, employees, and corporate headquarters; interchangeable use of letterhead; and, in some instances, a view of identical legal obligations.
The injurious consequence arising from this pervasive control and confused intermingling of the debtor and DOMAC lies in an allowance of DOMAC's claim. Such an allowance would deplete debtor's estate at the expense of the other real creditor. If DOMAC's claim was allowed, payment out of debtor's estate to DOMAC would be that much less paid to Sonatrach and that much more the debtor, in effect, keeps for itself since, as demonstrated, debtor and DOMAC are one and the same. It would be wholly inequitable to allow DOMAC, the alter ego, to deplete debtor's estate by paying itself. The allowance of DOMAC's claim would give rise to a grave injustice due to the pervasive control and confused intermingling demonstrated to exist between debtor and DOMAC. Also, it should be noted that even if DOMAC were not an alter ego of debtor, its claim would *774 be unenforceable under nonbankruptcy law and, therefore, must be disallowed.
Under the FERC gas tariff regulations (18 CFR 154.38), the movement of LNG between Sonatrach (the supplier), debtor and DOMAC (the distributors), and the customers, involved a bookkeeping process of corresponding, pass-through debits and credits in the form of "rolling adjustments." These rolling adjustments were recorded on "purchased gas cost adjustment accounts" which (as debtor acknowledged in its records) would "dissipate when amortized pursuant to FERC regulation."
Had there been no termination of business by the debtor, the accounts between Sonatrach, debtor, and DOMAC, would have balanced out. When the next monthly shipment of gas arrived, Sonatrach would have credited debtor by reducing the cost of the next shipment. Debtor would have then, similarly, credited DOMAC by reducing the cost of the next shipment and DOMAC would, in turn, have passed along the adjustment to its customers by a reduction in the price of the next shipment. The FERC established tariffs did not provide for treating this adjustment in any other fashion. However, because the debtor ceased importing LNG, there were no new shipments to adjust and no vehicle on which the pass through could attach.
The process of rolling reimbursements was stopped. FERC regulations provide for such reimbursements only in conjunction with subsequent gas deliveries. In, the absence of future deliveries, there is no FERC authorized mechanism to readjust the rolling debits and credits between Sonatrach, debtor, DOMAC, and the customers. Therefore, the allowance of DOMAC's claim against debtor's estate would give DOMAC a windfall of more than $500,000. This unjust enrichment by DOMAC would be gravely unfair to Sonatrach and to the extent that, ultimately, there might be other creditors, is found to be wholly inequitable. Such a claim, at least until FERC makes some provision for it, has no legal tariff provision and remains, at best, a mere bookkeeping entry. It is not a debt and cannot rise to the status of a legal obligation of the debtor.
Disallowance of a claim by an alter ego is justified to prevent injustice. "The essence of the test is whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain. If it does not, equity will set it aside." Pepper v. Litton, 308 U.S. 295, 307, 60 S.Ct. 238, 245, 84 L.Ed. 281 (footnote omitted). The bankruptcy court, under its equitable jurisdiction, has the power to analyze the circumstances surrounding any claim and to disallow those claims that would not be fair or equitable to other creditors. Id., 308, 309, 60 S.Ct. at 246 (footnote omitted). Moreover, a bankruptcy court may disallow a claim "by simply the violation of rules of fair play and good conscience by the claimant." Id. 310, 60 S.Ct. at 247.
CONCLUSION
The evidence presented to this court strongly demonstrates that debtor and DOMAC are alter egos. DOMAC's "claim" does not have standing even if there were no alter egos. Such a detriment to the estate would afford DOMAC an unfair advantage and demonstrates a lack of fair play and good conscience by DOMAC regarding Sonatrach and any potential other creditors. DOMAC's claim is disallowed.
NOTES
[1] As noted on debtor's Statement of Liabilities, "this amount reflects a rolling adjustment credit, primarily for the six month period ending May, 1985, that will dissipate when amortized pursuant to FERC regulation, by the FERC in the process of fixing a price for liquefied natural gas to be effective on January 1, 1986 for the succeeding six month period." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541540/ | 949 A.2d 401 (2008)
STATE
v.
Tajendra PATEL.
No. 2003-341-C.A.
Supreme Court of Rhode Island.
June 20, 2008.
*404 Jane McSoley, Esq., Providence, for Plaintiff.
Kevin Bristow, Esq., Providence, for Defendant.
Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.
OPINION
Justice FLAHERTY, for the Court.
In 1996, when the defendant Tajendra Patel (T.J.) married Komal Patel (Komal), the relationship between T.J. and Komal's family, who did not approve of the marriage, was very strained. Unfortunately, the marriage itself also became turbulent, and, in September 2001, Komal Patel took their four-year-old daughter, Kajal, and left the defendant.
For some time, Komal and Kajal lived at the Founder's Brook Motel in Portsmouth with Komal's sister, Prena Patel (Prena), her brother-in-law, Sanjeev Patel (Sanjeev), and their eight-year-old son, Jay. After Komal filed for divorce, Sanjeev acted as the primary contact between Kajal and T.J., accompanying his niece to the Swansea Mall for supervised visits with her father. Tragically, on January 1, 2002, Sanjeev Patel was murdered brutally by a man named Roger Graham (Roger or Graham), who had come to Rhode Island from Brooklyn, New York.[1] The only witness to this shocking event was Jay, who watched in horror as his father was shot to death in front of him in the office of the motel.
Graham had only one connection to the Patel family defendant. In the second of two recorded statements to the police, defendant admitted that he knew Sanjeev's killer. In that statement, defendant told the police that he and a man named Roger were driving around on New Year's Day, and that he told Roger about the problems he had with Komal and her family. T.J. admitted that he drove Roger to the motel to show him where Komal lived. Once at the motel, T.J. claimed that he was *405 stunned when Roger left the car and said that he intended to kill Sanjeev. The defendant told the officers that he waited in the car while Roger shot Sanjeev, and that the two of them then drove away.
The defendant was convicted by a jury of murder, in violation of G.L.1956 § 11-23-1, conspiracy to commit murder, in violation of G.L.1956 § 11-1-6, and discharging a firearm while committing a crime of violence, with death resulting, in violation of G.L.1956 § 11-47-3.2.[2] The defendant was sentenced to two consecutive life sentences for murder and discharging a firearm, and ten years, to be served consecutively, for conspiracy. He timely appealed to this Court.
On appeal, defendant argues that the trial justice erred when she (1) admitted an in-court identification of defendant because the identification procedure was unnecessarily suggestive and because the identification lacked independent reliability; (2) admitted a 9-1-1 call that was irrelevant and unfairly prejudicial; and (3) denied a motion to pass the case after two state witnesses characterized an envelope found in T.J.'s car as a "map" and "diagram" of the Founder's Brook Motel.
The state argues that the hearing justice erred when he concluded that the use of a showup procedure was unnecessarily suggestive; but, it contends that the trial justice was not clearly wrong in admitting either the in-court identification or the 9-1-1 tape.[3] Furthermore, the state argues that the trial justice was correct in her ruling that the inadvertent characterization of the envelope did not warrant a mistrial. The state also filed a cross-appeal, in the event of a new trial, arguing that the trial justice's exclusion of certain statements of witnesses who came from New York with Roger Graham was in error. For the reasons stated in this opinion, we affirm the judgments of conviction.[4]
I
Facts and Procedural History
On January 1, 2002, young Jay was playing on the computer in the office of the Founder's Brook Motel, while his mother, father, aunt Komal, and cousin Kajal were in their attached apartment preparing for a candlelight dinner to celebrate the New Year. Jay testified that when the front door bell rang, signaling the arrival of a customer, his father, Sanjeev, went into the office to greet the customer, who was described by Jay as a thin black man with black hair, wearing a black jacket. The man asked about room rates, and after Sanjeev answered his questions, the man placed some money on the counter and left the office.
Jay testified that minutes later, the same man returned to the office, but this time he held a firearm and said, "[g]ive me all the money you got." Jay said that his father pleaded with the man, "[o]h, please, don't do that, sir. Please don't do that." However, the man shot Sanjeev multiple times before he left the premises. A terrified Jay ducked down and stayed close to *406 the ground. He was the only witness to his father's appalling murder.
Sanjeev's wife, Prena, testified that before the air was punctuated by gunshots, she could hear her husband pleading with the customer, saying "[n]o, sir. No, sir. Please. No, sir." She entered the office after she heard the shots being fired and she saw a dark-skinned man, who was wearing a jacket with a hood, leave through the front door. Prena testified that at first she thought her husband was sitting down under the counter, but her son was telling her "[m]om, someone did shoot our dad." It was then that she saw that her husband was covered with blood.
Komal immediately called 9-1-1 for assistance. The tape of that emergency call was admitted into evidence at trial over defendant's objection. The defendant argued that the tape lacked significant probative value and also that it was unfairly prejudicial because it contained the "screams and anguished cries of Komal Patel." Furthermore, defendant argued that the tape of the 9-1-1 call was cumulative because Jay and Prena (as well as a police officer and firefighter) already had testified to the undisputed events that transpired. The state argued that the tape was relevant to show demeanor and that it was not unfairly prejudicial because it corroborated defendant's assertion that he was not the triggerman. The defendant also sought, in the alternative, the removal of the unintelligible portions of the tape, in which Komal's voice was muffled by the sounds of screaming and crying.
The trial justice listened to the tape, listened to the arguments of counsel, and admitted the 9-1-1 recording in its entirety, stating only that, "[t]he Court feels that the admission of the tape does furnish relevant evidence to the jurors, and I will allow the State to play it," but notably, she did so without any discussion of either unfair prejudice or balancing the relevance of the tape against the potential for unfair prejudice. After the tape was played for the jury, the jurors also were provided with a transcript of the recording.
In the 9-1-1 call, Komal frantically explained to the operator that Sanjeev had been shot by a tall black man in a black jacket. As mentioned, the recording was difficult to understand portions of Komal's speech were unintelligible and the tape contained a steady stream of screaming and crying in the background that interfered with the sound of Komal's anxious voice speaking to the operator. Significantly, these background sounds were not only the cries of Sanjeev's widow, but they also included the voice of a hysterical Jay, just after the boy had witnessed his father's death.[5] On the recording, Komal can be heard simultaneously responding to the operator, Jay, and her sister Prena, resulting in a cacophony of anguished voices. After the call was played for the jury, defense counsel noted the reaction of several of the jurors. "[I]n light of hearing the tape again, I would move to pass *407 the case. I would note the reaction of several of the jurors, who appeared to be quite moved by this. * * * I ask for a mistrial." The trial justice denied the motion.
During the investigation of Sanjeev's murder, the police investigation cast a wide net, and officers interviewed hundreds of people. One of those interviewed was Edward Melusky, an employee of Pizza Hollywood, a restaurant less than one mile from the motel. Melusky told the investigating officers that he remembered seeing two suspicious-looking men at the pizzeria on New Year's Day.
During the pretrial hearing, Melusky testified that the pair "looked like typical * * * drug dealers * * *," because the second, shorter man was wearing a lot of jewelry and they were driving a new and expensive car. Melusky testified that he remembered them because one of them made an unusual order of hot peppers on a single slice of pizza, requiring him to summon the manager. Melusky noted that he saw the pair again when he left to make a delivery, and he saw them again after he returned. He said that they were eating their food while sitting in a fancy foreign car. He noticed the car because it was a gold Acura with a Massachusetts license plate. At trial, he described the pair as an African-American man and a "Hispanic-looking" man, identifying defendant as the Hispanic man. Melusky explained that he "[was] not sure what nationality [the Hispanic-looking man was], but not white."
On January 26, 2002, the police interviewed T.J. for the first time. In his first statement, a recording of which was played for the jury, T.J. told the officers that he was not present in Rhode Island at the time of his brother-in-law's murder. He contended that he spent both New Year's Eve and New Year's Day with friends and family in Massachusetts. T.J. informed the police about his turbulent marriage and pending divorce and about how Sanjeev would supervise his visits with his daughter. T.J. described Sanjeev as a quiet man who did not drink and who kept to himself. T.J. also told the police that he harbored no ill feelings toward Sanjeev and that he appreciated his help with the supervised visits. Before defendant completed his interview and left the police station, the police took several photographs of his gold Acura.
On January 28, the police showed Melusky two pictures of defendant; one was an enlarged version of the other.[6] From these two photographs, Melusky identified defendant as the "Hispanic" man who was at the restaurant on New Year's Day.[7] During extensive pretrial hearings, defendant argued that Melusky's identification of defendant should have been excluded from evidence.[8] The hearing justice ruled that the police's use of the same two pictures of defendant was unnecessarily suggestive, especially in a situation in which there were no exigent circumstances. However, the hearing justice also concluded that Melusky's identification was independently *408 reliable and, therefore, he ruled that Melusky could make an in-court identification of defendant as the man he saw at Pizza Hollywood right before the murder took place.
Sheri Rogers and Dilip Bhatt, the front-desk clerk and general manager at the Days Inn, where T.J. and Komal previously had worked before she left him, also testified at trial. Rogers and Bhatt alleged that T.J., far from appreciating Sanjeev's assistance in facilitating visitation with his daughter, had expressed resentment against Sanjeev for interfering in his marriage with Komal. Rogers testified that a few weeks after Komal had left him, T.J. told her that Sanjeev and his wife were involved in Komal's leaving, and he was disappointed because they were supposed to be friends. Bhatt also testified that after Komal left him, T.J. was very angry and frustrated, and he complained to Bhatt that Sanjeev did not like him or the fact that he married Komal, and that Sanjeev interfered in his relationship with Komal.
After concluding that there were some major inconsistencies in defendant's statement, the police obtained a search warrant and retrieved T.J.'s cell-phone records in an effort to confirm whether he was in Rhode Island on that fateful day. The records revealed that defendant, indeed, was in Rhode Island during the time of the murder. On February 2, 2002, defendant acceded to law enforcement's requests and returned to speak with the police again; a recording of this statement also was played for the jury. At first, defendant denied that he had been in Rhode Island during the time in question; however, once the police confronted him with his cell-phone records, he admitted that he knew the man who was responsible for killing Sanjeev.
The defendant claimed that on New Year's Day, he contacted a man named Roger, who lived in Brockton, Massachusetts, to secure some marijuana.[9] The defendant described Roger as a black man, about twenty-five or twenty-six years old, approximately five feet, nine inches in height, dressed all in black on that day. T.J. told the police that, initially, he and Roger smoked marijuana and then continued to drive around while consuming alcohol.
During the drive, T.J. confided in Roger about his marital problems and when Roger asked where his wife and his in-laws lived, T.J. offered to show him. Before reaching their destination, the pair became hungry and stopped at a pizza place for something to eat. T.J. told the police that after they finished eating, he drove Roger to the Founder's Brook Motel.
T.J. confided in the officers that once he stopped the car, Roger stepped out and declared his intention to kill T.J.'s brother-in-law. T.J. claimed that he tried to stop him. He said, "Come on back, man. You're gonna get me in trouble, you know. If something happen you're gonna get myself in trouble," but, despite his entreaties, *409 Roger ran toward the motel. T.J. told the police that he was about to drive away from the motel when he heard the sound of gunshots. Roger then reappeared carrying a silver firearm, jumped in the car, pointed the weapon at defendant, and ordered him to drive away. T.J. said that they began to quarrel and G Graham yelled back at him, forcing him to drive at gunpoint. T.J. said that he was so upset that he was shaking, and he began to drive north on Route 24. The defendant eventually dropped Graham at an exit in Rhode Island off Route 95 South, where Graham warned him that if he ever opened his mouth about what he had seen or heard, he would be killed.
After completing his statement, T.J. was charged with murder. He consented to a search of his vehicle, which revealed an envelope that had certain ink markings on it. The defendant also voluntarily took the police officers on a drive through Massachusetts and Rhode Island, showing them the route that he and Roger took on the day Sanjeev was killed. He showed the officers where he picked up Roger, the streets that they drove on together, where they ate at Pizza Hollywood, where he parked his car outside the Founder's Brook Motel office, and where he dropped off Roger after the murder.
At trial, Dennis Pincince, a state police officer in the Criminal Identification Unit, testified about "a map that was recovered" in defendant's car. The defendant objected to the portrayal and the trial justice granted defendant's motion to bar any description of the markings on the envelope. The prosecution offered to characterize the envelope as a "diagram or a document," however, the trial justice ruled that no characterization of the envelope would be permitted. The trial justice then cautioned the jury to disregard the statement. She said, "[l]adies and gentlemen, you did hear mention of the word map. Just ignore the use of the term map. Okay? Thanks."
Later, during trial, Det. John Killian, the officer who searched defendant's car, testified that he found a "handwritten diagram" and a "diagram of the Founder's Brook Motel" in defendant's car.[10] Defense counsel immediately moved for a mistrial, arguing that this characterization transgressed the trial justice's earlier ruling, and the state police had been on notice that opinions as to what the drawing did or did not represent were not to be uttered. The attorney for the state explained, "[a]ll I asked him is what it was. I haven't gone over the questions with him I went over the questions with him last night, and his answer was that it was a piece of paper with markings on it that was found in the car." She later said, "I did not instruct him that he could not refer to it when I went over the questions with him."
Although defendant argued that a cautionary instruction could not "unring the bell" and would serve only to reinforce the characterization to the jury, the trial justice *410 decided to deny the motion for a mistrial and to give a cautionary instruction instead. She said:
"Members of the jury, you have just heard this witness make reference to a so-called diagram. And also, you heard his testimony that this is a diagram of the Founders Brook Motel. The Court is striking that from the record.
"I need your assurance you can totally ignore the fact that the witness so testified. It is not evidence in this case. It is not to be construed as any kind of evidence in this matter. Can I have your assurance that you will ignore that and, as hard as it is to unring a bell, pretend that you did not hear that?"
After the jury responded positively, the trial justice had the jury removed from the courtroom. The defendant again moved to pass the case. Instead, the trial justice advised Det. Killian not to "characterize what the writing is or the drawing is on that piece of paper" and to "only refer to it as a document * * *[.]"
After an extensive trial, the jury returned a guilty verdict on murder, conspiracy to murder, and use of a firearm while committing a crime of violence. The defendant challenges these convictions on appeal, arguing that the admission of Melusky's identification of defendant from his encounter at Pizza Hollywood was improper because the identification procedure the police used was unnecessarily suggestive and that the identification lacked independent reliability. T.J. also argues that playing the 9-1-1 recording for the jury was improper because it was irrelevant, and that any probative value it possessed was substantially outweighed by the danger of unfair prejudice. Finally, defendant argues that the trial justice erred when she denied a motion to declare a mistrial of the case after the state's witnesses characterized the envelope found in T.J.'s car as a "map" and a "handwritten diagram of the Founder's Brook Motel."
II
Analysis
A.
Motion to Suppress Melusky's Identification
On review, we will not overturn a trial justice's decision to deny a motion to suppress an identification unless it is clearly erroneous. State v. Texter, 923 A.2d 568, 573 (R.I.2007). "In determining whether or not the denial of a defendant's motion to suppress an identification was clearly erroneous, we assess the available evidence in the light most favorable to the state." Id.
We use a two-step procedure to determine whether the identification procedures the police employed violated a defendant's right to due process of law and the identification must be excluded. State v. Camirand, 572 A.2d 290, 293 (R.I.1990). First, "the [C]ourt must consider the question of whether the procedures used in the identification were unnecessarily suggestive." Id. If the procedure is found to have been unnecessarily suggestive, the second step requires a determination of whether the identification still has independent reliability despite the suggestive nature of the identification procedure. Id. (citing State v. Nicoletti, 471 A.2d 613, 615 (R.I.1984)).
A witness's out-of-court identification is not admissible at trial if the identification procedure employed by the police was "so unnecessarily suggestive and conducive to a substantial likelihood of misidentification that the accused was denied due process of law." State v. Holland, 430 A.2d 1263, 1269 (R.I.1981) (citing Neil v. Biggers, 409 U.S. 188, 198, 93 S.Ct. 375, 34 *411 L.Ed.2d 401 (1972)). The United States Supreme Court has said that,
"[i]t is the likelihood of misidentification which violates a defendant's right to due process * * *. Suggestive confrontations are disapproved because they increase the likelihood of misidentification, and unnecessarily suggestive ones are condemned for the further reason that the increased chance of misidentification is gratuitous." Biggers, 409 U.S. at 198, 93 S.Ct. 375.
This Court never has adopted a per se rule of exclusion when police officers have employed a procedure in which they show a single photograph or a single individual to a witness for the purpose of identifying a suspect. See State v. Hall, 940 A.2d 645, 653 (R.I.2008) (citing Texter, 923 A.2d at 574). In fact, we have said that "admission of evidence of a show up without more does not violate due process," id. (quoting Manson v. Brathwaite, 432 U.S. 98, 106, 97 S.Ct. 2243, 53 L.Ed.2d 140 (1977)), and we never have required the state to show evidence of exigency when such a procedure is used. Texter, 923 A.2d at 574 (citing State v. Ramos, 574 A.2d 1213, 1215 (R.I.1990)).
It is our opinion that the hearing justice prematurely concluded that the identification procedure, in which the police showed Melusky two copies of the same photograph, one being a "blowup" of the other, was unnecessarily suggestive. The hearing justice concluded that this violated the first part of the test simply on the basis that a single individual's photograph was shown, but he did not consider whether the procedure resulted in a substantial likelihood of misidentification. We believe this was error.
Although we agree that the better procedure is the use of a photograph array, we cannot, from this record, conclude that the procedure used here unnecessarily exacerbated the risk of misidentification. We are troubled by the fact that Melusky was shown a single photograph of an individual, who technically did not fit the original description of "Hispanic," as provided by Melusky. However, this, without more, is not enough to suggest that the risk of misidentification was substantial and this should have ended the inquiry. At this point, both the out-of-court and in-court identifications were admissible without further analysis. See State v. Lynch, 770 A.2d 840, 844 (R.I.2001).
In any event, the hearing justice then engaged in the second part of the test and permitted Melusky's in-court identification of defendant, concluding that it was independently reliable. Assessing whether Melusky's identification of defendant was independently reliable requires consideration of the totality of the circumstances, and, in particular, "the opportunity of the witness to view the criminal at the time of the crime, the witness' degree of attention, the accuracy of the witness' prior description of the criminal, the level of certainty demonstrated by the witness at the confrontation, and the length of time between the crime and the confrontation." State v. Parker, 472 A.2d 1206, 1209 (R.I. 1984) (quoting Biggers, 409 U.S. at 199, 93 S.Ct. 375).
The hearing justice concluded that Melusky, whom he characterized as "keen and alert," had ample time and opportunity to view the suspects as they gave their order and later while they ate in the car. The hearing justice was impressed with the level of detail Melusky recited, from the type of pizza ordered to details of the suspects' conversation. He also concluded that Melusky paid a high degree of attention to the men because of the fancy car they were driving. The hearing justice noted that Melusky testified that he knew *412 right away that the person depicted in the photograph was the same man he saw on that day. Finally, the length of time between his observation of defendant on January 1 and the identification on January 28 was not so long as to render the identification unreliable.
The defendant argues that the hearing justice failed to consider the accuracy of Melusky's prior description, in particular because he believed that the suspect was Hispanic; however, T.J. is Indian. It is clear that Biggers requires that the presiding justice conduct a holistic analysis of the circumstances, which includes weighing the various above-mentioned factors.
Here, we believe the hearing justice did consider Melusky's prior description of defendant as Hispanic, and he weighed it in light of Melusky's surprising attention to detail. T.J. certainly is not Hispanic. However, Melusky testified at trial that he "[was] not sure what nationality [he was], but not white." Melusky also stated during a pretrial hearing that he thought the suspect was "sort of Hispanic, [but he did not] really know what nationality." It is persuasive to us that this description, even if lacking in its precision, was the best description this nineteen-year-old Portsmouth pizza delivery person could convey with regard to the ethnicity of the suspect. We cannot expect him to pinpoint the suspect's exact country of origin. Rather, any discrepancies about his identification, including what he meant when he used the word "Hispanic," was an appropriate topic that could have been explored on cross-examination.
It is apparent that the Biggers factors weighed heavily in the state's favor. Even though, in this case, we conclude that the record does not support a finding that the showup procedure was unnecessarily suggestive or conducive to a substantial likelihood of misidentification, it is our inescapable conclusion that the hearing justice was not clearly wrong when he admitted Melusky's in-court identification. Therefore, we affirm that Melusky's identification was independently reliable and properly admitted into evidence at defendant's trial.
B.
Motion to Suppress Komal's 9-1-1 Phone Call
The defendant next contends that the admission of Komal's 9-1-1 call into evidence violated Rules 401 and 403 of the Rhode Island Rules of Evidence.[11] The defendant contends that the recording was irrelevant and that even if it did have some minimal probative value, the playing of the tape in unedited form to the jury resulted in unfair prejudice that substantially outweighed any evidentiary value the recording may have had.
We have said that the discretion to exclude evidence under Rule 403 must be exercised sparingly. Wells v. Uvex Winter Optical, Inc., 635 A.2d 1188, 1193 (R.I. 1994). It is only evidence that is *413 marginally relevant and enormously prejudicial that must be excluded. State v. Silvia, 898 A.2d 707, 717 (R.I.2006) (quoting Wells, 635 A.2d at 1193). Because "[t]he ultimate determination of the effect of evidence lies in the discretion of the trial justice," we will not disturb such a determination on appeal absent an abuse of discretion. State v. Oliveira, 774 A.2d 893, 924 (R.I.2001) (quoting State v. Aponte, 649 A.2d 219, 223 (R.I.1994)).
Below, defendant urged for the tape's exclusion because of its likelihood to inflame the passions and sympathies of the jury, or alternatively, that the crying and screaming that made much of the recording incomprehensible should be edited. The state countered that the tape was relevant to show the demeanor of all those present at the crime scene and to explain why the responders acted as they did. The state also argued that "murder is not a pretty sight," and the judge was free to give a cautionary instruction advising the jurors that sympathy was not to play a part in their consideration of the evidence.[12]
Unquestionably, the content of the 9-1-1 tape is disturbing to the listener it portrays the agonized screams of the decedent's family, moments after his slaying. Additionally, it is difficult to understand Komal's statements to the emergency operator, a fact that is compounded by more screaming in the background; presumably from the little boy who watched as his father was gunned down. We also note that a transcript of the 9-1-1 call was available and utilized by the jury. Although this evidence like any first-hand glimpse of a bloody homicide is difficult for a jury to digest and is potentially prejudicial, we are of the opinion that any danger of unfair prejudice did not overcome its probative value.
A Rule 403 analysis requires the trial justice to not only examine the evidence in the context of the case on trial, but to balance the evidence to determine whether its probative force "is substantially outweighed by the danger of unfair prejudice, * * *." We agree with the First Circuit Court of Appeals that this balancing must be left to the trial justice's discretion; "[o]nly rarely and in extraordinarily compelling circumstances will we, from the vista of a cold appellate record, reverse a [trial] court's on-the-spot judgment concerning the * * * weighing of probative value and unfair effect." United States v. Rodriguez-Estrada, 877 F.2d 153, 155-56 (1st Cir.1989) (quoting Freeman v. Package Machinery Co., 865 F.2d 1331, 1340 (1st Cir.1988)).
Unfortunately, after the trial justice examined the 9-1-1 tape in camera, and ruled that it was admissible, she failed properly to set forth her reasoning and the factors that weighed in favor of its admissibility. The trial justice merely concluded that the tape "does furnish relevant evidence" a finding that is both disappointing and of little assistance to this Court. However, we are satisfied that the issue of the tape's relevance, as balanced against the risk of unfair prejudice, is apparent on *414 the record before us. After careful review of the transcript in this case, we are satisfied that the tape was relevant and probative to the crimes charged in the indictment and that the trial justice did not err when she allowed it to be played to the jury.
The state's evidence in this case largely was circumstantial. Under our law, we do not distinguish between the probative value of circumstantial and direct evidence; the jury must weigh the evidence and determine whether it establishes the guilt of the accused beyond a reasonable doubt. State v. Caruolo, 524 A.2d 575, 584 (R.I.1987) (citing Holland v. United States, 348 U.S. 121, 139-40, 75 S.Ct. 127, 99 L.Ed. 150 (1954)). "The state may prove guilt by a process of logical deduction, by reasoning from an established circumstantial fact through a series of inferences to an ultimate conclusion of guilt." State v. Diaz, 654 A.2d 1195, 1202 (R.I.1995). We previously have held, in a context similar to the case before us, that the state "carries the burden of establishing every element necessary to the charge beyond a reasonable doubt, even if some of those elements may not be disputed." State v. Mora, 618 A.2d 1275, 1280 (R.I. 1993). Even when the evidence is gruesome, or graphic, or as in this case, produced in real time, the state has a right to establish the existence of the elements of the crimes. See id.
Although we concur with defendant that the evidence may have been cumulative, because eyewitness testimony was offered by the same witnesses as were on the recording, this fact does not overcome the tape's probative value. Notably, Komal placed Graham at the scene when she described the shooter as "a black guy," and "a tall guy." The state argues that the tape reflects the events immediately after the homicide and placed the co-conspirator at the scene, with a gun in his hand. Because defendant was charged with murder and conspiracy to commit murder, proof that Graham killed Sangeev was necessary despite the tape's disturbing content.
Notably, in Mora, 618 A.2d at 1280, this Court declined to hold that an enhanced audio-tape recording of the victim's screams during a brutal rape should have been excluded under Rule 403, even though the issue of force and coercion was not a disputed issue in the case. We also rejected the contention that the tape "was a needless presentation of cumulative evidence" or that it was intended "to evoke the jury's sympathies for the victim." Mora, 618 A.2d at 1280. The Court concluded that the recording established where the parties were situated and "served the same purpose as any other form of demonstrative evidence[.]" Id.
In the case before us, although we do not minimize the emotional wallop to anyone who listens to this recording, after balancing both ends of this difficult analysis, we cannot say that the danger of unfair prejudice substantially outweighed the probative value of the recording. Because we find no clear error, we affirm the trial justice's denial of defendant's motion to suppress the recording.
C.
Motion for a Mistrial
The defendants last argument is that the trial justice erred when she denied defendants motion for a mistrial after the states witnesses repeatedly characterized an envelope found in the trunk of T.J.'s car as a map and diagram of the Founders Brook Motel.
The trial justice has discretion to grant a mistrial and we will not disturb her ruling absent clear error. State v. *415 Higham, 865 A.2d 1040, 1044-45 (R.I.2004) (citing State v. Lynch, 854 A.2d 1022, 1033 (R.I.2004)). We will defer to the sound discretion of the trial justice and [t]he reason we vouchsafe such broad power in the trial justice in this regard is that he or she possesses a front-row seat at the trial and can best determine the effect of the improvident remarks upon the jury. State v. Mendoza, 889 A.2d 153, 158 (R.I.2005) (quoting Oliveira, 774 A.2d at 912).
At trial, Dennis Pincince, a witness for the state, first referred to the envelope as a map. Upon defendants objection, the trial justice immediately struck his characterization of the envelope from the record, and the jury acknowledged that it would ignore that reference. The defendant did not ask for a mistrial at that time, although defense counsel did move to prohibit any future characterization of the envelope, including calling it a diagram. The trial justice granted the motion.
Despite the trial justices ruling, Det. Killian, another witness for the state, later testified that he had found a diagram of the Founders Brook Motel in defendants car. Following defense counsels immediate and appropriate objection, and after denying his motion for a mistrial, the trial justice again gave a cautionary instruction to the jury, admonishing the jury not to consider his characterization as evidence. Although it is unclear from the record whether all exhibits with respect to the envelope were excluded (the original envelope was destroyed during processing), the trial justice did prohibit the state from referring to the envelope in its closing argument, and it appears that she prohibited the admission of an enlarged version of the envelope into evidence.
In our opinion, the trial justice did not commit clear error when she denied the motion for a mistrial, instead opting for a cautionary instruction to the jury. Any prejudicial effect caused by the comment sufficiently was minimized and, as we often have said, we will presume that the jury is able to follow such instructions in the absence of any evidence to the contrary. State v. LaRoche, 683 A.2d 989, 1000 (R.I. 1996). Here, there is no evidence that the jurors were unable to follow instructions. In addition to issuing the instruction, the trial justice also prevented the state from referring to the evidence in closing and she prevented the state from offering a blow-up of the document into evidence.
In our view, this was more than sufficient to overcome any potential prejudice which could have been suffered from the characterizations by the police witnesses, and although we are perturbed that the states witness testified counter to the trial justices earlier ruling, we do not see any clear error in her decision not to terminate the trial by mistrial.
III
Conclusion
We affirm the judgments of conviction and return the record to the Superior Court.
NOTES
[1] We recently affirmed Roger Graham's conviction for Sanjeev's murder in State v. Graham, 941 A.2d 848, 853 (R.I.2008).
[2] The defendant was acquitted of two charges, assault with intent to rob, in violation of G.L.1956 § 11-5-1, and conspiracy to commit robbery, in violation of G.L.1956 § 11-1-6.
[3] The hearing justice, who presided over the pretrial hearings, was not the same justice who presided at trial.
[4] Because we affirm the judgments of conviction, we do not address the state's arguments that the trial justice erred when she excluded the statements of the two men who accompanied Graham from New York.
[5] Apart from the continuous noises that can be heard on the tape, the transcript records pages where Komal's speech is written as "indecipherable" or "unintelligible." The transcript also captured Komal's impossible position as she tried to comfort the surviving family, while providing information to the 9-1-1 operator. For example:
"DISPATCHER 2: Okay, ma'am, what's your name?
"VOICE: Komal. Would you be quiet, please, Prena. My name is Komal, k-o-m-a-l.
"* * *
"KOMAL: Okay. (Unintelligible) Don't worry . . . Be quiet . . . Hold on one second, my boy's crying. Hold on."
[6] At this time, the police also showed Melusky five pictures of defendant's gold-colored Acura.
[7] At a later time, Melusky also identified Roger Graham, from a more traditional six-person photograph array, as the African-American man who visited Pizza Hollywood on the night of Sanjeev's murder.
[8] On appeal, defendant argues that this identification was the basis of the warrant that led to the police's obtaining T.J.'s phone records; therefore, defendant argues that if this identification was impermissible then the evidence gleaned afterwards, the so-called fruit of the poisonous tree, including T.J.'s phone records and his statements after the cat was let out of the bag, also were impermissible.
[9] A subsequent police investigation uncovered the relationship between T.J. and Roger Graham, which began the previous October at Alba's Laundromat in Brooklyn, New York. Witnesses testified that the relationship between the two continued to flourish, and on December 31, 2001, Graham and his friend Monty France left Brooklyn in a car driven by a man referred to as "Tallest," to meet an acquaintance of Roger's in Boston. When that car broke down at a North Attleboro gas station, the men removed the license plates from the car, and a passing police officer stopped them for suspicious behavior. The officer conducted a background check on the three men, which resulted in the arrest of France and "Tallest" on outstanding warrants. Graham was left to fend for himself at the gas station until defendant picked him up.
[10] Detective Killian's testimony on direct examination transpired as follows:
"Q What was inside the briefcases?
"A Again, personal papers, government records, banking records, handwritten diagram.
"MR. BRIODY: Objection.
"THE COURT: Overruled.
"* * *
"Q Detective, I'm going to show you what's been marked as State's Exhibit 61 and ask if you recognize that.
"(Said item handed to the witness)
"A Yes.
"Q Can you tell us what that is.
"A This is a diagram of the Founders Brook Motel that was recovered inside a briefcase that was taken out of
"MR. BRIODY: Objection. Ask to be heard at the side, Your Honor."
[11] Rule 401 of the Rhode Island Rules of Evidence provides:
"`Relevant evidence' means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence."
Rule 403 of the Rhode Island Rules of Evidence provides:
"Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."
[12] The trial justice instructed the jury, after the close of the evidence, but prior to closing arguments:
"Ladies and gentlemen, sympathy or any kind of emotion must never play any part whatsoever in your deliberations. You must remember that what you are doing is weighing evidence. You are weighing evidence. The evidence is either there, or it is not there. You must never consider what effect the outcome of your verdict might have on anyone. You are examining evidence and following your oath and following these instructions. All any person in any courtroom is entitled to is your fair, thorough, conscientious, and objective evaluation of the evidence." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541548/ | 949 A.2d 1069 (2008)
2008 VT 33
STATE of Vermont
v.
Ryan J. BRINK.
No. 06-517.
Supreme Court of Vermont.
March 14, 2008.
*1070 Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
ENTRY ORDER
¶ 1. Defendant appeals his convictions for sexually assaulting his stepdaughter, J.L., and enabling her consumption of alcohol. He asserts that the district court erred by permitting the State to introduce hearsay statements as prior consistent statements and violated his confrontation rights by permitting the complaining witness to write down her accusation instead of giving oral testimony. Defendant further asserts that the court should have granted his motion for judgment of acquittal because the evidence against him was insufficient to establish his guilt beyond a reasonable doubt. We affirm.
¶ 2. On March 27, 2006, defendant was charged with sexual assault of his step-daughter, J.L., pursuant to 13 V.S.A. § 3252(c),[*] and with enabling the consumption of alcohol by J.L., pursuant to 7 V.S.A. § 658(a)(2). Prior to trial, defendant filed a motion in limine to prohibit the State from introducing J.L.'s prior corroborating statements about the sexual assault through testimony of her boyfriend. Specifically, defendant argued that the *1071 proffered statements did not meet the criteria for prior consistent statements set forth in Vermont Rule of Evidence 801(d)(1)(B) and State v. Roy, 140 Vt. 219, 227, 436 A.2d 1090, 1094 (1981), and therefore were inadmissible hearsay. Defendant asserted that the statements made by J.L. to her boyfriend were not consistent with her trial testimony and that the State could not show the prior statements were made before J.L.'s motive to fabricate arose. The court heard oral argument on the motion on the morning of the trial and indicated that it would preliminarily allow the disputed testimony subject to its development at trial.
¶ 3. At trial, the State called J.L. as its first witness. The court, over the defendant's objection, allowed J.L. to provide a written response to the State's question about which part of defendant's body was touching her when she awoke to find defendant on top of her. When J.L. was unable to read what she wrote for the jury, the court further permitted the state's attorney to ask her: "Ryan's penis was in my vulva, is that what you wrote, yes or no?" J.L. responded, "Yes." The State next called J.L.'s boyfriend to the stand. He testified without objection by the defendant that, in October or November of 2004, J.L. told him that defendant had gotten her drunk and raped her. Following the defense's presentation of evidence, the jury found defendant guilty of sexual assault and enabling the consumption of alcohol by a minor.
¶ 4. After trial, defendant filed a motion for judgment of acquittal and new trial contending that: (1) the State did not provide sufficient evidence to prove defendant's guilt beyond a reasonable doubt, see V.R.Cr.P. 29(c) (allowing the court to set aside a guilty verdict if the evidence is insufficient to sustain a conviction), and (2) the court erroneously admitted the hearsay testimony of J.L.'s boyfriend, see V.R.Cr.P. 33 (requiring a new trial when the interests of justice so demand). The court denied the motion, finding that J.L.'s testimony alone was adequate to rebut defendant's claim of insufficiency. The court further ruled that the testimony of J.L.'s boyfriend satisfied the requirements for prior consistent statements under V.R.E. 801(d)(1)(B). This appeal followed.
¶ 5. Defendant now claims that the trial court committed reversible error with regard to three rulings. He argues that the court erred by: (1) permitting the State to introduce J.L.'s statements to her boyfriend as prior consistent statements, (2) violating his confrontation rights by permitting J.L. to provide a written accusation rather than oral testimony, and (3) denying his motion for judgment of acquittal where the State's evidence was insufficient to establish his guilt beyond a reasonable doubt.
¶ 6. Defendant's first argument that J.L.'s prior statements to her boyfriend did not corroborate her in-court testimony and were not made before her supposed motive to falsify arosewas not preserved at trial and, therefore, will not be addressed on the merits. We have, on numerous occasions, stressed that we will not decide issues that have not been properly preserved for appeal. See, e.g., In re White, 172 Vt. 335, 343, 779 A.2d 1264, 1270 (2001). "To properly preserve an issue for appeal a party must present the issue with specificity and clarity in a manner which gives the trial court a fair opportunity to rule on it." Id. (quotation and citation omitted).
¶ 7. Vermont Rule of Evidence 103(a) requires a "timely objection or motion to strike" to preserve a claim of error on a ruling admitting evidence. Under the 2004 amendments, a "definitive" ruling on admissibility obviates the need for a renewed *1072 objection at trial. See Reporter's Notes, V.R.E. 103 (noting the intention to restore uniformity of practice in state and federal courts following the 2000 amendment to Federal Rule of Evidence 103). Where a court makes only a preliminary ruling, however, our precedent in State v. Koveos controls. In Koveos, we held that the defendant had an obligation to object to deposition testimony at trial where the trial court had made only a preliminary ruling denying the defendant's motion in limine to exclude the testimony. 169 Vt. 62, 69, 732 A.2d 722, 727 (1999) ("A denial of a motion in limine seeking to exclude evidence is normally a preliminary ruling that `does not . . . mean that the evidence is admissible.'") (quoting State v. Dubois, 150 Vt. 600, 602, 556 A.2d 86, 88 (1988)); see also United States v. Yu-Leung, 51 F.3d 1116, 1120 (2d Cir.1995) (requiring trial court to rule "without equivocation" in order for a motion in limine to preserve an issue for appeal). Here, the trial court made only a preliminary ruling on defendant's motion to exclude the testimony of J.L.'s boyfriend, and defendant did not reassert his objection to the testimony at trial. Therefore, defendant failed to preserve the issue for appeal by not raising a timely objection as required by V.R.E. 103, and we decline to review it.
¶ 8. Defendant's second claim of error is not supported by the record. He asserts that the trial judge violated his confrontation rights by allowing the State to read J.L.'s written testimony to the jury in lieu of oral testimony. We have long recognized that the Confrontation Clause of the Sixth Amendment to the Federal Constitution and Chapter I, Article 10 of the Vermont Constitution provide a criminal defendant with "`the right physically to face those who testify against him, and the right to conduct cross-examination.'" State v. Roberts, 154 Vt. 59, 65-66, 574 A.2d 1248, 1250-51 (1990) (quoting Pennsylvania v. Ritchie, 480 U.S. 39, 51, 107 S.Ct. 989, 94 L.Ed.2d 40 (1987)). Defendant received both protections in the present case. First, defendant and his counsel retained an uninhibited view of J.L. and her demeanor throughout her testimony as required by the Confrontation Clause. State v. Lipka, 174 Vt. 377, 383, 817 A.2d 27, 33 (2002) (citing Maryland v. Craig, 497 U.S. 836, 851, 110 S.Ct. 3157, 111 L.Ed.2d 666 (1990) (requiring, at minimum, the opportunity "to view . . . the demeanor (and body) of the witness as he or she testifies")). As such, defendant's reliance on Coy v. Iowa, 487 U.S. 1012, 108 S.Ct. 2798, 101 L.Ed.2d 857 (1988), and Lipka is misplaced because, in both cases, the testifying witnesses were placed out of the defendant's sight. Second, defendant retained a full opportunity for contemporaneous cross-examination of J.L., which provided him greater rights than guaranteed by the Confrontation Clause. State v. Raymond, 148 Vt. 617, 620-21, 538 A.2d 164, 166 (1987) ("The `Confrontation Clause guarantees an opportunity for effective cross-examination, not cross-examination that is effective in whatever way, and to whatever extent, the defense might wish.'" (quoting Delaware v. Fensterer, 474 U.S. 15, 20, 106 S.Ct. 292, 88 L.Ed.2d 15 (1985))). Defendant had a full opportunity to explore J.L.'s reluctance to provide an oral accusation on cross-examination.
¶ 9. The circumstances here are similar to those in Maryland v. Craig, where the Supreme Court upheld a Maryland statute that permitted testimony by alleged child abuse victims by one-way, closed circuit television because the defendant was able to view the witness's testimony by video monitor and conduct contemporaneous cross-examination. 497 U.S. at 851-52, 110 S.Ct. 3157. In the present case, the trial court required J.L. to provide her testimony, including her written accusation, *1073 in full view and awareness of defendant. Therefore, the trial court acted within its discretion when it permitted the State to read J.L.'s testimony to the jury. See V.R.E. 611(a) (granting trial court "reasonable control over the mode and order of interrogating witnesses and presenting evidence" to "protect witnesses from harassment or undue embarrassment").
¶ 10. Finally, we reject defendant's argument that the trial court erred in denying his motion for judgment of acquittal. Defendant claims that the evidence presented by the State contained significant inconsistencies which made it impossible for a reasonable trier of fact to be convinced of defendant's guilt beyond a reasonable doubt. On review of a denial of a motion for judgment of acquittal, we must determine "whether, taking the evidence in the light most favorable to the state and excluding modifying evidence, the state has produced evidence fairly and reasonably tending to show the defendant guilty beyond a reasonable doubt." State v. Goodhue, 2003 VT 85, ¶ 4, 175 Vt. 457, 833 A.2d 861 (quotations omitted). Under this standard, where the victim testifies as to all elements of the charges against a defendant, we "need only recount the victim's testimony" concerning the charges to rebut a claim of error. State v. Prior, 174 Vt. 49, 53, 804 A.2d 770, 773 (2002); see also State v. Turner, 2003 VT 73, ¶ 7, 175 Vt. 595, 830 A.2d 122 ("A judgment of acquittal is proper only if the State has failed to put forth any evidence to substantiate a jury verdict."). At trial, J.L. testified that defendant provided her with whiskey to drink, and later, after she had fallen asleep, engaged in a sexual act with her involving penis and vulva contact. She further testified that she was fourteen years old and not married to defendant at the time the alleged sexual act occurred. The State's evidence, while fraught with inconsistencies, was sufficient on the elements of the crimes for a reasonable trier of fact to conclude that defendant "knowingly enable[d] the consumption of malt or vinous beverages or spirituous liquors by a person under the age of 21," pursuant to 7 V.S.A. § 658(a)(2), and "engage[d] in a sexual act with a child who is under the age of 16," pursuant to 13 V.S.A. § 3252(c). See Prior, 174 Vt. at 53, 804 A.2d at 773 (holding that victim's testimony provided sufficient evidence to convict the defendant of assault with a deadly weapon under 13 V.S.A. § 1021(3)). Thus, the trial court did not abuse its discretion in denying defendant's motion for judgment of acquittal.
Affirmed.
NOTES
[*] The original docket entry cited a violation of 13 V.S.A. § 3252(a)(3), which was the statutory provision alleging the same conduct prior to the 2006 amendments. | 01-03-2023 | 10-30-2013 |
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401 N.J. Super. 125
Omar SANDERS, Plaintiff-Respondent,
v.
Norma K. LANGEMEIER, Patricia L. Leslie, Clarendon National Insurance Company, Defendants, and
New Jersey Property-Liability Insurance Guaranty Association, Defendant-Appellant.
No. A-4335-06T3
Superior Court of New Jersey, Appellate Division.
Argued May 19, 2008.
Decided June 19, 2008.
*296 Hugh P. Francis, argued the cause for appellant (Francis & Berry, attorneys; Mr. Francis, of counsel and on the brief; Joanna Huc, on the briefs).
Kenneth E. Ryan, Passaic, argued the cause for respondent (Weiner, Ryan & Mazzei, attorneys; Mr. Ryan, on the brief).
Paul G. Witko, Deputy Attorney General, argued the cause for amicus curiae Commissioner of Banking and Insurance (Anne Milgram, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Mr. Witko, on the brief).
Starr, Gern, Davison & Rubin, Roseland, for amicus curiae The Association of Trial Lawyers of America-New Jersey (Jeffrey A. Rizika, of counsel; James A. Meszaros, on the briefs).
Before Judges LINTNER, GRAVES and ALVAREZ.
The opinion of the court was delivered by
LINTNER, P.J.A.D.
This appeal requires us to determine whether an otherwise uninsured passenger, not qualified to receive Medicaid, who is afforded medical payments limited to the emergency personal injury protection coverage afforded under the owner-operator's special insurance policy, is eligible to recover personal injury protection (PIP) *297 benefits for non-emergency medical treatment from the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) as administrator of the Unsatisfied Claim and Judgment Fund (UCJF).[1] We hold that the UCJF is obligated to provide PIP benefits not covered by the emergency personal injury protection coverage payable to those passengers not eligible for Medicaid, as they otherwise would have been protected had PIP coverage been in force to satisfy their medical treatment expenses.
The facts are undisputed. Plaintiff, Omar Sanders, was injured while riding as a passenger in an automobile owned and operated by Patricia Leslie when it was involved in a two-car accident in Bloomfield with a vehicle operated by Norma Langemeier. Leslie's vehicle was insured by a special automobile insurance policy issued by Clarendon National Insurance Company (Clarendon) pursuant to N.J.S.A. 39:6A-3.3. Langemeier was insured with a standard automobile policy issued by Allstate Insurance Company (Allstate). Sanders sustained cervical, thoracic, and lumbar injuries and was taken to St. Mary's Medical Center (St. Mary's) where he was given emergency treatment and released. Thereafter, he came under the care of Dr. Paul Misthos at Sall/Myers Medical Associates where he received treatment and incurred medical bills in the amount of $2305.47.
Allstate's standard policy did not cover Sanders for PIP benefits because he was neither a named insured nor a member of the named insured's family residing in the named insured's household while occupying an automobile, nor a passenger while occupying the named insured's vehicle. See N.J.S.A. 39:6A-4. Under Leslie's special policy, Clarendon only paid Sanders' emergency medical care rendered at St. Mary's. Because the Clarendon policy only afforded emergency personal injury protection coverage, Sanders sought payment of Dr. Misthos' bills from the UCJF. When the UCJF refused payment, Sanders filed suit naming the UCJF as a defendant.[2]
Motions for summary judgment were filed by both Sanders and the UCJF. After oral argument, the motion judge concluded that the UCJF was required to provide the applicable coverage for Sanders' non-emergent care. In a written opinion issued on March 13, 2007, the judge denied the UCJF's motion for reconsideration.[3] This appeal followed.
We begin our analysis by reviewing the applicable statutes. In 1998, the Legislature adopted the Automobile Insurance Coverage Act (AICRA). Under AICRA, N.J.S.A. 39:6A-3 continued the requirement that every owner of a motor vehicle maintain automobile liability insurance coverage with minimum limits of $15,000 per injury and $30,000 per accident. See also N.J.S.A. 39:6B-1. A policy issued with the required $15,000/$30,000 limits is known as a "standard automobile insurance policy." N.J.A.C. 11:3-3.2.
*298 The standard policy under AICRA was required to "contain personal injury protection benefits." N.J.S.A. 39:6A-4. "`Personal injury protection coverage' means and includes . . . [p]ayment of medical expense benefits" up to $250,000 per person per accident, including "reasonable, necessary, and appropriate treatment . . . to persons sustaining bodily injury." N.J.S.A. 39:6A-4a. The $250,000 medical expense benefit, which had been mandatory prior to the adoption of AICRA, became the default option for a standard policy, with reduced coverage limits of $15,000, $50,000, $75,000, and $150,000 available at the election of the insured. N.J.S.A. 39:6A-4.3e.
With the passage of AICRA, the Legislature introduced a non-compulsory option known as the "basic automobile insurance policy." N.J.S.A. 39:6A-3.1. Later, in 2003, the Legislature created the "special automobile insurance policy," N.J.S.A. 39:6A-3.3.
The basic policy allows for up to $250,000 in medical benefits for injuries to the brain and spinal cord, as well as disfigurement and "other permanent and significant injuries" treated immediately following an accident at an acute care facility. N.J.S.A. 39:6A-3.1. It is also required to contain reduced PIP coverage in an amount not to exceed $15,000 for reasonable and necessary treatment, and $5000 for property damage liability coverage. Ibid. The legislation additionally required carriers issuing basic policies to provide "optional liability insurance coverage" with limits of $10,000. N.J.S.A. 39:6A-3.1c.
The special policy was established by the Legislature "[i]n order to assist certain low income individuals . . . and encourage their greater compliance in satisfying the mandatory private passenger automobile insurance requirements." N.J.S.A. 39:6A-3.3. In setting the limited income criteria for qualification, the statute directs the commissioner to limit the availability of the special policy "to those persons eligible and enrolled in the federal Medicaid program." Ibid. The special policy provides (1) "[e]mergency personal injury protection coverage"; (2) a "[d]eath benefit in the amount of $10,000"; (3) the limited lawsuit option pursuant to N.J.S.A. 39:6A-8a; and (4) no "liability, collision, comprehensive, uninsured or underinsured motorist coverage." Ibid.
The special insurance "[e]mergency personal injury protection coverage," provides benefits for the named insured and dependent family members residing in the named insured's household, "as defined by the federal Medicaid program," and "other persons sustaining bodily injury while occupying . . . the automobile of the named insured." N.J.S.A. 39:6A-3.3b. "Emergency personal injury protection coverage" covers "only payment of treatment for emergency care in an amount not to exceed $250,000 per person per accident." Ibid. "Emergency care" is defined as
all medically necessary treatment of a traumatic injury or a medical condition manifesting itself by acute symptoms of sufficient severity such that absence of immediate attention could reasonably be expected to result in: death; serious impairment to bodily functions; or serious dysfunction of a bodily organ or part. Such emergency care shall include all medically necessary care immediately following an automobile accident, including, but not limited to, immediate pre-hospitalization care, transportation to a hospital or trauma center, emergency room care, surgery, critical and acute care. Emergency care extends during the period of initial hospitalization until the patient is discharged from acute care by the attending physician.
[Ibid.]
*299 Medical care is presumed to be "emergency care" when it is "initiated at a hospital within 120 hours of the accident." Ibid. While "[e]mergency personal injury protection coverage" also includes "all medically necessary treatment of permanent or significant brain injury, spinal cord injury or disfigurement after the patient is discharged from acute care," a special policy does not include the coverage provided by the standard policy or the limited coverage provided by the basic policy for non-emergency reasonable and necessary medical treatment.
A noteworthy difference between the basic and special policies deals with the applicability of uninsured motorist (UM) coverage. N.J.S.A. 17:28-1.1e(2)(d) provides that vehicles covered with a basic policy are not considered uninsured motor vehicles whereas those covered by special policies are considered uninsured motor vehicles.
The Unsatisfied Claim and Judgment Fund Law (UCJF Law) was enacted by the Legislature in 1952 and codified at N.J.S.A. 39:6-61 to -91. Concomitant with the passage of AICRA, N.J.S.A. 39:6-62 was amended to provide that an uninsured motor vehicle shall not include a vehicle covered by a basic policy. N.J.S.A. 17:28-1.1 was also amended to except the basic policy from the requirement that policies include minimum UM coverage of $15,000/$30,000/$5000. With the creation of the special policy, the UM statute was amended to provide that an automobile insured with a special policy shall be considered an uninsured motor vehicle. N.J.S.A. 17:28-1.1e(2)(d).
N.J.S.A. 39:6-86.1 designates who is qualified to receive the medical benefits provided under the UCJF Law. It contains the following pertinent language:
When any person qualified to receive payments under the provisions of the "Unsatisfied Claim and Judgment Fund Law" suffers bodily injury . . . arising out of an accident while occupying . . . an automobile . . . for which personal injury protection benefits under . . . ([N.J.S.A.] 39:6A-1 et seq.) . . . would be payable to such person if personal injury protection coverage were in force and the damages resulting from such accident . . . are not satisfied due to the personal injury protection coverage not being in effect with respect to such accident, . . . then in such event the [UCJF] shall provide [the enumerated benefits, including those for] . . . "reasonable, necessary and appropriate treatment." (emphasis added).
The personal injury benefits afforded by the UCJF under N.J.S.A. 39:6-86.1 are equivalent to those afforded by the default provision in the standard policy, pursuant to N.J.S.A. 39:6A-4.
On appeal, the UCJF contends that the above quoted statute restricts eligibility for benefits to those limited circumstances where there is no PIP coverage in effect. The UCJF posits that because plaintiff had PIP coverage, albeit limited to emergent medical care, he is not remediless and, thus, is precluded from seeking treatment benefits provided by the UCJF Law. We disagree.
Clearly, for liability purposes, a vehicle covered with a special policy is considered an uninsured motor vehicle under the UCJF Law, while one covered by a basic policy is not. Thus, under the plain meaning of N.J.S.A. 17:28-1.1e(2) and N.J.S.A. 39:6-62, had there not been liability coverage on the Langemeier vehicle, Sanders would have been eligible to seek minimum standard policy pain and suffering damages from the UCJF. See N.J.S.A. 39:6-62; N.J.S.A. 39:6-69. As a passenger in a vehicle covered with a special policy, Sanders is a person "qualified to receive payments *300 under the provisions of the" UCJF Law. N.J.S.A. 39:6-86.1; N.J.S.A. 39:6-62. It therefore follows that because Sanders remains uninsured for medical treatment, other than emergency care, he is entitled to recover those unsatisfied, standard policy PIP benefits as if such coverage was in full force and effect.
The statutory "[e]mergency personal injury protection coverage" provided by a special policy is not equivalent to the "[p]ersonal injury protection coverage" afforded by the standard policy. Simply stated, they are not the same benefits. That is to say, the limited emergency medical benefits, as defined by N.J.S.A. 39:6A-3.3, do not match the definition of PIP benefits required in the standard policy or provided by the UCJF. N.J.S.A. 39:6A-4; N.J.S.A. 39:6-86.1. Because Sanders is not qualified to opt for the limited coverage afforded by the special policy, it would be antagonistic to the legislative intent to limit him to emergency medical coverage when he is not entitled to additional treatment benefits provided under the federal Medicaid program. See N.J.S.A. 30:4D-6 (delineating the types of care covered by Medicaid, including chiropractic treatment).
The UCJF argues that the Legislature's failure to amend N.J.S.A. 39:6-62 in 2003, when it created the special policy, to include vehicles covered with a special policy as uninsured vehicles, when, at the same time it amended N.J.S.A. 39:6-86.7, requiring the UCJF to provided PIP benefits to pedestrians, evinces an intent on the part of the Legislature not to cover persons such as Sanders for PIP benefits. It also asserts that N.J.S.A. 17:28-1.1e(2)(d), which identifies a vehicle insured with a special policy as an uninsured vehicle, allows claimants to look to their UM policies for coverage. The UCJF's contentions are misplaced.
Sanders does not have a UM policy. Clearly, if he did, he would be a covered person precluded from seeking UCJF benefits. As of 2003, N.J.S.A. 39:6-62 expressly provides that a person is not a "qualified person where such person is an insured under a policy provision providing coverage for damages sustained by the insured as a result of the operation of an uninsured motor vehicle in a form authorized to be included in automobile liability polices." Thus, there was no need for the Legislature to amend N.J.S.A. 39:6-62. Because Leslie's vehicle is considered an "uninsured vehicle" under N.J.S.A. 17:28-1.1e(2)(d) and Sanders does not have UM coverage, he is a qualified person.
The UCJF further contends that use of the words "[w]hen any person qualified to receive payments under . . . the [UCJF Law] . . . while occupying . . . an automobile . . . for which personal injury protection benefits under AICRA . . . ([N.J.S.A.] 39:6A-1 et seq.) . . . would be payable to such person if personal injury protection coverage were in force" in N.J.S.A. 39:6-86.1 (emphasis added), evinces an expressed intent on the part of the Legislature to exclude those who receive emergency personal injury protection benefits afforded by a special policy because such benefits are a part and parcel of the benefits created by AICRA. Again, we disagree. As previously indicated, the "[e]mergency personal injury coverage" afforded under N.J.S.A. 39:6A-3.3 is different from "personal injury protection benefits" afforded and defined in section 4 of AICRA. Simply stated, they are different coverages. Thus, our reading of N.J.S.A. 39:6-86.1 indicates a legislative intent to provide Sanders the reasonable and necessary treatment expenses that he would be entitled to and that would be provided by "personal injury protection benefits" if in full force. When it comes to no fault PIP *301 benefits, "`[t]he protection of innocent third parties is a primary concern.'" Rutgers Cas. Ins. Co. v. LaCroix, 194 N.J. 515, ___, 946 A.2d 1027 (2008) (quoting Proformance Ins. Co. v. Jones, 185 N.J. 406, 420, 887 A.2d 146 (2005)).
"When the words in a statute are clear, and their literal application is compatible with the overall legislative design, the interpretive process is satisfied by enforcement of the plain meaning of the words." Jones v. Naser City Transp. Corp., 388 N.J.Super. 513, 514, 909 A.2d 752 (App.Div.2006) (citing O'Connell v. State, 171 N.J. 484, 488, 795 A.2d 857 (2002); New Capitol Bar & Grill Corp. v. Div. of Employ. Sec., 25 N.J. 155, 160, 135 A.2d 465 (1957)). Indeed, the Administrative Code treats PIP benefits and emergency personal injury protection as two distinct types of insurance coverage. See N.J.A.C. 11:3-4.1 (identifying "personal injury protection medical expense benefits and emergency personal injury protection coverage" separately); N.J.A.C. 11:3-4.2 (defining "emergency personal injury protection coverage" as that which is available under a special policy); N.J.A.C. 11:3-4.3 (titled, "Personal injury protection benefits applicable to basic and standard policies," describing personal injury protection benefits to those included under the basic and standard policies and not limiting such coverage to emergency care).
Moreover, we read the UCJF Law and AICRA in pari materia. See, e.g., State Farm Mut. Auto. Ins. Co. v. Licensed Bev. Ins. Exch., 146 N.J. 1, 13, 679 A.2d 620 (1996); Gorton v. Reliance Ins. Co., 77 N.J. 563, 571, 391 A.2d 1219 (1978); Giles v. Gassert, 23 N.J. 22, 33-34, 127 A.2d 161 (1956); Serkes v. Parsekian, 73 N.J.Super. 344, 348-49, 179 A.2d 785 (Law Div.1962). In our view, our interpretation is consistent with AICRA and the UCJF Law's expression that a vehicle insured with a special policy is an uninsured motor vehicle.
Finally, the UCJF asserts that because Sanders was eligible for emergency personal injury coverage under Leslie's policy, he is not remediless. It argues that the UCJF is designed to protect the public from uninsured motorists, not from those who are insufficiently insured. See Gorton, supra, 77 N.J. at 572, 391 A.2d 1219. This is not a situation in which Sanders chose to purchase a lesser policy. To be sure, as a person not eligible for Medicaid benefits, he could not obtain a special policy, even if he wanted to.
Generally speaking, the UCJF Law "is to be liberally construed to advance the remedy . . . and to the fulfillment of the essential legislative policy. The literal sense of terms is not to have ascendancy over the reason and spirit of the expression as a whole." Giles, supra, 23 N.J. at 34, 127 A.2d 161. Although the UCJF "was never intended to make every claimant whole or to compensate all accident victims; . . . it was intended to `offer some measure of relief to those who come within the class intended to be protected, to prevent a claimant from being forced to absorb the entire economic loss caused by the accident.'" Jimenez v. Baglieri, 152 N.J. 337, 342-43, 704 A.2d 1285 (1998) (quoting Unsatisfied Claim & Judgment Fund Bd. v. N.J. Mfrs. Ins. Co., 138 N.J. 185, 189, 649 A.2d 1243 (1994)) (emphasis added). Sanders' ineligibility for Medicaid benefits and his status as an otherwise uninsured passenger in a vehicle covered by a special insurance policy bring him within the class of persons intended to be protected by the UCJF when medical expenses are not fully satisfied due to PIP benefits not being in force. Our determination is in accord with the applicable statutes and the essential purpose of the UCJF Law. Thus, we conclude that the *302 UCJF is required to provide Sanders with those reasonable and necessary medical treatment expenses incurred from the accident.
Affirmed.
NOTES
[1] As Administrator of the UCJF, PLIGA is named as defendant. For purposes of this opinion, we refer to the UCJF.
[2] Sanders also named Langemeier and Leslie as defendants, seeking damages for pain and suffering. He eventually settled his pain and suffering case with Langemeier for $4000 and dismissed his complaint against Leslie.
[3] The motion judge permitted the UCJF to file its motion for reconsideration relying in part on an unpublished Appellate Division opinion in Solano v. N.J. Property-Liability Insurance Guaranty Association, No. A-1471-05, 2006 WL 2312394 at *1 (App.Div. Aug. 11, 2006), which held that a person insured under a basic policy without the optional UM coverage is eligible to receive benefits under the UCJF. | 01-03-2023 | 10-30-2013 |
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ESTATE OF Louis J. GIULIANO, Sr., et al.
v.
Louis J. GIULIANO, Jr.
No. 2007-100-Appeal.
Supreme Court of Rhode Island.
June 20, 2008.
*387 Jeffrey Techentin, Esq., Providence, for petitioner.
Thomas Dickinson, Esq., for respondent.
Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.
OPINION
Justice ROBINSON for the Court.
The defendant, Louis J. Giuliano, Jr., appeals from the entry of summary judgment in favor of the plaintiffs, the Estate of Louis J. Giuliano, Sr., and Patricia Lett.
This case came before the Supreme Court for oral argument on May 14, 2008, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After considering the record, the memoranda submitted by the parties, and the oral arguments of counsel, we are of the opinion that cause has not been shown and that the case should be decided at this time.
For the reasons set forth below, we reverse the Superior Courts grant of summary judgment.
Facts and Travel
1. The Probate Court Proceedings
On February 8, 2006, defendant's father, Louis J. Giuliano, Sr., died. Shortly after the senior Mr. Giuliano's death, Patricia Lett, on behalf of the Estate of Louis J. Giuliano, Sr., filed with the Probate Court for the Town of Smithfield a petition to probate the purported will of Mr. Giuliano.[1] Ms. Lett was the named executrix of the will, which specified that after debts, expenses, and taxes were paid, tangible property designated in any letter of instructions was distributed, and jointly held accounts became the property of the living joint holders of those accounts, the residue of the decedent's estate would be distributed to a trust that the decedent and Ms. Lett had established before he created the will.
The defendant (decedent's son) objected to the probate of the will, challenging the authenticity of the testator's signature; he *388 alleged that it was not actually his father's signature. On April 27, 2006, a hearing was held before the Probate Court. The attorney who drafted the will (the Drafting Attorney) testified at that hearing that he specifically recalled the decedent's execution of the will. In an affidavit[2] notarized by the Drafting Attorney, the signatures of two other attorneys (to whom we shall refer as Signer One and Signer Two) appeared beneath a statement that was a part of the affidavit; that statement declared (1) that the signers had, in the presence of each other, witnessed the execution of the will by the decedent and (2) that the decedent appeared to be of sound mind.
At the hearing in the Probate Court, the Drafting Attorney also testified that the two persons who signed the affidavit had witnessed the execution of the will. Signer One testified that he had witnessed the decedent's execution of the will, which occurred in a conference room at his law firm; he testified, however, that he could not recall if Signer Two was present at the same time as he had witnessed the will. Signer Two testified that he did not have a specific recollection of the events that occurred during the execution of the will because so many years had passed. Signer Two did identify the witness signature as his own. Offering the Probate Court an interpretation based on the "normal course of action" that his law firm would have followed when a will was executed there, Signer Two testified that, "based on past patterns and practices," he believed that the decedent had signed the will in his presence as well as in the presence of Signer One and that they then had signed in the presence of each other.
Testimony was offered in support of defendant's challenge to the authenticity of the decedent's signature that appeared on the will. The decedent's former wife, his daughter, and his son (defendant) all identified documents on which the decedent's signature appeared. Curtis Baggett, a handwriting expert, compared documents containing the decedent's known signature with the signature on the will, and he concluded that the signature on the will was not the decedent's own. He offered testimony concerning his methodology in examining the signatures and his findings on the technical differences between the shape of letters in the known signatures and the signature on the will. Mr. Baggett testified that it was his opinion that the signature on the will was not the true signature of Louis J. Giuliano, Sr.[3]
On July 21, 2006, the judge who presided over the hearing in the Probate Court issued a written decision concerning defendant's objection to the probate of decedent's will. The judge concluded that neither side's handwriting expert was particularly persuasive, but he added that he thought the methodology that plaintiffs' expert used was more generally accepted in the field. He stated that the testimony of the three attorneys established that the signature on the will was "more probably than not" the signature of the decedent.
*389 Nevertheless, the judge denied plaintiffs' petition for the probate of the will on the grounds that the witnesses to the will's execution could not remember whether they had witnessed the decedent sign the will in the presence of each other or whether they signed as witnesses in the decedent's presence. The Probate Court judge found as follows:
"[T]he proponents have not shown more probably than not that both witnesses signed in the presence of the testator and in the presence of each other or that both witnesses were present at the same time. These are essential elements."
Accordingly, the judge ruled that, because plaintiffs could not demonstrate that the statutory requirements had been met, the petition to probate the will would be denied. The judge entered an order to that effect on August 3, 2006.
2. The Superior Court Proceedings
Thereafter, on August 31, 2006, plaintiffs filed a complaint[4] in the Superior Court in which they asked the Superior Court to order the Probate Court to admit the will to probate. In that document, plaintiffs argued that the Probate Court judge had erroneously concluded that the will was not properly executed.
In November of that year, plaintiffs filed a motion for summary judgment; they asserted that the affidavit attached to the will established that there was no dispute that the witnesses to the will signed in the presence of the decedent and each other and that the decedent signed in the witnesses' presence. The plaintiffs argued that the statutory requirements for executing the will had been met and that the case should be remanded to the Probate Court with an order that that court admit the will to probate.
For his part, defendant objected to plaintiffs' contention, arguing that genuine issues of material fact existed with respect to the proper execution vel non of the will. Pointing to the fact that the witnesses were unable to state whether or not they had witnessed the decedent's signature in each other's presence, defendant asserted that summary judgment would be inappropriate. In addition, defendant submitted an affidavit from Curtis Baggett, the handwriting expert, in which Mr. Baggett opined that the decedent did not sign the will.
On January 2, 2007, a hearing was held in the Superior Court on plaintiffs' motion for summary judgment.
With respect to the handwriting expert's affidavit, the hearing justice remarked that it "doesn't say much." In response to that remark, counsel for defendant stated that the basis for Mr. Baggett's conclusions was set forth more fully in his testimony before the Probate Court. The hearing justice concluded that, because the affidavit was "so cursory," she was unable to find a genuine question of material fact. Reading the affidavit, the hearing justice stated:
"All he says is, `I base my opinion on my analysis of the signatures on the known and question[ed] documents and my use of accepted forensic document examination tools, principles and techniques.'"
After having quoted those words from the expert's affidavit, the hearing justice sardonically commented:
"Well, that's helpful.
"* * *
"How can I say, `Oh, wow, this dispute is genuine.'?"
The hearing justice characterized the content of the handwriting expert's affidavit *390 as "a bald statement," and she questioned how such "a bald statement" could be a predicate for the denial of summary judgment.
Counsel for defendant countered the hearing justice's queries by articulating the reasons why defendant thought the case should proceed beyond the summary judgment stage. He contended that the dispute was genuine in view of the fact that, in counsel's words, "a witness with the suitable qualifications is testifying in that affidavit that his professional conclusion is that the signatures are not genuine." He further argued:
"I think in the case where we're talking about the genuineness of a signature, your Honor, and the document examiner says that * * * his professional conclusion is that the signature is not genuine, that that does raise an issue of fact for the trier of fact."
The hearing justice disagreed with defendant's arguments in opposition to plaintiffs' motion for summary judgment. She stated:
"I'm going to grant the motion. I'm not satisfied that based on this affidavit that the dispute is a genuine dispute. I understand that experts can't be expected to detail every bit of their findings in an affidavit, or even in an interrogatory answer, or even in deposition testimony, but he has not come forward to give me enough so that I can, with confidence, say that this dispute is genuine. As I said before, I think the legislature enacted this whole process of self-executing affidavits to create some sort of presumptive effect. I don't think I've completely thought it through, but that's what I see that we have here, and the question is whether this is enough to get us by and shift the burden on to the estate."
The hearing justice additionally remarked that she did not believe the handwriting expert's affidavit overcame the "presumptive effect" of the self-executing affidavit. The hearing justice further stated that, because she could not "say with confidence" that a genuine dispute existed in the case, she would grant plaintiffs' motion for summary judgment.
In an order entered on January 4, 2007, the hearing justice sustained plaintiffs' probate appeal and ordered that the will be admitted to probate. The defendant filed a notice of appeal to this Court on January 16, 2007.
3. The Issues on Appeal
On appeal, defendant presents two arguments in support of his claim that this Court should reverse the judgment of the hearing justice: (1) that the self-executing affidavit is not sufficient to establish that all of the requirements for probating the will were satisfied; and (2) that he raised a genuine issue of material fact with respect to the authenticity of the decedent's signature on the will. The defendant contends that these two issues should have precluded the hearing justice from granting plaintiffs' motion for summary judgment.
The plaintiffs assert (1) that defendant improperly relied on the proceedings before the Probate Court to try to create a genuine issue of material fact; and (2) that the hearing justice appropriately granted their motion for summary judgment because the handwriting expert's affidavit was conclusory and failed to set forth sufficient facts in support of his opinion that the decedent did not sign the will.
Standard of Review
Summary judgment is "a drastic remedy," and a motion for summary judgment should be dealt with cautiously. Ardente v. Horan, 117 R.I. 254, 256-57, 366 *391 A.2d 162, 164 (1976) ("Summary judgment is a drastic remedy and should be cautiously applied * * *."); see also DePasquale v. Venus Pizza, Inc., 727 A.2d 683, 685 (R.I. 1999) ("This Court has consistently acknowledged that summary judgment is a harsh remedy that must be applied cautiously."); Sjogren v. Metropolitan Property and Casualty Insurance Co., 703 A.2d 608, 610 (R.I.1997).
The summary judgment papers filed by the movant must seek to establish that there exists no genuine dispute with respect to the material facts of the case. If the movant satisfies that requirement, the nonmovant must point to evidence showing that a genuine dispute of material fact does exist. See Benaski v. Weinberg, 899 A.2d 499, 502 (R.I.2006); Superior Boiler Works, Inc. v. R.J. Sanders, Inc., 711 A.2d 628, 631-32 (R.I.1998). The nonmovant must, by competent evidence, prove the existence of a disputed issue of material fact. Benaski, 899 A.2d at 502. The nonmovant may not rely upon "mere allegations or denials in the pleadings, mere conclusions or mere legal opinions." Tanner v. Town Council of East Greenwich, 880 A.2d 784, 791 (R.I.2005) (internal quotation marks omitted).
A hearing justice who passes on a motion for summary judgment "must review the pleadings, affidavits, admissions, answers to interrogatories, and other appropriate evidence from a perspective most favorable to the party opposing the motion." Steinberg v. State, 427 A.2d 338, 340 (R.I.1981). The hearing justice may grant the motion for summary judgment only if, after conducting that required analysis, he or she determines that "no issues of material fact appear and the moving party is entitled to judgment as a matter of law * * *." Id.
It is important to bear in mind that the "purpose of the summary judgment procedure is issue finding, not issue determination." Industrial National Bank v. Peloso, 121 R.I. 305, 307, 397 A.2d 1312, 1313 (1979); see also Saltzman v. Atlantic Realty Co., 434 A.2d 1343, 1345 (R.I.1981); Steinberg, 427 A.2d at 340 ("[I]n ruling on a motion for summary judgment, the trial justice must look for factual issues, not determine them."); O'Connor v. McKanna, 116 R.I. 627, 633, 359 A.2d 350, 353 (1976) ("[I]n passing on a motion for summary judgment, the question for the trial justice is whether there is a genuine issue as to any material fact and not how that issue should be determined.").
This Court reviews the granting of a motion for summary judgment on a de novo basis; in so doing, we employ the same rules and standards that the hearing justice used. Benaski, 899 A.2d at 502; see also O'Sullivan v. Rhode Island Hospital, 874 A.2d 179, 182 (R.I.2005); Gliottone v. Ethier, 870 A.2d 1022, 1027 (R.I.2005); DePasquale, 727 A.2d at 685. Summary judgment will be upheld by this Court only if no genuine issues of material fact exist and the movant is entitled to judgment as a matter of law. Liberty Mutual Insurance Co. v. Kaya, 947 A.2d 869, 872 (R.I. 2008) (noting that this Court will "affirm a summary judgment only when, after reviewing the admissible evidence in the light most favorable to the nonmoving party, we conclude that no genuine issue of material fact remains to be decided, and that the moving party is entitled to judgment as a matter of law") (internal quotation marks omitted); see also American Express Bank, FSB v. Johnson, 945 A.2d 297, 299 (R.I.2008); Lacey v. Reitsma, 899 A.2d 455, 457 (R.I.2006).
Analysis
I. The Self-Executing Affidavit
Pursuant to the Rhode Island General Laws, any "person of sane mind and eighteen *392 (18) years or older in age, may devise, bequeath, or dispose of, by his or her will, executed in the manner required by [statute], all real estate and all personal estate * * *." G.L.1956 § 33-5-2. Importantly, for a will to be admitted to probate, the will must meet the specific requirements set forth in the General Laws.[5]
Section 33-5-5 sets forth the criteria governing the validity of a will in Rhode Island. It provides in pertinent part as follows:
"No will shall be valid * * * unless it shall be in writing and signed by the testator, or by some other person for him or her in his or her presence and by his or her express direction; and this signature shall be made or acknowledged by the testator in the presence of two (2) or more witnesses present at the same time, and the witnesses shall attest and shall subscribe the will in the presence of the testator, but no form of attestation shall be necessary, and no other publication shall be necessary." Id.
Therefore, a valid will in Rhode Island must be signed by the testator in the presence of two witnesses; those witnesses, in turn, must sign the will in the presence of each other.
General Laws 1956 § 33-7-26 authorizes a particular procedure for proving a purported will or codicil which procedure is at issue in the instant case. That statute allows for the use of oral testimony or the submission of an affidavit to prove the validity of a will and therefore justify its admission to probate. Section 33-7-26 provides in pertinent part:
"In the absence of objection by anyone interested in the estate of a deceased person, the probate court may admit to probate a purported will or codicil of the deceased person upon oral testimony or affidavit in the following manner:
"(1) The oral testimony of any one of the subscribing witnesses as to the due execution of any purported will or codicil shall constitute sufficient evidence thereof.
"(2) An affidavit by the subscribing witnesses or any one or more of them, to any purported will or codicil, executed at any time after execution of the will or codicil, whether before or after the death of the testator, before any officer authorized to administer oaths in or out of this state, stating the facts as the witnesses or witness would be required to testify to in court to prove the will or codicil, shall constitute sufficient evidence of the due execution of the purported will or codicil."
The statute goes on to provide an acceptable form for the affidavit described in subparagraph (3) of § 33-7-26 an affidavit that is commonly referred to as a self-executing or self-proving affidavit.
Pursuant to the explicit terms of the statute, such an affidavit can serve as *393 proof of the facts that the affiant(s) "would be required to testify to in court to prove the will" if, but only if, there is "the absence of objection by anyone interested in the estate." Section 33-7-26. In his appeal to this Court, defendant has properly emphasized that such an affidavit serves as proof of the proper execution of a will only in the absence of an objection by an interested party. In view of the fact that defendant did, in fact, object to the probate of the will, he contends that the Superior Court's ruling that the will should be admitted to probate was improper. We agree.
Inasmuch as the hearing justice's decision to grant plaintiffs' motion for summary judgment rested on her perception that the self-executing affidavit created a "presumptive effect" of the will's validity,[6] we observe that our statutory law governing the use of such a document expressly stipulates that its function is to establish the validity of a will in a case in which there is an "absence of objection by anyone interested in the estate." Section 33-7-26. This is not such a case. As indicated above, defendant did object to the probate of his father's will; although the self-executing affidavit may offer some evidentiary value to the outcome of this case, we are unable to view it as determinative at the summary judgment stage.
Because defendant did indeed object to the probate of the will, it is clear from the express language of § 33-7-26 that the affidavit cannot alone serve as sufficient evidence to admit the will to probate; because the testimony of the signing attorneys raises questions about their presence during the will's execution, we conclude that a genuine issue of material fact exists with respect to whether or not the will was properly executed.
Accordingly, we conclude that this genuine issue of material fact caused the granting of summary judgment by the Superior Court to have been inappropriate.
II. The Authenticity Vel Non of the Signature on the Will
Additionally, defendant argues that he sufficiently pointed to another genuine issue of material fact viz., the issue of the authenticity vel non of the signature on the will; he contends that his showing in that regard should have precluded the hearing justice from granting plaintiffs' motion for summary judgment. We agree with defendant.
Our examination of the record in this case leads us to the ineluctable conclusion that a material factual dispute exists with respect to the issue of whether the signature that appears on the will is authentic.[7] We disagree with the hearing justice's conclusion that the affidavit of defendant's handwriting expert, Mr. Baggett, constituted an insufficient showing that there was a genuine factual dispute about the signature for the purposes of Rule 56 of the Superior Court Rules of Civil Procedure. While Mr. Baggett's affidavit was certainly somewhat laconic, he did sufficiently (1) provide information concerning his expertise as a document examiner; (2) indicate the documents that he examined; *394 (3) summarize the examination technique that he employed (viz., comparing the signatures on the "questioned" documents with the signatures on the "known" documents); and (4) set forth his "professional conclusion and expert opinion that the signatures on the [questioned] documents were signed by someone other than Louis Giuliano, Sr. * * *."
Even though the handwriting expert's affidavit was less than replete with information about the methodology that he employed before reaching his expert conclusion, it was at least minimally adequate to satisfy the obligation of defendant (the nonmovant) to show the presence of a "genuine issue as to [a] material fact." Rule 56(c). The affidavit was sufficient to accomplish what a nonmovant must do in order to defeat a facially proper motion for summary judgment; it was far from being an improper compilation of "naked conclusionary assertions that there may be underlying but unarticulated admissible and supporting evidentiary facts which, if uncontroverted, might serve as grounds for the relief sought." Harold W. Merrill Post No. 16 American Legion v. Heirs-at-Law of Smith, 116 R.I. 646, 648, 360 A.2d 110, 112 (1976); see also Carrozza v. Carrozza, 944 A.2d 161, 164 (R.I.2008); Roitman & Son, Inc. v. Crausman, 121 R.I. 958, 959, 401 A.2d 58, 59 (1979) (mem.).
We conclude that there is indeed a "genuine issue" of material fact with respect to the authenticity of the testator's signature. Although the hearing justice determined that she could not "say with confidence" that a genuine dispute exists in this case, we do not understand our caselaw to mandate such a requirement of "confidence" on the part of the hearing justice.[8] Rather, we have stated that summary judgment is to be employed cautiously because it is such an extreme remedy; summary judgment should occasion the termination of a case only where it is absolutely clear "that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law." American Express Bank, FSB, 945 A.2d at 299 (internal quotation marks omitted).
Conclusion
In view of the record before us, we conclude that summary judgment was improperly granted. Two issues of material fact perdure in this case: (1) whether or not the will was executed in accordance with the statutory requirements; and (2) whether or not the signature on the will is genuine. The resolution of those issues should not have been foreclosed by summary judgment.[9]
For the reasons set forth in this opinion, we reverse the Superior Courts grant of summary judgment. The papers in this *395 case may be remanded to the Superior Court.
NOTES
[1] In view of our holding today, the validity vel non of the purported will is yet to be determined. Accordingly, at this stage, the document at issue is only a "purported will." See G.L.1956 § 33-7-26. For the sake of conciseness, however, we shall hereinafter refer to it simply as "the will."
[2] A Rhode Island statute, discussed later in this opinion, authorizes the use of what is often referred to as a "self-proving" or "self-executing" affidavit as a basis for the admission of a will to probate under certain specified circumstances.
[3] It appears from the record that plaintiffs also introduced the testimony of a handwriting expert during the proceedings before the Probate Court; the transcript of this testimony was not found in the record submitted to this Court, but we can infer from the Probate Court judge's decision that plaintiffs' expert testified that the signature was authentic.
[4] The document that plaintiffs filed for the purpose of appealing to the Superior Court from the Probate Court was entitled "Complaint."
[5] The rationale that underlies the strict requirements surrounding the execution of wills has been cogently described in a law review article:
"Although the primary purpose of succession laws is realization of the decedent's intent, statutes intercede to thwart even the dearest goals of a would-be-testator * * *.
"Naturally, the purpose of these statutes, which set forth the requirements for a valid will, is not to convert the will-writing process into a game of connect-the-dots. The statutory requirements are generally straightforward, and as long as the testator is careful, she [or he] should succeed in meeting these requirements." Julia E. Swenton, The Missing Piece: The Forgotten Role of Testator Intent in the Application of the Doctrine of Dependent Relative Revocation in Oklahoma, 59 Okla. L.Rev. 205, 205 (2006).
[6] The hearing justice remarked that she did not believe that the affidavit of defendant's handwriting expert overcame the "presumptive effect" of the self-executing affidavit; she then stated that, because she could not "say with confidence" that a genuine dispute existed in the case, she would grant plaintiffs' motion for summary judgment.
[7] It should go without saying that the authenticity vel non of signatures on documents is always a matter of grave concern in our judicial system. See generally Rockdale Management Co. v. Shawmut Bank, N.A., 418 Mass. 596, 638 N.E.2d 29 (1994). For obvious reasons, that concern is heightened where the probate of wills is concerned.
[8] See Mitchell v. Mitchell, 756 A.2d 179, 185 (R.I.2000) (stating that the purpose of summary judgment "is not to cull out the weak cases from the herd of lawsuits waiting to be tried" and further stating that "only if the case is legally dead on arrival should the court take the drastic step of * * * granting summary judgment"); see also Rodrigues v. DePasquale Building and Realty Co., 926 A.2d 616, 622 (R.I.2007).
[9] While we express absolutely no view about the authenticity issue at this stage of the litigation, it may well be that the trier of fact will ultimately give short shrift to defendant's attempt to challenge the authenticity of the signature at issue; but it is also entirely possible that the trier of fact will reach the opposite conclusion. For today's purposes, however, that is precisely the point: under our Rule 56 jurisprudence, this is an issue that must be scrutinized and decided by a trier of fact. See Gliottone v. Ethier, 870 A.2d 1022, 1027 (R.I. 2005). The weight of the evidence should not be evaluated at the summary judgment stage. Steinberg v. State, 427 A.2d 338, 340 (R.I. 1981); see also Doyle v. State, 122 R.I. 590, 411 A.2d 907, 909 (1980); see generally Beaton v. Malouin, 845 A.2d 298 (R.I.2004). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541585/ | 949 A.2d 544 (2008)
108 Conn.App. 772
STATE of Connecticut
v.
Charles W. OUTLAW, Jr.
No. 28390.
Appellate Court of Connecticut.
Argued January 10, 2008.
Decided July 1, 2008.
*546 Christopher Y. Duby, special public defender, for the appellant (defendant).
Kathryn Ward Bare, deputy assistant state's attorney, with whom, on the brief, were Scott J. Murphy, state's attorney, and Louis J. Luba, Jr., senior assistant state's attorney, for the appellee (state).
FLYNN, C.J., and GRUENDEL and LAVINE, Js.
LAVINE, J.
The defendant, Charles W. Outlaw, Jr., appeals from the judgment of conviction, rendered after a jury trial, of failure to appear in the first degree in violation of General Statutes § 53a-172. On appeal, the defendant claims that the court improperly (1) denied his motion for a judgment of acquittal, as there was insufficient evidence from which the jury reasonably could have found that he wilfully failed to appear for sentencing, and (2) permitted the state to introduce evidence that he pleaded guilty to two felonies, including the names of the felonies. We affirm the judgment of the trial court.
The jury reasonably could have found the following facts. In April, 2001, the defendant was charged with attempt to commit assault in the first degree and assault of a police officer (2001 charges). On February 3, 2003, the defendant pleaded guilty to the 2001 charges under the Alford doctrine.[1] In exchange for his plea, the defendant agreed to be sentenced to ten years incarceration, execution suspended after four years, and three years of probation. During the plea canvass, the court, Handy, J., advised the defendant that sentencing would take place on March 28, 2003, and that if he did not appear at sentencing, he faced potential penalties.[2] Judge Handy also informed the defendant that a member of the office of adult probation would interview him prior to sentencing to prepare a presentence investigation report and that if he failed to cooperate with the office of adult probation, the court would sentence him nonetheless. The defendant was represented by counsel at the plea proceeding.
On March 28, 2003, at 10:07 a.m., when Judge Handy called the defendant's case for sentencing, she heard no response from either the defendant or his counsel.[3] Judge Handy, therefore, ordered the defendant's $250,000 surety bond forfeited and that he be rearrested. The defendant was arrested pursuant to the court's order on June 10, 2003, and charged with failure to appear in the fist degree. He was sentenced on the 2001 charges in accordance with the February 3, 2003 plea agreement on September 10, 2003.
*547 The defendant was tried to the jury on the charge of failure to appear in May, 2004. During its case-in-chief, the state placed in evidence the information and substitute information on the 2001 charges, the information on the charge of failure to appear, and the March 28, 2003 arrest warrant. The state also placed in evidence the appearance bond that the defendant had signed with regard to the 2001 charges.
The defendant testified that he was in the courthouse, outside Judge Handy's courtroom at 9:30 a.m. on March 28, 2003, waiting for his attorney, William Palmieri. According to the defendant, he waited for two hours before telephoning Palmieri, who was in another courthouse. The defendant further testified that Palmieri told him that he, Palmieri, would call the court, obtain a continuance of the sentencing and inform the defendant of the new sentencing date. The defendant also testified that Palmieri told him that he could leave the courthouse. The defendant testified that he left the courthouse, expecting that Palmieri would call and tell him when next to appear in court.[4] The defendant explained that he did not cooperate with the pretrial sentencing investigation because he intended to file a motion to withdraw his guilty plea.[5] On cross-examination, the defendant, having been convicted of felonies on three prior occasions, acknowledged that he knew that he was supposed to be in court on March 28, 2003. The defendant testified that prior to leaving the courthouse on March 28, 2003, he did not speak to any court personnel. At the close of evidence, the defendant moved for a judgment of acquittal. The court, Espinosa, J., denied the motion. The jury found the defendant guilty of failure to appear in the first degree, and he was sentenced to two years in prison consecutive to the sentence he was then serving.
I
The defendant's first claim is that the court improperly denied his motion for *548 a judgment of acquittal, claiming that there was insufficient evidence by which the jury could have found that he wilfully failed to appear for sentencing on March 28, 2003. We disagree.
"The standard of review we apply to a claim of insufficient evidence is well established. In reviewing the sufficiency of the evidence to support a criminal conviction we apply a two-part test. First, we construe the evidence in the light most favorable to sustaining the verdict. Second, we determine whether upon the facts so construed and the inferences reasonably drawn therefrom the [finder of fact] reasonably could have concluded that the cumulative force of the evidence established guilt beyond a reasonable doubt. . . .
"We note that the jury must find every element proven beyond a reasonable doubt in order to find the defendant guilty of the charged offense, [but] each of the basic and inferred facts underlying those conclusions need not be proved beyond a reasonable doubt. . . . If it is reasonable and logical for the jury to conclude that a basic fact or an inferred fact is true, the jury is permitted to consider the fact proved and may consider it in combination with other proven facts in determining whether the cumulative effect of all the evidence proves the defendant guilty of all the elements of the crime charged beyond a reasonable doubt." (Internal quotation marks omitted.) State v. Rice, 105 Conn. App. 103, 107, 936 A.2d 694 (2007), cert. denied, 285 Conn. 921, 943 A.2d 1101.
General Statutes § 53a-172(a) provides in relevant part: "A person is guilty of failure to appear in the first degree when (1) while charged with the commission of a felony and while out on bail or released under other procedure of law, he wilfully fails to appear when legally called according to the terms of his bail bond or promise to appear. . . ." (Emphasis added.) "[T]he word wilful means doing a forbidden act purposefully in violation of the law. It means that the defendant acted intentionally in the sense that his conduct was voluntary and not inadvertent. . . . Thus, wilful misconduct is intentional misconduct, which is conduct done purposefully. . . ." (Emphasis in original; internal quotation marks omitted.) State v. Khadijah, 98 Conn.App. 409, 415, 909 A.2d 65 (2006), appeal dismissed, 284 Conn. 429, 934 A.2d 241 (2007).
"In order to prove the `wilful' element of General Statutes § 53a-172, the state must prove beyond a reasonable doubt either that the defendant received and deliberately ignored a notice to appear or that he intentionally embarked on a course of conduct designed to prevent him from receiving such notice." (Internal quotation marks omitted.) State v. Laws, 39 Conn.App. 816, 819, 668 A.2d 392 (1995), cert. denied, 236 Conn. 914, 673 A.2d 1143 (1996).
"Because direct evidence of the accused's state of mind is rarely available . . . intent is often inferred from conduct . . . and from the cumulative effect of the circumstantial evidence and the rational inferences drawn therefrom." (Internal quotation marks omitted.) State v. Rice, supra, 105 Conn.App. at 108, 936 A.2d 694. "[I]t does not diminish the probative force of the evidence that it consists, in whole or in part, of evidence that is circumstantial rather than direct. . . . It is not one fact, but the cumulative impact of a multitude of facts which establishes guilt in a case involving substantial circumstantial evidence." (Internal quotation marks omitted.) Id., at 107, 936 A.2d 694.
During its case-in-chief, the state placed in evidence transcripts of the defendant's plea proceeding before Judge Handy, during *549 which she admonished the defendant to appear for sentencing or risk penalty. The appearance bond on the 2001 charges, which the state placed in evidence, was signed by the defendant and stated in relevant part: "IF I FAIL TO APPEAR . . . I will be committing the crime of FAILURE TO APPEAR and be subject to the following penalties . . . ONE YEAR IN PRISON OR $2,000 FINE OR BOTH, if I am charged with a Misdemeanor(s). FIVE YEARS IN PRISON or $5,000 FINE or BOTH, if I am charged with a Felony. . . ." The defendant was fully familiar with the criminal justice system, having been convicted of felonies on several occasions prior to the 2001 charges, and he admitted that he knew he was required to appear for sentencing on March 28, 2003.
In arguing to Judge Espinosa that the motion for a judgment of acquittal should be granted, defense counsel stated that the defendant was in the courthouse on the date in question but left because his counsel, who was not present, told him that he would obtain a continuance and notify him of the rescheduled date for sentencing. The state argued in response that the defendant's testimony as to why he did not appear in Judge Handy's courtroom or speak with court personnel was a matter of credibility for the jury to decide. In denying the defendant's motion for a judgment of acquittal, Judge Espinosa cited evidence that Judge Handy specifically told the defendant to appear on March 28, 2003, and that the defendant had experience with the criminal justice system and was aware of the consequences of failing to appear.
On the basis of our review of the record, we conclude that there was sufficient evidence by which the jury could have found that the defendant wilfully failed to appear for sentencing. The state presented evidence that the defendant received notice to appear, and the defendant testified that his counsel told him that he could leave.[6] It is not within the purview of appellate courts to analyze the process by which a jury reaches its verdict. Under the standard of review applicable to the facts of this case, the jury reasonably could have found, on the basis of the evidence presented and the reasonable inferences to be drawn therefrom, that the defendant's actions were intentional and that he therefore wilfully failed to appear for sentencing on March 28, 2003. Moreover, the jury was entitled to disbelieve the defendant's uncorroborated testimony that he was in the courthouse on that date. This court "must defer to the jury's assessment of the credibility of the witnesses based on its firsthand observation of their conduct, demeanor and attitude." (Internal quotation marks omitted.) State v. Pauling, 102 Conn.App. 556, 564, 925 A.2d 1200, cert. denied, 284 Conn. 924, 933 A.2d 727 (2007). For these reasons, we conclude that the court did not improperly deny the defendant's motion for a judgment of acquittal.
II
The defendant's second claim is that the court improperly permitted the state to introduce the defendant's guilty plea to the charges of assault of a police officer and attempt to commit assault in the first degree, as the evidence was irrelevant and its prejudicial effect greatly outweighed its probative value.[7] We reject this claim.
*550 The following facts are relevant to our review of the defendant's claim that Judge Espinosa improperly permitted into evidence the names of the felonies to which the defendant pleaded guilty. Prior to the start of evidence on May 7, 2004, the prosecutor informed the court that he intended to offer into evidence two transcripts of the court proceedings on the 2001 charges and asked whether he could read the transcripts into the record. Defense counsel inquired whether the state intended to put the defendant's entire February 3, 2003 guilty plea into evidence. The prosecutor responded that he did. Defense counsel argued that the entire plea was not probative of whether the defendant had violated § 53a-172(a). The defendant was willing to stipulate that he was accused of a felony as required by the statute. Defense counsel further argued that the facts underlying the 2001 charges were not relevant. The court reviewed the transcript of the defendant's plea and ordered that the facts underlying the 2001 charges be redacted. The court also ordered the state to redact the penalties for the 2001 charges discussed in the defendant's plea canvass. The court refused to order the state to redact the names of the felonies with which the defendant was charged, stating, "That's part of the the crime that he was on bail on was a felony."
The state's first witness was Gaynell Barrow, the acting deputy clerk in the geographical area number fifteen courthouse. Through Barrow, the prosecutor offered into evidence, as a business record, the "court information sheet on which information is recorded by the clerk of the procedures that happened in court." Defense counsel objected to certain information contained on the information sheet, arguing that it was prejudicial to the defendant. The prosecutor argued that all of the information on the sheet was relevant because it demonstrated that the defendant was familiar with court procedures. The defendant had been in court seventeen times on the 2001 charges, and he had failed to appear in the case once before. The information sheet documented that the first rearrest order had been vacated subsequently. In the prosecutor's words, the information sheet demonstrated that the defendant was familiar with the procedures to be followed if he failed to appear in court. The court permitted the state to put the entire information sheet into evidence. It was relevant to the defendant's familiarity with the court proceedings, the length of time the case had been pending, and the defendant's wilfulness and knowledge of his obligation to appear. The court further found that its probative value outweighed any prejudice to the defendant.
The prosecutor indicated that he intended to place in evidence the defendant's appearance bond, the substitute information that reflected the defendant's Alford plea and the transcript of the March 28, 2003 proceeding. Defense counsel argued that the documents were prejudicial to the defendant and cumulative. The prosecutor argued that the documents were admissible in full to demonstrate that a substitute information was filed, that the *551 charges against the defendant were still felonies and that the defendant was present in court on February 3, 2003, to enter a plea but was not present on March 28, 2003. The court overruled the objection, concluding that the evidence was relevant and that "the prejudice does not outweigh the probative value."
The prosecutor also indicated that he intended to enter into evidence the information sheet for the defendant's arraignment on June 11, 2004, for the purpose of showing that subsequent to Judge Handy's issuing a rearrest warrant, the defendant did not move to vacate the rearrest and that the 2001 charges were bifurcated from the charge of failure to appear. Defense counsel again argued that those documents were cumulative and being put into evidence to prejudice the defendant. The court overruled the objection, stating that the documents were relevant to the issue of wilfulness, as the defendant had an opportunity to appear in court and correct any misunderstanding about his failure to appear. The court ordered, however, that the sentence the defendant received was to be redacted.
The state also intended to put in evidence the defendant's rearrest warrant issued by Judge Handy. Defense counsel objected to the document because all of the crimes charged in connection with the 2001 charges appeared on the warrant and in duplicate. Judge Espinosa ordered the state to redact all of the 2001 charges referred to in the warrant, including the statute designations and offense classifications.
The abuse of discretion standard applies to our review of the defendant's claim. "[T]he trial court has broad discretion in ruling on the admissibility [and relevancy] of evidence. . . . The trial court's ruling on evidentiary matters will be overturned only upon a showing of a clear abuse of the court's discretion. . . . We will make every reasonable presumption in favor of upholding the trial court's ruling, and only upset if for a manifest abuse of discretion. . . .
"Evidence is relevant if it has any tendency to make the existence of any fact that is material to the determination of the proceeding more probable or less probable than it would be without the evidence. . . . The proffering party bears the burden of establishing the relevance of the offered [evidence]." (Citation omitted; internal quotation marks omitted.) State v. Lemay, 105 Conn.App. 486, 491-92, 938 A.2d 611, cert. denied, 286 Conn. 915, 945 A.2d 978 (2008).
"[E]vidence may be excluded by the trial court if the court determines that the prejudicial effect of the evidence outweighs its probative value. . . . Of course, [a]ll adverse evidence is damaging to one's case, but it is inadmissible only if it creates undue prejudice so that it threatens an injustice were it to be admitted. . . . The test for determining whether evidence is unduly prejudicial is not whether it is damaging to the defendant but whether it will improperly arouse the emotions of the jury." (Internal quotation marks omitted.) State v. Bennett-Gibson, 84 Conn.App. 48, 66, 851 A.2d 1214, cert. denied, 271 Conn. 916, 859 A.2d 570 (2004).
On the basis of our review of the record, including the transcript and the exhibits, we conclude that the court did not abuse its discretion in admitting the content of the documents at issue. The defendant argues that the names of the felonies are irrelevant and that all that was necessary for the state to prove the failure to appear charge was the fact that he had been charged with a felony or felonies. The defendant claims that naming the felonies was particularly harmful because one *552 of the felonies was assault of a police officer. He supports his position with the fact that the court instructed the jury that the charges to which the defendant pleaded guilty were felonies, without naming them. He also claims prejudice because the evidence was cumulative.
In response, the state argues that the names of the 2001 charges were relevant, as the names of the crimes establish that they are felonies and that the defendant had a motive for not appearing, i.e., to avoid incarceration and other serious penalties, and for that reason his failure to appear was wilful. We agree with the state.
The state had the burden to demonstrate the relevance of the proffered evidence, namely, that the defendant's failure to appear was wilful. Ordinarily, "evidence concerning other crimes of which the defendant has been charged or convicted, due to its prejudicial nature, is inadmissible. . . . Such evidence is admissible, however, if it is probative of motive, intent, identity, a system of criminal activity, or the credibility of the defendant's testimony." (Citation omitted.) State v. Candito, 4 Conn.App. 154, 161, 493 A.2d 250 (1985) (claim that court improperly admitted specific crimes of which defendant found guilty). In Candito, this court concluded: "The state had to prove beyond a reasonable doubt that the defendant while charged with the commission of a felony, wilfully failed to appear. The five felony charges to which the defendant pleaded guilty were serious crimes involving guns, drugs, and burglary for which he faced sentencing and probable incarceration when he failed to appear. Evidence of these underlying offenses was both relevant and material to two elements of the crime of failure to appear and was properly admitted by the trial court." (Internal quotation marks omitted.) Id.
As we noted in part I, generally, there is no direct evidence of a defendant's state of mind, and intent must be proved by circumstantial evidence. See, e.g., State v. Salaman, 97 Conn.App. 670, 677, 905 A.2d 739, cert. denied, 280 Conn. 942, 912 A.2d 478 (2006). The documents at issue, as the court noted, contained circumstantial evidence of the defendant's familiarity with court proceedings that was relevant to the element of wilfulness. We are unable to conclude that the disputed information in the documents was more prejudicial than probative. The court was careful to redact any information in the documents that was not relevant to the charge of failure to appear, thus lessening the prejudicial effect. See State v. Wild, 43 Conn.App. 458, 464, 684 A.2d 720 (measures devised by court to reduce prejudicial effect of evidence militates against finding of abuse of discretion), cert. denied, 239 Conn. 954, 688 A.2d 326 (1996).
Moreover, even if the court improperly admitted the names of the 2001 charges, which we conclude was not the case, the error was harmless. "When an improper evidentiary ruling is not constitutional in nature, the defendant bears the burden of demonstrating that the error was harmful. . . . As [our Supreme Court has] recently noted, a nonconstitutional error is harmless when an appellate court has a fair assurance that the error did not substantially affect the verdict." (Internal quotation marks omitted.) State v. Jacobson, 283 Conn. 618, 641, 930 A.2d 628 (2007). Our determination of harmlessness is guided by various factors that have been articulated as relevant to the question of evidentiary harmlessness, "such as the importance of the [evidence] in the prosecution's case, whether the [evidence] was cumulative, the presence or absence of evidence corroborating or contradicting the [evidence] on material points, the extent *553 of cross-examination otherwise permitted, and, of course, the overall strength of the prosecution's case." (Internal quotation marks omitted.) Id., at 641-42, 930 A.2d 628.
Section 53a-172 required the state to prove that the defendant was charged with a felony and that he wilfully failed to appear. We note first that the defendant was willing to stipulate that at the time he failed to appear, he had been charged with felonies. The court instructed the jury that the defendant was charged with felonies at the time he failed to appear. Admission of the names of the felonies, therefore, was to some extent cumulative. The jury also heard evidence that the defendant had three prior felony convictions and that he knew that he would be punished if he failed to appear. The defendant has not persuaded us, given the state's strong case against him, that the claimed error substantially affected the verdict.
The judgment is affirmed.
In this opinion GRUENDEL, J., concurred.
FLYNN, C.J., concurring.
I agree with the majority's conclusion that the judgment of the trial court must be affirmed and with much of its reasoning. I write separately, however, to explain a factor that was critical to my agreement with part I of the majority decision.
"[T]o secure a conviction for failure to appear . . . the state must prove beyond a reasonable doubt that the defendant was legally ordered to appear . . . that he failed to appear and that such failure was wilful. To prove the wilful element of failure to appear the state must prove beyond a reasonable doubt . . . that the defendant received and deliberately ignored a notice to appear. . . ." (Internal quotation marks omitted.) State v. Pauling, 102 Conn.App. 556, 568, 925 A.2d 1200, cert. denied 284 Conn. 924, 933 A.2d 727 (2007).
In this appeal, the defendant, Charles W. Outlaw, Jr., claims that the court improperly denied his motion for a judgment of acquittal on the basis of insufficient evidence. I agree with the majority's conclusion that the evidence was sufficient to support a conviction under General Statutes § 53a-172(a)(1) because the jury was free to make an independent assessment of the defendant's testimony. It did not have to believe that the defendant was present in the courthouse and that he left the courthouse on instruction from his attorney.[1]
My concern lies not in what the majority opinion says, but in what it does not say. On a daily basis, defendants are instructed by their attorneys, by court personnel and by prosecutors that their cases will not be going forward on that particular day or that a dismissal or nolle will be recommended and, therefore, that they need not be present and are free to leave. This avoids wasting the time of both the court and Connecticut citizens who are called to court when, for one good reason or another, cases cannot be heard or disposed of on that day or can be disposed of quickly without the presence of the defendant. Early every morning, lines form in the courthouses of our Superior Courts, *554 filled with defendants waiting to meet with prosecutors on motor vehicle infractions. Many of these defendants are told that the case will be nolled for various reasons and that they should leave the courthouse. Unless the presiding judge has forbade such common practices a defendant should be able to rely on such statements without facing criminal charges.
In the present case, the defendant submitted to the court a request to charge the jury on the element of wilfullness, which provided in relevant part: "Wilfully, as in General Statutes § 53a-172, implies doing a forbidden act purposely in violation of the law. . . . In order to prove that the defendant wilfully failed to appear before the [c]ourt, the [s]tate must prove beyond a reasonable doubt that the defendant purposely ignored his obligation to appear in court. If you believe the defendant physically went to the courthouse on March 28, 2003, to meet his lawyer in order to attend court and thereafter, when his lawyer failed to appear in the courthouse, the defendant contacted his lawyer and was advised that his lawyer was in another court and would obtain a new court date for the defendant, then you must find that the defendant did not deliberately ignore his obligation to appear in court as scheduled." The court, however, did not include this request in its charge to the jury. In this appeal, the defendant does not claim that the court improperly failed to give this requested instruction. It is for this reason that I agree with the majority's decision.
NOTES
[1] See North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970). Pursuant to the Alford doctrine, a defendant is not required to admit guilt but consents to being punished in order to avoid the risks of a trial.
[2] Judge Handy stated to the defendant: "I just want you to be aware of the fact that you better be here on the day I sentence you. Do we understand each other?" The defendant responded, "Yes."
[3] Judge Handy stated that the defendant "did not show up for his presentence investigation."
[4] By order of the Superior Court, Silbert, J., Palmieri was suspended from the practice of law for one year effective April 1, 2003, three days after the defendant was to be sentenced. The parties, however, stipulated that Palmieri's suspension was not related to his representation of the defendant in this case. Nonetheless, in his appellate brief, the defendant makes much of Palmieri's suspension. The defendant, however, failed to call Palmieri to testify at trial.
[5] On cross-examination, the jury heard the following:
"[The Prosecutor]: So, again . . . as reflected . . . in the transcript, and you were there for the court hearing, right, on February 3, 2003?
"[The Defendant]: Yes.
"[The Prosecutor]: It says, page ten. . . . `The Court. And you understand [that] once I impose and accept this . . . sir, you're not going to have an opportunity to change your mind; do you understand that?' And you answered, `yes,' correct?
"[The Defendant]: (unintelligible answer)
"[The Prosecutor]: And then it says [that] the court states [that] `the exception is the rule, that is, if . . . on the date that I sentence you, for any reason I cannot go along with this agreement, I will allow you to withdraw your plea and continue to go to trial. Do you understand that?' Your answer was `yes.' That's in the transcript. You were there for that right,?
"[The Defendant]: Yes.
"[The Prosecutor]: Okay. So, but . . . it's your claim that you went to court on March 28, 2008, with the intent of vacating your pleas, correct?
"[The Defendant]: Yes.
"[The Prosecutor]: Because [the] bottom line is [that] you just weren't happy you weren't happy with the disposition that . . . had been arranged?
"[The Defendant]: No.
"[The Prosecutor]: You just didn't want to . . . follow through with that agreement, correct?
"[The Defendant]: That agreement, no."
[6] Because we decide this appeal on the basis of the credibility determinations the jury was entitled to make, this case does not require us to consider whether reliance on the advice of counsel is a defense to a charge of failure to appear.
[7] The defendant's statement of this claim is unclear. The state contends that at trial, the defendant did not object to the fact that he pleaded guilty to two felonies from being placed in evidence and, therefore, that portion of his claim is not reviewable. Our review of the transcript reveals that the defendant objected only to the names of the 2001 charges to which he had pleaded guilty from being admitted in evidence. In his brief to this court, the defendant's argument is limited to the names of the felonies to which he pleaded guilty. Our review is confined to the court's permitting to be put into evidence the names of the felonies to which the defendant pleaded guilty, not the fact that he pleaded guilty.
[1] There was no evidence before the jury that the attorney ever appeared in the New Britain courthouse on March 28, 2003, the day that the defendant was to be sentenced. Consequently, without his attorney present, the defendant could not have been sentenced on that day. See State v. Williams, 199 Conn. 30, 45, 505 A.2d 699 (1986) (under both federal and state constitutions, defendant has due process right to assistance of counsel during sentencing); James L. v. Commissioner of Correction, 245 Conn. 132, 144, 712 A.2d 947 (1998) (sentencing process is critical stage of criminal proceeding). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541495/ | 949 A.2d 1082 (2008)
LEWIS
v.
GINGUE.
No. 08-032.
Supreme Court of Vermont.
March 7, 2008.
Appeal disposed of without published opinion or memorandum decision. Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541718/ | 76 B.R. 208 (1987)
In the Matter of Michael CRABTREE and Cynthia Crabtree, Debtor.
Michael CRABTREE, Plaintiff,
v.
UNITED STATES of America, Defendant.
Bankruptcy No. 85-316-BK-T, Adv. No. 86-299.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
August 4, 1987.
C. Kathryn Preston, Tampa, Fla., for plaintiff.
Marika Lancaster, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., Lynne England, Tampa, Fla., Wm. French Smith, Atty. Gen. of the U.S., Washington, D.C., I.R.S., Jacksonville, Fla., for defendant.
ORDER ON MOTION FOR SUMMARY JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a confirmed Chapter 11 case, and the matter under consideration is a Motion for Summary Judgment, filed by Michael Crabtree (Debtor), the Debtor who instituted this adversary proceeding. The Debtor in his Complaint filed against the United States of America, Internal Revenue Service (IRS), seeks an order directing the IRS to turn over to the Debtor the sum of $3,518.00, a refund due to the Debtor for overpayment of taxes for the year 1984, and the sum of $413.00 for the year of 1981 for a carry-back investment tax credit. It is the contention of the Debtor that there are no genuine issues of material facts and that he is entitled to a turnover order as a matter of law. This contention of the Debtor is based on the following facts which are indeed without dispute and appear from the record and which are as follows:
On February 11, 1985, the Debtor filed his voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code. In due course the Debtor filed his Disclosure Statement and his Plan of Reorganization. The Debtor having obtained approval of the Disclosure Statement, this Court scheduled a hearing to consider the confirmation of the Debtors' Plan of Reorganization. On June 18, 1986, the United States on behalf of the IRS filed an Objection to Confirmation on the ground that the Plan *209 abrogated the right of the IRS to offset the refund claim of the Debtor against the prepetition priority tax claim of the Government, the right of setoff authorized by § 6402(a) of the I.R.C. (1985) according to the Government.
On June 24, 1986, this Court conducted the previously scheduled confirmation hearing, heard argument in support of and in opposition to the Objection of Confirmation, and having concluded that the Plan of Reorganization of the Debtor met the standard for confirmation required by § 1129 of the Bankruptcy Code, overruled the Government's Objection and announced that the Plan of Reorganization will be confirmed. The conclusion was based on the finding that the Debtors' treatment of the Government's tax claim was in full accord with § 1129(a)(9)(C) of the Bankruptcy Code, which permits a deferred payment of a tax priority claim over a period not exceeding six years after the date of the assessment. This ruling was not intended to deal with the Debtor's right to a tax refund asserted in the interim by the Debtor who on June 13, 1986, filed this adversary proceeding in which he seeks an order directing the IRS to honor the Debtor's tax refund claim and turn over same to the Debtor.
The one-count Complaint filed by the Debtor basically alleges that the refund claim is property of the estate and pursuant to § 542 of the Bankruptcy Code the IRS shall be compelled to turn over the same to the Debtor. Although it is not very well articulated in the Complaint, it is intimated that the IRS violated the automatic stay imposed by § 362 by attempting to set off the tax refund claim against the prepetition priority tax claim of the Government. The Complaint does not state whether or not, in fact, such setoff was exercised by the IRS, neither does it state that if it was, it was a nullity because it was in violation of the automatic stay.
Although, as noted earlier, this Court orally confirmed the Plan of Reorganization on June 24, 1986, the actual Order of Confirmation was not entered until September 26, 1986. However, the Government, having recognized the legal ineffectiveness of any attempted setoff did, on September 24, 1986, two days before the entry of the Order of Confirmation, file a motion on behalf of the IRS and sought relief from the automatic stay in order to offset the Debtor's tax refund claims against the allowed tax priority claim of the Government. The Government motion was heard in due course, and on October 28, 1986, this Court denied the motion on the basis that the Order of Confirmation rendered the motion moot, inasmuch as the automatic stay imposed by § 362 was no longer operative after the entry of the Order of Confirmation.
These are the undisputed facts which according to the Debtor warrant a turnover order directing the IRS to honor the Debtor's tax refund claim and pay to the Debtor the sum of $3,518.00 and the sum of $413.00 respectively. Specifically it is the contention of the Debtor that the Order of Confirmation fixed with finality his obligation to pay the allowed priority tax claim of the Government, and the IRS is prohibited by virtue of § 1141(a) of the Bankruptcy Code to offset the Debtor's tax refund claim against the priority tax claim of the Government.
The Government, while it concedes that there are no genuine issues of material facts contend that the Debtor is not entitled to a turnover order of the tax refund and the Government is entitled to exercise its right of setoff authorized by § 6402 of Title 26 (IRS Code 1954).
The Order of Confirmation provides in pertinent part as follows:
". . . . ORDERED, ADJUDGED AND DECREED that the Debtors' Plan of Reorganization filed on August 12, 1985, as amended by that First Amendment to the Plan, dated September 3, 1985, be and the same hereby is, confirmed. It is further
ORDERED, ADJUDGED AND DECREED that entry of this Order revests title to all property of the Debtor in the Debtor. It is further
ORDERED, ADJUDGED AND DECREED that except to the extent that *210 payment of claims is required under the Plan, all debts of the Debtor are discharged. It is further
ORDERED, ADJUDGED AND DECREED that the Court retains jurisdiction for the purposes set forth in the Plan."
The record reveals that on June 6, 1986, the IRS filed its amended priority tax claim and the same was allowed in the amount of $33,304.75 on April 30, 1987 as a § 507(a)(7) tax priority claim.
There is no question that the tax refund claims of the Debtor are property of the estate. It is equally clear that by virtue of § 1141(b) of the Bankruptcy Code, the Order of Confirmation vests all property of the estate in the Debtor except as otherwise provided for in the Plan. Section 553 of the Bankruptcy Code expressly authorizes a right to offset by a creditor a mutual debt owing to the Debtor that arose prior to the commencement of the case. This right of setoff is subject only to the protection afforded to debtors by § 362 and § 363 of the Bankruptcy Code. The former is the automatic stay triggered by the filing of the Petition for Relief; the other is the provision which governs the debtor's right to use, sell or lease property of the estate.
Based on the foregoing, it is clear that the IRS had no right to offset prior to the entry of the Order of Confirmation without first obtaining a relief from the automatic stay. Thus any attempt if one was, in fact, made to exercise the right of setoff prior to September 26, 1986, was a violation of the automatic stay and therefore, it has no force or effect and it is a nullity.
This leaves for consideration the ultimate question, which is the right of the IRS to exercise its otherwise available right of setoff after the entry of the Order of Confirmation when the automatic stay is no longer operative. This question can only be answered satisfactorily by a proper analysis of the effect of the Order of Confirmation on the IRS' right to setoff. Neither counsel nor independent research found any decisional authority or persuasive text to assist this Court in resolving this facially apparent conflict between § 1141(b), the section which reverts in the debtor all property of the estate, and the statutory right of the IRS granted by § 553 of the Bankruptcy Code and § 6402(a) of 26 U.S.C.
To accept the proposition urged by the Government would, of course, totally emasculate a specific rehabilitative provision of the Bankruptcy Code, particularly § 1129(a)(9)(C), in instances where the debtor has a pending tax refund claim which if it is honored might play a very important role in the Debtors' efforts to consumate a confirmed plan. Moreover, the provisions of the Bankruptcy Code revesting title in the Debtor of properties of the estate would be rendered meaningless with regard to an item which undisputably is property of the estate and would grant a special and preferential treatment of an allowed tax priority claim of the Government, treatment contrary to that provided for by § 1129(a)(9)(C) of the Bankruptcy Code.
It cannot be gainsaid that a creditor whose prepetition claim is allowed and was not dealt with by the confirmed Plan of Reorganization should not have a right to a setoff and should not receive more than what is provided for by the confirmed plan. There is no rhyme or reason why this same rule should not be equally applicable to an allowed priority tax claim of the Government.
Based on the foregoing, this Court is satisfied that there are no genuine issues of material facts and that the Debtor is entitled to a judgment as a matter of law.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Debtors' Motion for Summary Judgment be, and the same is hereby, granted.
A separate final judgment will be entered in accordance with the foregoing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541726/ | 76 B.R. 746 (1987)
In re Harold RINEHART and Marilyn Rinehart, d/b/a Farmers, Debtors.
Bankruptcy No. 87-30042.
United States Bankruptcy Court, D. South Dakota.
July 24, 1987.
*747 James P. Hurley, Bangs, McCullen, Butler, Foye & Simmons, Rapid City, S.D., Jonathan K. Van Patten, Vermillion, S.D., for debtors.
Jon Haverly, acting through Small Business Admin., Sioux Falls, S.D., for U.S.
MEMORANDUM DECISION
PEDER K. ECKER, Bankruptcy Judge.
INTRODUCTION
This is before the Court on an amended motion for order to show cause filed on behalf of Harold and Marilyn Rinehart ("debtors") by Attorney James P. Hurley on May 18, 1987.[1] Debtors substantively allege: 1) the Small Business Administration ("SBA") does not have a right to offset its prefiling claims against Agricultural Stabilization and Conservation Service-Commodity Credit Corporation ("ASCS-CCC") farm program payments owed by the ASCS-CCC to the debtors to satisfy prefiling claims of the SBA because this is not a "mutual debt" as required under Bankruptcy Code Section 553(a); 2) the SBA's offset violated the automatic stay provisions of Bankruptcy Code Section 362(a); and 3) because the SBA's offset was "willful," debtors are entitled to damages under Bankruptcy Code Section 362(h). SBA conversely contends: 1) pursuant to the Debt Collection Act, 31 U.S.C. § 3701, et seq., and C.F.R. § 140.5, which give rise to an "administrative offset," it has a right to offset postfiling ASCS-CCC payments under Section 553(a); 2) that it did not violate the automatic stay provisions of Bankruptcy Code Section 362(a) because, postfiling, it only preserved the "status quo," which is comparable to an "administrative freeze" on a bank account, and no Section 542 turnover action was otherwise commenced. Attorney Jon Haverly represented the SBA, and a hearing was held in Pierre, South Dakota, on June 1, 1987. The material facts are these.
BACKGROUND
Debtors, who are husband and wife, filed for relief under Chapter 11 of the Bankruptcy Code on February 27, 1987. They operate a farming and ranching business near Highmore, South Dakota. Over the years, debtors have expanded their operation to 8,561 acres owned, plus additional leased acreage. They also participate in the Agricultural Stabilization and Conservation Service and Commodity Credit Corporation ("ASCS-CCC") farm programs.
During April, 1981, in exchange for a second mortgage on certain property and an executed promissory note, SBA lent the debtors $103,000. In January, 1982, the principal was increased to $171,600 in exchange for a third mortgage on certain other property and an executed "modification" *748 of the promissory note. Under the latter note, debtors were to make twenty-four annual payments of $12,177.00 on January 1 of each year, beginning with January 1, 1983 (SBA ex. 1). When debtors failed to make the 1986 payment, SBA declared a default and accelerated the debt (SBA ex. 3).
Beginning in January, 1987, SBA commenced an action for administrative offset pursuant to certain federal regulations. In a letter dated January 2, 1987, SBA informed the debtors that this constituted thirty days' "written notification" of intended offset unless the parties have otherwise entered into a repayment agreement or the debtors timely petitioned for review to the SBA's Hearings and Appeals Office (SBA ex. 4). No repayment agreement was reached or appeal taken (SBA ex. 6).
On February 16, 1987, SBA received a letter dated February 13, 1987, from the Department of Agriculture, approving the SBA's request for offset of ASCS-CCC farm program payments in the amount of $161,563.06. In that letter, the Department noted that the interest on that amount was accruing at a daily rate of $20.33 after December 4, 1986 (SBA ex. 7). SBA filed a proof of claim in the amount of $163,250.24 on March 19, 1987.
As stated, debtors filed their Chapter 11 petition on February 27, 1987.
On March 9, 1987, SBA received a letter dated March 5, 1987, from the Department of Agriculture, which reads, in part (SBA ex. 8):
"Dear [SBA Director]:
This acknowledges a request by [one of your employees] to refrain from setoff action with respect to [debtors] until further notification from the Small Business Administration."[2]
On March 10, 1987, debtors' attorney, James P. Hurley, sent SBA's attorney, Jon Haverly, a letter which reads, in part (debtors' ex. A):
Dear [Attorney]:
Our firm represents [the debtors]. [They] filed a Voluntary Petition under Title Eleven, United States Code on February 26, 1987 . . . the automatic stay provisions of the Code prevent any further attempts including telephone calls, letters, collection suits or otherwise, without prior Court approval to collect the amounts claimed.
On April 1, 1987, the United States Department of Agriculture (CCC) issued a check, No. 89038720, in the amount of $1,388.47 payable to the order of the SBA. This was the first ASCS-CCC installment payment.
Debtors were unaware that the SBA had been allowed an ASCS offset. When the debtors did not timely receive payment as expected, after preliminary investigation, they filed a motion for order to show cause on Farmers Home Administration ("FmHA") for turnover of that payment on May 8, 1987. FmHA replied that it had not requested the offset, but suggested the SBA had done so.
On May 11, 1987, SBA's attorney wrote a memo to SBA's "collateral cashier," which reads, in part (SBA ex. 9):
This memorandum is to advise you that Check No. 89038720 payable to SBA relating to [debtors] is the subject of litigation in U.S. Bankruptcy Court.
As a result of this litigation and the stay imposed by 11 U.S.C. § 362 the check must not be processed or applied to the account. The check must be held pending resolution of the litigation and advice of counsel.
On May 15, 1987, the SBA filed a motion for relief from stay to offset the ASCS-CCC payment. On May 18, 1987, debtors amended their motion to show cause directed to the SBA. SBA continued to have possession of the check up and until the June 1, 1987, hearing.
According to the debtors' schedules and disclosure statement, SBA, in its respective second and third mortgage positions on the debtors' real property, is totally undersecured based on the debtors' valuation estimates. See 11 U.S.C. § 506(a).
*749 ISSUES
The principal issues raised are:
1) Whether the Small Business Administration ("SBA") has a right to offset its prefiling claims against ASCS-CCC farm payments under Bankruptcy Code Section 553(a);
2) Whether the Small Business Administration's ("SBA's") postfiling continuation of the offset process, including holding of the Department of Agriculture's check payable to SBA, violates the automatic stay provisions of Bankruptcy Code Section 362(a); and
3) If so, whether the Small Business Administration ("SBA") "willfully" violated the automatic stay under Bankruptcy Code Section 362(h).
LAW
First Issue
As to the first issue, the Court holds that the SBA does not have a right to offset its prefiling claims against ASCS-CCC farm payments because the ASCS-CCC, and not the SBA, owes payments to the debtors and, therefore, this is not a "mutual debt owing by such creditor" under Bankruptcy Code Section 553(a). This is based on the following discussion.
An understanding of Section 553[3] is fundamental in analyzing this issue. A creditor establishes a right of setoff under this section when the following three-part test is met:
1. A debt owed by the creditor to the debtor arose prior to the commencement of the bankruptcy case;
2. A claim of the creditor against the debtor arose prior to the commencement of the bankruptcy case; and
3. The debt and claim are mutual obligations.
In re Brooks Farms, 70 B.R. 368, 371 (Bankr.E.D.Wis.1987). The Code recognizes setoff rights which are created under either federal or state law. See, e.g., In re Sarkis, 17 B.R. 174 (Bankr.D.S.D.1982); In re Brooks Farms, 70 B.R. at 368. Once established under Section 553, the right to setoff is treated as an allowed secured claim under Bankruptcy Code Section 506(a).[4] What this would mean in the instant case is that the SBA, who, for purposes of this matter, is totally undersecured in terms of its collateral, will otherwise be treated as a secured creditor up to the amount of its debt, right of setoff, and any ASCS-CCC payments owing to the reorganizing farmer debtors.
SBA claims its right to offset postfiling ASCS-CCC farm program payments under the Debt Collection Act, 31 U.S.C. § 3701, et seq.,[5] and C.F.R. § 140.5.[6] Debtors insist *750 that the SBA does not have a right to offset the ASCS-CCC payments because either the payments are owed to them by the ASCS-CCC, and not the SBA, and, therefore, no "mutual debt [is] owing by such creditor," as required under Section 553(a), or an attempted offset against a Chapter 11 debtor-in-possession lacks mutuality as required under that section. Conversely, SBA contends that because it is part of the government and the government, through its ASCS program, owes the debtors, there is a "mutual debt" owing.
The third part of the Section 553 test requires that the right to an offset must be on account of a "mutual debt." The term, "mutual debt," is not defined in the Bankruptcy Code and, thus, applicable case law must be reviewed to understand the meaning of the term. "To be mutual, the debts must be in the same right and between the same parties standing in the same capacity." 4 Collier on Bankruptcy ¶ 553.04[2], at 553-18 (15th ed. 1987); see also In re Visiting Home Services, Inc., 643 F.2d 1356, 1360 (9th Cir.1981); In re Brooks Farms, 70 B.R. 368, 371 (Bankr.E.D.Wis. 1987); In re Braniff Airways, 42 B.R. 443, 449 (Bankr.N.D.Tex.1984); In re Brendern Enterprises, Inc., 12 B.R. 458, 459 (Bankr. E.D.Pa.1981). The mutuality requirement is strictly construed. See 4 Collier on Bankruptcy ¶ 553.04, at 553-16 (15th ed. 1987).
The question then presented is whether the debts are "between the same parties, standing in the same capacity." The concept of setoff is based on the common sense observation that it makes little sense to require A to pay B when B owes A. See Studley v. Boylston National Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 57 L.Ed. 1313 (1913). This, of course, would not apply when A owes B and B owes C. The parties must be identical on both sides; otherwise, mutuality is not established. The Court must, therefore, examine the identity of both sides to determine whether the requirement of mutuality has been satisfied.
At the outset, the Court notes, in the reported cases on setoffs, the primary question regarding mutuality has usually focused on the debtors. As stated by the bankruptcy court in In re Braniff Airways, Inc., 42 B.R. 443, 449 (Bankr.N.D. Tex.1984): "Because the debtor and the debtor-in-possession are separate and distinct entities, the courts have concluded that the requisite element of mutuality of parties is lacking whenever a creditor attempts to offset pre-petition debt against a post-petition claim." This distinction is grounded on the language of 11 U.S.C. § 553(a), which requires both the obligation and the claim to arise before the commencement of the case. See 4 Collier on Bankruptcy ¶ 553.08[1], at 553-37 (15th ed. 1987). See also 11 U.S.C. § 549, which restricts postpetition transfers of property. However, the Court finds the debtor and debtor-in-possession distinction inapplicable to the instant facts because both the ASCS-CCC debt and the SBA claim arose prefiling.
SBA's position is simply that because it is part of the government, it stands "in the same capacity" as the ASCS-CCC for Section *751 553(a) purposes. It cites Small Business Administration v. McClellan, 364 U.S. 446, 81 S.Ct. 191, 5 L.Ed.2d 200 (1960); Luther v. United States, 225 F.2d 495 (10th Cir.1954), cert. denied, 350 U.S. 947, 76 S.Ct. 321, 100 L.Ed. 825 (1956); and W.T. Jones and Company v. Foodco Realty, Inc., 318 F.2d 881 (4th Cir.1963), as support for its position. Its argument essentially is that no matter which governmental agency owes the debt, any other governmental agency is entitled to offset its claim under Bankruptcy Code Section 553.
Its reliance on McClellan, Luther, and Foodco Realty is misplaced. McClellan involved a distribution of assets priority dispute under Section 64(a)(5) of the Bankruptcy Act. The specific issue addressed was whether the SBA was entitled to priority for "debts due to the United States" under Section 64(a)(5) and R.S. § 3466 [31 U.S.C. § 191] when it joined a private bank in making a loan and agreed to share in the money collected. Section 64(a), in pertinent part, read:
The debts to have priority, in advance of the payment of dividends to creditors, and to be paid in full out of bankrupt estates, and the order of payment, shall be
. . . .
(5) debts other than for taxes owing to any person, including the United States, who by laws of the United States is entitled to priority. . . .
Under R.S. § 3466, the United States was entitled to priority "[w]henever any person indebted to the United States is insolvent." McClellan, supra 364 U.S. at 451, 81 S.Ct. at 195. Recognizing that the purpose of these sections "is simply to protect the interest of the Government in collecting money due it," the Court held that, notwithstanding the SBA's private bank relationship, it is part of the "United States" for Section 64(a) purposes. Id. at 451-53, 81 S.Ct. at 195-97. Clearly, this case did not address the question of whether the SBA may stand in the shoes of the ASCS-CCC for claiming an offset under Section 553(a) (or its ancestor, Section 68 of the Bankruptcy Act), but whether the SBA is part of the United States for Section 64(a) purposes. Section 64(a) is the predecessor of Code Section 507.[7] 3 Collier on Bankruptcy ¶ 507.01, at 507-15 (15th ed. 1987). Neither Section 64(a) nor its successor, Section 507, have anything whatsoever to do with determining "mutuality" for offset purposes under Section 553(a), but only address priority for distribution of assets.
Luther, like McClellan, involved an attempt by the United States to collect a debt as a priority creditor in a liquidation of assets setting under Bankruptcy Act Section 64(a)(5). The case centered on the issue of whether the United States, through a debt owed the Commodity Credit Corporation, may offset against an Internal Revenue Service ("IRS") tax refund for Section 64(a)(5) purposes when no claim for IRS overpayments had been filed by petition date and was not determined owed to the debtor until sometime thereafter. Trustee insisted that the United States was not entitled to the income tax refund on three grounds: 1) Commodity Credit Corporation is a distinct legal entity from the United States and, therefore, the United States is not entitled to offset against the IRS payments; 2) because the tax refund was not due the debtor at the time of filing, there was not a mutual debt and credit; and 3) even if the United States could offset, it was inequitable to not subordinate its debt to other creditors. With little analysis other than relying on the "implicit" holding of Cherry Cotton Mills v. United States, 327 U.S. 536, 66 S.Ct. 729, 90 L.Ed. 835 (1946), the court held the United States could offset the IRS payment by a debt owed the Commodity Credit Corporation even though no IRS payment was owed on the petition date. 225 F.2d at 498.
Luther is inapplicable to the instant case for several reasons, including that it involved a priority dispute under Section 64(a)(5) of the Bankruptcy Act (ancestor of Bankruptcy Code Section 507(a)); it arose *752 in a liquidation of assets, and not reorganization, setting; it only addressed the question of whether the Commodity Credit Corporation is a separate legal entity from the United States and whether the IRS payment was considered owed to the debtor when no payments were due and owing on the filing date; and it relied on Cherry Cotton Mills, which did not arise in a bankruptcy setting.[8]
Foodco Realty only addressed the issue of "[w]hen the [SBA] has joined a private bank in making a construction loan secured by a recorded deed of trust and the borrower becomes insolvent, is the SBA's interest in the unpaid balance of the loan subordinate to mechanic's liens accorded priority over deeds of trust by state law." 318 F.2d at 882. This case is irrelevant for determining whether there is mutuality for Bankruptcy Code Section 553(a) purposes.
The issue under consideration was raised, but not resolved, by Judge Brister in In re Wilson, 49 B.R. 19 (Bankr.N.D. Tex.1985). In Wilson, the SBA claimed a right to an administrative offset of the debtor's income tax refund. The court made the following observation:
[The SBA] contends that Small Business Administration and the Department of the Treasury, Internal Revenue Service, each is an instrumentality and agency of the United States and that Small Business Administration should be permitted to setoff [sic] the IRS refund against its pre-petition debt. It has supported its claim with no authorities except for its contention that § 553 permits the setoff of mutual debts. I cannot find under the circumstances of this case that a mutual debt in fact exists which can be setoff [sic] by SBA.
In re Wilson, 49 B.R. at 21 (emphasis added).
The court did not rule on the setoff claim because it found that the SBA had waived its rights, if any, by failing to seek the setoff before the IRS had paid the refund to the bankruptcy trustee. Nevertheless, the question raised by Judge Brister as to whether the SBA and the IRS are identical parties for purposes of establishing mutuality is pertinent to this case.
There are a few cases involving an attempted offset of ASCS-CCC farm program payments by another agency of the government. See In re Schons, 54 B.R. 665 (Bankr.W.D.Wash.1985); In re Hill, 19 B.R. 375 (Bankr.N.D.Tex.1982). In Hill, the debtor brought a contempt motion against the FmHA for violation of the automatic stay. The FmHA had attempted to offset ASCS payments against its prepetition claims. The court found the entitlement to ASCS payments arose postfiling. From this, the court reasoned that the debtor and debtor-in-possession are separate and distinct entities and, thus, held mutuality of obligations did not exist. 19 B.R. at 380. It also held the FmHA in violation of the automatic stay for its attempted setoff. Schons was a Chapter 7 case, and the issue came before the court on a determination of priorities between two creditors. The IRS sought an offset of payments to the debtor under a milk diversion program (debt found to arise postfiling) against prepetition tax liability. The court allowed the setoff, finding mutuality because there was no debtor-in-possession as in a Chapter 11. 54 B.R. at 665. Neither case directly addressed the issue of whether one agency of the government stands "in the same capacity" as another.
Courts have recognized the right of the ASCS-CCC to offset against its own debt when both the claim and debt arose prefiling.[9]In re Matthieson, 63 B.R. 56 *753 (D.Minn.1986) (ASCS allowed to offset in a Chapter 7 case); In re Brooks Farms, 70 B.R. 368 (Bankr.E.D.Wis.1987) (In a Chapter 11, CCC was allowed offset against Corn Deficiency Program payments which are administered by the ASCS.); In re Newell, Bky. No. 3-85-455 (Bankr.D.Minn. 1985) (In a Chapter 11, CCC was allowed an ASCS payment offset.); see also In re Schons, 54 B.R. 665 (Bankr.W.D.Wash. 1985). In Brooks Farms, the CCC and ASCS are recognized as having one identity for "mutuality" purposes because: 1) CCC and ASCS are both part of the Department of Agriculture; and 2) ASCS acts on behalf of CCC and administers all government programs since CCC has no employees.[10] 70 B.R. at 370. See also Matter of Haffner, 25 B.R. 882 (Bankr.N.D.Ind.1982)[11] (CCC was denied offset when debtors entered into program postpetition and CCC attempted to offset against amounts owed to CCC from prefiling transactions.); In re Walat Farms, Inc., 69 B.R. 529 (Bankr.E. D.Mich.1987) (CCC was denied offset on ground that the Price Support and Production Adjustment Program contract is an executory contract under 11 U.S.C. § 365 and, if assumed by debtor-in-possession, *754 any right to deficiency payment arises post-petition and is owed to debtor-in-possession and, therefore, mutuality for Section 553 purposes does not exist.).
Unlike the ASCS and CCC, which are both within the Department of Agriculture, the SBA is an agency that is directly responsible to the President and independent of all other federal agencies.[12] Moreover, they are in different departments, they are managed and supervised by different secretaries and administrators, their budgets are separate and in no way related to one another (payment to the debtors under the farm program will have no effect on the budget or budgeting of SBA), and, finally, they are agencies which provide completely different services. Although both agencies are admittedly part of the government, the SBA has not established that they are "in the same capacity" for Section 553 purposes, but simply insists they are.
Guidance for resolution of this question may be found in the corporations context. A corporate subsidiary may not set off an obligation owing to the debtor against a debt owed by the debtor to another subsidiary of the same corporation. See, e.g., Depositors Trust Co. v. Frati Enterprises, 590 F.2d 377, 379 (1st Cir. 1979); In re Vehm Engineering Corp., 521 F.2d 186, 190-91 (9th Cir.1975); Matter of Fasano/Harriss Pie Co., 43 B.R. 864, 870 (Bankr.W.D.Mich.1984). A parent corporation may not set off a debt owed to the debtor against the claim of a subsidiary. See, e.g., In re Berger Steel Co., Inc., 327 F.2d 401, 403-04 (7th Cir.1964); In re Balducci Oil Co., Inc., 33 B.R. 847, 853 (Bankr.D.Colo.1983). See generally 4 Collier on Bankruptcy ¶ 553.04[2], at 553-19 (15th ed. 1987).
This case is unlike those reported cases where the single identity of the government agency was clearly established. See, e.g., IRS v. Norton, 717 F.2d 767 (3d Cir.1983) (IRS sought offset against a tax refund); In re Matthieson, 63 B.R. 56 (D.Minn.1986) (ASCS sought offset against deficiency payments); In re Brooks Farms, 70 B.R. 368 (Bankr.E.D. Wis.1987) (CCC sought offset against deficiency payments); In re Newell, Bky. No. 3-85-455 (Bankr.D.Minn.1985). Where the federal agency seeks to offset an obligation to the debtor against its own claim, setoff is proper.
Serious bankruptcy reorganization policy concerns are also raised by this issue. To allow a governmental agency like the SBA, FmHA, or the like to piggyback under the guise of "government" and offset ASCS-CCC farm program payments may effectively deny farmers or ranchers a meaningful opportunity attempt to reorganize in a Chapter 11, 12, or 13 setting.[13] As stated, in the instant facts, the SBA is totally undersecured in terms of its collateral and would otherwise be treated as secured up to the amount of setoff and ASCS-CCC payments owing. See 11 U.S.C. § 506(a) and n. 4. Although the Court is unsure as to the total ASCS-CCC payments owing to the debtors, the SBA's claim is $163,250.24. Clearly, this impact would be devastating to these farmers and every farmer who, prior to filing, participates in the ASCS-CCC program and owes either the SBA or FmHA at the time of filing. This is contrary to the United States Supreme Court's policy analysis in *755 United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). Addressing the question of what is property of the estate under 11 U.S.C. § 541(a), Justice Blackmun, writing for the majority, observed in part:
In proceedings under the reorganization provisions of the Bankruptcy Code, a troubled enterprise may be restructured to enable it to operate successfully in the future. . . . By permitting reorganization, Congress anticipated that the business would continue to provide jobs, to satisfy creditors' claims, and to produce a return for its owners. Congress presumed the assets of the debtor would be more valuable if used in a rehabilitated business than if "sold for scrap."
United States v. Whiting Pools, Inc., supra, at 203, 103 S.Ct. at 2312. Congress and the President voiced serious concern for family farmer survival in the October, 1986, passage of Chapter 12 bankruptcy reorganization. See Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986 which became effective November 26, 1986. See also In re Erickson Partnership, 68 B.R. 819 (Bankr. D.S.D.1987), aff'd, 74 B.R. 670 (D.S.D. 1987); In re Rennich, 70 B.R. 69 (Bankr.D. S.D. 1987).
Based on the foregoing, the Court holds that the SBA does not have a right to offset its prefiling claims against the debtors' postfiling ASCS-CCC farm program payments.
Second Issue
As to the second issue, the Court holds that the SBA's postfiling continuation of its offset process, including holding of the Department of Agriculture check payable to the SBA, violated the automatic stay provisions of Bankruptcy Code Section 362(a). This is based on the following discussion.
Under the Bankruptcy Code, an attempted setoff, without obtaining relief from the automatic stay, constitutes a violation of Bankruptcy Code Section 362(a)(7).[14]See also 11 U.S.C. § 362(a)(1) and (6). See, e.g., IRS v. Norton, 717 F.2d 767 (3d Cir.1983) (IRS violated the automatic stay by retaining a portion of the debtor's tax refund to offset a prepetition tax liability); In re Hill, 19 B.R. at 379. In pertinent part, Section 362(a)(7) provides:
Except as provided in subsection (b) of this section, a petition filed under section . . . 302 . . . of this title . . . operates as a stay, applicable to all entities, of . . . the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor.
11 U.S.C. § 362(a)(7).
What this means is that even if SBA can establish a right to setoff, it may not unilaterally exercise this right without violating the automatic stay provision. The automatic stay is fundamental to the reorganization process and the intended rehabilitation of a debtor in bankruptcy. It is intended to give the debtor a "breathing spell from the collection efforts of creditors, and to protect creditors by insuring that the assets of the estate will not be dissipated in a number of different proceedings." Johnson v. First Nat. Bank of Montevideo, Minn., 719 F.2d 270, 276 (8th Cir.1983), cert. denied, 465 U.S. 1012, 104 S.Ct. 1015, 79 L.Ed.2d 245 (1984). A creditor may not ignore the stay, but must ask for relief from the stay upon a showing of grounds established by 11 U.S.C. § 362(d).
The SBA contends that it did not violate the automatic stay, but merely intended to maintain the status quo:
"The United States of America has done nothing other than maintain the status quo which existed prior to the filing in bankruptcy. A creditor does not violate the automatic stay by maintaining the status quo."
SBA Memorandum, p. 2.
Its position is that this only constituted an "administrative freeze" of funds. This contention, however, is contrary to the SBA's own characterization of its action as an offset (SBA exs. 4, 7), as well as the statute and applicable regulations which *756 authorize an offset, not an "administrative freeze." The Court also disagrees with SBA's insistence that a diversion of the ASCS check, payable to order of the SBA, may properly be characterized as an "administrative freeze" when a true administrative freeze is where a bank places a hold on an account upon learning of a bankruptcy filing. See In re Hoffman, 51 B.R. 42 (Bankr.W.D.Ark.1985).
Moreover, many factors militate a finding that the SBA continued to seek repayment of its claim after petition filing. Although at some point between February 13, 1987, and March 5, 1987, it allegedly requested that the Department of Agriculture refrain from setoff and the Department agreed (SBA ex. 8), SBA received the check made out to it (SBA ex. 10) long after the bankruptcy petition filing, the Department's letter to it, or Attorney Hurley's letter (debtors' ex. A). Clearly, the SBA took additional actions to complete its offset after March 5, 1987 (date of Department of Agriculture letter agreeing to refrain from setoff). Aside from that, it continued in its collection pursuits after Attorney Hurley's letter in that it took possession of the check and never contacted either the debtors or the Court. It obviously became very concerned about its own position when it was informed that the debtors had, on May 8, 1987, filed an order to show cause against the FmHA for return of the checka "nice" memo, which was dated May 11, 1987, was issued by SBA's attorney to its "collateral cashier" not to process or apply the check to the account (SBA ex. 9). This was 73 days after petition filing, 62 days after Attorney Hurley's letter, and many weeks after the debtors expected this money which they desperately needed to facilitate their reorganization effort.
Based on the foregoing, the Court finds that the SBA's retention of the check, received by it long after the filing of the bankruptcy petition, is in and of itself a violation of the automatic stay. See, e.g., In re Haffner, 25 B.R. 882 (Bankr.N.D.Ind. 1982). It further finds that the SBA's assertion that it was only maintaining the status quo after the February 27, 1987, petition filing or March 10, 1987, letter from Attorney Hurley is without merit. Therefore, the Court holds that the SBA's postfiling continuation of its offset process, including holding of the Department of Agriculture check payable to the SBA, violated the automatic stay provisions of Bankruptcy Code Section 362(a).
Third Issue
As to the third issue, the Court finds that the SBA "willfully" violated the automatic stay under Bankruptcy Code Section 362(h), thereby entitling the debtors to seek damages for injury allowable under that provision. This is based on the following discussion.
Under the Bankruptcy Code, a debtor may recover actual damages, including costs, attorneys' fees, and punitive damages, for a willful violation of the automatic stay. 11 U.S.C. § 362(h) reads as follows:
"An 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."
For purposes of Section 362(h), "willful" means "deliberate or intentional." In re Mewes, 58 B.R. 124, 128 (Bankr.D.S.D. 1986). Where there is actual notice of the filing, it must be presumed that the offset was deliberate or intentional. In re Shafer, 63 B.R. 194, 198 (Bankr.D.Kan.1986); In re Meinke, Peterson & Damer, P.C., 44 B.R. 105, 108 (Bankr.N.D.Tex.1984).
Based on its previous findings, including that the SBA continued collection efforts of its prepetition claim by administrative offset after it had notice of the petition filing by way of Attorney Hurley's March 10, 1987, letter or otherwise, the Court finds that the SBA "willfully" violated the automatic stay provision under Bankruptcy Code Section 362(h). Mindful of a number of cases which have held that attempted setoff of government payments to the debtor are subject to the automatic *757 stay provisions, see, e.g., IRS v. Norton, 717 F.2d 767 (3d Cir.1983); In re Carlsen, 63 B.R. 706 (Bankr.C.D.Cal.1986); In re Shafer, 63 B.R. 194 (Bankr.D.Kan.1986); In re Hill, 19 B.R. 375 (Bankr.N.D.Tex. 1982), and how carefully courts scrutinize these matters, the SBA was clearly proceeding at its own risk after receipt of debtor attorney Hurley's March 10, 1987, letter, if not before.
Debtors' counsel is directed to schedule a hearing with the Clerk before the Bankruptcy Court on notice to SBA, ASCS-CCC, the Department of Agriculture, and counsel for determination of damages or sanctions against the SBA for the willful violation of the stay provisions of Section 362.
Accordingly, the above and foregoing hereby constitutes the Court's Findings of Fact and Conclusions of Law in the above-entitled matter pursuant to Bankr.R.P. 7052 and 9014 and Fed.R.Civ.P. 52. Counsel for the debtors is directed to submit an appropriate order in accordance with Bankr.R.P. 9021.
NOTES
[1] Debtors initially filed a motion for order to show cause against the Farmers Home Administration ("FmHA") on May 8, 1987, when payments due the debtors were not received. When they were informed that the SBA, and not the FmHA, was involved, they filed an amended motion. SBA has filed several related motions. They include: a resistance to motion for order to show cause filed on May 15, 1987; a motion for relief from the automatic stay filed on May 15, 1987; and a motion to strike pleading filed on June 1, 1987. Parties agreed that because all of the pleadings concern the principal question of whether the SBA may offset ASCS-CCC farm program payments owed by ASCS-CCC to the debtors to satisfy a prefiling claim of SBA, they may be consolidated into one action.
[2] No evidence was offered as to when, why, or how the request by the SBA was made.
[3] Bankruptcy Code Section 553(a) reads as follows:
Except as otherwise provided in this section and in sections 362 and 363 of this title, 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 debtor is disallowed other than under section 502(b)(3) of this title;
(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 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.
[4] Bankruptcy Code Section 506(a), in pertinent part, reads:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim. (emphasis added)
[5] 31 U.S.C. § 3716 provides, in pertinent part:
(a) After trying to collect a claim from a person under section 3711(a) of this title, the head of an executive or legislative agency may collect the claim by administrative offset. The head of the agency may collect by administrative offset only after giving the debtor
(1) written notice of the type and amount of the claim, the intention of the head of the agency to collect the claim by administrative offset, and an explanation of the rights of the debtor under this section;
(2) an opportunity to inspect and copy the records of the agency related to the claim;
(3) an opportunity for a review within the agency of the decision of the agency related to the claim and
(4) an opportunity to make a written agreement with the head of the agency to repay the amount of the claim;
(b) Before collecting a claim by administrative offset under subsection (a) of this section, the head of an executive or legislative agency must prescribe regulations on collecting by administrative offset.
[6] 13 C.F.R. § 140.5 provides, in pertinent part:
"(a) SBA may, after attempting to collect a claim from a person under normal SBA collection procedures, collect the claim by means of administrative offset."
See also 7 C.F.R. § 13.6 (concerning requests by other federal agencies for administrative offsets by ASCS).
[7] Under Section 507(a)(7), governmental priority claims only include certain types of taxes, including income tax, property tax, employment tax, and excise tax.
[8] In Cherry Cotton Mills, the United States Supreme Court, in a nonbankruptcy setting, only held that the Court of Claims had jurisdiction to determine whether the United States, through a debt owed the Reconstruction Finance Corporation, may offset against monies owed under the Agricultural Adjustment Act on the ground that 28 U.S.C. § 250(2) permitted the government to have all matters decided in one suit. It further held that although the Reconstruction Finance Corporation is called a corporation, it is still part of the government. 327 U.S. at 538-40, 66 S.Ct. at 729-30.
[9] Courts are divided on the question of when certain ASCS obligations become effective for Section 553(a) purposes. This often explains the inapposite results, because if the Court finds there is no prefiling obligation, then there is not a "mutual debt owing by such creditor" under Section 553(a). This forms part of the basis for courts relying on the debtor and debtor-in-possession theory. See In re Braniff Airways, 42 B.R. 443, 449 (Bankr.N.D.Tex.1984), for further explanation. One line of authority, beginning with In re Hill, 19 B.R. 375, 380 (Bankr.N.D.Tex. 1982), holds that ASCS is a prefiling obligation only when there has been a final determination of deficiency: "[T]he prerequisites for determination of entitlement to money occurs at or near harvest time. It is only after the market price of the crop is determined that one can conclude that a deficiency between that price and the target price occurs. Also, it is late in the season before a conclusion can be reached as to whether there is a `disaster' which provides disaster payments by ASCS. Therefore, I conclude that those monies, if any, to be paid by ASCS to, or for the benefit, of Hill are post-petition monies." Another line of authority, beginning with In re Matthieson, 63 B.R. 56 (D.Minn. 1986), conversely holds that a final determination is unnecessary: "After review of analogous case law . . . the court . . . rejects the conclusion in Hill. The creditor's right to setoff may be asserted in a bankruptcy case even though at the time the petition is filed [the debt] is absolutely owing but not presently due, or where a definite liability has accrued but is as yet unliquidated. (citations omitted) Where an obligation exists prior to bankruptcy, it is irrelevant that the exact amount of liability will not be determined until after the bankruptcy petition was filed." (citations omitted) Id. at 59. See also 4 Collier on Bankruptcy ¶ 553.10[2].
[10] In part, the Brooks court noted:
Wherever there is reference in this decision to CCC, ASCS or the United States Department of Agriculture, such reference shall be deemed to apply to all of these entities. CCC is a wholly-owned federal corporation within the United States Department of Agriculture. Because CCC has no employees, ASCS, a separate agency established by the Secretary of Agriculture with state and county committee offices, acts on behalf of CCC and administers all of the government programs, including the Corn Deficiency Program involved in this case.
70 B.R. at 370 n. 2.
And, among other things, later found:
"The claim of CCC against the debtor and the debt owed by CCC to the debtor were mutual obligations because they were between the same parties, in the same right and in the same capacity."
Id. at 371.
[11] While the Haffner court specifically denied the CCC's attempted setoff on the ground that its postpetition obligation may not be set off against the debtors' prepetition obligation because there is no mutuality under Section 553(a), it further noted:
[I]t appears that the regulations themselves would prohibit CCC from pursuing the setoff in this case. For example, 7 C.F.R. Section 13.5, which is entitled "Conditions under which setoff or withholding shall not be made" states in subpart (c):
Setoff shall not be made:
(c) Where collection of a debt has been barred by a discharge in bankruptcy and the debtor has not expressed a desire to make payment.
Admittedly, the discharge has not been entered in this case yet. However, the proceeding is currently pending, and the debts involved have not been determined to be nondischargeable. Further 7 C.F.R. section 1408.4(b)(3) regarding setoffs states:
. . . debts due CCC shall be set off, . . ., where the following conditions apply:
(3) There is no legal bar to enforcement of the debt.
Since this Court holds that the automatic stay bars the enforcement of collection efforts in this case, the regulations require CCC to refrain from setoff. . . .
By this decision CCC only loses its leverage to force the collection of a prepetition debt from a person who is proceeding under Title 11.
25 B.R. at 888.
[12] See 15 U.S.C. § 633(a):
In order to carry out the policies of this chapter there is created an agency under the name "Small Business Administration" . . . which Administration shall be under the general direction and supervision of the President and shall not be affiliated with or be within any other agency or department of the Federal Government.
[13] According to the United States Department of Agriculture (ASCS) statistics, in fiscal year 1987-88, 41,562 of 52,274 South Dakota farms participated in the various ASCS-CCC farm subsidy programs (approximately 80 percent). The breakdown in terms of acreage is as follows: of 4,820,988 wheat acres, 4,439,046 are enrolled; of 3,869,322 corn acres, 3,495,630 are enrolled; of 546,777 grain sorghum acres, 468,475 are enrolled; of 831,458 barley acres, 657,230 are enrolled; and of 1,970,022 oats acres, 1,223,627 are enrolled. While the percentage breakdown of how many South Dakota debtor-farmers are participating is unknown, the Court has no reason to believe that it would differ from the general farmer population.
[14] Bankruptcy Code Section 553(a), itself, denotes Section 362 applicability. See n. 3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541730/ | 949 A.2d 590 (2008)
Robert SNOWDER, et al., Appellants,
v.
DISTRICT OF COLUMBIA, et al., Appellees.
No. 06-CV-959.
District of Columbia Court of Appeals.
Argued December 13, 2007.
Decided June 5, 2008.
*593 Philip Friedman, Washington, for appellants.
William J. Earl, Assistant Attorney General, with whom Linda Singer, Acting Attorney General for the District of Columbia at the time the brief was filed, Todd S. Kim, Solicitor General, and Edward E. Schwab, Deputy Solicitor General at the time the brief was filed, were on the brief, for appellee District of Columbia.
Veronica Byam Nannis, with whom Timothy F. Maloney and Steven B. Vinick were on the brief, Greenbelt, MD, for appellees R & R Towing, Farco Towing, and Towing by TRP.
Stephen B. Stern, Washington, with whom Melissa M. McGuane was on the brief, for appellee Perry's Towing and Storage, Inc.
Before WASHINGTON, Chief Judge, and FISHER and THOMPSON, Associate Judges.
WASHINGTON, Chief Judge:
Appellants Robert Snowder, Nadine Garrick, Lawanda Harris, Ronald Kennedy, Verna Montague, and Felicia Moore appeal from a judgment in favor of appellees the District of Columbia and towing companies Perry's Towing and Storage, Inc., R & R Towing, Farco Towing, and Towing by TRP (collectively, "towing companies"). Appellants attempted to bring a *594 class action lawsuit against the District and the towing companies under numerous theories breach of bailment, conversion, civil conspiracy, unjust enrichment, and violations of the District of Columbia Consumer Protection Procedures Act ("CPPA") seeking to recover damages on behalf of people who were charged substantial fees for towing and storage services that were imposed without adequate notice or consent. The trial court denied class certification and ultimately entered summary judgment on all claims. We affirm the trial court's denial of class certification as well as the dismissal of all claims against the District of Columbia. Regarding the towing companies, we affirm the court's dismissal of appellants' breach of bailment claim; however, because the trial court did not discuss or decide appellants' other common law claims, we must remand the case to the trial court for consideration of those claims.
I. Facts[1]
A. Appellant Nadine Garrick & Appellee Perry's Towing.
On April 11, 2001, Nadine Garrick reported the theft of her vehicle (which was titled in her father's name) to the Metropolitan Police Department ("MPD"). Though she periodically checked with MPD, she did not receive any information about her vehicle. On May 16, 2001, she filed an insurance claim for the theft with State Farm. On May 31, 2001, State Farm paid her $5,248.38. On June 5, 2001, State Farm wrote to the Georgia Department of Motor Vehicles, seeking to change the title of the stolen vehicle to reflect its ownership of the car.
On August 22, 2001, MPD recovered Garrick's/State Farm's vehicle and requested that appellee Perry's Towing ("Perry's") impound the vehicle. The car remained at Perry's until Perry's sent a certified letter to Ms. Garrick's father, informing him of the vehicle's location. Ms. Garrick informed State Farm, and State Farm paid Perry's for the towing and storage fees. Ms. Garrick then re-purchased her vehicle from State Farm at a public auction on February 22, 2002, for $3,933.00.
B. Appellant Robert Snowder and Appellee R & R Towing.
Robert Snowder filed a stolen vehicle report on September 6, 2000. Four days later, appellee R & R Towing towed the car from MPD's 6D station. Nine weeks later, R & R Towing notified Mr. Snowder about possession of the vehicle and quoted him a, $1,800 towing and storage fee.[2] "Under protest" Mr. Snowder paid $900 to recover his car.
C. Appellants Lawanda Harris and Ronald Kennedy and Appellee Farco Towing.
On October 15, 2000, Lawanda Harris reported her vehicle stolen. MPD recovered her vehicle three days later and had appellee Farco tow and impound it. Ms. Harris discovered the location after a friend called MPD on October 24, 2000. *595 Farco quoted a fee of $395. Harris attempted to view her car at Farco's lot, but they refused to allow her to do so. She did not recover her car; Farco disposed of it.
On October 18, 1999, Ronald Kennedy reported his vehicle stolen to the Prince George's County Police Department. On October 27, 1999, MPD recovered the car and had Farco tow it. Mr. Kennedy's insurance agent informed him of the vehicle's recovery on November 26, 1999, but MPD did not confirm the recovery and location until December 3, 1999. Farco attempted to charge Kennedy $1,353.00. Mr. Kennedy did not recover his car. Although Farco's representative testified that the car could not have been driven off the lot and that he disposed of it, Mr. Kennedy's car continued to receive parking tickets as late as 2002.
D. Appellants Verna Montague and Felicia Moore and Appellee Towing by TRP.
On November 27, 2001, Verna Montague called MPD, believing her car had been stolen, only to learn that it had been towed for expired tags and impounded by TRP. Ms. Montague could not recover her car, however, as MPD was then holding her keys as evidence in connection with an investigation unrelated to this matter. Although TRP refused to release the car, it promised not to dispose of the car while she got her keys back. Ms. Montague enlisted MPD's help, and MPD helped bargain the charge of $895 down to $350. Ms. Montague then sought to have the car towed elsewhere, but TRP informed her that it disposed of the car. She thinks she may have seen her car on the streets following the alleged disposal.
On November 6, 2001, Towing by TRP towed Felicia Moore's car, as it was allegedly illegally parked. Upon learning of the location from MPD, Ms. Moore went to recover her car. She arrived between 10:30 and 10:45 P.M., but had to wait for someone to show up, which occurred around 12:45 A.M. (November 7, 2001). TRP charged her $270, which consisted of a $150 towing charge, $50 for special equipment, and $70 for two days of storage ($35 per day), even though the car had been on the lot for three hours. Ms. Moore paid the charges. She later had her parking notice of infraction dismissed, but she did not recover the towing or storage fees.
E. Towing Regulations in the District of Columbia for the Relevant Time Period.
At the time the appellants' cars were stolen, recovered, or impounded, the District Municipal Regulations provided that MPD officers could direct the towing and impoundment of "unattended and illegally parked vehicles." 18 DCMR § 2421.1 (1987). Further, the regulations required the police department (or an employee of the Department of Public Works) to inform the vehicle owner, immediately if possible, but if not, to provide written notice of impoundment to the last known address of the registered owner within five business days. 18 DCMR §§ 2421.2, 2421.4, and 2421.5 (1987).[3] Moreover, internal police orders required the MPD officer who *596 recovered a stolen vehicle to take control of the vehicle and notify the owner where it could be reclaimed. See MPD Special Order 01-05 (Mar. 1, 2001). The Special Order specifically noted that when the officer arranges for towing, the officer must ensure prompt and accurate notification "so that towing and storage charges can be held to a minimum." Id.[4]
II. Procedural History
Plaintiffs Robert Snowder and Jeffrey Schroeder (who sold the car to Snowder) initially filed a complaint against the District of Columbia and several towing companies on January 8, 2002. Plaintiffs (now expanded) filed an amended complaint on March 22, 2002, as a purported class action. On December 19, 2002, plaintiffs moved for class certification. The trial court (Hon. Natalia Combs Greene) denied class certification.
Perry's Towing moved for summary judgment, alleging that plaintiff Nadine Garrick (the only plaintiff involved with Perry's) lacked standing. The court granted that motion on all of Ms. Garrick's common-law claims, but preserved her claim under the CPPA. Following another motion for summary judgment by Perry's, a motion for summary judgment from the other defendant towing companies, and a motion for partial summary judgment from plaintiffs, the court granted summary judgment to the defendants, thus dismissing plaintiffs' claims except those against D.C. The trial court later granted D.C.'s motion for summary judgment on all claims (though it had previously dismissed the CPPA claim), thus dismissing plaintiffs' remaining claims, noting in a one-page order that the court agreed with the District's arguments.
III. Class Certification
D.C. Superior Court Rule of Civil Procedure 23 governs class actions. ` It provides:
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
D.C.Super. Ct. R. Civ. P. 23(a). Further, the purported class can only be certified under D.C.Super. Ct. R. Civ. P. 23(b) if:
(1) the prosecution of separate actions by or against individual members of the class would create a risk of
(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or
(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or *597 corresponding declaratory relief with; respect to the class as a whole; or
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair, and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
D.C.Super. Ct. R. Civ. P. 23(b). The plaintiff class "has the burden of showing that [its] cause of action meets the above prerequisites." Yarmolinsky v. Perpetual Am. Fed. Sav. & Loan Ass'n, 451 A.2d 92, 94 (D.C.1982). Further, as a preliminary matter, the moving party must demonstrate that the class is "`neither amorphous, nor imprecise.'" Lewis v. Nat'l Football League, 146 F.R.D. 5, 8 (D.D.C. 1992) (quoting Robertson v. Nat'l Basketball Ass'n, 389 F.Supp. 867, 897 (S.D.N.Y. 1975)). This court reviews a trial court's denial of class certification for abuse of discretion. See Ford v. ChartOne, Inc., 908 A.2d 72, 84 (D.C.2006).
In this case, the plaintiffs identified their class as follows:
All persons and entities, excluding any member of the judiciary, whose vehicles were towed and/or authorized to be towed in the District of Columbia without their consent by one of the Defendants and who incurred towing and storage charges after the Defendants failed to timely notify such persons their vehicles had been towed and impounded.
The trial court rejected this class. First, the court found the class was "flawed due to its vagueness and speculative nature," and thus, it was too amorphous and imprecise. In this regard, the court noted the lack of a time limitation in the class definition. In addition, the court questioned whether D.C. and the towing companies would have the same duty to notify the owners. The court did not further analyze this question, but noted that if the towing companies did have the same duty as D.C., the class could be "gargantuan," while if it did not, it could be much smaller. This led the court to find that the plaintiffs did not meet the numerosity requirement. Finally, the court noted its "concerns" that the issues of law and fact regarding D.C. would not be the same as those regarding the towing companies. For instance, the court was concerned that if the towing companies had any duty to notify, that might require a factual, case-by-case determination. Therefore, the court found no commonality.
Appellants argue that the court abused its discretion by making erroneous conclusions of law. Specifically, appellants argue that the court erred as a matter of law by "preliminarily and ultimately concluding that neither the District nor the Towing Operators have any enforceable duty to notify vehicle owners that their cars have been towed." Relying on ChartOne, supra, 908 A.2d at 89, appellants assert that the court here (as the court did in ChartOne) erred in denying class certification for the same reason why it would later grant summary judgment. However, contrary to appellants' view, the trial court did not find that neither D.C. nor the towing companies had a duty to notify appellants *598 at the time it denied class certification; rather, it was concerned that the possibility of different duties could require the court to consider claims against D.C. as distinct from those against the towing companies thus defeating commonality.
We agree with the trial court that the appellants' purported class failed to meet the commonality requirements for certification. Further, the plaintiffs' class definition is facially imprecise. It purports to include all persons who were not "timely notified," without providing any scope of what that term might mean. Moreover and more problematic, "the class representatives must be members of that class." Lewis, supra, 146 F.R.D. at 8; see D.C.Super. Ct. R. Civ. P. 23(a) (requiring that "the claims . . . of the representative parties are typical of the claims . . . of the class."). Here, appellants Ms. Moore and Ms. Montague received tickets and near-immediate notification about the towing of their cars, as their cars were illegally parked. Their claims are distinct from those of other members of the putative class whose cars were stolen and who did not receive notice for extended periods of time. At the very least, the case would require in-depth factual determinations about different individuals to determine whether any duty was breached in a given case. This makes the purported class potentially unmanageable. See Yarmolinsky, supra, 451 A.2d at 96 ("Where no one adjudication can settle the question of a defendant's liability to the class members, the case is inappropriate for class action because of the predominance of individual questions over common issues."). Accordingly, the trial court did not abuse its discretion in denying class certification. We must therefore consider whether the named members (appellants) have valid claims in their individual capacities against either the District of Columbia or any of the towing companies.
IV. The District of Columbia
A. The Consumer Protection Procedures Act.
Appellants assert that the District of Columbia and the towing companies violated D.C. regulations and procedures regarding towing and by failing to notify them about the impoundment of their cars, and that in so doing, the District and the towing companies committed trade practices in violation of the CPPA. "The Consumer Protection Procedures Act is a comprehensive statute designed to provide procedures and remedies for a broad spectrum of practices which injure consumers." Atwater v. District of Columbia Dep't of Consumer & Regulatory Affairs, 566 A.2d 462, 465 (D.C.1989). A main purpose of the CPPA is to "assure that a just mechanism exists to remedy all improper trade practices." D.C.Code § 28-3901(b)(1) (2001).
The CPPA creates a cause of action for consumers to seek redress of unlawful trade practices. Under D.C.Code § 28-3905(k)(1) (2001), "a person, whether acting for the interests of itself, its members or the general public, may bring an action under this chapter in the Superior Court of the District of Columbia seeking relief from the use by any person of a trade practice in violation of a law of the District of Columbia" to recover treble damages or $1,500 per violation (whichever is greater), punitive damages, injunctive relief, and reasonable attorney's fees.[5] D.C.Code § 28-3904 (2001) sets forth the types of *599 acts that constitute "unlawful trade practices," stating, "[i]t shall be a violation of this chapter, whether or not any consumer is in fact misled, deceived or damaged' thereby, for any person to . . . (dd) violate any provision of title 16 [regarding towing services] of the District of Columbia Municipal Regulations." Because the D.C. regulations contain certain procedural requirements for MPD officers, appellants believe that a violation of those regulations also exposes the District to liability under the CPPA
This court has previously held that the GPPA "was designed to police trade practices arising only out of consumer-merchant relationships." Howard v. Riggs Nat'l Bank, 432 A.2d 701, 709 (D.C.1981); see Carleton v. Winter, 901 A.2d 174, 179 (D.C.2006) (stating that the CPPA regulates conduct of merchants or goods suppliers); DeBerry v. First Gov't Mortgage & Investors Corp., 743 A.2d 699, 701 (D.C. 1999) (confirming that an unlawful trade practice can only be committed by a "merchant"). The CPPA defines "merchant" as a "person who does or would sell, lease (to), or transfer, either directly or indirectly, consumer goods or services, or a person who does or would supply the goods or services which are or would be the subject matter of a trade practice." D.C.Code § 28-3901(3) (2001). In this case, the District urges that the CPPA does not apply to it, arguing that it is not a "merchant." Relying on the plain language of the statute, it argues that it cannot be considered a merchant because it did not sell or provide the towing services in this case. Appellants, however, believe that the District indirectly sold or supplied towing services in this case because the towing companies acted pursuant to MPD authority; thus, because the towing companies could not act without the city's involvement, the city participated in the trade practice.[6]
While appellants' argument is not without some force given the relationship between MPD and the private towing companies it utilizes in the District of Columbia, we agree with the District and hold that it is not a merchant for purposes of the CPPA. See Howard, supra, 432 A.2d at 709 ("While a `merchant' is not limited to the actual seller of the goods or services complained of, he must be a `person' connected with the `supply' side of a consumer transaction."). We have previously held that a nonprofit educational institution was not a merchant under the CPPA See Save Immaeulata/Dunblane, Inc. v. Immaculata Prep. School, Inc., 514 A.2d 1152, 1159 (D.C.1986). In Save Immaculata, this court approvingly cited a Wisconsin case, wherein the Wisconsin Supreme Court concluded that its Consumer Act did not regulate a loan from the University of Wisconsin, Madison, explaining that the University "an arm of the state" was not a private, commercial business and its purpose was not to earn a profit, "but rather it is "motivated by a public, nonprofit purpose." See Board of Regents of the Univ. of Wisconsin Sys. v. Mussallem, 94 Wis.2d 657, 669, 289 N.W.2d 801, 807 (1980). Thus, even though the University extended credit, its purpose was not to profit. This court has since confirmed that nonprofit organizations generally, not just nonprofit educational institutions, are not merchants under the CPPA. See Schiff v. American Ass'n of Retired Persons, 697 A.2d 1193, 1197 (D.C.1997) (concluding *600 that the AARP was not covered by the CPPA even though it accepted fees for arranging the sale of insurance to its members); see also Kozup v. Georgetown Univ., 663 F.Supp. 1048 (D.D.C.1987), vacated on other grounds, 271 U.S.App. D.C. 182, 851 F.2d 437 (1988) (declining to find either Georgetown University Hospital or the American Red Cross to be merchants even though the Red Cross received fees for providing blood to the Hospital and the Hospital passed those costs on to its patients). Similarly, the District is not a commercial enterprise. Although MPD is involved in the towing of automobiles in the District, in that it contacts towing companies to retrieve vehicles on its streets, it did not supply the towing and storage services in this case. Nor did it receive any remuneration from those companies for the towing and storage services provided, or enter into a consumer-merchant relationship with any of the vehicle owners. Accordingly, appellants' CPPA claims against the District of Columbia must fail.
B. D.C.Code § 12-309 Notice of Intent to Sue.
Appellants also brought a number of common law claims against the District, including breach of bailment, conversion, and civil conspiracy. The District argues that these claims must fail because appellants did not give the District requisite notice of suit pursuant to D.C.Code § 12-309 (2001). That provision states:
An action may not be maintained against the District of Columbia for unliquidated damages to person or property unless, within six months after the injury or damage was sustained, the claimant, his agent, or attorney has given notice in writing to the Mayor of the District of Columbia of the approximate time, place, cause, and circumstances of the injury or damage. A report in writing by the Metropolitan Police Department, in regular course of duty, is a sufficient notice under this section.
D.C.Code § 12-309. "Because it is in derogation of the common law principle of sovereign immunity, section 12-309 is to be construed narrowly against claimants." Gross v. District of Columbia, 734 A.2d 1077, 1081 (D.C.1999) (internal; quotation omitted). "Unless it demonstrates compliance with the requirements of § 12-309, a plaintiffs suit against the District is properly dismissed." District of Columbia v. Arnold `& Porter, 756 A.2d 427, 436 (D.C. 2000). We review compliance with § 12-309 de novo. Id. In this case, only two of the appellants (Nadine Garrick and Lawanda Harris) gave express notice. Appellants, however, offer a variety of theories for why notice was adequate for all appellants. These arguments are unpersuasive,
Because § 12-309 applies only to unliquidated damage claims, appellants characterize their claims as liquidated. Tort claims, however, are considered unliquidated. See District of Columbia v. World Fire & Marine Ins. Co., 68 A.2d 222, 224-25 (D.C.1949) (finding that a tort claim, even for a fixed amount, was unliquidated). Indeed, in District of Columbia v. Campbell, 580 A.2d 1295, 1301-02 (D.C. 1990), this court held that a plaintiffs negligence claim failed for lack of notice, even where he asserted a quantum meruit claim. The court distinguished tort and quantum meruit claims from true contract claims, noting that the former are unliquidated, while the latter are liquidated. Id.; see id, at 1301 (quoting Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d 1293 (D.C.1979)) (discussing quantum meruit damages as "`by their very nature unliquidated and [that they] must be the subject of controversy and proof at trial'"). Despite appellants' attempts to re-cast their *601 claims as liquidated, most of the claims sound in tort. Claim I (breach of bailment) is at most a quasi-contract theory. See First American Bank, N.A. v. District of Columbia, 583 A.2d 993, 996 (D.C.1990). Claim II (conversion) is a tort theory. While some appellants paid certain amounts (which might not be the full extent of their damages, as they sought compensatory damages), others lost their cars entirely, and the value of the cars is uncertain.[7]
Next, pursuant to the final sentence of D.C.Code § 12-309, appellants assert that their, filing of stolen vehicle police reports put the District on notice of a potential future lawsuit. Police reports may indeed suffice as notice, but the report must state both the cause and the circumstances of the injury with enough particularity to inform the District of a reasonable basis for anticipating legal action. See Pitts v. District of Columbia, 391 A.2d 803, 809-10 (D.C.1978); Washington v. District of Columbia, 429 A.2d 1362, 1366 (D.C.1981) (en banc). Here, appellants' stolen vehicle police reports do not suffice. While the reports detail an injury (stolen vehicle), it is not the injury complained of here (excessive fees/conversion). Moreover, the reports do not establish a reasonable basis for anticipating legal action: informing the District that a car was stolen does not warn the District that the owner might sue the District if it later recovers that vehicle and then impounds it without proper notice.
Appellants further assert that Ms. Harris and Ms. Garrick provided sufficient notice to suffice for the entire class. Appellants rely on Dellums v. Powell, 184 U.S.App. D.C. 324, 338, 566 F.2d 216, 230 (1977), wherein the United States Court of Appeals for the District of Columbia Circuit concluded that an ACLU special counsel's § 12-309 letter sufficed to give notice for an entire class of plaintiffs. The court noted, "[b]ecause the claims asserted by the class representative must be typical of those of the class as a whole, the claims of any class member should in ordinary course be sufficient to indicate what evidence will be relevant to any defense." Id. In Dellums, a case alleging that a large group of protestors had been unlawfully arrested, the ACLU special counsel representing the class sent a letter that listed eleven plaintiffs by name with the circumstances of their arrests, along with an attached list of sixty-five other named individuals. 184 U.S.App. D.C. at 336, 566 F.2d at 228. Further, the court noted that the police could determine the names of the other 1,200 class members from the police reports written following that protest. 184 U.S.App. D.C. at 338, 566 F.2d at 230.
This court, however, has viewed Dellums narrowly: "[W]e decline to apply Dellums . . . a class action case where specific information was provided as to the claimants and types of claims that the District could expect from some 1200 claimants, to this case involving the claims of Arnold & Porter, Lillian Lawrence, Ltd. and their respective insurance agents, about whose claims the District was given absolutely no specific information prior to the filing of the lawsuit." Arnold & Porter, supra, 756 A.2d at 437 (rejecting the claims of appellees who filed no notice). Here, Ms. Harris's letter failed to notify D.C. about the claims of others it discusses only her situation. Neither did Ms. Garrick's letter, written by the class attorney, inform the city of any of the other named parties. Further, as seen in the *602 discussion regarding class certification, the purported class could apply to an indeterminate number of people, thus providing the District with little opportunity to investigate and attempt to resolve the anticipated litigation. Ms. Harris's and Ms. Garrick's letters did not sufficiently notify the District of the claims of the other named plaintiffs. As such, the claims of all other appellants against the District were properly dismissed.[8]
C. Nadine Garrick's Standing to Sue.
Appellee Perry's Towing argues that appellant Nadine Garrick does not have standing to sue under either her common law theories or the CPPA because State Farm paid her insurance claim following the theft of her vehicle and had assumed ownership of the vehicle prior to the towing by Perry's. See Community Credit Union Servs., Inc. v. Federal Express Servs. Corp., 534 A.2d 331, 333 (D.C. 1987) (noting that plaintiffs must assert their own rights). The trial court agreed, in part, and dismissed Ms. Garrick's common law claims (I-IV); however, it did not dismiss her CPPA claims at that time.
In response, appellants argue that Ms. Garrick was the owner of the vehicle and that the collateral source rule does not limit an insured from bringing legal claims against tortfeasors even if paid under the insurance claim. Appellants' argument is unavailing: because State Farm owned the vehicle at the time of the towing, the dismissal of claims I-IV as to Ms. Garrick was proper. Here, State Farm paid Ms. Garrick under the policy on June 5, 2001; Perry's did not tow the vehicle until August 22, 2001. Then, upon learning of the recovery, State Farm paid Perry's for the towing and storage charges, made repairs to the car, and then put it up for sale at auction, where Ms. Garrick "re-purchased" the car. Thus, though the title was still in Ms. Garrick's father's name at the time of notification, State Farm clearly exercised control over the vehicle. See Spindle v. Reid, 277 A.2d 117, 118-19 (D.C.1971) (noting that the "rule in this jurisdiction [is] that registration of legal title in one's name is not conclusive as to ownership" within the meaning of the Motor Vehicle Safety Responsibility Act).[9] Accordingly, the trial court's dismissal of Ms. Garrick's common law claims based on her lack of *603 standing is affirmed.[10]
D. Lawanda Harris.
Appellant Lawanda Harris timely notified the District of the "approximate time, place, cause, and circumstances of the injury or damage." See D.C.Code § 12-309. Further, the District acknowledged receipt of her letter and informed her that it would process her claim. Ms. Harris's common law claims against the District therefore meet the statutory notice requirements.
The District disputes liability on two grounds. First, the District states that the Municipal Regulations requiring notification applied only to "abandoned or Illegally parked vehicles," not recovered stolen vehicles, and that the internal police orders do not establish a standard of care. See Clark v. District of Columbia, 708 A.2d 632, 636 (D.C.1997) ("Because the Suicide Prevention Plan is only an unpublished internal agency procedure and not a statute or regulation, it cannot embody the standard of care under a negligence per se theory."). However, this court has further noted that although internal guidelines cannot themselves embody the standard of care, the "procedures may properly be received in evidence as `bearing on the standard of care.'" District of Columbia v. Wilson, 721 A.2d 591, 598 n. 13 (D.C.1998) (quoting Washington Area Metro. Transit Auth. v. Jeanty, 718 A.2d 172, 177 n. 11 (D.C.1998)). Although the court in Clark agreed that the procedures may bear on the standard, it stated that expert testimony would still be required to establish the standard of care. 708 A.2d at 636. Yet in this case, Commander Griffith of the MPD conceded in deposition that MPD has the responsibility of notifying vehicle owners of the towing of their vehicles.[11]
Second, the District argues that because its officers recovered the vehicles in the course of their law enforcement duties, their performance of that public duty is not actionable absent a special relationship, which the District asserts was not involved here. "Under the public duty doctrine, `a person seeking to hold the District of Columbia liable for negligence must allege and prove that the District owed a special duty to the injured party, greater than or different from any duty which it owed to the general public.'" Powell v. District of Columbia, 602 A.2d 1123, 1129 (D.C.1992) (quoting Klahr v. District of Columbia, 576 A.2d 718, 719 (D.C.1990)). This "special duty" is also referred to as a "special relationship." See *604 Warren v. District of Columbia, 444 A.2d 1, 3 (D.C.1981) (en banc). This court has recognized at least two ways to demonstrate a special relationship: (1) by showing direct or continuing contact between the victim and the governmental agency, along with justifiable reliance by the victim, see Platt v. District of Columbia, 467 A.2d 149, 151 (D.C.1983); or (2) by a statute prescribing mandatory acts for the protection of a particular class of persons rather than the public, see Turner v. District of Columbia, 532 A.2d 662, 667 (D.C. 1987).
Ms. Harris has proffered facts which, if proven, demonstrate direct contact with MPD. Following the theft of her car, she repeatedly contacted MPD. She filed a stolen vehicle report on the date of the theft. Then, she asserts that she contacted MPD every two days to ask about her car. During one of these contacts, she alleges that an MPD officer told her that the police would contact her when they recovered her car. On October 18, 2000, MPD recovered the car. Ms. Harris, or a friend, continued to call MPD after this date. But it was not until six days after the recovery that she learned of the impoundment (and this information came from a call by her friend, not one from MPD). These repeated contacts arguably reflect "`some form of privity between the police department and the victim that sets the victim apart from the general public.'" Powell, supra, 602 A.2d at 1130 (quoting Warren, supra, 444 A.2d at 10 (Kelly, J., concurring in part and dissenting in part)); see also id. at 1131 (finding direct contact where a vehicle owner registered her vehicle and paid a fee, which required the District to issue a license and registration tags to her).[12]
But Ms. Harris cannot prove justifiable reliance. "Justifiable reliance, in this context of proving a special relationship, means particular or special reliance." See Powell, supra, 602 A.2d at 1131 n. 11 (quoting Morgan v. District of Columbia, 468 A.2d 1306, 1315 (D.C.1983)). "The court has drawn a distinction between cases involving victims who suffer from public officials' fail[ure] to show up at all or do nothing after their arrival, and those who suffer from public officials' affirmative negligence." Id. (internal citation and quotation omitted). That is, while the District may be liable for an official's affirmative act that worsens a victim's condition, it will not be liable for that official's inaction or futile action. See id. (citing Johnson v. District of Columbia, 580 A.2d 140, 143 (D.C.1990)); see, e.g., Morgan, supra, 468 A.2d at 1317-18 (no special relationship where the wife of a police officer asked a police captain to keep her abusive husband away from her); Warren, supra, 444 A.2d at 3 (no special relationship where citizens informed the police of a rape in progress, even though the police responded to the call and violated internal investigatory procedures). Here, Ms. Harris alleges only a failure to act, not an affirmatively negligent act. Because she cannot establish justifiable reliance, she cannot establish a special relationship with the District. Therefore, her claim against the District must fail.
V. The Towing Companies
Appellants sought recovery from the towing companies based on the theories *605 of breach of quasi-bailment, conversion, civil conspiracy, unjust enrichment, and violations of the CPPA. The towing companies principally defended on the ground that they owed no duty to notify appellants about the impoundment, as only MPD had such a duty. Agreeing that appellants failed to establish that the towing companies have a duty to notify vehicle owners that their cars have been towed, the trial court granted summary judgment. In doing so, however, the trial court neither discussed nor decided appellants' conversion, civil conspiracy, unjust enrichment, or CPPA claims.[13] Therefore, although we affirm the court's conclusion that appellants failed to establish the towing companies' duty to notify, we must remand the case for the court to consider appellants' additional Common law claims against the towing companies.[14]
A. Breach of Quasi-Bailment.
The towing companies became bailees of appellants' vehicles when they took possession of them in expectation of compensation. See First Am. Bank, supra, 583 A.2d at 996. This is so even absent an explicit agreement: "[a]ll that is required is the existence of a mutual benefit." Id. This court has termed such a relationship a quasi-bailment. See id. Because of this relationship, the towing companies, as bailees, owed the appellants a duty to exercise ordinary care in the towing and impoundment of the appellants' vehicles. See id. at 997.
Relying on First American Bank, appellants argue that a towing company's duty to exercise ordinary care necessarily includes a duty to notify a vehicle owner of impoundment. But First American Bank did not involve a lack of notice. Rather, there, the appellant witnessed the towing and attempted to stop it. See id. at 995. And the issue in First American Bank was whether the defendants were liable for the disappearance of a money bag that had been inside the vehicle. Although First American Bank holds that companies must exercise ordinary care to safeguard vehicles in their possession, it is silent on the issue of notice.
Nor do appellants fare better by citing Wisconsin Ave. Sunoco v. Boone, a case from the District of Columbia Small Claims Court. See 126 D.W.L.R. 1729 (D.C.Super.Ct.Sm.Cl., Sept. 14, 1998) ["Boone"]. Similar to this case, in Boone, the vehicle owner's car was stolen, he reported the theft to the police, and MPD recovered the vehicle and requested impoundment. Neither MPD nor the towing company notified Boone of the recovery or impoundment for seven months, and the towing company billed Boone $3,254.64 for towing and storage. 126 D.W.L.R. at 1729, 1731. Yet, unlike this case, the District and the towing company had entered into an express contract, imposing certain duties on the towing company, such as, "[p]rior to providing any service[,] each tow truck operat[or] shall inform the owner or operator of the vehicle of all charges associated with the desired service(s). . . ." Id. at 1729. Based on this contract, the *606 court concluded that the towing company shared MPD's responsibility to notify. Id. at 1732.
Here, there is no express contract between the towing companies and the District and thus no expression of a shared responsibility.[15] Appellants dispute this distinction, arguing that the towing companies have an implied contractual relationship with the District. Because the companies and the District mutually benefit from their relationship the companies gain business almost exclusively through the District, while the District benefits by not having to impound vehicles appellants' argument is not without merit. But the critical distinction between this case and Boone is not that Boone involved an express contract, it is that the contract in Boone contained express provisions that required the towing company to apprise the vehicle owner of all charges before providing any service.
Absent such an express provision here, appellants bore the burden of adducing evidence showing that the towing companies were obligated to provide notice of impoundment. Appellants attempted to present such testimony through the expert testimony of Brian Albrite, a Virginia towing company owner. In deposition, Mr. Albrite opined that towing operators have a duty to notify owners that their vehicles are being held. He could not, however, base his opinion on any D.C. statute or regulation. And he conceded that he was unfamiliar with D.C. laws and regulations regarding towing. For these reasons, the trial court rejected his expert testimony. "Whether a witness possesses the requisite qualifications to express an opinion on a particular subject is within the trial court's discretion, and its decision in that regard will only be reversed for an abuse." Jung v. George Washington Univ., 875 A.2d 95, 105 (D.C.2005) (internal quotation omitted). Given Mr. Albrite's conceded unfamiliarity with D.C. towing laws or regulations, we see no abuse of discretion in rejecting his testimony.
Without Mr. Albrite's testimony, appellants could not prove the applicable standard of care or its breach. Accordingly, the trial court appropriately granted summary judgment on appellants' breach of bailment claims. Yet as noted above, the trial court failed to decide appellants' remaining common law theories. We must therefore remand this case so that the trial court can consider these arguments.
VI. Conclusion
We affirm the trial court's denial of class certification as well as the dismissal of all claims against the District of Columbia. Regarding the towing companies, although we affirm the court's dismissal of appellants' breach of bailment claim, we must remand the case for the trial court to consider appellants' conversion, unjust enrichment, and CPPA claims.
So ordered.
NOTES
[1] Because the trial court granted summary judgment to the District and the towing companies, we view the record in the light most favorable to appellants, the nonmoving party. See Childs v. Purll, 882 A.2d 227, 233 (D.C. 2005).
[2] Terrance Ross of R & R Towing testified in deposition that in other jurisdictions, such as, Maryland, R & R would become suspicious that the owner had not been notified if the vehicle had not been reclaimed within two weeks. He stated that after two weeks (even in D.C), he would begin to see if he could notify the owner or contact someone who could (i.e., teletype, police officers).
[3] District of Columbia Municipal Regulations now provide:
When an authorized government official directs the towing of a vehicle to a towing service storage lot, the government official shall notify the vehicle owner of record in accordance with DPW procedures, of the tow and storage, the storage location of the vehicle, and all other information required to be given under applicable District law.
16 DCMR § 406.9 (2005); see 51 D.C.Reg. 3428, 3432 (Apr. 2, 2004).
[4] The Special Order further details procedures for notifying the owner if the recovering officer cannot immediately do so. For example, if no notification is made within forty-eight hours, MPD was to send a notification letter by certified mail. MPD Special Order 01-05, at Part IV, A.3 (d).
[5] This section contains additional remedies for representative actions. See D.C.Code § 28-3905(k)(1)(E).
[6] As support, appellants cite State v. Cottman Transmissions Sys., Inc., 86 Md.App. 714, 729, 587 A.2d 1190, 1197 (1991), where the Maryland Court of Special Appeals examined a less expansive consumer protection statute and noted, in light of the word "indirectly" in the statute, that it covered those "who substantially participate[d] in the process." Notably, however, Cottman did not involve a consumer claim against a municipality.
[7] Appellants did not bring claim IV (unjust enrichment) against the District. Further, as noted above, claim V (CPPA claim) fails because the District is not a merchant.
[8] Finally, appellants assert (and the District essentially concedes) that if the court views Claim III (civil conspiracy) as a constitutional deprivation claim, D.C.Code § 12-309 notice is, not required. See Johnson-El v. District of Columbia, 579 A.2d 163, 170 (D.C.1990) ("As an Eighth Amendment claim brought under 42 U.S.C. § 1983, Johnson-El's complaint is not subject to the notice provisions of D.C.Code § 12-309."). However, in this case, the record is void of any evidence suggesting that the District and the towing companies conspired to deprive the vehicle owners of notice. While appellants may have other meritorious claims, the civil conspiracy claim fails.
[9] Appellants argue that the collateral source rule prevents the admission of evidence of the insurance coverage in this case. "The collateral source rule provides, as a general proposition, that an injured party may recover full compensatory damages from a tortfeasor regardless of the payment of any amount of those damages by an independent party (a `collateral source'), such as an insurance carrier." Bushong v. Park, 837 A.2d 49, 57 (D.C. 2003) (emphasis added). The italicized portions of the collateral source rule, however, demonstrate why it is inapplicable in this case. Here, State Farm (the independent party) compensated Ms. Garrick (the insured) for damages caused by the theft of her vehicle not for damages caused by Perry's failure to notify (the alleged tort in this case). Thus, while Ms. Garrick could sue the thief of her car despite State Farm's payment, she cannot sue a new tortfeasor because she did not own the vehicle when the second tort occurred.
[10] Ms. Garrick's CPPA claim against the towing companies remains. Though she did not own the vehicle at the time of the alleged injury, she can bring a CPPA claim on behalf of the general public. See D.C.Code § 28-3905(k)(1). Her CPPA claim against the District, however, fails because the District is not a merchant.
[11] All told, the regulations, internal operating procedures, and general practice may well confirm a duty on the part of MPD to notify vehicle owners when their cars have been towed or impounded. Further, while hot directly argued, intuitively, it is not difficult to see how the regulations regarding the towing of "unattended and illegally parked vehicles," see 18 DCMR § 2421.1, might apply to this case. The record does not detail the circumstances surrounding the recovery of the stolen vehicles; thus, while it is possible that the officers recovered the vehicles after pulling over the thieves (or others), it is also highly possible that the officers discovered the cars on the streets and found them to be either unattended or illegally parked. If that is the case, then the regulations would directly apply. This, however, is a factual determination that must be made by the trial court in the first instance. Accord, T.R. Ltd. v. Lee, 55 Md.App. 629, 465 A.2d 1186, 1189 (1983) (concluding that a Maryland statute governing unattended motor vehicles applied to a recovered stolen tractor-trailer that had run off the highway).
[12] Although this court has indicated that "even a series of contacts over a period of time is not enough `absent some showing that the agency assumed a greater duty to that person than the duty owed to the public at large,'" Powell, supra, 602 A.2d at 1130 (quoting Wanzer v. District of Columbia, 580 A.2d 127, 132 (D.C.1990)), we clarified that the Platt two-part inquiry (cited here) takes this greater duty factor into account by requiring justifiable reliance. See id. at 1130-31.
[13] This despite the court's earlier denial of the towing companies' motion to dismiss these claims. For example, the trial court denied the motion to dismiss the conversion claim, noting that the towing companies "fail[ed] to show that the initial possession of the vehicles was lawful." Yet the court failed to address this claim at the summary judgment stage.
[14] As noted above, however, the record is void of any evidence that the towing companies and the District conspired to deprive vehicle owners of notice. See, supra, note 8. Accordingly, appellants' civil conspiracy claim fails against the towing companies as well.
[15] On the contrary, Commander Joseph F. Griffith the individual responsible for overseeing MPD towing services confirmed that while MPD has a duty to notify the vehicle owners, neither the MPD Special Order nor any other regulation imposes a similar duty on towing companies. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541731/ | 76 B.R. 661 (1987)
In re Miles A. COOK and Nancy A. Cook, Debtors.
UNITED FEDERAL SAVINGS AND LOAN ASSOCIATION OF ILLINOIS, a corporation, Plaintiff,
v.
Miles A. COOK and Nancy A. Cook, Defendants.
Bankruptcy No. 87-80055, Adv. No. 87-8034.
United States Bankruptcy Court, C.D. Illinois.
August 4, 1987.
*662 Steven E. Davis, Galesburg, Ill., for plaintiff.
James S. Brannon, Peoria, Ill., for debtors/defendants.
OPINION AND ORDER
WILLIAM V. ALTENBERGER, Bankruptcy Judge.
The Plaintiff made a loan to the Debtors, and to evidence the loan, the Debtors signed and delivered to the Plaintiff a Note and Security Agreement (NOTE). At the top of the NOTE after setting forth the amount due, the number and amount of monthly payments, and other routine terms, the NOTE provided, in part, as follows:
"Description when Collateral is [✓] Motor Vehicle ...
New Year and Series Body No. If Manufacturer's Serial Use for
or Make Style Cyl. Truck Number which
Used Ton purch.
Capacity
____________________________________________________________________________________
used 1981 Olds Cutlass 4 dr. 1G3AR69F1BM411763 [✓] personal"
____________________________________________________________________________________
Immediately under that provision on the right side of the NOTE there is a separate section entitled by bold print "STATEMENT OF TRANSACTION". This portion of the NOTE contains spaces which when properly completed are intended to make the required Truth-in-Lending disclosures. Towards the bottom of the "Statement of Transaction" section there is a portion which reads as follows:
"Security: You are giving a security interest
in:
[] the goods or property being purchased.
[✓] any of your funds held by United Federal.
[] Other _________________________________"
Outside the "Statement of Transaction" section and towards the bottom of the NOTE, Paragraph 2 provides:
"Debtor agrees that the Association shall have, and there is hereby created in favor of the Association, a security interest *663 in the Collateral described or mentioned in the above Schedule of Collateral . . . "
The Debtors filed a Chapter 7 proceeding and the Plaintiff filed a petition seeking to have the automatic stay lifted to allow it to reclaim its collateral. In response to that petition, the Debtors counterclaimed contending they were not given the required Truth-in-Lending disclosures under Section 226.18(m) of the Truth-in-Lending disclosures under Section 226.18(m) of the Truth-in-Lending Regulations, Regulation Z, (12 CFR Section 226.18(m))[1] in the manner required by Section 226.17(a) (12 CFR Section 226.17(a)). Their specific charge is the section of the NOTE entitled "Statement of Transaction" does not disclose a security interest in the 1981 Olds. The Plaintiff responds to the charge by contending the disclosure was made at the top and bottom portions of the NOTE, even though the disclosure was not made in the "Statement of Transaction" section. The Plaintiff goes on to request sanctions alleging the counterclaim was not well founded in fact or warranted by existing law. While the litigation was pending, the vehicle was returned to the Plaintiff. So the only issues to be decided by this Court is whether the Plaintiff violated Truth-in-Lending and whether to impose sanctions on the Debtors.
Section 226.17(a) sets forth the general disclosure requirements for closed-end credit, and provides in part as follows:
"The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures shall be grouped together, shall be segregated from everything else, and shall not contain any information not directly related to the disclosures required under Section 226.18. . . ." (footnotes omitted.)
This section contains two requirements. First, the disclosures must be made clearly and conspicuously, and second the disclosures must be grouped together, be segregated from everything else and not contain any information not directly related to the required disclosures. Although the "Statement of Transaction" section of the NOTE is designed to comply with Section 226.17(a), because of the manner in which the blank spaces were completed, neither requirement is met.
The references at the top and bottom of the NOTE to the effect that the 1981 Olds was being given as collateral are not clear and conspicuous disclosures. The reference at the top of the NOTE merely provides a space for describing a vehicle as collateral, but there is no granting clause indicating the Debtors are giving a security interest in the Olds. Paragraph 2 at the bottom of the NOTE contains such a granting clause, which refers back to the top of the NOTE for a specific description of the collateral. Both provisions of the NOTE are in the smallest type size found on the NOTE and there is nothing to call these particular provisions to the Debtors' attention. The section entitled "Statement of Transaction" and other parts of the NOTE are printed in bolder or larger type. A reader's attention is drawn to those sections printed in bolder or larger type rather than to the provisions referring to the 1981 Olds as collateral found at the top and bottom of the NOTE. A disclosure is not clear and conspicuous when a reader must look for the disclosure in two separate portions of the note which are printed in the smallest type size found on the note while his attention is being diverted to another portion of the NOTE printed in bolder or larger type.
Nor can it be said that the required disclosures under Section 226.18(m) are grouped together and segregated. The location of this grouping of disclosures is commonly referred to as the "Federal Box".
The section of the NOTE entitled "Statement of Transaction" when properly completed, is intended to contain the disclosures normally found in the "Federal Box". This section was not properly completed *664 and the disclosure which the Plaintiff is relying on is located in two separate sections of the NOTE which are outside the "Federal Box" and intermingled with provisions not directly related to the required disclosures. Attorneys or lenders may glean from the NOTE the Plaintiff had a security interest in the 1981 Olds, but a borrower would not necessarily recognize such fact, and Truth-in-Lending disclosures being for the benefit of the borrower should be construed through his eyes and not those of the lender. See In re Underwood, 66 B.R. 656 (Bkrtcy.W.D.Va.1986).
Both Plaintiff and the Debtors were given an opportunity to file briefs on the issue. Neither side has submitted any authority which is directly applicable to Truth-in-Lending as amended by the Truth-in-Lending Simplification and Reform Act of 1980. The authority submitted by the Plaintiff all involve cases arising under Truth-in-Lending prior to the 1980 amendments. After Truth-in-Lending was first enacted, concern was expressed that creditors were encountering difficulty in keeping current with administrative interpretations, amendments, and highly technical judicial decisions, while borrowers were receiving disclosure statements which were too lengthy and difficult to understand. In response, Congress enacted the Truth-in-Lending Simplification and Reform Act of 1980, the purpose of which was to simplify the disclosures and to segregate them in a single location away from contract terms where the borrower could concentrate on them to analyze the transaction. S.Rep. No. 96-368, 96th Cong., 2d Sess. 16, reprinted in 1980 U.S.Code Cong. & Admin. News, 236, 251-54. If the Plaintiff's position were to be accepted, the goals of the Truth-in-Lending Simplification and Reform Act of 1980 would be defeated, as debtors could not look to a single location, i.e. the "Federal Box" for a simplified disclosure of the transaction.
THE COURT, THEREFORE, FINDS that the disclosures required by Section 226.18(m) were not made in the manner required by Section 226.17(a), and that the Plaintiff is not entitled to sanctions.
IT IS, THEREFORE, ORDERED:
1. That judgment is entered in favor of the Defendants and against the Plaintiff in the amount of $1,000.00, plus costs and reasonable attorney's fees to be determined by this Court.
2. That the Plaintiff's request for sanctions is denied.
This Opinion and Order is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.
NOTES
[1] Truth-in-Lending Regulations, Regulation Z, can be found at 15 U.S.C.A., following Section 1700. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541745/ | 949 A.2d 155 (2008)
The STATE of New Hampshire
v.
Peter MUNOZ.
No. 2007-159.
Supreme Court of New Hampshire.
Argued: February 21, 2008.
Opinion Issued: April 18, 2008.
*157 Kelly A. Ayotte, attorney general (Thomas E. Bocian, attorney, on the brief and orally), for the State.
Desfosses Law Firm, of Portsmouth (Philip Desfosses on the brief and orally), and Samdperil & Welsh, PLLC, of Exeter (Richard E. Samdperil on the brief), for the defendant.
GALWAY, J.
The defendant, Peter Munoz, appeals his conviction following a jury trial for attempted burglary, see RSA 635:1 (2007); RSA 629:1 (2007), arguing that the trial court erred in denying his motions to quash and to dismiss, and in permitting certain testimony. We affirm.
The record discloses the following facts. On May 29, 2003, Jennifer Durbin was alone in her second-floor apartment at the Fairways apartment complex in Derry when she heard a noise from her living room. When she went to investigate, she saw a man standing on her balcony attempting to pry open her sliding-glass door with an orange-handled screwdriver. When the man noticed her, he pulled the hood of his sweatshirt over his head, jumped off the balcony and departed. Durbin called the police. Upon their arrival, the police obtained a description of the man, and a latent fingerprint from the exterior handle of the balcony door.
Later that morning, an anonymous female caller with a Hispanic accent telephoned the Derry Police Department and spoke with Officer Barry Charewicz. She informed him that she had the name of someone the police "should be looking at for the Fairways attempted burglary." Despite being asked, the caller would not give her name, but did provide the defendant's name, age and physical description. The caller also stated that she and the defendant knew each other because they were from the same country. Shortly before trial, the caller was identified as the defendant's wife, Naomi Pena.
Based upon the information received from the then-anonymous tip, the police contacted the United States Immigration and Naturalization Service (INS) (now known as the United States Customs and Immigration Services) and obtained a fingerprint card for the defendant. It was later determined that the fingerprint from the balcony matched one on that card.
Approximately one month after finding the man on her balcony, Durbin and her husband moved out of their apartment. Three or four days prior to moving, the Durbins held a furniture sale at their apartment. Durbin testified that she recalled seeing the defendant and his wife at the sale, and that she sold them some furniture. Durbin testified that she was startled by the defendant's presence at the sale because she believed, though was not certain, that she recognized him as the man from her balcony. Durbin also testified that even at the time of trial she could not be certain if the defendant was, in fact, the man on her balcony.
In July 2003, with the defendant's wife acting as an interpreter, the police spoke with the defendant at his apartment. According to the interviewing officer's testimony, after being told that his fingerprint was found on the balcony, the defendant stated that he was not in Derry but in Boston on May 29. Later in the interview, the defendant stated that he was in Colombia on that day, but then stated that he had actually returned from Colombia before May 29. According to the officer, the defendant explained that his fingerprint might have been found in Durbin's apartment because he had been there to buy furniture, or because he had visited a prior tenant there, but he could not recall the *158 tenant's last name. At the conclusion of the interview, the police received the defendant's wife's permission to search her two cars and a slightly bent, orange-handled screwdriver was found in one.
The defendant was subsequently indicted for attempted burglary. Prior to trial, he moved to quash the indictment, arguing that it was defective. The Trial Court (Morrill, J.) denied the motion. He renewed his argument in a motion to dismiss at the close of the State's case, which the Trial Court (Coffey, J.) also denied. Additionally, before trial the defendant moved to preclude the State from referring to the anonymous telephone call or from disclosing its contents. The Trial Court (Coffey, J.), however, admitted testimony about the call, subject to certain limitations. The defendant appealed these rulings following his conviction for attempted burglary.
On appeal the defendant first contends, under Part I, Article 15 of the New Hampshire Constitution, that the trial court erred in denying his motions to quash and dismiss because the indictment was inadequate. According to the defendant, because burglary is essentially an attempt to enter a building to commit some other offense, for a burglary indictment to be adequate, it must allege which crime the perpetrator would have committed in furtherance of the burglary. The defendant contends that because a burglary indictment must allege the crime to be committed, so must an indictment for attempted burglary. Because the indictment here did not allege what other offense would be committed upon entry, it was defective.
"A person is guilty of an attempt to commit a crime if, with a purpose that a crime be committed, he does or omits to do anything which, under the circumstances as he believes them to be, is an act or omission constituting a substantial step toward the commission of the crime." RSA 629:1, I. Attempt is an inchoate crime that is considered a substantive offense in and of itself. State v. Johnson, 144 N.H. 175, 178, 738 A.2d 1284 (1999). To be constitutionally adequate, an indictment charging an attempt must allege both an intent to commit a crime and an overt act in furtherance of the crime. Id. at 177, 178, 738 A.2d 1284. However, while the attempt statute requires the State to identify the intended offense, it does not require the State to plead and prove the elements of the intended offense and it is ordinarily sufficient to state the intended offense generally. Id. at 178, 738 A.2d 1284. "Since an attempted crime is by definition a crime not completed, the State could not plead, factually identify, and prove the elements of the intended offense as if it had been carried out." Id.
Here, the indictment alleges that the defendant had the requisite intent and alleges an overt act in furtherance of the crime as well as the crime attempted, i.e., burglary. Therefore, it is constitutionally adequate. Id. at 177, 178, 738 A.2d 1284. Charging the defendant with attempted burglary does not require the State to specify the offense the defendant would have committed in furtherance of the burglary. Requiring the State to comply with the defendant's argument would require it to plead and prove the elements of the crime attempted, a result contrary to Johnson. Moreover, such a requirement would force the State to prove more than is required by the attempt statute, see RSA 629:1, I. The indictment meets the requirements for an adequate attempt charge and it describes the offense with sufficient specificity to allow the defendant to prepare for trial. Id. at 177, 738 A.2d 1284.
The defendant argues that not requiring the State to identify the crime to be committed would leave the jury to speculate *159 about what crime would have been committed. Permitting such speculation, according to the defendant, is impermissible because the jury could convict the defendant without reaching a unanimous decision regarding the crime that would have been committed. Unanimity, however, is required only as to the elements of the crime charged. See State v. Greene, 137 N.H. 126, 128, 623 A.2d 1342 (1993) ("The New Hampshire Criminal Code requires jury unanimity with respect to the presence of the elements of offenses in criminal cases as charged."). Here, the crime charged is attempted burglary, and unanimity is needed only as to its elements. What crime or offense the defendant would have committed in furtherance of the burglary is not an element of attempt, and, therefore, does not require unanimity. Accordingly, we conclude that the trial court did not err in denying the defendant's motions to quash and dismiss.
Next, the defendant contends that in admitting the officer's testimony regarding the substance of his conversation with the anonymous caller, the trial court violated his right of confrontation under both the State and Federal Constitutions. See N.H. CONST., pt. I, art. 15; U.S. CONST. amends. VI, XIV. Before trial, the defendant sought to exclude testimony regarding the anonymous call, but the trial court nevertheless permitted the State to introduce portions of the call through Charewicz, which the State did. The defendant argues that admitting Charewicz's testimony was error.
We address first the defendant's argument under Part I, Article 15 of the New Hampshire Constitution, citing federal opinions for guidance only. See State v. Miller, 155 N.H. 246, 253, 921 A.2d 942 (2007). The defendant contends that his rights under the State Constitution were violated because admitting Charewicz's testimony was contrary to Crawford v. Washington, 541 U.S. 36, 124 S.Ct. 1354, 158 L.Ed.2d 177 (2004). We have not, however, adopted the Crawford analysis as applicable in this State, see State v. Ayer, 154 N.H. 500, 511, 917 A.2d 214 (2006), cert. denied, ___ U.S. ___, 128 S.Ct. 63, 169 L.Ed.2d 52 (2007), and the defendant does not argue that we should do so here. Moreover, the defendant offers no argument under any other standard regarding the violation of his rights under the State Constitution. See id. (noting that we have traditionally applied the analysis in Ohio v. Roberts, 448 U.S. 56, 66, 100 S.Ct. 2531, 65 L.Ed.2d 597 (1980), to Confrontation Clause challenges under the State Constitution). Accordingly, we conclude that the defendant does not prevail on his claim under the New Hampshire Constitution.
In support of his claim under the Federal Constitution, the defendant relies principally upon Crawford, wherein the United States Supreme Court held that testimonial hearsay is inadmissible under the Federal Confrontation Clause unless the declarant is unavailable at trial and the defendant had a prior opportunity to cross-examine him or her. Crawford, 541 U.S. at 68, 124 S.Ct. 1354. As the First Circuit has stated:
Crawford holds that a declarant's "testimonial" out-of-court statement is not admissible under the Confrontation Clause unless (1) the declarant testifies, or (2) the defendant had a prior opportunity for cross-examination and the declarant is unavailable, or (3) the evidence is admitted for purposes other than establishing the truth of the matter asserted.
United States v. Maher, 454 F.3d 13, 19-20 (1st Cir.2006) (citations omitted), cert. denied, ___ U.S. ___, 127 S.Ct. 568, 166 L.Ed.2d 420 (2006); see also Ayer, 154 N.H. at 505, 917 A.2d 214. Here, it is undisputed that Pena did not testify and *160 that the defendant never had an opportunity to cross-examine her. Accordingly, resolution of the instant matter requires us to determine whether the evidence was admitted for purposes other than establishing the truth of the matter asserted.
"The Supreme Court has held in several instances that nonhearsay statements do not implicate the Confrontation Clause." United States v. Walter, 434 F.3d 30, 34 (1st Cir.), cert. denied, 547 U.S. 1199, 126 S.Ct. 2879, 165 L.Ed.2d 907 (2006). Moreover, "[i]n several cases, [the First Circuit] has held that when statements are offered only to provide context and not for the truth of the matter asserted, those statements are not hearsay." Id. The "`context' rationale," however, does not provide unlimited discretion to permit police testimony; what is most important is the precise nature of the context provided. Maher, 454 F.3d at 22. Here, the State argues that Pena's statements were not offered for the truth of the matter asserted, i.e., that the defendant attempted to burglarize Durbin's apartment, but to provide context for the investigation that followed. Indeed, the trial court ruled that Charewicz's testimony about the caller's statements was admissible to show the state of mind of the police, and the basis for their contact with INS. The defendant, however, contends that the testimony was offered to show that he had committed the crime.
As noted previously, before trial, the defendant sought to exclude all references to the telephonic tip and its contents. The State countered that the testimony regarding the tip would not be offered for its truth, but only to show why the investigation "took the turn that it did." The defendant then offered to permit the State to say that "a police investigation led us to suspect [the defendant]." This compromise was rejected by the trial court because it believed such a statement would imply that the police were aware of past criminal activity by the defendant, and would thus unfairly prejudice him. In the end, the trial court permitted the prosecution to admit Charewicz's testimony to the extent it would relate that the tipster said the defendant was one the police ought to "look at" in the Fairways attempted burglary, and that the caller gave a physical description of the defendant and knew the defendant because they were from the same country. The trial court stated that this testimony would be admitted in:
the manner in which we would similarly put in any kind of anonymous tip that's called in, that it's being offered to show the state of mind of the police and it's on that basis, that they predicated their next step, which was the fingerprint analysis. They had somewhere to go for that.
Thus, the trial court ruled that the testimony would not be admitted for its truth, but only to show why the police contacted INS and began investigating the defendant.
In his opening statement, the prosecutor relayed to the jury the contents of the call consistent with the trial court's ruling, and informed them that the description provided by the caller was the same as that given by Durbin. The prosecutor then informed the jury that based upon the information provided in the call, the police contacted INS. Later, the State introduced Charewicz's testimony as described previously, using leading questions so as to tailor the testimony to the trial court's pretrial ruling. Finally, in its closing, the State again related to the jury that the caller had given the police the defendant's name and physical description and had stated that she and the defendant were from the same country, and that as a result of this call the police contacted INS.
*161 "It is well settled that where a conversation is relevant irrespective of the truth of what is said, the hearsay rule does not operate to exclude the testimony." State v. Martineau, 116 N.H. 797, 798, 368 A.2d 592 (1976). Here, the trial court ruled that the testimony, as it has been described, would not be admitted for its truth, but only to show that a tip was given and that the police acted upon the information received. Thus, the trial court recognized that it was relevant that the conversation occurred and that it prompted the police to contact INS, regardless of whether the information in the call was, in fact, true. Accordingly, testimony about the call was admissible for a non-hearsay purpose. While the trial court did not issue an instruction to the jury informing them of the limited purpose for the testimony, the trial court had no obligation to do so absent a request therefore, or an objection to the lack thereof, by the defendant. See State v. Pelletier, 149 N.H. 243, 253, 818 A.2d 292 (2003).
The defendant contends that "if the statement was being admitted to show the police officers' state of mind, . . . then there was no need to include the caller's physical description of the defendant or her statement that [the defendant] was the one who committed the attempted break-in." The trial court, however, ruled that this information was permissible to show why the police contacted INS, as opposed to continuing their investigation in some other way. As argued by the prosecutor, "It has to make sense. Why would they go to INS?" In other contexts, we have noted that in assessing whether it is reasonable for the police to pursue an anonymous tip, we examine the reliability and credibility of the informant, and his or her basis of knowledge, as well as the quantity, quality and reliability of the information given. State v. Sousa, 151 N.H. 297, 299, 855 A.2d 1284 (2004). Here, inclusion of information such as the description and the provision of a name in reference to a particular incident helped to explain why the police might consider the tip to be reliable and why contacting INS for the defendant's fingerprint card was a reasonable step in light of the information obtained. Accordingly, because the information conveyed to the jury served to demonstrate the reasonableness of the police action in contacting INS, we conclude that the trial court's decision to permit the evidence on that ground was not error.
The defendant also contends that the testimony about the tip was offered for its truth because, during opening statements, the prosecutor used the information in the tip to corroborate the description given by Durbin. The defendant, however, made no objection to the prosecutor's argument during trial. Any argument that the State strayed beyond the trial court's pretrial ruling that the evidence was admitted for a limited, non-hearsay purpose should have been made to the trial court in the first instance, and we will not entertain objections that were not raised during the proceedings below because they are not preserved for our review. State v. Wong, 138 N.H. 56, 66, 635 A.2d 470 (1993).
Finally, the defendant contends that even if Charewicz's testimony was not hearsay, it was more prejudicial than probative, and, therefore, should not have been admitted. See N.H.R. Ev. 403. The State counters that the issue has not been preserved, or, if it has, the defendant does not prevail. As pointed out by the State, at no point did the defendant object to the introduction of any part of Charewicz's testimony on the ground that it would be more prejudicial than probative, nor did he invoke Rule 403's balancing of probative and prejudicial effect. His objection was based upon the Confrontation Clause and *162 not upon the supposed prejudicial nature of the evidence. In fact, the only time prejudice was mentioned was when the trial court ruled, without comment or objection from the defendant, that some portions of the call would be excluded as unfairly prejudicial. Even after this ruling, the defendant did not contend that the testimony permitted by the trial court was more prejudicial than probative. For these reasons, we conclude that the defendant has failed to preserve the issue for our review. See State v. Pepin, 156 N.H. 269, 275, 940 A.2d 221 (2007).
For the above reasons, we conclude that Charewicz's testimony was properly admitted by the trial court for a non-hearsay purpose. Accordingly, the testimony was not barred by Crawford.
Affirmed.
BRODERICK, C.J., and DALIANIS and HICKS, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644751/ | 4 So.3d 588 (2007)
D.C.
v.
STATE.
No. CR-05-2181.
Court of Criminal Appeals of Alabama.
January 12, 2007.
Decision of the alabama court of criminal appeals without opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541694/ | 949 A.2d 720 (2008)
In The MATTER OF Richard R. LEMIEUX and Joanne Lemieux.
No. 2007-227.
Supreme Court of New Hampshire.
Argued: May 21, 2008.
Opinion Issued: June 13, 2008.
*721 Cook & Molan, P.A., of Concord (Shawn J. Sullivan on the brief and orally), for the petitioner.
McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Jeanmarie Papelian and Joel T. Emlen on the brief, and Mr. Emlen orally), for the respondent.
DALIANIS, J.
The petitioner, Richard R. Lemieux, appeals an order recommended by a Marital Master (Rein, M.) and approved by the Superior Court (McHugh, J.) dismissing his petition to bring forward and approve a qualified domestic relations order (QDRO). The primary issue in the case is whether the trial court erred when it found that the petitioner failed to state a claim for reformation based upon mutual mistake of law. We reverse and remand.
The record supports the following facts: The petitioner, a federal employee, has a pension plan with the federal civil service retirement system. He and the respondent, Joanne Lemieux, were married in 1969 and divorced in 1990. Their final divorce decree incorporated the terms of their permanent stipulation, paragraph five of which provided:
The [petitioner's] pension shall be equally divided between the parties in a QDRO benefit arrangement.
a. [The respondent] is awarded 50% of the value of [the petitioner's] pension plan as of the date of the entry of the Libel of Divorce, pursuant to 29 U.S.C. Section [1056](d)(3)(C).
. . . .
c. The percent of benefits to be paid to [the respondent] is 50% of the value as of the date of the entry of the Libel for Divorce.
d. This Order applies to the entire pension plan in existence as of the above-referenced date.
e. This Order applies to all pension plans in which [the petitioner] participates as a result of his employment by the Federal Government.
f. Benefits for [the respondent] shall begin on the date [the petitioner] reaches earliest retirement age under the plan, whether or not he actually retired on that date.
On December 12, 2000, and January 24, 2001, the United States Office of Personnel Management (OPM), which administers the civil service retirement system, informed the petitioner that it had processed the respondent's claim pursuant to this paragraph of their stipulation. OPM awarded her fifty percent of the value of the petitioner's pension as of the date upon which he became eligible for retirement, a benefit of $1,354.93 per month.
In March 2001, the petitioner challenged OPM's decision, arguing that the respondent was entitled only to fifty percent of *722 the value of his pension as of the date on which the divorce action was filed, January 19, 1990. According to his calculations, the respondent was entitled to a benefit of $794.50 per month. OPM rejected the petitioner's arguments, and he appealed to the Merit Systems Protection Board, which upheld OPM's decision. The petitioner then appealed the board's decision to the Court of Appeals for the Federal Circuit, which ruled that OPM's calculation of the respondent's retirement benefit was correct. Lemieux v. Office of Personnel Management, 87 Fed.Appx. 727 (C.A.Fed. 2004).
In February 2006, the petitioner filed a petition to bring forward and approve a QDRO in superior court, arguing, in part, that a QDRO was needed to reform the parties' property settlement. The petitioner contended that reformation of the parties' property settlement was necessary because of a mutual mistake of law. The mutual mistake, he contended, was that paragraph five of the parties' permanent stipulation referenced the QDRO provision of ERISA, see 29 U.S.C.A. § 1056(d)(3)(C) (1999), even though his pension is exempt from ERISA. See 29 U.S.C.A. § 1003(b)(1) (1999) (governmental plans, including the petitioner's plan, are exempt from ERISA). Because of this mistake, he explained, paragraph five did not include the requisite language necessary to award a former spouse a percentage of a civil service retirement system pension as of the date of the parties' divorce. See Lemieux, 87 Fed.Appx. at 728.
Under the regulations governing civil service retirement benefits in effect when the parties divorced, to make such an award, the decree had to "either state the dollar amount of the award or explain with sufficient clarity that salary adjustments, as well as service, after the date of the decree are to be disregarded in computing the former spouse's share." Id. (quotation omitted). If the decree failed to include this language, the former spouse's share would be calculated as of the date of retirement and would include any increases in the annuity as a result of raises and cost-of-living adjustments in the years between the divorce and the retirement. Id. The parties' stipulation, which merely stated that the respondent was awarded fifty percent of the value of the petitioner's retirement as of the date of the entry of the libel for divorce, was ineffective under these regulations because it failed to "explicitly disallow the inclusion of raises and cost-of-living adjustments." Id.
The respondent filed a motion to dismiss the petition, which the trial court granted, ruling that the petitioner had failed to establish a mutual mistake of fact sufficient to reform the parties' stipulation. The petitioner moved for reconsideration, arguing, in part, that the mutual mistake at issue was one of law, not fact. The trial court rejected this argument, ruling that the alleged mistake of law did not require reforming the parties' stipulation because "it is not impossible for the retirement plan administrator to comply with [its] terms . . . as written." This appeal followed.
In reviewing the trial court's grant of a motion to dismiss, our standard of review is whether the allegations in the petitioner's pleadings are reasonably susceptible of a construction that would permit recovery. McNamara v. Hersh, 157 N.H. ___, ___, 945 A.2d 18, 20 (2008). We assume the petitioner's pleadings to be true and construe all reasonable inferences in the light most favorable to him. Id. We then engage in a threshold inquiry that tests the facts in the petition against the applicable law, and if the allegations constitute a basis for legal relief, we must *723 hold that it was improper to grant the motion to dismiss. Id.
The petitioner argues that the trial court erred when it rejected his claim that the parties' stipulation could be reformed because of a mutual mistake of law. We agree it could, but not that it had to, be reformed. That will be decided on remand.
It is well established that courts may grant reformation in proper cases where the instrument fails to express the intentions that the parties had in making the contract. Grabowski v. Grabowski, 120 N.H. 745, 747, 422 A.2d 1040 (1980). This principle applies to marital decrees that incorporate mutual mistakes in property settlements. Id.
Courts may grant reformation only when the evidence is clear and convincing that the written instrument does not express the true agreement of the parties. Id. "Although the plain meaning rule bars consideration of parol evidence to vary or contradict the meaning of a writing, parol evidence may establish that, due to a mutual mistake, the writing does not reflect the agreement of the parties." Id. at 748, 422 A.2d 1040.
The respondent contends that reformation may be had only for a mutual mistake of fact. To the contrary, while this is the law in a few jurisdictions, see 66 Am.Jur.2d Reformation of Instruments § 15, at 239 (2001), it is not the law in New Hampshire. In New Hampshire, as in many other jurisdictions, "when either type of mistake results in the parties' obvious failure to articulate their true and discoverable intent, reformation is available if justice and common sense require it." Hovden v. Lind, 301 N.W.2d 374, 379 (N.D.1981); see Eastman v. Association, 65 N.H. 176, 176-77, 18 A. 745 (1889).
Modern contract law does not distinguish between mistakes of fact and mistakes of law, but treats both alike for purposes of equitable relief. 27 R. Lord, Williston on Contracts § 70:125, at 615 (4th ed.2003); see Restatement (Second) of Contracts § 151 comment b at 384 (1981) ("The rules stated in this Chapter do not draw the distinction that is sometimes made between `fact' and `law.' They treat the law in existence at the time of the making of the contract as part of the total state of facts at that time."); 7 J. Perillo, Corbin on Contracts § 28.49, at 343 (revised ed. 2002) ("Today, the rule denying relief for mistake of law has little vitality. It has been eroded by so many qualifications and exceptions, varying from jurisdiction to jurisdiction. It is common to find cases where the issue is not even raised."); 2 E.A. Farnsworth, Farnsworth on Contracts § 9.2, at 564 (2d ed. 1998) ("[T]he modern view is that the existing law is part of the state of facts at the time of agreement. Therefore, most courts will grant relief for such a mistake, as they would for any other mistake of fact.").
The important question is not whether the mistake was one of law or fact, but whether it was the type of fabric that a court of equity would mend. Eligible candidates are those cases falling within the fundamental principle of equity that no one shall be allowed to be enriched unjustly at the expense of another by reason of an innocent mistake of law or fact entertained by both parties.
Lord, supra § 70:125, at 616.
We have issued only a few opinions regarding reformation for mutual mistake of law. See Massicotte v. Matuzas, 143 N.H. 711, 713, 738 A.2d 1260 (1999); Archer v. Dow, 126 N.H. 24, 28-29, 489 A.2d 574 (1985); Eastman, 65 N.H. at 176-77, 18 A. 745. Massicotte and Archer involved land conveyances. Both cases cited the following *724 rule: "It is old and well-established law that equity, at the instance of a grantor will reform a voluntary conveyance, where, by mistake of law or fact, a larger estate or more land has been granted than was intended to be conveyed." Massicotte, 143 N.H. at 713, 738 A.2d 1260 (quotation and ellipses omitted); see Archer, 126 N.H. at 28-29, 489 A.2d 574. Eastman, on the other hand, involved the reformation of a certificate of membership issued by the defendant to Gigar, the plaintiff's intestate. Eastman, 65 N.H. at 176, 18 A. 745. The parties "intended to make the benefit payable to Gigar's administrator. That it was not made payable to him was due to their mutual misapprehension of the legal effect of the language used in the certificate." Id. The court ruled that "[e]quity requires an amendment of the writing that will make the contract what the parties supposed it was and intended it should be, although their mistake is one of law and not of fact." Id. at 177, 18 A. 745.
We find Eastman controlling in this case. According to the petitioner's allegations, the parties intended to award the respondent fifty percent of his pension as of the date of the divorce decree, not as of the date of his eventual retirement. That the language of their stipulation failed to accomplish this was due to their mutual misapprehension of the legal effect of the language they used. We hold that these allegations are sufficient to state a claim for reformation based upon a mutual mistake of law. See Restatement (Second) of Contracts, supra § 155 comment a at 407 ("If the parties are mistaken with respect to the legal effect of the language that they have used, the writing may be reformed to reflect the intended effect."). Accordingly, we reverse the trial court's ruling to the contrary and remand for further proceedings consistent with this opinion. See Hearn v. Hearn, 177 Md. App. 525, 936 A.2d 400 (2007).
Reversed and remanded.
BRODERICK, C.J., and DUGGAN, GALWAY and HICKS, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541691/ | 76 B.R. 764 (1987)
In re Jason TAITE, Elaine Taite, Debtors.
PEOPLE OF the STATE OF CALIFORNIA, John K. Van de Kamp, Attorney General, Plaintiffs,
v.
Jason TAITE, Elaine Taite, Defendants.
Bankruptcy No. LA 85-09892-LF, Adv. No. LA 85-4076-LF.
United States Bankruptcy Court, C.D. California.
June 11, 1987.
*765 John K. Van de Kamp, Atty. Gen., Michael R. Botwin, Deputy Atty. Gen., Los Angeles, Cal., for State of Calif.
Earle Hagen, Hagen & Hagen, Encino, Cal., for debtors.
OPINION
LISA HILL FENNING, Bankruptcy Judge.
On July 18, 1985, Jason and Elaine Taite filed a joint Chapter 7 petition as husband and wife. They have since divorced. Their schedules list over $1,000,000 in disputed debts owed to the State of California as a result of state court judgments rendered in two related cases. The issue presented here is whether these debts are nondischargeable under 11 U.S.C. § 523(a)(2) or (a)(7). This Court concludes that all of these debts are nondischargeable as to Jason Taite; all but one are nondischargeable as to Elaine Taite.
BACKGROUND
In 1977, the Attorney General began an investigation of consumer fraud allegations against Debtors, doing business as Custom Craft Carpets, Inc., a retail carpet operation. Jason Taite served as president and chairman of the board of directors. Elaine was corporate secretary, the only other officer or director. At various times, she ran the office operations of the business and acted as the receptionist. No one other than the Taites ever owned stock in Custom Craft Carpets, Inc.
*766 Upon learning of the Attorney General's investigation, but prior to the filing of the complaint, Debtors' corporation sued the individual members of the Attorney General's office in Custom Craft Carpets, Inc. v. Evell J. Younger, Superior Court of Los Angeles County, Docket No. C 225751 (1979). The complaint alleged that defendants were continuing the investigation on the basis of fabricated evidence and with knowledge that the charges were false. The trial court granted summary judgment against Custom Craft. In affirming that decision, the court of appeal summarized the allegations as follows:
"Stripped of its conclusionary allegations and epithets, the complaint simply alleges that the deputy attorneys general and the deputy city attorney cooperated together in an inquiry into plaintiffs' [debtors] advertising and marketing practices. In the course of said inquiry, plaintiffs were invited to the office of the Attorney General and were advised that the deputies intended to file a civil action against the plaintiffs. Plaintiffs were offered a copy of a proposed civil complaint along with a proposed stipulated judgment which would provide for the payment of $50,000 in civil penalties and an injunction against engaging in certain proscribed practices in the future.
In short, the deputies advised plaintiffs of their intent to institute a civil action and proposed a settlement of the case. Plaintiffs then assert their innocence and allege in conclusionary fashion that deputy attorneys general and deputy city attorney, along with their employers, knew that the charges were false and were proceeding on fabricated evidence."
Custom Craft Carpets, Inc. v. Miller, 137 Cal. App. 3d 120, 124, 187 Cal. Rptr. 78, 80-81 (1982).
The court of appeal found "that the entire matter was from trial level to the appellate level a sham designed to gain time for Custom Craft to continue its improper conduct." Id. at 123, 187 Cal.Rptr. at 79. In addition to the usual costs on appeal, the court penalized Debtors $10,000 ($5,000 to the State of California and $5,000 to the City of Los Angeles) for taking a frivolous appeal. Id. at 123-124, 187 Cal.Rptr. at 79-80. These sanctions were awarded pursuant to California Rules of Court, Rule 26(a) which provides:
"Where the appeal is frivolous or taken solely for the purpose of delay or where any party shall have required in the type-written or printed record on appeal the inclusion of any matter not reasonably material to the determination of the appeal, or has been guilty of any other unreasonable infraction of the rules governing appeals, the reviewing court may impose upon offending attorneys or parties such penalties, including the withholding or imposing of costs, as the circumstances of the case and the discouragement of like conduct in the future may require."
The Attorney General's investigation resulted in a civil action against Debtors, People v. Custom Craft Carpets, Inc., Jason Taite, Elaine Taite, et al., Superior Court of Los Angeles County, Docket No. C226056 (1981). The complaint alleged violations of California Business and Professions Code Sections 17200 (unfair competition), 17500 (deceptive advertising), and 17508 (failing to substantiate advertising claims). After a three month trial, the superior court expressly found that Debtors:
". . . engaged in unlawful, unfair, and fraudulent business practices in violation of Business and Professions Code section 17200, made untrue and misleading statements in violation of Business and Professions Code section 17500 and failed to substantiate certain advertising claims as required by Business and Professions Code section 17508 . . ." Id. at 2.
After trial, the court issued a permanent injunction barring the use of deceptive television commercials, deceptive home sales films, bait and switch sales tactics, violations of the Unruh Act, illegal procurement and enforcement of lien contracts and deeds of trust, poor installation of carpeting, and failure to respond to meritorious complaints from customers. The trial court, however, refused to impose civil penalties *767 and restitution as the Attorney General requested. Both sides appealed.
The appellate opinion is reported in People v. Custom Craft Carpets, Inc., 159 Cal. App. 3d 676, 206 Cal. Rptr. 12 (1984). Expressing disgust with Custom Craft's "offensive practices" and "innumerable instances of unethical conduct" (Id. at 680-81; 206 Cal.Rptr. at 15), the court of appeal affirmed the award of injunctive relief and the determination that Custom Craft was liable for its many violations of the unfair competition and false advertising provisions of the Business and Professions Code. The appellate court, however, reversed the trial court in part, concluding that it had abused its discretion in failing to impose mandatory civil penalties and order restitution.
On remand, the trial court conducted supplemental evidentiary proceedings limited to the issues of appropriate monetary sanctions. On August 7, 1985, the court issued a Modified Final Judgment and on October 2, 1985 issued a Statement of Decision, which states:
"Defendants' violations of law were extensive. Over 20,000 deceptive television commercials were broadcasted, of which at least 6,000 were the blatantly deceptive commercials filed by William Riead. Defendants' television commercials were responsible for approximately 90% of defendants' customer leads which by early 1978 netted defendant over 40,000 customers.
"Defendants' deceptive television commercials were followed by deceptive sales films, bait and switch, violations of the Unruh Act, tricking customers into signing illegal lien contracts on their homes, backdating documents, improper installation, the use of illusory and deceptive warranties, the failure to respond to legitimate complaints, the use of extortionistic collection letters, impersonating a deputy sheriff, and by other deceptive conduct.
"Defendants prospered from their deceptive, unethical and illegal business practices. For example, their sales grew from $2,578,974 in carpet and drapery sales during fiscal year 1976 to over $4,000,000 during fiscal year 1980. During this time, defendants generated more than $16 million in sales from more than $2 million in advertising.
"Defendants attempted to mitigate their exposure to civil penalties by submitting declaration testimony of their poor financial state indicating a negative net worth greatly exceeding one million dollars. The burden of proving defendants' inability to pay the requested civil penalties rests on defendants' shoulders. People v. Toomey, (1984) 157 Cal. App. 3d 1, 24 [203 Cal. Rptr. 642]. Defendants failed to meet this burden.
"The evidence offered by defendants concerning their net worth was not believed by this court. The record is replete with examples of defendants' lack of veracity. For example, defendants admitted that the two million dollar contingent liability claims to be owed to Eugene Krivis was in reality only a one thousand dollar liability. Jason Taite admitted giving Independence Bank a financial statement which falsely purported to be prepared by a certified public accountant and which contained deliberately false financial information. Jason Taite also gave the bank a copy of the Taites' personal income tax return. Elaine Taite's signature was forged on the tax return. The numerous contradictions in financial statements and other financial evidence submitted to this court were so substantial and self-impeaching that the defendants' financial information could not be believed. Defendants' life style, which includes the recent purchase of a second home, recent remodeling, two leased luxury vehicles and a line of credit at a gambling casino indicate a substantially different financial picture than the one defendants attempted to paint . . .
"Over 3,000 customers in Los Angeles County alone had illegal liens placed on their homes. Eighteen homes in Los Angeles county were sold at foreclosure sales based on defendants' illegal and void liens. The proscribed practices were pervasive and long enduring. The *768 $750,000 civil penalty was based on the totality of the circumstances for all the violations of law that occurred."
People v. Custom Craft Carpets, Inc., Statement of Decision, Superior Court of Los Angeles County, No. C226056 pp. 6-8 (1985).
The $750,000 civil penalty was by no means the maximum that could have been awarded. California Business and Profession Code Sections 17206 and 17536 authorized up to $2,500 for each violation. The $750,000 in civil penalties "amounts to no more than $125 for each of the 6,000 broadcasts of the deceptive television commercials." Id. at 8.
In addition to the $750,000 civil penalty, the trial court ordered Debtors to pay $256,645 as partial restitution. The Statement explained that the amount of restitution was based upon a finding that 3,001 Los Angeles County customers of Debtors' company had paid between $35-45 in lien fees and reconveyance fees of $32.50 and $50.00 between 1975 and 1984 as a result of Debtors' illegal acts. The restitution calculation did not include lost equity in the homes, foreclosure related fees, or fees for contracts recorded outside of Los Angeles County.
Although dated shortly after Debtors' bankruptcy filing, the supplementary Statement of Decision was issued by the trial court sua sponte to provide a detailed explanation of the calculation of monetary awards already entered. This court thus could properly consider it.
On October 18, 1985, the Attorney General filed an adversary complaint in Debtors' bankruptcy case to determine the nondischargeability of (1) the Court of Appeal's order for $10,000 in sanctions resulting from the filing of the frivolous appeal; (2) the Superior Court judgment awarding $750,000 in civil penalties; and (3) the Superior Court judgment awarding $256,645 as restitution.
I. THE EFFECT OF THE STATE COURT JUDGMENTS
Bankruptcy court has exclusive jurisdiction to determine the nondischargeability of a debt arising from a state court judgment. Lawrence T. Lasagna, Inc. v. Foster, 609 F.2d 392, 396 (9th Cir.1979); In re Houtman, 568 F.2d 651, 653 (9th Cir. 1978); In re Moultrie, 51 B.R. 368, 372 (Bankr.W.D.Wash.1985). Under the Ninth Circuit rule, a state court judgment rendered after full litigation of the issues may be offered to establish a prima facie case of the elements of nondischargeability. The debtor has the right to offer rebuttal evidence, however, on the Section 523 criteria. Id. at 373.
As California's evidence of the fraud and misrepresentation perpetrated by Debtors, the Attorney General offered into evidence the Findings of Fact and Conclusions of Law, the Final Judgment, Modified Final Judgment, and Statement of Decision of the trial court and the published opinions of the California court of appeal in both Custom Craft Carpets, Inc., et al, v. Miller and People v. Custom Craft Carpet, Inc. The judgment against Debtors on the issue of liability was final at the time of the hearing in the adversary proceeding; the Superior Court's post-remand decision on the monetary awards was still pending on appeal.
The only rebuttal testimony offered by Debtors was that of Elaine Taite. Her testimony established that she had actual prior knowledge of the misrepresentations made in many of the commercials and that she was actively involved in the operations of the business, even though her ex-husband was the decision-maker. She, of course, shared Jason Taite's plush life style supported by the ill-gotten gains of these deceptive practices. She did not, however, have any knowledge of, participate in, or benefit from the suit to enjoin the Attorney General's investigation. By that time, her marriage was crumbling and her role in the business was de minimus.
The Attorney General argued that this Court should find all of the monetary awards against Debtors nondischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(7). The following discussion first focuses on the dischargeability of the civil *769 penalties, then addresses the restitution award, and, finally, the court sanctions.
II. THE CIVIL PENALTIES
The Attorney General argues that the $750,000 of civil penalties imposed by the state court judgment are automatically nondischargeable under Section 523(a)(7). This subsection makes a debt nondischargeable ". . . 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 penalties in this case fall squarely within the scope of this exception to discharge. Although civil in nature, an action by the Attorney General of California for violation of the California Business and Professions Code is a law enforcement action for the purpose of punishing the defendant and deterring further offenses. The civil penalties imposed against the defendant are intended to be punitive:
"An action filed by the People seeking injunctive relief and civil penalties is fundamentally a law enforcement action designed to protect the public and not to benefit private parties. The purpose of injunctive relief is to prevent continued violations of law and to prevent violators from dissipating funds illegally obtained. Civil penalties which are paid to the government (§ 17536, subds. (b) and (c); . . .) are designed to penalize a defendant for past illegal conduct." People v. Pacific Land Research, 20 Cal. 3d 10, 17, 141 Cal. Rptr. 20, 24, 569 P.2d 125, 129 (1977).
Moreover, Business and Professions Code Section 17206, under which Custom Craft was found liable, mandates that the trial court "must exact a penalty for each violation committed." Custom Craft, supra, 159 Cal.App.3d at 686, 206 Cal.Rptr. at 18 (emphasis in original). The trial court may only exercise discretion as to the amount of the penalty up to the $2500 ceiling per violation. This Court, therefore, concludes that the civil penalties of $750,000 imposed against Debtors are a debt for a "penalty payable to or for the benefit of a governmental unit" within the meaning of Section 523(a)(7). This penalty is therefore automatically nondischargeable. The State was thus not required to institute an adversary proceeding under 11 U.S.C. § 523(c) to determine nondischargeability of these penalties.
III. THE RESTITUTION ORDER
The Attorney General also argues that the $256,645 civil restitution order against the Debtors should be held nondischargeable under Section 523(a)(7). This issue appears to be one of first impression.
In late 1986, the United States Supreme Court held that criminal restitution is automatically nondischargeable because "§ 523(a)(7) preserves from discharge any condition a state criminal court imposes as part of a criminal sentence." Kelly v. Robinson, 479 U.S. ___, 107 S. Ct. 353, 361, 93 L. Ed. 2d 216 (1986). Although the question of civil restitution was not addressed, the Court's analysis bears upon the issues here.
In 1980, Carolyn Robinson pled guilty to a charge of larceny arising from the wrongful receipt of welfare payments from the State of Connecticut. The Connecticut Superior Court sentenced her to a prison term followed by a period of probation. As a condition of the probation, Robinson was ordered to make restitution of $100 per month to the Connecticut Probation Office. In 1981, Robinson filed a Chapter 7 bankruptcy petition listing the restitution obligation as a debt. Although informed that any objection to discharge of debts must be made prior to April 27, 1981, no state agency objected and debtor was granted a discharge. Later, the Connecticut Probation Office told Robinson that the discharge did not affect her obligation to continue restitution payments. Robinson filed an adversary proceeding in the Bankruptcy Court seeking declaratory relief and an injunction to prevent enforcement of the restitution order.
The bankruptcy court concluded that the discharge did not alter the state-ordered condition of parole. Robinson v. McGuigan, 45 B.R. 423 (Bankr.D.Conn.1984). In *770 that court's view, the required payments were not a debt under the definitional sections of the Bankruptcy Code, 11 U.S.C. §§ 101(11), 101(4) and 101(9). Since the required payments did not qualify as a "debt," they were not affected by the bankruptcy discharge. The court offered an alternate basis for its ruling: "Assuming arguendo that the state court's order of restitution did create a `debt' within the purview of the Bankruptcy Code, such a debt is a `penalty' and therefore excepted from discharge under § 523(a)(7)." Id. at 424 (emphasis in original). The district court affirmed the decision of the bankruptcy court.
The Second Circuit Court of Appeals rejected this analysis. In re Robinson, 776 F.2d 30 (2d Cir.1985). It concluded that the restitution was a "debt" but not a "penalty," and therefore held that it was dischargeable absent a timely and successful complaint filed pursuant to 11 U.S.C. § 523(c) to determine nondischargeability under Section 523(a)(2). The United States Supreme Court reversed, based upon its conclusion that Section 523(a)(7) ". . . creates a broad exception for all penal sanctions, whether they be denominated fines, penalties, or forfeitures..... [I]t codifies the judicially created exception to discharge for fines." 479 U.S. at ___, 107 S.Ct. at 362.
Quoting In re Pellegrino, 42 B.R. 129, 133 (Bankr.Conn.1984), the Supreme Court emphasized the governmental benefit:
"`Unlike an obligation which arises out of a contractual, statutory or common law duty, here the obligation is rooted in the traditional responsibility of a state to protect its citizens by enforcing its criminal statutes and to rehabilitate an offender by imposing a criminal sanction intended for that purpose.'"
Robinson, Id. 479 U.S. at ___, 107 S.Ct. at 362.
The Supreme Court concluded that restitution was "not compensation for actual pecuniary loss" because "the victim has no control over the amount of restitution awarded or over the decision to award restitution. Moreover, the decision to impose restitution generally does not turn on the victim's injury, but on the penal goals of the State and the situation of the defendant." Id. at ___, 107 S.Ct. at 362.
Throughout its opinion, the Supreme Court placed overriding importance on federal deference to "the States' interest in administering their criminal justice systems free from federal interference." Id. at ___, 107 S.Ct. at 361. In so doing, the Robinson majority avoided close analysis of the overall framework of the Bankruptcy Code and deliberately sidestepped the question of whether criminal restitution was a "debt" within the meaning of 11 U.S.C. § 101(11). Id. at ___, 107 S.Ct. at 361. This emphasis was necessary to the result because of Connecticut's failure to file a nondischargeability complaint against Robinson. Therefore, unless the debt was held to be automatically nondischargeable under Section 523(a)(7), Robinson would have to be discharged from her obligation due to the state's inaction. By contrast, here the State of California filed a timely complaint under Section 523(c).
Robinson leaves unanswered whether restitution ordered as part of a civil fraud judgment obtained in furtherance of a state's law enforcement purposes is either automatically nondischargeable under section 523(a)(7) or may be held a nondischargeable debt under section 523(a)(2).
A. Civil Restitution As A "Debt"
The Bankruptcy Code defines "debt" as "liability on a claim." 11 U.S.C. § 101(11). In turn, section 101(4) defines "claim" to include any:
"(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; . . . "
Section 101(9) defines a "creditor" as an: "(A) entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." "Entity" includes "person, estate, trust and governmental unit." 11 U.S.C. § 101(14).
*771 As a result of a state court judgment against Debtors, California has a right to payment of $256,645, which, absent the bankruptcy filing, it would have been entitled to enforce against Debtors' property in the same manner under California law as any judgment creditor. Under these definitional sections, therefore, the restitution judgment constitutes a "debt" that is subject to discharge in bankruptcy unless excepted from discharge under one or more provisions of Section 523.
This conclusion is confirmed by the legislative history of Section 101(4)(A), which emphasizes the broad sweep of the concept of "debts" that should be administered in a bankruptcy case:
"All claims against the debtor, whether or not contingent or unliquidated will be dealt with in the bankruptcy case . . . The proposed law will permit a complete settlement of the affairs of a bankrupt debtor, and a complete discharge and fresh start."
". . . "
". . . [S]ection 101(4) adopts an even broader definition of claim than is found in the present debtor rehabilitation chapters . . . By this broadest possible definition, and by the use of the term throughout the title 11, . . . the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court." H.R. Rep. No. 595, 9th Cong., 1st Sess. 309, reprinted in 1978 U.S.Code Cong. & Ad. News 5787, 5963, 6141, 6266.
The Senate Report that accompanied S. 2266 offered the same explanation of its identical definition of claim. See S.Rep. No. 989, 95th Cong. 2d Sess. 21, reprinted in 1978 U.S.Cong. & Ad.News, 5807-08, reprinted in Bankruptcy Reform Act of 1978; Hearings on S. 2266 and H.R. 8200 Before the Subcomm. on Improvements in Judicial Machinery of Senate Comm. on the Judiciary, 95th Cong., 1st Sess. 3 (1977).
Even though Section 523(a)(7) speaks in terms of "debt . . . for a fine, penalty or forfeiture," the Robinson majority reserved the question of whether criminal restitution is a debt. Dissenting Justices Marshall and Stevens, however, argued that the criminal restitution was by definition a "debt": "The definition of `debt' is intentionally broad not only to ensure the debtor of a meaningful discharge but to guarantee as many creditors as possible the right to participate in the distribution of the property of the estate." 479 U.S. at ____, 107 S.Ct. at 365. Commenting on the Second Circuit's opinion in Robinson, Justice Marshall stated:
As the Court of Appeals observed, a conclusion that the restitution obligation was not a debt `would produce the anomalous result that no holder of a right to restitution could participate in the bankruptcy proceeding or receive any distributions of the debtor's assets in liquidation. There is no evidence that Congress intended such a result.' 776 F.2d, at 35-36. On the contrary, Congress plainly intended that fines, penalties and forfeitures be deemed debts eligible to participate in the distribution of the bankruptcy estate, and the statute provides explicitly for that participation. See 11 U.S.C. § 726(a)(4). The very fact that fines, penalties and forfeitures are made nondischargeable under § 523(a)(7) indicates that they were deemed `debts'; if they were not debts, they would not be affected by discharge, see 11 U.S.C. § 524, and there would be no need to make them nondischargeable." Id. at ____, 107 S.Ct. at 365.
This analysis compels the conclusion that the instant civil restitution order is a "debt" under the Bankruptcy Code.
B. Applicability of Section 523(a)(7) to Civil Restitution Judgments
The Section 523(a)(7) exception to discharge has two tests that debts for fines, penalties and forfeitures must satisfy: (1) they must be "payable to and for the benefit of a governmental unit", and (2) they must not be "compensation for actual pecuniary loss". In Robinson, the United States Supreme Court held that, due to their law enforcement character, criminal *772 restitution judgments qualify as "fines" that are not debts for "actual pecuniary loss". 479 U.S. at ____, 107 S.Ct. at 361.
The Robinson dissenters parted company with the majority in concluding that criminal restitution is intended as compensation for the victim's pecuniary loss. As such, the dissenters would exclude restitution from automatic exception to discharge under Section 523(a)(7). In their view, although Connecticut's debt might well have been determined nondischargeable under other subsections of Section 523, failure to file the requisite complaint to determine nondischargeability meant that the restitution claim must be discharged. Cf., In re Heincy, 58 B.R. 930 (Bankr.S.D.Cal.1986) (Holding that a criminal restitution order was a debt, the bankruptcy court enjoined California from enforcing the restitution order during the pendency of the chapter 13 case, because the debt was provided for in the plan and the State had not timely objected to its discharge); Cf. In re Johnson-Allen, 69 B.R. 461 (Bankr.E.D.Pa.1987) (Criminal restitution obligations are "debts" dischargeable under chapter 13 plans.)
The question presented here is whether a government's civil restitution award based upon a finding of fraud is automatically nondischargeable under this section, or whether it should be subject, like civil fraud judgments obtained by any other creditors, to prove-up under the standard of Section 523(a)(2).
In determining if Section 523(a)(7) of the Bankruptcy Code should be interpreted broadly to include civil restitution, this Court is guided by the rule of construction stated so well by Justice Douglas: "`We do not read these statutory words with the ease of a computer. There is an overriding consideration that equitable principles govern the exercise of bankruptcy jurisdiction.'" Bank of Marin v. England, 385 U.S. 99, 103, 87 S. Ct. 274, 277, 17 L. Ed. 2d 197 (1966).
On the one hand, Congress has recognized the special importance of civil law enforcement in exempting from the automatic stay provisions of the Bankruptcy Code not only state criminal proceedings, but also "the commencement or condition of an action or proceeding by a governmental unit to enforcement such governmental unit's police or regulatory power." 11 U.S.C. § 362(b)(4).
On the other hand, a significantly different standard of proof is required in civil law enforcement and regulatory actions, than in criminal matters. Moreover, a determination of civil liability is not necessarily predicated upon the same kind of findings of intent and wrongful conduct as would be essential to criminal liability.
Examination of the statutory enforcement scheme at issue here demonstrates that the restitution remedy serves two goals: deterrence and compensation of victims. A state suit for violation of California's consumer protection statutes "is fundamentally a law enforcement action designed to protect the public and not to benefit private parties." People v. Pacific Land Research Co., supra, 20 Cal.3d at 17, 141 Cal.Rptr. at 24, 569 P.2d at 129. Any request for restitution in such an action is only ancillary to the remedies sought for the benefit of the public. People v. Superior Court (Jayhill), 9 Cal. 3d 283, 286, 107 Cal. Rptr. 192, 194, 507 P.2d 1400, 1402 (1973).
Restitution awards have been held to benefit the public and the state because "[t]he requirement that a wrongdoing entity disgorge improperly obtained moneys surely serves as the prescribed strong deterrent," which is why California has the standing to enforce such judgments. Fletcher v. Security Pacific National Bank, 23 Cal. 3d 442, 450, 153 Cal. Rptr. 28, 33, 591 P.2d 51, 56 (1979). However, civil restitution is, by its very nature, primarily intended to compensate victims for their losses. Here, the restitution award of $256,645 was ordered payable to the State of California and "shall be used to reimburse Custom Craft customers for funds they paid to defendants or their assignees. . . ."
Because only the State has standing to enforce its restitution judgment against Debtors, it qualifies as a creditor holding a restitution claim for purposes of the Bankruptcy *773 Code. If the actual victims had obtained their own fraud judgments against Debtors, however, they could have filed complaints to determine the nondischargeability of their restitution awards under 11 U.S.C. § 523(a)(2). As with all other creditors with Section 523(a)(2) claims, their evidence of fraud judgments could be rebutted by a debtor who is afforded the opportunity to persuade the bankruptcy court that the debtor's conduct was not of a type that should deprive him or her of a "fresh start." In re Houtman, supra, 568 F.2d at 655.
The identity of the creditor holding a civil restitution award should not control whether the bankruptcy court is deprived of its exclusive jurisdiction to determine dischargeability of compensatory civil fraud judgments. Such a result would be contrary to one of the major thrusts of the Bankruptcy Reform Act of 1978to classify claims, not creditors. Moreover, depriving the bankruptcy court of jurisdiction over this issue would mean depriving the debtor of the right to offer mitigating evidence to secure a "fresh start," in circumstances lacking the stringent due process protections of a criminal conviction.
The compelling state interest in the criminal sentencing process that was key to the Robinson analysis is absent here. Therefore, this court concludes that Section 523(a)(7) should not be extended to include civil restitution judgments obtained by the State on behalf of victims of a consumer fraud scheme, because they are primarily "compensation for actual pecuniary loss."
C. Applicability of Section 523(a)(2)
Holding that this civil restitution claim falls outside Section 523(a)(7)'s exception does not render it immune from a dischargeability attack. Based upon the State's timely complaint under Section 523(c), this court finds that this restitution claim is nondischargeable under Section 523(a)(2). Section 523(a)(2) excepts from discharge any debt "for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by(A) false pretenses, false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;. . . ."
California's claim based on its consumer fraud judgment qualifies as a claim for money "obtained by . . . false pretenses, false representation, [and] actual fraud." The State filed a timely complaint and has established all necessary elements for a nondischargeability holding. See In re Taylor, 514 F.2d 1370 (9th Cir.1975). The findings of the state court portray a massive, long-term, intentional scheme by Debtors to defraud consumers out of millions of dollars. Thousands of customers were induced to buy carpet through deceptive ads, and at least eighteen lost their houses to foreclosure as a result of Debtors' illegal liens. Therefore, this Court holds that the restitution award of $256,645 is nondischargeable under under Section 523(a)(2) of the Bankruptcy Code.
IV. ELAINE TAITE'S LIABILITY
Elaine Taite argued that the civil penalties of $750,000 and the restitution award of $256,645 should be discharged as to her, even if held nondischargeable as to Jason Taite. Elaine contended that she was not personally responsible for making any corporate decisions and was simply a passive spouse. This Court does not need to decide whether a debt of a truly passive spouse can be discharged from fraud under appropriate circumstances. The evidence of the state court findings and her own testimony in this court's hearing conclusively prove that Elaine Taite was an active accomplice and knowing beneficiary of the fraud scheme underlying these judgments.
In evidence adduced at the state court trial and confirmed at the hearing in this court, the State proved that Elaine was the Secretary-Treasurer, Vice-President and Director of Custom Craft and co-owner of 100% of the shares of the corporation. Among other things, she signed the deceptive and illusory warranties and saw the deceptive home sales film, "The Custom Craft Story," in advance of its showing to the public. She knew that the film and ads were false and that they were intended to *774 persuade consumers to buy Custom Craft's carpet. The trial court found this home sales film to be highly deceptive and misleading.
Although Elaine Taite lacked control of corporate decisions and activities, she had actual knowledge of and actively participated in the ongoing business of Custom Craft. She was effectively a partner in the business as well as the marriage. The fraud was conducted in the ordinary course of Custom Craft's business. Elaine Taite benefitted financially from the deception worked upon Custom Craft's customers. Under the standard enunciated by the Ninth Circuit in In re Cecchini, 780 F.2d 1440 (9th Cir.1986), the debts for both penalties and restitution are nondischargeable as to Elaine Taite.
V. THE SANCTIONS AWARD
The $5,000 penalty awarded to the Attorney General is a "penalty . . . payable to and for the benefit of a governmental unit." 11 U.S.C. § 523(a)(7). It is not "compensation for actual pecuniary loss." The court of appeal awarded the $5,000 in addition to the usual costs on appeal to discourage the Debtors and others from similar conduct in the future. This Court, therefore, finds the $5,000 in sanctions nondischargeable as to the debtor Jason Taite. Elaine Taite's testimony before this court established that she had no knowledge of either the original court complaint in Custom Craft Carpet, Inc. v. Miller or the filing of the appeal by her estranged husband. Neither of these actions were in the ordinary course of Debtors' business. Moreover, when these events occurred, Elaine Taite had already withdrawn from the business. This Court concludes that Elaine Taite should not be held liable for the filing of the Miller case or appeal. The $5,000 in sanctions is therefore dischargeable as to her.
CONCLUSION
This court holds the civil penalties nondischargeable under 11 U.S.C. § 523(a)(7). The civil restitution award is nondischargeable under 11 U.S.C. § 523(a)(2), but Section 523(a)(7) does not apply. These monetary awards are nondischargeable as to both Jason and Elaine Taite in such amounts as may be ultimately upheld by the state courts. The $5,000 in sanctions awarded in Custom Craft Carpets, Inc. v. Miller is dischargeable as to Elaine Taite, but nondischargeable as to Jason Taite.
An appropriate order shall be entered forthwith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541701/ | 76 B.R. 573 (1987)
In re 360 INNS, LTD., a Texas Limited Partnership, Debtor.
Bankruptcy No. 486-42247.
United States Bankruptcy Court, N.D. Texas, Fort Worth Division.
June 16, 1987.
*574 Michael A. McConnell, Kelley, Appleman, Hart & Hallman, Fort Worth, Tex., for 360 Inns, Ltd.
Gerrit M. Pronske, Pulliam, Hale, Spencer, Goodman, Stanley, Pronske & Trust, P.C., Dallas, Tex., for UNUM Life Ins. Co.
Kenneth Stohner, Jr., Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., for InterFirst Bank Dallas, N.A.
OPINION
DAVID W. HOUSTON, III, Bankruptcy Judge.
On February 17, 1987, in Forth Worth, Texas, there came on for consideration the plan of reorganization filed December 17, 1986, on behalf of the debtor, 360 Inns, Ltd., hereinafter referred to as the debtor. At the time of this hearing, an objection to *575 confirmation and motion to dismiss had been filed by a secured creditor, Union Mutual Life Insurance Company, hereinafter referred to as UNUM or Union Mutual. At said hearing, the Court received testimony and heard oral arguments from the attorneys representing both the debtor and UNUM. In addition, InterFirst Bank Dallas, N.A., hereinafter referred to as InterFirst, had filed an objection to the confirmation of the debtor's plan, but withdrew said objection at the hearing subject to the debtor's modification of its plan in conformity with an agreement that had been reached between the debtor and InterFirst. At the conclusion of the hearing, the Court took under advisement the confirmation of the plan, as well as, the objection to confirmation and motion to dismiss filed by UNUM. Pursuant to permission granted from the Court, the debtor and UNUM agreed to the submission of additional memoranda of law on the issues presented at the hearing, as well as, the filing of additional pleadings, including a modified plan of reorganization which has now been filed by the debtor.
I.
The Court has jurisdiction of the subject matter and the parties to these proceedings pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. These are core proceedings as defined in 28 U.S.C. § 157(b)(2)(A), (B), (K), (L) and (O).
II.
FACTUAL BACKGROUND
The debtor was organized on March 5, 1982, as a limited partnership under the laws of the State of Texas for the purpose of constructing, owning, and operating a Holiday Inn in Arlington, Texas, under a franchise with Holiday Inns, Inc., to be known as the "Holiday InnGreat Southwest". In order to obtain a portion of the construction funds, the debtor executed a promissory note payable to UNUM on March 25, 1982, in the original principal sum of $7,500,000.00, payable over a thirty year term. The note bears interest on the unpaid principal balance at a coupon interest rate of 15¼% per annum, plus additional interest charged at the rate of 17½% per annum on the annual gross room rents in excess of $2,500,000.00, referred to hereinafter as gross income interest. The note prohibits voluntary prepayment during the first ten years of its term, and thereafter provides for a prepayment penalty on a declining scale as the note reaches maturity from 5% to a low of 1% of the amount prepaid. During the first ten loan years, however, the note does provide for an involuntary prepayment penalty in the sum of 10%. In addition, the note contains a provision permitting default interest to be charged at the highest rate permitted by Texas law, triggered in the event of default in payment of any installment when due. The note is secured by a deed of trust and security agreement which encumbers the Holiday Inn property, the major asset of the debtor.
The property is further encumbered by a second deed of trust executed by the debtor in favor of InterFirst securing a promissory note, dated August 16, 1983, in the original principal sum of $3,500,000.00. The current principal balance of this note, in the approximate sum of $3,000,000.00, will fully mature on August 16, 1988. Accrued interest on this note is due and payable on a monthly basis in the approximate sum of $20,000.00 per month.
In its schedules filed in this case, the debtor valued its real property in the sum of $14,897,620.66. At the confirmation hearing, however, the expert real estate appraiser employed by the debtor valued the property, utilizing the income approach, at the sum of $12,400,000.00. The total debt which is secured by this property, as reflected in the debtor's schedules, is $11,132,059.83. As such, considering the appraisal testimony, the debtor enjoys an equity position in the property, at least effective the date of the filing of this bankruptcy case.
As a result of cash losses which commenced in 1985, coupled with an inability to provide debt service in 1986, the debtor filed its voluntary Chapter 11 bankruptcy petition on October 27, 1986.
*576 Thereafter, in addition to filing its objection to confirmation and motion to dismiss, noted hereinabove, UNUM filed a motion for determination of secured status, seeking a decision from this Court, pursuant to 11 U.S.C. § 506(b), that the aforementioned coupon interest, the gross income interest, the default interest incurred after the filing of the bankruptcy petition, the prepayment penalty, as well as, reasonable attorney's fees and expenses are includible in its secured claim. In addition, UNUM filed a motion to require the deposit of administrative expenses, which requests that all accrued and unpaid post-petition interest be considered as an administrative expense, payable immediately prior to the entry of any order confirming the debtor's proposed plan of reorganization.
At the time of the confirmation hearing, it was agreed that the debtor was not insolvent, as that term is defined in 11 U.S.C. § 101(31).
Hereinafter all references to United States Code sections shall be considered as Title 11, United States Code, unless specifically noted otherwise.
III.
PREPAYMENT PENALTY
The initial plan of reorganization filed by the debtor excluded any treatment of the prepayment penalty found in the promissory note executed in favor of UNUM. At the conclusion of the confirmation hearing, the Court advised the parties that since the debtor was solvent and owned a significant, unencumbered equity position in the Holiday Inn property, that the prepayment penalty, even if not includible in UNUM's secured claim, must be treated in the debtor's plan of reorganization because of the interaction of § 1129(a)(7), the "best interest of creditors" test, and § 726(a)(4), the priority of distribution for penalties established for Chapter 7 liquidation cases. The Court was of the opinion that the prepayment penalty was not unmatured interest as contemplated in § 502(b)(2), inasmuch as the prepayment penalty was activated and matured once the plan of reorganization proposed to prepay UNUM's debt. Because of the debtor's solvency and particularly the debtor's positive equity position in the hotel property, UNUM would be entitled to distribution in a Chapter 7 liquidation case of its matured prepayment penalty claim. Since the original plan provided for no treatment of the prepayment penalty, it could not survive the test of § 1129(a)(7), which mandates that each holder of a claim or interest receive as much as would be received if the debtor were liquidated in a Chapter 7 case. Although the prepayment penalty may well have been an allowed secured claim under § 506(b), the resolution of this issue was not necessary because the plan was simply not confirmable as initially presented.
As mentioned hereinabove, subsequent to the confirmation hearing, the debtor filed its modified plan of reorganization. In a departure from the original plan where no treatment was afforded the prepayment penalty, the debtor's modified plan separately classifies the prepayment penalty and treats it as follows:
Class 6.5The Penalty Claim of Union Mutual shall be paid in full according to the provisions of Paragraph 5 of the March 25, 1982 note from Debtor to Union Mutual. Upon prepayment of the Allowed Secured Claim of Union Mutual prior to March 25, 1992, a premium will be paid in an amount equal to ten percent (10%) of the principal sum prepaid; upon prepayment of the indebtedness to Union Mutual on or after March 25, 1992, or upon payment on maturity of such indebtedness under the provisions of Section 3.2 above, a premium will be paid in an amount equal to five percent (5%) of the principal sum prepaid. Union Mutual will retain its liens securing payment of its penalty claim. A Promissory Note and Deed of Trust incorporating these terms and the terms provided in Section 3.2 above, shall be delivered to Union Mutual on the Effective Date of the Plan.
The only distinction that the Court can discern between the above quoted provision in the debtor's modified plan of reorganization and the terms of UNUM's promissory *577 note is the fact that the debtor can voluntarily prepay the indebtedness prior to March 25, 1992, provided the 10% prepayment penalty is paid. The UNUM promissory note provides that there can be no voluntary prepayment prior to March 25, 1992, only an involuntary prepayment. In view of the fact that the debtor proposes to allow UNUM to retain its lien securing the prepayment penalty, this Court is of the opinion that the treatment of the prepayment penalty is permissible and will not preclude confirmation, if the debtor can satisfy the other provisions of § 1129(a) and (b). UNUM will receive on account of this penalty claim, property of a value, as of the effective date of the plan of reorganization, that is not less than the amount that UNUM would receive if the debtor were liquidated under Chapter 7 of the Bankruptcy Code.
IV.
SHOULD THE ACCRUED AND UNPAID POST-PETITION INTEREST UNDER THE UNUM PROMISSORY NOTE BE CLASSIFIED AS AN ADMINISTRATIVE EXPENSE AND PAID IN FULL IN CASH ON THE EFFECTIVE DATE OF THE DEBTOR'S PLAN OF REORGANIZATION, PURSUANT TO THE AGREED ORDER AUTHORIZING THE USE OF CASH COLLATERAL
In its motion to require the deposit of administrative expenses, UNUM argues that the unpaid post-petition interest, accruing as a result of its promissory note, should be classified as a superpriority administrative expense and paid in full in cash on the effective date of the debtor's plan of reorganization. UNUM contends that the basis for this claim, is found in the provisions of the agreed order authorizing the use of cash collateral dated November 3, 1986. Pertinent terms are set forth hereinbelow:
5. GRANT OF PRIORITY ADMINISTRATIVE CLAIM: The debts and obligations of the Debtor to Union Mutual which result from this Order or continue to exist under this Order shall be, and they hereby are, granted priority in accordance with § 364(c) of the Bankruptcy Code over any and all administrative expenses of the Debtor, whether heretofor or hereafter incurred, of the kind specified in § 503(b) or § 507(b) of the Bankruptcy Code. [emphasis in original]
The following sentence is excerpted from paragraph 2 of the agreed order:
The use of Cash Collateral by the Debtor pursuant to the terms of this Order are hereby deemed to be post-petition advances pursuant to § 364(c) of the Bankruptcy Code.
The agreed order permitted the debtor to utilize the revenues generated from hotel operations to continue in business. In almost every respect, excepting the paragraphs quoted hereinabove, the agreed order is classic authority to utilize cash collateral by consent. Post-petition liens were granted to UNUM to secure the use of the cash collateral, and $331,440.00 was designated as a per month ceiling restriction on the extent of such use. Perhaps most significantly, in an effort to avoid the depletion of UNUM's cash collateral position existing prior to the entry of the agreed order, was the restriction that the debtor could not utilize more monies than were deposited by the debtor on a monthly basis into the operating account without the express written consent of UNUM. Therefore, the cash collateral position of UNUM would not be adversely impaired during the effective period of the order.
In calculating its purported administrative expense claim, UNUM advances the position that this claim should include all accrued post-petition coupon and gross income interest less post-petition payments made by the debtor. UNUM initially contended that this figure amounted to the sum of $354,369.49, effective April 1, 1987 ($579,451.49, accrued post-petition coupon and gross profits interest, less $225,082.00, post-petition payments made by the debtor). This amount was disputed through an affidavit prepared by Randal J. Wright, Controller of Jackson-Shaw Company, to the effect that the debtor had overpaid UNUM gross profits interest in the sum of *578 $13,422.18, as opposed to UNUM's assessment of $155,000.00. Following a review of the affidavit, UNUM agreed that the debtor's calculations were correct.
Regardless of the amount, however, this Court is of the opinion that the position taken by UNUM in regard to the shortfall in post-petition interest is untenable.
The granting of a superpriority administrative expense claim pursuant to § 364(c) is generally permitted when a lender advances new money in the form of a post-petition loan to the debtor. The use of cash collateral generated from the debtor's business operations cannot and should not be equated with new monies provided by a post-petition lender, regardless of the language appearing in the agreed cash collateral order.
As noted in the letter memoranda submitted by counsel for InterFirst, an agreed order is in the nature of a contract and is subject to the rules of construction of contracts. Counsel for InterFirst points out three rules of contract construction which are relevant to this issue, to-wit:
A. In construing a contract, the Court should determine and give effect to the intent of the parties. Chadwick v. Esperanza Trade and Transport, Ltd., 548 F.2d 1161 (5th Cir.1977).
B. Each provision of a contract should be given its reasonable, natural and probable meaning when considered in relation to the agreement as a whole. Hennigan v. Chargers Football Company, 431 F.2d 308 (5th Cir.1970).
C. If a contract is found to be ambiguous (open to two reasonable interpretations), then the agreement will be construed more strictly against the party who drafted it. Zapata Marine Service v. O/Y Finnlines, Ltd., 571 F.2d 208 (5th Cir. 1978).
The agreed order drafted by UNUM's counsel is ambiguous, perhaps by design, and must be more strongly construed against UNUM.
The continuing use of hotel revenues should not be construed as post-petition advances of credit in the same context as if new monies were being poured into the debtor by UNUM. UNUM's position in the cash collateral was being adequately protected through the extension of post-petition liens, as well as, by the requirement that sufficient revenues be deposited into the operating account to offset the amounts of money expended.
The method by which UNUM calculates its administrative expense claim leaves a great deal to be desired and, in fact, has almost nothing to do with the terms of the agreed order. The nonpayment of interest accrued post-petition has no connection to the use of hotel revenues for the continued operation of the debtor's business, i.e., the use of cash collateral. As appropriately noted in the InterFirst memorandum, the obligation that UNUM now attempts to claim as an administrative expense results from its original promissory note, rather than from the cash collateral order. Succinctly stated, the terms of the cash collateral order cannot be reconciled with UNUM's calculation of the proposed administrative expense claim.
For further explanation as to why UNUM should not be entitled to an administrative expense claim, one must look to the three Bankruptcy Code sections set forth in paragraph 5 of the cash collateral order. The first is § 364(c)(1), which provides as follows:
(c) If the trustee is unable to obtain unsecured credit allowable under section 503(b)(1) of this title as an administrative expense, the court, after notice and a hearing, may authorize the obtaining of credit or the incurring of debt
(1) with priority over any or all administrative expenses of the kind specified in section 503(b) or 507(b) of this title;
§ 503(b) deals with the allowance of administrative expense claims which are defined and set forth in detail in subparts (1) through (6) of the subsection.
§ 507(b) provides as follows:
(b) If the trustee, under section 362, 363, or 364 of this title, provides adequate protection of the interest of a holder *579 of a claim secured by a lien on property of the debtor and if, notwithstanding such protection, such creditor has a claim allowable under subsection (a)(1) of this section arising from the stay of action against such property under section 362 of this title, from the use, sale, or lease of such property under section 363 of this title, or from the granting of a lien under section 364(d) of this title, then such creditor's claim under such subsection shall have priority over every other claim allowable under such subsection.
If the provisions of § 364(c)(1) were realistically applicable to this case, a debt incurred as a result of a post-petition loan transaction, legitimately authorized, might well enjoy superpriority status over other administrative expense claims allowed under § 503(b) or § 507(b). As set forth hereinabove, the Court is of the opinion that no credit was ever extended as a result of the agreed cash collateral order of a nature to even activate § 364(c)(1).
Because UNUM is an oversecured creditor whose position has been further protected through the extension of post-petition liens, and because there has been no diminution of this protection, UNUM has no claim allowable under §§ 503(b) or 507(a)(1) arising from the use of the cash collateral, which is absolutely necessary to activate the provisions of § 507(b).
The superpriority status afforded by § 364(c)(1) and § 507(b) are similar in that both can prime other administrative claims should there be a failure in other types of protection. As noted in In re Callister, 15 B.R. 521 (Bankr.Ut.1981), appeal dismissed, 673 F.2d 305 (10th Cir.1982), aff'd 13 BCD 21 (10th Cir.1984), "whereas adequate protection shields the creditor in the first instance from impairment in the value of his `interest in property,' the superpriority [of § 507(b)] was intended to recapture value unexpectedly lost during the course of the case . . ." Id. at 528.
In the context of this case, the superpriority protection afforded by § 507(b) could well be activated, as a result of the cash collateral order, if the value of the collateral securing the UNUM indebtedness depreciated to the point that UNUM became an undersecured creditor.
UNUM's attempted use of § 364(c)(1) in an effort to shore up the agreed cash collateral order is simply improper and cannot be permitted. Judge Blackwell Shelley wrote the following in In re AMT Investment Corporation, 53 B.R. 274 (Bankr.E. D.Va.1985), a case factually similar to the case before this Court, to-wit:
Indeed, if § 364(c)(1) were intended as a means of providing adequate protection to a cash collateral creditor, there would be no need for § 507(b), which, again, was designed for such creditors, since it provides for a lower priority in distribution than does § 364(c)(1). By virtue of mutual consent with the debtor, a cash collateral creditor, or any secured creditor, could obtain a § 364(c)(1) priority and improve its position in distribution by virtue of the debtor's allegation it could not obtain alternative financing. That is precisely the situation in the case at bar, and it cannot be condoned.
Id. at 277.
For the reasons set forth hereinabove, UNUM's motion seeking to claim the unpaid post-petition interest as an administrative expense is not well taken and shall be denied.
V.
MODIFICATION OF INTERFIRST CLAIM
The modified plan, filed by the debtor subsequent to the confirmation hearing, provides for a change in the interest rate to be applied to the InterFirst claim from a fixed rate of 9% per annum to a variable rate of 1.5% per annum above the base interest rate charged by InterFirst, such rate to be adjusted on the same date as any change in the base interest rate. See, § 3.3, Debtor's Modified Plan of Reorganization. In addition, the modified plan provides for the execution of guaranties by Lewis W. Shaw, II, Kenneth Shaw, and Steven D. Jorns, who presently serve as guarantors on the existing promissory note payable to InterFirst. The individuals will *580 now extend their guaranties to the promissory note to be delivered to InterFirst on the effective date of the plan. These modifications, as they affect the claim of InterFirst, were accepted by InterFirst at the confirmation hearing, after such modifications were dictated into the record by counsel for InterFirst. Therefore, this Court is of the opinion that there is no need for further solicitation of InterFirst for acceptance of the modified plan.
VI.
MODIFIED TREATMENT OF ALLOWED INTERESTS HOLDERS
"Allowed Interests" is defined as the limited partnership interests of GSWHI Joint Venture and Lewis W. Shaw, II, and the general partnership interest of Brown 360, Ltd., a Texas limited partnership, in the debtor, as provided in the Second Amended and Restated Agreement of Limited Partnership of 360 Inns, Ltd., dated August 16, 1983. The modified plan provides in § 3.7, Class 7, that "[t]he Allowed Interests shall remain in full force and effect in accordance with their terms and the legal, equitable and contractual rights to which such Allowed Interests are entitled shall remain unaltered, except to the extent provided under Section 5.5 . . ." Under the modified plan, the Allowed Interests are considered impaired.
§ 5.5 of the modified plan provides that: [t]he Debtor shall make no distributions of cash or cash equivalent to any general or limited partner or other person or entity except for operating expenses incurred in the normal course of business until: (1) the Promissory Notes to be delivered to Union Mutual and InterFirst under the Plan shall have been paid in full; or (2) there shall have been established a cash reserve of $200,000.00 as a reserve to insure the payment of the Promissory Notes payable to Union Mutual and InterFirst.
Insofar as impairment is concerned, the modified plan alters the Allowed Interests holders' claims only to the extent as provided in § 5.5, quoted hereinabove. These modifications, as they affect the Allowed Interests holders' claims were also dictated into the record at the confirmation hearing. Members of the Allowed Interests class, being Class 7, holding at least 2/3rds in amount of the allowed interests in such class, and constituting a majority of the members within said class, were present at the confirmation hearing and accepted the aforesaid modifications.
The additional modifications required by the Court as a result of this Opinion will affect the debtor's ability to make the proposed distributions to the Allowed Interests class. As such, the Court finds that there is a need for the debtor to solicit acceptances of the debtor's plan from the Class 7 Allowed Interests holders.
VII.
ACCEPTANCE OF MODIFIED PLAN BY OTHER CREDITOR CLASSES, AS WELL AS, CONTINUED REJECTION OF MODIFIED PLAN BY UNUM
No creditor classes or interests, other than the claims of UNUM, InterFirst, and the Allowed Interests holders are affected by the debtor's modified plan. As such, this Court is of the opinion that there is no need to solicit the acceptance of the modified plan from any other classes set forth in the modified plan except the Allowed Interests holders as discussed earlier.
UNUM, whose claims in the debtor's modified plan are treated in § 3.2 and § 3.65, previously rejected the debtor's original plan of reorganization. UNUM maintained its rejection of the modified plan at the confirmation hearing after the debtor changed the interest rate to be applied to the UNUM claim and added the provision for a cash reserve to secure the payment of the UNUM note to be delivered under the plan. Because of its previous rejection, as well as its current rejection of the modified plan, this Court is of the opinion that there is no need for the debtor to solicit UNUM's acceptance of the modified plan and that UNUM, pursuant to Rule 3019, Rules of Bankruptcy Procedure, is *581 deemed to have rejected the modified plan both as to its treatment under §§ 3.2 and 3.65 of the modified plan.
Therefore, the Court finds that all classes and all creditors have accepted the debtor's modified plan of reorganization except the Allowed Interests holders and UNUM, whose claims are treated as noted hereinabove in §§ 3.2 and 3.65 of the modified plan. If the debtor's modified plan is to be confirmed over the UNUM rejection, it must pass several tests set forth in the Bankruptcy Code, particularly the requirements found in 11 U.S.C. § 1129(b)(2)(A)(i)(ii) or (iii).
VIII.
DEFAULT RATE OF INTEREST
Contained in the promissory note, executed by the debtor in favor of UNUM, is the following provision:
4. If any payment of principal or interest provided for herein is not paid when due, each and every such delinquent payment, including the entire principal balance and accrued interest in the event of an acceleration of this Note as provided below, shall bear interest at the highest rate permitted by law from its due date until date of payment.
Since the promissory note is in default, UNUM contends that it is entitled to default interest at the highest rate according to the laws of the State of Texas from the date of default through confirmation of the debtor's plan of reorganization. This rate is approximately 18% per annum. UNUM has elected not to accelerate the entire principal amount of the promissory note, but seeks to apply the default rate of interest, as a part of its allowed secured claim, against each unpaid monthly installment. UNUM calculates this interest by treating each unpaid monthly installment as a new loan. Since there has been no acceleration of the note balance, the net effect of UNUM's treatment is to charge interest on each unpaid installment at the default rate of 18% per annum. The source of this calculation is a letter memorandum submitted by UNUM's counsel subsequent to the confirmation hearing at the request of the Court.
Since UNUM is obviously an oversecured creditor, it argues that default interest should be a part of its allowed secured claim pursuant to § 506(b) which provides as follows:
(b) To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
The debtor, in opposing UNUM's claim for default interest, relies primarily on three cases, i.e., Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S. Ct. 237, 91 L. Ed. 162 (1946); In re W.S. Sheppley and Company, 62 B.R. 271 (Bankr.N.D.Iowa 1986); and In re Tampa Chain Co., Inc., 53 B.R. 772 (Bankr.S.D.N. Y.1985).
In Vanston, the issue was whether interest on unpaid interest should be paid to first mortgage bondholders where the bond indenture provided for such payment and where the debtor's assets were sufficient to pay the first mortgage bondholders in full, including the interest on interest. In Vanston, however, the debtor, unlike 360 Inns, Ltd., was insolvent. The Supreme Court recognized that if interest on interest were paid to the first mortgage bondholders that the distribution to lower priority creditors, including unsecured creditors, would be measurably reduced. The Supreme Court disallowed the payment of interest on interest, stating that bankruptcy courts as courts of equity should not always enforce default rates of interest, but the question should be approached on a case by case basis.
In the case before this Court, there are four factors which are critical to the resolution of this issue:
1. The debtor is solvent.
*582 2. UNUM, the objecting creditor, is oversecured, enjoying a substantial equity cushion in the debtor's property.
3. InterFirst, the second mortgagee, like UNUM is oversecured and is to be paid in full. As a subordinate secured creditor, InterFirst has accepted the debtor's plan.
4. The debtor proposes to make substantial distributions to the Allowed Interests holders, the debtor's ownership class.
In Vanston, the debtor's insolvency was a critical issue in the Court's analysis, as was the concern for a fair and equitable distribution to all creditors.
Sheppley, like Vanston, involved an insolvent debtor. The Court there applied the Vanston rationale in terms of balancing the equities of all creditors on a case by case basis. Judge James Yacos, sitting by designation, stated the following:
In the absence of any square ruling to the contrary, I conclude that a bankruptcy court presented with a § 506(b) motion is not required in all cases to apply a contractual default rate of interest in determining the amount of an `allowed secured claim' within the meaning of that section.
. . . .
While I recognize that the cases cited can be read in different ways as to what they may `imply' as to the question squarely presented to this court, I do believe they all indicate that flexibility is possible in determining whether default rate of interest should be allowed in a particular reorganization proceeding.
. . . .
Reviewing the record in the present case I find the following pertinent factors pointing to the inappropriateness of allowing a default rate of interest on the Metropolitan's secured claim: (1) Metropolitan has never faced any realistic risk of non-payment of its debt either before or during these proceedings; (2) There is no evidence before the Court that the 9.27% basic contract rate was not a prevailing market rate of interest at the time of default and thereafter; (3) Justification for an increased rate to compensate for an assumed increased risk following default does not apply in this case, particularly since the plan proposal is for a relatively quick orderly liquidation as opposed to a long term `internal operation' type of reorganization; (4) On the evidence presently before the court it does not appear likely that distribution under the plan will reach down to shareholder interests; and at confirmation of any plan, if it should appear that shareholders may benefit, the court in its confirming order can provide for recapture of the default rate of interest for Metropolitan if the Ruskin ruling is determined to be persuasive and to be followed in this Circuit. . . . [emphasis in original]
Sheppley at 278-79.
Therefore, the Sheppley case turned on the debtor's insolvency, as well as, the fact that subordinate creditors would be penalized through the allowance of default interest. Perhaps more significantly, however, is Judge Yacos' parting shot to the effect that default interest could be recaptured at confirmation if the shareholders were to benefit. This decision clearly indicates that default interest can be permissible under certain circumstances.
In Ruskin v. Griffiths, 269 F.2d 827 (2nd Cir.1959), cert. denied, 361 U.S. 947, 80 S. Ct. 403, 4 L. Ed. 2d 381 (1960), the Second Circuit allowed a default rate of interest to be charged where the debtor was solvent and the benefits of the lower non-default interest rate would flow to the shareholders of the debtor, rather than to its creditors. There the court stated:
In Vanston the Supreme Court disallowed an indenture trustee's claim against an insolvent debtor for interest on interest payments provided for in the trust indenture. The interest on interest accrued because the district court, pursuant to its administration of an equity receivership, had ordered both the debtor and the receiver not to pay simple interest coupons that fell due under the indenture after the court assumed jurisdiction. Even if we agreed with the court below that a Supreme Court precedent dealing with an obligation for interest on interest *583 falling due because of an equity court's stay order is equally applicable to a claim based upon a contractual provision for additional simple interest arising because the debtor sought the intervention of the bankruptcy laws, a question we need not now decide, we would still have to distinguish Vanston on what we find was a basic ground of that decision. In Vanston the debtor was insolvent, and in our case it appears the debtor is solvent. In Empire Trust Co. v. Equitable Office Bldg. Corp., 2 Cir., 1948, 167 F.2d 346, we avoided a resolution of the effect of Vanston upon parties to a reorganization proceeding involving a solvent corporation, but the issue is squarely before us now, and we hold that the Supreme Court did not intend that the principle enunciated by it in Vanston, in a contest between creditors, should be applied to a contest between a debtor's creditor and its stockholders.
Id. at 830.
The Ruskin Court, commenting on the Supreme Court's decision in Vanston, pointed out language in the Vanston opinion to the effect that where an estate was sufficient to pay all creditors and to pay interest even after the petition was filed, that equitable considerations should be invoked to permit payment of additional interest, i.e., default interest, to the secured creditor rather than to the benefit of the debtor.
The Ruskin Court then went on to say:
"On the other hand, in In re International Hydro-Electric System, D.C.D. Mass. 1951, 101 F. Supp. 222, 224, the Massachusetts district court carefully considered this very problem when it held:
`[I]t is important that IHES is not at the present time insolvent. It has assets more than sufficient to meet all claims of its creditors. No benefit will be given to the debenture holders at the expense of any other class of creditors. The burden of this payment will fall entirely on the interest of the stockholders. They cannot complain that they are treated inequitably when their interest is cut down by the payment of a sum to which the debenture holders are clearly entitled by the express provisions of the trust indenture. The situation here differs from that in Vanson Bondholders Protective Committee v. Green * * * where the payment of interest on deferred interest payments was not allowed even though called for by the trust indenture, because the payment would have reduced the share of subordinate creditors in the reorganization of an insolvent corporation.'
A variable interest provision in event of a stated default such as we have here is not a penalty, nor should it be considered unconscionable."
Ruskin at 832.
There appears to be no dispute in this case that the charging of a default rate of interest is permissible in the State of Texas. A case dealing with a solvent debtor which permitted a default rate of interest to be charged is Debentureholders Protective Committee of Continental Investment Corp. v. Continental Investment Corp., 679 F.2d 264 (1st Cir.), cert. denied, 459 U.S. 894, 103 S. Ct. 192, 74 L. Ed. 2d 155 (1982). There the court held as follows:
But with respect to post-petition interest on both the unpaid instalments which fell due before, and the unpaid instalments which fell due after, the petition, the legal situation is different when the supposed bankrupt proves to be solvent. Where the debtor is solvent, the bankruptcy rule is that where there is a contractual provision, valid under state law, providing for interest on unpaid instalments of interest, the bankruptcy court will enforce the contractual provision with respect to both instalments due before and instalments due after the petition was filed. Ruskin v. Griffiths, 269 F.2d 827, 830-32 (2nd Cir.1959), cert. den. 361 U.S. 947, 80 S. Ct. 403, 4 L. Ed. 2d 381 (1960); In re Hydro-Electric System, supra, [at] 224. This rule is fair and equitable inasmuch as the solvent debtor's estate will have been enriched by the bankruptcy trustee's use of money which the debtor had promised to pay promptly to the creditor, and, correspondingly, *584 the creditor will have been deprived of the opportunity to use the money to his advantage. Moreover, the rule does not in any way affect any creditor other than the claimant of interest on interest. Finally, the rule is in harmony with the settled English and American law that when an alleged bankrupt is proved solvent, the creditors are entitled to receive post-petition interest before any surplus reverts to the debtor. New York v. Saper, 336 U.S. 328, 330 n. 7, 69 S. Ct. 554, 555 n. 7, 93 L. Ed. 710 (1949); United States v. Bass, 271 F.2d 129, 130 (9th Cir.1959); Littleton v. Kincaid, 179 F.2d 848, 27 A.L.R. 2d 572 (4th Cir.1950). [emphasis in original]
Debentureholders Protective Committee is cited with approval in In re Manville Forest Products Corp., 60 B.R. 403, 404 (S.D.N.Y.1986), to the effect that interest on interest is chargeable to a solvent debtor.
Looking at the factors that are pertinent to this case as set forth hereinabove, i.e., a solvent debtor, an oversecured objecting creditor, and distributions being proposed for subordinate creditors and Allowed Interests holders, this Court is of the opinion that UNUM is entitled to be paid interest on the unpaid installments, which necessarily includes interest on interest. Consideration has been given by the Court to the fact that UNUM has not accelerated the full note balance, and merely seeks to charge interest on payments that it has not timely received. Although the Court has not seen the precise mechanical calculations proposed by UNUM, the fact that the installment payments are not being timely paid is perceived to be an actual pecuniary loss to UNUM. The Court, however, does not necessarily agree that a default rate of interest at the rate of 18% per annum is reasonable under the circumstances of this case. Although the Court will permit UNUM to charge interest on the unpaid installments, the rate at which this charge shall be permitted bears careful scrutiny.
In the Sheppley case, cited hereinabove, Judge Yacos, in discussing the applicability of a contract rate of interest, pointed out the punctuation ambiguity that appears in § 506(b), as follows:
As both parties recognize, the language of § 506(b) can be read in two different ways. The statute provides:
To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
The question is whether the comma after the reference to interest indicates that the interest allowance is not governed by the contract. See 3 Collier on Bankruptcy, 15th Ed., § 506.05, pp. 506-41, 42 (1985), regarding the alleged `misplaced comma' and the resultant ambiguity.
There is very little legislative history on this provision but Judge Clark makes a convincing argument that the punctuation does not indicate a Congressional intent to render the contract rate irrelevant. See In re Loveridge Machine & Tool Co., 36 B.R. 159 (Utah 1983).
. . . .
On balance, I conclude that § 506(b) should be construed to include reference to interest at the contract rate. This, however, does not settle the issue as to default rates sinceas will be developed belowthe Supreme Court has held that contractual and other legally-established rights may sometimes conflict with equitable principles of distribution under the bankruptcy laws. [emphasis in original]
Sheppley, at 273-74.
As pointed out earlier, because the debtor in Sheppley was insolvent, Judge Yacos prohibited the application of interest on interest at the default rate, regardless of the fact that the default rate was clearly specified in the contractual agreement. As noted in the above quotation from the Sheppley opinion, legally established rights may sometimes conflict with equitable principles of distribution in bankruptcy.
*585 Although the debtor in this case, 360 Inns, Ltd., is currently solvent, this Court is convinced that had the debtor continued its course of operations without filing this bankruptcy case, insolvency was inevitable. Because of the economic conditions existing in the Arlington, Texas area, including the increased competitiveness in the hotel market, as well as, the substantial interest being paid by the debtor to UNUM, the debtor's balance sheet would have reflected a negative net worth within a fairly short period of time.
Although it dealt primarily with a dispute concerning the interest rate to be applied in calculating damages, necessary to compensate secured creditors pursuant to § 1124(2)(C), Matter of Arlington Village Partners, Ltd., 66 B.R. 308 (Bankr.S.D.Oh. 1986) differentiated between a non-default interest rate and a default interest rate appearing in a single contract. Concluding a well reasoned analysis, Judge Waldron held as follows:
In order, therefore, to compensate the creditors of this long-term debt for damages incurred by reasonably relying on the contract's default terms, and to provide appropriate interest on their claims, the court follows the principle developed in In re Colegrove [771 F.2d 119 (6th Cir.1985)] that equity demands that the present value of those delayed payments be recognized through the imposition of a market rate of interest. The court notes, however, that in the instant case, the parties bargained at arms-length and recognized fluctuating market rates on long-term debts by reflecting varying interest rates in their contract over its term, and further, that they mutually agreed in connection with this proceeding that, at a minimum, interest is ten percent (10%) per year on the total arrearages for payments of principal and interest owed for February-December 1985 and eleven percent (11%) per year for the January 1986 default.
Accordingly, the court orders that interest be computed using the market rate for long-term mortgages as of the due date of each late payment until the date paid, providing, however, if the market rate is below the ten percent (10%) or eleven percent (11%) stipulated minimum interest rate for the period in question, that interest be computed at the applicable ten percent (10%) or eleven percent (11%) agreed to by the parties in their contract, and if the market rate is higher than the default rate of fourteen percent (14%) agreed to by the parties in their contract, that the fourteen percent (14%) rate be used for computation.
Id. at 319.
Succinctly stated, the bottom line in Arlington Village Partners, Ltd., is that if the market interest rate is lower than the contract rate, then the court should apply interest at the contract rate. On the other hand, if the market interest rate is higher than the contract default rate, then interest should be applied at the contract default rate. In the case before this Court, it is obvious that the market interest rate is lower than the non-default contract interest rate, and most certainly lower than the default contract rate. As such, considering the equitable principles of distribution in bankruptcy, particularly the eventual, inevitable insolvency of the debtor herein, this Court is of the opinion that interest on the unpaid installments should not be charged by UNUM at a rate exceeding the non-default contract interest rate, i.e., 15¼% per annum. This conclusion is further supported by the fact that the market rate of interest at this time is not marginally but is significantly less than the non-default contract interest rate. To permit UNUM to charge a rate in excess of 15¼% per annum would be clearly unreasonable.
UNUM will therefore be permitted to charge interest on each unpaid installment, as if said installment were a new loan, from the date of default until the date of confirmation at the rate of 15¼% per annum.
IX.
THE APPROPRIATE DISCOUNT RATE REQUIRED BY 11 U.S.C. § 1129(b)
As noted hereinabove, UNUM has rejected the debtor's modified plan of reorganization *586 which proposes to fully pay UNUM's allowed secured claim in deferred cash installments bearing a discount rate of 1.5% per annum over the prime base rate of InterFirst. UNUM objects to the use of this proposed discount rate and insists that the default rate of interest, set forth in its existing promissory note, i.e., the highest rate permitted under the laws of the State of Texas or 18% per annum, should be used instead. The issue, therefore, is whether the debtor's modified plan of reorganization can be "crammed down" over the dissent of UNUM, pursuant to § 1129(b) which is set forth as follows:
(b)(1) Notwithstanding section 510(a) of this title, if all of the applicable requirements of subsection (a) of this section other than paragraph (8) are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.
(2) For the purpose of this subsection, the condition that a plan be fair and equitable with respect to a class includes the following requirements:
(A) With respect to a class of secured claims, the plan provides
(i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and
(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder's interest in the estate's interest in such property;
(ii) for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or (iii) for the realization by such holders of the indubitable equivalent of such claims.
The focal point of whether the debtor's modified plan meets the requirements of § 1129(b) centers on the appropriate discount or interest rate to be applied to UNUM's allowed secured claim. Because UNUM is an oversecured creditor, its allowed secured claim, which necessarily includes interest, attorney's fees, and costs, as discussed earlier in this Opinion, must be paid in full. Since the debtor proposes to pay this claim in deferred installments, a discount or interest factor must be added so that UNUM will receive no less than the full present value of its claim.
In re Jones, 32 B.R. 951 (Bankr.D.Ut. 1983), offers an informative overview of this frequently litigated issue, to-wit:
Few other issues under the bankruptcy code have produced so many opinions with such varied results as has the issue of the appropriate interest rate for determining present value. Chapter 11 cases include In re Southern States Motor Inns, Inc., 709 F.2d 647 (11th Cir.1983); In re Bay Area Services, 26 B.R. 811 (Bkrtcy.M.D.Fla.1982); In re Moore, 25 B.R. 131 (Bkrtcy.N.D.Tex.1982); In re Tacoma Recycling, Inc., 23 B.R. 547 (Bkrtcy.W.D.Wash.1982); In re Sullivan, 26 B.R. 677 (Bkrtcy.W.D.N.Y.1982); In re Patel, 21 B.R. 101 (Bkrtcy.M.D.Fla. 1982); In re Nite Lite Inns, 17 B.R. 367 (Bkrtcy.S.D.Cal.1982); In re Burgess Wholesale Manufacturing Opticians, 16 B.R. 733 (Bkrtcy.N.D.Ill.1982); and In re Landmark at Plaza Park, Ltd., 7 B.R. 653 (Bkrtcy.D.N.J.1980). There are more than fifty chapter 13 cases. Their relevance in the chapter 11 context, however, is an issue not yet resolved. Many factors may make the complexion of the risk in a chapter 13 case different from the risk in chapter 11. Nevertheless, the chapter 13 cases have broken important analytical ground. Most of the chapter *587 13 cases can be found in the citations in In re Fisher, 29 B.R. 542 (Bkrtcy.D.Kan. 1983) and In re Evans, 20 B.R. 175 (Bkrtcy.E.D.Pa.1982).
Id. at 958 n. 12.
A case cited by the debtor, In re Monnier Bros., 755 F.2d 1336 (8th Cir.1985) offers threshold insight concerning the selection of an appropriate discount rate, to-wit:
Under § 1129(b)(2)(A)(i)(II), deferred cash payments due Prudential must total `a value, as of the effective date of the plan, of at least the value of [Prudential's] interest in the estate's interest in' the collateral. Since the Prudential loan was accelerated and oversecured, Prudential had a right at the date the plan became effective to the unpaid principal plus any contract rate interest that had accrued up until that time. The task of the bankruptcy court was to determine what rate of interest would insure [that] Prudential ultimately receive the full value of that amount, given that the plan provided for level amortized payments over a fifteen year period.
One of the Code's few clues about what factors to take into account in selecting an appropriate interest rate appears in § 1129(b)(2)(A)(iii); that section states that a plan may be confirmed over the objections of a secured creditor if the plan affords the creditor the `indubitable equivalent' of his claim. 11 U.S.C. § 1129(b)(2)(A)(iii).
. . . .
Although § 1129(b)(2)(A)(iii), with its `indubitable equivalent' standard, is stated as an alternative to deferred repayment of the secured debt under § 1129(b) (2)(A)(i)(II), we are satisfied from a reading of [In re] Murel [Holding Co., 75 F.2d 941 (2d Cir.1935)] that the congressional reference to the case expresses threshold requirements applicable to selection of an appropriate interest rate. Cf. In re American Mariner Industries, 734 F.2d [426] at 432 [9th Cir.1984] (`indubitable equivalent' provision of 11 U.S.C. § 361 is a `catch-all alternative').
In the present case, neither Prudential nor debtors provided the bankruptcy court with much assistance in determining what interest rate would compensate Prudential for the time value of its money and the risks to its principal. Prudential provided no evidence on the issue, other than the rate set by the contract. Debtors, relying on 5 Collier on Bankruptcy ¶ 1129.03, at 1129-63 n. 45, provided the bankruptcy court with the prime rate, federal fund rate, discount rate, call money rate, commercial paper rate, certificates of deposit rate, and treasury bill rate, that had been reported in the December 9, 1983 Wall Street Journal.
The debtors ignored, however, a subsequent passage from the Collier discussion:
The appropriate discount rate must be determined on the basis of the rate of interest which is reasonable in light of the risks involved. Thus, in determining the discount rate, the court must consider the prevailing market rate for a loan of a term equal to the payout period, with due consideration for the quality of the security and the risk of subsequent default.
5 Collier on Bankruptcy ¶ 1129, at 1129-65. We note that the treasury bill rate, which the bankruptcy court ultimately applied, reflected one rate of return available on a short term, low risk investment. See In re Loveridge Machine & Tool Co., 36 B.R. 159 (Bankr.D. Utah 1983). [emphasis added]
Id. at 1338-39.
Although the term "indubitable equivalent" is perhaps even more vague than "an appropriate discount rate", the quotation from 5 Collier on Bankruptcy ¶ 1129, which mentions that the discount rate should be determined on the basis of a reasonable rate of interest considering the risks involved, is not only meaningful, but provides direction for this Court. Therefore, an appropriate discount rate should be calculated on a case by case basis, considering such factors as the prevailing market rate for a loan of equal term to that proposed in the debtor's plan, the quality of *588 the collateral securing the indebtedness, the credit standing of the borrower, and the risk of subsequent default.
In re Loveridge Machine and Tool Co., Inc., 36 B.R. 159 (Bankr.D.Utah 1983), another well written opinion by Judge Glen Clark, literally "covers the waterfront" on the issue of determining an appropriate discount rate. There, the dispute between the parties concerned the interest rate found in 28 U.S.C. § 1961(a), which was urged by the debtors since at that time it was substantially less than the contract rate of interest, as opposed to the contract rate which was urged by the secured creditor. The opinion perceptively noted that factors to be considered in setting an appropriate discount rate in a Chapter 11 context might well be distinguished from those factors utilized in setting a discount rate in a Chapter 13 case. Although Judge Clark did not set a firm discount rate, he disapproved the rate proposed by the debtors (that promulgated under 28 U.S.C. § 1961(a)), stating the following:
I find, based upon the above analysis, that none of the opinions which have adopted 28 U.S.C. § 1961(a) as a proper source of a discount rate for deferred cash payments is good precedent for making a decision in this case.
Independent of this conclusion, however, is my opinion that to use 28 U.S.C. § 1961(a) as the source of the interest rate for discounting deferred cash payments to Northwest under this plan would be ill advised and erroneous as a matter of law. Although Section 1961(a) is a convenient source for interest rates and is helpful in determining the risk-free rate of interest for one year loans, this case does not involve a risk-free loan. Neither does it involve a one year loan. Government obligations to repay loans evidenced by Treasury bills are, according to the prevailing economic wisdom, among the least risky of all investments. It is to be questioned whether the short-term risk-free rate of interest is a rational, much less a `fair and equitable' rate of interest for debtors' promise to pay Northwest's debt under its plan of reorganization. It has been said that `[n]o index for short term loans . . . is a sound baseline for arriving at a fixed rate that is to govern a forced loan for a period of years.' Blum, supra at 442. Northwest's loan will not be repaid for six to seven years. Debtors' credit standing, even if their plan is confirmed, will not in any sense be as good as those who may borrow at a risk-free rate. The parties, at the inception of Northwest's loan, calculated that a 19 percent interest rate would best measure the risks of the transaction. A rate of nearly half that rate seems inappropriate now. If debtor had shown that under its plan the risk of non-payment of Northwest's debt is about the same as the risk of non-payment of 52-week Treasury Bills, the court might have been persuaded otherwise. No such evidence was offered. Thus, although 28 U.S.C. § 1961(a) might be a good source for an interest rate in another case, it is not an acceptable source in this case. Moreover, the propriety of using 28 U.S.C. § 1961(a) as the source of the interest rate in this case is questionable in light of current rates of interest on similar loans. An officer of Northwest testified without contradiction that a loan similar to the one proposed by this plan, similarly collateralized, and with similar terms, would require a 14 to 16 percent interest rate if made to a borrower with good credit. A loan to a borrower with debtors' post-confirmation credit would require an interest rate of approximately 20 percent.
Section 1129(b)(2)(A)(i)(II) contemplates a `present value analysis that will discount value to be received in the future.' H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 412, 414-415 (1977), U.S.Code Cong. & Admin.News 1978, p. 6370; 124 Cong.Rec. H. 1104 (Sept. 28, 1978); S. 17421 (Oct. 6, 1978). This present value analysis was intended to `recogniz[e] the time-value of money.' House report, supra at 413, U.S.Code Cong. & Admin. News 1978, p. 6369. A method for determining the time value of money is not given.
*589 In In re Stockdale Corporation, Bankr. No. 81-01288, transcript of oral ruling, Mabey, J. (Bkrtcy.D.Utah June 23, 1982), the court found that the concept of the time value of money under Section 1129(b) with respect to a class of dissenting secured claims could be approached by beginning with the interest rate on risk-free investments due at the time of the completion of payments under the plan. To the applicable risk-free rate of interest, the Stockdale approach adds extra interest where necessary to compensate for risks imposed on secured creditors under the plan. Since secured creditors face some unavoidable risks even in the event of a liquidation, the additional interest to be added to the risk-free rate is based only on the additional risks imposed by the plan. [emphasis added]
Id. at 169-70.
Consistent with the Loveridge opinion, the majority of cases follow the proposition that the discount rate should be comparable to the rate of interest which would be charged by a creditor making a loan to a borrower with similar terms, circumstances, duration, collateral and risks. See, In re Wolf, 61 B.R. 1010 (Bankr.N.D.Ia.1986), In re Hildreth, 43 B.R. 721 (Bankr.D.Id. 1984), and Matter of Landmark at Plaza Park, Ltd., 7 B.R. 653 (Bankr.D.N.J.1980).
In order to determine whether the debtor's proposed discount rate is appropriate, considering the factors cited in the aforementioned cases, the Court must consider the testimony and evidence offered at the confirmation hearing. At the hearing, the debtor presented expert testimony through Ronald Colter, Senior Vice President, Miller/DaleWallenstein, a real estate investment banking firm owned by the Grubb and Ellis Company. (See debtor's Exhibit 3 for the qualifications of the witness.) The crux of this testimony centered on the appropriate interest rate that would be charged in the market by a creditor making a loan to a borrower under similar circumstances as those existing in the instant case. The following dialogue is excerpted from page 54 of the confirmation hearing transcript, to-wit:
Q. All right. Mr. Colter, I want you to assume the following facts:
Assume that we have a hotel, a Holiday Inn franchise located in Arlington, Tarrant County, Texas.
Assume further that it's managed in a competent fashion; that it's well maintained.
Assume further that we're talking about a first lien indebtedness of approximately $8 million.
Assume further that the lender can be forced involuntarily to make such a loan, so you don't have to worry about whether or not you can get somebody to actually make this loan; just assume that fact.
Assume further that the hotel and the improvements are worth approximately $12.4 million.
Assume further that the note on this first lien debt would be a note with a five-year term based upon a thirty-year amortization schedule; that they balloon at the end of five years.
And, I'm going to ask you in your opinion, would a 1½ percent floating rate of interest over the prime rate be a reasonable rate of interest for such a note, giving due consideration for the quality of the collateral and the risk of subsequent default?
A. Yes.
On re-direct examination by debtor's counsel, the following question and answer are excerpted from page 62 of the confirmation hearing transcript, to-wit:
Q. Mr. Colter, having heard all the risks and factors outlined by Mr. Pronske, would it change your opinion that 1½ over prime was a reasonable rate, assuming that you can have an involuntary loan?
A. That would be a reasonable rate.
To rebut this testimony, UNUM called its Regional Manager, Investment Real Estate Division, Peter F. Curtis, who testified that in setting interest rates, lenders generally start with existing rates set for treasury notes, bills, and bonds, and to those rates, different layers of risk factors are added, calculated as interest percentage points. *590 (See pages 68 and 69 of the confirmation hearing transcript.) Unfortunately, Mr. Curtis did not provide a firm interest rate that would be charged by UNUM to a borrower under circumstances similar to those existing in this case. He did testify, however, that he disagreed with the debtor's proposed rate, evidenced by the following excerpted testimony from pages 95 and 96 of the confirmation hearing transcript:
Q. Is prime plus 1½ a fair rate of interest given similar terms, duration, collateral, and risks in this situation?
A. Specifically to this particular property?
Q. Yes.
A. No, not even close.
Q. Is this in the ballpark?
A. Not even light years.
In support of Mr. Colter's testimony, the debtor offered into evidence the following exhibits:
A. Debtor's Exhibit No. 1Miller/DaleWallenstein Market Update Report, week of 2/9/87, reflecting interest rates, fees, and terms quoted by various nationwide lenders.
B. Debtor's Exhibit No. 6The Wall Street Journal, Money Rates, effective February 13, 1987, reflecting among several rates listed, a prime rate of 7½% per annum, the base rate on corporate loans at large U.S. money center commercial banks. (The Court notes that at this writing, the same publication indicates that the prime rate has risen to 8¼% per annum.)
C. Debtor's Exhibit No. 12The Wall Street Journal, Treasury Bonds, Notes and Bills Rates, effective February 13, 1987, reflecting various maturity dates and corresponding yields applicable to the aforementioned U.S. Government securities.
As a result of UNUM's objection, the Court is called upon to decide three issues:
(1) Whether the debtor's plan was filed in good faith as required by § 1129(a)(3);
(2) Whether the discount rate proposed by the debtor meets the "best interest of creditors test", found in § 1129(a)(7); and
(3) Whether this discount rate is "fair and equitable", as required by § 1129(b)(2)(A).
In an effort to show that the debtor's plan was not filed in good faith and, presumably, that the plan did not meet the requirements of § 1129(a)(7), UNUM introduced into evidence its Exhibit No. 9, which was an analysis prepared by its Regional Manager, Peter Curtis, of the projections found in the CushmanWakefield Appraisal Division Report, said report having been introduced into evidence as Debtor's Exhibit No. 2. This analysis, i.e., UNUM Exhibit No. 9, reflected the net income available for debt service which was extracted directly from the CushmanWakefield projections, as well as, reflected excess funds available after debt service to UNUM and InterFirst. The Court is of the opinion that the excess funds analysis prepared by Mr. Curtis is totally inaccurate. First, it calculates the annual debt service at a fixed interest rate of 9% per annum, based on principal debt balances only. In other words, the analysis does not take into account that the debtor proposes to pay both UNUM and InterFirst on a floating rate, i.e., 1½% above the InterFirst prime rate, as well as, that interest, cost, and attorney's fees should be added to the principal balances prior to the application of any interest rate. Secondly, the analysis is inaccurate in that it does not consider the reduction of principal which is built into the debt amortization. Consequently, the Court has no reliable evidence to determine exactly what excess funds will be available, if any, to be applied to presumably the Allowed Interests holders' claims. As such, the Court is left only with the conclusion that the debtor's modified plan is proposed in good faith and not by any means forbidden by law.
The "best interest of creditors test" found in § 1129(a)(7), is set forth as follows:
(7) With respect to each impaired class of claims or interests
(A) each holder of a claim or interest of such class
(i) has accepted the plan; or
*591 (ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date; . . .
The debtor proposes to pay UNUM, admittedly an oversecured creditor, the full amount of its allowed secured claim, including principal, accrued interest, costs, and attorney's fees, plus a present value discount factor at the rate of 1½% above the InterFirst prime rate. If the discount factor is appropriate, UNUM will certainly receive as much as it would be entitled to receive if the debtor were liquidated in a Chapter 7 case. As Judge Leroy Smallenberger commented in In re Hollanger, 15 B.R. 35 (Bankr.W.D.La.1981), a case permitting the "cramdown" of dissenting oversecured creditors' claims, to-wit:
where a dissenting claimant is receiving payment in full over a reasonable period of time, with an appropriate interest or discount factor being paid, that creditor is receiving all that the law requires . . .
Id. at 47.
In that case, the Court analyzed the plans' provisions in depth and concluded that the plans were "fair and equitable" as to the oversecured creditors, even though the unsecured creditors were to be paid in full prior to the oversecured creditors being paid in full, and even though the debtors were retaining an equity ownership in the secured property.
In this context, as additional protection for UNUM, the debtor's plan was modified to prohibit any distribution to the Allowed Interests holders until a cash reserve of $200,000.00 is established as a buffer to secure the payment of UNUM's claims, or until its claims are paid in full. Additionally, the debtor modified its plan to include the limited recourse provision against the debtor which is found in paragraph 12 of the UNUM promissory note. Accepting at this moment that the amount of the discount factor is reasonable, the modified plan appears to balance the rights of all creditors, while at the same time it represents an approach through which the debtor can feasibly reorganize.
Turning back now to the appropriate discount factor, the Court looks to the guidance provided in In re Wolf, 61 B.R. 1010 (Bankr.N.D.Ia.1986), where Judge Yacos, again sitting by designation, addressed the "fair and equitable" test as follows:
With regard to the fair and equitable test under § 1129(b)(1), (2) of the Code, the key issue is the setting of an appropriate interest rate on the payout to the secured creditors to assure that the deferred cash payments have a present value, as of the effective date of the plan, at least equal to the value of the creditors' interest in their collateral. The debtors offered expert witness testimony from a witness familiar with `rates of return' in various types of financing transactions. He has testified before various regulatory commissions and agencies. He testified in this court to a methodology looking to the `lost opportunity costs' in terms of what kind of return each creditor would receive by putting cash equal to the value of their lien into investments having comparable risks and a similar period of time.
The witness then compared the present debt obligation to medium grade bonds having a `Baa' or `BBB' rating. Under nationally recognized rating agency evaluations, the evidence indicates that under present circumstances the appropriate interest rate for such obligations would range from 10.5 percent to 11.2 percent. The witness also indicated the low end of that range would be most appropriate in terms of the present trend downward in such interest rates.
Against this evidence, the creditors offered testimony of bank officials stating that they would make no loans at 100 percent of value in the first place, and that in any event their going interest rates ranged from 12.75 percent to 13.25 percent. I believe the reference to the `100 percent loan' by the creditors is inappropriate in the present context of dealing with an existing loan. The rest *592 of the creditors' evidence, in effect insisting upon its current contract rates on other loans, is likewise off the mark. For one thing, there is no showing that the risks and terms of those other loans are in fact comparable to the present situation. Secondly, I do not believe that `creditor specific' interest rates are mandated by the `fair and equitable' concept embodied by § 1129(b)(1) and (2) of the Code. Otherwise a creditor who exacts exorbitant interest rates would automatically be guaranteed the same rates in Chapter 11 reorganization. The irony of such a result under a `fair and equitable' standard is apparent.
On balance, I conclude that an interest rate of 11 percent is appropriate and will accord the objecting creditors fair and equitable treatment within the meaning and spirit of § 1129(b)(1) and (2) of the Bankruptcy Code. The Court of Appeals for the Eighth Circuit has indicated flexibility in devising appropriate standards for farmer reorganization cases and I believe that the novel expert testimony offered by the debtors in this case, on interest rates, is convincing and establishes an appropriate range of such rates for present purposes. See In re Monnier Bros., 755 F.2d 1336, 1339, 1342 (8th Cir.1985); In re Ahlers, 794 F.2d 388 (8th Cir.1986). The debtor has agreed to amend the plan to include the interest rate determined to be appropriate by this court. [emphasis in original]
Id. at 1012-13.
Another case discussing appropriate discount rates and interest rates at length is Matter of Fi-Hi Pizza, Inc., 40 B.R. 258 (Bankr.D.Ma.1984). That case, however, is somewhat different than the case now before this Court in that priority tax claims were the subject of the dispute. The Commonwealth of Massachusetts had objected to the debtor's Chapter 11 plan of reorganization on the ground that it did not require payment of interest at the rate of 18% per annum on its priority tax claims. Judge Harold Lavien held that the Commonwealth was entitled to interest at the prevailing Internal Revenue Code rate on delinquent taxes plus 2.5%, concluding that this formula would provide an appropriate present value to the Commonwealth's claims which were to be paid in deferred payments of cash. The court relied on 26 U.S.C. § 6621 as a base rate, and then added the additional percentage points for the following reasons:
The Court notes that the § 6621 rate has been criticized in the past. See, In re Southern States Motor Inns, Inc., 709 F.2d 647, 651-52 (11th Cir.1983); In re Bay Services, 26 B.R. 811 (Bkrtcy.M. D.Fla.1982); In re Moore, 25 B.R. 131 (Bkrtcy.N.D.Tex.1982); In re Tacoma Recycling, Inc., 23 B.R. 547, 556 (Bkrtcy. W.D.Wash.1982). This criticism is based mainly upon a possible time lag of nearly two years in the effective date of interest changes. However, § 6621 was recently amended to provide for six-month adjustments, to bring the determination even closer to economic events and prevailing economic conditions. Pub.L. No. 97-248. Although it is still possible for a party to `reap a windfall,' the fact that the rate imposed by the Court will change when the § 6621 rate changes during the course of the debtor's deferred payments, means that the inequities will balance themselves during the long run. Also, it should be noted that the prime rate of any particular date is minimized because the § 6621 rate is an averaging of six months of rate variances. [footnote omitted]
As the Court has note previously, the § 6621 rate approximates a current rate. Granted that there may be rates that are more reflective of the current market in the short-term, over the long-termand that is what is involved in most periodic tax paymentsthe § 6621 rate, as periodically adjusted and averaged, does provide an approximation of an effective reflection of the market rate of interest and thus approaches present value. Moreover determination of the § 6621 rate by the Department of Treasury provides an accessible public figure that is not open to dispute so that chapter 11 debtors and, most important, potential investors can have relative certainty in *593 working toward reorganization. Accordingly, this Court will utilize though not confine itself to the § 6621 rate in determining the market rate.
The question remains as to what is the appropriate adjustment. The Court, in analyzing the previously described loan rates (home mortgage rates from 1.25% below § 6621 to 5.75% above, unsecured personal loans from 5 to 8% above), treasury notes and bonds (from 1.23% below and 1.99% above), and the SBA rate (1.75% above) as they relate to the present § 6621 rate, and having a special regard to its almost daily experience with the rates charged by actual commercial lenders and other financier's of chapter 11 debtors that range from one to three per cent over prime, [footnote omitted] finds that a rate that is 2.5% above the § 6621 rate as periodically adjusted to be appropriate. [footnote omitted] Such a combined rate will provide the Commonwealth taxing authorities, over the term of payments, a sum approximately equal to present value.
While there can be no absolute assurance that any stream of payments will, with certainty, place the recipient in the exact same position it would have been had a full cash payment initially been made, the Court must use its best judgment based upon all the factors presented to it to approximate as clearly as possible that result.
Id. at 271-72.
Fi-Hi Pizza is cited with approval in a case decided earlier in this district, In re Neff, 60 B.R. 448 (Bankr.N.D.Tx.1985), aff'd, 785 F.2d 1033 (5th Cir.1986).
As noted above, the debtor proposes to pay off the UNUM indebtedness at the end of five years, but the monthly payments over this five year period are calculated on the basis of a thirty year amortization with one final "balloon payment".
A review of the aforementioned documentary exhibits introduced by the debtor reveals the following information:
Exhibit 1 The interest rates for five year obligations ranged from 9.325% to 10.45% including discount points of 1.2%. The interest rates on thirty year obligations ranged from 10.775% to 11.45% including discount points of 1.2%.
Exhibit 6 The Federal Home Loan Mortgage Corporation (Freddie Mac) interest rate on a thirty year mortgage was reflected at 8.89%. This type mortgage, however, would secure specifically a residential loan, rather than a commercial transaction. As of June 1, 1987, this rate has risen to 10.57%. The Federal National Mortgage Association (Fannie Mae) interest rate on a thirty year mortgage was reflected at 8.72%. This type mortgage, like the Freddie Mac, would secure only a residential loan. As of June 1, 1987, this rate has risen to 10.3%.
Exhibit 12 The treasury bond and treasury note yield for a twenty-nine year obligation, which is nearest to the thirty year amortization proposed by the debtor, is reflected at 7.64%. This would be considered in the industry as a "risk free" obligation. If three percentage points were added to this rate, in keeping with the testimony of UNUM's representative, Peter Curtis, the rate would total 10.64%.
The rate now being charged by the Internal Revenue Service under 26 U.S.C. § 6621 is 9% per annum.
To bring all of these variables into perspective, the Court observes that at the date of the confirmation hearing the debtor's proposed rate would produce a discount factor of 9% per annum (7½% plus 1½%), while today that same proposal would produce a discount rate of 9¾% per annum (8¼% plus 1½%). This is generally less than the updated rates reflected in the aforementioned exhibits. Because the debtor is solvent and because it intends to eventually make distributions to its Allowed Interests holders, this Court cannot approve the proposed rate of 1½% over the InterFirst prime. However, in a departure from the Loveridge decision, and in an effort to conserve time, this Court will specify a discount rate that would be acceptable to permit confirmation of the debtor's plan. Considering the prevailing rates for a loan of equal term to that proposed in the modified plan, the quality of the security, and *594 the risk of subsequent default, this Court concludes that a rate of 2½% above the prime rate charged by InterFirst would be "fair and equitable" and would meet the "cramdown" test set forth in § 1129(b)(2)(A)(i)(I) and (II).
The debtor will be afforded an exclusive opportunity to further amend its plan within ten (10) days of the date of the entry of the Order, which will be prepared in connection with this Opinion, to reflect a discount rate of 2½% above the prime rate charged by InterFirst, as well as, to add interest at the contract rate to the unpaid installments of principal and interest as discussed earlier. Thereafter, the debtor will be afforded an additional period of ten (10) days to solicit the acceptance of the plan as modified consistent with this Opinion from the Allowed Interests holders. Should the Allowed Interests holders class accept these modifications, an order of confirmation will be subsequently entered by this Court.
If the debtor elects not to amend the plan as set forth hereinabove, confirmation of the debtor's modified plan, as currently filed with this Court, shall be denied.
A separate Order addressing the issues resolved in this Opinion will be entered contemporaneously herewith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857880/ | Stubblefield v. State
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-380-CR
CHRIS B. STUBBLEFIELD, JR.,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 146TH JUDICIAL DISTRICT,
NO. 40,331, HONORABLE RICK MORRIS, JUDGE
PER CURIAM
Appellant was convicted in a joint trial of five acts of forgery and was sentenced
to imprisonment for seven years and a $5000.00 fine. Tex. Penal Code Ann. § 32.21(b) (1989).
In two points of error, appellant contends that the district court erred in rendering judgment in
cause number 40,331 because the evidence is legally insufficient to support the judgment. We
will affirm.
Appellant allegedly stole checks belonging to Wayne Skinner, a legally blind,
elderly man who lives in a nursing home. A friend of appellant's worked in this nursing home.
Appellant attempted to pass one of Skinner's checks, number 572 (State's exhibit 4), at a King
Saver grocery store allegedly using a Department of Veteran's Affairs identification card showing
that appellant's name was Wayne Skinner. The check bore the purported signature of Wayne
Skinner as the drawer. The cashier called the police after recalling that Skinner's checks had been
reported as stolen. Appellant fled the grocery store after the cashier informed him the police were
coming and was later arrested after the police found him hiding under a pickup truck in the
parking lot.
Appellant was indicted in cause number 40,331 for forgery by possession of check
number 569 (State's exhibit 8) with intent to pass and transfer the check as well as intent to
defraud and harm another. Check number 569 was purportedly drawn by Skinner and bore what
purported to be Texas driver's license number "05339881," which also appeared on check number
572 (State's exhibit 4). Check number 569 was passed at David's Supermarket for merchandise.
The store submitted the check to the bank, which later returned the check unpaid as a forgery.
The State detected a latent print on check number 569 that matched appellant's fingerprint.
In his first point of error, appellant contends the evidence is insufficient to support
the judgment because the State has not proved that the purported drawer of the check, Skinner,
did not authorize appellant to write the check. See Payne v. State, 567 S.W.2d 4, 5 (Tex. Crim.
App. 1978). In Payne, the defendant's mother stated that it was possible that she authorized the
defendant to write her checks. The instant cause is distinguishable from Payne, however, because
Skinner testified that the only Chris Stubblefield he knew was white (appellant is African-American) and because Skinner testified that he did not believe he asked anyone to sign a check
for him that year. Skinner never stated that it was possible that he authorized appellant to write
checks for him.
The critical inquiry on review of the sufficiency of the evidence to support a
criminal conviction is whether the record evidence could reasonably support a finding of guilt
beyond a reasonable doubt. This Court does not ask whether it believes that the evidence at trial
established guilt beyond a reasonable doubt. Instead, the relevant question is whether, after
viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could
have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia,
443 U.S. 307, 318-19 (1979); Griffin v. State, 614 S.W.2d 155, 159 (Tex. Crim. App. 1981).
Viewing the evidence in the light most favorable to the prosecution, the jury could have
reasonably concluded that Skinner did not authorize appellant to write the check. Appellant's first
point of error is overruled.
In his second point of error, appellant contends the evidence is insufficient to
support the judgment because the State has not proved that the check was made, altered, executed,
completed, and authenticated at the time appellant allegedly possessed the check. In
circumstantial-evidence cases like the instant cause, we cannot sustain a conviction based on
circumstantial evidence if the circumstances do not exclude every other reasonable hypothesis
except that of the guilt of the defendant. Carlsen v. State, 654 S.W.2d 444, 449-50 (Tex. Crim.
App. 1983). (1) A review of the evidence, however, points to no other reasonable conclusion except
appellant's guilt: appellant was arrested while attempting to pass another of Skinner's checks at
a grocery store; appellant possessed a false identification card in Skinner's name; a false driver's
license number was written on the check that was identical to the number written on the check
appellant was attempting to pass at the time of his arrest; appellant had access to Skinner's checks;
Skinner was blind and did not remember writing a check to appellant; and appellant's fingerprint
was on the check. Viewed in the light most favorable to the prosecution, the evidence is legally
sufficient to prove that check number 569 was made, altered, executed, completed, and
authenticated at the time appellant allegedly possessed it. Point of error two is overruled.
The judgment of the district court is affirmed.
[Before Justices Powers, Jones and Kidd]
Affirmed
Filed: May 6, 1992
[Do Not Publish]
1. See generally Geesa v. State, 820 S.W.2d 154, 161-62 (Tex. Crim. App. 1991)
(overruling Carlsen and requiring the use of an express instruction on "reasonable doubt").
Geesa is limited to cases tried after November 6, 1991, and, thus, does not apply to this cause. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/823695/ | Order Michigan Supreme Court
Lansing, Michigan
October 22, 2012 Robert P. Young, Jr.,
Chief Justice
Michael F. Cavanagh
Marilyn Kelly
144624 & (25) Stephen J. Markman
Diane M. Hathaway
Mary Beth Kelly
Brian K. Zahra,
PEOPLE OF THE STATE OF MICHIGAN, Justices
Plaintiff-Appellee,
v SC: 144624
COA: 306098
Wayne CC: 08-008998-FC
EDWARD PINDER,
Defendant-Appellant.
_________________________________________/
On order of the Court, the motion to add issue is GRANTED. The application for
leave to appeal the December 27, 2011 order of the Court of Appeals is considered, and it
is DENIED, because the defendant has failed to meet the burden of establishing
entitlement to relief under MCR 6.508(D).
I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
October 22, 2012 _________________________________________
s1015 Clerk | 01-03-2023 | 03-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536235/ | 364 B.R. 407 (2007)
In re TELLURIDE INCOME GROWTH LP, Debtor.
Dennis Bullock, Don Gerber, Steve Hinkle, Mary L. Hinkle, Jerry D. James, Don G. Lyle, Jon R. Lyle, Kenneth R. Miller, Michael E. Monoscalco, Madelyn J. Monoscalco, Jill Marie Monoscalco, Laura C. Monoscalco, Eugene C. Moravec, Joseph R. Nardone, Howard W. Nutt, Ralph Edward Preston, Ken E. Rhode, James Sterling, Sandra R. Tingle, R.M. Yost Ira, R. Michael Yost, and Roselva M. Yost, Appellants,
v.
Telluride Income Growth LP, Telluride Global Development, LLC, E. Global Development Ltd., Telluride Asset Resolution, and Jeanne Y. Jagow, Trustee, Appellees.
BAP No. CO-05-090, Bankruptcy No. 03-31600-ABC.
United States Bankruptcy Appellate Panel of the Tenth Circuit.
March 12, 2007.
*408 *409 Douglas G. Benedon of Benedon & Serlin, Woodland Hills, CA (Joseph Solomon of Solomon & Solomon, Telluride, CO, and Steven R. Fox, Encino, CA, with him on the briefs), for Appellants.
John C. Smiley of Lindquist & Vennum P.L.L.P, Denver, CO (Michael Gilbert, Esq., of Reed & Fanos, Ouray, CO, with him on the briefs), for Appellees.
Before McFEELEY, Chief Judge, THURMAN, and SOMERS[1], Bankruptcy Judges.
OPINION
McFEELEY, Chief Judge.
This appeal is from the bankruptcy court's denial of the Appellants' motion, pursuant to Federal Rule of Bankruptcy Procedure 9023,[2] to alter or amend the bankruptcy court's findings of fact and conclusions of law entered when sustaining the Chapter 7 Trustee's motion to sell certain assets of the Debtor pursuant to 11 U.S.C. § 363.[3]
I. JURISDICTION AND SCOPE OF REVIEW
This Court has jurisdiction to decide "timely filed appeals from final judgments, order, and decrees' of bankruptcy courts within the Tenth Circuit, unless one of the parties elects to have the district court hear the appeal."[4] Rule 8002(a) requires that a notice of appeal shall be filed within ten days of the entry of judgment, or within 10 days of the entry of an order resolving a post trial motion under Rules 7052, 9023, or 9024. Appellants timely filed the notice of appeal from the September 7, 2005 judgment denying the motion to alter or amend on September. 16, 2005. Although the notice of appeal would be timely for an appeal from the order sustaining the 363 sale,[5] Appellants consistently state to the Court that they appeal only from the denial of the Rule 9023 motion and not from the order approving the 363 sale. The Court therefore regards this as an appeal from the denial of the Rule 9023 motion only. In this case all parties have consented to review by this Court, since no party has elected to have the appeal heard by the United States District Court for the District of Colorado.
A final decision is one which "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment."[6]*410 An order denying a post trial motion is a final order.[7] When there is no appeal from the underlying judgment, unless the trial court was powerless to render the judgment in the first instance, the denial raises for review only the order itself and not the underlying judgment.[8]
The scope of review of denial of a motion to alter or amend is narrow. The lower court's rulings on a motion under Federal Rule 59(e) is reviewed for abuse of discretion.[9]
II. BACKGROUND
The facts' necessary to resolve this appeal are not controverted. Although the appeal focuses on a very limited aspect of the transactions, knowledge of background facts is necessary to understand the issue on appeal.
The Debtor is Telluride Income Growth LP ("TIGLP"), an Arizona limited partnership formed in 1991 to acquire, develop, and sell real property in the town of Telluride, Colorado, known as the Ballard House. Several dozen limited partners invested approximately $1.6 million in the project. In 1994, the original general partners were replaced. William Baird was a member of the Board of Directors of the new general partner, Peak Returns, LLC, and was also in control the development's manager. One of the project's two buildings (the South Building) was completed in 1998, and the other property (the North Building) remains in the preliminary stages of construction. The Debtor ran out of money in the course of developing the North Building, and in October 1999 when faced with foreclosure, agreed to transfer several remaining unsold units in the South Building and the entirety of the uncompleted North Building to Western Slope, LLC,:a Baird entity.
The agreement pursuant to which the sale occurred was called "Contract For Sale and Equity Participation Agreement" ("EPA"). Under the EPA, Western Slope agreed to pay TIGLP's existing debts on the property (at the time, over $6.4 million) and to finance and complete construction of the North Building. The EPA provided that, if build-out and sale of the Ballard House occurred, Debtor would be entitled to 80% of the net profits, and Western Slope to 20%. Net profits are defined in Schedule C as total project revenues less: (1) repayment of all project expenses and existing and future debt related to the obligations under the agreement; and (2) repayment of the amount of the Debtor's investors' outstanding original investment in an amount not to exceed $1.6 million, plus interest from the date of investment forward at the rate of 8%. A subordinated Purchase Money Deed of Trust ("PMDOT") was given to the Debtor to secure performance of Western Slope's obligations under the EPA. The EPA requires that the PMDOT include specific language limiting the remedies available in the event of breach of the EPA to recourse against the real property subject to the deed of trust, i.e., the Ballard House. Debtor and Western Slope are the only *411 named parties to both the EPA and the PMDOT.
Western Slope made no significant progress with the construction of the North Building, and by early 2002, the primary lender, Pueblo Bank, commenced foreclosure against Western Slope. On February 15, 2002, E-Global Development Limited ("E-Global"), an entity owned/controlled by the Arthur and Robert Levine families (hereafter the "Levines"), who had previously made a significant investment in the Ballard House through Bauhinia, Ltd.("Bauhinia"),[10] bought the Pueblo loan for the full amount owed. Western Slope then gave E-Global a deed in lieu of foreclosure. E-Global then quitclaimed its interest to Telluride Global Development, LLC ("Telluride Global"), also a Levine company. The transfer was subject to the EPA.
On October 11, 2002, twenty-five of Debtor's limited partners ("Limited Partners"), representing contributors of approximately one half of the original $1.6 million invested in the Debtor by limited partners, commenced litigation in San Miguel County, Colorado state court, styled Dennis Bullock, et al. v. Telluride Income/Growth Limited Partnership, Ltd., et al., case number 02-CV78 (the "State Court Litigation"). There were twenty-seven defendants, including E-Global, Bauhinia, Telluride Global, Debtor, Western Slope, the Debtor's general partners, the Debtor's management and related entities, various lenders, and third-party purchasers of completed Ballard House condominium units in the South Building. The complaint alleged six causes of action: (1) breach of fiduciary duty and mismanagement of partnership assets; (2) accounting by, and dissolution of, the Debtor; (3) damages for breach of the partnership agreement; (4) misappropriation and fraudulent conveyance of partnership assets; (5) self-dealing; and (6) foreclosure of an equitable lien against the undeveloped North Building and unsold units in the South Building. The Limited Partners' allegations included the contention that the transfer of the Ballard House to Western Slope pursuant to the EPA was fraudulent and improper. Although not filed as a derivative action, the complaint asserted causes of action that were in fact Debtor's claims. Amended complaints adding parties and amending paragraphs in the original complaint were filed.
Defendants Bauhinia, E-Global, and Telluride Global sought dismissal of the foreclosure claim for failure to state a claim. The Limited Partners defended the motion by asserting that they were proper parties to foreclose the lien on Ballard House because they were third party beneficiaries of the EPA, which is secured by the PMDOT. The motion to dismiss was denied. The state court found that the allegations of third party beneficiary status and entitlement to an equitable, lien were sufficient to withstand the motion to dismiss. The state court, upon Limited Partners' motion, granted a preliminary injunction enjoining the defendants from selling the Ballard House property.
In March 2003, a voluntary Chapter 7 petition was filed on behalf of Debtor by a limited liability company purporting to be Debtor's general partner. That petition was dismissed in March 2004, on the Limited Partners' motion for summary judgment, due to defects in the authority of the legal entity.[11] In the meantime, on October *412 29, 2003, E-Global, Telluride Global (the owner of Ballard House), and a third party filed an involuntary Chapter 7 petition against Debtor. The order for relief was entered on June 4, 2004. On September 1, 2004, the Chapter 7 Trustee filed a Notice of Removal of the State Court Proceeding.
During the course of the bankruptcy, Telluride Asset Resolution, LLC ("TAR"), a Levine controlled entity, entered into an Agreement with the Trustee to purchase substantially all of the Debtor's assets.[12] The assets included were the estate's claims asserted in the State Court Litigation, including the claims asserted by the Limited Partners as derivative claims, and the Debtor's rights under the EPA. The Agreement also provided that the Trustee would release the PMDOT and any and all claims of the estate against TAR, Telluride Global, E-Global, and Bauhinia. Under the Agreement reached with the Trustee, the estate would receive $250,000 cash and release of claims in the amount of $10,519,079. On March 22, 2005, the Chapter 7 Trustee filed a motion pursuant to 11 U.S.C. § 105(a) and § 363 for approval of the sale. The Limited Partners objected, asserting that the consideration to be received by the estate was insufficient because the Trustee had not properly evaluated state court claims. After four days of evidentiary hearings on the objections, the bankruptcy court on August 2, 2005, granted the motion and approved the Agreement. Findings of fact and conclusions of law were read into the record and incorporated by reference into the court's order, entitled Order Under 11 U.S.C. § 363, And Fed. R. Bankr.P.2002, 6004, 9014 And 9019(a), (A) Approving Agreement To Acquire Assets And Release Claims; And (B) Authorizing (I) Transfers Of Certain Of Debtor's Assets Free And Clear Of Liens, Claims, Interests And Encumbrances, And (II) Mutual Release of Claims (hereafter "Sale Order"). Those findings included the following: "The limited partners are neither parties to the equity participation agreement, nor beneficiaries of the purchase money deed of trust that secures obligations under it." August 2, 2005 Hearing Transcript at 15, ll. 13-16, in Appellants' Appendix, Vol. 3, at 774. No stay was obtained, and no appeal was filed from the Sale Order. The sale was closed on August 15, 2005.
On August 11, 2005, the Limited Partners filed a motion to alter or amend the findings of fact and conclusions of law, but only as to the foregoing one sentence finding relating to the Limited Partners' rights under the EPA and the PMDOT. Telluride Global, E-Global Development, and TAR opposed the motion. On September 7, 2005, the bankruptcy court denied the Limited Partners' motion to alter or amend without stating reasons. On September 16, 2005, the Limited Partners filed a Notice of Appeal from the September 7, 2005 judgment.[13]
III. PRELIMINARY MOTIONS
A. THE MOTION TO DISMISS THE APPEAL AS MOOT IS DENIED
Before addressing the merits of the appeal, the Court will address three referred motions. The first is Appellees' Motion to Dismiss the appeal as moot under the authority of § 363(m) and case law that establishes *413 that failure to seek a stay of an order approving a sale of assets under § 363 renders any appeal of the sale order moot. As to application of this well-established principle to this case, Appellees argue that the Limited Partners' appeal, although technically from the order denying the motion to alter or amend, is in effect a challenge to an integral part of the order of sale. In Appellees' view, the Limited Partners seek to overturn findings and conclusions made in connection with the entry of the sale order, therefore challenging the validity of the sale.[14]
The Limited Partners agree that under subsection 363(m) an appeal which challenges an order approving the sale of assets is moot, if it satisfies the following two requirements: (1) no party obtained a stay of the sale order pending appeal; (2) the validity of the sale would be impacted by reversing or, modifying the authorization to sell. Under this standard, they urge that a challenge to a related provision of an order authorizing the sale, of the debtor's assets affects the validity of the sale only when the related provision is integral to the sale of the estate's assets and the provision is so closely linked to the agreement governing the sale that modifying or reversing the provision would adversely affect the parties' bargained for exchange. The Limited Partners urge these conditions are not satisfied.[15] They state the "sole issue on appeal is to clarify" the bankruptcy court's ruling regarding their rights under the EPA and the PMDOT and steadfastly disavow any intention to affect the validity of the sale. Appellants' Opening Br. at 6.
For the following reasons, the appeal is not moot. The Appellees rely upon § 363(m) as the basis for mootness. It provides:
The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
This subsection "protects the reasonable expectations of good faith third-party purchasers by preventing the overturning of a completed sale, absent a stay, and it safeguards the finality of the bankruptcy sale."[16] This purpose is achieved without "a per se rule that every appeal from an order approving a sale must be dismissed. The protection applies only if the court, upon reversing or modifying the order authorizing the sale, would affect the validity of the sale."[17] In the Tenth Circuit, when no stay is obtained, § 363(m) has been construed as having "removed only the possibility of remedies that would affect the validity of a sale to a good faith purchaser."[18]*414 The Third Circuit Court of Appeals has construed § 363(m) as establishing two prerequisites for mootness: "(1) the underlying sale or lease was not stayed pending the appeal, and (2) the court, if reversing or modifying the authorization to sell or lease, would be affecting the validity of a such a sale or lease."[19]
Under these standards, which we apply without consideration of the distinctions, if any, arising from the fact that this appeal is from the denial of a 59(e) motion rather than the Sale Order, the appeal is not moot. The issue on appeal is whether the bankruptcy court erroneously adjudicated the Limited Partners' rights in the EPA and PMDOT. The remedy sought by the Limited Partners can be granted without affecting the validity of the sale. The policy of finality of orders of sale is not involved in this appeal.
B. THE MOTION OF THE LIMITED PARTNERS TO TAKE JUDICIAL NOTICE OF PORTIONS OF THE BANKRUPTCY COURT RECORD IS GRANTED
The second motion is the Limited Partners' motion requesting that we take judicial notice of specified pleadings and a transcript filed in the bankruptcy court subsequent to the denial of the motion to alter or amend. These pleadings were filed in the adversary proceeding initiated by the removal of the State Court Litigation when, after the 363 sale and in reliance on the change of circumstances arising because of the approval and closing of the sale, TAR and Telluride Global moved for dissolution of the preliminary injunction and the related bond and dismissal of the adversary proceeding. The Limited Partners responded with a motion to remand. All of the documents which the Limited Partners wish for us to consider are part of the record in the related appeal, BAP Appeal No. CO-06-006, Telluride Asset Resolution, LLC v. Telluride Global Dev. (In re Telluride Income Growth LP), ___ B.R. ___, 2007 WL 646123, op. filed March 5, 2007.
The Limited Partners cite as authority 28 U.S.C. § 201(b), (d), and (f). This is an erroneous citation, since there is no such statute. However, Federal Rule of Evidence 201 addresses judicial notice of adjudicative facts. The Appellees oppose the motion and move to strike portions of the Limited Partners' brief referencing the non-record documents. The Appellees rely upon the general rule that an appeal should be decided upon the record that existed at the time of the judgment on appeal and argue that, although at times the court may take judicial notice of subsequent events, this is generally limited to subsequent actions that render the appeal moot.
We reject the Appellees' arguments and grant the motion to take judicial notice, and deny the motion to strike. The doctrine of judicial notice is broadly construed in the Tenth Circuit. "The scope and reach of the doctrine of judicial notice has been enlarged over the years until today it includes those matters that are verifiable with certainty."[20] In the context of an appeal to the district court from contempt citations entered by the bankruptcy court, the foregoing statement was cited as authority for the proposition that when exercising review, the court may *415 "take judicial notice of the bankruptcy court's records and files, as well as those of this court resulting from the many appeals the debtors have taken from the bankruptcy. . . ."[21] The Bankruptcy Appellate Panel of the Eight Circuit[22] has noted that the ongoing nature of bankruptcy proceedings may create situations where the reviewing court may take notice of events subsequent to the entry of the judgment from which the appeal was taken. That observation is particularly relevant in this appeal where we also have before us the related appeal in which these documents are part of the record.
In this case, subsequent events are relevant to this appeal because they illustrate the importance of the issue raised by the Limited Partners' motion to alter or amend. The portion of the bankruptcy court record subject to the motion establishes the following. On September 20, 2005, TAR was substituted for the Chapter 7 Trustee as a party plaintiff in the removed State Court Litigation. On October 5, 2005, TAR filed a "Motion to Dissolve Preliminary Injunction, Release Bond, and Dismiss Without Prejudice" ("Motion to Dismiss"). TAR alleged that it did not desire to pursue the claims of the Debtor which it acquired as part of the § 363 sale, argued that following the sale the Limited Partners had no claims, and requested the Court to dismiss the adversary "in its entirety," dissolve the preliminary injunction, and release the related bond. Motion to Dismiss at 4, ¶ 11, 13, in Request for Judicial Notice at 22. The Limited Partners opposed the Motion to Dismiss and filed a "Motion to Remand Proceeding to the Colorado State Court" ("Motion to Remand"). TAR and Telluride Global opposed the Motion to Remand. After full briefing, on December 14, 2005, the bankruptcy court held oral arguments on the motions and then orally stated on the record its findings of fact and conclusions of law. All claims of TAR, as successor to the Debtor, including all claims that were asserted by the Limited Partners as derivative claims were dismissed without prejudice. All the Limited Partners' direct claims and all counterclaims against the Limited Partners were remanded to the state court. Before making its rulings, the bankruptcy court made some observations concerning the 363 sale as follows:
This Court has previously ruled in connection with the trustee's contested sale and settlement motion that all claims of the debtor, TIGLP, including all derivative claims in [the removed case], which were moved on the filing of this case or which moved by operation of law in the filing of this case to the trustee, and were sold by the trustee to Telluride Asset Resolution, LLC. . . . The purchaser of these claims has now moved to dismiss them without prejudice.
I am not ruling today on nor have I previously addressed the viability of any limited partnership nonderivative claims. This Court has not addressed direct claims of limited partners in the [removed action] or otherwise.
Prior to removal, the state court determined that and I quote from the state court's ruling which has been filed, and was admitted in evidence in an earlier in this case, that plaintiffs have stated a cause of action to impose and foreclose an equitable lien upon the property.
I specifically note that the state court so ruled only in the context of denying a Rule 12(b)(6) motion to dismiss, and accordingly, the state court did not address *416 the merits of any such direct claims.
This court has specifically found on the basis of evidence presented to it and as an integral part of approving the settlement and sale of this bankruptcy estate's interest in claims, including claims under the so-called Equity Participation Agreement and the so-called Purchase Money Deed of Trust securing obligations under the Equity Participation Agreement that TIGLP and not the limited partners, was the party to the EPA and the Purchase Money Deed of Trust, and that TIGLP and not the limited partners was the beneficiary under the Purchase Money Deed of Trust.
If the limited partners wish to challenge this finding, an appeal of this Court's ruling, is or was the proper forum to mount such a challenge, collateral attack in the state court is not the proper forum. That, however, is a separate question than whether limited partners, apart from TIGLP or its successor by sale from the trustee, has separate direct claims by way of equitable liens or otherwise, against anyone other than TIGLP. Claims against TIGLP, of course, have to be filed as Proofs of Claim in this case.
December 14, 2005, Transcript at 25-27, in Appellants' Request for Judicial Notice at 86-88 (emphasis added). Orders memorializing the bankruptcy court's orders on the motions were filed on January 17, 2006. The Motion to Dismiss was granted to the extent that all claims held by TAR were dismissed without prejudice. The bankruptcy court abstained from ruling on whether to dissolve the preliminary injunction and related bond. As to the Motion to Remand, the bankruptcy court approved the motion as to all direct claims by the Limited Partners, if any, and any counterclaims thereto, if any.
On January 25, 2006, TAR and Telluride Global filed a notice of appeal from the two orders entered on January 17, 2006. That appeal was assigned BAP Appeal No. CO-06-006.
IV. DISCUSSION
This appeal is from the bankruptcy court's denial of the Limited Partners' motion pursuant to Rule 9023, which incorporates Federal Rule 59. It provides in relevant part:
(a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues . . . (2) in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the United States. On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and direct the entry of a new judgment.
Fed.R.Civ.P. 59(a). The motion sought only an amendment of one sentence of the bankruptcy court's findings when granting the Trustee's 363 motion to sell the Debtor's assets, including the EPA, free and clear. The challenged statement is the following: "The limited partners are neither parties to the equity participation agreement, nor beneficiaries of the purchase money deed of trust that secures obligations under it." August 2, 2005 Hearing Transcript at 15, ll. 13-16, in Appellants' Appendix, Vol. 3, at 774. The Limited Partners under Rule 9023 moved for an order determining that the bankruptcy court was not making any finding of fact or conclusion of law on whether the moving Limited Partners are or are not beneficiaries under the EPA. They asserted that determination of their rights under *417 the EPA was not necessary to the 363 sale and would go beyond the court's jurisdiction. They further asserted that the express language of the EPA provided that the Limited Partners are beneficiaries, that there was no evidence before the court in the 363 hearing to the contrary, and the state court had previously held that the Limited Partners have rights in the EPA independent of those of the Debtor.
In response, TAR, Telluride Global, and E-Global argued that the bankruptcy court's finding that the Limited Partners were not beneficiaries of the EPA was necessary to its ruling on the 363 motion, that the Limited Partners are not beneficiaries of the EPA under Colorado law, that testimony at the hearing on the 363 motion establishes that the Limited Partners were never intended to be third-party beneficiaries, and that the state court did not find that the Limited Partners were beneficiaries under the EPA. They asserted that "[i]n evaluating the TIGLP estate's rights under the EPA and PMDOT, the Court necessarily determined the nature and extent of the competing interests in these agreements that had been asserted by the moving limited partners." Telluride Global, E-Global, and TARs' Objection to Motion to Amend at 4, in Appellants' Appendix, Vol. 3, at 848.
At issue here is the term "beneficiaries." Both parties argue that this term in the bankruptcy court's order is ambiguous, and thus clouds the meaning of the sale.[23] The Limited. Partners asked for reconsideration for the purpose of clarifying that the term "beneficiaries" in the challenged statement means "named beneficiaries" and is exclusive of their claimed third party beneficiary rights. In contrast, the Appellees assert that the term "beneficiaries" is inclusive of all rights, both derivative and nonderivative. We see nothing in the record indicating that the term as used by the bankruptcy court is ambiguous. In the Sale Order the bankruptcy court stated:
Nothing in this Order or in the Agreement shall affect the claims of any entity who is not a signatory to the Agreement against any other entity, provided however, the Agreement and transactions authorized by this Order expressly dispose of all claims of this bankruptcy estate that have previously been, or could have been, asserted derivatively on behalf of the Debtor."
Sale Order at 4, ¶ 10, in Appellants' Appendix, Vol. 3, at 790 (emphasis added). The bankruptcy court clearly did not intend to rule on the viability of the Limited Partners' asserted third party beneficiary status. Furthermore, in subsequent proceedings as observed above, the bankruptcy court stated that it had no intention of ruling or approving the sale of any alleged third party beneficiary nonderivative claims. Under the circumstances of this case, there is no abuse of discretion.
V. CONCLUSION
For the foregoing reasons, the order denying the Limited Partners' motion pursuant to Federal Rule of Bankruptcy Procedure 9023 to alter or amend the bankruptcy court's findings of fact and conclusions of law entered when sustaining the Chapter 7 Trustee's motion to sell certain assets of the Debtor pursuant to 11 U.S.C. § 363 is affirmed.
SOMERS, Bankruptcy Judge, Concurring.
I concur in the Court's holding that, the bankruptcy court did not abuse its discretion *418 when denying the Appellants' motion to alter or amend, but I would reach that decision for reasons other than those stated by the majority in the portion of this Opinion entitled "Discussion."
NOTES
[1] Honorable Dale L. Somers, United States Bankruptcy Judge, United States Bankruptcy Court for the District of Kansas, sitting by designation.
[2] Federal Rule of Bankruptcy Procedure 9023 makes Federal Rule of Civil Procedure 59 applicable in cases under the Code. The Federal Rules of Bankruptcy Procedure will hereafter be referred to in the text as "Rules" or "Rule," and the Federal Rules of Civil Procedure will be referred to in the text as "Federal Rules" or "Federal Rule."
[3] This case was filed before October 17, 2005, when most provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 become effective. All statutory references to the Bankruptcy Code are to 11 U.S.C. §§ 101-1330 (2004), unless otherwise specified. All references to the Federal Rules of Bankruptcy Procedure are to Fed. R. Bankr.P. (2004), unless otherwise specified.
[4] In re Miller, 284 B.R. 734, 735 (10th Cir. BAP 2002) (citing 28 U.S.C. § 158(a)(1), (b)(1), and (c)(1))"
[5] Fed. R. Bankr.P. 8002(b).
[6] Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945).
[7] See Dimeff v. Good (In re Good), 281 B.R. 689, 698 (10th Cir. BAP 2002) (appeal from order denying motion for relief under Rule 9024); McLeod v. Hattaway, 34 Fed.Appx. 200 (6th Cir.2002) (denial of motion under Fed. R.Civ.P. 52(b)).
[8] See V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 223 (10th Cir.1979) (appeal from denial of Fed.R.Civ.P. 60(b) motion).
[9] Morganroth & Morganroth v. DeLorean, 213 F.3d 1301, 1313 (10th Cir.2000); Buell v. Sec. Gen'l Life Ins. Co., 987 F.2d 1467, 1472 (10th Cir.1993).
[10] Bauhinia, Ltd., a Hong Kong Corporation owed by the Levines, was a preconstruction purchaser and put deposits on four units in the North Building. Debtor alleges Bauhinia transferred its interests to E-Global.
[11] See In re Telluride Income Growth Ltd. P'ship, 311 B.R. 585 (Bankr.D.Colo.2004).
[12] Parties to the Agreement also included Telluride Global, E-Global, and Bauhinia.
[13] This is one of two related appeals in the TIGLP bankruptcy. The second is BAP Appeal No. CO-06-006, Telluride Asset Resolution, LLC v. Telluride Global Dev. (In re Telluride Income Growth LP), op. filed March 5, 2007, which was an appeal from orders entered in the adversary case initiated by the removal of the State Court Litigation.
[14] Appellees rely primarily upon In re Bel Air Assocs., Ltd., 706 F.2d 301, 304-05 (10th Cir. 1983) (decided under former Fed. R. Bankr.P. 805) and Anheuser-Busch, Inc. v. Miller (In re Stadium Mgmt. Corp.), 895 F.2d 845, 847-48 (1st Cir.1990).
[15] The Limited Partners rely primarily upon Cinicola v. Scharffenberger, 248 F.3d 110, 122 (3d Cir.2001) and In re Trism, Inc., 328 F.3d 1003, 1007 (8th Cir.2003).
[16] In re Trism, Inc., 328 F.3d, at 1006 (citing In re Paulson, 276 F.3d 389, 392 (8th Cir. 2002)).
[17] 3 Collier on Bankruptcy ¶ 363.11 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.2006).
[18] In re BCD Corp., 119 F.3d 852, 856 (10th Cir.1997).
[19] Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490, 499 (3d Cir.1998).
[20] St. Louis Baptist Temple, Inc. v. FDIC, 605 F.2d 1169, 1172 (10th Cir.1979).
[21] In re Winslow, 186 B.R. 716, 721 (D.Colo. 1995).
[22] In re Alexander, 239 B.R, 911, 913 (8th Cir. BAP 1999), aff'd, 236 F.3d 431 (8th Cir.2001).
[23] We note that the Sale Order was not appealed and we may not contemplate its effect through this appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536236/ | 364 B.R. 688 (2006)
In re Gordon Hans BRAATHEN, Debtor.
First State Bank of Munich, Plaintiff,
v.
Gordon Hans Braathen, Defendant.
Bankruptcy No. 05-31156, Adversary No. 05-7037.
United States Bankruptcy Court, D. North Dakota.
February 1, 2006.
*689 *690 *691 *692 *693 Cameron D. Sillers, Cameron D. Sillers, P.C., Langdon, ND, for Plaintiff.
Thomas. V. Omdahl, Omdahl Law Office, Grand Forks, ND, for Defendant.
MEMORANDUM AND ORDER
WILLIAM A. HILL, Bankruptcy Judge.
By Complaint filed August 22, 2005, Plaintiff First State Bank of Munich initiated this adversary proceeding seeking determinations that Debtor/Defendant Gordon Hans Braathen is not entitled to a discharge pursuant to 11 U.S.C. § 727(a)(2), (3), (4) and (5) and that an outstanding debt owed by the Debtor to the. Bank in the amount of $14,707 is nondischargeable pursuant to 11 U.S.C. § 523(a)(2). By Answer filed September 1, 2005, the Debtor denies the allegations.
The matter was tried on December 1, 2005. The following constitutes the Court's findings of fact and conclusions of law.
I. FINDINGS OF FACT
The Debtor is a farmer and a truck driver. The Bank made several operating and equipment loans to the Debtor over the years, and as of June 6, 2005, the Debtor owed the Bank $133,356.36. The property securing the debt included a vehicle, a tractor, a semi trailer, all equipment, all government payments, all accounts receivable, and all other property listed on the Bank's security agreement.
Brian Anderson, a Bank loan officer, testified that the Bank became aware in the fall of 2004 that the Debtor would not be able to repay his 2004 operating loan. The Debtor's crop yields were down because of a bad soybean crop. Anderson met with the Debtor in the fall of 2004 to discuss the shortage, and the plan was for the Debtor to sell his grain inventory and to put any crop insurance proceeds or government program payments toward the loan balance.
Anderson met with the Debtor again in the spring of 2005. Realizing the Debtor *694 could not repay the 2004 operating loan, the Bank decided not to renew the Debtor's operating loan for 2005. After applying the grain proceeds to the debt, there remained a $20,000-30,000 shortfall. The Debtor testified he turned over all his equipment to the Bank, and decided to quit farming. He asked the Bank to write off the rest of his debt, but the Bank refused.
A. The Disaster Payment
The Debtor received a crop disaster program payment from the Department of Agriculture on May 16, 2005, in the amount of $10,707. The Debtor had already decided to file for bankruptcy at this time and had discussed exemptions with his attorney when he received the payment. He testified he knew he would lose the money to creditors if he did not do something with it, so he used the money from the disaster payment to catch up on his mortgage payments because he had fallen behind. He also knew he had an outstanding obligation to the Bank and that the Bank would suffer financial harm if he did not turn over the check. The Bank's name was not on the check, though, and the Debtor denied knowing the Bank had a lien against the disaster payment. The Bank told him it wanted the money, but did not tell him they had a lien on the disaster payment. According to the Debtor, when hard times hit, he needed the money for his expenses and decided not to give it to the Bank. According to Anderson, he specifically told the Debtor that the Bank's security agreement included the disaster payment and that the Debtor needed to give the Bank the payment to reduce his indebtedness.
The Debtor received disaster payments just twice in his 20 years of farming. The last time he received a disaster payment, he deposited the payment into his checking account and wrote a check to the Bank because it was "the thing to do" even though no one from the Bank told him he had to turn the money over. The difference, according to the Debtor, was that last time he did not need the money and this time he did.
Anderson explained that the Bank has a form that typically is sent to the Farm Service Agency informing it to send any disaster payment check directly to the Bank and not a borrower. This procedure was not followed by the Bank in the Debtor's case in 2004 because although the Bank had a form filled out and in the Debtor's file, it was not signed by the Debtor.
B. The Debtor's Tools
Anderson testified that in determining whether to renew an operating loan each year, he and a borrower meet each spring to update the borrower's balance sheet schedules and to assess the operation's cash flow projections. The Bank's software saves the information from each prior year, and a loan officer and the borrower amend the schedule as appropriate to reflect changes in the property listed and its market value. The particular balance sheet schedule at issue in this case is Schedule 23 which lists the Debtor's machinery, equipment and vehicles. Every year Schedule 23 listed the Debtor's tools with a market value of $4,000.
Although the Debtor farmed for 20 years, he owned few tools because his father farmed for 40 years and had most of the tools the Debtor needed. The Debtor conceded at trial that he did not have the $4,000 worth of tools that were listed on his balance sheet, but he contended he never told the loan officer he had $4,000 worth of tools. He testified, "The Bank said I had $4,000 of tools. I never said that." The Debtor characterized the *695 $4,000 figure as the banker's "magic figure," and said that he simply did not disagree with the figure. He said he left the valuation of the tools to the loan officer because he is not an appraiser, and the Bank never asked to see his tools nor asked about the specific types of tools he owned.
Anderson visited the Debtor's farm and saw the Debtor's shop that contained the tools. Anderson, testified he thought $4,000 was a fair representation of the value of the tools and that the Debtor never told him the tools in the shop were his father's. He conceded, however, that he was aware the shop was also used by the Debtor's father and that the property in the shop was a mixture of the Debtor's and his father's. Anderson never itemized the Debtor's tools.
The Debtor's 2004 operating loan request was considered and approved by the Bank's loan committee. The president of the Bank, John Vollmer, testified that the lending committee looked very closely at the Debtor's loan application in 2004. The Debtor was short on collateral and at the edge of his credit limit. According to Vollmer, the lending committee may not have approved the Debtor's 2004 operating loan if they had known the truth about the tools because of the importance of the character of a borrower and the Bank's trust in borrowers.
In liquidating the. Debtor's property covered by its security agreement, the Bank abandoned any property at the farm worth less than $500 including the tools, press drills, a cultivator, and a harrow. Each of these items was listed on the Debtor's Schedule 23 as worth more than $500.
The Debtor filed a voluntary Chapter 7 petition for bankruptcy relief on June 6, 2005. The Debtor did not list any tools in his bankruptcy petition. At the meeting of creditors in connection with his bankruptcy case, the. Debtor testified he had $150 worth of tools. He stated at trial that $150 was the amount the Bank's auctioneer told him they were worth.
C. The Truck Rims
The Bank collateralized a loan with a truck. At some date unspecified in the record, the Debtor turned the truck over to the Bank, but he removed aluminum rims from the truck "quite a while earlier." The Debtor testified he did not know the rims were covered by the security agreement. He took the rims off because he needed money, and he viewed the rims as his property.
When the Debtor returned the truck to the Bank without the rims, Anderson explained to the Debtor that the rims were covered by the security agreement and told him the Bank needed the rims back. The Debtor returned some of the rims, but not all of them.
II. CONCLUSIONS OF LAW
The Bank argues both for the denial of a bankruptcy discharge to the Debtor and for a determination of nondischargeability of the $14,707 owed to the Bank by the Debtor. The Debtor's alleged conduct on which the Bank bases its claims includes: failure to turn over the disaster payment to the Bank, failure to list $4,000 worth of tools in his petition or to satisfactorily explain their absence, and failure to return all of the truck rims to the Bank
4. 11 U.S.C. § 727(a)
The Bank seeks to have the Debtor denied a discharge under 11 U.S.C. § 727(a)(2), (3), (4) and (5). Section 727(a) provides in relevant part:
(a) The court shall grant the debtor a discharge, unless
* * *
*696 (2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed
(A) property of the debtor, within one year before the date of the filing of the petition; or
(B) property of the estate, after the date of the filing of the petition;
(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;
(4) the debtor knowingly and fraudulently, in or in connection with the case
(A) made a false oath or account;
(B) presented or used a false claim;
(C) gave, offered, received or attempted to obtain money, property, or advantage, or a promise of money, property or advantage, for acting or forbearing to act; or
(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs;
(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities[.]
11 U.S.C. § 727(a).
Denying a debtor a discharge is a drastic remedy. Kaler v. Geller (In re Geller), 314 B.R. 800, 806 (Bankr.D,N.D. 2004). In light of the policy implications favoring debtors under the Bankruptcy Code, section 727 must be construed liberally in favor of the debtor and strictly against the objecting party with the burden of proof resting squarely upon the latter. Id. The standard of proof is a preponderance of the evidence. Id.
1. Section 727(a)(2)
The Debtor's alleged actions that may support a section 727(a)(2) claim are his failure to turn over the disaster payment and the truck rims to the Bank, both of which occurred prepetition. Section 727(a)(2)(A) applies to prepetition conduct. The elements essential to barring a discharge under section 727(a)(2)(A) are:
(1) that the act complained of was done within one year prior to the date of petition filing; (2) the act was that of the debtor; (3) it consisted of a transfer, removal, destruction or concealment of the debtor's property; and (4) it was done with an intent to hinder, delay or defraud either a creditor or an officer of the estate.
Kaler v. Craig (In re Craig), 195 B.R. 443, 449 (Bankr.D.N.D.1996).
The Bank presented no evidence as to when any act of the Debtor occurred with regard to the truck rims. The Bank therefore has not met the first element of section 727(a)(2)(A) with regard to the removal of the truck rims.
Next, the Debtor received the disaster payment on May 16, 2005. After that date, he transferred the money to be applied toward his mortgage. Because his *697 bankruptcy petition was filed on June 6, 2005, his act of transferring the money was within one year prior to the date of the petition. Having established the first three elements under section 727(a)(2)(A), the critical inquiry, then, is whether he made the transfer with the intent to hinder, delay or defraud the Bank.
Intent to defraud can be established by circumstantial evidence or from inferences drawn from a debtor's course of conduct. MWI Veterinary Supply Co. v. Rodgers (In re Rodgers), 315 B.R. 522, 531 (Bankr.D.N.D.2004). Courts have considered several factors in determining whether a debtor acted with intent to hinder, delay or defraud: (1) lack or inadequacy of consideration; (2) family, friendship or other close relationship between the transferor and transferee; (3) retention of possession, benefit or use, of the property in question; (4) financial condition of the transferor prior to and after the transaction; (5) conveyance of all of the debtor's property; (6) secrecy of the conveyance; (7) existence of trust or trust relationship; (8) existence or cumulative effect of pattern or series of transactions or course of conduct after the pendency or threat of suit; (9) instrument affecting the transfer suspiciously states it is bona fide; (10) debtor makes voluntary gift to family member; and (11) general chronology of events and transactions under inquiry. Id.
In this case, the Debtor put the money from the disaster payment toward his mortgage. He testified he knew he would lose the money to creditors if he did not do something with it, but he thought the money was his. The Bank did not offer any evidence as to the existence of any of the factors listed above or as to any other circumstantial evidence to support its claim. For these reasons, section 727(a)(2) cannot serve as a basis for denial of discharge in the case.
2. Section 727(a)(3)
A debtor may be denied a discharge pursuant to section 727(a)(3) for failure to keep or preserve records from which his financial `situation may be ascertained unless the failure is justified under all the circumstances of the case. Riley v. Riley (In re Riley), 305 B.R. 873, 882 (Bankr.W.D.Mo.2004). Intent is not an element of this ground for denial of discharge; the standard imposed is one of reasonableness. Id. Discharge should not be denied if the debtor's records, though poorly organized, are reasonably sufficient to ascertain the debtor's financial condition. Id. Although the Bankruptcy Code does not require an impeccable system of bookkeeping, the records must sufficiently identify the transactions so that intelligent inquiry can be made of them. Grisham, Farm Products, Inc. v. Keller (In re Keller), 322 B.R. 127, 132 (Bankr.E.D.Ark. 2005). The complaining party must make an initial showing that the debtor failed to maintain and preserve adequate records and that the failure makes it impossible to ascertain the debtor's financial condition and material business transactions. Id. If the debtor breaches his duty to his creditors to keep adequate records, he is given the opportunity to provide some justification for the breach. Id. If the debtor cannot justify his failure to keep adequate records, his discharge will be denied. Id.
The Bank did not identify any deficiencies in the Debtor's records and therefore has not met its burden of establishing that the Debtor's records were inadequate. Under the circumstances of the case and the limited record in this regard, the Court concludes the Debtor's records were reasonable, and section 727(a)(3) cannot serve as a basis for the denial of discharge in this case.
*698 3. Section 727(a)(4)
The Bank's contention with regard to this potential ground for denial of discharge is that the Debtor failed to list any tools in his Schedules of Assets and Liabilities when he filed his bankruptcy petition.
A debtor may be denied a discharge pursuant to section 727(a)(4)(A) if the debtor knowingly and fraudulently, in or in connection with a case, made a false oath or account. In order to deny a discharge to a debtor under this subparagraph, a plaintiff must establish that: (1) the debtor knowingly and fraudulently; (2) in or in connection with the case; (3) made a false oath or account; (4) regarding a material matter. Korte v. United States of America Internal Revenue Service (In re Korte), 262 B.R. 464, 474 (8th Cir. BAP 2001). A debtor's signatures on the petition, made under penalty of perjury, are declarations which have the force and effect of oaths of the kind encompassed by the discharge exception for making a false oath. Jordan v. Bren (In re Bren), 303 B.R. 610, 613 (8th Cir. BAP 2004) (overruled on other grounds). The proper functioning of the entire bankruptcy process is dependent upon debtors providing complete, accurate and reliable information in the petition and other documents submitted with the filing of the case so that parties in interest may evaluate debtors' assets and liabilities and appropriately administer the case. Id.
At issue here is whether the Debtor "knowingly and fraudulently" made a false oath. Because an admission or other direct evidence of fraudulent intent is rarely available, actual intent may be established by circumstantial evidence. Ellsworth v. Bauder (In re Bauder), 333 B.R. 828, 830 (8th Cir. BAP 2005). Courts are often understanding of a single omission or error resulting from an innocent mistake, but multiple inaccuracies or falsehoods may rise to the level of reckless indifference to the truth, which is the functional equivalent of intent to deceive. Kaler v. Geller (In re Geller), 314 B.R. 800, 807 (Bankr.D.N.D.2004). The Bank bears the burden of proving fraudulent intent. See In re Bauder, 333 B.R. at 832.
The Debtor admitted at the meeting of creditors that he has $150 worth of tools despite omitting them from his bankruptcy schedules. At trial, however, the Bank did not ask the Debtor why the tools were omitted from his schedules nor did it present circumstantial evidence raising the inference of fraudulent intent. Although the Court is troubled by the Debtor's failure to amend his schedules after the meeting of creditors when his mistake was brought to light, the Bank's burden of proof and evidentiary shortfall lead the Court to conclude that the Debtor's single omission of the tools from his schedules was indeed an honest mistake. For this reason, section 727(a)(4) cannot serve as a basis for the denial of discharge.
4. Section 727(a)(5)
Section 727(a)(5) of the Bankruptcy Code denies a debtor a discharge if he or she has failed to explain satisfactorily any loss or deficiency of assets to meet his or her liabilities. Section 727(a)(5) does not contain an intent element as part of its proof, and what constitutes a "satisfactory" explanation is left to the discretion of the Court. Riley, 305 B.R. at 885. As the party objecting to discharge, the Bank has the burden of proving that a loss of assets actually occurred. Id. Once that burden has been met, it is then incumbent upon the debtor to provide a satisfactory explanation for the loss of the asset. Id.
The Bank did not articulate its asserted basis for this potential ground for denial of *699 discharge, but presumably it is that the Debtor failed to explain the loss of tools that were listed on his balance sheet schedules with the Bank but not on his bankruptcy schedules. The Debtor explained, however, that he never owned $4,000 worth of tools. The tools that were valued at $4,000 included a mixture of tools belonging to both the Debtor and his father. The Bank did not sell the Debtor's tools at auction because the auctioneer deemed them to be worth less than $500. The Court is satisfied with the Debtor's explanation of why he currently has only $150 worth of tools, and the Bank's claim under section 727(a)(5) fails.
B. 11 U.S.C. § 523(a)
The Bank asserts that the Debtor's failure to disclose his tools on his petition, which were previously disclosed to the Bank and used to obtain credit was a fraudulent act under section 523(a)(2). The Bank further asserts that the Debtor's failure to turn over the disaster payment, which was pledged for the purpose of obtaining credit, was a fraudulent act under section 523(a)(2).
The statutory exceptions to discharge in bankruptcy are narrowly construed to effectuate the fresh start policy of the Bankruptcy Code. Owens v. Miller (In re Miller), 276 F.3d 424 (8th Cir.2002). Accordingly, a creditor opposing discharge of a debt must prove the debt falls within an exception to discharge. Werner v. Hofmann, 5 F.3d 1170, 1172 (8th Cir.1993). The standard of proof for exceptions to discharge under section 523(a) is the preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Section 523(a)(2) provides an exception to discharge for a debt
(2) for money, property, services or an extension, renewal, or refinancing of credit, to the extent obtained by
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition;
(B) use of a statement in writing
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reason ably relied; and
(iv) that the debtor caused to be made or published with intent to deceive[.]
11 U.S.C. § 523(a)(2). The language "obtained by" clearly indicates that the fraudulent conduct occurred at the inception of the debt, i.e., the debtor committed a fraudulent act to induce the creditor to part with its money, property or services. Valley Memorial Homes v. Hrabik (In re Hrabik), 330 B.R. 765, 772 (Bankr.D.N.D. 2005).
The Bank does not specify which subsection it asserts as a ground for nondischargeability, but subsections 523(a)(2)(A) and (B) are mutually exclusive. Land Investment Club, Inc. v. Lauer (In re Lauer), 371 F.3d 406, 413 (8th Cir.2004). First, the Debtor's representation to the Bank that he would turn over any disaster payment to the Bank did not concern his financial condition and subsection (A) applies. See Legendary Loan Link, LLP v. Glatt (In re Glatt), 315 B.R. 511 (Bankr.D.N.D.2004) (analyzing a debtor's alleged misrepresentation to comply with the terms of a lease agreement under section 523(a)(2)(A)).
To establish nondischargeability under section 523(a)(2)(A), the creditor *700 must prove the following: (1) the debtor made a false representation; (2) at the time made, the debtor knew it to be false; (3) the representation was made with the intention and purpose of deceiving the creditor; (4) the creditor relied on the representation; and (5) the creditor sustained the alleged injury as a proximate result of the representation. Claws v. Church (In re Church), 328 B.R. 544, 547 (8th Cir. BAP 2005).
The false representation the Debtor made in this case was that he would comply with the terms of the security agreement and turn over to the Bank any disaster payment he received. The Bank falls short, however, in establishing that the Debtor knew at the time the representation was made, i.e., when he executed the security agreement, that he would not comply with its terms. In fact, when he received a previous disaster payment, he gave it to the Bank. This conduct is inconsistent with the Bank's claim, and the Bank did not offer direct or circumstantial evidence to support a finding that the Debtor knew or should have known that he would not comply with the terms of the security agreement. In short, the. Bank has failed to carry its burden of proving the Debtor knew the representation that he would comply with the security agreement was false at the time it was made.
The Bank also asserts that the Debtor's failure to disclose his tools on his petition, which were previously disclosed to the Bank, and used to obtain credit, was a fraudulent act. First, the appropriate verbiage for the Bank is to assert that the Debtor's alleged misrepresentation as to the value of his tools, which induced the Bank to extend him credit, was fraudulent. Next, this conduct falls within the purview of 523(a)(2)(B) because it related to the financial condition of the Debtor.
To prevail under section 523(a)(2)(B), the Bank has to establish by a preponderance of the evidence that the Debtor obtained money from it (1) by the use of a statement in writing that was materially false; (2) that pertained to his financial condition; (3) on which the Bank reasonably relied; and (4) that the Debtor made with the intent to deceive the Bank. See 11 U.S.C. § 523(a)(2)(B); Jacobus v. Binns (In re Binns), 328 B.R. 126, 130 (8th Cir. BAP 2005).
The statement at issue here is the Debtor's representation that he owned $4,000 worth of tools. This statement pertained to his financial condition and satisfies the second element of section 523(a)(2)(B). The remaining issues are whether the written statement was materially false, whether the Bank reasonably relied on that statement in lending to the Debtor, and whether the Debtor made the statement with intent to deceive the credit union.
1. Material Falsity
The statement must be in writing and materially false. Although the Debtor did not write the $4,000 figure on the balance sheet schedule, he signed the schedule, and written statements need not be physically prepared by a debtor to satisfy the writing requirement of section 523(a)(2)(B). See Fairfax State Say. Bank v. McCleary (In re McCleary), 284 B.R. 876, 885 (Bankr.N.D.Iowa 2002). The writing requirement is satisfied if the written statement was signed, adopted and used, or caused to be prepared, by, the debtor. Id.; Voyatzoglou v. Hambley (In re Hambley), 329 B.R. 382, 399 (Bankr. E.D.N.Y.2005). The question, therefore, is whether the statements regarding the tools were materially false.
The concept of "materiality" within the context of section 523(a)(2)(B) includes *701 objective and subjective components. Ramsey Nat'l Bank & Trust Co. v. Dammen (In re Dammen), 167 B.R. 545, 550-51 (Bankr.D.N.D.1994). Objectively, a statement is materially false if it paints a substantially untruthful picture of a debtor's financial condition by misrepresenting information of the type that would normally affect the decision to grant credit. Wallander v. Wallander (In re Wallander), 324 B.R. 746, 752 (Bankr.N.D.Iowa 2005). The relevant subjective inquiry, although not dispositive, is whether the complaining creditor would have extended credit had it been apprised of the debtor's true situation. In re Dammen, 167 B.R. at 551.
The president of the Bank, John Vollmer, testified that the lending committee may not have approved the Debtor's 2004 operating loan if they had known the truth about the tools. In other words, even subjectively the statement was not necessarily material. Moreover, the Court is not convinced that the Bank proved the Debtor's statement was a misrepresentation that painted a substantially untruthful picture. The $4,000 worth of tools was a small part (3%) of the $126,500 worth of property listed on the balance sheet schedule. The Debtor's statement that he had $4,000 worth of tools may have been inflated, but it did not paint a substantially untruthful picture of his financial condition at the time the loans were made.
2. Reasonable Reliance
The next issue is whether the Bank reasonably relied on the Debtor's statement that he had $4,000 worth of tools. To establish reasonable reliance, a creditor must prove that reliance was objectively reasonable and that there was actual reliance. In re Bowden, 326 B.R. 62 (Bankr.E.D.Va.2005). Reasonable reliance is determined considering the totality of the circumstances. First Nat'l Bank of Olathe v. Pontow, 111 F.3d 604, 610 (8th Cir.1997); Guess v. Keim (In re Keim), 236 B.R. 400, 402 (8th Cir. BAP 1999).
The parties stipulated that the Bank relied upon the Debtor's representation as to the value of his tools. The question is whether the reliance was objectively reasonable. The Court does not sit as an after-the-fact' loan committee that second guesses lending decisions, but the standard of reasonableness places a measure of responsibility on a creditor to ensure that there exists some basis for relying on a debtor's representations. Among other things, a court may consider whether there were any "red flags" that would have alerted an ordinarily prudent lender to the possibility that the representations relied upon were not accurate, and whether even minimal investigation would have revealed the inaccuracy of the debtor's representations. Pontow, 111 F.3d at 610. The issue of reasonableness presented under section 523(a)(2)(B) is not whether it was reasonable for the Bank to have loaned the Debt or money, but whether it was reasonable for the Bank to have relied upon his statement that he had $4,000 worth of tools in extending him credit.
The Bank's software saved the Debtor's information from each prior year, and the $4,000 figure carried over each year. The only evidence as to where the $4,000 figure originated was the Debtor's testimony that it was the banker's "magic figure," and that he simply did not disagree with the figure. The Court finds his testimony that he left the valuation of the tools to the loan officer because he is not an appraiser reasonable, particularly when coupled with the fact that Brian Anderson, the loan officer, visited the Debtor's farm and saw the Debtor's shop containing his tools. Anderson knew the shop was also used by the Debtor's father and that the property in the shop was a mixture of the Debtor's *702 and his father's, yet he never itemized the Debtor's tools. Anderson's knowledge of the mixed ownership of the tools was a red flag that would have alerted an ordinarily prudent lender to conduct at least a minimal investigation into the veracity of the assertion. His failure to do so supports a finding that the Bank's reliance was not reasonable, and it bolsters the Court's finding that the representation was not material.
3. Intent to Deceive
For discharge to be barred, the debtor must have acted with intent to deceive. A creditor may establish such intent by proving reckless indifference to or reckless disregard for the accuracy of the information in a debtor's financial statement. NAFCO Fed. Credit Union v. Lawson (In re Lawson), 308 B.R. 417, 423 (Bankr.D.Neb.2004).
The Debtor's admission that he knew he did not have $4,000 worth of tools when he signed the balance sheet schedule evidences a reckless disregard for the accuracy of the information in his financial statement. However, all of the elements must be established to succeed on a claim under section 523(a)(2)(B), and the Bank has not established material falsity or reasonable reliance. The Bank's claim under section 523(a)(2)(B) therefore fails.
Based on the foregoing, the Complaint of Plaintiff First State Bank of Munich based upon sections 523 and 727 of the Bankruptcy Code is DISMISSED.
SO ORDERED.
JUDGMENT MAY. BE ENTERED ACCORDINGLY. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/234928/ | 216 F.2d 326
MODINE MANUFACTURING COMPANY, Appellant,v.GRAND LODGE INTERNATIONAL ASSOCIATION OF MACHINISTS, Local Union No. 1382 of International Association of Machinists, Appellees.
No. 12003.
United States Court of Appeals Sixth Circuit.
October 20, 1954.
COPYRIGHT MATERIAL OMITTED Lee C. Shaw, Chicago, Ill., E. Allan Kovar, Seyfarth, Shaw & Fairweather, Chicago, Ill., James G. Wheeler, Wheeler & Marshall, Paducah, Ky., on brief, for appellant.
Joseph S. Freeland, Paducah, Ky., Plato E. Papps, George W. Christensen, Washington, D. C., on brief, for appellees.
Before ALLEN, MARTIN and STEWART, Circuit Judges.
ALLEN, Circuit Judge.
1
This case presents important questions arising out of the certification by the National Labor Relations Board in 1948 and 1950, respectively, of different unions, namely, locals of AFL and CIO, to represent the same unit of employees in appellant's manufacturing plant at Paducah, Kentucky. The facts are not in controversy and are as follows:
2
In 1948 the Grand Lodge International Association of Machinists, hereinafter called "IAM," was duly certified as collective bargaining agent for an appropriate unit of certain employees at appellant's manufacturing plant in Paducah, Kentucky. A collective bargaining agreement was executed between appellant and IAM on April 30, 1948, to remain in effect until April 30, 1950. This contract, with certain amendments, was duly extended to April 30, 1951. During 1950 the National Labor Relations Board determined that this extension of the contract was premature and ordered an election to determine the employees' choice of agents. On June 19, 1950, the National Labor Relations Board certified CIO as having been chosen in this election. A few days thereafter the negotiating committee of IAM requested appellant to meet with it and to discuss the future relationship between IAM and appellant, which request was refused on the ground that appellant could deal only with CIO, the certified exclusive bargaining agent of the employees. On July 1, 1950, IAM filed suit in the Federal District Court seeking a declaratory judgment for rights under the extended contract and later amended and supplemented its complaint to allege that appellant had breached the union-shop provision of the collective bargaining agreement by its failure to require employees to become members of IAM and by consequent failure to collect dues for IAM. The District Court declared that the extended contract was in force up to April 30, 1951, and directed a verdict against appellant in the amount of the dues which IAM would have received if the employees of the company had remained members of IAM.
3
Appellant contends that the District Court had no jurisdiction over the controversy; that the District Court erred in holding that the collective bargaining agreement with IAM remained in effect after the certification of CIO as bargaining agent; and that IAM continued to have existing rights, which were violated, and suffered pecuniary damages by reason of appellant's refusal to deal with it under the extended contract.
4
As to the jurisdictional question, a refusal to bargain on the part of appellant constitutes an unfair labor practice and in absence of allegation of violation of contract between employer and the labor organization should be dealt with by the National Labor Relations Board. Amazon Cotton Mill Co. v. Textile Workers Union of America, 4 Cir., 167 F.2d 183. The amended and supplemental complaint herein, in addition to refusal to bargain, specifically alleges breach of the collective bargaining agreement. It avers that appellant, after the election of 1950, in violation of the bargaining agreement refused to require its employees to become members of IAM and that in consequence IAM lost dues and initiation fees in the amount of $7,500. The amended and supplemental complaint thus states an action for violation of the contract between an "employer and a labor organization representing employees" and falls squarely within the provisions of Section 301(a) of the Labor Management Relations Act, 29 U. S.C.A. § 185(a). We conclude that the District Court had jurisdiction of the case.
5
We deem it unnecessary to discuss in detail the decision of the District Court that the contract of 1948 was in full force and effect up to April 30, 1951. Whether or not the substantive provisions as to wages, hours, etc., were still binding after the certification of CIO is not the question presented here. The issue before us is whether IAM retained the rights accorded to it under the contract of 1948 as exclusive bargaining representative after the Board certified that this status had been taken away from IAM and given to CIO. On this point the law is crystal clear. The provisions as to IAM and the payment of dues became inoperative as soon as IAM ceased to be the bargaining representative.
6
The decision that IAM continued to have rights existing under the extended contract after IAM was repudiated by its members was therefore erroneous. While the employees did not repudiate the substantive provisions of the contract, they did formally declare that they desired to operate through a completely different bargaining agent. They not only voted to substitute CIO for IAM, but after the certification of CIO all but ten of the employees stopped paying dues to IAM Local in Paducah and as a consequence it was officially disbanded.
7
Under the National Labor Relations Act and the applicable decisions of the Federal courts, the bargaining contract must be administered by a representative of the employees' own choosing. It is an unfair labor practice for an employer to refuse to bargain collectively with the representative of his employees. Section 8(a) (5), Labor Management Relations Act, 29 U.S.C.A. § 158(a) (5). Moreover, the obligation to treat with the representative is exclusive and imposes the "negative duty to treat with no other." N.L.R.B. v. Jones & Laughlin Steel Corporation, 301 U.S. 1, 44, 57 S.Ct. 615, 628, 81 L.Ed. 893. After certification of CIO the employer was compelled to bargain and deal with CIO exclusively. This was true although the employer had bound himself by contract previously to bargain with IAM. National Licorice Co. v. N. L. R. B., 309 U.S. 350, 365, 60 S.Ct. 569, 84 L.Ed. 799; J. I. Case Co. v. N. L. R. B., 321 U.S. 332, 64 S.Ct. 576, 88 L.Ed. 762.
8
Recognition of IAM after the election and certification of CIO would have been unlawful. Since it is established that the bargaining agent can be dispensed with or changed by the employees, it is evident that the contract of 1948 after the election of 1950 had to be administered by CIO. The recognition clause of the agreement of 1948 became inoperative when IAM ceased to be the certified representative of the employees.
9
This is in accordance with the contract of 1948 upon which IAM relies for its cause of action. This provides, under its statement of the Basic Law of the Plant, that the Federal law prevails over any provisions in the contract and also that in the event any Federal law vitiates any portion of the agreement, "the remainder shall nevertheless remain in full force and effect." Under the 1948 contract, therefore, IAM was the exclusive bargaining representative only while its certification was in force. The certification of CIO deprived IAM of its status as bargaining representative. To hold that under these circumstances IAM could force employees who had clearly repudiated IAM to rejoin IAM and pay dues, both to CIO and IAM, runs counter to the entire spirit of the labor law. It follows that, after the certification of June 19, 1950, IAM had no rights under the collective bargaining agreement.
10
Moreover, as a matter of law IAM suffered through loss of dues no damage which could be attributed to the employer. The employer could not legally force the employees to join IAM, and IAM could no longer represent its former members. Hence it could not insist upon compensation, namely, the membership dues, for the service which it could not continue to give.
11
The judgment of the District Court was erroneous in the particulars indicated and must be, and hereby is, reversed. The case is remanded to the District Court with instructions to enter judgment in favor of the appellant, defendant in the trial below. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1536300/ | 364 B.R. 489 (2007)
IN RE ENRON CORP., et al., Reorganized Debtors.
Enron Power Marketing, Inc., Plaintiff,
v.
Public Utility District No. 1 of Snohomish County, Defendant.
Bankruptcy No. 01-16034 (AJG), Adversary No. 03-02064 (AJG).
United States Bankruptcy Court, S.D. New York.
March 9, 2007.
*490 *491 *492 *493 *494 Cadwalader, Wickersham & Taft LLP by Mark C. Ellenberg, Esq., of Counsel, Washington, DC, and by Israel Dahan, Esq., of Counsel, New York, NY, Special Counsel for the Reorganized Debtors.
Weil, Gotshal & Manges LLP by Peter Gruenberger, Esq., Jonathan D. Polkes, Esq., of Counsel, New York, NY, Counsel for the Reorganized Debtors.
Public Utility District No. 1 of Snohomish County, Washington by Michael Gianunzio, Esq., Eric Christensen, Esq., of Counsel, Everett, WA.
Moses & Singer by Alan Kolod, Esq., Alan E. Gamza, Esq., Philippe Zimmerman, Esq., of Counsel, New York, NY.
Law Offices of Michael A. Goldfarb by Michael A. Goldfarb, Esq., Jeffrey Maxwell, Esq., of Counsel, Seattle, WA.
OPINION CONCERNING PLAINTIFF ENRON POWER MARKETING, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND CONCERNING PUBLIC UTILITY DISTRICT NO. 1 OF SNOHOMISH COUNTY'S CROSS-MOTION TO DISMISS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT
ARTHUR J. GONZALEZ, Bankruptcy Judge.
This adversary proceeding primarily concerns state law claims arising from an agreement, subject to the filed-rate doctrine, for the purchase or sale of wholesale electric power. That contract provides that a party may declare an early termination of the contract upon the occurrence of certain, specified default events. The contract also provides that, in the event of early termination, a termination payment will be calculated based upon the difference between the contract rate and the market rate. The entitlement to the termination payment is not dependant on the party's status as the defaulting or nondefaulting party.
In addition, the underlying contract rate and issues related to that rate are themselves *495 the subject of current proceedings pending before the Federal Energy Regulatory Commission ("FERC"), which has exclusive jurisdiction over wholesale electric power rates.
As a threshold matter, the Court is asked to defer its ruling on the state law claims pending resolution of the proceedings currently before FERC. The Court denies that request. To the extent that request is based upon the doctrine of primary jurisdiction, the Court concludes that the doctrine of primary jurisdiction is not implicated, here, as the state law claims are not within FERC's particular expertise; indeed, FERC itself ordinarily declines to address state law contract issues. In addition, the Court need not await a determination from FERC as to the validity of the contract rates, as the filed-rate doctrine requires that contracts be enforced in accordance with the contractual rates unless and until those rates are set aside. Similarly, the resolution of the issues presented here will not bar FERC proceedings regarding the regulatory issues before it, and any FERC rulings that revise the contract rates or otherwise impact the parties' rights and responsibilities will be appropriately implemented in accordance with relevant law.
The parties also raise issues concerning the contract's arbitration clause. The Court is first asked to determine whether it has the authority to adjudicate the enforceability of that clause, or whether only FERC can make that determination. The Court concludes that FERC would have exclusive jurisdiction where the issue concerns the enforceability of the arbitration clause per se. However, the Court also concludes that where, as here, the issue concerns waiver of the right to exercise an arbitration clause, and where the alleged waiver is founded upon prior litigation of the issues sought to be arbitrated, the Court does have jurisdiction to consider the issue. Nonetheless, having considered the issue, the Court concludes that sufficient prejudice to establish waiver has not been shown.
Finally, the Court is asked to determine whether this matter is a core proceeding and whether arbitration of the issues presented here would conflict with the objectives of the Bankruptcy Code. The Court assumes that this matter is a core proceeding, but concludes that pursuing arbitration would not jeopardize objectives of the Bankruptcy Code nor would the Code provisions inherently conflict with the Federal Arbitration Act (the "FAA"). Thus, the Court concludes that the arbitration clause should be enforced and the state law claims raised in this adversary proceeding arbitrated.
Facts
Commencing on December 2, 2001, and from time to time continuing thereafter, Enron Corp. and certain of its affiliated entities, including Enron Power Marketing, Inc. ("EPMI" and collectively, the "Debtors"), filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). On July 15, 2004, the Court entered an Order (the "Confirmation Order") confirming the Debtors' Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors (the "Plan") in these cases. The Plan became effective on November 17, 2004 and, pursuant to section 1.232 of the Plan, from and after the effective date of the Plan, the Debtors are the Reorganized Debtors.
Prior to these events, Public Utility District No. 1 of Snohomish County ("Snohomish") and EPMI entered into the Master Power Purchase Agreement, dated January 26, 2001, (the "Master Agreement"), which built upon a version of the Edison Electric Institute ("EEI") form agreement[1]*496 as well as a cover sheet containing additional terms. The Master Agreement set forth the terms pursuant to which the parties could subsequently enter into individual transactions for the purchase or sale of wholesale electric power at specified prices. Accordingly, the parties executed several written confirmations that documented certain transactions in which EPMI agreed to sell, and Snohomish agreed to buy, wholesale power at a set price for a fixed period of time. Section 10.6 of the Master Agreement provides that it will be governed by and construed in accordance with the laws of the State of New York.
Article Five of the Master Agreement is entitled Events of Default; Remedies. Section 5.1 enumerates the types of events that constitute default under the agreement. The section provides, in its relevant part, that
An "Event of Default" shall mean, with respect to a Party (a "Defaulting Party"), the occurrence of any of the following:
. . .
(b) any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made Or repeated;
(c) the failure to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Event of Default, and except for such Party's obligations to deliver or receive the Product, the exclusive remedy for which is provided in Article Four) if such failure is not remedied within three (3) Business Days after written notice;
(d) such Party becomes Bankrupt;
(e) the failure of such Party to satisfy the creditworthiness/collateral requirements agreed to pursuant to Article Eight hereof.[2]
Master Agreement § 5.1.
Upon the occurrence of any of the enumerated default events, the non-defaulting party would have the right to terminate all outstanding transactions between the parties under the Master Agreement pursuant to certain specified procedures. Specifically, section 5.2 of the Master Agreement provides that
If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the other Party (the "Non-Defaulting Party") shall have the right (i) to designate a day, no earlier than the day such notice is effective and no later than 20 days after such notice is effective, as an early termination date *497 ("Early Termination Date") to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, Transactions (each referred to as a "Terminated Transaction") between the Parties, (ii) withhold any payments due to the Defaulting Party under this Agreement and (iii) suspend performance. The Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Settlement Amount for each such Terminated Transaction as of the early Termination Date (or, to the extent that in the reasonable opinion of the Non-Defaulting Party certain of such Terminated Transactions are commercially impracticable to liquidate and terminate or may not be liquidated and terminated under applicable law on the Early Termination Date, then each such transaction (individually, an "Excluded Transaction" and collectively, the "Excluded Transactions") shall be terminated as soon thereafter as reasonably practicable, and upon termination shall be deemed to be a Terminated Transaction and the Termination Payment payable in connection with all such Transactions shall be calculated in accordance with Section 5.3 below). The Gains and Losses for each Terminated Transaction shall be determined by calculating the amount that would be incurred or realized to replace or to provide the economic equivalent of the remaining payments or deliveries in respect of that Terminated transaction. The Non-Defaulting Party (or its agent) may determine its Gains and Losses by reference to information either available to it internally or supplied by one or more third parties including, without limitation, quotations (either firm or indicative) of relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market date in the relevant markets. Third parties supplying such information may include, without limitation, dealers in the relevant markets, end-users of the relevant product, information vendor and other sources of market information.
Master Agreement at § 5.2.
Thus, pursuant to the Master Agreement, the Non-Defaulting Party was responsible for liquidating and terminating all of the outstanding transactions, calculating the amount due for each transaction (the "Settlement Amount"), and netting Settlement Amounts with any other amounts due pursuant to the Master Agreement in order to arrive at the net amount due (the "Termination Payment"). Master Agreement at §§ 5.2-5.3. As the Termination Payment was linked to prices in the relevant wholesale-power market at the time of termination, either party could be "in the money" (i.e., the party owed money), even the Defaulting Party. Consequently, the Master Agreement contained what is known as a "full two-way payment" clause, which provided that "[t]he Termination Payment shall be due to or due from the Non-Defaulting Party as appropriate." Master Agreement at § 5.3. The Non-Defaulting Party was required to provide written notification' to the Defaulting Party of the amount of the Termination Payment and whether it was entitled to receive or required to make the payment. Master Agreement at § 5.4. The Master Agreement further provided that the party that owed the Termination Payment was to pay it within two business days after the notice was effective. Master Agreement at § 5.4.
On November 28, 2001, Snohomish sent a letter (the "November 28 Letter") asserting that EPMI was in default of the Master Agreement and that, pursuant to Section 5.2 of the Master Agreement, Snohomish was exercising its right to terminate the Master Agreement. Snohomish *498 further indicated that it would suspend performance tinder the Master Agreement the following day and that it was unable at that time to determine the Settlement Amount.
Thereafter, Snohomish sent EPMI a letter, dated December 21, 2001 (the "December 21 Letter"), in which it asserted that, pursuant to section 5.4 of the Master Agreement, no Termination Payment was due from Snohomish to EPMI. Snohomish premised that assertion on its claim that the Master Agreement was null and void and of no effect because Snohomish had been fraudulently induced to enter into it as a result of false warranties, representations and covenants made by EPMI, as well as a misrepresentation as to the credit rating of Enron Corp. Alternatively, Snohomish asserted that, even if the Master Agreement had continued viability, nevertheless, Snohomish did not owe a Termination Payment because EPMI's financial condition foreclosed its ability to perform under the contract. As argued before the Court, Snohomish maintains that the basic reason for including the termination payment clause was that the continued performance of their respective obligations would result in Snohomish receiving the energy and EPMI receiving payments for the duration of the term of the particular transaction. Snohomish argues that because EPMI could not perform, the reason for the Termination Payment clause was not implicated in the transaction. In the December 21 Letter, Snohomish also contended that the price charged under the Master Agreement violated the Federal Powers Act (the "FPA") as an unjust and unreasonable rate and that the contract should be reformed.
On May 17, 2002, EPMI sent Snohomish a letter (the "May 17 Letter") informing it that the termination was ineffective and that Snohomish was obligated to continue to perform under the agreement by accepting power from EPMI. EPMI contended that neither rescission of the contract nor its reformation could be unilaterally declared. In the May 17 Letter, EPMI asserted that EPMI had the capacity to continue to perform under the contract and that, in any event, the only remedy pursuant to the Master Agreement was for a party to declare an early termination and calculate a Termination Payment. Therefore, EPMI maintained that, pursuant to the Master Agreement, Snohomish was obligated to calculate the Termination Payment amount and provide EPMI with notice of it. Prior to Snohomish's refusal to accept performance from EPMI, EPMI had performed its obligations under the Master Agreement. In addition, EPMI continues to maintain that a Termination Payment is intended as a measure of the gain or loss attained by a party from an early termination of the contract.
On June 19, 2002, Snohomish sent EPMI a letter reiterating its view that the Termination Payment was not due and stating that it had previously made that zero "calculation" in the December 21 Letter. Snohomish further contended that EPMI had not disputed that calculation pursuant to the procedural requirements of the Master Agreement.
By letter dated, July 30, 2002, EPMI notified Snohomish that "[b]ecause Snohomish has failed to provide EPMI with the Termination Payment notice and written statement explaining in detail the calculation of the Termination Payment as required by Section 5.4 of the [Master] Agreement, EPMI has been left with no alternative but to calculate and determine the amount of Termination Payment due from Snohomish." EPMI set forth its calculation of the Termination Payment and directed payment.
*499 On January 31, 2003, EPMI filed a complaint commencing this adversary proceeding (the "Adversary Proceeding"). Included in the complaint was a claim for relief for the Termination Payment that Snohomish allegedly owed EPMI under the Master Agreement.
The Court entered an order, dated March 4, 2003, (the "Mediation Order") staying all activity in this and various similar "trading cases" and referring all such cases to mediation. On April 14, 2003, Snohomish filed a motion (the "Arbitration Motion") to dismiss the Adversary Proceeding, or in the alternative, to stay it pending arbitration. The Mediation Order effectively stayed the Arbitration Motion proceeding. The Mediation Order was subsequently modified, on May 18, 2005, to terminate the stay of litigation with respect to certain of the adversary proceedings, including the Snohomish Adversary Proceeding.
FERC had previously launched a comprehensive investigation of trading activities in the western electricity market and commenced enforcement proceedings against Enron and other market participants (the "Gaming and Partnership Proceeding"). On August 4, 2004, Snohomish filed a "Request for Clarification" concerning a FERC ruling in the Gaming and Partnership Proceeding. Through that request, Snohomish sought to have FERC resolve issues concerning EPMI's right to collect the Termination Payment. Snohomish sought discovery on those issues that ordinarily would not be permitted in arbitration, absent an affirmative grant of such authority. On October 26, 2004, EPMI filed a motion before the Court seeking to enforce the automatic stay and the Mediation Order and to compel Snohomish to withdraw its Request for Clarification. EPMI contended that, through the Request for Clarification, Snohomish was actually trying to infuse the state law contract issues pending before the Court into the Gaming and Partnership Proceeding. Snohomish countered that it was seeking a ruling from FERC in its regulatory capacity as to whether the Termination Payment violated the FPA, which Snohomish maintained was within FERC's police power exemption to the automatic stay. In the alternative, Snohomish sought to lift the stay, nunc pro tune, to allow it to proceed with the Request for Clarification.
By order, dated January 14, 2005, the Court denied, as premature, Enron's motion to have Snohomish withdraw its Request for Clarification before FERC. The Court's ruling was premised upon the fact that it was unclear precisely what relief Snohomish was seeking from FERC by its Request for Clarification and, therefore, it could not be determined if such relief were necessary. The Court, however, denied Snohomish's motion to annul the automatic stay The Court further cautioned Snohomish that, to the extent FERC undertook to interpret the terms of or the parties' rights under the Master Agreement as it related to state law contractual issues, any such action would be void ab initio, as those matters were pending before the Court and the automatic stay had not been lifted to permit Snohomish to bring those issues before FERC. Snohomish filed an appeal to the January 14, 2005 order. No stay of the effectiveness of that order was entered.
In response to the imbalance resulting from Snohomish's attempt to litigate issues concerning the Termination Payment before FERC while litigation with respect to those issues was stayed before the Court, and because the parties' attention was diverted from the mediation process implemented by the Court, the Mediation Order was, as previously noted, modified to terminate the stay as to the Adversary Proceeding. *500 Subsequently, a status conference was conducted before the Court on July 7, 2005, at which time EPMI requested permission to file a summary judgment motion concerning the Termination Payment in the Adversary Proceeding. Snohomish objected and argued that its Arbitration Motion should be heard before EPMI's summary judgment motion. On July 12, 2005, the Court granted EPMI's request to file a summary judgment motion and directed the parties to confer on a schedule as to that motion as well as the Arbitration Motion.
On August 5, 2005, Snohomish filed a new petition with FERC (the "FERC Petition") requesting that FERC determine whether the Termination Payment provisions were enforceable under the FPA. Thereafter, Congress enacted The Energy Policy Act of 2005. See Energy Policy Act of 2005, Pub.L. No. 109-58, § 1290, 119 Stat. 594, 983-84 (Aug. 8, 2005). Section 1290 ("Section 1290") of that act was of particular relevance to these proceedings. Snohomish argued that Section 1290 divested the Court of jurisdiction to determine the state law contractual issues bearing on the Termination Payment and granted FERC exclusive jurisdiction over those issues. EPMI argued that Section 1290 was clarifying legislation that maintained the status quo ante both the Court and FERC possessing concurrent jurisdiction over the issue that required Snohomish to obtain relief before the Court from the automatic stay prior to proceeding before FERC.
Upon EPMI's request, the District Court for the Southern District of New York (the "District Court") withdrew the reference in the Adversary Proceeding for the limited purpose of considering the effect of Section 1290. Specifically, EPMI sought a ruling that the Court rather than FERC had continuing jurisdiction to determine the state law Termination Payment issues. Further, EPMI requested that if the District Court were to construe Section 1290 as granting FERC exclusive jurisdiction over EPMI's state law contract claims regarding the Termination Payment, the District Court should also determine that such grant was unconstitutional.
In addition, following the passage of Section 1290, Snohomish amended the FERC Petition, on December 7, 2005, to include a request that FERC exercise the jurisdiction purportedly granted it under Section 1290 to determine if the Termination Payment provisions were enforceable under state law. Snohomish also requested that FERC enforce the Master Agreement and require EPMI to pay a termination payment to which Snohomish contended it was entitled. On February 6, 2006, Snohomish filed with FERC a motion for partial summary judgment concerning the Termination Payment issues.
Also subsequent to the passage of Section 1290, in a related proceeding concerning another energy trader, the Court concluded that, notwithstanding the pending District Court consideration of the effect of Section 1290, the Reorganized Debtors would not be prejudiced if the energy traders were allowed to proceed with their state law claims before FERC. The Court reasoned that if it were ultimately determined that FERC could not properly exercise exclusive jurisdiction over such matters pursuant to Section 1290, any proceeding that had been conducted based upon that premise would be void ab initio, which would nullify any resulting rulings by FERC.
On June 28, 2006, FERC issued an order (the "June 28 Order"), granting in part, and denying in part, the relief sought by Snohomish concerning the Termination Payment issues. Public Util. Dist. No. 1 *501 of Snohomish, Cty., Wash., Docket No. EL05-139-000, 2006 WL 1757334 (June 28, 2006). Specifically, FERC concluded that, based upon New York law, EPMI was not entitled to recovery of the Termination Payment. Id.
In the June 28 Order, FERC concluded that under New York law, the Master Agreement was properly rescinded and that EPMI could not enforce the Termination Payment provisions. Snohomish, Cty., Wash., 2006 WL 1757334 at *1, 18-22. As FERC determined the issue under New York contract law, it concluded that it was unnecessary to reach the issue of whether the termination provisions of the Master Agreement were barred by the FPA. Id. FERC also denied Snohomish's request for a refund because FERC determined that Section 1290 only related to recoveries of termination payments by EPMI against Snohomish, not recoveries by Snohomish against EPMI. Id. at *2, 23.
Further, FERC acknowledged that it would not have ordinarily reached the Termination Payment issues, as they "require . . . the application of state law and do not otherwise require uniform interpretation with respect to the policies [FERC is] required to administer." Snohomish, Cty., Wash., 2006 WL 1757334 at *1. Thus, FERC only addressed those issues because it viewed section 1290 as providing it with "exclusive jurisdiction . . . with respect to the termination payment claim." Id. Indeed, FERC declined to, decide similar state law issues concerning other energy companies to which it did not determine Section 1290 applied.
On August 31, 2006, the District Court issued its opinion (the "District Court Opinion") concerning the effect of Section 1290. The District Court determined that the amendment was intended as clarifying legislation and that it did not transfer jurisdiction of the state law claims to FERC. Enron Power Mktg., Inc. v. Luzenac America, Inc., Nos. 05 Civ. 9244, 10129, 2006 WL 2548453 (S.D.N.Y. Aug. 31, 2006). The District Court determined that the "jurisdiction over the state law contract issues lies with the bankruptcy, court." Id. at *17.[3] Snohomish appealed the District Court's ruling to the Second Circuit Court of Appeals.
As the District Court concluded that Section 1290 was a clarifying amendment that did not alter FERC's jurisdiction, the portion of the FERC Petition proceeding involving the interpretation of state law contractual issues was not within FERC's police power exception to the automatic stay. Rather, the District Court concluded that the Court had continuing jurisdiction over the state law contractual issues concerning the Termination Payment provisions of the Master Agreement. Luzenac, 2006 WL 2548453 at *17. Based upon the District Court's ruling, the Court observed that FERC could only have exercised its concurrent jurisdiction to adjudicate the state law contractual claims if Snohomish had first obtained relief from the automatic stay. As the automatic stay had not been lifted, the FERC Petition proceeding, insofar as it related to the state law Termination Payment issues, was *502 void ab initio and the resulting June 28 Order[4] was a nullity.
On October 6, 2006, EPMI filed a motion for partial summary judgment (the "EPMI Summary Judgment Motion"), currently before the Court, concerning EPMI's entitlement to the Termination Payment pursuant to the Master Agreement. Although the Court had approved EPMI's request to file such a motion on July 12, 2005, its filing had been forestalled by the intervening events.
By letter, dated October 6, 2006, Snohomish requested that the Court stay consideration of the EPMI Summary Judgment Motion pending the resolution of the appeal of the District Court Opinion to the Second Circuit. EPMI opposed Snohomish's request, arguing that if the Court were to await the Second Circuit's ruling, it would only further delay the outcome of the Adversary Proceeding, which had then been pending for almost four years. By order, dated October 11, 2006, the Court denied Snohomish's motion to stay the Adversary Proceeding.
Snohomish appealed the October 11, 2006 order denying its request to stay the Adversary Proceeding and sought to withdraw the reference of the Adversary Proceeding to the Court. On December 13, 2006, the District Court denied the request to withdraw the reference, holding that the elements for such withdrawal had not been established. In addition, in its December 13, 2006 ruling, the District Court noted that while the District Court Opinion did not include a mandate that the bankruptcy court proceed with the litigation pending the appeal to the Second Circuit, it was nevertheless within the bankruptcy court's discretion as to whether it would proceed with it.
Notwithstanding the District Court Opinion, on October 6, 2006, Snohomish filed a new petition (the "October Petition") with FE RC seeking, inter alia, entry of an order declaring that EPMI violated the June 28 Order by attempting to enforce the Termination Payment provisions through the EPMI Summary Judgment Motion and that continuation of such action was sanctionable. Snohomish filed the October Petition without seeking relief from the automatic stay.
In October 2006, EPMI filed a motion (the "Enforcement Motion") before the Court seeking an order enforcing the automatic stay and enjoining Snohomish from further prosecution of the October Petition. Snohomish opposed the relief and argued that the FE RC Petition and the October Petition proceedings were regulatory in nature and unimpeded by the automatic stay. The Court concluded that, based upon the District Court Opinion, to the extent state law Termination Payment issues were addressed in the FE RC Petition proceeding, it violated the automatic stay. As previously noted, the Court does not dispute FERC's exclusive jurisdiction to determine regulatory issues. Nor does it dispute that, had the stay been lifted, FE RC could have exercised its concurrent *503 jurisdiction to adjudicate the state law contractual claims. Snohomish, however, had not obtained relief from the automatic stay to have those issues considered by FERC.
As the Court discussed in its ruling concerning the Enforcement Motion, in both the FERC Petition and October Petition proceedings, Snohomish sought to adjudicate before FERC non-FPA related issues. The October Petition sought to enforce the June 28 Order resulting from a proceeding in which, as expressly stated by FERC and as observed by the District Court, FERC adjudicated state law contractual issues. As Snohomish sought FERC's determination on the state law issues without first obtaining relief from the stay, the FERC Petition proceeding was void ab initio. Further, Snohomish sought, in the October Petition, to preclude EPMI from continuing to litigate before the Court the Termination Payment issues that the District Court has expressly returned to the Court for determination. The Court concluded that any attempt to enforce the June 28 Order issued by FERC violated the automatic stay insofar as it concerned state law contractual issues, i.e., issues concerning the Termination Payment under the Master Agreement which the District Court returned to the Court for resolution. The Court further concluded that because the FERC Petition proceeding was void ab initio regarding the state law claims, any order emanating from such proceeding was equally without force. Inasmuch as there was no order for FERC to enforce, there was no violation of FERC's power to enforce orders. As a result, the Court granted EPMI the relief it sought in the Enforcement Motion.
To that effect, the Court entered an Order, dated October 30, 2006 (the "October 30 Order") which, among other things, enforced the automatic stay and directed Snohomish to withdraw the October Petition insofar as it sought entry of an order declaring that EPMI was violating the June 28 Order by attempting to enforce the Termination Payment provisions before the Court. Snohomish asserts that it has since complied with that directive.[5] In addition, Snohomish has filed an appeal of the October 30, 2006 Order.
On November 14, 2006, Snohomish filed a pleading renewing the Arbitration Motion, opposing the EPMI Summary Judgment Motion, and also seeking summary judgment (the "Snohomish Summary Judgment Motion") on certain of its defenses to enforcement of the Termination Payment provision.
Parties Contentions,
In the EPMI Summary Judgment Motion, EPMI argues that pursuant to the terms of the Master Agreement, it is entitled to the Termination Payment. Snohomish opposes the EPMI Summary Judgment Motion and is also pursuing the Arbitration Motion. Snohomish contends that, to the extent this matter is not decided by FERC, the Master Agreement requires that it be sent to arbitration. EPMI opposes the Arbitration Motion and argues that by its actions Snohomish has waived its right to exercise the arbitration clause or, alternatively, that the Court should not lift the automatic stay to permit arbitration but should retain jurisdiction to determine the state law contractual issues.
Snohomish further argues that, regardless of whether this matter is sent to arbitration, *504 EPMI cannot collect the Termination Payment based upon certain rulings by FERC; that EPMI has not established its entitlement to summary judgment; and that the Master Agreement is unenforceable based upon certain defenses, including that it was fraudulently induced. EPMI counters that its recovery of the Termination Payment is not precluded by FERC's previous rulings, that it has established its entitlement to summary judgment and that Snohomish's defenses fail as a matter of law. Snohomish counters that it is entitled to summary judgment on its defense of fraudulent inducement.
As noted, Snohomish argues that to the extent issues are presented that are not within FERC's exclusive jurisdiction, those issues should be decided by an arbitrator. Prior to addressing the issue of arbitration, the context in which Snohomish raises its arguments requires the Court to address certain other issues preliminarily. Specifically, Snohomish alternatively argues that, based upon prior rulings by FERC, there is an absence of authority to enforce the Termination Payment provision or, at a minimum, any ruling concerning the collection of the Termination Payment should be deferred until FERC resolves the regulatory issues pending before it. Although Snohomish raises these as alternate arguments to the applicability of the arbitration clause, nevertheless, this challenge bears on this Court's determination to proceed at all and interpret any aspect of the Master Agreement. Thus, it is only if the Court has determined that it will not defer the matter pending a ruling by FERC that it is required to reach the issue of arbitration. Therefore, the Court must set forth its rationale for not awaiting a FERC determination in the regulatory proceedings prior to issuing this decision.
Snohomish's argument, that enforcement of the Termination Payment should be deferred until FERC resolves the regulatory issues, is based upon various theories. In particular, Snohomish argues that there is not a valid filed rate to enforce as a result of prior actions by FERC and the absence of a FERC review of the market. In addition, Snohomish argues that the doctrine of primary jurisdiction requires that the Court defer ruling until FERC renders its ruling, or that it is premature for the Court to rule prior to the conclusion of the FERC proceeding.
Revocation Order
Snohomish argues that because EPMI's market-based rate authority was revoked in 2003, it cannot collect the Termination Payment, pursuant to 18 C.F.R. § 35.1(e), which provides that
No public utility shall, directly or indirectly, demand, charge, collect or receive any rate, charge or compensation for or in connection with electric service subject to the jurisdiction of the Commission, or impose any classification, practice, rule regulation or contract with respect thereto, which is different from that provided in a rate schedule required to be on file with this Commission unless otherwise specifically provided by order of the Commission for good cause shown.
18 C.F.R. § 35.1(e). Snohomish maintains that under FERC's market-based rate program, EPMI must have a market-based rate authorization and valid tariff on file before it can enforce any market-based contract like the Master Agreement. Snohomish states that FERC deprived EPMI of market-based rate authority in 2003 and declined to provide it with "wind-down authority" although other Enron entities were provided with such authority. Enron Power Marketing, Inc., 103 FERC ¶ 61,343, 2003 WL 21480248 *21, 23 (June *505 25, 2003), reh'g denied, 106 FERC ¶ 61,024 (2004) (the "Revocation Order"). Snohomish argues that, as a result of the Revocation Order, EPMI currently does not have a tariff on file with FERC and, therefore, is legally precluded, pursuant to section 35.1(e) of the Commission Regulations, from seeking to "demand, charge, collect or receive any rate, charge or compensation for or in connection with electric service" under the Master Agreement. Snohomish argues that to collect on the Termination payment claim, EPMI must reapply to FERC for new authorizations or, at a minimum, wind-down authority. Snohomish also urges that FERC has already determined the rates that EPMI seeks to collect to be unjust and unreasonable.
Alternatively, Snohomish argues that the EPMI Summary Judgment Motion is premature and cannot be properly determined until FERC completes its regulatory function. Snohomish asserts that in various proceedings within its exclusive jurisdiction, including the Gaming and Partnership Proceeding and the FERC Petition proceeding, FERC is considering a range of regulatory issues related to the Termination Payment, including whether the Termination Payment is precluded by the FPA, as well as related questions concerning whether the rates are just and reasonable. Snohomish also asserts that FERC is considering available remedies for market manipulation, including disgorgement of unjust profits, revocation of Enron's market-based rate authority retroactively, and additional non-monetary relief. Snohomish argues that while the FERC proceedings are ongoing, the Court should defer to FERC on issues within its exclusive authority and that it is premature to allow EPMI to collect before FERC determines those issues. Snohomish asserts that just and reasonable rates can only emanate from a properly functioning market. Snohomish maintains that the rates at issue here evolved from a manipulated market and, as a result, they are neither just nor reasonable and cannot be enforced until FERC completes the ongoing proceedings and formulates an appropriate remedy for the dysfunctional market. Snohomish urges that a review is an essential prerequisite for determining whether the rates are just and reasonable and that, absent such review, the tariff is not in compliance with the filed-rate doctrine or the FPA.
EPMI counters by arguing that the Revocation Order is prospective not retroactive. EPMI contends that it is entitled to enforce and collect amounts due under a non-revoked contract which was executed and terminated one and one-half years prior to the Revocation Order. Enron asserts that this is evidenced by FERC upholding the viability of other contracts entered into pursuant to EPMI's marketbased rate authority prior to the Revocation Order. EPMI cites to El Paso Elec. Co., Docket Nos. EL02-113-000, EL03-180-000, EL03-154-000, 2004 WL 1633470 at *7 n. 10 (F.E.R.C.2004) (citing Prior Notice & Filing Requirements Under Part II of the Federal Power Act, 64 Docket No. PL93-2-002, 1993 WL 285371, order on reh'g, 1993 WL 414816 (F.E.R.C. 1993)) where FERC stated that
A revocation of market based rates or a disgorgement of profits would not void contracts that parties may have signed, the rates may be changed prospectively or disgorgement of profits may be ordered, but the contract remains.
EPMI finds further support in the fact that, after FERC issued the Revocation Order and was fully aware of the market manipulation findings on which revocation was based, FERC, nevertheless, upheld the validity of EPMI's long-term power contracts with two other counter-parties, *506 Nevada Power Company ("Nevada Power") and Sierra Pacific Power Company ("Sierra Power").
EPMI further argues that FERC has neither determined that the rates are unjust and unreasonable nor has it issued a ruling that Enron manipulated the longterm power market. In addition, EPMI contends that the FERC ruling concerning market manipulation Snohomish references related to the California market and not the Pacific Northwest market in which Snohomish operates. Further, EPMI asserts that FERC concluded that the Pacific Northwest power market was not manipulated.
On June 25, 2003, FERC issued an order that revoked EPMI's authorization to sell power at market-based rates and terminated its electric market-based rate tariff. Enron Power Marketing, Inc., 103 FERC 61,343, 2003 WL 21480248 *21, 23 (June 25, 2003) (the "Revocation Order"). FERC determined that it would not provide EPMI with wind-down authority based upon its conclusion that "[u]nlike the other entities that have a specified need for continued authorization," EPMI had not made a request or showing that it needed "to retain its market-based rate authority for unwinding or otherwise." Id. at *21. It further determined that if EPMI emerges from reorganization, it must re-apply to FERC for new authorizations. Id.
The Court agrees with EPMI that the Revocation Order is prospective. While it precludes EPMI from entering into new market-based contracts, it does not preclude enforcement of previously executed agreements. This interpretation has been endorsed by FERC, which after issuing the Revocation Order, upheld the enforcement of similar contracts that EPMI had with other counter-parties and affirmed the denial of a request to modify such contracts. Nevada Power Co., et al. v. Enron Power Marketing, Inc., et al. ("FERC Nevada Decision"), 103 FERG ¶ 61,353, 2003 WL 21485862 *1, 25 (June 26, 2003). Indeed, that decision required the continued payment of the contract rates. Id. at *3.
The Court discussed the interplay between the Revocation Order and the FERC Nevada Decision in Enron Power Marketing, Inc. v. Nevada Power Co. (In re Enron Power Marketing, Inc.) ("Nevada I"), Docket Adv. Pro. No. 02-2520, slip op. (Bankr.S.D.N.Y. August 28, 2003), an adversary proceeding in which the Court granted EPMI's motion against Nevada Power and Sierra Power to enforce the relevant contractual termination payment provisions. As the Court noted, the FERC Nevada Decision affirmed a ruling denying a request to modify certain power contracts. Id. at *7. The Court further noted that "[t]he Revocation Order . . . is, prospective. It bars EPMI from entering into new market-based contracts, but does not impair EPMI's ability to enforce previously executed agreements. This is appellant from FERC's decision . . . [where it] determined to uphold enforcement of the parties' contracts despite [FERC's] issuance the previous day of the Revocation Order." Id. at *9. Moreover, in reaching its conclusion, FERC considered the evidence concerning claims of market manipulation and reviewed a staff report issued in a separate proceeding that had considered manipulation in the spot-market and its effect on the long-term market. Id. at *7 (citing FERC Nevada Decision, 2003 WL 21485862, at *22).
As referenced above in the language EPMI quoted from FERC, the revocation of market based rates does not *507 void the contract.[6] Rather, the contract continues with the same rates and the parties must await a determination by FERC as to whether it will adjust rates or order a disgorgement of profits. In that regard, FERC has not made a determination that the rates at issue are unjust and unreasonable. On the contrary, in the June 28 Order FERC denied Snohomish's request for a refund of charges made under the Master Agreement, holding that the issue was still under consideration in the Gaming and Partnership Proceeding. If the issue had already been determined, FERC clearly would not continue to consider it
Finally, with respect to Snohomish's argument that 18 C.F.R. § 35.1(e) precludes EPMI from collecting the Termination Payment, such an interpretation directly contravenes the filed-rate doctrine. The filed-rate doctrine requires that the relevant contract rate be applied until set aside by FERC. Although FERC has revoked, prospectively, EPMI's rate-based authority and did not provide EPMI with wind-down authority because EPMI saw no need for it to close out these contracts as, presumably, recognized by FERC FERC has not set aside the, applicable rates. Unless and until FERC adjusts the relevant rates, those rates must be applied, including with regard to any calculation of payments under the Master Agreement. As previously noted, FERC itself has recognized that contracts are enforceable even after the revocation of market-based authority. The Court cannot read an agency regulation in a way that would undermine the filed-rate doctrine, especially where the agency that promulgated that regulation has not applied it in that manner.
Primary Jurisdiction
In a related argument, Snohomish contends that the primary jurisdiction doctrine requires that the Court await FERC's determination on the remedial issues.[7] In opposition to this contention, EPMI argues that the primary jurisdiction doctrine does not apply to the state law contractual Termination Payment issues.
Primary jurisdiction applies where a claim is originally cognizable in the courts, but where its enforcement requires resolution of issues that have been placed within the special competence of an administrative body under a regulatory scheme. Fulton Cogeneration Associates v. Niagara Mohawk Power, 84 F.3d 91, 97 *508 (2d Cir.1996) (citing, United States v. Western Pac. R.R. Co., 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956)). The doctrine of primary jurisdiction allows a federal court to refer a matter outside its conventional experience to an administrative agency with expertise on the issue. Nat'l Communications Ass'n, Inc. v. AT & T Co., 46 F.3d 220, 223 (2d Cir.1995). Thus, the doctrine of primary jurisdiction is relevant where a court and an administrative agency have concurrent jurisdiction and it remains within the court's discretion to determine whether it will refrain from exercising its jurisdiction and refer the matter to an administrative agency premised upon primary jurisdiction. Enron Power Marketing, Inc. v. Nevada Power Co., (In re Enron Corp.) ("Nevada II"), Adv. Pro. No. 02-2520, Order, Docket entry # 318 at *3 (January 4, 2005).
Primary jurisdiction does not apply to legal questions within a court's conventional competence. New York State Elec. & Gas Corp. v. New York Independent System Operator, Inc., 168 F.Supp.2d 23, 26 (N.D.N.Y.2001). Rather, a court will defer to an agency under the doctrine of primary jurisdiction when a case involves "technical and intricate questions of fact and policy that Congress assigned to a specific agency." National Communications Ass'n, Inc. v. AT & T Co., 46 F.3d 220, 223 (2d Cir.1995). In such instances, the agency is "better equipped" to consider the issues because through experience, the agency has developed specialized expertise, knowledge, and insight into the issues involved and has more flexible procedures. Tassy v. Brunswick Hosp. Center, Inc, 296 F.3d 65, 68 (2d Cir.2002); In re Magnesium Corp. of America, 278 B.R. 698, 706 (Bankr.S.D.N.Y.2002).
In determining whether an agency has primary jurisdiction, a court considers the following four factors
1) whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency's particular field of expertise,
2) whether the question at issue is particularly within the agency's discretion,
3) whether there exists a substantial danger of inconsistent rulings, and
4) whether a prior application to the agency has been made.
New York State Elec. & Gas Corp., 168 F.Supp.2d at 26. In addition, a court must balance the advantages of applying primary jurisdiction with the possible costs that may result from complications and delay in the administrative, proceeding. National Communications Ass'n, Inc. v. AT & T Co., 46 F.3d at 223.
The purposes to be served in applying the primary jurisdiction doctrine are (1) to promote uniformity and consistency, for example, in rates and tariffs, and (2) to allow for reliance on the administrative expertise of an agency that has been charged with the task of overseeing the particular industry. Tassy, 296 F.3d at 68. Thus, a court must consider whether, the conditions for application of primary jurisdiction are present and whether application of the doctrine will aid in promoting these purposes. Id.
Contract interpretation is a matter within the competence of courts. Moreover, contract enforcement is not within FERC's specific expertise. Indeed, FERC itself has rejected the premise of Snohomish's argument in similar trading cases where the energy trader involved was not adjudged to be subject to the dictates of Section 1290. See, e.g., City of Vernon, Docket No. EL06-3-000, 2006 WL 1757331 (FERC June 28, 2006). Thus, when FERC is presented with state law contract issues and is not purportedly granted jurisdiction *509 by Section 1290, FERC declines to address standard contract issues. See e.g., City of Vernon, 2006 WL 1757331 at *11. FERC does not consider that it has special expertise on state law issues, nor do such issues implicate the FPA. Id. Here, the contract issues raised in connection with Termination Payment are within the competence of a court and do not require FE RC's expertise to resolve.[8] Moreover, if the Court were to conclude that the arbitration clause were waived or otherwise unenforceable, the Court would immediately proceed to resolve the summary judgment motions concerning enforcement of the Termination Payment clause.
Snohomish also argues that the Court should defer ruling because it is premature to rule before FERC concludes its remedial proceedings. The purpose of the Med-rate doctrine, however, does not favor deferral here. While it is within the Court's discretion to defer ruling in order to promote an efficient resolution of claims, that interest does not override the policy embodied in the filed-rate doctrine. As previously noted, FERC recognized the continued viability of the filed rate in similar contracts that EPMI entered with Nevada Power and Sierra Power when it determined that EPMI could continue to charge the contracted rate for power. The contract rate must be enforced until set aside by FERC and any allegations properly before the regulatory agency[9] must await that agency's determination on whether it will adjust the rates. Nevada I, at *11. Moreover, it would be contrary to the proper functioning of a regulated market and the goal of uniformity to allow one party to escape its obligation to pay under a tariff considered just and reasonable by the regulatory agency just because of the identity of the counter-party. Id.
The filed rate must be collected despite its sometimes harsh consequences because it incorporates the policy which Congress has adopted in regulating interstate commerce. Louisville & Nashville RR Co. v. Maxwell, 237 U.S. 94, 97, 35 S.Ct. 494, 495, 59 L.Ed. 853 (1915); Keogh v. Chicago & N.W. Ry. Co., 260 U.S. 156, 163, 43 S.Ct. 47, 49-50, 67 L.Ed. 183 (1922). The strictness of the rule is tempered by the fact that other avenues for relief are available to the aggrieved ratepayer, thus, when fraud is alleged, the regulatory agency can investigate the charges and issue appropriate remedies to benefit ratepayers. Wegoland, 27 F.3d at 21. In addition, the fact that the rates are filed is not a bar to governmental proceedings into the alleged fraudulent conduct. Square D Co., 476 U.S. at 416 n. 17, 106 S.Ct. at 1926 n. 17; Keogh, 260 U.S. at 162, 43 S.Ct. at 49. Indeed, the Gaming and Partnership Proceeding and the FERC Petition proceeding are examples of the other avenues for relief available to the aggrieved ratepayer.
Thus, the issues being investigated by FERC are not considered when determining whether the Termination Payment is enforceable under state-contract law. The filed-rate doctrine requires adherence to the rates set forth in the Master Agreement and its enforcement applying those *510 rates unless and until set aside by FERC. Any other interpretation would run counter to the filed-rate doctrine because purchasers of energy who lodged complaints with FERC could unilaterally determine to stop paying the filed rate prior to, any determination by FERC setting aside those filed rates. The Court's interpretation of the arbitration clause and the resulting resolution of the state law contract issues by either the Court or the arbitrator will not impact or otherwise undermine FERC's procedures or its determination concerning whether the filed tariff is unjust or unreasonable.
Accordingly, as the pending FERC proceedings do not concern the same issues that must be resolved in interpreting the Master Agreement, the doctrine of primary jurisdiction is not implicated with respect to the FERC proceedings. Therefore, in accordance with the Court's previous decisions concerning Nevada Power and FERC's recent decisions, the Court rejects Snohomish's primary jurisdiction argument. Nor would proceeding with the parties' respective summary judgment motions be premature, as the filed-rate doctrine requires enforcement of the filed rate until set aside. Moreover, there is no impediment to proceeding with an interpretation of the Master Agreement awaiting a determination by FERC in the Gaming and Partnership Proceeding or the FERC Petition proceeding concerning whether the rates are just and reasonable or whether a refund or disgorgement of profits is required. The resolution of the issues involved in the adversary proceeding will not interfere with FERC's continuation of any of the proceedings before it concerning its police and regulatory function. Further, any determinations by FERC in those proceedings that impact on any resolution of the state law issues such as would be the case if rates charged were adjusted by FERC will be appropriately incorporated if and when they become applicable. Alternatively, if FERC were to determine that amounts collected should be refunded or disgorged, at that time such a ruling could be implemented in accordance with applicable law. Having determined that consideration of the adversary proceeding should not be deferred awaiting FERC's resolution of the regulatory issues, the Court will proceed to address the arbitration issues.
Arbitration
Snohomish argues that this matter should be sent to arbitration pursuant to the terms of the Master Agreement.[10] Snohomish contends that while FERC's *511 exclusive jurisdiction over certain claims takes precedence over the arbitration clause contained in the Master Agreement, to the extent that any claim is litigated outside FERC, it must be decided in arbitration as provided for in the Master Agreement.
EPMI argues that Snohomish waived its right to seek enforcement of the arbitration clause when it elected to litigate EPMI's entitlement to the Termination Payment before FERC and seek discovery on that issue. In addition, EPMI contends that the automatic stay, which remains in effect through the Plan and Confirmation Order, precludes enforcement of the arbitration clause and should not be lifted under the circumstances of this case.
Federal policy favors arbitration as an alternate means of dispute resolution. PPG Industr. Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997). As a result of the strong presumption in favor of arbitration, its waiver is not readily inferred. Cotton v. Slone, 4 F.3d 176, 179 (2d Cir.1993). Indeed, any uncertainty concerning its waiver is resolved in favor of proceeding with arbitration. Crysen/Montenay Energy Co. v. Shell Oil Co. (In re Crysen/Montenay Energy Co.), 226 F.3d 160, 163 (2d Cir.2000). Nevertheless, arbitration can be waived where "a party engages in protracted litigation that results in prejudice to the opposing party." Cotton, 4 F.3d at 179. In addition, a party can waive arbitration when it takes action inconsistent with the right to arbitration where prejudice results. Lubrizol Int'l, S.A. v. M/V Stolt Argobay, 562 F.Supp. 565, 573 (S.D.N.Y.1982). However, where there is no extensive litigation and no proof of prejudice, the right to arbitrate is not waived. Louis Dreyfus Negoce S.A. v. Blystad Shipping and Trading, Inc., 252 F.3d 218, 229 (2d Cir.2001).
The type of prejudice required for waiver stems from the inherent unfairness resulting from "delay, expense or damage to a party's legal position." PPG Industr., 128 F.3d at 107. This unfairness is present when a party is forced to litigate an issue and later required to arbitrate the same issue. Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 134 (2d Cir.1997). There must be "substantive" prejudice to a party's claims if they were forced to arbitrate. Id. Moreover, it is the presence or absence of prejudice that is determinative of the issue of waiver. Lubrizol Int'l, 562 F.Supp. at 573.
Courts have found sufficient prejudice for waiver where a party seeking arbitration
-engages in discovery procedures not available in arbitration,
-makes motions going to the merits of an adversary's claims, or
-delays invoking arbitration rights while the adversary incurs unnecessary delay or expense.
Cotton, 4 F.3d at 179. (citations omitted). However, incurring legal expenses associated with litigating a matter, by itself, may not be considered sufficient prejudice. PPG Industr., 128 F.3d at 107. Nor is there prejudice where others are parties to the dispute but are not subject to arbitration even if a party subject to arbitration has to litigate in more than one forum. Blystad Shipping and Trading, 252 F.3d at 230. Moreover, there are no bright-line rules as the decision is very fact specific. Cotton, 4 F.3d at 179. Indeed, a decision on waiver must be based on the circumstances and context of the particular case. Doctor's Assocs., 107 F.3d at 130.
Factors considered by a court in determining whether to send a matter to arbitration include
*512 -the time elapsed from the commencement of litigation to the request for arbitration,
-the amount of litigation, including any substantive motions and discovery, and
-proof of prejudice.
PPG Industr., 128 F.3d at 107.
A party waives the right to invoke arbitration where it has previously litigated the same legal and factual issues even if that litigation occurred as part of a separate action or in a different forum. PPG Industr., 128 F.3d at 108 n. 2. The waiver, however, only occurs where "a party has previously litigated the same claims it now seeks to arbitrate." Doctor's Assocs., 107 F.3d at 133. Thus, there is no waiver if the two suits involve, different issues. Id. Nor can waiver of the right to arbitrate certain claims be inferred based upon the explicit waiver of other claims. Id. In addition, the "litigation of non-arbitrable claims does not waive a party's right to arbitrate other arbitrable claims." Doctor's Assocs., 107 F.3d at 132 n. 11. Thus, it is the "prior litigation of the same legal and factual issues" as the party subsequently seeks to arbitrate that results in the waiver of the right to arbitrate. Id. at 133.
As a preliminary matter, Snohomish argues that the arbitration clause is part of the filed rate and that, as a result, FERC is the proper forum in which to address any modification to the arbitration clause or any equitable defense to its enforcement. Snohomish references the Court's decision in Nevada I in support of its position that ancillary conditions and terms are included within the ambit of the filed rate and are part of the tariff, and that equitable defenses to such rates are not recognized because only FERC can alter the tariff. Thus, Snohomish argues, because the arbitration clause is a term of the contract, it is part of the filed rate, and FERC must address any request to modify or waive it.
The filed-rate doctrine requires that any filed rate "approved by the governing regulatory agency is per se reasonable and unassailable in judicial proceedings." Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 18 (2d Cir.1994). This doctrine recognizes that legislative bodies establish agencies for the purpose of setting rates, and courts are not suited to "engage in retroactive rate setting." Id. at 19. The agency approval establishes the reasonable rate which cannot be varied by either contract or tort unless and until the rate is suspended or set aside. Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 416-17, 106 S.Ct. 1922, 1927, 90 L.Ed.2d 413 (1986). Sellers regulated by FERC must charge only the rate filed with FERC and only FERC may alter that rate. Gulf States Utilities Co. v. Alabama Power Co., 824 F.2d 1465, 1471 (5th Cir.1987). The court may not determine the reasonableness of the rate nor replace it with one it considers more reasonable. Id. at 1470.
In the Nevada I decision, the Court referenced the fact that recognizing certain defenses to enforcement of a contract would be directly contrary to the filed-rate doctrine, as "[t]he thrust of all of these types of allegations is that absent the improper conduct, different rates would have applied." Nevada I, at *4 (citing, District No. 1 of Snohomish County v. Dynegy Power Marketing, Inc., et al. (In re California Wholesale Elec. Antitrust Litigation), 244 F.Supp.2d 1072, 1077 (S.D.Cal.2003)). Therefore, the filed rate doctrine dictates that equitable defenses cannot prevent the collection of a published tariff. Humboldt Express, Inc. v. The Wise Co., Inc. (In re Apex Express Corp.), 190 F.3d 624, 639 n. 21 (4th Cir.1999). If *513 presented with a defense or allegation that required the calculation of damages, the court could potentially conclude that a rate different from that filed was proper. California Wholesale, 244 F.Supp.2d at 1077. Thus, addressing any such claim would contravene the filed-rate doctrine, which precludes a court from determining the reasonableness of the filed rate. Id.
In the instant matter, EPMI is not seeking to modify or eliminate the arbitration clause. Rather, it is arguing that Snohomish waived its right to exercise that clause, a determination that does not impact the rates that would apply and, therefore, does not implicate the filed-rate doctrine. Thus, while interpreting the Master Agreement under state law, the Court can determine whether Snohomish has waived its right to arbitration. This contractual issue does not require FERC's expertise, and as the Court would not be making any determination that impacts the validity of the rates, it is within the competence of the Court to determine whether the right to arbitration has been waived.
A broad claim or defense that attacked the arbitration clause per se, such as whether arbitration were an appropriate procedure for resolving energy trading disputes or whether it violated a federal statute that FERC administered, would be an issue for FERC. See Metro East Center, 294 F.3d at 927-28 (noting that "any broader claim such as arbitration is an inappropriate practice in the telecommunications business or transgresses some aspect of the federal statutes that the FCC administers, is an argument for the FCC alone"). Thus, an effort to suspend or annul any section of a filed tariff would be an issue for the regulatory agency. Id.
EPMI, however, is not arguing that the arbitration clause is not an appropriate procedure for resolving energy trading disputes. Rather, EPMI is asking for a determination that Snohomish has waived the right to exercise that clause. EPMI acknowledges that the arbitration clause would be enforceable absent waiver by the counter-party or a conflict with the objectives of the Bankruptcy Code.[11]
Moreover, the Master Agreement incorporates the FAA and, therefore, the filed tariff authorizes the court to determine whether a dispute is arbitrable under 9 U.S.C. § 3.[12]Metro East Center for Conditioning and Health v. Qwest Communications Ina Inc., 294 F.3d 924, 927 (7th Cir.2002). This role is in accord with the filed-rate doctrine because "the tariff itself commands application of the Arbitration Act's standards." Id. As set forth in 9 U.S.C. § 3, a court is authorized to stay proceedings pending arbitration, "providing the applicant for the stay is not in default in proceeding with such arbitration." *514 A determination that a party has waived arbitration is precisely a finding that the party is "in default in proceeding with such arbitration."
In addition, as between an arbitration panel and a court, a court may reach the issue of whether arbitration has been waived in instances where the claim of waiver is premised upon prior litigation of the same dispute by the party then seeking arbitration. Doctor's Assocs., Inc. v. Distajo, F.3d 438, 456 (2d Cir.1995). This applies whenever a party seeking arbitration has engaged in any prior litigation of such dispute in any forum. Doctor's Assocs., Inc. v. Distajo, F.3d 438, 456 n. 12 (2d Cir.1995), (citing, Kramer v. Hammond, 943 F.2d 176 (2d Cir.1991)). Thus, the Court is the proper forum to determine whether Snohomish has waived its right to exercise the arbitration clause by litigating the state law issues in another forum.
Snohomish asserts that the Gaming and Partnership Proceeding and the FERC Petition proceeding are police and regulatory in nature and therefore under FERC's exclusive jurisdiction pursuant to the FPA. Snohomish contends that matters within FERC's exclusive regulatory authority are not arbitrable. Snohomish also maintains that because the proceedings at FERC were not arbitrable, any litigation relating to those proceedings could not be the basis of a waiver. Snohomish further asserts that the Court has previously acknowledged the regulatory nature of the Gaming and Partnership Proceeding in decisions it has rendered. Snohomish also cites several decisions that have concluded that FERC may retain jurisdiction over a dispute notwithstanding an arbitration clause in the contract. (e.g., PacifiCom v. Reliant Energy Services, Inc., 99 FERC ¶ 61,381 at P 24 (2002), reh'g denied, 103 FERC ¶ 61,355 (2003), aff'd, PacifiCorp v. FERC, 9th Cir. No 03-7252).
EPMI contends that even if FERC may arguably have had exclusive jurisdiction over the issues Snohomish raised, that does not affect Snohomish's waiver of its right to arbitration. EPMI maintains that the arbitration clause is broad and applies to "[a]ny claim . . . arising out of or relating to this Agreement," whether such claim "sound[s] in contract, tort, or otherwise, at law or in equity, under state or federal law, [and] whether provided by statute or the common law. . . ." Thus, EPMI urges that every issue raised before FERC related to the Master Agreement.
Where issues before FERC are not arbitrable, any litigation relating to such issues could not be the basis of a waiver. See e.g., Seguros Banvenez, S.A. v. S/S Oliver Drescher, 761 F.2d 855, 862 (2d Cir.1985). However, only rate issues within FERC's exclusive jurisdiction that implicate its area of expertise and its enforcement authority are not arbitrable. Gulf Oil Corp. v. F.P.C., 563 F.2d 588, 597 (3d Cir.1977). Thus, an issue would not be arbitrable if it relates to FERC's independent responsibility, as a regulatory body, to protect the public interest by enforcing filed-rate schedules. A/S Ivarans Rederi v. United States, 938 F.2d 1365, 1367-68 (D.C.Cir.1991) (noting that enforcement of rate schedules filed with the agency is "a matter distinctly within the [regulatory agency's] statutory mandate"); See also, Duke Power Co. v. FERC, 864 F.2d 823, 830 (D.C.Cir.1989) (noting that it was proper to disregard arbitration clause in contract because energy trader's "violation of the interconnection agreement effectively converted the . . . dispute from one between [the energy trader] and complainants to one between [the energy trader] and the [regulatory agency]"). However, when a state law contract issue is before *515 FERC and the issue does not implicate FERC's exclusive jurisdiction, FERC must consider the applicability of the arbitration clause and any defenses thereto.
Snohomish argues that the Court has already acknowledged that the Gaming and Partnership Proceeding is regulatory in nature and, therefore, within FERC's exclusive jurisdiction. Snohomish further argues that the FERC Petition proceeding, in which a determination is sought that the Termination Payment violates the FPA, is also within FERC's exclusive jurisdiction. Therefore, Snohomish contends that its conduct in these "regulatory proceedings" cannot form the basis of a waiver. Snohomish further argues that its participation in proceedings before FERC under Section 1290 was not inconsistent with its arbitration rights because it was proceeding under the assumption that the amendment had given FERC exclusive jurisdiction over the entire dispute concerning the Termination Payment.
EPMI argues that its contention that Snohomish waived its right to exercise arbitration is not based upon the regulatory aspects of the Gaming and Partnership Proceeding. Rather, EPMI argues that Snohomish systematically tried to infuse into that proceeding issues that formerly had not been part of that regulatory proceeding issues that related to the Termination Payment state law contractual claims. EPMI contends that the essence of the Request for Clarification was to excuse Snohomish from paying the Termination Payment owed to EPMI. EPMI maintains that it was prejudiced by that action, as Snohomish obtained discovery related to the Termination Payment issues that would not have been available in arbitration. In addition, EPMI contends that Snohomish sought to litigate the state law contract issues in the FERC Petition proceeding, including asking FERC to order EPMI to pay Snohomish a termination payment based upon a calculation reflecting the market movement during an earlier period when Snohomish would have been "in the money." EPMI further argues that even after the District Court Opinion was issued, Snohomish continued to litigate state law contractual issues before FERC by filing the October Petition.
The enactment of Section 1290 provided Snohomish with a defensible basis upon which to conclude that FERC had exclusive jurisdiction over the Termination Payment state law contractual issues. By itself, pursuing relief before FERC that was arguably within its exclusive jurisdiction following the enactment of Section 1290 would not establish waiver of the right to exercise the arbitration clause. However, the cumulative effect of Snohomish's conduct might require the conclusion that Snohomish acted inconsistently with its right to arbitrate the state law contractual issues.
Prior to the enactment of Section 1290 and following the District Court Opinion, Snohomish actively attempted to litigate the state law claims before FERC. Snohomish sought extensive discovery with respect to those issues in the Gaming and Partnership Proceeding and engaged in extensive motion practice before the District Court and Second Circuit. Moreover, after the District Court Opinion was issued, Snohomish filed the October Petition and continued to violate the automatic stay in an effort to litigate the state law Termination Payment issues before FERC and to delay any other forum from addressing those issues.
The Gaming and Partnership Proceeding was commenced in FERC's regulatory capacity. However, through its Request for Clarification, Snohomish introduced certain Termination Payment issues into that proceeding issues that were not previously *516 a part of that proceeding. Further, Snohomish conducted discovery a process that would not ordinarily be available in arbitration relating to EPMI's Termination Payment claims.
While Snohomish's active participation in pursuing certain conduct was inconsistent with its right to exercise the arbitration clause, "it is not inconsistency but the presence or absence of prejudice which is determinative of the issue of waiver." Lubrizol Int'l, 562 F.Supp. at 573. (Citations and internal quotations omitted). Here, EPMI has not shown that it suffered sufficient prejudice to establish waiver of the right to exercise the arbitration clause.
EPMI argues that Snohomish has obtained discovery that it Would not have been able to obtain in arbitration. EPMI contends that Snohomish expanded the discovery it sought in the FERC proceeding in order to obtain discovery concerning the central issues involved in the state law Termination Payment claim. Snohomish counters that because of the nature of the proceedings before FERC, involving disgorgement of profits and market manipulation, the discovery sought would tend to overlap to some extent with the discovery concerning the state law Termination Payment issues. Snohomish further argues that discovery properly pursued in those proceedings cannot form the basis for a waiver.
There is no dispute that Snohomish was entitled to the discovery on issues relevant to the Gaming and Partnership Proceeding. Moreover, the fact that discovery properly obtained in that proceeding benefitted Snohomish in another proceeding would not form the basis for a waiver of its right to arbitrate the state law issues. Other than directing the Court's attention to certain lines of inquiry pursued at various hearings and depositions, EPMI has not carried its burden to identify the particular prejudice it suffered as a result of the discovery obtained. Indeed, much of the discovery obtained concerning the Termination Payment related to the issue of profits, which is relevant to the market manipulation and disgorgement of profits issues pending before FERC.
Moreover, with respect to the state law issues concerning the Termination Payment, it does not appear that there is a material dispute concerning the methodology used to calculate it. In that regard, in its publicly disclosed 2004 Annual Report, Snohomish presented its calculation of an amount representing the Termination Payment that was not that different from EPMI's calculation, in relative terms. The real dispute centers on potential state law defenses, primarily fraud, to the enforceability of the contract itself. It is not clear how the discovery obtained related to those defenses.
Further, while EPMI had to seek relief from the Court on several occasions resulting from Snohomish's efforts to bring the Termination Payment issues before FERC, Snohomish had plausible justification for its efforts even if ultimately found to be incorrect. Moreover, with respect to certain of the proceedings, the Court had to analyze whether there were issues involving the FPA that were properly before FERC. As EPMI would have to respond concerning whether certain issues related to the FPA, under the facts, the added burden of addressing the other issues does not constitute the degree of prejudice that would Warrant waiver of the arbitration clause.
As previously" noted, because of the strong federal presumption preferring arbitration, any uncertainly concerning waiver is resolved in favor of allowing arbitration to proceed. Thus, the Court *517 concludes that Snohomish has not waived its right to exercise the arbitration clause in the Master Agreement.
EPMI also argues that the Court should not lift the automatic stay to allow Snohomish to proceed with arbitration because core bankruptcy issues are involved in this adversary proceeding. However, even when presented with a core proceeding, a bankruptcy court may not preclude arbitration unless the proceeding is premised on Bankruptcy Code provisions that "inherently conflict" with the FAA or where arbitration would jeopardize objectives of the Bankruptcy Code. In re United States Lines, Inc. v. American S.S, Owners Mut. Prot. & Indem. Ass'n (In re United States Lines, Inc.), 197 F.3d 631, 640 (2d Cir.1999). Here, even accepting EPMI's characterizations of the core aspects of this proceeding, pursuing arbitration would not jeopardize objectives of the Bankruptcy Code nor would the Code provisions involved inherently conflict with the FAA.
Here, the Master Agreement includes an arbitration clause signifying the parties intent to send state law contract issues to arbitration. Therefore, even if the proceeding were determined to be core, and even though the amount in issue may be a significant recovery for EPMI, the Court is bound to follow the parties intent to send the matter to arbitration unless the standards of the United States Lines case are met. The potential recovery for the estate involved here and the total number of trading cases at issue do not warrant an exception to the federal policy favoring arbitration. While there were approximately 80 trading cases sent to mediation, only a small percentage contained arbitration clauses. More significantly, if the matters had not been sent to mediation, any concerns that the Debtors would have had to deal with a number of arbitration proceedings while attempting to administer the estate could have been addressed by enforcing the automatic stay until the Debtors were in a position to adequately respond to such a number of litigation forums. In that way, the Debtors would have been provided with a necessary "breathing spell" until such time as an orderly process could have been developed to send the individual adversary proceedings to arbitration without disrupting the Debtors' restructuring. That stage has been reached with respect to this adversary proceeding. Therefore, the Court lifts any injunction provided for under the Plan and Confirmation Order, including the continuation of the automatic stay, to permit the state law contractual issues to proceed to arbitration.
Conclusion
The Court concludes that the doctrine of primary jurisdiction is not implicated because enforcement of a contract is within the competence of a court and not reserved to the particular expertise of FERC. In accordance with the filed-rate doctrine, even after its market-based authority was revoked and in the absence of wind-down authority, EPMI may enforce the Master Agreement using the relevant rates unless and until those rates are set aside by FERC. For the same reasons, the Court does not deem it necessary that a ruling be deferred on interpreting the contractual terms until FERC completes its remedial process.
Further, the Court may properly determine whether Snohomish has waived its right to exercise the arbitration clause in the Master Agreement. Although Snohomish may have engaged in persistent efforts to have FERC address the state law Termination Payment issues, which conduct was inconsistent with exercising the arbitration clause, EPMI has not sufficiently established that it was prejudiced *518 by Snohomish's efforts. In view of the strong federal policy favoring arbitration, the Court concludes that Snohomish has not waived its right to exercise the arbitration clause. The Court further concludes that, even if characterized as core, the proceeding must be sent to arbitration because pursuing arbitration would not jeopardize objectives of the Bankruptcy Code nor would the Code provisions involved inherently conflict with the FAA.
Based upon the foregoing, the arbitration clause of the Master Agreement must be enforced and the state law contractual issues must be resolved by an arbitrator. The Arbitration Motion is granted and the Adversary Proceeding is dismissed. As a result, the EPMI Summary Judgment Motion and the Snohomish Summary Judgment Motion are no longer before the Court.
Counsel for Snohomish is to settle an order consistent with this opinion.
NOTES
[1] The EEI form agreement is an industry standard contract for the purchase and sale of wholesale power.
[2] Section 5.1 of the Master Agreement also provided that an Event of Default triggering the remedies available in Article Five could result from certain conduct on the part of Enron Corp., as guarantor of EPMI's performance under the Master Agreement. The section' provides, in relevant part, that an Event of Default includes,
(h) with respect to [a Defaulting] Party's Guarantor, if any:
(i) if any representation or warranty made by a Guarantor in connection with this Agreement is false or misleading in any material respect when made or when deemed made or repeated;
(ii) the failure of a Guarantor to make any payment required or to perform any other material covenant or obligation in any guaranty made in connection with this Agreement and such failure shall not be remedied within three (3) Business Days after written notice;
(iii) a Guarantor becomes Bankrupt.
Master Agreement § 5.1(h).
[3] As a result of its interpretation of Section 1290, the District Court did not address the "several grave constitutional questions that could arise by interpreting [Section 1290] in the way that [Snohomish] . . . suggest[s], that is, as granting FERC exclusive jurisdiction over the state law claims for termination payments. Among the many potential constitutional concerns if [Section 1290] were to grant FERC exclusive jurisdiction over the state law claims are, for example, violations of the Bankruptcy Clause and the principle of separation of powers." Luzenac, 2006 WL 2548453 at *12.
[4] In the June 28 Order, FERC recognized that the issue of the interpretation of Section 1290, including its constitutionality was pending before the District Court for the Southern District of New York. Public Util. Dist. No. 1 of Snohomish, Cty., Was., Docket No. E105-139-000, 2006 WL 1757334 at *3 (June 28, 2006). Thus, Snohomish was cognizant of the fact that the District Court's ruling could impact FERC's June 28 Order. Specifically, implicit within the, scope of the District Court's interpretation of Section 1290 and its constitutionality would be a resolution of whether FERC had exclusive jurisdiction of the state law contract issue involving the Termination Payment. Moreover, Snohomish and the United States, as intervenor, were parties to the proceeding before the District Court and are bound by its ruling.
[5] See Notice of Withdrawal and Amended Petition of Public Utility District No. 1 of Snohomish County, Washington for Declaratory and Interim Relief, and for Expedited Consideration, Pub. Util. Dist. No. 1 of Snohomish County, Wash et al, EL9-05-139 et al. (F.E.R.C. Nov, 1, 2006)
[6] Snohomish argues that EPMI's reference to the language in the FERC decision to the effect that the revocation of market-based rates or the disgorgement of profits does not void a contract but it remains viable was "singled out" by the Ninth Circuit in Public Utility District No. 1 of Snohomish County v. FERC, 471 F.3d 1053, 1084 (9th Cir.2006), to exemplify "how FERC acted arbitrarily and capriciously in refusing to fully remedy the effects of the Western power crisis." Snohomish further maintains that the Ninth Circuit concluded that FERC's refusal to reform the contract at issue there, despite what FERC identified as Enron's violation of its marketbased rate authority, was an abdication of FERC's statutory responsibility to set just and reasonable rates.
However, even accepting Snohomish's characterization of the Ninth Circuit's ruling, such characterization merely reinforces the fact that FERC is charged with the responsibility for adjusting rates and that FERC has yet to adjust those rates. The rates, therefore, must be enforced until they are set aside by FERC.
[7] Though Snohomish, in part, couches its argument for deferral in terms of primary jurisdiction, and although the Court will discuss primary jurisdiction in that regard, the Court notes that primary jurisdiction more properly concerns referral of an issue to a regulatory agency, not deferral of a ruling pending resolution of proceedings before the agency.
[8] Moreover, the state law contractual issues related to the Termination Payment were before the Court first. The sole reason FERC entertained the state law contractual issues presented in the FERC Petition and issued the June 28 Order was in response to the enactment of Section 1290. As previously discussed, the June 28 Order was a nullity.
[9] In a regulated industry, the filed-rate doctrine requires that the regulatory agency not a court determine whether a party's conduct that impacts filed rates should be sanctioned or redressed. Nevada I, at * 11.
[10] The arbitration clause contained in section 10.12 of the Master Agreement provides, in relevant part, that
Any claim, counterclaim, demand, cause of action, dispute, and controversy arising out of or relating to this Agreement or the relationship established by this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving the Parties and/or their respective representatives (for purposes of this Section 10.12 only, collectively the "Claims"), even though some or all of such claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort, or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved by binding arbitration. Arbitration shall be conducted in accordance with the rules of arbitration of the Federal Arbitration Act and, to the extent an issue is not addressed by the federal law on arbitration, by the commercial Arbitration Rules of the American Arbitration. Association. The validity, construction, and interpretation of this agreement to arbitrate and all procedural aspects of the arbitration conducted pursuant hereto shall be decided by the arbitrators. In deciding the substance of the Parties' Claims, the arbitrators shall refer to the governing law.
[11] With regard to the latter point, EPMI argues that the Court has discretion to refuse to lift the automatic stay to allow arbitration to proceed in cases involving core issues if arbitration would frustrate the objectives of the Bankruptcy Code, thereby resulting in an inherent conflict between the Bankruptcy Code and the FAA. The Court will address this argument in turn.
[12] Section 3 of the Federal Arbitration Act provides that
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
9 U.S.C. § 3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/371003/ | 607 F.2d 1385
197 U.S.App.D.C. 200
DIRECTOR, OFFICE OF WORKERS' COMPENSATION PROGRAMS, UNITEDSTATES DEPARTMENT OF LABOR, Petitioner,v.COOPER ASSOCIATES, INC. t/a Raymond's Liquors and HartfordAccident and Indemnity Company, Respondents.COOPER ASSOCIATES, INC. t/a Raymond's Liquors and HartfordAccident and Indemnity Company, Petitioners,v.Janet COOPER and Lois Cooper and Director, Office ofWorkers' Compensation Programs, United StatesDepartment of Labor, Respondents.
Nos. 78-1290, 78-1295.
United States Court of Appeals,District of Columbia Circuit.
Argued May 1, 1979.Decided Sept. 28, 1979.
Mary A. Sheehan, Atty., Dept. of Labor, Washington, D.C., with whom Laurie M. Streeter, Associate Sol., Washington, D.C., was on the brief, for Director, Office of Workers' Compensation Programs, United States Department of Labor, petitioner in No. 78-1290 and respondent in No. 78-1295.
John C. Duncan, III, Washington, D.C., Cooper Associates, et al., for petitioners in No. 78-1295 and respondent in No. 78-1290.
Leonard J. Ralston, Jr., Washington, D.C., for Janet and Lois Cooper, respondents in No. 78-1295.
Before TAMM, LEVENTHAL and MacKINNON, Circuit Judges.
Opinion for the Court per curiam.
PER CURIAM:
1
Three questions are presented in this workmen's compensation case. First, is the family of decedent Jacob Cooper, who killed himself as a result of business pressures, entitled to workmen's compensation death benefits? Second, is the employer's insurer liable for the ten percent penalty imposed on employers who make late compensation payments? And finally, is the employer's insurer, pursuant to section 8(f) of the Longshoremen's and Harbor Workers' Compensation Act (1977), entitled to contribution toward its compensation liability from the "special fund"?1
2
* At the time of his death, Jacob Cooper (hereinafter Cooper) was an officer and director of a closely held corporation registered as Cooper Associates, Inc., t/a Raymond's Liquors. His wife was the president and sole shareholder of the corporation. In 1969, Cooper acquired for the corporation a small retail liquor store called Raymond's Liquors. For the first two years the business prospered. But beginning in 1971 it began to decline. Cooper became very depressed. He underwent psychiatric treatment and took medication. The business continued to decline and Cooper's psychological problems continued as well. In March, 1974, Cooper was found dead at Raymond's Liquor store of self-inflicted gunshot wounds.
3
Mrs. Cooper filed a claim for compensation death benefits on behalf of herself and her daughter Lois. 33 U.S.C. § 909, 36 D.C.Code § 501 et seq. The corporation's insurer, Hartford Accident and Indemnity Company (hereinafter insurer), opposed the claim. After a hearing, an Administrative Law Judge (ALJ) held that (1) the Cooper family was entitled to the death benefits claimed; (2) the insurer controverted the claim in a timely fashion, and therefore was not required to pay an additional ten percent penalty; and (3) the insurer was not entitled to contribution from the "special fund," and therefore had to shoulder the full cost of the compensation payments itself.
4
The insurer appealed to the Benefits Review Board for review of the ALJ's first and third findings. The Director of the Office of Workers' Compensation Programs, United States Department of Labor (Director) appealed with respect to the second finding. The Board affirmed the ALJ's conclusion that the family was entitled to death benefits. But it reversed the ALJ and imposed the ten percent penalty. And the Board also reversed the ALJ on the "special fund" question, holding that the insurer is entitled to contribution under section 8(f).
5
Both the insurer and the Director petition for review of the Benefits Review Board decision. The insurer argues that the Cooper family is not entitled to death benefits, and that even if they are entitled, the Board erred when it imposed the ten percent penalty. The Director contends that the insurer has no right to contribution from the "special fund."
II
6
1. The insurer argues that the Cooper family is not entitled to receive death benefits for three reasons. First Cooper was not an "employee," and therefore was not covered by the Compensation Act.2 Second, his death did not arise out of and in the course of his employment.3 And finally, Cooper's suicide was "intentional" and therefore not compensable.4 The ALJ and the Benefits Review Board considered each of these contentions, but held that (1) Cooper was an "employee," (2) his death was work-related, and (3) his suicide was not "intentional."5 There is ample evidence in the record to support the ALJ's and the Board's conclusions,6 and we affirm on the basis of their opinions.
7
2. An employer must pay a ten percent penalty on all late compensation payments unless he controverted claimant's right to compensation "(within) fourtee(n) day(s) after he (employer) ha(d) knowledge of the alleged injury or death . . . ." 33 U.S.C. § 914(d), (e) (1977). In the instant case, the employer knew of Cooper's death on March 25, 1974, but the insurer did not controvert the family's right to compensation until March 12, 1975, almost one year later. Initially therefore, the ALJ ordered the insurer to "pay a ten percent penalty on all installments of compensation not paid when due. . . ."7 On reconsideration, however, the ALJ reversed himself because the "notice . . . of controversion was filed within fourteen days subsequent to receipt by the Carrier (insurer) of notice that Jacob Cooper's death was reported to have occurred in the course of his employment."8
8
The Benefits Review Board reversed. First, it pointed out that
9
(u)nder the Act, the fourteen day period within which notice of controversion must be filed begins on the date the Employer first has Knowledge of the injury or death, not the day of receipt of Notice that the death was reported to have occurred In the course of employment.9
10
Second, the Board stated that under section 35 of the Compensation Act, 33 U.S.C. § 935 (1977), "notice to or knowledge of an employer of the occurrence of the injury shall be notice to or knowledge of the carrier (insurer) . . . ."10 Accordingly, the Board rejected the ALJ's analysis, which had focused on the date at which the insurer became aware that the death allegedly occurred in the course of employment. Since the claim was not controverted within fourteen days of when the employer learned of the death, the Board held that the section 14(e) penalty "must be awarded."11
11
The insurer argues that the Board's decision should be reversed for three reasons. As a threshold matter, the insurer contends that the Director lacked standing to appeal the section 14(e) issue to the Benefits Review Board. This argument is wholly without merit. The Board's regulations provide that an appeal may be taken by the "Secretary or his designee."12 The Director clearly falls within this category. Moreover, the Board has expressly stated:
12
the Section 14(e) issue is a substantial legal issue which affects the proper administration of the Act. The determination of whether or not to access the penalty under a particular set of circumstances impacts the Act's underlying policy of encouraging voluntary payment of compensation to the injured employees. Therefore, this issue is properly raised on appeal by the Director.
13
Berger v. Cork 'n' Bottle, 4 BRBS 339, 341 (1976).
14
The insurer also asserts that the section 14(e) issue was waived by both the family and the Director because neither contested the insurer's motion for reconsideration before the ALJ. We disagree. The Board's regulations do not require a response to request for reconsideration,13 and traditionally such responses are inappropriate.14 The failure to contest a motion under those circumstances is not a waiver. In addition, it is well established that the "right to additional compensation (under section 14(e)) cannot be waived."15 In fact, the Board has held that it can consider whether the section 14(e) penalty should be imposed even if the issue is "raised for the first time on appeal."16 Accordingly, there was no waiver here.
15
Finally, the insurer argues that the Board erred in imposing the penalty. The insurer's contention has three strands. First, the insurer asserts that the Board "fail(ed) to specifically address Judge Edward's findings that the circumstances presented were such as to excuse the employer's failure to file a timely notice of controversion. . . ."17 The Fourth Circuit recently observed that the section 14(e) "penalty is mandatory unless nonpayment (or the failure to controvert the claim in a timely manner) is due to conditions beyond the employer's control." Newport News Shipbuilding and Dry Dock Co. v. Graham, 573 F.2d 167, 171 (4th Cir. 1978). If the ALJ had found that the insurer's failure to controvert was due to circumstances beyond its control, therefore, the insurer's argument would have some force. But the ALJ never made such a finding. Instead, he stated that the insurer acted "in good faith" and that it would not be "in the interest of justice" to impose the penalty.18 Good faith is irrelevant to section 14(e), so the Board had no obligation to specifically address the ALJ's finding on that point.
16
Second, the insurer asserts that it would be unfair to impute the employer's knowledge to the insurer in this case. While normally the employer's interest would converge with those of its insurer, in this case the employer (Mrs. Cooper) would benefit from the imposition of the section 14(e) penalty. This argument is reasonable, and if it were necessary to the outcome of this case we would seriously consider making an exception to the statutory rule that an employer's knowledge is always imputed to his insurer.19 We need not make that determination here, however. The insurer concedes that it was informed of Cooper's death three days after the suicide.20 Since the insurer did not contest the claim until almost a year after it had Actual knowledge of Cooper's death, it is irrelevant whether the employer's knowledge is imputed to the insurer.
17
Third, the insurer suggests that it would be unfair to impose the penalty because "there was a substantial and serious question as to the circumstances surrounding Mr. Cooper's death . . . and its possible attribution to his employment."21 This argument is a reiteration of the ALJ's assertion that the fourteen day period should run from the date at which the employer/insurer learned that the death was work-related, rather than the date when the employer learned of the death. Neither the ALJ nor the insurer has cited any authority for this proposition, and it is contradicted by the explicit language of the statute. 33 U.S.C. § 914(b) (1977).22 We agree with the Board that the fourteen day period begins to run on the day when the employer learns of the death.
18
In short, since the insurer did not controvert the claim within fourteen days of when it had actual knowledge of Cooper's death, we hold that the Board properly imposed the penalty under section 14(e).
19
3. Section 8(f) of the Workers' Compensation Act, 33 U.S.C. § 908(f) (1977), provides that when the consequences of an employee's work-related injury are exacerbated because of that employee's pre-existing permanent partial disability, the employer's compensation liability is limited. The employer is responsible for compensation payments for only 104 weeks; thereafter a "special fund," created pursuant to section 44 of the Act, 33 U.S.C. § 944 (1977), is liable for the payments.23 The final issue in this case is whether Cooper's suicide as a result of his depression over business failures qualifies his employer/insurer for the limited liability provisions of section 8(f).
20
The ALJ held that the insurer was not entitled to contribution from the special fund. He noted that section 8(f) does not apply unless the employee suffered two injuries, and he found only one continuing injury here.24 The Benefits Review Board reversed. It stated:
21
(U)nder C & P Telephone (Company v. Director, Office of Workers' Compensation Programs (184 U.S.App.D.C. 18), 564 F.2d 503 (D.C.Cir. 1977)) the holding that Section 8(f) is inapplicable is incorrect. The Court in that case concluded that a work-related aggravation of a pre-existing condition may constitute a second injury for the purposes of Section 8(f). The overwhelming exacerbation of the decedent's pre-existing mental condition which the administrative law judge found resulted in the decedent's demise constituted sufficient injury to make applicable Section 8(f). See also Brannon v. Potomac Electric Power Co., 6 BRBS 527 . . . (Aug. 26, 1977).25
22
In effect, the Board held that each day Cooper went to work constituted a discrete, identifiable injury.
23
We are not persuaded by the Board's rather metaphysical analysis. It is apparent from the record that "the suicide resulted from a single injury or disability, namely, distress over the continuing failure of the corporate business enterprise. . . ."26 The two cases cited by the Board are distinguishable. In C & P Telephone, supra, the claimant had a pre-existing back problem. As a result of an elevator accident on the job, her back problem was aggravated. There was never any question that the claimant had a pre-existing disability (the back problem) and a second injury (the elevator accident). The only issue was whether section 8(f) applies when the second injury aggravates the pre-existing disability. The court held that section 8(f) applies when a second injury aggravates an existing disability, but that holding does not dispose of this case in which the question is whether there was a second injury at all.
24
Brannon, supra, which we decide today,27 is also distinguishable. In Brannon, an employee of a power company suffered a severe electric shock while at work. This left him with an extreme fear of electricity. His doctors testified, and the administrative decisions found, that his subsequent exposure to electricity constituted an additional trauma that aggravated his mental condition and led to his suicide. We upheld the Board's determination that since the decedent had a pre-existing disability (as a result of the accident) that was aggravated by a second injury (exposure to electronically energized equipment), section 8(f) was applicable. The second injury consisted not of the mere going to work, which was projected as feasible without exposure to energized equipment, but the additional factor of subsequent exposure to energized equipment. There was thus a discrete second injury and that is the critical factor lacking in Cooper's case.
25
The record here establishes that Cooper's suicide was the result of his depression over his continuing business failure. C & P Telephone and Brannon are distinguishable because in each of those cases it was conceded that there were two separate injuries. The Board erred, therefore, when it held that section 8(f) was applicable here because it was applicable in those cases. Accordingly, we reverse the Board and hold that the insurer is not entitled to the limited liability provisions of section 8(f).
III
26
In summary, we affirm the Board's determination that Cooper's family is entitled to compensation benefits, and that the insurer is liable for the ten percent penalty under section 14(e). We reverse the Board's conclusion that the insurer is entitled to contribution from the "special fund," however; since there was only one continuing injury in this case, the insurer must shoulder the entire cost of Cooper's family's claim.
27
Judgment accordingly.
1
36 D.C.Code § 501 (1973) provides that the provisions of 33 U.S.C. § 901 et seq. "shall apply in respect to the injury or death of an employee of an employer carrying on any employment in the District of Columbia."
2
Death benefits are only payable to the family of an "employee." E. g., 36 D.C.Code § 501; 33 U.S.C. § 909
3
33 U.S.C. § 902(2) (1977). In O'Leary v. Brown-Pacific-Maxon, 340 U.S. 504, 506-07, 71 S.Ct. 470, 471-72, 95 L.Ed. 483 (1951) the Court stated:
The test of recovery is not a causal relation between the nature of employment of the injured person and the accident. . . . Nor is it necessary that the employee be engaged at the time of the injury in activity of benefit to his employer. All that is required is that the "obligations or conditions" of employment create the "zone of special danger" out of which the injury arose.
4
33 U.S.C. § 903(b) (1977) ("No compensation shall be payable if the injury was occasioned solely by the . . . willful intention of the employee to injure or kill himself . . . .")
5
App. 98-101 (ALJ's Decision and Order); App. 115-20 (Benefits Review Board Decision)
6
Banks v. Chicago Grain Trimmers Ass'n, Inc., 390 U.S. 459, 467, 88 S.Ct. 1140, 1145, 20 L.Ed.2d 30 (1968) ("The Deputy Commissioner's finding . . . that there was a causal connection between the work-connected injury suffered by the petitioner's husband . . . and his fall at home some two hours later . . . must be affirmed if supported by substantial evidence on the record considered as a whole."); O'Keeffe v. Smith Associates, 380 U.S. 359, 363, 85 S.Ct. 1012, 1015, 13 L.Ed.2d 895 (1965) ("While this Court may not have reached the same conclusion as the Deputy Commissioner, it cannot be said that his holding that the decedent's death . . . arose out of and in the course of his employment is irrational or without substantial evidence on the record as a whole."); O'Leary v. Brown-Pacific-Maxon, supra, 340 U.S. at 508, 71 S.Ct. at 472 ("the findings are to be accepted unless they are unsupported by substantial evidence on the record considered as a whole.")
7
App. 105
8
App. 107 (ALJ's Supplemental Decision and Order)
9
App. 123 (emphasis added)
10
App. 123-24
11
Id. 124
12
"Any party in interest adversely affected or aggrieved by a decision or order issued pursuant to one of the Acts may appeal such decision or order to the Board. . . ." 20 C.F.R. § 802.201(a). " 'Party' or 'Party in interest' means the Secretary or his designee and any person or business entity aggrieved or directly affected by the decision or order from which an appeal to the Board is taken." 20 C.F.R. § 801.2(a)(10)
13
20 C.F.R. §§ 802.407-802.409
14
See, e. g., Fed.R.App.P. 40(a) ("No answer to a petition for rehearing will be received unless requested by the court . . . .")
15
Harris v. Marine Terminals Corp., 8 BRBS 712, 714 (1978)
16
Laber v. Sun Shipbuilding and Dry Dock Co., 7 BRBS 956, 957 (1978); Reed v. Sun Shipbuilding and Dry Dock Co., 4 BRBS 130, 134 (1976)
17
Insurer's Br. 50
18
App. 107-08 (ALJ's Supplemental Decision and Order)
19
33 U.S.C. § 935 (1977)
20
"As the record reflects, Jacob Cooper committed suicide on March 25, 1974. (J.A. 97) Three days later the decedent's nephew, attorney Steven M. Cooper, wrote to Hartford Accident and Indemnity Company, the workmen's compensation carrier for Cooper Associates, (and) advised that Jacob Cooper had died. . . ." Insurer's Br. 45
21
Insurer's Br. 51
22
See O'Leary v. Southeast Stevedore Co., 3 BRBS 419 (1976)
23
The purpose of § 8(f) is explained in Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor v. PEPCO, 197 U.S.App.D.C. ---, 607 F.2d 1378 (D.C.Cir. 1979), which is decided today, and discussed Infra page --- of 197 U.S.App.D.C., page 1391 of 607 F.2d
24
App. 104
25
App. 121
26
App. 102
27
Director v. PEPCO, supra | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/3764817/ | DECISION AND JUDGMENT ENTRY
{¶ 1} This case involves a boundary dispute between adjacent landowners. Kay Fancher contends the trial court's judgment in favor of Stuart and Donna Bugg is against the manifest weight of the evidence. The trial court relied upon the testimony presented by the Buggs' two surveyors and the previous owner of the tracts to establish the location of the boundary line. While Fancher presented some evidence that would support a different location, the trial court was free to choose which version of the facts it found to be more credible. Because the trial court's judgment is based upon some competent, credible evidence, we overrule Fancher's first contention.
{¶ 2} Second, Fancher contends that the trial court's decision is contrary to law because it failed to apply the general rule of primacy in determining *Page 2
boundary disputes, i.e., that monuments prevail over courses and distances when establishing the disputed location of a boundary line through resurvey. Because Fancher failed to request findings of fact and conclusions of law, we presume the trial court applied the appropriate law in the absence of something contrary in the record. Moreover, while tangible landmarks generally prevail over courses and distances, this is not an absolute rule. The law permits a fact-finder to use the call for course and distance rather than the call for monuments when the facts and circumstances indicate that method to be more reliable than monuments.
I. Facts {¶ 3} The Buggs own approximately 108 acres of land bordering the east side of Fancher's 57 acres. Thus, the property line in dispute forms the eastern boundary of Fancher's property and the western boundary of the Buggs' property. A creek and a fence run along this property line.
{¶ 4} At one time Ken Juillerat owned the entire parcel that now is held as two separate tracts by the Buggs and Fancher. At trial, Juillerat testified that he subdivided his land and sold part of it to Fancher in 1983. At the time, he believed the property he sold to Fancher consisted of approximately 75 acres, but it was later determined to be closer to 57 acres. Juillerat testified that he sold the remaining 108 acre tract to Mr. Mefford in 1986. Mr. Mefford then sold the property to the Buggs. Juillerat also testified that when he sold the portion of his property to Fancher, the parties did not survey the land. However, he testified that he intended for the property's eastern boundary to follow along the existing *Page 3
fence line located to the west of the creek because he did not want to build a new fence on the east side of the creek for his remaining property. He further testified that Fancher never indicated she was interested in the creek nor did she want it included in her property.
{¶ 5} The Buggs offered testimony from two separate surveyors, Eric Lutz and Ty Pell. Both men testified that they conducted surveys for the Buggs and concluded that the Buggs' western property line closely follows the fence line, and includes the creek. Fancher offered the testimony of her surveyor, Raymond Roberts, who concluded that Fancher's eastern property line was located east of the creek, and included the creek and fence.
{¶ 6} The trial court concluded the Buggs proved by clear and convincing evidence that the boundary line of their property follows the fence and includes the creek.
{¶ 7} In her pro se appellate brief, Fancher asserts the following assignments of error:
I. THE JUDGMENT AND FINAL ORDER IS NOT SUSTAINED BY THE EVIDENCE AND IS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.
II. THE JUDGMENT AND FINAL ORDER IS CONTRARY TO LAW.
II. Manifest Weight {¶ 8} In her first assignment of error, Fancher contends that the trial court's judgment is against the manifest weight of the evidence.
{¶ 9} An appellate court will not reverse a trial court's judgment so long as it is supported by any competent, credible evidence going to all of the *Page 4
essential elements of the case. CE. Morris Constr. Co. v. FoleyConstr. Co. (1978), 54 Ohio St.2d 279, 280, 376 N.E.2d 578. Under this highly deferential standard of review, a reviewing court does not decide whether it would have come to the same conclusion as the trial court. Rather, we are required to uphold the judgment so long as the record, as a whole, contains some evidence from which the trier of fact could have reached its ultimate factual conclusions. We are guided by the presumption that the trial court's factual findings are correct because the trial judge "is best able to view the witnesses and observe their demeanor, gestures and voice inflections, and use these observations in weighing the credibility of the proffered testimony." Seasons Coal Co.v. Cleveland (1984), 10 Ohio St.3d 77, 79, 461 N.E.2d 1273. In applying the "some competent credible evidence" standard, we should not reverse a judgment merely because the record contains evidence that could reasonably support a different conclusion. It is the trier of fact's role to determine what evidence is the most credible and convincing. The fact finder is charged with the duty of choosing between two competing versions of events, both of which are plausible and have some factual support. Our role is simply to insure the decision is based upon reason and fact. We do not second guess a decision that has some basis in these two factors, even if we might see matters differently. Rather, we must defer to the trier of fact in that situation.
{¶ 10} Initially, we note that appellant failed to request findings of fact and conclusions of law under Civ.R. 52. In the absence of findings of fact and conclusions of law, the reviewing court must presume the trial court applied the *Page 5
law correctly and must affirm if there is some evidence in the record to support the judgment. See Allstate Financial Corp. v. Westfield Serv.Mgt. Co. (1989), 62 Ohio App.3d 657, 577 N.E.2d 383. See also Pettit v.Pettit (1988), 55 Ohio App.3d 128, 130, 562 N.E.2d 929, 931, where the court wrote:
We conclude that when separate facts are not requested by counsel and/or supplied by the court the challenger is not entitled to be elevated to a position superior to that he would have enjoyed had he made his request. Thus, if from an examination of the record as a whole in the trial court there is some evidence from which the court could have reached the ultimate conclusions of fact which are consistent with his judgment the appellate court is bound to affirm on the weight and sufficiency of the evidence.
The message is clear: If a party wishes to challenge the * * * judgment as being against the manifest weight of the evidence he had best secure separate findings of fact and conclusions of law. Otherwise his already `uphill' burden of demonstrating error becomes an almost insurmountable `mountain.'
See, also, International Converter, Inc. v. Ohio Valley Converting,Ltd. (May 26, 1995), Washington App. No. 93CA34, 1995 WL 329571.
{¶ 11} At trial, the Buggs presented the testimony of two separate surveyors. Each one presented their surveys of the properties and concluded that the boundary line between the Buggs' and Fancher's property lie near the fence line. Both surveyors believed that the Buggs' property included the creek and extended west to the fence line.
{¶ 12} Additionally, the Buggs presented the testimony of Juillerat, the former owner of both tracts. He testified that when he partitioned the land and sold a portion to Fancher, he and Fancher intended for the property line to follow the existing fence line. Jullierat testified he walked the property with Fancher *Page 6
before he sold it to her and he pointed out stakes that marked the boundary. Fancher indicated she understood where her boundary would be.
{¶ 13} Under a manifest weight of the evidence standard, the surveyors' and Juillerat's testimony constitutes some competent, credible evidence to support the trial court's judgment. It is not our role to "second guess" the trial court when it chooses between two competing but rational versions of the facts. Even though Fancher's expert reached a different conclusion, the trial court's judgment is supported by some competent, credible evidence. Accordingly, we overrule Fancher's first assignment of error.
II. The Role of Monuments {¶ 14} In her second assignment of error, Fancher contends that the trial court's decision is contrary to law. She argues that the court erred by not applying the general rule that monuments prevail over courses and distances when establishing the location of a disputed boundary line through resurvey. See Broadsworth v. Kauer (1954),161 Ohio St. 524, 120 N.E.2d 111.
{¶ 15} Again, we note that because of Fancher's failure to request findings of fact and conclusions of law, we must presume regularity in the proceedings below and affirm unless there is some affirmative evidence in the record that the trial court misapplied the law.
{¶ 16} Based upon her surveyor's testimony, Fancher contends that the stone located on the east bank of the creek constitutes a monument, which represents the starting point for her boundary line. According to her expert, use of this monument established the line in Fancher's favor. *Page 7
{¶ 17} When determining boundary disputes, monuments are of prime importance. Broadsword, 161 Ohio St. at 533. The general rule is that:
A `monument' is a tangible landmark, and monuments, as a general rule, prevail over courses and distances for the purposes of determining the location of a boundary, even though this means either the shortening or lengthening of distance, unless the result would be absurd and one clearly not intended, or all of the facts and circumstances show that the call for course and distance is more reliable than the call for monuments.
Id. at 533-534, 120 N.E.2d 111, 116, quoting 6 Thompson on Real Property (Perm. Ed.), 519, Section 3327. Thus, when reviewing the evidence involved in a boundary dispute, courts should first consider natural and permanent monuments. Natural boundaries are next to be considered, followed by artificial marks, adjacent boundaries, course and distance, with course controlling distance. Area is the least important consideration. Id. See, also, Owens v. Haunert (2000),137 Ohio App.3d 507, 515, 739 N.E.2d 5, 10; 2 Ohio Jurisprudence 3d, Adjoining Landowners, Section 70.
{¶ 18} Here, the Buggs' two surveyors testified that the stone is not a monument and they did not rely on it. Rather, they used course and distance to establish the line. They testified that to consider the stone a monument would produce an absurd result because it would create a property line in which Fancher would own a creek located outside of her fence line. Furthermore, there was some concern that the stone may have been dislocated from its original location. Thus, the surveyors concluded that the proper boundary line followed the fence line. *Page 8
{¶ 19} After considering the evidence, the trial court adopted the survey presented by the Buggs as the actual boundary line. While tangible landmarks generally prevail over courses and distances, the court is permitted to consider other evidence if it concludes the use of a landmark would create an absurd result or the landmark is less reliable than course and distance. The testimony of the Buggs' surveyors and Juillerat's support the court's decision to ignore the monument that Fancher's survey embraced. Thus, the court did not apply an incorrect legal standard in reaching its decision. We overrule Fancher's second assignment of error.
JUDGMENT AFFIRMED. *Page 9
JUDGMENT ENTRY
It is ordered that the JUDGMENT BE AFFIRMED and that Appellee recover of Appellant costs herein taxed.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Highland County Common Pleas Court to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of the date of this entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.
McFarland, P.J. Abele, J.: Concur in Judgment and Opinion. *Page 1 | 01-03-2023 | 07-06-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1919455/ | 373 Pa. Super. 479 (1988)
541 A.2d 771
F.B. WASHBURN CANDY CORPORATION and Zurich Insurance Company, Appellants,
v.
FIREMAN'S FUND, Philip Packard and John Cepurneek, George Celia, Jr., Harold D. Lynn and Evelyn Lynn, his Wife, Dale Lynn, Jr. and Valley Home Improvement Company, Appellees.
Supreme Court of Pennsylvania.
Argued November 5, 1987.
Filed May 2, 1988.
*481 James F. Manley, Pittsburgh, for appellants.
Bernard J. McAuley, Pittsburgh, for appellees.
Before ROWLEY, DEL SOLE and MONTGOMERY, JJ.
DEL SOLE, Judge:
This is an appeal from the trial court order dismissing Appellants' exceptions in a declaratory judgment action.[1] The facts of this case are as follows.
Appellant-F.B. Washburn Candy Company, whose general omnibus liability insurance carrier was Appellant-Zurich Insurance Company, contracted with Appellee-Philip Packard for the shipment of Washburn's goods.[2] Appellee-Fireman's Fund[3] provided insurance coverage for Packard. Subsequently, Appellee-John Cepurneek,[4] one of Packard's employees, was delivering Washburn's goods when the truck he was driving collided with a vehicle occupied by Harold D. Lynn and Evelyn Lynn, his wife.
Thereafter, Washburn, Packard, and Cepurneek were named as defendants in a tort action arising from the accident. Upon receiving notice of the suit, Washburn *482 tendered the defense of the action to Fireman's Fund, claiming that Washburn was an omnibus insured under the insurance policy which Fireman's Fund had issued to Packard. Fireman's Fund disagreed, however, and refused to defend Washburn. For this reason, Washburn tendered the defense of the action to its general liability carrier, Zurich. Zurich, in turn, retained legal counsel so that a defense might be entered on Washburn's behalf. Following a jury trial, a plaintiff's verdict was returned against the defendants.
Thereafter, Washburn and Zurich commenced an action for declaratory judgment against Fireman's Fund for the purposes of having the trial court determine the rights of the parties under the policy Fireman's Fund had issued to Packard, and to recoup the costs associated with Zurich's defense of Washburn. In its Findings of Facts and Conclusions of Law, the trial court found that Fireman's Fund, the insurer of Packard's vehicle, was the primary insurance carrier. Zurich, Washburn's carrier, was held responsible only for excess coverage. Thus, it was concluded that Fireman's Fund should have defended Washburn in the underlying action. The trial court also ruled that Fireman's Fund was not liable to Zurich for the legal fees the excess carrier incurred in the defense of the underlying action or the declaratory judgment action. Exceptions were filed and later denied by the trial court. This appeal follows.
Appellants raise three issues on appeal:
1. Did not the court err in failing to award costs of defense incurred by Zurich Insurance Company in defending an action where the primary insurer of the vehicle involved in the accident, Fireman's Fund, refused to defend an omnibus insured;
2. Did not the court err in failing to award attorneys fees for the prosecution of the within declaratory judgment action; and,
3. Did not the court err in finding as a fact and concluding as a matter of law, that the the (sic) owner and operator of the tractor trailer involved in the accident was *483 an "insured" under the policy of insurance issued by Zurich Insurance Company to F.B. Washburn Candy Corporation.
With respect to the first issue, Appellants argue that Fireman's Fund repeatedly denied any obligation to defend Washburn, thereby acting in bad faith and in repudiation of its contract of insurance. Appellants contend that Fireman's Fund should be prohibited from benefiting from its own breach of contract. Thus, all of the defense costs associated with the underlying action should be paid by Fireman's Fund to Zurich. Appellants appropriately point out that the precise issue before us whether a primary insurer who refuses to defend an insured under the insurance policy must reimburse an excess carrier for defense costs incurred after the excess carrier renders a defense on the insured's behalf has not been addressed by the courts of this Commonwealth.
We have, however, had the opportunity to discuss the duties owed by an insurer to its insured after the insurer wrongfully refused to undertake a defense in an action brought by a third party against the policyholder. In Kelmo Enterprises v. Commercial Union Insurance Co., 285 Pa.Super. 13, 426 A.2d 680 (1981), the appellees were forced to engage private counsel after the appellant-insurance company declined to defend the appellees in the underlying tort action. While the action was still pending, the appellees filed a petition for declaratory judgment, seeking a determination of their rights under the policy and an award of counsel fees for the defense of the tort action and the declaratory judgment action. The trial court held that the appellant-insurance company was required to defend the appellees. Likewise, the appellees were awarded attorneys' fees. The appellant-insurance company appealed arguing, inter alia, that the trial court erred in awarding the attorneys' fees to the appellees. We affirmed.
With respect to the underlying action brought against the appellees, we opined that "[b]ecause our cases are well settled that in an action in assumpsit for the breach of a *484 covenant to defend recovery includes the costs of hiring counsel and other costs of defense, the lower court properly awarded appellees attorneys' fees for the defense of the [tort] action." Id., 285 Pa.Superior Ct. at 20, n. 4, 426 A.2d at 683, n. 4. In determining whether or not attorneys' fees should be granted for the declaratory judgment action, we held that "an insured who is compelled to bring a declaratory judgment action to establish his insurer's duty to defend an action brought by a third party may recover his attorneys' fees incurred in the declaratory judgment action if the insurer has, in bad faith, refused to defend the action brought by the third party." Id. at 426 A.2d at 685, citing New Hampshire Insurance Co. v. Christy, 200 N.W.2d 834 (Iowa 1972) (emphasis supplied).
In the case at bar, the trial court distinguished Kelmo and similar cases from the instant facts by noting that, even though Fireman's Fund may have breached its duty to Packard or Washburn, there exists no authority in Pennsylvania which states that a similar duty ran from the primary insurer to an excess insurance carrier. The trial court further elaborated that Zurich, being the excess carrier, had its own interest to protect by defending Washburn. Trial Court Opinion, 2/3/87, 2-3.
We disagree with the trial court's conclusion. Rather, we find that the doctrine of equitable subrogation applies to the facts before us:
[i]t is well established that the action for subrogation is one based on considerations of equity and good conscience. The goal is to place the burden of the debt upon the person who should bear it. The right of subrogation may be contractually declared or founded in equity, but even if contractually declared, it is to be regarded as based upon and governed by equitable principles . . . It has often been said that the equitable doctrine of subrogation places the subrogee in the precise position of the one to whose rights and disabilities he is subrogated.
Allstate Insurance Co. v. Clarke, 364 Pa.Super. 196, 527 A.2d 1021, 1023-1024 (1987) (citations omitted). Based on *485 this principle, we are of the opinion that Zurich stands in the same place as Washburn had Washburn been forced to retain private counsel in the underlying action. It is true that there exists no contractual obligation between Fireman's Fund and Zurich. Nevertheless, we are mindful that, while the interests of a primary insurer are virtually unaffected by the existence of excess coverage, the interests of an excess insurer are very much affected by the actions taken by the primary carrier, especially when the latter wrongfully refuses to defend its insured. Peter v. Travelers Insurance Co., 375 F. Supp. 1347, 1350-1351 (C.D.Cal. 1974).
We do not agree with the trial court's conclusion that Zurich should bear the costs of litigation by virtue of the fact that Zurich was only protecting its own interests as an excess carrier. Zurich was placed in the posture of defending Washburn only after Fireman's Fund wrongfully refused to render a defense. Thus, Zurich's duty to defend was activated under inappropriate circumstances. Moreover, under the doctrine of equitable subrogation, Fireman's liability as a primary insurer is not increased by Zurich's recovery of attorneys' fees. The duty owed to Zurich is identical to that which was owed to Washburn but was refused. See generally Peter v. Travelers Insurance Co., supra, at 375 F. Supp. at 1350.
Accordingly, under the guidance of Kelmo Enterprises v. Commercial Union Insurance Co., supra, we find that Fireman's Fund is responsible for the counsel fees incurred by Zurich in the defense of the underlying action. However, with respect to the attorneys' fees associated with the declaratory judgment action, we observe that the trial court did not determine whether or not Fireman's Fund's refusal to defend Washburn was in bad faith. Id. at 426 A.2d at 685. Therefore, we must remand this case to the trial court for this determination. If it is found that Fireman's Fund did act in bad faith, then Zurich is entitled to the counsel fees expended in the declaratory judgment action.
*486 Finally, Appellants argue that the trial court erred in finding that Cepurneek was an insured under the insurance policy issued to Washburn by Zurich. However, we need not discuss this issue. The trial court found that Fireman's Fund owed insurance coverage for bodily injury of $300,000 per person, with a maximum of $600,000 per accident. Fireman's Fund was also found to be responsible for $25,000 in property damages. Decree, 8/28/86. The record shows that the jury verdict was less than the limits of insurance coverage set by the trial court. Opinion, 4/22/85, 2. Thus, Zurich as an excess insurance carrier was not called upon to provide coverage in the instant matter. With this being the case, the issue of whether or not Cepurneek is covered under Zurich's insurance policy is moot. Further, we note that the only monetary injury complained of in this appeal concerns the assessment of the attorneys' fees incurred by Zurich.
Order affirmed in part, reversed in part. Case remanded for proceedings consistent with this Memorandum. Jurisdiction relinquished.
NOTES
[1] Ordinarily, an order dismissing exceptions is interlocutory and non-appealable until judgment has been entered on the docket. In Re: Estate of Brockerman, 332 Pa.Super. 88, 480 A.2d 1199 (1984). Although it would appear that Appellant's appeal was taken prematurely, we note from the record that judgment was entered on May 6, 1987. For this reason, there is no need to quash this appeal. See generally Pa.R.A.P. 902.
[2] Hereinafter referred to as "Washburn", "Zurich", and "Packard".
[3] Hereinafter referred to as "Fireman's Fund".
[4] Hereinafter referred to as "Cepurneek". | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919528/ | 312 Md. 662 (1988)
541 A.2d 1303
ISAAC CLEA ET AL.
v.
THE MAYOR AND CITY COUNCIL OF BALTIMORE ET AL.
No. 76, September Term, 1986.
Court of Appeals of Maryland.
June 9, 1988.
Gary S. Bernstein (Joseph F. Zauner III and Rocklin & Settleman, P.A., on the brief), Baltimore, for appellants.
Robert C. Verderaine (Verderaine & DuBois, P.A., on the brief), Baltimore, for appellee Robert E. Leonard.
Benjamin L. Brown, City Sol. and Millard S. Rubenstein, Asst. Sol., on the brief, Baltimore, for appellees Mayor and City Council of Baltimore City, Baltimore City Police Dept. and Bishop L. Robinson, Police Com'r.
Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, COUCH[*], McAULIFFE and ADKINS, JJ.
ELDRIDGE, Judge.
This is a tort action based upon an unlawful search of the plaintiffs' home by an officer of the Baltimore City Police Department. The questions before us relate to whether Baltimore City and the Police Department are vicariously liable for the police officer's conduct, and whether the officer is entitled to public official immunity under the circumstances.
I.
On January 30, 1985, Police Officer Robert Leonard, along with at least seven other armed police officers, forcibly entered the home of the Isaac Clea family and conducted a search of the entire premises pursuant to a search warrant. Officer Leonard had intended to obtain a warrant to search the residence of Alvin Thomas for narcotics. Officer Leonard's affidavit in support of his application for a warrant, and consequently the warrant itself, stated that Mr. Thomas resided at 2428 East Chase Street in Baltimore City. Actually, however, Thomas resided at 2428 East Eager Street in Baltimore City. The Clea residence was 2428 East Chase Street. Chase and Eager Streets are parallel to each other, one block apart.
Officer Leonard's affidavit in support of the search warrant also contained a description of the Thomas residence. The Thomas house was described as a two-story row house, with a white crossbuck storm door, a lamp post in the front yard, and no house numbers. The affidavit stated that Mr. Thomas lived in the basement of the house which his aunt, Ethel Dorman, an elderly woman approximately 96 years of age, rented. The Clea residence did not entirely match the house described in the affidavit. It did not have a lamp post in front; whether it had house numbers is not clear. Furthermore, Officer Leonard did not limit his search to the basement area of the house; instead, he searched the entire premises. No narcotics or other contraband were found. It is uncontested that Officer Leonard searched the wrong house.
Mr. Clea, his wife Mattie Mae Clea, their daughter Marion Willene, son Mathew Wayne, and granddaughter Chantel Lorraine, brought this action in the Circuit Court for Baltimore City to recover for damages allegedly sustained as a result of the wrongful search. The complaint contained counts based on invasion of privacy, defamation, negligence, and violations of Articles 24 and 26 of the Maryland Declaration of Rights. Named as defendants were the Mayor and City Council of Baltimore, the Baltimore City Police Department, the Police Commissioner of Baltimore City, and Officer Leonard.
The defendants Mayor and City Council, Police Department and Police Commissioner, filed a motion to dismiss, asserting various grounds including immunity. The defendant Leonard moved for summary judgment, claiming that he was entitled to a qualified immunity, based upon the absence of malice. Attached to the motion was an affidavit of Officer Leonard. The plaintiffs opposed the motion, submitting an affidavit by Mattie Mae Clea. After a hearing and consideration of each side's affidavits, the circuit court granted the defendants' motions and entered a judgment for costs in favor of all defendants.
The plaintiffs then appealed to the Court of Special Appeals, and, before the case was heard by that court, we issued a writ of certiorari.
II.
We shall first deal with the plaintiffs' assertion of liability on the part of the Mayor and City Council of Baltimore, the Police Department, and the Police Commissioner.
The plaintiffs' action against the defendants other than Officer Leonard has been premised entirely on the theory that the Baltimore City Police Department is, for tort liability purposes, an agency of the Mayor and City Council of Baltimore. The Department, the Commissioner, and the Mayor and City Council have all been regarded as local government entities employing Officer Leonard.
Moreover, the plaintiffs have not suggested that the Mayor and City Council, the Police Department, or the Police Commissioner were involved or connected in any way with, or cognizant of, the alleged wrongful conduct.[1] Instead, the plaintiffs seek to hold the City, the Department, and the Commissioner vicariously liable for Officer Leonard's conduct. The plaintiffs' position is that the City of Baltimore and its agencies, the Police Department and the Commissioner, together constitute an employer liable under the doctrine of respondeat superior. The plaintiffs rely upon a case dealing with the liability of Prince George's County for the tortious conduct of officers in the Prince George's County Police Department. See Bradshaw v. Prince George's County, 284 Md. 294, 396 A.2d 255 (1979). See, in addition, Cox v. Prince George's County, 296 Md. 162, 460 A.2d 1038 (1983); James v. Prince George's County, 288 Md. 315, 418 A.2d 1173 (1980).[2]
One difficulty with the plaintiffs' position, with regard to the counts in their complaint not based on alleged constitutional violations, is that Baltimore City and its departments are entitled to a degree of immunity in tort suits. Prince George's County, at the time of the Cox, James, and Bradshaw cases, had waived its immunity for tort actions. Baltimore City, however, has not waived its tort immunity. Consequently, as to many types of ordinary tort actions, including those sounding in negligence, Baltimore City is immune with regard to matters classified as "governmental" and not immune with regard to matters classified as "proprietary." See, e.g., Tadjer v. Montgomery County, 300 Md. 539, 546-551, 479 A.2d 1321 (1984); Austin v. City of Baltimore, 286 Md. 51, 405 A.2d 255 (1979), and cases there cited.[3] Police activity, of the type giving rise to the instant case, has been classified as governmental and not proprietary. See Cox v. Prince George's County, supra, 296 Md. at 166-167, 460 A.2d 1038; Wynkoop v. Hagerstown, 159 Md. 194, 150 A. 447 (1930).
The plaintiffs, treating the case as if Baltimore City had waived tort immunity, and as if Bradshaw v. Prince George's County, supra, controlled the liability of Baltimore City and its agencies for Officer Leonard's torts, have not focussed upon whether, under applicable principles of Maryland law, a municipality or county which has not waived immunity would be vicariously liable for tortious conduct like that alleged in this case.
A more fundamental obstacle, however, to the plaintiffs' theory of recovery against the Mayor and City Council of Baltimore, the Police Department, and the Police Commissioner, concerns the status of the Baltimore City Police Department for purposes of tort liability.
By Ch. 367 of the Acts of 1867, the General Assembly of Maryland made the Police Department of Baltimore City a state agency; its officials and officers were designated as state officers. Since that time, this Court has consistently held that Baltimore City should not be regarded as the employer of members of the Baltimore City Police Department for purposes of tort liability. Unlike other municipal or county police departments which are agencies of the municipality or county (see, e.g., Cox v. Prince George's County, supra, 296 Md. at 165-170, 460 A.2d 1038), the Baltimore City Police Department is a state agency. Thus, as a matter of Maryland law, no liability ordinarily attaches to Baltimore City under the doctrine of respondeat superior for the torts of Baltimore City police officers acting within the scope of their employment. See, e.g., Green v. Baltimore, 181 Md. 372, 30 A.2d 261 (1943); Taxicab Co. v. M. & C.C. of Baltimore, 118 Md. 359, 84 A. 548 (1912); Sinclair v. Baltimore, 59 Md. 592 (1883); Altvater v. the Mayor and City Council of Baltimore, 31 Md. 462 (1869). See also Austin v. City of Baltimore, supra, 286 Md. at 75-76, 405 A.2d 255 (concurring and dissenting opinion); Kaufman v. Taxicab Bureau, 236 Md. 476, 479-480, 204 A.2d 521 (1964), cert. denied, 382 U.S. 849, 86 S. Ct. 95, 15 L. Ed. 2d 88 (1965); Hector v. Weglein, 558 F. Supp. 194, 197-199 (D.Md. 1982).
It is true that, by Ch. 920 of the Acts of 1976, the General Assembly transferred the power to appoint the Baltimore City Police Commissioner from the Governor to the Mayor of Baltimore City. At the same time, however, the General Assembly maintained the express designation of the Baltimore City Police Department as a state rather than a local government agency. See § 16-2(a) of the Code of Public Local Laws of Baltimore City (1980, 1985 Supp.), being § 16-2(a) of Article 4 of the Code of Public Local Laws of Maryland.[4] Furthermore, the General Assembly, and not the Baltimore City Council, has continued to be the legislative body enacting significant legislation governing the Baltimore City Police Department. See, e.g., Ch. 265 of the Acts of 1982.
In light of the cases in this Court holding that the Baltimore City Police Department is a state agency for purposes of respondeat superior liability, and the General Assembly's continued adherence to the Department's classification as a state agency, it is clear that the Mayor and City Council of Baltimore would not be liable for Officer Leonard's alleged tortious conduct. As a matter of Maryland law, Baltimore City was simply not Officer Leonard's employer for tort liability purposes.[5] Apart from any other issues, Baltimore City was entitled to a judgment for this reason. On this ground, we shall affirm the judgment in favor of the Mayor and City Council of Baltimore.
Moreover, in determining whether the Baltimore City Police Department and its Commissioner might be liable, under the doctrine of respondeat superior, for Officer Leonard's tortious conduct, the principles governing the liability of state agencies would be controlling. The State of Maryland (which was not named as a defendant) is, of course, generally immune from tort liability unless that immunity has been waived. See, e.g., Md.-Nat'l Cap. P. & P. Comm'n v. Kranz, 308 Md. 618, 622, 521 A.2d 729 (1987), and cases there cited. See also State v. Hogg, 311 Md. 446, 458-465, 535 A.2d 923 (1988). In ordinary tort actions for damages, state agencies are also shielded by the State's sovereign immunity unless that immunity has been waived. Md.-Nat'l Cap. P. & P. Comm'n v. Kranz, supra, 308 Md. at 622, 521 A.2d 729. With regard to the liability or non-liability of state agencies or the heads of state agencies for constitutional violations, see, e.g., Dep't of Natural Resources v. Welsh, 308 Md. 54, 60-65, 521 A.2d 313 (1986), and cases there discussed; Walker v. Acting Director, 284 Md. 357, 364, 396 A.2d 262 (1979); Davis v. State, 183 Md. 385, 388-393, 37 A.2d 880 (1944); Dunne v. State, 162 Md. 274, 288, 159 A. 751, appeal dismissed, 287 U.S. 564, 53 S. Ct. 23, 77 L. Ed. 497 (1932); Weyler v. Gibson, 110 Md. 636, 73 A. 261 (1909). Finally, in the Maryland Tort Claims Act, first adopted by Ch. 298 of the Acts of 1981, the General Assembly has waived the State's immunity in tort actions subject to specified exclusions and limitations. See Maryland Code (1984, 1987 Cum.Supp.), §§ 12-101 through 12-110 of the State Government Article.[6]
None of the matters outlined above has been argued, raised, or even mentioned by the plaintiffs at any stage of this litigation. The issue of the Police Department's and the Commissioner's liability or non-liability, as state agencies, for Officer Leonard's conduct has never been raised in this case. The pertinent principles, considerations, and authorities have been entirely overlooked. Absent any briefing or argument whatsoever concerning the issue, we decline to decide it. See, e.g., State v. Rivenbark, 311 Md. 147, 160, 533 A.2d 271 (1987); Foster, Evans and Huffington v. State, 305 Md. 306, 315, 503 A.2d 1326, cert. denied, 478 U.S. 1010, 1023, 106 S. Ct. 3310, 3315, 92 L. Ed. 2d 722, 723, 745 (1986), and cases there cited. For this reason, we shall not disturb the judgment in favor of the Police Department and the Commissioner.
III.
Next, we shall address the non-constitutional tort counts against Officer Leonard. These are negligence, defamation, and invasion of privacy counts, as to which the plaintiffs have not claimed a violation of their constitutional rights.
In Maryland, a limited category of governmental personnel, including police officers, are entitled under certain circumstances to qualified immunity from tort liability for their negligent conduct. The principle was recently delineated for this Court by Judge J. Dudley Digges in James v. Prince George's County, supra, 288 Md. at 323-324, 418 A.2d 1173, as follows (emphasis in original):
"Before a governmental representative in this State is relieved of liability for his negligent acts, it must be determined that the following independent factors simultaneously exist: (1) the individual actor, whose alleged negligent conduct is at issue, is a public official rather than a mere government employee or agent; and (2) his tortious conduct occurred while he was performing discretionary, as opposed to ministerial, acts in furtherance of his official duties. E.g., Duncan v. Koustenis, 260 Md. 98, 104, 271 A.2d 547, 550 (1970); State, Use, Clark v. Ferling, 220 Md. 109, 113-14, 151 A.2d 137, 139-40 (1959); Cocking v. Wade, 87 Md. 529, 541, 40 A. 104, 106 (1898); Macy v. Heverin, 44 Md. App. 358, 361, 408 A.2d 1067, 1069 (1979); accord, Schoonfield v. Mayor & City Council of Baltimore, 399 F. Supp. 1068, 1088 (D.Md. 1975), aff'd, 544 F.2d 515 (4th Cir.1976); 2 F. Harper & F. James, The Law of Torts § 29.10, at 1638-39 (1956); W. Prosser, Handbook of the Law of Torts § 132, at 988-90 (4th ed. 1971); Restatement (Second) of Torts § 895D (1979); Bermann, Integrating Governmental and Officer Tort Liability, 77 Col.L.Rev. 1175, 1178-79 (1977). Once it is established that the individual is a public official and the tort was committed while performing a duty which involves the exercise of discretion, a qualified immunity attaches; namely, in the absence of malice, the individual involved is free from liability. See, e.g., Bradshaw v. Prince George's County, supra, 284 Md. at 302-04, 396 A.2d at 260-61; Robinson v. Bd. of County Comm'rs, 262 Md. 342, 346-47, 278 A.2d 71, 74 (1971). The rationale underlying this grant of immunity `is that a public purpose is served by protecting officials when the act is an exercise of their discretion.' Bradshaw v. Prince George's County, supra, 284 Md. at 304, 396 A.2d at 261."
See, in addition, Ashburn v. Anne Arundel County, 306 Md. 617, 621-622, 510 A.2d 1078 (1986); Cox v. Prince George's County, supra, 296 Md. at 169, 460 A.2d 1038 ("a police officer does not enjoy this immunity if he commits an intentional tort or acts with malice").
It is undisputed in this case that Officer Leonard was a public official and that his tortious conduct occurred while he was performing discretionary acts in furtherance of his official duties. It is further conceded by the plaintiffs that the non-constitutional torts here alleged are all ones falling within the scope of the immunity if Officer Leonard acted without malice. The plaintiffs' contention regarding these non-constitutional counts is that there was a triable issue as to whether Officer Leonard acted with malice. Thus, accepting the plaintiffs' concessions, the only question before us on this branch of the case is whether the trial court erred in concluding that, in light of the affidavits of Officer Leonard and Mattie Mae Clea, there was no showing of malice.
Officer Leonard's affidavit, in support of his motion for summary judgment, stated that the estranged wife of Alvin Thomas had given him the address of 2428 E. Chase Street. Officer Leonard's affidavit, in pertinent part, was as follows:
"5. Emma Thomas also reported to the affiant that Alvin Thomas was dealing in drugs and gave to Officer Olin Barber a cellophane bag containing a white powder and that there was contained in a black suit of Alvin Thomas located in the basement where her husband was living, similar cellophane bags containing white powder. The address given to your affiant of Alvin Thomas was 2428 E. Chase Street, that he lived in the basement at that address, and that he was living with his aunt, described as Ethel Dorman, and further described as an elderly woman, approximately 96 years of age.
"6. The affiant personally went to the scene of 2428 E. Chase Street to observe its characteristics and noticed that it was a two-story row home with a white crossbuck door on the front.
"7. The affiant then met with Emma Thomas at the police station in order to prepare an affidavit for a search and seizure warrant of 2428 E. Chase Street. He gave the description of the home as he had personally observed it to Emma Thomas and she acknowledged that the information given, namely a two-story row home with a white crossbuck front door met the description of the premises where her husband was residing. Your affiant also inquired of Emma Thomas of any other occupants of that location to which she replied, that the aforementioned elderly woman would be on the premises.
"8. The affiant also obtained from Emma Thomas a description of her husband, Alvin Thomas, in order to include that information in the affidavit. The affidavit was prepared and shown to Emma Thomas and read by her. She was then taken to the Honorable James Bundy, District Court of Maryland for Baltimore City, where Emma Thomas acknowledged that the information contained in the affidavit was true and correct. The affidavit contained the address of 2428 E. Chase Street. That premises then became the subject of execution of the search and seizure warrant.
"9. At all times, your affiant acted and relied upon the information contained in this affidavit, had no personal motive or other reason to conduct the search and seizure of the premises of plaintiffs, other than in the performance of his duties as a police officer for the Baltimore City Police Department. He had had no contact previously with the plaintiffs and harbored no illwill toward them."
In his earlier affidavit accompanying his application for a search warrant, Officer Leonard had also stated that he was informed that Thomas's residence at 2428 E. Chase Street had a lamp post in front of the house.
The affidavit of Mattie Mae Clea, which was the only document relied upon in the plaintiffs' response to Officer Leonard's motion for summary judgment, was in its entirety as follows:
"MATTIE MAE CLEA, one of the Plaintiffs in the above-captioned case, first being duly sworn, says:
"1. That she is an adult citizen of the State of Maryland, is competent to be a witness, and that the facts submitted in this Affidavit are based upon her personal knowledge.
"2. That she is and was at the time of the incident described in the Complaint an owner and occupant of the property known as 2428 East Chase Street in Baltimore City, Maryland.
"3. That no one has ever rented the property from her and her husband, and that she does not know of any persons named Ethel Dorman, or Alvin Thomas.
"4. That there is at the present time no lamp post in front of her house, nor has there ever been one there to her knowledge.
"5. That at the time of the search of her home, eight (8) or more armed police officers entered the premises, and searched every room in the house, including the main floor and the upstairs floor, as well as the basement. In the course of their search of upstairs rooms, the police officers entered the bedroom of Plaintiff Marion Willene Clea, her daughter, while her daughter was asleep in the bed in that room."
Both in the trial court and in this Court, the plaintiffs' argument, that there was actual malice, has focussed on the absence of the lamp post from the Clea residence and the scope of the search. The plaintiffs seize upon the statement in Officer Leonard's affidavit supporting the search warrant application that he was informed that Thomas's residence at 2428 E. Chase Street had a lamp post in front, and upon the statement in Leonard's affidavit supporting the summary judgment motion that the officer "personally went to the scene of 2428 E. Chase Street to observe its characteristics...." The plaintiffs then point to the affidavit of Mattie Mae Clea, in which she stated that the Clea house at 2428 E. Chase Street had no lamp post in front. From this, the plaintiffs assert (appellants' brief p. 10): "The Officer had been given a descriptive fact, i.e. the existence of the lamp post right in front of the house, which he obviously could not have personally observed since it was not present." The plaintiffs then conclude (ibid.): "He knew at that time, in fact, that the information given to him by the informant Emma Thomas was not correct. Execution by the Police Officer, Defendant Robert Leonard, of a Search Warrant which was based on information he knew to be incorrect, constituted deliberate and intentional performance of an illegal act.... This clearly demonstrates `malice' as defined in Maryland law...." The plaintiffs go on to argue that this conclusion is supported by the fact that the affidavit supporting the search warrant stated that Mr. Thomas lived in the basement of 2428 E. Chase Street, whereas Officer Leonard and the other officers searched the entire Clea house at 2428 E. Chase Street.
In our view, the conclusion drawn by the plaintiffs, from the absence of a lamp post and the area searched, is strained. According to Officer Leonard, the suspect's estranged wife gave him the Chase Street address. Except as to the absence of a lamp post, the Clea house essentially matched the house described by the informant. It is unreasonable to infer that Officer Leonard acted maliciously simply because the house searched differed in one minor respect from the house intended to be searched.
The plaintiffs take the position that, whenever there is some minor discrepancy between the description given an officer of a place to be searched and the way that place actually appears, it is reasonable to infer that the officer must have observed the discrepancy, must have concluded that it was the wrong place, and deliberately decided to search the wrong place. In this situation, however, other inferences are far more reasonable. It is likely that the officer either failed to notice the single difference, or, if he noticed it, concluded that the informant's description was erroneous in one relatively minor detail concerning the lamp post.
As to the scope of the search, there is no suggestion that the house where Thomas resided was divided into apartments. Officer Leonard was informed that Thomas resided with his aunt, in her house. The basement presumably was the portion designated as his quarters or room. Merely because one's private area of a single family dwelling is the basement, does not mean that the person does not have access to the house generally.
Moreover, the plaintiffs have not suggested any possible reason or motive for Officer Leonard to have deliberately searched the Cleas' residence instead of Thomas's residence. Rather, the two affidavits of Officer Leonard show that an honest mistake was made, and nothing submitted by the plaintiffs creates a reasonable inference to the contrary.
We recognize that "disposition by summary judgment is generally inappropriate in cases involving motive or intent." Di Grazia v. County Exec. for Mont. Co., 288 Md. 437, 445, 418 A.2d 1191 (1980). We further recognize that even where the facts are undisputed, if those facts are susceptible to inferences supporting the position of the party opposing summary judgment, then a grant of summary judgment is improper. Di Grazia v. County Exec. for Mont. Co., supra, 288 Md. at 445, 418 A.2d 1191; Honaker v. W.C. & A.N. Miller Dev. Co., 285 Md. 216, 232, 401 A.2d 1013 (1979); Porter v. General Boiler Casing Co., 284 Md. 402, 413, 396 A.2d 1090 (1979). Those inferences, however, must be reasonable ones. Washington Homes v. Inter. Land Dev., 281 Md. 712, 718, 382 A.2d 555 (1978); Fenwick Motor Co. v. Fenwick, 258 Md. 134, 136, 265 A.2d 256 (1970); Lawless, Adm'x v. Merrick, 227 Md. 65, 72, 175 A.2d 27 (1961). What was said by the United States Court of Appeals for the Fifth Circuit in Tyler v. Vickery, 517 F.2d 1089, 1094 (5th Cir.1975), cert. denied, 426 U.S. 940, 96 S. Ct. 2660, 49 L. Ed. 2d 393 (1976), is fully applicable to the instant case:
"In opposing a motion for summary judgment, a party is entitled not only to have the facts viewed in the light most favorable to it but also to all reasonable inferences which may be drawn from these facts. Harvey v. Great Atlantic & Pacific Tea Co., 5 Cir. 1968, 388 F.2d 123, 124-25; Liberty Leasing Co. v. Hillsum Sales Corp., 5 Cir.1967, 380 F.2d 1013, 1014-15. The inferences the non-moving party seeks to draw, however, must be `reasonable,' and it is in this respect that we find [appellants' theory] insufficient to controvert appellees' properly supported motion for summary judgment."
In a like vein, Professor Wright has observed (C. Wright, The Law of Federal Courts § 99, at 666-667 (1983)):
"It is frequently said that summary judgment should not be granted if there is the `slightest doubt' as to the facts. Such statements are a rather misleading gloss on a rule that speaks in terms of `genuine issue as to any material fact,' and would, if taken literally, mean that there could hardly ever be a summary judgment, for at least a slight doubt can be developed as to practically all things human. A better formulation would be that the party opposing the motion is to be given the benefit of all reasonable doubts in determining whether a genuine issue exists."
See also Griffin v. Griffin, 327 U.S. 220, 236, 66 S. Ct. 556, 564, 90 L. Ed. 635 (1946) ("unsupported suspicions" not sufficient to defeat summary judgment).
Considering all of the circumstances of this case, we do not believe that the inference of malice, which the plaintiffs attempt to draw, is reasonable. The undisputed facts before the trial judge, and all of the reasonable inferences, showed that Officer Leonard did not knowingly or deliberately search the wrong house. The mistake may have been the product of negligence. It was clearly a violation of the Cleas' constitutional rights. Nonetheless, on the record before her at the time, the trial judge was warranted in concluding that the mistake was not malicious. We shall, therefore, affirm the summary judgment in favor of Officer Leonard on the non-constitutional counts.
IV.
Finally, we turn to those counts against Officer Leonard alleging violations of Articles 24 and 26 of the Maryland Declaration of Rights.
In Widgeon v. Eastern Shore Hospital Center, 300 Md. 520, 479 A.2d 921 (1984), this Court, responding to a certified question from the United States District Court for the District of Maryland, pointed out that a common law tort action for damages exists to remedy violations of Article 24 and Article 26 of the Maryland Declaration of Rights.[7] The issue contested by the parties in the present case is whether a public official should be entitled to qualified immunity when such an action is brought.
In oral argument before us, Officer Leonard conceded that the qualified immunity for public officials acting in a discretionary capacity, generally based upon the presence or absence of actual malice, has not heretofore been applied by this Court to violations of constitutional rights. Officer Leonard further conceded that, if this qualified immunity were extended to cases involving violations of Maryland constitutional rights, then the individual whose rights are violated generally "has no remedy" and that invocation of the cause of action recognized in Widgeon v. Eastern Shore Hospital Center, supra, would "essentially" be "an exercise in futility." Nevertheless, Officer Leonard urges us to extend this qualified immunity to damage actions against public officials who violate Maryland constitutional rights. The plaintiffs obviously disagree with this position. Their view seems to be that, if any immunity is given to public officials violating rights under the Maryland Constitution, the standard should be the same as the "objective reasonableness" immunity test adopted by the Supreme Court for actions under 42 U.S.C. § 1983. See Malley v. Briggs, 475 U.S. 335, 106 S. Ct. 1092, 89 L. Ed. 2d 271 (1986); Harlow v. Fitzgerald, 457 U.S. 800, 102 S. Ct. 2727, 73 L. Ed. 2d 396 (1982). See also Butz v. Economou, 438 U.S. 478, 98 S. Ct. 2894, 57 L. Ed. 2d 895 (1978).
A review of Maryland case law discloses that a public official who violates a plaintiff's rights under the Maryland Constitution is entitled to no immunity. The plaintiff may recover compensatory damages regardless of the presence or absence of malice. Punitive damages for the constitutional violation, however, are not recoverable absent a showing of actual malice. In our view, there are sound reasons underlying the position taken by the prior decisions of the Court. We are not persuaded that Maryland law on this subject should be modified by this Court.
The matter of a public official's immunity from damages for a constitutional violation was apparently first ruled upon by the Court in Weyler v. Gibson, supra, 110 Md. 636, 73 A. 261. In that case, an enlargement of the Maryland Penitentiary encroached upon the plaintiffs' land, and the plaintiffs brought an action for damages against, among others, the Warden of the Maryland Penitentiary. With regard to the Warden's argument that he was entitled to the immunity of the State (110 Md. at 653, 73 A. 261), this Court responded as follows (id. at 653-654, 73 A. 261):
"JUDGE DILLON, in his work on the Laws and Jurisprudence of Eng. & Am., 207, said: `That all of the original States in their first Constitutions and Charters provided for the security of private property, as well as life and liberty. This they did either by adopting, in terms, the famous thirty-ninth article of Magna Charta which secures the people from arbitrary imprisonment and arbitrary spoliation, or by claiming for themselves, compendiously, all of the liberties and rights set forth in the great Charter.'
"Our Declaration of Rights (Article 19) declares that every man for any injury done to him in his person or his property ought to have remedy by the course of the law of the land, and (Article 23) [now Article 24] that no man ought to be deprived of his property, but by the judgment of his peers, or by the law of the land, and section 40, Article 3 of the Constitution prohibits the passing of any law authorizing private property to be taken for public use, without just compensation as agreed between the parties, or awarded by a jury, being first paid or tendered to the party entitled to such compensation."
After pointing out that the "immunity of the State from suit ... [is] firmly fixed in our law," this Court continued (id. at 654):
"But it would be strange indeed, in the face of the solemn constitutional guarantees, which place private property among the fundamental and indestructible rights of the citizen, if this principle could be extended and applied so as to preclude him from prosecuting an action ... against a State Official unjustly and wrongfully withholding property...."
Thus, the Court in Weyler flatly refused to extend the State's governmental immunity to a public official violating the plaintiffs' constitutional rights, including those under Article 24 of the Declaration of Rights.
A case involving a violation of Article 26 of the Declaration of Rights is Mason v. Wrightson, 205 Md. 481, 109 A.2d 128 (1954). The plaintiff in that case was David T. Mason, an attorney and later a distinguished judge of the Court of Special Appeals. In January 1953, because of the number of serious crimes in Baltimore City committed with deadly weapons, the Police Commissioner of Baltimore City issued a "general order" for police to search "all persons coming under police suspicion" for weapons. During January and February 1953, in the Police Department's Northwestern District where the defendant was a police officer, one hundred and twenty-nine taverns were entered by the police and the male patrons were "`patted down' in a search for concealed weapons." 205 Md. at 485, 109 A.2d 128. This was pursuant to the Commissioner's order and a further order by the Captain of the Northwestern District. During one night in February 1953, the plaintiff Mason was at a table with friends in a tavern in the Northwestern District when the police entered and announced that the male patrons would be searched. When the defendant, Sergeant Wrightson, reached the plaintiff and told him to "stand up and be searched," the plaintiff "arose from his chair, but informed Sergeant Wrightson that he did not consent to be searched because there was no legal basis for the search." Ibid. The plaintiff "was then searched by Sergeant Wrightson without his consent." Ibid. The plaintiff brought an action for damages against Sergeant Wrightson, and the trial court granted judgment for the defendant. This Court, however, reversed and remanded for entry of a judgment in favor of the plaintiff. After quoting the language of Article 26 of the Maryland Declaration of Rights and pointing out that the search was unlawful, this Court, in an opinion by Chief Judge Brune, concluded (Id. at 487, 109 A.2d 128):
"When a peace officer goes beyond the scope of the law he may become liable civilly and is not shielded by the immunity of the law.... The fact that the appellee was acting under orders of a superior officer does not relieve him of civil liability for his actions which are illegal and beyond the scope of duty."
Consequently, the police officer in Mason was granted no immunity despite the absence of malice and the officer's good faith in merely carrying out the orders of a superior.
Heinze v. Murphy, 180 Md. 423, 24 A.2d 917 (1942), was also an action for damages against a Baltimore City Police Officer. The plaintiff Murphy was arrested by Officer Heinze for disorderly conduct, although the officer had no warrant and lacked probable cause to make the arrest.[8] The trial court awarded the plaintiff both compensatory and punitive damages, and Officer Heinze appealed. This Court reversed the award of punitive damages because of the absence of malice but upheld an award of compensatory damages, saying (180 Md. at 429, 24 A.2d 917):
"The generally accepted rule in reference to ... damages, when an officer, such as a policeman, is involved, is that: `An officer who acts in good faith in making an arrest is absolved from punitive or exemplary damages, even though he is liable for compensatory damages. However, such damages may be allowed against an officer under circumstances upon which bad faith or malice may be attributed to him in making the arrest.' 22 Am.Jur., False Imp., Sec. 133, p. 439...."
And later (id. at 433-434, 24 A.2d 917):
"A trespass may be committed from a mistaken notion of power, and from an honest motive to accomplish some good end. But, while the law tolerates no abuse of power, yet, in morals and the eye of the law, there is a vast difference between ... a person acting mistakenly, from a worthy motive, and one committing the same act from a wanton and malicious spirit, and with a corrupt and wicked design. Hence, where damages beyond compensation, to punish the party guilty of a wrongful act, are asked, the evidence must show wanton or malicious motive, and it must be actual and not constructive or implied." (Emphasis added).
The Weyler, Mason, and Heinze cases compel the rejection of Officer Leonard's argument that a public official, guilty of violating a plaintiff's rights under the Maryland Constitution, should be entitled to a qualified immunity from compensatory damages based upon the absence of malice. These cases make it clear that an official who violates an individual's rights under the Maryland Constitution is not entitled to any immunity, and that the presence or absence of malice is pertinent only to the question of punitive damages. In addition, none of the other Maryland or English authorities recognizing a cause of action for damages to remedy violations of constitutional rights, and reviewed in Widgeon v. Eastern Shore Hosp. Center, supra, 300 Md. at 525-532, 479 A.2d 921, suggest that an individual guilty of violating the plaintiff's constitutional rights would be entitled to immunity.
Moreover, with regard to clothing a public official with a degree of governmental immunity, there are sound reasons to distinguish actions to remedy constitutional violations from ordinary tort suits. The purpose of a negligence or other ordinary tort action is not specifically to protect individuals against government officials or to restrain government officials. The purpose of these actions is to protect one individual against another individual, to give one person a remedy when he is wrongfully injured by another person. Issues of governmental immunity in this context concern whether, and to what extent, as a policy matter, a governmental official or entity is to be treated like an ordinary private party. See James v. Prince George's County, supra, 288 Md. at 329-336, 418 A.2d 1173.
On the other hand, constitutional provisions like Articles 24 or 26 of the Maryland Declaration of Rights, or Article III, § 40, of the Maryland Constitution, are specifically designed to protect citizens against certain types of unlawful acts by government officials. To accord immunity to the responsible government officials, and leave an individual remediless when his constitutional rights are violated, would be inconsistent with the purpose of the constitutional provisions. It would also, as frankly recognized by counsel for Officer Leonard in this Court, largely render nugatory the cause of action for violation of constitutional rights recognized in Widgeon, Mason, Heinze, Weyler, and other cases.
As Officer Leonard was not entitled to immunity with regard to the counts based on violations of Articles 24 and 26 of the Maryland Declaration of Rights, it was error to grant summary judgment for Officer Leonard on those counts.
JUDGMENTS IN FAVOR OF THE DEFENDANTS MAYOR AND CITY COUNCIL OF BALTIMORE, POLICE DEPARTMENT OF BALTIMORE CITY, AND POLICE COMMISSIONER OF BALTIMORE CITY, AFFIRMED. JUDGMENT IN FAVOR OF THE DEFENDANT LEONARD AFFIRMED IN PART AND REVERSED IN PART. CASE REMANDED TO THE CIRCUIT COURT FOR BALTIMORE CITY FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. PLAINTIFFS TO PAY TWO THIRDS OF COSTS AND DEFENDANT LEONARD TO PAY ONE THIRD OF COSTS.
NOTES
[*] COUCH, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A, he also participated in the decision and adoption of this opinion.
[1] Contrast, e.g., Mason v. Wrightson, 205 Md. 481, 484-485, 109 A.2d 128 (1954) (unlawful search pursuant to a "general order" by the Police Commissioner of Baltimore City); Weyler v. Gibson, 110 Md. 636, 654-655, 73 A. 261 (1909) (state official involved in carrying out unconstitutional state activity). See Dunne v. State, 162 Md. 274, 288, 159 A. 751, appeal dismissed, 287 U.S. 564, 53 S. Ct. 23, 77 L. Ed. 497 (1932). See also Monell v. New York City Dept. of Social Services, 436 U.S. 658, 690, 98 S. Ct. 2018, 2035-2036, 56 L. Ed. 2d 611 (1978).
[2] Furthermore, the plaintiffs in their brief perceive that the respondeat superior liability of Baltimore City, the Police Department, and the Commissioner, turns upon the single factor of whether Officer Leonard is entitled to immunity as a public official exercising a discretionary function. Relying upon one aspect of the Bradshaw opinion, the plaintiffs state that, if Leonard has immunity, then the employer-defendants are not liable. The plaintiffs then assert that the "converse must also be true" (appellant's brief p. 13), namely that if Leonard is not entitled to public official immunity, then the employer-defendants are automatically liable. The plaintiffs overlook the fact that the portion of the Bradshaw opinion on which they rely was later overruled in James v. Prince George's County, supra.
[3] The governmental-proprietary distinction has not been applied, however, when local governments have been sued for violations of constitutional rights. In that situation, there is ordinarily no local governmental immunity. See, e.g., Hebron Sav. Bk. v. City of Salisbury, 259 Md. 294, 269 A.2d 597 (1970); Jarvis v. Baltimore City, 248 Md. 528, 534-535, 237 A.2d 446 (1968); Burns v. Midland, 247 Md. 548, 234 A.2d 162 (1967).
[4] Even absent such an express designation by the Legislature, the fact that the head of an agency may be appointed by a local government executive rather than the Governor, while a factor to be considered, is not itself determinative of the agency's status as a state or local government entity. See, e.g., Md.-Nat'l Cap. P. & P. Comm'n v. Kranz, 308 Md. 618, 521 A.2d 729 (1987); O & B, Inc. v. Md.-Nat'l Cap. P. & P., 279 Md. 459, 369 A.2d 553 (1977).
[5] We are aware, of course, that the General Assembly's designation of the Baltimore City Police Department as a state agency would not be controlling for all purposes. For example, with regard to federal law liability under 42 U.S.C. § 1983, the state law classification of the Baltimore City Police Department would not be decisive, and the Baltimore City Police Department might well be regarded as a local government agency. See Hector v. Weglein, 558 F. Supp. 194, 197-199 (D.Md. 1982).
The plaintiffs' theories of recovery in the present case, however, are based entirely upon Maryland law. The plaintiffs did not include a count under 42 U.S.C. § 1983, and they have not in any manner relied on the Fourth Amendment or otherwise on federal law.
Moreover, if the plaintiffs had included a count under 42 U.S.C. § 1983, it would not have availed them in imposing liability on Baltimore City, the Police Department, or the Police Commissioner. As the Supreme Court emphasized in Monell v. New York City Dept. of Social Services, supra, 436 U.S. at 691, 98 S. Ct. at 2036, "a municipality cannot be held liable under § 1983 on a respondeat superior theory." Liability under § 1983 cannot be imposed on a municipality "unless action pursuant to official municipal policy of some nature caused a constitutional tort." Ibid.
[6] The coverage of the Maryland Tort Claims Act was broadened considerably by Ch. 538 of the Acts of 1985, effective July 1, 1985. Whether or not the type of actions complained of in this case, by an officer of the Baltimore City Police Department, would be encompassed by the Tort Claims Act if the actions had occurred on or after July 1, 1985, is a matter as to which we intimate no opinion. Nevertheless, it would appear that the statute, as worded prior to July 1, 1985, would not encompass conduct such as involved in the case at bar.
In addition, under a provision in the Tort Claims Act, § 12-105(a) of the State Government Article (1987 Cum.Supp.), state personnel, acting within the scope of their employment, and without malice or gross negligence, are granted immunity for acts with respect to which the State or its units have waived immunity in the Act. In light of the coverage of the Tort Claims Act at the time of the alleged unlawful search (January 30, 1985), this immunity provision would not seem to benefit Officer Leonard in the present case.
[7] In addition to the authorities cited in Widgeon, other cases and statutory provisions recognizing a cause of action for violations of Articles 24 and/or 26 include Mason v. Wrightson, 205 Md. 481, 109 A.2d 128 (1954); Heinze v. Murphy, 180 Md. 423, 24 A.2d 917 (1942); Maryland Code (1888), Art. 93, § 104.
[8] An unlawful warrantless arrest is, of course, a violation of Article 26 of the Declaration of Rights. Mulcahy v. State, 221 Md. 413, 421, 158 A.2d 80 (1960). See Gilmore v. State, 263 Md. 268, 275-276, 283 A.2d 371 (1971), vacated on other grounds, 408 U.S. 940, 92 S. Ct. 2876, 33 L. Ed. 2d 763 (1972); De Angelo v. State, 199 Md. 48, 51, 85 A.2d 468 (1952); Callahan v. State, 163 Md. 298, 301, 162 A. 856 (1932). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542142/ | 949 A.2d 499 (2008)
108 Conn.App. 533
STATE of Connecticut
v.
Brandon GARCIA.
No. 28453.
Appellate Court of Connecticut.
Argued December 3, 2007.
Decided June 24, 2008.
*501 Mary Anne Royle, special public defender, for the appellant (defendant).
Rita M. Shair, senior assistant state's attorney, with whom were John A. Connelly, state's attorney, and, on the brief, Patrick J. Griffin, assistant state's attorney, for the appellee (state).
McLACHLAN, LAVINE and MIHALAKOS, Js.
LAVINE, J.
The defendant, Brandon Garcia, appeals from the judgment of conviction, rendered after a jury trial, of possession of cocaine with intent to sell by a person who is not drug-dependent in violation of General Statutes § 21a-278, possession of a controlled substance with intent to sell within 1500 feet of a school in violation of General Statutes § 21a-278a(b), possession of marijuana with intent to sell in violation of General Statutes § 21a-277 and possession of marijuana with intent to sell within 1500 feet of a school in violation of General Statutes § 21a-278a(b). On appeal, the defendant claims that the trial court (1) abused its discretion when it denied his motion in limine to preclude evidence of the cash found in his car, (2) improperly denied his oral motion to suppress the cash found in his car and (3) lacked jurisdiction to determine that he should forfeit the money seized from his car. We affirm the judgment of the trial court.
The jury reasonably could have found the following facts. On June 22, 2004, undercover members of the Waterbury police tactical narcotics team, Gary Angon, *502 Eddie Apicella, John Healey and Danny Ferrucci, were surveilling the parking lot by the Shell gasoline station and convenience store at 79 Homer Street in Waterbury. The police had received numerous complaints about open drug dealing at this location and had made several narcotics arrests there previously. While Angon and Healey surveyed the area from an unmarked car parked at one of the gasoline pumps, Apicella and Ferrucci kept watch from an unmarked vehicle in a lot across the street. The officers communicated by portable radios.
Shortly after 9:30 p.m., the officers noticed Matthew Jenkins sitting in a Ford Explorer in an area of the lot that lies within 1500 feet of Sprague Elementary School. Minutes later, the defendant arrived in a black Lexus. When Jenkins sounded his vehicle's horn, the defendant acknowledged him. The defendant parked, exited his vehicle and walked to the Explorer, carrying a white shopping bag. At 9:42 p.m., the officers observed the defendant get into the Explorer, remove a smaller bag from the shopping bag and place it next to Jenkins. They observed Jenkins hand the defendant a roll of cash. The defendant then exited the Explorer and headed toward the convenience store. Angon arrested and searched the defendant, finding marijuana on his person, $2650 in one of his pockets and $570 in another pocket.
Jenkins, meanwhile, attempted to escape in his Explorer. When Apicella and Healey blocked Jenkins' exit with their vehicles, Jenkins fled on foot. From the Explorer, the officers recovered one bag containing 2.97 ounces of cocaine and another bag containing one half ounce of marijuana. Jenkins was apprehended subsequently. He testified at trial that when he telephoned the defendant to arrange his purchase of three ounces of cocaine for $2400 and one half ounce of marijuana for $250, the defendant suggested they meet at the Shell station parking lot. Jenkins also testified that he bought drugs from the defendant in the manner described by the undercover officers, exchanging cash for cocaine and marijuana.
At the arrest scene, Apicella assigned Angon to drive the defendant's vehicle to the police station. Angon quickly examined the defendant's vehicle to ensure that nothing in it would be disturbed or cause any danger during transit. On the rear seat, he discovered a shoe box containing cash. In the trunk of the car, he discovered another shoe box containing cash. Angon showed Apicella the two boxes but did not count the money. Angon then drove the car to the station, logged it in as evidence and conducted an inventory search of its contents. The inventory recovered included the boxes of cash from the rear seat and trunk, which contained $10,510 and $4000, respectively. The money was seized as drug sale proceeds.
The defendant was charged with possession of cocaine with intent to sell by a person who is not drug-dependent in violation of § 21a-278(a), possession of a controlled substance with intent to sell within 1500 feet of a school in violation of § 21a-278a(b), possession of marijuana with intent to sell in violation of § 21a-277 and possession of marijuana with intent to sell within 1500 feet of a school in violation of § 21a-278a(b). Following a jury trial, he was convicted on all four counts and sentenced to thirty-one years of incarceration. At his sentencing, he filed a motion for the return of the seized currency. The court denied the motion, ordering that the money seized be forfeited to the state. This appeal followed.
I
The defendant's first claim is that the court abused its discretion when it *503 denied his motion in limine to preclude evidence of the cash found in his car because the evidence was not relevant to the crimes charged. The defendant maintains that because the cash at issue did not change hands during the events that gave rise to the criminal charges, the admission of the cash into evidence at trial was more prejudicial than probative. We disagree.
Prior to trial, the defendant filed a motion in limine to prevent the state from admitting into evidence the cash seized from his vehicle. The court denied the motion, concluding that the cash was probative of the defendant's participation in drug sales and therefore relevant to his intent to sell drugs. The court additionally determined that the prejudicial effect of the evidence did not outweigh its probative value. Subsequently, the cash was admitted into evidence.
In denying the defendant's motion, the court explained that the defendant's alleged use of his vehicle to facilitate drug sales supplied a nexus between the cash recovered from the car and the defendant's intent to sell drugs: "The defendant was seen arriving in his car by the officers. . . . He is alleged to have parked the car a short distance away from where there was an apparent or alleged sale of narcotics. This is not a situation like the cases cited by the defendant in his motion where there is little or no factual nexus between the crime charged and the location from which the evidence in those cases was seized." Discerning a plausible connection between the defendant's intent to sell and the quantum of cash found in the car, the court deemed the evidence more probative than prejudicial.
"[T]he trial court has broad discretion in ruling on the admissibility of evidence. . . . The trial court's ruling on evidentiary matters will be overturned only upon a showing of a clear abuse of the court's discretion." (Internal quotation marks omitted.) State v. Carty, 100 Conn. App. 40, 52, 916 A.2d 852, cert. denied, 282 Conn. 917, 925 A.2d 1100 (2007). "[E]vidence may be excluded by the trial court if the court determines that the prejudicial effect of the evidence outweighs its probative value. . . . [A]dverse evidence is . . . inadmissible only if it creates undue prejudice so that it threatens an injustice were it to be admitted. . . . The test for determining whether evidence is unduly prejudicial is not whether it is damaging to the defendant but whether it will improperly arouse the emotions of the jury." (Internal quotation marks omitted.) State v. Bennett-Gibson, 84 Conn.App. 48, 66, 851 A.2d 1214, cert. denied, 271 Conn. 916, 859 A.2d 570 (2004). "The primary responsibility for conducting the balancing test to determine whether the evidence is more probative than prejudicial rests with the trial court, and its conclusion will be disturbed only for a manifest abuse of discretion." (Internal quotation marks omitted.) State v. Fernandez, 76 Conn.App. 183, 189, 818 A.2d 877, cert. denied, 264 Conn. 901, 823 A.2d 1220 (2003).
The admissibility of evidence is governed by the rules of relevance. See State v. Echols, 203 Conn. 385, 393, 524 A.2d 1143 (1987). "The quantity of money seized from [a] defendant [is] relevant to the issue of intent to sell cocaine." State v. Monar, 22 Conn.App. 567, 577, 579 A.2d 104, cert. denied, 216 Conn. 828, 582 A.2d 206 (1990). "[E]vidence from which the jury could reasonably infer intent to sell the . . . cocaine includes . . . the amount of . . . cash the defendant possessed. . . ." State v. Baldwin, 224 Conn. 347, 368-69, 618 A.2d 513 (1993). Accordingly, even if the proceeds from the sale to Jenkins were not included in the cash seized from the defendant's car, the cash was relevant to the issue of the defendant's alleged participation *504 in narcotics trafficking. Such evidence is commonly admitted as circumstantial evidence of a defendant's intent to sell drugs. See State v. Holeman, 18 Conn.App. 175, 179, 556 A.2d 1052 (1989). "Proof of a defendant's intent generally takes the form of circumstantial evidence. . . ." (Internal quotation marks omitted.) State v. Uribe, 14 Conn.App. 388, 393, 540 A.2d 1081 (1988).
We find no abuse of discretion in the court's determination that the cash found in the defendant's car was relevant to the crimes charged. We also are not persuaded that this evidence was unduly prejudicial. Our Supreme Court has defined the situations in which the potential prejudicial effect of relevant evidence would suggest its exclusion as the following: "(1) where the facts offered may unduly arouse the jury's emotions, hostility or sympathy, (2) where the proof and answering evidence it provokes may create a side issue that will unduly distract the jury from the main issues, (3) where the evidence offered and the counterproof will consume an undue amount of time, and (4) where the defendant, having no reasonable ground to anticipate the evidence, is unfairly surprised and unprepared to meet it." (Internal quotation marks omitted.) State v. Harris, 277 Conn. 378, 391, 890 A.2d 559 (2006).
None of these circumstances is present in this case. First, the defendant cites no authority to support his allegation that the cash at issue tended to arouse the jury's emotion, hostility or sympathy.[1] On the contrary, our courts regularly have regarded a criminal defendant's quantum of cash as circumstantial evidence of his intent to sell drugs. See State v. Baldwin, supra, 224 Conn. at 368-69, 618 A.2d 513 ("[t]he evidence from which the jury could reasonably infer intent to sell . . . cocaine includes . . . the amount of . . . cash the defendant possessed"); State v. Uribe, supra, 14 Conn.App. at 394, 540 A.2d 1081 ("[t]he defendant also possessed a quantity of cash in denominations which could reasonably lead a jury to conclude that the defendant intended to sell marihuana"). Second, the cash seized did not create a collateral issue during the trial but, rather, was germane to the charges. The defendant was free to explain the origin of the money as well as his theory that it was irrelevant to the crimes charged. Third, the evidence and counterproof did not consume an undue amount of time. Defense counsel's counterargument was direct and brief. Finally, the defendant had reasonable grounds to anticipate the evidence. The fact that he filed a pretrial motion to preclude the evidence at issue proves that he was not surprised by it.
Because a quantum of cash may provide circumstantial evidence of the intent to sell narcotics and because such evidence was not unduly prejudicial in this case, we deem proper the court's denial of the defendant's motion to preclude the cash found in his car.
II
The defendant's second claim is that the court improperly denied his motion to suppress *505 the cash recovered from his car because the boxes containing the cash were found and opened at the arrest scene without a warrant in violation of his rights under the fourth amendment to the federal constitution[2] and article first, § 7, of the constitution of Connecticut.[3] In particular, the defendant claims that the court improperly denied his motion to suppress (1) the cash found on the rear seat of the passenger compartment because the search incident to arrest exception to the warrant requirement applies only when an arrestee is able to reach for weapons or destroy evidence and (2) the cash found in the trunk because the inventory search exception cannot be applied to evidence discovered at the arrest scene.[4] We do not agree.
The defendant's motion to suppress was not made before trial but after the state had rested. By the time the defendant had moved to suppress the evidence in question, the jury was fully aware of it. After hearing arguments on the motion over a period of two days, the court denied it, determining that (1) the cash on the rear seat was discovered legally pursuant to a search incident to arrest and (2) the cash in the trunk was discovered legally pursuant to an inventory search. The court suggested that defense counsel present his positions regarding the evidence at issue during his closing argument.[5] In his closing argument, defense counsel characterized as inconsistent the officers' testimony about when and where the evidence at issue was discovered. *506
We first set forth our standard of review. "The Fourth Amendment to the United States constitution protects the right of the people to be secure in their persons, houses, papers and effects against unreasonable search and seizures. Ordinarily, police may not conduct a search unless they first obtain a search warrant from a neutral magistrate after establishing probable cause. [A] search conducted without a warrant issued upon probable cause is per se unreasonable . . . subject only to a few specifically established and well-delineated exceptions. . . . These exceptions have been jealously and carefully drawn . . . and the burden is on the state to establish the exception." (Internal quotation marks omitted.) State v. Orellana, 89 Conn.App. 71, 79-80, 872 A.2d 506, cert. denied, 274 Conn. 910, 876 A.2d 1202 (2005).
"Under the exclusionary rule, evidence must be suppressed if it is found to be the fruit of prior police illegality. . . . On appeal, we apply a familiar standard of review to a trial court's findings and conclusions in connection with a motion to suppress. A finding of fact will not be disturbed unless it is clearly erroneous in view of the evidence and pleadings in the whole record. . . . [W]here the legal conclusions of the court are challenged, we must determine whether they are legally and logically correct and whether they find support in the facts set out in the memorandum of decision. . . . Whether the trial court properly found that facts submitted were enough to support a finding of probable cause is a question of law. . . . Because a trial court's determination of the validity of a . . . search [or seizure] implicates a defendant's constitutional rights, however, we engage in a careful examination of the record to ensure that the court's decision was supported by substantial evidence. . . . However, [w]e . . . give great deference to the findings of the trial court because of its function to weigh and interpret the evidence before it and to pass upon the credibility of witnesses." (Internal quotation marks omitted.) Id., at 79, 872 A.2d 506.
As the defendant's claim challenges the court's denial of the motion to suppress on separate grounds, we address them in turn.
A
Claiming that the court improperly denied his motion to suppress the cash discovered on the rear seat of the passenger compartment, the defendant challenges the court's determination that Angon's inspection of the passenger compartment at the scene of the arrest was a search incident to arrest. According to the defendant, the search incident to arrest exception applies only when the arrestee is able to reach for weapons or destroy evidence.
In its ruling regarding the motion to suppress the cash found on the rear seat of the passenger compartment, the court stated: "The law is clear that the scope of a search incident to a full custodial arrest of a motor vehicle operator, which was the case in this case, includes a search of the passenger compartment of the vehicle and the contents of any open or closed containers found in the passenger compartment. That includes the rear seat. That includes things like the glove compartment, even if that compartment is locked. This is true . . . even where the arrestee has been removed from the vehicle and [is] handcuffed and placed in a patrol car. Consequently, as I see it, the defendant has no claim with respect to the shoe box seized from the passenger compartment." We agree with the court's interpretation of the law.
*507 "There are four recognized situations where a warrantless search of a car may lead to the conclusion that such a search was reasonable under the United States or state constitutions. They are: (1) it was made incident to a lawful arrest; (2) it was conducted when there was probable cause to believe that the car contained contraband or evidence pertaining to a crime; (3) it was based upon consent; or (4) it was conducted pursuant to an inventory of the car's contents incident to impounding the car." (Citation omitted; internal quotation marks omitted.) State v. Miller, 29 Conn.App. 207, 237-38 n. 1, 614 A.2d 1229 (1992), aff'd, 227 Conn. 363, 630 A.2d 1315 (1993); see State v. Delossantos, 211 Conn. 258, 266-67, 559 A.2d 164, cert. denied, 493 U.S. 866, 110 S.Ct. 188, 107 L.Ed.2d 142 (1989).
"[W]hen police make a lawful custodial arrest of an occupant of an automobile, and the arrestee is detained at the scene, police may contemporaneously search without a warrant the interior passenger compartment of the automobile." State v. Delossantos, supra, 211 Conn. at 266-67, 559 A.2d 164. "The search incident to an arrest exception . . . has traditionally been justified by the reasonableness of searching for weapons, instruments of escape and evidence of crime when a person is taken into custody and lawfully detained." (Internal quotation marks omitted.) State v. Santiago, 17 Conn.App. 273, 276-77, 552 A.2d 438 (1989). "[W]e have recognized that the police may make a search without a warrant incidental to a lawful custodial arrest. . . . Custodial arrests not only serve to protect the police themselves, but also serve . . . to assist in the investigation of crime." (Citations omitted.) State v. Dukes, 209 Conn. 98, 121, 547 A.2d 10 (1988).
The defendant's theory that the search incident to arrest exception requires that an arrestee be able to reach for weapons or destroy evidence is not supported by our case law. "In New York v. Belton, [453 U.S. 454, 101 S.Ct. 2860, 69 L.Ed.2d 768 (1981)], the United States Supreme Court held that a lawful custodial arrest justifies a contemporaneous search of the entire passenger compartment of an automobile, whether or not the arrestee actually had control over the area." (Emphasis added.) State v. Santiago, supra, 17 Conn.App. at 277, 552 A.2d 438. Indeed, our Supreme Court in State v. Badgett, 200 Conn. 412, 512 A.2d 160, cert. denied, 479 U.S. 940, 107 S.Ct. 423, 93 L.Ed.2d 373 (1986), declared that it "ordinarily will refuse to evaluate whether or not an individual arrested while in an automobile actually had access to the passenger compartment at the time of the search," citing several cases in which the searches were upheld even though the arrestee had no apparent opportunity to gain access to the passenger compartment of the automobile.[6] (Internal quotation marks omitted.) State v. Lizotte, 11 Conn. App. 11, 22, 525 A.2d 971, cert. denied, 204 Conn. 806, 528 A.2d 1154 (1987), quoting State v. Badgett, supra, at 427, 512 A.2d 160. Significantly, "a search incident to an arrest [need not] be limited to evidence of the crime for which a defendant is initially arrested." State v. Santiago, supra, at 277, 552 A.2d 438.
*508 Because the scope of a search incident to the arrest of a motor vehicle operator includes the passenger compartment of the vehicle, regardless of whether the arrestee could gain access to it, the cash discovered on the rear seat of the defendant's vehicle was admitted properly pursuant to Angon's lawful arrest of the defendant.[7] Consequently, the defendant's claim that the court improperly denied his motion to suppress this cash must fail.
B
The defendant also claims that the court improperly determined that Angon recovered the money from the trunk of the defendant's car pursuant to a valid inventory search. Specifically, the defendant argues that the court should not have credited Angon's testimony that this evidence was the product of a valid inventory search in light of Apicella's testimony that the money was discovered at the arrest scene prior to the inventory search at the police station.
Mindful that "[u]nder the exclusionary rule, evidence must be suppressed if it is found to be the fruit of prior police illegality"; (internal quotation marks omitted) State v. Orellana, supra, 89 Conn.App. at 79, 872 A.2d 506; we recognize the inventory search as "a well-defined exception to the warrant requirement." (Internal quotation marks omitted.) State v. Gasparro, 194 Conn. 96, 107, 480 A.2d 509 (1984), cert. denied, 474 U.S. 828, 106 S.Ct. 90, 88 L.Ed.2d 74 (1985). "In the performance of their community caretaking functions, the police are frequently obliged to take automobiles into their custody. . . . A standardized procedure for making a list or inventory as soon as reasonable after reaching the stationhouse not only deters false claims but also inhibits theft or careless handling of articles taken from the arrested person." (Citations omitted; internal quotation marks omitted.) Id., at 107-108, 480 A.2d 509.
Angon testified that in keeping with Waterbury police policy, he cursorily searched the car at the arrest scene and later counted the cash during an inventory search at the police station. Healey testified that at the scene of the crime, Angon "did a search of the immediate area of the Lexus that [the defendant] had exited from. He took all the evidence he had, and he drove that vehicle back to headquarters." Similarly, Apicella testified that at the arrest scene, Angon quickly examined the Lexus to ensure that nothing in it would cause a danger, or be disturbed, during transit. This testimony, which essentially corroborated the police report, suggests that Angon's examination of the car at the arrest scene was motivated by the "three governmental interests support[ing] inventory searches: (1) protection of the police from danger; (2) protection of the police against claims and disputes over lost or stolen property and (3) protection of the owner's property while it remains in police custody." (Internal quotation marks omitted.) State v. Hicks, 53 Conn.App. 470, 475-76, 730 A.2d 649 (1999).
The defendant alleges that there is a significant contradiction between Angon's testimony that the money in the trunk was discovered during the inventory search and Apicella's testimony that Angon told him at the arrest scene and prior to the inventory search that "there [was] money *509 in these boxes." The defendant is not claiming that the court did not have sufficient evidence on which to base its decision. Rather, he argues that the evidence the court relied on was not sufficiently credible. This claim therefore distills to a credibility contest. See State v. Nowell, 262 Conn. 686, 695, 817 A.2d 76 (2003).
In ruling on the motion to suppress the cash recovered from the trunk, the court stated: "[T]he issue is whether that shoe box was discovered and opened pursuant to a valid inventory search. [Defense counsel] claimed that it was not [discovered pursuant to a valid inventory search] based upon Detective Apicella's testimony in which he indicated that he returned to the gasoline station where he found Detective Angon and [the defendant] in custody. His testimony may, and I stress the word may, be somewhat contradictory with that of Detective Angon, who testified that he conducted an inventory search of the vehicle at the police station and [that] it was at that point that he discovered the shoe box containing the cash in the trunk." (Emphasis added.)
The court made credibility determinations to conclude that Angon properly received and recorded the box of cash from the trunk of the car as part of an inventory search, as is apparent from the following statements: "[I]t appears that [Angon] may have opened the trunk briefly at the scene, but certainly the sense I got from the testimony, which I credit, is that he actually took the shoe box out of the motor vehicle at the police department, and that's where he found one pile of cash. . . . [T]he court credits the testimony of Detective Angon that the second shoe box, the one taken from the trunk, was properly taken as part of a lawful inventory search." (Emphasis added.)
"[W]e . . . give great deference to the findings of the trial court because of its function to weigh and interpret the evidence before it and to pass upon the credibility of witnesses." (Internal quotation marks omitted.) State v. Orellana, supra, 89 Conn.App. at 79, 872 A.2d 506. We note that "[t]his court does not retry the case or evaluate the credibility of the witnesses. . . . Rather, we must defer to the [trier of fact's] assessment of the credibility of the witnesses based on its firsthand observation of their conduct, demeanor and attitude. . . . In a case that is tried to the court . . . the judge is the sole arbiter of the credibility of witnesses, and the weight to be given to their specific testimony." (Internal quotation marks omitted.) McClean v. Commissioner of Correction, 103 Conn.App. 254, 263, 930 A.2d 693 (2007), cert. denied, 285 Conn. 913, 943 A.2d 473 (2008); see State v. DaEria, 51 Conn.App. 149, 157, 721 A.2d 539 (1998).
In deference to the court's decision, which was based on credibility determinations, that the cash at issue was recovered pursuant to the standardized procedures of an inventory search, we conclude that the court properly denied the motion to suppress the evidence gathered during the search of the trunk of the defendant's vehicle.
III
The defendant last claims that the court improperly ordered the forfeiture of $14,510 seized from his vehicle. Specifically, he asserts that this cash could be forfeited only after an in rem hearing pursuant to General Statutes § 54-36h. Absent such a hearing, the defendant argues, the court lacked subject matter jurisdiction to make a forfeiture determination about money that did not change hands in the drug transaction under prosecution. The court, determining that the money seized from the defendant's vehicle constituted drug proceeds, concluded that it was authorized *510 to forfeit the money to the state pursuant to General Statutes § 54-36a(c). We agree with the court's conclusion.
The defendant's claim raises issues of statutory construction, over which our review is plenary. Whitaker v. Commissioner of Correction, 90 Conn.App. 460, 470, 878 A.2d 321, cert. denied, 276 Conn. 918, 888 A.2d 89 (2005). "A fundamental tenet of statutory construction is that statutes are to be considered to give effect to the apparent intention of the lawmaking body. . . . The meaning of a statute shall, in the first instance, be ascertained from 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, extratextual evidence of the meaning of the statute shall not be considered." (Internal quotation marks omitted.) Id., citing General Statutes § 1-2z.
"Where . . . more than one statute is involved, we presume that the legislature intended them to be read together to create a harmonious body of law . . . and we construe the statutes, if possible, to avoid conflict between them." (Citations omitted.) Berger v. Tonken, 192 Conn. 581, 589-90, 473 A.2d 782 (1984). "[I]t is an elementary rule of construction that all sections of an act relating to the same subject matter should be considered together. . . . Insofar as possible the separate effect of each individual part or section of an act is made consistent with the whole." (Internal quotation marks omitted.) Ossen v. Wanat, 217 Conn. 313, 320, 585 A.2d 685, cert. denied, 502 U.S. 816, 112 S.Ct. 69, 116 L.Ed.2d 43 (1991).
The subsection invoked by the court in this case, § 54-36a(c), which is contained in chapter 959 of the General Statutes, part III, titled, "Seized Property," specifically authorizes the judicial disposition of contraband, defined as "any property, the possession of which is prohibited by any provision of the general statutes," at the conclusion of criminal actions. "Unless such seized property is stolen property and is ordered returned pursuant to subsection (b) of this section or unless such seized property is adjudicated a nuisance in accordance with section 54-33g, or unless the court finds that such property shall be forfeited or is contraband, or finds that such property is a controlled drug, a controlled substance or drug paraphernalia as defined in subdivision (8), (9) or (20) of section 21a-240, it shall, at the final disposition of the criminal action or as soon thereafter as is practical, or, if there is no criminal action, at any time upon motion of the prosecuting official of such court, order the return of such property to its owner within six months upon proper claim therefor." (Emphasis added.) General Statutes § 54-36a(c). "A person should not be allowed to vest himself with a possessory interest by crime or to invoke the law in order to disengage himself from the unlawfulness of his conduct." State v. Morant, 242 Conn. 666, 671-72, 701 A.2d 1 (1997).
General Statutes § 54-36h, on which the defendant relies, is entitled, "Forfeiture of moneys and property related to illegal sale or exchange of controlled substances or money laundering. In rem proceeding. Disposition." It outlines the procedures required for effectuating in rem forfeiture proceedings.[8] On its face, the language of *511 this statute could be applied to currency such as that at issue in this case. The legislative history of § 54-36h, as well as the words "related to" in its title, suggest, however, that this section addresses money and property not disposed of by the court at the disposition of a criminal trial pursuant to § 54-36a. In passing § 54-36h, legislators addressed the type of property at issue in the case at bar: "[I]f [the state] were to go after a dealer and he had $100,000 in the bank, the government could not claim the whole $100,000 as potentially illegal and not give him the use of that." 32 H.R. Proc., Pt. 20, 1989 Sess., p. 6939, remarks of Representative Richard D. Tulisano. "A different result is mandated, however, where the property at issue is found alongside and seized contemporaneously with the drugs. In that instance, the connection between the property and the drugs is less speculative and, accordingly, that property is less worthy of an inference that it may be property that is not subject to [in rem] forfeiture [proceedings]. . . ." (Emphasis added.) State v. $28,194.63 U.S. Currency, Superior Court, judicial district of Ansonia-Milford, geographical area number five, Docket No. CR5-6977, 2001 WL 459121, (April 17, 2001) (29 Conn. L. Rptr. 672). "If the property that is confiscated in an automobile with drugs or in an apartment where you have half a million dollars in small bills as a part of an arrest, could this be used for a legal defense?" 32 H.R. Proc., supra, pp. at 6938-39, remarks of Representative J. Peter Fusscas. "[I]n the situation you described, that would not be available. That would be confiscated funds." Id., at p. 6939, remarks of Representative Tulisano.
The distinction in Connecticut statutes delineating the disposition of property seized as evidence, pursuant to § 54-36a, from property subject to forfeiture proceedings, pursuant to § 54-36h, leads us to conclude that seized contraband does not require in rem forfeiture proceedings, as unseized property does. "[A] careful reading of all of the relevant provisions of [§ 54-36h], as well as a search of its legislative history, reveal[s] that [the statute] was only intended to protect from forfeiture that property that has not yet been seized by the state. . . . This exemption was not intended, however, to extend to property that has been seized simultaneously with drugs, incident to a drug sales arrest." (Emphasis added.) State v. $28,194.63 U.S. Currency, supra, 29 Conn. L. Rptr. at 672.
The court in this case distinguished money that has exchanged hands in a drug *512 transaction from the type of property at which § 54-36h is aimed.[9] The court nonetheless made a finding that the money at issue constituted drug proceeds even though it had not exchanged hands during the transaction on which the charges against the defendant were based: "The defendant was not employed at the time and no plausible explanation was offered as to how the defendant could have lawfully possessed the large amount of cash [found in the vehicle]." Consequently, the court ordered the currency forfeited to the state pursuant to § 54-36a(c).
We agree with the court's conclusion that "the legislative history makes clear that these two statutes are to operate in tandem, even in cases involving seized cash from drug transactions." Id. We conclude that the court in this case properly exercised its authority to forfeit contraband to the state pursuant to § 54-36a(c). "The language of § 54-36h(b) is clear and unambiguous. It means what it says. The state `may petition the court in the nature of a proceeding in rem to order forfeiture,' but if it chooses to do so, the petition must be filed `[n]ot later than ninety days after the seizure of moneys or property.'" (Emphasis in original.) State v. $1970, 43 Conn.Supp. 203, 206, 648 A.2d 917 (1994). The fact that the state must act within ninety days if it chooses to bring an in rem proceeding does not prohibit a court from making forfeiture determinations about contraband at issue in a criminal trial pursuant to § 54-36a(c).
Having reviewed the relevant statutes and case law, we hold that § 54-36a(c) empowers courts presiding over criminal actions to dispose of contraband, including currency linked to illegal drug transactions, provided that a nexus exists between the contraband and the crimes charged.[10] In this case, the court specifically found that nexus to exist when it concluded that the currency "constitutes proceeds of an illegal drug transaction." The defendant, who was unemployed at the time of his arrest, offered no plausible explanation as to how the cash was obtained. The cash was found in a vehicle being used in a drug transaction. Finally, the defendant was convicted. The defendant's claim that the court lacked the authority to dispose of the seized money *513 must fail.[11]
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] Citing State v. Hall, 82 Conn.App. 435, 438, 844 A.2d 939 (2004), the defendant argues that "[t]he cash was exactly the type of evidence that could excite the passions of the jury or implicate criminal propensity." In Hall, however, the type of evidence claimed to be the type that could excite the passions of the jury was not a large quantity of cash but, rather, a large quantity of blank prescription pads. The defendant in that case was convicted of twenty-two counts of illegally prescribing a narcotic substance and fourteen counts of illegally prescribing a controlled substance. As to the admission of the pads, this court ruled that "the error, if any, was harmless. . . ." Id., at 439-40, 844 A.2d 939.
[2] The fourth amendment to the United States constitution provides: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."
[3] Article first, § 7, of the constitution of Connecticut provides: "The people shall be secure in their persons, houses, papers and possessions from unreasonable searches or seizures; and no warrant to search any place, or to seize any person or things, shall issue without describing them as nearly as may be, nor without probable cause supported by oath or affirmation."
Although the defendant claims his rights were violated under both the United States constitution and the constitution of Connecticut, he has not provided a separate analysis for his state constitutional claim. Consequently, we deem it abandoned and will not afford it review. State v. Fauntleroy, 101 Conn.App. 144, 159 n. 5, 921 A.2d 622 (2007).
[4] The defendant also claims that the court improperly denied his motion to suppress all the cash recovered from the vehicle on the ground that it was stored in closed containers, the opening of which required a search warrant. Because this claim is subsumed by the search incident to arrest and inventory search exceptions, we need not address it. See State v. Longo, 243 Conn. 732, 740, 708 A.2d 1354 (1998) ("the Appellate Court repeatedly has upheld . . . warrantless searches of closed containers located in automobiles where probable cause existed to search the vehicle"); see also State v. Billias, 17 Conn. App. 635, 642, 555 A.2d 448 (1989), citing United States v. Frank, 864 F.2d 992, 1001-1002 (3d Cir.1988) (permissible for police to open closed containers in inventory searches if they follow standard police procedures), cert. denied, 490 U.S. 1095, 109 S.Ct. 2442, 104 L.Ed.2d 998 (1989).
[5] The court stated, "At this point, I'm going to deny without prejudice your motion. I will permit you to develop facts as part of your case to further support your claim. We are going to do that in the presence of the jury. . . . If you demonstrate facts which change my mind, I will then consider whether or not the toothpaste can be put back in the tube. . . . It may be that that is an argument for you . . . with the jury during closing argument, but again, we would address that if, and only if, I am persuaded that the evidence shows otherwise."
[6] See State v. Badgett, supra, 200 Conn. at 427, 512 A.2d 160, citing United States v. Cotton, 751 F.2d 1146, 1148-49 (10th Cir. 1985) (Belton applicable even though defendant outside car and handcuffed); Traylor v. State, 458 A.2d 1170, 1173 (Del.1983) (defendant in handcuffs); State v. Valdes, 423 So.2d 944, 944 (Fla.App.1982) (defendant seated in police car); State v. Hopkins, 163 Ga.App. 141, 141, 293 S.E.2d 529 (1982) (defendant seated in police car).
[7] We note, furthermore, that the cash at issue would not have been suppressed had the court deemed its discovery inevitable. "[S]uppression of unconstitutionally obtained evidence [is required] only if the state fails to establish that the evidence would subsequently have been obtained pursuant to the inevitable discovery doctrine." State v. Miller, 227 Conn. 363, 386, 630 A.2d 1315 (1993).
[8] General Statutes § 54-36h provides in relevant part: "(a) The following property shall be subject to forfeiture to the state pursuant to subsection (b) of this section: (1) All moneys used, or intended for use, in the procurement, manufacture, compounding, processing, delivery or distribution of any controlled substance, as defined in subdivision (9) of section 21a-240; (2) All property constituting the proceeds obtained, directly or indirectly, from any sale or exchange of any such controlled substance in violation of section 21a-277 or 21a-278; (3) All property derived from the proceeds obtained, directly or indirectly, from any sale or exchange for pecuniary gain of any such controlled substance in violation of section 21a-277 or 21a-278; (4) All property used or intended for use, in any manner or part, to commit or facilitate the commission of a violation for pecuniary gain of section 21a-277 or 21a-278. . . .
"(b) Not later than ninety days after the seizure of moneys or property subject to forfeiture pursuant to subsection (a) of this section, in connection with a lawful criminal arrest or a lawful search, the Chief State's Attorney or a deputy chief state's attorney, state's attorney or assistant or deputy assistant state's attorney may petition the court in the nature of a proceeding in rem to order forfeiture of said moneys or property. Such proceeding shall be deemed a civil suit in equity, in which the state shall have the burden of proving all material facts by clear and convincing evidence. The court shall identify the owner of said moneys or property and any other person as appears to have an interest therein. . . ." (Emphasis added.)
[9] The court stated that "[General Statutes § 54-36h] is intended to permit the seizure and forfeiture of more than just the cash that may exchange hands in [a] drug transaction."
[10] In the United States Court of Appeals for the Second Circuit, the weight of the authority indicates that the government in an in rem forfeiture hearing relating to narcotics trafficking charges must demonstrate a nexus between the seized property and illegal drug activity. See United States v. Daccarett, 6 F.3d 37, 56 (2d Cir.1993).
Although the disputed order before us was not an in rem forfeiture determination but, rather, a judicial order at the culmination of a criminal trial, this nexus principle serves to guide courts on the due process limitations that apply to in personam forfeiture determinations given the property interests involved.
For example, in United States v. $31,990 in U.S. Currency, 982 F.2d 851, 854-55 (2d Cir. 1993), the court held that the following factors favor forfeiture of currency: the currency is found in a vehicle containing drugs; the currency is found close to drug activity; in cases where drugs are present, the currency constitutes an unusually large amount of money and is bundled. In United States v. $103,025.00 in U.S. Currency, 741 F.Supp. 903, 904 (M.D.Ga.1990), the court noted that "Congress certainly had no intention to elevate naked possession into equitable ownership in circumstances pointing to the likelihood that the possessor was a courier of drug money."
[11] In light of our conclusion that General Statutes § 54-36a(c) provided a basis for the court's action, we do not reach the issue of whether the court had the inherent or common-law authority to order the seized money forfeited. We also are not required to reach the issue of whether this section "codified" any prior, inherent common-law authority to order the proceeds forfeited. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3958096/ | Conviction for selling intoxicating liquor; punishment, three years in the penitentiary.
The facts in this case establish beyond doubt appellant's guilt. When the case was called for trial appellant filed a plea of former jeopardy, setting up that she had been convicted of the same offense at a former time, and attaching as exhibits to the plea a copy of the charge of the court and the verdict of a jury, both dated in 1929. It was alleged in the plea that the verdict had never been set aside, and the trial court was asked to "abate" the trial because of the matters alleged. Appellant appears to have introduced proof of the fact that an indictment was returned against her and that a verdict was rendered. Neither the allegations *Page 234
nor the proof adduced are sufficient to support a plea of jeopardy. It is not shown that judgment was ever entered, or sentence pronounced. The learned trial judge heard the plea and overruled it. It appears that this cause was numbered in the trial court 5407. Examination of the records of this court discloses the fact that on November 11, 1929, there was filed with the clerk of this court a transcript on appeal from the district court of Cherokee county, Texas, in cause No. 5407, styled Orene Pond v. State of Texas, and that thereafter, in an opinion duly rendered by this court, the judgment in cause No. 5407 was ordered reversed and the cause remanded for a new trial. In our opinion the action of the trial court in declining to consider said plea of jeopardy is not shown to be erroneous.
Appellant asked a new trial on the ground of misconduct of the jury, attaching the affidavits of four jurors to her motion. The state controverted said motion, and the court heard the evidence of eleven jurors, including the four whose affidavits were attached to said motion. The juror Garner repudiated the only thing appearing in his affidavit from which inference might arise that harmful discussion was had in the jury room. Careful examination of the testimony of the jurors fails to reveal any misconduct on the part of any of them. Nothing in their testimony appears of sufficient materiality to call for discussion.
Finding no error in the record, the judgment will be affirmed.
Affirmed.
Morrow, P. J., absent.
ON MOTION FOR REHEARING. | 01-03-2023 | 07-06-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/2538748/ | 80 P.3d 538 (2003)
191 Or. App. 62
STATE of Oregon, Respondent,
v.
Seveart Lynn McMILIAN, aka Justin Ray Pearson, Appellant.
96C-20672, 00C-54523; A115696 (Control), A115697.
Court of Appeals of Oregon.
Argued and Submitted October 21, 2003.
Decided November 26, 2003.
*539 Susan F. Drake, Deputy Public Defender, argued the cause for appellant. With her on the brief was Peter A. Ozanne, Executive Director, Office of Public Defense Services.
David J. Amesbury, Assistant Attorney General, argued the cause for respondent. With him on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.
Before BREWER, Presiding Judge, and SCHUMAN and ORTEGA, Judges.
BREWER, P.J.
Defendant appeals his convictions for two counts of identity theft, ORS 165.800, and a judgment revoking his probation in another case based on his commission of the identity theft crimes. In particular, he asserts that the trial court erred by (1) denying his motion to suppress evidence derived from a search of his person; (2) trying him on stipulated facts in the criminal case without first obtaining a written waiver of his right to a jury trial; (3) failing adequately to inquire concerning his request for new counsel; and (4) determining that he had violated his probation based on his commission of the identity theft offenses. We reverse and remand.
Defendant was convicted in 1996 of two counts of first-degree forgery and one count of racketeering, and he was placed on bench probation for those offenses. Defendant's probation on the forgery convictions expired in 1998, but he was scheduled to remain on *540 probation for the racketeering conviction until September 17, 2001.
On October 29, 2000, defendant was stopped by a police officer for a traffic infraction. Defendant left his vehicle to speak to the officer, who requested his identification. Defendant gave the officer his true name, but he stated that he had no identification and that he thought his driver's license was suspended. Defendant appeared nervous and fidgety. He also was sweating profusely despite the cold weather, he was moving his hands a lot, and he repeatedly put his hands in his pockets. The officer smelled the odor of methamphetamine coming from defendant's person. Because of defendant's behavior and his inability to produce identification, the officer believed that defendant might be armed. Concerned for his safety, the officer asked defendant if he could search him for weapons, and defendant consented.
The officer patted defendant down and checked inside his pockets. During that search, the officer found a checkbook inside defendant's jacket pocket. He opened the checkbook and found checks in the name of Anthony Meeker, as well as a driver's license bearing Meeker's name but displaying defendant's photograph. Defendant told the officer that the license was a fake. The officer detained defendant in the back of his patrol car based on defendant's failure to present a valid driver's license and his possession of a forged license. After advising defendant of his Miranda rights, the officer asked defendant how he had paid for groceries that the officer had seen in the back seat of defendant's car. Defendant stated that he "just paid for them." While the officer was talking to defendant, he saw a checkbook in the back of the patrol car. The officer picked up the checkbook and noticed that it contained checks in the name of "Correct Construction, Inc." The officer then called the store where defendant had purchased the groceries and was told that the purchaser had paid for them with a check in the name of Kevin Anderson. From that information, the officer concluded that the groceries were stolen.
Because defendant had stated that his driver's license was suspended, the officer impounded defendant's vehicle. Before having it towed, the officer inventoried the vehicle. During the inventory, the officer found a wallet that contained a driver's license in the name of Kevin Anderson but that, once again, displayed defendant's photograph. That license listed the same address as the checks for Correct Construction, Inc. As the officer moved the back seat forward to retrieve the groceries, he saw another checkbook on the floor of the vehicle. The officer opened that checkbook and found checks and a driver's license inside bearing the name of Richard Arnold. The license also displayed defendant's photograph.
Defendant was arrested and charged with two counts of identity theft, based on his alleged use of the identifications belonging to Anderson and Arnold. He was not charged with any offense pertaining to his possession of the checkbook and identification that the officer found in his jacket pocket. The state also initiated a show cause proceeding to revoke defendant's probation on his previous racketeering conviction. The show cause motion alleged four grounds for revocation: (1) the commission of new crimes; (2) failure to obey all laws; (3) failure to pay court-ordered financial obligations; and (4) failure to benefit from probation.
The trial court appointed counsel for defendant in the criminal and probation violation cases. At his arraignment, defendant requested new counsel, stating that his current counsel had "tried to coerce [him] into taking guilty pleas." The trial court replied that defendant's current attorney was "appointed to represent [him], and that's what he's doing." The court then proceeded to the next case on the docket.
Defendant moved, in both the criminal case and the probation violation proceeding, to suppress the evidence seized from his person and vehicle following the traffic stop. The trial court scheduled for the same date a hearing on the motion to suppress, a jury trial in the criminal case, and a probation violation hearing in the racketeering case. A combined evidentiary hearing was held on the probation violation charges and the motion to suppress. The state adduced evidence that defendant had committed the identity theft crimes with which he currently *541 had been charged. The court found that defendant had violated his probation by committing the same type of crime for which he had been placed on probation and, therefore, that he had not benefitted from probation. The court made no findings concerning the allegation that defendant had failed to pay his financial obligations.
The court denied the motion to suppress. The court then held a stipulated facts trial on the identity theft charges, and it convicted defendant of those offenses. The record does not reflect that defendant waived in writing his right to a jury trial.
At sentencing, the court revoked defendant's probation on the racketeering conviction, and it sentenced him to 60 months' imprisonment and 36 months' post-prison supervision. In addition, the court sentenced defendant to 13 months' imprisonment on each of the identity theft convictions, concurrent to one another, but consecutive to the probation revocation sentence.
Defendant appeals from his convictions in the identity theft case and the judgment revoking his probation in the racketeering case. To recapitulate, defendant asserts that the trial court erred by denying his motion to suppress on the ground that the search of the checkbook found in his jacket was unlawful; trying him on stipulated facts without first obtaining a written waiver of defendant's right to a jury trial; failing to adequately inquire concerning his request for new counsel; and determining that he had violated his probation based on his commission of the new identity theft offenses. We consider those arguments in turn.
Defendant first contends that the warrantless seizure and search of the checkbook located in his jacket pocket violated Article I, section 9, of the Oregon Constitution because (1) the officer did not have valid safety concerns when he requested consent to search defendant for weapons and, thus, the officer improperly extended the scope of the traffic stop; and (2) even if the request for consent to search was justified, the checkbook did not appear to contain a weapon and, therefore, should not have been seized or opened. The state concedes that "by opening the checkbook and examining its contents, [the officer] exceeded the scope of defendant's consent." Although that concession does not precisely track either of defendant's specific arguments, we understand it to accept defendant's second argument, namely, that, because defendant consented only to a weapons search, even if the officer had valid safety concerns, he was not entitled to seize and open the checkbook because it did not appear to contain a weapon.
We accept the state's concession.[1] A warrantless search violates Article I, section 9, unless it is justified by an exception to the warrant requirement. Consent is an exception, State v. Ready, 148 Or.App. 149, 152-53, 939 P.2d 117, rev. den., 326 Or. 68, 950 P.2d 892 (1997), as is officer safety, State v. Bates, 304 Or. 519, 524, 747 P.2d 991 (1987). The consent exception provides no independent justification for the seizure and search of the checkbook found in defendant's jacket because defendant consented only to a weapons search. The sole issue, therefore, is whether the seizure and search of that checkbook were justified by the officer safety exception.
An officer is permitted to take
"reasonable steps to protect himself or others if, during the course of a lawful encounter with a citizen, the officer develops a reasonable suspicion, based upon specific and articulable facts, that the citizen might pose an immediate threat of serious physical injury to the officer or to others then present."
Bates, 304 Or. at 524, 747 P.2d 991. The seizure and search of an item pursuant to an officer safety search must be supported by both an objective basis to believe and a subjective belief that the item contains a weapon. State v. Wiggins, 184 Or.App. 333, 340-41, 56 P.3d 436 (2002). The checkbook found in defendant's pocket clearly was not a weapon, and there was no evidence that the officer *542 believed that it could or did contain a weapon. Because the seizure and search of the checkbook were not supported by the officer safety exception, and defendant did not consent to a search of his person other than for weapons, the seizure and search violated defendant's rights under Article I, section 9. Accordingly, the trial court erred in denying defendant's motion to suppress the checkbook found in defendant's jacket pocket.
The question remains whether the proper suppression remedy is outright reversal of defendant's convictions or reversal and remand for a new trial. Defendant argues that the proper remedy is outright reversal because the discovery of the Anderson and Arnold identificationsthe subjects of his identity theft convictionsresulted from the exploitation of the unlawful seizure and search of the checkbook found in defendant's jacket. See State v. Rodriguez, 317 Or. 27, 40, 854 P.2d 399 (1993) ("Exploitation occurs when police take advantage of the circumstances of their unlawful conduct to obtain the consent to search."). The difficulty is that the trial court did not address the issue of exploitation in making its suppression decision. That issue is for the trial court's consideration in the first instance. See State v. Rocha-Ramos, 161 Or.App. 306, 313, 985 P.2d 217 (1999) (stating that, "[t]he trial court did not consider the issue of whether the officers' observations constituted an exploitation of their illegal stop. On remand, the trial court must decide that issue and make the appropriate rulings that follow as a legal consequence."). Accordingly, the proper suppression remedy is reversal and remand to the trial court.
We briefly consider defendant's second and third assignments of error, in which he argues, respectively, that his convictions must be reversed because the trial court failed to obtain a valid written waiver of his right to jury trial and because it failed adequately to inquire into his request for new counsel. With respect to the second assignment, the state concedes that the trial court erred in failing to obtain a written jury trial waiver. See State v. Lemon, 162 Or.App. 640, 986 P.2d 705 (1999) (holding that a waiver of the right to a jury trial must be in writing). However, both assignments of error are moot because they can be addressed as necessary should the issues framed by them arise on remand.
Defendant's fourth assignment of error is well taken. The state concedes that the trial court appears to have revoked defendant's probation based on his commission of the identity theft crimes that are the subjects of his current convictions. The record supports that concession. The state also concedes that, if those convictions are reversed, the judgment revoking defendant's probation also must be reversed. Again, we agree. The state's proof of identity theft crimes at the probation violation hearing included evidence that we have suppressed, and other new crimes evidence that the state adduced, including evidence pertaining to defendant's use of the Anderson and Arnold identifications, may be the subject of a further suppression hearing on remand. However, as discussed, the state also asserted other grounds for revocation. We therefore remand the probation revocation proceeding to the trial court for reconsideration in light of the reversal of defendant's convictions. See State v. Brown, 53 Or.App. 666, 669, 633 P.2d 20 (1981) (holding that, because it appeared that the defendant's robbery conviction was the primary, if not sole, basis for revoking his probation and that conviction was vacated, the case must be remanded to the trial court to reconsider its revocation decision, and if the trial court were to find that the purposes of probation were not being served, it could exercise its discretion accordingly).
Reversed and remanded.
NOTES
[1] Our acceptance of the state's concession makes it unnecessary to consider defendant's first argument. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/741131/ | 114 F.3d 829
Kirk D. SYKES, Appellant,v.The CITY OF GENTRY, ARKANSAS; The City Council of Gentry,Arkansas; Robert D. Abrahamson, Mayor, City ofGentry, Arkansas, Appellees.
No. 96-3988.
United States Court of Appeals,Eighth Circuit.
Submitted May 23, 1997.Decided June 13, 1997.
Kevin J. Pawlik, argued, Bentonville, AR (Ella M. Long, on the brief), for appellant.
Shane Perry, argued, North Little Rock, AR, for appellee.
Before MURPHY, HEANEY, and MAGILL, Circuit Judges.
MAGILL, Circuit Judge.
1
Kirk D. Sykes, the former police chief of Gentry, Arkansas, appeals the district court's1 grant of summary judgment against him in his 42 U.S.C. § 1983 (1994) action against the City of Gentry. We affirm.
I.
2
On March 22, 1995, Sykes was hired as the chief of police of Gentry, Arkansas. At the time Sykes was hired, § 14-43-504(e)(2) of the Arkansas Code provided that "Mayors shall have the power to choose and appoint the chief of the police department ... who shall hold office until the following election for mayor, and until a successor is appointed by the incoming mayor, unless sooner removed for cause...." Ark.Code Ann. § 14-43-504(e)(2) (Michie 1987). Section 14-43-505 provided that a police chief could be removed for inefficiency, misconduct, or neglect of duty by a majority vote of the city council. Ark.Code Ann. § 14-43-505 (Michie 1987). In an unappealed case not involving the instant parties, the United States District Court for the Western District of Arkansas held that these provisions created a property interest for a police chief in the position. See Pearson v. City of Paris, 839 F. Supp. 645, 650 (W.D.Ark.1993). Accordingly, the Pearson court held that the termination of a police chief without cause constituted a deprivation of property without due process, a violation of the Fourteenth Amendment that was actionable under § 1983. Id. at 649.
3
On April 5, 1995, about two weeks after Sykes was hired, the Arkansas Legislature enacted Ark.Code Ann. § 14-42-110 (Michie 1987 & Supp.1995). Section 110 provides that:
4
Mayors in cities of the first class and second class and incorporated towns shall have the power to appoint and remove all department heads, including city and town marshals appointed, unless the city or town council shall, by a two-thirds (2/3) majority of the total membership of the council, vote to override the mayor's action.
5
Ark.Code Ann. § 14-42-110 (emphasis added).2
6
On November 9, 1995, the Mayor of Gentry terminated Sykes without cause. The City Council considered the termination and a motion was made to override it, but failed for want of a second.
7
Sykes subsequently brought this action in the district court under § 1983.3 The district court denied relief, concluding that, while Sykes once had a property interest in his position, that property interest was destroyed when the Arkansas Legislature enacted § 110. Sykes now appeals.
II.
8
Sykes argues that his property interest in his position, created by § 504, was not lost by the subsequent enactment of § 110 because this would constitute a retroactive effect of the new statute. Because Arkansas law disfavors retroactive effects of statutes, see State v. Kansas City & Memphis Ry. & Bridge Co., 117 Ark. 606, 174 S.W. 248, 251 (1914), Sykes contends that his property interest was unaffected by the change in the law.
9
Sykes's argument is meritless. Had Sykes been terminated prior to the enactment of § 110, he perhaps would have had an argument for retroactivity. As it is, the impact of § 110 is purely prospective.
10
This Court has repeatedly held that a state may legislatively eliminate a previously conferred property interest in state employment. See Packett v. Stenberg, 969 F.2d 721, 726 (8th Cir.1992). "While the legislative alteration or elimination of a previously conferred property interest may be a deprivation, the legislative process itself provides citizens with the process they are due." Id. See also Gattis v. Gravett, 806 F.2d 778, 781 (8th Cir.1986) ("[T]he legislature which creates a property interest may rescind it, whether the legislative body is federal or state and whether the interest is an entitlement to economic benefits, a statutory cause of action or civil service job protections. By the time appellant discharged appellees, the Arkansas Legislature had removed appellees' employment position from those entitled to civil service system protections. Accordingly, the property interest previously conferred ... had been extinguished.... [Because] the legislative process affords all the procedural due process required by the Constitution, the elimination of appellees' property interest in employment, although a deprivation, was not a deprivation without due process under the Fourteenth Amendment of the Constitution." (emphasis added)).
11
Any property interest Sykes had in his position was eliminated when the Arkansas Legislature enacted § 110. Because Sykes had no property interest in his position, there was no due process violation when he was terminated. Accordingly, the district court's grant of summary judgment is affirmed.
1
The Honorable H. Franklin Waters, United States District Judge for the Western District of Arkansas
2
Gentry is considered a city of the first class
3
Sykes also sought relief under the Fair Labor Standards Act for unpaid overtime and under various state causes of action. The district court denied relief under these theories, and Sykes does not pursue them on appeal | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/2719973/ | 2014 IL App (1st) 131524
No. 1-13-1524
Opinion Filed June 26, 2014
FOURTH Division
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
GEORGE J. DOHRMANN III, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. )
)
) No. 07L1602
THOMAS E. SWANEY, )
Independent Executor of the Estate of )
Virginia H. Rogers, Deceased, )
) The Honorable
Defendant-Appellee. ) Mary L. Mikva,
) Judge Presiding.
______________________________________________________________________________
JUSTICE FITZGERALD SMITH delivered the judgment of the court, with opinion.
Presiding Justice Howse and Justice Lavin concurred in the judgment and opinion.
OPINION
¶1 Appellant George J. Dohrmann III appeals from the circuit court’s grant of summary
judgment to appellee Thomas E. Swaney, independent executor of the estate of Virginia H.
Rogers, deceased (the Estate), as to the two remaining counts of his complaint. These counts
relate to an alleged agreement made between Dorhmann and Mrs. Rogers prior to Mrs. Rogers'
1-13-1524
death in which Mrs. Rogers signed a document (the contract) agreeing to give Dohrmann, in part,
her apartment and all of the items contained therein, as well as the sum of $4 million. Dohrmann
contends on appeal that the trial court erred in granting summary judgment. For the following
reasons, we affirm.
¶2 I. BACKGROUND
¶3 Dohrmann, who was Mrs. Rogers' neighbor, filed a five-count fourth amended complaint
against Thomas E. Swaney, as guardian of the Estate of Virginia Rogers, a disabled person, and
as successor trustee of the Virginia H. Rogers Trust (Trust), 1 based on a contract dated April 1,
2000. Under the purported contract, in exchange for Dohrmann's "past and future services,"
including helping to continue the Rogers name by incorporating it into his children's name, Mrs.
Rogers agreed to convey to Dohrmann upon her death her apartment and everything within it, as
well as the sum of $4 million. The contract states that Mrs. Rogers will carry out this promise
through her "Will and Testament or other testamentary substitute." Dohrmann alleged that he
legally changed the names of his minor children to add the Rogers name and that he believed he
had performed all his duties under the contract. Mrs. Rogers filed a counterclaim alleging that
the contract was the product of fraud in the execution.
¶4 At the time of the summary judgment disputed herein, only counts I and II remained. By
count I, Dohrmann requested a declaratory judgment settling the rights of the parties under the
1
Mrs. Rogers has since died, and the cause is now captioned "GEORGE J.
DOHRMANN III v. THOMAS E. SWANEY, as Independent Executor of the Estate of Virginia
H. Rogers, Deceased."
2
1-13-1524
contract and imposing a constructive trust on Mrs. Rogers' apartment and $4 million worth of
assets for the benefit of Dohrmann. By count II, Dohrmann requested a declaration that the
transfer of Mrs. Rogers' apartment to the Trust is void, the creation of a constructive trust on the
apartment for the benefit of Dohrmann, or, in the alternative, a money judgment in the amount
equal to the present value of Mrs. Rogers' apartment. Mrs. Rogers' estate then filed a one-count
counterclaim, alleging that the contract was a product of fraud in the execution and asking the
court to declare the contract invalid and unenforceable and to require Dohrmann to pay
compensatory and punitive damages.
¶5 Most of the background facts are not in dispute, although the parties to disagree whether
certain information is properly before the court under the Dead-Man's Act (735 ILCS 5/8-201
(West 2012)). In this Background section, we consider only the facts properly before this court,
and address the Dead-Man's Act argument in the Analysis section
¶6 Dohrmann first met Mrs. Rogers in 1984. They lived in the same building, the Drake
Tower, a cooperative apartment building, at 179 E. Lake Shore Drive. Mrs. Rogers' apartment
was substantially larger than Dohrmann's apartment. The apartment was Mrs. Rogers' primary
residence, while Dohrmann's apartment was not his primary residence.
¶7 At the time they met, Mrs. Rogers was a 73-year-old widow. She had never had nor
adopted any children. Dohrmann was a 40-year-old neurosurgeon, married to Dr. Helen
Dohrmann. Eventually, they had two children, George IV and Geoffrey. Dohrmann and his
wife are still married.
¶8 Dohrmann and Mrs. Rogers began to socialize together more frequently in the early
1990s and served together on the board of the Drake Tower apartments. Mrs. Rogers got to
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know Dohrmann's wife and children during this time. From the record, it appears Mrs. Rogers
initially enjoyed Dohrmann's attention, but then became concerned that he was befriending her in
order to get her property upon her death.
¶9 In 1997 or 1998, Dohrmann approached Mrs. Rogers about adult adoption, suggesting
that one of them adopt the other. Dohrmann testified in deposition that Mrs. Rogers often said
she regretted not having any children, and Dohrmann wanted to give her the family she never
had. To that end, Dohrmann consulted with an attorney, who advised him that adult adoptions
could be done in Arkansas and referred him to an Arkansas attorney. In March 1998, Dohrmann
traveled to Little Rock, Arkansas, and met with an attorney who specialized in adoption law.
Upon learning that residency is a prerequisite for adult adoption in Arkansas, Dohrmann entered
into a written lease for an apartment in North Conway, Arkansas. The adoption attorney advised
Dohrmann that she needed a signed letter of engagement from Mrs. Rogers in order to proceed.
However, Mrs. Rogers never submitted a signed letter of engagement to the attorney and
Dohrmann never adopted Mrs. Rogers, nor was he ever adopted by Mrs. Rogers.
¶ 10 In February 2000, Dohrmann met with an estate planning attorney in Chicago, inquiring
what one would do if he wished to receive something in exchange for something after a person
died. The attorney drafted a skeleton agreement and subsequently discussed the agreement with
Dohrmann. The attorney did not, however, participate in the preparation or execution of the
contract in question here.
¶ 11 On April 1, 2000, Dohrmann and Mrs. Rogers, who was 89 years old at the time, signed
the contract. There were no witnesses present at the signing. Mrs. Rogers did not communicate
with her long-time lawyer and advisor, Mr. Swaney, regarding the contract. Mr. Swaney did not,
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in fact, learn of the contract until just prior to the initiation of the instant lawsuit. The contract in
its entirety reads:
"Agreement
Dear George:
In exchange for your past and future services and other
good and valuable consideration (including helping the Rogers
name to continue after my death by incorporating it into your
children's names), I (Virginia H. Rogers) agree to give you
(George J. Dohrmann III) upon my death 1) my apartment in the
Drake Tower (shares of 11-East, Drake Tower Apartments, Inc. in
Chicago) and all furniture, furnishings, personal effects and other
property contained within it and the elevator vestibule at the time
of my death 2) the sum of four million dollars ($4,000,000.00), and
so will provide in my Last Will and Testament or other
testamentary substitute that may take effect upon my death (my
'testamentary documents'). If my testamentary documents fail to
provide you with the above, you or your estate, shall have a valid
claim against my estate for such amount.
It is my request that you pay my friend and lawyer, Thomas
E. Swaney, the sum of one hundred thousand dollars
($100,000.000) as a surprise gift from me.
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This agreement may not be amended, modified or canceled
except by written agreement signed by you and me. This
agreement sets forth our entire agreement and understanding with
respect to the matters covered hereby and supersedes all of our
prior agreements or understandings with respect to the subject
matter hereof. This agreement shall be governed by and construed
in accordance with the laws of the State of Illinois applicable to
contracts to be performed entirely within such State (determined
without regard to choice of law provisions thereof).
If the above correctly sets forth your understanding of our
agreement, please indicate your acceptance by signing this
agreement in the space provided below.
Understood, accepted and agreed on April 1, 2000:
s/ George J. Dohrmann III
Signed on April 1, 2000:
s/ Virginia H. Rogers"
¶ 12 An appraiser estimated that the value of Mrs. Rogers' apartment as of April 1, 2000, was
approximately $1,438,000. Another appraiser estimated that the value of the "furniture,
furnishings, personal effects and other property contained within it and the elevator vestibule" as
of April 1, 2000, was approximately $100,045.
¶ 13 Two months later, on June 22, 2000, Dohrmann's two sons' names were legally changed
to include "Rogers" as one of their middle names. Their names are now George John Rogers
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Dohrmann IV, and Geoffrey Edward David Rogers Dohrmann. At that time, George IV was 13
years old and Geoffrey was 7 years old. In practice, the boys (now young men) use the Rogers
name inconsistently. George IV used it on his high school diploma and college applications, but,
according to George IV's deposition testimony, he did not use it on his driver's license, his
student ID card, his checking account, his credit card, his high school papers, his high school
exams, or his Facebook page. Geoffrey testified that he did not have a driver's licence or state
identification card, but that he used the Rogers name "whenever [he] writes down [his] full name
when necessary." He testified that he used the Rogers name on his high school applications, his
student ID card, and his ATM card. He did not use it on his Facebook page, but did use his two
other middle names.
¶ 14 On April 1, 2000, the date the contract was executed, Mrs. Rogers' estate plan consisted
of her will and the Trust. Neither included at that time or any other time a provision for the
benefit of Dohrmann or for any member of his family. Rather, her estate plan consisted of
bequests to various friends and distant relatives aggregating several million dollars, with the
remainder of the estate distributable to seven Chicago-based charities and Mrs. Rogers' alma
mater.
¶ 15 In November 2004, Mrs. Rogers transferred legal ownership of her apartment to the
Trust, where it remains as an asset. In March 2008, an order was entered in probate court
designating Mrs. Rogers a disabled person based on her suffering from moderate dementia and
probable Alzheimer's disease. She was adjudicated to be without capacity to manage her estate
or financial affairs. Mr. Swaney was appointed as the guardian of her estate.
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¶ 16 Dohrmann filed his original complaint in February 2007, of which only counts I and II
remained at the time of summary judgment. The Estate filed its counterclaim as part of its
answer. The parties then filed cross-motions for summary judgment as to the claims against
them. In its motion for summary judgment, the Estate argued that the contract should be set
aside as a matter of law because the consideration was so grossly inadequate as to shock the
conscience; the undisputed facts demonstrate that this inadequate consideration was
accompanied by circumstances of unfairness; and the contract is unconscionable.
¶ 17 In September 2011, the circuit court entered an order barring admission of Dohrmann's
testimony and that of his wife regarding conversations with Mrs. Rogers and her participation in
the preparation and execution of the contract, as well as the name change hearing.
¶ 18 In 2012, the circuit court, in a memorandum order, found that the contract was not
enforceable, granted the Estate's motion for summary judgment on counts I and II, and denied
Dohrmann's motion for summary judgment on the Estate's counterclaim. Dohrmann appeals the
grant of summary judgment against him on counts I and II.
¶ 19 II. ANALYSIS
¶ 20 On appeal, Dohrmann contends the trial court erred in granting summary judgment. He
argues that summary judgment was improper because: (1) the value of Dohrmann's performance,
that is, his sons' name changes, is a disputed issue of fact; (2) Mrs. Rogers' motive for entering
into the contract is a disputed issue of fact; (3) the existence of "circumstances of unfairness" in
the making of the contract is a disputed issue of fact; and (4) the testimony of Rogers' friends
that Rogers believed Dohrmann was trying to get her apartment and her estate was inadmissible
hearsay and should not have been considered by the court. For the following reasons, we affirm.
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¶ 21 Summary judgment is proper when the pleadings, affidavits, depositions and admissions
of record, construed strictly against the moving party, show there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-
1005(c) (West 2010). In ruling on a motion for summary judgment, the circuit court is to
determine whether a genuine issue of material fact exists, not try a question of fact. Williams v.
Manchester, 228 Ill. 2d 404, 417 (2008). A party opposing a motion for summary judgment
"must present a factual bias which would arguably entitle him to a judgment." Allegro Services,
Ltd. v. Metropolitan Pier & Exposition Authority, 172 Ill. 2d 243, 256 (1996). When
determining whether a genuine issue of material fact exists, the pleadings are to be liberally
construed in favor of the nonmoving party. Williams, 228 Ill. 2d at 417. "Summary judgment is
to be encouraged in the interest of prompt disposition of lawsuits, but as a drastic measure it
should be allowed only when a moving party's right to it is clear and free from doubt." Pyne v.
Witmer, 129 Ill. 2d 351, 358 (1989).
¶ 22 The primary objective in contract construction is to give effect to the intent of the parties.
If the contract is clear and unambiguous, the court must determine the parties' intent solely from
the ordinary and natural meaning of the language of the contract. Omnitrus Merging Corp. v.
Illinois Tool Works, Inc., 256 Ill. App. 3d 31, 34 (1993).
¶ 23 The basic requirements of a contract are an offer, acceptance, and consideration. Melena
v. Anheuser-Busch, Inc., 219 Ill. 2d 135, 151 (2006). The determination of whether
consideration is sufficient to support a contract is a question of law for the court to decide.
Valuable consideration for a contract consists of some right, interest, profit or benefit accruing to
one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by
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the other. F.H. Prince & Co. v. Towers Financial Corp., 275 Ill. App. 3d 792, 798 (1995);
Steinberg v. Chicago Medical School, 69 Ill. 2d 320, 330 (1977) (any act or promise that benefits
one party or disadvantages the other is sufficient consideration to support the formation of a
contract). Whether a contract contains consideration is a question of law, which we review de
novo. In re Marriage of Tabassum, 377 Ill. App. 3d 761, 770 (2007). "[W]here the amount of
consideration is so grossly inadequate as to shock the conscience of the court, the contract will
fail." Ahern v. Knecht, 202 Ill. App. 3d 709, 715 (1990). This court has considered the issue of
gross inadequacy of consideration:
"Evidence of gross inadequacy of consideration has been
considered by some Illinois courts as tantamount to fraud, whether actual
or constructive. [Citations.] Thus, where there is a substantial failure of
consideration for a contract, particularly where the inadequacy is
accompanied by other inequitable or unconscionable features, a court of
equity may rescind or cancel the contract.***
A contract may be treated as unconscionable when it is
improvident, oppressive, or totally one-sided. [Citation.] Even where
there is no actual fraud, courts of equity will relieve against hard and
unconscionable contracts which have been procured by taking advantage
of the condition, circumstances or necessity of the other parties.
[Citation.] Factors relevant to finding a contract unconscionable include
gross disparity in the values exchanged or gross inequality in the
bargaining positions of the parties together with terms unreasonably
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favorable to the stronger party. [Citations.] Courts will also look to such
factors as the age and education of the contracting parties, their
commercial experience [Citation], and whether the aggrieved party had a
meaningful choice when faced with unreasonably unfavorable terms."
Ahern, 202 Ill. App. 3d at 715-16.
Moreover, "[w]here the amount of the consideration which passed is not only so grossly
inadequate as to shock the conscience of the court, but also accompanied by circumstances of
unfairness, the court is in a position to set aside the transaction. [Citations.] Where the
inadequacy is great, the circumstances of unfairness need only be slight to cause this court to set
aside the transaction. [Citation.]" Mimica v. Area Interstate Trucking, Inc., 250 Ill. App. 3d 423,
431-32 (1993).
¶ 24 i. The Dead-Man's Act
¶ 25 Initially, we note that the parties dispute whether the testimony of Dohrmann and his wife
regarding statements allegedly made by Mrs. Rogers about what she received under the contract
is barred under the Dead-Man's Act (the Act). 735 ILCS 5/8-201 (West 2012). The Estate
argues that Dohrmann was and is precluded from presenting this evidence by operation of the
Dead-Man's Act and that this precise issue was presented to the circuit court, which ruled in
2011 that this particular testimony be stricken under the Dead-Man's Act. Dohrmann, on the
other hand, argues that the testimony in question was presented below by the Estate in support of
its motion for summary judgment and the Estate, therefore, waived the Dead-Man's Act's
protections.
¶ 26 The Dead-Man's Act provides:
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"In the trial of any action in which any party sues or defends as the
representative of a deceased person or person under a legal
disability, no adverse party or person directly interested in the
action shall be allowed to testify on his or her own behalf to any
conversation with the deceased or person under legal disability or
to any event which took place in the presence of the deceased or
person under legal disability ***." 735 ILCS 5/8-201 (West
2012).
Only that evidence which the decedent could have refuted is barred by the Act. Gunn v. Sobucki,
216 Ill. 2d 602, 609 (2005). The dual purposes of the Act are "to protect decedents' estates from
fraudulent claims and to equalize the position of the parties in regard to the giving of testimony.
Gunn, 216 Ill. 2d at 609.
¶ 27 "It is proper to apply the Dead-Man's Act in the context of a summary judgment
proceeding because, while a motion for summary judgment is not a modified trial procedure, it is
an adjudication of a claim on the merits and is the procedural equivalent of a trial." Balma v.
Henry, 404 Ill. App. 3d 233, 238 (2010). " '[I]t strains logic to construe the *** Act in a manner
that forces litigants to proceed to trial when it would be evident from an application of the ***
Act, in the context of a summary judgment proceeding, that a litigant cannot prove his case.' "
Balma, 404 Ill. App. 3d at 238 (quoting Rerack v. Lally, 241 Ill. App. 3d 692, 694-95 (1992)).
¶ 28 Here, this issue was previously determined by the circuit court in its September 2011
order in which it ruled that this testimony was barred by the Dead-Man's Act. Dohrmann on
appeal does not challenge this ruling, but merely reargues this issue as though the ruling does not
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exist. It does exist, and the testimony in question remains barred under the Dead-Man's Act.
Like the circuit court before us, we have disregarded any testimony submitted here that is
inconsistent with the order under the Dead-Man's Act.
¶ 29 ii. The Consideration Provided
¶ 30 Here, our review of the record persuades us that the trial court did not err in granting
summary judgment to the Estate where, based on the record before us, there was no genuine
issue of material fact. The circumstances existing when the contract was entered into in this case
were such that the terms of the contract should be set aside where the Estate sufficiently showed
the contract should be considered void due to the grossly inadequate consideration provided Mrs.
Rogers from Dohrmann, as well as the unfair circumstances surrounding the contract's creation.
¶ 31 Under the terms of the contract, Mrs. Rogers agreed to transfer, upon her death, to
Dohrmann over $5.5 million in assets in exchange for Dohrmann adding Rogers as an additional
middle name to his two sons' names, so that their names became George John Rogers Dohrmann,
IV, and Geoffrey Edward David Rogers Dohrmann. We note here that, in his answers to
interrogatories, Dohrmann described the consideration bargained for under the contract:
"7. With respect to paragraphs 4 and 7 of the Amended
Complaint, and specifically your allegation that you have
'performed all terms and conditions to be performed' by you under
the terms of the Contract, identify the following: (a) the 'past and
future services' and 'other good and valuable consideration'
contemplated under the terms of the Contract; (b) all facts you rely
on to support your allegation that you 'performed all terms and
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conditions to be performed' by you under the terms of the Contract;
and (c)all documents pertaining to such allegation.
Answer: The Contract identifies the consideration and the
acts to be performed by the parties. Dr. Dohrmann performed by
taking actions to change the names of his two sons and incorporate
the Rogers name into their legal names in order to continue the
Rogers name after the death of Ms. Rogers. Dr. Dohrmann
initiated legal proceedings in the Circuit Court of Cook County to
change the names of his sons and incorporate the Rogers name into
their legal names. On June 22, 2000, George J. Dohrmann IV
became legally known as George J. Rogers Dohrmann IV, and
Geoffrey Dohrmann became legally known as Geoffrey E. D.
Rogers Dohrmann.
There were and are no 'future services' to be performed. At
no time prior to the execution of the Contract did Ms. Rogers and
Dr. Dohrmann discuss any 'past' services or 'future services' to be
performed as part of the Contract.
All documents responsive to this Interrogatory have been
produced in Plaintiff's Response to First Set of Document Requests
of Defendant Virginia H. Rogers."
Accordingly, therefore, the sole consideration Dohrmann agreed to give in exchange for over
$5.5 million in assets was to add Rogers as an additional middle name to his sons' names.
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According to the plain language of the contract, the addition of 'Rogers' to the boys' names was
of value to Mrs. Rogers because it would help the Rogers name to continue after Mrs. Rogers'
death. We address that consideration here.
¶ 32 We agree with the Estate that Mrs. Rogers did not gain much by the addition of the
Rogers name to the boys' middle names. The stated purpose of adding the name was to "help[]
the Rogers name to continue after [her] death." However, Dohrmann did not change the boys'
surnames to Rogers, nor even exchange their middle names for Rogers. Rather, he merely added
the name Rogers as one of two middle names for George IV and one of three middle names for
Geoffrey. This can hardly be said to perpetuate the Rogers name after Mrs. Rogers' death.
¶ 33 We note here Dohrmann acknowledges it is appropriate for a court to consider whether
consideration was provided in a contract, but argues that it is improper for a court to consider the
relative value or adequacy of the consideration. He states: "a court may examine the
consideration exchanged for several purposes, none of which, however, includes determining
and/or weighing the relative value of adequacy of legal consideration exchanged." We disagree,
as, in cases like the one at bar where the consideration provided is so grossly inadequate as to
shock the conscience, a court may examine the adequacy of the consideration. See, e.g., Bonner
v. Westbound Records, Inc., 76 Ill. App. 3d 736, 743 (1979) ("It is not the function of either the
circuit court or [the appellate] court to review the amount of the consideration which passed to
decide whether either party made a bad bargain [Citations] unless the amount is so grossly
inadequate as to shock the conscience of the court." (Emphasis added)); see also Ahern, 202 Ill.
App. 3d at 716.
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¶ 34 Additionally, the contract is brief and makes no provision for when or even if the boys
must actually use the name Rogers. It appears from the record before us that the boys have used
the name only intermittently. Moreover, there is nothing in the contract to prevent the boys from
legally removing Rogers as a middle name, particularly because they, as minors, were not parties
to the contract. Where the consideration for a contract is illusory, the contract will be invalidated
for gross inadequacy of consideration. See Mimica, 250 Ill. App. 3d at 432. Although the
children allegedly took the Rogers name as their own in order to perpetuate the Rogers name
after Mrs. Rogers' death, enforcing that obligation is a legal impossibility. Accordingly, the
consideration to this contract is illusory.
¶ 35 In total, pursuant to the terms of the contract, Mrs. Rogers, an elderly widow, agreed to
give Dohrmann upon her death $5,538,000 in cash and property in exchange for Dohrmann
adding Rogers as an additional middle name to the names of his sons in an effort to help
perpetuate the Rogers name after Mrs. Rogers' death. The contract does not contain any
provision mandating how, when, or whether Dohrmann's sons are to use the Rogers name. The
disparity is shocking on its face. We agree with the circuit court, which stated that this
consideration "seems to be so minimally beneficial to Mrs. Rogers (particularly in light of the
goal stated in the Contract of 'continuing the Rogers name') as to be almost nonexistent,
especially when contrasted with the $5.5 million Dr. Dohrmann is to receive under the terms of
the Contract."
¶ 36 iii. Circumstances of Unfairness
¶ 37 Although the inadequacy of consideration in this situation is sufficient in itself to find this
contract void, we also agree with the circuit court and the Estate that there were circumstances of
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unfairness, that is, the extremely disproportionate bargaining power of the contracting parties,
surrounding the execution of the contract to such an extent that the contract could be found void
on those grounds, as well. See Mimica, 250 Ill. App. 3d at 431-32 ("Where the amount of the
consideration which passed is not only so grossly inadequate as to shock the conscience of the
court, but also accompanied by circumstances of unfairness, the court is in a position to set aside
the transaction. [Citations.] Where the inadequacy is great, the circumstances of unfairness need
only be slight to cause this court to set aside the transaction. [Citation.]"). Factors relevant to
this analysis include the age and education of the contracting parties. See Ahern, 202 Ill. App.
3d at 716 ("Courts will also look to such factors as the age and education of the contracting
parties, their commercial experience [Citation], and whether the aggrieved party had a
meaningful choice when faced with unreasonably unfavorable terms [Citations].").
¶ 38 In reviewing the record before us, we have found many of the uncontested facts clearly
demonstrate circumstances of unfairness surrounding the execution of the contract, that is, the
parties had vastly different bargaining positions. At the time of the contract's execution in 2000,
Mrs. Rogers was an 89 year old widow whose husband had died many years previously. Two
years following the execution of this contract, Mrs. Rogers was diagnosed with Alzheimer's
disease. She had no children nor any immediate family. She was entering into a contract worth
$5.5 million with Dohrmann, a physician. Mrs. Rogers had a long-time attorney and advisor,
Mr. Swaney, but she did not consult him regarding the execution of this contract. She also had
in place an estate plan for the event of her death.
¶ 39 The other contracting party, Dohrmann, is a highly educated neurosurgeon, married with
a family. Under the contract, Dohrmann stood to reap a benefit worth $5.5 million. Prior to
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entering into the contract, Dohrmann consulted an estate planning attorney. This attorney
drafted a "skeleton" agreement for him. These facts clearly show that the creation of this
contract involved gross inadequacy of consideration as well as circumstances of unfairness.
¶ 40 Dohrmann's argument that Mrs. Rogers' motive for entering into the contract is a disputed
issue of material fact which precludes summary judgment does not persuade us differently.
Dohrmann argues that Mrs. Rogers' actual motive in having the boys legally change their names
was "to take on and bear her name as their own, from which she would derive personal
satisfaction, pleasure and gratification." This argument, however, is belied by the very language
of the contract itself, which states unequivocally that the purpose of entering into the contract
was to "help[] the Rogers name to continue after my death by incorporating it into your
children's names." See Omintrus Merging Corp. v. Illinois Tool Works, Inc., 256 Ill. App. 3d 31,
34 (1993) ("The primary objective in contract construction is to give effect to the intention of the
parties ***. If the contract is clear and unambiguous, the judge must determine the intention of
the parties solely from the plain meaning of the language of the contract ***." (Internal quotation
marks omitted.)). In addition to the language of the contract itself, Dohrmann admitted in his
interrogatory responses in the circuit court that Mrs. Rogers' purpose for entering into the
contract was to continue her name after her death. Specifically, as discussed previously, in his
verified response to a written interrogatory, Dohrmann answered that he entered into the contract
with Mrs. Rogers "in order to continue the Rogers name after the death of Ms. Rogers."
Dohrmann's argument after summary judgment was granted that, in fact, Mrs. Rogers' actual
motive in entering into the contract and in having the boys legally change their names was "to
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take on and bear her name as their own, from which she would derive personal satisfaction,
pleasure and gratification" strikes us as disingenuous.
¶ 41 iv. Hearsay Exception
¶ 42 Finally, Dohrmann urges not to consider the evidence of Mrs. Rogers' statements to third
parties regarding Mrs. Rogers' suspicions that Dohrmann "was after" her property. Dohrmann
argues that these out-of-court statements were offered to prove the matter asserted and, therefore,
are inadmissible. The Estate replies that the statements in question are, in fact, admissible under
the "state of mind" exception to the hearsay rule. We agree with the Estate.
¶ 43 “ ‘Hearsay evidence is an out-of-court statement offered to prove the truth of the matter
asserted, and it is generally inadmissible due to its lack of reliability unless it falls within an
exception to the hearsay rule.’ ” People v. Caffey, 205 Ill. 2d 52, 88-89 (2001) (quoting People
v. Olinger, 176 Ill. 2d 326, 357 (1997)). Statements that indicate the declarant’s state of mind
are admissible as exceptions to the hearsay rule when the declarant is unavailable to testify, there
is a reasonable probability that the proffered hearsay statements are truthful, and the statements
are relevant to a material issue in the case. Caffey, 205 Ill. 2d at 91 (citing People v. Floyd, 103
Ill. 2d 541, 546 (1984)). The state of mind exception applies only to the state of mind of the
declarant and not the state of mind of someone other than the declarant. People v. Munoz, 398
Ill. App. 3d 455, 479 (2010); People v. Lawler, 142 Ill. 2d 548, 559 (1991).
¶ 44 Dohrmann's argument here is that these statements are inadmissible hearsay because "the
statements are offered to prove that Rogers, in fact, believed what she said she believed." We
disagree, as Mrs. Rogers' statements to third parties were not admitted into evidence to prove the
matter asserted, that is, that Dohrmann was trying to get property and money from her, but rather
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to demonstrate that, at the time Mrs. Rogers and Dohrmann entered into the contract in question,
Mrs. Rogers had suspicions regarding Dohrmann's motives and would, therefore, have been
reluctant to enter into such a contract with him. This demonstration of Mrs. Rogers' state of
mind at the time the contract was signed fits precisely into the state of mind exception to the
hearsay rule. See Caffey, 205 Ill. 2d at 91. The circuit court considered this question and found:
"[T]here are significant circumstances of unfairness
surrounding the Contract. The court rejects [Dohrmann's]
argument that Mrs. Rogers' suspicions regarding Dr. Dohrmann's
motives are inadmissible hearsay. [The Estate is] correct that these
are admissible because they are offered to prove Mrs. Rogers' state
of mind, and not for the truth of the matter asserted. Guski v. Raja,
409 Ill. App. 3d 686, 699-700 (1st Dist. 2011). These statements
are being offered to demonstrate that Mrs. Rogers held suspicions
toward Dr. Dohrmann, and thus would presumably have been less
included to enter into a contract of this nature with him. This is
only one of several aspects of this transaction that support [the
Estate's] argument about circumstances of unfairness."
We agree with the circuit court, particularly insofar as these statements, admitted as an exception
to the hearsay rule, are merely one of the myriad reasons we find that the execution of this
contract was surrounded by circumstances of unfairness.
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¶ 45 In the instant case, the circuit court properly granted summary judgment in favor of the
Estate where there was no genuine issue as to any material fact. The circuit court properly found
that the contract was unenforceable.
¶ 46 III. CONCLUSION
¶ 47 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 48 Affirmed.
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22 | 01-03-2023 | 08-21-2014 |
https://www.courtlistener.com/api/rest/v3/opinions/385899/ | 638 F.2d 21
Jimmie C. PELTIER et al., Plaintiffs-Appellants,v.ASSUMPTION PARISH POLICE JURY, Defendant-Appellee.
No. 79-2486.
United States Court of Appeals,Fifth Circuit.
Unit A
Feb. 23, 1981.
Larry P. Boudreaux, Thibodaux, La., for plaintiffs-appellants.
Aubert Talbot, Dist. Atty., Napoleonville, La., Abbott J. Reeves, Gretna, La., for defendant-appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before GOLDBERG, POLITZ and SAM D. JOHNSON, Circuit Judges.
POLITZ, Circuit Judge:
1
In 1975 the Assumption Parish Police Jury, the local governing authority in a rural south Louisiana parish, adopted an ordinance establishing a parochial service for the collection and disposal of solid waste materials garbage, rubbish and trash. The ordinance was amended in 1976 and again in 1978 to make it more comprehensive and detailed. As amended the ordinance provides for the discontinuance of water service as a penalty for the failure to pay garbage collection fees. In 1977 the police jury entered into a contract with the Assumption Parish Water District No. 1 pursuant to which the district bills and collects the fees for both water service and garbage collection. Of particular significance is the section which provides that non-payment of the garbage fee may result in the termination of water service to the affected premises. Water was "cut off" from the homes of several residents of Assumption Parish who were current in their water bills but who declined to pay garbage collection charges. Eleven of the persons affected filed the instant suit, individually and as a class action, seeking declaratory and injunctive relief. The district court found class certification unnecessary and, upon consideration of the filings and stipulation of the parties, held "that the practice of the Assumption Parish Police Jury to discontinue water utility service for non-payment of garbage collection charges is constitutionally permissible." We do not reach the constitutional issue as we find that the challenged actions of the Assumption Parish Police Jury exceed its authority. Accordingly, we reverse and remand.Constitutional vs. Statutory Resolution
2
The complaint challenges the constitutionality of the actions of the Assumption Parish Police Jury, a question we do not reach because the dispute may be resolved on another basis. Accordingly, we are to decide this matter without addressing the constitutional question, for as the Supreme Court has directed:
3
This Court has said repeatedly that it ought not pass on the constitutionality of an act of Congress unless such adjudication is unavoidable. This is true even though the question is properly presented by the record. If two questions are raised, one of non-constitutional and the other of constitutional nature, and a decision of the non-constitutional question would make unnecessary a decision of the constitutional question, the former will be decided. This same rule should guide the lower courts as well as this one.
4
Alma Motor Co. v. Timken Co., 329 U.S. 129, 136, 67 S.Ct. 231, 91 L.Ed. 128 (1946); citing Siler v. Louisville & Nashville R. Co., 213 U.S. 175, 29 S.Ct. 451, 53 L.Ed. 753 (1908); Light v. United States, 220 U.S. 523, 31 S.Ct. 485, 55 L.Ed. 570 (1910); and Spector Motor Service v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 (1944).
5
Consistent with this mandate we declared in Finch v. Mississippi State Medical Ass'n, Inc., 585 F.2d 765, 776 (5th Cir. 1978):
6
Within a relatively short time after the power and the duty of federal courts to declare federal statutes unconstitutional was established in Marbury v. Madison, 1803, 5 U.S. (1 Cranch) 137, 2 L.Ed. 60, and to rule on the invalidity of state statutes was elucidated in McCulloch v. Maryland, 1819, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579, the federal courts recognized a corollary obligation, to avoid constitutional confrontation whenever possible. E. g., Ex parte Randolph, C.C.D.Va.1833, 20 Fed.Cas. No. 11,558, p. 242. As applied to questions of interpretation of state law, this doctrine requires us to resolve federal constitutional claims only when a case cannot be decided on any other basis. The power of judicial review should be employed by the least democratic branch of the government only when decision inescapably requires it ....
7
From this legal launch pad we examine the applicable provisions of Louisiana law.
The Police Jury
8
The police jury form of government is found in almost all of Louisiana's 64 parishes. The authority of the parish police jury is vast but not plenary; police juries share with the legislature the police power of the state. As the Louisiana Supreme Court observed in Rollins Environmental Serv. v. Iberville Parish, 371 So.2d 1127, 1131 (La.1979):
9
A police jury in this State is a creature and subordinate political subdivision of the State and as such only possesses those powers conferred by the State's Constitution and statutes. La.Const. art. VI § 7(A); Union Sulphur Co. v. Parish of Calcasieu, 153 La. 857, 96 So. 787 (1923). Hall v. Rosteet, 247 La. 45, 169 So.2d 903 (1964); State v. Hertzog, 241 La. 783, 131 So.2d 788 (1961); B. W. S. Corporation v. Evangeline Parish Police Jury, 293 So.2d 233 (La.App.1974).
10
The statutory authority accorded to police juries is found in Title 33 of the Louisiana Revised Statutes of 1950. Section 1236 therein sets out the general powers conferred on police juries relevant to the instant inquiry. We note in particular La.R.S. 33:1236(16), (31) and (33), relating to the prevention of contagious disease and the disposal of solid wastes. These subsections provide:
11
The police juries and other parish governing authorities shall have the following powers:
12
(16) To enact ordinances and regulations, not inconsistent with the laws and constitution of the United States, nor of this state, to protect their respective parishes against the introduction of every kind of contagious disease.
13
(31) To enact ordinances to require, prohibit, or regulate the destruction, disposal, or burning of trash, garbage, leaves, limbs and branches, or debris of any kind and to regulate dumping and the use of borrow pits for sanitary fill.
14
(33) To regulate the collecting, pickup and transportation of garbage and trash, within the parish but outside incorporated municipalities, and to grant franchises, exclusive or nonexclusive to garbage and trash collectors, provided that an exclusive franchise shall be granted only after advertising, reception of bids and awarding of contract in accordance with law. The provisions of this Paragraph shall not apply in the parishes of Acadia, Vermillion, St. Landry, St. Charles, St. John the Baptist, St. James, St. Tammany, Ouachita, Ascension, Terrebonne, Evangeline, East Baton Rouge, Livingston, St. Helena, Jefferson, Jefferson Davis, Tangipahoa, Bossier, Rapides, Cameron, Grant, DeSoto, Sabine, Red River, Webster and Lafayette.
15
This general grant of power confers substantial responsibility over solid waste disposal which may, at first blush, appear sufficient to authorize the billing and collection procedure established by the Assumption Parish Police Jury. This initial impression fades upon consideration of other statutory provisions.
16
Bearing in mind that the police jury has only those powers conferred, we find particularly relevant La.R.S. 33:4169 entitled: "Collection contracts for sewerage service charges; garbage service charges." In subsections (A) and (D) the legislature authorizes local governmental units to establish joint billing for water and sewerage, and to provide that the failure to pay for either service may lead to the termination of the water supply.1 It is important to note that subsections (A) and (D) relate only to water and sewerage; there is no reference to solid waste.
17
The legislature has addressed the subject of the joint billing of garbage collection fees and water fees, as well as the termination of water services for failure to pay either, in La.R.S. 33:4169(B) and (C) which prescribe:
18
B. The governing body of the parish in which the State Capitol is situated shall be and is hereby empowered and authorized to execute a contract or contracts with a private water company or companies serving customers in the area served by a public garbage collection system and any such private water company is authorized and empowered to execute and enter into a contract with said governing authority, which contract may contain such terms and privileges as may be agreed upon by the parties thereto, pursuant to which a sanitation service fee imposed for services rendered by the garbage collection system will be collected for said parish by the water company in the same manner and subject to the same authorizations and provisions as contained in the preceding paragraph.
19
C. All contracts entered into pursuant to the provisions of subsection (B) shall be subject to the approval of the Louisiana Public Service Commission.
20
The joint billing and collection procedure for garbage and water bills of the type undertaken by the Assumption Parish Police Jury is authorized, but only in the parish in which the state capitol is situated (East Baton Rouge Parish). The specific grant of authority in the case of East Baton Rouge parish is significant because it demonstrates that the Louisiana Legislature obviously did not consider the general grant of power to deal with solid wastes broad enough to encompass this extraordinary procedure. The legislature has not given the Assumption Parish Police Jury the authority to enact the subject ordinance or to enter into the challenged contract.
21
The ordinance and contract are invalid for they are based on a power not conferred on this police jury. Having reached this conclusion we do not reach the constitutional issue and we express no opinion as to whether such authority may be appropriately conferred. We limit ourselves to the observation that, to modern man, running water is a necessity of life. To terminate such a basic utility is a serious matter which may only be done in a manner totally consistent with stringent due process requirements. Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978).
22
The decision of the district court is REVERSED. The matter is REMANDED for further proceedings consistent herewith.
1
La.R.S. 33:4169 (A) and (D) provide:
A. Any municipal corporation, parish or sewerage district operating a sewerage system shall have power to execute a contract with any private water company serving customers in the area served by said sewerage system, and any private water company is authorized and empowered to execute and enter into a contract with any municipal corporation, parish or sewerage district, providing sewerage service to customers of said water company, which contract may contain such terms and privileges as may be agreed upon between the parties thereto pursuant to which service charges imposed for service rendered by the sewerage system will be collected for the municipal corporation, parish or sewerage district by the water company or providing for a procedure to enforce collection of sewer charges by an agreement to shut off the service of the supply of water to any premises delinquent in the payment of either its water charges or sewer charges. Such municipal corporation, parish or sewerage district may agree to supply any such water company with such indemnity bond or liability insurance as such water company may consider necessary for its protection. Any such contract shall not require the approval of any state department, agency or commission.
D. Any municipal corporation, parish, or water district operating a water system shall have the power to execute a contract with any private sewerage company serving customers in the area served by said sewerage system, and any private sewerage company is authorized and empowered to execute and enter into a contract with any municipal corporation, parish, or water district, providing water service to the customers of said sewerage company, which contract may contain such terms and privileges as may be agreed upon between the parties thereto, pursuant to which service charges imposed for service rendered by the private sewerage company will be collected by the municipal corporation, parish, or water district or providing for a procedure to enforce collection of sewer charges by an agreement to shut off the services of the supply of water to any premises delinquent in the payment of either its water charges or sewer charges. The municipal corporation, parish, or sewer district may require any such sewerage company to supply such indemnity bond or liability insurance as the municipal corporation, parish, or water district may consider necessary for its protection and any such contract shall not require the approval of any state department, agency or commission. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1776420/ | 377 S.W.2d 343 (1964)
John STEVENS, Appellant,
v.
DURBIN-DURCO, INC., a Corporation, Respondent.
No. 50091.
Supreme Court of Missouri, Division No. 1.
April 13, 1964.
*344 Walter J. Gelber, Gray & Jeans, by James W. Jeans, St. Louis, for plaintiff-appellant.
Evans & Dixon, Ralph C. Kleinschmidt, A. J. Seier, Jr., St. Louis, for defendant-respondent.
HOUSER, Commissioner.
Action by John Stevens for damages for personal injuries sustained by him while using a "load binder," a device manufactured by defendant, Durbin-Durco, Inc. At the conclusion of plaintiff's case the court sustained defendant's motion for a directed verdict. Plaintiff has appealed from the ensuing judgment for defendant. We have jurisdiction since plaintiff prayed for $95,000.
Plaintiff charged negligence in several particulars, including negligent failure to equip the load binder with a safety ratchet to prevent kick-back, in connection with the allegation that defendant designed, manufactured, distributed, sold and put into the flow of commerce devices known as load binders, and that plaintiff was injured as a result of defendant's negligence, while using a load binder made by defendant. Defendant filed a general denial and pleas of contributory negligence and assumption of risk.
Plaintiff's evidence tended to show these facts: Plaintiff, a truck driver with 16 or 17 years' experience, and a fellow driver, Bill Macklin, were securing a load onto a flat-bed truck trailer by the use of a chain and a load binder, both of which were supplied by plaintiff's employer (who was not a party to this action). One end of the chain was hooked onto a metal lip on the bed of the trailer, and the chain was stretched over the load. The other end of the chain was then hooked onto the other side of the trailer bed. The function of the load binder was to take the slack out of the chain, thus providing a snug, tight attachment of the load to the trailer. A load binder consists of a cam action lever with a link and a hook on each end. The lever is 8 or 10 inches long. The mechanical principle is that of moving a lever through an arc. In one position the lever is open, and in the other it is closed. With the lever in open position each of the hooks is secured in the binding chain, then the movement of the lever through an arc of 180 degrees to a closed position draws the hooks together, thus tightening the chain. As the lever swings through the arc and reaches a closed position the mechanical advantage, and therefore the tension, increases. Swinging the lever through the arc is similar to compressing a spring, in that energy is stored into the load binder. At the end of the arc the pressure increases to its maximum, and if the pressure exerted is sufficient the handle of the device locks into a fixed position. Before reaching the closed or locked position the operator depends upon his own ability to hold the stored energy. A 200-pound man using the normal maximum force to close the lever would store 200 foot pounds of energy, i. e., that energy needed to raise 200 pounds one foot. By slipping a long pipe over the handle-lever the leverage is increased. About 90% of the time extension pipes, called "cheaters," are used, and according to an offer of proof defendant's literature stated that the load binder was designed to withstand the use of a cheater. Two men of normal capacity using a cheater pipe doubling the length of the handle-lever could store approximately 800 pounds of foot energy. Men working with the lever chest high, pulling down with their shoulders and arms, could use their total weight to the best advantage. If for some reason the force on the handle-lever with the cheater pipe on it is removed the 800 foot pounds of energy would be released. The use of the pipe introduces several dangers: the pipe might become loose and slip; the arc would be larger, necessitating a *345 change of position by the men swinging the pipe through the arc, with the possibility of their losing their grip or footing; the pipe is free to come loose if the pressure on the end of the pipe is released; if so released, the area of danger is increased. The men choose the cheaters to be used, which come in different lengths, and determine how much pressure to exert on the binder to tighten the chain.
Plaintiff was familiar with load binders, especially this type, which are in general use in the trucking industry. He had daily experience for years in binding and unbinding loads. Plaintiff knew that the longer the arm the greater the leverage and the more force that is overcome; that by doubling the length of the arm the same tension can be overcome with one half the force, and if quadrupled, only one quarter of the force would overcome the same resistance; that the further you bring the lever over the more resistance is built up in the handle. Plaintiff knew that "this thing was under tension and under pressure * * * and if you gave up on the thing, it could come back"; that the more tension it is under the more violently it will fly back, and if someone is leaning on it and it is released "it is going to come back" and "they are going to get hurt," and that he was aware of these characteristics and knew this on the day of the accident and up to the very instant of the accident. Plaintiff had no information about the "statistics" involved, or the technical considerations; precisely what mechanical advantage the device afforded or his own capacity applying force to the lever, or of the force stored and how that force would be affected by the use of the cheater pipe, but he did know that "when she springs open she springs open with a terrific force; if the pipe would come off she would come out like a bullet, maybe sail half-way up the block * * *."
When the load binder was first closed the chain was still too slack. After going up to the next link plaintiff and Macklin got on opposite sides of the handle and attempted to close the load binder. The chain ran vertically up the side of the load. A 30-inch-long cheater pipe was placed on the handle-lever and slipped almost to the bottom of itabout 8 or 10 inchesthus increasing the length of the handle-lever to 20-22 inches. Plaintiff and Macklin, using their hands, pushed down on the pipe. The lever was almost to the breaking point when the accident happened. Just before it happened, and when the handle-lever was "almost to the breaking point," plaintiff told Macklin to get his head out of the way "before it tears it off." The men exerted and used up all of their strength and energy, but it was too much strain for them to pull the handle-lever down all the way, and the tension on the binder overcame them. There was so much tension that the pipe turned sideways and came up, striking plaintiff on the side of the face, inflicting very serious injuries. The chain did not break. The load did not shift. The load binder did not break. None of the parts gave way. There was no structural failure. The men did not let go, nor did they lose their footing. The pipe extension was seated firmly, and did not slip. The pipe extension did not come off the handle, but remained over the handle, perfectly tight at all times, just as if it were a part of the handle. After the accident Macklin and another man put a longer cheater pipe (a 6-foot cheater) over the handle-lever of the binder, and using that additional leverage bound that same load for the trip.
Plaintiff offered to prove that there had been in common use in the trade a simple safety ratchet device, well-known in engineering circles and by manufacturers, which allows the storing of energy in a mechanical device such as a load binder, but which would prevent the sudden and complete release of the stored energy in the event the force was dissipated or no longer applied to the end of the handle-lever; that such a device could have been employed reasonably and effectively on this load binder; and that the use of such a safety device would have prevented the *346 pipe from being released suddenly through its entire arc.
Plaintiff asserts that his evidence and the reasonable inferences therefrom present a jury issue as to whether the load binder when put to its intended use created a reasonable likelihood of substantial harm, thus creating a duty on defendant's part to use reasonable care to avoid harm to plaintiff; that the imposition of a duty by the manufacturer to a user of its product does not depend upon whether the article is inherently dangerous (as implied in the circuit court's ruling) but rather whether it is dangerous when applied to its intended use; that reasonable men could find that this product was dangerous when applied to its intended use in that "the forces which users of the product were dealing with were of sufficient magnitude and there were no safety devices to prevent the sudden release of these forces in a manner endangering life and limb of the user." Plaintiff says defendant was obligated to exercise ordinary care to eliminate the danger before exposing a user of its product to such risk, where the manufacturer had "knowledge of some potential danger."
Plaintiff further asserts error in the court's ruling that plaintiff is barred because he assumed the risk, contending that plaintiff's conduct cannot bar him unless he voluntarily exposed himself to a known and appreciated danger, one glaringly obvious, thoroughly comprehended and appreciated, and that the conclusion must be inevitable that plaintiff freely consented, without constraint, to the risk.
Finally, plaintiff says the court erred in denying recovery on the ground that defendant's product had no latent defect and that the lack of a safety ratchet was open and obvious.
This case is based upon negligence, not on breach of implied warranty.[1] Plaintiff is a remote user of the product. Defendant is the manufacturer. There are no contractual relations between the parties. The defense is that there was no negligence, not that plaintiff cannot sue because of the lack of privity. This case comes under the exception to the requirement of privity of contract applicable to products dangerous because of the use to which they are to be put by whoever may use them for the purpose intended. Orr v. Shell Oil Co., 352 Mo. 288, 177 S.W.2d 608, 612[2]; McLeod v. Linde Air Products Co., 318 Mo. 397, 1 S.W.2d 122; Hursh, American Law of Products Liability, Vol. 1, § 6:92, p. 714, fn. 16.
The manufacturer of a product which is potentially dangerous when applied to its intended use, Tayer v. York Ice Machinery Corp., 342 Mo. 912, 119 S.W.2d 240, or reasonably certain to place life and limb in peril when negligently made, Zesch v. Abrasive Co. of Philadelphia, 353 Mo. 558, 183 S.W.2d 140, 145, 156 A.L.R. 469; McLeod v. Linde Air Products Co., supra; Jacobs v. Frank Adams Electric Co., Mo. App., 97 S.W.2d 849; Restatement, Law of Torts, § 395, is under a duty to a remote user to exercise ordinary care in its manufacture, and is liable to a remote user injured thereby if the injury results from a latent defect bespeaking lack of ordinary care in making the product. Zesch v. Abrasive Co. of Philadelphia, supra (abrasive cutting-off wheel exploded); McLeod v. Linde Air Products Co., supra (clogged valve in an oxygen tank); McCormick v. Lowe & Campbell Athletic Goods Co., 235 Mo.App. 612, 144 S.W.2d 866 (bamboo vaulting pole broke); Jacobs v. Frank Adams Electric Co., supra (electric panel board exploded).
But the manufacturer is not liable as an insurer, and he is under no obligation to make the product accident proof or *347 foolproof. Stevens v. Allis-Chalmers Mfg. Co., 151 Kan. 638, 100 P.2d 723, 726-727; Campo v. Scofield, 301 N.Y. 468, 95 N.E.2d 802, 804; Yaun v. Allis-Chalmers Mfg. Co., 253 Wis. 558, 34 N.W.2d 853, 858. Since practically any product, regardless of its type or design, is capable of producing injury when put to particular uses, "a manufacturer has no duty so to design his product as to render it wholly incapable of producing injury, * * *." Hursh, American Law of Products Liability, Vol. 1, § 2:59, p. 240. The manufacturer of a butcher knife, cleaver, or axe, properly made and free of latent defects and concealed dangers, may not be held liable merely because someone was injured while using the product. Thus a manufacturer is not liable to a man who while using an iron dumbbell drops it on his foot. Jamieson v. Woodward & Lothrop, 101 U.S.App.D.C. 32, 247 F.2d 23, cert. den. 355 U.S. 855, 78 S. Ct. 84, 2 L. Ed. 2d 63.
The extent and limits of the duty of a manufacturer of a product dangerous because of the use to which it is to be applied depend upon the nature and character of the defect and of plaintiff's knowledge thereof. As indicated by the Zesch, McLeod, McCormick and Jacobs cases, supra, the manufacturer may be held liable if the defect or danger is latent or concealed, but where the danger is open, obvious and apparent, or the user has actual knowledge of the defect or danger, there is no liability on the manufacturer. Parker v. Heasler Plumbing & Heating Co., Wyo.Sup., 388 P.2d 516, 518, and cases cited: Tyson v. Long Mfg. Co., (1959) 249 N.C. 557, 107 S.E.2d 170, 78 A.L.R. 2d 588; Rosebrock v. General Electric Co., 236 N.Y. 227, 140 N.E. 571; MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050, L.R.A.1916F, 696. In Campo v. Scofield, supra, the New York Court of Appeals said: "Suffice it to note that, in cases dealing with a manufacturer's liability for injuries to remote users, the stress has always been upon the duty of guarding against hidden defects and of giving notice of concealed dangers." The duty of the manufacturer in such case is satisfied by the manufacture of a product which is free of latent defects and concealed dangers. The rule, stated as lately as January 24, 1964 by the Supreme Court of Wyoming, is that "* * * [T]he manufacturer * * * of a machine, dangerous because of the way in which it functions, and patently so, owes to those who use it a duty merely to make it free from latent defects and concealed dangers. * * * Accordingly, if a remote user sues a manufacturer * * * for injuries suffered, he must allege and prove the existence of a latent defect or a danger not known to plaintiff or other users." Parker v. Heasler Plumbing & Heating Co., supra, 388 P.2d l. c. 518; Campo v. Scofield, Stevens v. Allis-Chalmers Mfg. Co., Yaun v. Allis-Chalmers Mfg. Co., Jamieson v. Woodward & Lothrop, supra; Harrist v. Spencer-Harris Tool Co., 244 Miss. 84, 140 So. 2d 558; Kientz v. Carlton, 245 N.C. 236, 96 S.E.2d 14; Standard Conveyor Co. v. Scott, 8 Cir., 221 F.2d 460; Messina v. Clark Equipment Co., 2 Cir., 263 F.2d 291.
If we assume by way of argument that the representations in the manufacturer's literature made the cheater pipe an integral part of the load binder; that the use of a cheater pipe introduced the dangers we have noted and that such dangers were in addition to those inherent in the use of the binder without a cheater pipe, and that the possible dangers by the use of the cheater pipe were in the nature of concealed dangers, such assumptions still would not change the applicable principles or the result under the facts of this case. That is because plaintiff's evidence clearly showed that the addition of the cheater pipe did not play any part in causing of the accident. As noted, the pipe did not slip but fitted tightly at all times as though it were an integral part of the load binder.
Is the rule as to latent defects and concealed dangers affected by plaintiff's charge that defendant should have equipped the product with a safety ratchet to prevent *348 "kick-back"? We think not in this case. A manufacturer is not obliged to adopt only those features which represent the ultimate in safety or design. Marker v. Universal Oil Products Co., 10 Cir., 250 F.2d 603; Mitchell v. Machinery Center Inc., (1961) 10 Cir., 297 F.2d 883, 886. A manufacturer is not under any duty "to provide a guard or other protective device to prevent injury from a patent peril or a source manifestly dangerous." Hursh, American Law of Products Liability, Vol. 1, § 2:12, p. 133, citing Strickler v. Sloan, (1957) 127 Ind.App. 370, 141 N.E.2d 863. Accordingly, where the product is free of latent defects and concealed dangers; where the perilous nature of the product and the danger of using it is obvious and not concealed; where its normal functioning creates no danger not known to or appreciated by the user; where it is properly manufactured to accomplish the function for which it is designed, the manufacturer has "satisfied the law's demands" and is under no duty to make it "more" safe by providing a built-in safety device. Campo v. Scofield, Harrist v. Spencer-Harris Tool Co., Kientz v. Carlton, Standard Conveyor Co. v. Scott, Stevens v. Allis-Chalmers Mfg. Co., Yaun v. Allis-Chalmers Mfg. Co., Jamieson v. Woodward & Lothrop, Messina v. Clark Equipment Co., supra.
Here the load binder was structurally sound. It did not disintegrate, break down, crack or fail. The perilous nature of the product was obvious and apparent to plaintiff; its lack of a safety ratchet was plain to be seen. Its use created no danger not known to and appreciated by plaintiff, an experienced trucker who had used load binders for years and knew and appreciated full well their dangerous characteristics and propensities. Plaintiff, with this knowledge and appreciation, cannot recover from the manufacturer simply because he was hurt through a mishap in the normal use of the load binder, which reacted in the normal and foreseeable manner anticipated by the user. To so rule would be to make an insurer of the manufacturer. The full measure of defendant's duty was to manufacture a load binder structurally sound and free from any latent defect or concealed danger. The evidence affirmatively shows that the device complied with these requirements. Plaintiff's "injury through the medium of such an agency is neither a probable nor natural result of anything done or left undone by the maker." Bohlen, Studies in the Law of Torts, (1926), p. 126.
Since plaintiff failed to show the existence or breach of any duty owed to this plaintiff we do not reach the question whether the court erred in ruling the plaintiff is barred because he assumed the risk.
Judgment affirmed.
COIL and WELBORN, CC., concur.
PER CURIAM.
The foregoing opinion by HOUSER, C., is adopted as the opinion of the court.
All of the Judges concur.
NOTES
[1] See Morrow v. Caloric Appliance Corporation, Mo.Sup. (en banc), 372 S.W.2d 41, based on implied warranty of fitness and safety, in which it was held that privity of contract between the ultimate purchaser and the manufacturer need not be shown in the case of damage from a hidden defect in a manufactured product. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2591410/ | 223 P.3d 837 (2010)
HARRIS
v.
STATE.
No. 101397.
Court of Appeals of Kansas.
February 12, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3042274/ | United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 05-4457
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of North Dakota.
Shondo Billie, *
* [UNPUBLISHED]
Appellant. *
___________
Submitted: April 5, 2007
Filed: April 10, 2007
___________
Before COLLOTON, HANSEN, and BENTON, Circuit Judges.
___________
PER CURIAM.
A jury found Shondo Billie guilty of one count of sexual abuse of a minor, in
violation of 18 U.S.C. § 2243(a), and four counts of aggravated sexual abuse of a
minor, in violation of 18 U.S.C. § 2241(c). The district court1 sentenced him to 230
months in prison and 5 years of supervised release. On appeal, counsel has filed a
brief under Anders v. California, 386 U.S. 738 (1967), containing a request to
withdraw. For the reasons discussed below, we affirm.
1
The Honorable Daniel Hovland, Chief Judge, United States District Court for
the District of North Dakota.
Counsel argues that the district court erred by denying the defense’s motion in
limine to exclude any evidence of additional, similar abuses by Billie against the same
victim during the same approximate period of time. We conclude that the district
court did not abuse its discretion by admitting this evidence under Federal Rules of
Evidence 413 and 414 because, in the circumstances of this case, the probative value
of the evidence was not substantially outweighed by the danger of unfair prejudice.
See United States v. Benais, 460 F.3d 1059, 1063 (8th Cir. 2006) (upholding
admission of evidence of other sexual assaults under Fed. R. Evid. 413 and 414 when
applying Fed. R. Evid. 403’s balancing test).
Having reviewed the record independently under Penson v. Ohio, 488 U.S. 75
(1988), and having found no non-frivolous issues for appeal, we affirm the judgment
of the district court and grant counsel’s request to withdraw. We deny Billie’s
pending motion for substitute counsel.
______________________________
-2- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542739/ | 93 F.2d 26 (1937)
COMMISSIONER OF INTERNAL REVENUE
v.
LINCOLN-BOYLE ICE CO.
LINCOLN-BOYLE ICE CO.
v.
COMMISSIONER OF INTERNAL REVENUE.
Nos. 6155, 6156.
Circuit Court of Appeals, Seventh Circuit.
December 1, 1937.
James W. Morris, Asst. Atty. Gen., and Sewall Key and F. E. Youngman, Sp. Assts. to Atty. Gen., for Commissioner of Internal Revenue.
A. J. Pflaum, Harry N. Wyatt, and W. R. Arrington, all of Chicago, Ill., for Lincoln-Boyle Ice Co.
Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.
LINDLEY, District Judge.
In No. 6155, the Commissioner of Internal Revenue petitions to review one decision of the United States Board of Tax Appeals, and in No. 6156 the taxpayer, Lincoln-Boyle Ice Company, another. Both causes involve on the merits, the question of the proper basis for the computation of depreciation of assets of the taxpayer in the taxable years 1927 and 1928. The question is the same for each year.
The taxpayer was organized in 1926 for the purpose of taking over four predecessor companies; Lincoln Ice Company, Boyle Ice Company, Ravenswood Ice Company, *27 and Irving Park Ice Company. The new company, on January 1, 1927, acquired all assets of each of the four corporations, except their cash, marketable securities and accounts and bills receivable, giving to the stockholders of the transferors in exchange, all of the preferred and common stock and $2,000,000 first mortgage bonds of the taxpayer, less $350,000 of the latter securities retained and used to discharge the then existing funded debt of the Boyle Ice Company.
The properties conveyed were appraised and taken over by the taxpayer at the appraised value. The Lincoln Ice Company conveyed 46.77 per cent. of the total assets acquired by the taxpayer and its stockholders received in return 54.59 per cent. of all securities delivered by the taxpayer in payment of the assets. The Boyle Ice Company conveyed 26.74 per cent. of the assets and its stockholders received 17.31 per cent. of the securities; the Ravenswood Ice Company 9.11 per cent. of the assets and 14.19 per cent. of the securities; the Irving Park Ice Company 17.36 per cent. of the assets and 13.89 per cent. of the securities. This resulted in an overpayment or profit to the Lincoln Company of 16.71 per cent., or $274,258.94; in an underpayment or loss to the Boyle Company of 35.23 per cent. or $330,495.81; an overpayment to the Ravenswood Ice Company of 55.71 per cent., or a profit of $178,116.16; an underpayment to the Irving Park Ice Company of 20.00 per cent. or a loss of $121,879.29.[1] The stockholders of the four predecessor corporations were not identical with the stockholders of the taxpayer.
In making its income tax report for each of the years 1927 and 1928, in computing depreciation upon its assets, the taxpayer used as a basis the cost of the properties to it at the appraisement figures made at the time the properties were acquired. The Commissioner approved this procedure for the year 1927, but in 1928 concluded that, despite the discrepancy in the respective interests received by the various transferring companies as compared with the value of the assets conveyed by them, the transaction amounted to a reorganization, and that the proper basis for computation of depreciation was the original cost of the properties to the respective transferors. Upon review the Board of Tax Appeals held, over the Commissioner's objection in an answer seeking to extend the latter basis to the prior year also, that the record was not such that for the year 1927 any deficiency could be assessed, but that for the year 1928 the evidence was such as to disclose that a reorganization had been effected and that the proper basis for computation of depreciation was the cost to the transferring companies, as contended by the Commissioner.
The causes were consolidated for hearing before the Board, and thereafter treated as one proceeding. On July 26, 1935, the board entered a one-member memorandum opinion covering all branches of the consolidated cause, finding in favor of the taxpayer for 1927 and in favor of the Commissioner for 1928. The Commissioner filed his motion in the consolidated cause, for reconsideration and review by the entire Board of this memorandum opinion, alleging that "the decisions" were in error. On August 30 the court ordered that the respondent's motion for review be denied, and that his motion for modification of the memorandum opinion be referred to Member McMahon. On January 15, 1936, it was ordered that the motion for reconsideration and modification of the memorandum opinion, disposing of the tax liability for each of the years, be denied. In view of the fact that the Board never modified its conclusion with respect to the year 1927, and was not asked to modify the same, the Commissioner now contends that the taxpayer's petition for review, having been filed more than three months after July 25, 1935, came too late.
The motion to dismiss must be denied. Where, as here, two cases are consolidated, disposed of in one hearing, by one memorandum opinion and order, and there follow motions for reconsideration or modification of the decision covering the entire cause, taken under consideration and finally disposed of, although one part of the order sought to be reviewed is not attacked, we consider the decision unitary in character. So long as petitions for modification or review are pending, the Board has jurisdiction to modify its decision with respect to any part thereof, and neither party can be denied an appeal within three months from final disposition of the motion to modify the *28 decision. Griffiths v. Commissioner, 50 F.2d 782 (C.C.A.7).
The issue as to the proper basis for computing depreciation can be settled only by an examination of the statutes involved. Under section 23 of the Revenue Act of 1928, 26 U.S.C.A. § 23 and note, (carried forward from the Act of 1926 [sections 214, 234, 44 Stat. 26, 41]), the taxpayer is entitled to a reasonable allowance for depreciation. Under section 112(b)(5), 26 U.S. C.A. § 112(b)(5) and note (the same substantially as section 203(b)(4) of the Act of 1926, 44 Stat. 12) no gain or loss can be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation and immediately after the exchange such person or persons are in control of the corporation. In the case of an exchange by two or more persons, this provision applies only if the amount of stock and securities received by each is "substantially in proportion to his interest in the property prior to the exchange." Section 113 of the Revenue Act of 1928 (26 U.S.C. A. § 113 note), provides that if the property is acquired by a corporation through the issuance of stock or securities in connection with a transaction covered by section 112(b)(5), the basis for determining gain or loss shall be the same as it would have been in the hands of the transferors. Section 203(b)(4) of the Act of 1926 and section 112(b)(5) of the Act of 1928 are statutory exceptions to the general rule that the gain or loss realized upon the sale of property must be recognized for the purpose of the income tax. The basis upon which depreciation of exhaustible assets is allowed by statute is the same as that provided for determining the gain or loss upon sale or other disposition of property.
It is to be observed that essential to the finding of no loss or profit is the condition that the amount of stock and securities received by each transferor shall be substantially in proportion to his interest in the property prior to the exchange. If the transferor receives stock of the receiving corporation, giving him an interest in all of its assets substantially the same as he had in the property transferred, he has neither lost nor gained, but if he receives stock of greater value than that of what he transfers, the exchange is equivalent to a sale, from which profit is derived. We have seen that the stockholders of one transferring company received 16 per cent. more in securities than the value of the transferred property; those of another, 35 per cent. less than the value of the property transferred; those of another, 55 per cent. more than the value transferred; and those of the fourth, 20 per cent. less than the value transferred.
We cannot reconcile these discrepancies in proportion with the language of the requirement of the act that the interest received by each party must be substantially the same as his interest in the property transferred. The case is even stronger than that of United Carbon Co. v. Commissioner of Internal Revenue, 90 F.2d 43 (C.C.A.4). There the discrepancy between the values conveyed and the securities received was less than in the case before us. That court concluded that the condition essential to the application of the section, namely, that the amount of stock received by each person must be substantially in proportion to the amount of property exchanged, did not exist; but, on the contrary, that the proportionate interest of no one of the transferors was substantially the same after the exchange as before. Similar in its reasoning is Snead v. Jackson Securities & Investment Co., 77 F.2d 19 (C.C.A.5).
We conclude, therefore, that no reorganization was effected, but that a purchase was made and that the cost of that purchase is the proper basis for computation of the taxpayer's depreciation.
The taxpayer deducted as an expense of its business the sum of $8,975.83, paid by it in the year 1927 as premiums, service charges, and release fees, in connection with its retirement of $350,000 in bonds then outstanding against the property of Boyle Ice Company, one of the transferring companies. This amount was deducted from income in the taxpayer's 1927 return, but was disallowed as a deduction by the Commissioner. The Board held [under San Joaquin Light & Power Corporation v. McLaughlin, 65 F.2d 677 (C.C.A.9)] that the sum was deductible as an ordinary, necessary business expense.
If a corporation redeems its own bonds, it may deduct any unamortized discount and expense incurred in connection with that particular bond issue as well as any premiums and expenses paid in connection with their redemption. Helvering v. California Oregon Power Co., 64 App.D.C. 125, 75 F.2d 644. But here the taxpayer was retiring the bonds of a transferring company, and the retirement was a part of full performance by the taxpayer of its purchase of the *29 property acquired. The payment of the bonds was the payment of so much of the purchase price; it was a capital investment. Consequently, the additional expense of $8,975.83, incurred in performing this obligation, in payment of the purchase price, was not properly deductible as a business expense.
The decisions of the board with reference to each of the years 1927 and 1928 are reversed, with directions to proceed in accordance with this opinion.
NOTES
[1] These figures are based upon a computation which excludes a bond issue of $350,000 owing by the Boyle Ice Company paid out of the proceeds of the bond issue of the taxpayer. If consideration is given to the $350,000, as a part of the cost, resulting discrepancies are even greater. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1801731/ | 618 So. 2d 1048 (1993)
COMMERCE INSURANCE AGENCY, INC.
v.
Trudeau J. HOGUE, III.
Trudeau J. HOGUE, III and Hogue & McAdams Insurance
v.
Ernest L. McADAMS, Jr., et al.
Nos. CA 92 0327, CA 92 0328.
Court of Appeal of Louisiana, First Circuit.
April 23, 1993.
Rehearing Denied June 16, 1993.
*1049 Dowell R. Fontenot, and M. Aubrey McCleary, Jr., Baton Rouge, for plaintiff-appellant Commerce Ins. Agency, Inc.
John Dale Powers and Mary A. Cazes, Baton Rouge, for defendant-appellee Trudeau J. Hogue, III.
Before LOTTINGER, C.J., and FOIL and FOGG, JJ.
FOIL, Judge.
In these consolidated suits brought by the parties to a contract of sale, we are asked to determine whether the contract is enforceable and whether either of the parties is entitled to damages. The trial court ruled that the contract was a nullity due to failure of consideration, but refused to award either party damages. We reverse the factual finding of the trial court on the enforceability issue and hold that the party seeking to enforce the contract substantially breached the contract and cannot therefore recover damages for nonperformance. Further, we affirm its ruling on the damage issues, but amend the judgment to allow an award of partial restitution.
FACTS
Commerce Insurance Agency, Inc. of Baton Rouge (CIA) filed this suit against Trudeau Hogue, III, seeking to enforce a contract of sale of its "Book of Business." Hogue asserted affirmative defenses and also filed a separate suit against, among others, CIA and Earnest McAdams, the owner of CIA, alleging breach of contract. The suits were consolidated for trial, during which the following evidence was adduced: Hogue, an insurance agent, was acquainted with McAdams and went to work for McAdams at CIA in 1983 as a salaried insurance salesman. Sometime thereafter, the two began to discuss the sale of CIA's business to Hogue. The elder McAdams wished to take on a rather inactive role in the insurance business. Because he did not want to be faced with potential liability, he wished to set Hogue up in a separate insurance entity. McAdams was to take on an advisory role in the new agency, and would work to procure new insurance business on behalf of Hogue. They also agreed that some of CIA's clients would not be transferred to Hogue and that McAdams would continue to write the insurance on certain specified policies.
To carry out their objectives, the parties agreed that CIA would sell Hogue its "Book of Business." They executed a preliminary agreement setting forth many of *1050 the details of the proposed sale, and executed a contract of Sale and Purchase on February 19, 1986. In the contract, the parties agreed that Hogue would pay $115,000.00[1] for the Book of Business. Also, Hogue agreed in the contract to pay automobile, travel and entertainment expenses on behalf of McAdams, and to pay health insurance for Mr. and Mrs. McAdams. The contract provided that these obligations were to remain in effect during the McAdams' lifetime.
The contract of sale specifically excluded all accounts of Capital Bank & Trust Company and all flood insurance accounts. While the contract declared that the Book of Business was attached thereto, there was no copy of the client list comprising the Book of Business attached to the contract.
Additionally, the contract contained a clause specifically allowing McAdams to compete with Hogue. That clause stated:
Buyer acknowledges the existence of Union Management Company and Commerce Insurance Agency of Baton Rouge, Inc. and Harper-Cox McAdams & McAdams Inc., all of which are entities in which Ernest L. McAdams, Jr. or Mary Joyce Cox McAdams, may now or may in the future hold an interest and which will continue to do business in competition with Buyer. Buyer agrees that the sole property being acquired with this transaction is the Book of Business as described above under the terms and conditions contained therein.
A reversionary clause in the contract provided that Hogue's nonperformance of his contractual obligations would result in the restitution of the Book of Business back to McAdams. It further set forth that Hogue's nonperformance would result in his having to pay McAdams three times the total consideration as a penalty.
The parties testified regarding the object of the sale, the Book of Business, and how the $115,000.00 sales price was arrived at. Prior to the execution of the contract, McAdams and Hogue went over a list containing all of CIA's accounts current. This written document contained all of CIA's active customers over a twelve-month period. From this list, McAdams called out the names of the clients and the amounts of the premiums. Hogue wrote down the amount of the premiums, totalled the figures and came out with a sixty-eight to seventy thousand dollar annual premium. This figure and a certain multiplier were used to arrive at the $115,000.00 purchase price. There was some discrepancy in the testimony regarding whether Hogue also wrote down the names of the clients on the list.
The testimony established that both parties clearly knew what was being transferred in the Act of Sale. Hogue testified that he knew that by purchasing the Book of Business, he was receiving the agency's current account list. He explained the importance of the agency list: it reveals the type of policy, expiration date, and premium amount, which serves as a timetable for the agent to contact insureds prior to the expiration of the policy, and also is useful in soliciting business. Hogue testified that it was his experience in the insurance industry that approximately 75% of all insureds renew their policies with the same agent. He stated that while he never looked at the physical evidence of the accounts current and never actually drew up a document entitled "Book of Business," he knew it existed. He attested that CIA's accounts current list remained at CIA's office, he knew where it was stored and filed, and candidly admitted that there was "no reason for me to look at it." He stated that he never asked for a copy of the accounts current list because in his mind, that list already existed and there was simply no need to ask for it.
After purchasing the Book of Business, Hogue began operating the agency as Hogue and McAdams Insurance Agency, Ltd. He and McAdams shared an office on Goodwood Boulevard in Baton Rouge. McAdams continued to write insurance for the policies specifically excluded from the sale *1051 and to procure new business for Hogue's new agency. Although the contract was silent regarding who would pay for the operational expenses in running the separate insurance agencies out of the Goodwood office, Hogue and McAdams Insurance Agency, Ltd. paid for all expenses, including the rent, salaries for two secretaries and a bookkeeper, and all other overhead costs. In addition, Hogue honored all of his obligations on the note, paying the monthly installments as well as the agreed to expenses on behalf of McAdams and his wife.
This relationship continued from May of 1986, the effective date of the sale of the Book of Business, until October of 1987, when Hogue announced his decision to relocate in order to save money on operational expenses. According to the testimony, Hogue demanded that McAdams share in the expenses of running the office; however, McAdams refused. Hogue stated that he had no choice but to move out of the Goodwood office in order to save money. On October 1, 1987, Hogue moved his files from the Goodwood office and set up another location in which to run the business.
Hogue testified that he derived approximately sixty to seventy thousand dollars in commissions from the Book of Business from May 1, 1986, until his departure in October of 1987. However, after he left the office, Hogue's renewals steadily declined. By the time of trial, only three customers purchased in the Book of Business had policies with Hogue. He stated that 99.9% of the customers he purchased in the Book of Business did not renew their policies, and that he derived only $231.00 in commissions from the remaining policies.
Hogue attributed the lack of renewals to the conduct of McAdams in soliciting the customers he purchased in the Book of Business shortly after he moved out of the Goodwood office. The evidence firmly established that McAdams' insurance agency did indeed solicit insurance business from clients who were sold to Hogue in the Book of Business. Shortly after Hogue's departure from the office, McAdams announced that CIA was "in the insurance business again." He acknowledged that he went back into the insurance business and "grabbed everybody that we could get our hands on." Although admitting that he was soliciting customers sold to Hogue in the Book of Business, he stated that he felt they were "fair game." He testified that he had no alternative but to get back into the insurance business in order to maintain his office and keep his secretaries on the payroll. McAdams stated he presumed, from the very first day of the contract, that he could write insurance for anyone he wanted because the contract gave him the right to compete. He also viewed the clause giving him the right to compete as his "collateral" in the event Hogue breached the contract. However, he did testify that he did not feel Hogue's actions in leaving the Goodwood office constituted a breach of the contract, as Hogue was merely relocating his business elsewhere.
Regarding the competition clause, Hogue testified that he understood that provision to give McAdams the right to continue writing insurance on policies specifically excluded from the sale and to write new policies. He never contemplated that McAdams would be authorized to solicit business sold to him. He stated that it would be incredible to believe that he would obligate himself to pay automobile and entertainment expenses to McAdams if McAdams could use those funds to solicit the very business he purchased from McAdams.
The record reveals that Hogue continued to honor his obligations under the contract until March of 1988, when he ceased all payments on the advice of his attorney. His failure to honor the contractual obligations prompted this suit by CIA to enforce the contract and to recover penalties as set forth therein. Hogue answered the suit asserting the defenses of failure of consideration and error or mistake regarding the principle cause of the contract. Hogue also filed a separate suit against, among others, CIA and McAdams, alleging that McAdams breached the contract in numerous particulars, including his solicitation of the insurance accounts and clientele from the Book of Business purchased by *1052 Hogue. Hogue sought damages for loss of revenues from insurance renewals, the value of business records, loss of goodwill, and a portion of the expenses for running the Goodwood office, totalling $272,131.75.
After reviewing the evidence, the trial court ruled that the contract was null and void due to the lack of a specific or determinable object. The court also declined to award damages to either of the parties. CIA took this appeal, contesting the trial court's refusal to enforce the contract and its failure to award CIA damages. Hogue answered the appeal, challenging the failure of the trial court to award damages to him.
DISCUSSION
We first address CIA's challenge to the trial court's ruling that the contract was void due to the lack of a specific object. In arriving at this conclusion, the trial court stressed that the Book of Business was not detailed in the body of the contract and ruled, therefore, that the contract lacked definition or description. The court stated that "the purchaser got nothing capable of description other than by the phrase `Book of Business' in consideration for the purchasers obligations under the alleged contract."
After reviewing all of the evidence, we hold that the trial court erred in ruling that the Book of Business was incapable of definition or description. La.Civ.Code art. 1973 provides that the object of a contract must be determinate at least to kind; however, the quantity of a contractual object may be undetermined, as long as it is determinable. The parties testified that they knew exactly what was being sold and were well aware that the Book of Business was CIA'a accounts current list for the preceding twelve-month period. This written list was used to derive the selling price for the business. Hogue admitted that he did not need physical evidence of the Book of Business, as that evidence was contained in the office files, he knew where it was located, and he had access to it whenever he wanted. The parties to this contract clearly understood what was being bought and sold and, therefore, the trial court's finding that the contract was void due to the absence of a specific object is erroneous.
However, we hold that CIA is not entitled to the relief that it seeks on an alternative basis. We believe that by soliciting the business McAdams sold to Hogue, McAdams breached the contract. While the contract did give McAdams the right to compete, this provision contemplated competition for new accounts, along with McAdam's continued involvement in writing accounts excluded from the sale. The contract did not authorize McAdams to solicit the business he transferred to Hogue in the sale and any other conclusion is simply untenable.
The law is settled that where one party substantially breaches a contract, the other party to it has a defense and an excuse for nonperformance. McAdams cannot claim damages for the nonperformance of a contract as to which he is in default. Silverman v. Caddo Gas & Oil Co., 127 La. 928, 54 So. 289 (La.1911); Ouachita National Bank in Monroe v. Gulf States Land & Development, Inc., 579 So. 2d 1115 (La. App.2d Cir.), writ denied, 587 So. 2d 695 (La.1991); Central Louisiana Electric Company v. Giant Enterprises, Inc., 371 So. 2d 641 (La.App.3d Cir.), writ denied, 375 So. 2d 646 (La.1979); Olympic Insurance Company v. H.D. Harrison, Inc., 463 F.2d 1049 (5th Cir.1972), cert. denied, 410 U.S. 930, 93 S. Ct. 1373, 35 L. Ed. 2d 593 (1973). Because McAdams substantially breached the contract of the sale of his business by soliciting the business which he sold to Hogue, he may not claim damages for Hogue's nonperformance of the contract. Thus, the trial court correctly refused to allow McAdams to recover any damages for Hogue's failure to perform under the contract.
We also agree with the trial court's refusal to award damages to Hogue. Hogue argues that the trial court should have awarded damages for bad faith breach of contract, contending that he is entitled to damages for loss of business he expected to receive, loss of goodwill, reputation and confidence of his clients.
*1053 La.Civ.Code art. 1995 provides that damages are measured by the loss sustained by the obligee and the profit of which he has been deprived. La.Civ.Code arts. 1996 and 1997 set forth damages allowable against an obligor in good faith, as opposed to an obligor in bad faith. The record does not support a finding of bad faith on McAdams' part. Further, any award of damages for loss of business revenues or lost profits based on the record before us would be entirely speculative, and we decline to enter an award for those damages sought by Hogue.
However, we believe that Hogue should be entitled to recoup the payments he made to McAdams after the time that McAdams actively breached the contract, at which point Hogue was no longer contractually obligated to make those payments. The record contains letters, dated October 21, 1987, soliciting clients who were purchased in the Book of Business. The record reveals that after this date, the following amounts were paid by Hogue pursuant to the contract: (1) The note $10,669.99; (2) Auto expenses$825.00; (3) Health Insurance$1,756.95; (4) Travel and Entertainment expenses$2,050.00. We hold that Hogue is entitled to recover $15,301.94 from McAdams, representing the payments made by Hogue after the date of McAdam's breach of the contract.
CONCLUSION
Based on the foregoing, the judgment of the trial court refusing to enforce the contract at issue, and declining to award damages to either party thereto is affirmed. The judgment of the trial court is amended to reflect an award to Trudeau Hogue, III in the amount of $15,301.94. All costs of this appeal are assessed to appellant, Commerce Insurance Agency.
AMENDED AND AFFIRMED.
NOTES
[1] For this amount, Hogue executed a promissory note for $115,000.00, with interest, payable in 60 monthly installments, beginning September 10, 1986. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1802599/ | 306 So. 2d 910 (1974)
Gayle Wayne FOSTER
v.
Bruce M. BARKER.
No. 10060.
Court of Appeal of Louisiana, First Circuit.
December 16, 1974.
Rehearing Denied February 10, 1975.
*911 Robert L. Kleinpeter, Baton Rouge, for appellant.
James R. Coxe, III, Baton Rouge, for appellee.
Before LANDRY, BLANCHE and NEHRBASS, JJ.
BLANCHE, Judge.
Defendant-appellant, Bruce M. Barker, appeals from an adverse judgment of the trial court ordering him to pay to plaintiff-appellee, Gayle Wayne Foster, $4,026.06, plus legal interest from date of judicial demand until paid, all costs of court and $150 in expert witness fees. Plaintiff answered the appeal, seeking an increase in general damages from $2,500 to $10,000 and also the sum of $1,500 for loss of earnings. We affirm the decision of the trial court.
The incident giving rise to this suit occurred on October 20, 1973, at defendant's apartment in Baton Rouge, Louisiana. The testimony reflects that plaintiff arrived at defendant's apartment at approximately midnight on the twentieth in search of his girl friend, Jimmie Rose Hart, after a friend told him of her presence there. When plaintiff gained admittance to the apartment, he discovered Miss Hart and the defendant in matching blue pajamas. An argument then ensued between the plaintiff and defendant, with the plaintiff making certain derogatory remarks concerning the defendant's alleged sexual proclivities. Plaintiff further threatened the defendant, stating that he would break his neck and also boasting that if the defendant went for his gun he would break his bones. Thereafter, defendant did, in fact, go into the bedroom, which was located only a few feet away from where plaintiff was standing, obtained a 32-caliber pistol, and shot the plaintiff.
Although the facts are somewhat in conflict, it appears that this first shot was fired by defendant when plaintiff was only a few feet away and that the bullet struck plaintiff in the right arm, penetrated the chest and lodged in the back. Defendant contends plaintiff provoked the shot by raising his arms as if to strike defendant or take the gun away, as plaintiff had threatened to do. Plaintiff contends, however, that he was not striking at defendant but simply threw his hands in the air in an *912 attempt to defend himself. After the first shot, plaintiff ran from the apartment, with the defendant in close pursuit. When plaintiff reached a point just outside the door of the apartment, the defendant shot plaintiff a second time in the back, and plaintiff was knocked against a parked car. Defendant continued chasing plaintiff across the apartment complex until plaintiff finally collapsed.
It is conclusive that the incident that took place in the apartment lasted but a few moments, and there was only a short interval between the first and second shots. Defendant telephoned the police and plaintiff was rushed to the hospital where he remained for four and a half days. According to expert testimony, plaintiff recovered fully within approximately four months. However, both bullets remain in plaintiff's body. The second one, lodged superficially, could be easily removed.
The trial judge, in rendering judgment in favor of plaintiff, found as a fact that "no overt physical act" was taken toward the defendant and further found that mere words, even though intended to incite or irritate, cannot justify a battery, citing Morneau v. American Oil Company, 272 So. 2d 313 (1973); Squyres v. Phillips, 285 So. 2d 337 (La.App. 3rd Cir. 1973). The trial judge's statement of the law is correct and supported by the foregoing cases.
Defendant does not quarrel with the cases relied upon by the trial judge but contends that his factual findings are in conflict with the evidence. He claims that plaintiff created a tense situation by his presence and demeanor in defendant's apartment and that plaintiff committed an overt physical act toward the defendant by raising his right hand as if to strike at or grab the defendant (a fact which plaintiff denies), and under these circumstances the defendant was justified in retaliating with a dangerous weapon. In support of his position, defendant cites McCullough v. McAnelly, 248 So. 2d 7 (La.App. 1st Cir. 1971).
In McAnelly, supra, this Court found that certain youths were out looking for trouble and deliberately set out to intimidate and terrorize the McAnelly family. The majority also found that it was reasonable for McAnelly to believe that he or his family was in immediate danger of death or bodily harm and that he was justified in using reasonable force (a dangerous weapon) in order to repel an attack on his son. In so holding the Court quoted the following pertinent judicial declarations:
"`Of course, resort to the use of a dangerous weapon in order to repel a supposed attack upon a defendant's person or that of persons to whom he owes a duty to protect cannot be countenanced as justifiable save in exceptional cases where the actor's fear of the danger is not only genuine but is founded on facts which would be likely to produce similar emotions in men of reasonable prudence.' Patterson v. Kuntz, 28 So. 2d 278 (Orl. La.App. 1946).
`For the privilege of self-defense to exist, it is not necessary that the danger actually exist. It is only necessary that the actor have grounds which would lead an ordinary reasonable man to believe it exists, and that he so believe. All the facts and circumstances are to be taken into account to determine the reasonableness of the belief.' Pearson v. Taylor, 116 So. 2d 833 (La.App. 2 Cir. 1959)." (McCullough v. McAnelly, 248 So. 2d 7, 10)
We find no such "exceptional case" as the majority found in McCullough. Each case depends on its own peculiar facts and circumstances, and the evidence must be relied upon to determine the aggressor and whether more force than necessary was used to repel the aggression, Assuming arguendo that the trial judge *913 was in error in finding that plaintiff committed no overt physical act toward the defendant, there is not a scintilla of evidence in the record to justify the defendant's use of a dangerous weapon. It was only after the defendant appeared with gun in hand that plaintiff raised his arms, and we believe the trial judge's conclusion is correct that such conduct did not constitute an overt act of aggression toward defendant. Additionally, it is to be noted that when the plaintiff ran, after the first shot was fired, the defendant pursued him and shot him again. The trial judge was correct in finding a lack of justification for defendant's use of a dangerous weapon.
Plaintiff answered the appeal, seeking an increase in the award of general damages by the trial judge. He also assigns as error the trial judge's failure to award him loss of wages in the sum of $1,500. The trial judge, in Oral Reasons for Judgment, stated:
"Now, we note that the plaintiff in this suit incurred past medical expenses totaling $1,476.06. Future medical expense of $50.00 is proven. There is testimony to the effect that he lost approximately ten weeks wages, which according to the plaintiff was to the extent of approximately $150.00 per week, plus commissions. We also note that the gunshot wounds, the pain and suffering resulting from those gunshot wounds, and the additional future hospital medical which will be necessary for the removal of the bullet, would also constitute damages for which this Court would normally award the sum of five or six thousand dollars. Future hospital expenses were not, however, proven. While an award for these other items would normally be in order, we believe that the provocation, the verbal abuse and the action of the plaintiff in this case certainly should be held against him in mitigation of the damages. For those reasons we refuse to award the loss of wages in this case and we're going to cut the award for personal injuries down to the sum of $2,500.00." (Oral Reasons for Judgment, Record, pp. 42, 43)
From our review of the evidence, we concur in the finding that the plaintiff went to defendant's apartment and verbally abused him and threatened him with physical harm. In other words, he went there looking for trouble and found it. The trial judge was, therefore, justified both in law and fact in mitigating damages.
In Moore v. Blanchard, 216 La. 253, 43 So. 2d 599 (1949), the Court reviewed the question of when surrounding circumstances may be shown to mitigate damages in assault and battery cases, quoting extensively from 4 American Jurisprudence, verbo Assault and Battery, and noting the Louisiana jurisprudence in which compensatory damages were mitigated by reason of provocation or fault shown on the part of the plaintiffs.
In Morneau, cited supra, the Supreme Court noted the rule of law that words which are calculated to provoke and arouse to the point of physical retaliation may mitigate damages in a civil action but found that the words used by the plaintiff in that case were insufficient to merit any mitigation of damages.
In Squyres, supra, the Third Circuit Court of Appeal recognized this rule of law.
For the foregoing reasons, the judgment of the trial court is affirmed, at the cost of defendant-appellant.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542350/ | 122 F.2d 209 (1941)
MILLER
v.
MILLER.
No. 7718.
United States Court of Appeals for the District of Columbia.
Argued May 14, 1941.
Decided June 30, 1941.
*210 Leonard J. Ganse, of Washington, D. C. (Carl F. Bauersfeld, of Washington, D. C., on the brief), for appellant.
Alfred M. Schwartz, of Washington, D. C. (Charles H. Bergazin, of Washington, D. C., on the brief), for appellee.
*211 Before GRONER, Chief Justice and EDGERTON and RUTLEDGE, Associate Justices.
EDGERTON, Associate Justice.
This is an appeal from a summary judgment of the District Court for unpaid instalments of alimony under a Nevada decree. On September 16, 1933, a Nevada court granted appellee an absolute divorce with custody of two minor children, a daughter born in 1916 and a son born in 1917 or 1918. Appellant was ordered to pay to appellee $150.00 per month, "for her support, and for the support and education of the minor children"; and, if she remarried, to "continue to make such payments to * * * [her] for the support of the said minor children alone."
The complaint and bill of particulars in the present suit, which appellee commenced on January 10, 1940, alleged that the Nevada decree was still in force, that appellee had not remarried, and that since November 1, 1934, appellant had paid less than the decree required. On complaint, answer, a deposition of appellant, and affidavits, the District Court granted summary judgment for the amount of the arrears.
A claim for unpaid alimony under a final decree of a State court is entitled to full faith and credit here.[1] The Nevada statute of limitations bars actions upon a judgment or decree six years after the cause of action accrues. Comp.Laws Nev. § 8524. No cause of action accrued until default. Default first occurred in the instalment due on November 1, 1934, and the six year period then began to run on that instalment.[2] When this suit was brought, no suit on unpaid instalments was barred in Nevada. Accordingly none was barred here. Our three-year catch-all statute of limitations, despite its reference to "this section" (341), does not cut down the periods which are specifically prescribed in Sections 322 and 343 for suits on domestic and foreign judgments.[3]
The Nevada decree prescribed a single allowance for the support of appellee and the children. Such an allowance is treated as alimony payable to the wife.[4] It is not to be construed as an award of $50 to her and $50 to each child.[5] So long as she remains unmarried, the order to pay her $150 a month is not contingent on the minority of the children; it is only in the event of her remarriage that payments are to be made "for the support of the minor children alone." The Nevada court apparently fixed alimony at $150 a month not as being all that the combined necessities of appellee and the children required, but as being all that appellant could reasonably pay. This appears from the fact that if the wife remarried while the children remained minors, appellant was to pay the full amount for the support of the children alone. The decree made no express provision for the opposite contingency of the wife remaining single after the children became adults. If it had provided expressly for that contingency, presumably it would have done so on the same principle. We are not concerned with the question whether the Nevada court now could or would, on application, modify the decree so as to reduce the amount of the alimony, in view of changed circumstances which include the maturity of the children on the one hand and an increase in appellant's salary on the other. We must enforce the decree as it stands. It is absolute, and entitles appellee to $150 a month until she remarries.
The complaint alleged that appellee had not remarried. Appellant answered that he was informed and believed, and therefore alleged, that she had remarried. His deposition set forth the following facts. A friend, whom he named, informed him in the summer of 1934 that she had learned of appellee's remarriage from two acquaintances, *212 whom he also named. In the following fall he wrote to appellee that he had received this information, and warned her that he would reduce his payments unless she denied it. He knew that she received the letter, because an alimony check which it contained came back canceled. Beginning two months later, he reduced all his monthly payments from $150 to $100. Appellee neither replied to his letter nor objected, until two years later, to the reductions in his payments. He and other persons observed her at various places with one Leonard Carmalt. Others saw them together at various apartments, and also walking on the street, arm in arm, carrying groceries. Appellant himself saw them together several times, in two apartments which she successively occupied, and saw him wiping dishes and emptying garbage there. Appellant once saw Carmalt enter her apartment about noon. He had not come out when appellant left two hours later. Appellee's affidavit in support of her motion for summary judgment stated that she had not remarried, and that she had told appellant, in reply to a letter from him in 1938, that this was the fact. But appellee did not deny that she received appellant's letter of 1934, or assert that she told him at any time before 1938 that she was unmarried, or deny his assertion that for two years she made no protest at his action in reducing his payments on the theory that she was married; nor did she deny her alleged close association with Carmalt.
Rule 56(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The purpose of this rule "is to dispose of cases where there is no genuine issue of fact, even though an issue may be raised formally by the pleadings."[6] However, "The court is not authorized to try the issue, but is to determine whether there is an issue to be tried."[7] "To proceed to summary judgment it is not sufficient then that the judge may not credit testimony proffered on a tendered issue. It must appear that there is no substantial evidence on it, that is, either that the tendered evidence is in its nature too incredible to be accepted by reasonable minds, or that conceding its truth, it is without legal probative force."[8] Rule 56(e) provides that "supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Appellant's testimony to appellee's implied admission of remarriage by her failure to deny that she had remarried when her interest required her to deny it, part of his testimony to more or less matrimonial conduct, and part of his testimony to matrimonial repute, were made on appellant's own knowledge. We think that this testimony raised a genuine issue as to the material fact of remarriage.[9] Since the Nevada decree provides that, upon remarriage, payments are to be continued "for the support of the * * * minor children alone," it provides in effect that, unless there are minor children, payments are to be discontinued upon remarriage. The children have reached their majority. It follows that, if appellee has remarried, the accrual of further instalments of alimony ceased on her remarriage or on the majority of the younger child, whichever occurred later. Since there is a genuine issue as to a material fact, the court should "make an order specifying the facts that appear without substantial controversy * * * and directing such further proceedings in the action as are just."[10]
Reversed.
NOTES
[1] Barber v. Barber, 21 How. 582, 16 L. Ed. 226; Sistare v. Sistare, 218 U.S. 1, 13, 30 S. Ct. 682, 54 L. Ed. 905, 28 L.R.A., N.S., 1068, 20 Ann.Cas. 1061; Loughran v. Loughran, 292 U.S. 216, 227, 54 S. Ct. 684, 78 L. Ed. 1219; Phillips v. Kepler, 47 App.D.C. 384; Junghans v. Junghans, 72 App.D.C. 129, 112 F.2d 212.
[2] Arndt v. Burghardt, 165 Wis. 312, 162 N.W. 317; Gaston v. Gaston, 114 Cal. 542, 46 P. 609, 55 Am. St. Rep. 86; McGill v. McGill, 101 Kan. 324, 166 P. 501.
We need not consider whether acquiescence in continuous defaults over a six year period would bar suits for instalments which became due thereafter. Cf. Simpson v. Simpson, 21 Cal. App. 150, 131 P. 99; Davis v. Gould, 234 Mo.App. 42, 131 S.W.2d 360, 361.
[3] D.C.Code, Tit. 24, § 343. McKay v. Bradley, 26 App.D.C. 449, 451.
[4] Knabe v. Knabe, 176 Md. 606, 6 A.2d 366, 124 A.L.R. 1317; Cohen v. Cohen, 174 Md. 61, 197 A. 564; Jackson v. Jackson, 179 Ga. 152, 175 S.E. 456.
[5] Crouch v. Crouch, 140 Ga. 76, 78 S.E. 408.
[6] Fletcher v. Krise, 73 App.D.C. 266, 120 F.2d 809, 811.
[7] Dwan v. Massarene, 199 A.D. 872, 192 N.Y.S. 577, 582.
[8] Whitaker v. Coleman, 5 Cir., 115 F.2d 305, 306.
[9] Cf. Curry v. Mackenzie, 239 N.Y. 267, 146 N.E. 375, 376: To justify summary relief "the court must be convinced that the issue is not genuine, but feigned, and that there is in truth nothing to be tried."
[10] Rule 56(d). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2452801/ | 256 P.3d 897 (2011)
SMITH
v.
STATE.
No. 104103.
Court of Appeals of Kansas.
July 8, 2011.
Decision Without Published Opinion
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542151/ | 947 A.2d 1143 (2008)
CATHEDRAL AVENUE COOPERATIVE, INC., Appellant,
v.
Hope H. CARTER, John Hemphill, Jr., and Twenty Fifty-Eight Partnership, L.P., Appellees.
No. 07-CV-205.
District of Columbia Court of Appeals.
Argued April 8, 2008.
Decided May 15, 2008.
As Amended June 16, 2008.
*1147 James H. Hulme, with whom Donald B. Mitchell, Jr. and Joshua A. Fowkes, were on the brief, Washington, for appellant.
Richard T. Rossier, Washington, with whom Susan M. Gschwendtner was on the brief, for appellees.
Before RUIZ and REID, Associate Judges, and FERREN, Senior Judge.
FERREN, Senior Judge:
This landlord and tenant case brings to this court, for the fourth time, a rent dispute that has continued for a quarter-century between Cathedral Avenue Cooperative, Inc. (the Tenant), a cooperative association that owns the 145-unit residential building at 4101 Cathedral Avenue, N.W., and Hope H. Carter, John Hemphill, Jr., and Twenty Fifty-Eight Partnership, L.P., all members or successors of a group (the Landlord) that in 1959 leased the land to the Tenant for 99 years for construction and operation of the building.
In August 2006, an arbitration panel increased the rent under the ground lease to $163,493.84 for the period 2004-2014. The central question presented on appeal is whether this arbitration award is limited to the dollar amount calculated by the panel, as the Landlord contends, or is broad enough to include the reasons for the decision, as the Tenant maintains. More specifically, the Tenant urges us to rule that a majority of the arbitrators expressly premised the dollar calculation on an interpretation of the lease that limits any rent increase to an adjustment derived solely from an inflation index. The Landlord, to the contrary, argues that no majority rationale is evident from the arbitrators' opinions, and thus that the scope of the award is limited as the trial court ruled to the agreed-upon bottom line, $163,493.84.
The significance of this dispute lies not in the rent level payable during 2004-2014 but in the potential impact of the award on future arbitrations. If the arbitrators expressly calculated the increase based on the Tenant's interpretation of the lease, that will strengthen the Tenant's argument that this interpretation binds future arbitrators under the doctrines of res judicata or collateral estoppel. If, however, the rationale for decision is not part of the award, the Landlord will have more room to argue in a future proceeding (as it did unsuccessfully in this one) that the decennial rent adjustment can and should be premised on increased land value, not merely on inflation. In that case, the Tenant would be limited to arguing that the inflation index rationale, while not expressly part of the 2006 award, is nonetheless implicit in it (and thus that the Landlord's land value argument is precluded forevermore, even though the 2006 award did not expressly incorporate a preclusion rationale).[1]
This is not the first time that the rationale for decision has surfaced as an issue. In two previous arbitration proceedings the first initiated by the Landlord, the *1148 second initiated by both the Landlord and Tenant the parties sought a ruling that incorporated the rationale for the decision, but for different reasons no definitive answer was forthcoming in either case. In the present proceeding, in contrast with the earlier ones, each arbitrator wrote extensively on the meaning of the rent adjustment clause. In ruling on the Tenant's motion to confirm the award, however, the trial court continued the narrow approach. The judge confirmed the arbitrators' decision that set the annual rent "for the 10-year period commencing November 1, 2004" at $163,493.84. But, without a hearing or an explanation, the judge declined "to specifically adopt or reject any reasoning articulated by the arbitrators."
Although neither party contests the $163,493.84, the Tenant appeals the portion of the trial court order that declined to incorporate the reasons for decision by the two arbitrators in majority. It asks us to find in the majority decision an interpretive ruling that the lease limits a rent adjustment to an increase based on inflation alone. For the reasons that follow, we agree with the Tenant and remand the case with instructions to amend the Confirmation of Arbitration Award, as set forth at the end of this opinion.
I.
The Landlord and Tenant executed the ground lease (Lease) in November 1959. It provided an initial annual rent of $25,320 subject to increase, for the first time, after twenty-five years. The rent adjustment provision appears in Article I, Section 4, which also anticipates arbitration:
[S]aid annual basic rental of Twenty-Five Thousand Three Hundred Twenty Dollars ($25,320.00) shall be adjusted to the Wholesale (Primary Market) Price Index, for all items, as determined by the United States Department of Labor, Bureau of Labor Statistics [the WPI], . . . or its successor or most nearly comparable successor at the time of the adjustment. . . . If such Index shall be discontinued with no successor or comparable successor, or if either party with reasonable grounds therefor shall notify the other that such Index is no longer applicable for the purpose of this lease, the parties shall attempt to agree upon a substitute formula, but in the event the parties are unable to agree upon a substitute formula, then the matter shall be referred to arbitration as herein provided. (Emphasis added.)
The parties refer to the highlighted portion of the rent adjustment provision as the "Opt-Out Clause" the clause at the heart of this dispute.
The rent adjustment provision also includes strict time periods for seeking a change in the rent level:
At least (90) days prior to the expiration of the first twenty-five (25) years of the term of this lease and at least ninety (90) days prior to the expiration of each succeeding ten (10) year period of the term hereof, the Landlord or the Tenant may, upon written notice to the other, request that the basic annual rental then being payable hereunder be increased or decreased for the succeeding ten (10) year period of the term of this lease in accordance with the foregoing provisions.
Failure to give timely written notice of a request for a rent adjustment will leave the pending rent level intact for the next ten years.
Article XII of the Lease specifies the procedures governing arbitration. The portions relevant here state: "In case there are three (3) arbitrators selected as above mentioned, an award in writing signed by any two of them shall be final. The expense of any such arbitration shall be borne equally by the Landlord and the Tenant. Judgment upon any award here-under *1149 may be entered in any court having jurisdiction thereof." (Emphasis added.) Article XII did not provide for application of any particular rules and said nothing about whether the arbitrators should issue a reasoned award.
The 1984 Arbitration
The Landlord sought the first rent adjustment, and initiated the related arbitration, in 1984. It argued that because land values had been accelerating at a rate higher than advances in the Producer Price Index (PPI, successor to the WPI), it had "reasonable grounds" to argue under the Opt-Out Clause that an inflation index was "no longer applicable" and that the rent instead should be premised on land value.
The arbitration proceeding went nowhere. The trial court agreed with the Tenant that the validity of the Landlord's notice seeking a rent increase was not subject to arbitration and ruled on the merits that the notice was untimely. See Carter v. Cathedral Ave. Coop., Inc., 532 A.2d 681, 683 (D.C.1987). Because a motion was pending in the trial court, however, we dismissed the Landlord's appeal as premature. See id. at 683-85. Thereafter, the trial court ruled again that the notice issue was not arbitrable, a ruling we reversed. See Carter v. Cathedral Ave. Coop., Inc., 566 A.2d 716, 719 (D.C.1989). Eventually, another judge ruled that the arbitration should proceed before a three-member panel, not before a single arbitrator as the Landlord had argued. We sustained that ruling. See Carter v. Cathedral Ave. Coop., Inc., 658 A.2d 1047, 1048 (D.C.1995). In the end, the arbitration panel ruled that the Landlord's request to change the nature of the rent adjustment formula was untimely, and the panel determined that the annual rent for the ten-year period 1984-1994 would be $83,343.84, after applying the PPI index formula in Article I, Section 4 of the Lease.[2]
The 1994 Arbitration
In 1994, the Landlord and tenant jointly initiated arbitration in order to settle the issue that the Landlord had failed, on procedural grounds, to have resolved in 1984, namely, whether appreciating land values were "reasonable grounds" under the Opt-Out Clause for abandoning an inflation index as "no longer applicable for the purpose of this lease." The Landlord presented evidence that "[s]ince the beginning of the lease term, the PPI has increased by a factor of 3.76, whereas the value of the land has increased by a factor of 11.8." A three-member arbitration panel, without expressly addressing the Landlord's contention, retained an inflation index substituting the Consumer Price Index (CPI) for the PPI and calculated the ten-year annual rent for 1994-2004 at $128,925.31.
The 2004 Arbitration
In June 2004, the Landlord again announced that there were "reasonable grounds" for concluding that an inflation index was "no longer applicable" and submitted the matter for arbitration. The Tenant moved for a stay, asking the trial court to rule based on the 1994 arbitration that res judicata (claim preclusion)[3]*1150 and/or collateral estoppel (issue preclusion)[4] barred the Landlord from rearguing its contention under the Opt-Out Clause that the decennial rent level should be premised on land value, not inflation. The court denied the stay, ruling that the preclusion question itself was for the arbitrators, not the court, to decide.
Each party then appointed an arbitrator, and those two chose a third, neutral member to chair the panel. The Tenant moved to dismiss the Landlord's demand for arbitration on preclusion grounds, whereupon arbitrators Tenenbaum and Von Salzen, on June 9, 2005, denied the motion without prejudice, reserving the right to reconsider upon presentation of additional evidence that the 1994 award (issued in 1995) barred the Landlord's 2004 contention.[5] Arbitrator Moses dissented, concluding, by reference to the 1994 award, that res judicata and collateral estoppel precluded the Landlord from proceeding under its theory.
After the arbitration hearing, a majority of the panel, arbitrators Tenenbaum and Moses, rejected the Landlord's argument and set the annual rent level for the ten years beginning November 1, 2004, at $163,493.84 based on the CPI. Arbitrator Tenenbaum wrote a 47-page "Arbitration Decision" elaborating his reasoning. Arbitrator Moses concurring "in the Arbitration Decision by the majority of the Panel" issued a one-page "Concurring Opinion" stating that, by virtue of the 1994 award, res judicata precluded rejection of the CPI index; otherwise he would have found the PPI "still applicable." Arbitrator Von Salzen dissented. He found support for the Landlord's position in the "objective law of contracts," a meticulous parsing of Article I, Section 4 of the Lease, the economic data supplied by the Landlord's experts, and a refutation of arbitrator Tenenbaum's legal analysis.
The Tenant filed in the trial court a Motion to Confirm Arbitration Award, which the Tenant interpreted to include not only the ten-year annual rental but also the majority rationale for decision limiting rent increases under the Opt-Out Clause to calculations based on an inflation index. The Landlord did not object to confirmation of the ten-year dollar amount but opposed interpreting the Award to include a particular rationale for decision. As noted earlier, the trial judge, without holding a hearing, declined without explanation "to specifically adopt or reject *1151 any reasoning articulated by the arbitrators."
Before us now is the Tenant's appeal of (1) the trial court's refusal to confirm the arbitrators' legal rationale, in addition to the dollar value of the award, and (2) the court's further refusal to award the Tenant "costs, disbursements, and attorneys' fees" pursuant to the District of Columbia Arbitration Act (DCAA), D.C.Code § 16-4313 (2001). In addition to opposing the Tenant's contentions, the Landlord, citing Article XX of the Lease, asks for its own "costs, expenses, and reasonable attorney fees" attributable to the appeal.
II.
"We review de novo a trial court's judgment confirming an arbitration award."[6] Judicial review of arbitration awards, however, is limited.[7] "This limited review serves to attain a balance between the need for speedy, inexpensive dispute resolution, on the one hand, and the need to establish justified confidence in arbitration among the public, on the other."[8] In considering arbitration agreements made before enactment of the DCAA in 1977, the trial court must confirm an award unless the arbitrators exceeded "the scope of their authority,"[9] or were party to "corruption" or "fraud," or responsible for "gross" or "manifest" mistake of law.[10] For agreements made after enactment of the DCAA,[11] the statute expressly incorporates all but the last of these common law criteria in greater detail, while omitting all reference to legal mistake.[12] Despite that omission, however, this court has acknowledged that "[w]here it appears that the arbitrator manifestly disregarded the law, court inquiry may be undertaken," at least when the decision approaches "being arbitrary and capricious."[13] Aside from this extreme exception, however, this court "will not review an arbitration decision on the merits."[14] This virtual omission of *1152 review for legal mistake, both at common law and under the DCAA reflects a policy inherent in election of arbitration over a judicial trial that the parties have bargained for the arbitrators' judgment, even more than for legal correctness, and thus should not be deprived of that judgment.[15]
For our purposes, because the Lease was signed years before enactment of the DCAA and has not been amended thereafter, the DCAA would have no relevance except for the Tenant's request for attorney fees and costs pursuant to the statute the last issue for our consideration.
III.
In order to demonstrate that the arbitration award includes a legal ruling, not just a dollar amount, the Tenant argues in its brief that the award embraces the "Arbitration Decision" in full in other words, the reasons for decision as well as the result authored by arbitrator Tenenbaum.[16] It offers two reasons for this broad reading of the award. First, it says, the parties jointly requested, and thus are bound by, a legal interpretation of the Opt-Out Clause. Second, although arbitrator Moses issued a one-page "concurring opinion," rather than sign the forty-seven-page Arbitration Decision written by arbitrator Tenenbaum, these two opinions were legal equivalents, containing identical interpretations of the Opt-Out Clause as well as agreement about the annual rent. As a result, contends the Tenant, arbitrators Tenenbaum and Moses, constituting a 2-1 majority, must be said to have signed an agreed-upon award composed of a monetary ruling and a legal elaboration in conformity with Article XII of the Lease.
Before considering these contentions, it is important to note that they are properly before this court; they need not await resolution in a later arbitration proceeding. Although presumably the Tenant could have waited to raise them, in arguing for their preclusive effect, when the next decennial rent adjustment is at issue in 2004, the Tenant is entitled to their consideration at this time, in this court, because of the allegation that they are expressly a part of the 2004 arbitration award that has been presented for judicial confirmation, not merely implicit in it[17] as would be the argument down the road in 2014.
A.
In addressing the Tenant's first proposition that both parties asked the arbitrators to issue a legal ruling interpreting the Opt-Out Clause we begin with perhaps the obvious observation that arbitrators are required to rule on all the issues, but on no more than the issues, the parties submit; the parties themselves determine the universe for decision.[18] So how can one tell for sure what issues have been submitted? When a dollar figure is *1153 sought by both parties, such as a rent level, that issue is unquestionably presented; otherwise, the arbitrator would lack an assignment. But the question whether the rationale for that decision is also a submitted issue, requiring written reasons for decision by the arbitrator or whether the arbitrator can volunteer reasons as part of the award without being asked is more complicated.
In the first place, arbitrators commonly do not offer reasons for decision[19]-indeed, under American Arbitration Association rules (not relevant here), arbitrators presumptively do not.[20] Typically, therefore, as this court has noted, an arbitrator issues a short and concise statement of the result,[21] less often a more elaborate, "reasoned award" that "sets forth findings of fact and conclusions of law," or perhaps even a "judicial-type opinion."[22]
In this case, the parties did not formally request, by joint submission, that the arbitrators announce a rationale for decision. On the other hand, both parties argued vigorously their respective views of the interpretive premise inflation index or land value on which the arbitrators should base their decision. The fact that a party argues a legal basis for decision, of course, does not in itself suggest that the party is requesting a ruling on that rationale; one can seek a dollar result, for example, without necessarily wanting a ruling potentially with preclusive effect on the reasons for decision. When, however, a dollar calculation requested by both parties necessarily depends, preliminarily, on selection of one rationale over another for that calculation (in contrast with mixed rationales that yield a hybrid result), it may be difficult to argue that the request for calculation excluded all desire for a written expression of that reasoning.
In denying the Tenant's 2004 motion for a stay of the Landlord's demand for arbitration, after rejecting (without prejudice) the Tenant's contention that the 1994 arbitration award had established an inflation index rationale for future years, the 2004 panel majority concluded:
While an adjudicator might ultimately find that the original parties to the Ground Lease intended that the rental adjustment must always be an inflation-based index or inflation based formula (or for that matter, that it be a value based index or formula), it is certainly not obvious from words of the Ground Lease or the awards made in the prior arbitration proceedings, that the parties are bound in 2004 and after to a particular adjudicated determination of those questions. [Footnote omitted.]
Accordingly, and applying the plain words of the Ground lease, once the Landlord notified Tenant of its contention that the CPI Formula was no longer applicable for purposes of the Ground Lease, the Landlord was entitled to have the parties (or, if they could not agree, an arbitration panel) consider the threshold question of whether there are reasonable grounds to conclude that the CPI Formula is no longer applicable for purposes of the Ground Lease. It should be noted that if the parties wish *1154 to do so, they may request that this arbitration panel, in addition to deciding the issues regarding the 2004 rent adjustment that have been submitted to arbitration, resolve other matters in dispute in a manner which might establish principles that would be applicable to future decennial adjustments under the Ground Lease. But the Panel believes that it has not yet been demonstrated that the outcome reached by virtue of the Amended 1995 Award [for the 1994 arbitration] was definitive on these issues. (Emphasis added.)
The Landlord takes the position that the parties never accepted the panel's invitation to submit "other matters," including the rationale for decision, for resolution as part of the "award." We conclude that the Landlord is wrong. In fact, as we shall explain, the rationale for decision is not an "other matter"; it is among "the issues regarding the 2004 rent adjustment that have been submitted to arbitration."
In its Demand for Arbitration, the Landlord submitted six issues, "including any matter that arises in connection with or in relation to" any of them. The arbitrators were to consider Issues 2, 3, 4, and 6 only "[i]f the answer to Issue 1 above is yes."[23] Issue 1 reads as follows:
Whether the Landlord has reasonable grounds for concluding that the rent adjustment formula set forth in Article I, Section 4 of the Lease, as modified by the Amended Initial and Final Award of Arbitrators executed on March 9-14, 1995, and transmitted to the parties on March 21, 1995, is no longer applicable for the purpose of the Lease.
The panel majority answered in the negative and calculated the dollar amount for the period 2004-2014 based on the CPI inflation index formula applied in 1995 (for the 1994 arbitration).
Did the parties ask the arbitrators to explain the rationale for their dollar decision? The answer is "yes." In the first place, the threshold issue before the arbitrators was the methodology or "formula" for calculating the rent adjustment; the dollar amount would come later, after methodology was resolved. The Landlord recognized that threshold requirement by submitting, as Issue I, the question whether there were "reasonable grounds" for abandoning the CPI Index used in calculating the "Amended Initial and Final award of Arbitrators" in 1995. Thereafter, as the parties tried the case, it was clear to all that resolution of Issue I required the arbitrators to answer an anterior, predicate question: whether the Opt-Out Clause in the Lease permitted the Landlord to seek a rent adjustment based on land value rather than inflation.[24] No other ground for the Landlord's proposal was offered or considered. In rejecting that proposal, therefore, the panel majority necessarily determined that a rent adjustment is limited to a calculation that accounts for inflation; land value is irrelevant. Accordingly, what the parties have conceptualized as a separate category reasons or rationale for decision is not that at all. Interpretation of the scope of the Opt-Out Clause-a determination necessary to resolving Issue I is inherent in the very first issue submitted for arbitration, and thus the arbitrators were expected to answer it. The arbitrators' answer, *1155 "No," to the Landlord's Issue 1 contained an indisputable reason-inflation index only that was a fundamental part of the answer itself, not merely a supporting rationale. In the very submission of Issue 1, the Landlord asked for interpretation of the Opt-Out Clause. The arbitrators provided it.
The manner in which both parties presented their cases confirms this conclusion; we discern no desire by either one to limit the arbitrators to a one-word answer "No" to Issue 1, without accompanying explanation. In its arbitration brief, the Landlord stated as "Point I" its argument that a party "may opt out of the CPI-U-based[25] rent adjustment formula" if there are "reasonable grounds" for doing so, and asked the arbitrators to "adopt as the substitute formula for calculating the annual ground rent . . . six percent (6%) of the fair market value of the land. . . ." Later, at the arbitration hearing, Landlord's counsel concluded: "Our position is that these economic facts that I've just summarized demonstrate beyond a doubt that there are reasonable grounds to change the rent adjustment formula. We suggest that that formula should be 6 percent of land value. . . . [W]hen the parties are unable to come to an agreement, it falls to the arbitrators to stand in the shoes of the parties and, in my view, come up with a new index that fits the new facts of the current time." (Emphasis added.) The Landlord, therefore, was proposing a formula that necessarily required an interpretation of the Opt-Out Clause that was flexible enough to accommodate a rent adjustment based on land value, not merely on inflation.
In response, counsel for the Tenant reaffirmed his client's position: "[W]e want to end this once and for all and get a ruling that the landlord can't keep doing what they've been trying to do the last three times. . . . Now the landlord wants to change this index lease to one based on the value of real estate. The evidence will show that this does effect a fundamental change in the character and the economics of the lease, so we've joined issue on this as to whether or not that can happen. I think the evidence will show you that it cannot." (Emphasis added.) The Landlord's counsel never negated the Tenant's representation highlighted here.
Later, during questions from the panel, arbitrator Von Salzen asked the Tenant's counsel: "[C]ould you tell me where we get the authority to decide anything other than the 2004 rent adjustment? Because I think you just said and you said in your opening argument that you wanted us to decide that this must always be in an index lease." (Emphasis added.) To which Tenant's counsel replied: "[I]f you look at the arbitration clause itself in the ground lease, you will see that it certainly gives you the authority to decide that issue[,] especially since it's, in our view, a decision that's necessary to a construction of the clause of the lease in deciding what should be done here going forward." (Emphasis added.) The Landlord's counsel never contradicted the Tenant's answer.
Both parties, therefore, asked the panel, as the basis for resolving Issue 1, for an interpretation of the Opt-Out Clause: was it limited to adjustment for inflation or flexible enough to adjust for land value? And it was clear from what arbitrators Tenenbaum and Moses wrote and signed that both intended their answer inflation index only to be part of the award.
*1156 B.
We have concluded that the arbitrators had before them a required interpretation of the Lease as part of the award. But did a panel majority "sign" the award, including that required interpretation? Art. XII of the Lease provides that "[i]n case there are three (3) arbitrators selected as above mentioned, an award in writing signed by any two of them shall be final." No one questions that two of the arbitrators, Tenenbaum and Moses, signed an award that calculated the rent due the Landlord for the period 2004-2014. The contested issue is whether the two also can be said, within the meaning of Art. XII, to have signed a broader award interpreting the Opt-Out Clause.[26]
If both arbitrators did sign, the Tenant will at least have room to argue that the 2006 award (derived from the 2004 arbitration) includes both of the components claimed: dollars and rationale. Otherwise not. We begin by noting that, in 2004, the Tenant responded to the Landlord's demand for arbitration by moving to dismiss the proceeding. The Tenant argued that the 1994 Arbitration had determined that rent under the ground lease could be adjusted only for inflation, not for increase in value, and that res judicata and/or collateral estoppel accordingly barred relitigation of that claim (or issue). Ruling on June 7, 2005, arbitrators Tenenbaum and Von Salzen, as noted earlier, denied the Tenant's motion without prejudice while Arbitrator Moses dissented, agreeing with the Tenant's preclusion rationale.
Then came the decision on the merits. In his 2006 "Arbitration Decision," Arbitrator Tenenbaum, ruled as a matter of law, by reference to contractual language, that the Lease authorized use of the Opt-Out Clause to change the index used to adjust the rent for inflation. But, he added, the lease did not allow broader use of that clause to change the rationale for adjusting the rent from inflation to a land value. Tenenbaum then buttressed that interpretation by relying on this court's Worthington decision.[27] He concluded that any use of the Opt-Out Clause beyond reconsideration of the particular inflation index to be used-the kind of tool expressly recognized in the Lease for revising the rent-would be tantamount to requiring the arbitrators to renegotiate the Lease without discernible criteria for doing so. Absent *1157 such criteria, the Lease would be unenforceable.
Arbitrator Moses issued a "concurring opinion" that states in full:
I concur in the Arbitration Decision by the majority of the Panel. I do so believing I am bound, as I stated in my Dissenting Opinion dated June 7, 2005, under the doctrine of res judicata, by the decision of the 1994 panel that held that the Consumer Price Index ("CPI"), not the Producer Price Index ("PPI") (the successor to the WPI), specified in the Lease was to be used by the parties. If I did not feel bound by the doctrine of res judicata, I would have found that the PPI was still applicable, Landlord having not established by a preponderance of the evidence "reasonable grounds . . . that such Index is no longer applicable for the purpose of this lease."
Moses purported to "concur in the Arbitration Decision," but then straightaway cited res judicata a purely legal defense as his rationale for accepting the CPI that Tenenbaum also embraced. But for such preclusion, added Moses, he would have stayed with the PPI the inflation index used before the 1994 arbitration proceeding because in Moses's view the Landlord had not met the evidentiary test required to demonstrate that the PPI, as originally provided in the Lease, was "no longer applicable." Left to his own resolution of the merits, therefore, arbitrator Moses by relying on the PPI would have calculated a lower annual rent than the CPI-based rent calculated by his colleague, Tenenbaum.
At first blush, it would appear that Moses can be said not to have joined in the Tenenbaum "opinion" (or "decision") but to have merely concurred in the "result," arriving at the annual rent ($163,493.84) by a legal route (claim preclusion) that barred his preference for a different merits resolution less generous to the Landlord. But that analysis is far too superficial and deals with the wrong question. By demanding arbitration, the Landlord pressed a threshold question presented twice before, in 1984 and 1994 whether a rent adjustment under the Opt-Out Clause of the Lease can be premised on the reasonable value of the land. As to this question of allowable methodology, arbitrators Tenenbaum and Moses were in complete accord: the Landlord's valuation theory was unavailable under the Lease.
Tenenbaum made this clear in his "Arbitration Decision" of June 6, 2006:
[T]he majority would . . . interpret the Opt-Out Clause in a manner which . . . gives effect to the parties' original selection of the WPI-based COLA Formula, and the other structural aspects of the Lease which support the view that the escalation formula is intended solely to provide the Landlords with inflation protection. [Emphasis added.]
Moses expressly "concur[red] in the Arbitration Decision by the majority of the Panel" language that embraced rationale as well as dollar calculation. And, like Tenenbaum, Moses had been clear during this proceeding how he interpreted the Opt-Out Clause. In his "Dissenting Opinion" of June 7, 2005, in which he argued for the first time that res judicata barred the panel from rejecting the CPI approach adopted by another panel In 1994, Moses unequivocally rejected the Landlord's valuation theory:
In short, the Lease taken as a whole does not permit the phrase, "the purpose of this lease," to be read to give the Landowners an interest in the value of the land for the Lease Term. . . . The Lease, read as a whole, compels the use of an inflation index. Landowners parted with the value of the land for 99 years when they signed the Lease in 1960. [Emphasis added.]
*1158 Whatever differences these two arbitrators eventually might have had in applying an inflation index to calculation of the rent adjustment, had Moses felt free to question use of the CPI, those differences would have been irrelevant to their shared view that the Landlord's approach was unacceptable. Tenenbaum and Moses, therefore, may have arrived at the same annual rent by different routes, but on the way they agreed absolutely that the Landlord's proposal could not be accommodated under the Lease.
In sum, because arbitrators Tenenbaum and Moses both concluded as a matter of law albeit in separate opinions that the Opt-Out Clause of the Lease limits the landlord to rent adjustments based only on inflation, we are satisfied that they both signed at least two determinations at the heart of the "Arbitration Decision": (1) the dollar amount of annual rent ($163,493.84) for the period 2004-2014, and (2) a rejection of the landlord's valuation theory as a basis for calculating rent under the Opt-Out Clause.
IV.
Finally, each party claims entitlement to attorney fees and related costs. The Tenant asks for them in connection with pursuing its Motion to Confirm Arbitration Award in the trial court and on appeal; the Landlord seeks them only in connection with this appeal. We conclude that neither party is entitled to fees or costs.
Asserting that the DCAA applies to the fee issue, the Tenant cites D.C.Code § 16-4313 (2001), which provides that after the trial court has confirmed, modified, or corrected an arbitration award and judgment has been entered, "[c]osts of the application and of the proceedings subsequent thereto, and disbursements may be awarded by the Court." Assuming, without deciding, that "costs" would include "attorney fees" in this context,[28] we cannot accept the Tenant's argument. As noted above in Part II, the DCAA does not apply to arbitration agreements entered into before enactment of the DCAA in 1977, unless amended thereafter (which has not occurred here).[29] The Tenant offers no persuasive reason why the costs provision should be applied to this 1959 Lease while other provisions of the DCAA are inapplicable.
Tenant notes, initially, that the Landlord's Motion to Compel Arbitration cited the DCAA, D.C.Code § 16-4302(a), in addition to Super. Ct. Civ. R. 70-I, as grounds for getting into court, and contends that the parties accordingly had adopted the DCAA for purposes of this case. That argument has no heft.
Tenant next argues that, because the Landlord did not cite any of the five bases for vacating the award under the DCAA, D.C.Code § 16-4311(a), supra note 12, the award including the inflation index ruling under the Opt-Out Clause should have received trial court confirmation (as we here hold), and accordingly that fees and costs should be awarded against the Landlord as losing party.[30] That argument, too, goes nowhere. Even if the DCAA were to apply, attorney fees *1159 would be awardable in the court's discretion ("may be awarded") only because of "the losing party's unjustified refusal to comply with the award."[31] In this case, the Landlord has not refused to comply with anything; it has merely defended against the Tenant's effort to clarify the scope of the award, which the Tenant could have waited to clarify ten years hence, by invoking res judicata and collateral estoppel, if the Landlord again were to propose its land value theory when demanding arbitration under the Opt-Out Clause.
The Landlord relies for its fee claim not on the DCAA but on Article XX of the Lease, which provides: "In case Landlord shall, without any fault on its part, be made a party to any litigation commenced by or against the Tenant, the Tenant shall pay all costs, expenses and reasonable attorney fees incurred by or against the Landlord by or in connection with such litigation." Construing the Lease as a whole, we are satisfied that the term "litigation" in Article XX is not intended to embrace arbitration proceedings and related court review in connection with decennial rent adjustments. As best interpreted, this provision is an indemnity clause intended to reimburse the Landlord for attorney fees and costs incurred in connection with litigation between the Tenant and third parties in which the Landlord is impleaded; it does not cover claims strictly between the contracting parties.[32] No other explanation for limiting attorney fees to the Landlord comes to mind, especially in light of language in Article I, Section 4 that not only anticipates arbitration but also provides that "[t]he expense of any such arbitration shall be borne equally by the Landlord and the Tenant." Even if that provision does not literally extend to confirmation or other court review of the arbitrators' award, it is highly improbable that the parties intended only for the Landlord, never the Tenant, to recover fees in connection with court review of a rent adjustment proceeding when either one of them could be the moving party.
The only means by which either party may recover attorney fees, then, is under an exception to the "American Rule,"[33] which requires each party to bear its own legal fees unless one of three exceptions applies.[34] The prevailing party may recover fees and costs from the losing party if authorized by statute, by contract, or by the court's exercise of equitable power "when the interests of justice so require."[35] The latter, equitable exception is available when the court finds that the losing party has acted "in bad faith, vexatiously, wantonly, or for oppressive reasons,"[36] or a prevailing class representative *1160 is eligible under the "common fund" doctrine.[37]
To justify fee-shifting under the bad faith exception the only exception potentially available to either party here "bad faith conduct must be so egregious that fee shifting becomes warranted as a matter of equity."[38] "Bad faith may be found either in the initiation of a frivolous claim or in the manner in which a properly filed claim is subsequently litigated."[39] We assess allegations of bad faith conduct by examining whether the claim is entirely without merit "and has been asserted wantonly, for purposes of harassment or delay, or for other improper reasons."[40]
Nothing close to such conduct by either party is evident here. Both sides presented well crafted, strong arguments in good faith for their respective positions before the arbitrators, as evidenced not only by the briefs and record but also by the fact that the panel split 2-1 in its decision. The same high quality of performance is apparent from briefing and argument on appeal, for which this court is grateful. Each party, therefore, shall be left to pay its own fees and expenses.
V.
The Landlord submitted for arbitration the question whether it had "reasonable grounds for concluding that the rent adjustment formula set forth in Article I, Section 4 of the Lease," as determined in the 1994 arbitration, "is no longer applicable for the purpose of the Lease." In order to answer that question, the parties contested whether the Lease permits the Landlord to seek a rent adjustment based on land value rather than inflation; no other rationale for decision was considered. Two of the three arbitrators concluded that the Opt-Out Clause in Article I, Section 4 limits the "reasonable grounds" for changing the "index" used to calculate the rent adjustment to one that controls for inflation; the Landlord's land value alternative was rejected. Because this determination was necessary in answer to Landlord's Issue 1 before the rent adjustment itself could be calculated, it is inherent in the award signed by a majority of the arbitrators, satisfying Article XII of the Lease.
Accordingly, it is ORDERED that the Confirmation of Arbitration Award on appeal is remanded for the trial court to amend the Confirmation by striking the last sentence
FURTHER ORDERED that this court declines to specifically adopt or reject any reasoning articulated by the arbitrators
and substituting therefor
FURTHER ORDERED that, pursuant to Article XII of the Ground Lease, a majority of the arbitrators (two of the three) have signed `in writing' the following answer to the question that serves as a necessary predicate to the resolution of Issue I submitted by the Landlord: when either party notifies the other under Article I, Section 4 of the Ground Lease that the `Index' used to calculate the rent adjustment `is no longer applicable for the purpose of this lease,' the Opt-Out Clause in that Section *1161 limits the `reasonable grounds' for changing `such Index' to grounds that rely for proposed change on an Index that controls for inflation.
So ordered.
NOTES
[1] We explain the significance of this case only to make clear why the parties, who both accept the new rent level, are nonetheless disputing now the scope of the arbitration award. We express no opinion on whether, or how, our decision might have a bearing on the application of res judicata or collateral estoppel in the next rent adjustment proceeding ten years hence. We focus only on the proper understanding of the 2006 arbitration covering the years 2004-2014 and leave to future tribunals all decisions about the impact of our ruling, if any, in subsequent proceedings.
[2] After finding the Landlord's demand for arbitration untimely, the panel also concluded, 2 to 1, that the Landlord had "proposed a formula that should be adopted as a `substitute formula' under Article I, Section 4 of the Lease." The Landlord's chosen arbitrator filed a concurrence explaining that the panel's statement meant that the panel had accepted the Landlord's substantive position as applicable to all "future adjustments." The Tenant's chosen arbitrator filed a dissent contending that the Landlord had "expressly limited" its proposal to the ten-year period 1984-1994. The meaning of the panel's statement was never definitively resolved.
[3] See, e.g., Patton v. Klein, 746 A.2d 866, 869-70 (D.C. 1999) ("a final judgment on the merits of a claim bars relitigation in a subsequent proceeding of the same claim between the same parties or their privies," as well as claims "arising out of the same transaction which could have been raised" but were not) (citations omitted).
[4] See, e.g., Washington Med. Ctr. v. Holle, 573 A.2d 1269, 1283 (D.C.1990) (collateral estoppel "renders conclusive in the same or a subsequent action determination of an issue of fact or law when (1) the issue is actually litigated and (2) determined by a valid, final judgment on the merits; (3) after a full and fair opportunity for litigation by the parties or their privies; (4) under circumstances where the determination was essential to the judgment, and not merely dictum") (citations omitted).
[5] The majority agreed that the 1994 award "specifically reserved the right of both Landlord and Tenant . . . to establish reasonable grounds at the time of each decennial adjustment . . . for asserting that the rent adjustment formula . . . is no longer applicable for purposes of the Ground Lease." Nor had the Tenant established that the grounds asserted by the Landlord in 2004 were identical to those sought in 1994 (or that other requirements of res judicata or collateral estoppel had been satisfied). Finally, according to the majority, the Tenant had not proved that the 1994 panel had "decided that the Ground Lease requires the use of an inflation-based approach to the decennial rent adjustment, rather than a value-based index or formula, or a hybrid formula, for making rent adjustments."
[6] Tauber & Assocs. v. Trammell Crow Real Estate Servs., Inc., 738 A.2d 1214, 1216 (D.C. 1999) (citing Grad v. Wetherholt Galleries, 660 A.2d 903, 905 (D.C.1995)).
[7] Id. at 1217 (citing Shaff v. Skahill, 617 A.2d 960, 963 (D.C. 1992)).
[8] Id. (citing Brandon v. Hines, 439 A.2d 496, 509 (D.C. 1981) (internal quotation marks omitted)).
[9] Brandon, 439 A.2d at 509.
[10] Mancuso v. L. Gillarde Co., 61 A.2d 677, 679 (D.C.1948).
[11] D.C.Code § 16-4318 (2001); Meshel v. Ohev Sholom Talmud Torah, 869 A.2d 343, 360 (D.C.2005).
[12] The DCAA, D.C.Code § 16-4311(a) (2001), provides that a court shall vacate an arbitration award only when:
(1) The award was procured by corruption, fraud or other undue means;
(2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party;
(3) The arbitrators exceeded their powers;
(4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of section 16-4315, as to prejudice substantially the rights of a party; or
(5) There was no arbitration agreement and the issue was not adversely determined in proceedings under section 16-4312 and the party did not participate in the arbitration hearing without raising the objection; but the fact that the relief was such that it could not or would not be granted by a Court of law or equity is not ground for vacating or refusing to confirm the award.
[13] Lopata v. Coyne, 735 A.2d 931, 940 (D.C. 1999); accord Shore v. Groom Law Group, 877 A.2d 86, 91 (D.C.2005).
[14] Lopata, 735 A.2d at 940 (quoting Poire v. Kaplan, 491 A.2d 529, 534 (D.C.1985) (internal quotation marks omitted)).
[15] See United Steelworkers of Am. v. Am. Mfg. Co., 363 U.S. 564, 567-68, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 764, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983); Tauber & Assocs., 738 A.2d at 1219; Poire, 491 A.2d at 534.
[16] At oral argument, however, counsel for the Tenant limited the request for incorporation of the Arbitration Decision to the paragraphs under the final heading ("Conclusion").
[17] See, e.g., Shaff, 617 A.2d at 963 n. 9.
[18] Ohm, 3 COMMERCIAL ARBITRATION (3d ed. 2007) § 115:5 ("In an award, the arbitrator must decide all issues submitted," but "the arbitrator's authority is exceeded when deciding matters not submitted"); see Poire, 491 A.2d at 533 n. 6 ("parties to an arbitration agreement cannot be required to submit to arbitration matters that they did not agree would be the subject of arbitration" (citations omitted)); cf. Shore, 877 A.2d at 95 ("[a]n arbitration award is deemed final as long as it shows an intention to resolve the issues submitted").
[19] See Lopata, 735 A.2d at 940 ("An arbitrator is not required to explain the reason for a damage award."); Poire, 491 A.2d at 534 ("That the arbitrator did not spell out his interpretation of the joint venture agreement does not make the award invalid.").
[20] Oehmke, 3 COMMERCIAL ARBITRATION (3d ed.2007) § 117:4
[21] See Poire, 491 A.2d at 534 (citing United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 598, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960)).
[22] Oehmke, 3 COMMERCIAL ARBITRATION §§ 115:6; 117:4.
[23] Issue 5 pertained only to the completion date for arbitration and the rent payable in the event that the arbitration was not completed before beyond November 1, 2004.
[24] Conceptually, perhaps, this "anterior, predicate question" could be characterized in the alternative as a "rephrasing" of Issue 1. Either way, interpretation of the Opt-Out Clause was inherent in resolution of the Landlord's first submitted issue.
[25] According to the Landlord, the "CPI-U-based" formula is the "CPI-All Urban Consumers, U.S. City Average, All Items" index. Throughout the proceedings this index was summarized, more succinctly, as the CPI.
[26] We interpret the requirement that two of three arbitrators "sign" the award to mean that they must agree on the essential terms, not literally sign the same piece of paper.
[27] George Y. Worthington & Son Mgmt. Corp. v. Levy, 204 A.2d 334 (D.C. 1964), concerned a dispute over an option to extend a ground lease for an additional five years "at a rent to be agreed upon by both parties, such agreement to be based upon the prevailing fair rentals for similar property at that time." Id. at 335 (emphasis added). This court held that the trial judge had not exceeded his authority in determining the fair monthly rental because the option provided a means for calculating the rent in the event that the parties were unable to agree on rental terms. Id. at 337. The court recognized that the language of an option itself may provide sufficient clarity to allow the court to determine appropriate relief, within the contemplation of the parties, in contrast with an open-ended provision that would improperly put the court in the position of "making a new contract for the parties." Id.
Applying Worthington to this case, arbitrator Tenenbaum concluded that the Landlord's broad interpretation of the Opt-Out Clause would violate Worthington "because such an interpretation would essentially require that the parties . . . negotiate something new if one of them has reasonable grounds to be dissatisfied." Even if we were to disagree with Tenenbaum's reasoning, we would not review the award on the merits because the parties bargained for the panel's ruling without regard to its legal correctness. See, e.g., Tauber & Assocs., 738 A.2d at 1219.
[28] See Blitz v. Beth Isaac Adas Israel Congregation, 352 Md. 31, 720 A.2d 912, 918-20 (1998) (confirming that attorney fees "incurred both at trial and on appeal" are included in "disbursements" awardable under Uniform Arbitration Act).
[29] Compare Washington Auto. Co. v. 1828 L St. Assocs., 906 A.2d 869, 878 (D.C.2006) (DCAA applicable to appraisal under 1962 lease because parties amended lease in 2003).
[30] The Tenant adds that the award is also "subject to the Federal Arbitration Act, 9 U.S.C. §§ 9 & 13," a statement that we do not address because unnecessary to our merits disposition and because that Act has no attorney fee provision.
[31] Blitz, 720 A.2d at 919.
[32] See, e.g., Tony Guiffre Dist. Co., Inc. v. Washington Metro. Area Trans. Auth., 740 F.2d 295, 298 (4th Cir.1984); Ranger Constr. Co. v. Prince William County Sch. Bd., 605 F.2d 1298, 1304-05 (4th Cir.1979); see also Safeway Stores, Inc. v. Chamberlain Protective Servs., Inc., 451 A.2d 66, 72 (D.C. 1982) ("well-established that even where an indemnitee is entitled to recover attorney's fees incurred in resisting the indemnified claim, he is not entitled to recover the fees incurred in establishing the right to indemnity").
[33] See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975); Jung v. Jung, 844 A.2d 1099, 1107 (D.C.2004).
[34] Attorney fees are also awardable under D.C.App. R. 38 as a sanction where an attorney "takes an appeal or files a petition or motion that is frivolous or interposed for an improper purpose, such as to harass or to cause unnecessary delay, or fails to comply with an order of this court."
[35] Hall v. Cole, 412 U.S. 1, 5, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973).
[36] Id.; Jung, 844 A.2d at 1107.
[37] Under the "common fund" doctrine, courts may award attorney fees to a class representative where the representative's action "creates or traces a `common fund,' the economic benefit of which is shared by all members of the class." Hall, 412 U.S. at 5-6 & n. 7, 93 S.Ct. 1943.
[38] Jung, 844 A.2d at 1107 (citing Gen. Fed'n of Women's Clubs v. Iron Gate Inn, Inc., 537 A.2d 1123, 1128 (D.C.1988)).
[39] Id. at 1108 (citing Synanon Found., Inc. v. Bernstein, 517 A.2d 28, 38 (D.C. 1986)).
[40] Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541958/ | 76 B.R. 132 (1987)
In re James R. NABBEFELD, Debtor.
Bankruptcy No. 87-01080.
United States Bankruptcy Court, E.D. Wisconsin.
July 22, 1987.
John A. Muraski, Green Bay, Wis., trustee.
Theodore A. Miller, Green Bay, Wis., for debtor.
DECISION
D.E. IHLENFELDT, Bankruptcy Judge.
The debtor, James Nabbefeld, filed a chapter 7 bankruptcy petition on March 10, 1987. In his schedules, he listed "Lien on Homestead, $15,000" as real property in which he had an interest, and he claimed "Homestead, $15,000" as exempt pursuant to § 815.20 of the Wisconsin Statutes.[1] The trustee objected to the claimed exemption on the following grounds:
Debtor's interest is actually a lien against ex-spouse's homestead as result of divorce judgment; such interest is not entitled to homestead treatment or exemption under Wisconsin Statutes.
The underlying facts are not in dispute.
Some time prior to May of 1986, the debtor's then wife, Loretta Nabbefeld, commenced *133 divorce proceedings against him. Shortly after the proceedings were commenced, Nabbefeld moved out of the family homestead located at 7462 Van's Court, Kaukauna, Wisconsin. He moved into a rented room and later on into a rented apartment in the same town. On May 19, 1986, the Family Court Commissioner issued a "Temporary Order" directing Nabbefeld to vacate the residence of the parties and in fact indicating that he had already done so.
On October 1, 1986, Loretta Nabbefeld was granted an absolute divorce by the Circuit Court of Outagamie County, Wisconsin. The parties stipulated to a division of property, which stipulation is attached to the divorce judgment and incorporated therein by reference. Paragraph 6 of the stipulation provides:
6. Petitioner shall receive the homestead of the parties with an approximate value of $52,500.00 and a Mortgage of $22,000.00. Petitioner shall make all mortgage payments. Respondent shall have a Lien of $15,250.00. Lien shall be payable when whatever event occurs firstremarriage of the Petitioner, death of the Petitioner, sale of the house by the Petitioner or the youngest child attains the age of 18 yrs. At that time the Lien is due and payable with no interest.
Paragraph 4 of the court's conclusions of law states:
4. The provisions of the final stipulation on file herein, a copy of which is attached hereto, are made a part hereof and incorporated herein by reference as if fully set forth at length herein. The division of property and transfers of title therein are approved, and each is divested of any title in and to the property of the other party.
At the time of the divorce, the parties had been married for some 15 years or more, and they had owned their home on Van's Court for around six or seven years. Mrs. Nabbefeld and their two minor children continue to live in the Van's Court home, while the debtor presently resides in Fond du Lac, Wisconsin in a rented apartment. He has not remarried. The parties have stipulated that if called upon to testify, the debtor would state that he considered his interest in the Van's Court property to be and intended it as his homestead. His attorney has stated that "if it became necessary for Mr. Nabbefeld to so protect his interest, he could arrange to move back into the original homestead." Just how this would be "arranged" was not explained. Nabbefeld does not have and has not had any other interest in real or personal property that he could claim exempt as a homestead.
The foregoing facts of this case are not unlike those in a case decided under the old Bankruptcy Act, In re Beilke, No. 71-B-2423 (Bk.ED WI 1972), an unreported decision of Honorable Howard W. Hilgendorf, a former judge of this court. In each case, there was a divorce followed by the debtor husband occupying rented quarters, and the ex-wife and children living in the property claimed exempt as a homestead. In each case, the husband was ordered out of the property, although Nabbefeld in fact left before the order was made. In each case, the bankruptcy trustee objected to the debtor's homestead exemption claim on the ground that he was not occupying the property.
The principal difference between the cases is that in Beilke, the divorce decree gave the husband an undivided interest as a tenant in common and the wife the right to remain in the home until it was sold, whereas in this case, the decree provides that the wife "shall receive the homestead of the parties" and the debtor "shall have a Lien" to be paid upon the occurrence of any of four events.[2] Nothing is said concerning *134 occupation of the property, and the trustee notes that when Nabbefeld initially removed himself from the property, it was by agreement and not because he was forced out of the property.
Pointing to Wisconsin case authority which holds that the Wisconsin exemption laws should be given a liberal construction to effect their purpose, Judge Hilgendorf ruled against the trustee and in favor of the debtor's homestead exemption claim in the Beilke case. He stressed the fact that the language of the divorce judgment showed it was the intent of the divorce court to preserve the homestead rights of both parties until the property was sold.
Beilke was cited and followed in In re Lumb, 12 B.R. 862 (Bk.ED WI 1981), and Lumb was affirmed on appeal by the district court for this district (Case No. 81-C-1159, June 17, 1982). The district court referred to "a small but consistent line of [Wisconsin] cases" which hold that persons who are involuntarily removed from their homesteads do not lose their homestead rights in the property. The court said:
In sum, while the Wisconsin Supreme Court has been strict in requiring that persons able to exercise a reasonable degree of volition in their place of residence prove by some one or more concrete acts, and not merely through expressed intent, their intent to maintain certain property as a homestead, and also prove their present entitlement to reside on the claimed homestead property, the Court has been more lenient toward persons who indisputably established a homestead and then were forced by circumstances not of their own making to leave the homestead premises.
The case of In re Neis, 723 F.2d 584 (7th Cir.1983), also deals with the issue of whether a debtor is entitled to a Wisconsin homestead exemption in a home he has left because of a pending divorce. In the Neis case, following marital difficulties, the debtor had moved out of the premises he was claiming exempt, and had lived in a number of other properties, some of which he owned. The court held that whether or not the debtor could claim his original home as exempt at the time in question depended upon his intent at that time whether he had intended to abandon or to maintain his homestead in that property, or whether he intended to create a new homestead when he moved into the other property that he owned.
In view of the cases cited, it seems clear that if the divorce decree had left Nabbefeld with an interest in the title to the property and then awarded his wife the right to occupy the property, the trustee would not have felt obligated to even raise a question regarding his right to the homestead exemption. Since no explanation has been offered as to why the attorneys used the language they did in drafting the agreement, the court surmises it was solely a matter of inadvertance that permitted this issue to arise.
Nabbefeld has no other property of any kindonly the Van's Court homethat he could claim exempt as a homestead. He would testify, if asked, that he looks upon the Van's Court home as his homestead, and there is no reason to disbelieve him and no evidence to the contrary. The statute itself expressly provides that it extends "to any estate less than a fee." Lueptow v. Guptill, 56 Wis.2d 396, 202 N.W.2d 255 (1972) (land contract vendee can claim homestead exemption in vendee's equitable interest in the real estate).
Based upon the facts and circumstances of this case, the authorities set out above, and Wisconsin's strong public policy to protect the homestead exemption and construe the homestead statutes liberally in favor of the debtor, the court holds that the debtor may claim a homestead exemption with respect to his interest in the Van's Court home.
This decision shall stand as and for findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052.
NOTES
[1] 815.20 Homestead exemption definition. (1) An exempt homestead . . . selected by a resident owner and occupied by him or her shall be exempt from execution, from the lien of every judgment and from liability for the debts of the owner to the amount of $40,000, . . . except as otherwise provided. The exemption shall not be impaired by temporary removal with the intention to reoccupy the premises as a homestead nor by the sale of the homestead, but shall extend to the proceeds derived from the sale to an amount not exceeding $40,000, while held, with the intention to procure another homestead with the proceeds, for 2 years. . . . The exemption extends to the interest therein of tenants in common, having a homestead thereon with the consent of the cotenants, and to any estate less than a fee.
[2] The debtor did not deed his interest in the property to Mrs. Nabbefeld following the divorce, and the divorce decree was not recorded with the Register of Deeds for Outagamie County. Although it is not entirely clear that the debtor has been divested of his title to the property, the court assumes for the purposes of this case that the language in the stipulation and the court's conclusion of law No. 4 effected a transfer of title to the wife. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541960/ | 76 B.R. 212 (1987)
In re COASTLAND CHRYSLER PLYMOUTH, INC., Debtors.
Bankruptcy No. 85-02208-BKC-TCB.
United States Bankruptcy Court, S.D. Florida.
May 20, 1987.
Edward R. Miller, Naples, Fla., for debtors.
John C. Shawde, Mershon, Sawyer, et al., Miami, Fla., for Trustee.
Robert W. Clark, MacFarlane, Ferguson, et al., Tampa, Fla., Janie Anderson, co-counsel, Steel, Hector & Davis, Miami, Fla., for First Florida Bank, N.A.
MEMORANDUM DECISION
(FIRST FLORIDA BANK CLAIMS)
THOMAS C. BRITTON, Chief Judge.
The trustee's objections (C.P. 298a) to the 19 claims filed by the bank against three of the four consolidated debtors were heard on May 18. The parties announced that they have reached agreement on all issues except one. In this order, I shall resolve the remaining issue and direct the parties to submit an order resolving all the objections, incorporating the disposition agreed upon between the parties as well as this court's resolution of the sole remaining disputed item.
The bank sustained a loss of $2,832,434 as a result of a fraud committed upon it by its own employees acting in concert with employees of the debtors. It asserted a claim in that amount against an insurance carrier upon a surety bond. The claim was compromised and settled between the bank and its surety by the payment of $1 million to the bank and the assignment by the surety to the bank of all claims and rights of action it might have as subrogee, provided however that the bank will remit to the surety any money it might recover in excess of the bank's claimed loss. The bank and the trustee have stipulated that only $1,737,370 of its total loss is properly asserted as a claim against the estate of these debtors. They have also stipulated that $320,000 of the $1 million payment made by the surety to the bank is properly allocated to that part of the bank's loss which may appropriately be asserted against these debtors.
*213 It is the bank's position that it is entitled to claim the entire $1.7 million loss. It is the trustee's position that the bank's claim should be reduced by the amount it has received from its surety ($320,000) and, therefore, should be allowed in the amount of $1,417,370. I agree with the bank and disagree with the trustee.
The trustee's contention is based upon 11 U.S.C. § 509(c) which subordinates a surety's claim to the claim of its principal until the principal has been paid in full from the bankruptcy estate or otherwise. The trustee's argument misapplies § 509(c), which was enacted for the protection of a creditor as against the claims of the creditor's surety. 3 Collier on Bankruptcy ¶ 509.04 (15th Ed. 1987). Neither the provisions of § 509(c) nor its legislative history require that the creditor's claim be reduced until and unless the creditor's claim has been paid in full by the bankruptcy estate or the surety or both. It has not been suggested that such is or is likely to be the case here. There is, in short, no plausible or equitable reason why this creditor's full claim for its loss chargeable to these debtors should not be allowed as a general, unsecured claim for the purpose of distributing the debtors' assets. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541961/ | 76 B.R. 935 (1987)
In re Robert D. SHERET d/b/a Twin Pines Sport Shop, Debtor.
RELIANCE FUNDING CORPORATION, its assignees and/or successors in interest, Secured Creditor,
v.
Robert D. SHERET d/b/a Twin Pines Sport Shop and Conrad C. Tota, Trustee, Respondents.
No. CIV-86-888E, Bankruptcy No. 83-12037M.
United States District Court, W.D. New York.
August 7, 1987.
*936 Lawrence Brown, Buffalo, N.Y., for secured creditor.
Mark A. Lillenstein, Delevan, N.Y., for respondent.
ELFVIN, District Judge.
The secured creditor, Reliance Funding Corporation ("Reliance"), has moved pursuant to 28 U.S.C. § 158 to vacate the sanctions portion of an order of the Bankruptcy Court, alleging that the Court failed to apply correctly Bankruptcy Rule 9011(a), and to vacate that portion of the Order denying its motion to lift the stay imposed pursuant to 11 U.S.C. § 362(a).
Bankruptcy Rule 9011 is a restatement of Fed.R.Civ.P. rule 11In re 1801 Restaurant, Inc., 40 B.R. 455, 457 (D.Md. 1984)and, like rule 11, requires that every pleading, motion or other paper be signed by an attorney of record, or by the party himself if appearing pro se. Under the federal rule and its bankruptcy analogue, the signature confirms that the signer has read the document and "that to the best of his knowledge, information and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law * * * and that it is not interposed for any improper purpose * * *." In re Usoskin, 61 B.R. 869, 874 (E.D.N.Y. 1986); Bkrtcy. Rule 9011(a). The rule imposes an affirmative duty upon an attorney to conduct a reasonable inquiry into the viability and verity of the pleading before signing it. Subjective good faith does not provide a safe harbor against sanction. Eastway Const. Corp. v. City of New York, 762 F.2d 243, 253 (2d Cir.1985); Zaldivar v. City of Los Angeles, 780 F.2d 823, 829 (9th Cir.1986). The reasonableness of the investigation should be determined by the existing circumstances at the time the pleading, motion or paper was submitted. What constitutes a reasonable inquiry may be determined by considering such factors as the amount of time available for investigation, reliance upon a client or another member of the bar for the facts, and the plausibility of the law used in the pleading. Advisory Committee Note of 1983, reprinted in 2A J. Moore, J. Lucas, Moore's Federal Practice, ¶ 11.01[4] at 11-4, 11-5.
On January 22, 1986 Reliance moved to lift the section 362(a) stay, premised upon the debtor's alleged failure to pay mortgage installments timely. Default for the months of November 1985, December 1985 and January 1986 was averred. The motion was returnable February 3, 1986 before the Honorable Beryl E. McGuire, United States Bankruptcy Judge. At this proceeding, the allegation concerning the November 1985 default was duly withdrawn by counsel, upon information supplied by Reliance January 16, 1986, four days prior to the motion's execution date (Tr. 9). Counsel further stated that, according to Reliance's records, the debtor was still in default for the months of December 1985 and January 1986 (Tr. 9). The record also indicates that counsel for the debtor admitted that the December 1985 payment was made on January 2, 1986 and had not cleared until after the motion's execution date and filing (Tr. 9-11). As to the January 1986 default, the debtor's counsel indicated *937 on the record that payment had been drawn January 24, 1986, two days after the motion's filing, and had not cleared at the time of the February hearing (Tr. 5). Counsel for Reliance noted that his client had informed him that as of January 29, 1986 payment had not been received for either December 1985 or January 1986 (Tr. 6). A second hearing was held on March 27, 1986. Reliance's counsel did not appear. At this hearing the Bankruptcy Court found that the motion papers were not well grounded in fact and violated Bankruptcy Rule 9011(a). Accordingly, the Court sanctioned Reliance, awarding $1,400.00 in attorney's fees to the debtor's counsel (Tr. 13-14).
The record in the instant case does not support the finding and attendant sanction imposed by the Bankruptcy Court. By admission of the debtor's counsel, neither the December 1985 nor the January 1986 payment had cleared until after the motion's execution and filing (Tr. 5, 9-11). The alleged November default is more problematic. Because Reliance's counsel had received notification of payment prior to the motion's date of execution (Tr. 9), the allegation of default for November is a defect in the moving papers; however, such defect is not sufficient to render the motion the type of baseless action intended to fall within the Rule's purview. The federal rule "and its bankruptcy equivalent is intended to discourage dilatory or abusive tactics and help streamline the litigation process by lessening frivolous claims or defenses." See Advisory Committee Note, supra, ¶ 11.01[4] at 11-5. Further, a court must look to the pleading or motion as a whole when attempting to determine the propriety of sanctions. Martinez, Inc. v. H. Landau & Co., 107 F.R.D. 775, 778 (D.C.Ind. 1985). The record indicates that the December 1985 and January 1986 allegations of default were accurate at the time of the motion's execution and that the pleading as a whole was well grounded in fact and based upon knowledge, information and belief formed after reasonable inquiry under the circumstances. Additionally, there is no indication in the record that Reliance's motion was interposed for vexations or improper purposes.
Reliance's counsel further contends that the motion in fact was not dismissed by the Bankruptcy Court. Reliance contends that, in view of the record of proceedings had at the February and March hearings, there was no indication that the Court dismissed the motion, although it signed the Order as though such relief had been both requested and granted. See, Brief of Reliance at 15. Implicit in the record of these proceedings is the notion that, once late payment had been accepted by Reliance and the default cured, there were no grounds upon which to grant Reliance's request for a lifting of the stay. See, e.g., Tr. 9, February 3, 1986 hearing. Hence, the Bankruptcy Court was justified in denying the motion under these circumstances.
Accordingly, it is hereby ORDERED that the sanctions portion of the Order of the Bankruptcy Court is reversed, and that the denial of the secured creditor's motion is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541971/ | 76 B.R. 275 (1987)
Lawson F. BERNSTEIN, Trustee in Bankruptcy of Frigitemp Corporation, Plaintiff,
v.
IDT CORPORATION, George Davis, General Dynamics Corporation, Panagiotis Takis Veliotis, James H. Gilliland, Paulette Veliotis, Elizabeth Gilliland, Leonora L. Cable, a/k/a Leonora Davis, Mark J. Deroche and John Doe Defendants whose identities are currently unknown to Plaintiff, Defendants.
84 Civ. 5299 (EW).
United States District Court, S.D. New York.
July 16, 1987.
*276 *277 Berger & Montague, Philadelphia, Pa., for Lawson F. Bernstein; David Berger, H. Laddie Montague, Jr., Martin I. Twersky, of counsel.
Hollman & Byrne, New York City, for IDT Corp. and George Davis; Matthew L. Byrne, of counsel.
Jenner & Block, Chicago, Ill., for Gen. Dynamics Corp.; Albert E. Jenner, Jr., Nicholas D. Chabraia, William P. Suriano, Susan B. Cohen, of counsel.
OPINION
EDWARD WEINFELD, District Judge.
Plaintiff Lawson F. Bernstein, trustee in bankruptcy of Frigitemp Corporation (the Trustee), brought this action against IDT Corporation (IDT), and its president, George Davis (Davis), as well as General Dynamics Corporation (GD), some of GD's officers, and other individuals not parties to this motion. The Trustee now moves to dismiss the counterclaims of those defendants.
The complaint alleges that Frigitemp, a corporation in the business of subcontracting on marine construction of naval and merchant vessels (commonly known as "joiner work"), filed a Chapter XI Bankruptcy Petition on March 20, 1978, and continued to operate its business until May 29, 1979 when it was adjudicated a bankrupt. The plaintiff was appointed Trustee on that date and has been serving as Trustee ever since. Defendant Davis had been a senior vice president of Frigitemp's marine division, who in February 1978 created IDT Corporation, of which he has been president and a member of its board of directors since at least 1978. Defendant GD is engaged in the shipbuilding business through its Quincy, Massachusetts shipbuilding division.
The complaint alleges that in late 1977 or early 1978, co-defendant P. Takis Veliotis, Executive Vice President of GD's Marine and International Operations, along with co-defendant James H. Gilliland, a GD officer, conspired with Davis and co-defendant Gerald E. Lee, Frigitemp's chief executive officer, to form IDT for the purpose of obtaining by fraudulent conveyance subcontracts and other Frigitemp property and assets, to make illicit payments to Veliotis and Gilliland, and to perpetuate the violations and pattern of racketeering activity described in the complaint. The complaint further alleges that from 1973, defendants engaged in a scheme to embezzle and fraudulently divert money from Frigitemp by paying kickbacks to Veliotis and Gilliland, and to conceal their illegal activities from the Trustee and the Bankruptcy Court. It is further alleged that as part of this scheme, defendants allegedly obtained, through perjured testimony, a settlement and release from the Trustee.
*278 On July 16 and September 8 and 9, 1980, Davis and IDT (through Davis) submitted to oral deposition in the Frigitemp bankruptcy proceedings, when Davis denied knowledge of any fraudulent scheme or conspiracy to make payments. Veliotis was deposed on February 28, 1980, and denied that Davis had ever illegally transferred money to him, or that he conducted any banking transactions at Grand Cayman Island. According to the complaint, these statements were false in that hundreds of thousands of dollars were transferred to Veliotis's Swiss bank account located at Cayman Island by Davis and other employees of Frigitemp. Similar allegations are made as to defendant Gilliland. In total, $1,125,000 was allegedly transferred to Veliotis's Swiss bank accounts, and $925,000 into Gilliland's. It is further alleged that at the time of their perjured testimony, both Veliotis and Gilliland were acting on behalf of GD, and that GD knew or should have known that the testimony was perjured.
In April 1981, the parties entered into a settlement and release agreement whereby defendants were released from any claims by the Trustee, and assignments were executed whereby others now alleged to be co-conspirators assigned to Davis and IDT their rights to claims against Frigitemp. As part of the agreement, Davis and IDT paid Frigitemp $1,369,620 in consideration for certain Frigitemp purchase orders it had obtained prior to the filing of the petition; $30,000 in consideration for certain Frigitemp patents it had obtained prior to the filing of the petition; $100 in settlement of all claims Frigitemp may have against IDT and Davis; and $280 in consideration for the Trustee's assignment to IDT of any claims the Trustee may have against the assignees listed in the agreement. The total amount paid by IDT and Davis was $1,400,000.
The Trustee alleges that the settlement agreement executed by him was fraudulent, obtained in reliance upon the false and perjurious statements made during the depositions and as part of the illegal scheme, conspiracy and pattern of racketeering activity charged in the complaint. After the release and assignments were executed, the Trustee learned that, as a condition of many of the contracts between GD and Frigitemp, the individual defendants agreed that Davis and Lee would embezzle and divert Frigitemp funds equal to at least ten percent of the contract price, and transfer that money to Veliotis and Gilliland. In total, at least $4,500,000 was illegally transferred to Veliotis and Gilliland. The transfer of funds was accomplished by the submission of false invoices issued by certain colluding entities, which Frigitemp paid. Davis is alleged to have shared in substantial portions of these payments. As a result of the illegal scheme, Frigitemp was forced to file for bankruptcy protection on March 20, 1978. GD then terminated its contracts with Frigitemp and reawarded them to IDT. The Trustee alleges that Frigitemp was injured by this scheme in that its valuable contracts were transferred to IDT for no or inadequate consideration; the Trustee was delayed in pursuing enforcement of his rights due to the perjured testimony, thereby allowing assets to be concealed, dissipated or removed from the jurisdiction of the United States, and further allowing individual defendants to leave the country.
In addition to a claim asserted under the Racketeer Influenced and Corrupt Organizations Act (RICO),[1] the Trustee also alleges common law fraud in the inducement of the settlement agreement. Defendant GD is further charged with negligence in entrusting Veliotis and Gilliland with positions of responsibility, and in failing to either discover the scheme or bring it to an end.
In their answer, Davis and IDT categorically deny the charges of wrongful conduct against them, and allege a counterclaim against the Trustee that the Trustee had violated the terms of the settlement agreement by commencing this action, failing to preserve, as the agreement provided, the confidentiality of the information obtained in reaching the settlement, and failing to *279 employ the dispute resolution procedure set forth in the settlement agreement. As a result, Davis and IDT demand return of the $1,400,000 paid upon the execution and delivery of the release and settlement agreement.
GD likewise asserted counterclaims against the Trustee, including claims for civil RICO violations, common law fraud, inducement to breach fiduciary duties, and breach of contract. GD also seeks equitable relief to recover the overcharges allegedly billed to and paid by GD. We consider the counterclaims of the two sets of defendants separately.
DISCUSSION
A. Counterclaims of Davis and IDT
In support of its motion to dismiss the counterclaims asserted by Davis and IDT, the Trustee argues that the claims are neither "provable" under § 63(a)[2] nor "allowable" under § 57(g)[3] of the Bankruptcy Act of 1898 (the Act), which controls this case.[4] Therefore, § 68(b)[5] of the Act bars the assertion of the claims.
Under § 68(b), a party sued in a plenary action brought by a trustee in bankruptcy may not assert counterclaims in that plenary action unless those counterclaims are both "provable" and "allowable" within the meaning of the Act.[6] A provable claim is one existing on the date the bankruptcy petition is filed, because it is the filing of the petition which fixes the date upon which creditors may share in the estate.[7] Under § 57(g) of the Act, a claim is allowable only if the creditor surrenders to the Trustee any void or voidable preferences, liens, conveyances, transfers or assignments it may have obtained from the estate.
The counterclaim advanced by Davis and IDT arises out of the settlement agreement entered into between the parties more than three years after Frigitemp filed its petition. The counterclaim is therefore not provable, and not assertable as a setoff or counterclaim.
Neither is the claim "allowable" as the term is defined in § 57(g) of the Act. Davis and IDT do not dispute that they acquired preferences prior to the filing of the petition in the form of purchase orders and patents, but contend that they offered to surrender the property. However, their offer was contingent upon Frigitemp's repayment of the $1,400,000 paid to Frigitemp, the very relief Davis and IDT seek by assertion of their counterclaim. Under § 57(g), the surrender must be unconditional.[8]
The counterclaim asserted by Davis and IDT is neither provable nor allowable. The Trustee's motion to dismiss the counterclaim is therefore granted.
B. Counterclaims of General Dynamics
We next consider the Trustee's motion directed to the GD counterclaims. The Trustee asserts that the RICO, common law fraud, and inducement to breach fiduciary duty claims sound in tort and therefore are not provable, that the claims cannot be asserted because they are stayed by the automatic stay imposed by the Bankruptcy Court, and that the claims are barred because GD failed to file a proof of claim in Bankruptcy Court.
As outlined above, GD has asserted counterclaims under the civil provisions of the *280 Racketeer Influenced and Corrupt Organizations Act (RICO), common law fraud, inducement to breach fiduciary duty, and breach of contract. For these claims to withstand the Trustee's motion, they must be provable as defined by § 63(a) of the Act. Section 63(a)(4) provides that a debt is provable in bankruptcy if it is founded upon "a contract express or implied." GD contends that all of its claims should be considered provable because they stem from an alleged breach of contract. Contrariwise, the Trustee maintains that the civil RICO and fraud claims clearly sound in tort and therefore must be dismissed.
In determining the provability of a claim under § 63(a)(4), the Court analyzes the specific facts of the case to determine whether the claim sounds in tort or contract.[9] Although the language of § 63(a)(4) is interpreted broadly, to cover claims of a quasi-contractual nature,[10] a claim sounding strictly in tort is not provable under that subsection.
Underpinning GD's RICO claims are the factual allegations that Davis paid bribes and kickbacks to Veliotis and Gilliland to insure that Frigitemp would be awarded subcontracts from GD. This scheme is alleged to have involved the intentional creation of sham corporations, submission of phony invoices, payment of funds into foreign bank accounts, formation of IDT, and submission of illegal, fraudulent and excessive charges to GD. Because of this activity, GD claims it was injured in its business dealings with others.
However viewed, these RICO claims cannot fairly be characterized as quasi-contractual. The claims allege a widespread kickback and bribery scheme, and are based in contract only to the extent that Frigitemp used phony invoices in furtherance of its allegedly fraudulent scheme. Rather, the claim clearly alleges a tort by stating as its primary allegation that GD has been injured in its dealings with others. As such, the claim sounds in tort, is nonprovable, and cannot be asserted in this proceeding. The same holds true for GD's common law fraud claim, which alleges an intentional failure to disclose the existence of the kickback scheme, as well as the claim that Frigitemp intentionally induced Veliotis and Gilliland to breach their fiduciary duty to GD.
GD's remaining claims, seeking the overcharges it paid out and asserting a breach of contract claim, clearly sound in contract and are provable. However, the Trustee contends that the claims are barred by the automatic stay imposed by the Bankruptcy Court, and cannot be asserted in any event because GD failed to file a proof of claim in Bankruptcy Court.
Although the automatic stay would bar the assertion of these claims in a plenary action initiated by GD, a different result obtains where the claim is asserted as a set-off or counterclaim by a defendant. As our Court of Appeals noted in Matter of Bohack Corp.,[11] "where a debtor institutes a lawsuit and then invokes the protection of [the automatic stay] on a counterclaim, the situation warrants careful scrutiny." Just as a court has the discretion to deny a creditor's request to lift a stay where it would be inequitable to allow the creditor's claim to proceed, so too a court has the discretion to grant a set-off "when a debtor moves outside the confines of the bankruptcy court in an attempt to reap the benefits but circumvent the burdens in another forum."[12] In Bohack, the Court of Appeals reversed the district court's injunction of a creditor's counterclaim in an antitrust proceeding brought by the debtor. The court noted that the debtor brought the costly proceeding, and that it was unfair for it to argue that it could not afford *281 to defend the counterclaim after having done so. To deny GD the assertion of properly pleaded counterclaims would allow the Trustee to use the stay as a sword instead of a shield.
The Trustee further argues that the stay may not be lifted without an order from the Bankruptcy Court. However, this is a proceeding in district court, which has the power to determine whether an automatic stay applies to a claim before it.[13] The Court also has the authority and duty under its equity jurisdiction to lift such a stay when justice so requires.
Finally, the Court rejects the Trustee's argument that GD is precluded from asserting its provable claims in this action because it did not file a proof of claim in the Bankruptcy Court. Counterclaims and set-offs may be asserted in a plenary suit notwithstanding the fact that no proof of claim had been filed in Bankruptcy Court.[14] A creditor may be content not to file such a claim as long as no affirmative relief is sought from it by the bankrupt, but once the Trustee asserts a claim against the creditor, equity requires that the creditor be permitted to assert authorized counterclaims.
In conclusion, the Trustee's motion to dismiss the counterclaims of Davis and IDT is granted, as is the motion to dismiss the counterclaims of GD alleging fraud, inducement to breach fiduciary duty, and civil RICO violations. The motion to dismiss the counterclaims seeking equitable relief and alleging breach of contract is denied.
So ordered.
NOTES
[1] 18 U.S.C. §§ 1961-1968.
[2] Ch. 541, 30 Stat. 544, 562 (1898) (as amended and codified at 11 U.S.C. § 103(a) (1976)).
[3] Ch. 541, 30 Stat. 544, 560 (1898) (as amended and codified at 11 U.S.C. § 93(g) (1976)).
[4] Frigitemp's petition was filed in March 1978, prior to the adoption of the Bankruptcy code of 1978, and is therefore governed by the Bankruptcy Act.
[5] Ch. 541, 30 Stat. 544, 565 (1898) (as amended and codified at 11 U.S.C. § 108(b) (1976)).
[6] Allegaert v. Perot, 466 F.Supp. 516, 518-19 (S.D.N.Y.1978).
[7] Zavelo v. J.S. Reeves, 227 U.S. 625, 33 S.Ct. 365, 57 L.Ed. 676 (1913); Workman v. Harrison, 282 F.2d 693 (8th Cir.1960); Wheeling Structural Steel Co. v. Moss, 62 F.2d 37, 40 (4th Cir. 1932).
[8] In re Lyon, 114 F. 326 (D.C.N.Y.1902).
[9] Allegaert v. Perot, 466 F.Supp. at 519; Duban v. Pro Tech Programs, Inc., 441 F.Supp. 467 (S.D.N.Y.1977); Crimmins v. Crimmins, 406 F.Supp. 282 (S.D.N.Y.1975).
[10] Copeland v. Emory Investors, 436 F.Supp. 510, 514-517 (D.Del.1977), aff'd without opinion, 586 F.2d 834 (3d Cir.1978).
[11] 599 F.2d 1160, 1168 (2d Cir.1979).
[12] Id.; accord Binnick v. Avco Financial Services of Nebraska, Inc., 435 F.Supp. 359 (D.Neb.1977).
[13] In re Baldwin-United Corp., 765 F.2d 343, 347 (2d Cir.1985).
[14] Zorwitz v. Okin, 121 F.Supp. 56, 57 (E.D.N.Y. 1954). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541975/ | 76 B.R. 64 (1985)
In re Roy M. BRUNELL, Jr.
Roy M. BRUNELL, Jr., et al.
v.
FEDERAL NATIONAL MORTGAGE ASSOCIATION.
Civ. A. No. 85-2546.
United States District Court, E.D. Pennsylvania.
July 25, 1985.
*65 David A. Scholl, Lehigh Valley Legal Services, Inc., Bethlehem, Pa., for plaintiffs.
Joseph A. Goldbeck Jr., Philadelphia, Pa., for Federal Nat. Mortg. Ass'n.
MEMORANDUM AND ORDER
HUYETT, District Judge.
Plaintiffs-appellants Roy M. Brunell, Jr. and Diane Brunell, formerly Diane L. Cuppy ("plaintiffs"), filed this appeal from an order of the United States Bankruptcy Court for the Eastern District of Pennsylvania issued March 28, 1985, 47 B.R. 830, which granted summary judgment to defendant-appellee Federal National Mortgage Association ("defendant").
Case History
Plaintiffs commenced this adversarial action pursuant to 11 U.S.C. § 548(a)(2), et seq., on October 26, 1983 to set aside a sheriff's sale of their home to defendant, their mortgagee, on April 8, 1982. Plaintiffs filed for Chapter 13 bankruptcy on April 14, 1982, six days after the sheriff's sale of their home. After learning that the loss of their home could possibly have been avoided by assigning their mortgage to the United States Department of Housing and Urban Development ("HUD"), plaintiffs instituted this adversarial action.
On March 16, 1984, the parties stipulated that defendant would not convey the premises to a third party or attempt to evict plaintiffs until a decision on cross-motions for summary judgment was rendered. Plaintiffs are still residing at the house in question. Judge Thomas M. Twardowski of the Bankruptcy Court for the Eastern District of Pennsylvania issued a memorandum opinion and order on March 28, 1985, granting defendant's motion for summary judgment. Thereafter, plaintiffs filed an appeal of the decision to this court.
Presently pending before me is plaintiffs' appeal of the order granting defendant's motion for summary judgment. Plaintiffs have also renewed their summary judgment motion.
Discussion
"The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving." 28 U.S.C. section 158. The scope of this appeal is whether the bankruptcy court erred in applying legal precepts.
*66 The parties do not dispute the findings of fact of the bankruptcy court. The court found: (1) at the time of the sheriff's sale, the property in question had a fair market value of approximately $31,000; (2) defendant was the foreclosing creditor and had a mortgage lien of $29,630.83; (3) defendant purchased the property at the sheriff's sale for the nominal bid of $1.00; and (4) a possibility existed that HUD would accept an assignment of the mortgage.
Sections 548(a)(2)(A) and (B)(i) of Title 11 of the United States Code states:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor . . .
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; . . . [or other non-applicable alternatives].
In the past, courts have granted this relief and avoided similar transfers when these requirements were met.[1]See e.g., In Re: Matter of Ewing, 33 B.R. 288 (Bankr.W.D. Pa.1983); In Re: Jones, 20 B.R. 988 (Bankr.E.D.Pa.1982).
In the present case, it is clear that the transfer occurred within one year before the filing date of the petition for bankruptcy; in fact, the sheriff's sale took place only six days prior to filing the petition. There is also no dispute that plaintiffs were insolvent at the date of the sale. The question at issue then, is whether Judge Twardowski correctly concluded that plaintiffs received "reasonably equivalent value" upon transfer of their property at the sheriff's sale.
In claiming that they did not receive the reasonably equivalent value for their home, plaintiffs argue that the only figure the court should consider in determining "value" from the sale is the $1.00 received at the sale and that the amount, if any, by which their debt was satisfied is irrelevant. Plaintiffs cite two 1938 Pennsylvania Supreme Court cases in support of this position. Noting that "the satisfaction of the deficiency judgment does not meet the requirements of the petition," the court in Home Owners Loan Corp. v. Eiden, 329 Pa. 532, 533, 198 A. 114 (1938), held that the price realized at the sheriff's sale was not reasonably equivalent to the value of the property sold. Because the sum realized at the sale was grossly inadequate, plaintiffs were entitled to have the sale set aside and have the property put to a second sale where it might bring a price in excess of plaintiffs' debt. Id. The court in Peoples Pittsburgh Trust Co. v. Blickle, 330 Pa. 398, 199 A. 213 (1938), held that large discrepancies between the property's fair market value and value received at sale would justify setting the sale aside. The Court did not address the issue of what constitutes "value." Apparently, however, the court did not include debt satisfaction in its determination.
Arguably, under these two cases, plaintiff received only $1.00 for property with a fair market value of $31,000. This would not be a "reasonably equivalent value."[2] Recent developments in the bankruptcy *67 area, however, undermine whatever precedential value these cases may have had. The most important of these developments is the enactment of 11 U.S.C. § 548(d)(2)(A) which defines "value" under this section to include "satisfaction or securing of a present or antecedent debt of the debtor." Therefore, defendant argues that, based on this definition, any amount of plaintiffs' debt which is satisfied must be added to the price paid at sheriff's sale to determine the value received from the sale.
Plaintiffs contend, however, that only $1.00 of their debt is satisfied and that mortgage foreclosure does not bar a subsequent proceeding to recover any deficiency on the bond. Although defendant might be able to institute a personal action subsequent to an in rem foreclosure to recover any deficiency, it would have to comply with the Deficiency Judgment Act. See National Council of the Junior Order of United American Mechanics v. Zytnick, 221 Pa.Super. 391, 293 A.2d 112 (1972); Marine Midland Bank v. Surfbelt, Inc., 718 F.2d 611 (3d Cir.1983).
The Deficiency Judgment Act, 42 Pa.C.S. § 8103, states that, "After the hearing and the determination by the court of the fair market value of the property sold, the debtor . . . shall be released and discharged of such liability to the judgment creditor to the extent of the fair market value of said property . . ." (emphasis added). Therefore, even though defendant could pursue an action to recover any deficiency judgment, no deficiency exists because plaintiffs' debt was less than the fair market value of the property. The purpose of the Deficiency Judgement Act was to remedy the inequity under which a creditor could purchase real estate for a nominal amount at forced sale and still retain full amount of judgment against the debtor. Shrawder v. Quiggle, 256 Pa.Super. 303, 389 A.2d 1135 (1978). The Act was designed to remedy the exact type of problem of which plaintiff complains.
Defendant cites recent authority that supports adding the amount of debt satisfied to the price realized at sheriff's sale in order to determine the "value" received from the sale. For example, In Re: Yorketown Associates, 40 B.R. 701 (Bankr.E.D. Pa.1984), held that a sheriff's sale would not be set aside because it generated "reasonably equivalent value" for the property when the indebtedness that was satisfied through foreclosure proceeding was added to the amount bid at sale. By adding a $3,000,000 debt satisfaction to a bid of $297,000, the court found the value to be equivalent to a fair market value that was in excess of $2,000,000. See also In Re: Dudley, 38 B.R. 666 (Bankr.M.D.Pa.1984); In Re: The Southerton Corp. v. United Penn Bank, 17 B.R. 472 (Bankr.M.D.Pa. 1981); Vend-A-Matic, Inc. v. Frankford Trust Co., 296 Pa.Super. 492, 442 A.2 1158 (1982).
Based on the above cases and the Deficiency Judgment Act, 42 Pa.C.S. § 8103, the amount of debt that is satisfied is added to the sale price to determine the *68 value received for the property. Because, in the present case, the fair market value of the property ($31,000) is greater than plaintiffs' debt to the defendant ($29,630.83), the debt is completely extinguished. Therefore, plaintiffs received $29,631.83 ($29,630.83 plus $1.00) for their property. Judge Twardowski was correct in concluding that this is a "reasonably equivalent value" pursuant to 11 U.S.C. § 548(a)(2) and, accordingly, that the sheriff's sale should not be set aside.
Plaintiffs also contend that their possessory interest in the home, and right to save it via a HUD assignment are "value" which the Court should consider. Plaintiffs do not, however, support this argument and I am unaware of any case law dealing with this matter.
The sheriff's sale satisfied the requirements of 11 U.S.C. § 548(a)(2) and should not be set aside. Therefore, the bankruptcy court's order of summary judgment is affirmed. Plaintiffs' motion for summary judgment is denied.
NOTES
[1] 11 U.S.C. § 522(g)(1) states:
(g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 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; . . .
Plaintiffs can take the position of the trustee for the purposes of this section because the sale of their home was an involuntary transfer, the home was never concealed, and their interest in the home could have been and was exempted pursuant to 11 U.S.C. § 522(d)(1). In Re: Dudley, 38 B.R. 666 (Bankr.M.D.Pa.1984).
[2] In support of their position that the sheriff's sale did not realize a reasonable equivalent to the fair market value of plaintiffs' property, plaintiffs developed a hypothetical situation in which the sale realized $18,000, the plaintiffs indebtedness was $16,000 and the fair market value of the property was $31,000. If the sale realization of $18,000 were added to the debt of $16,000, the sum, $34,000, would exceed the $31,000 market value. Plaintiffs argue that, in that situation, they would have an equity of $15,000 ($31,000-$16,000) but would only receive $2,000 from the sale ($18,000-$16,000) and would therefore lose $13,000 in equity. Plaintiffs' analysis would be applicable if a third party had purchased the property at the sheriff's sale for $18,000. In that case, the first $16,000 of the $18,000 would have to be applied to defendant's lien and $2,000 would be left for plaintiffs. A court could reasonably find, under such circumstances, that the $18,000 was not a reasonably equivalent value.
In this case, however, the creditor/mortgagee has bought the property at the public sheriff's sale and has both paid a dollar amount and promised to extinguish the indebtedness up to the fair market value. Using plaintiffs' numbers, defendant would pay $18,000 in cash and extinguish the $16,000 debt. The $18,000 would not have to be applied to the $16,000 and would go directly to plaintiff or other lienholders. Therefore, in this case, it is appropriate to add the satisfaction of the debt to the sale price to determine whether a "reasonably equivalent value" has been realized.
When a creditor/mortgagee purchases property of the debtor at sheriff's sale, the Deficiency Judgment Act requires that the creditor discharge the debtor of liability up to the fair market value of the property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542174/ | 386 B.R. 585 (2008)
In re Gail A. KORBE, Debtor.
Gail A. Korbe, Plaintiff,
v.
Department of Housing and Urban Development, Defendant.
Bankruptcy No. 07-22856-JAD. Adversary No. 07-2291-JAD.
United States Bankruptcy Court, W.D. Pennsylvania.
April 22, 2008.
*586 Catherine T. Martin, Esq., for the Debtor, Gail A. Korbe.
Megan E. Farrell, Esq., for the Defendant, the U.S. Dept. of Housing and Urban Development.
MEMORANDUM OPINION
JEFFERY A. DELLER, Bankruptcy Judge.
This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052. The matter before this Court are competing Motions for Summary Judgment filed by both the Plaintiff and the Defendant with respect to the Plaintiffs complaint seeking to avoid or "strip off the Defendant's lien pursuant to 11 U.S.C. §§ 506(a)[1] and (d).[2] This Court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334(b). This matter is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A),(K) and (0).
I.
The facts of this case are generally not in dispute. This case was commenced by Debtor, Gail A. Korbe ("Debtor" or "Ms. Korbe"), filing a voluntary petition under Chapter 13 of the United States Bankruptcy Code on May 4, 2007. (Dkt, # 19; Joint Statement of Material Facts Not In Dispute (the "Joint Statement") at ¶ 3).
At the time of the commencement of this bankruptcy case, and through the date of this Memorandum Opinion, the Debtor was the owner of a residence located at 127 Dawes Street, Pittsburgh, PA 15210. (Joint Statement at ¶ 1). As of the commencement of the bankruptcy case, the Debtor's residence was subject to three mortgages consisting of: a first mortgage in favor of Washington Mutual in the amount of $51,880.24, a second mortgage in favor of Beneficial in the amount of $7,485.11, and a third mortgage in favor of the defendant herein the U.S. Department of Housing and Urban Development ("HUD")in the amount of $3,007.12. (Id. at ¶¶ 4, 5 and 6).
The Debtor's residence has a value of $46,000. (Id. at ¶ 2).[3] As a result, at *587 Adversary No. 07-2252-JAD, Washington Mutual's secured claim was stipulated to be no more than $46,000 and at Adversary No. 07-2284-JAD the lien of Beneficial was "stripped-off' thus rendering Beneficial to be a wholly unsecured creditor.
III.
Given the fact that there is no equity in the Debtor's residence above and beyond the first mortgage of Washington Mutual, the Debtor commenced this adversary proceeding seeking the entry of an order pursuant to 11 U.S.C. §§ 506(a)(1) and (d) stripping off the lien of HUD. The government opposes the relief sought by the Debtor, and questions whether this government creditor's lien may be stripped away. This Court concludes that HUD's lien may be stripped away under the facts and circumstances of this case.
No doubt exists that Section 506 of the Bankruptcy Code supports the determination that HUD is an unsecured claimant and that its lien should be stripped away as a matter of bankruptcy law.
Section 506(a) of the Bankruptcy Code unequivocally provides that an allowed claim is a secured claim only "to the extent of the value of such creditor's interest in the estate's interest in such property." 11 U.S.C. § 506(a)(1). Given that there is no equity in the subject property above and beyond the mortgage interest of Washington Mutual, the value of HUD's interest in the Dawes Street property is valued at zero. As such, HUD's claim is an unsecured claim at best. Because HUD's claim is an unsecured claim, its lien position is stripped away as being void pursuant to 11 U.S.C. § 506(d).
The remaining question is whether there are any unique facts of this case which would save HUD from having the Court both void HUD's lien and declare HUD's claim as being unsecured? HUD appears to argue that its lien position is anti-modifiable.
The Court is mindful that this case is a Chapter 13 case, and the anti-modification provisions of 11 U.S.C. § 1322(b)(2) have been applied in situations where the mortgagee is undersecured. See Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993). The facts of this case, however, are that HUD's claim is wholly unsecured and the Third Circuit has held that the anti-modification provisions of 11 U.S.C. § 1322(b)(2) are not applicable in this instance. In re Mc-Donald, 205 F.3d 606 (3d Cir.2000)(holding that Nobelman does not apply when there is no equity whatsoever in the debtor's property to support the subordinate creditor's lien).
HUD further argues in its briefs that the Court has some discretion as to whether HUD's lien position can be stripped away, and suggests that the equities of the case dictate that HUD retain its lien position. The Court disagrees.
As an initial matter, the Court notes that nothing in Section 506 of the Bankruptcy Code authorizes the Court to ignore a debtor's valid lien stripping action in the name of equity. Indeed, equity follows the law and our United States Supreme Court has reminded us that the bankruptcy courts' equitable powers are to be exercised within the confines of the *588 Bankruptcy Code.[4]See Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 99 L. Ed. 2d 169 (1988); see also 11 U.S.C. § 105(a)(statutory provision allowing the bankruptcy courts to "issue any order, process or judgment that is necessary or appropriate to carry out the provisions of the Bankruptcy Code). The Third Circuit Court of Appeals has also echoed this admonition. See In re Combustion Engineering, Inc., 391 F.3d 190, 236 (3d Cir.2004)("The general grant of equitable power contained in § 105(a) cannot trump specific provisions of the Bankruptcy Code, and must be exercised within the parameters of the Code itself.").
Even if the Court has the equitable power that HUD contends, this Court is reluctant to exercise it in this case. Some of the Court's reasons are outlined below.
HUD's claim against the Debtor arises out of the partial claim program sponsored by HUD and the Federal Housing Administration. See 12 U.S.C. § 1715u(b). Prior to the Debtor's bankruptcy filing, the Debtor fell into arrears with its first mortgagee (i.e., Washington Mutual) and HUD cured the arrearage in exchange for a subordinate lien against the subject premises.[5] HUD suggests that the equities of the case should save it from the lien stripping mandated by operation 11 U.S.C. §§ 506(a) and (d). Among the reasons cited by HUD is the fact that HUD's loan is non-recourse and, as a result, it loses the ability to get paid in full if lien stripping is allowed.
The Court is sympathetic to HUD's position, and recognizes the value of the partial claim program. However, HUD has not directed the Court to any statutory text supporting the notion that its claim is purely non-recourse. Rather, the implementing statute of the partial claim program provides that "payment under such program to the mortgagee shall be made in the sole discretion of the Secretary and on terms and conditions acceptable to the Secretary ..." See 12 U.S.C. § 1715u(b). Nothing contained in this statute precludes the Secretary from requiring partial payment claims of HUD under the statute to be recourse. As such, it appears that the *589 decision to have partial claim mortgages be non-recourse lies with the discretion of the regulatory agency. One factor that the agency can consider in this regard is the likelihood that the lien at issue would be stripped off in bankruptcy. Thus, it appears that the loss or waiver of a recourse claim by HUD is largely its own doing.
Moreover, the fact that HUD's claim is in rem in nature actually favors the application of 11 U.S.C. § 506 because this statute ensures that claimants who have a cognizable lien against valuable assets actually receive the benefit of the value of their collateral and no more. Section 506 of the Bankruptcy Code is not intended to be a sword used by wholly unsecured creditors to block Chapter 13 relief to the honest, but unfortunate, debtor.
The Court also has reviewed the Partial Claim Promissory Note (the "Note") dated December 1, 2000 that is attached to the Declaration of the United States' Agency Department of Housing and Urban Development at Exhibit 3.[6] The Note appears to be recourse in nature in that it does not provide that payment is to be made solely to HUD out of proceeds of collateral if the borrower defaults. The Note even provides that "each person is fully and personally obligated to keep all promises made in this Note" and that the "Lender may enforce its rights under this Note against each person individually or against all signatories together." See Note at § 6. Thus, contrary to the pleadings filed by HUD, it appears that HUD in-fact may have a general unsecured claim against the estate as a result of these proceedings.[7] HUD nonetheless acknowledges that it never filed a proof of claim in this case.
Finally, like all creditors, government creditors wish to get paid in bankruptcy cases and some provisions of the Bankruptcy Code even elevate the claims of some governmental entities over the claims of other creditors. See e.g., 11 U.S.C. § 507(a)(8) (priority treatment of certain tax obligations); and 11 U.S.C. § 523(a)(1) (rendering certain tax claims non-dischargeable). These provisions of the Bankruptcy Code indicate that Congress knows when to provide government creditors with increased protection and Congress knows when to not do so.
This Court will not undo the statutory scheme set forth in the Bankruptcy Code. Artuz v. Bennett, 531 U.S. 4, 10, 121 S. Ct. 361, 148 L. Ed. 2d 213 (2000)("Whatever merits these and other policy arguments may have, it is not the province of this Court to rewrite the statute to accommodate them."); Harris v. Garner, 216 F.3d 970, 976 (11th Cir.2000) (en banc) ("We will not do to the statutory language what Congress did not do with it, because the role of the judicial branch is to apply statutory language, not rewrite it."). As a result, the Court will afford HUD the same treatment afforded to other creditors similarly situated under 11 U.S.C. § 506. That is, HUD is not immune from the lien stripping provisions of 11 U.S.C. § 506(a) and (d). Cf., Johnson v. The Internal Revenue Service et al, 386 B.R. 171, 2008 WL 1743950 (Bankr.W.D.Pa.2008) (holding that the liens of the IRS and Pennsylvania Department of Labor and Industry may be *590 stripped away pursuant to 11 U.S.C. §§ 506(a) and (d) in a reorganization under Chapter 11).
IV.
A motion for summary judgment shall be granted if the court determines that "there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The material facts of this case are not in dispute and reflect that any claims asserted by HUD in these proceedings are fully unsecured. As a result, the subordinate lien interest asserted by HUD against the Debtor's premises is void by operation of 11 U.S.C. §§ 506(a) and (d). Summary judgment therefore will be entered by the Court in favor of the Debtor and against HUD. A separate Order will be issued.
ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF GAIL A. KORBE AND AGAINST DEFENDANT DEPARTMENT OF HOUSING and URBAN DEVELOPMENT
AND NOW, this 22ND day of April, 2008, IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT for the reasons set forth more fully in the Memorandum Opinion issued contemporaneously with this Order:
1. The Motion for Summary Judgment filed by the Debtor is GRANTED and the Motion for Summary Judgment filed by the Defendant U.S. Department of Housing and Urban Development ("HUD") is DENIED.
2. The interest of HUD in the Plaintiff/Debtor's real estate located at 127 Dawes Street, Pittsburgh, PA 15210 is valued at zero ($0.00).
3. Pursuant to 11 U.S.C. § 506(a), HUD's claim is declared to be a wholly unsecured claim.
4. Pursuant to 11 U.S.C. § 506(d), the putative lien of HUD against the Debtor's residence located at 127 Dawes Street, Pittsburgh, PA 15210 is declared VOID.
NOTES
[1] Section 506(a) of the Bankruptcy Code provides that an
allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, ... and is an unsecured claim to the extent that the value of such creditor's interest ... is less than the amount of such allowed claim.
11 U.S.C. § 506(a)(1).
[2] Section 506(d) of the Bankruptcy Code states that to "the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void ..." 11 U.S.C. § 506(d).
[3] This valuation is derived from the Debtor's appraisal dated May 21, 2007. The date of the appraisal is two weeks subsequent to the petition date and is of even date with the Debtor's first proposed Chapter 13 Plan (and the plan was confirmed on an interim basis on July 13, 2007). HUD has not offered an appraised value of the subject property, and instead implies that the value of the property is greater than $46,000 because "valuation" is to be determined on a date when the HUD mortgage is due (i.e., in the year 2017). See HUD's Reply Brief in Support of Defendant's Motion for Summary Judgment (Dkt.# 23) at n. 1. Regardless of the date of valuation, HUD has produced no evidence in this case suggesting that the valuation of the Dawes Street property is greater than $46,000 at any period of time. Thus, the only figure in the record is the $46,000 valuation provided by the Debtor. In any event, the timing of the valuation used in this case is consistent with the timing of valuations utilized in other Section 506 cases. See In re McCanon, 242 B.R. 479, 482 (Bankr.W.D.Mo.2000)(using the date the petition was filed); see also In re Crain, 243 B.R. 75, 81-84 (Bankr.C.D.Ca.1999)(noting that the date of confirmation of Chapter 13 plan has been utilized by some courts).
[4] The Court does recognize that Section 1322 of the Bankruptcy Code sets forth the contents of a Chapter 13 plan in bankruptcy. See 11 U.S.C. § 1322. Section 1322(a) mandates what a debtor is required to include in a Chapter 13 plan and Section 1322(b) contains permissive provisions of a Chapter 13 plan. Compare 11 U.S.C. § 1322(a) with 11 U.S.C. § 1322(b). Pursuant to these provisions of Chapter 13, no debtor is required to strip off a lien. Rather this remedy is permissive and Section 1322 recognizes this fact. See 11 U.S.C. § 1322(b)(2). HUD suggests that the permissive language found in 11 U.S.C. § 1322(b) accords bankruptcy courts with the discretion to ignore a debtor's lien strip off request. What HUD conveniently ignores is that the statutory predicate of the Debtor's relief in the instant adversary proceeding is 11 U.S.C. § 506 and not 11 U.S.C. § 1322(b). Thus, HUD's reliance upon Section 1322(b) is misplaced. In addition, HUD ignores the fact that only a debtor may propose a Chapter 13 plan. If HUD's argument were to be accepted, then HUD would in essence be given de facto standing to write the Debtor's plan. This result is not what Chapter 13 of the Bankruptcy Code contemplates.
[5] HUD has not asserted in these proceedings that these cure payments by HUD give rise to a claim based on subrogation. The record also reflects that HUD was granted its own note and mortgage, which in any event suggests that HUD has no claim of subrogation and instead holds its own direct and independent claim against the Debtor. See e.g., In re Pearce, 236 B.R. 261, 266 (Bankr.S.D.Ill.1999)(creditor not entitled to subrogation when the creditor advances funds to the debtor to pay an existing debt and takes a new mortgage). The Court therefore need not address the issues relating to the modification of subrogation claims in bankruptcy and whether HUD would be bound by the Debtor's settlement with Washington Mutual at Adversary Proceeding No. 07-2252-JAD.
[6] The Declaration is attached at Exhibit "A" to the Defendant's Brief In Support of Its Motion for Summary Judgment. See Dkt. # 21.
[7] Recognizing this flaw in its argument, HUD has filed a Supplemental Declaration of the United States' Agency Department of Housing and Urban Development (the "Supplemental Declaration"). See Dkt. # 23, Exhibit to Reply Brief. In this declaration, HUD switches its position and acknowledges its claim is recourse against the Debtor (but rarely ever enforced). See Supplemental Declaration at ¶¶ 4 and 5. HUD also agrees that the Debtor's personal liability is dischargeable in bankruptcy. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542176/ | 947 A.2d 989 (2008)
108 Conn.App. 222
LASER CONTRACTING, LLC
v.
TORRANCE FAMILY LIMITED PARTNERSHIP et al.
No. 28802.
Appellate Court of Connecticut.
Argued March 13, 2008.
Decided June 3, 2008.
*991 Brian B. Staines, for the appellants (defendants).
Frank J. Liberty, for the appellee (plaintiff).
LAVINE, BEACH and PETERS, Js.
PETERS, J.
With limited exceptions, the Home Improvement Act, General Statutes § 20-418 et seq., makes a home improvement contract that is not in writing unenforceable in an action either for breach of contract or for unjust enrichment. Barrett Builders v. Miller, 215 Conn. 316, 322, 576 A.2d 455 (1990). The principal issue in this case is whether the services performed by a contractor in installing a modular home at a new site and in making improvements to the newly installed home qualify for the statutory exception for contracts for the construction of a new home. General Statutes § 20-419(4)(A). Relying on the fact that the contractor's services preceded the issuance of a certificate of occupancy for the modular home, the trial court held the exception to be applicable and also resolved other remaining issues in favor of the contractor. We affirm the judgment of the trial court.
On June 30, 2003, the plaintiff, Laser Contracting, LLC, filed a multicount complaint against the defendants, Torrance Family Limited Partnership and Jeffrey Torrance, to recover for services rendered in conjunction with the removal of a modular home from East Lyme and its attachment to a new foundation at 120 Rattlesnake Ledge Road, Salem.[1] The *992 defendants filed a general denial and a special defense based on the Home Improvement Act.[2] After a trial to the court, the court rendered judgment on behalf of the plaintiff on its claims of breach of contract and unjust enrichment and awarded damages of $45,398.27 as well as interest in the amount of 10 percent a year pursuant to General Statutes § 37-3a.[3]
The memorandum of decision of the trial court contains the following findings of fact. The defendants hired the plaintiff to prepare a modular home for its removal to a newly poured foundation at 120 Rattlesnake Ledge Road, Salem, and to perform services required to make the home functional at its new location. Subsequently, Scott Weston, the sole member of the plaintiff limited liability company, entered into an agreement to purchase the Salem property from the defendants at a price based on the combined costs of the lot, the modular home, the relocation and improvements made prior to purchase. In reliance on this agreement, the plaintiff incurred expenses to make further improvements to the home. The agreement could not, however, be performed as originally drafted because the defendants did not yet own the underlying lot on the stated closing date of November 1, 2002. They did not obtain title to the lot until December 31, 2002. The parties' subsequent negotiations for a formal purchase and sale agreement were unsuccessful, and the defendants sold the property to a third party purchaser. Before doing so, the defendants were required to pay $42,076.94 for the release of mechanic's liens for services performed by the plaintiff. They maintained that they incurred a net loss of $9498 on the sale to the third party.
In light of these findings, the court rejected the defendants' argument that, because no written contract was provided pursuant to the Home Improvement Act, they had no duty to pay the plaintiff for the services rendered and materials installed. Instead, the court concluded that the defendants' offer to sell the property to Weston had induced the plaintiff to perform additional improvements to the property. Without differentiating between the plaintiff's claims for breach of contract and unjust enrichment, the court awarded the plaintiff a total of $45,398.27.[4]
The defendants' appeal raises three principal issues. As a matter of statutory law, they challenge the validity of the court's conclusion that the Home Improvement Act did not bar the plaintiff's recovery. As a matter of substantive law, they contend that the court improperly held them liable both for breach of contract and for unjust enrichment. As an evidentiary matter, they contest the propriety of the court's holding both defendants liable to the plaintiff. Although we agree in part with the defendants' second claim, we nonetheless affirm the judgment in favor of the plaintiff.
I
THE HOME IMPROVEMENT ACT
As a general rule, a home improvement contract is not enforceable against a homeowner unless the contract complies with the writing requirements of *993 the Home Improvement Act, General Statutes § 20-429. Barrett Builders v. Miller, supra, 215 Conn. at 322, 576 A.2d 455; New England Custom Concrete, LLC v. Carbone, 102 Conn.App. 652, 659, 927 A.2d 333 (2007). In this case, the plaintiff argued, and the trial court found, that the services performed by the plaintiff fell within the statutory exception for contracts for "[t]he construction of a new home. . . ."[5] General Statutes § 20-419(4)(A). In their appeal, the defendants maintain, as they did at trial, that the exception is inapplicable. We agree with the trial court in ruling to the contrary.
The principal precedent on which the defendants rely is Rizzo Pool Co. v. Del Grosso, 232 Conn. 666, 657 A.2d 1087 (1995), in which our Supreme Court held the Home Improvement Act to be applicable to the construction of a swimming pool concurrently with the construction of a new home. Rizzo Pool Co. expressly relied on the fact that the pool installation contract was "completely separate and distinct" from the new home construction and involved unrelated contractors. Id., at 677, 657 A.2d 1087. The defendants here claim that, analogous to Rizzo Pool Co., the trial court's finding that described the plaintiff's services as "repairs, alterations and upgrades" denotes the court's implicit determination that the services amounted to home improvements that were separate and distinct from the modular home's original construction.
We must decide two issues: whether the court properly found that relocation of the house to Salem constituted new construction and, if so, whether the services undertaken by the plaintiff after the defendants' agreement to sell the property to Weston qualified as separate and distinct home improvements, as in Rizzo Pool Co. Our resolution of these issues requires us to determine whether the court's explicit and implicit findings of fact were clearly erroneous. See Practice Book § 60-5; Pandolphe's Auto Parts, Inc. v. Manchester, 181 Conn. 217, 219-22, 435 A.2d 24 (1980).
The court record and the memorandum of decision establish the factual basis for the court's finding that "the [mobile] home was new to the lot, and work [was required to qualify for] a certificate of occupancy."[6] Prior to any work on the Salem property, the former owner of the lot and the defendants entered into a purchase and sale agreement that included a provision requiring the seller to apply for a building permit. The permit was granted under a new home construction license,[7] as opposed to a home improvement license. Upon its purchase and relocation,[8] the modular *994 house was uninhabitable and in need of electrical, plumbing and heating services. A new basement, septic system, well, garage and driveway were constructed where none previously had existed. In sum, the project involved the construction of a new home, albeit with a used part. The trial court therefore properly found that the statutory exception governed the installation of the modular home on the Salem property.
The more difficult question that remains is whether the specific "repairs, alterations and upgrades" to the modular home that the plaintiff performed after Weston's agreement to buy the property equally qualify as home improvements under Rizzo Pool Co. Our Supreme Court's opinion in Rizzo Pool Co. is again illuminating. As previously noted, in that case the pool installation contract involved services that were physically separate and distinct from the new home construction, and performed by separate unrelated contractors. Rizzo Pool Co. v. Del Grosso, supra, 232 Conn. at 677, 657 A.2d 1087. In addition, the pool contract contained no indication that the pool was to be installed at any particular stage of the new home construction or even that it was to have been installed prior to the completion of the new home. Id., at 677-78, 657 A.2d 1087. By contrast, the record in this case shows that the plaintiff's services after the defendants agreed to sell Weston the property were not separate and distinct from the underlying project of reassembling and preparing a modular home for resale at a new location. At trial, Torrance testified: "[M]y agreement with Mr. Weston had to do with him taking over the project, completing the construction and completing the house." Unlike the situation in Rizzo Pool Co., then, not only was the contractor always the same entity, but the services it performed consistently served the parties' common goal of completing the house for resale. We conclude, therefore, that the trial court's finding that the plaintiff's services fell within the scope of the new construction exception to the Home Improvement Act was not clearly erroneous.
II
BREACH OF CONTRACT AND UNJUST ENRICHMENT
In their alternate arguments for reversal of the judgment of the trial court, the defendants maintain that the trial court improperly rendered judgment in favor of the plaintiff on the plaintiff's claims of breach of contract and unjust enrichment. This argument has two parts. The defendants maintain that (1) they never entered into an enforceable contract with the plaintiff and (2) they cannot be held liable for both breach of contract and unjust enrichment. Although we agree in part with the defendants' second argument, we need not address the merits of their contract claim because the judgment can be sustained on the ground of unjust enrichment.
The defendants maintain that, as a matter of law, it was improper for the trial court to render judgment in favor of the plaintiff both on its claim of breach of contract and on its claim for unjust enrichment. Although the defendants have not brought to our attention any effort on their part at trial to have the plaintiff undertake an election of remedies, they nonetheless are correct that they cannot be held liable simultaneously for breach of an express contract and an implied in law contract governing the same subject matter. Meaney v. Connecticut Hospital Assn., Inc., 250 Conn. 500, 517, 735 A.2d 813 (1999); 1 E. Farnsworth, Contracts (2d Ed.1998) § 2.20, p. 176. The trial court, therefore, should not have rendered *995 judgment in favor of the plaintiff on both the first and fourth counts of the plaintiff's complaint.
We may, nonetheless, affirm the judgment against the defendants if we conclude that the plaintiff established one of its claims, namely, its claim of unjust enrichment. As recently restated by our Supreme Court, "[u]njust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract. . . . A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another. . . . With no other test than what, under a given set of circumstances, is just or unjust, equitable or inequitable, conscionable or unconscionable, it becomes necessary in any case where the benefit of the doctrine is claimed, to examine the circumstances and the conduct of the parties and apply this standard. . . . Unjust enrichment is, consistent with the principles of equity, a broad and flexible remedy." (Internal quotation marks omitted.) Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).
Appellate appraisal of a trial court's finding of unjust enrichment is governed by the well established principle that "the determinations of whether a particular failure to pay was unjust and whether the defendant was benefited are essentially factual findings for the trial court that are subject only to a limited scope of review on appeal. . . . Those findings must stand, therefore, unless they are clearly erroneous or involve an abuse of discretion. . . . This limited scope of review is consistent with the general proposition that equitable determinations that depend on the balancing of many factors are committed to the sound discretion of the trial court." (Citations omitted.) Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire, Co., 231 Conn. 276, 283, 649 A.2d 518 (1994).
Our review of the record persuades us that, in this case, the court properly rendered an equitable judgment for the plaintiff on the basis of unjust enrichment. The parties do not dispute the court's findings that the individual defendant, who was the senior partner of the defendant partnership, proposed selling the house and the land to Weston at a time when he knew that the partnership did not yet own the real property. In the months subsequent to this proposal, the plaintiff continued to make improvements to the property and was observed to be doing so by the individual defendant. This evidence supported the court's implicit finding that the defendants acquiesced in the performance of the plaintiff's services. Weston's interest in purchasing the property was frustrated by the parties' inability to agree on subsidiary terms of a formal purchase and sale agreement. In light of this record, the trial court properly could conclude that the defendants unjustly enriched themselves by selling the improved property to a third party without fully compensating the plaintiff for the enhancement in the value of the property that was attributable to the valuable services rendered by the plaintiff.
Case law also supports the trial court's findings in this case. In Wainwright v. Talcott, 60 Conn. 43, 22 A. 484 (1891), our Supreme Court reviewed a complaint in which the plaintiff allegedly had been assured that his family would inherit the defendant's property. Although the defendant had acquiesced in the plaintiff's improvements to the property, he ultimately devised the improved real estate to another party.[9] Id., at 49-50, 22 A. 484. Identifying *996 the principle animating the complaint, our Supreme Court stated: "The cause of action in such cases is not the refusal to perform a contract, or keep a promise or engagement upon which another relied, but it is the consequent unjust infliction of loss or injury upon one party, and the consequent benefit and advantage resulting to the other, from the violation or breach of a faith and confidence which, under the circumstances, a court of equity deems to have been rightly reposed in him." Id., at 52-53, 22 A. 484.
More recently, our Supreme Court reviewed a case in which the defendant offered and agreed to sell a residential property to his nephew, the plaintiff, when the defendant reached retirement age. Misisco v. La Maita, 150 Conn. 680, 681-82, 192 A.2d 891 (1963). Although the nephew made substantial alterations and improvements to the property in reliance on his uncle's assurances, the defendant repudiated the agreement. Id., at 682, 192 A.2d 891. Our Supreme Court stated: "The cause of action . . . is to recover for the loss which the plaintiff has incurred as a result of making, to the enrichment of the defendant, expenditures for and the improvements to the property in reliance on a course of conduct by the defendant which led the plaintiff to believe that the defendant would sell the property to him. . . . It is an action in quasi contract, i.e. an obligation, arising by law, on which the same remedy is given as would be given if the obligation arose out of contract. . . . Although the right of recovery is based on equitable principles, it is nevertheless an action at law, the purpose of which is to prevent unjust enrichment. . . . The only remedy is in an award of money damages." (Citations omitted.) Id., at 683-84, 192 A.2d 891.[10]
These precedents illuminate the present case and reinforce our conclusion that the trial court properly awarded money damages on the basis of unjust enrichment to the plaintiff, whose self-interested expenditures, made in reliance on the defendants' assurance to sell Weston the property, proved to have benefited the defendants.
As a final matter, the defendants argue on appeal that the court could not have awarded restitution on the basis of *997 unjust enrichment because they were not enriched by the services performed by the plaintiff. They cite the fact that the third party sale resulted in a net loss of $9498 and that this loss was exacerbated by their obligation to pay $42,076.94 toward the payment of mechanic's liens for services performed by the plaintiff.
A trial court's determination of the exact amount of recovery under the unjust enrichment doctrine is a question of fact. Hartford Whalers Hockey Club v. Uniroyal Goodrich Tire, Co., supra, 231 Conn. at 283, 649 A.2d 518. To obtain review of the propriety of such an award, a litigant must provide us with a record of the underpinnings of the court's decision. In this case, the court did not make specific factual findings either with respect to the plaintiff's costs or with respect to the benefits conferred on the defendants. The defendants did not seek an articulation of the basis for the court's award. See Practice Book § 66-5. On this record, we have no basis other than speculation to review the court's determination.[11] Accordingly, we decline to review this claim. See Newtown Pool Construction, LLC v. Errico, 103 Conn.App. 566, 571, 930 A.2d 50 (2007).
III
LIABILITY OF THE DEFENDANT PARTNERSHIP
The court awarded the plaintiff a remedy both against Jeffrey Torrance and against Torrance Family Limited Partnership. The partnership maintains that the trial court improperly denied its motion for dismissal on all counts of the plaintiff's complaint for failure to make out a prima facie case. The partnership bases this contention on two arguments. As a matter of pleading, it alleges that it improperly was held liable on the plaintiff's claim of unjust enrichment because the plaintiff's posttrial brief did not expressly refer to the partnership's potential liability.[12] As a matter of proof, it alleges that the record establishes that the plaintiff dealt only with the individual defendant and not with the partnership defendant. We disagree.
The trial court implicitly found that Jeffrey Torrance, in conducting the negotiations with Weston, was acting as an agent of the Torrance Family Limited Partnership. That finding was supported by evidence that the checks issued to purchase both the modular home and the lot on which the modular home was placed were drawn on a partnership account. Furthermore, the partnership was identified as the operative party in the documents attendant to the sale of the property to the third party purchaser. Finally, the partnership does not dispute the fact that the individual defendant was its principal partner. Because these findings of fact were not clearly erroneous, the court's decision to hold the partnership liable for unjust enrichment must be sustained.
The judgment of the trial court is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The complaint alleged (1) breach of an oral contract, (2) violation of the implied covenant of good faith and fair dealing, (3) violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq., and (4) unjust enrichment.
[2] Although the defendants also filed a claim for setoff, the trial court found this defense to have been abandoned at trial. The defendants have not contested the court's ruling.
[3] The plaintiff has not appealed from the court's denial of the second and third claims for recovery.
[4] The defendants did not file a motion for articulation asking the court to clarify the basis for the court's monetary award. Practice Book § 66-5.
[5] Because we hold this statutory exception applicable, we need not address the validity of the trial court's alternate holding that the defendants were not "owners" entitled to invoke the provisions of the Home Improvement Act because, at the time of the plaintiff's performance, the defendants had not yet obtained title to the underlying property.
[6] A certificate of occupancy was first issued on February 24, 2003, more than nine months after construction work had begun and after the plaintiff had ceased work on the property.
[7] No issue has been raised under the New Home Construction Contractors Act, General Statutes § 20-417a et seq., either in the trial court or in this court.
[8] Though not dispositive of the Home Improvement Act defense, the bill of sale representing the defendants' purchase of the East Lyme structure is more indicative of a sale of a chattel than of a real estate transaction. Under the Uniform Commercial Code, "`Goods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale. . . ." U.C.C. § 2-105(1) (1998); see also General Statutes § 42a-2-105(1). Accordingly, other courts have traditionally classified modular homes to be "goods" under the Uniform Commercial Code. See Cates v. Morgan Portable Building Corp., 591 F.2d 17, 20 (7th Cir.1979); Stephenson v. Frazier, 399 N.E.2d 794, 797 (Ind.App.1980); Joswick v. Chesapeake Mobile Homes, Inc., 362 Md. 261, 266-67, 765 A.2d 90 (2001).
[9] In his complaint, the plaintiff, William Wainwright, alleged that the defendant, John L. Talcott, had "assured and promised the plaintiff that upon his, John L. Talcott's, death, his interest in said real estate should go to the plaintiff's wife and children, and that any improvements made by the plaintiff thereon and expenses incurred therefor, should at the death of said Talcott accrue to the benefit of the plaintiff's wife and children; that in reliance upon said promise and assurance the plaintiff expended large sums of money on the permanent improvement of said real estate; that Talcott knew of this expenditure and knew that it was done in reliance upon his said assurance; that afterwards Talcott, by will, left all of his interest in said real estate to others and has never in any way reimbursed the plaintiff for said expenditures. . . ." Wainwright v. Talcott, supra, 60 Conn. at 49-50, 22 A. 484.
[10] This reasoning also was articulated in the Restatement of the Law of Restitution: "A person who has rendered services to another or services which have inured to the benefit of another or who has affixed chattels to the land or chattels of another is entitled to restitution therefor if the services were rendered or the chattels were affixed . . . (b) to obtain the performance of an agreement with the other therefor, not operative as a contract, or voidable as a contract and avoided by the other party after the services were rendered, the one performing the services erroneously believing because of a mistake of fact that the agreement was binding upon the other. . . ." Restatement, Restitution, Quasi Contracts and Constructive Trusts § 40, p. 155 (1937). "A person who has acquired an interest in land or chattels as the result of an agreement with the owner made under a mistake of fact and avoided by the owner is entitled to restitution for the value of services rendered in their preservation or in making appropriate improvements thereon." Id., at § 42(3), p. 167; see also id., at § 170 comment (a), p. 689.
[11] Because the court rendered damages of $45,398.27 plus interest, we could conclude that it agreed with the plaintiff's claim that the defendants' recovery from the third party purchaser was enhanced by the value of the improvements to the property that Weston had undertaken.
[12] The defendants also fault the trial court's judgment on the ground that the plaintiff, in its posttrial brief, did not specifically argue its contract and unjust enrichment claims. In the absence of a rule of practice that, as a prerequisite to adjudication, requires a party to articulate every claim from its pleadings in its posttrial brief, this argument lacks merit. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542003/ | 949 A.2d 982 (2008)
HAINES
v.
THE CITY OF WARREN.
No. 2333CD06.
Commonwealth Court of Pennsylvania.
April 17, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542006/ | 949 A.2d 861 (2008)
401 N.J. Super. 203
JEN ELECTRIC, INC., Plaintiff-Appellant,
v.
COUNTY OF ESSEX, Defendant-Respondent.
No. A-3957-07T1
Superior Court of New Jersey, Appellate Division.
Argued June 3, 2008.
Decided June 24, 2008.
*863 Suzanne M. Cerra argued the cause for appellant (Nukk-Freeman & Cerra, P.C., Short Hills, attorneys; Ms. Cerra, Kerrie R. Heslin, and Kristine V. Ryan, on the brief).
Mitchell W. Taraschi, Roseland, argued the cause for respondent (Connell Foley, LLP, attorneys; Mark L. Fleder and Mr. Taraschi, of counsel; Mr. Taraschi and Christine I. Gannon, on the brief).
Before Judges SKILLMAN, YANNOTTI and LeWINN.
The opinion of the court was delivered by
YANNOTTI, J.A.D.
Plaintiff JEN Electric, Inc. appeals from an order entered by the trial court on April 4, 2008, which dismissed plaintiff's complaint on the ground that plaintiff did not have standing to challenge bidding specifications issued by defendant County of Essex for a contract to undertake certain traffic signal and road improvements on Central Avenue in Newark, New Jersey. Plaintiff also appeals from an order entered by the trial court on March 19, 2008, which denied plaintiff's motion for leave to file an amended complaint naming Daidone Electric, Inc., a bidder on the contract, as an additional plaintiff. For the reasons that follow, we affirm.
I.
In October 2007, the County publicly advertised for the submission of bids on the contract for the Central Avenue project, which requires, among other things, the successful bidder to provide a traffic control system, video car detection devices and related electronic equipment, and computer software. Plaintiff is a vendor that distributes the PEEK Traffic Control System line of products, which are manufactured by Quixote Corporation. Plaintiff objected to the specifications on the ground that they required equipment and software manufactured by Econolite and did not afford bidders the opportunity to propose products that were the functional equivalent of the Econolite equipment and software.
Thereafter, the County issued an addendum to the specifications which indicated that the County would accept products that were the equivalent of any brand name products designated in the specifications. The addendum also stated that pre-qualification of alternative products was not required. Bids were submitted in response to the request for proposals, but the County elected to reject all of the bids and seek new proposals.
In December 2007, the County issued revised specifications for the project, calling for the submission of bids by January 10, 2008. Plaintiff claimed, however, that the revised specifications were more restrictive than those issued in October 2007 because they allegedly made it impossible for products to be considered the equal of those specified in the bidding documents.
In a letter dated December 21, 2007 to Leonard Sorge, the County's principal buyer, Frank Dobiszewski, plaintiff's vice-president of engineering, asserted that the "form and content" of the revised specifications violated the Local Public Contracts Law (LPCL), N.J.S.A. 40A:11-1 to -51, because the specifications for certain equipment "are for a specific manufacturer (Econolite), with no approved equal provision."
Dobiszewski asserted that there was only one vendor in the State who could supply the necessary traffic signal equipment identified in the bid specifications. He stated that, "[a]s a supplier of a competing *864 brand that can meet or exceed the specific brand listed, [plaintiff] feel[s] [that] this unfair practice is in direct violation of the public bid process." Dobiszewski requested that the County postpone the bid opening "until the specifications can be reviewed and amended."
Sorge responded to Dobiszewski in a letter dated December 24, 2007. He stated that, as indicated in the bid specifications, the County "ALWAYS" accepts an equivalent to any brand name product identified as a requirement in its public bidding specifications. Sorge added that "the equivalent [product] must meet or exceed the specification of the brand stated in the bid and it is the responsibility of the bidder to prove that the equivalent meets or exceeds specification."
On December 26, 2007, the County issued a clarification to the bidding documents, which stated that the specifications "should read Econolite or equal (equivalent) in all sections of the specification[s]." The clarification additionally stated that the equivalent products "must meet or exceed" the bidding requirements.
On December 27, 2007, Dobiszewski again wrote to Sorge. He stated that the revised bid specifications favored a particular "sole source" vendor for the Econolite traffic signal equipment, despite the fact that "generic specifications exist." Dobiszewski asserted that the specifications were unlawfully restrictive. Dobiszewski cited the LPCL, the regulations adopted by the Department of Community Affairs (DCA) pursuant to the LPCL, as well as a federal regulation that pertains to the use of federal funds on state and local highway projects, 23 C.F.R. § 635.411 (2008).
Dobiszewski additionally asserted that the County was overpaying for its traffic signal equipment and that "the total traffic signal equipment package cost given to [c]ontractors from us and another competing supplier was approximately $650K lower than" the supplier of the Econolite products. He asked that the bid specifications "be revised to a generic format in order to provide a fair and open bidding process."
Sorge replied in a letter dated January 3, 2008. He stated that the County had given careful consideration to Dobiszewski's concerns but reaffirmed the County's position that the bid specifications were in full compliance with the LPCL and all applicable federal and state regulations. Sorge indicated that the date for the submission of bids would not be extended and bids would be opened on January 10, 2008.
Sorge added that, as noted in the clarification to the specifications dated December 26, 2007, the County "ALWAYS" accepts equivalents to any "BRAND NAME" specified in a request for bids. He stated that it was the County's "understanding that equivalents to Econolite [b]rand [p]roducts in the specification are commercially available."
On January 8, 2008, plaintiff filed an action in lieu of prerogative writs in the Law Division in which it alleged that the County's revised bid specifications violated the LPCL and certain state and federal regulations. Plaintiff claimed that the specifications were unlawfully restrictive because certain of the requirements for equipment and software were identified by manufacturer, rather than nationally-recognized, generic standards.
Plaintiff asserted that the County had designated five brand-name products to be used on the project, specifically products manufactured by Econolite, Pelco, Clary, Safetran, and APX.[1] Plaintiff alleged that *865 the specifications were invalid "because they foreclose[d] the possibility that a vendor [could] supply non-brand name equivalents for any of these products, in direct violation of both federal and state bidding laws."
Plaintiff sought an order declaring the bidding specifications null and void, directing the County to immediately issue an addendum to the specifications that complies with the LPCL and the applicable state and federal regulations, and enjoining the County from awarding any contract based on the current "illegal" bid specifications.
On January 9, 2008, the trial court entered an order temporarily restraining the County from awarding a contract based on the challenged bidding specifications until further order of the court. The court ordered the County to show cause why a preliminary injunction should not be entered enjoining the County from proceeding with the contract. The court also ordered expedited discovery and required that it be completed in advance of the hearing on plaintiff's application for a preliminary injunction.
On January 10, 2008, the County received eight bids on the contract, including a bid from Daidone. The specifications did not require the bidders to identify the products that they would supply in performance of the contract. Therefore, the bids do not reveal whether the bidders contemplated using Econolite products, PEEK products, or any other products in fulfilling the contract requirements.
In its response to the order to show cause, the County argued that the bidding specifications were not unlawful. The County also argued that plaintiff did not have standing to challenge the County's bid specifications because it was not a bidder or prospective bidder on the contract, and was not a taxpayer in Essex County.
Plaintiff thereupon filed a motion seeking leave to amend its complaint to add Daidone as a plaintiff. The County opposed the motion, arguing that Daidone had waived its right to challenge the bid specifications by submitting a bid for the contract without challenging the specifications within the time required by N.J.S.A. 40A:11-13(e). The statute provides in pertinent part that:
[a]ny prospective bidder who wishes to challenge a bid specification shall file such challenges in writing with the contracting agent no less than three business days prior the opening of the bids. Challenges filed after that time shall be considered void and having no impact on the contracting unit or the award of a contract.
Plaintiff argued, however, that Daidone had objected to the specifications in a letter to the County dated January 2, 2008. The trial court disagreed, finding that Daidone had merely sought clarification of the bidding requirements and never stated in the letter that it was challenging the specifications. Accordingly, the court denied plaintiff's motion to amend the complaint by order dated March 19, 2008.
The court scheduled a hearing on plaintiff's motion for a preliminary injunction. At the hearing, the trial court decided to dismiss plaintiff's complaint. The court found that, because plaintiff was not a bidder, prospective bidder, or Essex County taxpayer, it did not have standing to challenge the bid specifications.
*866 After the court rendered its decision, plaintiff orally renewed its motion to amend the complaint to add Daidone as a plaintiff. The trial court denied the application because plaintiff had not filed a motion seeking that relief, and because the complaint had already been dismissed.
On April 3, 2008, plaintiff moved in the trial court for a stay pending appeal. The court denied the motion. On April 4, 2008, the court entered an order which dismissed plaintiff's complaint with prejudice, vacated the restraints previously imposed, and authorized the County to award a contract for the project.
Plaintiff filed a notice of appeal on April 8, 2008, and moved on an emergent basis for a stay of the trial court's April 4, 2008 order pending appeal. On April 17, 2008, we denied plaintiff's motion. Thereafter, plaintiff sought relief in the Supreme Court. On May 5, 2008, the Supreme Court granted plaintiff's motion for a stay pending appeal. We thereupon expedited the appeal.
II.
Plaintiff first argues that the trial court erred by finding that it did not have standing to challenge the County's bidding specifications. We disagree.
The purpose of competitive bidding statutes "is to secure competition and guard against favoritism, improvidence, extravagance and corruption." Trap Rock Indus., Inc. v. Kohl, 59 N.J. 471, 479, 284 A.2d 161 (1971) (quoting Hillside Twp. v. Sternin, 25 N.J. 317, 322, 136 A.2d 265 (1957)). Our public bidding laws "are for the benefit of the taxpayers and not the bidders; and they should be construed with sole reference to the public good[.]" Ibid. Therefore, it is in the public interest "to permit suits to enforce the policy" of the public bidding laws. Ibid.
However, our case law has limited the class of persons or entities with standing to bring such lawsuits. Indeed, it is well established that only taxpayers, bidders, and prospective bidders may challenge the award of a contract to the successful bidder. L. Pucillo & Sons, Inc. v. Twp. of Belleville, 249 N.J.Super. 536, 542-43, 592 A.2d 1218 (App.Div.1991); Band's Refuse Removal, Inc. v. Borough of Fair Lawn, 62 N.J.Super. 522, 539, 163 A.2d 465 (App.Div.1960), certif. denied, 34 N.J. 67, 167 A.2d 55 (1961). See also Trap Rock, supra, 59 N.J. at 479, 284 A.2d 161 (stating that taxpayers and bidders have standing to challenge the award of publicly bid contracts); Warnock Ryan Leasing, Inc. v. State, Dep't of Treasury, 194 N.J.Super. 11, 16, 475 A.2d 1270 (App.Div. 1984) (holding that taxpayers have standing to challenge the award of a public contract); Advance Elec. Co., Inc. v. Montgomery Twp., 351 N.J.Super. 160, 168 n. 1, 797 A.2d 216 (App.Div.) (noting that an unsuccessful bidder has standing to challenge the award of a public contract), certif. denied, 174 N.J. 364, 807 A.2d 195 (2002).
Furthermore, our case law has established additional pre-requisites for challenges to bidding specifications issued by contracting units pursuant to the public bidding laws. New Jersey courts will not entertain a challenge by a bidder to bidding specifications after the bids have been opened. Camden Plaza Parking, Inc. v. City of Camden, 16 N.J. 150, 158-59, 107 A.2d 1 (1954); Waszen v. City of Atl. City, 1 N.J. 272, 276, 63 A.2d 255 (1949); Saturn Constr. Co. v. Bd. of Chosen Freeholders, 181 N.J.Super. 403, 407, 437 A.2d 914 (App.Div.1981); James Petrozello Co., Inc. v. Chatham Twp., 75 N.J.Super. 173, 179, 182 A.2d 572 (App.Div.1962). The "rationale of such a holding is that one cannot endeavor to take advantage of a contract *867 to be awarded under illegal specifications and then, when unsuccessful, seek to have the contract set aside." Waszen, supra, 1 N.J. at 276, 63 A.2d 255; see also Sevell's Auto Body Co., Inc. v. N.J. Highway Auth., 306 N.J.Super. 357, 369-70, 703 A.2d 948 (App.Div.1997) (bidder has standing to challenge bid specifications if the bidder commenced its action prior to the bid submission date), certif. denied, 153 N.J. 51, 707 A.2d 154 (1998).
In addition to the requirement under our case law that prospective bidders on publicly bid contracts challenge the bidding specifications before the opening of bids, the LPCL establishes the time frame within which such a challenge must be made and the consequences of failing to do so. N.J.S.A. 40A:11-13(e) provides that any "prospective bidder" who wishes to challenge a bidding specification issued pursuant to the LPCL must do so in writing "no less than three business days prior to the opening of the bids." Ibid. The statute further provides that any challenge to the bid specifications raised after that time is considered "void" and will have "no impact on the contracting unit or the award of a contract." Ibid.
Plaintiff brought this action to challenge the County's bidding specifications. However, plaintiff concedes that it is not an Essex County taxpayer. Plaintiff also concedes that it was not a direct bidder on the contract and never intended to submit a direct bid in response to the request for proposals. In his deposition, Dobiszewski testified as follows:
Q. At the time this was going on in December of 2007 and 2008 was [plaintiff] considering or intending to be a primary bidder to Essex County on this project?
A. No.
Q. By the way, to fall back to the original round of bidding. Did [plaintiff] ever consider or intend to be a primary bidder for the project on the first round of bidding?
A. No.
Because plaintiff is not a taxpayer in Essex County, did not submit a direct bid on the contract, and never intended to submit a direct bid in response to the specifications, plaintiff does not have standing under our case law to maintain this action.
Plaintiff nevertheless argues that it should be considered a "prospective bidder" under N.J.S.A. 40A:11-13(e) and deemed to have standing under the statute to challenge the bidding specifications. In a certification filed in the trial court, Dobiszewski stated:
The only distinction between [plaintiff] and a "direct" bidder is that, instead of submitting its bid for the traffic signal equipment and services it wishes to supply on this Project directly to the County, [plaintiff] instead submits its bid to the general contractor on the Project. The general contractor, in turn, incorporates [plaintiff's] bid into the overall bid it submits to the County. In fact, the County would not accept a direct bid for just the traffic control equipment from [plaintiff] or [a] similar subcontractor. Thus, the only way to submit a bid for this equipment is via a general contractor.
Plaintiff argues that we should interpret the term "prospective bidder" in N.J.S.A. 40A:11-13(e) expansively to foster the goals of the public bidding laws.
We note, however, that N.J.S.A. 40A:11-13(e) does not confer standing upon a "prospective bidder" to maintain an action in our courts to challenge bidding specifications. Rather, the statute simply imposes limitations upon challenges to bid specifications by prospective bidders. As we have pointed out, the statute requires that, *868 if a "prospective bidder" wishes to challenge bid specifications, it must make its objections in writing to the contracting unit no less than three business days prior to the date established for the opening of the bids. The statute also makes clear that a challenge raised after that time is void and will have "no impact on the contracting unit or the award of a contract."
In any event, we conclude that an entity that proposes to furnish equipment to a direct bidder on a public contract should not be considered a "bidder" or "prospective bidder" under our case law or N.J.S.A. 40A:11-13(e). A contrary conclusion would be at variance with the ordinary meaning of the term "bidder."
A "bid is both an offer and a unilateral contract; when it is accepted, it becomes a mutually binding contract." Cataldo Constr. Co. v. Essex County, 110 N.J.Super. 414, 417, 265 A.2d 842 (Ch.Div. 1970). Consequently, in order to acquire the status of a "bidder," an entity must submit a proposal to enter into a mutually binding agreement with the governmental body. An entity that merely supplies equipment to a general contractor cannot be considered a "bidder."
Plaintiff additionally argues that we should give an expansive interpretation to the term "prospective bidder" because such an interpretation would be in the public interest. Plaintiff contends that direct bidders may not have an incentive to challenge bid specifications that might unlawfully exclude a particular supplier's products. Again, we disagree.
We reject the view that a direct bidder on a publicly bid contract does not have an incentive to challenge bidding specifications that may unlawfully restrict the use of certain equipment in the performance of the contract. We must assume that a direct bidder would be inclined to challenge the specifications if the bidder believes that it might be able to offer a lower price if the restriction were eliminated.
Plaintiff also contends that it has standing to challenge the County's bid specifications under general standing principles. We recognize that, in many contexts, New Jersey courts have taken a liberal approach to the issue of standing. Crescent Park Tenants Ass'n v. Realty Equities Corp., 58 N.J. 98, 107, 275 A.2d 433 (1971). However, as we have explained, our case law makes clear that only taxpayers and prospective bidders may bring lawsuits to challenge bidding specifications for publicly bid contracts. Despite these limitations, our case law already permits a wide array of individuals and entities to bring lawsuits to challenge bidding specifications.
We are not persuaded that the public's interest in the effective enforcement of our bidding laws requires that we also confer standing upon an entity like plaintiff which is not a taxpayer in the contracting unit and does not bid directly on a public contract, but wants to supply equipment and software to the direct bidders.
We therefore conclude that plaintiff does not have standing under New Jersey's case law or the LPCL to challenge the County's bidding specifications.
III.
We turn to plaintiff's contention that, because the Central Avenue road improvement project is being undertaken with federal funds, it has standing under federal law to pursue its challenge to the County's specifications. In our view, plaintiff's argument is entirely without merit.
Plaintiff alleges that the County's bidding specifications violate the Federal-Aid Highway Act (FAHA), 23 U.S.C.A. §§ 101 to 166 (2008). The FAHA establishes certain *869 requirements when federal monies are used for state and local highway improvements. The FAHA provides, among other things, that a contract for a federal-aid highway project undertaken by a state or local government generally shall be awarded as a result of competitive bidding to the lowest responsive bid. 23 U.S.C.A. § 112(b)(1). The FAHA further provides that the state or local government may not enter into a contract awarded as a result of competitive bidding "without the prior concurrence of the Secretary [of Transportation] in the award thereof." 23 U.S.C.A. § 112(d).
In addition, 23 C.F.R. § 635.411 provides that:
[f]ederal funds shall not participate, directly or indirectly, in payment for any premium or royalty on any patented or proprietary material, specification, or process specifically set forth in the plans and specifications for a project, unless:
(1) Such patented or proprietary item is purchased or obtained through competitive bidding with equally suitable unpatented items; or
(2) The State transportation department certifies either that such patented or proprietary item is essential for synchronization with existing highway facilities, or that no equally suitable alternate exists; or
(3) Such patented or proprietary item is used for research or for a distinctive type of construction on relatively short sections of road for experimental purposes.
[Ibid.]
We note that, although plaintiff maintains that the County's bid specifications contravene 23 U.S.C.A. § 112 and 23 C.F.R. § 635.411, plaintiff has not cited any provision of the FAHA or the federal regulations that expressly confers standing upon it to bring a lawsuit to pursue its claims.
Nevertheless, in support of its contention that it has standing under federal law to pursue its challenge to the County's bid specifications, plaintiff relies upon Glasgow, Inc. v. Fed. Highway Admin., 843 F.2d 130 (3d Cir.1988). In that case, the Pennsylvania Department of Transportation (PennDOT) sought bids on a contract for the completion of a portion of a federal-aid highway. Id. at 132. Glasgow, Inc. submitted the lowest bid. Ibid. Initially, the PennDOT rejected Glasgow's bid but later, after Glasgow brought an action in the Pennsylvania courts challenging that decision, the PennDOT awarded the contract to Glasgow. Ibid. However, the Federal Highway Administration (FHWA) refused to concur in the award. Id. at 133. Glasgow filed a complaint in the federal district court challenging the FHWA's action. Ibid. The federal district court enjoined the FHWA from withholding its concurrence. Id. at 130.
On appeal, the FHWA argued, among other things, that Glasgow did not have standing to maintain the action. Id. at 134. The Court of Appeals for the Third Circuit noted that when a plaintiff challenges an action of a federal agency, its standing is determined under the "zone of interest test" established by the Supreme Court of the United States. The court stated that:
[t]he zone of interest test is a guide for deciding whether, in view of Congress' evident intent to make agency action presumptively reviewable, a particular plaintiff should be heard to complain of a particular agency decision. In cases where the plaintiff is not itself the subject of the contested regulatory action, the test denies a right of review if the plaintiff's interests are so marginally related to or inconsistent with the purposes *870 implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit. The test is not meant to be especially demanding; in particular, there need be no indication of congressional purpose to benefit the would be plaintiff. [Footnote omitted].
[Id. at 134-35 (quoting Clarke v. Sec. Indus. Ass'n, 479 U.S. 388, 399-400, 107 S.Ct. 750, 757, 93 L.Ed.2d 757, 769 (1987)).]
The court observed that, although Glasgow was not the subject of the FHWA's action, its interest in the contract as a disappointed bidder was not "so marginal" that it should be precluded from bringing suit. Id. at 135. The court added:
On the other hand, there is a substantial basis to conclude that Glasgow does not have standing in this case. It is PennDOT and not Glasgow which sought the federal aid. Further[,] Glasgow's bid was delivered to PennDOT and not the FHWA and it is with PennDOT, if any agency, that Glasgow will contract. Further, Congress enacted the Act to advance the public interest and not to benefit individual contractors. 23 U.S.C. § 101. We also note that PennDOT has not joined in this action nor has it brought its own case against the FHWA by reason of FHWA's refusal to concur in the award. Therefore it would not be unreasonable to conclude that Glasgow is asserting the legal interests of a third party which does not care to pursue them itself. In that circumstance[,] it could be reasonably held that Glasgow does not have standing.
[Id. at 135-36.]
Ultimately, the court elected not to decide the issue of standing. Id. at 136 n. 3.
In our view, plaintiff's reliance upon Glasgow is misplaced. As noted, the Glasgow case involved a challenge by a disappointed low bidder to a decision by the FHWA to withhold consent for the contract award. In this matter, the record does not indicate whether the FHWA has concurred in the award of the contract for the Central Avenue road improvement project. Thus, there is no federal agency action at issue and the FHWA is not a party to this case.
Furthermore, the court in Glasgow expressed doubt as to whether the plaintiff had standing to challenge the FHWA's decision to withhold its consent for the contract despite the fact that the plaintiff was the low bidder and the PennDOT was prepared to award it the contract. In this case, plaintiff was not the low bidder on the contract. Indeed, plaintiff was not a direct bidder or prospective bidder on the contract. Plaintiff is merely a supplier of products that it would like to have used in the performance of the contract. In our view, the Glasgow case does not support plaintiff's contention that it has standing to pursue its federal claims in this matter.
IV.
We turn to plaintiff's contention that the judge erred by denying its motion to amend the complaint to add Daidone as a plaintiff.
The standard that governs our review of the trial court's March 19, 2008 order is well established. A decision on a motion to amend a pleading "is generally left to the sound discretion of the trial court . . . and its exercise of discretion will not be disturbed on appeal, unless it constitutes a `clear abuse of discretion.'" Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J.Super. 494, 506, 828 A.2d 966 (App.Div.2003) (quoting Salitan v. Magnus, 28 N.J. 20, 26, 145 A.2d 10 (1958)). The trial court's exercise of discretion requires a two-step analysis: "whether the *871 non-moving party will be prejudiced, and whether granting the amendment would nonetheless be futile." Notte v. Merchants Mut. Ins. Co., 185 N.J. 490, 501, 888 A.2d 464 (2006).
Here, the trial court found that adding Daidone as a plaintiff would be futile because Daidone was barred by N.J.S.A. 40A:11-13(e) from challenging the bid specifications. As we stated previously, a prospective bidder on a publicly advertised contract that wishes to challenge the bidding specifications must do so within three business days prior to the date set for the opening of bids, and any such challenges filed thereafter are void. N.J.S.A. 40A:11-13(e).
Plaintiff argues that Daidone's letter of January 2, 2008 was a timely challenge to the bid specifications. In that letter, Daidone asked whether a substitution of materials and equipment must be made after the signing of the contract or at the time of bidding. Daidone asked how it was possible to get a letter of recommendation regarding the ASC/3 Econolite controller software since that product had only been introduced in August 2007. In addition, Daidone inquired as to why the control software had to be compatible with an Econolite ASC/3 controller if the specifications called for an Econolite ASC/2-210 controller. Daidone also stated, "[i]f a substitute controller is submitted that is equal to the ASC/2-210 controller, and approved, does the [c]ontrol [s]oftware sill have to be compatible with the Econolite ASC/3 controller?" The County responded to each of these inquiries on January 4, 2008.
The trial judge found that even giving Daidone's January 2, 2008 letter its "most liberal reading," Daidone was not challenging the specifications. In our view, the judge's finding is unassailable. There is no statement in Daidone's letter of January 2, 2008 which even remotely suggests that Daidone was challenging the bidding specifications.
Plaintiff additionally argues that Daidone's letter of January 9, 2008 represented a challenge to the bidding specifications. We note that plaintiff did not raise this contention in the trial court. Daidone's January 9, 2008 letter stated:
Please be advised that other New Jersey Department of Transportation approved traffic signal vendors are unable to provide pricing on the subject project due to their inability to obtain the technical performance requirements from the County. Please see the attached letter. At this time, only the Econolite Vendor, named in your specifications[,] can quote the job.
Daidone Electric, Inc. feels it would be in the best interest of the County to provide the technical performance requirements in order to create a competitive bidding process.
Attached to Daidone's letter was a January 9, 2008 letter from plaintiff, in which plaintiff stated that it would not be providing a price quotation for the traffic signal equipment on the project. In its letter, plaintiff additionally stated:
[w]e apologize for any inconvenience; however, after numerous attempts by [plaintiff] asking the County to provide the technical performance requirements that they have developed to determine what parameters will be used as the basis to determine what will constitute an "approved equal" for all items, they have failed to provide this information.
Like Daidone's January 2, 2008 letter, its letter of January 9, 2008 did not expressly state that Daidone was challenging the bidding specifications. Moreover, the letter was sent to the County one day prior to the opening of bids, which was *872 after the time required by N.J.S.A. 40A:11-13(e) for asserting a challenge to the bid specifications.
Because it failed to assert a challenge to the bidding specifications at least three days prior to the bid opening, Daidone was precluded by N.J.S.A. 40A:11-13(e) from raising a later challenge to the specifications. Therefore, the trial court correctly found that adding Daidone as a plaintiff in this case would be futile.
Plaintiff argues, however, that if Daidone is precluded by N.J.S.A. 40A:11-13(e) from asserting a challenge to the bid specifications, it should be permitted to contest the specifications based on its status as a taxpayer in Essex County.
We reject the contention that a bidder can do an "end-run" around the time limitations imposed by N.J.S.A. 40A:11-13(e) when the bidder happens to be a taxpayer in the relevant contracting unit. Were we to accept plaintiff's argument, the statute would be meaningless, at least as applied to bidders who also are taxpayers of the government entity that issued the specifications. A statute should not be construed in a manner that would lead to "absurd or unreasonable results." State v. Gill, 47 N.J. 441, 444, 221 A.2d 521 (1966). Accordingly, we reject plaintiff's argument that Daidone has standing as a taxpayer to challenge the bid specifications, notwithstanding its patent failure to comply with N.J.S.A. 40A:11-13(e).
Affirmed.
NOTES
[1] Plaintiff stated, by way of example, that the specifications called for Econolite's traffic controllers, video detection systems, and central traffic control software. The specifications also required the use of Pelco's mounting hardware, Clary's battery back-up, and either Safetran or APX's cabinets. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541977/ | 76 B.R. 105 (1987)
In re Henry T. MANUEL, Debtor.
Mary V. DAY, Plaintiff,
v.
Henry T. MANUEL, Defendant.
Bankruptcy No. 86-03221-R, Adv. No. 86-0855-R.
United States Bankruptcy Court, E.D. Michigan.
July 22, 1987.
Dennis Moffett, Pontiac, Mich., for plaintiff.
James Sheehan, Birmingham, Mich., for defendant.
SUPPLEMENTAL MEMORANDUM OPINION
STEVEN W. RHODES, Bankruptcy Judge.
I.
On April 22, 1987, the Court gave a bench opinion denying a motion for summary judgment filed by the debtor, Henry T. Manuel. This written opinion supplements that bench opinion.
The plaintiff, Mary V. Day, seeks a judgment that her debt is non-dischargeable under 11 U.S.C. § 523(a)(2). The complaint alleges Manuel's fraud, including arson and insurance fraud, in connection with a land contract by which Day sold to Manuel a building and lot in Waterford Township for $175,000.
Manuel asserts that he is entitled to a judgment of dismissal on the grounds of res judicata. The basis for this assertion is as follows:
In 1984, before Manuel's bankruptcy was filed, Day filed a complaint against Manuel in state court asserting fraud and breach of contract claims, and alleging essentially the same facts and circumstances as her present complaint filed in this Court. Manuel *106 argues that because in the state court action the parties entered into a settlement and consent judgment which dismissed the fraud claims with prejudice, Day is precluded from relitigating the fraud claim.
Thus, the issue is what effect this Court should give to the earlier state court settlement and judgment.
II.
A similar issue was addressed previously by this Court in the case of In re Eadie (Bend v. Eadie), 51 B.R. 890 (Bankr.E.D. Mich.1985). In that case, this Court, applying the test set forth in Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985) and in In re Byard (Harris v. Byard), 47 B.R. 700 (Bankr.M.D.Tenn. 1985), held that a prior state court default judgment against the debtor precluded the debtor from relitigating a fraud claim under section 523(a)(2).
These decisions considered the effect of "the full faith and credit" statute, 28 U.S.C. § 1738, which provides in pertinent part:
Such . . . [state] judicial proceedings . . . shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State . . . from which they are taken.
In Byard, 47 B.R. at 701-02, the court noted the Supreme Court's holding in Migra v. Warren City School District Board of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56 (1984):
[A] federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the state in which the judgment was rendered.
See also Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); and Kremer v. Chemical Construction Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982).
As this Court noted in Eadie, 51 B.R. at 893, the proper test in applying the full faith and credit statute was set forth by the Supreme Court in Marrese as follows: First, the court should determine the preclusive effect of the judgment under the law of the state where the judgment originated. Second, the court must determine whether any federal statute expressly or impliedly creates an exception to the usual application of the full faith and credit statute.
Accordingly, this Court must first determine whether under Michigan law, a consent judgment which recites that certain claims are dismissed with prejudice would preclude later litigation of the same claims.
III.
Under Michigan law, issue preclusion prevents further litigation of those issues which were actually and necessarily litigated. Howell v. Vito's Trucking & Excavating Co., Inc., 386 Mich. 37, 191 N.W.2d 313 (1971). See also Sahn v. Brisson's Estate, 43 Mich.App. 666, 204 N.W.2d 692 (1972).
However, the Michigan courts hold that issues involved in a case settled by a consent judgment are not actually litigated, and thus have no issue preclusive effect. American Mutual Liability Insurance Company v. Michigan Mutual Liability Company, 64 Mich.App. 315, 235 N.W.2d 769 (1975). In that case, the court noted a split in other jurisdictions on the effect of consent judgments. The court held:
For the reasons which follow, we are of the opinion that consent judgments should not be given collateral estoppel effect.
First, collateral estoppel rules do not require that a consent judgment bind a party to facts which were originally in issue in the action that was settled. A consent judgment reflects primarily the agreement of the parties. Dora v. Lesinski, 351 Mich. 579, 582 [88 N.W.2d 592] (1958). The action of the trial judge in signing a judgment based thereon is *107 ministerial only. The parties have not litigated the matters put in issue, they have settled. The trial judge has not determined the matters put in issue, he has merely put his stamp of approval on the parties' agreement disposing of those matters. But a judgment can be given a collateral estoppel effect only as to those issues which were actually and necessarily adjudicated. Howell v. Vito's Trucking & Excavating Co., Inc., 386 Mich. 37, 42 [191 N.W.2d 313] (1971). It follows that because the issues involved in the settled case were not actually adjudicated, one of the prerequisites to giving a judgment collateral estoppel effect is not satisfied. Thus, the answer to the question posed above is: Nothing is adjudicated between two parties to a consent judgment.
While the fact that a consent judgment does not satisfy the legal requirements of collateral estoppel is reason enough to reject American Mutual's contention, there are also persuasive policy reasons for denying collateral estoppel status to consent decrees. The social interest in reducing instances of costly litigation is undermined by a rule which provides drastic consequences for settlements. One will tend to avoid a settlement rather than be later bound in potentially far-reaching, and often unintended, ways by facts embedded in an otherwise innoccuous [sic] settlement agreement. Because the application of the doctrine of collateral estoppel to consent judgments will in many cases be unforeseeable, consent judgments may become less desirable, thus impeding and embarrassing the settlement process. [Footnotes omitted.]
Id. at 326-28, 235 N.W.2d 769.
Several Michigan decisions have applied the rule announced in American Mutual. See Goldman v. Wexler, 122 Mich.App. 744, 333 N.W.2d 121 (1983); Peterson v. City of Lapeer, 106 Mich.App. 148, 307 N.W.2d 744 (1981); and Berar Enterprises, Inc. v. Harmon, 101 Mich.App. 216, 300 N.W.2d 519 (1980).[1]
It must be noted that American Mutual created an exception to this rule where a consent judgment explicitly reflects the parties' intent to be bound on a particular issue of fact. 64 Mich.App. at 327 n. 13, 235 N.W.2d 769. However, that exception does not apply here. The pleadings in the prior state court proceedings reflect that the parties intended to be bound only by the effect of the consent judgment; nothing suggests that the parties stipulated to any specific findings of fact.
IV.
Under Michigan law, however, a consent judgment does have claim preclusive or res judicata effect. See American Mutual Liability, above. See also Knowlton v. City of Port Huron, 355 Mich. 448, 94 N.W.2d 824 (1959); and Prawdzik v. Heidema Brothers, Inc., 352 Mich. 102, 89 N.W.2d 523 (1958). Under Michigan law, res judicata requires that the same evidence necessary to sustain the second cause of action would have been sufficient to authorize the first judgment. Accordingly, Michigan law does apply claim preclusive effect, that is, res judicata effect, to an earlier state court consent judgment.
But as noted earlier, under Marrese this is not the end of the inquiry. The issue then becomes whether there is a federal exception to the application of the full faith and credit statute.
On the issue whether there is any such exception in bankruptcy, Brown v. Felsen, 442 U.S. 127, 138, 99 S.Ct. 2205, 2212-13, 60 L.Ed.2d 767 (1979), held:
Refusing to apply res judicata here would permit the bankruptcy court to make an accurate determination whether respondent in fact committed the deceit, fraud, and malicious conversion which petitioner alleges. These questions are now, for the first time, squarely in issue. *108 They are the type of question Congress intended that the bankruptcy court would resolve. That court can weigh all the evidence, and it can also take into account whether or not petitioner's failure to press these allegations at an earlier time betrays a weakness in his case on the merits.
Some indication that Congress intended the fullest possible inquiry arises from the history of Section 17 [Section 17 of the Bankruptcy Act since repealed]. In the 1898 Bankruptcy Act, Congress provided that only `judgments' sounding in fraud would be excepted from a bankrupt's discharge. In 1903, Congress substituted `liabilities' for `judgments.' The amendment, said the accompaning House Report, was `in the interest of justice and honest dealing and honest conduct,' and it was intended `to exclude beyond peradventure certain liabilities growing out of offenses against good morals.' This broad language suggests that all debts arising out of conduct specified in Section 17 should be excepted from discharge and the mere fact that a conscientious creditor has previously reduced his claim to judgment should not bar further inquiry into the true nature of the debt." [Citations and footnotes omitted.]
Both Brown v. Felsen and the present case involve the debtor's defensive use of a prior state court consent judgment against a creditor's assertion in bankruptcy that a debt is nondischargeable due to fraud. Although in Brown the prior judgment made no mention of the fraud claims, while in the present case the prior judgment specifically dismissed the fraud claims with prejudice, this distinction makes no difference. See Marrese, 470 U.S. at 386, 105 S.Ct. at 1335; Byard, 47 B.R. at 702; and Eadie, 51 B.R. at 893.
Accordingly, the Court concludes that the parties' prior state court consent judgment dismissing the fraud claim with prejudice does not preclude relitigation of Day's claim in the present proceeding.
The debtor's motion for summary judgment is denied.
NOTES
[1] This rule that issue preclusive effect is not given to consent judgments is the minority rule. See 47 Am.Jur.2d Judgments, § 1089, pp. 144-46 (2d ed. 1969). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/386236/ | 639 F.2d 191
Charles P. FISHER, Appellant,v.J. Marshall COLEMAN and Richard H. Barrick, Appellees.
No. 79-1693.
United States Court of Appeals,Fourth Circuit.
Argued Aug. 19, 1980.Decided Jan. 27, 1981.
Deborah C. Wyatt and Steven D. Rosenfield, Charlottesville, Va., for appellant.
James E. Moore, Asst. Atty. Gen., Richmond, Va. (Marshall Coleman, Atty. Gen., Richmond, Va., on brief), for appellees.
Before RUSSELL, WIDENER and PHILLIPS, Circuit Judges.
PER CURIAM:
1
Fisher appeals from a summary judgment which rejected his constitutional challenge to two Virginia statutes which, respectively, allow state courts to interdict the sale of alcoholic beverages to one adjudged an "habitual drunkard," and make it a misdemeanor for anyone to sell alcoholic beverages to one known to be under such an interdiction order or for the person under interdiction to purchase or possess alcoholic beverages. We affirm.
2
In his action under 42 U.S.C. § 1983 against the Attorney General and a Commonwealth Attorney of the State of Virginia, Fisher claimed that: (1) Virginia Code § 4-51, insofar as it employs the term "habitual drunkard" as a predicate for interdiction, is void for vagueness on its face and as applied to him in violation of the Fourteenth Amendment; (2) Virginia Code § 4-62(2), making it a misdemeanor for a person interdicted as an "habitual drunkard" under § 4-51 to purchase or possess alcohol, violates the Eighth Amendment's proscription of cruel and unusual punishment.
3
In a thorough, well-reasoned opinion, the district court held (1) that Fisher lacked standing to challenge the interdiction provisions of Va.Code § 4-51 on vagueness and overbreadth grounds because, viewed both from his perspective or that of enforcing officials, his undisputed conduct (inter alia, fifty-nine convictions for public drunkenness over a period of slightly more than two years prior to his interdiction) fell clearly within the challenged language, citing, inter alia, Broadrick v. State of Oklahoma, 413 U.S. 601, 93 S. Ct. 2908, 37 L. Ed. 2d 830 (1973); (2) that, on the authority of Powell v. Texas, 392 U.S. 514, 88 S. Ct. 2145, 20 L. Ed. 2d 1254 (1968), the provisions of Va.Code § 4-62(2), making it a crime for one interdicted as an habitual drunkard to purchase or possess alcoholic beverages do not threaten cruel and unusual punishment; and (3) that the Attorney General of the State was not a proper party because not engaged in direct enforcement of the challenged statutes.
4
Because not necessary to decision, we express no opinion on the issue whether the Attorney General was a proper party. Upon a consideration of the record, the briefs, and the arguments of counsel before this court, we affirm the district court's judgment on the merits for reasons sufficiently stated by that court. Fisher v. Coleman, 486 F. Supp. 311 (W.D.Va.1979).
5
AFFIRMED. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1542337/ | 947 A.2d 168 (2008)
400 N.J. Super. 307
Frank DiMISA, Judy Morris, Beth Thomas-Edwards, each individually and as partners and on behalf of 61 East Main St., a general partnership, Plaintiffs-Appellants,
v.
Ronald ACQUAVIVA, R.E. Investors Ltd., Inc., and Christopher Acquaviva, Defendants-Respondents.
Docket No. A-0993-06T3.
Superior Court of New Jersey, Appellate Division.
Submitted November 28, 2007.
Decided May 16, 2008.
Blank Rome LLP, Cherry Hill, for appellants (John J. Pribish and Virginia G. White, of counsel and on the brief).
Rosner Nocera & Ragone, New York City, for respondents (Eliot L. Greenberg and Anna S. Park, on the brief).
Before Judges AXELRAD, PAYNE and MESSANO.
The opinion of the court was delivered by
PAYNE, J.A.D.
In this appeal, we are called upon to determine whether attorneys' fees incurred in setting aside a judgment against a partnership on its note secured by a mortgage, improperly procured by the son of a partner through a corporation he had established to accept assignment of the *169 note and mortgage, constitute recoverable compensatory damages that would serve as a foundation for a further claim of entitlement to punitive damages.
I.
The facts of the matter are somewhat complex. Plaintiffs Frank DiMisa, Judy Morris, Beth Thomas-Edwards, and defendant Ronald Acquaviva were general partners in 61 East Main Street, a partnership formed in 1986 to take title to property at that address, located in Holmdel, New Jersey, for use in the operation of a real estate business. At the time of purchase, a loan in the amount of $350,000, secured by a mortgage and note, was obtained from United Jersey Bank. Thereafter, in violation of Article VIII(b)10 of the partnership agreement, precluding the transfer of a partnership interest to a nonpartner, Ronald Acquaviva secretly transferred his partnership interest first to his daughter-in-law, Marsha Acquaviva, and then to his son, defendant Christopher Acquaviva. On November 27, 1998, Christopher, in turn, obtained an assignment of the note and mortgage by the Bank to defendant R.E. Investors Ltd. (REI) by payment of the discounted sum of $83,251.[1] However, the certificate of incorporation for REI, listing Christopher as its sole shareholder and officer, was not filed until January 6, 1999. Funds for the purchase of the note and mortgage assigned to REI were obtained from the estate of Christopher's grandfather with the consent of Christopher's father, Ronald, although it does not appear that either was a beneficiary under the grandfather's will, but only served as co-executors.
In 1998, plaintiffs contacted Summit Bank, successor in interest to United Jersey Bank, to obtain information regarding the payoff amount on the mortgage, and they learned at that time that the Bank no longer held the mortgage to the property. After acquiring the partnership checkbook from Ronald Acquaviva, its possessor, plaintiffs learned that mortgage payments were being made on the partnership's behalf to REI, which plaintiffs were led to believe was an independent corporation, only later learning of Christopher Acquaviva's interest in it through examination of corporate documents ordered from the New Jersey Secretary of State. Payments on the mortgage were made by the partnership to REI from December 1998 through January 2000.
By letter dated January 4, 1999, Christopher Acquaviva informed the partnership that he had been advised "by the holder of the mortgage on 61 East Main Street, that same matured on October 1, 1998 and is now due in full," Christopher further advised the partnership that the mortgage was in default, and although the mortgage holder had accepted payments for November and December 1999, payment in full of a principal balance of $143,131.25 plus interest from December 1, 1998 was now expected. A deadline of February 15, 2000 was set for payment.
In a letter addressed to plaintiffs and Christopher Acquaviva, dated March 20, 2000, counsel for REI informed the partners of a default in loan payments. An ex parte default judgment on the note in the amount of $154,535.95 was obtained on April 18, 2000 in foreclosure proceedings instituted by REI.
*170 In a separate action, on May 2, 2000, plaintiffs filed an application for an order to show cause, supported by a verified complaint against defendants Ronald and Christopher Acquaviva and REI, claiming fraud, breach of fiduciary duty, breach of the partnership agreement, and conspiracy, and seeking an accounting as well as injunctive relief in the foreclosure action. On June 4, 2001, Judge Clarkson Fisher, Jr. granted plaintiff's motion for partial summary judgment, vacating the judgment of foreclosure, dismissing the foreclosure action and declaring the mortgage extinguished.[2] Remaining issues "concerning the monetary relief to which either the plaintiffs or defendants may be entitled" were transferred to the Law Division for resolution. In a September 26, 2001 opinion addressing motions for reconsideration by plaintiffs and by defendants Christopher Acquaviva and REI, Judge Fisher addressed plaintiffs' claim that the partnership should be dissolved, determining that the issue properly should be resolved by arbitration as required by Article XIII of the parties' partnership agreement. Additionally, in a January 25, 2002 order, Judge Fisher required plaintiffs to pay REI the sum of $40,852.19 plus interest at a rate of $9.40 per day, commencing on November 30, 2001, which sum represented the plaintiffs' pro rata share of the balance of the purchase price of the note and mortgage.
Arbitration then occurred before retired Appellate Division judge John Keefe. In a decision dated September 22, 2003, the arbitrator expelled Christopher Acquaviva from the partnership and dissolved it as originally constituted, as of November 27, 1998, awarded Christopher the value of his partnership interest as of that November date together with interest at the rate specified in Rule 4:42-11, and permitted the partnership to be reconstituted and continued in the same name with plaintiffs as partners. The arbitration award was confirmed by order of April 8, 2004, entered by Judge Quinn. When reaching his decision in the matter, Judge Quinn observed:
There remains therefore to be litigated the issues of both compensatory and punitive damages. I am satisfied first of all that based on Judge Keefe's arbitration ruling, that at least a prima facie case has been shown and demonstrated for the entitlement by the plaintiffs [to] punitive damages.
I will therefore order that discovery proceed, and that discovery be had in connection with the punitive damage allegations of this complaint, along with discovery to be had on the compensatory damages in this case.
The relief sought [by plaintiffs], in addition to confirming the arbitration award, asks that this Court vacate the order of Judge Fisher dated January 25th 2002 [awarding damages to REI]. I'm going to deny that request at this time.
On September 6, 2006, Christopher Acquaviva and REI renewed their motion for summary judgment, filed previously before Judge Fisher and Judge Quinn, arguing as they had previously that plaintiffs' only damages consisted of the attorneys' fees expended in the matter, that the American Rule precluded the award of such fees, and that in the absence of a *171 compensatory damage award, punitive damages were unavailable. Plaintiffs argued an exception to the American Rule applied, because the tortious conduct of Christopher Acquaviva caused them to incur attorneys' fees in proceeding against a third party, REI.
The motion was decided by a third judge, who in an opinion delivered from the bench on October 12, 2006, disagreed with plaintiffs, determining that the facts presented did not fit within the limited exception to the American Rule recognized in In re Niles, 176 N.J. 282, 823 A.2d 1 (2003), a decision in which the Supreme Court held that "when an executor or trustee commits the pernicious tort of undue influence, an exception to the American Rule is created that permits the estate to be made whole by an assessment of all reasonable counsel fees against the fiduciary that were incurred by the estate" both those fees otherwise chargeable to the estate involving litigation with third parties and those incurred in litigation with the tortfeasor-trustee. Id. at 293-300, 823 A.2d 1. The judge continued his ruling by observing:
I find that where they talk about a third party in that Supreme Court opinion, it's radically different than what we're dealing with here. The parties really, they were all one and the same. They were all one and the same, all family members. This became a shell game between the various players.
And that plays right into my comments about the fact that all the parties to this were very, very well known real estate professionals. There's no undue influence, nobody took advantage of one another. This is just a situation where you've got to be careful who you get into partnership with.
I still do not understand some of the dynamics of the case. But it doesn't really affect my decision here.
On this basis, the judge found any exception to the American Rule inapplicable, found no compensatory damages to exist, and therefore dismissed the punitive damage claim as to Christopher Acquaviva and REI. Thereafter, Ronald Acquaviva also moved for summary judgment, and that motion was granted.
II.
Plaintiffs have appealed from the judge's summary judgment orders in favor of Christopher Acquaviva, REI and Ronald Acquaviva, arguing (1) the motion judge disregarded the principle of law of the case by ignoring the decisions of Judge Fisher and Judge Quinn allegedly recognizing plaintiffs' right to attorneys' fees; (2) plaintiffs possess damage claims in addition to their attorneys' fees; and (3) plaintiffs are entitled not only to their legal fees as damages, but also money that was paid to REI in the form of monthly mortgage payments and to a reversal of Judge Fisher's January 25, 2002 order requiring plaintiffs to reimburse REI for the balance of the amount spent in purchasing the note and mortgage.
We do not accept plaintiffs' argument that the law of the case precluded the motion judge from entering summary judgment against them. In this regard, plaintiffs assert that both Judge Fisher and Judge Quinn found in their favor on the issue of entitlement to attorneys' fees. However, our review of the record satisfies us that neither judge issued a definitive ruling on the issue. While recognizing a theoretical right to fees, Judge Fisher stated: "Whether ultimately there should be an award or how much it ought to be, I have no idea at the present time." Similarly, Judge Quinn found, on the basis of the arbitration decision, that plaintiffs had established a prima facie case for entitlement to punitive damages, but noted that: *172 "There therefore remains to be litigated the issues of both compensatory and punitive damages," and he ordered that discovery be conducted on those issues. Thus, a foundation for application of the law of the case doctrine is absent in this case. State v. Reldan, 100 N.J. 187, 203, 495 A.2d 76 (1985); Franklin Med. Assocs. v. Newark Public Schools, 362 N.J.Super. 494, 511-12, 828 A.2d 966 (App.Div.2003).
We agree with plaintiffs, however, that the motion judge was mistaken when he entered summary judgment in defendants' favor as the result of his determination that plaintiffs were not entitled to attorneys' fees as a matter of law.
The Restatement (Second) of Torts § 914 provides:
(1) The damages in a tort action do not ordinarily include compensation for attorney fees or other expenses of the litigation.
(2) One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.
In his decision of September 22, 2003, arbitrator Keefe determined that Christopher Acquaviva had breached his fiduciary obligations to the partnership stating:
Instead of informing the petitioners that he had purchased the mortgage and offering the petitioners the opportunity of contributing their pro rata share, he concealed the fact with the clear purpose of collecting interest on the indebtedness, and, indeed, the title upon foreclosure. As noted by Judge Fisher, respondent was "disingenuous" at best when he misled petitioners into thinking that it was some unrelated third party who was declaring a default on the mortgage when in fact it was he who was doing so. Thereafter, he obtained a judgment of foreclosure against his own partners. Such actions are a breach of the partner's fiduciary duty to the partnership. . . .
The arbitrator's determination, as a consequence, to expel Christopher from the partnership and to permit its reconstitution without him was confirmed by Judge Quinn.
Despite New Jersey's general adherence to the American Rule that parties should bear their own attorney's fees unless fee shifting is authorized by statute, court rule or contract, the State's courts have long recognized the principle, reflected in § 914 of the Restatement, that one whose tortious conduct requires another to bring or defend a suit against a third party to protect his interests may be assessed the attorneys' fees incurred in the third-party action as an element of damages arising from the tort. See, e.g., State, Dept. of Envtl. Prot. v. Ventron, 94 N.J. 473, 505, 468 A.2d 150 (1983) ("if a third party sues one who as been defrauded, as DEP sued the Wolfs, the defrauded party `may recover from the tortfeasor the expenses of that litigation, including counsel fees, as damages flowing from the tort.'"); Feldmesser v. Lemberger, 101 N.J.L. 184, 186-87, 127 A. 815 (E. & A.1924) (affirming a verdict in favor of contract purchasers of property for attorneys' fees incurred in futilely seeking to enforce the contract, executed fraudulently by a person other than the property owner); Jugan v. Friedman, 275 N.J.Super. 556, 573-74, 646 A.2d 1112 (App.Div.) (permitting recovery of attorneys' fees incurred by judgment creditor in litigation against third-parties to set aside fraudulent transfers by judgment debtor), certif. denied, 138 N.J. 271, 649 A.2d 1291 (1994); *173 Dorofee v. Pennsauken Tp. Planning Bd., 187 N.J.Super. 141, 144-46, 453 A.2d 1341 (App.Div.1982) (permitting a municipal planning board to recover fees and expenses incurred in defending litigation brought by purchasers of land-locked property on the ground, found to be incorrect, that the board had participated in the fraudulent misrepresentations of the seller as to the nature of the property); Hagen v. Gallerano, 66 N.J.Super. 319, 333, 169 A.2d 186 (App.Div.1961) (holding that "the reasonable expense of the litigation to establish the invalidity of [a release of claims against insurer] is an item that is recoverable in a fraud case.").[3]
Further, as Justice Zazzali, writing for the Court in In re Estate of Lash, recognized:
Breach of fiduciary duty is a tort theory, such that attorneys' fees incurred as a result of that breach may be recoverable as a portion of the plaintiff's damages. Wolfson v. Bonello, 270 N.J.Super. 274, 291 n. 12, 637 A.2d 173 (App. Div.1994) (describing breach of fiduciary duty as a tort); Paris of Wayne, Inc. v. Richard A. Hajjar Agency, 174 N.J.Super. 310, 318, 416 A.2d 436 (App.Div. 1980) (same); Sullivan v. Jefferson, Jefferson & Vaida, 167 N.J.Super. 282, 287, 400 A.2d 836 (App.Div.1979) (same); Rodriguez v. Cardona Travel Bureau, 216 N.J.Super. 226, 230, 523 A.2d 281 (Law Div.1986); Restatement (Second) of Torts § 974 ("One standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of duty imposed by the relation.").
[169 N.J. 20, 27, 776 A.2d 765 (2001).]
As a consequence, in Lash, where a breach of fiduciary duty by the administrator had caused the estate to incur attorneys' fees to litigate its claim against the surety in order to demonstrate the surety's liability for the administrator's defalcation, the Court found the fees were a foreseeable consequence of the administrator's actions, and thus assessable against the administrator as damages. Id. at 27-28, 776 A.2d 765. See also In re Niles, 176 N.J. 282, 293-96, 823 A.2d 1 (2003), upon which the motion judge relied, holding, among other things, that the counsel fees of third parties incurred in litigation by the former trustee in order to avoid inter vivos trust agreements obtained through undue influence by a successor trustee and his mother, initially charged to the estate of the settlor, should be borne by the tortfeasors.[4]
In finding the precedent that we have discussed to be inapplicable, the motion judge appears to have concluded that litigation against REI did not constitute litigation against a third-party for fee-shifting purposes. We disagree. In doing so, we acknowledge that Chancery Judge Fisher premised his determination to extinguish the note and mortgage given by the partnership on grounds of merger, despite the fact that the mortgage was nominally assigned to REI, a non-debtor, thereby recognizing an identity of interest between REI and Christopher Acquaviva. However, in rejecting the contention that REI was a separate juridical entity, Judge Fisher explicitly noted that "[t]he problem with such a contention is that it is raised in *174 a court of equity, where labels or veils may be disregarded in order to do complete justice."
We find it significant that, having resolved the equitable issues raised by the parties, Judge Fisher then transferred the action to the Law Division for determination of plaintiffs' legal right to compensatory and punitive damages. In this legal context, there is no basis for engaging in the corporate veil-piercing undertaken by Judge Fisher in fashioning his equitable remedy.[5] As we recently observed: "`piercing the corporate veil is not technically a mechanism for imposing "legal" liability, but for remedying the "fundamental unfairness [that] will result from a failure to disregard the corporate form."'" Verni ex rel. Burstein v. Stevens, 387 N.J.Super. 160, 199, 903 A.2d 475 (App.Div.2006) (quoting Trs. of the Nat'l Elevator Indus. Pension, Health Benefit & Educ. Funds v. Lutyk, 332 F.3d 188, 193 (3d Cir.2003)), certif. denied, 189 N.J. 429, 915 A.2d 1052 (2007). In this compensatory damage context, invocation of an equitable remedy avoiding the protections of corporate formation would not remedy any fundamental unfairness inherent in recognizing the corporate form of REI. Rather, it would serve to create an unfairness by depriving plaintiffs of the attorneys' fees to which they are entitled as the result of their suit against the corporate entity, occasioned by the fraud and breach of fiduciary duty of the Acquavivas. We are aware of no precedent that would require us to turn an equitable doctrine on its head so as to reach so inequitable a result. Indeed, precedent elsewhere has established in a case in which a corporate parent unsuccessfully sought to avoid designation as a third party for fee shifting purposes, "even if a party seeking to pierce the corporate veil establishes that a subsidiary is no more than a parent's `alter ego,' the party must establish that equity requires that the two corporations be treated as one." Phil Crowley Steel Corp. v. Sharon Steel Corp., 702 F.2d 719, 722 (8th Cir.1983); see also Ventron, supra, 94 N.J. at 500, 468 A.2d 150 (holding that the purpose of the doctrine of piercing the corporate veil is to prevent an independent corporation from being used to defeat the ends of justice). No equitable argument requiring the corporate form of REI to be disregarded can be made in this compensatory damage context.
As a factual matter, there is nothing to suggest that plaintiffs regarded REI as a corporate embodiment of Christopher Acquaviva at least until the time that they received the certificate of incorporation pursuant to their request to the Secretary of State. Nor have we been offered any legal basis for concluding that plaintiffs' chancery action against REI was improper, or that complete relief in that action could have been afforded without its presence. In these circumstances, we discern no principled reason to conclude that the attorneys' fees incurred by plaintiffs in suing REI do not constitute an element of their damages under the precedent that we have discussed. Accordingly, we reverse the orders granting summary judgment to defendants in this matter.
III.
We decline to reach plaintiffs' argument that Judge Fisher erred in failing to require disgorgement of payments made to REI on the mortgage and in requiring *175 them to pay their pro rata share of the remaining balance of the amount expended in procuring the assignment as improperly raised in this appeal. See R. 2:5-1(f)3A. We likewise decline to reach plaintiffs' arguments with respect to additional damage claims. Any such claims as can be supported can be addressed further upon remand.
Reversed and remanded for trial.
NOTES
[1] The maturity date of the note was initially August 2, 1991. As the result of a default in payment on the note, foreclosure proceedings were commenced by United Jersey Bank in an action that was settled on November 30, 1993 by execution of a consent order for settlement that, among other things, extended the maturity date of the note to April 1, 1995. Thereafter, the maturity date was further extended to September 1, 1998.
[2] Finding that, as an equitable matter, the debt had been assigned to a debtor, Judge Fisher declared the debt to be extinguished "because the same person cannot be both debtor and creditor with respect to the same debt. See, e.g., Kessler v. Tarrats, 191 N.J.Super. 273, 284, 466 A.2d 581 (Ch.Div.1983), aff'd, 194 N.J.Super. 136, 476 A.2d 326 (App. Div.1984)."
[3] Although a ruling on the issue of fraud has not been made, prima facie grounds for such a claim exist.
[4] We note that, in In re Estate of Vayda, 184 N.J. 115, 875 A.2d 925 (2005), the Court declined to allow attorney fee shifting "whenever a non-attorney executor is removed because of, among other things, breach of a fiduciary duty and bad faith against co-beneficiaries." However, that case did not involve a third-party action and thus the decision is inapplicable here.
[5] We note as well that disregarding the corporate form of REI was likely unnecessary to the remedy of merger, since REI had not been incorporated at the time of the assignment of the note and mortgage, and thus the de facto assignee of the instruments was Christopher Acquaviva. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857878/ | Harker Heights
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-160-CV
CITY OF HARKER HEIGHTS, TEXAS,
APPELLANT
vs.
SUN MEADOWS LAND, LTD. AND SILVER CREEK DEVELOPMENT COMPANY,
APPELLEES
FROM THE DISTRICT COURT OF BELL COUNTY, 146TH JUDICIAL DISTRICT
NO. 125,624-B, HONORABLE WILLIAM C. BLACK, JUDGE PRESIDING
The City of Harker Heights ("the City") appeals from an adverse judgment
rendered in a suit brought by two developers. Sun Meadows Land, Ltd. ("Sun Meadows") and
Silver Creek Development Company ("Silver Creek") sued the City on counts of breach of
contract, failure of consideration, money had and received, constructive trust, and mutual mistake,
seeking damages and recovery of funds escrowed with the City at the time their subdivisions were
approved. The trial court rendered judgment on the jury verdict, awarding the developers no
damages but permitting them to recover their escrowed funds, less the value of certain road
improvements made by the City, plus prejudgment interest. We will affirm the trial court's
judgment.
BACKGROUND
In July 1987, James Saunders and Enzo Pellegrino each sought City approval of
their respective subdivisions, Sun Meadows III and Silver Creek. The proposed subdivisions were
adjacent to each other and both abutted Old Nolanville Road, a road built and maintained by Bell
County. The City of Harker Heights lies on one side of Old Nolanville Road, the city of
Nolanville on the other. A new elementary school built on the Harker Heights side of the road
led to increased daily traffic on Old Nolanville Road, primarily due to school children being
transported to and from school. Harker Heights officials considered the county road to be below
city standards: it had no sidewalks or curbs, the surface was substandard, it was too narrow for
the increased traffic, and a dangerous "S" curve presented a traffic hazard. Concerns about
improving Old Nolanville Road were heightened when the City was asked to approve the two new
subdivisions which would potentially add to its congestion.
Some agreement was reached whereby the City would approve the two subdivision
plats if each developer would escrow his respective share of the City's projected costs of annexing
and improving Old Nolanville Road at some future time; this plan was calculated to save
assessment of each individual who owned a lot adjacent to the road when the City eventually
annexed the county road.
Together, the subdivisions extended 5600 frontage feet along the road. The City's
Director of Public Works estimated the road improvement costs to be thirty-eight dollars per foot.
In March 1988, Sun Meadows posted a letter of credit with the City in the amount of $36,945.50
and subsequently received final approval for its subdivision plats. In July 1988, the City deducted
$46,011.54 from amounts owed to Mr. Pellegrino on another project and Silver Creek received
final plat approval.
The City never annexed Old Nolanville Road. Bell County made certain
improvements to the road, but not all of those contemplated by the City. The county required the
City to install a storm-drainage system at an estimated cost of $155,000. The City also put in
curbs and gutters on its side of the road at an estimated cost of $12,500.
The developers protested when the City spent their escrowed funds but never
annexed Old Nolanville Road in order to make the improvements necessary to bring it up to city
standards. The parties disputed the nature of the agreement surrounding the escrowed funds. The
City maintained that the developers' funds merely secured early approval of the subdivision plats
and did not obligate the City to spend the funds in any particular fashion. The developers
insisted, however, that the City agreed to make specific improvements to Old Nolanville Road,
estimated to cost thirty-eight dollars per foot, and further agreed not to draw on the escrowed
funds until other adjacent landowners were assessed their respective shares of road improvement
costs. When the City refused to refund the escrowed funds because it no longer had them, Sun
Meadow and Silver Creek filed this suit, seeking restitution of the funds and damages for breach
of contract, failure of consideration, money had and received, constructive trust, and mutual
mistake.
After trial to a jury, both parties moved for judgment on the verdict. The court
rendered judgment for the developers on the verdict, awarding $31,000 to Sun Meadows and
$39,000 to Silver Creek, plus prejudgment interest.
The City brings three points of error on appeal: (1) the court erred in entering a
verdict for the developers because the jury's finding that the City breached its agreement with the
developers precluded recovery on a theory of unjust enrichment; (2) the court erred in
disregarding the jury's material findings that the City breached its agreement and that the
developers suffered zero damages as a result of that breach; and (3) there was no evidence to
support submitting the unjust enrichment issue to the jury.
ANALYSIS
Restitution for Unjust Enrichment
In points of error one and two, the City suggests that "where there exists a valid
express contract covering the subject matter, there can be no implied contract." Woodard v.
Southwest States, Inc., 384 S.W.2d 674, 675 (Tex. 1964). Because the jury implicitly found an
agreement (by finding the City breached its agreement with Sun Meadows and Silver Creek), the
City argues that the developers cannot recover their escrowed funds on a theory of unjust
enrichment. Because the jury found the City breached its agreement but failed to find that the
developers suffered any damages from the breach, the City argues that any recovery on a theory
of unjust enrichment is precluded. The City thus contends that the jury's answers regarding the
breach and the lack of damages were material findings that the trial court could not disregard to
render a judgment in favor of the developers. See Tex. R. Civ. P. Ann. 301 (Supp. 1992) ("The
judgment of the court shall conform to the pleadings, the nature of the case proved and the
verdict, if any . . . .").
It is the duty of courts to reconcile apparent conflicts in jury findings whenever
reasonably possible. C. & R. Transport, Inc. v. Campbell, 406 S.W.2d 191,195 (Tex. 1966)
(citing Texas & Pac. Ry. v. Snyder, 321 S.W.2d 280, 282 (Tex. 1959)). But if a finding creates
a fatal conflict with other findings such that judgment cannot be rendered in favor of a party, that
finding is material and may not be disregarded. 4 Roy W. McDonald, Texas Civil Practice in
District and County Courts § 17.31, at 239-40 (Frank W. Elliott ed., rev. ed. 1984). The City
contends that the finding of an agreement and the finding that the City was unjustly enriched are
in fatal conflict. Sun Meadow and Silver Creek assert that the findings can be reconciled by
proper rules of construction. We agree with the developers that the court properly rendered
judgment on the verdict without disregarding a material finding.
Restitution for unjust enrichment is often an appropriate measure of recovery for
breach of contract, for example in a case where the complaining party's expectation damages are
too hard to measure. Dan B. Dobbs, Remedies § 4.1, at 222 (1973). Restitution involves
restoring property or money taken from the plaintiff. It is a measure of damages, not a cause of
action. Unlike other contractual damages, restitution focuses on forcing the defendant to disgorge
benefits that it would be unjust to keep, rather than on compensating the plaintiff. The principle
that underlies the remedy of restitution is the avoidance of unjust enrichment:
The principle, once again, is to deprive the defendant of benefits that in equity and
good conscience he ought not to keep, even though he may have received those
benefits quite honestly in the first instance, and even though the plaintiff may have
suffered no demonstrable losses.
Id. at 224.
The law of restitution for unjust enrichment emerged both in law and in equity.
In law, the courts developed a form of action known as assumpsit; "money had and received" was
a common count in general assumpsit to restore money "that in equity and good conscience
belongs to another." Key Pontiac, Inc. v. Blue Grass Sav. Bank, 265 N.W.2d 906, 908 (Iowa
1978); see also Staats v. Miller, 243 S.W.2d 686, 687 (Tex. 1951). Under such a count, the right
of recovery exists independent of the parties' agreement or intent, when one holding another's
funds would be unjustly enriched if the law did not presume a promise to restore the funds. Coast
Trading Co., Inc. v. Parmac, Inc., 587 P.2d 1071, 1075 (Wash. Ct. App. 1978). An action
for money had and received may be founded upon an express agreement or one implied in fact,
but it is not dependent upon either. Tidwell v. O'Bryan's Adm'r., 181 S.W.2d 260, 261
(Kentucky Ct. App. 1944). The United States Supreme Court recognized the equitable principles
underlying this cause of action as early as 1933:
This is often called an equitable action and is less restricted and fettered by
technical rules and formalities than any other form of action. It aims at the abstract
justice of the case, and looks solely to the inquiry, whether the defendant holds
money, which ex aequo et bono belongs to the plaintiff.
U.S. v. Jefferson Elec. Mfg. Co., 291 U.S. 386, 402-03 (1933) (citations omitted).
Equity also developed several devices to award restitution, including the
constructive trust and the equitable lien. But behind all of the devices lay the very general
principle of avoiding unjust enrichment.
Today, there is wide recognition that the principle involved in these cases is the
unjust enrichment principle, and with some sad exceptions, courts . . . have sought
to make the law conform to this principle, without too much regard to whether the
case arose in law or equity . . . .
Dobbs, Remedies § 4.1 at 225.
By 1937 the law of restitution had become sufficiently recognized by the American
Law Institute to deserve its own Restatement, setting forth the following generalization:
[T]hat [Restitution] would lie in all the cases where one had received or used
something for which it was just that he should compensate another, the remedy
being a money payment for the value of the thing given or the benefit received. .
. . [I]ts avowed ethical basis distinguishes it from most judicial statements, and its
indefiniteness makes easy an extension of liability to newly arising situations.
Restatement of Restitution, Introductory Note at 8-9 (1937).
The City has cited several Texas cases holding that recoveries on an express
contract and in quantum meruit are inconsistent. See, e.g., Truly v. Austin, 744 S.W.2d 934
(Tex. 1988); Woodard, 384 S.W.2d 674; Lone Star Steel Co. v. Scott, 759 S.W.2d 144 (Tex.
App. 1988, writ denied). Quantum meruit is founded on the principle of unjust enrichment, but
it involves the specific situation where plaintiff has performed services which benefitted defendant.
"Recovery in quantum meruit will be had when nonpayment for the services rendered would
`result in an unjust enrichment to the party benefitted by the work.'" Vortt Exploration v. Chevron
U.S.A., 787 S.W.2d 942, 944 (Tex. 1990) (citing City of Ingleside v. Stewart, 554 S.W.2d 939,
943 (Tex. Civ. App. 1977, writ ref'd n.r.e.)). However, if these parties contracted for the
rendition of services, the contract must govern plaintiff's compensation. Truly, 744 S.W.2d at
936.
Quantum meruit is an equitable remedy grounded in the principle of unjust
enrichment, but it is only one of many remedies developed in law and equity to avoid unjust
enrichment. Although the presence of a valid contract governing the rendered services may defeat
a recovery in quantum meruit, the finding of an agreement does not defeat all restitution remedies
grounded in the principle of unjust enrichment. See, e.g., Barrett v. Ferrell, 550 S.W.2d 138
(Tex. Civ. App. 1977, writ ref'd n.r.e.) (court considers damages sought under a contract and the
alternative plea of restitution for unjust enrichment); Pasadena Assoc. v. Connor, 460 S.W.2d
473, 480 (Tex. Civ. App. 1970, writ ref'd n.r.e.) (restoring money paid under a contract, "which
was never completed and from which no benefits were received"); Statz v. Adams, 55 S.W.2d 882
(Tex. Civ. App. 1932, no writ) (jury found a contract which the plaintiff failed to read and
rendered verdict restoring money paid).
In Question No. One, the jury was asked: "Did the City of Harker Heights, Texas,
fail to comply with its agreement, if any, with Sun Meadows Land, Ltd. and Silver Creek
Development Co.?" Answer: "Yes." But no questions were submitted to ask the jury to define
the terms of the agreement. The terms of the oral agreement causing the developers to escrow
approximately $83,000 with the City was at the heart of this dispute. The City maintained that
the only thing it ever agreed to do was to give early approval to the Sun Meadow and Silver Creek
subdivisions. The developers protested that they would never have paid to have their subdivisions
approved; rather, they advanced the funds as a preassessment for specific road improvements the
City was to make after annexing Old Nolanville Road and after assessing adjacent landowners.
In Question No. Two, the jury was asked: "Has the City of Harker Heights,
Texas, been unjustly enriched with respect to the funds received from Sun Meadow Land, Ltd.
and Silver Creek Development Co.?" Answer: "Yes." In answer to Question No. Three, the
jury found that the City had been unjustly enriched by $31,000 in funds received from Sun
Meadows and by $39,000 in funds received from Silver Creek. The jury appears to have
subtracted from the developers' escrowed funds the value of the curbs and gutters the City
installed along Old Nolanville Road in determining the amount of the City's unjust enrichment.
In Question No. Four, the jury was asked what sum of money would reasonably
compensate the developers for their damages, if any, from the City's breach and it answered
"None." The jury was asked to consider only two elements of damage: (1) money tendered to
the City, and (2) diminished land values. The developers did not convince the jury that the value
of the lots in the two subdivisions had been diminished by the City's failure to annex and improve
Old Nolanville Road. Likewise, the jury did not award damages for "money tendered" because
in the answer to the previous question that same amount of money, less the value of the benefits
received, had been awarded to plaintiffs to avoid the City's unjust enrichment. We think the trial
court properly reconciled any apparent conflict between the answers to Questions Three and Four
to render judgment for Sun Meadows and Silver Creek on the verdict.
The finding of an unspecified agreement between the City and the developers, that
the City breached in ways that are never defined, does not preclude a judgment for the developers
based on the jury's verdict that the City was unjustly enriched. Indeed, the principle of unjust
enrichment suggests that restitution is an appropriate remedy in circumstances where the
agreement contemplated is unenforceable, impossible, not fully performed, thwarted by mutual
mistake, or void for other legal reasons. See, e.g., Pasadena Assoc., 460 S.W.2d 473 (Hospital
should be restored value of what it parted with under a contract which was never completed and
from which no benefits were received); Statz, 55 S.W.2d 882 (either mutual mistake or legal fraud
entitled party to recover money paid for which the consideration failed); Key Pontiac, Inc., 265
N.W.2d 906 (action for money had and received lies where money is given for special purpose
which is impossible to carry out).
We overrule points of error one and two.
No Evidence.
In its third point of error, the City maintains that there is no evidence to support
the submission to the jury of an unjust-enrichment issue. In reviewing a "no evidence" challenge,
we consider only the evidence and reasonable inferences drawn therefrom which, when viewed
in their most favorable light, support the jury verdict or court finding. The court must disregard
all evidence and inferences to the contrary. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex. 1987);
Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex. 1986). If there is more than a scintilla
of evidence to support the finding, the no-evidence challenge fails. Stafford, 726 S.W.2d at 16.
Any probative evidence supporting the finding will be sufficient to overrule the point of error.
Robert W. Calvert, No Evidence and Insufficient Evidence Points of Error, 38 Tex. L. Rev. 361,
364 (1960).
The developers sought to prove that the City escrowed their funds for the specific
purpose of annexing and improving Old Nolanville Road to bring it up to city street standards.
They introduced evidence that the Director of Public Works for the City assessed them thirty-eight
dollars per linear foot fronting on the road, based on the projected costs of specific improvements.
The developers testified that they understood the escrowed funds would simply save the City from
assessing individual homeowners at the time of a future assessment, but that no funds would be
drawn until the road was annexed and other landowners were assessed. The City testified that
they never annexed the road and they never assessed other adjacent landowners.
The City's defense to the money had and received claim was threefold: (1) that the
developers paid only for early approval of their plats and the City was not obligated to spend the
money on the road improvements; (2) that the county made certain road improvements (albeit not
the ones the City had planned to make) and therefore the developers received their benefit; and
(3) that the City expended some $155,000 putting in place a storm-drainage system for Old
Nolanville Road, a benefit to the developers far exceeding the $83,000 they placed in escrow. The City testified that no other developer had ever paid to get a subdivision plat
approved. The City testified that plans to annex the county road were abandoned when the
departure of twenty-thousand Fort Hood soldiers to Saudi Arabia seriously undermined the local
economy. The City admitted that it was required to install the storm-drainage system by Bell
County and that no landowners were assessed for this expenditure. The City explained that
subdivision developers were normally required to escrow funds to secure performance of projects
promised to obtain subdivision approval, but that this rationale did not apply to the developers of
Sun Meadow or Silver Creek who had completed all requirements for plat approval. James
Saunders testified that he was not required to install storm drainage for Old Nolanville Road to
secure plat approval for Sun Meadows. There was evidence that the City Manager or the Director
of Public Works may have promised the two developers that specific road improvements would
be made with the escrowed funds after annexation, but that the City Council never officially
ratified such an agreement.
We conclude that there is more than a scintilla of evidence to support submitting
the issue of unjust enrichment to the jury. We overrule the City's third point or error.
We affirm the trial court's judgment.
Bea Ann Smith, Justice
[Before Chief Justice Carroll, Justices Aboussie, and B. A. Smith]
Affirmed
Filed: May 6, 1992
[Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542052/ | 76 B.R. 523 (1987)
In re PURCO, INC. t/d/b/a Tri State Insulation, Inc. and t/d/b/a Speco Marketing, Debtor.
Vedder J. WHITE, Esq., Trustee, Plaintiff,
v.
Marlin K. COON, Coon Refrigeration, Inc., Defendants.
Vedder J. WHITE, Esq., Trustee, Plaintiff,
v.
Marlin K. COON and Coon Refrigeration, Inc., Defendants.
Vedder J. WHITE, Esq., Trustee, Movant,
v.
Marlin K. COON, and Coon Refrigeration, Inc., Respondents.
Bankruptcy No. 83-00544E, Adv. Nos. 84-0097, 85-0004.
United States Bankruptcy Court, W.D. Pennsylvania.
July 28, 1987.
*524 Vedder J. White, trustee, Erie, Pa., pro se.
John W. Beatty, Erie, Pa., for defendants, Marlin K. Coon and Coon Refrigeration, Inc.
*525 OPINION ON TRUSTEE'S COMPLAINT TO RECLAIM PROPERTY OF THE DEBTOR, TO AVOID CERTAIN LIENS AND SUBORDINATE CLAIMS OF COON AND COON REFRIGERATION, TO RECOVER PROCEEDS OF THE SALE OF DEBTOR'S ASSETS, AND ON TRUSTEE'S PETITION TO ABANDON PROPERTY
WARREN W. BENTZ, Bankruptcy Judge.
MOTION FOR ABANDONMENT
Case Summary
Before this Court are three interrelated proceedings instituted by the Trustee in the above bankruptcy case. The Trustee, on July 25, 1984, filed a complaint (Adversary No. 84-0097) to reclaim property of the Debtor and to avoid certain liens upon that property. This complaint alleged, inter alia, that various judgment notes, security agreements, and financing statements given by the Debtor, Purco, Inc. ("Purco") to Marlin K. Coon ("Coon") and Coon Refrigeration, Inc. ("Coon Refrigeration") were fraudulent conveyances, or must be deemed to be contributions to capital, or were executed without requisite corporate authority.
The Trustee, on January 23, 1985, filed a second complaint (Adversary No. 85-0004) seeking to recover from Defendants Coon and Coon Refrigeration some $21,320, being the proceeds of their postpetition sale of a 1977 GMC truck, attached equipment and inventory thereon, alleged to have been part of the Debtor's estate. Count II of this complaint essentially restated the Trustee's position in his first complaint, i.e., that the claims and liens of Coon and Coon Refrigeration were invalid as a fraudulent conveyance under state law, that the liens were granted in violation of applicable corporation law and that the claims of Coon and Coon Refrigeration and should be equitably subordinated to the claims of other creditors. Counts III and IV of this complaint were withdrawn.
The final matter requiring disposition in this case is the Trustee's Petition (Motion) to Abandon Property filed March 15, 1985. Specifically, the Trustee wishes to abandon certain inventory located on the real property owned by Coon Refrigeration which was alleged to constitute a hazardous waste under the laws of the Commonwealth of Pennsylvania. The security agreements, even if they are determined to be valid, do not specifically cover this inventory. Defendants therefore assert they have no interest in the inventory. If the inventory is abandoned by the trustee, then the problem of its disposal will be that of (1) the empty corporate shell of Purco, Inc., and (2) the owner of the real estate, i.e., Coon Refrigeration. Defendants Coon and Coon Refrigeration therefore oppose such abandonment.
All of the foregoing matters were heard by this Court together for convenience of administration, notwithstanding the fact that the matters were never consolidated by a formal motion. The matters were considered on March 15, 1985 by the Honorable William B. Washabaugh, Jr. and further hearings were held before the undersigned.
Facts
Prior to October of 1979, Coon Refrigeration, Inc., in addition to its refrigeration business, operated a division called "Tri-State Insulation, Inc. Division," which engaged in the business of applying polyurethane and elastomeric insulation coatings. Thomas Purvis was a sales person for such products. In October, 1979, Purvis and Coon commenced business as "Tri-State Insulation, Inc." and attempted to incorporate under that name. Because of the unavailability of that name, the name "Purco, Inc." was used, and articles of incorporation were approved by the state on April 11, 1980.
The capitalization of the new corporation was as follows:
(a) Coon Refrigeration, Inc. transferred the assets of its "Tri-State Insulation, Inc. Division" being equipment, vehicles and inventory of a value of $135,000 to Purco, *526 Inc., and took back a note for $135,000. Marlin Coon intended that all of the assets of Purco should be subjected to a lien to secure the $135,000 note, and his failure to obtain such lien was through inadvertence.
(b) 500 shares of $1 par stock was issued to Marlin Coon and the same amount to Thomas Purvis. No payment was made for the stock initially. In 1981, Purco was threatened by unpaid creditors; Coon and Purvis met with their lawyers and accountants and upon their recommendation, executed promissory notes of $10,000 each to Purco to be able to show some capital invested. Evidence as to whether these notes were ever paid is unclear.
Coon Refrigeration, Inc. is wholly owned by Marlin Coon.
Coon Refrigeration also leased to Purco the portion of the premises owned by Coon Refrigeration from which its "Tri-State Insulation, Inc. Division" had previously conducted business.
Gross sales of Purco for the fiscal year ended September 30, 1982 were $1,812,721.
On October 1, 1982, Coon executed renewal notes in higher amounts as President of Purco in favor of himself and Coon Refrigeration. Coon also caused Purco to execute security agreements and financing statements in favor of himself and Coon Refrigeration which purported to impose liens upon all of the equipment and vehicles of Purco. The financing statements were executed and filed October 20 and 21, 1982. Purvis was not present at any shareholder meeting and was not given the opportunity to vote on any resolution authorizing Purco to execute the notes, security agreements, or financing statements.
On November 15, 1983, Purco ceased to do business and pursuant to the security agreements, Coon, on behalf of himself and/or Coon Refrigeration took possession of Purco's assets. Purco filed its bankruptcy petition on December 18, 1983.
After the bankruptcy filing, Coon sold the 1977 GMC truck and the attached equipment and inventory thereon on July 27, 1984 to one Stanley Lutz ("Lutz") for $21,320 and retained the proceeds. The truck and equipment were among the items initially transferred to Purco as part of the $135,000 of equipment, vehicles and inventory, but the owner's name on the vehicle title certificate was not changed.
On September 24, 1984, the Pennsylvania Department of Environmental Resources, Bureau of Solid Waste Management, ("DER") issued a Notice of violation of the Pennsylvania Solid Waste Management Act (the "SWMA") and the rules and regulations promulgated under that Act and served the Notice by certified mail upon the Trustee, Coon, Purvis, and Coon Refrigeration. The Notice alleged inter alia that staff inspections of the site upon which the Debtor operated its business disclosed the presence of solid wastes, that the storage and/or disposal of such wastes requires a permit, and that neither Purco, Coon Refrigeration, Coon, nor Purvis had such a permit.
Issues
I. Whether the renewal notes and security agreements executed in October of 1982 are invalid, as a matter of corporate law as having been executed without requisite corporate authority or as voidable by the trustee as a fraudulent conveyance within the meaning of the Pennsylvania Uniform Fraudulent Conveyance Act.
II. Whether the security interest and ultimately the claims of Coon and Coon Refrigeration may be equitably subordinated to the claims of other creditors.
III. Whether the 1977 GMC truck and attached equipment was part of the estate so as to enable the Trustee to recover the proceeds of the postpetition sale thereof from Coon and Coon Refrigeration.
IV. Whether the Trustee may abandon inventory which is property of the estate as burdensome to the estate pursuant to 11 U.S.C. § 554 where such inventory may be hazardous waste, located on the premises of the debtor's landlord who may also be the original owner of some of the inventory, and where the landlord is a corporation owned by the same person who exercised control over the debtor corporation.
*527 Discussion
I. Fraudulent Conveyance
The Trustee argues that the attempt to transfer a security interest in virtually all of the Debtor's personal property by Coon as President and Secretary of the Debtor to Coon individually and to Coon Refrigeration constitutes a fraudulent conveyance which he may avoid. The security agreements were executed on October 1, 1982 and financing statements were filed October 23, 1982. Since the bankruptcy petition was filed December 23, 1983, more than one year after the purported conveyance of the security interest, the Trustee is without the benefit of 11 U.S.C. § 547 which permits the Trustee to avoid certain transfers to insiders occurring within one year of the filing of a bankruptcy case. Nevertheless, a trustee in bankruptcy is authorized to proceed under state fraudulent conveyance statutes by virtue of 11 U.S.C. § 544(b) which provides:
The trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.
The Trustee looks to the Uniform Fraudulent Conveyance Act as enacted in Pennsylvania at 39 Pa.Stat. § 351 et seq. ("Title 39"). We believe that the Trustee may avoid the conveyance here at issue under sections 354, 355, or 357 of Title 39. We will discuss each section in turn.
A. Section 354
Section 354 states that "every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent, is fraudulent as to creditors, without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration." The two-fold question is whether the conveyance (i.e., transfer of the security interest) was made at a time when the debtor was insolvent and if so, whether the conveyance was for fair consideration.
Insolvency for purposes of fraudulent conveyance law is defined as follows:
A person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.
Purco was insolvent from its inception. The asserted value of the equipment and inventory which Coon transferred to Purco was $135,000, exactly equal to the promissory note issued by Purco to Coon and Coon Refrigeration in payment thereof. $1,000 of capital stock was issued but no payment was made. Hence, Purco was launched with no capital. Accrual of five minutes rent, or five minutes of accrued wages, or the slightest purchase rendered Purco insolvent. From the commencement of the business with no capital, Purco's financial condition deteriorated until 1981 when Coon and Purvis met with their lawyers and accountants because of threats by unpaid creditors. The $10,000 note executed by Purvis, and the $10,000 note executed by Coon, even if paid (as to which the evidence is uncertain), were insufficient by that time to stabilize the company or put it into a solvent situation. Purco was, in October, 1982, when the security agreements were executed and perfected, insolvent.
The security agreements did not create new debt; they purported to secure the pre-existing debt with a lien on all of Purco's assets.
Having found Purco to be insolvent at the time of the conveyance of the security interest, we must determine whether the conveyance was for fair consideration.
Fair consideration is defined at § 353(b) of Title 39:
Fair consideration is given for property or obligation
(b) When such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property or obligation obtained.
*528 The securing of antecedent debt has been held to be fair consideration. See Inland Security Company, Inc. v. Estate of Kirshner, 382 F. Supp. 338, 1974 (W.D.Mo.). The fact that value of the property subject to the conveyance of the security interest was equivalent, or at least not disproportionately small compared to the amount of the antecedent debt may be inferred from the failure of the trustee to dispute the values assigned to assets covered. But the question here was whether the obligation was incurred in good faith. Before a finding of fair consideration can be made, a court must first find that the transferee acted in good faith, Cohen v. Sutherland, 257 F.2d 737, 742 (2d Cir.1958). Whether a transfer was in good faith depends upon whether, under the circumstances, the transaction carries the earmarks of an arm's length bargain, Bullard v. Aluminum Co. of America, 468 F.2d 11, 13 (7th Cir.1972). Good faith may be lacking because of a transferee's position as an insider with control of the corporate finances, In re Carousel Candy Co., Inc., 38 B.R. 927, 936 (Bkrtcy.E.D.N.Y.1984). The relevant text of Carousel Candy is informative: "the transfers were made by persons who controlled the debtor, not for the benefit of any of the creditors but in the imminence of insolvency to remove the assets from the reach of creditors and preserve them for their own enjoyment or purposes . . . When defendants realized that the debtor was beyond hope of revival, they decided to strip it of saleable assets and to help themselves, and no one but themselves, to the proceeds." Id. at 936 [citation omitted]. See also Duberstein v. Werner, 256 F. Supp. 515 (E.D.N.Y.1966), (transfer avoided because of transferor's position as insider with control over the corporation's finances); Southern Industries, Inc. v. Jeremias, 66 A.D.2d 178, 411 N.Y.S.2d 945 (2d Dept.1978) (good faith lacking where advantage accrues to officer, director, or major shareholder of corporation over rights of other creditors). The case of Julien J. Studley, Inc. v. Lefrak, 66 A.D.2d 208, 412 N.Y.S.2d 901 (2d Dept. 1979), aff'd. 48 N.Y.2d 954, 425 N.Y.S.2d 65, 401 N.E.2d 187 (1979), states with precision what occurred in the case at bench: "The manipulation of corporate assets by the respondents [officers] in the face of the petitioner's [creditor's] rights by preferring the interests of those in control of the corporation reflects bad faith and deprives the respondents of the status of transferees for fair consideration." Id. at 215, 412 N.Y.S.2d 901, cited with approval in In re Checkmate Stereo & Electronics, Ltd., 9 B.R. 585 (Bankr.E.D.N.Y.1981) at 618.
As an insider with a fiduciary obligation to Purco's other creditors, Coon's conduct carried none of the earmarks of an arm's length transaction and was lacking in good faith. From the inception of the business, the clear intent of Marlin Coon was to launch the business with substantial apparent assets, while contributing no capital. He intended from the beginning to have a lien on all corporate assets to secure the $135,000, which he "loaned" the new company for it to commence operations. He thought it fair business practice to launch an operating business with apparent substantial assets, retaining for himself the right to reap the gains and profits, but with only outside creditors taking the risk. Only by inadvertence did he fail to acquire his blanket liens at the inception of the new venture. When it became apparent that the new business was failing, he became more diligent in engaging counsel to prepare the papers to secure repayment to himself and no one else. In short, it was unadorned self-dealing. Therefore, the conveyance of the security interest in Purco's assets was given without fair consideration, lacking as it was in good faith, and must fail as a fraudulent conveyance under § 354.
B. Section 355
The transfer of the security interest, when finally accomplished in 1982, left Purco with an unreasonably small amount of capital. The transfer is accordingly fraudulent under § 355 of the Act which provides:
Every conveyance made without fair consideration, when the person making it is engaged, or is about to engage, in a *529 business or transaction for which the property remaining in his hands after the conveyance is an unreasonably small capital, is fraudulent as to creditors, and as to other persons who become creditors during the continuation of such business or transaction, without regard to his actual intent.
We have already found that there was not fair consideration for the transfer of the security interest. We also concluded that Purco was insolvent before and after the transfer. A finding of insolvency is ipso facto a finding that the Debtor was left with unreasonably small capital after the conveyance, United States v. Gleneagles Inv. Co. Inc., 565 F. Supp. 556 (M.D.Pa. 1983). To say that the giving of the security interest left the debtor in this case with an unreasonably small amount of capital is an understatement. It virtually left the debtor with no capital in that there were no unencumbered assets after Coon got the security interest. We conclude the transfer was a fraudulent conveyance under § 355.
C. Section 357
Finally, we view the granting of the security interest in the debtor's assets as a fraudulent conveyance under § 357 which provides:
Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud, either present or future creditors is fraudulent as to both present or future creditors.
This section, unlike the two sections previously discussed which operate irrespective of the transferee's intent, requires that the transferee actually intended to defraud his creditors. Actual intent is frequently difficult to discern. Rarely does the individual seeking to benefit himself declare his intention to engage in a fraud. The intentions and motivations of such a person must therefore be inferred from his conduct. In this regard the behavior of insiders or those who exert considerable influence over the affairs of a corporate debtor should receive rigorous scrutiny. "Circumstances from which courts have been willing to infer fraud include . . . the fact that the transferee was an officer or was an agent or creditor of an officer of an embarrassed corporate transferor." 4 Collier on Bankruptcy, ¶ 548.02 (15 ed. 1985). See also Duberstein, supra, where the court held that the delivery of a chattel mortgage to a corporate officer in repayment for loans made by the officer to the debtor was fraudulent. (The court there also found that the loans there were actually contributions to capital.) Additional support for finding actual intent when the transferee is an insider is found in In re Vaniman Intern, Inc., 22 B.R. 166 (Bkrtcy.E.D.N.Y. 1982). The court there said "where the transferee is in a position to dominate or control the debtor's disposition of his property, the transferee's intent to hinder, delay or defraud creditors may be imputed to the debtor." Id. at 182.
Purco's initial capitalization was nil. By 1982 Purco was having difficulty staying ahead of its creditors. Evidence and testimony show that, sensing the impending demise of the company, Coon took a blanket security interest in all of Purco's tangible personal property. At that time it had substantial liabilities, little or no cash on hand, and inventory of little value. Yet rather than discharging his fiduciary obligations to Purco's other creditors, as President and Secretary of Purco, Coon chose to favor himself with a blanket security interest in the only items which might have been available to satisfy Purco's creditors. Worse still, he did so when he exercised complete and autocratic control over the debtor, as indeed his counsel acknowledged to the court when he argued that Coon and Coon alone had corporate authority to grant the security interest. United States v. Gleneagle Inv. Co., supra, stands for the proposition that where the transferree knows of the claims of creditors and knows that creditors will not be paid after the transfer, the court may infer that the transferee intended to hinder, delay or defraud creditors. Id. at p. 580. In the case at bar, actual intent to defraud creditors is apparent. In Coon's capacity as President, he knew too well of Purco's other creditors. *530 He did not merely believe creditors would not be paid on their claims, it was his design and intention to insure that they would not. The trustee may therefore defeat the security interest under § 357. We conclude that the granting of the security interest was a fraudulent transfer under Sections 354, 355 and 357. Accordingly, the trustee may avoid the transfers by virtue of 11 U.S.C. § 544(b). This conclusion renders unnecessary our consideration of whether the transfer may have been invalid as contrary to applicable principles of corporation law.
II. Equitable Subordination of the Claims of Coon and Coon Refrigeration
Equitable Subordination of the Claims of Coon and Coon Refrigeration.
Statutory authority for the subordination of the claim or claims of one creditor to those of another is found at 11 U.S.C. § 510(c) which provides:
(c) Notwithstanding subsections (a) and
(b) of this section, after notice and a hearing, the court may
(1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest; or
(2) order that any lien securing such a subordinated claim be transferred to the estate.
It was intended with the enactment of this provision that the concept of equitable subordination be left to case law interpretation. See, e.g., (124 Cong.Rec. H 11095 [daily ed. Sept. 28, 1978]; S 17412 [daily ed. Oct. 6, 1978]). The cases have formed a tripartite test. The three elements of a subordination case are:
(i) The claimant must have engaged in some type of inequitable conduct.
(ii) The misconduct must have resulted in injury to the creditors of the bankrupt or conferred an unfair advantage on the claimant.
(iii) Equitable subordination of the claim must not be inconsistent with the provisions of the Bankruptcy Code.
In re Multiponics, 622 F.2d 709 (5th Cir. 1980). See also In re N & D Properties, Inc., 54 B.R. 590 (D.C.Ga.1985); In re Americana Apparel, Inc., 55 B.R. 160 (Bkrtcy.E.D.Pa.1985). Where the claimant is a fiduciary of the debtor, the courts have generally required a showing of fraud, overreaching, inequitable conduct or, in some instances, the violation of the rules of fair play and good conscience by the claimant, in order to warrant subordination of a particular claim, In re Americana Apparel, Inc., supra. The Supreme Court explained in Pepper v. Litton, 308 U.S. 295, 60 S. Ct. 238, 84 L. Ed. 281 (1939):
A director is a fiduciary. So is a dominant or controlling stockholder or group of stockholders. Their powers are powers in trust. Their dealings with the corporation are subjected to rigorous scrutiny and where any of their contracts or engagements with the corporation is challenged the burden is on the director or stockholder not only to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein. The essence of the test is whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain. If it does not, equity will set it aside. While normally the fiduciary obligation is enforceable directly by the corporation, or through a stockholder's derivative action, it is, in the event of bankruptcy of the corporation, enforceable by the trustee for that standard of fiduciary obligation is designed for the protection of the entire community of interests in the corporation creditors as well as stockholders. Id. at p. 306, 60 S.Ct. at 245.
The court's reasoning is more compelling in the case of a sole director or controlling stockholder. The Supreme Court also said in Twin-Lick Oil Co. v. Marbury, 91 U.S. (1 Otto) 587 (1896) at page 590: "If he should be a sole director, or one of a smaller number vested with certain powers, this obligation would be still stronger, and his *531 acts subject to more severe scrutiny, and their validity determined by more rigid principles of morality, and freedom from motives of selfishness."
Accordingly, we hold that the trustee may subordinate the claim of an officer, director or shareholder, who is also a creditor, in control of a corporation to the claims of unsecured creditors where there is clear and convincing evidence that the officer, director or shareholder used his insider status to his benefit by over-reaching or self-dealing. Coon undercapitalized Purco from its beginnings and refused to infuse sufficient capital even when the necessity for cash was apparent. Indeed, Coon was forced to seek advice of counsel and accountants for suggestions on how to save the floundering company and as his and Purvis's testimony revealed, their advisors told them "infuse capital." By the time the company was hopelessly insolvent, he conveyed to himself a blanket security interest in virtually all of the assets held by the debtor. A more egregious example of self-dealing could scarcely be conceived.
III. Unauthorized Postpetition Sale
We turn our attention to whether the trustee can recover the proceeds from the sale of the GMC truck after the filing of the bankruptcy. The GMC truck was part of the initial capitalization and was employed in the operation of Purco's business. Its value was included in determining the debt owed by Purco of $135,000. Title was retained by Coon only because a formal transfer would have necessitated payment of a 6% transfer tax. Coon might argue that retention of legal title was equivalent to taking a security interest in the GMC truck. Coon's argument fails for the same reason his blanket security interest in all other of debtor's assets fails lack of good faith as set forth above. Accordingly, the lien and debt interest of Coon in the GMC truck and its attached equipment, and proceeds of sale thereof, will be subordinated to the claims of other creditors. The proceeds of the sale ($21,320.00) will be ordered to be paid over to the trustee.
IV. Abandonment
The Trustee has moved the court for an order permitting him to abandon certain inventory presently located on wooded real estate at 8164 Pagan Road, Erie, Pennsylvania. The real estate is owned by Coon Refrigeration. The inventory or its predecessor was at this location prior to the incorporation of Purco, when the business was operated as a division of Coon Refrigeration. The security interest did not specifically cover inventory. Even if it had, as a consequence of the determination that the security interest was invalid as a fraudulent conveyance under state law and that any claims of Coon and Coon Refrigeration on any of the Debtor's assets were subject to equitable subordination under the Bankruptcy Code, the inventory would nevertheless be available for the Trustee to liquidate for the benefit of general creditors.
The Trustee asserts that the inventory is or may be hazardous waste and that the cost of removing or otherwise disposing of the waste will exceed its value. If this is so, naturally the inventory would be burdensome to the estate. The Defendants concede, in fact, insist, that the inventory was not covered by the security interest. Defendants also do not dispute that the inventory is hazardous waste or that the costs of removing it or disposing of it will exceed any possible value it may still have. Rather, the Defendants deny that the Trustee may abandon the hazardous waste and cite as the sole authority for their position the case of Midlantic National Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 106 S. Ct. 755, 88 L. Ed. 2d 859 (1986).
The inventory consists, as nearly as can be gathered, of approximately eighty drums of cut-back asphalt, used to tar and chip roads, and a number of five gallon cans, some of which may have been transferred to fifty-five gallon drums, which contain cut-back asphalt but also contain various thinners, including urethane and toluene. Testimony indicated that there may be as many as 200 drums in total *532 inventory and that some of the drums may leak.
On September 24, 1984, as a result of staff inspections conducted on September 10, 12, and 18, 1984, the Commonwealth of Pennsylvania, Department of Environmental Resources ("DER") issued a Notice of Violation ("Notice"). The Notice cited Coon Refrigeration, Coon, Purvis, and the Trustee for the operation and maintenance of an unpermitted solid waste disposal site in violation of several applicable provisions of the Pennsylvania Solid Waste Management Act, 35 P.S. 6018.101 et seq. and Hazardous Waste Rules and Regulations and Rules and Regulations for Solid Waste Management promulgated by the DER pursuant to authority granted it under the Solid Waste Management Act. The Notice also instructed the parties to take various steps to abate the violations, none of which were taken to this Court's knowledge. The only evidence of the costs likely to be incurred in complying with the DER directives was the testimony of Coon that the freight and incineration of the waste would cost between $150 and $200 per drum, or a total cost based on 200 drums of between $30,000 and $40,000. The Court has not been informed of any costs incurred to date by the DER and the DER has not filed a proof of claim in this case nor entered an appearance. The court was advised at argument that the DER has sealed the leaking drums in oversize containers.
The Trustee's authority to abandon property determined by him to be burdensome to the estate is found at 11 U.S.C. § 554:
(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(a)(1) of the 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.
In Midlantic, the Supreme Court stated that: "a trustee may not abandon property in contravention of a state statute or regulation that is reasonably designed to protect the public health or safety from identified hazards." Id., 106 S.Ct. at 762. It is thus now clear that there exists an exception to the trustee's power of abandonment. However, "This exception to the abandonment power vested in the trustee by § 554 is a narrow one. It does not encompass a speculative or indeterminate future violation of such laws that may stem from abandonment. The abandonment power is not to be fettered by laws or regulations not reasonably calculated to protect the public health or safety from imminent and identifiable harm." Id. at 762-63 n. 9.
The effect of abandonment is that ownership and control of the asset is reinstated in the debtor with all rights and obligations as before filing a petition in bankruptcy, Riggs National Bank v. Perry, 729 F.2d 982 (4th Cir.1984), In re Franklin Signal Corp., 65 B.R. 268 (Bkrtcy.D.Minn.1986). Such abandonment is to the person having the possessory interest in the property.
In the case of In re Franklin Signal Corp., 65 B.R. 268 (Bkrtcy.D.Minn.1986), the bankruptcy court, in reviewing Midlantic concluded at page 272: "The trustee only needs to take adequate precautionary measures to ensure that there is no imminent danger to the public as a result of abandonment."
The state of Wisconsin, although aware of the presence of the drums containing the chemicals, had undertaken no action to clean up the site. The court inferred from the state's inaction that no imminent threat to the public existed. Having thus concluded *533 that Midlantic did not absolutely preclude abandonment of hazardous waste by the trustee, the court in Franklin Signal fashioned a five factor test to be applied case by case before a bankruptcy court may permit abandonment: (1) the imminence of danger to the public health and safety, (2) the extent of probable harm, (3) the amount and type of hazardous waste, (4) the cost of bringing the property into compliance with environmental laws, and (5) the amount and type of funds available for cleanup."
A less restrictive reading of Midlantic was also adopted in In re Oklahoma Refining Company, 63 B.R. 562 (Bkrtcy.W.D. Okla.1986). There the debtor had operated a crude oil refinery for 65 years prior to the bankruptcy at the site which the debtor sought to abandon. The Oklahoma State Department of Health had issued directives and orders in response to samples showing that noxious substances were leaking into underground aquifers and resulting in contamination. The testimony showed that the contamination of the aquifer posed a substantial and certain threat to drinking water but which threat might not manifest itself until many years in the future. The trustee was in compliance with all consent agreements and orders but was not able to propose a satisfactory closure plan for the site because any closure plan did not include a cleanup. The bankruptcy judge found it significant that the secured creditor had already consented to the use of cash collateral by the trustee to comply with the state agencies and to minimize the possibility of future harm, including the removal of remaining waste, the monitoring of wells, and the request for an environmental report. The report concluded that a cleanup might cost $2.5 million and require 30 years of monitoring. The trustee estimated the value of the estate at $4 million with none of the assets being unencumbered. The estate was in fact subject to $40 million in secured claims and another $8 million in unsecured claims.
The bankruptcy court characterized the trustee's quandary as follows:
"The trustee thus finds himself confronted with a formidable dilemma. On the one hand, he has no funds which are not cash collateral but, under a strict reading of Midlantic could be required to comply with state laws and regulations which is impossible because of § 363(c)(2). 11 U.S.C.A. § 363(c)(2). We do not believe the Supreme Court intended to place bankruptcy trustees in such a predicament but rather that Midlantic requires the bankruptcy court, in determining whether to permit abandonment, to take state environmental laws and regulations into consideration."
In addition to the two foregoing bankruptcy court decisions, we find support for a less severe reading of Midlantic in the opinion itself wherein the Court instructed that the trustee's petition to abandon will be denied unless (emphasis added) the trustee has "formulat[ed] conditions that will adequately protect the public's health and safety," Midlantic, supra, 106 S.Ct. at 762. The necessary corollary to this passage is that abandonment will be permitted when the conditions are such that abandonment will not render the public health and safety inadequately protected.
We have no qualified testimony that the inventory is hazardous waste, but assuming the inventory here to be hazardous waste, there is no showing that the public health and safety are not adequately protected, nor is there a showing of a clear and imminent danger nor does there appear to be any great risk of harm or threat to public safety, either immediate or in the foreseeable future. The court infers from the DER's lack of interest in this proceeding that there is no threat to the public health or safety which warrants DER's participation. Also, there is no showing that the landlord/landowner (Coon Refrigeration), which will be in possession of such inventory upon abandonment, is not capable of any remedy which may be necessary to adequately protect the public.
There is no evidence showing how much of the contaminated inventory on the premises of Coon Refrigeration was left there by the debtor or how much originated with *534 the Coon Refrigeration division which previously operated the same business. It may consist of some of each. In our view, it makes no difference. The trustee will be permitted to abandon all of such inventory, irrespective of its original source.
An appropriate order was entered June 30, 1987. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542028/ | 949 A.2d 982 (2008)
THE CITY OF PHILADELPHIA
v.
CIPRIANO.
No. 1581CD07.
Commonwealth Court of Pennsylvania.
April 18, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542017/ | 949 A.2d 820 (2008)
195 N.J. 375
STATE of New Jersey, Plaintiff-Respondent.
v.
Diara BARDEN, Defendant-Appellant.
No. A-23 September Term 2007
Supreme Court of New Jersey.
Argued February 19, 2008.
Decided June 24, 2008.
*823 Alison S. Perrone, Designated Counsel, argued the cause for appellant (Yvonne Smith Segars, Public Defender, attorney; Ms. Perrone and Julie A. Higgs, Designated Counsel, on the briefs).
Natalie A. Schmid Drummond, Deputy Attorney General, argued the cause for respondent (Anne Milgram, Attorney General of New Jersey, attorney).
Justice WALLACE, JR., delivered the opinion of the court.
In this case, the trial court admitted evidence that defendant sold drugs to co-defendant over a six-month period prior to the robbery under a theory of res gestae. On appeal, the Appellate Division affirmed, but held that the other-crimes evidence *824 was properly admitted under N.J.R.E. 404(b) to show defendant's motive with respect to the crimes charged and that the corresponding limiting instruction was appropriate. We granted certification "limited solely to the question of whether testimony that defendant sold drugs to the co-defendant over a six-month period prior to the robbery of September 7, 2003, was improperly admitted by the trial court under either a theory of res gestae or N.J.R.E. 404(b)." We now reverse. We conclude that the evidence that defendant sold drugs to the co-defendant over a six-month period was evidence of other crimes that was unduly prejudicial and should have been excluded.
I.
A.
The State presented the following evidence at trial. Sixteen-year-old Andrea Gendron was addicted to crack cocaine since mid-2003. She supported her drug habit by means of prostitution, theft, and burglary. Gendron purchased crack cocaine from defendant Diara Barden on approximately thirty occasions for six months prior to September 2003.
On Sunday, September 7, 2003, Gendron asked defendant to give her some crack cocaine and promised to pay him later because she had no money. Defendant declined but suggested that they rob one of Gendron's clients. Gendron agreed and selected Robert Brown as the victim because he kept money in a safe in his bedroom. She also told defendant that Robert's brother, Randall Brown, lived in the same house.
Gendron called Robert and received permission to come see him. Defendant then drove Gendron to Robert's house in a burgundy Mustang, but before going there they stopped at a house on Olden Avenue where defendant retrieved a handgun. Gendron and defendant arrived at Robert's house around 9:30 p.m. Prior to entering the house, the two agreed that they would tell Robert that defendant was Gendron's bodyguard and was there to protect her. When they knocked on the door, Robert refused to allow defendant to enter with Gendron. Defendant returned to his car while Robert and Gendron went upstairs to a bedroom. Soon thereafter, Gendron heard defendant beeping the car horn. She excused herself from Robert and left the house to go talk to defendant. Several minutes later, Gendron returned to the house with defendant. When they were inside, Robert approached them and asked defendant to leave. As he escorted defendant to the door, defendant drew a handgun and demanded that Robert call his brother who was also in the house. Defendant and Robert then walked to the kitchen where Robert yelled for Randall. Defendant was distracted when Randall entered the room, allowing Robert the opportunity to grab defendant's wrist.
Randall joined the struggle as defendant continued to hold the handgun. Defendant yelled for Gendron to stab Robert. Gendron grabbed a pot instead and began hitting Randall on the head. The struggle shifted to the dining room where Robert forced defendant to drop the handgun outside the screened window. Defendant was able to break free and fled from the house with Gendron.
Robert's neighbor, Tom Sliwinski, overheard the commotion and called the police. When the police arrived, Robert outlined what occurred and gave the police a description of defendant and Gendron. Defendant was eventually apprehended and charged with robbery.
B.
At trial, defendant presented a different picture of the incident. In addition to his *825 own testimony, he offered the testimony of Towanna Stephens, his cousin; Peggy Barden, his grandmother; Brett Barden, his uncle; and Theresa Jones, Robert's neighbor.
Defendant testified that on the night of September 7, 2003, he, Towanna, Peggy, Brett, and other family members were sitting outside of Peggy's house in Trenton, when they observed a young, white girl who did not live in the neighborhood walking up and down the street, looking lost and confused. After about ten minutes, the girl, later identified as Gendron, approached Peggy's house and asked Brett to give her a ride.
At first Brett agreed to do so. However, after receiving a cell phone call from his girlfriend asking him to pick her up, Brett asked defendant to give the girl a ride. Defendant said he hesitated, but his grandmother persuaded him to do it. Defendant and Gendron departed in a maroon Mustang and drove to 219 Homecrest Avenue in Ewing. When they arrived at the house, Gendron asked him to wait outside while she went inside. Defendant agreed. After about ten minutes, he began blowing the horn to tell Gendron to hurry. At that point, Theresa came outside and asked him to stop beeping the horn.
Defendant said that Gendron came to the front door and motioned for him to come inside. He entered the house and told Gendron he was leaving. At that point, Robert came downstairs and yelled at defendant for being in his home. The two exchanged insults that led to a verbal altercation. Defendant turned to leave when Robert struck him in the head. Defendant fought back but another man joined in the fight. Defendant testified that it was Robert who displayed a handgun during the fight. At some point during the struggle, they crashed into a window and Robert dropped the handgun outside. Defendant was able to flee from the house, and he drove away with Gendron. Defendant claimed he never saw Gendron before that day and denied having a handgun. Defendant also denied discussing with Gendron the idea of committing a robbery, and that he made a statement to the police about the incident.
C.
The State called Detective Holt to rebut much of defendant's testimony. Detective Holt testified that defendant came to the police station on September 12, 2003. He administered Miranda[1] warnings to defendant, and defendant waived his right to remain silent. After explaining that Gendron had been identified as a suspect of a robbery on Homecrest Avenue, Detective Holt asked defendant if he knew anything about the case. Defendant was silent for about thirty minutes before Detective Holt asked defendant where he was the previous Sunday. Defendant replied that he had traveled to Maryland for a few days and returned on Sunday. When Detective Holt told defendant that the police recovered a handgun and intended to check it for fingerprints, defendant again fell silent for about twenty minutes before asking what would happen if he told him what occurred that day. Detective Holt replied that he could not make defendant any promises. Defendant then told Detective Holt that he drove to a house with Gendron to see "some guy" and while inside, the man's brother came out of the kitchen with a handgun. Defendant indicated that a fight broke out and the handgun fell out the window. A short while later, he and Gendron fled from the house. Detective Holt testified that defendant indicated he *826 did not want to say anything else and the questioning stopped.
The State sought to read a statement that Detective Holt had obtained from Sliwinski, Robert's neighbor, because he was on military duty in Iraq at the time of the trial, and defendant consented. In the statement, Sliwinski outlined that he heard an argument at Robert's house, went outside to investigate, looked into the dining room window, and saw the two Brown brothers fighting a black man. Sliwinski ran home to call the police. He was on the phone when he heard either Robert or Randall yell, "He has a gun." A few seconds later, Sliwinski saw a handgun fall from the window to the ground. Sliwinski walked over and picked up the handgun before he walked to the front of his house where he saw a black male and a petite, white female run from Robert's home and drive away in a Mustang.
D.
The jury found defendant guilty of first-degree robbery, second-degree attempted theft, fourth-degree aggravated assault, third-degree unlawful possession of a weapon, and second-degree possession of a weapon for an unlawful purpose. The jury found defendant not guilty of second-degree burglary. After merger, the trial court imposed a sentence of fifteen years with an eighty-five percent parole disqualifier for the first-degree robbery offense and a concurrent four-year term for the unlawful-possession-of-a-weapon offense.
On appeal, the Appellate Division affirmed in an unpublished opinion. The panel applied the test outlined in State v. Cofield, 127 N.J. 328, 338, 605 A.2d 230 (1992), to assess the admissibility of other crimes evidence under N.J.R.E. 404(b), and found no error in the admission of testimony that defendant sold drugs to Gendron thirty times during the six months prior to the charged offense. The panel concluded that the evidence of other crimes was properly admitted to demonstrate the reason why defendant participated in the robbery and how the scheme to steal from Robert arose from defendant's refusal to "loan" drugs to Gendron. The panel did not address defendant's contention that the evidence was improperly admitted as res gestae. We granted defendant's petition for certification. State v. Barden, 192 N.J. 75, 926 A.2d 858 (2007).
II.
Defendant argues that Gendron's testimony that he sold drugs to her during the six months prior to the date of the offense was not admissible either as evidence of other crimes under N.J.R.E. 404(b) or under a theory of res gestae. He contends that the evidence did not satisfy the Cofield test for admission under N.J.R.E. 404(b) because the evidence was not relevant to any material issue, but that even if it were relevant, its probative value was outweighed by the prejudice to him. He urges that if the evidence is deemed relevant and material, at a minimum, the evidence must be sanitized by eliminating the prior drug sales and permitting Gendron to testify that she knew defendant for six months before the robbery, and that defendant was aware of her drug addiction from seeing her around the neighborhood. He urges that the holding of the Appellate Division that the evidence was admissible to demonstrate his intent and motive for the scheme to steal from the victim would serve to invite the jury to find that defendant must have acted in conformity with his propensity for committing crimes. He suggests that we follow State v. Hernandez, 170 N.J. 106, 784 A.2d 1225 (2001), and hold that evidence of the prior sales "smacks of prohibited propensity evidence" that was more prejudicial than probative. *827 Defendant adds that even if the evidence was properly admitted under N.J.R.E. 404(b), it was error not to instruct the jury that the evidence was limited solely to show intent. Further, defendant contends that the trial court erred in admitting the evidence under a res gestae theory when the alleged transactions occurred up to six months before the robbery, were factually separate from the robbery, and were not necessary for the jury to understand the circumstances of the robbery.
In contrast, the State argues that the evidence of the prior drug transactions was admissible under N.J.R.E. 404(b) because that evidence was essential to establish defendant's motive and intent for committing the charged offense. The State contends that the Cofield test was satisfied and the trial court properly instructed the jury as to its prohibited and permissible uses. Additionally, the State argues that the trial court properly admitted the evidence of prior drugs sales as res gestae because it was part and parcel of the offenses tried and gave context for the crime. The State contends that the res gestae concept covers not just conduct that occurs at the same time as the charged crimes, but also conduct that may occur at different times and in different places.
III.
A.
On numerous occasions we have stated the principles applicable to the admission of evidence of other crimes under N.J.R.E. 404(b). State v. Kemp, 195 N.J. 136, 948 A.2d 636 (2008); State v. Lykes, 192 N.J. 519, 534-37, 933 A.2d 1274 (2007); State v. Williams, 190 N.J. 114, 122, 919 A.2d 90 (2007); State v. Jenkins, 178 N.J. 347, 365, 840 A.2d 242 (2004); State v. G.V., 162 N.J. 252, 256-58, 744 A.2d 137 (2000); State v. Marrero, 148 N.J. 469, 490-92, 691 A.2d 293 (1997); State v. Cofield, supra, 127 N.J. at 331-38, 605 A.2d 230. N.J.R.E. 404(b), which governs the admissibility of evidence of other crimes, was formerly Evidence Rule 55. Thus, any reference in earlier cases to Evidence Rule 55 would influence our determination under present N.J.R.E. 404(b).
N.J.R.E. 404(b) provides that:
Evidence of other crimes, wrongs or acts is not admissible to prove the disposition of a person in order to show that such person acted in conformity therewith. Such evidence may be admitted for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity or absence of mistake or accident when such matters are relevant to a material issue in dispute.
The Rule seeks to strike a balance between the prejudice to a defendant that is inherent in other-crimes evidence and the recognition that the evidence may be highly relevant to prove a defendant's guilt of the crime charged. If the "other crime evidence [is] offered solely to prove criminal disposition [it] is excluded under the Rule." State v. Stevens, 115 N.J. 289, 300, 558 A.2d 833 (1989). However, if that evidence is offered to prove other facts in issue such as motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident, it may be admissible subject to a weighing of the probative value against its apparent prejudice. Ibid.
In Cofield, supra, the Court articulated a four-part test designed to guide the determination of when to admit such evidence. 127 N.J. at 338, 605 A.2d 230. The Court defined the four-part test as follows:
1. The evidence of the other crime must be admissible as relevant to a material issue;
*828 2. It must be similar in kind and reasonably close in time to the offense charged;
3. The evidence of the other crime must be clear and convincing; and
4. The probative value of the evidence must not be outweighed by its apparent prejudice.
[Ibid.]
Recently, we noted that the second prong may be eliminated where it "serves no beneficial purpose." Williams, supra, 190 N.J. at 131, 919 A.2d 90. We explained that the "usefulness [of Cofield's second prong] as a requirement is limited to cases that replicate the circumstances in Cofield," in which evidence of drug possession that occurred subsequent to the drug incident that was the subject of the prosecution was relevant to prove possession of the drugs in the charged offense. Ibid. Thus, in Williams, where the other-crimes evidence was relevant only to the defendant's state of mind, and in other similar instances, the test became a three-part test by elimination of the similar-in-kind prong. Ibid.
The fourth prong, whether the probative value of the evidence is outweighed by its apparent prejudice, is generally the most difficult part of the test. Because of the damaging nature of such evidence, the trial court must engage in a "careful and pragmatic evaluation" of the evidence to determine whether the probative worth of the evidence is outweighed by its potential for undue prejudice. Id. at 303, 919 A.2d 90. In the weighing process, the court should also "consider the availability of other evidence that can be used to prove the same point." Jenkins, supra, 178 N.J. at 365, 840 A.2d 242 (citation and quotation omitted).
The trial judge should be careful to exclude other torts or crimes evidence, even though it is independently relevant, wherever he can reasonably do so without damaging the plaintiff's or prosecutor's case. For example, if the prosecutor has adequate proof of identity, or of motive and the like, he should not be permitted to use the highly inflammatory evidence of other crimes to establish those facts. In a forgery case where authorship of the allegedly forged writing is in issue, the trial judge, for instance, should not admit standards indicating the defendant's guilt of other forgeries if neutral standards of the defendant's handwriting are available to the prosecutor.
[Stevens, supra, 115 N.J. at 303, 558 A.2d 833 (citation and quotation omitted).]
In an effort to reduce the inherent prejudice in the admission of other-crimes evidence, our courts require the trial court to sanitize the evidence when appropriate. State v. Collier, 316 N.J.Super. 181, 185, 719 A.2d 1276 (App.Div.1998), aff'd o.b., 162 N.J. 27, 738 A.2d 369 (1999). In Collier, the court explained "[t]hat sanitizing accommodates the right of the proponent to present relevant evidence and the right of the objecting party to avoid undue prejudice." Id. at 195, 719 A.2d 1276; see State v. Brown, 180 N.J. 572, 584, 853 A.2d 260 (2004) (finding "that any potential for prejudice can be ameliorated by the sanitization of the predicate offense"); State v. Fortin, 318 N.J.Super. 577, 598, 724 A.2d 818 (App.Div.1999) (noting that "at trial the judge must `sanitize' the other-crime evidence by confining its admissibility to those facts reasonably necessary for the probative purpose of `identity'"), aff'd, 162 N.J. 517, 745 A.2d 509 (2000).
If the trial court determines that the evidence of other crimes is admissible, in addition to sanitizing the evidence when appropriate, the court must carefully *829 instruct the jury as to its limited use. "[T]he court's instruction `should be formulated carefully to explain precisely the permitted and prohibited purposes of the evidence, with sufficient reference to the factual context of the case to enable the jury to comprehend and appreciate the fine distinction to which it is required to adhere.'" Fortin, supra, 162 N.J. at 534, 745 A.2d 509 (quoting Stevens, supra, 115 N.J. at 304, 558 A.2d 833). The instruction should be given when the evidence is presented and in the final charge to the jury. Id. at 534-35, 745 A.2d 509.
In our review of a trial court's determination on the admissibility of the evidence of other crimes under N.J.R.E. 404(b), we give great deference to the decision of the trial court. Lykes, supra, 192 N.J. at 534, 933 A.2d 1274. "Only where there is a clear error of judgment should the trial court's conclusion with respect to that balancing test be disturbed." Marrero, supra, 148 N.J. at 483, 691 A.2d 293 (citation and quotation omitted). However, when a trial court does not analyze the admissibility of other-crimes evidence under Cofield, we may conduct a plenary review to determine its admissibility. Lykes, supra, 192 N.J. at 534, 933 A.2d 1274.
B.
We turn now to apply the above principles to the present case. At trial, the trial court conducted a hearing out of the presence of the jury to determine the admissibility of Gendron's testimony that during the six months prior to the robbery she purchased crack cocaine from defendant on approximately thirty occasions; that defendant knew she was addicted to crack cocaine; that her relationship with defendant was based solely on the purchase of drugs; and that on the date of the alleged crimes, the two of them agreed to rob Robert to acquire money for Gendron to purchase drugs from defendant.
In performing its gate-keeping function, the trial court found that the evidence was relevant to show defendant's intent and motive to commit an armed robbery. Further, the court found the evidence of the other crimes was shown by clear and convincing evidence, and that its probative value outweighed any prejudicial effect. However, because the evidence was not similar in kind to the crimes charged to satisfy the second prong of Cofield, the trial court decided not to admit the evidence under Rule 404(b), but found it admissible under a res gestae theory.
As previously suggested, the second prong of Cofield is not applicable in every case and its "usefulness as a requirement is limited to cases that replicate the circumstances in Cofield." Williams, supra, 190 N.J. at 131, 919 A.2d 90. Here, we agree with the Appellate Division that under the circumstances presented, the second prong of the test served no beneficial purpose and should not have been considered.
The fourth prong, whether the prejudicial effect of the evidence outweighs its probative value, requires a careful weighing of competing interests. Stevens, supra, 115 N.J. at 303, 558 A.2d 833. If other less prejudicial evidence may be presented to establish the same issue, the balance in the weighing process will tip in favor of exclusion. Jenkins, supra, 178 N.J. at 365, 840 A.2d 242.
The evidence that defendant and Gendron planned the robbery so Gendron could obtain money to purchase drugs and that Gendron and defendant had known one another for some time was relevant and admissible. However, the testimony of six months of drug transactions between defendant and Gendron was *830 not needed to show the motive and intent for the robbery. Rather, that could have been established by testimony regarding Gendron's drug addiction; that she sought drugs on the day of the robbery; and that she and defendant planned the robbery to obtain money to purchase drugs. Indeed, Gendron could have testified that she knew defendant for six months prior to the robbery and that defendant was aware of her drug addiction from seeing her around the neighborhood.
Consistent with the view we expressed in Hernandez, supra, we find that the evidence that for six months prior to the offense defendant sold drugs to Gendron more than thirty times was unduly prejudicial and "smack[ed] of prohibited propensity evidence." 170 N.J. at 130, 784 A.2d 1225 (noting that evidence defendant sold drugs twenty times during two months prior to arrest was extremely prejudicial and "smacks of prohibited propensity evidence"). The risk was too high that the jury could conclude that because defendant was involved in numerous prior drug sales, he was prone to criminal activity in general. We conclude that the probative value of testimony of six months of prior drug sales was outweighed by its prejudicial effect and the evidence should have been excluded.
C.
In addition, we do not find that the trial court's limiting instruction on the admission of the other-crimes evidence was sufficient to eliminate the prejudice to defendant. Although the trial court admitted the evidence as res gestae, and not other-crimes evidence, the court also gave a limiting instruction. The trial court instructed the jury on the limited use of the evidence both at the time the evidence was admitted and in the final charge to the jury. Immediately following Gendron's testimony that she bought drugs from defendant for six months, the trial court instructed the jury on the following:
You've heard testimony from this witness that she had a drugs-for-money relationship with the defendant, Mr. Barden. Of course, it's for you to weigh her credibility and determine whether that was so. But the Court cautions you about this: Even if you were to find that it was so, you may not conclude that simply because of that relationship, that is, that Mr. Barden was dealing drugs, that he is, therefore, guilty of the offenses charged in the indictment.
This court has allowed this testimony for the reason that it will enable you to understand the circumstances under which all of this allegedly transpired. But again, you may not conclude, even if you find that Mr. Barden was dealing drugs, that he is, therefore, guilty of this offense. They are separate matters and are to be decided separately.
Later, at the close of trial, the court instructed the jury
Evidence has been presented that the defendant, Mr. Barden, had, previously to September 7, 2003, engaged in drug transactions with Andrea Gendron. Normally, evidence that a defendant was involved in other criminal activity is not admissible because it has the tendency to suggest that the defendant must, therefore, be guilty of the crimes charged in the present indictment.
Here, the court permitted testimony that the defendant was involved in prior drug transactions with Andrea Gendron so that you may understand the circumstances under which Andrea Gendron acted. Of course, it is for you, and not the court, to determine whether Andrea Gendron's testimony is credible in the first place. All that the Court has done is to allow you to hear the testimony, *831 but it does so with the strict admonition that if you find that evidence to be credible, you may not consider it for any other purpose other than to explain Andrea Gendron's conduct on September 7th, 2003. You may not, even if you find it to be credible, find the defendant guilty simply because you are convinced that he previously was involved in a drug transaction with Andrea Gendron.
Despite the trial court's diligence in giving limiting instructions to the jury both at the time of the admission of the other-crimes evidence and in the final charge, we find that the instructions were incomplete. "A carefully crafted limiting instruction must explain to the jury the limited purpose for which the other-crime evidence is being offered." Hernandez, supra, 170 N.J. at 131, 784 A.2d 1225. That is, the court must clearly "explain precisely the permitted and prohibited purposes of the evidence with sufficient reference to the factual context of the case to enable the jury to comprehend and appreciate the fine distinction to which it is required to adhere." Cofield, supra, 127 N.J. at 341, 605 A.2d 230. Although the court explained that the jury could not use the evidence that defendant committed prior drug deals to simply find him guilty for that reason, and that the evidence could be used to explain the circumstances under which Gendron acted, the charge failed to "focus the jury precisely on the permissible uses of the other-crime evidence in the context of the facts of this case and those issues genuinely in dispute." Hernandez, supra, 170 N.J. at 132, 784 A.2d 1225. That is, the jury charge should have informed the jury that the evidence was limited solely to establish defendant's motive and intent.
Because defense counsel did not object to the court's instruction, we consider the error under the plain error rule. R. 2:10-2. Plain error is reversible if it is "clearly capable of producing an unjust result." R. 2:10-2. The test is whether the possibility of injustice is sufficient "to raise a reasonable doubt as to whether the error led the jury to a result it otherwise might not have reached." State v. Macon, 57 N.J. 325, 336, 273 A.2d 1 (1971). However, an erroneous charge will rarely stand on the ground that the error was harmless. State v. Weeks, 107 N.J. 396, 410, 526 A.2d 1077 (1987).
As we noted above, it was error to admit the evidence of other crimes. "The likelihood of prejudice is acute when the proffered evidence is proof of a defendant's uncharged misconduct." Stevens, supra, 115 N.J. at 302, 558 A.2d 833 (citations omitted). In combination with the error in the admission of the other-crimes evidence and the shortcomings in the jury charge, we find a "reasonable doubt whether the error led the jury to a result it otherwise might not have reached." Macon, supra, 57 N.J. at 336, 273 A.2d 1; see R. 2:10-2.
IV.
The State also argues that Gendron's testimony that defendant sold her drugs on numerous occasions prior to the day of the robbery was admissible as res gestae. Defendant not only argues against the admissibility of the evidence as res gestae, but urges that the Court should no longer apply the concept.
We noted in State v. Long, 173 N.J. 138, 153, 801 A.2d 221 (2007), that "the ancient res gestae concept has been used to admit a wide variety of evidence in both the criminal and civil context under circumstances that are now codified as hearsay exceptions in the New Jersey Rules of Evidence." (emphasis added). Further, we also explained that "[d]espite the urging of *832 some to abandon the use of the principle denominated as res gestae, . . . courts continue to cling to it." Ibid. In a concurrence, Chief Justice Poritz pointed out that "although the res gestae principle, standing alone, has been discredited by scholars as a basis to admit otherwise inadmissible evidence, where, as here, its use is tethered to specific Evidence Rules, it remains a useful interpretive tool." Id. at 166, 801 A.2d 221 (Poritz, C.J., concurring) (emphasis added). In his concurrence/dissent, Justice Stein urged that the Court eliminate the concept of res gestae because "the principles that historically have comprised the res gestae exception have been codified, but without use of the words `res gestae.'" Id. at 169, 801 A.2d 221 (Stein, J., concurring in part, dissenting in part). Justice Stein was of the view that
the res gestae concept has been superseded by four separate hearsay exceptions: present sense impressions, excited utterances, present bodily conditions, and present mental states and emotions. Because those principles have been codified by specific exceptions, the Court would be better served by abandoning continued reference to the phrase res gestae and replacing it with the precise analysis contemplated by our Rules of Evidence.
[Id. at 170, 801 A.2d 221 (emphasis added).]
We need not decide the debate whether res gestae should remain a viable concept in our jurisprudence. We are convinced that even if res gestae remains a viable theory, it should not have formed the basis for the admission of evidence that Gendron had purchased drugs from defendant over the past six months. That highly prejudicial evidence was simply not needed to establish defendant's motive and intent. See Kemp, supra, 195 N.J. at 162, 948 A.2d 636.
V.
The judgment of the Appellate Division is reversed and the matter is remanded for a new trial.
Justice ALBIN, concurring.
I fully concur with the majority's opinion, but add these few words. For the reasons I expressed in State v. Kemp, 195 N.J. 136, 157-58, 948 A.2d 636 (2008) (Albin, J., concurring), I believe that the time has come for this Court to abandon the discredited doctrine of res gestae as an independent basis for the admission of evidence. I look forward to the Court addressing whether res gestae has any continuing relevance in our evidence law when the issue is squarely before us.
Justice LONG joins in this opinion.
For reversal and remandment Chief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE, RIVER-SOTO and HOENS 7.
For concurrance Justices LONG and ALBIN 2.
NOTES
[1] Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304418/ | Mr. Justice Dyer
delivered the opinion of the Court.
This appeal challenges the jurisdiction of the Tennessee Public Service Commission (T.C.A. sec. 65-101) to issue to a public utility a certificate of convenience and necessity to operate in a geographical area, which area has been previously designated to a Utility District.
On August 6, 1956, West Wilson Utility District was created by order of the County Judge of Wilson County, *76Tennessee, acting pursuant to Chapter 26, Title 6, T.C.A., for the purpose of creating and operating a public water system in a. designated geographical area in Wilson County. Cumberland Water Company is a public utility, chartered under the quasi-public corporation statutes of Tennessee for the purpose, inter alia, of creating and operating a public water system and has authority to operate in certain geographical area in Davidson County, Tennessee.
It is proposed there be developed a residential subdivision to be known as Shiloh Park on about three hundred acres of land, of which about one-half is in Davidson County and the other half in Wilson County. The land of Shiloh Park in. Wilson County is within the geographical area designated as a service area of the West Wilson Utility District. On May 6, 1966, Cumberland Water Company filed its petition with the Public Service Commission for a certificate of convenience and necessity to operate-, inter alia, a public water system in Shiloh Park, both in Davidson and Wilson Counties. The Public Service Commission, after a full hearing, granted the certificate and upon appeal by writ of cer-tiorari the Chancery Court of Davidson County sustained this action. West Wilson Utility District appeals.
We are here faced with the question of whether the Public Service Commission had jurisdiction to issue to Cumberland Water Company a. certificate of convenience and necessity to operate a public water system in that area of Wilson County where West Wilson Utility District has previously been granted authority by order of the County Judge of Wilson County to operate a public water system. The area of Shiloh Park in Davidson County is not here at issue.
*77It should be noted the Public Service Commission claims no jurisdiction over West Wilson Utility District by virtue of T.C.A. sec. 6-2613; nor is it disputed the Public Service Commission does have jurisdiction over the Cumberland Water Company.
The case of Chandler Investment Co. v. Whitehaven Utility District of Shelby County, 44 Tenn.App. 1, 311 S.W.2d 603 (1957), involved the same statute at issue in the case at bar; that is Chapter 26, of Title 6, T.C.A. In this case Chandler proposed to construct a residential subdivision within the geographical area of Whitehaven Utility District. Chandler by declaratory judgment action sought to have the utilities furnished the subdivision by another utility, in this case the Memphis Light, Gas and Water Division of the City of Memphis. The Court, in an opinion by Judge Carney, after going into considerable detail in examining the Code sections, Chapter 26, of Title 6, held:
The provisions of T.C.A. Section 6-2607 quoted above provide the only method by which the exclusive franchise awarded to the Whitehaven Utility District may be modified; i. e., that the Quarterly County Court of Shelby County adjudicate that the public convenience and necessity requires other or additional services. Hence, we hold that the sole recourse available to the Chandler Investment Company, if it is dissatisfied with the services offered by the Whitehaven Utility District, is to petition the Quarterly County Court of Shelby County under the authority of T.C.A. Section 6-2607 to establish that the public convenience and necessity requires that the exclusive franchise to furnish water, fire protection and sewerage service granted to the Whitehaven Utility District be modified *78so as to permit other agencies, possibly the City of Memphis Light, Gas and Water Division, to furnish water to the complainant and other potential customers within the vicinity of complainant’s subdivision. 44 TenmApp. at 24-25, 311 S.W.2d at 613.
This holding in Chandler has since been approved by this Court in the following cases: City of Crossville v. Middle Tennessee Utility District, 208 Tenn. 268, 345 S.W.2d 865 (1961); Consolidated Gray-Fordtown-Colonial Heights Utility District v. O’Neal, 209 Tenn. 342, 354 S.W.2d 63 (1962); Whitehaven Utility District of Shelby County v. Ramsey, 215 Tenn. 435, 387 S.W.2d 351 (1964)
The case at bar is controlled by the holding in the Chandler case. West Wilson Utility District has an exclusive franchise to construct and operate a public water system in its designated geographical area which includes that part of Shiloh Park in Wilson County. The only method by which this franchise can be altered or modified in any way is by a petition filed in the County Court of Wilson County for that purpose. The action on any such petition is subject to appellate review. See Pace v. Garbage Disposal District of Washington County, 54 Tenn.App. 263, 390 S.W.2d 461 (1965).
The logic of the Chandler decision is compelling. If upon creation of a utility district any other agency, including the courts, be allowed by any method to modify the geographical area in the district without the matter being first heard by the creating agency (County Court) could result in utter chaos.
The chancellor cited the case of Briley v. Cumberland Water Company, 215 Tenn. 718, 389 S.W.2d (1964). In *79the Briley case the utility (Cumberland. Water Company) filed its petition with the Public Service Commission requesting the issuance of a certificate of convenience and necessity for geographical area of Davidson County where it had not previously operated. The issue on appeal was whether under T.C.A. sec. 65-2706 the utility had to obtain the consent of or a franchise from the local political subdivision, in this case Davidson County, as a condition precedent to the Public Service Commission issuing the certificate of convenience and necessity.
In the Briley case no question was made as to the jurisdiction of the Public Service Commission to issue the certificate of convenience and necessity for the area at issue as in the case at bar. In the Briley case it was not claimed anyone had a franchise for the area in issue. In the case at bar, West Wilson Utility District has an exclusive franchise for the area. The Briley case is not applicable to the case at bar.
It results that the Public Service Commission exceeded its jurisdiction in issuing to Cumberland Water Company a certificate of convenience and necessity to operate a public water system in that geographical area of Shiloh Park in Wilson County, which is within the designated geographical area of West Wilson Utility District. The order of the Public Service Commission insofar as it applies to the operation of a public water system by Cumberland Water Company within the designated area of West Wilson Utility District is void; otherwise, the order of the Public Service Commission is approved.
Burnett, Chief Justice, and Chattin and Creson, Justices, concur.
Humphreys, Justice, not participating. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1542042/ | 115 F.2d 102 (1940)
VOELKEL et al.
v.
BENNETT.
No. 7380.
Circuit Court of Appeals, Third Circuit.
October 11, 1940.
*103 Fred C. Gartner, Herbert Welty, Arno P. Mowitz, and Harry C. Kohlhas, Jr., all of Philadelphia, Pa., for appellants.
W. Glenn George and Ralph N. Kellam, both of Philadelphia, Pa., for appellee.
Before MARIS, JONES, and GOODRICH, Circuit Judges.
GOODRICH, Circuit Judge.
This was a civil action for damages resulting from the negligent killing of five year old Thomas Voelkel. The child was struck by an automobile operated by the defendant and was dead upon his arrival at a hospital. Apparently he never regained consciousness after being struck. The action was brought jointly by his parents in their own right and by the father as administrator.
The parents' right of action is derived from the Act of April 15, 1851, P.L. 669, § 19, as amended 12 P.S. § 1601 et seq. Prior to 1937 this was the only action arising out of a person's wrongful death in Pennsylvania. The legislature had provided in § 35(b) of the Fiduciaries' Act, Act of June 7, 1917, P.L. 447, 20 P.S. § 772, that a personal representative might commence and prosecute all actions which his decedent could have brought in his lifetime with the exception of libel and slander. This section complemented § 35(a) of the same act, 20 P.S. § 771, which provided for the survival of actions brought by the decedent in his lifetime; § 35(b) provided for the survival of causes of action vested in the decedent in his lifetime. The Supreme Court of Pennsylvania held in Strain v. Kern, 1923, 277 Pa. 209, 120 A. 818, that § 35(b) was unconstitutional because the title of the act was defective. In 1937 the Legislature remedied the defect in the title and re-enacted § 35(b), 20 P.S. § 772. As stated in Gannon v. Lawler, 1939, 34 Pa. Dist. & Co. R. 571, 576, the present statutory law of Pennsylvania would seem to provide that "if no suit is brought by one who dies of injuries sustained through negligence of another, the relatives of decedent may sue the wrongdoer * * * and the personal representatives of decedent may sue defendant upon whatever cause of action decedent might have sued in his lifetime." Two distinct causes of action, neither of which was cognizable at common law, are thus recognized in the statutes.
The jury returned a verdict for the plaintiffs of $1,710, of which $210 was for funeral expenses. In answer to interrogatories the jury stated that all of the damages were awarded to the parents and nothing to the administrator. Although plaintiff complains of the inadequacy of the award to the parents, we agree with the learned court below that the verdict was not inadequate upon this branch of the case. The main dispute centers about plaintiff's complaint that the trial judge incorrectly charged the jury on the measure of damages with respect to the administrator. In sum, the jury was charged that the administrator could recover the earnings of the boy from age 21 to the end of his life expectancy, less the amount the decedent would have expended to maintain himself during that period. The administrator was treated as being entitled to the net estate his decedent would have accumulated had he lived out his normal span.
*104 The question is one which has not been settled by decision of either the Supreme Court or the Superior Court of Pennsylvania. It is, obviously, purely one of Pennsylvania law. There are Common Pleas decisions upon the point, which have been helpful in reaching our conclusion in this case.
What is the measure of damages in the administrator's suit under the Act of 1937, bearing in mind that recovery under a death by wrongful act statute modeled after a statute in England known as Lord Campbell's Act is not concerned in the question? The plaintiff contends that it is "the value of life lost," citing Mr. Justice Lowrie's opinion in Pennsylvania R. R. Co. v. McCloskey's Adm'r, 1854, 23 Pa. 526. But this vague concept has long since been abandoned for the more easily measurable standard of pecuniary loss. Gaydos v. Domabyl, 1930, 301 Pa. 523, 152 A. 549. The general view with regard to survival statutes is expressed in the Restatement of Torts, § 926, Comment a as follows:
"Where the defendant's act has caused the death, in most States the survival and revival statutes are interpreted as giving to the representative of the estate no more than the damages accruing before the death. * * *
"Because of the overlapping of the damages recoverable under a separate death statute, damages for shortening the life of the deceased are not recoverable under a survival statute, although such damages are given under a combined death and survival statute."
See, also, "A New Death Act" by Milford J. Meyer, 43 Dickinson Law Review, January, 1939.
In construing the 1937 Act, Judge Heiligman, in a carefully thought-out opinion in the case of Gannon v. Lawler, 1939, 34 Pa. Dist. & Co. R. 571, 579, enumerates the measure of damages for the personal representative as follows: (a) "Medical, nursing, hospital, funeral, and similar expenses should be awarded to the party who paid them."
That item is not involved in this case for in the suit by the parents an allowance was made to them for funeral expenses.
(b) "The personal representative should recover for the physical pain, mental distress, loss of time, and loss of earning power caused by the injury for the fixed period between the injury and the death".
In this case these elements are not involved for the period between injury and death of the victim was very short, he was unconscious during the entire period, and, obviously, in this case of a child of five there could be no loss of earning power in the short interval between injury and death.
These items, Judge Heiligman believed, constituted the only ones recoverable in such a suit.
The opinion in Gannon v. Lawler is wholeheartedly endorsed by Common Pleas Court No. 7, Philadelphia County, speaking through Judge Crumlish, in Findeisen v. Friedman, 1939, 35 Pa. Dist. & Co. R. 523. The limitation of recovery for loss of earning power to the period between injury and death is again approved by the Common Pleas Court of Montgomery County in an opinion by Judge Dannehower in Glaesser v. Evans, 1939, 36 Pa. Dist. & Co. R. 68.
Confining recovery by the administrator to pecuniary loss of earning capacity suffered by the deceased's "estate" seems to have three possibilities as to measure of damages. The first, and evidently the majority, view is to confine recovery by the deceased's representative to the loss of deceased's earning power between the dates of injury and death. (Damages for pain and suffering plus expenses are of course included.) The second possibility is to allow the jury to estimate deceased's loss of earning power, not only until actual death, but until the end of his normal life expectancy. This view was rejected by the trial court and we believe correctly. The third is the view, adopted by the trial court, which permits the jury to estimate the net result of the future earnings of a deceased, in this case after he had attained majority he being a minor and the parents entitled to earnings during minority, less his estimated personal expenses. Authority for such measure of damages is found in the decision in the case of McCabe v. Narragansett Electric Lighting Co., 1904, 26 R.I. 427, 59 A. 112.
Any rule allowing the jury to estimate upon what the deceased might have earned after his death is, of course, to some extent, speculative. But so are damages given to his next of kin on the basis of probable continuance of support. The mere fact that the element of speculation enters does not necessarily, in these instances, bar the item from the jury's consideration. But if the measure of damages is to be the economic *105 worth of an individual we believe the instruction given by the learned trial judge to the effect that recovery should be the net accumulation rather than probable gross earnings is the more desirable one. The unfortunate plaintiff cannot enjoy the earning and the spending of the gross amount and his estate would grow only to the extent that he accumulated an excess of income over outgo. See discussion in 44 Harv. L. Rev. 980.
If the final interpretation of the Pennsylvania statute becomes that already given by the Common Pleas courts in the decisions cited there is still no error of which the plaintiff can complain, for the learned judge's instruction was more favorable to the plaintiff than the interpretation of the Pennsylvania law given in the Common Pleas decisions noted above. The jury concluded that no damages would be awarded upon the application of this test. We cannot say that their conclusion was wrong.
There being no error, the judgment of the District Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542065/ | 949 A.2d 982 (2008)
SMITH
v.
COMM. OF P.A, DEPT. OF TRANS., BUREAU OF DRIVER LIC.
No. 1820CD07.
Commonwealth Court of Pennsylvania.
April 18, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542047/ | 949 A.2d 279 (2008)
401 N.J. Super. 99
Alexander IVASHENKO and Caroline Ivashenko, Plaintiffs-Appellants,
v.
KATELYN COURT COMPANY, INC., a New Jersey Corporation; Russell Weber, Jr.; Russell Weber, Sr.; Thomas J. Fitzpatrick; AED Associates, Defendants-Respondents.
No. A-6532-06T3
Superior Court of New Jersey, Appellate Division.
Argued April 22, 2008.
Decided May 30, 2008.
*280 Sam Maybruch, Hazlet, argued the cause for appellants (Maybruch & Zapcic, attorneys; Mr. Maybruch and Matthew R. Goode, on the brief).
Chris W. Kemprowski, Somerset, argued the cause for respondents, Katelyn Court Company, Inc., Russell Weber, Jr. and Russell Weber, Sr. (Law Offices of Michael C. Urciuoli, attorneys; Mr. Kemprowski, on the brief).
Richard W. Gaeckle, New Brunswick, argued the cause for respondents, Thomas J. Fitzpatrick and AED Associates (Hoagland, Longo, Moran, Dunst & Doukas, attorneys; Andrew J. Carlowicz, Jr., of counsel; Mr. Gaeckle, on the brief).
Before Judges SKILLMAN, WINKELSTEIN and LeWINN.
The opinion of the court was delivered by
WINKELSTEIN, J.A.D.
In this appeal, we are asked to decide if the election of remedies provision of the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20 (the *281 Act), and its concomitant regulations, N.J.A.C. 5:25-1.1 to -5.5 (the regulations), bar plaintiffs' lawsuit against the builder and architects of their home. The trial court dismissed plaintiffs' complaint on summary judgment on the grounds that the lawsuit was barred because plaintiffs had previously sought relief under the Act. On appeal, plaintiffs argue that their election to proceed under the Act was not knowing and voluntary, and thus the Act's election of remedies provisions did not preclude their Superior Court action. We find merit to plaintiffs' argument, and accordingly, we reverse the summary judgment and reinstate their complaint.
For purposes of the summary judgment motion, the material facts are not contested. In December 1998, plaintiffs entered into a contract with defendant Katelyn Court, owned by defendants Russell Weber, Sr. and Russell Weber, Jr. (collectively, the builder), to purchase a newly constructed home in Old Bridge. Defendant Thomas J. Fitzpatrick, an architect, employed by defendant AED Associates (collectively, the architects), prepared the plans. The home was substantially constructed in 2000. After plaintiffs moved into the home that December, they provided the builder with a punchlist of items that needed repair, one of which was the rear foundation wall, which plaintiffs described as having "three wet spots" and "bowing in."
In May 2001, plaintiffs filed their first New Home Warranty (HOW) claim, asserting that the rear foundation wall in the basement of their home was defective. Because the parties did not agree to arbitration, Terence Luckie, a claims analyst of the Bureau of Homeowner Protection (the Bureau), met with plaintiffs and Russell Weber, Jr. in July 2001 at plaintiffs' home. See N.J.A.C. 5:25-5.5(c)3ii. Luckie requested that the builder provide the specifications that the architects had prepared concerning the repair of the rear foundation wall. Those specifications had been previously submitted to the Old Bridge Township Building Department after the foundation wall was pushed in when a piece of equipment struck it during construction. The specifications stated, in part, that the "rear block wall [had] been pushed in . . . by machine/equipment grading around foundation[, and the] [j]oints shall be watched for any future movement. The issue will be address[ed] if needed in the future." At the time they filed the first HOW warranty claim, plaintiffs were unaware of the incident and that the architects had submitted specifications to repair the wall.
Also following the meeting, plaintiffs provided Luckie with a report prepared by their engineer, Andrew Marino. The report stated, in part, that "[b]ased on the lean noted in the wall (up to 3 inches) and inward buckling, as well as water penetration, horizontal cracking and evidence of ongoing movement, it is recommended that the wall be reconstructed with new reinforced pilasters, properly tied at the top and bottom."
On September 5, 2001, the Bureau issued its decision. As to plaintiffs' claim that the rear foundation wall was bowing, the decision stated:
Repairs were made to the rear basement wall according to specifications provided by Builder's Architect and approved by the Construction Official prior to the issuance of the Certificate of Occupancy. At the time of inspection there was no sign of failure or evidence of a Major Structural Defect as defined in N.J.A.C. 5:25-1.3 & 3.7. . . . The homeowner shall monitor the wall throughout the warranty period for signs of movement and/or cracking, and notify the Builder and the New Home *282 Warranty Program . . . by phone and in writing should the wall exhibit signs of movement or failure. Therefore at this time this claim is DENIED.
[(emphasis added).]
After receiving the decision, plaintiffs filed a second notice of claim and request for dispute settlement. Without addressing the merits of the claim as it pertained to the foundation wall, on October 17, 2001, an arbitrator denied the claim as duplicative of the first HOW warranty claim.
Over the next two years, the foundation wall continued to deteriorate. It developed a large horizontal crack, seven and one-half feet off of the floor, approximately one-eighth to one-quarter of an inch in width, and roughly thirty feet long. Several vertical cracks connected to the horizontal crack, with one crack passing through the foundation to the exterior of the wall. The tops of the pilasters, vertical structural columns, had separated from the foundation, with additional bowing of the rear wall. Consequently, in February 2004, plaintiffs filed another HOW warranty claim. The Bureau scheduled a hearing for July 13, 2004, at plaintiffs' home.
Before the hearing date, Marino reinspected the foundation wall. In a June 15, 2004 inspection report, he stated:
In August of 2001, I noted cracks between the rear foundation wall and attached pilasters. These cracks have further developed into large separations. . . . The pilasters have not been secured at the top as previously recommended and as anticipated, the wall has continued to move inward. . . . Most notably, large horizontal cracks have developed in the wall. . . . These cracks which exceed 1/4 inch [in] thickness . . . serve to further weaken this wall from its prior condition. In this area the wall has less inherent strength. . . . The two wythes[[1]] of block are now beginning to delaminate . . . toward the upper center of the wall . . . and I am concerned that there may be no steel ties or inadequate ties between the wythes of block. Sections of mortar previously holding the wythes of block together are loose and easily removed by hand. The load from the home above, in those areas, is being primarily carried by the 8 inch wall alone. If unreinforced, the 8 inch block is drastically undersized for a wall of this height. . . .
. . . [T]he stability of this wall is extremely questionable. Continued inward buckling of the wall can result in vertical shortening of the wall which will result in downward movement of and ongoing damage to the structure above. The wall is at a point where a minimal amount of further inward movement could result in failure of the wall and structure above. Steps should be taken to reinforce the wall immediately until a permanent repair can be completed.
After receiving Marino's report, plaintiffs inspected the files of the Township Building Department where they discovered a Notice of Unsafe Structure that had been issued on June 1, 2000. The notice stated that an "unsafe condition/imminent hazard has been found to exist . . .: Cracks in foundation and excess of two-inch lean in rear foundation wall." Prior to viewing the file, plaintiffs had no knowledge of the Notice of Unsafe Structure.
In a letter dated July 9, 2004, Marino advised plaintiffs that the wall continued to move inward, the July 2000 repairs had not resolved the problem, and "the overall *283 construction of the wall is deficient." Consequently, prior to the scheduled July 13, 2004 hearing, plaintiffs withdrew the 2004 claim.
In June 2005, plaintiffs filed a complaint charging the builder with negligent construction, breach of the implied warranty of habitability, breach of contract, misrepresentation, and a violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -167. Plaintiffs alleged negligence by the architects in the initial design of, and subsequent repairs to, the foundation wall.[2]
During discovery, plaintiffs deposed Alfred Polluzzi, a draftsman, who was a partner in AED. Polluzzi testified that after he had been told that a bulldozer struck and cracked the foundation wall, he did not inspect the inside of the home because the builder did not direct the architects to go inside. He relied instead on what the builder told him with regard to the crack in the foundation. Polluzzi further testified that after the bulldozer accident, the foundation wall was subject to movement. He stated that when the ground next to the wall became wet, the wall could move because at fifteen courses in height, it was too high.
Both the builder and the architects moved for summary judgment. The trial court ruled that because plaintiffs had initially elected to proceed under the Act, they were precluded by the election of remedies provisions from bringing the court action. The court also granted the architects' motion, primarily on the grounds that even though the architects were not parties to the HOW warranty proceedings, plaintiffs were collaterally estopped from relitigating whether the foundation wall was defective.
The Act and the regulations require that new homes conform to minimum construction and quality standards, and provide new home purchasers with warranty protection. N.J.S.A. 46:3B-7.1.
The Act includes an election of remedies provision:
Nothing contained herein shall affect other rights and remedies available to the owner. The owner shall have the opportunity to pursue any remedy legally available to the owner. However, initiation of procedures to enforce a remedy shall constitute an election which shall bar the owner from all other remedies. Nothing contained herein shall be deemed to limit the owner's right of appeal as applicable to the remedy elected.
[N.J.S.A. 46:3B-9 (emphasis added).]
The attendant regulation spells out in more detail the requirement that a homeowner elect whether to proceed under the Act or in court:
[T]he filing of a claim against the warranty specified by this subchapter shall constitute the election of a remedy and shall bar the owner from all other remedies. Nothing herein shall be deemed to limit the owner's right to elect other remedies except that such election shall bar the owner from pursuing the same claim under the warranty specified in this subchapter and in accordance with the procedures related hereto. For the purpose of this section, election of other remedies shall mean the filing of a complaint, counter-claim, cross-claim or third party complaint in any court that alleges matters covered by the warranty in particular or unworkmanlike construction in general.
[N.J.A.C. 5:25-3.10.]
*284 The regulations also preclude a homeowner from filing more than one claim for the same defect, but permit a homeowner to file a new claim "if new facts arise which could not previously have been known with reasonable diligence." N.J.A.C. 5:25-5.5(b)3ii.
We examined the reach of the election of remedies provisions in Konieczny v. Micciche, 305 N.J.Super. 375, 380, 702 A.2d 831 (App.Div.1997), where we concluded that the homeowners' initiation of arbitration proceedings under the Act barred them from seeking additional relief in court for defects that had been submitted to the arbitrator, as well as for defects that the homeowners knew about but did not submit to the arbitrator. The language of N.J.S.A. 46:3B-9"initiation of procedures to enforce a remedy shall constitute an election which shall bar the owner from all other remedies"means that "when a homeowner `initiates' a binding arbitration proceeding . . . the homeowner has elected the administrative procedure to `enforce a remedy' relating to defects." Konieczny, supra, 305 N.J.Super. at 381, 702 A.2d 831. This interpretation is consistent with the legislative purpose of the election of remedies provision, which balance "the waiver of any judicial remedy [with the] election of a prompt, convenient and cost-saving means of resolving disputes concerning construction defects." Id. at 382, 702 A.2d 831. Thus, the election of remedies provisions subsume all of the homeowners' claims of which they were aware when they filed their claim under the Act, including claims for common-law fraud and violations of the Consumer Fraud Act, even if the homeowners did not raise those claims with the arbitrator. Id. at 380, 702 A.2d 831.
Plaintiffs do not disagree with these general principles, but instead assert that the election of remedies provisions do not apply to them because they did not initiate their HOW warranty claims with full knowledge of the damage to their home. They rely on our decision in Spolitback v. Cyr Corp., 295 N.J.Super. 264, 270, 684 A.2d 1021 (App.Div.1996), where we held that a homeowner's election of remedies, which would effectively bar alternative relief,
must be knowingly and voluntarily made, especially where the choice is to arbitrate disputes rather than to litigate them. Without a realistic opportunity to understand the nature and scope of the particular issues to be addressed, a party cannot be said to have the requisite basis for making a knowing and voluntary waiver of available remedies for resolution of those issues.
[(citations omitted).]
The record supports plaintiffs' argument. At the time they filed the first HOW warranty claim, they were unaware that a bulldozer had struck the foundation wall while the home was being constructed. Nor were they aware that the Township building inspector had issued a Notice of Unsafe Structure as a result of the accident. The builder had not informed plaintiffs of the accident or the unsafe structure notice. Neither had the builder informed plaintiffs that the architects had proposed a plan to fix the wall following the accident without having inspected for damage inside the home, but had prepared specifications based substantially on information provided by the builder.
Even at the time plaintiffs filed their 2004 HOW warranty claim, they were not aware of the unsafe structure notice or of many material facts related to the damage to and repair of the foundation wall. When they discovered the information, they withdrew that claim before it was adjudicated by the Bureau.
*285 Given these circumstances, plaintiffs were deprived of a realistic opportunity to understand the nature and scope of the potential problems facing them when they elected to proceed under the Act rather than seek relief in court. Plaintiffs' election was not made knowingly or voluntarily.
We are mindful that information concerning the bulldozer accident, and the unsafe structure notice, were available to plaintiffs before they initiated the first HOW warranty claim. A search of the Township's building department records would have provided plaintiffs with that information. We are not persuaded, however, that it was plaintiffs' obligation to check those records in the absence of, at the very least, knowledge that the bulldozer accident had occurred and damaged the foundation wall.
The purpose of the Act is "to protect new homeowners and abandon the ancient doctrine of caveat emptor." Ingraham v. Trowbridge Builders, 297 N.J.Super. 72, 80, 687 A.2d 785 (App.Div. 1997). Under the circumstances presented here, barring plaintiffs from proceeding in court would not foster that purpose.
Also notable is that in rendering its decision on plaintiffs' first HOW warranty claim, the Bureau did not enter a final adjudication of plaintiffs' claim that the foundation wall was defective. The Bureau gave plaintiffs the right to "monitor the wall throughout the warranty period for signs of movement and/or cracking," and notify the builder and New Home Warranty Program should that occur. Thus, the Bureau did not foreclose plaintiffs from seeking additional relief in the future should the problems with the wall become worse. The question here is not whether plaintiffs are entitled to seek additional relief from the builder for defects in the wall, but in which forum they are entitled to request that relief. In that their election to proceed under the Act was not knowing and voluntary, plaintiffs are not barred from seeking additional relief in court.
We next address plaintiffs' claim against the architects. Because the architects are not builders, see N.J.S.A. 46:3B-2f (defining builder as an entity "engaged in the construction of new homes"), the election of remedies procedures do not apply to them. Konieczny, supra, 305 N.J.Super. at 384, 702 A.2d 831. Nevertheless, the architects claim that plaintiffs' lawsuit against them must fail under the doctrine of defensive collateral estoppel. We disagree.
Defensive collateral estoppel "permits a defendant who was not a party to an action involving a common plaintiff to use a finding of fact from the prior action to preclude litigation of the issue in a pending case." Id. at 385, 702 A.2d 831. The doctrine forecloses a party from litigating an issue where the party asserting the preclusion shows that
(1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the court in the prior proceeding issued a final judgment on the merits; (4) the determination of the issue was essential to the prior judgment; and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.
[Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521, 897 A.2d 1003 (2006) (quotations and citation omitted).]
Administrative proceedings, like those before the Bureau, are generally "entitled to preclusive effect if rendered in proceedings meriting that deference." Id. at 522, *286 897 A.2d 1003 (quotations and citation omitted).
Here, the architects have not established the elements necessary to invoke collateral estoppel as a defense to plaintiffs' claim. The Bureau recognized in its 2001 decision that the wall was still susceptible to movement, with the potential for additional cracking. It advised plaintiffs to monitor the wall and notify the builder and the New Home Warranty Program if the wall continued to deteriorate, which it did. In other words, the Bureau did not render a final adjudication on the merits, the absence of which precludes the architects from invoking defensive collateral estoppel. See id. at 521, 897 A.2d 1003 (one element of collateral estoppel is that "the court in the prior proceeding issued a final judgment on the merits").
The architects have also failed to demonstrate that the issues in the court proceeding and the proceeding before the Bureau were identical. Ibid. (an element of collateral estoppel is that "the issue to be precluded is identical to the issue decided in the prior proceeding"). Plaintiffs' claim includes an allegation that the architects were negligent, and that their plans for repair of the wall fell below the standard of care for architects. That assertion of negligence was not at issue in the Bureau's 2001 decision, which was limited to whether the wall constituted a "major structural defect" as defined in the regulations. This is yet another reason that defeats the architects' collateral estoppel defense.
We therefore reverse the summary judgment dismissing plaintiffs' complaint as to all defendants and remand for further proceedings.
NOTES
[1] A wythe is a continuous vertical section of a masonry wall, one unit in thickness. International Building Code, § 2102 (2006 ed.).
[2] The trial court dismissed the claim against the architects as it related to the initial design of the house. Plaintiffs have not challenged that decision on appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542079/ | 949 A.2d 738 (2008)
The STATE of New Hampshire
v.
KOREAN METHODIST CHURCH OF NEW HAMPSHIRE.
No. 2007-381.
Supreme Court of New Hampshire.
Argued: January 31, 2008.
Opinion Issued: May 16, 2008.
*739 Kelly A. Ayotte, attorney general (Lynmarie C. Cusack, assistant attorney general, on the brief and orally), for the State.
Cronin & Bisson, P.C., of Manchester (John F. Bisson and John G. Cronin on the brief, and Mr. Cronin orally), for the defendant.
DUGGAN, J.
The defendant, Korean Methodist Church of New Hampshire (Church), appeals the denial by the Superior Court (Coffey, J.) of its preliminary objection to the declaration of taking filed by the State. See RSA 498-A:9-a,:9-b (Supp.2007). We affirm.
The record supports the following facts. The State initiated this condemnation proceeding in connection with the planned construction of a new access road to the Manchester-Boston Regional Airport and the associated environmental mitigation. See RSA 230:45 (Supp.2007). Approximately 100 acres of upland forest and other terrestrial habitat will be destroyed because of the project. Additionally, a new bridge and roadway will be laid over approximately twelve acres of wetlands and one acre of the Merrimack River. To compensate for these environmental impacts, the State has sought to acquire approximately 760 acres for preservation, approximately four acres of which belong to the Church.
On April 8, 2004, a special committee appointed by the Governor and Executive Council held a public hearing, preceded by notice to each affected property owner, see RSA 230:17 (1993), to determine if there was "occasion" for the layout of the proposed mitigation area and to hear evidence regarding the economic, social and environmental effects of the proposed mitigation efforts. See RSA 230:14 (Supp.2007) (amended 2006),:19 (1993),:45; see also Rodgers Dev. Co. v. Town of Tilton, 147 N.H. 57, 59-60, 781 A.2d 1029 (2001) (determining whether "occasion" exists involves balancing public interest in layout against rights of affected landowner and burden imposed upon municipality). The State contends, and the Church does not dispute, that the Church failed to attend this hearing. Following the hearing, the special committee determined that there was occasion for the laying out of the mitigation area, which included the area where the Church's property is located. See RSA 230:19.
On November 1, 2006, the State filed a declaration of taking with the New Hampshire Board of Tax and Land Appeals (BTLA), indicating its intent to take a conservation easement interest in the Church's property. See RSA 498-A:5 (Supp.2007) (amended 2006). The Church filed its preliminary objection to the State's declaration of taking on December 4, 2006. See RSA 498-A:9-a. In it, the *740 Church contended that: (1) the taking of its property was not a matter of public necessity; (2) other unimproved parcels suitable for mitigation were available for purchase on the open market; (3) the net public benefit of the taking was insufficient to warrant taking the Church's principal asset, given that the Church is a voluntary organization; (4) taking an easement on the Church's property unfairly saddled the Church with tax liability and liability for third-party damages for the partial use of the easement area; and (5) the Church has a pending agreement to sell a portion of the area to a third party for $100,000. Notably, the Church did not allege that the special committee's finding of an occasion for laying out the mitigation area was fraudulent or grossly mistaken. See RSA 230:14,:19,:45.
Consistent with RSA 498-A:9-b, the Church requested that the BTLA transfer its preliminary objection to the superior court for an evidentiary hearing "on the issues of necessity, public purpose and net public benefit." After reviewing the State's response to the preliminary objection, the court ruled that, based upon the record before it, the "preliminary objection must be denied." The State contends, and the Church does not dispute, that the Church did not seek leave to submit a reply to the State's response to its preliminary objection.
The focus of the Church's appeal is upon the trial court's failure to hold an evidentiary hearing before ruling on the preliminary objection. The Church asserts, first, that this failure constituted an unsustainable exercise of discretion, and, second, that it violated the Church's State constitutional right to due process.
Before addressing the Church's first argument, we briefly outline the process under the Eminent Domain Procedure Act, RSA chapter 498-A (1997 & Supp.2007). Before the State may initiate a condemnation proceeding, it must obtain an independent appraisal of the property to be taken and, based upon it, submit an offer to purchase the property to the property owner. See RSA 498-A:4 (Supp. 2007). If the offer is accepted, title may then be transferred. See RSA 498-A:4, IV(b). If the offer is rejected, the State may commence condemnation proceedings. See RSA 498-A:4, IV(c). To do so, the State must first file a declaration of taking with the BTLA. See RSA 498-A:5. A record of the declaration must then be filed with the applicable office of the registry of deeds and notice must also be given to the condemnee. See RSA 498-A:7,:8 (1997). The condemnee may file a preliminary objection to the declaration of taking within thirty days after the return day of the notice. See RSA 498-A:9-a.
There are three permissible grounds for the objection, one of which is to challenge the necessity, public use and net-public benefit of the taking. See RSA 498-A:9-a, I(c). If this is the ground upon which the condemnee files a preliminary objection, the BTLA must transfer the objection to the superior court, see RSA 498-A:9-b, I, which must then require the State to respond and "may conduct an evidentiary hearing before it rules on the preliminary objection," RSA 498-A:9-b, II. If the superior court denies the preliminary objection, the BTLA must then proceed to determine the amount of just compensation due the condemnee for the taking. See RSA 498-A:9-b, III,:25 (Supp.2007). If the superior court grants the preliminary objection, the BTLA must then determine the damages, if any, due the condemnee, and dismiss the declaration of taking. See RSA 498-A:9-b, IV; see also RSA 498-A:9-a, V.
The Church concedes, as it must, that RSA 498-A:9-b, II vests the superior court with the discretion to hold an evidentiary *741 hearing on a preliminary objection to a declaration of taking. RSA 498-A:9-b, II provides that the superior court "may" hold an evidentiary hearing. "It is a general rule of statutory construction that the word `may' is permissive in nature. . . ." In the Matter of Bazemore & Jack, 153 N.H. 351, 354, 899 A.2d 225 (2006).
We review the superior court's decision to hold an evidentiary hearing under our unsustainable exercise of discretion standard. See id. at 355-56, 899 A.2d 225. Under this standard, we review only whether "the record establishes an objective basis sufficient to sustain the discretionary judgment made." State v. Lambert, 147 N.H. 295, 296, 787 A.2d 175 (2001). Unless a party establishes that such a ruling was clearly untenable or unreasonable to the prejudice of the party's case, it will not be disturbed. Id.
Here, the record establishes an objective basis sufficient to sustain the trial court's decision not to hold an evidentiary hearing on the Church's preliminary objection. The trial court ruled that, to prevail on its preliminary objection, the Church had to establish that the special committee's finding that there was an occasion for the laying out of the mitigation area as proposed was fraudulent or grossly mistaken. See RSA 230:14,:19,:45. The Church, however, failed even to allege fraud or gross mistake, much less provide an offer of proof. Absent this, we decline to hold that the trial court's decision not to hold an evidentiary hearing was an unsustainable exercise of discretion.
The Church asserts three arguments against this conclusion. First, the Church contends that requiring it to prove fraud or gross mistake was error. The State counters that the Church failed to preserve this argument, and we agree.
As the appealing party, the Church had the burden of providing the court with a record sufficient to demonstrate that it raised all of its appeal issues before the trial court. Bean v. Red Oak Prop. Mgmt., 151 N.H. 248, 250, 855 A.2d 564 (2004); see Sup.Ct. R. 13, 16(3)(b). The record provided in this appeal, however, fails to show that the Church ever argued before the trial court that requiring it to prove fraud or gross mistake was error. Accordingly, the Church has failed to preserve this argument, and we decline to address it. See Bean, 151 N.H. at 250, 855 A.2d 564.
Second, the Church argues that because the trial court did not hold an evidentiary hearing, it considered "only one side of the debate." To the extent that this is true, it is not because there was no evidentiary hearing, but because the Church's preliminary objection failed to plead gross mistake or fraud. If the trial court had "only one side of the debate" before it, it is because the Church failed to provide the court with the other side.
Third, the Church asserts that the trial court's decision not to hold an evidentiary hearing was unsustainable because without it, the trial court lacked support for certain findings. The only findings relevant to this appeal concern the Church's failure to plead gross mistake or fraud. As these findings have ample support in the record, we uphold them.
We turn next to the Church's contention that the trial court's failure to conduct an evidentiary hearing violated the Church's State constitutional rights to due process. See N.H. CONST. pt. I, art. 15.
To determine whether due process required an evidentiary hearing in the superior court, we normally would examine the following three factors: (1) the private interest affected by the official action; (2) the risk of an erroneous deprivation of *742 such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and (3) the government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail. Appeal of Town of Nottingham, 153 N.H. 539, 551, 904 A.2d 582 (2006); see Mathews v. Eldridge, 424 U.S. 319, 335, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976). The Church "neither cites nor discusses the foregoing three-factor analysis," Appeal of Town of Nottingham, 153 N.H. at 552, 904 A.2d 582, and points to no controlling precedent establishing that, in the face of the process that the Church indisputably received, it also had a right to an evidentiary hearing in superior court. Under these circumstances, therefore, we consider this argument undeveloped and decline to review it. See id.
Affirmed.
BRODERICK, C.J., and DALIANIS, GALWAY and HICKS, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542071/ | 115 F.2d 331 (1940)
COMMISSIONER OF INTERNAL REVENUE
v.
PROUTY.
No. 3603.
Circuit Court of Appeals, First Circuit.
November 1, 1940.
*332 Loring W. Post, of Washington, D. C. (Samuel O. Clark, Jr., Sewall Key, and Joseph M. Jones, all of Washington, D. C., on the brief), for Commissioner of Internal Revenue.
Allison L. Newton, of Boston, Mass. (Douglas L. Ley, of Boston, Mass., on the brief), for Olive H. Prouty.
*333 Before MAGRUDER and MAHONEY, Circuit Judges, and PETERS, District Judge.
MAGRUDER, Circuit Judge.
In 1923 Olive H. Prouty, the taxpayer herein, set up three trusts. Between 1923 and 1931 the grantor, by virtue of power reserved to her, made various amendments to the trust instruments. The Commissioner ruled that the gifts were not complete in 1931; that under Section 501 of the Revenue Act of 1932, 47 Stat. 245, as amended by Section 511 of the Revenue Act of 1934, 48 Stat. 758, 26 U.S.C.A. Int.Rev. Acts, pages 580, 769, gift taxes became due upon amendment of each of the trusts on January 2, 1935, whereby the grantor finally relinquished all reserved power to revoke or amend the trust instruments. Upon petition for redetermination of the deficiency, the Board of Tax Appeals held with the taxpayer that the gifts had been completed prior to the enactment of the gift tax in 1932, and decided that there was no deficiency in gift taxes for the year 1935. The correctness of this decision by the Board is now before us on petition for review.
After the amendments in 1931 each of the three trust instruments contained a provision reserving to the grantor a power to revoke or amend, with the written consent of her husband, Lewis I. Prouty, during his lifetime, and thereafter, alone. As a condition precedent to the exercise of this power in a given calendar year, the grantor had to serve upon the trustee, during the preceding year, a formal notification of intention to revoke or amend.
Section 501 (c) of the Revenue Act of 1932 provided:
"The tax shall not apply to a transfer of property in trust where the power to revest in the donor title to such property is vested in the donor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such property or the income therefrom, but the relinquishment or termination of such power (other than by the donor's death) shall be considered to be a transfer by the donor by gift of the property subject to such power, and any payment of the income therefrom to a beneficiary other than the donor shall be considered to be a transfer by the donor of such income by gift."
This subsection was repealed in 1934, 48 Stat. 758, for the reason, as explained in the committee reports, that "the principle expressed in that section is now fundamentally part of the law by virtue of the Supreme Court's decision in the Guggenheim case. * *" H.Rep. 704, 73d Cong., 2d Sess. (1934), p. 40; Sen.Rep. 558, same session, p. 50. In Burnet v. Guggenheim, 288 U.S. 280, 53 S. Ct. 369, 77 L. Ed. 748, which arose under the gift tax of 1924, the Supreme Court, without the aid of specific language in that Act, had reached the result which was expressly provided for in Section 501 (c) of the 1932 Act. In view of this legislative history Treasury Regulations 79 (1936 ed.) quite properly provide, notwithstanding the repeal of Section 501 (c), as follows:
"Art. 3. Cessation of donor's dominion and control.
"* * *
"As to any property, or part thereof or interest therein, of which the donor has so parted with dominion and control as to leave in him no power to cause the beneficial title to be revested in himself, the gift is complete. But a transfer (in trust or otherwise), though passing both legal and beneficial title, is still in essence merely formal so long as there remains in the donor a power to cause the revesting of the beneficial title in himself, and the gift, from the standpoint of substance, remains incomplete during the existence of the power. A donor shall be considered as having the power to revest in himself the beneficial title to the property transferred if he has such power in conjunction with any person not having a substantial adverse interest in the disposition of the property or the income therefrom. A trustee, as such, is not a person having a substantial adverse interest in the disposition of the trust property or the income therefrom. The relinquishment or termination of the power, occurring otherwise than by the death of the donor (the statute being confined to transfers by living donors), is regarded as the event which completes the gift and causes the tax to apply. * * *"
If, therefore, Lewis Prouty is determined to be a person not having a substantial adverse interest in the disposition of the trust corpus or income therefrom, the gifts were not complete in 1931 and gift taxes accrued in 1935 upon the grantor's unqualified relinquishment of her power to revoke or amend.
We shall refer first to Trusts Nos. 2 and 3, because in them we think it clear that *334 Lewis did not have a substantial adverse interest as of 1931.
In Trust No. 2 the grantor declared herself trustee of certain securities, with direction to the trustee to pay out of the net income the sum of $2,500 a year to Lewis I. Prouty during his lifetime, "and to add the balance of the net income to the principal and invest it as a part thereof during the lifetime of Lewis I. Prouty, with full power and authority in the sole and uncontrolled discretion of said Olive Higgins Prouty as long as she shall be the Trustee hereunder from time to time to pay to said Lewis I. Prouty and said Jane Prouty [a daughter], or either of them, in such proportions as the said Trustee may see fit the whole or any part of the principal of the trust fund if said Trustee deems it necessary or advisable for the maintenance, support and welfare of said Lewis I. Prouty and said Jane Prouty or either of them. * * *" It was provided that Lewis would succeed as trustee if he outlived the grantor; but in that event Lewis as trustee would not be empowered to make any payments to himself, other than the annuity, though he could in his "sole and uncontrolled discretion" make payments of the whole or any part of the principal to Jane Prouty if he deemed it advisable for her maintenance, support and welfare. At Lewis' death the property was to pass to Jane, with various remainders over. The power in the grantor to amend or revoke the trust, with the consent of Lewis, has already been mentioned.
Trust No. 3 was the same as Trust No. 2, except that Richard Prouty, a son, was substituted for Jane.
So far as the annuity is concerned, the Commissioner conceded that an effective gift thereof in each trust had been made prior to the passage of the Revenue Act of 1932. Accordingly, in determining the deficiency, he subtracted the value of the annuities, calculated on the basis of Lewis' life expectancy, and subjected the remaining value of the corpus of each trust to the gift tax. This method of apportionment might be objected to on the ground that if the annuity constituted a substantial adverse interest, it was an interest in the whole of the corpus out of the net income of which the annuity was payable, so that the gift should be treated as having been completed in 1931 as to all the trust res. But such an interpretation would afford an obvious facility for tax evasion, particularly with respect to the grantor's income tax in the application of the comparable provisions of Section 166 dealing with revocable trusts.[1] To the extent that a proposed partial revocation would leave Lewis' annuity intact, he would have no substantial countervailing interest tending to induce him to withstand the grantor's wishes. We think that the Commissioner was justified in deducting the capital value of the annuity and in treating the transfer in 1935 upon relinquishment of the power as being a gift merely of the remainder of the corpus after such deduction. Therefore, in considering whether Lewis had a substantial adverse interest in Trusts Nos. 2 and 3, we may leave out of account the annuities to him provided in these trusts. Cf. Kaplan v. Commissioner, 1 Cir., 66 F.2d 401; Paul W. Litchfield v. Commissioner of Internal Revenue, 39 B.T.A. 1017.
The only other interest which Lewis had in the corpus of Trusts Nos. 2 and 3 was the possibility that, under the provision previously quoted, his wife, as trustee, might in her "sole and uncontrolled discretion" pay over to him such portions of the principal as she might deem advisable for his maintenance, support and welfare. But the main purpose of the trust was to accumulate the income during Lewis' lifetime, and the record does not suggest the existence of circumstances indicating any likelihood that Lewis would ever receive anything by virtue of this provision. *335 Certainly Lewis, while receiving aggregate annuities of $7,500 from the three trusts, could never obtain a court decree compelling the trustee to give him something under this discretionary power. That such a remote and speculative possibility of gain does not constitute a "substantial adverse interest" was ruled by this court on quite similar facts in Fulham v. Commissioner, 1 Cir., 110 F.2d 916, 918.
Another point was stressed by the Board in connection with Trusts Nos. 2 and 3, namely, that in each case the corpus at the death of Lewis was to go to his children. "It is natural to assume," said the Board, "that his desire and concern for the support, maintenance, and welfare of his children after his death would prompt him to resist any effort on the part of the grantor of the trust to alter, amend or revoke that part of the trust so as to revest in her title to such property." No doubt this is an interest of a sort. But we think the phrase "substantial adverse interest," as it was used in Section 501 (c) of the Revenue Act of 1932 and as it is used in Sections 166 and 167, 26 U.S.C.A. Int.Rev. Acts, pages 543, 580, means a direct legal or equitable interest in the trust property, and not merely a sentimental or parental interest in seeing the trust fulfilled for the advantage of other beneficiaries. Loeb v. Commissioner, 2 Cir., 113 F.2d 664, 666.
Trust No. 1 presents a different situation. We may lay to one side the annuity of $2,500 payable to Lewis; and also the possibility that Lewis might receive something through the exercise by the grantor as trustee of her discretion to pay to Lewis such part of the principal as she might deem advisable for his maintenance, support and welfare. Under this trust instrument Lewis had, in addition, two important interests affecting the whole of the corpus, interests which were lacking in the other two trusts. (1) If he should outlive the grantor, the corpus was to pass at his death as he should by his last will direct and appoint.[2] The prospect of acquiring this power of disposition certainly would furnish a pecuniary motive, far from negligible, tending to induce Lewis to stand out against any desire of the grantor to revoke the trust. Cf. Curry v. McCanless, 307 U.S. 357, 371, 59 S. Ct. 900, 83 L. Ed. 1339. (2) If he should outlive the grantor, he would succeed as trustee and, as such trustee, would have full discretion to pay to himself the whole or any part of the principal should he deem it advisable for his own maintenance, support and welfare. In Cox v. Commissioner, 10 Cir., 110 F.2d 934, such a power held by a grantor-trustee was held to be so substantial as to amount in effect to a power in the grantor to revest in himself the corpus of the trust estate and hence to subject the grantor to an income tax under Section 166; this despite the fact that the power may have been technically a fiduciary one.
Examining these intimate family trusts, one must recognize an element of unreality in the inquiry whether a beneficiary's interest is substantially adverse to the grantor. The supposition is that, given a sufficient stake in the trust, the beneficiary is not likely to yield to a wish of the grantor to revoke the trust. In many cases the grantor may have full confidence in the compliant disposition of the member of the family he selects to share his power of revocation, even though such member is named as beneficiary of a handsome interest in the trust. The very fact that the grantor reserved a power to revoke indicates a mental reservation on his part as to the finality of the gift; and if the grantor wishes to hold on to a power of recapture, it stands to reason he will vest the veto power in someone whose acquiescence he can count on. Cf. Helvering v. City Bank Farmers Trust Co., 296 U.S. 85, 90, 56 S. Ct. 70, 80 L. Ed. 62. However, we cannot read into the gift tax, any more than into Sections 166 and 167, the proposition that a member of the grantor's immediate family can never be deemed to have "a substantial adverse interest." So far as the gift tax is concerned, it is fair enough to take the grantor at his word. *336 As to the income tax, it might be rational for Congress to tax all family income as a unit. But as the law now stands both gift tax and income tax we must give weight to the formal rights conferred in the trust instrument in determining whether a given beneficiary has a substantial adverse interest, bearing in mind the admonition of Helvering v. Clifford, 309 U.S. 331, 335, 60 S. Ct. 554, 556, 84 L. Ed. 788, that "where the grantor is the trustee and the beneficiaries are members of his family group, special scrutiny of the arrangement is necessary * * *."
The present case is on the border line, but considering the aggregate of Lewis' interests under the terms of Trust No. 1, we are not persuaded that the Board was in error in its conclusion that Lewis had a "substantial adverse interest." It is true that Lewis will have to outlive the grantor to reap the benefits, but in the normal vicissitudes of life the chance of his survival is substantial. Lewis has a contingent interest in the whole of the current income, for if the trustee does not pay it to him under her discretionary power, it must be added to the corpus and thus becomes subject to Lewis' testamentary power of appointment. A substantial chance of coming into a good thing may constitute a "substantial adverse interest"; especially where, as here, it is a chance to control the disposition of the entire corpus of a large estate. It is a chance one would not lightly relinquish. The interest need not be presently vested in possession and enjoyment. See Jane B. Shiverick v. Commissioner of Internal Revenue, 37 B.T.A. 454.
The Commissioner further contends, however, that a gift is not complete even where the grantor's reserved power to revoke is subject to the veto of a person who does have a substantial adverse interest; and that therefore a gift tax became payable in 1935 when the grantor relinquished this power. See First National Bank of Birmingham v. United States, D. C., 25 F. Supp. 816. It is pointed out that when such a power so restricted is extinguished by death of the grantor, the corpus is treated as part of the gross estate of the grantor for purposes of the estate tax. Helvering v. City Bank Farmers Trust Co., 296 U.S. 85, 56 S. Ct. 70, 80 L. Ed. 62. And in Estate of Sanford v. Commissioner, 308 U.S. 39, 60 S. Ct. 51, 56, 84 L. Ed. 20, the court said that the gift tax is supplementary to the estate tax; that the two are in pari materia and must be construed together; that: "There is nothing in the language of the statute, and our attention has not been directed to anything in its legislative history to suggest that Congress had any purpose to tax gifts before the donor had fully parted with his interest in the property given, or that the test of the completeness of the taxed gift was to be any different from that to be applied in determining whether the donor has retained an interest such that it becomes subject to the estate tax upon its extinguishment at death." Nevertheless, as the court pointed out (308 U.S. at page 45, 60 S. Ct. 51, 84 L. Ed. 20), the two taxes are not always mutually exclusive.[3] The estate tax expressly provides for taxation where at the time of the grantor's death he retained a power to revoke either "alone or in conjunction with any person." Section 302(d), Revenue Act of 1926, 44 Stat. 71, 26 U.S.C.A. Int.Rev.Acts, page 228. But Section 501 (c) of the 1932 gift tax provided that the tax should not apply to a transfer of property in trust where the power to revest the property in the donor was vested in the donor "either alone or in conjunction with any person not having a substantial adverse interest." This seems to imply that the gift tax applies where the power to revoke is retained in conjunction with a person who does have a substantial adverse interest. When Section 501 (c) was repealed in 1934, it was stated that the provision was unnecessary because the Guggenheim case had so established the law even without the aid of express provision. In the Guggenheim case the power to revoke was reserved in the grantor alone. Treasury Regulations 79, 1936 Ed., which we have quoted above have the same meaning as the now repealed Section 501 (c) *337 and contain the same apparent implication that if the power to revoke is reserved in conjunction with a person having a substantial adverse interest, the donor is to be considered as having so parted with dominion as to render the gift complete. The Commissioner must have thought that this was so when he prepared the deficiency notice in the case at bar, for he deducted the value of the annuities to Lewis on the theory that as to them the gifts were complete in 1931.
In view of this legislative history we conclude that since Lewis had a substantial adverse interest in Trust No. 1 as of 1931, the gift was complete at that time, despite the power of revocation reserved to the grantor in conjunction with Lewis. As a result, Trust No. 1 escapes both the gift tax and the estate tax. However, our decision is not a precedent endangering the revenue. The tax is avoided here only because the gift was made before the gift tax was enacted. These family trusts, created since 1932, will inevitably be subject to the gift tax, or the estate tax, or in some instances, both.[4] The Commissioner's argument, advanced to meet the exigencies of the case at bar, if accepted and applied in future cases, would only result in postponing the incidence of the tax.
We have not overlooked an additional argument advanced by the Commissioner. Leaving aside the question whether Lewis had a substantial adverse interest in Trust No. 1, the Commissioner contends that the "bundle of rights and powers" retained by Mrs. Prouty as of 1931 was such that she remained in substance the owner of the corpus, and that the income of the trust was then taxable to her under Section 22(a), Revenue Act 1934, 26 U.S.C.A. Int.Rev.Acts, page 669, by the doctrine of Helvering v. Clifford, 309 U.S. 331, 60 S. Ct. 554, 84 L. Ed. 788; that the gift being regarded as incomplete for purposes of the income tax should be similarly regarded for purposes of the gift tax. The answer is twofold. In the first place, it is far from clear that the premise is correct as to the applicability of Helvering v. Clifford. Cf. Commissioner v. Branch, 1 Cir., 114 F.2d 985, decided by this court October 23, 1940. Second, the gift tax does not seem to be so closely integrated with the income tax that decisions like the Clifford case extending the applicability of Section 22 (a) to the grantor of a trust, must necessarily be read as holding that no gift tax was payable upon the creation of the trust. It may be frankly recognized, however, that the interrelation of the income, estate, and gift taxes presents many puzzling problems which deserve the attention of Congress.
The decision of the Board of Tax Appeals is affirmed as to Trust No. 1 and reversed as to Trusts Nos. 2 and 3; and the case is remanded to the Board for further proceedings not inconsistent with this opinion.
NOTES
[1] Section 166 of the Revenue Act of 1932, 47 Stat. 221, 26 U.S.C.A. Int.Rev. Acts, page 543, provided as follows:
"Revocable Trusts
"Where at any time [during the taxable year] the power to revest in the grantor title to any part of the corpus of the trust is vested
"(1) in the grantor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, or
"(2) in any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, then the income of such part of the trust [for such taxable year] shall be included in computing the net income of the grantor."
The amendment of this section by the Revenue Act of 1934, 26 U.S.C.A. Int. Rev.Code, § 166, merely struck out the portions indicated in brackets above but otherwise made no change.
[2] This power of appointment was provided in an amendment made in 1929 to Article Second of the trust instrument. In form Lewis was given the power of appointment upon his death, without regard to whether he died before or after the grantor. But in the contingency of Lewis' predecease, the Commissioner interprets the trust instrument as empowering the grantor to nullify any testamentary appointment by exercising her power to revoke prior to actual payment of the principal to the beneficiaries designated in Lewis' will. This interpretation is disputed by the taxpayer. We assume, without deciding, that the Commissioner is right on this point.
[3] Section 402(b) of the Revenue Act of 1932, 47 Stat. 245, 26 U.S.C.A. Int.Rev. Acts, page 578, provides:
"If a tax has been paid under Title III of this Act on a gift, and thereafter upon the death of the donor any amount in respect of such gift is required to be included in the value of the gross estate of the decedent for the purposes of this title, then there shall be credited against the tax imposed by section 401 of this Act the amount of the tax paid under such Title III with respect to so much of the property which constituted the gift as is included in the gross estate * * *."
[4] See footnote 3, supra. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542063/ | 949 A.2d 286 (2008)
401 N.J. Super. 111
In the Matter of the COMMITMENT OF T.J.
No. A-3179-06T1
Superior Court of New Jersey, Appellate Division.
Argued April 30, 2008.
Decided June 17, 2008.
*287 Lorraine M. Gormley, Assistant Deputy Public Advocate, argued the cause for appellant, T.J. (Ronald K. Chen, Public Advocate, attorney; Ms. Gormley, on the brief).
Thomas M. Bachman, Assistant Essex County Counsel, argued the cause for respondent, State of New Jersey, County of Essex (Harry J. Del Plato, Essex County Counsel, attorney; Mr. Bachman, of counsel and on the brief).
Before Judges CUFF[1] LISA and LIHOTZ.
*288 The opinion of the court was delivered by
LIHOTZ, J.A.D.
We examine the propriety of two orders requiring the conditional extension pending placement (CEPP) of appellant's involuntary civil commitment to the Trenton Psychiatric Hospital (TPH), pursuant to Rule 4:74-7(g). We conclude the trial court failed to make the proper legal findings to continue appellant's hospitalization. Accordingly, the orders dated January 11 and February 8, 2007, improperly infringed upon his constitutionally guaranteed liberty rights and must be reversed.
On April 18, 2006, appellant, T.J. was temporarily, civilly committed to the Ann Klein Forensic Hospital, West Trenton. He was transferred to the hospital from South Woods State Prison. T.J.'s incarceration was imposed following conviction for robbery and aggravated sexual assault, during which he blinded the victim. T.J. was never classified as a sexually violent predator (SVP), subject to civil commitment under N.J.S.A. 30:4-27.24 to -27.38. T.J. had a history of drug abuse. His civil commitment followed episodes in prison, which resulted in a diagnosis of chronic schizophrenia, paranoid type. While civilly confined, T.J. completed the maximum term of his criminal sentence.
On September 7, 2006, the trial court did not continue T.J.'s civil commitment but placed him on CEPP. R. 4:74-7(g). The judge also ordered the Special Status Patient Review Committee (SSPRC),[2] an administrative hospital committee, to determine the level of allowable privileges and the nature of any necessary restrictions due to T.J.'s mental health status and Megan's Law[3] conviction. T.J. was then transferred to the less restrictive Drake Building (Level 2 privileges) at TPH.
The court reviewed T.J.'s CEPP status on October 5 and November 2, 2006. Richard Povacz, T.J.'s treating social worker, submitted a request to the SSPRC in the hope it would approve T.J.'s transfer to a residence with Level 3 privileges. This would enable T.J. to enjoy home visits, grounds privileges, and supervised work opportunities. T.J.'s transfer to a less restrictive environment stalled while awaiting SSPRC action and an available placement.[4]
On January 4, 2007, T.J. was interviewed and authorized for placement in the Discharge Oriented Program (DOP). The DOP offered counseling and coping skills to ease a participant's return to the community. However, T.J.'s admission was subject to SSPRC approval.
At the time of the January 11, 2007 review hearing, T.J. remained housed in the Drake Building. The court had not received a report from the SSPRC.
Povacz again expressed his support for T.J.'s transfer from the Drake Building to a less restrictive Level 3 environment because he "had never been any problem," was always compliant with all medications, and was "very helpful." Povacz acknowledged *289 a current placement was not "available" because the SSPRC had not held a review hearing. Povacz believed a DOP bed was available, but transfer could not occur without SSPRC authorization.
Also, Povacz had submitted a discharge plan for T.J.'s release the prior week and it too, awaited SSPRC approval. The ultimate discharge plan for T.J. provided that he would reside with his father and step-mother in Newark.
T.J. expressed his frustration with being housed in a restrictive facility despite his progress and demonstrated ability to participate in extended privileges. T.J. requested immediate discharge to his parents' home with the understanding that he would continue his medication, attend any recommended after-care programs, schedule psychiatric care, and counseling.
L.W., T.J.'s father, wanted T.J. to be discharged and stated his son was "welcome" to reside in his home upon discharge. He stated he and his wife were prepared to provide daily supervision and assure T.J.'s attendance at his programs.
A review of the trial judge's determination on January 11, 2007, reveals her concern and caution exercised for T.J.'s benefit. The judge commented on T.J.'s Megan's Law status, which "was something that should be dealt with on a very cautionary basis" and "was complicated by the fact that [T.J.] had an extensive drug problem and certainly his use of drugs exacerbated the antisocial behavior that was at the root of these charges to begin with." The judge's aim was to prevent recidivism:
So I think it's very important, I've seen the revolving door too many times and I want [T.J.] to have every benefit because I really think, as I know that Mr. Povacz believes that this gentleman can succeed where we've seen all too many fail. But what we do know is that they need to have help and that help has to be in place prior to the discharge.
. . . .
[W]hat I was upset about was that it has been a long period of time before he has . . . been moved to a less restrictive setting, that's my concern. And . . . I'm not satisfied that [T.J.] is ready and that appropriate measures are in place in the community and the level of support that would protect the community as well as to assist [T.J.] is present as well as the SSPRC who essentially that's basically what they do is evaluate that.
I haven't heard from the SSPRC but just based upon the testimony that I have, and determine his level of restriction, the goal here is to discharge. The issue is when. Because of the Megan's law, there is an SSPRC and that's why we have them. Those are the experts. I want to hear from them and I want to hear from them soon.
So I am basically going to continue [T.J.'s] CEPP in light of all of those issues, I don't find at this point in time that there is an appropriate less restrictive setting for him in place until I have more information, more specific information.
And in light of his status and in light of his prior offenses . . . I certainly find that without that support system and without that level of supervision as well as support, that he could be, and I find by clear and convincing, that he could be a danger to others based upon information or to himself, but based upon others, based upon the prior criminal record and history of problems with drug abuse.
Although the judge denied T.J.'s request for discharge, she suggested he should be transferred to the DOP after SSPRC approval. CEPP status was continued for *290 two weeks pending a report from the SSPRC.
When the matter was relisted on January 25, 2007, Povacz advised the SSPRC had accepted the treatment team's recommendation for T.J.'s transfer to the DOP. The judge emphasized the importance of T.J.'s participation in the DOP to aid his adjustment upon release because he had been institutionalized for almost fourteen years.
The next review hearing was held on February 8, 2007. T.J. remained in the Drake Building and had not been transferred to the DOP because no beds were available. Povacz explained he was not able to arrange after-care planning because T.J. was not discharged. T.J., distressed by the inaction, reiterated his request to be discharged to reside in his father's home. L.W. acknowledged T.J. would be living with him and asked for his son to be discharged.
The trial judge again denied the discharge request, but authorized a four-hour offsite visit between T.J. and his parents. The judge's continued caution was expressed in her determination:
[T]here are three issues that I'm looking at. One issue is the fact of the Megan['s Law] status. Two . . . is the fact that there had been a prior history of substance abuse, for which [T.J.] successfully completed [a] MICA program and I commend you for that.
That's not to say that . . . you['ll] never go back there again because as we know, it's an ongoing situation. You have to fight every day. And the third, is the adjustment from being in an institution to being out in the outside world. [A]s well as your getting back to know your family and them getting back to know you and the whole thing.
But in my mind at this point in time, I think with all of those factors in mind, that I would be looking to a short period of conditional discharge but I do want to have things in place for that. And I would like to see how everything goes with the brief visits as well as I'm sure the family members would like to see how everything goes with the brief visits.
And in light of that, I think you are presently, and you have continued to be, and moved along with the least restrictive setting, every time you've come back, everyone is advocating for you to go to a least restrictive setting. . . .
So we're talking less than a month is what my hope is if we can get, you have to have a program in place. I want to have other things, that probably the social worker wants, at least to follow up with his Megan['s Law] status as well as with substance abuse. So I want all those things in place because you have the rest of your life and I want it to be great.
And yes, we are being cautious. Yes, you are being extremely patient. But I think with all those things in terms of CEPP that you have and everyone has been advocating for the least restrictive environment, and I would anticipate that hopefully your brief visits go well. You'll be conditionally discharged within a month.
The court's prediction of conditional discharge within one month did not occur. After the March 8, 2007 review, CEPP was continued until T.J.'s conditional release was granted on April 12, 2007. The terms of conditional discharged included: (i) compliance with prescribed medications; (ii) attendance at a five-day program at the Social Club House in Springfield, including a MICA counseling program and psychiatric outpatient treatment; (iii) attendance at a sex offender treatment program at the *291 Irvington Counseling Center along with monthly group sessions; (iv) abstention from substance abuse; (v) Megan's Law registration as required by N.J.S.A. 2C:7-2.1.
T.J. appeals from the January 11, 2007 and February 8, 2007 orders continuing his involuntary hospitalization. He argues the court misapplied its discretion by ordering CEPP in the absence of clear and convincing evidence that he represented a danger to himself, others or property. See N.J.S.A. 30:4-27.2(h) and (i).
Although T.J. is no longer involuntarily committed, his appeal is not mooted by his release. First, "when the patient remains liable for his or her hospital bill . . . a finding in the patient's favor will entitle the patient to a credit for any period of illegal commitment." In re Commitment of B.L., 346 N.J.Super. 285, 292, 787 A.2d 928 (App.Div.2002). Second, even if appellant had no liability for hospital costs, "we should nevertheless decide the issue because it implicates a committee's constitutional right to liberty. . . ." In re Commitment of G.G., 272 N.J.Super. 597, 600 n. 1, 640 A.2d 1156 (App.Div.1994).
The procedures to obtain an order for the involuntary civil commitment of a mentally ill person, set forth in N.J.S.A. 30:4-27.1 to -27.23 and Rule 4:74-7, are designed to balance a citizen's basic right to liberty with the State's police power to protect the community and its parens patriae power to care for citizens who are unable to care for themselves. N.J.S.A. 30:4-27.1(b); see Addington v. Texas, 441 U.S. 418, 426, 99 S.Ct. 1804, 1809, 60 L.Ed.2d 323, 330-31 (1979). The overall objective is to provide said persons with "inpatient treatment and rehabilitation services in accordance with the highest professional standards and which will enable those hospitalized persons to return to their community as soon as it is clinically appropriate." N.J.S.A. 30:4-27.1(c).
For a court to continue its initial commitment order, the State must show by clear and convincing evidence that a committee is
in need of continued involuntary commitment by reason of the fact that (1) the patient is mentally ill, (2) mental illness causes the patient to be dangerous to self or dangerous to others or property as defined in N.J.S.A. 30:4-27.2h and -.2i, (3) the patient is unwilling to be admitted to a facility for voluntary care, and (4) the patient needs care at a short-term care or psychiatric facility or special psychiatric hospital because other services are not appropriate or available to meet the patient's mental health care needs.
[R. 4:74-7(f)(1).]
"The civil commitment process must be narrowly circumscribed because of the extraordinary degree of state control it exerts over a citizen's autonomy." In re S.L., 94 N.J. 128, 139, 462 A.2d 1252 (1983). "[O]ur Legislature and the New Jersey Supreme Court have promulgated statutes and rules to ensure that no person is involuntarily committed to a psychiatric institution without having been afforded procedural and substantive due process." In re Commitment of Raymond S., 263 N.J.Super. 428, 431, 623 A.2d 249 (App. Div.1993); In re Commitment of W.Z., 173 N.J. 109, 126, 801 A.2d 205 (2002).
Understanding we afford deference to the trial court's supportable findings, In re Commitment of J.P., 339 N.J.Super. 443, 459, 772 A.2d 54 (App.Div.2001) (citing State v. Fields, 77 N.J. 282, 311, 390 A.2d 574 (1978)), we have not hesitated to reverse involuntary commitments when the record failed to contain clear and convincing evidence of "a substantial risk of dangerous conduct within the reasonably foreseeable *292 future." S.L., supra, 94 N.J. at 138, 462 A.2d 1252 (quoting State v. Krol, 68 N.J. 236, 260, 344 A.2d 289 (1975)); In re Commitment of J.R., 390 N.J.Super. 523, 530, 916 A.2d 463 (App.Div.2007); In re Commitment of M.C., 385 N.J.Super. 151, 162, 896 A.2d 495 (App.Div.2006); B.L., supra, 346 N.J.Super. at 304, 787 A.2d 928; Raymond S., supra, 263 N.J.Super. at 433-34, 623 A.2d 249.
Here, we do not examine T.J.'s initial commitment, which presumably complied with N.J.S.A. 30:4-27.10(c) and (h), the statute that addresses the involuntary commitment of an inmate in need of care who is scheduled for release upon expiration of a maximum term of incarceration. T.J.'s challenge is directed to the continued hospitalization pursuant to CEPP, despite the court's finding that he did not demonstrate dangerousness.
Further, we do not take issue with the court's initial September 7, 2007 order for CEPP that requested review of T.J.'s status by the SSPRC. We have "declared that `the outright release of the committee into the community without the use of any intermediate levels of restraint would normally constitute a manifestly mistaken exercise of the reviewing court's discretion.'" In re Civil Commitment of E.D., 183 N.J. 536, 551, 874 A.2d 1075 (2005) (quoting Fields, supra, 77 N.J. at 302, 390 A.2d 574). We conclude that determination was appropriate after consideration of the presented facts and circumstances. However, when faced with the SSPRC's inexplicable four-month delay in providing any review of T.J.'s needs, the trial court continued the use of CEPP, instead of considering discharge, stating T.J. must first advance "through the levels" to be "a success story." The question for our review is whether CEPP was properly employed in this instance.
In the court's discretion, CEEP may be used, in discrete circumstances, to continue hospitalization of a committee
[i]f a patient otherwise entitled to discharge cannot be immediately discharged due to the unavailability of an appropriate placement, the court shall enter an order conditionally extending the patient's hospitalization and scheduling a placement review hearing within 60 days thereafter. If the patient is not sooner discharged, a second placement review hearing shall be held no later than six months after the initial placement review hearing and subsequently at no greater than six-month intervals.
[R. 4:74-7(h)(2).]
The Supreme Court first addressed whether the State could retain a mental health patient who qualified for discharge, but "who could not survive independently outside the institution without some care and supervision," in S.L., supra, 94 N.J. at 132, 462 A.2d 1252. Many of the patients in S.L. had been psychiatrically hospitalized for decades. Id. at 131, 462 A.2d 1252. Although mentally ill, they were not dangerous and were too ill or infirm to provide for their daily needs. Ibid. Thus, they were incapable of survival without continuous post-release care. Ibid. The Court's determination addressed the State's obligation to provide further care for these helpless patients, rather than to merely "cast them adrift into the community." Id. at 140, 462 A.2d 1252. The use of CEPP was approved to respond to the special needs of these special patients. Ibid. The Court held that the continued confinement on a provisional or conditional basis, done "of necessity," was a proper exercise of the State's parens patriae authority for the well-being of a committee. Ibid.
The Court was well aware that the State's use of CEPP "in the process of *293 arranging for appropriate placement" exerted "substantial control over the individual's life and liberty." Ibid. Therefore, this continued curtailment of an individual's liberty interest would only result upon a finding that the committee is "incapable of survival on [his] own." G.G., supra, 272 N.J.Super. at 604, 640 A.2d 1156.
A less restrictive means of assuring proper continued care without the same liberty infringements imposed by hospitalization is a conditional discharge, guided by N.J.S.A. 30:4-27.15(c). The statute provides:
(1) The court may discharge the patient subject to conditions, if the court finds that the person does not need involuntary or continued involuntary commitment and the court finds:
(a) that the patient's history indicates a high risk of rehospitalization because of the patient's failure to comply with discharge plans; or
(b) that there is substantial likelihood that by reason of mental illness the patient will be dangerous to himself, others or property if the patient does not receive other appropriate and available services that render involuntary commitment unnecessary.
(2) Conditions imposed pursuant to this section shall include those recommended by the facility and mental health agency staff and developed with the participation of the patient. Conditions imposed on the patient shall be specific and their duration shall not exceed 90 days unless the court determines . . . that the conditions should be imposed for a longer period.
Respondent County of Essex (Essex) argues T.J.'s past history, which included criminal behavior, drug use, and commission of a Megan's Law offense, necessitated a gradual change in restrictions, not conditional discharge. Citing Fields, supra, Essex maintains "even where the committee's condition shows marked improvement, only the most extraordinary case would justify modification in any manner other than by a gradual de[-]escalation of the restraints upon the committee's liberty." 77 N.J. at 303, 390 A.2d 574. Further, Essex contends the court properly maintained CEPP while awaiting the expertise of the SSPRC to recommend an appropriate placement. Unlike the patients in other reported cases that examine the use of CEPP, Essex states T.J. required specialized placements to support needs in addition to mental health and the long-term effects of institutionalization. Thus, Essex maintains this case presents unique circumstances that mandated the use of CEPP until an appropriate placement was solidified.
We agree with Essex there are no reported cases that squarely address the use of CEPP for a mental health patient who has committed a violent crime and a sex offense, but who is not a SVP. However, we disagree that prior pronouncements on the restrictive use of CEPP do not apply to this instance. We conclude the State's burden to justify the continued involuntary commitment or the use of a less restrictive curtailment of individual liberty through CEPP is no different for T.J., whose mental illness contributed to past violent criminal behavior, including a sexual assault, than it is for any other patient who has not committed a violent crime or sexual offense. Fields, supra, 77 N.J. at 293-94, 390 A.2d 574; Krol, supra, 68 N.J. at 250, 344 A.2d 289.
The Supreme Court unambiguously stated the use of CEPP is justified when immediate discharge cannot be accomplished "due to the unavailability of an appropriate placement." R. 4:74-7. Thus, "it becomes the task of the reviewing judge [] to `mold' an appropriate order *294 based upon his [or her] evaluation of the level of restraints dictated by the committee's present condition." Fields, supra, 77 N.J. at 302, 390 A.2d 574. Due process requires meaningful review of the individual's need to assure the least restrictive curtailment of liberty while properly protecting the public.
It is clear the trial judge sought to rely on the SSPRC's report to assess T.J.'s "appropriate placement" upon discharge.
An "appropriate placement" referred to in the Rule and in S.L. [supra,] is a placement in a facility that will provide continuing support and assistance through the day to mentally ill people who are "incapable of survival on their own." The Court described such a place as a "facility" that would provide "the needed level of care in the least restrictive manner[.]" [94 N.J.] at 140-41, 462 A.2d 1252.
An "appropriate placement" does not refer to a community mental health agency that provides periodic follow-up care, such as a step program or the administration of medicine, no matter how important that care may be to the committee's well-being.
[G.G., supra, 272 N.J.Super. at 604-05, 640 A.2d 1156.]
Although T.J.'s mental health and criminal history posed a specialized need for post-discharge aftercare, there is no evidence these needs warranted admission to a residential facility. Rather, as demonstrated by the order of conditional release, all that was required was outpatient counseling programs for mental health, sex offender treatment, and prevention of drug and alcohol abuse.
T.J. had available living arrangements outside the hospital. L.W. and his wife arranged to provide daily supervision to assure T.J.'s successful reintegration to society. Regardless of the court's expressed desire for T.J. to achieve a smooth adjustment and transition into the community, no evidence was presented to sustain a finding that he could not properly survive or function living in the community with his father under parental supervision. The standard established in S.L., that the committee would be "incapable of survival on [his] own," was not met. S.L., supra, 94 N.J. at 140, 462 A.2d 1252.
So too, the trial court's fear of T.J.'s potential relapse without specific aftercare placements designed by the SSPRC, however well-intentioned, is legally insufficient to continue his hospitalization. J.R., supra, 390 N.J.Super. at 530, 916 A.2d 463. The trial judge abrogated the responsibility to perform an independent check on whether confinement was appropriate when faced with inaction by the SSPRC. In re Commitment of D.M., 313 N.J.Super. 449, 454, 712 A.2d 1277 (App.Div.1998).
We have stressed that "CEPP is not intended as a means for extending an involuntary commitment simply because the hospital has not yet arranged for the periodic follow-up care of a patient not found to be a danger to self, others or property." [G.G., supra, 272 N.J.Super.] at 605, 640 A.2d 1156]. And, we have cautioned that use of "that erroneous approach . . . devalue[s] [the patient's] constitutional right to liberty." Ibid. We reaffirmed those principles in B.L., supra, 346 N.J.Super. at 308, 787 A.2d 928. Thus, CEPP is not a fallback option when the [S]tate cannot implement a discharge plan within forty-eight hours, and CEPP is not a means through which the judge may delay a conditional release.
[M.C., supra, 385 N.J.Super. at 162, 896 A.2d 495.]
*295 We agree with T.J. that the court, although motivated to assure his absolute "success," misapplied its discretion when continuing CEPP. At the January 11, 2007 review hearing, T.J. fulfilled all requisites for discharge: he completed his maximum criminal sentence; he was properly medicated and fully compliant and no longer suffered the problems posed by his mental illness; he attended all therapy and followed any recommendations; he demonstrated no disruptive, violent or aberrant behaviors; and he was patient, cooperative, and helpful despite his unwavering desire to be released. T.J. recognized his need for and responsibility to attend continued psychotherapy, abstention from drugs and alcohol, and the requirements of Megan's Law registration. He exceeded all expectations as he remarkably progressed in the programs he was permitted to attend. Both T.J. and his parents demonstrated an awareness of and a desire to implement appropriate aftercare programs.
The SSPRC administrative delay of almost five months rendered impotent the recommendation for T.J.'s less restrictive confinement, his gradual integration to the community, and the implementation of a discharge plan. T.J.'s extended confinement in the Drake Building was not justified and resulted from convenience because of the inefficiencies of the SSPRC.
The trial court's critical finding to justify CEPP that appropriate measures in the community were not in place at "a level of support that would protect the community as well as to assist T.J." cannot be supported by adequate, substantial and credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484, 323 A.2d 495 (1974). An appropriate placement in his father's home was available and community adjustment certainly was not fulfilled by retention in the Drake Building. Conditional release should have been used to provide a permissible means for requiring continued medication compliance, Megan's Law registration, substance abuse abstinence and counseling, and continued psychotherapy.
Reversed.
NOTES
[1] Judge Cuff did not participate in oral argument. However, with the consent of counsel, she has joined in this opinion. R. 2:13-2(b).
[2] The SSPRC provides review of recommendations made by a patient's treatment team balancing the patient's need to "successfully participate in treatment and rehabilitative programs, while maintaining a safe and secure therapeutic milieu for patients and staff. . . ." N.J.A.C. 10:36-1.1.
[3] N.J.S.A. 2C:7-1 to -11.
[4] The record regarding SSPRC action is unclear. Following the September 2006 review hearing, but prior to the January 11, 2007 hearing, references suggest the SSPRC modified T.J.'s status to Level 2. SSPRC modification to Level 3 and approval for the DOP at the TPH Lincoln Complex did not occur until sometime after the January 11, 2007 hearing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542075/ | 115 F.2d 627 (1940)
EX-CELL-O CORPORATION
v.
CITY OF CHICAGO et al. AMERICAN CAN CO.
v.
SAME.
Nos. 7237, 7334.
Circuit Court of Appeals, Seventh Circuit.
November 14, 1940.
*628 Owen Rall, of Chicago, Ill., for appellant Ex-Cell-O Corp.
Andrew D. Collins, of Chicago, Ill., for appellant American Can Co.
Barnett Hodes, Corp. Counsel, Walter V. Schaefer and Chas. P. Horan, Assts. Corp. Counsel, and Alfred Kamin, all of Chicago, Ill., for appellees.
Before EVANS and TREANOR, Circuit Judges, and LINDLEY, District Judge.
LINDLEY, District Judge.
In 7237 plaintiff is a manufacturer of patented machines for the production of paper milk bottles. It licenses certain milk distributors in Chicago to make and sell such bottles and collects valuable license fees therefor dependent upon the number of bottles made and sold. In 7334, plaintiff is a manufacturer of similar bottles which it sells for profit to dairy companies in Chicago. In each complaint, plaintiff sought to obtain a declaratory judgment that the milk ordinance of the City of Chicago does not prohibit the use of paper milk containers, or if it does, that it is invalid. The District Court held that neither plaintiff had any such direct interest in the purpose of the suits as to enable it to maintain the action. From the resulting judgment dismissing the complaint, each plaintiff appeals.
The general rule controlling the decision in this cause is announced by the Supreme Court in Massachusetts v. Mellon, 262 U.S. 447, 43 S. Ct. 597, 601, 67 L. Ed. 1078, as follows: "The party who invokes the power must be able to show, not only that the statute is invalid, but that he has sustained or is immediately in danger of sustaining some direct injury as the result of its enforcement, and not merely *629 that he suffers in some indefinite way in common with people generally."
The immediate question, therefore, is whether either plaintiff is sustaining or in danger of sustaining some direct injury. It is obvious that each plaintiff has an ultimate pecuniary interest in the practical results of the alleged invalid ordinance or the averred erroneous interpretation of the ordinance by the municipal authorities. Is that interest direct, growing out of direct injury within the meaning of the Supreme Court's announcement? As to this, the parties are in sad disagreement.
The courts may, at the suit of proper parties, determine, whether specific acts are unconstitutional or invalid under the law. They may, under similar circumstances, determine whether actions of administrative officials in interpretation and administration of legislative acts, violate the constitutional or legal rights of the suitor. In either instance the power of the court is the same, namely: To determine whether constitutional provision or legislative enactment is transcended either by the legislative act itself or by the administration thereof. This power of judicial determination is delicate in character, one to be exercised with caution and care, for it may result in disapproval of acts of the legislative department or of actions of the executive department, both co-ordinate branches of the government. This care, this caution has been proverbially observed by the courts, lest in their zeal to prevent what they deem unjust, they exceed their judicial authority, assert an unwarranted superiority over their co-ordinate governmental branches and invade fields of policy preserved to the legislative arm or the realm of administrative discretion lodged in the executive branch. Obviously such determination may not be had at the suit of any and all members of the public or in an ex parte proceeding. It can be secured only at the suit of one directly and not remotely interested.
In the present case the American Can Company is not engaged in the distribution of milk. It manufactures and sells paper bottles. The ordinance complained of or the administrative acts of defendants in interpretation and administration thereof, in no wise forbid such manufacture and sale. The act, as interpreted by defendants, is asserted by them to forbid the use of paper milk bottles in Chicago. Defendant is free to manufacture and to sell such bottles wherever it may desire, even in Chicago. Obviously, few, if any, persons will purchase them for use there, but that result we deem incidental, consequential and indirect. Were plaintiff forbidden to manufacture and sell paper milk bottles in Chicago, the effect upon its business would be direct and inevitable.
Thus it is apparent that inevitable financial pecuniary damage is not the test of the sufficiency of plaintiff's interest. Otherwise the right to sue might be extended indefinitely to parties far removed, such as workmen in plaintiff's factories whose wages are reduced or lost because of lack of realization of profits by their employer. Just as clearly, privity of contract is not essential, for defendants are liable for their torts which directly affect the plaintiff, and for breach of their legal duties in that respect, defendants are liable in damages. Rather the whole question is whether the damage claimed springs directly to plaintiff from defendants. If it is incidental, if it is indirect, defendants may not invoke the court's jurisdiction. In L'Hote v. City of New Orleans, 177 U.S. 587, 20 S. Ct. 788, 793, 44 L. Ed. 899, the question presented was whether an ordinance of New Orleans prescribing limits outside of which no woman of lewd character should dwell deprived plaintiffs of their property rights. Plaintiffs owned real estate adjacent to the limited area and alleged that the enforcement of the ordinance would wholly destroy or substantially depreciate the value of their estate. The court held that their property was not directly touched by the legislative action but was affected only in an incidental and consequential way, saying: "Here the ordinance in no manner touched the property of the plaintiffs. It subjected that property to no burden, it cast no duty or restraint upon it, and only in an indirect way can it be said that its pecuniary value was affected by this ordinance. * * * Under these circumstances we are of the opinion that the ordinance in question is not one of which the plaintiffs in error can complain."
In Sproles v. Binford, D.C., 52 F.2d 730, 733, a court of three judges was convened at the suit of the Wichita Falls Motor Company et al. to determine the validity of a state statute which limited the size and weight of motor vehicles operated on the public highways of the state. The Wichita Falls Company was engaged in *630 the manufacture and sale of motor vehicles of the prohibited size. By the act their market in Texas was destroyed, an effect similar to that upon plaintiff in the present instance. The court said: "The Wichita Falls Motor Company is not using the highways. The basis of its complaint is that it is now, and has been for many years, engaged in the manufacture and sale (frequently on credit) of a (and yet has many on hand), which, uncertain type or certain types of vehicles der the act, it alleges cannot be used on the public highways of Texas, and it therefore cannot sell them, nor collect for those already sold, and that its business will be wrecked by the enforcement of this act. It relies upon Pierce v. Society of the Sisters, 268 U.S. [510] 532, 45 S. Ct. 571, 69 L.Ed. [1070] 1077, 39 A.L.R. 468, and other similar cases. Such cases, however, are, we think, distinguishable from the case here presented by the motor company. We think the injury alleged by it is too remote to bring it within the rule of such cases."
Other instances of judicial refusal to entertain suits at the instance of parties similarly situated are Georgia Music Operators Association v. City of Atlanta, 183 Ga. 794, 190 S.E. 32; Davis & Farnum Mfg. Co. v. Los Angeles, 189 U.S. 207, 23 S. Ct. 498, 47 L. Ed. 778; Connelly v. Department of Agriculture & Markets et al., 162 Misc. 73, 293 N.Y.S. 711; Meyer Const. Co. v. Corbett, D.C., 7 F. Supp. 616; Arkansas Power & Light Co. v. West Memphis Power & Water Co., 184 Ark. 206, 41 S.W.2d 755; Danciger et al. v. American Express Co., 247 Mo. 209, 152 S.W. 302; Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453, 15 S.W.2d 280; Amalgamated O. G. Corp. v. City and County of San Francisco, D. C., 263 F. 617.
In Davis & Farnum Mfg. Co. v. Los Angeles, 189 U.S. 207, 23 S. Ct. 498, 501, 47 L. Ed. 778, the court held that plaintiff, a subcontractor with a gas company to erect a gas works upon premises pursuant to a permit granted the landowner for the erection of the gas works, could not, though he had partially constructed the tank, complain of an ordinance subsequently passed which forbade building gas works in the area where this was located. The court said:
"The plaintiff in this case stands practically in the position of one who seeks to take advantage of the unconstitutionality of a law in which it has only an indirect interest, and by the enforcement of which it has suffered no legal injury. In this it stands much in the position of the plaintiff in Tyler v. Judges of the Court of Registration, 179 U.S. 405, 21 S. Ct. 206, 45 L. Ed. 252, and in Turpin v. Lemon, 187 U.S. 51, 23 S. Ct. 20 [47 L. Ed. 70]; [In re] Wellington, 16 Pick. [Mass.] 87, 96, 26 Am.Dec. 631; Sinclair v. Jackson, 8 Cow. [N.Y.] 543; Jones v. Black, 48 Ala. 540; Shehane v. Bailey, 110 Ala. 308, 20 So. 359; Dejarnett v. Haynes, 23 Miss. 600. * * *
"As the appellant has shown no legal interest in this litigation, and no lack of a complete and adequate remedy at law, it results that the bill was properly dismissed, and the decree of the court below is therefore affirmed."
Where plaintiff complained that the statute arbitrarily deprived him of his rights because it required trucks carrying coal entering New York to proceed to the nearest licensed scales to be weighed and that he had been thereby deprived of his business, the court said, in Connelly v. Department of Agriculture & Markets et al., 162 Misc. 73, 293 N.Y.S. 711, 717: "Unquestionably the requirement of the statute that the driver of a truck conveying anthracite upon crossing the state line shall proceed to the nearest licensed weighmaster's scales, has resulted detrimentally to plaintiff's business. * * * The statute in no way restricts, restrains, or changes the rights or authority of the plaintiff as a licensed weighmaster. By a provision which does not directly affect the plaintiff, and of which there may be the gravest doubt as to its validity, business of the plaintiff has been diverted. He has sustained a loss of patronage, not because he has been deprived of any right vested in him, not because he has been restricted in the exercise of the privileges his license as a weighmaster entitles him to enjoy, but because of the enactment of a requirement resting upon individuals engaged in a business with which he is not directly connected or concerned. The plaintiff is in the position of one who seeks a determination that a statute is unconstitutional, without showing that his rights or privileges are restricted, curtailed, destroyed, or directly affected by the provisions of such statute."
*631 In Meyer Const. Co. v. Corbett, D.C., 7 F. Supp. 616, plaintiffs who were consumers sought to restrain the collection of a sales tax in California which was imposed upon retailers but under the statute was collected by the retailers from the consumers. The court dismissed the petition because the plaintiffs were without right to maintain the suit.
The application of the principles announced, if correct, is decisive of plaintiff's rights. Here plaintiff is not using milk bottles in the distribution of milk in Chicago. It is manufacturing and selling them. Its market in Chicago, by the actions complained of, may be removed and destroyed. Yet it may proceed to manufacture and sell wherever it desires including Chicago. It is only indirectly and remotely interested and the damage accruing to it is only remotely consequential and incidental. Christman v. United States, 7 Cir., 74 F.2d 112, at page 114.
Plaintiff relies upon Savage v. Jones, 225 U.S. 501, 32 S. Ct. 715, 56 L. Ed. 1182. In our opinion the decision is not applicable for the reason that the jurisdiction of the court was invoked and sustained because of unwarranted interference with interstate commerce in the original package and the statute operated upon plaintiff directly as it required him to file a certificate and to affix a prescribed label. His interest was, therefore, direct. Station WBT v. Poulnot, D.C., 46 F.2d 671, likewise, has to do with the right of plaintiff to engage freely in interstate commerce. In Buchanan v. Warley, 245 U.S. 60, 38 S. Ct. 16, 17, 62 L. Ed. 149, L.R.A. 1918C, 210, Ann.Cas.1918A, 1201, plaintiff sold to a colored man real estate in a section where it was illegal for a colored person to occupy land, and, except for the ordinance, plaintiff was entitled to specific performance. The statute was a bar to the relief. He was directly interested in his right to sell property. The court said: "The right of the plaintiff in error to sell his property was directly involved and necessarily impaired because it was held in effect that he could not sell the lot to a person of color who was willing and ready to acquire the property, and had obligated himself to take it."
Similar cases of direct interest are to be found in other cases cited by plaintiff, such as Callaghan & Co. v. Smith, 304 Ill. 532, 136 N.E. 748, where the statute directly invaded plaintiff's business of publishing statutes by an unconstitutional grant of special privilege to its competitor; Dugan v. Bridges, D.C., 16 F. Supp. 694, where plaintiff, if it did not comply with the statute, incurred penalties, and Pierce v. Society of the Sisters, 268 U.S. 510, 45 S. Ct. 571, 69 L. Ed. 1070, 39 A.L.R. 468, where plaintiffs, proprietors of schools, sued to enjoin enforcement of a statute which compelled children to be sent to public schools. The court held that plaintiffs were invoking protection against arbitrary, unreasonable and unlawful interference with plaintiffs' business, resulting in eventual destruction of property rights.
We doubt that there is any real distinction between the suit of the holder of a monopoly franchise for public utility purposes against the alleged illegal acts of the licensor in granting another franchise in violation of the terms of plaintiff's and the suit of plaintiff in the present instance. An example of the former is Arkansas Power & Light Co. v. West Memphis Power & Water Co., 184 Ark. 206, 41 S.W.2d 755. It is immaterial that public utilities enjoy a monopoly granted by special franchise. The question decided in the case cited was whether plaintiff, which had spent much money in the pursuance of its franchise, had a right to sue. The decision was in the negative. So here plaintiff is complaining of an alleged wrongful exercise of the police powers of the state and though it has spent some money in making paper bottles, its interest in the alleged invalidity of the actions complained of is even more remote than that of the utility company holding an unlimited franchise. We agree with the District Court's conclusion that plaintiff was without right to sustain the action.
In 7237 Ex-Cell-O Corporation is even more remotely interested. It is one step further removed from the object of the legislation, for it is the manufacturer and licensor of machines built to manufacture paper milk bottles which it has leased to distributors in the City of Chicago. It follows that our conclusion with regard to the rights of the American Can Company must be the same as to those of the Ex-Cell-O Corporation.
The judgments of the District Court are affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542356/ | 122 F.2d 132 (1941)
FIELDCREST DAIRIES, Inc.,
v.
CITY OF CHICAGO et al.
No. 7502.
Circuit Court of Appeals, Seventh Circuit.
August 4, 1941.
Writ of Certiorari Granted November 24, 1941.
*133 Barnet Hodes, Alexander J. Resa, J. Herzl Segal, L. Louis Karton, and James A. Velde, all of Chicago, Ill., for appellants.
Fred A. Gariepy, Owen Rall, and John Spalding, all of Chicago, Ill., for appellees.
Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.
Writ of Certiorari Granted November 24, 1941. See ___ U.S. ___, 62 S. Ct. 301, 86 L.Ed. ___.
MAJOR, Circuit Judge.
This appeal is from a declaratory judgment decree in favor of plaintiff and awarding an injunction against defendants, entered October 23, 1940. The suit *134 was commenced by a bill of complaint, filed February 2, 1939, which sought a judicial declaration that a milk ordinance of the City of Chicago, requiring milk to be delivered in "standard milk bottles," did not prohibit the sale of milk in plaintiff's paper containers, or that, if it does, the ordinance is invalid. An injunction was also sought restraining the defendants from interfering with the sale of milk in such containers. A hearing was had before a master who recommended a denial of the relief sought. The court sustained objections to the master's report and entered the decree in controversy.
Thus, the issues for decision are: (1) Does the ordinance forbid the delivery of milk in plaintiff's paper containers, and (2) if so, is the ordinance valid. Under the latter issue it is contended that any power which the City Council of the City of Chicago might have had to prohibit the sale of milk in such containers was withdrawn by an Act of the Illinois Legislature enacted in 1939, and, irrespective of this, that the ordinance was and is so unreasonable and arbitrary, both as a matter of law and fact, as to make it invalid.
The Master decided all issues in favor of the defendants, while the court concluded that plaintiff's container was a standard milk bottle within the meaning of the ordinance, and further concluded that any other construction of the ordinance would render it void.
Before discussing the merits of the issues presented, it is appropriate to state that the master made a number of purported findings of fact which, in part at least, were not accepted by the court. The defendants contend that the court was obligated under Rule 53(e) (2) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, to accept such findings "unless clearly erroneous." We think it is unnecessary to discuss to what extent, if any, this rule should be given application for the reasons: (1) The purported findings are in the nature of conclusions rather than findings of fact, and (2) for the more important reason that we have reached the conclusion that the cause should be disposed of on a legal rather than factual basis.
On January 4, 1935, there was enacted by the City Council of the City of Chicago, an ordinance regulating the production and distribution of milk in the city. Shortly thereafter there was promulgated by the Chicago Board of Health, regulations in conformity therewith. The provision of the ordinance now under attack is the third sentence of Section 3094: "Any milk or milk products sold in quantities of less than one gallon shall be delivered in standard milk bottles; provided, however, that nothing herein contained shall be construed to prohibit hotels, soda fountains, restaurants, and similar establishments from dispensing milk or milk products from sanitary dispensers approved by the board of health."
Prior to the institution of suit, plaintiff repeatedly sought from the Chicago Board of Health a permit to retail milk in the city which was denied on the ground that the container in which plaintiff proposed to deliver its milk was not a "standard milk bottle" within the meaning of the ordinance. Thus, the first issue in dispute revolves solely around the interpretation of those words as used in the ordinance. It is the contention of the plaintiff, sustained by the lower court, that such words should be construed to include its paper container, while the defendants contend that they should be construed to include glass bottles only.
Any detailed description of plaintiff's business, or the process employed in the manufacture of plaintiff's container appears irrelevant to a construction of the ordinance. At this point, therefore, we make only a brief reference to the same. Plaintiff, a wholly-owned subsidiary of the Dean Milk Company, a corporation, is engaged in the distribution of milk and milk products. Its plant is located at Chemung, McHenry County, Illinois, where it has two machines leased from the Ex-Cell-O Corporation, used for packaging milk in paper containers bearing the trade name "Pure-Pak." Its facilities are such that it is unable to use glass bottles. Its container is manufactured from paper obtained from a mill in West Virginia. The paper is cut, trimmed and printed at a manufacturing plant located in Ohio. The product is shipped to plaintiff's plant and assembled into the type of containers now in controversy. Such containers are commonly and, we think, generally referred to by Governmental officials and those interested in the trade as "Single Service Containers." This follows from the fact that they are destroyed after a single use. Thus they *135 are distinguished from a multi-container, such as a glass bottle, which may be used many times. The court adopted the master's description of plaintiff's container: "Plaintiff's container is a prismatic box about 6½ inches high and 4½ inches wide, with a gable top, made of paper and paraffined on the inside and outside. In the middle of one of the slanting surfaces of the gable top is a so-called pouring lip which is about an inch square and which is pulled out like an ear when milk is poured out of the container." 35 F. Supp. 451, 453.
The court, in construing the words "standard milk bottle" as including plaintiff's container, relied strongly upon two factors: (1) The situation existing in the trade at the time of trial rather than at the time the ordinance was enacted, and (2) the definition of the word "bottle" as given by numerous lexicographers. As to the first factor, the court said: "* * * The ordinance is not static. The words are general and continuing in their operation. The ordinance must be construed in the light of new and changing conditions and current thought and practice. If, in the course of time, the advancement of science has produced a container which serves the same purpose as a glass container, and if the product delivered therein conforms to the requirements of sanitation prescribed by the health ordinances, then the ordinance must be given such construction as to permit the use of the later developed scientific container."
We are of the view that this was an unsound basis upon which to predicate a construction of the ordinance. As was said in Sup v. Cervenka, 331 Ill. 459, 462, 163 N.E. 396, 398: "* * * The courts have no legislative powers, and in the interpretation and construction of statutes their sole function is to determine, and within the constitutional limits of the legislative power to give effect to, the intention of the Legislature. * * *"
And in United States v. Goldenberg, 168 U.S. 95, 102, 18 S. Ct. 3, 4, 42 L. Ed. 394: "The primary and general rule of statutory construction is that the intent of the lawmaker is to be found in the language that he has used. He is presumed to know the meaning of words and the rules of grammar. The courts have no function of legislation, and simply seek to ascertain the will of the legislator. * * * No mere omission, no mere failure to provide for contingencies, which it may seem wise to have specifically provided for, justify any judicial addition to the language of the statute. * * *"
In United States v. First National Bank, 234 U.S. 245, on page 259, 34 S. Ct. 846, on page 850, 58 L. Ed. 1298, referring to facts subsequent to the enactment as bearing upon its construction, the court said: "* * * But these after facts can have little weight in determining the meaning of the legislation, and certainly cannot overcome the meaning of plain words used in legislative enactments. * * *"
That the language of a legislative enactment is to be construed in accordance with its meaning at the time used rather than by a meaning afterwards acquired was held in People v. Barnett, 319 Ill. 403, 150 N.E. 290. On page 408 of 319 Ill., on page 292 of 150 N.E., the court said:
"* * * The true rule is that statutes are to be construed as they were intended to be understood when they were passed. Statutes are to be read in the light of attendant conditions and that state of the law existent at the time of their enactment. The words of a statute must be taken in the sense in which they were understood at the time the statute was enacted. * * *
"The legislative intent that controls in the construction of the statute has reference to the Legislature which passed the given act. * * * In interpreting a statute, the question is what the words used therein meant to those using them. * * *"
A municipal ordinance is to be tested in the same manner as a state statute. Pacific States Company v. White, 296 U.S. 176, 186, 56 S. Ct. 159, 80 L. Ed. 138, 101 A.L.R. 853; People v. Chicago Rys. Co., 270 Ill. 87, 105, 110 N.E. 386, Ann. Cas.1917B, 821. Thus the theory of construction advanced by the plaintiff, apparently followed by the District Court, to the effect that the words "standard milk bottle" should be interpreted in accordance with the meaning of those words at the time of trial rather than their meaning at the time the ordinance was enacted, is not tenable. The recognition of such a theory would, in effect, impose legislative functions upon the courts. It would mean that a legislative enactment might mean one thing today and something else tomorrow. Changed conditions, *136 of course, may make advisable a repeal or modification of existing legislation, but if so, the appeal should be to the legislature and not the courts.
We therefore must consider the language employed by the City Council in the enactment of the ordinance in the light of conditions as they existed at that time. The record discloses that the glass milk bottle, similar to those in general use at that time, was invented in 1884, and that for many decades milk in less than gallon quantities had been delivered in the City of Chicago in such bottles. Their general appearance, size and shape have been substantially the same for a half century. On the other hand, the use of paper containers was scarcely known when the ordinance was enacted. True, their development began about 1928, but they first came into general use in the Eastern states about 1938. Since that time their use has rapidly increased in all parts of the country, including the area adjacent to the City of Chicago.
Plaintiff argues that under such circumstances it could not have been the intent of the City Council in 1935, to exclude the use of paper containers. It is possible and, we think, likely that this is correct. The question, however, is what it intended to permit rather than what it intended to exclude. To us it is readily apparent that what the City Council did mean and intend by use of the words "standard milk bottle" was the glass bottle at that time in universal use. The language employed in the ordinance itself lends support to this view. We have quoted heretofore that portion of the ordinance directly involved in this controversy and it is pertinent to point out that in other portions of the ordinance the word "containers" is employed. For instance, in referring to quarantine premises, the ordinance states: "No milk bottle or other containers may be taken out of or away * * *." There was no occasion to use the words "other containers" if they were included in the words "milk bottles." The use of the words "milk bottle or other containers" is inconsistent with an intent that the latter was included in the former. The omission of the latter from the provision in controversy is therefore significant.
That a standard milk bottle has generally been recognized as not including a paper container or a single service container is well near conclusively demonstrated by the record. A number of witnesses who testified for the plaintiff recognized the distinction. In the same year the ordinance was passed, the United States Biennial Census of Manufacturers was taken, in which glass products were divided into three classifications, one of which was glass containers, and milk bottles were listed as one of the classes of glass containers. Under date of January 13, 1936, the Dean Milk Company (of which the plaintiff is the wholly-owned subsidiary) wrote the Board of Health that they would like to present the facts about "delivering milk to the City of Chicago in paper containers instead of bottles." Certainly there was no thought at that time that milk bottles included paper containers. The United States Public Health Service construed "standard milk bottle" to exclude paper containers. In June, 1939, its model ordinance was amended by adding "or in single service containers" after "standard milk bottles." If the latter included the former, there was, of course, no occasion for the amendment. On August 2, 1938, the sales manager of the manufacturer of the machines used by the plaintiff for filling the containers, in a letter to the Board, referring to the ordinance, stated: "True, its fundamental principles were written a good many years ago, and would not include the present, more sanitary milk receptacle because it was then unknown."
The court, after quoting numerous lexicographers as to the definition of the word "bottle," stated: "* * * While, in modern times, bottles have usually been made of glass, yet of the material out of which bottles have been made may be mentioned, besides glass and skins, hard stone, wood, ivory, bone, porcelain, glazed pottery and common earthenware. In fact, a bottle is not characterized by the material out of which it is made. * * *"
This reasoning, in our judgment, overlooks the fact that the language employed must be interpreted according to its usual and ordinary meaning. It could not be logically contended that the "standard milk bottle" referred to in the ordinance included a bottle made of skins, stone, wood, bone, or the numerous other articles out of which bottles, according to the lexicographers, have sometimes been made. We are not to search for that which possibly could have been included in the *137 language employed, but must ascertain what was intended under the existing circumstances and conditions. Whatever meaning the word "bottle" might have had in ancient times, there can be no question in our mind but that in modern times it has generally been recognized as made of glass, and this has been the universal meaning as applied to a milk bottle.
The master found the words "standard milk bottle" specified in the ordinance to be: "A glass bottle of the type, shape and proportions well known to the trade and the community in Chicago as having been used for many years for the delivery of milk at retail."
It is our judgment that the master's conclusion in this respect was correct. It follows that the use of plaintiff's paper containers for the delivery of milk in the City of Chicago was prohibited by the ordinance.
We now consider the attack made upon the validity of the ordinance. While we have construed the ordinance in the light of the situation existing at the time of its passage, a different test is permitted and, in fact, required in determining its validity at the time of trial. As was said in Chastleton Corp. v. Sinclair, 264 U.S. 543, 547, 44 S. Ct. 405, 406, 68 L. Ed. 841: "* * * A law depending upon the existence of an emergency or other certain state of facts to uphold it may cease to operate if the emergency ceases or the facts change even though valid when passed. Perrin v. United States, 232 U.S. 478, 486, 487, 34 S. Ct. 387, 58 L. Ed. 691. Missouri v. Chicago, Burlington & Quincy R. R. Co., 241 U.S. 533, 539, 540, 36 S. Ct. 715, 60 L. Ed. 1148. In Newton v. Consolidated Gas Co., 258 U.S. 165, 42 S. Ct. 264, 66 L. Ed. 538, a statutory rate that had been sustained for earlier years in Willcox v. Consolidated Gas Co., 212 U.S. 19, 29 S. Ct. 192, 53 L. Ed. 382, 48 L.R.A. (N.S.) 1134, 15 Ann. Cas. 1034, was held confiscatory for 1918 and 1919."
This rule was recognized in Perrin v. United States, 232 U.S. 478, 487, 34 S. Ct. 387, 391, 58 L. Ed. 691: "* * * The fact that the conditions may become so changed in the future as to render the prohibition inoperative affords no reason for condemning it now. * * *"
Moreover, where the public policy of a state has been declared in the interim between the judgment of the lower court and appeal here, we are bound to give recognition to such policy. Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 543, 61 S. Ct. 347, 85 L. Ed. 327. Under this view we need not consider or decide the validity of the ordinance at the time of its enactment. The question for consideration is whether the ordinance now contravenes the public policy of the State of Illinois, and whether so or not, was the situation at the time of the institution of suit so altered as to make the prohibition contained in the ordinance unreasonable and void. On these questions, as well as others, the master found in favor of the defendants. In deciding to the contrary, the court, as already pointed out, placed its chief reliance upon a construction of the ordinance as including plaintiff's paper container. The court also held: "Any other construction would render the ordinance void. Moreover, the court is of opinion that under the recent statute of Illinois, heretofore referred to, the city is without power to prohibit the use of single service containers if such containers conform with the provisions of the statute."
The Illinois Legislature on July 24, 1939, during the pendency of this suit, enacted legislation (Illinois R.S.1939, Ch. 56½ Foods, Pars. 115-134) which plaintiff contends established a policy for the state concerning the manufacture and distribution of pasteurized milk, including its distribution in single service containers. The statute is lengthy and there seems no occasion to set it forth verbatim. It is sufficient to point out that it provides for the issuance of a Certificate of Approval to a pasteurization plant whose methods of operation comply with the numerous requirements of the act. It also requires compliance "in accordance with minimum requirements adopted by the Director for interpretation and enforcement of this Act." (The act defines "Director" as meaning the Director of the Department of Public Health.) Item 10 of Sec. 15 provides in part: "* * * Single service containers, caps, gaskets and similar articles shall be manufactured and transported in a sanitary manner."
Item 18 of the same section provides: "Bottling or packaging of milk and milk products shall be done at the place of pasteurization by approved mechanical equipment."
Pursuant to the power conferred by the act, the Director of the Illinois Department *138 of Public Health has promulgated "minimum requirements" for interpretation and enforcement of the act. Among other things required are that single service containers shall be manufactured and handled in accordance with the requirements of the Department. The character of the buildings and rooms in which such containers are manufactured, packed, stored and handled, is prescribed. The average maximum bacterial count of the stock from which such containers are made is stated, and it is required that all operations in the fabrication plant, and during their transportation, shall be conducted so as to reduce to a minimum the possibility of contaminating such articles. It is required that all single service containers "shall be so treated as to be as impervious to milk and milk products as practicable."
There is no room for doubt but that the State, by this act, as well as by the regulations promulgated pursuant thereto, has undertaken to regulate the pasteurization of milk, as well as its sale and distribution. It is equally plain that the use of single service containers such as used by the plaintiff for the distribution of milk is permitted and approved upon compliance with the act.
The authorities are uniform that any ordinance which conflicts with any statute or public policy adopted by the State Legislature is invalid. The rule is aptly stated in 2 McQuillin on Municipal Corporations, 572: "A Municipal corporation cannot, without special authority, prohibit what the policy of a general statute permits. Nor, on the other hand, can an ordinance permit that which the State's policy forbids. Consequently under a general grant of power, a municipal corporation cannot adopt ordinances `which infringe the spirit, or are repugnant to the policy, of the state as declared in its legislation.' It thus follows that if the state has expressed through legislation a public policy with reference to a subject, a municipality cannot ordain in respect to that subject to an effect contrary to, or in qualification of the public policy so established. * * *"
Such rule has been recognized by the Illinois courts. City of Chicago v. Union Ice Cream Mfg. Co., 252 Ill. 311, 315, 96 N.E. 872, Ann.Cas.1912D, 675; City of Chicago v. Drogasawacz, 256 Ill. 34, 37, 99 N.E. 869; City of Marengo v. Rowland, 263 Ill. 531, 534, 105 N.E. 285, 286. In the Marengo case the court said: "* * * Municipal authorities, under general grant of power, cannot adopt ordinances which infringe the spirit of a state law or are repugnant to the general policy of the state. * * *"
It is also well established that the General Assembly may resume at any time the power previously delegated to a municipality. Wilkie v. City of Chicago, 188 Ill. 444, 452, 58 N.E. 1004, 80 Am. St. Rep. 182.
Thus, we are confronted with a situation wherein the State on the one hand has expressly recognized and made provision for the use of a single service container for the sale and distribution of milk upon compliance with the requirements of the act, and regulations lawfully promulgated in conformity therewith, and on the other hand, with the provision of the City Ordinance which prohibits such use. Plaintiff has complied with the State requirements and has been issued a Certificate of Approval. By this token it has been authorized by the state to sell and distribute its product within the confines of Illinois in single service containers. The City of Chicago, however, by the prohibition contained in its ordinance, denies to plaintiff this right conferred by the State.
The defendants, however, in defense of this apparent repugnancy, rely upon Sec. 19 of the 1939 Act, which reads: "Nothing in this act shall impair or abridge the power of any city, village or incorporated town to regulate the handling, processing, labeling, sale or distribution of pasteurized milk and pasteurized milk products, provided that such regulation [does] not permit any person to violate any of the provisions of this Act."
The title of the 1939 Act is: "An Act regulating the handling, processing, labeling, sale and distribution of pasteurized milk and pasteurized milk products."
Thus it will be noted that the language of the saving clause reserves to the city the right to regulate the same matters described in the title of the act.
It is contended by the defendants that by this saving clause, the city retains unimpaired the broad field of regulation which it theretofore had as recognized in Koy v. City of Chicago, 263 Ill. 122, 104 N.E. 1104, Ann.Cas.1915C, 67, and City of Chicago v. Bowman Dairy Co., 234 Ill. 294, 84 N.E. 913, 17 L.R.A.,N.S., 684, 123 Am. St. Rep. 100, 14 Ann.Cas. 700. It is claimed that there is only one limitation in the saving clause and that is the proviso that the city *139 shall "not permit any person to violate any of the provisions of this Act." Frankly, we are unable to conceive the purpose of these words. Certainly the city is without authority to permit the violation of the statute under discussion, or any other. The prohibition in this respect is meaningless. We think the words must be regarded as surplusage.
Furthermore, we are of the opinion that the purpose of the saving clause was not as broad as claimed by the defendants, notwithstanding that its language furnishes some support for such contention. The courts of Illinois have frequently recognized that power exercised by municipalities may be conferred or withdrawn by implication. Village of Atwood v. Cincinnati, Indianapolis & W. R. Co., 316 Ill. 425, 147 N.E. 449; Stowell v. Prentiss, 323 Ill. 309, 319, 154 N.E. 120, 50 A.L.R. 584.
It therefore appears reasonable that the sole purpose of the saving clause was to prevent a construction by implication, withdrawing the vast authority which the city had theretofore had over the milk industry. The ordinance of the City of Chicago and regulations of its Board of Health disclose scores of ways and means by which the industry is regulated, extending from the health of the cow producing the milk, to its delivery at the home of the consumer. The purpose of the saving clause, in our judgment, was to preserve in the city the unquestioned right to continue in a field which had been entered by the state, and in which, thereafter, each should have co-extensive power and authority. The defendants' contention, if sustained, would give the city a power broader than that provided by the Legislature for the state. It would make the state subservient to the city. It would impute to the Legislature the purpose of withdrawing the power theretofore exercised by the city and by the saving clause reconferring such power. We are unable to believe that such an incongruous result was intended. As was said in Elsenau v. City of Chicago, 334 Ill. 78, 81, 165 N.E. 129, 130: "* * * A statute which grants powers to a municipal corporation is strictly construed, and any fair or reasonable doubt of the existence of an asserted power is resolved against the municipality which claims the right to exercise it. * * *"
Neither do we agree with the defendants' argument that the prohibition of plaintiff's single service container is a mere regulation. It is true that all regulations are prohibitory in nature to those who are unable to comply therewith, and that the prohibition of plaintiff's container may be considered a regulation as it pertains to the sale and distribution of milk. However that may be, the state, upon entering the field not only made provision for the sale and distribution of pasteurized milk, but recognized, permitted and approved the use of such containers, and the ordinance is squarely in conflict therewith. That the city, by virtue of the saving clause, has the power to regulate paper containers, we have no doubt, but we are unable to accept the theory that it has authority to outlaw that which the state has legalized. We therefore are of the opinion that the portion of the ordinance prohibiting plaintiff from distributing milk in single service containers is contrary to the public policy of the state, and void.
Having thus concluded, we find no occasion to discuss at length or decide other controverted questions as to the validity of the ordinance. We are not unmindful of the broad power possessed by a legislative body, of the strong presumption of legality attaching to their acts, and that it is not within the province of a court to substitute its judgment for theirs as announced in the many cases cited and relied upon by the defendants. Such authorities, however, have no application in view of what we have decided. Moreover, it appears that the presumption in favor of validity could be little more than a shadow in the instant matter for the reason that the use of single service containers was in its incipient stage when the ordinance was enacted, and the legislative body could not, from the nature of things, have considered and weighed their advantages and disadvantages.
It is true the record discloses some evidence in support of defendants' contention that the use of such containers presents a hazard to health. Such evidence, however, carries little, if any, conviction when considered in connection with the fact that the United States Public Health Service, whose model ordinance has been widely adopted by cities throughout the United States, including the City of Chicago, amended its ordinance in 1939, so as to include the regulation of single service containers, and that such amendment was subsequently proposed to the Council of the City of Chicago by its Board of Health; that the Legislature of the State of Illinois and its *140 Department of Health have approved the use of such containers since 1939, and that their use has been authorized and permitted by more than 200 cities and villages in the United States, including such cities as Washington, D. C., New York and Philadelphia, as well as practically all of the cities and villages near and adjacent to the City of Chicago.
From what we have decided, it follows plaintiff was entitled to a declaratory judgment that the ordinance prohibiting the use of its Pure-Pak Single Service Container was void. It also follows that plaintiff was entitled to an injunction restraining the defendants from prohibiting, but not from regulating, the use of such containers. The cause is therefore reversed and remanded for the sole purpose of modifying the decree so as to conform with the views herein expressed.
LINDLEY, District Judge (dissenting in part).
I regret that I am unable to agree that the ordinance violates the public policy of Illinois as expressed in Illinois Revised Statutes 1939, Chap. 56½, Section 115-134.
Under Koy v. City of Chicago, 263 Ill. 122, 104 N.E. 1104, Ann.Cas.1915C, 67, the authority of Illinois cities to regulate the sale and distribution of milk includes power to declare the means by which purity, wholesomeness and freedom from disease shall be secured; to require milk containers to be of prescribed character and to protect the public generally in the sale and distribution of milk. This municipal authority, thus defined by the Supreme Court, is still lodged in the city unless there is something in the statute mentioned which has expressly or impliedly withdrawn it.
The statute does not direct the use of paper milk bottles. It inferentially recognizes that single service containers of some character will be employed but there is no provision that cities must permit them to be used. The whole effect of the enactment is that if "single-service" containers are used they shall conform to certain minimum requirements to be prescribed by the Illinois Department of Public Health. To my mind this legislation did not take from the city power to determine whether paper milk bottles were reasonably possibly dangerous to health and therefore should not be used. Indeed, the legislature apparently recognized the retained police power of the city in the provision that nothing in the act "shall impair or abridge the power of any city * * * to regulate the handling * * * [and] sale * * * of pasteurized milk." This language, it seems to me, was not meaningless or surplusage, as announced in the majority opinion, but rather in the nature of a declaratory clause maintaining the existing status, inserted by the legislature in an abundance of caution, to assure municipalities that their power to act in the premises was not taken away, provided their ordinances should not in any way conflict with the provisions of the statute.
To my mind this is far removed from those cases where the legislature has entered the field and by its action taken over all the police power upon any specific subject, such as confronted the court in Northern Trust Company v. Chicago Rys. Co., 318 Ill. 402, 149 N.E. 422 and City of Chicago v. Jensen, 331 Ill. 129, 162 N.E. 115. In case of such complete occupation of the range there is no area left in which the city may legitimately operate. Here the state has apparently left to the city the right to determine whether paper milk bottles shall or shall not be used. The language of City of Chicago v. Union Ice Cream Co., 252 Ill. 311, 96 N.E. 872, Ann.Cas.1912D, 675, is pertinent.
The master found upon substantial evidence a number of facts bearing upon the undesirability of use of paper milk bottles, showing clearly that at least the question of desirability of their use is debatable. In such case the city council is entitled to exercise its own administrative and legislative judgment, a judgment not to be superseded by verdict of a jury or decision of a court. Carolene Products Co. v. Evaporated Milk Ass'n, 7 Cir., 93 F.2d 202; United States v. Carolene Products Co., 304 U.S. 144, 58 S. Ct. 778; 82 L. Ed. 1234; United States v. Morgan, 61 S. Ct. 999, 85 L. Ed. 1429. See annotation 119 A.L.R. 243.
I think the ordinance should be sustained. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542384/ | 947 A.2d 1228 (2008)
195 N.J. 33
Luz M. CRUZ, Petitioner-Respondent,
v.
CENTRAL JERSEY LANDSCAPING, INC., Respondent-Appellant.
Valentyna Hohl, Petitioner-Respondent,
v.
Insulated Duct & Cable Co., Respondent-Appellant.
Audrey Bush, Petitioner-Respondent,
v.
Kauffman & Minteer, Inc., Respondent-Appellant.
Ruth A. Herzer, Petitioner-Respondent,
v.
Classic Cars Nissan, Inc., Respondent-Appellant.
No. A-34 September Term 2007
Supreme Court of New Jersey.
Argued February 20, 2008.
Decided June 9, 2008.
*1230 Richard J. Williams, Jr., argued the cause for appellants (McElroy, Deutsch, Mulvaney & Carpenter, attorneys; Michael J. Marone, of counsel; Mr. Williams and Joseph G. Fuoco, Morristown, on the briefs).
Vicki W. Beyer, Lawrenceville, argued the cause for respondent Luz M. Cruz (Stark & Stark, attorneys).
Andrew A. Valeriani, Jr., Edison, argued the cause for respondent Valentyna Hohl.
George Kotch, Jr., argued the cause for respondents Audrey Bush and Ruth A. Herzer (Mr. Kotch, attorney; Robert R. Hanneman, Jr., on the letters in lieu of brief).
Justice HOENS delivered the opinion of the Court.
In this matter, we consider four consolidated appeals that raise the question of whether the Legislature's 2004 amendment to the schedule of workers' compensation death benefits was intended to be applied retroactively. In two of these matters, the Workers' Compensation judge concluded that the amendment was entitled to prospective application only, with the result that both of those claimants were denied an increase in benefits, which they sought to be calculated from the effective date of the amendment. In the other two matters, a different Workers' Compensation judge reached the opposite conclusion, determining that claimants were entitled to an increase in the rate of their benefits as of the effective date of the amendment, even if a final award had already been entered based on the rate schedule previously in effect.
The four separate matters were consolidated for consideration in the Appellate Division, where a divided panel found the arguments in favor of retroactivity more persuasive than those in favor of prospective application. However, one member of the appellate panel dissented, which brings the dispute before this Court on appeal as of right. Because the record demonstrates that the Legislature neither expressly stated, nor implicitly made known, its intention to have the increased benefit levels apply retroactively, we reverse.
I.
Prior to the enactment of the 2004 amendments, the Workers' Compensation Act, N.J.S.A. 34:15-1 to -142 (the Act), set forth a schedule of benefits that applied to all claims arising from the death of a worker. That schedule provided for benefits that varied depending upon the number of the deceased worker's surviving dependents. The benefit rates began at fifty percent of the decedent's wages if he or she were survived by one dependent, and increased with the number of additional dependents up to a ceiling of seventy percent of wages if there were five or more dependents. N.J.S.A. 34:15-13(a) to -13(e) (2003), amended by L. 2003, c. 253, § 1. In 2004, the Legislature amended the statute and replaced the tiered system of benefits with a flat rate of seventy percent of the decedent's wages, to be payable *1231 regardless of whether a deceased worker was survived by one or more dependents. L. 2003, c. 253, § 1.
There is no dispute that each of the claimants is entitled to death benefits payable under the Act. The sole issue is whether they are entitled to benefits at the amended flat rate of seventy percent of each decedent's gross wages or only to the pre-amendment graduated-tier benefits based on the number of each decedent's dependents. We begin, then, with a recitation of the particular facts and the relevant procedural history of each of the matters before us on appeal.
A.
Cruz v. Central Jersey Landscaping, Inc.
Luz Cruz's husband, Jose Antonio Perez, suffered a fatal accident on March 19, 2002, in the course of his employment with Central Jersey Landscaping, Inc. At the time of his death, Perez's gross weekly wages were $542.00. Perez was survived by Cruz and three dependent children. Cruz filed a claim petition for death benefits under the Act on April 10, 2002. Central Jersey Landscaping conceded that the claim was compensable and voluntarily began making payments of $342.30 per week to Cruz, without the entry of any formal award. That weekly amount was calculated based on the statutory rate for four dependents, which was fixed by the statute at sixty-five percent of Perez's wages. See N.J.S.A. 34:15-13(d) (2003).
Six months after the statute was amended, Cruz sought a retroactive increase in benefits to seventy percent of her late husband's wages, as would have been awarded in accordance with the newly modified provision. On February 28, 2005, the judge of compensation denied Cruz's petition. In reaching this decision, the compensation judge reasoned that the employer's obligation to pay was fixed, and therefore vested, no later than the date on which it had begun making death benefit payments, if it had not already vested on the date of Perez's death. Because the court analyzed the application as Cruz's effort to overturn a previously vested right, and because the amendment to the statute included no direction from the Legislature about retroactivity, the court concluded that Cruz's benefits should continue at the rate set forth in the schedule that pre-dated the amendment.
Cruz filed her notice of appeal on April 7, 2005.
Hohl v. Insulated Duct & Cable Company
Gerald F. Hohl died on July 9, 2003, from chronic bronchitis and bladder cancer that he developed as a result of occupational exposure during his employment with Insulated Duct & Cable Company. At the time of his death, his average gross weekly wages were $370.00 and his wife, Valentyna Hohl (Hohl), was his only surviving dependent. The employer voluntarily commenced payment of death benefits of $185.00 per week to Hohl on August 19, 2003, without the entry of any formal award, in accordance with the statutory rate of fifty percent of her decedent's wages. See N.J.S.A. 34:15-13(a) (2003).
Following the adoption of the statutory amendment, Hohl sought an increase in her benefits to the newly-enacted rate of seventy percent. On February 28, 2005, the same judge of compensation who on that date had denied the Cruz petition, also denied Hohl's petition, relying on the same rationale.
Hohl filed her notice of appeal on April 7, 2005.
Bush v. Kauffman & Minteer, Inc.
Norman Bush died on February 1, 2002, from chronic obstructive pulmonary disease *1232 contracted as a result of his employment with Kauffman & Minteer, Inc. At the time of his death, his average gross weekly wages were $419.40 and his only surviving dependent was his wife, Audrey Bush (Bush). She filed a claim for death benefits in May 2002, seeking compensation at the statutory rate of fifty percent of her late husband's wages, for a weekly payment of $209.70. See N.J.S.A. 34:15-13(a) (2003).
Despite its initial denial, Kauffman & Minteer later conceded that the claim was compensable, leaving the retroactive application of the amendment as the only disputed issue. On December 22, 2004, a different judge of compensation reached the opposite conclusion from that articulated by the judge who had decided the Cruz and Hohl petitions. That judge, in granting Bush's petition, concluded that the amendment should be applied retroactively. The judge found that Bush's employer had presented no evidence that manifest injustice would result from a retroactive application of the amendment. Moreover, the judge reasoned that the Legislature's use of the phrase "except as hereinafter provided" in the amended statutory language, was a reference to a "timeframe" that "conveys the [L]egislature's explicit reminder that the [L]egislature establishes the applicable calculation of dependency benefits and can change such in the future." Bush was therefore awarded death benefits at a rate of seventy percent of her late husband's wages, beginning on January 14, 2004, the effective date of the statutory amendment, and continuing thereafter.
Kauffman & Minteer filed its notice of appeal on April 27, 2005.
Herzer v. Classic Cars Nissan, Inc.
Francis J. Herzer died on March 26, 2003, from coronary artery disease and renal failure developed as a result of occupational exposure during his employment with Classic Cars Nissan, Inc. At the time of his death, his average gross weekly wages were $260.00 and his only surviving dependent was his wife, Ruth Ann Herzer (Herzer). Herzer filed a successful claim for death benefits and, on January 8, 2004, the Workers' Compensation court entered an order approving a settlement in Herzer's favor and awarding benefits. The final award set Herzer's benefit rate at fifty percent of her late husband's wages, in accordance with N.J.S.A. 34:15-13(a) (2003).
Following entry of the judgment, the employer, Classic Cars Nissan, Inc., commenced payment to Herzer at that rate, resulting in a weekly payment of $130.00. Although that matter had already been resolved by the entry of the order approving the settlement, after the statute was amended, Herzer sought to increase her benefits to the new seventy percent rate. The judge of compensation to whom her matter was assigned was the same one who had decided the Bush claim. Relying on the rationale expressed in his previously-announced decision in that matter, the judge granted Herzer's petition. He therefore reopened the judgment and awarded her increased benefits at a rate of seventy percent of her late husband's wages, retroactive to January 14, 2004, the effective date of the amendment to the statute.
Classic Cars Nissan, Inc. filed its notice of appeal on May 26, 2004.[1]
*1233 B.
II.
These four matters were consolidated for purposes of appeal. Cruz v. Cent. Jersey Landscaping, Inc., 393 N.J.Super. 34, 38, 922 A.2d 770 (App.Div.2007). The Appellate Division, in a split decision, determined that the amendment to the Act that created a uniform rate for death benefits was entitled to retroactive application. Applying this Court's previously articulated two-part test for retroactivity, see Twiss v. State, Dep't of Treasury, Office of Fin. Mgmt., 124 N.J. 461, 467, 591 A.2d 913 (1991), the majority of the panel reasoned that because the Legislature did not explicitly limit the amendment to future claims, the new rate was intended to apply retroactively to claims accruing prior to the amendment's January 14, 2004, effective date. Cruz, supra, 393 N.J.Super. at 42-47, 922 A.2d 770. Although recognizing that employers had a significant interest in being required to make only the lower death benefit payments based on the schedule, the majority concluded that the employers' interest was not a vested right and that increasing payments did not result in a manifest injustice. Id. at 49, 922 A.2d 770.
The dissenting judge disagreed. He explained that because the Legislature neither explicitly nor implicitly demonstrated an intent to apply the amendment retroactively, in light of "the general principle that a statute takes effect as of the time it goes into effect, and the general principle that statutes should not be applied retroactively, [he was] convinced that the amendment does not apply retroactively." Id. at 54-55, 922 A.2d 770 (Holston, J.A.D., dissenting). Because of the dissent, these four consolidated cases have come before us on appeal as of right. R. 2:2-1(a)(2).
II.
We have recently explained the essential principle of our Workers' Compensation laws:
New Jersey's long-standing and comprehensive statutory scheme of workers' compensation coverage is "designed to establish a no fault system of compensation for workers who are injured or contract a disease in the course of employment."
[Fitzgerald v. Tom Coddington Stables, 186 N.J. 21, 30, 890 A.2d 933 (2006) (quoting Brock v. Pub. Serv. Elec. & Gas Co., 325 N.J.Super. 582, 588, 740 A.2d 167 (App.Div.1999), certif. denied, 163 N.J. 77, 747 A.2d 285 (2000)).]
Further, we have long recognized that this system for the compensation of injured workers "is remedial social legislation and should be given liberal construction in order that its beneficent purposes may be accomplished." Torres v. Trenton Times Newspaper, 64 N.J. 458, 461, 317 A.2d 361 (1974); see Fitzgerald, supra, 186 N.J. at 30, 890 A.2d 933. In considering questions relating to workers' compensation in general, we have adhered to our understanding that the "ultimate purpose . . . is to provide a dependable minimum of compensation to insure security from want during a period of disability." Fitzgerald, supra, 186 N.J. at 31, 890 A.2d 933 (quoting Naseef v. Cord, Inc., 48 N.J. 317, 325-26, 225 A.2d 343 (1966)).
Although we are guided by these general principles, in determining the effect to be given to the 2004 amendments to the statute, our essential task is to understand and give effect to the intent of *1234 the Legislature. See Bunk v. Port Auth. of N.Y. & N.J., 144 N.J. 176, 194, 676 A.2d 118 (1996) (construing intent of Legislature's amendment to Workers' Compensation Act). In doing so, we look first to the plain language of the amendment, seeking further guidance only to the extent that the Legislature's intent cannot be derived from that analysis. Ibid. In the event that language is not clear and unambiguous on its face, we look to other interpretive aids to assist us in our understanding of the Legislature's will. See, e.g., id. at 192-94, 676 A.2d 118 (reviewing related recent amendments and committee statements); Panzino v. Continental Can Co., 71 N.J. 298, 301-03, 364 A.2d 1043 (1976) (relying on sponsor's statement for guidance).
A.
Our Workers' Compensation Act requires employers to compensate employees who are injured by an accident "arising out of and in the course of" employment if the accident is "natural[ly] and proximate[ly] cause[d]" by the "actual or lawfully imputed negligence of the employer" and is not due to the employee's own willful negligence. N.J.S.A. 34:15-1. The Act also applies to any claim for the death of an employee, N.J.S.A. 34:15-4, arising under statutes governing wrongful death claims generally, N.J.S.A. 2A:31-1 to -6.
The Act includes specific provisions that govern calculation of the amount of compensation to be paid to dependents of an employee who dies during the course of his or her employment. N.J.S.A. 34:15-13. It is these provisions, and the Legislature's 2004 amendment to these payment calculations, that are at the core of the appeals before us. At the time of the death of each claimant's decedent, the statute included a schedule for calculating the benefits payable, expressed as a percentage, that varied based upon the number of surviving dependents. See N.J.S.A. 34:15-13(a) to -13(e) (2003). The applicable range provided for benefits of: fifty percent of wages for one dependent, N.J.S.A. 34:15-13(a) (2003); fifty-five percent of wages for two dependents, N.J.S.A. 34:15-13(b) (2003); sixty percent of wages for three dependents, N.J.S.A. 34:15-13(c) (2003); sixty-five percent of wages for four dependents, N.J.S.A. 34:15-13(d) (2003); and seventy percent of wages for five or more dependents, N.J.S.A. 34:15-13(e) (2003).
On January 14, 2004, the Legislature enacted an amendment to the statute that revised the formula for calculating death benefits. L. 2003, c. 253, § 1. The amended version, which reflects the current state of the law, provides: "Except as hereinafter provided, in case of death, compensation shall be computed, but not distributed, on the following basis: a. for one or more dependents, [seventy percent] of wages." N.J.S.A. 34:15-13; L. 2003, c. 253, § 1. The subsections of the Act, that had previously set forth the tiered schedule based on number of dependents, were amended to read: "(Deleted by amendment, P.L. 2003, c. 253.)" N.J.S.A. 34:15-13(b) to -13(e). The amendments, which were enacted on January 14, 2004, were specifically designed to "take effect immediately," L. 2003, c. 253, § 4. There are several other subsections of N.J.S.A. 34:15-13, none of which was affected by the 2004 amendment. Notably among them is the general rule that death benefits do not continue indefinitely, but terminate after 450 weeks, unless the decedent is still then survived by a minor dependent. N.J.S.A. 34:15-13(j).
The dispute among the parties centers on what the Legislature intended when it provided that the amendment would "take effect immediately." Each of the claimants argues that this language signals *1235 the complete elimination of the tiered system of benefits as of the effective date of the amendment. They contend that as a result each of them is entitled to the newly-enacted single benefit level instead of the benefits available in the original tier to which each of them previously was assigned based on the number of surviving dependents. More specifically, three of the claimants, namely, Cruz, who as of the date of the amendment had a pending petition and was accepting voluntary payments, Hohl, who also was accepting voluntary payments but did not have a pending petition, and Bush, who had a pending petition but had not received voluntary payments, assert that they are entitled to the benefit of the higher payment amounts payable as of the amendment's effective date. The fourth claimant, Herzer, argues that she is entitled to have her previously adjudicated matter reopened and is entitled to the benefit of the higher payment rate even though, at the time when the amendment became effective, her award had already been finalized.
In response, the employers assert that the language chosen by the Legislature only supports the award of the higher benefits to claimants whose decedents died on or after the effective date. They argue that the Legislature could not have intended to apply the new benefit amounts to pending claims because that would result in the amendment, sub silentio, reopening all previously entered awards so as to benefit all claimants. The employers contend that the Legislature could not have intended to work such a far reaching impact on settled claims without some explicit indication that this was its anticipated outcome.
We turn, then, to our consideration of what the Legislature intended when it amended the benefits to be awarded under the Act.
B.
We "have long followed a general rule of statutory construction that favors prospective application of statutes." Gibbons v. Gibbons, 86 N.J. 515, 521, 432 A.2d 80 (1981) (footnote omitted). This preference is based on our long-held notions of fairness and due process. Id. at 522, 432 A.2d 80; see Landgraf v. USI Film Prods., 511 U.S. 244, 266, 114 S.Ct. 1483, 1497, 128 L.Ed.2d 229, 253 (1994) ("The Due Process Clause . . . protects the interests in fair notice and repose that may be compromised by retroactive legislation. . . ."); Rothman v. Rothman, 65 N.J. 219, 225, 320 A.2d 496 (1974) ("[R]etroactive application . . . may diminish in value or totally destroy an individual's right, whether in property as such or arising out of contract, provided that the public interest to be promoted sufficiently outweighs in importance the private right to be impaired.").
Although the rule favoring prospectivity is, "a sound rule of statutory interpretation," Rothman, supra, 65 N.J. at 224, 320 A.2d 496; accord Charles B. Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv. L.Rev. 692, 693 (1960), "if the Legislature expresses an intent that the statute is to be applied retroactively, the statute should be so applied." Oberhand v. Dir., Div. of Taxation, 193 N.J. 558, 571, 940 A.2d 1202 (2008) (citing Gibbons, supra, 86 N.J. at 522, 432 A.2d 80.) As we have recently commented, the Legislature may express its intent explicitly or by implication "in that `retroactive application may be necessary to make the statute workable or to give it the most sensible interpretation.'" Ibid. (quoting Gibbons, supra, 86 N.J. at 522, 432 A.2d 80).
Consequently, the preference for prospective application is not applied *1236 mechanistically to every case. Rothman, supra, 65 N.J. at 224, 320 A.2d 496. To be sure, retroactivity is appropriate, in general, when it is expressed, Gibbons, supra, 86 N.J. at 522-23, 432 A.2d 80; see Nobrega v. Edison Glen Assocs., 167 N.J. 520, 536, 772 A.2d 368 (2001) (requiring an "unequivocal expression of . . . legislative intent" (quoting Dewey v. R.J. Reynolds Tobacco Co., 121 N.J. 69, 95, 577 A.2d 1239 (1990)), when an amendment is curative, Gibbons, supra, 86 N.J. at 523, 432 A.2d 80, or when the expectations of the parties so warrant, ibid. Only if one of these grounds is present, will we give a statute retroactive effect.
C.
We begin by observing that the Legislature's amendment must be understood in light of our pre-existing interpretation of the Act's death benefits. Long before the Legislature enacted the amendment altering the benefit rates, we held, in McAllister v. Board of Education, Town of Kearny, that a claim for death benefits accrues, and the rights thereto vest, on the date of death. 42 N.J. 56, 59-60, 198 A.2d 765 (1964) (benefits allowed on date of death govern rather than lesser rates applicable as of the time of the original injury). As part of our analysis we presume, as we must, that the Legislature "is . . . aware of judicial construction of its enactments," N.J. Democratic Party, Inc. v. Samson, 175 N.J. 178, 195 n. 6, 814 A.2d 1028 (2002) (citing Brewer v. Porch, 53 N.J. 167, 174, 249 A.2d 388 (1969)), and we therefore review the amendment in light of this Court's prior reasoning regarding the dates for accrual of claims and vesting of rights set forth in McAllister.
There is little in the way of legislative history that informs us about the meaning and intent of the 2004 amendment. The bill that was eventually enacted was one of several bills introduced beginning in 2000, each of which would have replaced the tiered system of benefits with a uniform rate to be paid regardless of the number of dependents, some providing for a one hundred percent wage benefit. See, e.g., Senate Bill No. 1416 (Mar. 26, 2002); Assembly Bill No. 1853 (Feb. 21, 2002); Senate Bill No. 886 (Feb. 7, 2000); Assembly Bill No. 1125 (pre-filed for 2000).
The Senate bill and its Assembly counterpart that were eventually passed by the Legislature provided for a uniform death benefit rate of seventy percent and specified that the change would take effect immediately. Although this benefit rate was lower than that which some of the other bills had proposed, and although it did not embrace the language included in the other bills that was explicitly prospective, there is no evidence that the Legislature's decision to enact this bill was intended to be an affirmative rejection of any of the provisions of those other proposed bills. Nor is the fact that the Legislature did not alter the bill's wording in response to testimony suggesting that the language about the effective date could be clearer, see Hearing on Senate Bill No. 1522 Before the Senate Labor Comm. (Dec. 9, 2002), significant to our understanding of legislative intent. The mere fact that witnesses spoke in favor of the bill or raised their own interpretations about how the language might have been written, and that this was met by silence of the Legislature in response, is an insufficient basis on which to read into the amendment a far reaching impact that it would not otherwise have had. Those facts and those statements tell us only what the speaker or the witness believed to be the case; they say nothing about what the Legislature meant by the words it chose to include in the amendment. Rather, in light of our previous determination that the *1237 claim accrues and the rights vest on the date of death, we conclude that the Legislature intended its language to be understood in that context.
Indeed there is nothing in the amendments or in the sponsors' statements that suggests that the Legislature intended to give the new benefit level retroactive effect of any kind. We certainly see no basis in the legislative history, and in an interpretive framework that includes our prior holding that vesting occurs on the date of death, to conclude that the Legislature intended to effect a reopener of settled awards. Nor is there anything in the directive that the act "shall take effect immediately" to suggest retroactivity. On the contrary, these words bespeak an intent contrary to, and not supportive of, retroactive application. Lombardo v. Revlon, Inc., 328 N.J.Super. 484, 490-91, 746 A.2d 475 (App.Div.2000). Similarly, it cannot be said that the Legislature's inclusion of the general phrase "except as hereinafter provided" was intended, without more, by the Legislature to operate as an affirmative grant of a right to retroactive relief.
We derive additional support for our conclusion that the Legislature intended only a prospective application of the new benefit rates from our analysis of the fiscal note that accompanied the bill. It makes no mention of the impact that a retroactive application would have entailed. Instead, the fiscal note calculates only the projected future impact of the increase using estimates and assumptions about the average anticipated claims. It contains no analysis of the impact that the amendment would have regarding an increase in the benefits payable on existing or previously settled claims. The fiscal note itself, therefore, suggests that the Legislature did not intend that the increased benefits would be available to existing or pending claims. Indeed, although a fiscal note with a plain analysis of a bill's retroactive effect would support the conclusion that the Legislature so intended, see Harris v. Branin Transp., Inc., 312 N.J.Super. 38, 44-45, 711 A.2d 331 (App.Div.), certif. denied, 156 N.J. 408, 719 A.2d 640 (1998), nothing in this fiscal note so suggests. The implication, then, is that the Legislature did not intend that the increased benefits would be available to dependents with previously pending claims.
Taken together, we understand the Legislature's direction that the amendment take effect immediately to mean that the increased benefit rates will apply to claims that arise immediately after the effective date of the amendment to the Act. In so concluding, we are of course mindful of our usual rules governing retroactivity, which do not suggest a contrary result here. We discern no reason to expand our retroactivity rules to extend the reach of this amendment beyond that which the Legislature directed.
We reach this result for a further, more practical, reason. As the Herzer claim demonstrates, if we interpret the amendment to apply broadly, it would reach even beyond pending and non-finalized claims. That analysis would raise the specter that all of the awards that have been entered in years past would be reopened to permit an increase in benefits as of January 14, 2004. In the absence of an unambiguous directive that the Legislature so intended, we cannot conclude that the amendment was expected to be applied in such an expansive fashion.
III.
The judgment of the Appellate Division is reversed. The orders in Cruz and Hohl *1238 are therefore reinstated, the order in Bush is reversed and the matter remanded for further proceedings in the Workers' Compensation court, and the order in Herzer is vacated.
For reversal Chief Justice RABNER and Justices LONG, ALBIN, WALLACE, RIVERA-SOTO, and HOENS 6.
Opposed None.
NOTES
[1] Herzer filed a cross-appeal, in which she challenged the award of attorney's fees that she had received as insufficient. The Appellate Division declined to interfere with that award, concluding that it was "not manifestly inadequate or the product of an abuse of discretion." Cruz v. Cent. Jersey Landscaping, Inc., 393 N.J.Super. 34, 51, 922 A.2d 770 (App.Div.2007) (citing Akef v. BASF Corp., 305 N.J.Super. 333, 341, 702 A.2d 519 (App.Div. 1997)). As Herzer did not file a petition for certification, that issue is not before this Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542439/ | 60 F.2d 252 (1932)
COMMISSIONER OF INTERNAL REVENUE
v.
OLDS.
No. 5853.
Circuit Court of Appeals, Sixth Circuit.
June 29, 1932.
*253 Morton K. Rothschild, of Washington, D. C. (G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, C. M. Charest, and Frank M. Thompson, all of Washington, D. C., on the brief), for petitioner.
Maxwell W. Benjamin and C. F. Stanton, both of Detroit, Mich. (Raymond H. Berry, of Detroit, Mich., and E. Barrett Prettyman and Fred Gibbs, both of Washington, D. C., on the brief), for respondent.
Before MOORMAN, HICKS, and SIMONS, Circuit Judges.
MOORMAN, Circuit Judge.
The question for decision in this case is whether an agreement which respondent made with his three daughters constituted a partnership within the meaning of section 218(a) of the Revenue Acts of 1918 and 1921 (40 Stat. 1070, 42 Stat. 245).
The respondent conducted a dock and timber business in Cheboygan, Mich. He had three daughters, one married and two unmarried. Desiring to train his daughters in the handling of large sums of money, and wishing to divide his property during his lifetime so as to avoid any family disputes after his death, in December of 1918 he entered into a written agreement to sell to each of them a one-fourth interest in everything he owned. Upon the execution of the agreement each of the daughters executed to the respondent her promissory note for $400,000, payable on demand without interest. It was stipulated in the agreement that the business should be conducted by the respondent "in his name" or in any other name that he might choose; that the daughters should draw out of the profits of the business only such amounts as he saw fit to pay them and as they might "need for their living and comfort during his lifetime"; that they should have "the privilege of looking over the books of the company" and "everything pertaining to the business" at all times; and that, if at any time any one of them should become dissatisfied with the way the business was being conducted or should think her interest was being impaired, he would return to her her note and take over her interest.
Upon the completion of the agreement, entries were made on the books of the business debiting the respondent and crediting the daughters with the amounts represented by the notes. During the year 1919 further entries were made showing that a fourth interest in the business had been transferred to each of the daughters. In that year and the succeeding years withdrawals of profits were debited to the parties receiving them, with the result that at the close of each of these business years the books showed net balances in favor of the parties in different amounts. Upon these facts, found more in detail than herein stated, the Board concluded that a bona fide partnership was entered into, and determined the taxable income of the respondent for the years here involved 1919, 1920, and 1921 in accordance with the provisions of section 218(a) of the Revenue Acts of 1918 and 1921.
*254 The Commissioner contends that the agreement did not constitute a partnership within the meaning of the section of the Revenue Act referred to, and, subsidiarily, that the Board of Tax Appeals erred in receiving evidence of the purposes of the respondent in making the agreement, the negotiations with his daughters with reference thereto, and the entries on the books and accounts of the business after the agreement was made.
There is nothing in the evidence complained of which violates the rule that parol evidence is not admissible to vary the terms of a written contract. The agreement is not one which is to be interpreted as though there were a suit against the parties thereto by a third party, but is to be considered as an agreement inter se, which agreement the Commissioner contends was not entered into for the purpose of forming a bona fide partnership. Where the good faith of such an agreement is assailed, it is obviously permissible to show the reasons actuating the parties in making it; indeed, one of the tests of a partnership relation, as between the parties, is the intention that a partnership be formed. London Assurance Corp'n v. Drennen, 116 U.S. 461, 6 S. Ct. 442, 29 L. Ed. 688. The agreement here involved, though made in Ohio, was to be performed in all of its details in Michigan, where the business was located. In that state the question of partnership, as between the parties, is one of intention to be gathered from all the facts and circumstances. Bird v. Hamilton, Walk. Ch. 361; Beecher v. Bush, 45 Mich. 188, 200, 7 N.W. 785, 40 Am. St. Rep. 465; Canton Bridge Co. v. Eaton Rapids, 107 Mich. 613, 65 N.W. 761; Morrison v. Meister, 212 Mich. 516, 519, 180 N.W. 395; Klein v. Kirschbaum, 240 Mich. 368, 371, 215 N.W. 289. Whatever may be the rule elsewhere as to the reception of evidence touching this question, we cannot doubt that the Board of Tax Appeals, in seeking the true purpose of the agreement here in question, had the right to receive evidence that would be admissible in the courts of the state where the contract was to be performed. See Pritchard v. Norton, 106 U.S. 124, 136, 1 S. Ct. 102, 27 L. Ed. 104; Supreme Lodge, Knights of Pythias v. Meyer, 198 U.S. 508, 517, 25 S. Ct. 754, 49 L. Ed. 1146. Under the rules of evidence in Michigan, the conversations between the parties leading up to the signing of the agreement, including their orally expressed purposes in that connection, were admissible in evidence as tending to show that the agreement was a partnership agreement.
The agreement was executory in form. In order to transform it into an executed one, and thus call the partnership into being, it was necessary that the parties do the things that they agreed to do, that the daughters execute and deliver to the respondent their respective notes, and that he transfer to them the property interest he had agreed to sell. Beckford v. Hill, 124 Mass. 588, 589; Baldwin v. Burrows, 47 N.Y. 199, 208; Irwin v. Bidwell, 72 Pa. 244, 251. The daughters evidenced their performance by executing the notes. The respondent signalized his by causing entries to be made on the books of the business showing that each of the daughters owned a fourth interest. This act, as well as subsequent acts of a like nature, were plainly admissible to show that the agreement was executed.
It is contended that the agreement is invalid because it does not permit the daughters to withdraw their share of the profits without restraint. In our opinion, it is not essential to the validity of a partnership agreement that the rights of the partners as to the control of the business or the disposition of profits be equal. It is within the power of the parties entering into a partnership agreement to restrict the rights of the several partners to the extent of making one of them the sole agent of the others for conducting the business. Beecher v. Bush, supra. They may also agree that profits shall not be distributed but put back in the business, or shall be distributed only upon the happening of a specified event or as authorized by the partner in charge of the business. Compare Haller v. Willamowicz, 23 Ark. 566; Richard v. Mouton, 109 La. 465, 33 So. 563; Greend v. Kummel, 41 La. Ann. 65, 5 So. 555; Gill v. Crosby, 63 Ill. 190; Chapin v. Streeter, 124 U.S. 360, 8 S. Ct. 529, 31 L. Ed. 475.
Nor in our opinion was the agreement rendered invalid by the undertaking of the respondent to repurchase upon the dissatisfaction of the daughters. Partnership agreements can be created only by contract, either express or implied. Dunham v. Loverock, 158 Pa. 197, 27 A. 990, 38 Am. St. Rep. 838. In the absence of statutory inhibitions, they are governed, as between the parties, by the principles applicable to other contracts. There are many cases holding that contracts making fulfillment depend upon the satisfaction of one of the parties are *255 valid. Where the fulfillment is denied in such cases, the test of its sufficiency is the good faith of the dissatisfaction. Williston on Contracts, vol. 1, p. 74; Goltra v. Weeks, 271 U.S. 536, 548, 46 S. Ct. 613, 70 L. Ed. 1074. See, also, Mills-Morris Co. v. Champion Spark Plug Co., 7 F.(2d) 38, 39 (6 Cow. C. A.); Morrissey v. Broomal, 37 Neb. 766, 780, 56 N.W. 383; Over v. Byram Foundry Co., 37 Ind. App. 452, 77 N.E. 302, 117 Am. St. Rep. 327. The contract here under consideration is an executed contract of sale. It carries, it is true, an obligation to repurchase for a named consideration if the buyers shall become dissatisfied, not with the contract, but with the way the business is run. Whether the buyers could defeat a suit on the notes or could compel a repurchase would depend, under the authorities cited, upon the good faith of their dissatisfaction. We know of no reason why an executed contract of sale which provides for a repurchase or the return of the purchase consideration upon the occurrence of a designated determinable event is not valid and binding as between the parties, nor why it should not be binding as to third parties. Indeed, we have no doubt that, if this business should fail while the contract is in existence, the separate estates of the daughters, if they have any, could be reached by creditors.
It is not important that the respondent did not intend to require payment of the notes. They were executed and were collectible in his hands except upon a good-faith showing of dissatisfaction. Besides, he had the right to give an interest in his business to his daughters. There is no creditor attacking the transaction, and, if the gift was made in good faith, the taxing authorities cannot complain. Marshall v. Commissioner, 57 F.(2d) 633 (6 Cow. C. A.). The case is unlike Lucas v. Earl, 281 U.S. 111, 50 S. Ct. 241, 74 L. Ed. 731, or Burnet v. Leininger, 285 U.S. 136, 52 S. Ct. 345, 76 L. Ed. 665. Here the respondent did not undertake to establish a joint tenancy in salaries or fees to be earned or to create a subcontract and convey a part of his earnings from the business to his daughters. He sold or gave to each of them a one-fourth interest in his business, and later, when a part of it was sold for a large amount, they received their partnership share of the proceeds. In such circumstances the Board of Tax Appeals was justified in holding that a partnership existed.
The order of the Board is affirmed.
HICKS, Circuit Judge (dissenting).
The question is well stated in the opinion of the court. The agreement is printed in the margin.[1]
During the year 1918 respondent operated a coal dock and owned certain timber properties and various bonds and stocks. He, with Mrs. Olds, lived at Cheboygan, Mich. He had two unmarried daughters, Blanche and Gertrude, and one married daughter, Mrs. Florence Buhrman, who lived at Dayton, Ohio. During the summer of 1918 respondent conceived the idea of a general business partnership between himself and his daughters. While the family was together at the home of Mrs. Buhrman on December 31, 1918, there was a general discussion upon the subject, unimportant now in view of the written instrument above referred to which was executed by the parties on that date. At the same time the three daughters each executed a note for $400,000 in compliance with the terms of the writing. One of the notes is copied in the margin.[2]
*256 The Board decided that a partnership existed between respondent and his daughters, and upon this basis determined respondent's tax liability for the years involved in accordance with the applicable statutes above cited. The court is in accord.
I cannot accept this view.
I have briefly recited the circumstances leading to the execution of the instrument because of its very meager reference to the subject-matter, but their consideration is not required, or, as I understand, allowed, in ascertaining the intention of the parties. The writing, read in connection with the notes, is unambiguous. The "Memorandum of Agreement" is between the father and his daughters. Respondent agreed to sell, and each of his daughters agreed to buy, "one quarter interest in everything he owns." Each daughter agreed to give her note for $400,000 in settlement. I need not discuss other features appearing in the second paragraph which the parties were fully competent to include if they chose to do so.
I think the weakness of respondent's contention is found in the italicized paragraph. Therein the makers of the notes expressly reserved the right to have them returned if at any time or in any way they should become dissatisfied with the way respondent conducted the business and should think that their interest was being impaired by his management. The exercise of this right was to be determined by the independent judgment of the makers of the notes. See Miami Coca-Cola Bottling Co. v. Orange Crush Co., 296 F. 693, 694, C. C. A. 5. This right imposed from the beginning an obligation upon the respondent to return the notes upon demand. The effect was to destroy the notes as enforceable obligations as between the parties and to strip the instrument of all mutuality of engagement. To promise to pay and at the same time to reserve the right to revoke the promise is no promise. The obligation to hold the notes subject to the demand for their return is wholly inconsistent with the idea that the notes were either a promise to respondent or a consideration for the purchase. I think, therefore, that the agreement was void. The obligation to pay the notes was negatived by the reserved right to demand their return.
I think we are not dealing with a contract effective until terminable at will but with a contract invalid from its inception. Velie Motor Car Co. v. Kopmeier Motor Car Co., 194 F. 324, 330, C. C. A. 7; City of Pocatello v. Fid. & Dep. Co., 267 F. 181, 182, C. C. A. 9; U. S. v. White Oak Coal Co., 5 F.(2d) 439, 441, C. C. A. 4; Miami Coca-Cola Bottling Co. v. Orange Crush Co., supra; Bernstein v. W. B. Mfg. Co., 238 Mass. 589, 591, 131 N.E. 200; Rehm-Zeiher Co. v. F. G. Walker Co., 156 Ky. 6, 14, 160 S.W. 777, 49 L. R. A. (N. S.) 694; Hutchinson Baking Co. v. Marvel, 270 Pa. 380, 113 A. 433; Bankers' Trust & Audit Co. v. Farmers' & Merchants' Bank, 163 Ga. 352, 136 S.E. 143; Page on Contracts (2d Ed.) vol. 1, § 572.
A different situation would have arisen if the makers had paid the notes, but they have never done so. The notes were renewed on December 31, 1924, and respondent still holds them.
Section 6 (1) of part 2 of the Uniform Partnership Act adopted in Michigan (Comp. Laws Mich. 1929, § 9846), where the written agreement was to be performed defines a partnership as "an association of two or more persons to carry on as co-partners a business for profit."
Upon the foregoing consideration, I think that respondent failed to establish before the Board by any substantial evidence that any partnership, as contemplated by the Partnership Act or by section 218(a) of the Revenue Acts involved, was ever effected between respondent and his daughters. The parties never became co-owners of respondent's property.
But, aside from all this, I think the matter can be brought into clearer view by the application of a very practical test. See Lucas v. American Code Co., 280 U.S. 445, 449, 50 S. Ct. 202, 74 L. Ed. 538. Suppose we lay aside everything that was spoken or written between the parties and examine the question from the standpoint of what they really did or failed to do. In this light it appears to me that the daughters did nothing of consequence. During the six years intervening between the execution of the agreement and the bringing of this action the daughters neither invested any money in the business nor contributed any service. The record fails to disclose that they even exercised the "privilege of looking over the books." Upon the other hand, respondent managed the business for the whole period exactly as he did before the execution of the agreement, with this one difference: He distributed to them such "profits" as he chose to distribute, taking into consideration their living necessities. But there is no magic in words. Profits imply investment, and there was no investment by the daughters.
NOTES
[1] "This Memorandum of Agreement, made and entered into this 31st day of December, 1918, by and between Millard D. Olds of the city of Cheboygan, Cheboygan County, Michigan, party of the first part, and each of his daughters, Edna Blanche Olds, Gertrude Gladys Olds, and Florence Olds Buhrman, parties of the second part.
"Witnesseth, that Millard D. Olds, party of the first part, agrees to sell one quarter interest in everything he owns to each of his daughters, parties of the second part, agreed to buy, giving their promissory note for $400,000.00 each. It is agreed that the business shall be conducted by party of the first part, by him and in his name, or in any other name that he sees fit to use. Parties of the second part are not to draw out any of the profits, only in such amounts as said party of the first part, sees fit to pay them, and as they, parties of the second part, may have need for their living and comforts during his lifetime. Parties of the second part, may have the privilege of looking over the books, and everything pertaining to the business, at any or all times. These notes are to be made for $400,000.00 each payable on demand and without interest.
"If at any time, either party of the parties of the second part, are in any way dissatisfied with the way said party of the first part, conducts the business, and think that their interest is being impaired by such management, party of the first part agrees to return their notes and take over their interest.
"In witness whereof, the parties hereto have here-unto set their hands the day and year above mentioned.
"Millard D. Olds
"Edna Blanche Olds
"Gertrude Gladys Olds
"Florence Olds Buhrman"
[2] "Cheyboygan, Mich., December 31, 1918.
"$400,000.00
"On Demand after date without grace for value received, I promise to pay to the order of Millard D. Olds Four Hundred Thousand and no/100 Dollars at M. D. Olds' office, without interest. Due on Demand.
"Gertrude Gladys Olds.
"(Written across the face of the above: `Paid with renewal note. M. D. Olds')" | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857870/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-057-CR
THE STATE OF TEXAS,
APPELLANT
vs.
JOHN REMSING,
APPELLEE
FROM THE COUNTY COURT AT LAW NO. 7 OF TRAVIS COUNTY
NO. 344,016, HONORABLE BRENDA KENNEDY, JUDGE
The State appeals the trial court's order granting appellee's pretrial plea of double
jeopardy. (1) In a single point of error, the State asserts that the trial court erred because the State
will not rely upon conduct for which appellee has been convicted to establish an essential element
of the offense of driving while intoxicated, second offense. See Tex. Rev. Civ. Stat. Ann. 6701l-1 (Supp. 1992). We agree and reverse the trial court's order.
Austin police officer Richard Colbert stopped the vehicle appellee was driving on
the night of September 5, 1990. After appellee failed field sobriety tests, Colbert arrested him
for driving while intoxicated. The officer also issued appellee a traffic citation for failure to drive
in a single marked lane. See Tex. Rev. Civ. Stat. Ann. art. 6701d, § 60(a) (1977). Prior to the pretrial hearing, appellee entered a plea of no contest to the offense of failure to operate a
vehicle within a designated lane.
The constitutional prohibition against double jeopardy includes protection against
a second prosecution for the same offense after conviction. See Illinois v. Vitale, 447 U.S. 410,
415 (1980); Ex parte Peterson, 738 S.W.2d 688, 689 (Tex. Crim. App. 1987). The resolution
of this issue in this cause turns on whether the two offenses, under the complaint and information
charging the violations, are the same offenses for a successive-prosecution, double-jeopardy
analysis. The first step in our determination is the test set out in Blockburger v. United States,
284 U.S. 299, 304 (1932):
The applicable rule is that, where the same act or transaction constitutes a violation
of two distinct statutory provisions, the test to be applied to determine whether
there are two offenses or only one is whether each provision requires proof of an
additional fact which the other does not.
The complaint charging appellee with failure to drive in a single marked lane
provides that appellee:
[D]id drive and operate a motor vehicle on a public street therein situated which
was then and there divided into two or more clearly marked lanes for vehicular
traffic and did then and there fail to drive said motor vehicle as nearly as practical
entirely within a single lane thereof.
The information charging appellee with driving while intoxicated provides in pertinent part that
appellee:
did then and there drive and operate a motor vehicle in a public place in Travis
County, to-wit: a street and highway while intoxicated, when said defendant did
not have the normal use of his mental and physical faculties by reason of the
introduction of alcohol into the said defendant's body and defendant had an alcohol
concentration of at least 0.10.
Each of the two offenses requires proof of a statutory element not required by the
other. The offense for which appellee had been convicted required proof that he did not drive as
nearly as practical within a single lane. The pending driving-while-intoxicated cause requires proof that appellee was intoxicated. Thus, because the two offenses each require proof of a
different element, the Blockburger test is satisfied.
However, the United States Supreme Court held in Grady v. Corbin, 110 S. Ct.
2084, 2093 (1990), that a subsequent prosecution must do more than merely survive the
Blockburger test. The court reasoned that a further examination must be made because the double
jeopardy clause bars a prosecution where the government, "to establish an essential element of an
offense charged in that prosecution, will prove conduct that constitutes an offense for which the
defendant has already been prosecuted." Grady, 110 S.Ct. at 2093. The court then stated that
the analysis requires a determination of "conduct" the State will prove, "not the evidence the State
will use to prove that conduct. . . . [T]he presentation of specific evidence in one trial does not
forever prevent the government from introducing that same evidence in a subsequent proceeding."
Grady, 110 S.Ct. at 2093. In a recent opinion, United States v. Felix, U.S. , No. 90-1599,
March 25, 1992, the Supreme Court stated that it would be an "extravagant reading of Grady" that
a "mere overlap in proof between two prosecutions" establishes a double jeopardy violation.
In Grady, the driver of the car hit by Corbin died as a result of injuries suffered
in the accident. Corbin pleaded guilty to the misdemeanor offenses of driving while intoxicated
and failing to keep to the right of the median. The issue before the Supreme Court was whether
subsequent charges growing out of the accident -- criminally negligent homicide and third degree
assault -- were the "same offenses" as the prior offenses for which Corbin had been convicted for
purposes of double jeopardy analysis. In a bill of particulars, the prosecution stated it would rely
on proof of the offenses of driving while intoxicated, veering across the median and driving forty
to fifty miles per hour in heavy rain to establish essential elements of the homicide and assault
offenses. Id. 110 S. Ct. at 2094. The court noted that the State had admitted it would prove the
entirety of the conduct for which Corbin was convicted. After concluding that the Double
Jeopardy Clause bars this successive prosecution, the Court stated:
This holding would not bar a subsequent prosecution on the homicide and assault
charges if the bill of particulars revealed that the State would not rely on proving
the conduct for which Corbin had already been convicted (i.e., if the State relied
solely on Corbin's driving too fast in heavy rain to establish recklessness or
negligence).
Grady, 110 S.Ct. at 2094.
In State v. Marshall, 814 S.W.2d 789 (Tex. App. 1991, pet. ref'd), the defendant
was charged with the misdemeanor offense of driving while intoxicated (DWI) and failure to stop
and render aid (FSRA), a felony conviction, as the result of the defendant driving an automobile
that collided with a motorcycle. The issue before the court was whether the State was barred from
prosecuting the felony FSRA offense after the defendant had pleaded guilty to the offense of DWI.
Utilizing the test enunciated in Grady, the court concluded:
The FSRA charge simply does not require the State to prove conduct constituting
an offense for which Marshall has been previously convicted. Although in the
FSRA case the State must prove some of the elements of the DWI conviction: that
Marshall was driving an automobile, that he struck the complainant, and that the
complainant was injured, these elemental facts alone do not constitute an offense
for which Marshall has been previously convicted. Unless the State is required to
prove every element of DWI, including Marshall's intoxication, as a prerequisite
to a conviction in the FSRA charge, the successive prosecutions are not for the
"same offense" as defined under the Double Jeopardy Clause's second guarantee.
Marshall, 814 S.W.2d at 796 (emphasis in original).
In Jacobs v. State, 823 S.W.2d 749 (Tex. App. 1992, no pet.), the defendant was
arrested for and pleaded guilty to driving while intoxicated, enhanced by an allegation of serious
bodily injury to a passenger in the defendant's car. Subsequently, the passenger died and the
defendant was indicted for involuntary manslaughter. After the trial court denied the defendant's
plea of double jeopardy, the defendant, pursuant to a plea bargain, plead nolo contendere to
involuntary manslaughter. On appeal, the court denied the defendant's contention that the trial
court erred in overruling his plea of double jeopardy, stating:
Here, the State did not rely on the fact of appellant's intoxication in order to
establish his guilt of involuntary manslaughter. Instead, the State alleged that
appellant recklessly caused the victim's death while operating a motor vehicle by
failing to maintain a single lane of traffic and driving at an unsafe speed. Because
the information and indictment rely on different conduct for the two offenses, we
hold that double jeopardy did not bar the prosecution for involuntary
manslaughter.
Jacobs, 823 S.W.2d at 751 (emphasis added).
In State v. Garcia, 810 S.W.2d 240 (Tex. App. 1991, no pet.), the defendant was
charged with running a red light and driving while intoxicated, both alleged offenses growing out
of the same occurrence. Prior to the prosecution for driving while intoxicated, the defendant was
convicted for the traffic-light violation. The trial court dismissed the driving while intoxicated
prosecution "due to a double jeopardy bar." Id. On appeal, the court found that the trial court
had not made the correct analysis under Grady:
The present ruling before us constitutes a misapplication of the rule in Grady. The
confusion no doubt arises from a failure to adequately discriminate between the
phrases "element of the offense" and "conduct that constitutes an offense."
Appellee and the lower court have adopted a position that the phrases are
synonymous and identified the common element of Appellee's prior convictions
and the instant DWI prosecution as driving a vehicle. Driving a vehicle is an
element of each offense charged against the Appellee, as was the case in Grady,
but driving alone is not "conduct which constitutes an offense."
Garcia, 810 S.W.2d at 241 (emphasis in original).
In Grady, the State was required to reprove every element of the offenses for which
Corbin had been convicted in order to establish the elements of criminally negligent homicide and
third degree assault. The Grady court found that the offenses for which Corbin had been
convicted constituted essential elements of the offenses.
In the instant cause, failure to drive in a single marked lane is not an essential
element of the offense of driving while intoxicated. The charging instruments rely on different
elements for the two offenses. The fact that the State may offer evidence of appellee's failure to
drive in a single marked lane to establish probable cause does not elevate this conduct to an
element of the offense. To conclude otherwise constitutes "a failure to adequately discriminate
between the phrases `element of the offense' and `conduct that constitutes an offense.'" Garcia,
810 S.W.2d at 241. "[P]recedents hold that a mere overlap in proof between two prosecutions
does not establish a double jeopardy violation." United States v. Felix, U.S. (No. 90-1599,
March 25, 1992). The State's point of error is sustained.
We reverse and remand to the trial court with instructions to vacate the dismissal
order.
Tom G. Davis, Justice
[Before Chief Justice Carroll, Justices B. A. Smith and Davis*]
Reversed and Remanded with Instructions
Filed: May 6, 1992
[Publish]
* Before Tom G. Davis, Judge (retired), Court of Criminal Appeals, sitting by assignment.
See Tex. Gov't Code Ann. § 74.003(b) (1988).
1. See U.S. Const. amends. V, XIV; Tex. Const. art. I, § 14. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2857890/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-470-CR
RUSSELL LOUIS FOLEY,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE COUNTY COURT AT LAW OF COMAL COUNTY,
NO. 90CR-1149, HONORABLE FRED CLARK, JUDGE
PER CURIAM
Appellant pleaded no contest to an information accusing him of possessing less than
two ounces of marihuana. Controlled Substances Act, Tex. Health & Safety Code Ann. §
481.121 (Pamph. 1992). Pursuant to a plea bargain agreement, the court assessed punishment at
incarceration for thirty days and a $450 fine, but suspended imposition of sentence and placed
appellant on probation for six months. By four points of error, appellant complains that the
county court at law erred by overruling his pretrial motion to suppress evidence. See Lemmons
v. State, 818 S.W.2d 58 (Tex. Crim. App. 1991).
As he was patrolling Landa Park shortly after midnight on April 15, 1990, New
Braunfels police officer Kevin Fazzone saw appellant and a companion standing beside a pickup
truck. The officer approached the two men to tell them there was a midnight curfew in the park
and they would have to leave. The officer noticed that appellant displayed typical signs of
intoxication: a strong odor of intoxicating beverage, bloodshot eyes, unsteady balance, and
slurred speech. Based on these observations, the officer concluded that appellant was intoxicated.
During cross-examination, Fazzone acknowledged that appellant was not armed, was not verbally
or physically threatening, and was able to understand the officer's questions.
Officer Tommy Gonzales responded to Fazzone's call for a backup. Gonzales
described appellant and his companion as very unsteady on their feet; they were leaning against
the pickup in order to stand. In the officer's opinion, both men were very intoxicated. Gonzales
arrested appellant for public intoxication and conducted a pat-down search of his person. A bulge
in appellant's pants pocket proved to be a plastic bag containing a green leafy substance the officer
believed was marihuana. Two more bags of suspected marihuana were found in a jacket inside
the pickup.
Appellant urges, as he did below, that the police officers did not have probable
cause to arrest him for public intoxication. Appellant does not dispute the fact of his intoxication,
nor does he deny that Landa Park is a public place. Appellant contends, however, that the facts
known to the officers at the time of his arrest would not warrant a prudent person in believing that
appellant was a danger to himself or to another. See Tex. Penal Code Ann. § 42.08(a) (1989);
Britton v. State, 578 S.W.2d 685, 689 (Tex. Crim. App. 1979) (opinion on rehearing). We
disagree.
Because of the curfew, it was necessary for appellant and his companion to leave
the park. The officers could reasonably conclude that appellant and his equally intoxicated friend
would endanger themselves and the general public if they drove away in the pickup. See Dickey
v. State, 552 S.W.2d 467 (Tex. Crim. App. 1977); Bentley v. State, 535 S.W.2d 651 (Tex. Crim.
App. 1976). The officers also could reasonably conclude that the two men would endanger
themselves if they attempted to walk home, given the fact that it was dark and there was vehicular
traffic in the area. See Balli v. State, 530 S.W.2d 123 (Tex. Crim. App. 1975).
Appellant relies on dicta found in this Court's opinion in Collins v. State, 795
S.W.2d 777, 779 n. 4. In Collins, the police officer met the intoxicated defendant at a service
station. The officer testified that the defendant offered to remain at the station if he was too
intoxicated to drive. The officer also stated that the defendant appeared to be able to take care
of himself. We believe that these facts distinguish Collins from the cause now before us. We also
believe that this cause is factually distinguishable from the following cases cited in Collins, in each
of which it was held that the police did not have probable cause to arrest for public intoxication:
Davis v. State, 576 S.W.2d 378 (Tex. Crim. App. 1978); Berg v. State, 720 S.W.2d 199 (Tex.
App. 1986, pet. ref'd); Carey v. State, 695 S.W.2d 306 (Tex. App. 1985, no pet.).
We conclude that the police had probable cause to arrest appellant without a
warrant for the offense of public intoxication. Tex. Code Crim. Proc. Ann. art. 14.01(b) (1977).
The subsequent search was authorized as incident to that lawful arrest. Rogers v. State, 774
S.W.2d 247, 264 (Tex. Crim. App. 1989). The trial court did not err by overruling the motion
to suppress.
The judgment of conviction is affirmed.
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Affirmed
Filed: April 22, 1992
[Do Not Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542163/ | 947 A.2d 135 (2008)
179 Md. App. 589
Mireille ZIMMER-RUBERT
v.
BOARD OF EDUCATION OF BALTIMORE COUNTY.
No. 838, September Term, 2007.
Court of Special Appeals of Maryland.
May 5, 2008.
*136 Jon B. Stolarz, Baltimore, for appellant.
Leslie R. Stellman (Shani K. Whisonant, Hodes, Pessin & Katz, PA, on brief), Towson, for appellee.
Panel DAVIS, ADKINS, RASIN, GALE E. (specially assigned), JJ.
*137 DAVIS, J.
Appellant, Mireille Zimmer-Rubert, filed suit in the Circuit Court for Baltimore County against appellee, the Board of Education for Baltimore County, to recover $100,000 in compensatory damages for age discrimination based upon the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq. (Supp. III 1994). Pursuant to Maryland Rule 2-322, appellee filed a Motion to Dismiss for insufficiency of service of process, lack of jurisdiction and failure to state a claim upon which relief can be granted. The circuit court granted appellee's motion and dismissed appellant's claim without prejudice. This appeal was thereafter timely noted in which appellant presents the following issues for our review:
I. Whether [appellee] is a local autonomous entity, and not a state agency, making it subject to suit under the [ADEA].
II. Whether the [c]ircuit [c]ourt erred when it determined that [Md.Code Ann., Cts. & Jud. Proc. § 5-518(c) (1974, 2001 Repl.Vol.)][1] did not waive sovereign immunity for [appellee].
For the reasons that follow, we conclude that, although appellee is a state agency, Md.Code Ann., Cts. & Jud. Proc. § 5-518(c) (1974, 2001 Repl.Vol.) constitutes a specific waiver of sovereign immunity for recovery of damages of up to $100,000. Consequently, we shall reverse the judgment of the Circuit Court for Baltimore County and remand for further proceedings.
FACTUAL BACKGROUND
Born on January 16, 1949, appellant is an experienced educator qualified to teach English, Spanish, German and French. In March of 2004, appellant filed an application to teach foreign language in appellee's high schools. Unsuccessful in her quest to secure a teaching position and, upon learning that young teachers were hired to fill vacant positions for which she was qualified, appellant filed a Charge of Discrimination with the Equal Employment Opportunity Commission. On March 17, 2006, appellant was granted a Right to Sue letter.
Within ninety days, appellant filed a Complaint in the circuit court[2] against appellee, alleging age discrimination and "demanding judgment for compensatory damages in the amount of $100,000, attorney fees, pursuant to 29 U.S.C. § 626(b), interest and the costs of [the] action." Appellee subsequently moved to dismiss appellant's suit on the grounds stated supra.
A hearing on appellee's motion was held on May 25, 2007. In a ruling from the bench on that same day, the trial court granted appellee's motion, finding that appellant's ADEA claim was barred by appellee's Eleventh Amendment immunity. Explaining her decision, the trial judge opined that, "on further reflection in looking at [C.J. § 5-518], as well as [Alden v. Maine, 527 U.S. 706, 119 S. Ct. 2240, 144 L. Ed. 2d 636 (1999) ], that the 11th Amendment immunity must be specifically waived, and it's not."
STANDARD OF REVIEW
In reviewing a motion to dismiss, "we accept all well-pled facts in the complaint, *138 and reasonable inferences drawn from them, in a light most favorable to the non-moving party." Converge Servs. Group, LLC v. Curran, 383 Md. 462, 475, 860 A.2d 871 (2004). We will only find that dismissal was proper "if the alleged facts and permissible inferences, so viewed, would, if proven, nonetheless fail to afford relief to the plaintiff." Sprenger v. Public Serv. Comm'n of Maryland, 400 Md. 1, 21, 926 A.2d 238 (2007). Thus, our task is confined to determining whether the trial court was legally correct in its decision to dismiss. Id.
ANALYSIS
I
In a four-prong argument, appellant argues that, when considering the factors for determining whether an entity is an agency of the State for Eleventh Amendment purposes, "the overwhelming and inescapable conclusion is that appellee is not a[S]tate agency, but an autonomous entity not entitled to sovereign immunity protection." Appellee's argument is two-fold. Preliminarily, appellee maintains that the issue sub judice is not properly before us on appeal. Appellee contends, however, that, if we choose to address this issue, the Court of Appeals and the United States District Court for the District of Maryland have consistently held that Maryland school boards are State agencies and, thus, afforded Eleventh Amendment immunity protections.[3]
Throughout the May 25 hearing and responsive pleadings filed, appellant argued that the General Assembly prohibited the county boards of education from raising the defense of sovereign immunity to any claim of $100,000 or less and, therefore, appellee was barred from asserting Eleventh Amendment immunity. Upon our review of the record, we found no instances in which appellant challenged the "State agency" status of appellee.
Maryland Rule 8-131(a) provides:
Ordinarily, the appellate court will not decide any other issue unless it plainly appears by the record to have been raised in or decided by the trial court, but the Court may decide such an issue if necessary or desirable to guide the trial court or to avoid the expense and delay of another appeal.
See In re Katherine C., 390 Md. 554, 560, 890 A.2d 295 (2006) (quoting State v. Bell, 334 Md. 178, 189, 638 A.2d 107 (1994)) (The primary purpose of Rule 8-131(a) is "to ensure fairness for all parties in a case and to promote the orderly administration of law.").
Although appellant never raised the issue of whether appellee is a local autonomous entity or a State agency, the trial court, in finding that C.J. § 5-518(c) did not specifically waive Eleventh Amendment immunity, made a threshold assumption that appellee is an "arm of the State."[4]See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 141-44, 113 S. Ct. 684, 121 L. Ed. 2d 605 (1993) (opining that Eleventh *139 Amendment immunity is only available to states and "state entities").
In order to review the propriety of the trial court's ruling, we must determine whether appellee is a state entity entitled to Eleventh Amendment protections. See Weatherly v. Great Coastal Express Co., 164 Md.App. 354, 367, 883 A.2d 924 (2005) (holding that "critical to our determination of an issue on appeal is the trial court's opportunity to consider the issue"). Furthermore, for this Court to remand the issue sub judice to the trial court for "full consideration" would be a waste of judicial resources. In an effort to avoid the expense and delay of another appeal, we shall determine whether appellee is an arm of the State or a local autonomous entity for the purposes of the Eleventh Amendment.
The Eleventh Amendment provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. The Supreme Court, in its interpretation of the Amendment, has held that it "largely shields [s]tates from suit in federal court without their consent, leaving parties with claims against a[s]tate to present them, if the [s]tate permits, in the [s]tate's own tribunals." Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 39, 115 S. Ct. 394, 130 L. Ed. 2d 245 (1994). Similarly, the Court of Appeals has opined, "It was settled over a hundred years ago that the Eleventh Amendment to the United States Constitution provides a state with immunity to claims arising under federal law and asserted by a citizen of that state in federal court." Maryland Military Dep't v. Cherry, 382 Md. 117, 122, 854 A.2d 1200 (2004).
While "[t]he bar of the Eleventh Amendment to suit in federal courts extends to states and state officials," it "does not extend to counties and similar municipal corporations." Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S. Ct. 568, 50 L. Ed. 2d 471 (1977) (internal citations omitted). Only the states themselves or a state agency or instrumentality that functions as an "arm of the state" is entitled to invoke sovereign immunity or the immunity afforded by the Eleventh Amendment. See Regents of the Univ. of California v. Doe, 519 U.S. 425, 429, 117 S. Ct. 900, 137 L. Ed. 2d 55 (1997); see also Ram Ditta v. Maryland Nat. Capital Park and Planning Comm'n, 822 F.2d 456, 457 (4th Cir.1987) (holding that, by its terms, the Eleventh Amendment applies only to "one of the United States" and "does not immunize political subdivisions of the state, such as municipalities and counties, even though such entities might exercise a `slice of state power'").
Determining whether appellee is an arm or instrumentality of the State, entitled to the protections of the Eleventh Amendment, or a county or local agency, to which immunity does not apply, requires careful scrutiny. The federal courts have suggested several factors in ascertaining whether an entity is the alter ego of the state. The principal factor, upon which courts have virtually always relied, is whether the state treasury will be responsible for paying any judgment that might be awarded against the entity. Lewis v. Bd. Educ. of Talbot County, 262 F. Supp. 2d 608, 612 (D.Md.2003). In the case sub judice, it is clear that a judgment in appellant's favor would not have a direct impact upon the State treasury. Accordingly, our inquiry focuses on three critical factors, which may provide a sufficient nexus between appellee and the State so *140 that appellant's suit against appellee would amount to a suit against the State:
(1) the degree of control that the State exercises over the entity or the degree of autonomy from the State that the entity enjoys; (2) the scope of the entity's concerns-whether local or statewide-with which the entity is involved; and (3) the manner in which State law treats the entity.
Id. (citing Cash v. Granville County Bd. of Educ., 242 F.3d 219, 224 (4th Cir.2001)).
In Lewis, a former employee of the Board of Education of Talbot County brought suit against the Board and its agents for breach of contract, wrongful discharge, promissory estoppel and violations of federal and state constitutional rights. Lewis, 262 F.Supp.2d at 610. The Board asserted, inter alia, that it was protected from suit by sovereign immunity, pursuant to the Eleventh Amendment. Id. at 612. The federal court concluded that the Board was entitled to sovereign immunity with respect to all claims, because it was an arm of the State. Id. at 612-14. Addressing the Board's autonomy, the court found:
Among other things, the Talbot County Board's members are appointed by the Governor of Maryland, not locally elected.[[5]] See [Md.Code Ann., Educ. § 3-108 (1978, 2006 Repl.Vol.)].[[6]] In Maryland, the Board may buy, sell, and hold property only with the approval of the State Superintendent. See [Educ. § 4-115]. Each new school established by the Talbot County Board becomes a "part of the State program of public education." [Educ. § 4-109]. The Board's employment and teacher certification practices are more closely regulated in Maryland than those of the boards in North Carolina.[7]See, e.g., [Educ. §§ 6-202 & 4-205(c)] (the [S]tate, through the State Board of Education, is the ultimate judge of the validity of dismissals for both professional and non-professional employees); Md. Regs.Code tit. 13A § 07.02.01 ([S]tate controls form of contract for certificated employees); Md. Regs.Code tit. 13A §§ 12, et seq. ([S]tate defines and enforces teacher certification requirements). While both boards exercise some budgetary discretion, the Talbot County board must submit to an annual audit conducted by the [S]tate. See [Educ. § 5-109]. Moreover, the State of Maryland retains the power to reconstitute and oversee the operation of schools that do not meet [S]tate standards for student performance. See Md. Regs. Code tit. 13A § 01.04.08.
Id. at 613.
Similarly, in Jones v. Frederick County Bd. of Educ., 689 F. Supp. 535, 538 (D.Md. 1988), the United States District Court for the District of Maryland concluded that the Frederick County Board of Education *141 was an agent of the State, entitled to Eleventh Amendment immunity, reasoning
Maryland law creates the county boards of education and governs their composition and membership. The statute requires the county boards to carry out the applicable provisions of [the Education Article of Maryland] and the bylaws, rules, regulations, and policies of the State Board [of Education]. The county boards must obtain the [S]tate's approval regarding the establishment of schools, acquisition or disposition of property, construction or renovation of buildings, and curriculum. The [S]tate appropriates substantial funds to support the county boards. In return, the county boards must acquiesce to an annual audit and submit an annual budget to the [S]tate.
Id. at 537-38 (internal citations and quotations omitted); see, e.g., Adams v. Calvert County Pub. Schs., 201 F. Supp. 2d 516, 521 (D.Md.2002) ("[Calvert County Public Schools are] immune from suit for monetary damages under the ADEA"); Biggs v. Bd. of Educ. of Cecil County, 229 F. Supp. 2d 437, 444 (D.Md.2002) ("[T]he local school board is a state agency entitled to invoke the protections of Eleventh Amendment immunity"); Dunn v. Baltimore County Bd. of Educ., 83 F. Supp. 2d 611 (D.Md.2000) (dismissing claim pursuant to ADEA because Baltimore County Board of Education is an agency of the State and, thus, immune from suit); Rosenfeld v. Montgomery County Pub. Schs., 41 F. Supp. 2d 581, 586 (D.Md.1999) ("[Montgomery County Public Schools] and its members, in their official capacities, are [S]tate entities.").
Considering whether appellee's scope of concern is local or statewide in nature, we note that the public school system in Maryland is a comprehensive statewide system, created by the General Assembly in conformance with the mandate of Article VIII, § 1 of the Maryland Constitution to establish, throughout the State, a thorough and efficient system of free public schools. Twenty-four county boards were thereafter created by the General Assembly as an integral part of that state system. Educ. § 3-103. These county boards are subject to intensive supervision by the State Board of Education in virtually every aspect of their operations, which in turn affects the educational policy and administration of the entire public school system.
Notwithstanding the supervision by the State Board of Education, each county board is charged with maintaining and improving the local education system. Educ. § 4-101 (providing that "[e]ducational matters that affect the counties shall be under the control of a county board of education in each county" and each board "shall seek in every way to promote the interests of the schools under its jurisdiction"). Each board also determines the educational policies of the county school system. § 4-108(3). Although the "scope of concern" factor tilts both for and against a finding of sovereign immunity, the degree of control that the State exercises over appellee and the State's treatment of appellee, as we shall explain infra, clearly outweighs this factor.
The Court of Appeals undoubtedly considers county school boards instrumentalities of the State rather than independent, local bodies. See, e.g., State v. Bd. of Educ. of Montgomery County, 346 Md. 633, 635 n. 1, 697 A.2d 1334 (1997) ("The various county boards of education are state agencies."); Bd. of Educ. of Prince George's County v. Secretary of Personnel, 317 Md. 34, 44 n. 5, 562 A.2d 700 (1989) ("It is settled that county boards of education are state agencies."); Bd. of Educ. of Prince George's County v. Prince George's County Educators' Ass'n, 309 Md. 85, 95 n. 3, *142 522 A.2d 931 (1987) ("County boards of education are, of course, state agencies and not agencies of the county government."); Montgomery County Educ. Ass'n v. Bd. of Educ. of Montgomery County, 311 Md. 303, 317, 534 A.2d 980 (1987) (recognizing the local boards as state agencies); McCarthy v. Bd. of Educ. of Anne Arundel County, 280 Md. 634, 639-50, 374 A.2d 1135 (1977) (examining the history of Maryland public education from colonial times, through the Constitutions of 1864 and 1867 and the concomitant statutes to conclude that the Board of Education of Anne Arundel County is a State agency); Bd. of Educ. of Montgomery County v. Montgomery County, 237 Md. 191, 197, 205 A.2d 202 (1964) (noting the local school boards are not a branch of the county government nor an agency under its control); see also Norville v. Anne Arundel County Bd. of Educ., 160 Md.App. 12, 862 A.2d 477 (2004), vacated on other grounds, 390 Md. 93, 887 A.2d 1029 (2005) (extensively discussing and ultimately holding that the Anne Arundel Board of Education is an arm of the State for purposes of Eleventh Amendment immunity).
Appellant, however, contends that these "earlier decisions" of the Court of Appeals rely upon the basis of stare decisis and not an in-depth analysis in holding that county boards of education are State agencies. In support of her proposition, appellant places considerable emphasis on Chesapeake Charter, Inc. v. Anne Arundel County Bd. of Educ., 358 Md. 129, 747 A.2d 625 (2000), in which Judge Wilner wrote: "In terms of their composition, jurisdiction, funding, and focus, [the county schools boards] clearly have a local flavor." Appellant's reliance on Chesapeake Charter, Inc., however, is misplaced as the case suggests to us that, under very limited circumstances, a county board of education in Maryland is to be treated as a local agency rather than as an arm of the State.
Chesapeake Charter, Inc. involved "a procurement dispute" between three school bus contractors and the Anne Arundel County Board of Education. Id. at 131, 747 A.2d 625. The Court had to determine whether the procurement of services by a county board of education was subject to the State's General Procurement Law. The Court recognized that county school boards have consistently been regarded as State agencies, but carved out a particular area in which a board is not deemed an agency of the State, holding that "[a]lthough legally State agencies . . . they are not normally regarded, for structural or budgetary purposes, as units within the Executive Branch of the State government." Id. at 137, 747 A.2d 625.
After reviewing the history of the General Procurement Law and the Education Article, the Court concluded that a county school board is not a "unit" under State procurement law. Id. at 145-46, 747 A.2d 625. As we read Chesapeake Charter Inc., the Court left intact the principle that county school boards are ordinarily state agencies. If the case were to signal a change in regard to the Court's longstanding history of holding that county school boards are State entities, the Court of Appeals would have, with specificity, made that known. See Norville, 160 Md.App. at 59, 862 A.2d 477 (concluding that the Court of Appeals recognized only a limited exception with respect to budgetary matters and procurement, but left virtually intact the principle that county boards are ordinarily considered arms of the State).
Statutorily, Maryland does not include county school boards within the definition of "local government" in the Local Government Tort Claims Act. C.J. § 5-301. Furthermore, upon reviewing the legislative scheme governing public education in Maryland, *143 it is clear that, while broad authority is conferred upon county school boards, their respective powers are limited by the State. See Norville, 160 Md.App. at 45-50, 862 A.2d 477 (providing an in-depth discussion of the legislative scheme governing public education in Maryland). For instance, considerable control over matters of personnel are conferred upon county boards. On the other hand, all teachers in the State have identical contracts on forms mandated by the State Board, see COMAR 13A.07.02.01B, and the State Board of Education has the final word on local employee termination appeals brought by certified employees. See Educ. § 6-202(a)(4). Moreover, the State Superintendent has the sole authority to terminate a county superintendent. Educ. § 4-201(e) (providing the State Superintendent with the sole authority to remove a county superintendent from office); see also Educ. § 4-201(c)(2) (setting forth that the "appointment" of a county superintendent is not valid unless approved in writing by the State Superintendent).
County boards have the power to hold property, Educ. § 4-114, and to condemn property without State approval. Educ. § 4-119. In addition, a county school board may consolidate schools, Educ. § 4-120, and enter into cooperative agreements for the joint administration of programs. Educ. § 4-123. The State, however, retains supervisory control over local development of school property. Although county boards may purchase real property, build and remodel school buildings and select land for school sites, they may only do so with the approval of the State Superintendent of Schools. Educ. §§ 2-303(f), 4-115, 4-116.
Furthermore, even though Maryland's twenty-four county boards of education enjoy considerable latitude in budgetary matters, Educ. §§ 5-102, 5-103, the boards have no independent taxing authority. Consequently, Maryland school boards must rely completely upon federal, state and local government funding to carry out the educational programs mandated by the State Board. Each year, "Subject to the rules and regulations of the State Board and with the advice of the county superintendent," each county prepares an annual budget in accordance with the operating and capital budget categories prescribed by statute. Educ. § 5-101. Discounting federal funds, the financing for the operating budgets of the school boards is shared between the State and each county pursuant to statutory mandates. Educ. §§ 5-101, 5-202, et seq.; COMAR 13A.02.05.01. In calculating the amount of state funding for school system operating budgets, the Education Article sets forth a "wealth equalization" process whereby each county's net taxable income is calculated so that school systems in counties with a relatively smaller tax base receive a larger proportion of State funding. See Hornbeck v. Somerset County Bd. of Educ., 295 Md. 597, 620-32, 458 A.2d 758 (1983) (describing Maryland's formula for State school budgeting and holding that Maryland's Constitution and Declaration of Rights requires "an adequate education measured by contemporary educational standards").
Given the pervasive State control over all aspects of Maryland public education and following the clear precedent of the Court of Appeals and the United States District Court for the District of Maryland, we hold that appellee is a State agency. Maryland boards of education have never been autonomous local entities as suggested by appellant, but have been, since their inception, arms of the State and, therefore, immune from suit under the Eleventh Amendment.
*144 II
Appellant argues that, even if appellee is a State agency, C.J. § 5-518(c) clearly and unambiguously abrogates sovereign immunity for any claim, up to $100,000, against a county board of education. Therefore, according to appellant, appellee is barred from asserting Eleventh Amendment immunity as a defense to her claim. Appellee, on the other hand, posits that appellant appears to "confuse and conflate" the notions of "Eleventh Amendment immunity" and "sovereign immunity." Because there is a clear distinction between the State's "sovereign immunity," as contemplated by C.J. § 5-518(c) and "constitutional immunity" afforded to the State and State entities by the Eleventh Amendment, appellee argues that the statute's partial waiver of sovereign immunity does not constitute an unequivocal waiver of its Eleventh Amendment immunity from liability under the ADEA.
At the outset, we find it useful to distinguish the related but not identical concepts of the State's sovereign immunity and Eleventh Amendment immunity. The Eleventh Amendment is "rooted in a recognition that the [s]tates, although a union, maintain certain attributes of sovereignty, including sovereign immunity." Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30, 39, 115 S. Ct. 394, 130 L. Ed. 2d 245 (1994). The Amendment was adopted for "twin reasons": (1) "the [s]tates' fears that federal courts would force them to pay their Revolutionary War debts, leading to their financial ruin," and (2) to emphasize "the integrity retained by each [s]tate in our federal system." Id.
Sovereign immunity "derives not from the Eleventh Amendment but from the structure of the original Constitution itself." Alden v. Maine, 527 U.S. 706, 728, 119 S. Ct. 2240, 144 L. Ed. 2d 636 (1999). The Alden Court acknowledged that the Supreme Court has "sometimes referred to the [s]tates' immunity from suit as `Eleventh Amendment immunity,'" but that phrase, while a "convenient shorthand," is also something of a "misnomer" for "sovereign immunity of the [s]tates neither derives from, nor is limited by, the terms of the Eleventh Amendment." Id. Expounding upon the difference, the Supreme Court wrote:
Rather, as the Constitution's structure, its history, and the authoritative interpretations by this Court make clear, the [s]tates' immunity from suit is a fundamental aspect of the sovereignty which the [s]tates enjoyed before the ratification of the Constitution, and which they retain today (either literally or by virtue of their admission into the Union upon an equal footing with the other [s]tates) except as altered by the plan of the Convention or certain constitutional Amendments.
Id.; See Federal Maritime Comm'n v. South Carolina State Ports Auth., 535 U.S. 743, 753, 122 S. Ct. 1864, 152 L. Ed. 2d 962 (2002) ("[T]he Eleventh Amendment does not define the scope of the [s]tates' sovereign immunity; it is but one particular exemplification of that immunity."); Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 267-68, 117 S. Ct. 2028, 138 L. Ed. 2d 438 (1997) (holding that Eleventh Amendment immunity is but an example of state sovereign immunity as it applies to suits filed in federal court against unconsenting states by citizens of other states).
The principle of sovereign immunity, preserved by constitutional design, "accords the `[s]tates the respect owed them as members of the federation.'" Alden, 527 U.S. at 748-49, 119 S. Ct. 2240 (quoting Puerto Rico Aqueduct and Sewer Authority, 506 U.S. at 146, 113 S. Ct. 684); see also Coeur d'Alene Tribe, 521 U.S. at 268, 117 S. Ct. 2028 (recognizing "the dignity and *145 respect" afforded to a state, which the immunity is designed to protect). Therefore, as the Court of Appeals has opined, the doctrine "precludes suit against governmental entities absent the State's consent." ARA Health Servs., Inc. v. Dep't of Public Safety and Corr. Servs., 344 Md. 85, 91-92, 685 A.2d 435 (1996).
In Kimel v. Florida Bd. of Regents, 528 U.S. 62, 120 S. Ct. 631, 145 L. Ed. 2d 522 (2000), the Supreme Court examined whether the ADEA contained a clear abrogation of the states' Eleventh Amendment immunity from suit by individuals and whether the extension of the ADEA to the states was a proper exercise of Congress's power under § 5 of the Fourteenth Amendment, thereby constituting a valid exercise of congressional power to abrogate the states' Eleventh Amendment immunity from suit by individuals. The Supreme Court concluded that, "[e]ven where the Constitution vests in Congress complete lawmaking authority over a particular area, the Eleventh Amendment prevents congressional authorization of suits by private parties against unconsenting [s]tates." Id. at 78, 120 S. Ct. 631.
In Alden, the Supreme Court affirmed the applicability of the Eleventh Amendment to states and state entities sued in their own courts, holding that Article III, § 1 of the United States Constitution "in no way suggests . . . that state courts may be required to assume jurisdiction that could not be vested in the federal courts and forms no part of the judicial power of the United States." Id. at 753, 119 S. Ct. 2240. The Supreme Court, on the other hand, made clear that state law could abrogate the state's Eleventh Amendment immunity. Id. at 755, 119 S. Ct. 2240; see also Robinson v. Bunch, 367 Md. 432, 439, 788 A.2d 636 (2002).
The General Assembly, in Section 4-105(d)[8] of the Education Article, provided that a "county board shall have the immunity from liability described under § 5-518 of the Courts and Judicial Proceedings Article." Section 5-518(b), in turn, provides that "[a] county board of education . . . may raise the defense of sovereign immunity to any amount claimed above the limit of its insurance policy or, if self-insured . . . above $100,000." Subsection (c) of § 5-518, however, prohibits a county board of education from "rais[ing] the defense *146 of sovereign immunity to any claim of $100,000 or less."
The interpretation of a statute is a judicial function. Muhl v. Magan, 313 Md. 462, 481-82, 545 A.2d 1321 (1988). Our goal is to "ascertain and effectuate legislative intent," Consol. Constr. Servs., Inc. v. Simpson, 372 Md. 434, 456, 813 A.2d 260 (2002), which can "be divined through an analysis of the plain language of the statute itself and from consideration of the statutory scheme as a whole." Moore v. Miley, 372 Md. 663, 677, 814 A.2d 557 (2003). We construe the words of a statute "according to their common and everyday meaning." Id. When the words are "clear and unambiguous and express a plain meaning, we will give effect to the statute as it is written." Id. (citation and quotation marks omitted). We may not "modify an unambiguous statute by adding or removing words to give it a meaning not reflected by the words the Legislature chose to use, nor `engage in forced or subtle interpretation in an attempt to extend or limit the statute's meaning.'" Facon v. State, 375 Md. 435, 446, 825 A.2d 1096 (2003) (citation omitted). To the extent "reasonably possible," we read a statute so "that no word, phrase, clause or sentence is rendered surplusage or meaningless." Mazor v. State of Md., Dep't of Corr., 279 Md. 355, 360, 369 A.2d 82 (1977).
To effectuate the legislative intent, we 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." Chesapeake Charter, Inc., 358 Md. at 135, 747 A.2d 625 (quoting Tucker v. Fireman's Fund Ins. Co., 308 Md. 69, 75, 517 A.2d 730 (1986)). When we are unable to determine the legislative intent, we may look to legislative history, the statutory purpose and the "relative rationality and legal effect of various competing constructions." Baltimore County v. RTKL Assocs., 380 Md. 670, 678, 846 A.2d 433 (2004).
Patently, the language of C.J. § 5-518(c) unequivocally waives "sovereign immunity" for any claim of $100,000 or less. See Lizzi v. Washington Metro. Area Transit Auth., 156 Md.App. 1, 9-10, 845 A.2d 60 (2003) (holding that, for the General Assembly to abrogate sovereign immunity, a waiver must be "unequivocally expressed in the statutory text" and that a waiver must "be strictly construed, in terms of its scope, in favor of the sovereign"); see also State v. Sharafeldin, 382 Md. 129, 140, 854 A.2d 1208 (2004) (opining that the State's immunity from suit is "one of the highest attributes of sovereignty" and that courts decline to abrogate sovereign immunity by judicial fiat).
Because the plain language of C.J. § 5-518(c) unambiguously waives appellee's sovereign immunity for claims up to $100,000, appellant contends that drawing any distinction between sovereign immunity and Eleventh Amendment immunity is unnecessary and, in support of her contention, points to our decision in Norville, supra. In Norville, a former employee of the Anne Arundel County Board of Education sued the Board, alleging age discrimination under the ADEA. Similar to the appeal sub judice, the former employee argued that the county board was not an arm of the State for purposes of Eleventh Amendment immunity and, alternatively, that, if entitled to Eleventh Amendment immunity, the General Assembly waived the Board's sovereign immunity pursuant to C.J. § 5-518(c).
We concluded that the Anne Arundel County Board of Education was a state agency and that the "plain language of the statute indicates that the Board may not raise the defense of sovereign immunity in *147 regard to any claim of $100,000 or less." Id. at 64-65, 862 A.2d 477 (emphasis supplied). The Court of Appeals granted the Board's petition for writ of certiorari to decide whether we erroneously construed C.J. § 5-518(c) as a waiver of the Board's immunity from suit under the Eleventh Amendment. The Court, however, never reached the question presented because, as it explained, the former employee's suit was barred by the principles of res judicata.[9] 390 Md. at 102-03, 887 A.2d 1029. Accordingly, the Court vacated the judgment and remanded the case to us with instructions to dismiss the appeal.
Because our decision was vacated, appellee argues that it is improper for appellant to assign precedential value to our analysis and holding. In West v. State, 369 Md. 150, 157, 797 A.2d 1278 (2002), the Court of Appeals held that "a Court of Special Appeals' opinion underlying a judgment, which is reversed or vacated in its entirety by this Court on another ground, may, depending upon the strength of its reasoning, constitute some persuasive authority in the same sense as other dicta may constitute persuasive authority." Appellee, however, maintains that there is nothing persuasive about our reasoning in Norville and argues that our decision overlooks Supreme Court precedent that neither consent to be sued in state court nor a general waiver of sovereign immunity is sufficient to constitute a waiver of Eleventh Amendment immunity. See Florida Dep't of Health & Rehabilitative Servs. v. Florida Nursing Home Ass'n, 450 U.S. 147, 149-50, 101 S. Ct. 1032, 67 L. Ed. 2d 132 (1981) (holding consent to be sued in state court insufficient); Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241, 105 S. Ct. 3142, 87 L. Ed. 2d 171 (1985) (holding general waiver of sovereign immunity insufficient).
According to appellee, in order to effectively waive Eleventh Amendment immunity, C.J. § 5-518(c) would have to do more than reference "any claims." Instead, relying upon the unreported decision[10] in Barnes v. Anne Arundel County Bd. of Educ., 2001 WL 121962 (D.Md. 2001), appellee insists that the statute would need to specifically assert that immunity under the Eleventh Amendment is waived. In Florida Dept. of Health and Rehab. Servs. v. Florida Nursing Home Ass'n, 450 U.S. 147, 101 S. Ct. 1032, 67 L. Ed. 2d 132 (1981), cited by Barnes, the Supreme Court reviewed whether Florida expressly waived its Eleventh Amendment immunity and consented to suit in federal court based upon two acts of the State. The first was a Florida law providing that the Department of Health and Rehabilitative Services is a "body corporate" with the capacity to "sue and be sued." Id. at 149, 101 S. Ct. 1032. The second was an agreement under the Medicaid Program in which the Department of Health and Rehabilitative *148 Services agreed to "recognize and abide by all State and Federal Laws, Regulations, and Guidelines applicable to participation in an administration of, the Title XIX Medicaid Program." Id.
The Supreme Court opined that "we will find waiver only where stated `by the most express language or by such overwhelming implications from the text as [will] leave no room for any other reasonable construction'" and added that the "mere fact that a [s]tate participates in a program through which the Federal Government provides assistance for the operation by the [s]tate of a system of public aid is not sufficient to establish consent on the part of the [s]tate to be sued in the federal courts." Id. at 150, 101 S. Ct. 1032 (quoting Edelman v. Jordan, 415 U.S. 651, 673, 94 S. Ct. 1347, 39 L. Ed. 2d 662 (1974)). The lower court holding could not be reconciled with these principles and, accordingly, the Supreme Court held that Florida did not waive its immunity under the Eleventh Amendment. Id.; see also Edelman, 415 U.S. at 673-74, 94 S. Ct. 1347 (establishing that neither such participation in itself, nor a concomitant agreement to obey federal law, is sufficient to waive the protection of the Eleventh Amendment).
Conversely, in Port Auth. Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 110 S. Ct. 1868, 109 L. Ed. 2d 264 (1990), the Supreme Court concluded that the statutory consent to suit provision in a bi-state compact between New York and New Jersey, creating the Port Authority of New York and New Jersey, elucidated by a venue provision, established the states' waiver of Eleventh Amendment immunity. Id. at 306-08, 110 S. Ct. 1868. In Feeney, an employee of a railroad owned by the Port Authority of New York and New Jersey brought an action against the railroad pursuant to the Federal Employers' Liability Act and related federal statutes. The Port Authority moved to dismiss the complaints, asserting that it enjoyed New York and New Jersey's sovereign immunity.
New York and New Jersey, however, in a consent to suit provision, provided that they "consent to suits, actions, or proceedings of any form or nature at law, in equity or otherwise . . . against the Port of New York Authority." Id. at 306, 110 S. Ct. 1868. Sensitive to the values underlying the Eleventh Amendment, the Supreme Court declared that consent to suit in federal court must be express and, thus, held that it construes ambiguous and general consent to suit provisions, standing alone, as insufficient to waive Eleventh Amendment immunity. See Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241, 105 S. Ct. 3142, 87 L. Ed. 2d 171 (1985) (holding that general consent to suit provision in Article III, § 5, of the California Constitution, providing "[s]uits may be brought against the State in such manner and in such courts as shall be directed by law" did not waive Eleventh Amendment immunity because the "provision does not specifically indicate the [s]tate's willingness to be sued in federal court").
The Supreme Court further concluded that other textual evidence of a state's consent to suit in federal court may resolve any ambiguity and sufficiently establish the scope of the general consent to suit. In Feeney, the venue statute, which was passed as part of the same act setting forth the consent to suit provision, declared that venue "shall be laid within a county or judicial district, established by one of said States or by the United States." Id. at 307, 110 S. Ct. 1868. The Supreme Court, therefore, held that the venue provision resolved any ambiguity contained in the states' general consent to suit provision and that the two provisions *149 read together expressly waived the states' Eleventh Amendment immunity.
In light of Florida Nursing Home Ass'n and Feeney, the General Assembly specifically prohibited a county board of education from raising the defense of Eleventh Amendment immunity to any claim of $100,000 or less. Certainly, C.J. § 5-518 is less expansive than the bi-state compact in Feeney. Furthermore, the lack of a venue provision is of no consequence because, in light of Alden's holding, Eleventh Amendment immunity may be asserted by the State in either federal or state courts. Thus, there is no need for C.J. § 5-518(c) to specifically indicate a consent to suit in federal court.
C.J. § 5-518(c) is not a general waiver of sovereign immunity as demonstrated by Supreme Court precedent. Under the settled approach to statutory interpretation, the words "any claim" cannot reasonably be read to exclude certain categories of claims. The General Assembly left no room for any other reasonable construction. The plain and unambiguous meaning of the statutory text is that appellee cannot assert sovereign immunity as a defense to "any" claim under $100,000, including those based on age discrimination. See Norville, 160 Md.App. at 70, 862 A.2d 477 (as persuasive support for our holding that C.J. § 5-518(c) waives sovereign immunity for claims up to $100,000).
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY REVERSED; CASE REMANDED FOR FURTHER PROCEEDINGS.
COSTS TO BE PAID BY APPELLEE.
NOTES
[1] Unless otherwise indicated, all subsequent statutory references herein shall be to Md. Code Ann., Courts and Judicial Proceedings Article § 5-518(c).
[2] The ADEA provides for concurrent federal and State jurisdiction to hear complaints arising under the statute. 29 U.S.C. § 626(c).
[3] Appellee is joined in this view by the Maryland Association of Boards of Education (MABE), which has submitted an amicus curiae brief. MABE is a private, non-profit organization, of which all twenty-four Maryland school boards are members. Because the issues presented have Statewide legal and fiscal importance for all school boards throughout the State, MABE provides additional support for appellee's argument that appellee is an arm of the State and that C.J. § 5-518(c) does not abrogate a county school boards' entitlement to protections under the Eleventh Amendment.
[4] We shall use "arm of the State" and "State agency" interchangeably.
[5] Like the Board of Education in Talbot County, the members comprising appellee are appointed by the Governor of Maryland. Educ. §§ 3-108, 3-109, 3-114.
[6] Unless otherwise indicated, all subsequent statutory references herein shall be to the Maryland Code, Education Article.
[7] In Cash, supra, the Court of Appeals for the Fourth Circuit conducted a thorough review of North Carolina's system of public education and found that the Granville County Board was not a state entity. While the judge acknowledged that Cash strongly informed his analysis, he held that Cash was not dispositive, opining that "Cash lays out the test to determine whether suit against a school board essentially constitutes suit against the state, but [Cash] does not imply that county school boards in other states should automatically be denied sovereign immunity." Lewis, 262 F.Supp.2d at 613.
[8] Section 4-105, entitled "Comprehensive liability insurance; defense of sovereign immunity" provides:
(a) Each county board shall carry comprehensive liability insurance to protect the board and its agents and employees. The purchase of this insurance is a valid educational expense.
(b) The State Board shall establish standards for these insurance policies, including a minimum liability coverage of not less than $100,000 for each occurrence. The policies purchased under this section shall meet these standards.
(c)(1) A county board complies with this section if it:
(i) Is individually self-insured for at least $100,000 for each occurrence under the rules and regulations adopted by the State Insurance Commissioner; or
(ii) Pools with other public entities for the purpose of self-insuring property or casualty risks under Title 19, Subtitle 6 of the Insurance Article.
(2) A county board that elects to self-insure individually under this subsection periodically shall file with the State Insurance Commissioner, in writing, the terms and conditions of the self-insurance.
(3) The terms and conditions of this individual self-insurance:
(i) Are subject to the approval of the State Insurance Commissioner; and
(ii) Shall conform with the terms and conditions of comprehensive liability insurance policies available in the private market.
(d) A county board shall have the immunity from liability described under § 5-518 of the Courts and Judicial Proceedings Article.
Id.
[9] The Court of Appeals' decision was predicated upon the determination of the United States District Court for the District of Maryland that the Anne Arundel County Board of Education was a State entity entitled to assert Eleventh Amendment immunity. The former employee chose not to appeal the decision to the U.S. Court of Appeals, but instead filed suit in the Circuit Court for Anne Arundel County, alleging age discrimination in violation of Md.Code (1957, 2003 Repl.Vol.), Art. 49B, unjust enrichment, quantum meruit, common law wrongful discharge and intentional infliction of emotional distress. The Court of Appeals held that the district court's ruling was deemed a final decision on the merits.
[10] It has been held that unreported cases are not acceptable authority. Powers v. Hadden, 30 Md.App. 577, 353 A.2d 641 (1976). An unpublished opinion has no binding precedential effect in unrelated matters as to the legal principles applied. In re Bast, 212 B.R. 499 (Bankr.D.Md.1997). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542195/ | 947 A.2d 653 (2008)
194 N.J. 607
Brian Scott OWENS, Sr., and Shannon Eileen Owens, Husband and Wife, as Individuals, as Guardians Ad Litem for their minor children, Brian Scott Owens, Jr., B. Montana Owens and Lane Finley Owens, as General Administrators of the Estate of Matthew Owens and as Administrators Ad Prosequendum for the Estate of Matthew Owens, Deceased, Plaintiffs-Respondents,
v.
Gerald FEIGIN, M.D., Defendant-Appellant, and
William D. Bolletino, Jr., William D. Bolletino, Sr., Susan D. Bolletino, Theodore Woodside, Woodside Funeral Home, Honda Corporation, and John Does 1 through 125, Inclusive, Fictitious Named Defendants, Jointly, Severally, and in the Alternative, Defendants.
No. A-43 September Term 2007
Supreme Court of New Jersey.
Argued March 25, 2008.
Decided June 3, 2008.
Mark R. Vespole argued the cause for appellant (Tressler, Soderstrom, Maloney *654 & Priess, attorneys; Mr. Vespole and Kathleen Giles, Newark, on the brief).
Clifford L. Van Syoc, Cherry Hill, argued the cause for respondents (Van Syoc Chartered, attorneys).
Karen L. Jordan, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey, (Anne Milgram, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel).
Edward L. Barocas, Legal Director, submitted a brief on behalf of amicus curiae American Civil Liberties Union of New Jersey.
PER CURIAM.
The sole question in this appeal is whether the notice-of-claim requirement in the New Jersey Tort Claims Act (TCA), N.J.S.A. 59:1-1 to 12-3, applies to a cause of action under New Jersey's Civil Rights Act (CRA), N.J.S.A. 10:6-1 to -2. The trial court originally dismissed plaintiffs' CRA claim for failure to satisfy the TCA's notice-of-claim requirement, but that decision was reversed on appeal. Owens v. Feigin, 394 N.J.Super. 85, 97, 925 A.2d 106 (2007). We granted certification to review the Appellate Division's determination. 192 N.J. 473, 932 A.2d 25 (2007). We find nothing in the CRA's language or legislative history that convincingly evidences that the Legislature meant to import the TCA's requirements for suit as necessary predicates for bringing a CRA claim. We hold, therefore, that the TCA's notice-of-claim requirement does not apply to CRA causes of action.
I.
Plaintiffs Brian Owens, Sr., and his wife, Shannon, filed a complaint on February 9, 2006, asserting claims arising out of the death of their thirteen-year-old son, Matthew.[1] Among the defendants named in the complaint was Dr. Gerald Feigin, the medical examiner for Salem County. The complaint alleged, among other things, that in the conducting of Matthew's autopsy, Feigin "deliberately violated plaintiffs' civil rights in violation of the Civil Rights Act of 2004."
Although plaintiffs had presented a timely notice of claim to other public entities and employees named as defendants in this litigation prior to filing the complaint,[2] plaintiffs did not serve a notice of claim on Feigin. Feigin therefore moved to dismiss plaintiffs' claims against him, asserting that all claims were barred because plaintiffs failed to satisfy the TCA's notice-of-claim requirement. Noting that the TCA mandates that a plaintiff file a notice of claim within ninety days of the accrual of the cause of action against a public entity or employee, N.J.S.A. 59:8-8, unless the claimant demonstrates good cause to justify a late filing, N.J.S.A. 59:8-9, the trial court dismissed all claims against Feigin, N.J.S.A. 59:8-3.
Plaintiffs filed a motion for leave to appeal the trial court's decision in respect of their CRA claim against Feigin. That motion was denied by an Appellate Division panel, but this Court subsequently granted the motion and summarily remanded the matter to the Appellate Division for consideration on the merits. 188 N.J. 344, 907 A.2d 1006 (2006). After argument, the *655 Appellate Division reversed, holding that plaintiffs did not need to satisfy the TCA's notice-of-claim requirement to bring a CRA claim. Owens, supra, 394 N.J.Super. at 97, 925 A.2d 106. We then granted this petition for certification. 192 N.J. 473, 932 A.2d 25 (2007).
II.
In 2004, the Legislature adopted the CRA for the broad purpose of assuring a state law cause of action for violations of state and federal constitutional rights and to fill any gaps in state statutory anti-discrimination protection. See L. 2004, c. 143; see also S. Judiciary Comm., Statement to Assemb. Bill No. 2073, at 1 (May 6, 2004) (stating that "to protect and assure against deprivation of the free exercise of civil rights which are guaranteed and secured under the New Jersey Constitution and federal Constitution, this bill provides a remedy when one person interferes with the civil rights of another. . . . [and further] is intended to address potential gaps which may exist under [the New Jersey Law Against Discrimination (LAD) and bias crime statutory causes of action]"). N.J.S.A. 10:6-2(c) provides a remedy against private and public defendants for a person who demonstrates that he or she
has been deprived of any substantive due process or equal protection rights, privileges or immunities secured by the Constitution or laws of the United States, or any substantive rights, privileges or immunities secured by the Constitution or laws of this State, or whose exercise or enjoyment of those substantive rights, privileges or immunities has been interfered with or attempted to be interfered with, by threats, intimidation or coercion by a person acting under color of law.
Notably, the CRA's sole procedural component is found in N.J.S.A. 10:6-2(d), which states that CRA actions "may be filed in Superior Court," and directs a court to hold a jury trial "[u]pon application of any party." Otherwise, the CRA is facially silent about any other procedural requirement that a plaintiff must satisfy in order to bring a CRA cause of action.
The legislative history developed prior to enactment of the CRA also demonstrates that the Legislature's predominant focus was on creating the state law cause of action and on establishing the substantive proofs necessary to maintain a CRA claim. The sponsors' statement, committee statements, and floor amendments to Assembly Bill No. 2073 are bereft of any express or implied expression of intent that the TCA's notice-of-claim requirement was envisioned to constitute a prerequisite to the maintenance of a CRA claim. See Sponsors' Statement to Assemb. Bill No. 2073 (Feb. 9, 2004); Assemb. Judiciary Comm., Statement to Assemb. Bill No. 2073 (Feb. 19, 2004); S. Judiciary Comm., Statement to Assemb. Bill No. 2073 (May 6, 2004); Statement to Assemb. Bill No. 2073 (June 24, 2004) (second reprint) (floor amendments proposed by Assemblyman Cohen).
That said, despite the lack of legislative evidence of intent on the subject, Feigin points to the statement issued by Governor McGreevey at the bill's signing as indicative of an intent that TCA requirements would apply to CRA claims.[3]*656 In that brief statement, the Governor commented that the CRA "does not create any new substantive rights, override existing statutes of limitations, waive immunities or alter jurisdictional or procedural requirements . . . that are otherwise applicable to the assertion of constitutional and statutory rights." Office of the Governor, Press Release at 1 (Sept. 10, 2004). We find that statement to be, at most, ambiguous on the precise issue presented. Plainly read, it states that whatever procedural requirements previously applied to statutory and constitutional claims shall apply to the vindication of such claims through the CRA. However, the mix of statutory and constitutional claims captured by the CRA makes ready identification of common procedural notice requirements difficult.
The CRA creates a statutory cause of action for damages against public defendants, and arguably could fall within the TCA's purview. See Velez v. City of Jersey City, 180 N.J. 284, 289, 292, 850 A.2d 1238 (2004) (recognizing that N.J.S.A. 59:1-2 purports to establish default limits of public entity liability and that "injury" as defined in N.J.S.A. 59:1-3 is "broad enough to encompass [harm arising] from intentional as well as negligent conduct"). However, no statutory cause of action subject to the TCA's procedural requirements has been brought to our attention. Indeed, in the few cases involving statutory claims against public entities where the TCA's requirements were in issue, those requirements were found inapplicable. See Fuchilla v. Layman, 109 N.J. 319, 337-38, 537 A.2d 652 (finding TCA's notice requirements inapplicable to LAD claims), cert. denied, 488 U.S. 826, 109 S.Ct. 75, 102 L.Ed.2d 51 (1988); Brook v. April, 294 N.J.Super. 90, 100, 682 A.2d 744 (App.Div. 1996) (holding that TCA's requirements are inapplicable to claims brought under Workers' Compensation Law); see also Brennan v. Norton, 350 F.3d 399, 431-33 (3d Cir.2003) (predicting that our Court would not find TCA's notice requirements applicable to CEPA actions); Lakes v. Brigantine, 396 N.J.Super. 65, 69, 931 A.2d 622 (Law Div.2007) (concluding that TCA's notice requirements do not apply to CEPA actions). Furthermore, the CRA's purpose includes rectifying violations of constitutional rights, the protection of which has never depended on the satisfaction of the TCA's procedural and substantive requirements. See Velez, supra, 180 N.J. at 296, 850 A.2d 1238 (recognizing that state and federal constitutional rights supersede statutory limitations on actions); see also Greenway Dev. Co. v. Borough of Paramus, 163 N.J. 546, 557, 750 A.2d 764 (2000) (holding that TCA's notice requirement did not apply to inverse condemnation claim); cf. Tice v. Cramer, 133 N.J. 347, 375, 627 A.2d 1090 (1993) (concluding that public entity liability under 42 U.S.C.A. § 1983 may exist even when inconsistent with TCA's immunities to suit).
Given that stark field of case law universally rejecting the importation of the TCA's notice-of-claim requirement into other statutory claims, or for any constitutional claim, we think that the Legislature would have spoken expressly on the subject had it intended that the TCA's notice requirement serve as a prerequisite to a CRA cause of action. Instead, neither the plain language of N.J.S.A. 10:6-2 nor that statute's legislative history contains any indication of such intent by the Legislature. In light of the broad remedial purpose of the CRA, and absent any legislative expression to the contrary, we are unconvinced that the Legislature chose to condition the rectifying of an infringement on an individual's vital constitutional rights, or of injurious discriminatory conduct, on satisfaction of the TCA's notice-of-claim requirement. If we are incorrect in that conclusion, we are confident that the *657 Legislature will clarify its intent through amendment.
We hold, in conclusion, that plaintiffs' CRA claim against Feigin was improperly dismissed.
III.
The judgment of the Appellate Division is affirmed, as modified. The matter is remanded to the Law Division for further proceedings consistent with this opinion.
For affirmance as Modification/Remandment Chief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE and HOENS 6.
Opposed None.
NOTES
[1] The Owenses stated claims individually, in their capacity as guardians ad litem for Matthew's siblings, and in their capacity as administrators of Matthew's estate.
[2] Those defendants are not pertinent to the resolution of this dispute. We recite here only those aspects of the facts and procedural history of this matter that concern the narrow issue before us.
[3] In the hierarchy of legislative history, signing statements do not carry the interpretive force afforded to statements from the Legislature. See Skeer v. EMK Motors, Inc., 187 N.J.Super. 465, 472, 455 A.2d 508 (App.Div. 1982) (recognizing that signing statement "is not perhaps the most authoritative legislative history" but can provide some indication of legislative intent). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857884/ | DAVIS V. TABOR
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-014-CV
RONALD K. DAVIS,
APPELLANT
vs.
BILL TABOR D/B/A TABORTOWNE STORE,
APPELLEE
FROM THE DISTRICT COURT OF BASTROP COUNTY, 335TH JUDICIAL DISTRICT
NO. 19,211, HONORABLE HAROLD R. TOWSLEE, JUDGE
Ronald K. Davis, appellant, sued Bill Tabor d/b/a Tabortowne Store, appellee,
alleging violations of the Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code Ann.
§§ 17.41-.63 (1987 & Supp. 1992). Following a non-jury trial, the trial court rendered a take-nothing judgment in favor of Tabor. Davis perfected this appeal. Due to the trial court's failure
to file findings of fact and conclusions of law, this Court abated the appeal and ordered the trial
court to file such findings and conclusions. Although the deadline we imposed for filing such
findings and conclusions has passed, none have been filed. Accordingly, we will reverse the trial
court's judgment and remand the cause for a new trial.
BACKGROUND
The incident that led to this lawsuit occurred on May 31, 1988, when Davis
pumped diesel fuel instead of gasoline into his van at Tabor's convenience store, allegedly causing
damage to the van's gasoline-powered engine. Davis testified that certain acts and omissions on
the part of Tabor and his employee resulted in Davis's mistakenly pumping diesel fuel into his
van. According to Davis, there were no labels on the fuel pumps at the store; therefore, he had
no way of knowing that he was using a diesel pump instead of a regular gasoline pump. Further,
Davis testified that before he pumped the diesel fuel into his van, the attendant at the store at least
implicitly told him that the pump he used was a gasoline pump when in fact it was a diesel pump.
Tabor, on the other hand, presented evidence that the pumps were labeled and that Davis had
already pumped the diesel fuel into his van before he ever talked to the attendant at the store.
DISCUSSION
In his second point of error, Davis complains of the trial court's failure to file
written findings of fact and conclusions of law. In accordance with Tex. R. Civ. P. 296, Davis
timely requested the trial court to make written findings of fact and conclusions of law. After the
trial court failed to comply within the time allowed, Davis duly filed a "notice of past due findings
of fact and conclusions of law" with the clerk of the court pursuant to Rule 297 of the Rules of
Civil Procedure. It then became the duty of the clerk to call the notice to the attention of the
court. Tex. R. Civ. P. 297. Nonetheless, the trial court failed to file any findings or conclusions.
A trial court's duty to file findings and conclusions is mandatory; therefore, "the
failure to respond when all requests have been properly made is presumed harmful, unless `the
record before [the] appellate court affirmatively shows that the complaining party has suffered no
injury.'" Cherne Indus., Inc. v. Magallanes, 763 S.W.2d 768, 772 (Tex. 1989) (quoting Wagner
v. Riske, 178 S.W.2d 117, 120 (Tex. 1944)). After examining the record, we are unable to
conclude that the trial court's failure to file findings and conclusions was not harmful to Davis.
It is unclear on precisely what basis the trial court rendered its take-nothing judgment against
Davis; therefore, we are unable to properly address Davis's sufficiency-of-the-evidence points.
On January 8, 1992, pursuant to Tex. R. App. P. 81(a), we entered an order
abating the appeal and directing the trial court to make and file appropriate findings of fact and
conclusions of law within thirty days of the date of the order. See Cherne Indus., 763 S.W.2d
at 773. Requests for additional or amended findings or conclusions, and any such findings or
conclusions made by the trial court, were to be filed in accordance with Tex. R. Civ. P. 298. The
order directed the district clerk to prepare a supplemental transcript containing such findings,
conclusions, and requests, and deliver it to the Clerk of this Court for filing no later than the
sixtieth day after the issuance of the order. To date, however, the district clerk has not filed a
supplemental transcript with this Court containing findings and conclusions.
CONCLUSION
As stated above, the trial court's failure to file findings of fact and conclusions of
law is presumed harmful unless the record shows that the appellant has suffered no injury; in the
present case, it does not. Therefore, we sustain Davis's second point of error; we do not address
his other points of error. Pursuant to Tex. R. App. P. 81(b)(1), (c), we reverse the trial court's
judgment and remand the cause for a new trial.
J. Woodfin Jones, Justice
[Before Justices Powers, Jones and B. A. Smith]
Reversed and Remanded
Filed: April 29, 1992
[Do Not Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542213/ | 122 F.2d 6 (1941)
JONES, Collector of Internal Revenue,
v.
NORRIS et al. SAME
v.
NORRIS.
Nos. 2168, 2169.
Circuit Court of Appeals, Tenth Circuit.
August 4, 1941.
*7 Warren F. Wattles, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Norman D. Keller, and Carl J. Marold, Sp. Assts. to the Atty. Gen., and Charles E. Dierker, U. S. Atty., of Oklahoma City, Okl., on the brief), for appellant.
D. A. Richardson and Hayes, Richardson, Shartel & Gilliland, all of Oklahoma City, Okl., for appellees.
Before PHILLIPS, HUXMAN, and MURRAH, Circuit Judges.
MURRAH, Circuit Judge.
The two cases involve similar facts and questions of law, and were consolidated for trial and appeal.
The determinative question presented here is whether or not income from certain trusts, created by a father for the benefit of his children, is taxable to him as grantor under Section 22 (a) or Sections 166 and 167 of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev.Acts, page 669, and 26 U.S.C.A. Int.Rev.Code, §§ 166, 167.
Based on the contention that the income from the trust estate was taxable to the grantor, the Commissioner determined a deficiency for the taxable years of 1934 and 1935, (the computations are not in dispute) which the taxpayer appellee paid. On suit for refund, the trial court held that the income was not taxable to the grantor under Sections 166 and 167, and rendered judgment for the appellee taxpayer, from which the Commissioner has appealed.[1]
On January 20, 1921, the taxpayer, P. A. Norris, (appellee here) executed, acknowledged and delivered one trust instrument, by the terms of which he purported to create seven separate trusts for seven of his children. The trust was intended to be an irrevocable gift to the children and was to continue in force for twenty years. The net income during the term of the trust was to be retained by the trustee and added to the corpus to be invested as capital.
On March 1, 1935, the taxpayer executed, acknowledged and delivered a declaration of trust to C. L. Griffith, who was at that time the trustee of the former trust. This trust was for the benefit of his two other married children. The provisions of the second trust were in all material respects the same as the first trust. They will be treated here similarly and referred to herein as the Trust.
*8 From time to time, as provided therein, he conveyed certain property to the trust, including real estate and securities. When Norris executed the second trust, he filed a gift tax return and paid the gift tax assessed. Thereafter, and until 1935, the trustee made return upon the annual income from the trust estate, and paid the tax thereon under Section 161 et seq. of the Revenue Act.
In addition to the usual and ordinary provisions relating to the duties of the trustee, the trust instrument, among others contained the following provisions: "* * * I further reserve to myself alone, during my life time, and after my death, to my wife, * * * alone, the right to change my Trustee, but not the right to revoke said gift or trust estates hereby created, * * *. In order to safeguard the several trust estates and for their better care * * * and to meet changing or unexpected conditions and for the benfit of my said beneficiaries * * * I do further reserve the right any time prior to my death, * * * as I may deem proper to make such further changes * * * as I may see fit and proper to make in the management thereof; and in the character and form of investment; in changing investments or in directing that any investments shall remain and be held as permanent investments after my death; in changing the trustee, or such other changes as may in my opinion be for the best interest of my said beneficiaries. I further reserve the right during my lifetime, to order and direct my said Trustee to make settlement, either in full or in part, with any one of my said beneficiaries, after such one shall have reached the age of twenty-one years, or to order and direct that a certain part of the net income from any one, or more, of said estates, to be determined by me alone, shall be paid to the beneficiary thereof, * * *. I further reserve the right to nominate and appoint any one of my said beneficiaries, to act with me, or after my death, in handling said trust estates, with such powers as I may give him, * * *. The right to make the changes in said declaration of trust, herein set out, shall not however, operate to revoke the several estates hereby created, but is intended to be exercised only as in my judgment may be for the best interest of said beneficiaries. * * * While the estates hereby created are separate and distinct estates, and are to be so handled, the trustee shall have the right * * * to invest the fund of any one or more jointly in any investment made, but the income therefrom shall be kept separate, and shall be credited to each of such beneficiaries, according to his or her interest therein."
The trust instrument further provided that the trustee was required to render an annual statement to the grantor of each of the said estates for the preceding year. It further provided that in the event of the death of one or more of the beneficiaries, the trust should not be terminated thereby, but should continue for the full term and thereupon be paid to the child, or children, of such deceased beneficiary; if no children, then to the surviving beneficiaries, and the children then living of any deceased beneficiary by right of representation.
It is manifest that by the terms of the trust instrument, the grantor reserved unto himself full power of control and management over the trust estate, the same as if he were designated as the trustee. In fact, the trustee was a confidential employee of the grantor and it is plain that during the life of the trust, the grantor exercised autocratic powers over the trust estate, but his management was highly profitable.
The grantor did not record the deeds of conveyance to the trust until 1935, when the question of taxability to him arose. When it became advantageous to lease certain properties, included within the trust estate, for oil and gas, he executed the oil and gas leases to the property. He retained in his own bank account a substantial part of the proceeds resulting from trading in the property of the trust estate, but he kept strict books of account of his own, and the trustee kept honest and accurate account of all transactions which correctly reflected the property of the trust and the amount which he owed the trust estate at all times.
The grantor testified that he kept the funds of the trust estate in his own bank account merely as a matter of business convenience and gave similar explanations for his failure to record deeds of conveyance from himself to the trust. He further stated that he executed the oil and gas leases on the property of the trust in order to obviate possible difficulties in the title.
*9 The contentions of the Commissioner here are based on the broad premise that because, (1) by the terms of the trust the grantor reserved the power to make such changes in the trust as he saw fit and proper in the management, or in his opinion, were for the best interest of the beneficiaries, (2) he reserved the right to change the beneficiary, (3) he did not affix the required Revenue Stamps to the deeds of conveyance of property transferred to the trust, or record the same in the counties where the properties were located, (4) he retained large sums of the trust money in his personal bank account, subject to his own use, (5) of the autocratic manner in which he controlled and managed the trust estate, coupled with the intimate family relationship found to exist, he did not part with the substantial incidents and attributes of ownership over the property essential to non-taxability under Section 22 (a) or Sections 166 and 167 of the Revenue Act of 1934.
The trial court held that the powers reserved by the trust intrument were limited to management and did not authorize revocation, revestment or reverter; that he did part with the substantial incidents and attributes of ownership within the purview of the applicable taxing statutes. Norris v. Jones, D.C., 31 F.Supp. 463.
We think the scope of our examination requires us to consider whether or not under all the facts and circumstances presented, the grantor of the trust is taxable either under Section 22 (a) or Sections 166 and 167 of the Revenue Act of 1934.[2] Helvering v. Hormel, supra and Commissioner of Internal Revenue v. Richter, supra. Sections 166 and 167, and Section 22 (a) all deal with concepts of ownership, but the problem of interpretation under Sections 166 and 167 is quite different from that under Section 22 (a). Helvering v. Wood, 309 U.S. 344, 60 S.Ct. 551, 84 L. Ed. 796. The ambit of Sections 166 and 167 contemplates a limited purpose to tax income from trust property to the grantor. Taxation under Sections 166 and 167 is dependent upon the power of the grantor to revest the property in himself. If by the terms of the trust instrument the power to revest is found to exist, the income is taxable to the grantor under Sections 166 and 167; if it does not exist it is non-taxable to the grantor and taxable under Section 161 et seq. The question is uninfluenced by the power to revert upon termination. Helvering v. Wood, supra; Helvering v. Dunning, 4 Cir., 118 F.2d 341 and Commissioner of Internal Revenue v. O'Keeffe, 1 Cir., 118 F.2d 639. Cf. Regulation 86, Article 166-1; Regulation 94, Article 166-1, and T.D. 4629 of Regulation 86.
Under Section 22 (a), as liberally construed by Helvering v. Clifford, 309 U. S. 331, 60 S.Ct. 554, 84 L.Ed. 788, taxation to the grantor depends upon whether or not the grantor, after the trust has been established may still be treated as the owner of the corpus. Under this scheme (Section 22 (a) all attributes and incidents of ownership become material to the *10 question of taxability, and in the determination of this question many facts and circumstances become relevant, which may or may not be pertinent in the interpretation of Sections 166 and 167. It might be said that the power to tax income upon trust property to the grantor under Sections 166 and 167 is found within the borders of Section 22 (a), as interpreted by the Clifford case. Certainly, all elements of taxability under Sections 166 and 167 become relevant under Section 22 (a).
It is sufficient therefore for us to consider whether or not the grantor of the trust may be considered for all practical purposes the owner of the trust within the broad and sweeping provisions of Section 22 (a). In the determination of this question all facts and circumstances, which bear upon the creation and operation of this trust become material, as well as the terms and provisions of the trust instrument itself. Because of the intimate family relationship existing between the grantor and the beneficiaries, and the arrangement growing out of it, it is our duty to scrutinize the provisions of the trust and all the circumstances attendant upon its creation and operation. Helvering v. Clifford, supra and Cox v. Commissioner of Internal Revenue, 110 F.2d 934.
We think the rationale of the Clifford case does not bring the facts here within the taxing scope of Section 22 (a). Since the Clifford case, courts have held Section 22 (a) inapplicable to facts much weaker than the instant facts. Commissioner of Internal Revenue v. Branch, 1 Cir., 114 F.2d 985, 132 A.L.R. 839 and Helvering v. Achelis, 2 Cir., 112 F.2d 929.
In the Branch case, supra, the First Circuit refused to extend the rationale of the Clifford case beyond the facts presented therein and held that the grantor of a trust was not taxable upon the income of the trust which he had created for his wife, making himself the trustee with full powers of management. The court there said [114 F.2d 987]: "* * * Where the grantor has stripped himself of all command over the income for an indefinite period, and in all probability, under the terms of the trust instrument, will never regain beneficial ownership of the corpus, there seems to be no statutory basis for treating the income as that of the grantor under Section 22 (a) merely because he has made himself trustee with broad power in that capacity to manage the trust estate. * * *" See, also, Commissioner v. O'Keeffe, supra, 118 F.2d page 642.
In all cases wherein the courts have invoked the doctrine of the Clifford case to sustain the taxation of income from a trust estate to the grantor, the facts follow closely the Clifford case. Helvering v. Hormel, supra; Cox v. Commissioner of Internal Revenue, supra; Helvering v. Dunning, supra; First National Bank of Chicago v. Commissioner of Internal Revenue, 7 Cir., 110 F.2d 448; Thomson v. Helvering, 8 Cir., 114 F.2d 607, and Penn v. Commissioner of Internal Revenue, 8 Cir., 109 F.2d 954. In each of these cases, the court was dealing with a short term trust in which the power of revocation, revestment or reverter was either expressly manifest by the terms of the trust instrument, or the powers of management were so absolute as to admit of no question of the right of economic benefit to the grantor.
The salient features of this trust which distinguish it from the rationale of the Clifford case, and cases decided subsequently, are found, (1) in the tenure of the trust. The trust was to continue for a period of twenty years from its execution, (2) the grantor was to receive none of the benefits of either the corpus or income during its tenure, (3) on the termination of the trust both the corpus and the income were to be distributed to the beneficiaries named therein, or their issue, (4) the record does not show that the grantor ever received any economic benefit from either the corpus or the income of the trust.
It is true that in addition to the extensive powers of control and management granted by the trust, the trust instrument authorized the grantor to make such changes as he saw fit and proper in the management of the estate for the best interest of his beneficiaries, but such powers of change were limited to management and the power to revoke or retake any of the corpus or income was specifically denied to him.
We find no difficulty in divining the purpose of the power to make changes in the management, when such power is not inconsistent with the irrevocable provisions of the instrument. If the trust be irrevocable, it is certainly beyond the power of the grantor to revest or revert, because the property (both corpus and income) by *11 the terms of the trust instrument is to be distributed to the beneficiaries in person on its termination, or sooner in the discretion of the grantor.
The trust is valid under state law and enforceable as between the beneficiaries and the grantor. Section 9672, Oklahoma Statutes 1931, 16 Oklahoma Statutes Annotated Section 15; Kimberly v. Cissna, 161 Okl. 17, 16 P.2d 1090; Hudson v. Jones, D.C., 22 F.Supp. 938, and Rose v. Commissioner of Internal Revenue, 6 Cir., 65 F.2d 616.
We do not understand that the power of management, however unlimited, may operate to bring the grantor within the sweeping provisions of Section 22 (a), if by such powers he cannot derive any economic benefit therefrom, except whatever advantages he may gain by virtue of the provisions in the Revenue Act, which permits the creation of trusts and imposes taxation under Section 161 et seq.
It is plain that the question of taxability under Section 22 (2) or Sections 166 and 167 is one of degree and that we should resolve the substantial doubt in favor of taxability. Certainly, we should not allow "the form to obscure the reality." Where the line should be drawn depends upon the peculiar facts in each case, in the light of the broad reasoning manifest in the decisions before us. See Harrison v. Schaffner, 61 S.Ct. 759, 85 L.Ed. 1055, decided by the Supreme Court March 31, 1941.
Aside from the weight to be accorded the findings of fact below, Helvering v. Clifford, supra and Commissioner of Internal Revenue v. Branch, supra, our own appraisal of the facts leads irresistibly to the conclusion that the grantor retained neither the power to revoke, revest or revert either the corpus or the income. Absent these essential elements there can be no substantial incidents or attributes of ownership, sufficient to vest in the grantor any of the economic benefits of the trust, essential to taxation under either Section 22 (a) or Sections 166 and 167 of the Revenue Act of 1934.
The judgments of the lower court are affirmed.
NOTES
[1] The Commissioner contended below that Sections 166 and 167 of the Revenue Act of 1934 controlled the question. The case was presented, considered and decided under Sections 166 and 167. On appeal, the Commissioner contends that the taxpayer is taxable under either Section 22 (a) or Sections 166 and 167. No objection is laid to the consideration of the taxability of the taxpayer under either of the sections. We shall consider taxability under Section 22 (a) and Sections 166 and 167. Helvering v. Hormel, 8 Cir., 111 F.2d 1, affirmed by the Supreme Court March 17, 1941, 61 S.Ct. 719, 85 L.Ed. 1037, and Commissioner of Internal Revenue v. Richter, 3 Cir., 114 F.2d 452, reversed by the Supreme Court March 17, 1941, 61 S.Ct. 723, 85 L.Ed. 1043.
[2] Section 22 (a) of the Revenue Act of 1934, 48 Stat. 680, includes among "gross income" all "gains, profits, and income derived * * * from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever."
Section 166 reads in full: "Where at any time the power to revest in the grantor title to any part of the corpus of the trust is vested
"(1) in the grantor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, or
"(2) in any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, then the income of such part of the trust shall be included in computing the net income of the grantor."
Section 167. Income for benefit of grantor. "(a) Where any part of the income of a trust
"(1) if, or in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of the income may be, held or accumulated for future distribution to the grantor; or
"(2) may, in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of the income, be distributed to the grantor; or
* * * * * *
then such part of the income of the trust shall be included in computing the net income of the grantor." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542223/ | 947 A.2d 896 (2008)
Stephen MATTATALL
v.
STATE of Rhode Island.
No. 2005-318-Appeal.
Supreme Court of Rhode Island.
May 29, 2008.
*897 Paula Rosin, Esq., Providence, for Plaintiff.
*898 Virginia M. McGinn, Esq., Providence, for Defendant.
Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.
OPINION
Justice ROBINSON for the Court.
The applicant, Stephen Mattatall, appeals to this Court from the denial of his application for postconviction relief. On appeal, the applicant contends: (1) that the hearing justice erred in declining to recuse himself with respect to Mr. Mattatall's application for postconviction relief; and (2) that the Alford[1] plea made by applicant in 1979 when faced with a reckless driving charge was not made knowingly, intelligently, and voluntarily, and therefore should not have been used as a predicate for sentencing the applicant under the habitual offender statute when, several years later, he was convicted of second-degree murder.
This case came before the Supreme Court for oral argument on April 8, 2008, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After considering the record, the memoranda submitted by the parties, and the oral arguments of counsel, we are of the opinion that cause has not been shown and that the case should be decided at this time.
For the reasons set forth below, we affirm the judgment of the Superior Court.
Facts and Travel
In 1983, applicant was charged with the murder of one John Scanlon, whose body had been found in applicant's home on the morning of September 24, 1982. Following a jury trial, applicant was convicted of murder in the second degree, and he was sentenced to a term of forty years imprisonment, with thirty years to serve and the balance suspended with probation. The trial justice also imposed an additional ten-year sentence pursuant to the habitual offender statute.[2] The applicant appealed his conviction to this Court, which reversed and remanded the case for a new trial. State v. Mattatall, 510 A.2d 947 (R.I.1986).[3]
A second jury trial, which began in September of 1987, ended in a mistrial due to *899 applicant's behavior in the courtroom, for which he was held in contempt of court.
Finally, following a third jury trial in 1988, applicant was found guilty of second-degree murder and was sentenced to a term of sixty years imprisonment, with fifty years to serve and the balance suspended with probation. The trial justice also sentenced applicant to an additional twenty-year term pursuant to his status as an habitual offender. This Court affirmed his conviction in State v. Mattatall, 603 A.2d 1098 (R.I.1992); that opinion contains a thorough recitation of the facts and procedural history with respect to applicant's trial and eventual conviction of second-degree murder.
After this Court's affirmance of his conviction, applicant filed a pro se application for postconviction relief pursuant to G.L. 1956 § 10-9.1-1, alleging over thirty separate grounds for relief, including prosecutorial misconduct and "[c]onspiracy and [i]neffectiveness." A hearing was held on September 28, 2004, at the conclusion of which the hearing justice found that the application was "wholly meritless, groundless, and must be denied." An order reflecting that determination was entered on October 7, 2004.
Before his first application was denied by the Superior Court, applicant filed a second pro se application for postconviction relief on November 29, 2001. In that second application, he contended that the enhancement of his second-degree murder sentence pursuant to the habitual offender statute was improperly predicated in part on his prior felony conviction for reckless driving, death resulting. That conviction resulted from applicant's Alford plea,[4] but his second application contended that that plea was not made knowingly, voluntarily, and intelligently. The applicant *900 also argued that, because he "didn't commit" the offense of reckless driving, death resulting, "he should not and cannot be deemed a repeat offender" for purposes of sentencing pursuant to the habitual offender statute.
Although applicant filed his second application for postconviction relief in Kent County, the matter was subsequently transferred to Providence County to the justice of the Superior Court who had presided over the third murder trial. The applicant then moved to recuse that justice and to have his application assigned for hearing by another judicial officer, whom he specifically identified. In support of that two-pronged motion, applicant alleged: (1) that the justice to whom the case was assigned was biased against him and (2) that the trial justice who accepted applicant's Alford plea in the 1979 reckless driving case should rule on any challenge to that plea. On May 9, 2002, the hearing justice entered an order denying applicant's motion to recuse and to reassign.[5]
Thereafter, on October 26, 2005, the hearing justice denied Mr. Mattatall's second application for postconviction relief. The hearing justice noted that applicant had previously challenged the use of his 1979 conviction as a predicate for the imposition of an additional sentence pursuant to the habitual offender statute, which argument had been rejected by both the Superior Court and subsequently by this Court in State v. Mattatall, 603 A.2d 1098 (R.I.1992). Accordingly, the hearing justice concluded that consideration of the second application was precluded by the doctrine of res judicata. The hearing justice also stated that he had heard and denied applicant's previous application for postconviction relief and that he could "conceive of no grounds nor any compelling interests of justice that entitle [applicant] to another post-conviction entreaty."[6] It is from this denial of his second application for postconviction relief that applicant timely appealed.
On appeal, applicant contends that the hearing justice erred in denying his motion to recuse and his motion to have his application for postconviction relief reassigned. The applicant's specific contentions are: (1) that "it is neither appropriate nor the normal procedure for someone other than the judge who took the plea that is being challenged on post-conviction relief to consider a defendant's application, unless the original judge is unavailable for reasons such as death or retirement;" (2) that assignment of an application for postconviction relief to the original trial justice is mandatory; and (3) that the justice who denied his second application for postconviction *901 relief should have recused himself because, in applicant's estimation, he was biased against applicant.
The applicant also contends that his 1979 Alford plea was not made knowingly, intelligently, and voluntarily and that his claim at to this issue is not precluded by the doctrine of res judicata.
Standard of Review
Section 10-9.1-1 provides that the remedy of postconviction relief is available to any person who has been convicted of a crime and who thereafter alleges either that the conviction violated the applicant's constitutional rights or that the existence of newly discovered material facts requires vacation of the conviction in the interest of justice.[7]Larngar v. Wall, 918 A.2d 850, 855 (R.I.2007). In reviewing a hearing justice's determination with respect to an application for postconviction relief, this Court will not disturb the findings of the hearing justice "absent clear error or a showing that the [hearing] justice overlooked or misconceived material evidence." State v. Thomas, 794 A.2d 990, 993 (R.I.2002); see also Gonder v. State, 935 A.2d 82, 84-85 (R.I.2007); Doctor v. State, 865 A.2d 1064, 1067 (R.I.2005); Ouimette v. State, 785 A.2d 1132, 1135 (R.I. 2001).
At the same time, however, "questions of fact concerning whether a defendant's constitutional rights have been infringed, and mixed question of law and fact with constitutional implications, are reviewed de novo." Thomas, 794 A.2d at 993 (internal quotation marks omitted); see also Gonder, 935 A.2d at 85. Nevertheless, as we have emphasized on numerous occasions, in conducting our review, we still accord great deference to a hearing justice's findings of historical fact and to inferences drawn from those facts, even when the de novo standard is applied with respect to issues of constitutional dimension. See Gonder, 935 A.2d at 85; Thomas, 794 A.2d at 993; Ouimette, 785 A.2d at 1135.
Analysis
I
The Motion to Recuse and Reassign
Before we address applicant's contentions, we pause to note that he has not provided a transcript of the hearing on his motion to recuse and reassign.[8] This Court has declared on numerous occasions that it is "`risky business' for a party to appeal without providing the Court with a transcript of the Superior Court proceedings." West v. Town of Narragansett, 926 A.2d 1021, 1023 (R.I.2007) (mem.); see also Lavoie v. North East Knitting, Inc., 918 A.2d 225, 228 (R.I.2007); Sentas v. Sentas, 911 A.2d 266, 270 (R.I.2006); 731 Airport Associates, LP v. H & M Realty Associates, LLC, ex rel. Leef, 799 A.2d 279, 282 (R.I.2002). Nevertheless, in this instance, the Superior Court's order denying applicant's motion to recuse and reassign sufficiently sets forth the hearing justice's reasoning to permit us to review same.
*902 A
Recusal
The applicant contends that the hearing justice should have recused himself because his impartiality was uncertain given the fact that, when sentencing him in the underlying murder case, the hearing justice had made a number of unfavorable comments with respect to applicant's character and credibility. In support of his claim, applicant points to Article VI, Canon 3E of the Supreme Court Rules of Judicial Conduct, which states that a judicial officer is required to "disqualify himself or herself in a proceeding in which the [judicial officer's] impartiality might reasonably be questioned, including but not limited to instances where * * * (a) the [judicial officer] has a personal bias or prejudice concerning a party * * *."
This Court has stated on several occasions that judicial officers are obligated to recuse if they are "unable to render a fair or an impartial decision in a particular case." Kelly v. Rhode Island Public Transit Authority, 740 A.2d 1243, 1246 (R.I.1999); see also Ryan v. Roman Catholic Bishop of Providence, 941 A.2d 174, 185 (R.I.2008); In re Antonio, 612 A.2d 650, 653 (R.I.1992). "At the same time, however, justices have an equally great obligation not to disqualify themselves when there is no sound reason to do so." Ryan, 941 A.2d at 185; see also Kelly, 740 A.2d at 1246; State v. Clark, 423 A.2d 1151, 1158 (R.I.1980). The burden is on the party seeking recusal to establish that the judicial officer possesses a "personal bias or prejudice by reason of a preconceived or settled opinion of a character calculated to impair his [or her] impartiality seriously and to sway his [or her] judgment." Cavanagh v. Cavanagh, 118 R.I. 608, 621, 375 A.2d 911, 917 (1977); see also Ryan, 941 A.2d at 185; Kelly, 740 A.2d at 1246.
In support of his contention that the hearing justice was biased against him, applicant points to two statements made by the hearing justice when he sentenced applicant in 1988 pursuant to the habitual offender statute. First, after citing fourteen separate instances of misconduct committed by applicant between August of 1985 and May of 1987, the trial justice stated:
"[W]hat clearly surfaces from the various reports of misconduct is an individual who reflects an attitude of hostility and a propensity for violent and volatile behavior, with numerous instances of abusive and threatening conduct."
The applicant also points to the trial justice's observations with respect to applicant's conduct during the murder trial:
"[T]he defendant lied under oath at trial. It's clearly implied by the jury's verdict. If it wasn't clearly implied, then you need only look further to the Defendant's spurious motions to take a sodium pentothal test to somehow support a new story that he has as to how the victim was killed."
In his order denying applicant's motion to recuse in the instant case, the hearing justice made the following observation:
"Every sentencing judge is affirmatively obliged to set forth reasons for imposing a sentence, particularly where, as here, the habitual offender statute mandates that an additional incarceration penalty be imposed.
"When a defendant is convicted of murder and is subject to increased incarceration, it may be expected that the sentencing judge's remarks will, perforce, be somewhat less than flattering *903 in fashioning an appropriate sentence."[9]
We are in complete agreement with the hearing justice's statement that "[r]ecusal does not thereafter lie simply because the court has carried out its judicial responsibility of explaining the reasons for that sentence." Rather than making biased or prejudicial statements about applicant,[10] the hearing justice, in accordance with what this Court has encouraged judicial officers to do, was simply articulating his reasons for enhancing applicant's sentence in accordance with the habitual offender statute.
Upon our review of the record, it is utterly clear to us that the statements made by the hearing justice during the 1988 sentencing proceeding reflect neither prejudice nor a personal bias against applicant; accordingly, we conclude that the hearing justice's decision not to recuse with respect to the second application for postconviction relief was proper.
B
Reassignment
The applicant contends that his second application for postconviction relief should have been considered by the trial justice who accepted his Alford plea in 1979. We disagree.
Rule 2.3(d)(4) of the Superior Court Rules of Practice provides as follows:
"Applications for post-conviction relief shall be assigned by the clerk to the formal and special cause calendar. The justice assigned to the calendar shall submit the application, as the case may be, for disposition by the justice who presided at the trial of the applicant. In any case where the trial justice is no longer a member of the court, the justice assigned to the calendar shall submit the application for disposition, on a rotational basis, to the justices assigned to the trial calendar."
We construe the Rule's reference to "the justice who presided at the trial of the applicant" to mean the justice who presided at the trial concerning which the applicant is aggrieved which in this case would be the 1988 trial that resulted in applicant's sentencing as an habitual offender. That is exactly what happened in this case: both of Mr. Mattatall's postconviction relief applications were, in fact, assigned to the justice who presided over the murder trial and who sentenced applicant pursuant to his conviction for second-degree murder at that trial, from which sentence (specifically the additional sentence imposed in view of applicant's status as an *904 habitual offender) applicant currently seeks relief.
Even if, as applicant contends, his second application for postconviction relief should have been heard by the trial justice who accepted his Alford plea in 1979, Rule 2.3(d)(4) clearly and unambiguously states that, if a trial justice "is no longer a member of the court," then the application should be assigned to another justice of the Superior Court. That is precisely the situation with which we are now confronted. Having thereafter assumed a different judicial office, the Superior Court justice who presided at the time of the 1979 Alford plea was no longer a member of that court at the time when applicant's second application was filed.
Accordingly, we reject applicant's contention as it is wholly meritless.
II
The Alford Plea
We now turn to applicant's final claim of error that his 1979 Alford plea[11] was not made knowingly, intelligently, and voluntarily and that the hearing justice in the instant case erred in determining that applicant's claim was precluded by the doctrine of res judicata.
The applicant argues that he "could not have raised his claim that his [Alford] plea to reckless driving was involuntary on direct appeal of his murder conviction, nor could he have raised it in connection with his [first] post-conviction application that sought to vacate his murder conviction." The applicant further contends that he was required to raise this issue by filing a postconviction relief application "directed at the plea itself." It is applicant's contention that he "has not yet had his day in court to which he is entitled on this claim."
In the postconviction relief context, the doctrine of res judicata is codified in § 10-9.1-8. See Miguel v. State, 924 A.2d 3, 4 (R.I.2007) (mem.); Figueroa v. State, 897 A.2d 55, 56 (R.I.2006) (mem.) (stating that § 10-9.1-8 "codifies the doctrine of res judicata as applied to petitions for post-conviction relief"); Taylor v. Wall, 821 A.2d 685, 688 (R.I.2003); State v. DeCiantis, 813 A.2d 986, 993 (R.I.2003).
Section 10-9.1-8, which is entitled "Waiver of or failure to assert claims," provides:
"All grounds for relief available to an applicant at the time he or she commences a proceeding under this chapter must be raised in his or her original, or a supplemental or amended, application. Any ground finally adjudicated or not so raised, or knowingly, voluntarily and intelligently waived in the proceeding that resulted in the conviction or sentence or in any other proceeding the applicant has taken to secure relief, may not be the basis for a subsequent application, unless the court finds that in the interest of justice the applicant should be permitted to assert such a ground for relief." (Emphasis added.)
The res judicata doctrine "operates as an absolute bar to relitigation of the same issues between the same parties when a final judgment has been rendered." Carillo v. Moran, 463 A.2d 178, 182 (R.I. 1983); see also Miguel, 924 A.2d at 4; Taylor, 821 A.2d at 688. Furthermore, "[a] judgment on the merits in the first case not only is conclusive with regard to the issues that were actually determined *905 but also precludes reconsideration of all other issues that might have been raised in the prior proceeding." Carillo, 463 A.2d at 182 (emphasis added);[12]see also Miguel, 924 A.2d at 4; Taylor, 821 A.2d at 688.
Section 10-9.1-8 contains a very limited and narrow exception to this otherwise absolute bar; that exception provides that issues which were "finally adjudicated or not so raised" may nonetheless be the basis for a subsequent application for postconviction relief if the court finds it to be "in the interest of justice." See Ramirez v. State, 933 A.2d 1110, 1112 (R.I.2007) ("Under § 10-9.1-8, parties cannot bring forth new claims in subsequent applications that could have been, but were not, raised in the first postconviction-relief application absent an `interest of justice' showing."); Miguel, 924 A.2d at 4.
In his supplemental memorandum filed with this Court in accordance with Article VI, Rule 12A of the Supreme Court Rules of Appellate Procedure, applicant contends that the doctrine of res judicata does not preclude his arguments with respect to his 1979 Alford plea. The applicant contends that, because he sought to obtain a reversal of his conviction for second-degree murder in his first postconviction relief application, his second application "concerned a different case and a different conviction." In other words, it is applicant's contention that his first application dealt with his conviction for murder while his second application dealt with his 1979 Alford plea. The applicant also contends that he "could not have raised his claim that his plea to reckless driving was involuntary * * * in connection with his [first] post-conviction application * * *."
In our judgment, these arguments are meritless and unavailing. The applicant could have, and certainly should have, raised his arguments with respect to his Alford plea in his first application for postconviction relief. He did not do so, and we consider the contentions set forth in the second application for postconviction relief to be barred by virtue of the res judicata doctrine. Moreover, after considering the record, we are satisfied, as was the hearing justice, that there is no sufficient reason for us to analyze said contentions pursuant to the limited statutory "interest of justice" exception to the bar against successive applications for postconviction relief.[13]See Miguel, 924 A.2d at 4.
*906 Conclusion
For the reasons stated in this opinion, we affirm the judgment of the Superior Court, and the papers in this case may be remanded to the Superior Court.
NOTES
[1] See North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970); see also note 4, infra.
[2] General Laws 1956 § 12-19-21 (commonly referred to as the "habitual offender statute") provides in pertinent part:
"(a) If any person who has been previously convicted in this or any other state of two (2) or more felony offenses arising from separate and distinct incidents and sentenced on two (2) or more occasions to serve a term in prison is, after the convictions and sentences, convicted in this state of any offense punished by imprisonment for more than one year, that person shall be deemed a `habitual criminal.' Upon conviction, the person deemed a habitual criminal shall be punished by imprisonment in the adult correctional institutions for a term not exceeding twenty-five (25) years, in addition to any sentence imposed for the offense of which he or she was last convicted."
[3] After granting the state's petition for certiorari, the United States Supreme Court directed this Court to reconsider one aspect of its decision (viz., the right to counsel issue) in light of the decision in Kuhlmann v. Wilson, 477 U.S. 436, 106 S.Ct. 2616, 91 L.Ed.2d 364 (1986). Rhode Island v. Mattatall, 479 U.S. 879, 107 S.Ct. 265, 93 L.Ed.2d 243 (1986) (mem.). Upon reconsideration, this Court reaffirmed its initial ruling and remanded the case to the Superior Court for a new trial. State v. Mattatall, 525 A.2d 49 (R.I.1987).
[4] Two previous convictions triggered applicant's classification as an habitual offender pursuant to § 12-19-21.
Although it is not entirely clear from the record before us, it appears that the first conviction relied on by the trial justice was for assault with a dangerous weapon; that conviction is not at issue in the instant case. See State v. Mattatall, 603 A.2d 1098, 1116 (R.I.1992).
The second conviction was for reckless driving, death resulting, pursuant to G.L. 1956 § 31-27-1. In 1979, the applicant was found guilty by a jury of reckless driving, death resulting; however, the trial justice vacated the jury's verdict and granted applicant's motion for a new trial. In so doing, the trial justice stated that it was his belief that there was contradictory evidence as to whether or not applicant had been the operator of the motor vehicle that was involved in the accident. Following the grant of the motion for a new trial, applicant immediately informed the trial justice that he wished to enter an Alford plea, which the court accepted.
The United States Supreme Court in Alford upheld a procedure whereby a court may accept a knowing and voluntary plea of guilty from a defendant, even though the defendant maintains his or her innocence, provided that the trial justice determines that the state has presented a factual foundation for the plea on the basis of evidence other than the defendant's own admission. Alford, 400 U.S. at 36-38, 91 S.Ct. 160; State v. Fontaine, 559 A.2d 622, 624 (R.I. 1989); see also Azevedo v. State, 945 A.2d 335, 338-39 (R.I.2008); Armenakes v. State, 821 A.2d 239, 242 (R.I.2003); State v. Mattatall, 603 A.2d 1098, 1118 n. 6 (R.I.1992). As this Court has made clear on numerous occasions:
"[A]lthough a criminal defendant may be relieved of the embarrassment of admitting participation in the crime or comforted by the fact that he or she has maintained his innocence and the victim sometimes is left in a quandary about what occurred during the plea proceeding, the result is abundantly clear: the defendant stands convicted of the crime." Armenakes, 821 A.2d at 242; see also Mattatall, 603 A.2d at 1118.
A conviction based on an Alford plea may later be used "for any legitimate purpose, including sentencing factors and enhancement, impeachment, and in collateral proceedings, such as deportation." Armenakes, 821 A.2d at 242.
[5] The applicant sought interlocutory review by this Court of the denial of his motion to recuse and to reassign; his petition for certiorari was denied on May 27, 2004.
[6] In rejecting applicant's second postconviction relief application, the court also observed "that the offense that [applicant] has targeted was committed some twenty-four years ago." Citing and quoting from this Court's decision in Raso v. Wall, 884 A.2d 391, 394 (R.I.2005), the hearing justice went on to state in dictum that the "`venerable defense of laches' may well be an appropriate vehicle that would, in any event, preclude the defendant's latest imprecation."
We agree with the hearing justice's assessment concerning the defense of laches. In our estimation, it would have been entirely appropriate for the state to have raised the affirmative defense of laches in an instance such as this where an applicant is challenging an event that took place so many years ago. There comes a time when the "prejudice" precondition to a finding of laches can be presumed. Northern Trust Co. v. Zoning Board of Review of Westerly, 899 A.2d 517, 520 (R.I.2006) (mem.) ("Given the egregious nature of the delay * * *, presuming prejudice to [the adverse party] gives us no pause.").
[7] An applicant who files an application for postconviction relief bears the burden of proving, by a preponderance of the evidence, that such relief is warranted. See, e.g., Gonder v. State, 935 A.2d 82, 84 n. 1 (R.I.2007); Larngar v. Wall, 918 A.2d 850, 855 (R.I.2007); see also Estrada v. Walker, 743 A.2d 1026, 1029 (R.I. 1999); Jacques v. State, 669 A.2d 1124, 1129 (R.I.1995).
[8] The applicant also failed to provide this Court with the transcript of the sentencing hearing during which the trial justice made the statements that applicant alleges were biased and that were the basis for his motion to recuse.
[9] Although this Court has held that a sentencing justice is not affirmatively required to articulate his or her reasons for imposing a particular sentence, we have stated that "a statement of reasons by the trial justice in justification of his departure from the sentence that would normally be expected in response to a given offense might well be of assistance in explaining to an appellate court why no abuse of discretion has taken place." State v. Small, 122 R.I. 634, 639 n. 5, 410 A.2d 1336, 1339 n. 5 (1980).
In addition, this Court has often stated that sentencing justices must take into account a variety of factors in fashioning an appropriate sentence. See, e.g., State v. Brigham, 666 A.2d 405, 406 (R.I.1995) ("In determining a fair sentence, a trial justice considers various factors including the severity of the crime, the defendant's personal, educational, and employment background, the potential for rehabilitation, societal deterrence, and the appropriateness of the punishment.").
[10] As an example of such an instance, see State v. Nordstrom, 122 R.I. 412, 413-14, 408 A.2d 601, 602 (1979), where this Court granted the defendants a new trial because the trial justice's disparaging statements uttered outside of the courtroom concerning the defendants were inconsistent with the impartiality required of judicial officers.
[11] We pause to express our continuing doubt about the wisdom of allowing defendants to enter an Alford plea. This is an issue that we may revisit at a later time. See Azevedo, 945 A.2d at 338 (noting that "we question the wisdom and utility of this procedural vehicle").
[12] The quoted formulaic summary of the res judicata principle brings to mind the following poignant passage from John Greenleaf Whittier's famous poem, Maud Muller (1854):
"For of all sad words of tongue or pen,
"The saddest are these: `It might have been.'"
[13] Even if we were persuaded (and we are not) that the "interest of justice" exception referred to in G.L. 1956 § 10-9.1-8 required us in this case to address applicant's arguments with respect to his 1979 Alford plea, we would still conclude that his contentions are meritless. The transcript of the proceedings relative to the Alford plea indicates that applicant understood the significance of his entering an Alford plea and that he was doing so for reasons that he perceived as being beneficial to him. Moreover, in his memorandum in support of his second application for postconviction relief, applicant reiterates the reasons that motivated him to enter an Alford plea.
It seems that applicant is not protesting the voluntariness of his 1979 Alford plea, but rather the fact that it was used several years later as a basis for sentencing him to additional incarceration pursuant to the habitual offender statute. This argument is similarly barred by the doctrine of res judicata in view of the fact that applicant raised such an argument on direct appeal from his second-degree murder conviction. In denying that appeal, this Court concluded that:
"When a defendant enters an Alford plea, which is accepted by the court, then such plea in a later judicial proceeding constitutes a conviction, irrespective of the fact that the defendant maintains his innocence and does not stand up and confess guilt * * *. Because Mattatall's Alford plea was accepted in an earlier proceeding and judgment entered, the trial justice had every right to consider this conviction for purposes of the habitual-offender statute." Mattatall, 603 A.2d at 1118. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542225/ | 947 A.2d 972 (2008)
108 Conn.App. 146
STATE of Connecticut
v.
Robert MUCKLE
State of Connecticut
v.
Stanley Scott.
State of Connecticut
v.
Maryann Sprague.
Nos. 28108, 28109, 28110.
Appellate Court of Connecticut.
Argued January 7, 2008.
Decided June 3, 2008.
*973 Roger J. Frechette, New Haven, for the appellants (defendants).
Leon F. Dalbec, Jr., senior assistant state's attorney, with whom, on the brief, were Michael Dearington, state's attorney, and John P. Doyle, Jr., assistant state's attorney, for the appellee (state).
GRUENDEL, LAVINE and STOUGHTON, Js.
LAVINE, J.
Each of the defendants in these consolidated appeals, Robert Muckle, Stanley Scott and Maryann Sprague, was convicted, after a trial to the court, of disorderly conduct in violation of General Statutes § 53a-182(a)(5) in connection with a demonstration at the Planned Parenthood of Connecticut (Planned Parenthood) facility in New Haven. On appeal, each of the defendants claims that the evidence was insufficient to establish that he or she either obstructed or intended to obstruct pedestrian traffic in violation of the statute. We affirm the judgments of the trial court.
These appeals arise out of events that transpired on July 9, 2005, when the defendants were on the sidewalk adjacent to Edwards Street near its intersection with Whitney Avenue in New Haven. The court found, in its oral decision, that "in the morning hours at or near . . . 345 Whitney Avenue in New Haven, [the defendants] by their physical presence, together with the presence of their numerous bulky signs, the carriages with signs placed on them, the bricks holding the carriage in place, and the location of the parties and the property within close proximity on the seven foot sidewalk, intended to cause inconvenience, annoyance or alarm by getting in the way of or blocking pedestrian traffic on the sidewalk of Edwards Street." The defendants were sentenced on October 3, 2006,[1] and these appeals followed. *974
"In reviewing a sufficiency of the evidence claim, we apply a two-part test. First we construe the evidence in the light most favorable to sustaining the verdict. Second, we determine whether upon the facts so construed and the inferences reasonably drawn therefrom the [trier of fact] reasonably could have concluded that the cumulative force of the evidence established guilt beyond a reasonable doubt." (Internal quotation marks omitted.) State v. Damato, 105 Conn.App. 335, 340-41, 937 A.2d 1232 (2008). "When there is conflicting evidence . . . it is the exclusive province of the court, as 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." (Internal quotation marks omitted.) Capp Industries, Inc. v. Schoenberg, 104 Conn.App. 101, 116-17 n. 11, 932 A.2d 453, cert. denied, 284 Conn. 941, 937 A.2d 696, 697 (2007). "Questions of whether to believe or to disbelieve a competent witness are beyond our review. As a reviewing court, we may not retry the case or pass on the credibility of witnesses. . . . We must defer to the trier of fact's assessment of the credibility of the witnesses that is made on the basis of its firsthand observation of their conduct, demeanor and attitude." (Internal quotation marks omitted.) State v. Felder, 95 Conn. App. 248, 263, 897 A.2d 614, cert. denied, 279 Conn. 905, 901 A.2d 1226 (2006). "On appeal, we do not ask whether there is a reasonable view of the evidence that would support a reasonable hypothesis of innocence. We ask, instead, whether there is a reasonable view of the evidence that supports the [finder of fact's] verdict of guilty." (Internal quotation marks omitted.) State v. Lopez, 289 Conn. 779, 809, 911 A.2d 1099 (2007). "In the absence of evidence to the contrary, [an appellate court] will not assume that a finding adverse to an appellant's case could only have been the product of a failure by the court to consider all of the evidence presented." Capp Industries, Inc. v. Schoenberg, supra, at 117 n. 11, 932 A.2d 453.
Following the presentation of evidence from September 5 through 7, 2006, the court rendered its decision orally on September 26, 2006. The court first recited the evidence that had been presented. The court heard testimony from Brian Donnelly, a New Haven police officer, and the defendants. The state also "introduced seventeen exhibits, including a video [from a stationary camera system employed by Planned Parenthood] that partially depicted the events of July 9, 2005,[2]*975 thirteen posters ranging in size from four feet by five feet to two feet by two feet, an umbrella stroller measuring approximately three feet tall by one and one-half feet wide, a baby carriage measuring approximately three and one-half feet tall by two feet wide, and eight bricks, which were contained in the baby carriage. The defendants introduced three exhibits consisting of photographs." (Emphasis added.)
The court made the following findings of fact, including, most significantly, that Donnelly was a credible witness and that the defendants were not. "[O]n July 9, 2005, in the morning hours at or near . . . 345 Whitney Avenue in New Haven, [the defendants] by their physical presence, together with the presence of their numerous bulky signs, the carriages with signs placed on them, the bricks holding the carriage in place, and the location of the parties and the property within close proximity on the seven foot sidewalk, intended to cause inconvenience, annoyance or alarm by getting in the way of or blocking pedestrian traffic on the sidewalk of Edwards Street.
"And [the court] further finds that by those aforesaid actions, the defendants created a risk of getting in the way of or blocking pedestrian traffic. The court finds that all three defendants were warned several times to move their persons and belongings so as not to impede pedestrian traffic on the sidewalk and that the defendants did not comply. The court further finds that three pedestrians were observed to step off the sidewalk and onto the adjacent grass because of the location of the defendants, their signs and carriages on the sidewalk. Therefore, the court finds that the state has proven beyond a reasonable doubt that each of the defendants is guilty of a violation of . . . General Statutes § 53a-182(a)(5)."[3]
The substance of the defendants' claims on appeal is that there was insufficient evidence by which the court could have found them guilty of violating § 53a-182(a)(5) because there was no credible evidence that any one of them obstructed pedestrian traffic and that the video contradicts the court's findings. Moreover, the defendants argue that there was no pedestrian traffic.[4] On the basis of our review of the testimony, the defendants' exhibits and the video, we conclude that there is evidence in the record to support the court's findings.
The finder of fact must find every element of the statute proven beyond a reasonable doubt to find the defendants guilty of the offense charged, but "each of the basic and inferred facts underlying those conclusions need not be proved beyond a reasonable doubt. . . . If it is reasonable *976 and logical for the [finder of fact] to conclude that a basic fact or an inferred fact is true, the [fact finder] is permitted to consider the fact proven and may consider it in combination with other proven facts in determining whether the cumulative effect of all of the evidence proves the defendants guilty of all the elements of the crime charged beyond a reasonable doubt." (Internal quotation marks omitted.) State v. Martin, 285 Conn. 135, 147-48, 939 A.2d 524 (2008).
"[I]t is within the province of the trial court, when sitting as the fact finder, to weigh the evidence presented and determine the credibility and effect to be given the evidence. . . . Credibility must be assessed . . . not by reading the cold printed record, but by observing firsthand the witness' conduct, demeanor and attitude." (Internal quotation marks omitted.) State v. Lawrence, 282 Conn. 141, 155, 920 A.2d 236 (2007).
General Statutes § 53a-182(a) provides in relevant part: "A person is guilty of disorderly conduct when, with intent to cause inconvenience, annoyance or alarm, or recklessly creating a risk thereof, such person . . . (5) obstructs vehicular or pedestrian traffic. . . ." "[T]o support a conviction for disorderly conduct, the defendant's predominant intent must be to cause inconvenience, annoyance or alarm, rather than to exercise his constitutional rights." State v. Indrisano, 228 Conn. 795, 809, 640 A.2d 986 (1994). "[T]he mens rea language of § 53a-182(a) can be formulated more precisely as follows: the predominant intent is to cause what a reasonable person operating under contemporary community standards would consider a disturbance to or impediment of a lawful activity, a deep feeling of vexation or provocation, or a feeling of anxiety prompted by threatened danger or harm. In order to sustain a conviction for disorderly conduct, the state must begin by demonstrating that the defendant had such a state of mind." Id., at 810-11, 640 A.2d 986.
"[P]roof beyond a reasonable doubt does not mean proof beyond all possible doubt . . . nor does proof beyond a reasonable doubt require acceptance of every hypothesis of innocence posed by the defendant that, had it been found credible by the trier, would have resulted in an acquittal. . . . Furthermore, [i]n [the] process of review, it does not diminish the probative force of the evidence that it consists, in whole or in part, of evidence that is circumstantial rather than direct. . . . it is not one fact, but the cumulative impact of a multitude of facts which establishes guilt in a case involving substantial circumstantial evidence. . . . Indeed, direct evidence of the accused's state of mind is rarely available. . . . Therefore, intent is often inferred from conduct . . . and from the cumulative effect of the circumstantial evidence and the rational inferences drawn therefrom. . . . [A]ny such inference cannot be based on possibilities, surmise or conjecture. . . . It is axiomatic, therefore, that [a]ny [inference] drawn must be rational and founded upon the evidence." (Internal quotation marks omitted.) State v. Aloi, 280 Conn. 824, 842-43, 911 A.2d 1086 (2007).
Our review of the evidence discloses that Donnelly testified that on July 9, 2005, he was familiar with Scott and Muckle. When he arrived at the scene in response to a complaint telephoned to the police department, Donnelly observed several protestors on the sidewalk as well as a number of signs. The defendants' signs, posters and placards were placed in evidence. The size of them varied from four feet by five feet to two feet by two feet. The photographic and video evidence demonstrated that the signs, stroller and baby *977 carriage secured by bricks were on the sidewalk on Edwards Street adjacent to the Planned Parenthood building. Donnelly estimated that six times he asked the defendants, individually or as a group, not to block the sidewalk. He also testified that Scott stated that he had "a constitutional right to block the sidewalk and to protest." The court reasonably could have inferred on the basis of the size of the defendants' belongings and their position on the sidewalk that the defendants intended to cause inconvenience, annoyance and alarm or obstructed the sidewalk.[5]
With regard to the obstruction of pedestrian traffic, Donnelly testified that shortly after he arrived, he informed the defendants that they and their signs were obstructing the sidewalk completely, and that at one point, Scott and Sprague were holding signs standing side by side completely blocking the sidewalk. He also testified that several people could not physically pass on the sidewalk because of where the defendants were standing. Deborah Camerota, a defense witness, testified that she saw the sidewalk blocked one time. Donnelly's testimony[6] and the photographic and video evidence provided a basis for the court to conclude that pedestrians walked off the sidewalk to get around the signs, stroller and baby carriage on the sidewalk. For these reasons, we conclude that there was sufficient evidence presented by the state to prove beyond a reasonable doubt that the defendants were in violation of § 53a-182(a)(5).
The judgments are affirmed.
In this opinion GRUENDEL, J., concurred.
STOUGHTON, J., dissenting.
In my view, the evidence and the inferences reasonably drawn therefrom do not support a conclusion that the defendants, Robert Muckle, Stanley Scott and Maryann Sprague, actually obstructed pedestrian traffic during their demonstration at the Planned Parenthood of Connecticut (Planned Parenthood) building in New Haven. Therefore, I respectfully dissent.
Officer Brian Donnelly of the New Haven police department testified that he saw three pedestrians approaching toward the area where the protesters were with their props and that these three pedestrians stepped off the sidewalk.[1] He further testified that he observed two of the three stop as they approached the area and step onto the grass adjoining the sidewalk. These two were never identified, and Donnelly did not know where they went. He testified that he thought that they stepped onto the grass because they could not proceed through the protestors along the sidewalk. That was never established, however, and Donnelly also testified that they may have simply stepped off the sidewalk and walked into the Planned Parenthood building. The record reveals that no other evidence regarding these two pedestrians *978 was provided to the court. No evidence was presented indicating, for example, whether the two pedestrians were traveling together. More importantly, the record does not indicate the positioning of the defendants at the time when the two pedestrians stepped off the sidewalk. Thus, it is not clear which, if any, of the defendants were even blocking the sidewalk at the time that these pedestrians departed from it. It also is not clear whether any of the defendants noticed the two pedestrians.
The third and final pedestrian referenced by Donnelly, and relied on by the state, was a woman who was walking a dog. Donnelly testified that she continued along the sidewalk and stepped onto the grass with her dog when she reached the spot where Scott and Sprague were standing with some policemen. This episode is shown in a video from a stationary camera system employed by Planned Parenthood that depicted a portion of the events during the demonstration, which we have reviewed. The video is consistent with Donnelly's testimony of the event. The portion of the sidewalk where the woman with the dog stepped onto the grass was occupied by Donnelly and two other police officers in addition to two of the defendants. To the extent that the sidewalk was blocked, the evidence is insufficient to establish that it was the defendants alone, rather than the defendants and the police officers, who blocked the sidewalk. Additionally, even though this pedestrian stepped onto the grass with the dog, she was hardly inconvenienced even slightly, let alone obstructed in her progress. No one attempted to stop her, and she proceeded past the defendants without incident. The state had to show that while intending to impede a lawful activity, the defendants obstructed pedestrian traffic. See State v. Scott, 83 Conn. App. 724, 730, 851 A.2d 353 (2004). One is not obstructed in this sense simply because one is obliged to step around another person who is also on the sidewalk. See State v. Anonymous (1976-9), 33 Conn.Supp. 93, 98, 363 A.2d 772 (1976).
Whether the other two pedestrians might have been obstructed cannot be determined from the evidence. Where they were headed was never revealed, Donnelly testified that he did not know where they were headed, and there is no evidence that they actually attempted to walk along the sidewalk.
Deborah Camerota, referred to in the majority opinion, was considered by the state to have been among the protesters.
I would reverse the judgment.
NOTES
[1] All of the defendants were sentenced to ninety days in the custody of the commission of correction, execution suspended. Muckle and Sprague were ordered to pay fines of $250 each, and Scott was ordered to pay a fine of $500. Muckle and Sprague each received a conditional discharge, requiring that they have no contact with Planned Parenthood, stay 100 yards away from any Planned Parenthood office in Connecticut, have no contact with Planned Parenthood employees or visitors and have no new arrests. Scott received one year of probation subject to standard terms, plus he is to stay 100 yards away from any Planned Parenthood office in Connecticut, have no contact with Planned Parenthood employees or visitors, stay ten feet away from any motor vehicle approaching a Planned Parenthood office, make a $250 charitable contribution to the Crime Victims Compensation Fund within three months of sentencing and perform ten hours of community service each week for one year.
[2] The parties stipulated that the video depicted images captured by a motion detector system mounted on the Planned Parenthood building and that the time the images were captured as shown on the video was accurate as to minutes and seconds, but was "off" by one hour. The video camera does not record continuously, but only when it detects motion. There are therefore spaces over time in the video. In other words, the video contains seven minutes of imagery over the passage of twenty-five minutes of time. Donnelly testified that the camera's view encompassed a small portion of the sidewalk on either side of the driveway. It could not observe the full length of the sidewalk where the defendants had placed their signs, stroller and baby carriage. Notwithstanding that the video does not purport to portray all of the events as to which evidence was produced, the defendants argue that the seven minute video "proves with mathematical certainty that not only [was] there . . . no intent to cause inconvenience, annoyance or alarm, but there [was] absolutely no obstruction of pedestrian traffic."
[3] It does not escape our notice that the defendants failed at trial to move for a judgment of acquittal either after the state's case-in-chief or at the conclusion of evidence.
[4] The defendants stated the issue in their brief as: "Did the trial court err when it entered its oral judgment that the defendants were guilty beyond a reasonable doubt of violating . . . § 53a-182(a)(5), which states [that] a person is guilty of disorderly conduct when, with intent to cause inconvenience, annoyance or alarm, such person obstructs pedestrian traffic, but, however, as proven by state's exhibit one, the [video], which proves that there was not only no intention to obstruct pedestrian traffic, but [that] there was no pedestrian traffic to be obstructed, as there is not a scintilla of credible evidence that the defendants' obstructed pedestrian traffic?" (Emphasis in original.)
[5] The defendants did not file a motion for articulation; see Practice Book § 66-5; asking the court to clarify whether it found that they intended to cause inconvenience, annoyance or alarm and on what basis.
[6] Donnelly testified that he observed three people walk off the sidewalk onto the grass because they could not physically pass on the sidewalk. The defendants testified that they did not intend to block pedestrian traffic and that they did not block the sidewalk. The court found Donnelly's testimony to be more credible. In their brief, the defendants argue that pedestrian traffic was not blocked because there was no pedestrian traffic. The record does not support this claim.
[1] The state conceded at trial that no pedestrians were prevented from accessing the Planned Parenthood building. | 01-03-2023 | 10-30-2013 |
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