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https://www.courtlistener.com/api/rest/v3/opinions/1542228/ | 122 F.2d 710 (1941)
ANTHONY P. MILLER, Inc.,
v.
NEEDHAM et al.
No. 7627.
Circuit Court of Appeals, Third Circuit.
June 17, 1941.
Rehearing Denied October 2, 1941.
*711 Edward H. Cushman, of Philadelphia, Pa., for appellant.
Lewis M. Stevens, of Philadelphia, Pa., for appellee.
Before MARIS, JONES, and GOODRICH, Circuit Judges.
GOODRICH, Circuit Judge.
This is an action by a general contractor against the surety company which furnished the bonds for a subcontractor's performance, to recover damages sustained by the plaintiff by reason of the subcontractor's inefficiency and his failure to complete the work and pay materialmen. The defences raised by the surety in the court below were: (1) Fraud on the part of the subcontractor which was participated in by the plaintiff[1] in procuring the bonds and (2) over-payments by the contractor to the subcontractor. The learned trial judge dismissed the complaint. He refused to make the finding of fraud contended for by the defendant, although he did not find that there was not fraud. The defendant-appellee, in this court, strenuously urges the circumstances tending to prove fraud upon our attention. We shall not review the testimony. Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, provides: "* * * Findings of fact shall not be set aside unless clearly erroneous * * *." We find no such clear error in the fact finding of the court below.
Plaintiff, Miller, had a contract with the United States Government for the construction of buildings in the Westfield Acres Housing Project in New Jersey. The contracts for heating, plumbing and outside steam distribution were let to Needham by subcontracts executed September 3, 1936. Needham's bonds to Miller, with the bonding company as surety for the performance by Needham, were executed September 22, 1936. Needham abandoned the contracts on December 24, 1937.
The contracts between Miller and Needham provided for monthly progress payments of 85% of the value of the work done during the preceding month. It is found, as a fact, that the plaintiff overpaid Needham from the beginning of the job until the latter suspended performance. The overpayment as of December 24, 1937 was found to be $46,681.92, plus a sum sufficient to complete Needham's incompleted contracts. The full amount of this overpayment represented an invasion of what should have been the retained percentage amount.
If the case stopped there we should have the often litigated situation of the creditor who overpays the debtor on a building contract and the problem of the effect of such overpayment upon the surety. In two-state transactions presenting questions of conflict of laws, it is now clear that a federal court, in making the appropriate rules of reference to the law of other states, must follow the conflict of laws decisions of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 61 S.Ct. 1020, 85 L.Ed. 1477, 1941; Griffin v. McCoach, 61 S.Ct. 1023, 85 L.Ed. 1481, 1941. In this case for instance, the court below and this court as well, adopts such rules of reference to the law of other states as a Pennsylvania court makes, subject, of course, to the governing effect of the Federal Rules of Civil Procedure in procedural matters.
But before we reach the point of determining what law applies to the effect upon the surety of overpayment by the creditor (Miller), we must consider an argument raised by the plaintiff, which, if sustained, materially changes the whole problem. Defendant bonding company is an Indiana *712 corporation. Its business in eastern Pennsylvania is secured through Howard Hager & Co., Inc. of Philadelphia.[2] Hager, it appears, had written bonds before for the subcontractor, Needham. Upon the occasion of this application he called upon Miller and said he (Hager) would provide Needham with the necessary bonds for the latter's part of this project if Miller would agree to accept trade acceptances from Needham as had been done before on a prior job. This Miller agreed to do. It was these trade acceptances which accelerated the payments by Miller to Needham.
The plaintiff contends that this arrangement binds the bonding company. The argument, as we understand it, goes something like this: (1) That Hager was the general agent of the defendant company; (2) that a general agent may bind his principal by making contracts on his behalf notwithstanding limitations put upon the agent's authority by the principal; (3) that this arrangement, made on behalf of the defendant by its general agent, Hager, bound the defendant notwithstanding that the payments were not made in accordance with the terms of the written contract.
The trial judge did not make a formal finding that Hager was the general agent for the bonding company for eastern Pennsylvania at the time of the transaction in question, although requested to do so. In his opinion, however, he states that "Hager was the defendant's general agent". Plaintiff here, as in the court below, calls attention to the activity of the Hager firm on behalf of the bonding company over a period of years, to the compensation paid by the company which was claimed to be that paid to a general agent, to his appointment of subagents and to his designation as general agent in an insurance directory and on letterheads.
Two questions of Pennsylvania law are presented relevant to this problem. The first is, what law is referred to in determining the scope of Hager's authority. This is a conflict of laws question, obviously, and the authority in Pennsylvania follows the general rule to the effect that the reference is to the law of the place where the agent acts on the principal's behalf.[3] Hager was a Pennsylvania agent by the terms of his appointment, his office was in Philadelphia and an examination of the entire record fails to disclose any evidence that the bonds in question were executed and delivered at any other place than that which is the most natural place under the circumstances, Philadelphia. The law of Pennsylvania therefore governs the scope of Hager's authority. Likewise the law of Pennsylvania must govern the effect to be given to an alleged consent by Hager, subsequent to the execution of the bonds and the beginning of the work by Needham, to the use of the trade acceptances to finance Needham. This consent, if given, was likewise given at Hager's office in Philadelphia.
This leads, then, to the second question of Pennsylvania law: the authority of a general agent.
The distinction between a general agent and a special agent, in Pennsylvania and elsewhere, seems to turn on continuity of service rather than the breadth of the agent's powers.[4] The conclusion, then, that Hager may be regarded as a general agent for the bonding company does not take one far in the real question in the case. As such agent did he have power to agree to an alteration of the provisions of the contracts upon which the bonding company was surety? The general rule, which is followed in Pennsylvania, with regard to what the general agent may do to bind his principal is stated in § 161 of the Restatement *713 of Agency: "A general agent for a disclosed or partially disclosed principal subjects his principal to liability for acts done on his account which usually accompany or are incidental to transactions which he is authorized to conduct if, although they are forbidden by the principal, the other party reasonably believes that the agent is authorized to do them and has no notice that the agent is not so authorized."[5] That Hager was expressly limited by instructions from the bonding company from making changes in the contracts is clear.[6] There is no evidence that this was known to Miller. But there is nothing to show that the power to agree to a material alteration of a building contract is one of the powers which usually accompany or are incidental to transactions engaged in by the general agents of surety companies. On the contrary, testimony of insurance experts offered by the plaintiff was to the effect that the powers of general agents in the surety business vary in each particular case according to their agency agreement with the employing company. In the absence of a controlling decision[7] specifically holding that such power is incidental to a general agency for a bonding company, certainly we should not conclude it in this case. Indeed the weight of argument would seem to lead strongly to the opposite conclusion. The retention of a substantial portion of each payment, as the contracts here provided for, is the very thing which a surety might well depend upon to measure his risk in insuring the subcontractor's performance.
Nor was there any representation of authority, not actually existing, on which it could be said that Miller could have relied. Indeed, each of the bonds was accompanied by a power of attorney authorizing execution in the particular transaction. This fact would certainly negative a conclusion of the existence of any unrestrained freedom on the part of the agent to write them as he pleased. We conclude, then, that, under the law of Pennsylvania, there was neither actual, incidental nor apparent authority to consent to this material alteration of the method of payment.
This brings us back, therefore, to the question of the situation of a surety where a creditor varies the terms of a contract with the principal debtor by changing the stipulated method of time of payment. By what law is that question to be determined? The obligation of Needham to perform was clearly to take place in New Jersey since that was the place of the building operations in which he was engaged. The surety guaranteed Needham's performance. We may conclude that the surety's obligation is performable in New Jersey. Does it follow that the effect of what the creditor has done shall be determined by New Jersey law? The defendant says yes and cites § 374 of the Restatement of Conflict of Laws which is squarely to this effect.[8] Bearing in mind, however, that a federal court in Pennsylvania must decide this matter as a Pennsylvania court would decide it, the answer is not so clear. The closest Pennsylvania decision to the point seems to be Tenant v. Tenant, 110 Pa. 478, 1 A. 532, 534, 1885. This case involved the effect of an oral notice by a surety on a West Virginia note that the creditor must proceed against the principal debtor for its collection, or he (the surety) would not be responsible. By the law of West Virginia, to be effective, such notice had to be in writing. The court held that the surety was nevertheless liable. It was said through Mr. Justice Green that "The right of a surety to discharge his obligation by notice to the creditor to pursue the debtor is an incident of the contract of suretyship. It is a part of the law of that contract, and is, therefore, a part of the contract itself. It is a qualification of the *714 obligation of the contract, reducing it from a peremptory and absolute obligation to one of a qualified or conditional character * * * the right of a surety to discharge his obligation by a disregarded notice to the creditor to pursue the principal debtor, is a matter affecting the obligation of the contract, and must, therefore, be determined by the law of the place of the contract." If Greenwald & Co. v. Kaster, 86 Pa. 45, 1878, is in point at all it looks in this direction also. In Beale on Conflict of Laws, § 374.2 the learned author makes a general statement similar to that already quoted from the Restatement. He adds, however, that in all of the cases found upon the point, it was unnecessary to make a choice between place of contracting and place of performance. The same is true, of course, of the Tenant case just discussed, for the attention of the court there was directed to the distinction between procedure and substance, not between obligation and performance. Nevertheless, the court treated the matter as a matter of obligation and we take the Pennsylvania law as it is declared by Pennsylvania courts. It has been pointed out that the line between obligation and performance is not a bright one, but a question of degree and "Like all questions of degree, the solution must depend upon the circumstances of each case and must be governed by the exercise of judgment."[9] The only Pennsylvania authority which we have classifies the question as one of obligation. That represents the law for a federal court unless and until the courts of Pennsylvania analyze the problem to the contrary.
This being so, the effect of the method of payment adopted by Miller to the subcontractor, Needham, upon the surety's obligation must be determined by the law of Pennsylvania, which we have concluded to be the place of contracting.[10] The case must be remanded to the trial court for the determination and application of that law. There was no express finding in the trial court that the bonds which were the subject-matter of this suit were executed and delivered in Pennsylvania. If, upon further proceedings in this cause, that is found not to be the fact the application of the rule of reference to the place of contracting already set out will clearly determine what law is to be applied. In addition, as pointed out above, the Pennsylvania rule of reference is to the place where the contract was made to determine the scope of Hager's authority to bind his principal.
The judgment of the District Court is reversed and the case is remanded to the District Court for proceedings not inconsistent with this opinion.
NOTES
[1] It is unnecessary here, as it was in the court below, to distinguish between Anthony P. Miller as an individual and Anthony P. Miller, Incorporated.
[2] Again, it is unnecessary to distinguish in this litigation between Howard Hager & Co., Inc., the corporation, and the President of the corporation, Howard Hager.
[3] Restatement, Conflict of Laws, § 345 and Pennsylvania Annotations thereto.
[4] Restatement of Agency, § 3. Comment c to this Section states: "A general agent may have little discretion in regard to the transactions which he is employed to perform, while a special agent may have great discretion in the single transaction which he conducts. Thus, one is a general agent if he is in continuous employment, although the employment consists of purchasing articles as the employer directs with no discretion as to the kinds, amounts, or prices to be paid; while one employed to purchase a single article would be a special agent although given the widest discretion, as where one is directed to purchase any suitable article as a wedding gift." See quotations from numerous Pennsylvania decisions cited in Pennsylvania Annotations to the Restatement of Agency, § 3. Cf. Maryland Casualty Co. v. Peoples, 26 Pa.Super, 142, 1904.
[5] Pennsylvania authorities in accord with this statement may be found in Pennsylvania Annotations to the Restatement of Agency, § 161.
[6] Paragraph A of the agency agreement between Hager and the bonding company provides: "The Agent agrees to abide by the rules and written, printed or telegraphic instructions of the Company. Nothing herein contained shall be construed as authorizing the Agent to sign any bond or undertaking on behalf of the Company without specific authority nor waive any forfeiture, nor alter or agree to any alteration, extension or waiver of any bond, undertaking or contract, nor do anything on behalf of the Company unless specifically authorized in writing by the Company so to do."
[7] We do not read Anderson v. National Surety Co., 196 Pa. 288, 46 A. 306, 1900, as supporting the plaintiff's position.
[8] § 374 reads: "The law of the place of performance determines whether release of one party to a contract, or extending the time for performance in favor of the principal party, or surrendering security, discharges the other parties."
[9] Restatement, Conflict of Laws, § 332, comment c; Restatement, Conflict of Laws, § 358, comment b.
[10] See National Beverage Sales Co. v. Weinstein, 303 Pa. 387, 154 A. 595, 1931. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542231/ | 947 A.2d 47 (2008)
Sisay SHEWAREGA, Appellant,
v.
Kidist YEGZAW, Appellee.
No. 06-CT-969.
District of Columbia Court of Appeals.
Submitted March 27, 2008.
Decided April 18, 2008.
*49 David Carey Woll, Wheaton, MD, was on the brief, for appellant.
Appellee did not submit a brief.
Linda Singer, then Attorney General of the District of Columbia, Todd S. Kim, Solicitor General, Rosalyn Calbert Groce, Deputy Solicitor General, and Sidney R. Bixler, Assistant Attorney General, filed a brief on behalf of the District of Columbia as amicus curiae.
Before GLICKMAN and THOMPSON, Associate Judges, and TERRY, Senior Judge.
GLICKMAN, Associate Judge:
Sisay Shewarega appeals his conviction of criminal contempt for willfully disobeying a civil protection order (CPO) issued pursuant to the Intrafamily Offenses Act.[1] Appellant argues that his contempt conviction must be reversed because the CPO was void ab initio for lack of subject matter jurisdiction, and alternatively for insufficient proof that he violated the CPO. We reject appellant's jurisdictional argument. We conclude, though it is a close question, that there is sufficient evidence in the record to support appellant's contempt adjudication. However, because the trial court's determination rests on factual findings that are clearly erroneous, we must remand for the court to reconsider its verdict after an accurate assessment of the trial record.
I.
The statutory predicate for issuance of a CPO is a finding of good cause to believe that the respondent has committed or is threatening to commit an "intrafamily offense" within the meaning of D.C.Code § 16-1001(5).[2] At the time of the events at issue here, that statute defined an "intrafamily offense" as follows:
The term "intrafamily offense" means an act punishable as a criminal offense committed by an offender upon a person:
(A) to whom the offender is related by blood, legal custody, marriage, having a child in common, or with whom the offender shares or has shared a mutual residence; or
(B) with whom the offender maintains or maintained a romantic relationship not necessarily including a sexual relationship. A person seeking a protection order under this subparagraph shall reside in the District of Columbia or the underlying intrafamily offense shall have occurred in the District of Columbia.[3]
In her petition for a CPO, appellee Kidist Yegzaw alleged that she and appellant *50 shared the same residence a boarding house owned and occupied by appellant, in which she rented a room and that appellant had committed an intrafamily offense by assaulting and threatening her.
After holding a hearing, the trial court granted Ms. Yegzaw's petition. The CPO, issued on April 21, 2006, recites the court's findings of jurisdiction over the parties and subject matter, and of good cause to believe that appellant had committed an intrafamily offense. Appellant was ordered not to "assault, threaten, harass, or stalk Petitioner, or destroy Petitioner's property." Appellant was not barred from otherwise contacting or communicating with Ms. Yegzaw. The CPO, which appellant signed, warned that if he did not comply with its terms, he would be subject to prosecution for civil or criminal contempt.[4] Appellant did not appeal the entry of the CPO.
Less than three weeks later, Ms. Yegzaw moved the court to adjudicate appellant guilty of criminal contempt. She alleged that appellant had violated the CPO on May 8, 2006, by knocking forcefully on her bedroom door, yelling and screaming at her, and making threats to get her deported to her native country and to kill her.
Appellant moved to dismiss the contempt proceeding on the ground that the Superior Court lacked jurisdiction to issue the CPO. At the hearing on the motion, appellant testified, and Ms. Yegzaw agreed, that they never had a familial, romantic, or intimate personal relationship of any kind; their only relationship was one of landlord and tenant at the rooming house where they both resided. The CPO was void for want of jurisdiction, appellant argued, because the Intrafamily Offenses Act had not been and (as its title suggests) should not be construed to apply to such impersonal relationships. The trial court rejected this argument, and denied appellant's motion, in view of appellant's admission that the kitchen, living room, dining room, entrance, and hallways at the rooming house were common areas for all the residents, including Ms. Yegzaw and himself. The court found that appellant and Ms. Yegzaw therefore "shared a mutual residence" within the meaning of D.C.Code § 16-1001(5). That limited relationship was enough, the court ruled, to satisfy statutory prerequisites for an "intrafamily offense."
At trial, Ms. Yegzaw prosecuted her motion for contempt without the assistance of counsel. She did not testify; her only witness was her housemate, Shawaue Taffese. Ms. Taffese testified that on the night of May 8, 2006, appellant followed Ms. Yegzaw up to her room from the kitchen, where Ms. Yegzaw had brewed some tea. Appellant was shouting at Ms. Yegzaw, reviling her for her use of the kitchen. He then banged on her door and, Ms. Taffese recalled, he yelled "I'm going to make you deported. . . . I'm going to deport two of you, but especially her." Ms. Taffese did not testify to any other threats. On direct examination, she stated that appellant hit Ms. Yegzaw (which Ms. Yegzaw herself had not alleged). However, Ms. Taffese retracted that statement on cross-examination, saying "I didn't say that he hit her. He was going to hit her. He came to hit her. . . . He came forward, he banged the door and then he came forward to hit her," though he did not actually do so. Both Ms. Taffese and Ms. Yegzaw were frightened; they called the police, who responded but made no arrest.
*51 Appellant presented three witnesses in his defense. He and his girlfriend, Hewan Worku, testified that they were in his room on the night of May 8. At some point, Ms. Worku went to the kitchen for some water and called up to appellant to ask if he had meant to leave the downstairs lights on. Ms. Yegzaw and Ms. Taffese then came out of their rooms and started screaming and cursing at Ms. Worku, telling her that the lights were none of her business. Appellant emerged and escorted Ms. Worku back to his room without speaking to the other two women. When the police arrived, appellant and Ms. Worku told them what had happened, and the police left. This testimony was partially corroborated by the third defense witness, Saba Alemu, who also rented a room in appellant's house. Ms. Alemu testified that she was awakened on May 8 by the women's yelling and did not hear appellant's voice at all.
At the conclusion of the trial, the court reviewed the evidence before delivering its verdict. Observing that "the case comes down to who do you believe," the court "credit[ed] the testimony of Ms. Yegzaw and Ms. Taffese" that appellant "made threats. Threats to kill Ms. Yegzaw. Threats to have her deported." Accordingly, the court found, appellant violated the CPO "by making threatening and harassing statements" to Ms. Yegzaw.
II.
Appellant's challenge to the court's jurisdiction rests on his claim that his relationship with Ms. Yegzaw fell outside the purview of the Intrafamily Offenses Act because it was not of a familial, romantic, or other intimate nature. This challenge must be rejected for two independent reasons.
First, appellant was not entitled to attack the validity of the CPO in the contempt proceeding on the grounds he asserted. Even if his relationship with Ms. Yegzaw could not have supported the issuance of a CPO under the Intrafamily Offenses Act, appellant still was obligated to obey the court order unless and until it was reversed or vacated, on pain of being found in contempt.[5] It is true that "[v]oidness of a court order is an absolute defense" to a contempt charge,[6] and that disobedience of a void order may not be punished as contempt.[7] But a court order is void "only if the court that entered it had no jurisdiction over the parties or the subject matter, or if the court's action was otherwise so arbitrary as to violate due process of law."[8] The CPO issued against appellant was not void in this narrow *52 sense. The Superior Court unquestionably had subject matter jurisdiction over the petition for a CPO and personal jurisdiction over the parties, and appellant makes no claim that the court denied him due process.
In any event, appellant's claim that the Intrafamily Offenses Act does not apply to his non-intimate relationship with Ms. Yegzaw is mistaken. Formerly, D.C.Code § 16-1001(5) defined an intrafamily offense as a criminal offense committed by an offender upon a person:
(A) to whom the offender is related by blood, legal custody, marriage, having a child in common, or with whom the offender shares or has shared a mutual residence; and
(B) with whom the offender maintains or maintained an intimate relationship rendering the application of this chapter appropriate.[9]
By using the word "and" between subparagraphs (A) and (B), the former statute did require an "intimate relationship," in addition to one of the relationships listed in subparagraph (A), to establish an intrafamily offense, as this court stated in McKnight[10] and Sandoval.[11] But those cases, on which appellant relies, are outdated, because the statute was amended in 1995. Among other changes, the 1995 amendment replaced the word "and" connecting subparagraphs (A) and (B) of D.C.Code § 16-1001(5) with "or," so as to provide that any relationship listed in either subparagraph would suffice by itself.[12] Sharing a mutual residence need not coexist with any of the other relationships kinship, legal custody, marriage, having a child in common, or a romantic relationship on which an intrafamily offense may be predicated, for it is listed as an alternative to all of them. So far as the statute is concerned, the reason the parties shared a mutual residence is immaterial.
III.
Conviction of criminal contempt for violating a CPO requires proof beyond a reasonable doubt that the defendant willfully disobeyed the court's order.[13] In evaluating the sufficiency of the proof, we must view the evidence in the light most favorable to sustaining the judgment, and we may not reverse the trial court's factual findings unless they are clearly erroneous or, equivalently, plainly wrong or without evidentiary support.[14] Whether the CPO forbade the acts proved is a question of law, as to which our review is de novo.[15]
*53 Crediting what it referred to as "the testimony" of Ms. Yegzaw and Ms. Taffese, the trial court found that appellant violated the CPO by making threats to kill Ms. Yegzaw and to have her deported. That finding is clearly erroneous, for Ms. Yegzaw did not testify, and Ms. Taffese never said appellant threatened to kill Ms. Yegzaw. The only threat to which Ms. Taffese testified was appellant's threat to have Ms. Yegzaw deported.[16]
Ms. Taffese's testimony about that threat and the circumstances surrounding it, if credited, seems to us sufficient, if barely so, to make out a CPO violation by appellant. In ordering appellant not to "assault, threaten, harass, or stalk [Ms. Yegzaw], or destroy [her] property," the CPO appears aimed at preventing conduct of a criminal or incipiently criminal nature. As appellant points out, threatening someone with deportation does not violate the criminal threats statutes in this jurisdiction.[17] However, the District's anti-stalking statute criminalizes "harassing," i.e., "engaging in a course of conduct either in person, by telephone, or in writing, directed at a specific person, which seriously alarms, annoys, frightens, or torments the person, or engaging in a course of conduct either in person, by telephone, or in writing, which would cause a reasonable person to be seriously alarmed, annoyed, frightened, or tormented."[18] Appellant argues that acts of a "harassing" nature must be committed "on more than one occasion" to violate the statute,[19] and that no such repetition was proved here, because Ms. Taffese testified to only one instance of harassment at most. But as a prophylactic measure imposed in the wake of an intrafamily offense, the CPO need not await the materialization of a full-fledged criminal pattern; rather, we think it must be read as proscribing even a single act of harassment, if that act otherwise satisfies the statutory definition of the offense. While it seems to us a close question whether appellant's threat of deportation, under the particular circumstances it was made, was sufficiently distressing and malicious to meet that test, we are not prepared to hold that no reasonable trier of fact could so find.
Nonetheless, we cannot say that the trial court would have found appellant guilty of willfully violating the CPO based on Ms. Taffese's account alone that is, without mistakenly relying on Ms. Yegzaw's *54 allegations as well. Because the court based its decision on clearly erroneous findings that Ms. Yegzaw testified and that appellant threatened to kill her we are constrained to remand this case for the court to weigh the evidence in the record afresh and render a new verdict.[20]
So ordered.
NOTES
[1] D.C.Code § 16-1001 et seq. (2001 & Supp. 2007).
[2] See D.C.Code § 16-1005(c).
[3] D.C.Code § 16-1001(5) was amended in respects not pertinent to our construction of the statute in this case by D.C. Law 16-306, § 206(a), 53 D.C.Reg. 8610 (effective Apr. 24, 2007).
[4] D.C.Code § 16-1005(f) provides that violation of a civil protective order is punishable as contempt.
[5] See, e.g., Baker v. United States, 891 A.2d 208, 212 (D.C.2006) ("[E]ven assuming for the sake of argument that the trial court's nocontact order was invalid, Baker's conviction for contempt must be upheld for his failure to comply with that order.") (citations omitted); In re Marshall, 445 A.2d 5, 7 (D.C.1982) ("[A]ppellant had an obligation either to comply with the court order . . . or to seek to have the order vacated."); In re Evans, 411 A.2d 984, 993 n. 10 (D.C.1980) ("As a general rule, `[v]iolations of an order are punishable as criminal contempt even though the order is set aside on appeal.'") (quoting United States v. United Mine Workers, 330 U.S. 258, 294, 67 S.Ct. 677, 91 L.Ed. 884 (1947)).
[6] Kammerman v. Kammerman, 543 A.2d 794, 799 (D.C.1988).
[7] See In re Banks, 306 A.2d 270, 273 (D.C. 1973) (stating that a void order "could be disobeyed with impunity").
[8] Kammerman, 543 A.2d at 799 (internal citations omitted); see also Marshall, 445 A.2d at 7 ("The court had jurisdiction of the party and of the subject-matter. Hence, however defective or erroneous the proceedings, the judgment was not void, and could, at most, be voidable.") (quoting Hunter v. United States, 48 App. D.C. 19, 23 (1918)).
[9] D.C.Code § 16-1001(5) (1994 Supp.) (emphasis added).
[10] McKnight v. Scott, 665 A.2d 973, 975 (D.C. 1995).
[11] Sandoval v. Mendez, 521 A.2d 1168, 1171 (D.C.1987).
[12] See D.C. Law 10-237, § 2(a), 42 D.C.Reg. 36, 1636 (effective March 21, 1995). According to a Judiciary Committee Report, witnesses had urged the Council to broaden the definition of an intrafamily offense to cover, inter alia, "non-intimate acquaintance situations, such as housemates," or "any relationship where there is a very close association, contact, or familiarity." COUNCIL OF THE DISTRICT OF COLUMBIA COMM. ON THE JUDICIARY, Report on Bill No. 10-477, the "Domestic Violence in Dating Relationships Act of 1994" (Oct. 12, 1994), at pp. 3, 4.
[13] See Ba v. United States, 809 A.2d 1178, 1182 n. 6, 1183 (D.C.2002); Mabry v. Demery, 707 A.2d 49, 51 (D.C. 1998). The requirement of willfulness imports knowledge of the court's order and an intent to do what the order proscribes. See Jones v. Harkness, 709 A.2d 722, 723-24 (D.C.1998).
[14] See Jones, 709 A.2d at 723; Vereen v. Clayborne, 623 A.2d 1190, 1192 (D.C.1993).
[15] See Ba, 809 A.2d at 1182-83.
[16] The trial court did not cite Ms. Taffese's testimony that appellant "was going to hit" or "came forward to hit" Ms. Yegzaw, nor did the court find that appellant had committed an assault. Because Ms. Taffese did not further describe what she saw appellant do, or otherwise explain her conclusion that appellant was about to hit Ms. Yegzaw, we do not think her testimony would support a finding beyond a reasonable doubt that appellant committed either attempted-battery assault or intent-to-frighten assault. See Robinson v. United States, 506 A.2d 572, 574-75 (D.C. 1986) (contrasting elements of each type of assault); see also Joiner-Die v. United States, 899 A.2d 762, 765 (D.C.2006) (enumerating elements of intent-to-frighten assault).
[17] Those statutes criminalize only to threats to do bodily harm, see D.C.Code § 22-407 (2001), or threats to kidnap any person or to injure the person of another or physically damage the property of another, see D.C.Code § 22-1810 (2001).
[18] D.C.Code § 22-404(e) (2001 & Supp. 2007). A violation of the anti-stalking statute can be made out in four different ways, one of which is by proving that the accused on more than one occasion engaged in conduct with the intent to cause emotional distress to the complainant by willfully, maliciously, and repeatedly harassing the complainant. See D.C.Code § 22-404(b) (2001 & Supp.2007); see also United States v. Smith, 685 A.2d 380, 383 (D.C. 1996); Richardson v. Easterling, 878 A.2d 1212, 1217 (D.C.2005).
[19] D.C.Code § 22-404(b).
[20] See In re C.J., 514 A.2d 460, 463-64 (D.C. 1986) (reversing judgment in a bench trial, although there was sufficient evidence to support the verdict, because "the trial judge's findings contain factual statements that are unsupported by the record," and "the possibility exists that in finding guilt, the trier of fact was swayed by erroneous factual matter"); see also Nat'l Hous. P'ship v. Mun. Capital Appreciation Ptnrs. I, L.P., 935 A.2d 300, 321 (D.C.2007) (same). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542144/ | 122 F.2d 800 (1941)
COMMISSIONER OF INTERNAL REVENUE
v.
BROWN.
No. 7716.
Circuit Court of Appeals, Third Circuit.
September 4, 1941.
*801 L. W. Post, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Lee A. Jackson, Sp. Assts. to Atty. Gen., on the brief), for petitioner.
S. Leo Ruslander, of Pittsburgh, Pa. (Samuel Kaufman and James A. Graham, both of Pittsburgh, Pa., on the brief), for respondent.
Before BIGGS, MARIS, and CLARK, Circuit Judges.
BIGGS, Circuit Judge.
The question presented by the petition at bar is whether or not the income for the year 1935 to a trust created on January 1, 1927, by the respondent and taxpayer, Antoinette K. Brown, should be treated as taxable income to her. The Commissioner insists that it should be so treated under Section 22(a), Section 166, or Section 167 of the Revenue Act of 1934, 48 Stat. 686, 729, 26 U.S.C.A., Internal Revenue Acts, pages 669, 727.
The indenture of trust provides that $35 a month shall be paid from the trust income to Margaret Kane, a retired servant of the grantor, and that the residue of the income shall be paid to Josephine Ballard, a friend of the taxpayer. Stock dividends, extraordinary cash dividends, rights, and proceeds of sales are to be treated as accretions to principal. The indenture further provides that the trust shall terminate upon the death of the grantor, and that the corpus shall be distributed to the estate of the taxpayer.
The grantor retained no power to revoke the trust, but did retain the power to modify or alter "in the following particulars only":
"(A) Increasing the principal of the trust fund by adding to the property and securities set forth in said `Property Schedule,' property and securities, which the Trustee shall receive, hold, manage, sell and invest and reinvest and dispose of, in the same manner and with the same limitations as herein specified in respect of the respective properties and securities enumerated in the said Schedule and forming the original trust estate.
"(B) Disposing of the income of the trust estate as originally constituted, or as it may exist from time to time, otherwise than as originally provided in this Indenture *802 by the said `Schedule of Income Distribution,' by altering the proportion or amount of income to be paid to or applied to he use of any one or more of the beneficiaries, by canceling any benefaction to any one or more beneficiaries, by substituting any beneficiary or beneficiaries in the place of any one or more of them, by adding to the number of beneficiaries, by providing for the proportion or amount of income to be paid or applied to the use of such additional or substituted beneficiaries; provided, however, that in no event shall any such modification or alteration direct that the said income be paid to or applied to the use or benefit of the party of the first part.
"(C) Directing the distribution of the principal of the trust estate as the same shall be constituted at the termination thereof, otherwise than as is originally provided in this Indenture by the said `Schedule of Disposition of Principal upon Termination of Trust,' by altering the proportion or amount of the principal of said trust estate to be assigned, paid and set over to any one or more of the beneficiaries mentioned in said schedule, by canceling any benefaction to any one or more of said beneficiaries, by substituting any beneficiary or beneficiaries in the place of any one or more of them, by adding to the number of said beneficiaries, by providing for the proportion or amount of the principal of the trust estate to be assigned, paid and set over to such additional or substituted beneficiary, or for the manner in which all or any part of said principal shall be divided or distributed upon the death of said Antoinette K. Brown.
"(D) [To remove the trustee with or without cause and to substitute another trustee or trustees in his place.]"
The taxpayer and grantor did not exercise any of her reserved rights until after the year 1935.
The income from the trust for 1935 amounted to $26,130.92, including a capital gain amounting to $3,283.50. All income, exclusive of the capital gain, was distributed by the trustee to Margaret Kane and Josephine Ballard, as directed by the terms of the trust.
The Commissioner in his deficiency notice informed Mrs. Brown that the income was taxable to her under Sections 166 and 167, and before the Board of Tax Appeals contended that the income also was taxable to her under Section 22(a). The Board of Tax Appeals decided that the income was not taxable to Mrs. Brown under either Section 166 or Section 167 and that the Commissioner had failed to make out a case under Section 22(a), meanwhile stating in its opinion that the taxpayer had never had an opportunity to be heard on the question of her taxability under Section 22(a). The Commissioner thereupon petitioned this court for review.
The grantor is a resident of Pennsylvania and the original trustee was a resident of North Carolina. We entertain no doubt, however, that it was the intention of the parties that the law of New York should govern their rights under the trust. The original trust indenture was executed there, as were the amendments to the indenture, which need not be detailed here. Moreover, the indenture provides that the moneys belonging to the trust estate are to be deposited with the Bankers Trust Company of New York. There can be no question that the weight of authority is to the effect that the situs of a trust is to be determined by finding the intent of the grantor and taking into consideration all other operative factors. Hutchison v. Ross, 262 N.Y. 381, 187 N.E. 65, 89 A.L.R. 1007; Restatement of the Law of Conflict of Laws, Section 297, Comment (d); Goodrich on Conflict of Laws (2d Ed.) Section 155.
The Commissioner contends that the specific provision of the trust indenture that "* * * in no event [should] any * * * alteration or modification [of the trust indenture] direct * * * the income to be paid to or applied to the use or benefit of the [taxpayer] * * *" would not be an effectual bar under the law of New York to the recovery of title to the property by the taxpayer. The Commissioner's argument runs as follows. Should the taxpayer choose to exercise her power to cancel the interests of the named beneficiaries, no person would have any standing to compel the substitution of a new beneficiary or beneficiaries. Accordingly, says the Commissioner, the taxpayer would become the sole beneficiary of the trust despite the provision of the trust indenture that she should not become the beneficiary of the income. As sole beneficiary she would have the right to revoke the trust and regain the corpus. The Commissioner cites 1 Scott on Trusts, Section 127.1; Doctor v. Hughes, 225 N.Y. 305, 122 N.E. 221; Livingston v. Ward, 247 N.Y. 97, 159 *803 N.E. 875; Berlenbach v. Chemical Bank & Trust Co., 260 N.Y. 539, 184 N.E. 83 (No. 2); and other cases; together with Section 23 of the Personal Property Law of the State of New York.
The precise argument here made by the Commissioner was passed upon by the Circuit Court of Appeals for the Second Circuit, in respect to a trust substantially identical upon this point with that at bar, in Knapp v. Hoey, 104 F.2d 99, 101, and was found to be without merit. The short answer to the argument, as was pointed out by Judge Patterson and approved by Judge Augustus N. Hand, is that the cancellation of the benefaction of income to any one or more of the beneficiaries would necessarily require a substitution of new beneficiaries for the old ones. The fact is that the terms of the trust serve to prevent the income thereto from being within the language of Section 166.
As to the income being taxable to the grantor under Section 167, it should be pointed out that this exact question also was passed on in Knapp v. Hoey, supra, decided adversely to the Commissioner. We find the reasoning of the Circuit Court of Appeals for the Second Circuit persuasive. It is obvious that Mrs. Brown cannot name herself a direct beneficiary under the trust, and any benefits which she might attempt indirectly to gain under the trust, by amendments to its provisions or otherwise would be void by virtue of its express provisions prohibiting the use of any income for her benefit.
On the question of taxing the trust income to the respondent by virtue of the provisions of Section 22(a), the Board stated "* * * the Commissioner has failed to make a case." 42 B.T.A. 693. We cannot agree with this conclusion. The application of Section 22(a) was argued before us and major portions of the petitioner's brief and the respondent's brief are devoted to this question. We conclude that the principles of Helvering v. Clifford, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788, might compel the conclusion that the income was taxable to Mrs. Brown. A difference between the trust in the cited case and that in the case at bar is in term, the trust in Helvering v. Clifford, supra, being for five years only. This is to be considered in any decision respecting "ownership" of the property in a trust. Control of property is very close to ownership if not its equivalent. Control of income from property approximates ownership. Helvering v. Horst, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655; Helvering v. Eubank, 311 U.S. 122, 61 SCt. 149, 85 LEd. 81; Harrison v. Schaffner, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055. See, also, Commissioner v. Buck, 2 Cir., 120 F.2d 775. In Helvering v. Clifford also the income was used within the family group In the case at bar the income for the year 1935 was devoted to the maintenance of a friend and a servant, the grantor, however, retaining the power, actually exercised in 1937, to return the income from the trust to the family group.
The Board points out that the respondent has not had the opportunity to be heard by it in respect to the application of Section 22(a). We conclude that the respondent is entitled to her day before the Board upon the issue presented by the section. At this stage of the case we cannot say that the question presented is solely one of law and is not one of law and fact to be determined initially by the Board.
Accordingly the decision of the Board is reversed and the cause is remanded with directions to permit the parties to adduce additional evidence and to decide the issues presented by Section 22(a).
MARIS, Circuit Judge (dissenting).
I think that the decision of the Board of Tax Appeals was right in all respects and should be affirmed. Since that decision was in favor of the respondent I see no need to afford her a further hearing before the Board.
The only point on which I differ with the majority of the court is as to the taxability of the trust income to the respondent as in fact her income under the broad definition of Section 22(a) of the Revenue Act and the rule of Helvering v. Clifford, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788. The Board held that the Commissioner failed to make a case under Section 22(a). My brethren say that they cannot agree with this conclusion. I think it was right.
The trust which the respondent created was to continue in all events until her death. She reserved no power to revoke it and although she might change the beneficiaries she was expressly precluded from ever receiving any benefit herself. Her only other power was to change the trustee *804 at her pleasure. As a matter of fact the respondent did not exercise any of these rights until after the taxable year with which we are concerned. During that year and at all times previously the beneficiary of all but a very small part of the income was a person unrelated to the respondent.
The Clifford case, and the cases which have followed it in the Supreme Court, involved and emphasized situations in which surplus income was distributed among the members of an intimate family group by the trusts held invalid for income tax purposes. I agree with the Circuit Court of Appeals for the Second Circuit that this is the significant distinction between those cases and cases like the one now before us. See Commissioner v. Chamberlain, 121 F. 2d 765, and compare Commissioner v. Buck, 120 F.2d 775. Certainly there is a clear distinction based upon the deepest and most primitive of the emotions which motivate human behavior between the transfer of income to members of the donor's intimate family circle for whose support he has strong legal and moral obligation and the transfer of income to those for whose support no such obligation exists.
Furthermore, I think that the Supreme Court in the Clifford case indicated that the question whether a donor had retained such control over and benefits under a trust fund as to render its income his within the definition of Section 22(a), was a question of fact to be found by the triers of fact. It would follow under settled principles that the finding of the Board of Tax Appeals upon this question should not be reversed by us if supported by substantial evidence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542255/ | 122 F.2d 400 (1941)
E. I. DU PONT DE NEMOURS & CO.
v.
SYLVANIA INDUSTRIAL CORPORATION.
No. 4813.
Circuit Court of Appeals, Fourth Circuit.
August 16, 1941.
*401 Hugh M. Morris, of Wilmington, Del. (J. Gordon Bohannan, of Petersburg, Va., on the brief), for appellant.
C. O'Conor Goolrick, of Fredericksburg, Va., and Ellis W. Leavenworth, of New York City (Leslie D. Taggart, of New York City, on the brief), for appellee.
Before PARKER, SOPER, and DOBIE, Circuit Judges.
SOPER, Circuit Judge.
The validity of the word "cellophane" as a trade-mark indicating a kind of wrapping material manufactured by E. I. duPont de Nemours and Company, a Delaware corporation, is the subject matter of this suit in which Sylvania Industrial Corporation, a Virginia corporation, is charged with infringement and unfair competition. In answer to the bill of complaint Sylvania denied infringement and averred affirmatively that "cellophane" is not a trademark, but is a generic and descriptive name used by the public and the trade to indicate a kind of product manufactured both by plaintiff and by defendant. Going further, Sylvania averred that the character of "cellophane" as the descriptive name of a product was adjudicated in DuPont Cellophane Co., Inc. v. Waxed Products Co., Inc., 2 Cir., 85 F.2d 75, certiorari denied, 299 U.S. 601, 57 S.Ct. 194, 81 L.Ed. 443, 304 U.S. 575, 58 S.Ct. 1047, 82 L.Ed. 1539, 305 U.S. 672, 59 S.Ct. 227, 83 L.Ed. 436, in which case the plaintiff in the instant case, as successor to a wholly owned subsidiary, was plaintiff, and Waxed Products Company, Inc., a customer of Sylvania, was defendant; and that Sylvania, being interested in the suit, employed counsel and defended the suit on behalf of its customer openly and to the knowledge of the plaintiff and the court.
Upon these pleadings in the instant case, Sylvania moved in the District Court for summary judgment dismissing the complaint, in accordance with Rule 56 of the Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c. This motion came on for hearing upon the pleadings and certain affidavits and other documents filed by the parties. The District Judge, being of opinion that the plaintiff was estopped from maintaining the action by the final judgment adverse to DuPont in the prior case, granted the motion and dismissed the suit. The propriety of this ruling is the only question on this appeal. That question involves the determination of (1) the basis of the court's decision in the prior case, and (2) Sylvania's connection therewith.
In connection with the motion for summary judgment, the following facts with reference to the use of the term "cellophane" by Sylvania and its customers were established: DuPont and Sylvania are the only manufacturers of the product in this country. Prior to the end of 1936, Sylvania, in contracting with its customers, described the goods as "transparent cellulose wrapping paper". Sylvania first used the term "cellophane" in its advertisements in December, 1936, and first used it on its goods in November, 1937. These uses were subsequent to the decision of the trial court in the prior case on May 11, 1934, and the decision of the appellate court therein on July 17, 1936; but Sylvania filled customers' orders for cellophane with its own product from 1930 until 1933. Sylvania did not encourage the use of the word by the public, and uniformly advised its customers to avoid its use. The Waxed Products Company, defendant in the prior case, did not use the word on its goods or in its advertisements, but supplied customers who asked for cellophane with material made by Sylvania.
The following facts were shown with regard to Sylvania's connection with the Waxed Products Company's case. Sylvania petitioned the trial court therein for leave to intervene on the ground that the word "cellophane" was a descriptive name for its product, and that its customers could not sell it successfully without filling orders for cellophane, and hence Sylvania had a substantial interest in the outcome of the case. The District Judge held that this motion should be denied as a matter of discretion, unless Sylvania would stipulate to be bound in all respects by the final decree. Sylvania was unwilling to make this stipulation, and intervention was therefore denied. But counsel who appeared for Waxed Products Company said in his opening statement that although Sylvania was not willing to face the eventualities *402 of the required stipulation, it did come into the case to take care of the defendant. Prior to the examination of the witnesses, counsel for the defendant, in reply to a question from counsel for DuPont, declined to say that Sylvania was guiding and controlling the defense, but admitted that counsel representing the defendant was employed by Sylvania; and in answer to questions from counsel for DuPont, the President of the Waxed Products Company testified that the attorneys employed by Sylvania were in charge of the defense. Under these circumstances the District Judge made the following statement in his opinion (DuPont Cellophane Co. v. Waxed Products Co., 6 F. Supp. 859, 862): "It is admitted by the defendant that attorneys selected and paid by Sylvania Industrial Corporation, and not by defendant, are defending and guiding this suit." Upon the same question, the District Judge in the pending case made the following finding in his memorandum opinion: "The defendant in the prior suit was the seller of cellophane made by the defendant in this suit, and the defendant in this suit selected and paid the attorneys who defended and guided that suit to the knowledge of the plaintiff."
It is not open to doubt that the DuPont Company in the prior case sought an adjudication that it possessed a valid trademark in the word "cellophane", or that the suit was defended on the ground, amongst others, that the word, if ever a valid trade mark, had become a generic name descriptive of the product. The District Court rejected this defense and held that "cellophane" was a valid trade-mark which DuPont owned and was alone entitled to use. The court said (6 F. Supp. 884): "The name `Cellophane' characterizes a single thing coming from a single source, and is a valid trade-mark, even if it should be shown that the product is more emphasized than the producer, or that the identity of the producer was unknown." Accordingly, the court issued a decree which provided:
"1. That the name cellophane is a valid trade-mark.
"2. That plaintiff is the owner of and alone entitled to use the trade-mark cellophane, and that its goods alone can lawfully be sold under that name.
"3. That defendant has infringed the exclusive rights of the plaintiff by supplying and passing off in response to requests for cellophane transparent film not manufactured by plaintiff."
The decree also provided that a writ of injunction should issue against Waxed Products Company from using the word "cellophane" in connection with any product not made by DuPont, and from filling orders for cellophane with any such product without explaining to the purchaser that the goods were not DuPont's.
On appeal this finding as to the character of the word was reversed. The Circuit Court of Appeals said (85 F.2d 77):
"The court below made a finding that the name `characterizes a single thing coming from a single source, and is a valid trademark, even if it should be shown that the product is more emphasized than the producer or that the identity of the producer is unknown.' This finding seems to us not only not warranted by the evidence but clearly disproved. * * *
"It would have served as a useful trademark, at least in the beginning, if it had not almost immediately lost ground as such because it was employed to describe the article itself. Indeed, no other descriptive word was adopted."
After reviewing the evidence as to the origin of the product, and of the descriptive word in France and its use in France and elsewhere prior to 1923, the court said (85 F.2d 78): "It seems quite evident that the French manufacturers and their agents, as well as the relatively limited public that were interested in using these cellulose films before DuPont entered the field, constantly employed the word `cellophane' to describe the product and that it was used in a generic sense from the beginning."
The court then reviewed the evidence on the same subject after the acquisition of the French interests by the DuPont Company in 1923, and said (85 F.2d 80):
"The course of conduct of the complainant and its predecessors, and especially complainant's advertising campaign, tended to make cellophane a generic term descriptive of the product rather than of its origin and, in our opinion, made it so to at least a very large part of the trade. * *
"The evidence we have summarized demonstrates that `cellophane' is used to designate the cellulose product we are concerned with, far more commonly than any other term, and is certainly the descriptive word in general use."
*403 Summarizing the whole question as to the signification of the word "cellophane", the court said (85 F.2d 82): "In the present case the word `cellophane' ordinarily signifies the cellulose product we have been discussing and nothing more, but to certain persons it is probable that it means the complainant's goods."
The court then held that the decree of the District Court should be modified so as to conform to the following statement (85 F.2d 82): "The defendant should be allowed to use the word cellophane unconditionally in dealing with those to whom it means no more than the product and should be able to fill orders for cellophane received from such persons either with Sylvania cellophane or any other cellophane. But as the complainant's use of the word `cellophane' has had a wide publicity, there may be some persons who desire DuPont cellophane. Accordingly, it seems to us in the interest of justice that, when filling orders for cellophane, the defendant should state that the product sold is Sylvania cellophane or the cellophane of whomsoever may be the maker, and need state nothing more. The defendant may likewise use the word cellophane in its advertisements provided it shall prefix the maker's name as a possessive."
Notwithstanding this decision, DuPont submitted a proposed decree in which the District Court was asked to hold that cellophane is a valid trade-mark which DuPont owns and alone is entitled to use; but in view of the opinion of the appellate court, the District Court refused, and decreed as follows: "1. That the word cellophane ordinarily signifies the cellulose product involved in this suit and nothing more, and is the descriptive word in general use to designate such product, although to certain persons it probably means the plaintiff's product."
The decree also provided that the defendant be enjoined from selling, in response to requests for cellophane, any product except that of DuPont, without clearly stating the name of the manufacturer. A second appeal followed in which it was assigned as error, amongst other things, that the trial court had decreed that cellophane ordinarily signifies the cellulose product and nothing more, and had declined to decree that "cellophane" is a valid trademark. This decree was affirmed without opinion on February 23, 1938.
This recital seems to show very clearly what was decided in the New York case. Nevertheless, DuPont contends that a careful study of the reasoning of the Circuit Court of Appeals will show that it was not necessary for the court to pass upon the validity of "cellophane" as a trade-mark, and that its invalidity was not actually adjudicated. The argument rests upon certain statements in the opinion of the appellate court from which the inference is drawn that in the view of the court the controversy involved the passing off of Sylvania's goods for the goods of DuPont, and not the infringement of the latter's trade mark. The court referred to the fact that the Waxed Products Company, having been warned by Sylvania, billed and labelled the goods which it sold as "cellulose", and did not use the name "cellophane" except that when it received orders for cellophane, it filled them with its own goods. The court said (85 F.2d page 76) that the case did not turn on the question whether cellophane was at one time more than a descriptive term, but upon what it meant to the public during the period covered by the suit, and that the rights of DuPont were based on the wrong done by the defendant, if any, in misleading customers as to the origin of the goods. In this connection the court said (85 F.2d 81): "The District Court erred in concluding that `the trade-mark cellophane does not depend upon what was in the customer's mind' and in deciding the case on the theory that the public understanding as to the meaning of the word was immaterial. Such a theory is out of accord with the essence of the law of trade-marks. The rights of the complainant must be based upon a wrong which the defendant has done to it by misleading customers as to the origin of the goods sold and thus taking away its trade. Such rights are not founded on a bare title to a word or symbol but on a cause of action to prevent deception. It, therefore, makes no difference what efforts or money the DuPont Company expended in order to persuade the public that `cellophane' means an article of DuPont manufacture. So far as it did not succeed in actually converting the world to its gospel it can have no relief."
Finally, as we have seen, the court concluded that the word "cellophane" ordinarily signifies a sort of cellulose product, but probably means to certain persons the *404 goods of DuPont; and hence the court, without reversing the decree below completely, modified it by limiting the injunction in accordance with its opinion, and by limiting the accounting to such sales as the plaintiff might prove had been made by the defendant to persons who expected DuPont cellophane and got that of other producers.
Our examination of these proceedings convinces us that the court did pass upon the validity of the trade-mark, and that it was not the intention of the court to restrict the final decree to the holding that Sylvania's goods were passed off and sold as the goods of DuPont. It is true that the opinion suggests that something of this sort was probably involved in the defendant's practice of filling orders for cellophane with Sylvania's product. But such a practice itself may amount to trade-mark infringement, as well as unfair competition. See the authorities cited in the opinion of the District Court, 6 F.Supp. 885; Restatement of Torts, § 727, Comment B. There was in fact no proof that any one had actually been misled by the defendant's acts, and DuPont subsequently produced no such proof, although given the opportunity to do so by the accounting feature of the decree. DuPont was primarily interested in the establishment of the validity of its trade-mark. It sought, and in the first instance, obtained a favorable decree in this respect; and this ruling did not stand only because the appellate court found as a fact that the word, whatever may have been its original significance had become descriptive in character and incapable of exclusive appropriation. This finding, substantially reproduced in the final decree, was an adjudication that destroyed the validity of the trade-mark; and that the decree was so understood by DuPont is shown by its assignment of errors in the second appeal. See Cromwell v. County of Sac, 94 U.S. 351, 24 L.Ed. 195.
The provision in the final decree that the defendant should not use the term "cellophane" in connection with its goods without stating the manufacturer's name does not conflict with this view. The probability that to some persons the term means a DuPont product grew out of DuPont's long association with the goods and its ownership of expired patents upon the process of manufacture. The requirement that the name of the maker be affixed to the goods was far from indicating that the term "cellophane" was the sole property of DuPont. On the contrary, it was designed to permit the use of the term by competitors of DuPont in such a way as not to confuse the buying public. A similar restriction has been made in other cases with regard to the use of a term, once exclusively owned by a single individual, that had become public property. Singer Mfg. Co. v. June Mfg. Co., 163 U. S. 169, 203, 204, 16 S.Ct. 1002, 41 L.Ed. 118; Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118, 59 S.Ct. 109, 83 L.Ed. 73. See, also, Restatement of Torts, §§ 735 (1) and (2).
DuPont contends, in the second place, that even if there has been an adverse adjudication upon the validity of the trade mark, nevertheless the issue may be now litigated again under the rule laid down in Triplett v. Lowell, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949, because Sylvania was not a party to the earlier case and was not bound by its decree. It is pointed out that Sylvania refused to intervene when offered the opportunity to do so upon condition that it agree to be bound in all respects by the final decree. But this circumstance is not decisive, although it should be taken into account in determining the extent of Sylvania's participation in the trial. The evidence shows that while Sylvania did not become a party to the record, its interest in the case remained unabated and it actually controlled the litigation as fully as it could have done, if it had intervened. Its manifest interest in the use by the trade of the term "cellophane" to designate the goods, and its actual and avowed participation in the trial, fully justified the conclusion reached by the District Judge in each case, that Sylvania defended and guided the earlier suit to the knowledge of the plaintiff.
The binding force of the judgment of a court upon a person not named as a party to the suit, but actually in control thereof to the knowledge of the other side, has been frequently described in the decisions of the federal courts. The underlying principle is succinctly stated in Souffront v. Compagnie Des Sucreries, 217 U. S. 475, 486, 487, 30 S.Ct. 608, 612, 54 L.Ed. 846, as follows: "The persons for whose benefit, to the knowledge of the court and of all the parties to the record, litigation is being conducted, cannot, in a legal sense, be said to be strangers to the cause. The *405 case is within the principle that one who prosecutes or defends a suit in the name of another, to establish and protect his own right, or who assists in the prosecution or defense of an action in aid of some interest of his own, and who does this openly, to the knowledge of the opposing party, is as much bound by the judgment, and as fully entitled to avail himself of it, as an estoppel against an adverse party, as he would be if he had been a party to the record. Lovejoy v. Murray, 3 Wall. 1, 18 L.Ed. 129."
The Circuit Courts of Appeals have applied this principle, especially in cases in which the manufacturer of an article alleged to infringe a patent has undertaken to defend a customer when sued for infringement. It has been quite generally held that while mere assistance in the defense of a case is insufficient to bind a person not joined as a party, participation in the trial and control of the litigation, openly avowed by the participant or at least known to the other side, will bind the participant as fully as if he had been a party to the record. The rule is sound and just since it recognizes the real parties to the suit, and applies the established principles of mutuality and finality that characterize the estoppel of a judgment. See, Elliott Co. v. Roto Co., 2 Cir., 242 F. 941; Hanks Dental Ass'n v. International Tooth Crown Co., 2 Cir., 122 F. 74; Bemis Car Box Co. v. J. G. Brill Co., 3 Cir., 200 F. 749; Jefferson Elec. Lt., Heat & Power Co. v. Westinghouse Elec. & Mfg. Co., 3 Cir., 139 F. 385; White v. Croker, 5 Cir., 13 F.2d 321, 324; Beyer Co. v. Fleischmann Co., 6 Cir., 15 F.2d 465; Foote v. Parsons, 6 Cir., 196 F. 951; Doherty Research Co. v. Universal Oil Products Co., 7 Cir., 107 F.2d 548, 550; General Electric Co. v. Morgan-Gardner E. Co., 7 Cir., 168 F. 52; Cushman v. Warren-Scharf Asphalt Paving Co., 7 Cir., 220 F. 857; Phoenix Finance Corp. v. Iowa-Wisconsin B. Co., 8 Cir., 115 F.2d 1; City of Mankato v. Barber Asphalt Paving Co., 8 Cir., 142 F. 329; Hy-Lo Unit & Metal Products Co. v. Remote C. Mfg. Co., 9 Cir., 83 F.2d 345; Carson Inv. Co. v. Anaconda Copper Mining Co., 9 Cir., 26 F.2d 651, 657; Rumford Chem. Works v. Hygienic Chem. Co., 215 U.S. 156, 157, 30 S.Ct. 45, 54 L.Ed. 137; Litchfield v. Goodnow (Litchfield v. Crane), 123 U.S. 549, 550, 8 S.Ct. 210, 31 L.Ed. 199; Bigelow v. Old Dominion Copper Co., 225 U.S. 111, 32 S.Ct. 641, 56 L.Ed. 1009, Ann.Cas. 1913E, 875.
The contention is made that the principle of these cases has no application here because Sylvania had no legally recognizable interest of its own that justified its participation in and control of the prior suit. It is said that Sylvania had no complicity in the passing off with which its customer was charged, and no liability to it as an indemnitor. But if the actualities are regarded, it is seen that little practical difference existed between the situation of Sylvania and that of the manufacturers who defended many of the patent cases referred to. Sylvania's goods did not of themselves violate the alleged trade-mark, but in the hands of its customers they were being put to a use that amounted to infringement of the trade-mark, if it possessed validity. Moreover, Sylvania itself made like use of the mark after the final decree in the Waxed Products case, and it was of much greater importance to it than to its customers to establish the legality of its behavior. These were the considerations known to every one in the suit that led Sylvania to identify itself with the defense. We think that its interest in the suit was sufficient to bind it if the decision had been adverse, and that it is now entitled to the protection of the favorable decree. Compare General Chemical Co. v. Standard Wholesale P. & A. Works, 4 Cir., 101 F.2d 178.
The judgment of the District Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542257/ | 947 A.2d 776 (2008)
COMMONWEALTH of Pennsylvania, Appellee
v.
Robert John FLETCHER, Appellant.
No. 311 WDA 2007.
Superior Court of Pennsylvania.
Argued February 27, 2008.
Filed April 18, 2008.
David H. Acker, New Castle, for appellant.
Kathleen Fee-Baird, Asst. Dist. Atty., New Castle, for the Com., appellee.
BEFORE: MUSMANNO, ORIE MELVIN and COLVILLE[*], JJ.
OPINION BY COLVILLE, J.:
¶ 1 This is an appeal from the judgment of sentence imposed following Appellant's guilty pleas to charges related to the sexual abuse of his minor niece, including two counts of indecent assault. Appellant was sentenced and designated a sexually violent predator ("SVP") for purposes of Pennsylvania's Megan's Law. Appellant presents argument on only one issue for our review: whether the SVP designation was supported where there was insufficient evidence that Appellant engaged in predatory behavior in the assaults on his niece. When this Court reviews the sufficiency of the evidence supporting a determination of SVP status, "we will reverse the trial court only if the Commonwealth has not presented clear and convincing evidence sufficient to enable the trial court to determine that each element required by the statute has been satisfied." Commonwealth v. Haughwout, 837 A.2d 480, 484 (Pa.Super.2003) (citation omitted). We affirm.
¶ 2 In the relevant statute, a "sexually violent predator" is defined, in pertinent part, as "[a] person who has been convicted of a sexually violent offense as set forth in [42 Pa.C.S.A.] section 9795.1 (relating to registration) and who is determined to be a sexually violent predator under [42 Pa. C.S.A.] section 9795.4 (relating to assessments) due to a mental abnormality or personality disorder that makes the person likely to engage in predatory sexually violent offenses." 42 Pa.C.S.A. § 9792. This definition contains no requirement for a determination that the SVP engaged in predatory behavior in the instant offense.[1]*777 The statutory definition of "predatory," about which the arguments before us revolve, is relevant only in that an SVP must be found to have a mental abnormality or personality disorder which renders the SVP likely to engage in predatory behavior. Appellant does not challenge that determination.
¶ 3 Because Appellant has challenged only one evidentiary insufficiency in his SVP classification, one which is not a requirement thereof, we find no merit to his appeal.
¶ 4 Judgment of sentence affirmed.
NOTES
[*] Retired Senior Judge assigned to the Superior Court.
[1] The circumstances of the instant offense are material to the SVP assessment process, see 42 Pa.C.S.A. § 9795.4(b) (listing "Facts of the current offense" as a mandatory area of inquiry in assessment); there is simply not a requirement that the offense be found to have been "predatory." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542259/ | 947 A.2d 484 (2008)
2008 ME 32
STATE of Maine
v.
Margo MALPHER.
Docket: Was-07-63
Supreme Judicial Court of Maine.
Submitted on Briefs: November 27, 2007.
Decided: February 28, 2008.
*485 Ronald W. Bourget, Esq. Bourget & Bourget, P.A., Augusta, ME, for Margo Malpher.
Michael Povich, Dist. Atty., Paul Cavanaugh, II, First Asst. Dist. Atty., Ellsworth, ME, for the State of Maine.
Panel: SAUFLEY, C.J., and CLIFFORD, ALEXANDER, LEVY, SILVER, and GORMAN, JJ.
GORMAN, J.
[¶ 1] Margo Malpher appeals from a judgment of the District Court (Calais, Romei, J.) forfeiting Malpher's twenty dogs and one cat to the State of Maine Animal Welfare Program. Maipher argues that: (1) notice by service and filing of an ex parte order and application for the order, to initiate forfeiture proceedings, is improper procedure pursuant to 17 M.R.S. § 1021 (2007), and is insufficient to constitute due process; and (2) 17 M.R.S. § 1021 is void for vagueness.[1] We affirm the District Court's judgment.
I. BACKGROUND
[¶ 2] In September 2006, Chrissy Perry, a humane agent for the State of Maine Animal Welfare Program, began an investigation of an anonymous complaint that Margo Malpher had several dogs that were not regularly cared for and were living in filthy conditions. After finding no one home at Malpher's residence on two consecutive days, and posting notices on Malpher's residence and adjacent kennel, Perry applied for and obtained a search warrant to inspect the animals and seize them if necessary.
[¶ 3] Perry returned to Malpher's home on September 21, 2006, with a veterinarian, and a state trooper, to execute the search warrant. Malpher was home and initially declined to let the team inspect the animals, but did comply when served with a copy of the search warrant. The team first entered the kennel and found it to be filthy. Feces and urine covered much of the floor, and there was little or no ventilation. Perry and her team found nineteen dogs in the kennel; all of the dogs' coats were heavily matted, covered in feces, and wet with urine. The team next inspected Malpher's residence, where it found one more dog and one cat and the same "unlivable" conditions.
*486 [¶ 4] Based on the condition of the animals, the team seized them[2] and transported them to the Bangor Humane Society. Malpher, who had acknowledged seeing the notices left by Perry, was present when Perry and her team loaded the animals into their vehicles.
[¶ 5] On September 25, after obtaining reports about the dogs from the veterinarian and groomers at the shelter, Perry applied for an ex parte order to continue seizure of the animals. Perry stated in the application that Malpher had cruelly abandoned or cruelly treated the animals within the meaning of 7 M.R.S. § 4011 or 17 M.R.S. § 1031. Perry also stated that an ex parte order was necessary, pursuant to 17 M.R.S. § 1021(4), because the animals had been deprived of necessary medical attention and humanely clean conditions.
[¶ 6] Perry's application was granted, and the ex parte order generated by her application was entered in the District Court on the same day. Malpher was served with the ex parte documents, which included notice that a "show cause" hearing had been set for October 5, 2006. The order stated that Malpher was to appear at the Calais District Court on that date to show cause why the animals should be returned to her possession. On October 4, 2006, Malpher filed a motion to continue the "show cause" hearing to a later date. The court granted that motion and rescheduled the hearing for October 20, 2006. The parties appeared on that date and again on November 7, 2006. After the two-day hearing, the court ordered the animals forfeited to the State of Maine Animal Welfare Program.[3] The court found that the animals were "prisoners in their own coats" and that the animals had been treated cruelly due to deprivation of humanely clean conditions. Malpher filed this timely appeal.
II. DISCUSSION
[¶ 7] Malpher's first argument on appeal is that the notice she received by service of the ex parte application and order was not the proper procedure to initiate forfeiture proceedings under 17 M.R.S. § 1021 and was insufficient to meet the requirements of due process. We disagree.
[¶ 8] During the hearing, Malpher asserted that the case was not brought correctly under the statute and that notice was flawed. The trial court found no error in the State's process under section 1021. Because we are reviewing the trial court's interpretation of section 1021, we must review the statute de novo. See Yeadon Fabric Domes, Inc. v. Me. Sports Complex, LLC, 2006 ME 85, ¶ 13, 901 A.2d 200, 205.
[¶ 9] Section 1021 provides for several proceedings the State may initiate to protect animals. For purposes of reviewing the process used in this case, we discuss the various proceedings.
[¶ 10] Title 17 M.R.S. § 1021(1) permits an authorized person, such as a humane agent, to apply to the District or Superior Court for authorization to take possession of an animal in dire circumstances. The authorized person is required to notify the animal's owner of the proposed seizure and of the scheduled date for a "show cause" hearing. 17 M.R.S. § 1021(2). At that hearing, the owner has an opportunity to show cause why the *487 animal should not be "taken and turned over to the applicant or other suitable person or disposed of humanely." Id. If, after that hearing, the court finds that the animal has been "cruelly abandoned or cruelly treated by its owner or the animal is maimed, disabled, diseased, dehydrated, malnourished or injured," the court is directed to make an appropriate order for the animal's care or disposal. 17 M.R.S. § 1021(3).
[¶ 11] When the animal's condition appears to be even more serious, an authorized person may apply to the District or Superior Court or to a justice of the peace for an ex parte order authorizing him or her to seize the animal before a hearing has occurred. 17 M.R.S. § 1021(4). Because this method involves an immediate seizure, the judicial officer granting the order must first determine that the animal's condition or circumstances are grave. Id. When an ex parte seizure occurs, either the applicant or the owner may appear in the District or Superior Court and "move the dissolution or modification of the ex parte order." 17 M.R.S. § 1021(4)(C).
[¶ 12] As a third alternative, an authorized person may apply to the District or Superior Court for authorization to take possession of the animal "for examination and observation for a 30-day period." 17 M.R.S. § 1021(5). This method requires that the owner of the animal be notified of a "show cause" hearing before the animal can be seized permanently or humanely destroyed. Id.
[¶ 13] Finally, an authorized person who has reasonable cause to believe that an animal is being subjected to cruelty as defined by 17 M.R.S.A. § 1031 (Supp. 2006)[4] or 17 M.R.S. § 1032, may seize the animal without an order. 17 M.R.S. § 1021(5-A). Upon making the seizure, the agent is required to present the owner with notice of the reason for the seizure, contact information, and information concerning the "ensuing court procedure." Id. In those cases where the State intends to charge the owner with a crime, this subsection would effect an immediate end to the alleged criminal activity.
[¶ 14] In this case, however, the initial "taking" of the animals occurred as a result of a search warrant, rather than any of the above processes. Perry had obtained the warrant in order to ascertain the status of animals that appeared to have been abandoned at Malpher's property and, based upon the conditions she found, executed the warrant and took the animals. On Monday, September 25, 2006, although the animals were already in the State's custody pursuant to the search warrant, Perry applied for an ex parte order[5] to take immediate possession of the animals without prior notice to the owner. In her application, Perry alleged that Malpher had cruelly abandoned or cruelly treated twenty dogs and one cat, and that there was a need for the ex parte order because there was a reasonable likelihood that "there [was] a danger that unless immediate action [was] taken . . . the condition of an . . . animal deprived of . . . necessary medical attention . . . or humanely clean conditions [would] be substantially impaired or worsened." Perry attached to her application a six-page statement that included the information that prompted her to apply for the search *488 warrant as well as information about the condition of the animals that had been seized. Her application was granted on September 25 and Perry delivered to Malpher a copy of the ex parte order and a copy of her application, with her attached statement. The order included a hearing date, and the application and statement contained Perry's name, address, and telephone number.
[¶ 15] Based upon the facts of this case, we are satisfied that, by explaining to Malpher on September 21, 2006, why she was taking the animals, and by providing Malpher with copies of the ex parte application and order, Perry provided Malpher with sufficient notice of the reason she had taken the animals as well as notice of an already-scheduled court hearing.
[¶ 16] In addition, Malpher was afforded due process when she was given a full opportunity over two days of trial to present her case, explain the condition of the animals, and argue that they should be returned to her. Her argument to the trial court that the animals' condition was analogous to that of a person with dreadlocks was apparently not convincing. We find the trial court's holding that Malpher cruelly treated her animals by forcing them to endure living conditions that were "abominable and extremely unhealthy" is entirely supported by the record.
[¶ 17] Malpher's second argument on appeal is that section 1021 is void for vagueness because it does not define the term "cruelly treated." We disagree.
[¶ 18] We review the constitutionality of a statute de novo, beginning with the presumption of the statute's constitutionality. Guardianship of K-M, 2005 ME 8, ¶ 17, 866 A.2d 106, 112. We have stated that a statute may be unconstitutionally vague when "people of common intelligence must guess at its meaning." State v. Witham, 2005 ME 79, ¶ 7, 876 A.2d 40, 42. Additionally, "[i]n light of the fundamental precept that we will, if possible, construe statutes so as to avoid a danger of unconstitutionality, . . . legislation should not be held invalid on the ground of uncertainty if susceptible of any reasonable construction that will support it." Id. (quotation marks and alteration omitted).
[¶ 19] People of common intelligence need not guess that "cruelly treated," in the context of a statute regulating the treatment of animals, refers to treatment that causes suffering or pain. Additionally, 17 M.R.S. § 1031, which is within the confines of the animal welfare provisions, includes deprivation of necessary medical attention or humanely clean conditions as treatment that amounts to cruelty to animals. We therefore conclude that section 1021(5-A) is not void for vagueness.
The entry is:
Judgment affirmed.
NOTES
[1] Malpher makes several unmeritorious subarguments that we decline to reach.
[2] The team seized one standard poodle, sixteen miniature poodles, one Cavalier King Charles spaniel, two poodle-spaniel mixed breed dogs, and one longhaired gray cat.
[3] Malpher raised a constitutional challenge to the statute during the hearing and the court ruled that the statute is constitutionally sufficient.
[4] Title 17 M.R.S.A. § 1031 has since been amended. P.L. 2007, ch. 439, § 37 (effective Sept. 20, 2007) (codified at 17 M.R.S. § 1031 (2007)).
[5] The form application used by Perry incorrectly includes a reference to 17 M.R.S.A. § 1021 "(5a)," which is not an actual subsection; subsection 5-A refers to the seizure of animals without a court order. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542260/ | 386 B.R. 261 (2008)
In re James William LULL, Debtor.
Bowers and Merena Auctions, LLC, a Delaware limited liability company, Plaintiff,
v.
James Lull, an individual; Kapaa 382, a Hawaii limited liability company; Gregg Gardiner as trustee of the Gregg C. Gardiner Revocable Living Trust; and Daniel Yamaguchi, an individual, Defendants.
Bankruptcy No. 06-00898. Adversary No. 07-90026.
United States Bankruptcy Court, D. Hawai`i.
February 29, 2008.
*263 Richard C. Spencer, Law Offices of Richard C. Spencer, P.C., Los Angeles, CA, for Plaintiff.
Lora Han, Thomas Sylvester, Bendet, Fidell, Sakai & Lee, Lisa S. Hirahara, Wayne K.T. Mau, Watanabe Ing & Komeiji LLP, Cuyler Shaw, Kevin W. Herring, Ashford & Wriston, Honolulu, HI, Stephen S. Ellis, Rutan & Tucker LLP, Costa Mesa, CA, for Defendants.
Daniel Yamaguchi, Lihue, HI, pro se.
OPINION CONCERNING MOTION FOR SUMMARY JUDGMENT
LLOYD KING, Bankruptcy Judge.
I. INTRODUCTION
This is an adversary proceeding in bankruptcy. Fed. R. Bankr.P. 7001. The complaint seeks interpleader relief. Fed. R.Civ.P. 22; Fed. R. Bankr.P. 7022. Before the court is a motion for summary judgment by Defendant Gregg Gardiner, as trustee of the Gregg C. Gardiner Revocable Living Trust ("Gardiner"), one of the claimants to the interpleader fund. Fed. R.Civ.P. 56; Fed. R. Bankr.P. 7056.
Plaintiff Bowers and Merena Auctions, LLC ("Bowers and Merena"), is in the business of accepting consignments of rare coins and other collectibles, which it offers for sale, by auction, to the general public. Defendant James W. Lull ("Lull") is the debtor in the underlying chapter 7 liquidating bankruptcy case. Ronald K. Kotoshirodo ("trustee") is the trustee in bankruptcy in Lull's case. By amended order dated October 1, 2007, the trustee was substituted for Lull as a party defendant. Defendants Gardiner, Kapaa 382, LLC ("Kapaa 382"), and Daniel Yamaguchi ("Yamaguchi") are creditors of Lull.
II. FACTS
On April 21, 2006, Lull entered into a consignment agreement with Bowers and Merena for auction of his Standing Liberty quarter-dollar collection on August 18, 2006. On April 21, 2006, Bowers and Merena also agreed to, and did, loan to Lull the sum of $700,000, the loan to be repaid from the auction proceeds.
The collection sold at auction for $1,119,750. After repayment of its loan to Lull and expenses of sale, Bowers held net proceeds of $455,046.11.
Gardiner, Kapaa 382 and Yamaguchi have all advised Bowers and Merena that they are entitled to the auction proceeds.
Gardiner's claim to the proceeds arises from a March 1, 2005, loan to Lull in the amount of $3.8 million. Lull was unable to repay the loan when it became due, on February 28, 2006. In July, 2006, Gardiner' agreed to forbear from taking immediate legal action to enforce the note after Lull offered to provide Gardiner with comprehensive *264 security for the outstanding debt. Lull executed a security agreement on July 19, 2006, which granted Gardiner a security interest in "all personal property and other assets" of Lull and specifically listed all commonly known categories of personal property, including goods, accounts, money, chattel paper, general intangibles, instruments, and the proceeds thereof.
Gardiner recorded a financing statement in the Bureau of Conveyances of the State of Hawaii on July 20, 2006. The financing statement described Gardiner's collateral as, "All assets and all personal property of the Debtor (including, without limitations, fixtures), whether now owned or hereafter acquired or arising, and wherever located, and all proceeds and products thereof."
Kapaa 382 made short-term loans to Lull on September 20, 2005, for $933,000; on December 5, 2005, for $471,566.82; on December 15, 2005, for $165,000; and on December 19, 2005, for $400,000. On July 26, 2006, in consideration for the loans, Lull executed a "Partial Settlement Agreement" in which he agreed, among other things, to "convey and transfer to [Kapaa 382] title to the Coin Collection currently consigned to Bowers and Merena Auctions, LLC for auction scheduled to occur in August 2006, by Bill of Sale[.]"
Kapaa 382 filed a financing statement with the California Secretary of State on August 22, 2006, but the financing statement listed Kapaa 382 as both the debtor and the secured party and did not mention Lull.
On July 11, 2006, Lull executed an assignment of the proceeds of the coin auction to Yaraaguchi, apparently on account of an unpaid promissory note, dated May 16, 2006, in the amount of $700,000. There is no evidence that the assignment was recorded.
On December 8, 2006, Lull filed a voluntary chapter 7 petition. Filed claims in the bankruptcy case exceed $55 million, including unsecured claims of nearly $42 million.
III. PROCEDURAL HISTORY
On November 8, 2006, Bowers and Merena filed a complaint for interpleader in the Superior Court of California, County of Los Angeles, seeking to compel the defendants to litigate their respective rights to the coin auction proceeds. Bowers and Merena deposited $453,302.26 with the clerk of the Superior Court after deducting $1,743.85 in attorneys' fees from the net proceeds.
After Lull filed a voluntary chapter 7 petition in late 2006, Gardiner removed the interpleader action to the United States Bankruptcy Court for the Central District of California, Los Angeles Division, on March 7, 2007. On May 18, 2007, the California bankruptcy court transferred venue to this court.
Upon removal of this lawsuit to the bankruptcy court in Los Angeles, all parties stipulated that the fund is to remain with the clerk of the Superior Court until final judgment of a court of competent jurisdiction. The stipulation also provides for release of the interpleader plaintiff and payment to plaintiff of $5,000 on account of its interpleader fees and expenses. The stipulation was filed in the United States Bankruptcy Court, Central District of California, on April 18, 2007. Stipulation for Discharge of Plaintiff from Interpleader Action and Allowance of Capped Fees and Costs, Case No. 2-07-ap-01206 (Docket No. 11). According to the stipulation, there are 6 coins which did not sell at the auction. After plaintiff sells those coins, the net proceeds will be added to the interpleader fund.
*265 On October 1, 2007, the trustee, as substituted defendant for Lull, filed a cross-claim against all other defendants, asserting that the transfers to Kapaa 382 and Yamaguchi could be avoided for the benefit of the bankruptcy estate as unperfected transfers pursuant to 11 U.S.C. § 544, and that the transfer to Gardiner could be avoided as a fraudulent transfer pursuant to 11 U.S.C. § 548.
Gardiner and Kapaa 382 filed answers to the cross-claim denying the trustee's allegations. In its answer, Gardiner asserted good faith defenses under 11 U.S.C. §§ 548(c) and 550(b)[1] to the trustee's fraudulent transfer claim.
Yamaguchi has not made an appearance in this adversary proceeding.
On December 14, 2007, Gardiner filed a motion for summary judgment as to all claims and all parties in this action, seeking a determination that it has a superior claim to the entire interpleader fund. The motion came on for hearing on January 31, 2007. Wayne K.T. Mau, Esq., appeared for Gardiner; Lora Han, Esq., appeared for Kapaa 382; and Cuyler Shaw, Esq., and Kevin Herring, Esq., appeared for the trustee. After hearing oral argument, the court took the matter under advisement. Upon consideration of the written and oral arguments of the parties, for the reasons stated below, the court will enter an order granting the motion in part and denying the motion in part.[2]
IV. STANDARD
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c), Fed. R. Bankr.P. 7056. The party seeking summary judgment bears the initial responsibility of identifying evidence which it believes demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The issue of material fact necessary to defeat summary judgment "is not required to be resolved conclusively in favor of the party asserting its existence[.]" First Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). Rather, "all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." Id. See also, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
In a motion for summary judgment, the court must view the facts in the light most favorable to the non-moving party. State Farm Fire & Cas. Co. v. Martin, 872 F.2d 319, 320 (9th Cir.1989).
V. DISCUSSION
Gardiner asserts that it is entitled to the entire interpleader fund as a matter of law because it has a perfected security interest in Lull's coin collection that has priority over all other asserted interests in the collection, and because the trustee cannot avoid Gardiner's security interest as a fraudulent transfer.
Kapaa 382 argues in opposition to the motion that Gardiner does not have a *266 properly perfected security interest because the auctioned coins are "money" and the filing of a financing statement is insufficient to perfect a security interest in money under the Uniform Commercial Code ("UCC"). The trustee argues that summary judgment is inappropriate because there is a genuine issue of material fact as to whether Gardiner's security interest is a fraudulent transfer not within the good faith exception of 11 U.S.C. § 548(c).
A. Validity and Priority of Gardiner's Security Interest
The first question is whether Gardiner has taken the proper steps to perfect a security interest in the coins and the auction proceeds.
Gardiner recorded a financing statement that described the collateral securing his $3.8 million promissory note as "[a]ll assets and all personal property of the Debtor...." Under revised Article 9 of the UCC as adopted by the Hawaii Legislature in 2000, such supergeneric descriptions of collateral are permitted in financing statements. Haw.Rev.Stat. § 490:9-504 provides that a financing statement sufficiently indicates the collateral that it covers if it provides "[a]n indication that the financing statement covers all assets or all personal property" of the debtor.
Although a similarly broad description in a security agreement is not sufficient for a security interest to be enforceable, Haw.Rev.Stat. §§ 490:9-203(b)(3)(A) and 490:9-108(c), the security agreement signed by Lull specifically identified every commonly known category of personal property, among them goods, accounts, money, chattel paper, general intangibles and instruments. Under section 490:9-108(b), collateral is reasonably identified if the identification is by: "(1) specific listing; (2) category; (3)[and] ... a type of collateral defined in [the UCC]." The security agreement signed by Lull identified the collateral by category and also by UCC-defined type. See Haw.Rev.Stat. § 490:9-102. It therefore sufficiently described the collateral to which Gardiner's security interest attached.
Kapaa 382 argues that the filing of Gardiner's financing statement did not perfect a security interest in the coins because the coins are "money," and, under Haw.Rev.Stat. § 490:9-312(b)(3), "a security interest in money may be perfected only by the secured party's taking possession[.]" Although Kapaa 382 has not had actual possession of the coins, it suggests that additional discovery may reveal that Bowers and Merena held the coins for Kapaa 382's benefit and that Kapaa 382 therefore had constructive possession of the coins.[3]
Kapaa 382's argument that the auctioned coins constitute "money" under Article 9 is not persuasive. Coins are not merely "money" where their market value far exceeds their face value.
UCC Article 9 does not define "money," but Article 2, concerning sales, recognizes that "money" can be transformed into "goods" under certain circumstances. The Official Comment to UCC section 2-105 states that, "Goods is intended to cover the *267 sale of money, when money is being treated as a commodity, but not to include it when money is the medium of payment." Although the drafters appeared to have had in mind sales of foreign currency in offering this clarification, the same reasoning applies to sales of numismatic coins where "money is being treated as a commodity[.]"
The definition of "goods" in Article 9 specifically excludes money. Haw.Rev. Stat. § 490:9-102. However, it makes little sense to take the narrow view that coins of numismatic value are always money and never goods under Article 9. For example, the old quarter-dollar coins sold at auction by Plaintiff are no longer money that could be used at face value for the purchase of goods.
There is little case law on this issue. However, the cases take the commonsense approach that coins worth more than face value are not merely "money". For example, in Coroner v. U.S., 671 F.2d 367 (9th Cir.1982), a corporation paid a dividend to shareholders in the form of collectible coins, $20 U.S. gold Double Eagles. The face value was $5,500. The market value was $70,936. The issue was whether, for tax purposes, the dividend was taxable at the face value or at the market value of the coins. The Court of Appeals held that the taxable dividend was the market value, not the face value, of the coins, observing that, "[w]hen legal tender, by reason of its value to collectors or the intrinsic worth of its contents, has a fair market value in excess of its face value or tender, then it should be deemed property other than money. ..." 671 F.2d at 368.
In In re Midas Coin Co., 264 F.Supp. 193 (E.D.Mo.1967), the court found that coins that had numismatic value were "goods" within the Missouri statute authorizing a secured party to perfect a security interest in goods by taking possession of the collateral without filing a financing statement. In that case, the coins were used in the debtor-coin dealer's business and were pledged as collateral for a bank loan. As the court noted, "The law favors a construction which harmonizes with reason and which tends to avoid absurd or unreasonable results." 264 F.Supp. at 195.
Kapaa 382 contends that McKee v. State Farm Fire and Casualty Co., 145 Cal. App.3d 772, 193 Cal.Rptr. 745 (1983), compels a different result. In McKee, a homeowner sued his insurance company for breach of contract and bad faith after the insurer determined that a valuable silver coin collection stolen from the plaintiff's home was subject to a policy exclusion limiting the insurer's liability for "money, bullion, numismatic property and bank notes" to $100. The California Court of Appeal held that a commonsense reading of the exclusion compelled a determination that the coins fell within the categories of "money" and "numismatic property." The court stated that, "Limiting the reasonable meaning of `money' to only that which is actually circulating as part of the currency is not reasonable." 145 Cal.App.3d at 776, 193 Cal.Rptr. 745.
McKee is distinguishable because the policy exclusion at issue specifically referred to numismatic property. Moreover, McKee does not stand for the proposition that collectible coins must always be "money" and can never be "goods" in commercial transactions; it merely observed, in the context of an insurance policy exclusion that covered numismatic coins, that "money" includes non-circulating, collectible coins.
Following the commonsense approach of Cordner and Midas, it will be held that the valuable coins consigned by Lull to Bowers and Merena for auction are "goods".
*268 Under Hawaii law, a security interest in goods may be perfected by taking possession, Haw.Rev.Stat. § 490:9-313(a), but otherwise must be perfected by filing a financing statement in the jurisdiction where the debtor is located. Haw.Rev. Stat. §§ 490:9-310 and 490:9-301. When Lull gave the security interest to Gardiner, Lull was a resident of Hawaii. Gardiner, accordingly, properly perfected its security interest in the coin collection by filing a financing statement covering all of Lull's personal property. Under Haw.Rev.Stat. § 490:9-315(a)(2), "a security interest attaches to any identifiable proceeds of collateral." Gardiner's security interest therefore reaches the proceeds of the coin auction.
Because Lull's collectible coins are "goods" under Article 9 and Gardiner had a perfected security interest in the coins at the time Lull purportedly transferred the collection to Kapaa 382, Gardiner's security interest would have priority over any security interest held by Kapaa 382,[4] regardless of whether Bowers and Merena held the coins for the benefit of Kapaa 382. Therefore, additional discovery on the issue would be unproductive.
There is no evidence in the record that Lull's purported assignment of the auction proceeds to Yamaguchi was ever recorded, and Yamaguchi did not respond to this motion. Accordingly, it will be held, based on the undisputed facts, that Gardiner's security interest also has priority over any interest held by Yamaguchi in the auction proceeds.[5]
B. Whether Gardiner's Security Interest Was a Fraudulent Transfer
The next question is whether Gardiner's perfected security interest can be avoided as a fraudulent transfer pursuant to section 548 of the Bankruptcy Code. Gardiner argues that it is entitled to summary judgment in its favor on the trustee's cross-claim because the trustee cannot establish that the transfer was made with actual intent to hinder, delay or defraud creditors. Even if the trustee can establish actual intent, Gardiner further contends, the transfer cannot be avoided because Gardiner took the security interest for value and in good faith.
1. Standard
Section 548(a) provides that the trustee may avoid:
(1) ... any transfer ... of an interest of the debtor in property, or any obligation by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity *269 to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred. ...
Section 548(c) provides, however, that:
Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.
2. Actual intent to hinder, delay or defraud
Gardiner argues that the trustee does not have any evidence that Lull gave Gardiner its security interest with actual intent to hinder, delay or defraud his creditors. In his cross-claim, the trustee asserts that the transfer was made as part of a Ponzi scheme whereby Lull solicited investors to make bridge or "flip" loans for real estate deals but actually used funds from new investors to pay earlier investors.
The trustee's insistence on the existence of a Ponzi scheme seems to stem from reported opinions holding that the fact that a transfer is made in furtherance of a Ponzi scheme is sufficient to establish actual intent under section 548(a)(1)(A) or its state law equivalents. See, e.g., Haves v. Palm Seedlings Partners (In re Agric. Research & Tech. Group), 916 F.2d 528, 536 (9th Cir.1990)("the mere existence of a Ponzi scheme, which could be established by circumstantial evidence, has been found to fulfill the requirement of actual intent on the part of the debtor"); and Plotkin v. Pomona Valley Imports, Inc. (In re Cohen), 199 B.R. 709, 717 (9th Cir. BAP 1996)("Proof of a Ponzi scheme is sufficient to establish the Ponzi operator's actual intent to hinder, delay, or defraud creditors for purposes of actually fraudulent transfers under Bankruptcy Code § 548(a)(1)."). Gardiner contends, however, that the trustee has no credible evidence that Lull was engaged in a Ponzi scheme.
"Generally, a Ponzi scheme is a phony investment plan in which monies paid by later investors are used to pay artificially high returns to the initial investors, with the goal of attracting more investors." Alexander v. Compton (In re Bonham), 229 F.3d 750, 759 n. 1 (9th Cir.2000). Proceeds are tunneled "from new investors to previous investors in the guise of profits from the alleged business venture, thereby cultivating an illusion that a legitimate profit-making business opportunity exists and inducing further investment." Wyle v. C.H. Rider & Family (In re United Energy Corp.), 944 F.2d 589, 590 n. 1 (9th Cir.1991).
The trustee argues that the evidence, including Lull's own testimony at his creditors' meeting and Fed. R. Bankr.P.2004 examinations, shows that Lull used investors funds for payments to earlier investors instead of for a legitimate business purpose. The trustee offers, among other evidence, Rule 2004 deposition testimony from Lull stating that in 2003, investors' money "stopped being used for bridge loans and started going in to pay project costs and other things" including "debt servicing ... to pay other clients." Tr., Rule 2004 Deposition of James Lull by Creditors Claire Mortimer and John Mortimer on September 6-7, 2007, p. 231, attached as Exhibit "K" to the Declaration of Cuyler Shaw in Support of Defendant Ronald K. Kotoshirodo's Opposition to Secured *270 Creditor Gregg C. Gardiner Revocable Living Trust's Motion for Summary Judgment.(Docket No. 87). The trustee identifies at least 10 creditors whose loans to Lull apparently went toward paying Lull's past debts.
According to the trustee, the pleadings and proofs of claim filed in the bankruptcy case alone demonstrate that Lull was conducting a Ponzi scheme. Proofs of claim filed in the underlying bankruptcy case indicate that, by mid-2006, more than $25 million had been loaned to Lull for purported real estate investments. The trustee alleges that Lull has never been able to identify any legitimate underlying business for which he used the loan proceeds.
The evidence presented thus far does not establish that Lull was engaged in a Ponzi scheme. However, proof of the existence of a Ponzi scheme is but one method, of establishing actual intent to hinder, delay or defraud under section 548(a)(1)(A). Actual intent also can be, and usually is, established by circumstantial evidence or "`inferences drawn from a course of conduct.'" Leonard v. Coolidge (In re National Audit Defense Network), 367 B.R. 207, 219-20 (Bankr.D.Nev.2007)(quoting Mazer v. Jones (In re Jones), 184 B.R. 377, 385 (Bankr.D.N.M.1995)).
Actual intent may be established, for example, where a transfer wears a sufficient number of the "badges of fraud" the "recurring actions that historically have been associated with the actual intent to hinder, delay or defraud creditors." National Audit Defense Network, 367 B.R. at 220 (citing Twyne's Case, 3 Coke Rep. 80b, 76 Eng. Rep. 809 (Star Chamber 1601)). The Uniform Fraudulent Transfer Act provides the following nonexclusive list of badges of fraud:
(1) the transfer was to an insider;
(2) the debtor retained possession or control of the property transferred after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer or obligation was made or obligation was incurred, the debtor was. sued or threatened with suit;
(5) the transfer was of substantially all of the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets
(8) the value of the consideration received by the debtor was [not] reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and
(11) the debtor had transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the debtor.
See Haw.Rev.Stat. § 651C-4(b). The list provides "neither a counting rule, nor a mathematical formula. No minimum number of factors tips the scales toward actual intent." Wolkowitz v. Beverly (In re Beverly), 374 B.R. 221, 236 (9th Cir. BAP 2007).
There remains a genuine issue of fact as to whether Lull transferred the blanket security interest to Gardiner with actual intent to hinder, delay or defraud Lull's creditors. Several legal theories are available for the litigation of the issue.
*271 2. Section 548(c) exception
Gardiner argues that summary judgment in its favor is appropriate even if a genuine issue of material fact exists as to actual intent, because the undisputed facts show that Gardiner took the security interest "for value and in good faith," thereby satisfying the exception to avoidance of a fraudulent transfer under section 548(c).
a. Value
There is no question that Gardiner gave value for its security interest. Section 548(d)(2) specifically provides that "value" under section 548 "means property, or satisfaction or securing of a present or antecedent debt of the debtor. ..." The $3.8 million loaned by Gardiner well exceeds the $453,302.26 in the interpleader fund.
b. Good faith
Gardiner bears the burden of establishing that it received the transfer in good faith. Agricultural Research, 916 F.2d at 535 (citing Candor Diamond Corp. v. Rosenberg (In re Candor Diamond Corp.), 76 B.R. 342, 351 (Bankr.S.D.N.Y. 1987)).
Gardiner trustee Gregg Gardiner's affidavit filed in support of the instant motion states that, "[a]t the time the [Lull] proposed granting the Gardiner Trust a security interest in his assets, the Gardiner Trust had no actual or constructive knowledge of any improper conduct being performed by [Lull] or the alleged `Ponzi' scheme as it is being proffered by the Trustee." Affidavit of Gregg Gardiner as Trustee of the Gregg C. Gardiner Revocable Trust, ¶ 11 (Docket No. 64).
Gardiner's disavowal of any knowledge of a Ponzi scheme is insufficient to demonstrate that, as a matter of law, it took the blanket security interest in good faith. The current record does not indicate that Gardiner was aware of the full extent of Lull's dealings with other investors. In this circuit, however, the good faith standard under section 548(c) features an objective component, wherein "a transferee's knowledge of, or reasonable cause to suspect, the transferor's insolvency may be inconsistent with good faith." Gill v. Maddalena (In re Maddalena), 176 B.R. 551, 556 (Bankr.C.D.Cal.1995)(citing 4 Collier on Bankruptcy ¶ 548.07[3], 548-81 (15th ed.1990)). (Emphasis added.) "In cases involving actual fraud by the debtor-transferor, the courts define `good faith' required by Section 548(c) to mean that viewed objectively, the transferee neither knew nor should have known of the fraudulent nature of the transfer." 176 B.R. at 555 (citing Agricultural Research, 916 F.2d at 535). Under the objective component of the good faith standard, "Facts sufficient to warrant a finding of inquiry notice are also sufficient to defeat the good faith that is essential to the § 548(c) safe harbor." Cohen, 199 B.R. at 720.
The trustee notes that at the time Gardiner took its security interest, Gregg Gardiner had recently learned that another investor, Jon Anderton, was owed a delinquent debt of $5 million from Lull and had hired an attorney to attempt collection. The trustee believes he can prove at trial that Gregg Gardiner and Anderton discovered undisclosed overlaps in the names of borrowers to whom the funds received from Gardiner and Anderton had supposedly been loaned.
The trustee also notes that Gardiner obviously was aware of substantial delinquent debt owing to it and that a partial payment check given by Lull to Gardiner had been dishonored by Lull's bank. Gardiner therefore knew that it was taking a general transfer a security interest in all of Lull's personal property at a time when Lull had at least two creditors with *272 multi-million dollar claims, Gardiner and Anderton. The "purported transfer of all or substantially all of the debtor's property" is a recognized badge of fraud. Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 806 (9th Cir.1994). See also, Haw.Rev.Stat. § 651C-4(b), supra The trustee has presented sufficient evidence to create a genuine issue of fact as to whether the available objective facts known to Gardiner at the time of the transfer put Gardiner on inquiry notice of Lull's insolvency and allegedly fraudulent activity. Therefore, Gardiner is not entitled to a determination that he took the transfer in good faith.
VI. CONCLUSION
Gardiner's motion for summary judgment will be granted in part and denied in part.
The motion will be granted as to Gardiner having perfected a security interest in Lull's personal property. The only challenge on this point is the suggestion by Kapaa 382 that the consigned coin collection is "money", requiring possession, rather than the filing of a UCC financing statement, for perfection of the security interest. Case law and the official comments to the UCC make it clear that numismatic coins, with a market value far in excess of the face value of the coins, are not merely "money", but constitute "goods", in which a security interest is perfected by the recording of a financing statement where the goods are in possession of another party. Gardiner has taken all necessary steps for the perfection of its security interest in Lull's personal property, and has demonstrated that its security interest in the auction proceeds has priority over the asserted interests of co-defendants Kapaa 382 and Yamaguchi.
The motion will be denied, to the extent that it seeks a ruling that Lull's conveyance to Gardiner of the security interest cannot be avoided by the trustee in bankruptcy as a fraudulent conveyance. The trustee has raised genuine issues of material fact concerning: (1) whether or not giving the security interest to Gardiner was done with actual intent, on Lull's part, to hinder, delay, or defraud his creditors; and (2) if there was a fraudulent conveyance, whether it was received by Gardiner in "good faith", which would entitle Gardiner to the protection of section 548(c).
The court makes no determination at this time as to whether Gardiner has an allowed claim in the amount it asserts.
Pursuant to the foregoing discussion, an order will be entered granting in part and denying in part Gardiner's motion for summary judgment.
NOTES
[1] Gardiner's assertion of a good faith defense under 11 U.S.C. § 550(b) is misplaced. Gardiner is the initial transferee of the challenged security interest. The § 550(b) good faith defense is available only to subsequent transferees of the initial transferee.
[2] The court has jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(A), (H), (K) and (O), and 28 U.S.C. § 1334(b). This is a core proceeding.
[3] Pursuant to Haw.Rev.Stat. § 490:9-313(c), [A] secured party takes possession of collateral in the possession of a person other than the debtor, the secured party, or a lessee of the collateral from the debtor in the ordinary course of the debtor's business, when:
(1) The person in possession authenticates a record acknowledging that it holds possession of the collateral for the secured party's benefit. ...
[4] Kapaa 382's financing statement filed with the California Secretary of State suffers from the acknowledged fatal flaw that it does not identify Lull. See Haw.Rev.Stat. § 490:9-502(a) and Cal. Com.Code § 9502(a)("a financing statement is sufficient only if it: (1) provides the name of the debtor. ..."). Accordingly, Kapaa 382 does not rely on the financing statement in asserting that it had a security interest in the coin collection.
[5] Article 9 governs the transactions involving Kapaa 382 and Yamaguchi notwithstanding the fact that Lull purported to convey his interest in the coins by way of a "Bill of Sale" to Kapaa 382 and by way of an "assignment of proceeds" to Yamaguchi. "Article 9 of the UCC applies to any transaction intended to create a security interest[.]" Hawaii Broad. Co., Inc. v. Hawaii Radio, Inc., 82 Hawai`i 106, 116, 919 P.2d 1018 (1996). The undisputed facts show that the transfers to Kapaa 382 and Yamaguchi were intended as security for Lull's obligations to those creditors. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542265/ | 122 F.2d 45 (1941)
FOGLE et al.
v.
GENERAL CREDIT, Inc.
No. 7693.
United States Court of Appeals for the District of Columbia.
Decided June 30, 1941.
*46 P. Michael Cook, of Washington, D. C., for appellants.
William R. Lichtenberg, Joseph Luria, and Samuel Barker, all of Washington, D. C., for appellee.
Before MILLER, EDGERTON, and RUTLEDGE, Associate Justices.
RUTLEDGE, Associate Justice.
The principal question presented is whether a recorded chattel mortgage given by an automobile dealer to a finance company, which left the car in the dealer's possession with authority to offer it for sale in the regular course of business but not to complete a sale until the mortgage lien should be satisfied, is valid as against a purchaser having no actual knowledge of the mortgage.
The buyer and the bank which assisted him to finance the purchase were plaintiffs in the trial court. They sought a decree directing the defendant to deliver to them the certificate of title, free and clear of any liens, and adjudging the lien of defendant's mortgage to be void. By counterclaim defendant asked for judgment for $350 with interest, the amount of its lien under the mortgage, or in lieu of this possession of the car or foreclosure of the mortgage lien.
The evidence does not appear in the record. The findings of fact[1] are not in dispute and are as follows:
"On November 30, 1938, Georgetown Motors, Inc., a dealer in new and used automobiles in the District of Columbia, executed and delivered to the defendant, General Credit, Inc., a chattel mortgage in the aggregate amount of $1,005.00, secured on four used automobiles then in possession of said Georgetown Motors, Inc. One of the automobiles included in this chattel mortgage was a 1938 Plymouth Sedan encumbered thereby in the amount of $350.00. This chattel mortgage was duly recorded on December 7, 1938, in the Office of the Recorder of Deeds for the District of Columbia. On December 7, 1938, Georgetown Motors, Inc. assigned and delivered to the defendant the certificate of title to said 1938 Plymouth Sedan, and the defendant retained possession of said certificate until after this suit was filed.[2]
"Georgetown Motors, Inc. retained possession of said automobiles and with the knowledge of the defendant, displayed same on its salesroom floor, for sale to the public, until January 5, 1939. It was agreed between deft. & Georgetown Motors that no sale was to be made until lien in favor of deft. was paid & satisfied.
"On January 5, 1939, the plaintiff James C. Fogle purchased from Georgetown Motors, Inc. the 1938 Plymouth Sedan for an agreed purchase price of $625.00, and in payment thereof delivered to said Georgetown Motors, Inc. his 1934 Plymouth automobile, for which he was given credit in the sum of $225.00, and a cashier's check in the sum of $400.00 drawn by the plaintiff The City Bank to the order of said Georgetown Motors, Inc. The said $400.00 *47 was advanced by the plaintiff The City Bank to the plaintiff James C. Fogle as a loan on account of the purchase price, and was secured by a chattel mortgage on said automobile. Neither plaintiff had actual knowledge of the mortgage.
"The plaintiff James C. Fogle took possession of said automobile under temporary or dealer's tags, and made demand on the said Georgetown Motors, Inc. for the certificate of title, and learning it was in the possession of the defendant, made demand upon it. Georgetown Motors, Inc. never paid or satisfied the lien.
"Georgetown Motors, Inc., on or about January 15, 1939, became insolvent and ceased doing business."
The trial court held that the plaintiffs had notice of defendant's mortgage by operation of law, dismissed their complaint, and gave judgment for defendant against them for $350.
The issues relate to the effects to be given, in the circumstances of the case, to the recording act, Section 177 of Title 25, D.C.Code (1929), and Sections 2 and 3 of the District of Columbia Motor Vehicle Title and Registration Regulations.[3] Plaintiffs say that defendant is estopped by its conduct from claiming the benefit of the constructive notice generally afforded by recording the mortgage. Defendant insists that there is no basis for such an estoppel and that the sale to Fogle was void for failure to comply with the registration regulations.
If defendant's mortgage had not been recorded, the case would be ruled by General Credit, Inc. v. Universal Credit Co., 1938, 69 App.D.C. 80, 99 F.2d 115, and by Associates Discount Corp. v. Crow, 1940, 71 App.D.C. 336, 110 F.2d 126, and Associates Discount Corp. v. Hardesty, 74 App.D.C. ___, 122 F.2d 18 (decided May 5, 1941). In the General Credit case the facts were substantially identical with those presented here, except for recording. In holding that the finance company, Universal Credit, was estopped to assert its lien as against a purchaser from the dealer to whom Universal had given possession with knowledge that the car would be placed in his storeroom and offered for sale in regular course of business, we said:
"The general rule is that the seller of chattels can confer no better title than he himself has, but a recognized exception to the rule is based on estoppel. Thus, if the owner of the chattels stands by and permits another, particularly a licensed dealer in such chattels, to hold himself out to the world as owner, to treat the goods as his own, to place them with similar goods in a public show-room and to offer them for sale to the public, he will be estopped by his conduct from asserting his ownership against a purchaser for value and without notice."[4]
In Associates Discount Corp. v. Crow, supra, the facts were substantially identical with those in the Universal Credit case, except that the finance company held the certificate of origin issued pursuant to the Motor Vehicle Title and Registration Regulations and the purchaser from the dealer sued to require the company to deliver the certificate to him. We reversed the District Court's judgment for the plaintiff for want of sufficient findings of fact and remanded the cause in order that they might be made. But the necessary implication of the decision was that a purchaser who acquires title under circumstances like those presented in the Universal Credit case is entitled to have the certificate of origin delivered to him by the lienor who entrusts possession of the car to the dealer for purposes of display for sale in the regular course of business. And this was the clear and explicit ruling in Associates Discount Corp. v. Hardesty, supra.
We think the Associates Discount cases are conclusive against General Credit's argument, advanced first on the appeal, that the sale to Fogle was void because a certificate of title was not assigned to him by Georgetown Motors at the time of the transfer, as required by Section 2 of the Registration Regulations.[5] It is true that those cases involved new cars and "certificates *48 of origin" required for such vehicles under Section 3(a) of the Regulations,[6] while this one affects a used car and a "certificate of title" required by Section 2(c). The specific prohibition of Section 3(a) is narrower than that of Section 2(c), in that it is limited to dealers and their acquisition of new vehicles. But the two sections, taken as a whole, are interrelated in other provisions, and we think the fundamental purpose of the two subsections is the same, so that they should be construed consistently with reference to the effect of failure to assign and deliver the required certificate at the time of transfer. In the absence of more substantial difference in the two provisions, we see no persuasive reason for giving greater effect to one than to the other or for adding to the explicit statutory sanctions by avoiding the transfer made in violation of the one prohibition and not doing so as to one made in violation of the other. In Associates Discount Corp. v. Hardesty, supra, we said:
"The only sanction in the District of Columbia laws applicable under the conditions we have here, is that the purchaser cannot use the automobile on the highways of the District of Columbia. The statute provides only that the `owner' shall first obtain a certificate. But it nowhere provides that he is any less the owner because he fails to do so. In our opinion, the statute does not avoid a contract otherwise valid. Our conclusion, therefore, is that the sale to Hardesty gave him title to the car and that being so, that he has the right to possession of the certificate under the rule implicit in the Crow case."
Furthermore, Section 3 specifically provides that no dealer shall "have any used motor vehicle or trailer in his possession unless he shall have a certificate of title for it issued or assigned to him." General Credit, which seeks to take advantage of the prohibition of Section 2 against transfer without assignment of the certificate, cannot be relieved of the burden of this further provision, which we think was directed against exactly the sort of arrangement to which it was a party in this case. The very purpose of the provision appears to have been to prevent *49 persons holding the certificate from giving possession of the vehicle to a dealer without also delivering the certificate to him, in other words, to prohibit the very thing which General Credit did in this case. We find no merit in the contention that the transfer to Fogle was void for want of delivery of the certificate of title.
It remains to consider the most important question, namely, the effect of recording the mortgage. The recording act, Section 177, applies to chattels generally, not merely to automobiles,[7] and is as follows: "Recording of bills of sale, chattel mortgages, and deeds of trust. No bill of sale, mortgage, or deed of trust to secure a debt of any personal chattels whereof the vendor, mortgagor, or donor shall remain in possession, shall be valid or effectual to pass the title therein, except as between the parties to such instruments and as to other persons having actual notice of it, unless the same be executed, acknowledged, and within ten days from the date of such acknowledgment filed in the office of the recorder of deeds and the said filing of such instrument therein as aforesaid as to third persons not having notice of it as aforesaid shall be operative only from the time within the said ten days when it is delivered to said record."
The weight of authority in other jurisdictions sustains the view that in circumstances substantially identical with or similar to those presented here the constructive notice generally afforded by compliance with the recording act is nullified.[8] Although the facts in some of the cited cases tend more strongly to support application of principles of estoppel or waiver than do the findings in this one,[9] we do not regard the differences as sufficiently substantial to dictate a different result if due account is taken of inferences which we think must be drawn from the findings.[10]
It would be sufficient for disposition of the case to rely upon these authorities and the reasons which they assign to support their result. But we add our own approval. The statute is intended ordinarily to make a recorded instrument effective to give constructive notice to all with whom the person in possession may undertake to deal. But the protection is not entirely one-sided or absolute. The statute has another function, namely, to provide an opportunity for investigation of the title and discovery of liens. The two functions are closely related. The opportunity to investigate is the foundation of the constructive notice. When it exists unimpaired by any act of the mortgagee, the statute casts the burden of investigation upon those who may deal with the mortgagor, and their failure to make it assumes something of the quality of negligence. But the statute is a bulwark, not a trap. The mortgagee is favored so long as he acts consistently with the statutory conditions. But when he goes further and either by his conduct prevents the purchaser from making the usual investigation or takes advantage of circumstances which he knows or reasonably should know would have this effect, he destroys the foundation upon which his own protection rests. He cannot throw the purchaser off guard concerning the protection which the statute gives to him and take advantage at the same time of what otherwise would or *50 might have been discovered. Thus, if the mortgagee clothes the mortgagor with the indicia of ownership,[11] or gives him authority to sell the property,[12] or stands by in silence and watches the mortgagor deal with it as owner,[13] he nullifies the effect of recording by his inconsistent representation.
Had the mortgage involved here contained a power of sale, the statutory notice would have been nullified. Within the authorities which have been cited, the same consequence follows when the circumstances are such that they would create an apparent authority to sell in the mortgagor.[14] Actual power of sale is not required, nor is strict estoppel.[15] When, in addition to possession, other facts known to the mortgagee or acts done by him are such that prospective purchasers would be led reasonably to believe that the mortgagor has power to sell the property, the effect in throwing the purchaser off guard and preventing investigation of the title records by him is the same as if there were actual authority to sell known to the purchaser or indicia of ownership given to him.
The circumstances here are of that character and had that effect. Georgetown Motors was a dealer. Its business was selling cars and buying them. It does not appear that it had any other. The car was delivered to it with the intention that it be offered for sale, that is, that it be placed in the dealer's stock in trade to all appearances as part of it, in the dealer's regular display room, without any notice or warning that it was subject to lien held by another, though this might easily have been attached,[16] and that it be shown to customers in the regular course of trade. It is common knowledge that dealers frequently, if not always, take care of title transfers and registration, as well as licensing, as part of the transaction of sale, often completing these matters after receiving payment and making delivery. The dealer here was more than mortgagor in possession. He was agent for bringing about a sale. The circumstances were such that prospective purchasers naturally would be thrown off inquiry and it is not unreasonable to infer that defendant must have known that this was likely to occur. Furthermore, as we have said above, both the dealer and defendant were parties to a violation of the registration regulations in making such an arrangement without having the certificate of title placed in the dealer's possession. Had they obeyed the regulation, the purchaser would have been entitled to rely upon the certificate as showing ownership in the dealer or would have been given actual knowledge by it concerning defendant's lien. As against such a violation and facts so disarming, we think the constructive notice which recording would have given in their absence must be held ineffective. It strengthens this conclusion that it brings the recording act and the registration regulations into harmony.
The judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.
Reversed and remanded.
NOTES
[1] Upon a former appeal the case was remanded for want of sufficient findings. Fogle & City Bank v. General Credit, Inc., 1940, 71 App.D.C. 338, 110 F.2d 128.
[2] During the pendency of the suit, the certificate was delivered to plaintiffs pursuant to an order of court which required this on condition that bond be filed conditioned for the payment of costs and damages which defendant might suffer.
[3] Promulgated pursuant to the District of Columbia Traffic Act, 1929, 43 Stat. 1119 (1925), as amended 44 Stat. 812 (1926), D.C.Code 1929, T. 6, § 241 et seq.
[4] 69 App.D.C. 80, 81, 99 F.2d 115.
[5] "Certificate of Title Required. (a) After January 1, 1932, no owner of a motor vehicle or trailer registered in the District of Columbia prior thereto shall operate or permit the operation of such motor vehicle or trailer on any public highway without first obtaining a certificate of title therefor. (b) After January 1, 1932, no registration card or identification tags for any motor vehicle or trailer shall be issued by the director until the owner thereof shall make application for and be granted a certificate of title for such motor vehicle or trailer. (c) After January 1, 1932, no person shall acquire or dispose of any used motor vehicle or trailer within the District of Columbia unless a certificate of title shall have been obtained by the person who disposes of it and shall have been assigned at the time of transfer of ownership of the used motor vehicle or trailer to the person who acquires it. (d) After January 1, 1932, no person shall have any motor vehicle or trailer in his possession on a public highway, knowing or having reason to believe that the owner of it has failed to obtain a certificate of title therefor, except as otherwise provided in these regulations. (e) Anyone convicted of violating paragraph (c) or (d) of this section shall for each such offense be fined not more than $500 or imprisoned not more than 10 days, or both."
[6] "Certificate of Origin of Ownership. (a) After January 1, 1932, no dealer shall acquire a new motor vehicle or trailer unless he obtains at the time of its acquisition such written evidence of origin and ownership and of any liens, encumbrances, or trust agreements existing against said vehicle as may be satisfactory to the director. (b) Within 24 hours of the acquisition of any new motor vehicle or trailer by a dealer he shall submit, on a form furnished by the director, a certificate of origin and ownership and of any liens, encumbrances, or trust agreements existing against said vehicle. This certificate shall be signed in ink by the dealer if a natural person, otherwise by an individual authorized to sign, and verified before a person authorized to administer oaths. When the director is satisfied with the evidence submitted, he will approve the certificate with his signature and the seal of his office, which will allow the dealer to hold the vehicle for resale, display, demonstration, or test, or transfer between terminals and warehouse. Only dealers, banks, or finance companies may assign the above certificate to other dealers, banks, or finance companies, by executing an assignment on a form approved by the director. Such assignment shall in every instance be signed in ink by dealer, if a natural person, otherwise by an individual authorized to sign and verified before a person authorized to administer oaths. After January 1, 1932, no dealer shall have in his possession for more than 72 hours after its acquisition a new motor vehicle or trailer without having a certificate of origin or ownership therefor approved by the director, or such other certificate as may have been approved by the director, or a certificate of title for the motor vehicle or trailer issued or assigned to him, nor shall he have any used motor vehicle or trailer in his possession unless he shall have a certificate of title for it issued or assigned to him. All of the above certificates shall be subject to inspection upon demand of the director or a police officer."
[7] Accordingly, a construction peculiarly applicable to motor vehicles is not appropriate. Moore v. Ellison, 1927, 82 Colo. 478, 261 P. 461; Boice v. Finance & Guaranty Corp., 1920, 127 Va. 563, 102 S.E. 591, 593, 10 A.L.R. 654.
[8] Moore v. Ellison, 1927, 82 Colo. 478, 261 P. 461; National City Bank v. Adams, 1923, 30 Ga.App. 219, 117 S.E. 285; Denno v. Standard Acceptance Corp., 1931, 277 Mass. 251, 178 N.E. 513; Hostetler v. National Acceptance Co., 1930, 36 Ohio App. 141, 172 N.E. 851; Boice v. Finance & Guar. Corp., 1920, 127 Va. 563, 102 S.E. 591, 10 A.L.R. 654; Southern Wisconsin Acceptance Co. v. Paull, 1927, 192 Wis. 548, 213 N.W. 317. The case of Finance & Guaranty Co. v. Defiance Motor Truck Co., 1924, 145 Md. 94, 125 A. 585, appears to take a contrary view, as do Whitehurst v. Garrett, 1928, 196 N.C. 154, 144 S.E. 835, and Utica Trust & Deposit Co. v. Decker, 1927, 244 N.Y. 340, 155 N.E. 665.
[9] As by disclosing an established course of conduct between the mortgagor-dealer and the mortgagee, Hostetler v. National Acceptance Co., 1930, 36 Ohio App. 141, 172 N.E. 851; or previous instances of sale without notice to or consent of the mortgagee, Denno v. Standard Acceptance Corp., 1931, 277 Mass. 251, 178 N.E. 513; or that the mortgagee knew that the mortgagor was to pay the mortgage out of the proceeds of the sale, Southern Wisconsin Acceptance Co. v. Paull, 1927, 192 Wis. 548, 213 N.W. 317.
[10] E. g., the usual practices of automobile dealers in arranging for transfers of title and registration, as well as licensing. Cf. text infra.
[11] As when the title registration is permitted to remain in the mortgagor's name, cf. Winakur v. Sapourn, 1929, 156 Md. 662, 145 A. 342.
[12] As when the mortgagee authorizes or permits the mortgagor to discharge the mortgage by paying the amount due from the proceeds of sale, cf. Denno v. Standard Acceptance Corp., 1931, 277 Mass. 251, 178 N.E. 513; Hostetler v. National Acceptance Co., 1930, 36 Ohio App. 141, 172 N.E. 851; Southern Wisconsin Acceptance Co. v. Paull, 1927, 192 Wis. 548, 213 N.W. 317.
[13] Cf. Employers' Casualty Co. v. Helm, Tex.Civ.App.1927, 295 S.W. 955. See also Winakur v. Sapourn, 1929, 156 Md. 662, 145 A. 342.
[14] Cf. note 8 supra. Some of the cases speak in terms of "indicia of ownership." Examination of the facts shows that this does not refer to technical investiture of legal title in the mortgagor, as by placing registration in his name or delivering to him a certificate of title made in his name. Delivery of possession to a dealer with knowledge that he will offer the car for sale in the regular course of business as apparently a part of his stock in trade appears to be what is meant by giving him "indicia of ownership."
[15] Cf. Denno v. Standard Acceptance Corp., 1931, 277 Mass. 251, 178 N.E. 513, 515.
[16] Cf. Hostetler v. National Acceptance Co., 1930, 36 Ohio App. 141, 172 N.E. 851, 852. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542182/ | 122 F.2d 461 (1941)
EVANS
v.
UNITED STATES.
No. 1992.
Circuit Court of Appeals, Tenth Circuit.
August 22, 1941.
*462 *463 *464 David Allen, of Denver, Colo. (James B. Kelsey and John H. Murray, both of Leavenworth, Kan., and Joseph J. Wolf, of San Francisco, Cal., on the brief), for appellant.
Summerfield S. Alexander, U. S. Atty., of Topeka, Kan. (Homer Davis, Asst. U. S. Atty., of Topeka, Kan., on the brief), for appellee.
Before PHILLIPS and BRATTON, Circuit Judges, and FRANKLIN E. KENNAMER, District Judge.
FRANKLIN E. KENNAMER, District Judge.
This appeal is from a conviction in the court below of the appellant, Everett Ault Evans, alias Everett A. Troglin, alias Dutch Evans, of the crime of murder in the first degree for the killing of Herbert Otis Hayes within the United States Penitentiary at Leavenworth, Kansas.
It was charged that appellant committed an assault on Hayes about 10:30 A. M. on May 23, 1938, which resulted in the death of the latter shortly before 10 A. M. of May 25, 1938. Both appellant and the deceased, Hayes, were, at the time, convicts serving sentences in the Penitentiary.
In the morning of May 23, 1938, appellant and four other inmates of the prison were in what is called the "sole room" a room in the prison shoe factory where shoe soles were stacked in racks and the air kept moist with water sprayers. The deceased, Hayes, who bore the nick-name of "King Kong," came into the "sole room" bringing shoe soles to be placed on the racks, and appellant, who was sitting on one of the racks or shelves, looped a string about the head and neck of Hayes and gave it a jerk which caused Hayes to fall to the floor and become unconscious. It was claimed by the Government that while Hayes was on the floor and in an unconscious state, appellant inserted the handle of a broom with considerable force into the anal canal of Hayes, upward into the rectum for a distance of about seven or eight inches from the external rectum, lacerating the intestine and puncturing the sigmoid flexure or colon at the juncture of the sigmoid and rectum, from which inflicted wounds peritonitis developed and caused the death of Hayes about two days later. The episode of looping the string about Hayes and his falling to the floor and becoming unconscious from the fall was admitted by the testimony of appellant, he testifying that he was merely "playing" with Hayes and had no intention of injuring him. Although having previously made statements, both written and oral, to the contrary, at the trial appellant denied the use of the broom handle on Hayes in any manner. His such denial was corroborated by the testimony of three other convicts who were in the "sole room" at the time Hayes was injured. About 10:30 A. M. of May 23, Hayes applied to the first aid attendant in the prison shoe factory for some headache tablets. At that time, this attendant testified that Hayes was holding a hand to his side and leaned against a seat, and there was a bruise over one of Hayes' eyes and lacerations on both sides of his neck. Hayes also returned to this attendant during the afternoon of the same day and was given some headache tablets. Early in the evening of that day Hayes was taken to the Penitentiary hospital, and there the physicians diagnosed his condition as appendicitis requiring an immediate surgical operation. Accordingly, an operation was performed which was completed about 11:48 P. M. After opening the abdomen, according to the medical testimony, the appendix was found to be intact and not undergoing any active disease. The surgeon then elongated the incision he had made and further examined the abdominal cavity and its viscera. This disclosed a ruptured sigmoid from which and its surroundings emanated a considerable quantity of fresh fecal matter and some bloody inflammatory fluid. Without narrating further the details of this operation which were related at great length by the medical witnesses, it was found, to use the language of Doctor O'Kane, testifying for the Government, that Hayes was suffering from "generalized peritonitis," which meant "that the entire abdominal cavity or the intestine, the viscera, were bathed in this fecal, greenish fluid, purulent pus." In the opinion of the attending physicians, this peritonitis caused the death of Hayes. This operation and an autopsy shortly after Hayes died revealed, in addition to the ruptured sigmoid, injuries in the form of abrasions and tears in the anal and rectal canals up to the point of the rupture or puncture of the sigmoid, indicating that some blunt instrument had been inserted into the anus and forced upward some seven or eight inches, and that all these wounds had the appearance of having been freshly made. A portion of the viscera was admitted in evidence to demonstrate *465 the position and character of the wounds. In the opinion of the medical witnesses, the peritonitis causing the death of Hayes was incited by the infliction of the above-mentioned wounds. About 8:30 o'clock on the morning of May 24, two officials of the Penitentiary made a search of the "sole room" and there found a broom. At this time the part of the broom where the straw joined the handle was very wet, and the upper part of the handle was wet and had the appearance of having been recently cleaned and sand papered. Sand paper and emery paper were kept in the shoe factory for the use of the convicts in their work. Appellant made a written statement concerning the occurrences leading to the death of Hayes to Associate Warden Shuttleworth on May 23 and another on May 24. He also made a written statement to L. B. Reed, Special Agent of the Federal Bureau of Investigation, at the Penitentiary, on June 27, 1938. In the second of the statements made to Shuttleworth, appellant admitted the incident of the string and the falling of Hayes to the floor and being revived from an apparent faint by wet hands placed on his face, but in neither of the Shuttleworth statements did appellant mention a broom. In his written statement made to Investigator Reed, appellant, among other things, said:
"While Hayes was on the floor I picked up a broom that was in the sole room and poked it up his (Hayes) trouser leg, in an effort to poke him and bring him back to consciousness."
In addition to the mentioned written statements, appellant made several oral statements to the officers. At the time Investigator Reed took the written statement, according to his testimony, the appellant made the further statement to him orally, which the appellant did not want incorporated into the writing, that he had used the broom handle on Hayes, and when asked by the investigator in what manner, appellant replied, "I jabbed it up his" anus. The appellant testified that he made no such statement. Hereinabove, we have attempted to briefly narrate the most material circumstances of this tragedy as disclosed by the record, but we will hereinafter make further necessary reference to the evidence at the trial.
Appellant contends that the evidence is insufficient to support the verdict. Hereunder, and making major argument thereon, appellant claims that the evidence failed to establish the corpus delicti. It is insisted that apart from the extrajudicial confession or admissions of appellant admitted in evidence, there was no evidence to prove the body of the crime. It is the law that unless corroborated by independent evidence of the corpus delicti, the extrajudicial confession or declarations of a defendant charged with crime are not sufficient to authorize a conviction. Gulotta v. United States, 8 Cir., 113 F.2d 683; Gregg v. United States, 8 Cir., 113 F.2d 687; Martin v. United States, 8 Cir., 264 F. 950; Naftzger v. United States, 8 Cir., 200 F. 494. But the independent evidence, however, need not be of itself sufficient proof of guilt, but need only be a sufficient showing which together with the defendant's confession or admission establishes the crime beyond a reasonable doubt. Gulotta v. United States, supra; Gregg v. United States, supra; Naftzger v. United States, supra; Forte v. United States, 68 App.D.C. 111, 94 F.2d 236, 127 A.L.R. 1120; 20 Am.Jur., §§ 1230-1233. The corpus delicti may be proved by circumstantial evidence. 20 Am.Jur., § 1231; Perovich v. United States, 205 U.S. 86, 27 S. Ct. 456, 57 L. Ed. 722; St. Clair v. United States, 154 U.S. 134, 14 S. Ct. 1002, 38 L. Ed. 936. It is stated in Murray v. United States, 53 App.D.C. 119, 288 F. 1008, 1016, that:
"The corpus delicti, as relates to homicide, is composed of two elements: (a) The death of the person alleged to have been killed; (b) that some criminal agency caused such death. * * * Of course, both of these elements must be established beyond a reasonable doubt. When the jury find these established, the next inquiry is as to the identity of the criminal agency; and this, too, must be established beyond a reasonable doubt, but is properly no part of the corpus delicti."
In our judgment, this case correctly defines the constituent elements of corpus delicti. Wharton, however, gives a somewhat different definition.
"The corpus delicti in homicide consists of the criminal act and the resulting death, and the agency of the accused in its commission." Wharton, The Law of Homicide, 3rd Ed., § 587.
Accepting either of the above definitions, there was ample proof in the instant case of the body of the crime independent of the admissions of the appellant. The death of Hayes, of course, is undisputed, and the *466 medical testimony is very clear that it resulted from peritonitis activated by the wounds inflicted by the forcible insertion of some blunt instrument such as the broom handle in evidence seven or eight inches upward into his rectum. The use of the string by appellant and the falling of Hayes to the floor and his resultant unconsciousness is undisputed. After his injury, Hayes applied for medical assistance, at the time bearing marks of a bruise over his eye and lacerations about his neck, and holding a hand to his side and leaning up against a seat. This was indicative of some internal suffering. Early the next morning, a broom was found in the "sole room," and the handle of this broom appeared to have been freshly cleansed and sand papered, and parts of the broom were very wet. The handle of this broom was such character of an instrument as was capable of inflicting the wounds which caused the death of Hayes. The cleansing and sand papering, evidencing an attempted concealment of its brutal use, was a strong circumstance tending to establish that it was the instrument used to perpetrate the crime. Hayes was taken to the hospital early in the evening of the day of the assault. The surgical operation and the autopsy which followed definitely revealed the injuries to the rectum and sigmoid, and the character of these injuries was a circumstance of great weight. All of the above related facts were in evidence by other witnesses, entirely independent of any admission of the appellant. Hence, we conclude that there was sufficient evidence to establish the corpus delicti, even if the admissions of the appellant be wholly disregarded in that connection.
It is further contended that the evidence did not show malice and premeditation to warrant a verdict of guilty of murder in the first degree. It is stated in Wharton on The Law of Homicide, 3rd Ed., § 96, as follows: "If the act which produces death was attended with such circumstances as are the ordinary symptoms of a wicked, depraved, and malignant spirit, the law will imply malice without reference to what was passing in the mind of the slayer at the time of the fatal act."
The fact that cruelty or brutality is manifested in the killing will raise an inference of malice. 29 C.J. 1099, § 73. The length of time of premeditation is not material, and the circumstances of the act committed by the appellant show premeditation. Suhay v. United States, 10 Cir., 95 F.2d 890. Consequently, there is no merit in this contention of appellant.
Appellant urges error in the admission in evidence of the written statement of appellant made to Investigator Reed. From the record, it appears that the statement was made voluntarily and without duress or coercion. It was clearly admissible. Further, appellant says it was reversible error to permit the introduction in evidence of certain articles of demonstrative evidence, namely, the string used by appellant in causing the deceased to fall to the floor; the broom, and the viscera of deceased consisting of the sigmoid flexure or colon. As to the string and broom, 22 C.J.S., Criminal Law, p. 931, § 611, states the rule to be:
"Evidence is relevant to show that the accused owned, possessed, or had access to any articles with which the crime was or might have been committed."
It is true the broom was somewhat different in condition at the time of its introduction in evidence than when found in the "sole room" by the Penitentiary officials, but this difference existed only in change of coloring and that at the trial there was no dampness about the broom as would be naturally caused by the lapse of time. It was properly identified and had been in the custody of the Warden of the prison since it was found. Likewise the viscera was properly admissible to show the nature of the wounds inflicted on the deceased, and their locations. 22 C.J.S., Criminal Law, p. 1226, § 716 c; State v. Byrne, 60 Mont. 317, 199 P. 262; State v. Rodriguez, 23 N.M. 156, 167 P. 426, L. R.A.1918A, 1016; People v. Coltrin, 5 Cal. 2d 649, 55 P.2d 1161; State v. Sweet, 101 Kan. 746, 168 P. 1112.
It is also urged that the trial court erred in permitting Agent Reed, of the Federal Bureau of Investigation, to give evidence qualifying the written statement of appellant made to him. When this witness was first on the stand, he identified the statement and related that it was written after an oral statement had been made by appellant, and further said appellant told him that "he poked the man with a broomstick in an effort to bring him to; that the man was unconscious." Later, being recalled as a witness and after refreshing his memory from a report of his *467 investigation written the next day after the interview with appellant, Reed testified that appellant told him, referring to the broomstick, "I jabbed it up his" anus. Witness was testifying almost eleven months after he had taken the statements from appellant, during which period he had investigated many crimes. It was not to his discredit that he could not recall all the details of his interview with appellant without reference to written memoranda, and if the oral statements of appellant qualified the written statement, they were none the less competent, if voluntary, and the record shows nothing to indicate otherwise.
An assignment of error is argued that the court refused to admit testimony of the general reputation of the deceased as a moral pervert. The record shows that a Government witness was asked on cross-examination if the deceased did not have a reputation as a moral pervert. Obviously, this was not proper cross-examination. No attempt was made by the defense testimony to establish such a reputation for accused. We find no merit in this contention of appellant. His defense was that he did not commit the crime, and it is questionable if the reputation of deceased as a pervert was at all admissible, but if it was, it was a defensive matter.
Appellant also claims error in the admission of testimony to impeach one McIlvain, a witness for defendant, without sufficient foundation being laid therefor. In his direct examination this witness related certain acts which took place in the "sole room" and afterwards and also certain conversations with appellant. On cross-examination he was asked as to whether or not he told certain Penitentiary officers that appellant had made statements contrary to the statements related by witness in his direct examination. In rebuttal, the Government called these officers to testify that the witness had made different statements to them. 70 C.J. 799, 800. There was no error in this.
At the close of the instructions to the jury, the trial court inquired if the accused had any changes to suggest or any exceptions, and counsel for accused stated "The defendant suggests no changes." However, appellant invokes the rule that this court may notice a plain and serious error though unassigned, contending that the trial court failed to instruct on the presumption of innocence, and further that the instructions of the court submitted to the jury only the possibility of death having been caused by some person other than the deceased, and left no room for an inference that an act of the deceased himself could have caused his death. The rule as to unassigned error as stated by appellant is not questioned. However, as to the failure of the trial court to give an instruction as to the presumption of innocence, it is clearly the law that this is not error unless the accused specifically request such an instruction. Raffour v. United States, 9 Cir., 284 F. 720; Sylvia v. United States, 6 Cir., 264 F. 593. Compare the holdings of this court in Troutman v. United States, 10 Cir., 100 F.2d 628; Kitrell v. United States, 10 Cir., 79 F.2d 259; Hall v. United States, 10 Cir., 78 F.2d 168; Hoffman v. United States, 10 Cir., 68 F.2d 101; Aldridge v. United States, 10 Cir., 67 F.2d 956, and Addis v. United States, 10 Cir., 62 F.2d 329. Moreover, the trial court, as a part of the charge to the jury, instructed: "The burden of proof rests upon the Government to prove his guilt and not upon the defendant to prove his innocence." The cases of Cochran v. United States, 157 U.S. 286, 15 S. Ct. 628, 39 L. Ed. 704, and Coffin v. United States, 156 U.S. 432, 15 S. Ct. 394, 39 L. Ed. 481, relied upon by appellant are not in point, as in each of these cases there was a timely request for an instruction as to the presumption of innocence and a denial by the trial court of such request. We cannot agree with appellant that the instructions of the trial court eliminated from the consideration of the jury the possibility of suicide. That issue, of course, was not tendered as a defense, but the portion of the instruction complained of in this respect contained this language:
"For instance, in this case we have some evidence that the defendant stated to some of the officers that he used this broomstick, and on the other hand, you have his absolute denial that he did use the broomstick or any other blunt instrument, but you have the circumstance that (sic) testified here that the deceased, the dead man, suffered certain injuries that could not have been received except in a manner such as described; that it, some person or some instrument must have caused the injury." (The italics are ours.)
*468 There was no evidence pointing to suicide, but under the instruction given there was nothing to prevent the jury from considering the possibility of such. As destructive of appellant's argument on this point, it may also be remarked that there was no request for an instruction on the theory of self inflicted wounds. We conclude, therefore, there is no showing in the instructions of the trial court of any serious error, resulting in grave injustice to accused or in a clearly erroneous judgment, such as would warrant a reversal. Addis v. United States, supra.
It is further assigned as error that the trial court in considering a motion for a new trial which was overruled received evidence dehors the record in a report made to the court by a probation officer. On May 15, 1939 (three days after verdict) a motion for new trial was filed, and this was overruled by the trial court on June 28, 1939. On the same date, while appellant was before the court, and after statements were made by him, his counsel, and counsel for the Government, the court ordered sentence deferred pending an investigation by the probation officer. On July 3, 1939 a second motion for new trial was filed, which was overruled August 1, 1939, the day on which the report of the probation officer was filed. Apparently, the trial judge was simply following the common practice in Federal district courts of having cases investigated before pronouncing sentence in order that rights of the accused may be better safeguarded at the time of sentence. We perceive no error in this action of the trial court. Furthermore, ordinarily the action of the trial court in passing on a motion for new trial is not reviewable by the appellate court. Holmgren v. United States, 217 U.S. 509, 30 S. Ct. 588, 54 L. Ed. 861, 19 Ann.Cas. 778; Benetti v. United States, 9 Cir., 97 F.2d 263; Cooper v. United States, 4 Cir., 247 F. 45; Lewis v. United States, 8 Cir., 14 F.2d 111; Clark v. United States, 9 Cir., 245 F. 112.
We have before us a motion of appellant to remand this case to the trial court in order that a motion for a new trial on the ground of newly discovered evidence may be there entertained. By mandate of the Supreme Court in Evans v. United States, 311 U.S. 635, 61 S. Ct. 69, 85 L. Ed. ___; Id., 312 U.S. 651, 61 S. Ct. 548, 85 L. Ed. ___, we were directed to reconsider this motion when the transcript of the evidence should come before us. Hence it is timely and necessary that we now determine same. The motion is supported only by the affidavit of Harry Peck Murrey, made June 25, 1940, in the United States Penitentiary at Alcatraz Island, California, where at the time, both Murrey and appellant were confined as convicts. Affiant states he was an inmate of the Penitentiary at Leavenworth when the death of Hayes occurred, and that on the evening of the day of the alleged assault on Hayes, affiant went to the cell of Hayes to get some thread and borrow a guitar; that when he came to the cell, he saw Hayes seated upon a toilet abusing himself in the rectum with a toilet plunger; that Hayes fell off the toilet seat, and when he arose from the fall he was pale in the face and the plunger was still up his rectum; that Hayes then removed the stick from his rectum, remarking that he frequently did that to make his bowels move; that affiant said nothing about this incident prior to the trial because of fear of being isolated by prison officials, or otherwise punished. The appellee has presented an application for permission to file affidavits in opposition to the motion to remand, and has attached to the application the affidavits proposed for filing. The appellant has made written objection to the filing and consideration of these counter affidavits. We think the objections have no tenable ground, and the affidavits tendered by the Government should be filed. As stated in Wagner v. United States, 9 Cir., 118 F.2d 801, 802:
"Rule 2(3), Criminal Practice and Procedure 18 U.S.C.A. following section 688, provides for remanding to the trial court for its consideration of a motion for new trial in certain circumstances. We have no power to entertain a motion for a new trial, hence we consider only whether, in the exercise of our discretion, we should remand the case."
Concerning newly discovered evidence as a ground for new trial, it is said in 23 C.J.S. Criminal Law, p. 1253, § 1461, as follows: "Generally newly discovered evidence is not ground for a new trial unless it is credible and probably would change the result."
Johnson v. United States, 8 Cir., 32 F.2d 127, 130 enumerates the legal grounds for sustaining a motion for new trial as the *469 following: "There must ordinarily be present and concur five verities, to wit: (a) The evidence must be in fact, newly discovered, i. e., discovered since the trial; (b) facts must be alleged from which the court may infer diligence on the part of the movant; (c) the evidence relied on, must not be merely cumulative or impeaching; (d) it must be material to the issues involved; and (e) it must be such, and of such nature, as that, on a new trial, the newly discovered evidence would probably produce an acquittal. 12 Cyc. 734, and cases cited."
Judge Parker, of the Fourth Circuit, referring to a similar situation, in Isgrig v. United States, 109 F.2d 131, 134, as to the duty of the court, says: "The case will be remanded, however, only if showing is made to the appellate court that the lower court would be justified in granting the new trial. Cf. Horne v. United States, 4 Cir., 51 F.2d 66, 67."
Considering the affidavit of Murrey alone, and without reference to the counter affidavits presented by the Government, in view of the above authorities we are of the opinion that the lower court would not be justified in granting a new trial on Murrey's testimony should it be of the nature disclosed by his affidavit. His statement is of very doubtful credibility. He was a fellow prisoner with appellant at Leavenworth and again at Alcatraz and did not disclose his information to appellant until March 1, 1940. The statement has too much of the appearance of a last effort scheme evolved by himself and appellant in order that appellant may escape punishment for his crime, and is certainly not of that character of testimony which, if placed in evidence on a new trial, would probably produce an acquittal. See Goodman v. United States, 3 Cir., 97 F.2d 197.
The unusual circumstances of this case, as well as the gravity of the crime charged and the punishment imposed, have commanded a careful scrutiny of the record and a close study of the legal points involved, as to both the motion to remand and the appeal proper. From such consideration, we conclude the appellant has had a fair and impartial trial, without prejudicial error committed, and there is no sound reason for either sustaining the motion to remand or reversing the cause.
Accordingly, the motion to remand is denied, and the case is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542192/ | 947 A.2d 913 (2008)
287 Conn. 183
ROYAL INDEMNITY COMPANY
v.
TERRA FIRMA, INC., et al.
Nos. 17873, 17874.
Supreme Court of Connecticut.
Argued March 10, 2008.
Decided June 3, 2008.
Celeste M. Butera, pro hac vice, with whom were Pia E. Riverso, pro hac vice, and, on the brief, Thomas C. Clark and Melicent B. Thompson, Avon, for the appellant in Docket No. 17873 (plaintiff).
Frank H. Santoro, with whom, on the brief, were R. Cornelius Danaher and Calum B. Anderson, Hartford, for the appellant in Docket No. 17874 (third party defendant United States Fire Insurance Company).
Michael S. Taylor, with whom were Wesley W. Horton and, on the brief, Eliot B. Gersten, Hartford, S. Dwight Stephens, pro hac vice, and Robert N. Reed, certified legal intern, for the appellee (defendant Konover Construction Corporation).
David P. Condon, New London, for the appellee (named defendant).
ROGERS, C.J., and NORCOTT, KATZ, PALMER and ZARELLA, Js.
PER CURIAM.
The plaintiff, Royal Indemnity Company (Royal Indemnity), brought this action against the defendants, Terra Firma, Inc. (Terra Firma),[1] and Konover Construction Corporation (Konover), seeking a judgment declaring that it was not obligated to defend or indemnify Konover for liability arising out of Konover's own negligence under an insurance policy (Royal Indemnity policy) that it had issued to Terra Firma. Thereafter, Konover filed a counterclaim against Royal Indemnity seeking, a judgment declaring that Royal Indemnity was obligated to defend and indemnify it.[2] Konover also filed a *914 third party complaint against the third party defendant, United States Fire Insurance Company (United States Fire), seeking a judgment declaring that United States Fire had a duty to defend and indemnify Konover when the limits of the Royal Indemnity policy were exhausted under an insurance policy (United States Fire policy) that United States Fire had issued to Terra Firma.[3] Konover subsequently filed a motion for partial summary judgment, claiming that it was entitled to coverage under the Royal Indemnity policy and the United States Fire policy as a matter of law.[4] Royal Indemnity then filed a cross motion for partial summary judgment and an opposition to Konover's motion for partial summary judgment, claiming that, as a matter of law, it was not obligated to defend or indemnify Konover for liability arising out of Konover's work. United States Fire also filed a motion for summary judgment, claiming that it was entitled to judgment as a matter of law because Konover was not an insured under the United States Fire policy. The trial court rendered partial summary judgment for Konover on its counterclaim against Royal Indemnity and on its third party complaint against United States Fire, and denied the motions for summary judgment filed by Royal Indemnity and United States Fire. Royal Indemnity and United States Fire then filed these separate appeals,[5] claiming that the trial court improperly rendered partial summary judgment in Konover's favor. We affirm the judgment of the trial court.
The trial court's memorandum of decision sets forth the following facts and procedural history. "On September 30, 1998, Konover, the general contractor for construction of a BJ's Wholesale Club in Willimantic, entered into a subcontract with [Terra Firma] under which [Terra Firma] was to perform site work including excavation. Two clauses of that contract are germane to the resolution of the current dispute. An indemnification and hold harmless clause provided that [Terra Firma] would indemnify Konover and hold it harmless for damages caused in whole or in part by the negligence of [Terra Firma]. A separate clause required [Terra Firma] to procure, inter alia, general liability insurance in the amount of not less than one million dollars and to name Konover as an additional insured. [Terra Firma] obtained such insurance in the amount of one million dollars per occurrence and two million dollars total from [Royal Indemnity] and excess insurance from [United States Fire]." Royal Indemnity Co. v. Terra Firma, Inc., 50 Conn. Super. Ct. 563, 564-65, ___ A.2d ___ (2006). The policies defined an "`insured'" as any person named as an insured under the policies, "`but only with respect to liability arising out of . . . "[Terra Firma's] work". . . .'" Id., at 569, ___ A.2d ___.
"On October 30, 1999, during the effective dates of the Royal Indemnity and United States Fire policies, two employees of [Terra Firma], Richard Archambault and Dubie Sowell, were injured on the job. They subsequently brought personal injury *915 actions against [Terra Firma] and Konover. Archambault alleged in his complaint that Konover was negligent because, inter alia, it: failed to provide `cave-in' protection; failed to ensure safe working conditions in breach of its nondelegable duty; failed to inspect the work site properly; failed to supervise independent contractors and their employees properly; and failed to enforce compliance with applicable regulations. Sowell's allegations were substantially similar.
"Both Sowell and Archambault included claims against [Terra Firma]. Summary judgment was granted in favor of [Terra Firma] in both actions in 2001, on the ground that there was no evidence of any intentional conduct or knowledge by the employer that injuries were `substantially certain' to occur. Workers' compensation was, then, the exclusive remedy available to the employees with respect to [Terra Firma].
"The cases against Konover were consolidated and wended their way toward trial. Shortly before trial, counsel for Sowell and Archambault submitted a motion in limine seeking to exclude evidence of negligence on the part of [Terra Firma]. Relying primarily on Durniak v. August Winter & Sons, Inc., 222 Conn. 775, 776-77, 610 A.2d 1277 (1992), the trial court excluded evidence of [Terra Firma's] negligence. The court did, however, allow evidence of the conduct of [Terra Firma] and its duties and obligations. After receiving notice of this ruling, but during trial of the case, Royal Indemnity disclaimed both the duty to indemnify and the duty to defend, claiming that, because Sowell and Archambault could recover only as to negligence on the part of Konover, Konover could not be an additional insured under the terms of the policy. Despite the disclaimer, defense counsel provided by Royal Indemnity continued to represent Konover. United States Fire, the excess carrier, apparently adopted the same position as Royal Indemnity.
"The trial judge submitted the case to the jury on the theory that Konover had a nondelegable duty to provide a reasonably safe workplace and recited essentially the allegations of negligence recited previously in reference to the claims of Sowell and Archambault. The jury returned verdicts in favor of Archambault in the amount of $3,450,000 and in favor of Sowell in the amount of $2,833,000. The underlying cases are currently being appealed." Royal Indemnity Co. v. Terra Firma, Inc., supra, 50 Conn.Supp. at 565-66, ___ A.2d ___..
As previously set forth, Royal Indemnity brought this action against Terra Firma and Konover seeking a judgment declaring that it was not obligated to defend and indemnify Konover in the underlying actions. Konover then filed a counterclaim against Royal Indemnity and impleaded United States Fire, alleging that the insurance companies were obligated to defend and indemnify it. The parties filed cross motions for summary judgment and the trial court rendered partial summary judgment in favor of Konover on its counterclaim against Royal Indemnity and on its third party complaint against United States Fire. The trial court concluded that the insurance companies had a duty to defend and indemnify Konover because Konover's liability in the underlying actions arose out of Terra Firma's work and, therefore, Konover was an insured under the policies. Thereafter, Royal Indemnity filed and the trial court granted a motion pursuant to Practice Book § 61-4[6] for *916 written determination that the issues resolved by the judgment were of such significance to the determination of the outcome of the case that the delay incident to the appeal would be justified. The Chief Judge of the Appellate Court subsequently granted permission to file these interlocutory appeals.
Our examination of the record on appeal, and the briefs and arguments of the parties, persuades us that the judgment of the trial court should be affirmed. Because the trial court's memorandum of decision fully addresses the arguments raised in the present appeal, we adopt the trial court's concise and well reasoned decision as a statement of the facts and the applicable law on these issues. See Royal Indemnity Co. v. Terra Firma, Inc., supra, 50 Conn.Supp. at 563, ___ A.2d ___. It would serve no useful purpose for us to repeat the discussion therein contained. See, e.g., Lagassey v. State, 281 Conn. 1, 5, 914 A.2d 509 (2007); Cashman v. Tolland, 276 Conn. 12, 16, 882 A.2d 1236 (2005).
The judgment is affirmed.
NOTES
[1] We note that Terra Firma formerly was known as Soneco/Northeastern, Inc., and was referred to as such in the trial court opinion.
[2] Konover also alleged equitable estoppel, bad faith, and violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq., and the Connecticut Unfair Insurance Practices Act, General Statutes § 38a-815 et seq.
[3] Konover also alleged equitable estoppel.
[4] Konover did not seek summary judgment with respect to its counter-claims against Royal Indemnity alleging equitable estoppel, bad faith and violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act, or its claims against United States Fire alleging equitable estoppel. See footnotes 2 and 3 of this opinion.
[5] Royal Indemnity and United States Fire appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeals to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1.
[6] Practice Book § 61-4(a) provides in relevant part: "This section applies to a trial court judgment that disposes of at least one cause of action where the judgment does not dispose of either of the following: (1) an entire complaint, counterclaim, or cross complaint, or (2) all the causes of action in a complaint, counterclaim or cross complaint brought by or against a party. . . .
"When the trial court renders a judgment to which this section applies, such judgment shall not ordinarily constitute an appealable final judgment. Such a judgment shall be considered an appealable final judgment only if the trial court makes a written determination that the issues resolved by the judgment are of such significance to the determination of the outcome of the case that the delay incident to the appeal would be justified, and the chief justice or chief judge of the court having appellate jurisdiction concurs. . . ." (Emphasis in original.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542198/ | 947 A.2d 404 (2008)
108 Conn.App. 192
Charles SPELLS
v.
COMMISSIONER OF CORRECTION.
No. 28278.
Appellate Court of Connecticut.
Argued March 13, 2008.
Decided June 3, 2008.
*405 James M. Fox, special public defender, for the appellant (petitioner).
Robin S. Schwartz, assistant state's attorney, with whom, on the brief, were John A. Connelly, state's attorney, and John J. Davenport, senior assistant state's attorney, for the appellee (respondent).
LAVINE, BEACH and PETERS, Js.
LAVINE, J.
The petitioner, Charles Spells, appeals from the judgment of the habeas court denying his petition for a writ of habeas corpus. On appeal, he claims that the court improperly concluded that his trial counsel did not render ineffective assistance by failing (1) to seek the recusal of the trial court and (2) to test certain hair samples in time to offer the results as evidence. We affirm the judgment of the habeas court.
The relevant facts are set forth in this court's decision affirming the petitioner's conviction on direct appeal. See State v. Spells, 76 Conn.App. 67, 818 A.2d 808, cert. denied, 266 Conn. 901, 832 A.2d 67 (2003). On October 20, 2000, the petitioner and an accomplice, James Butler, held up a convenience store in Waterbury. Both men were armed and wore masks. They took $400 from the cash register, robbed and assaulted a customer and drove away in the vehicle of another customer. Id., at 70, 818 A.2d 808. The police later found that vehicle in a nearby parking lot. Id. Inside it was a black neoprene mask containing several strands of hair. On October 24, 2000, the police received a telephone call that led them to consider the petitioner a suspect in the case. Id. When questioned by the police, the petitioner confessed to the crime and implicated Butler as his accomplice. Id., at 70-71, 818 A.2d 808. In his statement, the petitioner provided specific details of the crime, including where the vehicle taken from the store had been abandoned and the fact that the keys had been thrown into a wooded area behind the vehicle. Id., at 71, 818 A.2d 808. In the petitioner's apartment, the police found several black masks, one of which was identified by a witness as being similar to the mask worn by one of the men who had robbed the convenience store. Id. On October 30, 2000, Butler was arrested. He subsequently confessed to the crime and implicated the petitioner. Id., at 71 n. 1, 818 A.2d 808.
At trial, the petitioner, who was represented by attorney Louis S. Avitabile, asserted that his statement to the police was fabricated and that he was innocent. On May 25, 2001, he was convicted of three counts of robbery in the first degree in violation of General Statutes § 53a-134(a)(4) and one count of conspiracy to commit robbery in the first degree in violation of General Statutes §§ 53a-48 and 53a-134(a)(4). After the verdict was announced, the petitioner became physically aggressive, pushing over a chair that hit one of the courtroom marshals. When the marshals were unable to subdue the petitioner, Judge O'Keefe, who was presiding, left the bench and held the petitioner down so that the marshals could handcuff him.
*406 On July 30, 2001, as the prosecutor was addressing the court with the state's sentencing recommendations, the petitioner spat on the prosecutor. After the petitioner was removed from the courtroom, the trial court made the following statements. "I feel very badly for the [prosecutor], who is a dedicated, hardworking public servant, just trying to do his job, and he does it well, trying to protect law-abiding citizens from people like [the petitioner]. And to have to put up with this is disturbing." The court sentenced the petitioner to a total effective term of forty-five years in prison. Thereafter, this court affirmed the conviction on appeal. After the Supreme Court denied certification to appeal, the petitioner filed a petition for a writ of habeas corpus, in which he alleged that Avitabile provided ineffective assistance of counsel. An evidentiary hearing was held on May 25, 2006. On October 31, 2006, the habeas court denied the habeas petition in a written memorandum of decision, concluding that the petitioner failed to meet his burden of proving that counsel's performance was deficient and that he suffered prejudice. On November 8, 2006, the court granted the petitioner certification to appeal to this court. This appeal followed.
We first set forth the standard of review applicable to our analysis of the petitioner's claims. "Our standard of review of a habeas court's judgment on ineffective assistance of counsel claims is well settled. In a habeas appeal, this court cannot disturb the underlying facts found by the habeas court unless they are clearly erroneous, but our review of whether the facts as found by the habeas court constituted a violation of the petitioner's constitutional right to effective assistance of counsel is plenary. . . .
"In Strickland v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984), the United States Supreme Court established that for a petitioner to prevail on a claim of ineffective assistance of counsel, he must show that counsel's assistance was so defective as to require reversal of [the] conviction. . . . That requires the petitioner to show (1) that counsel's performance was deficient and (2) that the deficient performance prejudiced the defense. . . . Unless a [petitioner] makes both showings, it cannot be said that the conviction . . . resulted from a breakdown in the adversary process that renders the result unreliable. . . .
"The first component, generally referred to as the performance prong, requires that the petitioner show that counsel's representation fell below an objective standard of reasonableness. . . . Because of the difficulties inherent in making the evaluation, a court must indulge a strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance; that is, the [petitioner] must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. . . . [C]ounsel is strongly presumed to have rendered adequate assistance and made all significant decisions in the exercise of reasonable professional judgment. . . .
"The second part of the Strickland analysis requires more than a showing that the errors made by counsel may have had some effect on the outcome of the proceeding. . . . Rather, [the petitioner] must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. . . . When a [petitioner] challenges a conviction, the question is whether there is a reasonable probability that, absent the errors, the factfinder would have had a reasonable doubt respecting guilt.
*407 "Because both prongs [of Strickland] must be established for a habeas petitioner to prevail, a court may dismiss a petitioner's claim if he fails to meet either prong. . . . Accordingly, a court need not determine the deficiency of counsel's performance if consideration of the prejudice prong will be dispositive of the ineffectiveness claim." (Citations omitted; internal quotation marks omitted.) Crocker v. Commissioner of Correction, 101 Conn. App. 133, 136-37, 921 A.2d 128, cert. denied, 283 Conn. 905, 927 A.2d 916 (2007).
I
The petitioner first claims that the court improperly failed to find that Avitabile rendered ineffective assistance for failing to seek the recusal of the trial judge. Specifically, the petitioner asserts that recusal of the judge was warranted, pursuant to canon 3(c) of the Code of Judicial Conduct[1] because a reasonable person would question the impartiality of a judge who physically restrained a defendant and made sympathetic remarks to a prosecutor. We do not agree.
At the habeas trial, Avitabile testified that because Judge O'Keefe had a reputation for being fair and had not disciplined the petitioner for the courtroom disturbances, he believed that it would be best for his client not to request a disqualification or recusal. The habeas court concluded that Avitabile had acted reasonably. It stated: "Once the normal decorum surrounding court proceedings was again established, Judge O'Keefe continued to preside over the petitioner's matter in what can only be described as an unbiased manner. . . . The petitioner here has not presented any evidence that shows a reasonable person would call into question Judge O'Keefe's impartiality."
We agree with the court that because Avitabile's representation of the petitioner comported with an objective standard of reasonableness, the petitioner has failed to satisfy the first prong of Strickland. To satisfy this prong, the petitioner would have to demonstrate that Avitabile's performance was "not reasonably competent or within the range of competence displayed by lawyers with ordinary training and skill in the criminal law. . . ." (Internal quotation marks omitted.) Lewis v. Commissioner of Correction, 89 Conn.App. 850, 855, 877 A.2d 11, cert. denied, 275 Conn. 905, 882 A.2d 672 (2005). The petitioner has made no such showing.
The petitioner has not demonstrated that a lawyer in Avitabile's position would have any reason to doubt the trial court's fairness. Avitabile testified at the habeas trial that he considered it favorable to the petitioner's interests that the court did not hold the petitioner in contempt after he caused the courtroom disturbance. The court likewise opined: "If anything, the outburst perversely benefited the petitioner."[2] (Emphasis in original.) Additionally, *408 the court described itself as "hard-pressed to see how any attorney could render deficient performance by failing to request recusal" in this case, given this court's conclusion on appeal that the judge had no duty to recuse himself. (Emphasis in original.)
We concur with the court's conclusion that Avitabile's decision not to seek disqualification of a judge reputed to be a fair jurist was a sound trial strategy. "To satisfy the first prong of Strickland, the petitioner must . . . overcome the presumption that alleged ineffective assistance was not the result of sound trial strategy." (Internal quotation marks omitted.) Beverly v. Commissioner of Correction, 101 Conn.App. 248, 252, 922 A.2d 178, cert. denied, 283 Conn. 907, 927 A.2d 916 (2007). The petitioner's first claim thus fails under the first prong of Strickland.[3]
II
The petitioner additionally claims that the court improperly failed to conclude that Avitabile rendered ineffective assistance by not proffering certain hair sample test results as evidence at trial. According to the petitioner, Avitabile's failure to present these results constituted ineffective assistance because it deprived him of an adequate defense. We do not agree.
The following additional facts are relevant to our resolution of the petitioner's claim. It was Avitabile's trial strategy to cast doubt on the reliability of the petitioner's confession, which he asserted was coerced, by emphasizing the lack of physical evidence tying the petitioner or his alleged accomplice to the crime. To do this, Avitabile planned to use the results of a hair analysis test conducted by the state, which he believed would establish that neither the petitioner nor his alleged accomplice, Butler, was the source of the hair recovered from the mask found in the car.
On the eve of the trial, however, the state informed Avitabile that the hair samples from the mask and from the petitioner had not been sent to the laboratory for analysis. Avitabile immediately requested a continuance so that the analysis could be completed before trial. The court denied the continuance but ordered the state to compare the hair of the petitioner to that found in the mask. The results of that analysis, which were submitted to the jury, excluded the petitioner as a possible source of the mask hair. The results of a subsequent analysis comparing Butler's hair to the hair found in the mask, which were not submitted to the jury, indicated that Butler's hair and the hair found in the mask were dissimilar. State v. Spells, supra, 76 Conn.App. at 74, 818 A.2d 808.
The court concluded that the petitioner failed to demonstrate, pursuant to the second prong of Strickland, that he was prejudiced by Avitabile's failure to submit the test results comparing Butler's hair to the hair from the mask as evidence at trial. We agree with the court. The petitioner did not show that there was a reasonable probability that, but for Avitabile's failure to present these test results, the outcome of his trial would have been different. The *409 absence of test results did not impede the petitioner from presenting his theory that there was no scientific evidence linking him or Butler to the crime. See State v. Brown, 242 Conn. 445, 461, 700 A.2d 1089 (1997).[4] Moreover, a different result was not probable in light of the evidence presented by the state. The jury reasonably could have relied on the petitioner's detailed confession, Butler's corroborating statement and other witness statements to find the petitioner guilty beyond a reasonable doubt.
We conclude that the court properly determined that the petitioner failed to demonstrate, pursuant to the second prong of Strickland, that he was prejudiced by Avitabile's failure to proffer the test results at issue as evidence at trial. The petitioner's second claim thus fails.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] Canon 3(c)(1) of the Code of Judicial Conduct provides in relevant part: "A judge should disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned, including but not limited to instances where: (A) the judge has a personal bias or prejudice concerning a party. . . ." We reject the petitioner's suggestion that the judge violated this canon. As this court stated in its decision on the petitioner's direct appeal: "We conclude, therefore, that there was no reason for the judge to recuse himself for having made a statement on the record in recognition of the difficult tasks performed by the judicial marshals and the prosecutor in the face of the [petitioner's] disruptive behavior." State v. Spells, supra, 76 Conn.App. at 85, 818 A.2d 808.
[2] Due to concerns that the jury might have overheard the petitioner's outburst, the state opted to withdraw its part B information. The part B information would have exposed the petitioner to a considerably longer sentence.
[3] The petitioner makes the additional related claim that Avitabile's failure to preserve the issue of the judge's recusal for appellate review amounted to ineffective assistance of counsel. Because we agree with the court that Avitabile's tactics and strategy were consistent with the raised defense of actual innocence, we conclude that the petitioner's claim of ineffective assistance of counsel for failure to preserve appellate issues likewise fails under the first prong of Strickland.
[4] Additionally, the petitioner's failure to provide the court with trial transcripts prevented the court from examining the petitioner's claim in light of the evidence actually presented to the jury. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542321/ | 122 F.2d 213 (1941)
BULLOCK
v.
UNITED STATES.
No. 7634.
United States Court of Appeals for the District of Columbia.
Argued April 7, 1941.
Decided June 30, 1941.
Eli Grubic and T. Emmett McKenzie, both of Washington, D. C., for appellant.
Dennis McCarthy, of Washington, D. C. (E. M. Curran, Charles Murray, and Arthur McLaughlin, all of Washington, D. C., on the brief), for appellee.
Before GRONER, Chief Justice, and VINSON and EDGERTON, Associate Justices.
EDGERTON, Associate Justice.
This appeal is from a conviction of murder in the first degree. The trial judge instructed the jury that, though "deliberate and premeditated malice"[1] involves turning over in the mind an intention to kill, "it does not take any appreciable length of time to turn a thought of that kind over in your mind." In 1931, this court said as much.[2] But in 1937 we approved the opposite rule, that "some appreciable time must elapse."[3] We adhere to the latter rule. To speak of premeditation and deliberation which are instantaneous, or which take no appreciable time, is a *214 contradiction in terms. It deprives the statutory requirement of all meaning and destroys the statutory distinction between first and second degree murder. At common law there were no degrees of murder. If the accused had no overwhelming provocation to kill, he was equally guilty whether he carried out his murderous intent at once or after mature reflection. Statutes like ours, which distinguish deliberate and premeditated murder from other murder, reflect a belief that one who meditates an intent to kill and then deliberately executes it is more dangerous, more culpable or less capable of reformation than one who kills on sudden impulse; or that the prospect of the death penalty is more likely to deter men from deliberate than from impulsive murder. The deliberate killer is guilty of first degree murder; the impulsive killer is not. The quoted part of the charge was therefore erroneous. The majority of the court think, however, that it was sufficiently corrected by a later charge which in effect contradicted it.[4]
But we all think the evidence insufficient to show that the killing was deliberate and premeditated. When the victim, a police officer, came on the scene, appellant was engaged in a drunken quarrel with another person and had a loaded revolver in his hand. There is no sufficient evidence that appellant was facing in the officer's direction, or knew of his presence, until he spoke. The officer asked "What's the trouble around here?" or "What's all this racket about?" The prosecutor, in his opening statement to the jury, conceded that "as soon as the officer spoke, defendant shot him." Shortly before the close of the trial the court said: "The way it impresses me from the evidence is that the officer was right on top of them, and almost momentarily the man pulled the revolver and shot him." In denying a motion for a new trial the court said: "My view is that the defendant did not realize a police officer was nearby until the officer called out the question `What's the trouble around here?' and that it was a matter only of a second or two before the defendant fired the two shots in rapid succession which resulted in the death of the police officer." The evidence overwhelmingly supports these statements of the prosecutor and the judge. Accordingly it does not support a conviction of first degree murder. There is nothing deliberate and premeditated about a killing which is done within a second or two after the accused first thinks of doing it; or, as we think the evidence shows, instantaneously, as appellant, interrupted in his quarrel, turned and fired. Appellant's motion for a directed verdict in respect to first degree murder should have been granted.
After the killing, appellant escaped. He was indicted in 1932, when the crime was committed, but was not arrested until 1939. On April 29, 1939, District police officers brought him from New Jersey to the District and took him to police headquarters. They arrived about 6:30 p. m. About 10 p. m., they took him to a police station for the night. From 1 p. m. to 2 p. m., on April 30, he was in the homicide squad room at headquarters. He was then taken to Northeast Washington to search for the gun. About 7:30 p. m. he was brought back to headquarters. During the afternoon policemen questioned him at length. One of them testified: "We would ask him, and then asked him over again, and over and over and over several times. We questioned him along the line." According to the officers, he made oral confessions. An alleged written confession, which defendant signed, was typed by a police officer, beginning about 8 p. m. and ending about midnight on April 30. This alleged confession was read to the jury, with an instruction *215 to disregard it unless they found, beyond a reasonable doubt, that it was not obtained by force, threats, or promises.
Appellant is an illiterate Negro. He testified that policemen kicked and beat him to compel him to sign the confession; that this made him dizzy and almost blind; that he thought they would kill him if he did not sign; and that the jail physician gave him salve and bandage for his injuries, and tablets for the pain in his head. Appellant's account included circumstantial details such as bleeding from the nose and mouth, and washing away the blood over a sink at headquarters. He testified that he was well treated after he was transferred to the jail. The jail physician testified that on May 2 he gave defendant ointment, gauze, and adhesive for wounds caused by an "abrasive influence," and that either on that day or the next he "gave sedative drugs to alleviate defendant's severe headache." The police denied all violence.
By the Fifth Amendment, "No person * * * shall be compelled in any criminal case to be a witness against himself." This forbids the use of extorted confessions.[5] The Code of Criminal Procedure requires an arresting officer "to take the defendant before the nearest United States commissioner or the nearest judicial officer having jurisdiction under existing laws for a hearing, commitment, or taking bail for trial."[6] This duty must be discharged without unnecessary delay.[7] Appellant's detention for more than 36 hours without hearing or commitment, which would ordinarily have been unlawful, was perhaps excused by the fact that it occurred on Saturday night and Sunday. The fact that appellant was subjected during his long detention to persistent and repeated questioning,[8] his testimony that the police used violence, the physician's corroborative testimony, and the fact that the murdered man was a policeman, make it appear probable that violence was used. Yet we cannot say that no reasonable man, seeing the witnesses, could find the contrary. Even if there was no violence, it does not follow that the confession was voluntary. In cases decided since appellant's trial, the Supreme Court has condemned the practice of extorting confessions from poor and ignorant men by persistent and repeated questioning, and has ruled that "no such practice * * * shall send any accused to his death."[9] Though the questioning to which the defendant was concededly subjected in this case was less extensive than in the cases just cited, it was obviously improper. Whether it was extensive enough to violate the defendant's constitutional rights we need not decide on this appeal, as we are reversing the conviction on another ground.
Reversed.
NOTES
[1] D.C.Code, Tit. 6, § 21.
[2] "Deliberation and premeditation may be instantaneous." Aldridge v. United States, 60 App.D.C. 45, 46, 47 F.2d 407, 408, reversed on other grounds, 283 U.S. 308, 51 S. Ct. 470, 75 L. Ed. 1054, 73 A.L.R. 1203. The point was not involved in the case, since the jury were charged that "there must be an appreciable time * * *."
[3] Bostic v. United States, 68 App.D.C. 167, 170, 171, 94 F.2d 636, 639, 640, certiorari denied, 303 U.S. 635, 58 S. Ct. 523, 82 L. Ed. 1095; People v. Guadagnino, 233 N.Y. 344, 135 N.E. 594, 597; State v. Arata, 56 Wash. 185, 105 P. 227, 21 Ann.Cas. 242. Contra, People v. Donnelly, 190 Cal. 57, 210 P. 523; State v. Russo, 1 Boyce, Del., 538, 77 A. 743; State v. Daniel, 139 N.C. 549, 51 S.E. 858; Commonwealth v. Daynarowicz, 275 Pa. 235, 119 A. 77; Perugi v. State, 104 Wis. 230, 80 N.W. 593, 76 Am. St. Rep. 865.
Statements like that in the Bostic case, 68 App.D.C. 167, 169, 94 F.2d 636, 638, that "no particular length of time is necessary for deliberation," are consistent with the rule that some appreciable length of time is necessary.
[4] "Deliberation is the turning over in one's mind of a thought or intention, a consideration and reflection upon the intention or design. Now, that means, in short, that if a party forms a purpose to kill and immediately kills the party whom he purposes to kill, without giving it any thought whatever or turning it over in his mind after he has conceived the thought, he is not guilty of first degree murder. If he purposes to kill him, turns it over in his mind, gives it what you might call a second thought he might consider the consequences, he might consider whether he should do it or not if he gives it any consideration by way of turning that thought over in his mind, then that is the element of deliberation. Sometimes it might take some time to deliberate; other times, you would deliberate rapidly. The turning over in one's mind might be rapid in a given case, and might be slow; but in every case of first degree murder you must have both a purpose to kill and, after that purpose and intent is formed, you must have a turning over of it in your mind to some extent, even though it might be brief."
[5] Bram v. United States, 168 U.S. 532, 542, 18 S. Ct. 183, 42 L. Ed. 568.
[6] U.S.C.A. Tit. 18, § 595.
[7] Janus v. United States, 9 Cir., 38 F.2d 431, 438; United States v. Ebbs, D.C. W.D.N.C., 10 F. 369, 375.
[8] Cf. People v. Alex, 265 N.Y. 192, 192 N.E. 289, 94 A.L.R. 1033.
[9] Chambers v. Florida, 309 U.S. 227, 241, 60 S. Ct. 472, 479, 84 L. Ed. 716; White v. Texas, 310 U.S. 530, 533, 60 S. Ct. 1032, 84 L. Ed. 1342. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542320/ | 947 A.2d 1191 (2008)
Charlene McCAMEY, Petitioner,
v.
DISTRICT OF COLUMBIA DEPARTMENT OF EMPLOYMENT SERVICES, Respondent.
No. 04-AA-211.
District of Columbia Court of Appeals.
Argued en banc November 30, 2006.
Decided May 15, 2008.
*1194 Julie V. Abizaid, with whom David L. Elkind was on the brief, for petitioner.
Todd S. Kim, Solicitor General for the District of Columbia, with whom Robert J. Spagnoletti, Attorney General for the District of Columbia at the time the brief was filed, Edward E. Schwab, Deputy Solicitor General at the time the brief was filed, and Sheila Kaplan, Assistant Attorney General, were on the brief, for respondent.
Before WASHINGTON, Chief Judge, and FARRELL, RUIZ, REID, GLICKMAN, KRAMER, FISHER, BLACKBURNE-RIGSBY, and THOMPSON, Associate Judges.
WASHINGTON, Chief Judge:
Charlene McCamey petitioned this court to review a decision of the Director of the District of Columbia Department of Employment Services (D.C.DOES) that denied her workers' compensation claim for psychological injuries she alleges resulted from an accidental physical injury suffered in the course of her employment. A three-judge division of this court affirmed the Director's decision, holding that the Director's application of an objective test to workers' compensation claims involving psychological injuries was consistent with this court's prior decisions. We granted Ms. McCamey's petition for rehearing en banc to consider whether application of an objective standard, as currently defined, to psychological injuries that are related to work-related physical injuries is consistent with the language and purpose of our workers' compensation law. We conclude that it is not and accordingly must reverse.
I.
Ms. McCamey was employed by the District of Columbia Public Schools (DCPS) as a visiting instructor for homebound students. On September 29, 2000, while on the job, Ms. McCamey suffered injuries to her forehead, lower back and neck when she fell as a result of the collapse of a table that she and another instructor were moving. The Administrative Law Judge (ALJ) who heard her case found that as a result of the fall, Ms. McCamey suffered frequent, extensive, and excruciating headaches. In addition, following the accident, McCamey was afflicted with "depression, panic attacks, confusion, auditory hallucinations, and memory loss."
The foregoing events, however, occurred in the context of a serious pre-existing psychological illness. During the mid-1990s, several years prior to the accident, Ms. McCamey had begun to experience psychological problems attributable in substantial part to the death of her father, who had spent most of his life in a mental hospital.[1] Ms. McCamey was treated by a *1195 psychiatrist, Dr. Maria C. Hammill, and subsequently returned to work. It is undisputed that after completing her treatment regimen, Ms. McCamey was capable of performing her regular employment duties without incident. Indeed, the ALJ found that Ms. McCamey had not seen Dr. Hammill for several years prior to the workplace accident.
At issue in this case is Ms. McCamey's claim for temporary total disability benefits arising from the psychological injuries that she attributes to her workplace accident. Dr. Hammill, the treating psychiatrist, was of the opinion that the workplace incident exacerbated Ms. McCamey's pre-existing psychological disorder. Dr. Bruce Smoller, a psychiatrist who examined Ms. McCamey on behalf of DCPS, and who relied in part on an MRI scan of Ms. McCamey's brain and on thyroid tests, opined that the source of Ms. McCamey's psychological injury was not her accident, but rather a pre-existing psychosis. In a "Recommended Compensation Order" entered on April 22, 2003, the ALJ denied Ms. McCamey's claim for psychological injury. Applying to the record before him the Director's analysis in Dailey v. 3M Co. & Northwest Nat'l Ins. Co., H & AS No. 85-259 (May 19, 1988), and this court's decision in Porter v. District of Columbia Dep't of Employment Servs., 625 A.2d 886 (D.C.1993), the ALJ found
1. that "claimant herein has presented substantial evidence of a cognizable injury";
2. that Ms. McCamey's "stressors," i.e., the aggravation of her pre-existing psychological condition, "did arise in the course of her employment,"[2] but
3. that Ms. McCamey failed to satisfy the "objective" standard approved in Porter, i.e., that a person of normal sensibilities with no history of mental illness would have suffered a similar psychological injury.
Ms. McCamey appealed to the Director of D.C. DOES. On February 10, 2004, the Director affirmed the ALJ's decision. The Director found, as had the ALJ, that "Claimant's pre-existing condition was exacerbated by a physical injury." Nevertheless, the Director upheld the denial of compensation, reasoning that although Dr. Hammill and Dr. Smoller expressed different opinions, "[n]either opined, and the evidence did not show, that an individual who did not have a pre-existing anxiety disorder would have suffered a psychological injury as a result of trauma to the head."
Ms. McCamey filed a timely petition for review of the Director's decision. A three-judge panel of this court affirmed, holding that while Ms. McCamey's position was not "implausible in principle," it was nevertheless foreclosed due to the court's decisions in Porter, supra, 625 A.2d at 888-89, and Landesberg v. District of Columbia Dep't of Employment Servs., 794 A.2d 607, 614-15 (D.C.2002). See McCamey v. District of Columbia Dep't of Employment Servs., 886 A.2d 543, 548 (D.C.2005). Subsequently, this court granted Ms. McCamey's petition for rehearing en banc. McCamey v. District of Columbia Dep't of Employment Servs., 896 A.2d 191 (D.C.2006).
II.
A. Standard of Review.
This court "will not disturb an agency decision if it rationally flows from the factual findings on which it is based and if those findings are supported by *1196 substantial evidence." Children's Defense Fund v. District of Columbia Dep't of Employment Servs., 726 A.2d 1242, 1247 (D.C.1999). Therefore, this court will affirm the agency's ruling unless it is arbitrary, capricious, or otherwise an abuse of discretion and not in accordance with the law. See Landesberg, supra, 794 A.2d at 612. Questions of law, however, are reviewed de novo. See King v. District of Columbia Dep't of Employment Servs., 742 A.2d 460, 466 (D.C.1999). "To be sure, `an agency's interpretation of its own regulations or of the statute which it administers is generally entitled to great deference from this court. There is, however, a well-recognized exception to this rule. When the agency's decision is inconsistent with the applicable statute . . . we owe it far less deference, if indeed we owe it any deference at all.'" Id. (quoting Columbia Realty Venture v. District of Columbia Rental Hous. Comm'n, 590 A.2d 1043, 1046 (D.C.1991)). As we have noted before, "`the agency's interpretation of the statute it administers is not binding upon this court [if] it conflicts with the plain meaning of the statute or its legislative history.'" Murphy v. District of Columbia Dep't of Employment Servs., 935 A.2d 1066, 1070 (D.C.2007) (quoting Lincoln Hockey LLC v. District of Columbia Dep't of Employment Servs., 810 A.2d 862, 866 (D.C.2002)) (citations omitted). "[T]he judiciary is the final authority on issues of statutory construction." Harris v. District of Columbia Office of Worker's Comp., 660 A.2d 404, 407 (D.C.1995) (citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 n. 9, 104 S. Ct. 2778 (1984)).
Panel decisions by this court bind future divisions of the court. See M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C. 1971). The court sitting en banc, however, may overrule the decisions of prior divisions. See id. "Although the doctrine of stare decisis has considerable force in statutory analysis because [the legislature] can correct a court's interpretive mistakes through legislation, we should not `appl[y] stare decisis mechanically to prohibit overturning our earlier decision determining the meaning of statutes.'" In re McBride, 602 A.2d 626, 636 (D.C.1992) (en banc) (quoting Monell v. New York City Dep't of Social Servs., 436 U.S. 658, 695, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978)).
B. Principles of Workers' Compensation Law.
The District of Columbia Workers' Compensation Act ("WCA") provides for the compensation of employees who suffer disabilities that are causally connected to workplace injuries. The WCA covers "[t]he injury or death of an employee that occurs in the District of Columbia if the employee performed work for the employer, at the time of the injury or death, while in the District of Columbia." D.C.Code § 32-1503(a)(1) (2001). The Act further defines "injury" as
[A]ccidental injury or death arising out of and in the course of employment, and such occupational disease or infection as arises naturally out of such employment or as naturally or unavoidably results from such accidental injury, and includes an injury caused by the willful act of third persons directed against an employee because of his employment.
D.C.Code § 32-1501(12) (2001).
Workers' Compensation laws reflect a compromise between employees and employers regarding injuries arising out of employment. "The District of Columbia Workers' Compensation Act of 1979, like its 1928 predecessor, was enacted to provide a reasonably quick and efficient manner to compensate employees for disabilities resulting from employment-bred injuries. Employees and employers were both thought to gain by a system in which common law tort remedies were discarded *1197 for assured compensation regardless of negligence or fault." Ferreira v. District of Columbia Dep't of Employment Servs., 531 A.2d 651, 654 (D.C.1987) (footnote omitted); cf. D.C.Code § 32-1504(b) (2001) (providing that compensation under the Act is the employee's exclusive remedy against the employer for "any illness, injury, or death arising out of and in the course of his employment"). The purpose of workers' compensation laws, "which is to provide financial and medical benefits to employees injured in work-related accidents," is a humanitarian one. Grayson v. District of Columbia Dep't of Employment Servs., 516 A.2d 909, 912 (D.C.1986). This court follows the principle that "workers' compensation statutes should be liberally construed to achieve their humanitarian purpose." Vieira v. District of Columbia Dep't of Employment Servs., 721 A.2d 579, 584 (D.C.1998); see also Ferreira, supra, 531 A.2d at 655.
The aggravation rule is an obvious example of meeting the humanitarian nature of the Act. "It is well-settled that `an aggravation of a preexisting condition may [also] constitute a compensable accidental injury under the Act.'" King, supra, 742 A.2d at 468 (quoting Ferreira, supra, 531 A.2d at 660) (internal quotation omitted). "The fact that other, nonemployment related factors may also have contributed to, or additionally aggravated [petitioner's] malady, does not affect [the] right to compensation under the `aggravation rule.'" Ferreira, supra, 531 A.2d at 660 (internal quotation omitted).[3] "If an employee experiences a work-related injury which, combined with a previous disability or physical impairment (work-related or non-work related) causes substantially greater disability or death, the liability of the employer shall be as if the subsequent injury alone caused the subsequent amount of disability." Georgetown Univ. v. District of Columbia Dep't of Employment Servs., 830 A.2d 865, 873 (D.C.2003). In Harris, supra, 660 A.2d at 408, the court distinguished the aggravation of a pre-existing injury from a mere recurrence of the injury by requiring some intervening work-related event: "This is not a case, however, in which the `recurrence' was the result of the natural progression of the condition, unaffected by any intervening work-connected cause." See id. (internal citation and quotation omitted); see also 9 ARTHUR LARSON, LARSON'S WORKERS' COMPENSATION LAW § 153.02[3] (2007) ["LARSON'S"] ("To find that there has been an aggravation, it must be shown that the second episode contributed independently to the final disability.").
The aggravation rule stems from the principle that the employer must take the employee as it finds him or her. "Employers must accept with their employees the frailties that predispose them to bodily hurt . . . and if petitioner's disability arose even in part out of and in the course of [her] employment, compensation is appropriate." Ferreira, supra, 531 A.2d at 660 (internal citations and quotations omitted; emphasis in original). Professor Larson concurs:
Preexisting disease or infirmity of the employee does not disqualify a claim *1198 under the "arising out of employment" requirement if the employment aggravated, accelerated, or combined with the disease or infirmity to produce the death or disability for which compensation is sought. This is sometimes expressed by saying that the employer takes the employee as it finds that employee.
1 LARSON'S, supra, at § 9.02[1]; see id. at § 9.02D[1] (citing cases expressing that employer takes the employee as it finds him or her).[4]
Similarly, "DOES has recognized that the [WCA] covers complications flowing from a compensable injury." Brown v. District of Columbia Dep't of Employment Servs., 700 A.2d 787, 791-92 (D.C.1997). "The rule is that a subsequent injury, whether an aggravation of the original injury or a new and distinct injury, is compensable if it is the direct and natural result of a compensable primary injury." Id. (internal quotation omitted); see 1 LARSON'S, supra, at § 10.01 (same test). Larson notes that "cases in which an initial medical condition itself progresses into complications more serious than the original injury" present no legal controversy and "the added complications are of course compensable." Id. § 10.02. "[O]nce the work-connected character of any injury, such as a back injury, has been established, the subsequent progression of that condition remains compensable so long as the worsening is not shown to have been produced by an independent nonindustrial cause." Id.[5]
Moreover, "[t]his jurisdiction has repeatedly rejected the notion that a `specific traumatic injury' is necessary to establish a prima facie case of an `accidental injury." Ferreira, supra, 531 A.2d at 656. "[T]he statutory language `accidental injury' does not require that an unusual incident be the cause of the injury, but is satisfied if something unexpectedly goes wrong within the human frame." Washington Metro. Area Trans. Auth. v. District of Columbia Dep't of Employment Servs., 506 A.2d 1127, 1130 (D.C.1986). "While the precise meaning of the `human frame' definition of `accidental injury' is undeniably elusive, it clearly encompasses two concepts." Ferreira, supra, 531 A.2d at 656. "First, the nature of the activity or event which results in or contributes to the injury may occur in the `usual and ordinary course of work.' The work need not be unusual or unexpected." Id. "Second, the nature of the potential cause of the disability need not be a discrete, particularized event." Id.
Indeed, the WCA features a statutory presumption of compensability. Under D.C.Code § 32-1521 (2001), it is presumed that a "claim comes within the provisions of this chapter" in the absence of any evidence to the contrary. "This sound presumption, designed to effectuate the humanitarian purposes of the statute, reflects a `strong legislative policy favoring awards in arguable cases.'" Ferreira, supra, 531 A.2d at 655 (quoting Wheatley v. Adler, 132 U.S.App. D.C. 177, 183, 407 F.2d 307, 313 (1968) (en banc)). "In order to benefit from the presumption, a claimant needs to make some `initial demonstration' of the employment-connection of the disability." Id. (quoting 1 ARTHUR LARSON, WORKMEN'S COMPENSATION LAW § 10.33, at 3-138 (1986)). "The initial demonstration *1199 consists in providing some evidence of the existence of two `basic facts': a death or disability and a work-related event, activity, or requirement which has the potential of resulting in or contributing to the death or disability." Id. (emphasis in original). "The presumption then operates to establish a causal connection between the disability and the work-related event, activity, or requirement." Id. "Once the presumption is triggered, the burden is upon the employer to bring forth `substantial evidence' showing that the death or disability did not arise out of and in the course of employment." Id. This court has held that expert testimony is not required to invoke the presumption. See McNeal v. District of Columbia Dep't of Employment Servs., 917 A.2d 652, 658 (D.C.2007) ("[Claimant] was not obliged to present expert opinion of causation in order to enjoy the benefit of the presumption. It was not [his] burden to do that unless and until the employer presented sufficient evidence to rebut the presumed causal connection.") (internal quotation omitted).[6]
C. D.C. Government Comprehensive Merit Personnel Act.
While the WCA applies to private-sector employees in the District, Chapter 23 of the District of Columbia Government Comprehensive Merit Personnel Act ("CMPA") governs disability claims of District of Columbia employees.[7]See D.C.Code § 1-623.01 et seq. (2001); Kralick v. District of Columbia Dep't of Employment Servs., 842 A.2d 705, 710 (D.C. 2004); see also Jackson v. District of Columbia Employees' Compensation Appeals Bd., 537 A.2d 576, 577 n. 1 (D.C.1988) ("[A] comparable system for providing disability benefits has been established under the District of Columbia Government Comprehensive Merit Personnel Act"). The CMPA provides for the compensation of disabilities causally connected to workplace injuries:
The District of Columbia shall pay compensation as specified by this subchapter for the disability or death of an employee resulting from personal injury sustained while in the performance of his or her duty, unless the injury or death is: (1) caused by willful misconduct of the employee; (2) caused by the employee's intention to bring about the injury or death of himself or herself or of another; or (3) proximately caused by the intoxication of the injured employee.
D.C.Code § 1-623.02.[8]
The two acts are conceptually close, see District of Columbia v. Thompson, 570 A.2d 277, 286 (D.C.1990), aff'd in relevant part, 593 A.2d 621, 635-36 (D.C.1991), and this court has considered case law under one act to be "informative" as to the other. See Estate of Underwood v. Nat'l Credit Union Admin., 665 A.2d 621, 631 (D.C. 1995).[9] For example, the CMPA defines *1200 "injury," inter alia, as "injury by accident," see D.C.Code § 1-623.01(5), while the WCA defines "injury" as "accidental injury or death arising out of and in the course of employment," see D.C.Code § 32-1501(12). Moreover, CMPA's "injury sustained while in the performance of his or her duty" provision has been construed as requiring that the "injury arise out of and in the course of employment," the same standard used under the WCA. See Wright v. D.C. Dep't of Public Works, ECAB No. 88-40, 1991 D.C. Wrk. Comp. LEXIS 1, **3-4 (D.C. Dep't of Employment Servs., Sept. 13, 1991) (looking to case law involving the Federal Employees' Compensation Act to define "while in the performance of duty," and noting that "`[a]rising out of and in the course of' are generally accepted as the coverage formula in most jurisdictions"); see also In re Christine Lawrence, 36 ECAB 422, 424 (1985) ("The phrase `while in the performance of duty' has been interpreted by the [Employees' Compensation Appeals] Board to be the equivalent of the commonly found prerequisite in workmen's compensation law of `arising out of and in the course of employment.'").
Though there are some differences between the two statutes, they do not materially alter the analysis of this case involving a psychological injury that is related to a physical injury suffered in the course of employment. Of note, however, is the aggravation rule, which the WCA expressly codifies, see D.C.Code § 32-1508(6)(A) (2001)[10], but the CMPA does not. The D.C. Council based Chapter 23 of the CMPA on its pre-existing federal counterpart, the Federal Employees' Compensation Act ("FECA"), 5 U.S.C. § 8101 et seq. See REPORT OF THE COMMITTEE ON GOVERNMENT OPERATIONS, BILL No. 2-10, District of Columbia Government Comprehensive Merit Personnel Act of 1978 (July 5, 1978) [D.C. Law No. 2-139] at 112 (providing that Chapter 23's program of disability compensation "is essentially an enactment of current federal law."). Consistent with the Act's genesis, this court has analogized provisions of the CMPA to FECA. See Thompson, supra, 570 A.2d at 285 (construing a provision in CMPA by citing to case law construing the Federal Employees Compensation Act, "which is identical to the disability compensation portion of CMPA"); cf. Wright, supra, 1991 D.C. Wrk. Comp. LEXIS 1 at *4 (D.C. Department of Employment Services adopting Employees' Compensation Appeals Board interpretation of identical FECA provision). *1201 Similar to the CMPA, FECA does not statutorily provide for the aggravation rule[11]; however, the Employees' Compensation Appeals Board ("ECAB")the administrative adjudicatory body charged with reviewing FECA claims[12]has made it clear that aggravations of pre-existing injuries are compensable under FECA:
The [ECAB] has held that it matters not what the state or condition of the health of the employee might be; if the conditions of employment constitute the precipitating cause of disability, such disability is compensable as having resulted from accidental injury arising out of the employment. The aggravation of a preexisting disease or defect is as compensable as an original or new injury.
In re Eloise C. West, Dkt. No. 94-1439, 1996 WL 1357781, *4 (E.C.A.B.1996). Indeed, the ECAB has applied this principle to claims involving emotional injury as well:
A preexisting condition, which may be mental or nervous in character, does not disqualify a claim if the employment aggravated, accelerated, or combined with the condition to produce the death or disability for which compensation is sought. This is sometimes expressed by saying that the employer takes the employee as he finds him.
In re Victor I. Hasson, 42 ECAB 153, 159 (1990) (citing, inter alia, LARSON'S WORKERS' COMPENSATION treatise). Thus, just as this court, the ECAB has justified the application of the aggravation rule via the well-settled proposition that employers must take their employees as they find them. Therefore, in light of the conceptual closeness of the CMPA to the WCA, as well as the CMPA to FECA, along with the underlying humanitarian purpose of those Acts, we can discern no reason why this fundamental principle of workers' compensation law would not apply in the context of the CMPA. See 1 LARSON'S, supra, at § 9.02[1] (explaining the basis for the aggravation rule).
D. District of Columbia tests regarding psychological injuries.
The present dispute concerns the application of a so-called objective test or standard for determining entitlement to compensation, a test defined as requiring an employee seeking compensation for psychological injuries to show that an average person not predisposed to such injury would have suffered a similar injury. In this case, McCamey, supra, 886 A.2d at 548 the panel rejected Ms. McCamey's argument that this objective standard should not apply to cases involving psychological injuries that result from accidental physical injuries occurring in the workplace. The panel concluded that Ms. McCamey's position, while not "implausible in principle," was foreclosed due to the court's decisions in Porter, supra, 625 A.2d at 888-89 and Landesberg, supra, 794 A.2d at 614-15. In those cases, this court held that the objective test, which had up to then been applied only in cases involving psychological injuries caused by emotional or mental stress ("mental-mental" cases), could properly be applied by DOES to psychological injuries stemming from physical accidents ("physical-mental"). See McCamey, supra, 886 A.2d at 547-48. On rehearing en banc, McCamey urges that such an expansion was improper, contrary to the test that is applied universally throughout the United States, and inconsistent with the workers' compensation statute.
*1202 A review of the historical development of the objective test in the District as well as a review of jurisprudence from other jurisdictions provides strong support for Ms. McCamey's position. The expansion of the objective test from mental-mental cases to physical-mental cases is inconsistent with the language, legislative history, and purpose of the Workers' Compensation Act and the CMPA. Its application deprives an entire class of employees (including claimants with pre-existing psychological conditions) of compensation for injuries that they can prove are connected to workplace accidents. Because the workers' compensation statutes exist for the purpose of compensating employees for work-related injuries, the objective test (at least as applied to physical-mental claims) is inconsistent with the statute and must be overturned.
1. McEvily to Dailey to Spartin.
Our review of D.C. case law involving the application of an objective test to psychological disability claims begins with McEvily v. District of Columbia Dep't of Employment Servs., 500 A.2d 1022 (D.C. 1985). In McEvily, the claimant served as head of WMATA's employee benefits branch. Despite initially having a positive work experience, claimant began to experience frustration as a result of managerial changes in the personnel department. Id. at 1022. Although McEvily's new supervisor did not criticize or embarrass him, he grew frustrated over her inattentiveness and her failure to act on or approve his proposals. Id. at 1022-23. "Believing that it was necessary for his mental health to give up his job, petitioner stopped working on December 1, 1982." Id. at 1023. Subsequently, he filed a workers' compensation claim for a psychiatric disability (depressive reaction). Id.
At the hearing, he testified on his own behalf; meanwhile, WMATA called a board-certified psychiatrist, who testified based on an independent medical examination that (1) McEvily suffered from a cyclothymic disorder and a narcissistic personality disorder, but that (2) both disorders pre-existed his employment with WMATA. Id. Therefore, the doctor opined "that there was no connection between his work situation and his predisposition to the illness which he experienced." Id. According to the court, "Dr. Schulman could not find any incident, experience, or ongoing occurrence that represented a significant stressor that would have affected anyone who was not so predisposed. He concluded that there could be no reasonable assessment of job-related stress, because the nature of that stress was highly subjective to petitioner." Id. The examiner denied his claim, finding that the depression did not arise out of the employment. Id. The Director affirmed, "concluding that petitioner's evidence did not give a `rationalized account of the causal relationship between the depression and [petitioner's] work." Id. Based on its review of the record, this court affirmed, "find[ing] substantial evidence to support the conclusion that petitioner did not suffer a compensable injury under the Act." Id. at 1024. Notably, this court affirmed on substantial evidence grounds (in a case where the claimant did not produce medical evidence himself). The court did not enunciate an objective test, but rather held that the employer's expert's opinion that there was no work-related connection supported the examiner's conclusion that the depression was not connected to the employment.
Drawing partly on McEvily, the Director set forth the objective test in Dailey v. 3M Co. & Northwest Nat'l Ins. Co., H & AS No. 85-259 (May 19, 1988). Dailey was a secretary who worked in Indianapolis but accepted relocation to Washington, D.C. in lieu of the termination of her position. Id. at *1. However, after relocation, *1203 she began to suffer from depression and an ulcer; she then stopped working and returned to her family in Indiana. Id. at **1-2. After the hearing examiner denied her claimfinding that her depression did not arise out of her employmentshe appealed to the Director, claiming that her "predisposition to a depressive condition should not bar her eligibility for benefits when work-related events aggravated her pre-existing condition." Id. at **2-3. The hearing examiner noted the testimony of the claimant's psychiatrist that the claimant "was intact" prior to her move as well as his conclusion that her condition was caused by her work, but further noted the doctor's opinion that the claimant suffered from obsessive-compulsive disorder "and a significant inability to deal with life's difficulties." Id. at **3-4. Based on this information, the examiner "conclude[d] . . . that, had claimant not been otherwise so predisposed, the changes in her job situation would not have affected claimant in the manner in which they did[13]. . . . Furthermore, [the examiner did] not find those changes occurring in claimant's life unusual or uncommon to the workplace." Id. at *4. The examiner also noted that other life events affected claimant as well. Id.
On administrative appeal, the Director reviewed case law from the Agency and D.C. regarding claims of mental disabilities arising from employment. The Director cited McEvily and interpreted this court's McEvily decision as holding "that for persons having a significant predisposition to a particular emotional injury, there must be some type of incident, experience, or occurrence at work which could have affected someone who was not significantly predisposed to that type of injury." Id. at *5 (citing McEvily, supra, 500 A.2d at 1023). The Director then examined the Agency's prior decision in Chaney v. Southeastern Univ., H & AS No. 84-350 (Apr. 6, 1986) as it was summarized by the Director's decision in Wenzel v. British Airways:
The Chaney decision held that, at the very least, the concept of "arising out of the employment" requires a showing that there were obligations placed on employee or conditions under which the employee performed which exposed him to risks or dangers which could have [led] to the kind of psychological injury actually suffered. . . . Thus, to support the ultimate finding that a psychological injury arises out of the employment there must be a finding, supported by the evidence, that within the conditions of the workplace there was a specific, articulable source of injury in the workplace and a finding, supported by medical evidence, that the alleged source of the injury could have produced the kind of injury the employee suffered. . . .
In requiring more than a showing that an employee had a medically harmful, psychologically adverse reaction to the work environment, Chaney emphasized that it is the employment, and not the make-up of the employee, which must account for the source of the employee's stress. If there is nothing discernible in the employment which for articulable reasons would ordinarily account for the employee's severe reaction, then the employee's injury does not arise out of the employment. Thus, inasmuch as Chaney directs attention to the work environment, and not to the employee's perception of his work environment, a factfinder has an objective basis on which to make his findings.
Id. at **6-7 (quoting Wenzel v. British Airways, H & AS No. 84-308, * *6-7 (Oct. 6, 1985)) (emphasis added). In Chaney, therefore, the Director had established an objective test requiring the claimant to *1204 proffer evidence of "a specific, articulable source of injury"that is, something tangible about the work environment rather than relying on the claimant's purely subjective perceptions or on the mere evidence that an adverse reaction occurred.
However, the Director then read McEvily and Chaney/Wenzel together to require a different test. The Director's understanding of McEvily (as noted above) is quite similar to the Director's view of Chaney/Wenzel; however, McEvily involved someone pre-disposed to psychological injury. The Director combined the interpretation of McEvily, that a claimant pre-disposed to injury must offer evidence of "some type of incident, experience, or occurrence at work which could have affected someone who was not significantly predisposed to that type of injury," with its requirement of a specific, articulable source of injury from Chaney/Wenzel to produce the test we now refer to as the Dailey test:
[T]he Director now specifically holds, that in order for a claimant to establish that an emotional injury arises out of the mental stress or mental stimulus of employment, the claimant must show that actual conditions of employment, as determined by an objective standard and not merely the claimant's subjective perception of his working conditions, were the cause of his emotional injury. The objective standard is satisfied where the claimant shows that the actual working conditions could have caused similar emotional injury in a person who was not significantly predisposed to such injury.
Dailey, supra, at **7-8. This test shifted the focus from an objective examination of the workplace environment to an examination of both the environment and the employee.[14] This had the added effect of erecting a stricter barrier for those claimants who had previously suffered from psychological conditionsbecause these claimants could no longer point to themselves as examples, the focus necessarily shifted to a hypothetical, average third person.
This court confronted the Dailey test in Spartin v. District of Columbia Dep't of Employment Servs., 584 A.2d 564 (D.C. 1990), a case involving another mental-mental claim. The petitioner in Spartin had been the president of a large human resources consulting firm. Id. at 565. Although he had to work hard, he viewed his job as "fun and exciting" until a larger London based firm bought out his company, made him Chairman of the Board of an international recruiting company, and assigned him numerous new responsibilities on top of his already substantial job. Id. at 565-66. Eventually, petitioner sought medical care for what he thought was a heart attack; his physician, however, diagnosed him as suffering from depression-related disorders and referred him for psychiatric and psychological care. Id. at 566. After being diagnosed with serious depression, he quit working and filed a workers' compensation claim. Id. His employer offered *1205 the testimony of a psychiatrist who opined that claimant suffered from depression and dementia, but that those conditions were not attributable to his jobapparently suggesting that the dementia was related to some type of metabolic disturbance and the depression to his experience of chest pain. Id. at 567-68. The hearing examiner credited the employer's psychiatrist and concluded that "petitioner had not met his burden of demonstrating that the actual conditions of employment, as determined by an objective standard and not merely the petitioner's subjective perception of his working condition, caused the emotional injury." Id. at 568.
On review by this court, the petitioner challenged the application of the Dailey test. Id. This court noted that "[a]lthough the general rule of causation in workers' compensation cases is to be liberally construed . . . the Director has crafted special standards for certain types of claimed injuries," and that Dailey was such a test. Id. (internal quotations and citation omitted). According to the court,
Viewed generally, insofar as it requires an objective demonstration of job stressors, Dailey fits within the modern trend to compensate workers for emotional injury caused by job stress. . . . Professor Larson advocates an "objective" standard for such cases that is very similar to the Dailey test: "in order for non-traumatically caused mental injury to be compensable in a workmen's compensation case, the injury must have resulted from a situation of greater dimensions than the day-to-day mental stress and tensions which all employees must experience."
Id. at 569 (quoting 1B A. LARSON, WORKMEN'S COMPENSATION LAW § 42.23(b) (1987)) (internal citation and footnote omitted). This comparison between Dailey and LARSON'S view of the modern trend reveals two important points: (1) they relate to compensation "for emotional injury caused by job stress," and (2) the objective test examines the conditions of the workplace environment.
The court went on, however, to state that neither the hearing examiner nor the Director had properly applied Dailey, explaining,
The Dailey test is objective: it focuses on whether the stresses of the job were so great that they could have caused harm to an average worker. As the Director explained in Dailey, job stresses are to be "measured against the usual stressors or mental stimuli of employment in general." . . . Thus, a claimant must show under the Dailey test that his current job conditions are unusually stressful as compared to employment conditions in general, not as compared to his work history.
Spartin, supra, 584 A.2d at 569 (internal citation omitted).
The court then noted that the Director in Dailey acknowledged that "`a work related aggravation of a pre-existing condition can be compensable under the law of workers' compensation." Id. at 570 (quoting Dailey, supra, at 9).[15] The court then opined,
*1206 [a]lthough recovery for aggravation of a preexisting condition may seem incompatible with the Dailey test's focus on a hypothetical employee who is not "predisposed" to injury, we do not read Dailey to preclude recovery where a claimant comes to the job with a preexisting psychological condition. Under Dailey, an employee predisposed to psychic injury could recover if he is exposed to work conditions so stressful that a normal employee might have suffered similar injury. Thus, an employee with a predisposition to mental illness is not precluded from recovering under Dailey. Only when so interpreted is the Dailey standard compatible with the Workers' Compensation Act.
Id. (emphasis added). As interpreted by Spartin, therefore, the Dailey test was intended to preserve the right of persons predisposed to mental injury to recover in some cases, but only where a "normal person might have suffered similar injury." In succeeding decisions, the Dailey rule has continued to be applied in a way that forecloses compensation unless a "normal" or "average" employee would experience similar injury.
This review demonstrates that the court's development of the objective standard occurred wholly within the context of mental-mental claims; indeed, entirely within mental-mental claims involving non-traumatic or gradual stress. It is clear that the Director and this court have acknowledged the difficulty inherent in evaluating claims of psychological disability and have attempted to address the problem by imposing a measure of objectivity: "[C]laims of work related emotional injury are among the most difficult to handle and adjudicate. While in theory work related mental injuries are as compensable as work related physical injuries, the adjudication of mental injury claims clearly presents more difficult problems. Mental injury claims are more difficult because of the inherent difficulties of objectively determining the existence of an injury and its source." Dailey, supra, at 15. However, as noted, the test shifted over time from an objective examination of the employee's workplace environment to one that examined both the environment and the employee's particular susceptibilities. If an employee was predisposed to injury, then that employee would have to point to a hypothetical third person. It is within this admittedly unsettled context that the court expanded the application of the objective test to physical-mental claims.
2. Porter and Landesberg.
This court first considered application of the objective test to a psychological injury claim springing from a physical workplace accident, as opposed to one arising from gradual workplace stress, in Porter, supra, 625 A.2d at 886. In Porter, the petitioner was injured when a gurney struck her while she performed duties as a nursing assistant at George Washington University Hospital. Id. at 888. The petitioner contended that she suffered a disability due to post-traumatic stress disorder and that the disability was traceable to the gurney incident; her board-certified psychiatrist supported this theory at her hearing. Id. In response, her employer relied on testimony from another board-certified psychiatrist who opined that the petitioner's severe depression was linked not to the gurney incident, but stemmed from a preexisting hysterical/hypochondriacal personality disorder marked by cyclothymic features. Id. The Hearing Examiner *1207 credited the latter testimony and found that the disability stemmed from a preexisting mental condition; the Director affirmed. Id.
On review, this court considered whether the administrative adjudicators applied a standard consistent with the Act, and concluded that they did. The court first reviewed McEvily, and noted that in that case, both the Hearing Examiner and Director "implicitly approved the test for causation reflected in the [testifying] psychiatrist's evaluation. . . . `[the psychiatrist] could not find any incident, experience, or ongoing occurrence that represented a significant stressor that would have affected anyone who was not so predisposed [to the depressive reaction]. He concluded that there could be no reasonable assessment of job-related stress, because the nature of that stress was highly subjective to petitioner.'" Porter, supra, 625 A.2d at 888 (quoting McEvily, supra, 500 A.2d at 1022) (emphasis in Porter). Next, the court reviewed Spartin, and confirmed that this court adopted the Dailey objective test. Notably, the court quoted the following passage from Spartin: "`an employee predisposed to psychic injury could recover if he is exposed to work conditions so stressful that a normal employee might have suffered similar injury. Thus, an employee with a predisposition to mental illness is not precluded from recovering under Dailey.'" Porter, supra, 625 A.2d at 889 (quoting Spartin, supra, 584 A.2d at 570) (emphasis in Porter). The court reaffirmed that Dailey fit within the modern trend of compensating "emotional injury caused by job stress," regardless of predisposition, "but that the test `is objective: it focuses on whether the stresses of the job were so great that they could have caused harm to an average worker.'" Porter, supra, 625 A.2d at 889 (quoting Spartin, supra, 584 A.2d at 569) (emphasis in Porter). Thus, to this point in the Porter decision, the court merely reaffirmed Spartin's adoption of the Dailey test which itself is a conflation of an objective test focused purely on stressors within the workplace environment with one that takes into account a particular employee's predisposition to a certain injury.
According to the court, the hearing examiner found that the petitioner's condition was not causally related to her work injuries, but was related solely to her preexisting disability. Porter, supra, 625 A.2d at 889. The Director affirmed that it was not work-related "because no `specific, articulable source' rooted in the job, no `concrete non-personal stressors' had been identified as its cause." Id. (quoting Director) (emphasis in Porter). The court interpreted these conclusions: "[b]oth the examiner and the Director concluded, in other words, that the gurney accident would not have caused a person lacking petitioner's subjective, pre-existing personality disorder to suffer the disability she now experienced." Id.[16]
With this as background, the court stated, "[a]s in Spartin, we perceive no reason here why the agency's application of an objective causal test to petitioner's claim of *1208 emotional injury is inconsistent with the Workers' Compensation Act." Id. Moreover, the court in Porter went on to expand Dailey to cover physical-mental claims as well:
Nor is it decisive that petitioner, unlike the claimant in Spartin, cites a specific job-related accident as the cause of her disorder rather than less easily identified conditions of stress in the employment. Whatever the triggering event or condition, the Director may properly apply a rule for causation in this difficult area of emotional injury that discourages spurious claimsone focusing on [1] the objective conditions of the job and [2] their effect on the `normal employee' not predisposed to the injury by a mental disorder.
Porter, supra, 625 A.2d at 889 (brackets and emphasis added). The court cites no additional authority for this expansion.
Clearly, the court seems to defer to the Director to interpret the Act reasonably in such a way that discourages spurious claims for compensation. However, this expansion reveals the flaw in the Dailey test that becomes particularly heightened in the context of physical-mental claims. In such cases, the physical accident supplies the "objective conditions of the job" far more clearly than a general allegation of gradual workplace stress, which almost necessarily develops over time. But the Director's concern with the difficulties of proving workplace causation in the case of persons predisposed to mental injury may not displace the protections of the Act. More precisely, neither the Director nor this court may interpret the Act in such a way that prevents those with preexisting conditions from establishing that they are entitled to compensation as to do so would ignore the aggravation rule and be inconsistent with a humanitarian act whose principal purpose is to compensate employees for injuries they prove to be work-related. See Spartin, supra, 584 A.2d at 570 ("[A]n employee with a predisposition to mental illness is not precluded from recovering under Dailey. Only when so interpreted is the Dailey standard compatible with the Workers' Compensation Act.").
In Dailey, the reason the Director rejected the aggravation of a pre-existing injury argument was because claimant failed to prove legal causationthe examiner did not credit her psychiatrists' testimony that her emotional injury was related to her work conditions.[17] The reason that the objective test was required was because of the inability to pinpoint something different about the work environment or conditions of that job. In the context of physical-mental disabilities, the physical accident is the unexpected occurrence supplying the necessary (and objective) workplace connection. Thus, in cases of physical injury, so long as the claimant proffers competent medical evidence connecting the mental disability to the physical accident (legal causation), the claimant has either established a prima facie case of aggravation or a new injury. That being *1209 the case, the objective test is simply unnecessary. Put another way, the pure objective test is always met in physical-mental cases, provided that the claimant proves the connection between the mental condition and the physical accident.
Following Porter, this court has continued to apply the Dailey standard to physical mental claims. In Landesberg, the court affirmed the Director and hearing examiner's denial of benefits to an employee who claimed she developed post-traumatic stress disorder following a work-place accident involving the closing of Metro bus doors based on findings that (1) the claimant was predisposed to psychological problems, and (2) per a psychiatrist's opinion, the conditions causing the emotional injury were not "so stressful that a reasonable person not predisposed to psychological injury might suffer the same injury." 794 A.2d at 613-14. Relying on Porter, the court noted, "psychological injuries are only compensable under the Act if the accident constitutes a sufficient stressor." Id. at 614 (citing Porter, supra, 625 A.2d at 889). The division in McCamey followed Porter and Landesberg:
[W]e have held that the statute reaches the aggravation of an employee's physical condition resulting from work-place injuries. But in light of Porter and Landesberg, as well as McEvily and other authorities cited in Porter, Ms. McCamey's position, though ably and conscientiously presented, founders upon our precedents, and it cannot prevail unless those precedents are overruled by the court sitting en banc.
McCamey, supra, 886 A.2d at 548 (emphasis in original).
We are now presented with that opportunity. In light of the humanitarian nature of the statute, we hold, in cases involving physical-mental claims, that the objective test is inconsistent with the statute's principal purpose of compensating employees who prove a connection between a disability and their work. Accordingly, its use must be overturned. Further, just as the aggravation rule in purely physical claims stems from the general principle that an employer must take an employee as it finds him or her, so too should the aggravation rule apply in physical-mental claims without requiring the employee to point to a hypothetical third personan additional, heightened burden that is necessarily speculative and unnecessary within the context of physical-mental claims where the work-related cause is distinct. Alternatively, if the psychological injury is tied not to the work-related accident, but rather a physical injury that itself arose from the work-related accident, the reviewing body could analyze it as a subsequently occurring injury that could be causally tied to the injury sustained in the workplace accident. Once complainant has established a compensable primary injury (either through the presumption or testimony), the necessary causal connection standard is enunciated in Brown, supra, 700 A.2d at 791-92.
DOES's most-recent attempt to elucidate the objective test further reveals the test's flaws and demonstrates that DOES has expanded its applicability beyond a general concern for objectivity to a test that is practically impossible for someone with a predisposition of psychological problems to meet. In West v. Washington Hosp. Ctr., the Compensation Review Board ("Board") squarely confronted "whether a psychological condition claimed to be the consequence or medical sequelae of a physical injury arising out of and in the course of employment, rather than the result of workplace stress, must meet the same standard for invoking the presumption of compensability under the Act as a psychological injury alleged to have resulted *1210 from workplace stress without a physical injury." CRB (Dir.Dkt.) No. 99-97, *6 (Aug. 5, 2005).[18] In West, the claimant suffered a back injury in a slip-and-fall accident at work and eventually developed chronic depression which she claimed was connected to the accident. Id. at *2. The hearing examiner declined to apply the Dailey test, believing it to be unnecessary in the context of a physical accident, and instead applied the subsequent medical injury causation standard from Whittaker v. District of Columbia Dep't of Employment Servs., supra note 3, 668 A.2d at 844. West, supra, at **3-4. On review, the Board examined post-Dailey cases, including cases wherein the Director or this court applied the Dailey objective test to physical-mental claims. The Board conceded that Dailey involved a claim involving job stress, rather than a physical accident, but asserted that the test applied to physical-mental claims as well:
[I]t would require an overly restrictive reading of Dailey, and a misapplication of the body of law that Dailey represents, to limit the standard enunciated therein to job stress induced emotional and psychological claims only. . . . It is the nature of the injury asserted (i.e. emotional and/or psychological injury), rather than the conditions of the workplace environment, that warrants application of the Dailey standard. This is because mental and emotional injury claims are, as the Director explained, inherently more difficult to objectively determine than are claims of physical injury.
West, supra, at **12-13. As support, the Board cites to the Director's statement in Dailey that "`[m]ental injury claims are more difficult because of the inherent difficulties of objectively determining the existence of an injury and its source.'" Id. at *13 (quoting Dailey, supra, at *15) (emphasis added). Our reading of the Agency's decisions and our own cases, however, suggests that it is not the fact of injury that is elusive, it is the cause of the injury and the determination of whether that causal event is work-relateda concern included in the italicized portion of Dailey referenced above, but neglected in West. Instead, West reflects a skepticism of whether the employee suffers an injury at all.
The Board goes on to set forth its view of Dailey's requirements:
[T]he Dailey standard may be satisfied notwithstanding the lack of evidence showing that the psychological or emotional injury sustained by the claimant would have similarly resulted to a non-predisposed individual of normal sensibilities. Required in such instances is evidence as to the nature of the employment-related physical injury sustained, that the claimant's psychological/emotional impairment is at least partially attributable to the sustained physical injury or its aftereffects, and that the claimant was not predisposed to the emotional/psychological injury of which he/she complains.
West, supra, at ___ 28-29. Lest there be any doubt as to the Board's view of the importance of the predisposition element, the Board reiterated, "[i]t is not, however, the lack of evidence of predisposition that is required, but the affirmative showing of evidence that Respondent was not pre-disposed that is required." Id. at 29 (emphasis added). As an example of the potential application of this rule, the Board had earlier cited a case where the claimant had met the objective standard by establishing through medical evidence that the claimant was not pre-disposed to the emotional *1211 injury she suffered. See West, supra, at *18 n. 9 (citing Aycock v. Am. Assoc. of Retired Persons, Dir. Dkt. No. 01-30 (Jan. 15, 2002)).
This reformulation of the Dailey test exposes its fatal flaw. The shift in focus from the objective work conditions to the individual person and his or her predisposition to injury led not only to the necessity of speculating about hypothetical "normal" employees, it has led inexorably to the conclusion that persons with pre-existing psychological conditions cannot recover disability benefits if they suffer from the aggravation of their preexisting condition. This is directly antithetical to the well-established aggravation rule, against the well-established principle that the employer must take the employee as it finds him or her, and against the principal purpose of the statute to compensate employees for injuries they can prove are related to employment. Further, it is contrary to this court's admonition in Spartin that the objective test must permit those predisposed to emotional conditions to receive compensation if they have met their burden of proof or else it would contravene the Act.
E. Other jurisdictions' tests regarding psychological injuries within the context of physical-mental claims.
In Spartin, this court viewed Dailey as fitting "within the modern trend to compensate workers for emotional injury caused by job stress," and further noted that Professor Larson advocated a form of an objective test for mental-mental claims involving job stress. See Spartin, supra, 584 A.2d at 569. Thus, this court has turned to outside jurisdictions for guidance on these issues. Secondary sources reviewing case law from around the country confirm that the compensability of emotional injuries stemming from physical accidents is uniformly accepted. Larson states,
[W]hen there has been a physical accident or trauma, and claimant's disability is increased or prolonged by traumatic neurosis, conversion hysteria, or hysterical paralysis, it is now uniformly held that the full disability including the effects of the neurosis is compensable. Dozens of cases, involving almost every conceivable kind of neurotic, psychotic, psychosomatic, depressive, or hysterical symptom, functional overlay, or personality disorder, have accepted this rule.
3 LARSON'S, supra, at § 56.03[1] (emphasis added); see also id. at § 53.06D (compiling cases nationwide that accept physical-mental claims). Further, "[a]s in other connections, a preexisting weakness in the form of a neurotic tendency does not lessen the compensability of an injury which precipitates a disabling neurosis." Id. at § 56.03[2]; see also 3 LARSON'S, supra, at § 56.04[3] (discussing the aggravation rule and noting, "[t]here appears to be no reported decision in which compensation was denied in this type of case solely because there was a preexisting neurotic tendency").
Other commentators agree: "Courts uniformly have held that a mental injury which implicates the existence of a physical impact stimulus or a physical injury satisfies the personal injury requirement [of workers' compensation laws]. The analogy to negligence cases concerning mental injuries is obvious. The existence of an objective, traumatic, work connected physical impact or injury provides an intuitive guarantee that the mental disorder is genuine and that the employment genuinely caused it." Lawrence Joseph, The Causation Issue in Workers' Compensation Mental Disability Cases: an Analysis, Solutions, *1212 and a Perspective, 36 VAND. L.REV. 263, 288 (1983); see id. at 288 n. 104 (citing supportive cases). Joseph further explains how courts can appropriately deal with predisposition:
Courts generally have recognizedconsistent with present medical knowledgethat an individual's personal psychological disposition in part causes employment related mental injuries. Accordingly, courts have interpreted the arise-out-of employment requirement to account for this element of personal susceptibility. This interpretation arises from the axiom in workers' compensation law that employers must take employees as they arewith their personal bodily and mental deficiencies. Therefore, the appropriate arise-out-of employment inquiry in mental disability cases is whether the workers' employment aggravates, accelerates, or combines with his personal mental disposition to produce his disability.
Id. at 299.
Both Larson and Joseph cite to numerous cases throughout the country that recognize physical-mental claims without imposition of an objective test. A review of some of them demonstrates that while courts may apply slightly different language in the causation standard, they are straightforward tests that connect disability to the accident. For example, in Gartrell v. Dep't of Correction, 259 Conn. 29, 787 A.2d 541, 548-49 (C2002), the Connecticut Supreme Court agreed with the plaintiff that the aggravation of a preexisting psychiatric condition was compensable as a distinct injury when it was the direct consequence of a work-related physical injury; the court so held in part in recognition of "a fundamental tenet of workers' compensation law . . . that an employer takes the employee in the state of health in which if finds the employee." Id. at 549 (internal quotation omitted). Regarding a causal standard, the court held that the physical injury had to be a "but for" cause of the aggravation. Id.
In Illinois, psychological disabilities are compensable where a physical injury is a causative factor:
[A] disability caused by a neurosis is compensable if it resulted from an accidental injury. The work-related accident need not be the sole causative factor of the neurosis but need be only a causative factor of the condition. Further, even where the psychological condition was a preexisting one, if the work-related accident aggravated the condition, it is compensable.
Amoco Oil Co. v. Industrial Comm'n, 218 Ill.App.3d 737, 161 Ill. Dec. 397, 578 N.E.2d 1043, 1050 (1991) (internal citations omitted).[19] Illinois's ready compensation of physical-mental claims dates back at least to 1924. See United States Fuel Co. v. Industrial Comm'n, 313 Ill. 590, 145 N.E. 122, 123 (1924) ("It is immaterial whether this [permanent incapacity to work] is caused by a physical injury or a mental disorder resulting from the injury.").
The case of Love v. McDonald's Restaurant illustrates an example of another court that struggled to reach a proper standard in physical-mental claims. See 13 Kan. App. 2d 397, 771 P.2d 557 (1989). In Love, the claimant fell down some stairs at work and later claimed that her neurosis was connected to that workplace accident. Id. at 558. Kansas's early cases *1213 had involved physical injuries, wherein the court applied the rule that the neurosis was compensable if directly traceable to the physical injury. Id. The court then considered mental-mental claims and added a causal element that sought to link the workplace to the ultimate disability. Id. This was because the statute specifically called for "personal injury by accident;" thus, absent the accident, the court imposed a causal connection requirement linking the claimed emotional disability to the workplace environmenta clearly distinct test for the distinct situation presented by gradual stress mental-mental claims. However, in a later case, the court then conflated the two tests, such that "traumatic neurosis was compensable only if the mental disability [was] directly traceable to a work-related physical injury and could also be causally connected to the conditions and requirements of claimant's job." Id. at 559 (emphasis in Love; internal quotation and citation omitted). The appeals court in Love rejected the conflated test and returned to the straightforward requirement that the disability be directly traceable to a workplace accident. Id. at 560.
This case further supports the distinction between physical-mental and mental-mental claims. The Kansas courts only created a new causal test in the absence of the physical accident because it was only then that work-connectedness was in doubt. If the employee proves the disability and proves that it is connected to a physical workplace accident ("directly traceable" in Kansas; "causative factor" in Illinois; "but for" in Connecticut), then there is no problem establishing that the disability arose out of employment.
III.
The objective test as applied cannot be reconciled with the clear language of either the WCA or the CMPA, both of which provide in straightforward language that the Acts compensate workers for injuries they suffer on the job. The WCA covers "[t]he injury or death of an employee that occurs in the District of Columbia if the employee performed work for the employer, at the time of the injury or death, while in the District of Columbia," D.C.Code § 32-1503(a)(1), while the CMPA covers "the disability or death of an employee resulting from personal injury sustained while in the performance of his or her duty," D.C.Code § 1-623.02. Further, the test as applied fails to meet the humanitarian purpose of the statute, it neglects to award compensation in arguable cases, and it is contrary to the aggravation rule and the general principle that employers must accept employees as they find them. Moreover, as demonstrated above, it is simply unnecessary in physical-mental cases because the accident supplies the necessary objective work connection. Accordingly, the test must be overturned.
Though the workplace accident supplies the necessary and objective workplace connection, the claimant must still ultimately prove that his or her disability is causally connected to that accident. While a review of decisions from other jurisdictions reveals different terminology for defining causation in this context, those jurisdictions do not offer any particular reason for adopting any particular test (e.g., "but for," "causative factor," "directly traceable"). Thus, we hold that it is appropriate to apply the causal standards seen throughout D.C. workers' compensation cases. In cases where the statutory presumption is applicable, the claimant must show that the physical accident had the potential of resulting in or contributing to the psychological injury. See Smith, supra, 934 A.2d at 435 (quoting Mexicano v. District of Columbia Dep't of *1214 Employment Servs., 806 A.2d 198, 204 (D.C.2002)) ("`To benefit from the statutory presumption, the employee need only show some evidence of a disability and a work-related event or activity which has the potential of resulting in or contributing to the disability.'"). Where the presumption is either inapplicable or has been rebutted, the burden falls on the claimant to prove by a preponderance of the evidence that the physical accident caused or contributed to the psychological injury. See Washington Post v. District of Columbia Dep't of Employment Servs., 852 A.2d 909, 911 (D.C.2004). In determining whether a claimant has met his or her burden, a hearing examiner must weigh and consider the evidence as well as make credibility determinations. In this regard, the examiner may of course consider the reasonableness of the testimony and whether or not particular testimony has been contradicted or corroborated by other evidence.
While neither the West case nor the application of the objective test to mental-mental claims is squarely before the court in this case, our analysis in this case necessarily affects the scope of the objective standard in mental-mental cases as well. The reason that the objective test is unnecessary in the physical-mental context that the physical accident supplies the necessary work-connection-flows back to Dailey's conflation of the desire for objective verification of a work-related event with the Director's concern that an employee's predisposition to mental injury would make the determination that the disability was caused by workplace stress more difficult. In some mental-mental claims, this objectively verifiable work connection may be far less apparent; thus, the imposition of a carefully crafted test to establish the necessary connection between mental injury and work may be appropriate for such cases. We do not purport to say here what such a test should be. However, any test that prevents persons predisposed to psychological injury from recovering in all cases is inconsistent with the legislative history and humanitarian purpose of the D.C. WCA and CMPA. Accordingly, if the Board decides that a special test for mental-mental claims remains desirable, it must be one focused purely on verifying the factual reality of stressors in the work-place environment, rather than one requiring the claimant to prove that he or she was not predisposed to psychological injury or illness, or that a hypothetical average or healthy person would have suffered a similar psychological injury, before recovery is authorized.[20]
Although we defer to an Agency's reasonable interpretation of the statute it is empowered to administer, we cannot defer when the interpretation is inconsistent with the language and purpose of the statute. Because the objective test, as applied to physical-mental claims, is inconsistent with the language of the WCA and the CMPA and is contrary to the purposes underlying the District's workers' compensation laws, it is unreasonable and therefore its use must be overturned. Accordingly, the decision of the Director is reversed and the case is remanded for further proceedings consistent with this opinion.
So ordered.
NOTES
[1] Ms. McCamey's condition was further aggravated by the death of her mother.
[2] Although the ALJ did not expressly so state, it appears that he credited Dr. Hammill's opinion over that of Dr. Smoller.
[3] A presumption of compensability applies within the context of the aggravation rule:
Under this jurisdiction's "aggravation rule," there is no question that "a particular medical condition [that] is a result of the compensable work injury" may itself be compensable and thus covered by the presumption. Where there is a dispute . . . about whether the disabling aggravated condition . . . is causally related to or "arose out of" the claimant's employment, the presumption applies and is triggered if the claimant produces "some evidence" of the two basic facts described in Ferreira.
Whittaker v. District of Columbia Dep't of Employment Servs., 668 A.2d 844, 846-47 (D.C. 1995).
[4] According to Larson, "[t]he preexisting condition may be any kind of weakness. . . . It may be mental or nervous in character." 1 LARSON'S, supra, at § 9.02[3]; see id. at § 9.02D[3] at D9-77 (citing cases).
[5] Relevant to this case, Larson notes, in the section on subsequent injuries, "[t]he situation is no different when the subsequent complication takes the form of a neurosis rather than a physical exacerbation." 1 LARSON'S, supra, at § 10.02 (2007).
[6] However, "[n]otwithstanding the statutory presumption of compensability, the burden ultimately falls on the claimant to show by a preponderance of the evidence that his or her disability was caused by a work-related injury." Washington Hosp. Ctr. v. District of Columbia Dep't of Employment Servs., 744 A.2d 992, 998 (D.C.2000).
[7] The CMPA was "enacted to create a modern, flexible, and comprehensive system of public personnel administration in the District of Columbia government." Council of School Officers v. Vaughn, 553 A.2d 1222, 1225 (D.C.1989).
[8] By contrast, the WCA covers "[t]he injury or death of an employee that occurs in the District of Columbia if the employee performed work for the employer, at the time of the injury or death, while in the District of Columbia." D.C.Code § 32-1503(a)(1).
[9] We note as well that the D.C. Council has amended the CMPA on more than one occasion to align it more closely with the WCA. See REPORT OF THE COUNCIL OF THE DISTRICT OF COLUMBIA, BILL No. 8-74, District of Columbia Workers' Compensation Equity Amendment Act of 1990 (July 6, 1990) [D.C. Law No. 8-198] at 3 (explaining that the purpose of the Bill "is to amend the District of Columbia Workers' Compensation Act of 1979 (`Act') and title 23 of the District of Columbia Merit Personnel Act of 1978 in order to standardize certain workers' compensation benefits of public and private employees in the District of Columbia ('District'), promote a fairer system of compensation, and establish a commission for the review of the procedure and method of rate making for the District."); REPORT OF THE COUNCIL OF THE DISTRICT OF COLUMBIA, BILL No. 12-618, Fiscal Year 1999 Budget Support Act of 1998 (May 5, 1998) [D.C. Law No. 12-175] at 12 ("Section 2102 [of the Bill] amends provisions in the CMPA that establish the disability program for District employees. The amendments are designed to make disability hearing procedures for public employees substantially similar to the procedures for private employees under the workers' compensation statute. They are intended to make the procedures speedier and to permit the District, as employer, the same rights to present evidence and to appeal decisions to which private sector employers are entitled.").
[10] "If an employee receives an injury, which combined with a previous occupational or nonoccupational disability or physical impairment causes substantially greater disability or death, the liability of the employer shall be as if the subsequent injury alone caused the subsequent amount of disability. . . ." D.C.Code § 32-1508(6)(A).
[11] The CMPA and the FECA provisions regarding compensation for disability or death of an employee and their definitions of "injury" are identical. Compare D.C.Code §§ 1-623.02, -623.05(5), with 5 U.S.C. §§ 8102, 8101(5).
[12] See 5 U.S.C. § 8149.
[13] The examiner cited McEvily (though the decision from the Director) as support.
[14] The Director recognized the alteration of the test:
The objective standard which the Director establishes in this decision is a departure from the Chaney decision which only uses an objective standard to determine whether there are actual specific articulable sources of stress in the work place. Assuming that an actual specific articulable source of stress is identified and established, and assuming that the medical evidence establishes a causal connection between the actual specific articulable source of stress and the alleged work injury, Chaney would allow for a finding that the injury arose out of the employment even if the source of stress would not have affected a person who was not predisposed to the particular injury.
Dailey, supra, at *8 n. 1.
[15] In Dailey, the Director confirmed that aggravation of pre-existing injuries via workplace accidents is compensable; however, the Director suggested its application was inappropriate in that case because the claimant could not establish legal causationthat is, that the examiner had found that the claimant's mental injury was "caused by her own personal make up and non-work related factors, as opposed to being caused by events or conditions of her employment." Dailey, supra, at ___ 10-11. Thus, under this reading, the claimant would have to prove a connection between her mental injury and the workplace environment by showing that someone who was not predisposed would have suffered her injuries. If she demonstrated that the hypothetical person would have so suffered, then she receives compensation despite her predisposition because the pre-existing injury would have been shown to have been aggravated by a work-place condition.
[16] However, another possible interpretation is that the hearing examiner's conclusion that the injury "related solely to" her preexisting disorder demonstrates a factual credibility determination finding that the employer's psychiatrist fully rebutted the petitioner's evidence of causal connection. Thus, it is possible that the hearing examiner or director may have reached a different conclusion had the examiner believed that the gurney incident contributed to the injury. As the court in Porter notes, the hearing examiner issued her findings three months prior to the Director's Dailey decision. See Porter, supra, 625 A.2d at 889 n. 3.
[17] "While the Director readily agrees that a work related aggravation of a pre-existing condition can be compensable under the law of workers' compensation, in this case, there was a specific finding that claimant's injury did not arise out of her employment. In other words, to say that one's working conditions have aggravated a pre-existing condition, presupposes that legal causation has already been established between the pre-existing condition and the injury which is attributed to the employment conditions; but in this case, legal causation was never established. The thrust of the Hearing Examiner's finding was that whatever emotional problems claimant experienced were caused by her own personal make up and non-work related factors, as opposed to being caused by events or conditions of her employment." Dailey, supra, at 10-11.
[18] Review of this case is currently pending before this court.
[19] Amoco features similarities to Ms. McCamey's situation. In Amoco, the claimant had a pre-existing psychological condition, but the condition was never so disabling as to prevent him from working. See 161 Ill. Dec. 397, 578 N.E.2d at 1050. The claimant's mental condition, however, deteriorated after the work-related accident. Id.
[20] The issue is discussed at length in LARSON, supra, at § 56.06. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542325/ | 386 B.R. 272 (2008)
In re Kent J. JOHNSON, Debtor.
Kent J. Johnson, Plaintiff,
v.
Daniel L. Stapelman as Minidoka County Commissioner, Lynn A. Hunsaker as Minidoka County Commissioner, Minidoka County as a subdivision of the State of Idaho; Cassia Regional Medical Center, Defendants.
Bankruptcy No. 04-42117-JDP. Adversary No. 07-8071.
United States Bankruptcy Court, D. Idaho.
March 20, 2008.
*274 Patrick J. Geile, Foley, Freeman, PLLC, Meridian, ID, for Plaintiff.
Alan Goodman, Minidoka County Prosecuting Attorney, Rupert, ID, for Defendant Minidoka County.
*275 William R. Dalling, Dalling & Bailing, Idaho Falls, ID, for Defendant Cassia Regional Medical Center.
MEMORANDUM OF DECISION
JIM D. PAPPAS, Bankruptcy Judge.
Introduction
In this adversary proceeding, Plaintiff Kent Johnson alleges that the Defendants, the Minidoka County Commissioners ("County") and Cassia Regional Medical Center ("CRMC"), violated the terms of Plaintiff's bankruptcy discharge, and that County's medical indigency lien should be avoided. Docket No. 1. County and CRMC dispute the allegations that they violated the discharge injunction and assert County's lien is valid. Docket Nos. 7, 8.
On December 18, 2007, Plaintiff moved for summary judgment. Docket No. 20. The Court conducted a hearing on the motion on January 30, 2008 at which counsel for the parties appeared and argued. At the conclusion of the hearing, the Court took the issues under advisement.
Having now carefully considered the record, the parties' submissions and arguments, and the applicable law, this Memorandum disposes of the issues.[1]
Facts
These issues are presented in the context of a summary judgment motion because the material facts in this action are not in dispute.
Plaintiff was treated at CRMC on June 27, 2004 for abdominal pain. On June 28, 2004, Plaintiff sought assistance from County in paying his resulting medical expenses, and completed a "Uniform County Medical Assistance Application." Plaintiff was interviewed by a County investigator on July 7, 2004 in connection with that application. On July 12, 2004, County caused a Notice of Lien to be filed in the Minidoka County Recorder's Office; on July 13, 2004, a similar Notice of Lien was filed with the Idaho Secretary of State.
On August 23, 2004, County denied Plaintiff's application for medical assistance on the basis that Plaintiff was not medically indigent as that term is defined by Idaho Code § 31-3502(1). On September 13, 2004, CRMC timely requested a hearing before the county commissioners regarding the denial of Plaintiff's application. That hearing was scheduled for December 10, 2004.
In the meantime, on October 8, 2004, Plaintiff and his wife filed a voluntary petition for relief under chapter 7[2] of the Bankruptcy Code. Plaintiff's medical bills to CRMC were listed in Plaintiff's schedule of debts, and County and CRMC were mailed a notice of the bankruptcy filing. In light of the bankruptcy case, the administrative hearing previously scheduled for December 10, 2004 was cancelled. On February 2, 2005, the Court entered a discharge in favor of Plaintiff and his wife. As discussed below, this discharge effectively prohibited any creditor from pursuing any action against Plaintiff to collect any discharged debts.
Following the entry of discharge, the administrative proceedings regarding Plaintiff's application for medical assistance were resumed. On March 10, 2005, CRMC caused to be issued and served *276 Plaintiff with a subpoena to appear at the rescheduled hearing to be held on April 15, 2005. As commanded by the subpoena, Plaintiff appeared and testified at that hearing. Three days later, on April 18, 2005, County approved Plaintiff's application for medical assistance and paid CRMC the applicable Medicaid rate for the services it had provided to Plaintiff. In connection with that determination, County waived Plaintiff's obligation to immediately reimburse County for these sums, but asserted that its lien on Plaintiff's real property securing this obligation would continue in effect.
On July 10, 2007, Plaintiff commenced this adversary proceeding to challenge the validity of County's lien and to recover sanctions against County and CRMC for attempting to collect a discharged debt.
Discussion
I.
Summary judgment may be granted if, when the evidence is viewed in a light most favorable to the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(e), by Fed. R. Bankr.P. 7056; Leimbach v. Lane (In re Lane), 302 B.R. 75, 81 (Bankr.D.Idaho 2003) (citing Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir.2001)). A court "may grant summary judgment for the non-moving party if it is apparent from the record and at the hearing that there is no genuine issue of material fact essential to the movant's case." Superior Eng'g and Elecs. Co., Inc. v. Sanders, 833 F.2d 823, 825 (9th Cir.1987).
In order to safeguard the public health, safety and welfare, Idaho law requires a county to pay a provider for necessary medical expenses incurred by indigent patients residing in that county. Idaho Code § 31-3501 et seq. To receive assistance, a written application must be submitted to the county clerk; the application may be filed by either the indigent patient, or by a third party on behalf of the patient. Idaho Code § 31-3504(1), (2). When an application is filed, an automatic lien arises which attaches to all real and personal property owned by the indigent patient. Idaho Code § 31-3504(4). To perfect the lien, the County may record a notice in the appropriate office, either in the county for real property, or with the Secretary of State for personal property. Id. If perfected, the priority of this statutory lien relates back to the date the medical services were provided. Id.
If an application is approved, the county is obligated to pay the applicable reimbursement rates to the provider rendering medical services, up to $10,000 per applicant for any consecutive twelve month period. Idaho Code §§ 31-3508, 31-3505B. If approved, and the county determines that the applicant is able to pay a portion of the financial assistance received over a reasonable period of time, then the applicant is obligated to reimburse the county, Idaho Code § 31-3510A. Should an application be denied, either the applicant or the medical provider can appeal the decision to the board of county commissioners. Idaho Code § 31-3505D.
Disputes over Idaho's medical indigency statutes are not new in the bankruptcy forum. The interplay of the state statutory scheme with the federal bankruptcy law has given rise to abundant litigation, as the Court has been called upon to reconcile the recovery rights of providers and lien rights of counties, on the one hand, with debtors' right to a financial fresh start on the other, See, e.g., Mechling v. Bonner County (In re Mechling), 02.4 I.B.C.R. 164 (Bankr.D.Idaho 2002); In re Hegel, 00.2 I.B.C.R. 101 (Bankr.D.Idaho 2000); Sarty v. Board of County Commissioners of Ada *277 County (In re Sarty), 99.4 I.B.C.R. 162 (Bankr.D.Idaho 1999); In re Walker, 97.3 I.B.C.R. 91 (Bankr.D.Idaho 1997); Handy v. Bonner County (In re Handy), 97.3 I.B.C.R. 79 (Bankr.D.Idaho 1997). Although this case shares a few common threads with the facts presented in connection with prior decisions, the focus here on the impact of the discharge injunction adds a new wrinkle to the legal fabric.
II.
In this adversary proceeding, Plaintiff assails the validity and extent of County's statutory lien on Plaintiff's house. Plaintiff acknowledges that his application for assistance was filed, and that County recorded its resulting notice of lien, prior to the filing of Plaintiff's bankruptcy petition. However, Plaintiff points out that County did not approve the application for assistance, or make any payments to CRMC, until after the discharge was entered and bankruptcy case was closed. As a result, Plaintiff contends, at the time the bankruptcy petition was filed, County's lien was valueless, and was therefore void in its entirety. In the alternative, Plaintiff argues that Idaho Code § 31-3504 is unconstitutional on its face and as applied in this instance.
This Court has previously rejected Plaintiff's first argument. In Handy, prior to the debtor's bankruptcy filing, Bonner County acquired and perfected its real property lien in accordance with Idaho Code § 31-3504. However, when the debtor's bankruptcy petition was filed, Bonner County had not yet approved the application for medical assistance or made any payments to his medical providers. Notwithstanding, this Court held that the county's lien was valid. The Court explained that, by recording the lien notice, Bonner County had given constructive notice to any subsequent purchaser or hypothetical bona fide purchaser of the debtor's real property, its lien was not avoidable in bankruptcy, and the lien was valid to secure payments thereafter advanced for the debtor's medical care. In re Handy, 97.3 I.B.C.R. at 80.
The Court reached the same conclusion in Sarty. There, the Court noted that although the amount of the lien must be quantified during the benefit determination process, the automatic lien perfected when the notice was recorded was not invalidated by the bankruptcy filing. In re Sarty, 99.4 I.B.C.R. at 163.
Plaintiff has not advanced any arguments to persuade the Court to reconsider its prior analysis of this issue. Under the reasoning explained in Handy and Sarty, the Court concludes that County holds a valid lien on Plaintiff's real property, which was not limited to the amount that had been paid out by County on the bankruptcy filing date (i.e., $0). Instead, County's lien is enforceable for the full amount paid out under Plaintiff's application as allowed by Idaho law.[3]
III.
Plaintiff also argues that Idaho Code § 31-3504 is unconstitutional under the United States Constitution because the statute effects a state sponsored taking of his property (i.e., the equity in his home) without adequate procedural due process.[4]*278 Plaintiff's argument rests on the fact that Idaho Code § 31-3504 allows a third party applicant to apply for financial assistance on behalf of an indigent patient. Plaintiff explains that, in such a case, the statutory lien to secure reimbursement to a county automatically arises and attaches to the patient's property without the patient's consent. Thus, Plaintiff reasons, a patient is deprived of a property interest without an opportunity to be heard.[5]
"The fundamental requirement of due process is the opportunity to be heard `at a meaningful time and in a meaningful manner.'" Mathews v. Eldridge, 424 U.S. 319; 333, 96 S.Ct, 893, 47 L. Ed. 2d 18 (1976) (quoting Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 14 L. Ed. 2d 62 (1965)). "Due process, unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place and circumstances." Cafeteria Workers v. McElroy, 367 U.S. 886, 895, 81 S. Ct. 1743, 6 L. Ed. 2d 1230 (1961). Rather, "due process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v. Brewer, 408 U.S. 471, 481, 92 S. Ct. 2593, 33 L. Ed. 2d 484 (1972).
A.
Plaintiff makes two distinct constitutional arguments. First, Plaintiff argues that Idaho Code § 31-3504 is unconstitutional as applied in this case. Obviously, the Court is not confronted with the situation where a third party filed an application on behalf of an indigent patient without first obtaining his consent. Rather, in this case, Plaintiff signed and filed the application for financial assistance himself. Under these facts, the combination of the requirements in the Idaho statutes, combined with the information contained in the application form which Plaintiff completed, afforded him the requisite due process notice and hearing rights.
Idaho Code § 31-3501 et seq. provide notice to all Idaho citizens concerning the consequences of filing an application for indigent assistance, including that a lien will arise and attach to all of a patient's real and personal property. See Idaho Code § 31-3504(4). But apart from the notice, the statutes also provide for an investigation prior to an initial determination of eligibility for assistance, Idaho Code § 31-3505A, and a right to appeal and a hearing before the county commissioners concerning any initial determination, Idaho Code § 31-3505D. In addition, the statutes provides an applicant or third party a limited right to obtain judicial review, but only as to "a final determination of the board to deny an application for financial assistance. ..."[6] Idaho Code § 31-3505G.
*279 In addition to the notice and process provided in the statutes, the application form which Plaintiff signed notified him that, as a consequence of its execution and filing with the county, a lien may be asserted against his property for amounts paid out by County, and that he may be obligated to reimburse County for any assistance received.[7]
Given these facts, the Court concludes that Plaintiff received adequate notice that a lien would automatically attach to his property upon filing the application for financial assistance.[8] Moreover, the due process requirements embodied in the Idaho statutes guaranteed Plaintiff's right to be heard and to obtain a review of any adverse decision made by County concerning the application. Thus, the constitutional requirements were satisfied in this case, and thus, Idaho Code § 31-3504 is not unconstitutional as applied to Plaintiff.
B.
Plaintiff next argues that Idaho Code § 31-3504 is unconstitutional on its face because "[t]here is not a set of facts that provides due process to an applicant when a third party applies [for indigent medical assistance] on [the patient's] behalf." Docket No. 21.
Plaintiff's argument mischaracterizes the standard for a facial challenge to a statute. For a facial attack to be successful, a challenger must demonstrate that no set of circumstances exist under which the statute would be valid. United States v. Salerno, 481 U.S. 739, 745, 107 S. Ct. 2095, 95 L. Ed. 2d 697 (1987). Because a facial attack requires unconstitutionality under all circumstances, it necessarily presumes that the litigant would be able to sustain an "as applied" challenge. City of Chicago v. Morales, 527 U.S. 41, 78, n. 1, 119 S. Ct. 1849, 144 L. Ed. 2d 67 (1999). Since the Court holds above that Idaho Code § 31-3504 is not unconstitutional as applied to Plaintiff, Plaintiff's facial challenge also fails.
IV.
Plaintiff next argues that by continuing the administrative hearings after Plaintiff received a bankruptcy discharge, both CRMC and County violated the injunction embodied in the discharge, because, in essence, Plaintiff's personal liability to CRMC for the medical expenses was at stake in those proceedings. County and CRMC disagree with Plaintiff's position. County explains that the hearing was conducted *280 solely for CRMC's benefit, and that Plaintiff's participation was required simply to provide additional factual information so that County could determine if he was indeed medically indigent at the time the application was filed. County and CRMC both insist that at no time did either entity attempt to impose any personal liability on Plaintiff.
Section 524 of the Code provides:
(a) A discharge in a case under this title
. . .
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived[.]
11 U.S.C. § 524(a)(2).
In support of his position, Plaintiff cites Sacred Heart Med. Ctr. v. Hegel (In re Hegel), 01.1 I.B.C.R. 19 (D.Idaho 2001). Admittedly, Hegel is not exactly on point as the time line of events differs significantly. But the decision does provide some valuable insight into resolution of the issues before the Court.
In Hegel, the debtor received emergency medical treatment at a hospital. Less than a month later, he filed a petition for relief under chapter 7. The following day, without notice of the debtor's bankruptcy filing, the hospital submitted a third party application to Kootenai County seeking indigent financial assistance for the medical services it rendered to the debtor. The hospital's application was initially denied, and the hospital appealed that decision to the county commissioners. Prior to the appeal hearing, though, the hospital received notice of the debtor's bankruptcy; it immediately sought relief from the § 362(a) automatic stay prohibiting collection actions against the debtor in order to continue the administrative process.
This Court denied the hospital's request. The hospital appealed that decision to the district court, arguing, inter alia, that the hospital had an independent right to seek payment from the county. Plaintiff contends that in Hegel, the district court held that an action by a hospital to receive assistance is not an independent third party action because it directly affects the debtor.
Although the district court did conclude that the hospital did not have an independent right to collect for the charges, the court's precise language is critical. It stated: "where a hospital files a third-party application with the County, the hospital's actions necessarily affect the property of the debtor." In re Hegel, 01.1 I.B.C.R. at 21 (emphasis added). Plaintiff's argument attempts to extend this holding to include the personal liability of the debtor.
The distinction between the personal liability of the debtor, and the liability of debtor's property for a prebankruptcy debt, is important in this context for at least two reasons. First, only the automatic stay was at issue in Hegel. The district court did not discuss the impact of the discharge injunction on the hospital's actions. Second, the purposes underlying the automatic stay and the discharge injunction are different.[9] Because these two *281 statutory tools are intended to promote distinct policies, they are structured differently and proscribe different actions. In other words, an action that would be a violation of the automatic stay, were it in effect, would not necessarily constitute a violation of the discharge injunction. Because no automatic stay was in effect at the relevant times, only the discharge injunction is at issue in this case.
A discharge in bankruptcy affects only a debtor's personal liability on a debt. Johnson v. Home State Bank, 501 U.S. 78, 83, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991). "Valid, perfected liens that have not been disallowed or avoided survive the bankruptcy discharge of the underlying debt." In re Handy, 97.3 I.B.C.R. at 80; see also, Dewsnup v. Timm, 502 U.S. 410, 418, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992). The discharge injunction prevents creditors from attempting to collect, recover, or offset discharged debt as a "personal liability of the debtor." 11 U.S.C. § 524(a)(2). However, some contact between creditors and debtors is permissible. "So long as the creditor is not collecting the debt as a 'personal liability of the debtor,' there is no violation under § 524(a)(2)." In re Garske, 287 B.R. at 545.
When, after Plaintiff received a discharge, the administrative proceedings resumed, the objective was not to determine whether Plaintiff was personally liable to CRMC for the medical debt; rather, the proceedings were necessary to determine whether County was liable to CRMC for the debt. CRMC apparently believed that Plaintiff's participation in the hearing was required in order to present the appropriate facts regarding Plaintiff's financial situation so that the county commissioners could make a proper determination as to County's obligation to pay CRMC. If the board determined that Plaintiff was indeed medically indigent at the time the emergency medical services were rendered, it had no discretion to deny the application. In re Walker, 97.3 I.B.C.R. 91, 92 (Bankr.D.Idaho 1997); Idaho Code § 31-3505B. If the facts revealed that Plaintiff was medically indigent, County would be required by Idaho statute to pay CRMC.
According to the transcript, during the administrative hearing CRMC made it clear that it was not attempting to impose personal liability for the medical debt on Plaintiff. CRMC's counsel stated: "Obviously, [Plaintiff] has no obligation to the hospital because it was taken out in bankruptcy.... It's [CRMC's] position, and I think Alan's [referring to Mr. Goodman, a County attorney] always agreed with us... that if an application is made to the County, and if it was made to the County before the bankruptcy that the County's responsible." Transcript of Hearing, April 15, 2005, 3:9-11, Docket No. 22. At the hearing, County also acknowledged that Plaintiff was not personally liable for the medical debt, but maintained that its lien remained valid. County commissioner Marvin Bingham stated: "We can't charge him but we got a lien against him." Transcript of Hearing, April 15, 2005, 17:20, Docket No. 22. This position is further evidenced in the written "Order Waiving Reimbursement," dated April 18, 2005, entered in the administrative proceeding by County which provides:
since these medical bills, were discharged through [Plaintiff's] bankruptcy petition, the [Plaintiff] is not required to make reimbursement payments to Minidoka *282 County for the medical charges on his behalf.
IT IS THEREFORE ORDERED THAT Minidoka County does hereby waive reimbursement by the [Plaintiff]. However, Minidoka County has secured this debt with a lien against the [Plaintiff's] real property.
Ex. H, Docket No. 24.
Because neither County nor CRMC were attempting to collect the medical debt as a personal liability of Plaintiff, they did not violate § 524(a)(2) by resuming the administrative hearings after Plaintiff received his discharge.
Conclusion
For the reasons stated above, based upon this record, it appears County retains a valid lien on Plaintiff's real property. In addition, the Court declines to hold that Idaho Code § 31-3504 is unconstitutional on its face or as applied in this case. Finally, it appears that neither County nor CRMC violated § 524(a)(2) by continuing the administrative hearings after Plaintiff received his discharge.
Plaintiff's motion for summary judgment, Docket No. 20, will be denied by separate order. Defendants have not sought summary judgment. However, based upon the Court's review of the record, it would appear that no genuine issue of material fact remains for trial, and that Defendants may be entitled to summary judgment. Ordinarily, a court cannot grant summary judgment sua sponte "without giving the losing party ten days' notice and an opportunity to present new evidence, `[however, a court] may grant summary judgment without notice if the losing party has had a full and fair opportunity to ventilate the issues involved in the motion.'" Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1431, 1439 (9th Cir.1995) (quoting United States v. Grayson, 879 F.2d 620, 625 (9th Cir.1989)). To ensure that Plaintiff has been fully heard on the issues, the Court's order shall afford Plaintiff an opportunity to show cause why summary judgment in favor of Defendants dismissing this action should not be entered.
NOTES
[1] To the extent required by rule, this Memorandum constitutes the Court's findings of fact and conclusions of law. Fed. R. Bankr.P. 7052.
[2] Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all rule references are to the Federal Rules of Bankruptcy Procedure, Rules XXXX-XXXX.
[3] At oral argument, counsel for County acknowledged that the actual amount of the lien was not formally determined during the administrative benefit determination process. However, as of the bankruptcy date, all of the medical bills and the applicable Medicaid reimbursement rates were fixed. Thus, County explained, the amount of the lien could have been determined by a simple mathematical formula.
[4] The Fourteenth Amendment provides, in part: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law[.]" U.S. CONST. amend. XIV, § 1.
[5] The Supreme Court has indeed held that "temporary or partial impairments to property rights that attachments, liens, and similar encumbrances entail are sufficient to merit due process protection." Connecticut v. Doehr, 501 U.S. 1, 12, 111 S. Ct. 2105, 115 L. Ed. 2d 1 (1991).
[6] Since in this case, Plaintiff's property rights were impaired only because County approved his application, this statutory right to judicial review would not protect him. However, under the former version of Idaho Code § 31-3505, the Idaho appellate courts have treated decisions concerning indigent medical assistance in the same fashion as those rendered by a state administrative agencies, enabling any aggrieved party to request that the state district court review a county's decision in the manner provided by Idaho's Administrative Procedures Act, Idaho Code § 67-5201 et seq. See Intermountain Health Care, Inc. v. Board of County Comm'rs, 107 Idaho 248, 688 P.2d 260, 263 (Ct.App.1984), rev'd on other grounds, 109 Idaho 299, 707 P.2d 410 (1985); Univ. of Utah Hosp. v. Minidoka County, 120 Idaho 91, 813 P.2d 902, 906 (1991).
[7] Immediately above the applicant signature lines, the application provided: "I/we understand that the county may place a lien on my/our property and that I/we will be required to reimburse the county for any expense which I/we have requested or has been requested on my/our behalf." Ex. C, Docket No. 22.
[8] Had the application for assistance been filed by CRMC or some other third party, then perhaps Plaintiff's argument would be stronger. However, as that is not the case here, the Court declines to engage in that analysis. Even so, the Court observes that while the statute allows a "third party" to execute and file an application for assistance with the county, it requires that the third party sign the application under oath "on the applicant's behalf" and "in the same form and manner" as required for a patient's application. Idaho Code § 31-3504(1), (2); see also Idaho Code § 31-3505(5) (providing that "[a]ny application... which fails to meet the provisions of chapter, shall be denied.") Presumably, to constitute a valid application, a third party would be compelled to demonstrate some lawful basis to act in the patient's stead, for example, under an appointment or by law as a condition to any payment by the county.
[9] The automatic stay was designed, in part, to shield the debtor from the financial pressure of his creditors during the pendency of the bankruptcy proceeding. Stringer v. Huet (In re Stringer), 847 F.2d 549, 551 (9th Cir.1988) (citing H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 340 (1977), reprinted in 1978 U.S.Code Cong. & Admin. News 5963, 6296-97). On the other hand, "[t]he purpose of the discharge injunction is to `effectuate one of the primary purposes of the Bankruptcy Code, to afford the debtor a financial fresh start.'" Garske v. Arcadia Financial, Ltd. (In re Garske), 287 B.R. 537, 542 (9th Cir. BAP 2002) (quoting Cherry v. Arendall (In re Cherry), 247 B.R. 176, 182 (Bankr.E.D.Va.2000)). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542344/ | 947 A.2d 771 (2008)
RECREATION LAND CORPORATION and Treasure Lake Property Owners Association, Inc., Appellees
v.
M. Imogene HARTZFELD and Thomas Hartzfeld, Appellants.
No. 881 WDA 2007.
Superior Court of Pennsylvania.
Argued January 15, 2008.
Filed April 18, 2008.
*772 Mitchel B. Zemel, Homestead, for appellants.
Michael P. Yeager, Clearfield, for appellees.
BEFORE: LALLY-GREEN, PANELLA, and TAMILIA, JJ.
OPINION BY LALLY-GREEN, J.:
¶ 1 Appellants, M. Imogene Hartzfeld and Thomas Hartzfeld, appeal from the order entered on April 17, 2007, directing them to remove a dog pen from a parcel of property. We affirm.
¶ 2 The trial court set forth the factual and procedural history of the case as follows:
This case concerns a Complaint for Injunctive Relief on behalf of Recreation Land Corporation (RLC) and the Treasure Lake Property Owners Association (TLPOA) for the removal of a dog pen erected by M. Imogene Hartzfeld, now joined by Thomas Hartzfeld (Hartzfeld). Hartzfeld raises a defense of Adverse Possession.
FACTS
This action is the latest in a series of litigious actions between Defendant and Plaintiff stretching back to 1987.
[ . . . ]
The dog pen sits on a strip of property (the disputed property) approximately 150 ft. wide between the lot owned by Hartzfeld (Lot No. N-11-A) and Treasure Lake, all located in Sandy Township, Clearfield County, Pennsylvania. Title to the disputed property is vested in the TLPOA and title to Lot No. N-11-A is vested in Hartzfeld.
The disputed land as well as Lot No. N-11-A were at one time both owned by John DuBois (DuBois), the original owner of the Treasure Lake Subdivision. In 1958, DuBois conveyed to the parents of Hartzfeld a deed for Lot No. N-11-A. In 1961, DuBois filed the lot block plan for the development that would eventually become Treasure Lake and recorded a document titled "Stipulations and Conditions" the following year. These stipulations and conditions were a set of *773 restrictions on the allowable use of the lots in the lot block plan and included the words "all persons who are owners of lots as set forth in the aforementioned Lot Block Plan, and their invitees, shall have the privilege of using the land surrounding Lake Rene [now Treasure Lake] . . . including the 150' wide strip of land surrounding Lake Rene as owned . . ." In 1968, DuBois amended the stipulations and conditions. Also in 1968, a document entitled "Declaration of Restrictions" was filed by DuBois' successor in interest.
The disputed property is wooded and Hartzfeld has tried to maintain a natural look for the area. It is noted that the Treasure Lake Subdivision as a whole is basically wooded. Defendant has planted some pines along one side of the strip in order to block his view of another house and planted grass in the disputed area. Hartzfeld has also engaged in the maintenance of the area by removing limbs, cutting the grass, removing dead trees, and grading the ground, clearing the brush, and cutting saplings. Additionally, in the disputed area, Hartzfeld as well as two adjacent owners have constructed permanent docks. Hartzfeld uses the ground for boat storage, camping and other recreational activities and has also constructed a dog pen of considerable size.
All attempts at possession by the Defendant satisfy the 21-year time requirement except the dog pen. Defendant has also confronted people on five different occasions about possible trespass onto the disputed property. The first and second were Mr. Mandell and Mr. Curry about the placement of their respective docks in which Hartzfeld felt that the docks were encroaching onto his property (the disputed property) however Hartzfeld ultimately gave them permission. The third was a minor who Hartzfeld told he needed an adult with them in order to fish. The fourth involved Mr. Curry about the removal of a dead tree, to which Hartzfeld also ultimately acquiesced. The last was Mr. Nelson, a contractor that installed a water and sewage line across the disputed property. Hartzfeld initially objected to the placement of the line but ultimately acquiesced. It is Defendant's contention in the current suit that he is the rightful owner of the disputed property, and has acquired legal title through the action of Adverse Possession.
Trial Court Opinion, 3/29/2007, at 1-3.
¶ 3 On March 28, 2007, following a non-jury trial, the trial court ruled in favor of RLC and TLPOA. The court directed Appellants to remove the dog pen, and rejected Appellants' claim of adverse possession. The court reasoned that Appellants failed to prove the "actual" and "exclusive" elements of adverse possession. Appellants filed post-trial motions, which were denied on April 17, 2007. This appeal followed.[1]
¶ 4 Appellants raise two issues on appeal:
1. Did [Appellants] establish that [their] possession of the Disputed Property was "actual", as required by the law of adverse possession?
2. Did [Appellants] establish that [their] possession of the Disputed Property was "exclusive", as required by the law of adverse possession?
Appellants' Brief at iv.
¶ 5 Appellants argue that the trial court erred by ordering them to remove the dog *774 pen, because they owned the land in question through adverse possession.
¶ 6 When reviewing the results of a non-jury trial, we give great deference to the factual findings of the trial court. In re Scheidmantel, 868 A.2d 464, 478-479 (Pa.Super.2005). We must determine whether the trial court's verdict is supported by competent evidence in the record and is free from legal error. Id. For discretionary questions, we review for an abuse of that discretion. Id. For pure questions of law, our review is de novo. Id.; see also Lilly v. Markvan, 563 Pa. 553, 763 A.2d 370, 372 (2000) (an equity court's ruling will not be reversed absent an abuse of discretion, misapplication of the law, or a lack of support in the record for the court's factual findings).
¶ 7 This Court summarized the principles of proving adverse possession as follows:
Adverse possession is an extraordinary doctrine which permits one to achieve ownership of another's property by operation of law. Accordingly, the grant of this extraordinary privilege should be based upon clear evidence. Edmondson v. Dolinich, 307 Pa.Super. 335, 453 A.2d 611, 614 (Pa.Super.1982) ("It is a serious matter indeed to take away another's property. That is why the law imposes such strict requirements of proof on one who claims title by adverse possession.") One who claims title by adverse possession must prove actual, continuous, exclusive, visible, notorious, distinct and hostile possession of the land for twenty-one years. Each of these elements must exist; otherwise, the possession will not confer title.
Flannery v. Stump, 786 A.2d 255, 258 (Pa.Super.2001) (certain citations omitted), appeal denied, 569 Pa. 693, 803 A.2d 735 (Pa.2002). As noted above, the trial court found that Appellants failed to prove that they "actually" or "exclusively" possessed the land on which the dog pen sits.
¶ 8 First, Appellants argue that the court erred by misapplying the law of "actual" possession. Specifically, Appellants contend that the court mischaracterized the land at issue as "woodland," which carries a strict standard for adverse possession.
¶ 9 "In general, actual possession of land means dominion over the property." Bride v. Robwood Lodge, 713 A.2d 109, 112 (Pa.Super.1998). The requirements for "actual" possession of a property will necessarily vary based on the nature of the property. See id. Our case law has developed a rather strict standard for proving adverse possession of woodland. "A person establishes actual possession of a woodland by `residence or cultivation of a part of the tract of land to which the woodland belongs.'" Bride, 713 A.2d at 112, quoting Niles v. Fall Creek Hunting Club, Inc., 376 Pa.Super. 260, 545 A.2d 926, 929 (1988); see also Niles, supra ("substantial" enclosure of woodland may also qualify as "actual" possession under certain circumstances).
¶ 10 The issue of whether a parcel of land is "woodland" appears to be a threshold factual question for the trial court to decide in the first instance. Here, it is undisputed that the land at issue was far less extensive or forested than the land in Bride or Niles. See Bride (disputed area was 18 acres of woodland used for hunting and removing timber); Niles (disputed area was "113.4 acres of undeveloped timberland"). Nevertheless, the trial court did not abuse its discretion in finding that the area at issue was "woodland." The record supports the trial court's finding that disputed property has an extensively wooded character, and is unenclosed.[2]*775 Moreover, it is undisputed that Appellants did not cultivate, significantly enclose, or erect a residence on the parcel at issue. Thus, the trial court did not err by finding that Appellants failed to prove "actual" possession by clear and convincing evidence. Because actual possession is necessary to a finding of adverse possession, the court did not err in rejecting Appellants' adverse possession claim.
¶ 11 Even assuming arguendo that the court did err on the issue of "actual" possession, we would conclude that the court did not err on the issue of "exclusive" possession. In Flannery, this Court summarized the principles of exclusive possession as follows:
[T]he adverse claimant must use the land exclusively for himself. . . . It is well settled that a party claiming title to real property by adverse possession must affirmatively prove that he or she had actual, continuous, distinct, and hostile possession of the land for twenty-one years. Each of these elements must exist, otherwise the possession will not confer title. An adverse possessor must intend to hold the land for himself, and that intention must be made manifest by his act. . . . He must keep his flag flying and present a hostile front to all adverse pretensions. Broadly speaking, actual possession of land is dominion over the land; it is not equivalent to occupancy. Where the possession, at its inception, is permissive, . . . [adverse possession] will not begin to run against the real owner until there has been some subsequent action of disseizin or open disavowal of the true owner's title[.]
Flannery, 786 A.2d at 259-260 (citations omitted, emphasis added).
¶ 12 In the instant case, the record reflects that since at least 1968, the TLPOA has considered the disputed land to be common lakefront property for everyone in the Treasure Lake community to enjoy, including Appellants. Moreover, Appellants knew that the TLPOA, as titleholder to the disputed land, granted permission for Appellants to enjoy the land. Under those circumstances, it was incumbent on Appellants to first openly disavow and challenge TLPOA's title before the adverse possession period could begin to run. Flannery. Here, Appellants never did so. They apparently treated the disputed property as their own, and purported to allow other Treasure Lake residents to use the disputed property, but they never openly challenged and disavowed RLC/TLPOA's title to the land.[3] The trial court did not err in finding that Appellants failed to prove that their possession was exclusive. This claim fails.
¶ 13 Order affirmed.
NOTES
[1] On May 10, 2007, the trial court ordered Appellants to file a concise statement of matters complained of on appeal. Appellants filed a timely concise statement. The trial court did not issue a Rule 1925 opinion. The record contains, however, an opinion filed March 29, 2007, which addresses the matters at issue on this appeal.
[2] Appellants further argue that the Treasure Lake area as a whole is now extensively developed, and that the trial court erred by concluding that "the Treasure Lake Subdivision as a whole is basically wooded." See Trial Court Opinion, 3/29/2007, at 2. In our view, the trial court's characterization of the subdivision as a whole is irrelevant to the issue of whether the particular disputed parcel at issue is woodland.
[3] As the trial court aptly put it, "A man cannot grant to all Pennsylvanians the right of entry into the State Capitol Building and then claim that his possession is exclusive. He is granting a right that they already held." Trial Court Opinion, 3/29/07, at 4. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919525/ | 75 Md. App. 486 (1988)
541 A.2d 1331
ERWIN MENDELSON
v.
HELENE MENDELSON.
No. 1421, September Term, 1987.
Court of Special Appeals of Maryland.
June 9, 1988.
Shelby F. Mitchell (Leonard C. Greenebaum and Sachs, Greenebaum & Tayler on the brief), Chevy Chase, for appellant.
Sue Ann Mahaffey, Rockville, for appellee.
Argued Before GILBERT, C.J., and BLOOM and KARWACKI, JJ.
BLOOM, Judge.
Appellant, Erwin Mendelson, and appellee, Helene Mendelson, were divorced by a decree of the Circuit Court for Montgomery County on 30 March 1977. That decree incorporated but did not merge the separation and property settlement agreement executed by the parties on 14 July 1976, over a year after they separated.
Appellant paid spousal support to appellee, in accordance with their agreement, for approximately 9 years. In November 1985, however, he petitioned the court to terminate or reduce his support obligation because of appellee's "flagrant misconduct." Aggrieved by the circuit court's denial of his petition, appellant brought this appeal. Appellant must remain aggrieved; we shall affirm the circuit court's decision.
Facts
The parties were married in June 1957; they separated in 1975. On 14 July 1976, they entered into a separation and property settlement agreement, which provided, inter alia, that appellant would pay appellee "as alimony Twenty-two Thousand Eight Hundred Dollars ($22,800) annually in twelve (12) equal monthly payments of One Thousand Nine Hundred Dollars ($1,900) payable on the first day of each month...." This contractual spousal support was to be adjusted each August according to cost of living increases as set forth by the Bureau of Labor Statistics of the United States Department of Labor; it was to "cease upon the death of either party or upon the remarriage of the [appellee]." The agreement further stated that the appellee waived "any cause of action she may have to seek additional alimony or change the alimony provisions provided for in this Agreement, provided that the [appellant] does not breach ... [the] Agreement." The final provision concerning the spousal support dealt with the circumstances of how the support could be reduced. The agreement specified that if the appellant became disabled or retired at age 60 or thereafter, "the parties shall attempt to agree on alimony ... payments that are equitable in light of the [appellant's] changed financial resources"; should the parties be unable to reach such an agreement, then "either party may apply to a court of competent jurisdiction for such relief as may be appropriate."
Subsequent to the divorce, appellee met and developed a close relationship with one Manuel Epstein, who moved into appellee's home in 1981. Mr. Epstein pays some of the household expenses and generally maintains the home. Appellee covers the balance of the expenses.
On 22 November 1985, appellant filed a petition to reduce or terminate the contractual spousal support, asserting that a reduction or termination of the support was warranted because appellee's relationship with Epstein constituted a significant change in appellee's financial circumstances, thereby negating appellee's need for the support. In her answer, appellee admitted her relationship with Epstein but denied that the relationship lessened her need for the support or significantly changed her financial situation.
On May 5, 1987, the case came before a Domestic Relations Master. At the conclusion of appellant's case, appellee moved for dismissal, citing the failure of appellant to show a substantial change in financial circumstances. The master's factual findings, based on the evidence presented to him, were that Epstein's contributions were not disproportionate and that but for those extra contributions appellee would probably need an increase in the support, which was precluded by the separation agreement. Consequently, the master recommended dismissal of appellant's petition, stating that appellee's relationship with Mr. Epstein was not "flagrant misconduct" that would require termination or a reduction of the spousal support, nor did the relationship effect a substantial change in appellee's financial circumstances.
Appellant noted exceptions to the master's report and requested a hearing. The court granted a hearing and on 6 July 1987 orally overruled appellant's exceptions and affirmed the master's report. On 5 August 1987, appellant noted an appeal from that oral order. On 7 October 1987, the circuit court issued a written order overruling appellant's exceptions, thereby affirming the master's report. Appellant then noted an appeal from that order.[1]
The "Flagrant Misconduct"/"Change in Financial Condition" Argument
The parties refer us to a trilogy of cases from this Court concerning the kind of conduct that will permit a trial court to terminate or reduce alimony or spousal support. Appellant relies on Atkinson v. Atkinson, 13 Md. App. 65, 281 A.2d 407 (1971), and Roberts v. Roberts, 35 Md. App. 497, 371 A.2d 689 (1977), for his argument that appellee's cohabitation with Epstein constitutes "flagrant misconduct" which permits a trial court to reduce or terminate contractual spousal support. Appellee relies on Meyer v. Meyer, 41 Md. App. 13, 394 A.2d 1220 (1978), cert. denied, 284 Md. 746 (1979), for her argument that her post-divorce cohabitation does not in itself justify reduction or termination of the support, but that such cohabitation may only be considered where it is relevant to a change in her financial condition. Appellee asserts that since, as the master found, no change in her financial condition has taken place, her relationship with Mr. Epstein is irrelevant.
In Atkinson we noted that there was a conflict of authority as to what, if any, post-divorce conduct would justify termination of spousal support, recognizing that in some states "flagrant misconduct" had been held to justify termination, whereas other states had rejected that concept. 13 Md. App. at 71-72, 281 A.2d 407. We found it unnecessary to align Maryland with either faction, since the activities of the recipient of the support, which did not include "living with" another man outside of marriage, did not constitute "flagrant misconduct" in any event. 13 Md. App. at 73, 281 A.2d 407. In Roberts we adopted the suggestion in Atkinson that "flagrant misconduct" could be grounds for terminating post-divorce support, but again found that the alleged misconduct alcoholism did not amount to "flagrant misconduct." 35 Md. App. at 503-07, 371 A.2d 689.
Appellant would have us (1) firmly hold that which we merely suggested in Atkinson and Roberts, that "flagrant misconduct" is a cause for terminating post-divorce support, and (2) determine that, by openly living with Mr. Epstein without benefit of marriage, appellee is guilty of such "flagrant misconduct" as would require the application of that rule. Appellee, however, points to Meyer, in which we, after reviewing the authorities dealing with the question of whether post-divorce sexual conduct would be grounds for terminating alimony, held:
[T]hat alimony, awarded to a wife in a decree of divorce a vinculo matrimonii, may not be terminated or reduced solely because of her unchaste conduct subsequent to the divorce. That post-divorce conduct may, however, be considered when it is relevant to a change in financial condition.
41 Md. App. at 21, 394 A.2d 1220.
It would appear, therefore, that appellee has the better of it. Despite the earlier dicta in Atkinson and Roberts, Meyer flatly held that misconduct alone will not justify termination of alimony, only a change in financial circumstances, which may or may not accompany such misconduct, will require termination or modification of alimony. And, as appellee points out, the master found that there had been no substantial change in financial circumstances and the chancellor accepted that finding. Appellant, of course, asserts that that finding is unsupported by, and contrary to, the evidence.
We need not resolve this dispute. We do not reach it because there is a more fundamental basis for affirming the denial of appellant's petition to terminate or modify support. By providing that their agreement should be incorporated but not merged in the divorce decree, the parties deprived the court of any post-enrollment power to end or diminish the contractual support for any reason not specified in the agreement. We explain.
"Incorporated But Not Merged"
Prior to Johnston v. Johnston, 297 Md. 48, 465 A.2d 436 (1983), and the companion case of Hamilos v. Hamilos, 297 Md. 99, 465 A.2d 445 (1983), it was quite common for counsel drafting separation and property settlement agreements to insert a provision to the effect that in the event of divorce the agreement should be incorporated but not merged into the decree. It was apparently believed that incorporation would make the agreement part of the decree while non-merger would preserve its contractual status. Thus, in the event of a breach, it was thought, the aggrieved party would have the choice of enforcing the decree or suing on the contract. Since such language is still being inserted in separation agreements, we suspect that Johnston has been ignored or misread.
In Maryland, the traditional definition of alimony was court ordered payments to a wife for her support to continue during the joint lives of both husband and wife and so long as the parties live separate and apart. Bebermeyer v. Bebermeyer, 241 Md. 72, 215 A.2d 463 (1965); Blades v. Szatai, 151 Md. 644, 135 A. 841 (1927); Hood v. Hood, 138 Md. 355, 113 A. 895 (1921); Newbold v. Newbold, 133 Md. 170, 104 A. 366 (1918); McCaddin v. McCaddin, 116 Md. 567, 82 P. 554 (1911); Wallingsford v. Wallingsford, 6 H. & J. 485 (1823). This traditional definition was modified by the passage of the Maryland Equal Rights Amendment, Md. Const. Decl. of Rights art. 46, thereby eliminating the gender bias stated in the traditional definition. Consequently, alimony may now be awarded to either spouse. See, Hofmann v. Hofmann, 50 Md. App. 240, 437 A.2d 247 (1981). See also, Md.Fam.Law Code Ann. § 11-101(b) (1984, 1987 Cum.Supp.) ("The court may award alimony to either party"). By virtue of Md.Fam.Law Code Ann. § 11-106(a), alimony may be awarded for a limited period of time and need not continue indefinitely during the joint lives of the parties or until the remarriage of the recipient. Cf. Md.Fam.Law Code Ann. § 11-106(c) (authorizing a court to award alimony for an indefinite period upon making certain factual findings).
The courts of Maryland have always recognized a distinction between alimony (sometimes referred to as "technical alimony"), which the court is empowered to award, and contractual spousal support which the court could not grant but for the agreement of the parties. See, Bellofatto v. Bellofatto, 245 Md. 379, 226 A.2d 313 (1967); Bebermeyer v. Bebermeyer, 241 Md. 72, 215 A.2d 463 (1965); Schroeder v. Schroeder, 234 Md. 462, 200 A.2d 42 (1964); Dickey v. Dickey, 154 Md. 675, 141 A. 387 (1928). The parties may, of course, agree upon the amount, duration, and method of payment of spousal support, and the court may, but need not, accept, adopt, and incorporate the agreement and make it part of the judgment or decree of divorce. If the agreed upon spousal support meets the definition of alimony, that is, if the court would have had the power to make that award absent the agreement, the award is technical alimony when the agreement is made part of the decree. But if the support provisions of the decree do not meet the technical definition of alimony, i.e., if its terms are such that the court could not have awarded it but for the agreement, the provision remains contractual support even if it is made part of the decree. See, Bebermeyer v. Bebermeyer, 241 Md. at 77, 215 A.2d 463; Dickey v. Dickey, 154 Md. at 678-79, 141 A. 387.
This distinction between technical alimony and contractual spousal support was far more important formerly than it is today. Prior to 1950, an agreement to pay spousal support that was made part of the divorce decree but did not qualify as technical alimony could be enforced by sequestration, execution, and attachment, see, Reichhart v. Brent, 247 Md. 66, 230 A.2d 326 (1967), but not by imprisonment for contempt. Such support was a debt imposed by contract rather than a duty imposed by judicial decree. See, Dickey v. Dickey, 154 Md. at 681, 141 A. 387. Furthermore, such contractual support, being purely contractual and not technical alimony, could not be modified by the court. Soldano v. Soldano, 258 Md. 145, 146, 265 A.2d 263 (1970) (per curiam); Bellofatto v. Bellofatto, 245 Md. at 385-86, 226 A.2d 313; Bebermeyer v. Bebermeyer, 241 Md. at 77-78, 215 A.2d 463; Dickey v. Dickey, 154 Md. at 678, 141 A. 387.
The first of these distinctions between technical alimony and contractual spousal support was blurred in 1950 by the adoption of an amendment to the Maryland Constitution, Md. Const. art. III, § 38, which now provides:
No person shall be imprisoned for debt, but a valid decree of a court of competent jurisdiction or agreement approved by decree of said court for the support of a spouse or dependent children, or for the support of an illegitimate child or children, or for alimony (either common law or as defined by statute), shall not constitute a debt within the meaning of this section.
The second distinction was largely obliterated by Md. Fam.Law Code Ann. § 8-103(b), by virtue of which even contractual spousal support that is not technical alimony is subject to modification by the court, unless the agreement between the parties expressly provides otherwise.
Despite the amended language of article III, § 38 and that of § 8-103(b) of the Family Law Code, unless the separation agreement is made part of the divorce decree, it cannot be enforced by imprisonment for contempt. There being no order to pay the support, failure to pay would merely be a breach of contract and not contemptuous disobedience of a court order. Likewise, if the agreement for spousal support is not made part of the decree or judgment of divorce, once the decree is enrolled the court no longer has any continuing jurisdiction over it that would enable the court to modify the agreement. See, Md.Rule 2-535. See also, Platt v. Platt, 302 Md. 9, 485 A.2d 250 (1984).
With those general principles in mind, we now turn to what the Court of Appeals said in Johnston v. Johnston, 297 Md. 48, 465 A.2d 436 (1983), about the effect of incorporating an agreement for spousal support into a divorce decree without merging it into the decree.
Johnston dealt with the question of whether a separation agreement that was incorporated but not merged in a divorce decree may be collaterally attacked. In holding that such a separation agreement was not subject to collateral attack, the Court discussed at length the significance of "incorporation" and "merger." The terms standing alone, according to the Johnston Court, have very different meanings. "Incorporation" will be construed so as to mean that the court will identify the separation agreement and approve it as valid. "Merger," on the other hand, means the substitution of rights and duties under the divorce decree for those under the separation agreement. Where a separation agreement recites that it is to be incorporated into the decree and no mention is made of merger, a merger will take place and the rights and duties of the separation agreement will merge and become part of the court's decree. When this occurs, the separation agreement, now the court's decree, is enforceable through contempt proceedings and may be modified by the court.[2] If, however, a separation agreement is incorporated but not merged, then the separation agreement is not superseded by the decree. In that instance, the agreement survives as a separate and independent contractual arrangement between the parties, 297 Md. at 56, 465 A.2d 436, but not being part of the decree, its terms cannot be enforced by way of contempt proceedings. Whether the court can modify it is a matter left to the agreement itself. Md.Fam.Law Code Ann. § 8-103.
In the case sub judice, we are confronted with a separation agreement that, by its terms, was incorporated but not merged into the divorce decree. What that means, according to Johnston, is that the court identified that agreement, approved its terms, and determined it to be valid. By thus conclusively establishing the validity of the agreement, the divorce decree precludes any collateral attack against it by either party. 297 Md. at 66, 465 A.2d 436. Not having been made part of the decree itself, however, the agreement remained a separate and independent contractual arrangement between the parties and, as a consequence, it could not be enforced by contempt proceedings.
We are not here concerned with enforceability of the agreement, but with whether it may be modified by the court. That is the question to which we now turn.
We note first that the agreement stated that appellant was to make payments to appellee, "as alimony," on a monthly basis. These payments were to cease upon the death of either party or upon the remarriage of the appellee. By agreeing to these payments, the appellee waived any cause of action she might have had to seek additional "alimony" or change the "alimony" provisions provided for in the agreement, provided appellant did not breach his agreement to make such payments. The only modification permitted by the agreement relative to the "alimony" payments would be by the appellant, if he became disabled or retired at age 60 or thereafter. Upon one of those two occurrences, the parties are obliged to try to agree on a modification of the support payments. If the parties are unable to agree, then, and only then, may one of them ask a court to modify the support payments. These modification provisions essentially render the separation agreement sub judice non-modifiable by a court at this time, there being no claim of disability or retirement. Appellee may not seek to modify the terms of the agreement under any conditions, having waived any right to obtain an increase in alimony for any reason. Appellant, in turn, has waived all right to seek a reduction unless he becomes disabled or retires, at age 60 or thereafter. And even upon the occurrence of one of those eventualities, no court modification can be obtained until after the parties fail to reach an agreement concerning modification. In sum, although the agreement does provide that it can be modified upon the happening of certain contingencies, appellant cannot rely on the agreement itself as authorizing a modification because none of those contingencies has occurred. Nor can he rely upon an argument that the court has the authority, under § 8-103(b) of the Family Law Code, to modify the provisions of the agreement because the agreement does not contain a specific statement that its provisions with respect to support "are not subject to any court modification." Because the agreement was not merged into the decree, the circuit court that issued that decree lost its continuing jurisdiction over it and thus any power to modify it when the decree became enrolled.
Finally, the power of the court to terminate alimony pursuant to Md.Fam.Law Code Ann. § 11-108[3] is not present in this case because what is called alimony in the separation agreement is not alimony. Just because a separation agreement calls payments to an ex-spouse "alimony" does not make them so. See, Schroeder v. Schroeder, 234 Md. 462, 200 A.2d 42 (1964); Newbold v. Newbold, 133 Md. at 175, 104 A. 366. The payments as provided for in the separation agreement are simply contractual spousal support payments and not alimony because (1) the contractual support terms do not come within the definition of alimony; and (2) the court did not order the payment of support. The circuit court, therefore, had no power to modify or terminate the support payments based upon any traditional concept of continuing equitable jurisdiction or upon any provision of the Family Law Code. And, as discussed supra, appellant has no contractual right to such a modification. Although separation agreements are expressly sanctioned by statute, Md.Fam.Law Code Ann. § 8-101, such an agreement between spouses is, after all, nothing more than a contract. It is subject to the same general rules that govern all contracts, and particular questions related to the agreement must be resolved by reference to the particular language of the separation agreement. See, Eigenbrode v. Eigenbrode, 36 Md. App. 557, 373 A.2d 1306 (1977); Pumphrey v. Pumphrey, 11 Md. App. 287, 273 A.2d 637 (1971). As in any contract, the words of a separation agreement are to be given their ordinary meaning. Payne v. Payne, 73 Md. App. 473, 534 A.2d 1360 (1988). And the plain, unambiguous, and clear language of this agreement precludes modification of support payments at this time.
As for the termination of the contractual spousal support, the separation agreement states that the support shall terminate upon the death of either party or upon the remarriage of appellee. This language, too, is plain and unambiguous. Since neither death nor appellee's remarriage has occurred, the termination provisions have not been activated. Appellant argues that appellee has lived with Mr. Epstein for six years in a relationship that has all the attributes of marriage. The problem with that assertion is that a relationship with "all the attributes of marriage" does not amount to marriage. Marriage, within the meaning of the plain language of the separation agreement, means undergoing a ceremony and obtaining a marriage license. See, Md.Fam.Law Code Ann. § 2-401. Appellee and Mr. Epstein have not complied with these legal requirements for marriage. Furthermore, it is firmly settled that Maryland does not permit common law marriages to be formed within its borders. Henderson v. Henderson, 199 Md. 449, 87 A.2d 403 (1952); Townsend v. Morgan, 192 Md. 168, 63 A.2d 743 (1949); Mitchell v. Frederick, 166 Md. 42, 170 A. 733 (1934); Goldin v. Goldin, 48 Md. App. 154, 426 A.2d 410, cert. denied, 290 Md. 714 (1981); Jennings v. Jennings, 20 Md. App. 369, 315 A.2d 816, cert. denied, 271 Md. 738 (1974). Since appellee has not remarried, the court did not err in refusing to terminate the contractual spousal support.
In summary, an agreement for spousal support that is not merged into the divorce decree remains entirely contractual and passes beyond the court's power to modify it for any reason other than one provided for in the contract once the decree is enrolled. And the agreement between the parties to this case cannot be modified or terminated because the contingencies that would authorize modification or termination have not occurred. Appellant complains that if this is the result the agreement is unconscionable as it permits appellee to receive spousal support and enjoy all the benefits of her relationship with Mr. Epstein. We do not think this situation is unconscionable. The master specifically found that Mr. Epstein's monetary contributions to appellee were not inordinate and that but for Mr. Epstein's contributions appellee would have had to ask for increased support, which she was prohibited from doing by the express terms of the separation agreement, in order to maintain the standard of living she formerly enjoyed. Mr. Epstein's monetary contributions are merely filling the void that an increase in the contractual support would have filled. While we can understand appellant's plight, the facts remain that he negotiated and freely entered into the terms of the separation agreement; the validity of that agreement has been judicially affirmed, Johnston v. Johnston, supra; and appellant will not be heard to challenge the agreement or any of its provisions at this late date.[4]
JUDGMENT AFFIRMED.
COSTS TO BE PAID BY APPELLANT.
NOTES
[1] In his brief, appellant asserts that this appeal is really two appeals proceeding simultaneously on the same record. That is an incorrect characterization. This appeal is from the 7 October 1987, written order as the 6 July 1987 ruling did not constitute a final judgment. While it is true that a court's oral order and a docket entry may constitute a final appealable judgment if no further action is contemplated by the trial court, Doehring v. Wagner, 311 Md. 272, 533 A.2d 1300 (1987), this is not the situation as regards the 6 July 1987 ruling. The docket entry for the July 6 hearing notes that the circuit court overruled appellant's exceptions and that the status of the case was "open." This open status indicates that further action by the court was contemplated and thus negates any inference that the court's oral ruling and docket entry constituted a final judgment. Therefore, the filing of the appeal from the 6 July 1987, ruling was premature; and since the filing of a premature appeal does not divest the trial court of jurisdiction, Makovi v. Sherwin-Williams Co., 311 Md. 278, 533 A.2d 1303 (1987), the trial court retained authority and its written order of 7 October 1987, constituted the final appealable judgment.
[2] Spousal support may be fixed by a separation agreement that expressly provides the support is non-modifiable. Md.Fam.Law Code Ann. § 8-103(b). If such an agreement is merged into a divorce decree, the court may enforce it by contempt proceedings but may not modify it.
[3] Unless the parties agree otherwise, alimony terminates:
(1) on the death of either party;
(2) on the marriage of the recipient; or
(3) if the court finds that termination is necessary to avoid a harsh and inequitable result.
[4] We note that a different result might have been reached if the agreement had contained a provision to the effect that the spousal support would terminate if the appellee entered into a "marriage-type arrangement," which may be characterized by
a common residence which each party regards as his or her own home, a common household to which each contributes, and a personal relationship that is more than casual and has significant meaning to each. These things are measured, of course, by living arrangements, by shared assets and expenses, and by how the parties and the community view their relationship.
Fisher v. Fisher, 75 Md. App. 193, 540 A.2d 1165 (1988). Appellee's relationship with Mr. Epstein arguably could qualify as such a "marriage-type arrangement." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542334/ | 947 A.2d 464 (2008)
ESTATE OF Leonard RALEIGH, Appellant,
v.
Lawrence R. MITCHELL, et al., Appellees.
Lawrence Mitchell, et al., Appellants,
v.
Estate of Leonard Raleigh, et al., Appellees.
Nos. 03-CV-221, 03-CV-396, 03-CV-1263.
District of Columbia Court of Appeals.
Argued November 3, 2004.
Decided May 8, 2008.
*467 St. John Barrett, Washington, for appellant and appellee Estate of Leonard Raleigh.
Daniel S. Roth, Washington, with whom Kurt Berlin was on the brief, for appellees and appellants Lawrence Mitchell and Aida Bastida.
Michael C. Mace, with whom Wayne F. Cyron was on the brief, for appellees E & G Investment Services and Edgar E. Gramajo.
Roger S. Mackey for appellee St. Paul Mercury Insurance Company.
Before REID, Associate Judge, and WAGNER[*] and FERREN, Senior Judges.
WAGNER, Senior Judge:
In appeal number 03-CV-221, appellant, the Estate of Leonard Raleigh, appeals from an order of the trial court granting summary judgment for appellees, Lawrence Mitchell, Aida Bastida, E & G Investment Services, Inc. and Edgar E. Gramajo, on the ground that the estate is not the legal owner of the real property that is the subject of this action and has no standing to sue on causes of action related to the ownership of the property. The estate argues that the trial court erred in failing to allow it to substitute the real party in interest and in awarding attorney's fees and costs to appellees. In appeal number 03-CV-396, Mitchell and Bastida appeal from an order of the trial court refusing to grant it judgment on the estate's personal representative's surety bond. We affirm the decision of the trial court granting summary judgment and denying judgment on the surety bond. We reverse the trial court's order awarding attorney's fees.
I.
The Raleigh Estate argues that the trial court erred in granting the appellees' motion for summary judgment. Specifically, it contends that the trial court erred (1) in concluding that the Raleigh Estate had no standing to sue in its own right for real property titled in the name of the Atlanta Corporation and (2) in denying the estate the opportunity to substitute the corporation, which the court considered to be the real party in interest, as a party plaintiff. Appellees respond that the trial court properly granted them summary judgment because, even assuming that the Raleigh Estate could prove that the decedent owned all of the shares of the Atlanta Corporation at the time of his death, it would have no legal entitlement to any corporate asset. They contend that "piercing the corporate veil," the sole legal theory advanced by the Raleigh Estate in support of its claims, is not available to shareholders as a means of assuming individual rights to corporate assets.[1]
*468 A. Background/Standing Issue
In its fourth amended complaint, the Raleigh Estate sued the Atlanta Corporation, the appellees, and others to quiet title to certain real property in the District of Columbia, which it contended that the decedent owned at the time of his death, but had recorded in the name of the Atlanta Corporation.[2] The complaint stated that the properties were subject to deeds of trust held by appellees, Ana Mitchell and Aida Bastida, and that the trustees on one or more of the deeds of trust were Lawrence Mitchell, Richard Bruce Mitchell and C. Barry Mitchell. The estate alleged that foreclosure sales related to the properties were defective or improper and should be set aside. It also asserted that the Atlanta Corporation's corporate charter had been revoked and that its registered agent was deceased. Appellees filed a motion for summary judgment in which they acknowledged as undisputed that the subject real property was titled in the name of Atlanta Corporation, noted that the estate did not claim to be subrogated to the corporation's position, and argued that the estate had no claim to the properties or any cause of action pertaining to them. They also filed the supporting affidavit of Lawrence Mitchell, a professional title examiner, in which he averred that: he had handled several real property transactions for Atlanta Corporation in which Leonard Raleigh acted as agent or officer of the corporation in the 1980s and 1990s; that Raleigh provided him with a copy of Atlanta's Articles of Incorporation, which Mitchell verified were on file through the District's public records; that payment on the loans secured by Atlanta's real property were in default by November 1996; and, that the public records reflected that the corporation was in good standing during the years that the transactions occurred and in early 1997.[3] The trial court rejected as inapplicable the estate's "alter ego" theory by which it sought on behalf of the decedent as a corporate shareholder to pierce the corporate veil. Therefore, it determined that the estate had no standing to sue on behalf of the corporation and that the Atlanta Corporation would be the proper party plaintiff in the action.[4]
There is no dispute that all of the real property in which the estate claimed an interest was titled and recorded in the name of the Atlanta Corporation and remained so at the time of decedent's death. *469 The estate's theory in the trial court was that the corporation was the alter ego of Leonard Raleigh, or at least, there was a genuine material issue in dispute concerning that fact. As factual support for this claim, the estate relied on evidence that Raleigh maintained a bank account in the name of "Leonard Raleigh d/b/a Atlanta Corporation and that Lawrence Mitchell," one of the trustees on one or more of the deeds of trust wrote the attorney for the estate a letter in which he stated that
I have known the late Mr. Raleigh since the late 1980s and dealt with him through his corporation, the Atlanta Corporation. On at least one or more occasions I questioned him as to the stock of Atlanta Corporation and his response was that he was the sole owner and did not intend to have any partners in the said corporation.
Appellees argue that even assuming that this evidence was sufficient to establish that Raleigh owned all of Atlanta's corporate stock, the estate as his successor would not have a direct interest in the corporation's properties that were lost at foreclosure that would entitle it to sue as owner.
B. Applicable Legal Principles
"`The general rule is that a corporation is regarded as an entity separate and distinct from its shareholders.'" Lawlor v. District of Columbia, 758 A.2d 964, 975 (D.C.2000) (quoting Vuitch v. Furr, 482 A.2d 811, 815 (D.C.1984)). "[I]t is well established that because of the separate legal existence of a corporation, the corporate property is vested in the corporation itself and not the stockholders. . . ." Office of People's Counsel v. Public Serv. Comm'n of the District of Columbia, 520 A.2d 677, 681-82 (D.C.1987) (citation and internal quotation marks omitted). "Even if stock ownership is concentrated in the hands of one person, it does not alter the fact that title to the corporate property is vested in the corporation and not in the owner of its stock." Id. at 682 (citations omitted). Applying these principles in Office of People's Counsel, this court held that a corporation that owned all of the stock of its three wholly owned subsidiaries, which in turn owned numerous taxicabs, was not the legal owner of the vehicles. Id. at 682.[5] The reasons for the general rule precluding shareholders from suing individually to redress a corporate right are to avoid multiple suits, to prevent a bar to the corporation's right of action, and to ensure that any damages recovered will be available to the corporation's creditors and any other shareholders. 12B WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 5910 (perm.ed., rev.vol.2000) ("FLETCHER"); see Office of People's Counsel, 520 A.2d at 682 (noting that even if the corporation went bankrupt, the sole shareholder would have no legal right to the corporation's assets, but only a right to share in the proceeds of liquidation). It is the corporate directors, and not its shareholders, who have the authority to manage the corporation, including decisions to litigate on behalf of the corporation. Behradrezaee v. Dashtara, 910 A.2d 349, 354 (D.C.2006) (citing Flocco v. State Farm Mut. Auto. Ins. Co., 752 A.2d 147, 151 (D.C.2000) and D.C.Code § 29-101.04(2) (2001) formerly D.C.Code § 29-304(2) (1981) (providing that a corporation has the power "[t]o sue and be sued, complain *470 and defend, in its corporate name. . . .")) (other citation omitted).[6]
C. Analysis
It is undisputed that the title to the real property out of which the estate makes its claims was titled at the relevant time in the name of the Atlanta Corporation. Under the circumstances, the foregoing authorities support appellees' position that the estate would have no legal right to the individual assets owned by the corporation merely because its decedent was a shareholder or even the sole shareholder in Atlanta. See Office of People's Counsel, supra, 520 A.2d at 682. The corporation's property is vested in the corporation and not its individual shareholders. Id. at 681-82. The authority to sue to redress the alleged wrongs related to the foreclosures upon Atlanta's real property also belongs to the corporation, not to the individual shareholder. See Behradrezaee, supra, 910 A.2d at 354. Since the estate had no legal interest in the real property belonging to the corporation, it could not sue individually to redress any alleged wrongs against the corporation's property interests.[7]
Having not chosen to pursue a derivative action,[8] the estate sought in the trial court to proceed on the theory that the Atlanta Corporation was Raleigh's alter ego. Courts apply the "alter ego" theory "to cast aside the corporate shield and fasten liability on the individual shareholder," when substantial ownership of corporate stock is concentrated in one person or a few persons and other factors support disregarding the corporate entity in the interest of equity and fairness. 1 WILLIAM MEADE FLETCHER, ET AL., FLETCHER CYCLOPEDIA OF THE LAW OF CORPORATIONS § 41.35 (perm.ed., rev.2006). Thus, this theory appears in cases where a party seeks to pierce the corporate veil and impose liability upon the corporation's shareholders. See, e.g., Bingham v. Goldberg. Marchesano, Kohlman, Inc., 637 A.2d 81, 92 (D.C.1994). Generally, the corporate entity will be respected, but a party may be permitted to pierce the corporate veil upon proof "`that there is (1) unity of ownership and interest, and (2) use of the corporate form to perpetrate fraud or wrong,'" or "other considerations of justice and equity" justify it. Id. at 93 (quoting Vuitch, supra, 482 A.2d at 815 (internal quotation marks omitted)). In determining whether the corporation *471 is the alter ego of its shareholders, the court will consider various factors, such as "(1) whether corporate formalities have been disregarded, (2) whether corporate funds and assets have been extensively intermingled with personal assets, (3) inadequate initial capitalization, and (4) fraudulent use of the corporation to protect personal business from the claims of creditors." Id. (citing Vuitch, 482 A.2d at 816) (reversing the imposition of personal liability upon a shareholder where the evidence failed to establish these elements); accord Flocco, supra, 752 A.2d at 155 (citation omitted) (affirming dismissal of a party's complaint seeking to pierce the corporate veil where there were no allegations of inadequate capitalization of the corporation, failure to observe various corporate formalities, or commingling of funds).
In this case, the estate sought to use the "alter ego" theory to pierce the corporate veil of Atlanta, not to impose shareholder liability, but in an effort to claim that Raleigh, the majority shareholder, owned in his individual capacity the real property titled in the name of Atlanta Corporation. Since it is equitable in nature, "the [alter ego] doctrine can be invoked `only where equity requires the action to assist a third party.'" McCarthy v. Azure, 22 F.3d 351, 362-63 (1st Cir.1994) (quoting 1 FLETCHER, supra, at § 41.10) (other citations omitted). "`The ultimate principle is one permitting its use to avoid injustice.'" United States v. Andrews, 330 U.S.App. D.C. 420, 427, 146 F.3d 933, 940 (1998) (quoting Quinn v. Butz, 166 U.S.App. D.C. 363, 379, 510 F.2d 743, 759 (1975)); Lawlor, supra, 758 A.2d at 975 (quoting Vuitch, supra, 482 A.2d at 815) (explaining that piercing the corporate veil requires, inter alia, evidence of "use of the corporate form to perpetuate fraud or wrong"). The estate's decedent is not in the position of an innocent third party requiring invocation of the alter ego doctrine to avoid an injustice resulting from someone else using the corporate form. Where the person seeking to pierce the corporate veil "is himself the one who is claimed to have obscured the line, he cannot be permitted to use the alter ego designation to his own behoof." McCarthy, 22 F.3d at 363; see Andrews, supra, 330 U.S.App. D.C. at 427, 146 F.3d at 940 (holding that the sole shareholder "cannot don the mantle of an innocent party in order to pierce the cloak of his own fraud").
Moreover, the estate provided little, if any evidence, in support of its motion for summary judgment that the corporation was Raleigh's alter ego. For example, it did not offer evidence that Atlanta Corporation disregarded corporate formalities, that there was extensive intermingling of corporate assets with Raleigh's personal assets, that capitalization was inadequate, or that Raleigh fraudulently used the corporation to protect his business from creditor's claims. See Bingham, supra, 637 A.2d at 93 (citation omitted) (listing such factors for consideration in determining viability of alter ego theory). The estate pointed to only one bank account for which Raleigh listed himself as doing business as Atlanta Corporation. Absent is evidence of the remaining factors. Under the circumstances, the trial court properly concluded that the estate, as Raleigh's successor in interest, could not rely on the alter ego theory to assert ownership of Atlanta Corporation's assets and pursue in its individual capacity a cause of action belonging to the corporation.
Super. Ct. Civ. R. 17(a) provides, in pertinent part:
Every action shall be prosecuted in the name of the real party in interest. . . . No action shall be dismissed on the *472 ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.
In applying this rule, this court has stated "that an action should not be dismissed without a fair opportunity to substitute the real party in interest." Duckett v. District of Columbia, 654 A.2d 1288, 1290 (D.C. 1995); see id. at 1291 (reversing the trial court's decision dismissing an action for lack of standing because it "fail[ed] to provide the plaintiff with an opportunity to substitute herself as personal representative [of her son's estate] as the real party in interest").[9] The estate contends here that the trial court violated Rule 17(a)'s mandate by failing to provide it the opportunity to substitute Atlanta Corporation as the plaintiff. Appellees argue that the trial court properly denied the estate's request to substitute the Atlanta Corporation as plaintiff, which the estate first made in its motion to reconsider the court's order granting summary judgment, because a reasonable time had long since expired, and the estate still had filed no motion for leave to amend the complaint or submitted a proposed new pleading.
The trial court did not provide reasons for its order denying the estate's motion for reconsideration and request for an opportunity to substitute the Atlanta Corporation as the real party in interest. Appellees argue that Rule 17(a) was intended to avoid dismissal at the beginning of the litigation when determination of the proper party is difficult or an honest mistake.[10] They point out that the trial court's order granting summary judgment for lack of standing came some thirty-four months after the estate filed its initial complaint and was rejected because the alter ego theory it pursued was not viable. They also contend that they challenged the estate's standing in motions to dismiss the first amended complaint and in answer to each amended complaint as an affirmative defense.
At least in answer to the second amended complaint, appellee Lawrence Mitchell asserted as a defense that the estate lacked standing to bring the action. That answer was filed some twenty-nine months before the trial court granted appellees summary judgment based upon the estate's lack of standing.[11] The estate itself apparently recognized Atlanta's legal interest in the subject real property. In each of its complaints, the estate named Atlanta Corporation as a party defendant *473 and asserted that the property was titled in the corporation's name. However, appellant chose to pursue its own interest on an alter ego theory. Only after its legal theory proved to be unsuccessful and summary judgment was entered for appellees did the estate seek to secure the benefit of substitution of the real party in interest under Rule 17(a). However, the estate did not claim in its motion for reconsideration whether or how it intended to proceed to secure authority to act on behalf of the corporation.[12] Rule 17(a) indicates that an action should not be dismissed because it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed for substitution of that party. Duckett, supra, 654 A.2d at 1290 (citing Jaramillo v. Burkhart, 999 F.2d 1241, 1246 (8th Cir.1993)). On the unique facts of this case, appellees' arguments that more than a reasonable time had been allowed for the estate to substitute the proper party plaintiff in the action and that the case was dismissed because the estate could not prevail on the legal theory that it advanced are persuasive. Under the circumstances, we find no error in the trial court's decision denying appellant's motion for reconsideration requesting that it be permitted to substitute the corporation as party plaintiff. Cf. Duckett, supra, 654 A.2d at 1291 (reversing dismissal for lack of standing where the plaintiff had made an honest error and moved to add the proper party within a reasonable time).[13]
II.
The estate argues that the trial court erred in awarding attorney's fees and costs to appellees. It contends that under the well-established American Rule, parties to litigation must bear their own legal fees and expenses. Appellees respond that several of the secured notes and trust deeds on the foreclosed properties contain contractual attorney fee provisions, which form the basis for their recovery against the estate.
Under the "American Rule," generally, each litigant must bear his or her own attorney's fees and litigation costs. Concord Enter. Inc. v. Binder, 710 A.2d 219, 225 (D.C.1998) (citation omitted). An exception arises when the parties by contract agree that one or the other shall pay such fees and costs. Id. (citing Urban Masonry Corp. v. N & N Contractors, 676 A.2d 26, 33 (D.C.1996)). The applicability of this limited exception to the American Rule will depend upon whether the parties agree to fee-shifting as reflected by the language in the parties' contract. See, e.g., Pellerin v. 1915 16th Street, N.W. Coop. Ass'n, Inc., 900 A.2d 683, 689 (D.C.2006) (holding that a contract provision limiting recovery of attorney's fees to actions instituted by a cooperative association for default by its member was not broad enough *474 to include attorney's fees incurred in defending against the member's representative's suit for breach of contract); Concord Enter., 710 A.2d at 225 (remanding the case to the trial court for a determination of whether attorney's fees and costs claimed fit within the terms of a deed of trust and whether any breach by the lender relieved the borrower of liability for same); Oliver T. Carr Co. v. United Tech. Commc'n Co., 604 A.2d 881, 884 (D.C.1992) (holding that a contract providing for a defaulting purchaser to pay reasonable attorney's fees where seller had to undertake collection efforts did not cover fees for seller's defense of buyer's claims for breach of contract and warranty). Thus, a close examination of any relevant contractual language is required to determine the scope of any claimed fee-shifting provision.
Appellees relied upon the notes and deeds of trust related to two pieces of property identified in the complaint to support their claim for attorney's fees and expenses.[14] First, they relied on an attorney's fee provision in a 1993 note and deed of trust on real property at 1002 Rhode Island Avenue, N.W., securing the indebtedness. The promissory note was executed by Atlanta Corporation, but Raleigh guaranteed its payment. The note provides that "all guarantors hereby agree that in the event this note is placed in the hands of an attorney for collection after a declaration of default they agree to pay all costs of collection, including but not limited to attorneys fees of Fifteen percent." This court has previously rejected the argument that a narrow fee-shifting provision of this type can be read reasonably to support the recovery of attorney's fees incurred by a creditor in defense of a debtor's claims for breach of contract or breach of warranty. See Pellerin, supra, 900 A.2d at 689; Carr, supra, 604 A.2d at 884. The fee provision in Pellerin provided in pertinent part: "If the Lessee [member] shall at any time be in default hereunder, and if the Lessor [association] shall institute an action or summary proceeding against the Lessee based upon such default, then the Lessee will reimburse the Lessor for the expense of attorney's fees. . . ." Pellerin, 900 A.2d at 685 n. 3. This court reasoned in Pellerin that even if the association's defense of the member's breach of contract claim was an aspect of the entire litigation, it was not, as the contract language required for fee-shifting, an action instituted against the member (or her estate) based upon her default.[15]Id. at 689.
The fee provision of the 1993 note in this case is even more narrow than the fee provision in Pellerin, in that here, the language allows recovery of attorney's fees only if the note is placed with an attorney for collection, and it limits those fees to 15% of the amount recovered. The litigation here is not an action placing the note with an attorney for collection because of the borrower's default.[16] Therefore, it does not come within the language of the *475 fee-shifting provision. See Pellerin, supra, 900 A.2d at 689; Carr, supra, 604 A.2d at 884. Limitation of the amount of attorney's fees to a percentage of the amount recovered in a collection action also suggests that the language can not be read broadly to cover the defense of related actions or counterclaims. To the extent that the deed of trust securing the indebtedness incorporates by reference the terms of the promissory note, the incorporated fee provision is subject to the same limitations, and therefore, the deed of trust does not support the award.
There is another impediment to appellees' recovery of attorney's fees based upon the 1993 deed of trust. Only the Atlanta Corporation, which owned the property at the time, executed this deed of trust conveying an interest as security for the loan.[17] While the decedent personally guaranteed repayment of the promissory note, there is no showing that he was a party to the deed of trust or agreed to be bound by its separate covenants and undertakings. Raleigh's estate cannot be held liable for attorney's fees in derogation of the American Rule where its decedent never agreed by contract (here, the deed of trust) to be bound for same. See Carr, supra, 604 A.2d at 884; Kudon, supra note 15, 547 A.2d at 979.[18] Therefore, an award of attorney's fees could not be based upon the 1993 promissory note and deed of trust.[19]
Appellees also rely upon a 1996 promissory note and deed of trust on 1702-10th Street, N.W. securing repayment, both of which Raleigh executed personally.[20] It appears to be undisputed that the 10th Street property passed to the surviving joint tenant upon Raleigh's death by right of survivorship. See Gallimore v. Washington, 666 A.2d 1200, 1203-04 (D.C. 1995) (noting that the surviving joint tenant's interest becomes exclusive upon the other joint tenant's death). Although conceding that the 10th Street property vested in the surviving joint tenant after Raleigh's death, appellees argue that Raleigh remained personally liable on the promissory note, which incorporated by reference *476 the attorney fee provisions found in the deed of trust. The note provides: "If suit is brought to collect on this Note, the Note holder shall be entitled to collect all reasonable costs and expenses of the suit, including, but not limited to, reasonable attorney's fees." Again, this language is limited in scope to costs and expenses, including attorney's fees, of a collection suit brought for nonpayment of the note. As such, it is similar to the language in the cases discussed previously, which have rejected recovery of attorney's fees for defense of the borrower's or seller's claims where, as here, no such action has been instituted. See Pellerin, supra, 900 A.2d at 689; Carr, supra, 604 A.2d at 884. The note also references deeds of trust given on the same date to secure the indebtedness and incorporates by reference their terms, covenants, and conditions. However, the only deed of trust of "even date" in the record that appellees address in their argument on appeal is the one for the 10th Street property.[21] The attorney's fee provisions in this deed of trust are stated in pertinent part in the margin of this opinion.[22] The question is whether, under the circumstances presented, these provisions entitle appellees to recover attorney's fees to defend the suit brought by the decedent's estate.
*477 Appellees rely upon this court's decision in Kudon, supra note 15, 547 A.2d 976, in support of their claim for attorney's fees. In Kudon, this court affirmed the trial court's order awarding attorney's fees to a lessor for its successful defense of a lessee's suit alleging tortious interference with contract. Id. at 980-81. The lessor had counterclaimed for breach of the lease agreement, for conversion of the property (a postage meter) that was the subject of the agreement, and for replevin. Id. at 976-77. The agreement provided that the lessee could recover attorney's fees in the event that the lessee breached the agreement or "if any writ, process or proceeding shall be instituted where the Meter may be levied upon or affected." Id. at 980. In sustaining the award, this court found that specific criteria for allowing attorney's fees for defense of a claim and asserting a counterclaim, which we discuss hereinafter, had been established. Id. The estate argues that the present case, unlike Kudon, is not a combined proceeding in which the defense had to pursue a counterclaim or face the possibility of being collaterally estopped from doing so. See id. at 981. This is an important distinction. See id. Here, appellees did not file a counterclaim seeking to collect upon the 1996 note upon which they rely to support their claim for attorney's fees. Thus, unlike Kudon, appellees' defense against the estate's complaint was not integral to any efforts to collect on the note. Appellees suggest that since the estate sought to set aside the foreclosure sale, they had to defend in order to retain any money collected as a result. A major flaw in this argument as it relates to the 1996 note is that appellees did not seek in this action any judgment on the decedent's note against his estate. Any cause of action that they might have on the note against Raleigh, the maker, would not be eliminated solely because the estate sought to challenge the manner in which appellees handled their foreclosure remedy. See Szego, supra note 16, 651 A.2d at 318 (holding that a mortgagee may pursue remedies of a money judgment on the note and foreclosure pursuant to a deed of trust in any sequence without violating the doctrines of res judicata, collateral estoppel and election of remedies). Under the circumstances, we find no basis for concluding that appellees are entitled to attorney's fees in this action based on the provisions for same incorporated by reference into the 1996 note.[23]
The estate also argues persuasively that even an analysis applying the criteria identified in Kudon does not warrant recovery of attorney's fees in this case. The relevant factors identified in Kudon for determining whether to award attorney's fees for defense of a claim are: (1) whether the party requesting fees precipitated the litigation; (2) whether the litigation was bonafide and required because of the party opposing payment; (3) whether the claim by the opponent of payment was raised to offset or reduce the debt owed; and (4) whether it was necessary for the party *478 requesting the fees to defend against the claim in order to collect or enforce the underlying contractual obligation. 547 A.2d at 980. Assuming without deciding that the first factor (i.e., who precipitated the litigation) means no more than who filed the lawsuit, that factor would weigh in appellees' favor, as the estate originated the action.[24] However, none of the remaining factors supports an award of attorney's fees against the estate under the terms of the 1996 note. Litigation related to the note itself was not made necessary by the estate. In fact, appellees asserted no claim based on the note. As for the third factor, the estate's claim was not asserted in an attempt to reduce or extinguish the debt owed on the 1996 note. Finally, for the reasons stated previously, it was not necessary for appellees to defend the complaint in order to enforce the debt evidenced by the 1996 note which contained the attorney's fee provisions appellees relied upon. Apparently, appellees opted to leave the pursuit of an in personam remedy on the note for another day, and did not assert it in this action. See Szego, supra note 16, 651 A.2d at 318. Since the Kudon factors weigh heavily in the estate's favor and for all of the foregoing reasons, we conclude that appellees failed to demonstrate their entitlement to attorney's fees.
For the foregoing reasons, the judgment of the trial court in appeal no. 03-CV-221 is affirmed with the exception of its order awarding attorney's fees and costs to appellees, which we reverse and remand with instructions to vacate. In light of our disposition, appeal no. 03-CV-1263, in which Mitchell and Bastida seek reversal of the trial court's order vacating a prior order granting them a judgment on the personal representative's surety bond in the probate proceeding to cover costs and attorney's fees, is affirmed.
So ordered.
NOTES
[*] At the time of argument, Judge Wagner was Chief Judge of the court.
[1] Appellees also argue that this appeal should be dismissed because the appointment of the successor personal representative had expired before she filed a notice of appeal. The Superior Court reinstated the authority of the personal representative nunc pro tunc from June 26, 1999, well before the estate noted the appeals in this case. Appellees contend that they did not receive a copy of the petition to restore the personal representative to office. However, they have failed to demonstrate that they were entitled to service of the petition in the probate proceeding in which the personal representative's authority was restored. In any event, any challenge to the validity of the personal representative's appointment should have been made in the trial court in the probate proceeding. Therefore, we reject these arguments.
[2] The estate also sought an injunction to preclude conveyance, transfer, or encumbrance of the property, the payment of the proceeds of the alleged unlawful sales, and other relief as the interest of justice requires.
[3] Lawrence Mitchell averred in his affidavit that he is a professional title examiner, authorized title insurance agent, and operator of a title agency handling real property transactions in the District of Columbia.
[4] In its written order, the court explained:
The Court is aware of no credible legal theory or precedent, and [the Raleigh estate] has proffered none that would permit [it] to sue on behalf of Atlanta Corporation qua Leonard Raleigh. [The estate's] reliance on an "alter ego" theory is misplaced and inapplicable. "Piercing the corporate veil" is an equitable doctrine that prevents culpable individuals from draping themselves with the corporate cloak and its attendant limitations on liability. The Court, however, is aware of no inverse "alter ego" theory by which a shareholder is permitted to "pierce the corporate veil" in order to bring suit on the corporation's behalf. In short, "piercing the corporate veil" facilitates the imposition of corporate obligations-it does not permit the assumption of corporate rights by shareholders.
[5] In Office of People's Counsel, supra, the question was whether the corporate holding company was an owner of the vehicles which would have qualified it (pursuant to D.C.Code § 44-305(a)(2)) to establish a sinking fund in lieu of insuring the taxicabs owned by its subsidiary corporations. Id. at 683.
[6] The derivative form of action is available to shareholders "`to enforce a corporate cause of action against officers, directors, and third parties.'" Behradrezaee, supra, 910 A.2d at 354 (quoting Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95, 111 S. Ct. 1711, 114 L. Ed. 2d 152 (1991) (other citations omitted; emphasis in the original)). Pleadings in derivative actions are governed by Super. Ct. Civ. R. 23.1. Id. at 355 (citation omitted). However, in none of its complaints has the estate claimed to be suing derivatively on behalf of the corporation or even sought to conform its complaint to the strict requirements of Rule 23.1. Therefore, we have no occasion to consider any issue raised in this action in the context of a derivative action.
[7] "The stockholders are equitable owners of the property and assets of the corporation." J.D.P. v. F.J.H., 399 A.2d 207, 210 n. 1 (Del. 1979) (citations omitted); see id. at 211 (holding that "an increase in retained earnings of a corporation controlled by a spouse may be included in the calculation of the couples' marital property" under the theory that the court was dividing the husband's equitable interest in the corporation). This court has recognized that principle. See Office of People's Counsel, supra, 520 A.2d at 681. However, such equitable interest does not alter the fact that title to corporate property is vested in the corporation, or permit a shareholder to sue on causes of action properly belonging to the corporation. See id. at 681-82.
[8] See note 6, supra.
[9] In Duckett, this court reversed the trial court's order dismissing for lack of standing a mother's action alleging negligence as the cause of her son's death, filed in her individual capacity, rather than as her deceased son's personal representative. See 654 A.2d at 1289.
[10] See FED.R.CIV.P. 17(a) advisory committee's note (1966). Super. Ct. Civ. R. 17(a) is modeled after the comparable federal rule.
[11] In support of a motion to dismiss the third amended complaint for failure to join indispensable parties, appellee Lawrence Mitchell claimed that the trial court had urged the estate to research the status of the titles to the real property in question and to identify who held interests of record. Motions were also filed by appellees, E & G Investment Services, Inc. and Edgar Gramajo. The trial court denied the motions, except with respect to the Vermont Avenue property. With respect to that property, the trial court gave the estate thirty days within which to file an amended complaint by adding two indispensable parties or show cause why they were not necessary parties. The estate filed a fourth amended complaint adding the two parties.
[12] The estate alleged in its initial complaint that the corporation's charter had been revoked. In this jurisdiction, by statute, remedies may survive dissolution, and suits may be prosecuted or defended by the corporation in its corporate name within two years of the date of dissolution. See D.C.Code § 29-101.97 (2001). The estate made no representations about whether the corporation could meet the criteria for invocation of this statutory provision or that it could represent the corporation.
[13] In light of our disposition, we need not address the estate's argument that the trial court erred in denying its motion for partial summary judgment based on its claim that it was entitled to judgment quieting title to the Vermont Avenue property in the name of the estate. The estate concedes that its argument concerning the trial court's ruling that its motion for a pretrial order and sanctions is moot is appropriate for consideration only if summary judgment is reversed. Therefore, we do not address it.
[14] The trial court stated that it was awarding attorney's fees, having considered the motion, the estate's opposition, the reply and sur-reply, "based on the reasonable fee provisions of the trust deeds and notes." The specific notes and deeds of trust documents are not identified in the order. Therefore, on appeal, we consider only those documents presented to the trial court for consideration and then addressed in argument on appeal.
[15] In Pellerin, this court distinguished Kudon v.f.m.e. Corp., 547 A.2d 976 (D.C.1988), where the broad scope of a fee-shifting provision was held to encompass fees for the defense of a lessee's complaint for tortious interference with contract relations and compulsory counterclaim for breach of the lease agreement. Pellerin, supra, 900 A.2d at 689 n. 15.
[16] See Szego v. Kingsley Anyanwutaku, 651 A.2d 315, 317 (D.C.1994) (citations omitted) (holding that the holder of a note secured by a deed of trust has two remedies that may be pursued consecutively, i.e., a suit on the note or a foreclosure action against the property securing the debt).
[17] Appellees prevailed on their claim that the decedent Raleigh had no interest in the real property covered by this deed of trust.
[18] See also McCarthy, supra, 22 F.3d at 363 (holding that a majority stockholder could not claim the benefit of an arbitration provision in a contract made by the corporation where the claim was based on an alter ego theory which the court rejected).
[19] The only other provision in the 1993 deed of trust that references attorney's fees appears in a "whereas" clause. It is not clear that this clause would support appellees' claim for attorney's fees related to the estate's action to quiet title. See Trilon Plaza, Inc. v. Comptroller of the State of New York, 788 A.2d 146, 151 (D.C.2001) (citing Perry v. Perry, 88 U.S.App. D.C. 337, 190 F.2d 601 (1951)) (noting that Perry implies that when a whereas clause is consistent with the remaining parts of a contract, the former may be considered as evidence of the parties' intent). But see Grynberg v. Federal Energy Regulatory Comm'n, 315 U.S.App.D.C. 154, 157, 71 F.3d 413, 416 (1995) (citation omitted) (rejecting Commission's conclusion that a prefatory Whereas clause defined the extent of an obligation covered in another article of a contract based upon standard contract law that such clauses cannot create rights beyond those set forth in the operative terms). However, in light of our disposition of the issue, we need not resolve whether this Whereas clause can support a claim for attorney's fees against the estate.
[20] Both the note and deed of trust appear to have been executed by decedent, Raleigh, in his individual capacity, although he also consented to the note on behalf of Atlanta Corporation. The grantors in this deed of trust are listed as decedent, Raleigh, and Ella Dunlap, joint tenants.
[21] The promissory note to which Atlanta Corporation consented through Raleigh as president reflects that the borrower granted as additional collateral the equity in 1000 and 1002 Rhode Island Avenue, N.W., "by execution of a Deed of Trust for that purpose." However, it does not appear that any deed of trust related to the 1996 loan, other than the one related to the 10th Street property, was "executed for that purpose" or presented in the trial court or to this court on appeal. Therefore, we consider only the deed of trust related to the 10th Street property.
[22] The 1996 deed of trust provides as follows:
7. Protection of Lender's Security. If Borrower fails to perform the covenants and agreements contained in this Deed of Trust, or if any action or proceeding is commenced which materially affects Lender's interest in the Property, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then Lender at Lender's option, upon notice to Borrower, may make such appearances, disburse such sums and take such action as is necessary to protect Lender's interest, including, but not limited to, disbursement of reasonable attorney's fees. . . .
Any amounts disbursed by Lender pursuant to this paragraph 7, with interest thereon, shall become additional indebtedness of Borrower secured by this Deed of Trust.
* * *
18. Acceleration; Remedies. . . . upon Borrower's breach of any covenant or agreement of Borrower in this Deed of Trust, including the covenants to pay when due any sums secured by this Deed of Trust, Lender prior to acceleration shall mail notice to Borrower . . . specifying: (1) the breach; (2) the action required to cure such breach; (3) a date . . . by which such breach must be cured; and (4) that failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by the Deed of Trust and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the breach is not cured on or before the date specified in the notice, Lender at Lender's option may declare all sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by applicable law. Lender shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in this paragraph 18, including, but not limited to, reasonable attorney's fees.
[23] There is no dispute that the 10th Street property passed by right of survivorship upon decedent's death to the surviving joint tenant. See Gallimore, supra, 666 A.2d at 1203-04. Since the estate never had any interest in the real property securing repayment of the debt, there appears to be no way that this litigation could foreclose any rights that appellees might have in the security. While the estates's fourth amended complaint lists this property, along with three others, as one that decedent owned when he died, it also states that decedent was the "beneficial owner" only of those properties standing in the name of Atlanta Corporation. The 10th Street property was not in the name of the Atlanta Corporation; however, the fourth amended complaint alleges that the notice of foreclosure stated that all four properties would be sold as a group in order to discourage potential buyers other than the noteholder or his family members.
[24] The estate argues that the litigation was precipitated by appellees' misconduct in the manner in which the foreclosures were conducted. Since the case was dismissed for lack of standing, the merits of its contention cannot be evaluated. In light of our disposition, we need not decide whether the first factor means no more than who precipitated the action. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857934/ | WALKER V. BRODHEAD
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-205-CV
ROBERT H. WALKER & ANITA ZAPATA WALKER,
APPELLANTS
vs.
EUGENE A. BRODHEAD, RECEIVER OF NATIONAL COUNTY
MUTUAL FIRE INSURANCE COMPANY,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT
NO. 494,255, HONORABLE F. SCOTT McCOWN, JUDGE PRESIDING
This is a default judgment case. Robert H. Walker and Anita Zapata Walker ("the
Walkers"), appellants, filed a petition for bill of review in the district court in an attempt to
overturn a default judgment previously taken against Robert H. Walker ("R. Walker") by the
appellee, Eugene H. Brodhead, Receiver of National County Mutual Fire Insurance Company (the
"Receiver"). The trial court granted the Receiver's motion for summary judgment denying the
Walkers' bill of review, and the Walkers have appealed to this Court. On appeal, the Walkers
argue in five points of error that the default judgment is void because the record affirmatively
shows that the trial court lacked personal jurisdiction over R. Walker at the time it entered the
judgment. We will affirm the judgment of the trial court.
BACKGROUND
On December 30, 1988, the Receiver filed suit against R. Walker and others,
alleging various causes of action for fraud in connection with the insolvency of National County
Mutual Fire Insurance Company ("National County"). After filing suit, the Receiver made
numerous unsuccessful attempts to serve process on R. Walker. Thereafter, on January 23, 1989,
the Receiver obtained an order from the trial court authorizing substituted service of process.
Pursuant to the order allowing substituted service, the process server left a copy of the citation
with a person at R. Walker's ranch in Kerrville, Texas. Thereafter, R. Walker failed to answer
or appear in the suit, and the trial court rendered a default judgment against him on February 13,
1989. On March 10, 1989, the trial court severed the suit against R. Walker from the remaining
defendants, making the default judgment final.
In an attempt to overturn the default judgment, the Walkers filed a petition for bill
of review in November 1990, arguing: (1) that the method of service attempted by the Receiver
was not reasonably calculated to give R. Walker notice of the suit and in fact did not give him
reasonable notice of the suit; and (2) that service of process was not accomplished in strict
accordance with the applicable rules of procedure or the order authorizing substituted service.
The Walkers perfected this appeal from the trial court's summary judgment denying their bill of
review.
STANDARD OF REVIEW
The standards for reviewing a summary judgment are well established:
1. The movant for summary judgment has the burden of showing that there is
no genuine issue of material fact and that it is entitled to judgment as a
matter of law.
2. In deciding whether there is a disputed material fact issue precluding
summary judgment, evidence favorable to the non-movant will be taken as
true.
3. Every reasonable inference must be indulged in favor of the non-movant and
any doubts resolved in its favor.
Nixon v. Mr. Property Mgt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
A petitioner for bill of review must ordinarily plead and prove three elements: (1)
a meritorious defense to the cause of action alleged to support the judgment, (2) which the movant
was prevented from making by the fraud, accident, or wrongful act of the opposite party, (3)
unmixed with any fault or negligence on the part of the movant. Ortega v. First RepublicBank
Fort Worth, 792 S.W.2d 452, 453 (Tex. 1990); Alexander v. Hagedorn, 226 S.W.2d 996, 998
(Tex. 1950). The Walkers, however, sought to have the default judgment set aside on a different
ground: that the trial court did not have personal jurisdiction over R. Walker at the time it
rendered the default judgment because process had not been properly served on him. See Peralta
v. Heights Medical Center, Inc., 485 U.S. 80 (1988). Therefore, in order to support a summary
judgment in this case, the record must show that proper service of process was had as a matter
of law and that there is no genuine issue of material fact as to that matter.
REASONABLY CALCULATED TO GIVE NOTICE
As stated above, R. Walker asserts that he did not have actual notice of the
underlying suit before the trial court's rendition of default judgment against him. Such lack of
notice, however, does not necessarily void the judgment. Due process requires only that the
method of notice utilized be reasonably calculated, under the circumstances, to apprise an
interested party of the pendency of the action and afford the party the opportunity to present
objections. Peralta, 485 U.S. at 84-85.
The record in the present case reveals that after numerous unsuccessful attempts
by the Receiver to serve process on R. Walker at his business and residential addresses, the trial
court permitted substituted service pursuant to Rule 106:
(b) Upon motion supported by affidavit stating the location of the
defendant's usual place of business or usual place of abode or other place where
the defendant can probably be found and stating specifically the facts showing that
service has been attempted under either (a)(1) or (a)(2) at the location named in
such affidavit but has not been successful, the court may authorize service
(1) by leaving a true copy of the citation, with a copy of the petition
attached, with anyone over sixteen years of age at the location specified in such
affidavit, or
(2) in any other manner that the affidavit or other evidence before
the court shows will be reasonably effective to give the defendant notice of the suit.
Tex. R. Civ. P. 106. In granting the substituted service, the trial court ordered
that service upon Defendant Robert H. Walker in this cause be by Richard
Grayum, a disinterested adult, by leaving a true cipy [sic] of the citation, with a
cipy [sic] of the petition in this cause attached, with anyone over sixteen (16) years
of age at La Reata Ranch, 2555 Shepherd Rees Road, Kerrville, Texas, a place
where Defendant Robert H. Walker may probably be found.
The Walkers assert that: (1) leaving a copy of the citation with someone at La
Reata Ranch was not reasonably calculated to give R. Walker notice of the suit; and (2) the
Receiver fraudulently obtained the order authorizing substituted service because it knew that R.
Walker was out of the country at the time and therefore knew that he probably could not be found
at La Reata Ranch. Having reviewed the summary-judgment record, we conclude that both
arguments are without merit.
First, there is evidence that the Walkers designated La Reata Ranch as their
residential homestead in December 1988. The Receiver attached a copy of the Walkers'
homestead designation to its motion for substituted service. In addition, the record contains the
sworn testimony of three witnesses, including two sons of R. Walker, that R. Walker had made
La Reata Ranch his residence in December 1988 and that it was the best place to locate him at the
time the Receiver was attempting to serve him with process. This evidence went uncontradicted
by any competent summary-judgment evidence except for the Walkers' fraud allegations, which
we determine to be legal conclusions wholly unsupported by the record. Therefore, based on the
record in this case, we conclude that as a matter of law substituted service of process on R.
Walker at La Reata Ranch was a method of notice that was reasonably calculated, under the
circumstances, to apprise R. Walker of the pendency of the action and afford him the opportunity
to present objections.
COMPLIANCE WITH PROCEDURAL REQUIREMENTS
The Walkers further argue that even if it was reasonable to authorize substitute
service of process on R. Walker at La Reata Ranch, the Receiver failed to comply with the
requirements of the Rules of Civil Procedure and the order authorizing substitute service. The
Walkers argue that there are three defects in the officer's return of citation: (1) the officer's
return was not verified as required by the order; (2) the officer's return failed to show that the
officer left the citation with an individual over the age of sixteen; and (3) the officer's return failed
to show that the officer left the citation at La Reata Ranch. Even if we assume, however, that the
officer's return contained those defects, on January 4, 1991, after notice and hearing, the court
below signed an order permitting the officer's return to be amended pursuant to Rule 118 of the
Texas Rules of Civil Procedure. The amendments to the officer's return rectified the alleged
omissions; therefore, the dispositive issues are whether the trial court properly allowed
amendment of the officer's return and what effect the amended return has on the default judgment.
Rule 118 provides the following:
At any time in its discretion and upon such notice and on such terms as it
deems just, the court may allow any process or proof of service thereof to be
amended, unless it clearly appears that material prejudice would result to the
substantial rights of the party against whom the process issued.
Tex. R. Civ. P. 118 (emphasis added). The Rule authorizes the trial court to amend proof of
service "at any time," with the only limitation being material prejudice to the defendant's
substantial rights. (1) Thus, the court below had jurisdiction to allow amendment of the proof of
service pursuant to Rule 118, even though some twenty-two months had passed since the default
judgment became final. Therefore, we now discuss whether the trial court properly allowed the
amendment of the return.
1. Amendment Properly Allowed?
The Walkers do not challenge the propriety of the trial court's order permitting the
officer's return to be amended to show that the citation was actually left with someone over the
age of sixteen at La Reata Ranch. Rather, the Walkers focus on the "verification" requirement.
They argue that verification of the officer's return is a substantive requirement of proper service
of process and, therefore, a court cannot properly use Rule 118 to allow an officer to verify his
return after the rendering of a default judgment. We disagree.
As recently stated by the Texas Supreme Court, Rule 118 gives a trial court express
authority "to allow amendment of the return to reflect the service that was actually had."
Higginbotham v. General Life & Accident Ins. Co., 796 S.W.2d 695, 696 (Tex. 1990). The
Walkers to not dispute the fact that the Receiver left a copy of the citation with a person over the
age of sixteen at La Reata Ranch. Nor do they argue that the return cannot be amended to reflect
these facts. Indeed, it is clear that such amendments are proper under Rule 118. See
Higginbotham, 796 S.W.2d at 696-97; Mylonas v. Texas Commerce Bank-Westwood, 678 S.W.2d
519, 522-23 (Tex. App. 1984, no writ); Bavarian Autohaus, Inc. v. Holland, 570 S.W.2d 110,
113 (Tex. Civ. App. 1978, no writ); Employer's Reinsurance Corp. v. Brock, 74 S.W.2d 435,
437-38 (Tex. Civ. App. 1934, writ dism'd).
In light of the fact that the return can be amended to add or change substantive
facts, it would be incongruous to conclude that an officer cannot also amend a return to verify
facts already contained therein. Indeed, as pointed out by the trial court, any time an officer
amends a return, he or she must verify the return as amended. The Walkers have cited no
authority to support their position that verification is not a proper amendment under Rule 118;
therefore, we find their argument without merit and conclude that as a matter of law the trial court
was authorized to allow the amendment of the officer's return to reflect the service actually had
and to allow verification of the facts contained therein. We also conclude as a matter of law that
the amendment of the return did not materially prejudice any substantial rights of the Walkers.
2. Relation Back of the Amended Return
Finally, the Walkers argue that even if the return was properly amended, no default
judgment can be granted under Rule 107 until proof of service, as required by the order
authorizing substitute service, has been on file with the clerk of the court for at least ten days.
See Tex. R. Civ. P. 107. The order authorizing substitute service in this case required that the
officer's return of service be verified; therefore, the Walkers argue, even if the return can be
amended to satisfy the verification requirement of the order, the default judgment must be set
aside because proof of service as required by the order was not on file with the clerk at least ten
days before the default judgment was entered. This argument is without merit as well.
The law is clear that when a return is amended under Rule 118, the amended return
relates back and is regarded as filed when the original return was filed. See Higginbotham, 796
S.W.2d at 696-97; Bavarian Autohaus, 570 S.W.2d at 113; Lafleaur v. Switzer, 109 S.W.2d 239,
241 (Tex. Civ. App. 1937, no writ); Employer's Reinsurance Corp., 74 S.W.2d at 438. The
original return was filed at least ten days before the default judgment was entered; therefore, Rule
107 was satisfied.
CONCLUSION
In conclusion, we quote from a previous opinion of this Court:
The purpose of citation is to give proper notice, to those entitled thereto, of the
matter to be determined by the court, and the place and time of such hearing. This
necessarily involves two elements: (1) The service of the process; and (2) the
return of the officer, showing that he has complied with the law. It is the service,
and not the return, which gives the court jurisdiction over the defendant. . . . The
return of citation is but the certificate of the officer as to where, when and how it
was executed. And such return, if erroneous, may be subsequently corrected.
Gunter's Unknown Heirs & Legal Representatives v. Lagow, 191 S.W.2d 111, 113 (Tex. Civ.
App. 1945, writ ref'd). Thus, based on our foregoing discussion, we conclude that as a matter
of law the trial court had personal jurisdiction over R. Walker at the time it rendered the default
judgment against him. Therefore, the court did not err in granting summary judgment denying
the Walkers' bill of review.
We overrule the Walkers' points of error and affirm the trial court's judgment.
J. Woodfin Jones, Justice
[Before Justices Jones, Kidd and B. A. Smith]
Affirmed
Filed: April 1, 1992
[Publish]
1. 1 Courts have held that a trial court loses jurisdiction to allow amendments under Rule 118
if a writ-of-error appeal has been perfected. See Zaragoza v. De La Paz Morales, 616 S.W.2d
295, 296 (Tex. Civ. App. 1981, writ ref'd n.r.e.), and cases cited therein. However, no
petition for writ of error was filed in this case; therefore, we need not address the soundness
of those holdings. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542625/ | 410 B.R. 491 (2009)
In re Sancedric L. WILLIAMS, Debtor.
No. 08-37433-H3-13.
United States Bankruptcy Court, S.D. Texas, Houston Division.
February 11, 2009.
Rolfe W. Goode, Attorney at Law, Houston, TX, for debtor.
David G. Peake, Houston, TX, trustee.
William E. Heitkamp, Houston, TX, Chapter 13 Trustee.
*492 MEMORANDUM OPINION
LETITIA Z. CLARK, Bankruptcy Judge.
The court has held a hearing on the "Debtor's Emergency Motion for Reconsideration of Debtor's Motion for Extension of the Automatic Stay Pursuant to 11 U.S.C. Section 362(c)(3)(B)" (Docket No. 22). The following are the Findings of Fact and Conclusions of Law of the court. A separate Judgment will be entered denying the motion. To the extent any of the Findings of Fact are considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law are considered Findings of Fact, they are adopted as such.
Findings of Fact
Sancedric L. Williams ("Debtor") filed a voluntary petition under Chapter 13 of the Bankruptcy Code in the instant case on November 21, 2008. Prior to the filing of the petition in the instant case, Debtor filed the petition in Case No. 08-32070-H3-13 on March 31, 2008. Case No. 08-32070-H3-13 was dismissed by order entered October 22, 2008.
Debtor's counsel in Case No. 08-32070-H3-13 was Rolfe W. Goode. Goode also is Debtor's counsel of record in the instant case.
In the instant case, on December 12, 2008, 21 days after the date of filing of the petition in the instant case, Debtor filed a motion to continue the automatic stay as to all creditors, "and that the Debtor have such other and further relief, both at law and in equity, to which he may show himself justly entitled." (Docket No. 8). The motion to continue the stay was set for an emergency evidentiary hearing on December 17, 2008.
At the December 17, 2008 hearing, Debtor testified that Case No. 08-32070-H3-13 was dismissed because he lost his job, and was unable to make the payments called for under the confirmed plan in that case. He testified that he is now employed, and that he had made the first payment under the proposed plan in the instant case. He testified that he had obtained papers from the Chapter 13 Trustee to prepare a wage order.[1]
At the conclusion of the December 17, 2008 hearing, the court announced the following oral ruling: "This application can be approved, provided that the wage order or an ACH[2] is filed promptly, and in no event later than December twenty-second."
Debtor did not submit a proposed wage order or file a notice regarding an ACH draft before December 22, 2008. On January 6, 2009, an order was entered denying Debtor's motion for continuation of the stay, for the reason that Debtor failed to *493 certify by December 22, 2008 his fulfillment of the conditions stated at the December 17, 2008 hearing. (Docket No. 15).
On January 14, 2009, Debtor filed a document titled "Certificate of Compliance," indicating that a wage order "was signed and filed with the United States Chapter 13 Trustee" on December 20, 2008. The document refers to "Exhibit No. 1 attached hereto." There is no exhibit attached to the document. (Docket No. 21).
On January 16, 2009, Debtor filed the instant motion for reconsideration. In the instant motion, Debtor pleads that he delivered information for preparation of a wage order to the Chapter 13 Trustee, but that Debtor's counsel failed to follow up with Debtor or Trustee, because counsel was on vacation from December 19, 2008 through January 5, 2009.
At the hearing on the instant motion, held on February 4, 2009, Debtor testified that Chapter 13 plan payments have been deducted from Debtor's last three paychecks. He testified that he is current on payments to the Chapter 13 Trustee under his proposed plan.
At the conclusion of the February 4, 2009 hearing, the court directed Goode to check into the status of a wage order. Debtor still has not filed with the court either a proposed form of wage order or an ACH notice.
Conclusions of Law
Under Section 362(c)(3)(A) of the Bankruptcy Code, with exceptions not pertinent to the instant case, the automatic stay terminates on the 30th day after the date of filing of a case filed by an individual who was a debtor in a case dismissed within the preceding year. 11 U.S.C. § 362(c)(3)(A).
Section 362(c)(3)(B) provides:
[O]n the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as to any or all creditors (subject to such conditions or limitations as the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the party in interest demonstrates that the fling of the later case is in good faith as to the creditors to be stayed.
11 U.S.C. § 362(c)(3)(B).
A presumption applies that the case has not been filed in good faith if, inter alia, the debtor failed to perform the terms of a confirmed plan. 11 U.S.C. § 362(c)(3)(C)(i)(II)(cc).
This court generally requires the submission of a wage order or EFT order by promptly after the meeting of creditors in a case. See Local Bankruptcy Rule 2003.
With respect to cases before this judge, the court generally has not granted extension or continuation of the automatic stay in the absence of proof of a wage order, ACH debit, or EFT authorization, to ensure that plan payments are made.
As a threshold matter, the court must consider whether it has the authority to grant the instant motion. Under Section 362(c)(3)(B), relief can be granted only "after notice and a hearing completed before the expiration of the 30-day period." In In re Toro-Arcila, 334 B.R. 224 (Bankr. S.D.Tex.2005), the court held that where a motion was filed before the 30-day period had expired, but could not be heard on sufficient notice before the 30-day period had expired, the court lacked jurisdiction to grant relief under Section 362(c)(3)(B). The court nonetheless granted relief imposing a stay under Section 362(c)(4).
In In re Ortiz, 355 B.R. 587 (Bankr. S.D.Tex.2006), the court assumed jurisdiction to reconsider a ruling denying a motion *494 to impose the automatic stay under Section 362(c)(4).
Opinions addressing reconsideration of rulings in bankruptcy cases have applied Bankruptcy Rules 9023 and 9024.[3] The only published opinions addressing Bankruptcy Rules 9023 and 9024 to motions to extend stay reject the substantive theory that the court may, on first motion, "reconsider" the statutory termination of the stay. See In re Ajaka, 370 B.R. 426 (Bankr.N.D.Ga.2007); In re Reed, 370 B.R. 414 (Bankr.N.D.Ga.2006). They do not address the situation in which parties seek reconsideration of the court's ruling on a motion to extend stay.
The instant case presents a question of first impression as to whether the court may reconsider an order regarding a motion to extend the stay under Section 362(c)(3)(B) after the expiration of the initial 30-day period. The instant case differs from Toro-Arcila in that the hearing was commenced on sufficient notice and completed before the expiration of the 30-day period. It also differs from Ortiz in that what was initially sought was not an imposition of a stay, but rather the extension of the automatic stay beyond the initial 30-day period in the instant case. It differs from Ajaka and Reed in that the instant case addresses this court's previous ruling denying the motion.
Bankruptcy Rules 9023 and 9024 apply Rules 59 and 60 of the Federal Rules of Civil Procedure to cases under the Bankruptcy Code, with certain enumerated exceptions. The enumerated exceptions do not include the question of whether to extend the stay under Section 362(c)(3)(B). The court concludes that Rules 59 and 60 of the Federal Rules of Civil Procedure Apply.
However, notwithstanding the applicability of Rule 59(e), the Bankruptcy Rules "shall not abridge, enlarge, or modify any substantive right." 28 U.S.C. § 2075.
The application of Rule 59(e) to permit the court to retroactively grant an extension of stay, after the court has denied such an extension, and the time to grant an extension has expired, appears to enlarge a substantive right conferred by the Bankruptcy Code. Thus, such application of Rule 59(e) is barred by 28 U.S.C. § 2075. The court concludes that relief cannot be granted on reconsideration, under Section 362(c)(3)(B) of the Bankruptcy Code, after the 30-day period of Section 362(c)(3)(B) expires.
To the extent the underlying motion to extend stay sought "other and further" relief, the court could consider, on reconsideration, whether to grant relief under Section 362(c)(4).[4] The court's determination of such a motion for reconsideration fits squarely within the rule in Ortiz. However, in the instant case, Debtor still has not complied with this court's condition to file either a wage order or an ACH. When the court conditions the extension of stay or imposition of stay on the filing of a wage order, or ACH or EFT authorization, it is incumbent upon the Debtor and Debtor's counsel to comply with the condition by filing documents with the court. Counsel should not presume that the submission of documents to the Chapter 13 Trustee will result in the timely satisfaction of the condition. The court concludes that, to the extent that the request for "other and further" relief might *495 be considered to request relief pursuant to 11 U.S.C. § 362(c)(4), that request is denied, in light of Debtor's continued failure to file a wage order, or ACH or EFT authorization in the above captioned case.
NOTES
[1] A wage order is an order signed and entered by the bankruptcy court directing a debtor's employer to withhold the debtor's Chapter 13 plan payment from the debtor's wages and remit the payment to the Chapter 13 trustee. This judge requires the filing of either a motion for entry of a wage order, or a proposed wage order bearing the signature of either the debtor or debtor's counsel, in order to demonstrate the provenance of the proposed form of wage order. Wage orders, and motions for entry of wage orders, are typically submitted by Debtors, but may also be submitted by the Chapter 13 Trustee.
[2] ACH is an automated clearinghouse draft of a bank account. A debtor typically arranges an ACH draft directly with the Chapter 13 Trustee. There is typically no record on the docket sheet of an ACH draft, so this judge requires, when an ACH draft is intended to fulfill a condition for continuation of the automatic stay, that the debtor or debtor's attorney file with the court a notice of execution of the ACH draft. The court has subsequently amended its local rules to permit payment by electronic funds transfer (EFT).
[3] The court notes that the instant motion was filed timely for consideration under Rule 59(e) of the Federal Rules of Civil Procedure, as made applicable by Bankruptcy Rule 9023.
[4] Pursuant to Section 362(c)(4)(B), such relief must be sought within the first 30 days after the date of filing of the later case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857953/ | Drew v. Anderson
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-282-CV
JULIUS DREW, SR.,
APPELLANT
vs.
ROSCO A. ANDERSON, WILLIE E. WHITE, SR., AND GEORGE LONG, JR.,
APPELLEES
FROM THE DISTRICT COURT OF BELL COUNTY, 146TH JUDICIAL DISTRICT
NO. 117,702-B, HONORABLE OLIVER S. KITZMAN, JUDGE PRESIDING
PER CURIAM
Appellant, Julius Drew, Sr., appeals the trial court's order dismissing his cause for
want of prosecution. Appellant brought suit in November 1987 against appellees Rosco
Anderson; Willie White, Sr.; and George Long, Jr., seeking damages arising from the dissolution
of a partnership. On March 11, 1991, after appellant failed to appear for trial, the trial court
signed the order of dismissal. We will affirm the order of the trial court.
In point of error two, appellant claims that the trial court did not comply with the
Rules of Civil Procedure when it notified him of the dismissal hearing. On Monday, February 25,
1991, appellant failed to appear for a trial setting of which he had notice. After waiting several
hours for appellant to arrive, the court announced that the cause was set for dismissal for want of prosecution on Friday, March 1. The court directed the clerk to notify
appellant of the dismissal hearing according to Tex. R. Civ. P. Ann. 165a (Supp. 1992).
The transcript contains a letter from the court to appellant, dated February 25,
1991, informing him that the dismissal hearing was set for 9 a.m., Friday, March 1. At the
dismissal hearing, the court took notice of the letter and took notice that it was directed to
appellant at the address shown in the court's file. The court noted that this address was in Belton
and that the letter to appellant was mailed from Belton. The court then struck appellant's
pleadings for his failure to appear at the trial setting on February 25. (1)
Appellant argues that Rule 21 required that he receive three days' notice of the
dismissal hearing. Tex. R. Civ. P. Ann. 21 (Supp. 1992). He further argues that Rule 21a
required that three more days be added to the time within which he was required to act because
he was served by mail. Tex. R. Civ. P. Ann. 21a (Supp. 1992). Adding these together, appellant
concludes that the hearing should not have been held before Tuesday, March 5.
Rule 21 by its terms applies to hearings on orders that a party requests of the court.
Fishing Publications, Inc. v. Williams, 661 S.W.2d 323 (Tex. App. 1983, no writ); cf. Martinez
v. General Motors Corp., 686 S.W.2d 349 (Tex. App. 1985, no writ). Here, however, the court
set appellant's case for dismissal on its own motion. Rule 21a states that whenever a party is
required to do an act within a prescribed period after the service of notice on him and the notice
is served by mail, three days shall be added to the prescribed period. The notice of the dismissal
hearing did not require appellant to act within a "prescribed period" after service of the notice.
Rules 21 and 21a do not support appellant's argument that the trial court gave him improper notice
of the dismissal hearing.
Whether the court dismissed this case pursuant to its inherent power or pursuant
to Rule 165a, appellant was entitled to notice and an opportunity to show cause why his case
should not be dismissed. Tex. R. Civ. P. Ann. 165a(1) (Supp. 1992); (2)
Callahan v. Staples, 161
S.W.2d 489 (Tex. 1942); Collier Mgf. & Supply, Inc. v. InterFirst Bank Austin, N.A., 749
S.W.2d 560 (Tex. App. 1988, no writ). The record before this Court indicates that appellant was
given notice of the court's intention to dismiss the cause in compliance with Rule 165a(1). We
overrule point two.
In points one and three, appellant claims that the trial court erred in failing to rule
on various motions. Appellant asserts in point one that the trial court erred in "failing to resolve
the many motions filed by appellant before proceeding to trial." In point three, appellant faults
the trial court for "refusing to act on appellant's post dismissal motions." An assignment of error
is multifarious if it attacks several distinct rulings of the trial court. This Court can disregard an
assignment of error that is multifarious. Pooser v. Lovett Square Townhomes Owners' Ass'n, 702
S.W.2d 226 (Tex. App. 1985, writ ref'd n.r.e.). However, multifarious points may be considered
if, after reviewing the argument, the appellate court can determine with reasonable certainty the
nature of the complaint raised. Id. at 228. In his argument under both points appellant presents
a list of motions that were not ruled on, but does not explain the legal basis for the alleged errors.
This Court has reviewed the argument under both points, but is not able to discern the basis of
appellant's complaint under either point. We overrule points one and three.
In point of error four, appellant contends that the trial court erred in denying his
motion for summary judgment. On June 13, 1989, appellant filed a motion for summary
judgment, and on August 15, 1989, the trial court signed an order denying his motion. The
record shows that the case was set for jury trial on Monday, February 25, 1991; appellant failed
to appear in court on this date.
An order denying a motion for summary judgment is not a final, appealable
judgment, but is interlocutory and unappealable. Novak v. Stevens, 596 S.W.2d 848 (Tex. 1980).
The denial of appellant's motion for summary judgment obliged him to go forward to trial.
Having failed to pursue his case to trial, appellant cannot complain of the denial of his motion for
summary judgment. We overrule appellant's fourth point.
By one cross-point appellees request damages, asserting that this appeal was taken
for delay and without sufficient cause. Tex. R. App. P. Ann. 84 (Supp. 1992). Rule 84 allows
an appellate court to award damages if it determines that an appellant has appealed for delay and
without sufficient cause. After reviewing the record, we cannot conclude that no sufficient cause
for appeal existed and that the appeal was taken solely for delay. See Gaines v. Frawley, 739
S.W.2d 950 (Tex. App. 1987, no writ). We decline to award damages in this case and overrule
the cross-point.
The judgment of the trial court is affirmed.
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Affirmed
Filed: March 18, 1992
[Do Not Publish]
1. 1 The trial court ordered preparation of a statement of facts from the hearings on February
25 and March 1, 1991, and ordered that this statement of facts be submitted to this Court in a
supplemental transcript.
2.
2 Texas R. Civ. P. Ann. 165a(1) (Supp. 1992) provides in part:
Notice of the court's intention to dismiss and the date and place of the dismissal
hearing shall be sent by the clerk to each attorney of record, and to each party not
represented by an attorney and whose address is shown on the docket or in the
papers on file, by posting same in the United States Postal Service. At the
dismissal hearing, the court shall dismiss for want of prosecution unless there is
good cause for the case to be maintained on the docket. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1542378/ | 122 F.2d 167 (1941)
COMMISSIONER OF INTERNAL REVENUE
v.
WOOLLEY.
No. 367.
Circuit Court of Appeals, Second Circuit.
July 30, 1941.
Writ of Certiorari Denied December 15, 1941.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Harry Marselli, Sp. Assts. to Atty. Gen., for the petitioner, Commissioner of Internal Revenue.
Elden McFarland, of Washington, D. C., (Ellwood W. Kemp, Jr., and G. A. Donohue, both of New York City, of counsel), for respondent Daniel P. Woolley.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
Writ of Certiorari Denied December 15, 1941. See 62 S. Ct. 365, 86 L.Ed. ___.
AUGUSTUS N. HAND, Circuit Judge.
The question before us is whether the income, accruing after June 19, 1934, from a trust created by the respondent, Daniel P. Woolley, on February 10, 1933, should *168 be taxed as part of his income for the year 1934. The Board decided that it was properly returned as the income of the trust rather than of the grantor. We think this was error and hold that the Commissioner rightly taxed the income against the respondent.
The taxpayer placed certain securities in trust by deed dated February 10, 1933, in which he appointed his wife, Ethel Y. Woolley, trustee for the following uses and purposes:
"To take control and management thereof and to invest and reinvest and keep the same invested and to receive the income therefrom, and, after paying the reasonable and proper expenses of the trust, to pay and distribute the principal thereof and the income therefrom as follows:
"(a) During the life of the Settlor, to pay over and distribute the whole or any part of the net income thereof annually, in such amounts and proportions as Ethel Y. Woolley, the said Trustee hereunder may, in her sole, absolute and uncontrolled discretion, determine, to and among one or more of the following, in accordance with their respective needs, of which she shall be the sole judge, to wit:
"The Settlor,
"Robert W. Gardner, Jr., of Asheville, North Carolina, infant nephew of the Settlor,
"Ethel Y. Woolley, wife of the Settlor, and to accumulate the balance of such net income, if any, for the benefit of such of the above named persons, who may be infants at the time of such accumulation, and in such proportions among them, as the said Trustee may in her sole discretion determine. All income so accumulated shall be paid over to the person for whose benefit it is accumulated upon his attaining the age of twenty-one (21) years but, if such person shall die before attaining the age of twenty-one (21) years, then such income accumulated for his benefit shall thereupon be paid over to those persons who under the laws of the State of New York in effect at the time of the death of such person, would be entitled to the property of such person had he died intestate.
"(b) Upon the death of the Settlor, the trust herein created shall terminate and the principal amount, together with any additions thereto, shall be paid over to the estate of the Settlor."
The trustee was empowered to retain any property in the trust which was transferred to her, but if the settlor should notify her to sell or lease any such property and to purchase any property out of funds of the trust she was to comply with his directions. The settlor reserved the right to transfer additional investments or property to the trustee that he might wish to substitute for property then constituting the principal of the trust. It was provided in the trust deed that the trustee should not be under any obligation to pay off a loan for which a part of the principal of the trust was pledged. It was also provided that the trust might be "revoked in whole or in part by the Settlor by an instrument in writing executed after December 31, 1933" and that he might at any time by an instrument in writing extend the period during which the trust might not be revoked. It was also provided that on the death or resignation of Ethel Y. Woolley he might appoint one Kemp as successor-trustee with the same powers, and if Kemp should not accept an appointment, he might appoint a trustee in Kemp's stead.
In pursuance of the power reserved in the trust instrument the settlor, on June 19, 1934, executed a revocation of the trust which effected a termination as of January 1, 1937, and on June 19, 1934, he agreed with his wife to waive and renounce any right he might have to revoke the trust prior to January 1, 1937. As a result of these acts the trust became limited on June 19, 1934, to a duration of less than three years.
The trustee, Ethel Y. Woolley, made no distribution of income during 1934, which was accumulated and not paid or credited to any beneficiary in that year. In 1935 she distributed $5,000 of the income to herself and part of it to her husband. During one year she paid out of the trust income for the schooling and other expenses of the nephew Gardner, whose expenses she and her husband had always paid, and whom they adopted in 1939. He became of age in 1940. The income realized between January 1 and June 19, 1934, amounting to $10,632.50 was reported by him in his individual return, because he had a power of revocation during that period. The income from June 19 to December 31, 1934, amounting to $11,926.71, was reported by the trustee as income of the *169 trust. The Commissioner assessed to the settlor the income for the latter period as well as $408.53 representing two installments of New York State income taxes which had been paid by the trustee prior to June 19, at a time when the trust was revocable, and claimed as a deduction in her return.
The income for the period prior to June 19, 1934, was taxable to the settlor under the provisions of Section 166 of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev.Code, § 166, and, as we have already said, the propriety of thus taxing it has not been questioned. The income for the remainder of 1934 was, in our opinion, likewise taxable to the settlor under the rule promulgated by the Supreme Court in Helvering v. Clifford, 309 U.S. 331, 60 S. Ct. 554, 84 L. Ed. 788. After he had provided for the termination of the trust on January 1, 1937, its duration became limited to a period which under any circumstances would be less than three years, the reversion would be at all times vested in him and the income would remain in the family. While the trustee was not, as in Helvering v. Clifford, the settlor himself, yet the settlor retained a control over the corpus for, under Article Second of the Trust Deed, he could require his wife to sell securities held in the trust and to purchase others as he might direct. In addition to this he was given power to appoint a successor-trustee in the event of the death or resignation of his wife and the refusal of Kemp to accept appointment in her place. The contingent beneficial interest of the nephew in the income of the trust is a variant that was not found in Helvering v. Clifford, but a nephew, whose education and maintenance the taxpayer had been responsible for for many years, must be regarded as "in the family" even though he was not a member of the settlor's household. As was said by Douglas, J., in Helvering v. Clifford, 309 U.S. at page 335, 60 S.Ct. at page 557, 84 L. Ed. 788: "We have at best a temporary reallocation of income within an intimate family group. Since the income remains in the family and since the husband retains control over the investment, he has rather complete assurance that the trust will not effect any substantial change in his economic position. It is hard to imagine that respondent felt himself the poorer after this trust had been executed or, if he did, that it had any rational foundation in fact."
We have just discussed the questions now before us in our opinion in Commissioner of Internal Revenue v. Barbour, 2 Cir., 122 F.2d 165, filed July 26, 1941, in which we held that Helvering v. Clifford required the settlor of a trust for a short term to pay the tax on the income, though neither he nor any member of his family was trustee and though he was given no specific control over investments while the trust continued. The liability of the present taxpayer would seem to be still clearer.
The income in question is taxable to the grantor under Section 22(a) of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev. Acts, page 669. Accordingly, the decision of the Board is reversed with directions to reinstate the deficiency determined by the Commissioner. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542382/ | 122 F.2d 252 (1941)
PEMBROKE REALTY & SECURITIES CORPORATION
v.
COMMISSIONER OF INTERNAL REVENUE.
LOEW
v.
SAME.
CITY BANK FARMERS TRUST CO.
v.
SAME (two cases).
Nos. 257-260.
Circuit Court of Appeals, Second Circuit.
August 4, 1941.
M. H. Blinken, of New York City, for petitioners.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and A. F. Prescott, Sp. Assts. to the Atty. Gen., for respondent.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
SWAN, Circuit Judge.
The question presented for review by these four petitions is whether Pembroke Realty & Securities Corporation (for brevity hereafter referred to as Pembroke) is subject to surtax upon undistributed adjusted net income for the year ending September 30, 1936, under section 351 of the Revenue Act of 1934, 26 U.S.C.A. Int. Rev.Acts, page 757. The Board confirmed the commissioner's determination of Pembroke's liability. The other petitioners are the stockholders of Pembroke to whom all of its assets were distributed in liquidation during the taxable year. They were subjected to transferee liability for the corporation's surtax. Their petitions raise no additional questions. Transferee liability of the stockholders is conceded, if Pembroke is liable.
*253 There is no dispute concerning the facts, which were stipulated. In 1929 Pembroke was incorporated under the laws of New York to engage in the business of buying and selling stock as a trader. On October 1, 1935, the beginning of the taxable year in suit, the corporation was insolvent. Operating losses had more than wiped out the entire paid-in cash capital of $325,000 for which its 3250 shares of stock were issued. Its liabilities (not including capital stock) exceeded its assets at cost by $28,646.97 and at fair market value by nearly $10,000. During the taxable year Pembroke had a net income of $87,133.21 upon which it paid an income tax in the correct amount. In September, 1936, the three stockholders voted to dissolve the corporation and distribute its assets in liquidation. This was done. At the end of the taxable year the corporation had retained nothing except sufficient cash to pay its income tax of $10,681.44 and its dissolution expenses of $4,788.22. The assets distributed in liquidation to the shareholders had a book value at cost of $43,075.69 and a fair market value at date of distribution of $83,588.04. Purporting to act pursuant to the provisions of section 351 of the Revenue Act of 1934 the commissioner assessed a deficiency surtax of $18,348.43 against Pembroke, which the Board confirmed.
Section 351(a) provides for a surtax of 30 per cent. "upon the undistributed adjusted net income" up to $100,000 of "every personal holding company". Pembroke was such a company within the definition prescribed by section 351(b) (1). The term "undistributed adjusted net income" is defined in section 351(b) (2) to mean the adjusted net income, as defined in section 351(b) (3), less a 20 per cent. deduction, less amounts used to retire indebtedness incurred prior to January 1, 1934, and less "Dividends paid during the taxable year". Section 351(b) (4) provides that "The terms used in this section shall have the same meaning as when used in Title I." Section 115(a) in Title I, 26 U.S.C.A. Int. Rev.Acts, page 703, defines "dividend" to mean "any distribution made by a corporation to its shareholders * * * out of its earnings or profits accumulated after February 28, 1913." And Treasury Regulations 86, promulgated under the 1934 Act, state in Article 351-2 that the term "dividends" means dividends as defined in section 115(a) and does not include liquidating dividends or other capital distributions. In denying Pembroke a dividends paid credit in computing its "undistributed adjusted net income" the Board held that the distributions to its shareholders were not dividends within the meaning of this applicable section for two reasons: "There were no accumulated earnings," since its capital was impaired, citing Foley Securities Corporation v. Commissioner, 38 B. T.A. 1036, affirmed 8 Cir., 106 F.2d 731; and "the distributions were in liquidation", citing Gaston & Co. v. Commissioner, 39 B.T.A. 640.
If the case is considered as one where a personal holding company which has retained current earnings is seeking exemption from the surtax by reason of deductions which the statute permits, it is difficult to escape the Board's conclusion. Yet the result appears to us to be a patent perversion of the purpose of the statute. Section 351 was new legislation which introduced for the first time the concept of taxing a corporation upon the amount of its current earnings and profits withheld from distribution to stockholders. The legislation was enacted for the purpose of inducing personal holding companies to distribute current income by laying a penal surtax upon income which they retained. This is made crystal clear by the legislative history of the section. The reports cited in the footnote[1] recognize that the most prevalent form of tax avoidance practiced by individuals with large incomes was to transfer property to a controlled corporation "the incorporated pocketbook" with the result that income derived from the property would be taxed at corporation rates and no surtax would be paid by the individual, if the income was not distributed. An earlier attempt to prevent use of the corporate form to avoid surtaxes (section 104 of the Revenue Act of 1928, 26 U.S.C.A. Int.Rev.Acts, p. 375), had been found difficult to administer. In the 1934 Act, section 102, 26 U.S.C.A. Int.Rev.Acts, page 690, took the place of the earlier legislation with respect to corporations other than personal holding companies, and as to them section 351 provided for a tax *254 which "will be automatically levied" without the necessity of proving a purpose to avoid surtaxes. As stated in the Committee Reports the purpose of giving a credit for dividends paid to shareholders during the taxable year was "to prevent the additional tax from applying to sums actually distributed". That actual distribution of current income would avoid imposition of the surtax is clearly expressed in the Report of the Senate Committee on Finance:
"Many will consider the surtax imposed on these personal holding companies a harsh measure. However, a corporation which falls within this section * * * can always escape this tax by distributing to its stockholders at least 90 percent[2] of its adjusted net income."
A similar statement appears in the House Report. The arguments advanced in debating the measure point to the same conclusion. See Cong.Record 73rd Cong., 2d sess., Vol. 78, Part 3, pp. 2662, 2789. To us it appears beyond question that the Congress did not intend to impose a penalty tax upon a corporation which in fact distributed all its current earnings to shareholders. The purpose was to induce such distribution, and the tax was laid on "undistributed" income. Had Pembroke's capital not been impaired, its distribution of current income would indisputably have been a "dividend" and the corporation would not have been subject to a surtax. It is incredible, in the light of the purpose of the legislation, that a different result was intended in the case of a corporation whose capital happened to be impaired.
This consequence, however, is said to be inevitable because of the definition of "dividend" in section 115(a). We do not think so. A dividend is there defined as "any distribution made by a corporation * * * out of its earnings or profits accumulated after February 28, 1913." Read literally, the statute would seem to be satisfied by Pembroke's distribution to its shareholders of earnings accumulated during the year ending September 30, 1936. All that stands in the way is the gloss put upon the definition by the ruling that a corporation cannot have accumulated earnings available for a dividend so long as its capital is impaired. Ordinarily that gloss upon the statutory definition may be justified. See Willcuts v. Milton Dairy Co., 275 U.S. 215, 218, 48 S. Ct. 71, 72 L. Ed. 247. We do not think it need be carried over into section 351. To do so results in consequences contradictory to the purposes of that section. It precludes corporate earnings actually distributed to the shareholders from being treated as dividends so as to increase their surtaxes and it penalizes the corporation for doing the very thing the statute was intended to induce it to do.
It is urged that support for the commissioner's position is to be found in section 109 of the Revenue Act of 1935, 49 Stat. 1014, 1020, 26 U.S.C.A. Int.Rev. Acts, page 802, and section 115(a) of the Revenue Act of 1936, 49 Stat. 1648, 1687, 26 U.S.C.A. Int.Rev.Acts, page 868, which broadened the definition of dividend to include distribution of current earnings regardless of impairment of capital. While the legislative history of these amendments shows that members of Congress supposed that section 351 had the meaning the commissioner ascribed to it, it also shows that they disapproved of it. An interpretation which was erroneous and which Congress wanted to change when it came to their attention cannot preclude the courts from exercising their function of construing the statute. In our opinion the distribution of current earnings should be deemed a dividend within the meaning of section 351, regardless of the fact that the taxpayer's capital was impaired. In so far as Foley Securities Corp. v. Commissioner, 8 Cir., 106 F.2d 731, lays down a contrary rule, we respectfully disagree with it.
There is, however, a broader ground on which the conclusion that Pembroke was not subject to surtax may be supported. This is the ground taken by the Tax Bureau in I.T. 3067 where it was said: "It is obvious that in the case of a complete liquidation of a corporation no income remains undistributed and, therefore, there is nothing to which the undistributed profits tax is applicable. In this situation, it is immaterial whether the prescribed distributions take the form of an ordinary dividend or a distribution in liquidation."
The Bureau was there considering the tax imposed by section 14 of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Acts, page 823, but the principle that when no *255 income is retained because of complete liquidation the statute is inapplicable is equally apposite to the 1934 Act. It is within the power of the courts to declare that a thing which is within the letter of a statute is not governed by the statute because not within its spirit or the intention of its makers. Holy Trinity Church v. United States, 143 U.S. 457, 472, 12 S. Ct. 511, 36 L. Ed. 226; Lau Ow Bew v. United States, 144 U.S. 47, 59, 12 S. Ct. 517, 36 L. Ed. 340; see, also, Helvering v. Gregory, 2 Cir., 69 F.2d 809, 810, affirmed 293 U.S. 465, 55 S. Ct. 266, 79 L. Ed. 596, 97 A.L.R. 1355. We think this principle justifies the holding that Pembroke, which distributed all of its current income in complete liquidation was not subject to the surtax provided by section 351.
Accordingly the orders are reversed.
NOTES
[1] Preliminary Report of a Sub-Committee of the Committee on Ways and Means, 73rd Cong. 2d sess.; Report of Committee on Ways and Means, House Rep. No. 704, 73rd Cong. 2d sess.; Report of Senate Finance Committee, Senate Rep. No. 558, 73rd Cong. 2d sess.
[2] The 10 per cent. of adjusted net income allowed by the House bill to be accumulated by the corporation was increased to 20 per cent. as finally enacted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542393/ | 122 F.2d 579 (1941)
THE SAN GIUSEPPE.
M. COOK & SON, Ltd., et al.
v.
SAGLIETTO.
No. 4809.
Circuit Court of Appeals, Fourth Circuit.
August 29, 1941.
*580 Braden Vandeventer, of Norfolk, Va., and Eberhard P. Deutsch, of New Orleans, La. (Vandeventer & Black, of Norfolk, Va., Deutsch and Kerrigan, of New Orleans, La., and Eugene W. Ong, of New York City, on the brief), for appellants.
Leon T. Seawell, of Norfolk, Va. (Hughes, Little & Seawell, of Norfolk, Va., on the brief), for appellee.
Before PARKER, SOPER, and DOBIE, Circuit Judges.
PARKER, Circuit Judge.
These are cross appeals in a suit in admiralty brought by British cargo owners against the Italian vessel San Giuseppe which arrived at the port of Norfolk, Va., on June 8, 1940, with cargo destined for London, England, and was interned at Norfolk as the result of the war between Great Britain and Italy, which began June 10th. The suit was for possession of the *581 cargo and for damages sustained as the result of the necessity of transshipment. Decree was entered directing the delivery of the cargo to the owners but absolving the vessel from the damages claimed. The cargo owners appeal from that portion of the decree refusing them damages, contending that the vessel was guilty of deviation in putting into the port of Norfolk and was consequently liable as an insurer for damages sustained by the cargo. The vessel appeals from that portion of the decree charging her with the expense of unloading at Norfolk, contending that under the provisions of the bills of lading this was an expense to be borne by the cargo owners.
The San Giuseppe was an Italian steamship under time charter to the Continental Grain Company and sublet under a voyage charter to the Gans Steamship Line of New York. The voyage charter provided that she should have liberty to coal at Norfolk and Newport News. Early in June she took on a cargo of timber, staves, turpentine and tar at New Orleans, La. and Panama City, Fla., for delivery in London, England, and collected freight thereon in excess of $200,000. The master, in giving notice of readiness to load to the agents of the voyage charterer, had advised that he would call at Norfolk for bunkers, as he had been instructed to do by the time charterers. He left New Orleans with only 617 tons of bunkers aboard and had been instructed to have 600 tons when leaving Norfolk for the voyage across the ocean. He issued bills of lading in the name of the vessel covering the cargo and providing that same was to be transported by the vessel to London "with liberty to call at any port or ports, in or out of the customary order, to receive or discharge coal, cargo, passengers, or for any other purpose". Because of war conditions, it was necessary for vessels bound for England to stop at some Atlantic port for sailing orders for the crossing of the ocean, as these were secret orders, were changed every three or four days and could not be communicated to the vessel at sea. While the vessel was at New Orleans, the master was notified by the British Consul there to get his sailing orders for crossing the Atlantic from the British Consul at Norfolk.
On June 8th, the San Giuseppe entered the port of Norfolk for bunkers and sailing orders. The master applied to the charterer's agent for bunkers but did not take them on, as he was directed by the charterer's agent to see the Italian consular agent at Norfolk, and was directed by the latter to remain in port until further orders. On June 10th he received a radio message from the Italian government advising of Italy's entrance into the war and directing all Italian merchant vessels to seek the nearest neutral port and remain there. He consequently remained in Norfolk. If he had not put into Norfolk but had followed the direct route from the Gulf ports to London, he would have been 740 miles off shore at the time of the receipt of the radio message from the Italian government. Had he been in this position, it would have been his duty to turn about and make for the port of Norfolk, and he testifies that this is what he would have done.
The court below found "that in the shipping trade it has been considered over a long period of time to be a usual and reasonable practice of coal burning vessels similarly situated on voyages from Gulf ports to the United Kingdom or continental European ports to call at Norfolk for bunkers". This was supported by the testimony of a large number of witnesses who were shown to have knowledge of the customs and practices of the trade. It was shown that more vessels coal at Norfolk and Newport News than at any other port on the Atlantic or Gulf coasts of the United States, that coal of superior quality is obtained there, that the price is much lower than at Gulf ports, and that from 1,800 to 2,000 ships a year call there for bunkers. The witness Meyer, president of Gans Steamship Line, the voyage charterer, testified that it was customary for vessels of his company to bunker at Norfolk on such voyages, that this practice had been followed by this vessel on two voyages immediately prior to this, and that marine insurers, who charge an additional premium for extra calls, make no such charge for a bunkering call at Norfolk. The witness Hasler of Norfolk who was arranging to bunker the vessel testified: "It is nothing unusual for a steamer loading general cargo in the Gulf and proceeding to the United Kingdom to call in at Hampton Roads on the homeward voyage to replenish her bunkers. That has been in vogue, to my knowledge, for the last thirty years, anyway". The vessel's master, Captain Saglietto, testified that the twenty ships of his company's fleet, of which he is senior officer, bunker at Norfolk on all voyages from the Gulf to the United Kingdom or continental Europe. Sperling, an officer of Continental Grain, time charters of the *582 vessel, testified: "The custom is usually to bunker at Hampton Roads after loading at the Gulf". "Yes, over a period of six years (period of witness' employment by Continental Grain) say about 90 per cent of our coal-burning vessels loading in the Gulf for either United Kingdom or the Continent bunkered at Norfolk". Stevenson, president of Bulk Carriers Corporation and of Ocean Freighting and Brokerage Corporation, testified: "It has been quite the recognized custom for vessels loading in the Gulf bound for the United Kingdom to go via Hampton Roads for bunkers, * * *. I consider it a reasonable practice". The substance of the above testimony was reiterated by Schulze, president of Richard Meyer Company, Havens, an officer of the Strong Shipping Company, Gavigan, president of Funch Edye & Company, and Salzmann, employed by the latter company in charge of its Gulf to Scandanavia operations.
There was no testimony in contradiction of the above, except that the cargo owners introduced a list showing that only a little over 11 per cent of coal-burning vessels bound from Gulf ports for ports in the United Kingdom stopped at Norfolk for bunkers during the five and a half year period preceding the voyage in question. This list, however, did not show the vessels which put into Norfolk for some other purpose as well as for bunkers nor did it show vessels bound for continental ports which bunkered there, or which of the vessels came to the Gulf ports with sufficient bunkers for a return voyage, a frequent practice prior to the war on the part of vessels from European ports making a voyage and return to ports of the Gulf.
The bills of lading provided that the prepaid freight "shall be deemed fully and irrevocably earned upon receipt of the goods by the carrier". They contained the usual "restraint of princes" provision and a war risk clause quoting a provision of the time charter to the effect that, if the vessel were prohibited from going to the port of discharge by the government of her flag, she should discharge the cargo at any other port covered by the charter party as ordered by the charterers and be entitled to freight as if she had discharged at the port to which she had been originally ordered. The cargo owners do not controvert that the effect of these protective clauses, if applicable, is to exonerate the vessel from liability for the damages claimed by them; but their contention is that the protective clauses are not applicable because, they argue, in calling at Norfolk the vessel was guilty of unreasonable deviation, the effect of which was to displace the protective clauses and render her liable for the damage sustained by the cargo owners, irrespective of whether there was or was not causal connection between deviation and loss. The court below held that the call at Norfolk was a reasonable deviation and that the vessel did not thereby forfeit the protection of the contract of carriage. It held, also, that a further reason for denying damages was the lack of causal connection between the alleged deviation and the loss.
We agree with the court below that there was no unreasonable deviation on the part of the vessel. Whether the Carriage of Goods by Sea Act, 46 U.S.C.A. § 1304(4) has enlarged the scope of permissible departure from the course of the voyage, we need not stop to inquire. Prior to the passage of the act, a deviation was defined as a "voluntary departure without necessity or reasonable cause from the regular and usual course of the voyage". 1 Bouv. Law Dict., Rawle's Third Revision, p. 860; Hostetter v. Park, 137 U.S. 30, 40, 11 S. Ct. 1, 34 L. Ed. 568; Constable v. National Steamship Co. 154 U.S. 51, 66, 14 S. Ct. 1062, 38 L. Ed. 903. A departure from the regular course of the voyage through necessity or for reasonable cause was not, under the prior maritime law, a deviation forfeiting insurance or rendering the vessel an insurer; and, for the purposes of this case, we may assume that the words "reasonable deviation" as contained in the statute confer no greater liberty upon the vessel than she had under the rule of the maritime law prior to its enactment. When the liberty to call clause is taken into consideration, we think that the call at Norfolk cannot be considered either unreasonable or without necessity within the meaning of that rule.
It may be conceded that the evidence is not sufficient to establish a custom, within the technical meaning of that term, for vessels bound from Gulf ports to ports of the United Kingdom to call at Norfolk for bunkers. We think, however, that it does establish that such practice is not unreasonable and is within the "liberty to call" clause contained in the bill of lading. While that clause should not be construed as authorizing a complete departure from the general course of the voyage (Swift & Co. v. Furness, Withy & Co., D.C., 87 *583 F. 345) it must certainly be interpreted as permitting a call for bunkers at a port within the general course of the voyage and ancillary thereto, if it is to be given any meaning whatever. The suggestion that such call is authorized only in cases of emergency, or where there is necessity for bunkering by stages, would deny it all meaning, as a call for bunkers, in the absence of the clause, would not amount to deviation under such circumstances. Nor is the vessel to be denied the benefit of the clause because of failure to take on sufficient bunkers for the entire voyage prior to its commencement. One of the manifest purposes of the clause is to give to the vessel some liberty of action with respect to coaling, so that she may avail herself of the privilege of calling for bunkers on the general course of the voyage at ports where coal may be obtained advantageously. As was well said by Cross, J., in the case of J. Peters v. Canada Sugar Refining Company, Montreal Law Reports, 2 Q.B. 420, where the charter party described the voyage from Havana to Montreal via the River St. Lawrence, and where the ship cleared Havana for Sydney with only enough coal to reach that point and stopped at Sydney for bunkers:
"The declaration that the vessel was in every way fitted for the voyage, did not contradict or exclude the exception in the charter that she was at liberty to call at any intermediate port for coal. The exception implied that the calling for coal was a convenient incident of the voyage which the ship might avail herself of, and a presumption that a full provision of coal at Cuba for the whole voyage might be inconvenient, and not a necessity; that a vessel was sufficiently sound and provided for a voyage when she had such supply of coal as suited the route, a complement being more suitably obtained at a call port where she reserved liberty to stop for a supply, besides which, it was the duty of the charterer, in order to protect himself, to have insured according to the terms which he had agreed to by the charter, making the same exception in the policy as was contained in the charter."
Pertinent also is the recent decision of the House of Lords in the case of The Indian City, Reardon Smith Line, Ltd. v. Black Sea & Baltic General Ins. Co., Ltd., [1939] App.Cas. 562, referred to by the court below. In that case the vessel was on a voyage from Poti in the Black Sea to a port of the United States. Instead of taking on oil bunkers at Poti she called for same at Constantza in Rumania. The contract gave the vessel liberty to call for the purpose of bunkering. In holding that this did not constitute deviation, Lord Wright said:
"In 1930 cheap fuel oil for bunkers became available at Constantza in Rumania. Constantza, thereupon, became largely used as a bunkering port in particular for vessels bound from the Black Sea on long ocean voyages. In 1932 and 1933, 114 oil-burning vessels called at Constantza for bunkering only. This figure shows the importance of the port as a bunkering port. It is not necessary to analyze closely what proportion of oil-burning vessels sailing through the Bosphorus on ocean voyages bunkered at Constantza. It is sufficient for purposes of this case to record what has been accepted on both sides, namely, that 25% of the whole number called and bunkered at Constantza in the three and a quarter years before the casualty which overtook the Indian City. I emphasize these facts, because the position of Constantza as a usual and recognized bunkering port in the Black Sea seems to me to be a key point in the case. * * * In modern times in all long ocean voyages, the need to replenish bunkers (coal or oil) has to be considered. The doctrine of stages of the voyage which enables a shipowner to start with bunkers sufficient for the stage, so long as he fills up his bunkers at the next bunkering port, necessarily involves calling at that port, and also perhaps, later ports, in order to fulfill the recurring obligation to keep the vessel seaworthy in regard to bunkers. Thus to call at such ports has become an ordinary incident of the voyage. The need to do so may help to determine the general route, for instance, whether it is to be by the Cape of Good Hope or the Suez Canal. A shipowner is entitled, with certain limits determined by what is reasonable, to be guided in his choice of bunkering ports by considerations of cheapness and convenience. * * * He may decide to fill up his bunkers after sailing from the port of loading at some convenient port. He may decide to do this at Constantza, at Istanbul, or at Algiers, or at Oran, or at Ceuta, all of which are available bunkering ports, starting from the loading port with sufficient bunkers to take the ship to the next bunkering port which he decides to use. In this way he selects the stage for bunkering. *584 The vessel must be seaworthy for that stage, but it is the ship owner's province to fix the stage, that is, to determine where he will bunker, so long as his decision is reasonable and usual. In the present case, as in the other voyages during the relevant period, the appellants selected Constantza as the bunkering port. Their case is that they had done so a great many times without objection and save in this one case without mishap. They relied on all the evidence to which I have briefly referred to support their claim that the route by Constantza is a usual route. The position therefore is that to call at some port for bunkers is no deviation, and the only question is whether Constantza is a usual and reasonable port of call for this purpose.
"I agree with Greer, L. J., that the evidence that 25% of oil-burning vessels sailing from the Black Sea on ocean voyages call at Constantza for bunkers is sufficient to show a usual route. The shipowner is not here attempting to prove a custom. To prove a custom he would have to show that it was uniform and universal in the trade, but that is not what is in question here. Nor need he show that other routes were not available, that is, that there were not alternative ports of call at which he might bunker. There are no doubt other available ports of call for this purpose, some, and perhaps all, of which would involve much less extra steaming. I think the shipowner is entitled to balance the cost to him of extra steaming against the cheapness or convenience of Constantza, so long as to do so is not unreasonable in regard to the interests of the charterer or any other persons who might be concerned."
In point, too, is the supplemental opinion of Judge Learned Hand in The Blandon, D.C., 287 F. 722, 725, in which was involved an alleged deviation to Philadelphia to take on cargo on a voyage from New York to Valencia. In holding that this call did not constitute a deviation in the light of the liberty to call clause, Judge Hand said:
"In my earlier decision I neglected to observe the clause in the main body of the bill of lading; that point not being argued at the hearing or in the briefs. It is this: `With the liberty to call at any port or ports in or out of the customary route in any order.' The question is whether this clause justified the ship in calling at Philadelphia, a deviation which I have held to have been otherwise unjustified. If these words are to mean anything at all, it seems to me that they must include such a stop as Philadelphia. True, it was not a stop on the customary route; at least, I must assume so on this record. Yet it was expressly agreed that the port might be `out of the customary route.' What more limited sense can those words mean than a stop at a place some thirty hours away? It is said that the clause will allow only reasonable deviations, and this is indeed true, since such a clause is to be construed in its context. Swift & Co. v. Furness, etc. [Co.] (D.C.) 87 F. 345. For example, it might not allow a side voyage to Tampico or Galveston; certainly it would not permit a call at Rio or Montevideo. But it must mean to give the ship permission to steam by a different route from that she was otherwise bound to take, besides giving her leave to make ports of call en route; i. e., `in * * * the customary route.' Such permission involves delay, and was meant to involve delay."
The law relating to "liberty to call" clauses was well summed up by the District Judge in W. R. Grace & Co. v. Toyo Kisen Kabushiki Kaisha, D.C., 7 F.2d 889, 891, 892, affirmed 9 Cir., 12 F.2d 519, certiorari denied 273 U.S. 717, 47 S. Ct. 109, 71 L. Ed. 856, as follows:
"As a conclusion from all the cases, it is apparent that the `general liberty' clause is not treated as of `no effect.' It is a stipulation of the parties, to be given effect, like other stipulations, in so far as it does not conflict with the Harter Act (Comp.St. §§ 8029-8035 [46 U.S.C.A. §§ 190-195]), or the general purpose and policy of the law, or the real intent of the contract between shipper and carrier. It may be fairly said that reservations by a carrier of general liberties of departure from the route of the contractual voyage must be read in due relation and subordination to the main commercial purpose of the contract of affreightment, and as a matter of law will justify only such deviations from that route as are consistent with that particular commercial purpose.
"The propriety of any particular deviation is a question of fact in each case and there is no fixed rule for such determination. It is a question of inherent reasonableness, and pertinent to the inquiry of the surrounding circumstances, namely, the commercial adventure, which is the subject of the contract, the character of the vessel, *585 the usual and customary route, the natural and usual ports of call, the location of the port to which the deviation was made, and the purpose of the call thereat."
See, also, the Nichiyo Maru, D.C., 14 F. Supp. 727, 729, affirmed 4 Cir., 89 F.2d 539; United States v. Los Angeles Soap Co., 9 Cir., 83 F.2d 875, 889; The Salvore, 2 Cir., 60 F.2d 683, 685; The Half Moon, D.C., 21 F.2d 447, affirmed Callister v. U. S. Shipping Board, etc., Corp., 2 Cir., 30 F.2d 1008; Dietrich v. U. S. Shipping Board E. F. Corp., 2 Cir., 9 F.2d 733; The Emelia S. dePerez, D.C., 287 F. 361, affirmed 2 Cir., 288 F. 1019; The Citta DiMessina, D.C., 169 F. 472; The Sidonian, D.C., 34 F. 805.
We find no binding authority to the contrary in the cases relied on by the cargo owners. The Willdomino, 272 U.S. 718, 47 S. Ct. 261, 262, 71 L. Ed. 491 was a clear case of deviation. The vessel cleared Ponta Delgada for New York without sufficient coal for the voyage and then, after proceeding for five or six days on the course to New York, changed her course for North Sydney, Nova Scotia. The court held that proceeding for five or six days on the course for New York was a deviation from any permissible course to North Sydney, but did not hold that she might not have called at North Sydney under the terms of her bill of lading. On this point the court said: "Nothing in the present bills of lading suggests that the vessel might wander about the sea, heading first for one port, and then without adequate reason for another. If the Willdomino had the privilege of going from Ponta Delgada to North Sydney and intended so to do, it was her duty to take the ordinary course. This she did not do."
The Henry W. Cramp, 3 Cir., 20 F.2d 320 in no way involved the right to call for bunkers as an incident of the voyage under a liberty to call clause, but was the case of a sailing vessel which sailed from Pensacola, Florida for Genoa, Italy, and which put into Norfolk and stayed there for two months without any reason or excuse disclosed by the record. The case of Hurlbut v. Turnure, 2 Cir., 81 F. 208, affirming, D. C., 76 F. 587, is more nearly in point, but that was a case of general average. The vessel there had cleared from Cuba for New York with an insufficient supply of fuel and had been obliged to burn a part of her cargo and equipment to get into Newport News. What was decided was that the vessel could not throw into general average the cost of putting into the port of Newport News merely because the bills of lading gave her the right to call there. The court held that not having fulfilled her duty to take the usual supply of coal when sailing for New York, she must be deemed to have voluntarily taken the risk of putting into some port of call in order to make that supply good. Whether it would have constituted a deviation for the vessel to have put into Newport News if she had sailed for that port with sufficient coal for the voyage was not directly involved.
There is another ground upon which the call at Norfolk is justified, not only as being reasonable, but also as being necessary in the prosecution of the voyage to London. The war between England and Germany was in progress and a crossing to England was fraught with the gravest danger to a vessel carrying a contraband cargo. Before a crossing of the ocean could be attempted, it was necessary for the vessel to call at an Atlantic port for sailing orders, so that she might know where to meet her convoy and protect herself in the meantime from the danger of German raiders and submarines. These orders could not be communicated to the vessel at sea because of the necessity for secrecy, and they could not be given her at New Orleans or Panama City because they were changed every few days. A call at some Atlantic port for such orders was, therefore, a necessary incident of the voyage; and, as Norfolk was the most convenient port and was the port at which bunkers were to be taken, a call there for sailing orders was directed by the British consul at New Orleans. Even if there had been no intention to take bunkers, a call at some Atlantic port would have been necessary, and Norfolk, being the nearest and most convenient, was the logical port at which to call. The intention to take bunkers there, even if a call for that purpose alone would not have been justified, cannot make the vessel guilty of a deviation in making the call for orders which she was under the necessity of making. To say that she would have stopped for bunkers whether she needed the orders or not is beside the point, for she must have stopped for orders whether needing the bunkers or not. In the absence of the "liberty to call" clause in the bill of lading, such necessary call in pursuance of the voyage could not be held a deviation. It was certainly not an unreasonable exercise of the privilege conferred by that clause.
*586 Even without the necessity of calling for orders, we think that the call at Norfolk would have been justified by the prevailing war conditions. As a matter of fact war was only two days off when the call was made, and already Italian consuls were refusing to permit vessels in port to put to sea. For a vessel to seek port under such circumstances could hardly be held an unreasonable deviation from her voyage. The Kronprinzessin Cecilie 244 U.S. 12, 37 S. Ct. 490, 61 L. Ed. 960. That the captain may not have known of the imminence of war, would not, we think, deprive the vessel of the right to rely upon the fact that, in calling at Norfolk, she in fact did precisely what she should have done in the light of existing circumstances. If she did what was right, she ought not be deprived of the benefit of right action because the captain may have acted more wisely than he knew.
If the call at Norfolk were deemed a deviation, a grave question would be presented as to whether the damages claimed by the cargo owners would be recoverable; for unquestionably the damage resulting from transshipment must have been incurred by the cargo owners whether deviation by the vessel had occurred or not. The vessel, if she had continued on her direct course to London, would have been only 740 miles from Norfolk when the radio message was sent out announcing the war between Great Britain and Italy and directing Italian vessels to put into the nearest neutral port. It would have been her duty to obey this order; and her master testifies that he would have put into Norfolk as the nearest available port, the reasonable thing for him to do under the circumstances. While it is true that, upon a deviation, the vessel becomes an insurer of the cargo, the doctrine seems fairly well established that she is not liable for loss or damage which "must equally have occurred even if there had been no deviation". Scrutton on Charter Parties and Bills of Lading, p. 310; Story on Bailments, 8th Ed., pp. 466, 467; Williston on Contracts, § 1096; James Morrison & Co. Ltd. v. Shaw, Savill & Albion, Ltd., [1916] 2 K.B. 783; The Hermosa, 9 Cir., 57 F.2d 20, 27; Maghee v. Camden, etc., R. Co. 45 N.Y. 514, 6 Am.Rep. 124; Memphis & C. R. R. Co. v. Reeves, 10 Wall. 176, 19 L. Ed. 909; The Ida, 2 Cir., 75 F.2d 278; Globe & Rutgers Fire Ins. Co. v. United States, 2 Cir., 105 F.2d 160, 166; The Caterina Gerolimich, D.C., 43 F.2d 248, 252. Since we are of opinion, however, that there was no deviation by the vessel, it is not necessary to decide this point.
On the appeal of the vessel, also, we think that the decree below should be affirmed. The vessel contends that cargo owners should bear the expense of discharging the cargo at Norfolk because of the provisions of paragraph 11 of the bill of lading, the pertinent portion of which is as follows:
"In the event of war or hostilities existing or threatened, the goods shall at all times be at the sole risk of the owners thereof of arrest, restraint, capture, seizure, detention or interference of any sort by any power; and the carrier and its representatives are privileged in their absolute discretion, if deemed advisable for the protection of the vessel or of any cargo or to avoid loss, damage, delay, expense, danger, either with or without proceeding to or toward the port of discharge or entering or attempting to enter or discharge the goods there, and whether such entry or discharge be permitted or not, to proceed to or remain at any other port or ports, including the port of shipment, once or oftener in any order or rotation retaining the goods on board or discharging the same at the risk and expense of the owners thereof at such port or ports at the first or any subsequent call, and full freight and all other charges shall be paid by shipper, consignee, and/or owner, and the goods shall be subject to a lien therefor".
The vessel, however, did not proceed under this clause of the bill of lading. She refused to discharge the cargo or to deliver it to the owners until ordered to do so by the court below; and the court ordered the delivery on the ground that the venture had been frustrated by war and that the owners were entitled to the possession of the cargo. Whose duty, then, was it to make delivery? If the goods had been carried to London, no question is made that both under the terms of the bills of lading and under the provisions of the Carriage of Goods by Sea Act that duty rested upon the vessel. Is the duty any less because war conditions have absolved her from making a portion of the voyage for which she has been paid? We think not. As pointed out by the court below, there is no showing that it would cost the vessel any more to discharge at Norfolk than at London, and there certainly is no reason *587 to think that the cost of discharge at Norfolk is as great as the cost of discharge at London plus the cost of transportation across the ocean, of which the vessel has been relieved. In such situation, it is not unreasonable, we think, to require the vessel to bear the cost of unloading and thus to carry out to the extent of her ability the obligation which she has undertaken.
And we think that the burden of unloading in such situation is imposed upon the vessel and her owners by a reasonable interpretation of the provision of the war risk clause of the time charter quoted in the bill of lading. That clause is as follows:
"No bills of lading to be signed for any blockaded port and if the port of discharge be declared blockaded after bills of lading have been signed, or if the port to which the ship has been ordered to discharge either on signing bills of lading or thereafter be one to which the ship is or shall be prohibited from going by the government of the nation under whose flag the ship sails or by any other government, the owner shall discharge the cargo at any other port covered by the charter party as ordered by the charterers (provided such other port is not a blockaded or prohibited port as above mentioned) and shall be entitled to freight as if the ship had discharged at the port or ports of discharge to which she was originally ordered." (Italics supplied.)
Here the vessel was prohibited from going to the port of discharge named in the bill of lading by the government of the nation under whose flag she was sailing. She was in a port covered by the charter. While the discharge was not ordered by the charterers, it was ordered by the court on motion of the cargo owners, who stood in the shoes of the charterers in so far as the duty of the vessel and her owners to discharge cargo was concerned. No authority is cited as to why the vessel should not bear the burden of discharging the cargo under such circumstances, and we know of none. On the contrary, we think that the spirit, if not the letter of the contract of carriage, places that burden upon the vessel and that in equity and good conscience that is where it belongs.
For the reasons stated, the decree appealed from will be affirmed both on the appeal and the cross appeal.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/455692/ | 767 F.2d 935
U.S.v.Gordon
84-5164
United States Court of Appeals,Ninth Circuit.
6/20/85
1
C.D.Cal.
AFFIRMED | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1542512/ | 997 A.2d 1231 (2010)
DELAWARE AVENUE, LLC, Petitioner,
v.
DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES and Department of Environmental Protection, Respondents.
No. 2393 C.D. 2009.
Commonwealth Court of Pennsylvania.
Argued May 18, 2010.
Decided June 10, 2010.
As Amended June 11, 2010.
Richard D. Malmed, Philadelphia, for petitioner.
Martha R. Smith, Asst. Counsel, Harrisburg, for respondent, Department of Conservation and Natural Resources.
Margaret O. Murphy, Asst. Counsel, Harrisburg, for respondent, Department of Environmental Protection.
BEFORE: PELLEGRINI, Judge, and LEAVITT, Judge, and FLAHERTY, Senior Judge.
*1232 OPINION BY Judge PELLEGRINI.
Delaware Avenue, LLC (Petitioner) petitions for review of an order of the Board of Property (Board)[1] sustaining the preliminary objections of the Department of Conservation and Natural Resources (DCNR) and the Department of Environmental Protection (DEP) and dismissing its complaint for improper service of process and failure to state a claim. Finding no error in the Board's decision, we affirm.
This case concerns 10 acres of riparian land in the City of Philadelphia bounded by the Betsy Ross Bridge to the south and the Delaware River to the east. In 1960, the Commonwealth, City of Philadelphia, Delaware River Port Authority, federal government and Army Corp of Engineers all participated in a project which dredged the nearby Frankford Creek and dumped the fill along the banks of the Delaware River, directly south and east of the subject property, in order to provide subjacent support for several piers of the Betsy Ross Bridge. The dumping of this fill resulted in the exposure of approximately four acres of previously submerged land between the property and the Delaware River.
Petitioner recently acquired title to the 10-acre property by special warranty deed and the four acres of newly exposed land by quit claim deed. In an attempt to quiet title to the four acres of previously submerged land, Petitioner filed an action in federal court against the City of Philadelphia, the Delaware River Port Authority, the federal government and the Commonwealth. The first three parties did not contest title and agreed that title could be quieted as to them. The Commonwealth was dismissed from the case on its motion on the basis of sovereign immunity.
Petitioner then attempted to quiet title as to the Commonwealth by filing a complaint with the Board contending that it had title to the filled land. The Commonwealth filed preliminary objections, which among other things,[2] claimed that it owned the land on which the fill was placed. In addressing this question, the Board first noted that ownership of land underneath the water of a navigable river lies in the Commonwealth, held in trust for the people. Black v. American International Corp., 264 Pa. 260, 107 A. 737 (1919). While the natural accretion of soil inures to the riparian landowner, the addition of land resulting from man-made improvements to a navigable river inures to the Commonwealth. Id. Petitioner admitted that the addition of the four acres of land *1233 between its property and the Delaware River occurred due to the dumping of fill along the riverbank, a man-made event. Therefore, the land belonged to the Commonwealth, and the Board sustained the preliminary objection and dismissed the complaint. This appeal followed.[3]
On appeal, Petitioner argues that the Board erred in granting the Departments' preliminary objection in the nature of a demurrer and dismissing the complaint because the Commonwealth does not have any title interest in the land at issue. Petitioner admits that submerged lands of navigable rivers are owned by the Commonwealth and held in trust for the benefit of the public. Poor v. McClure, 77 Pa. 214, 219 (1873).[4] Petitioner also admits that the four acres of land at issue were exposed due to the dumping of fill along the Delaware River, a man-made event rather than the natural flow of alluvion which is commonly referred to in property law as "accretion," which would entitle it to the newly created land. However, Petitioner contends that "the overwhelming state of scholarly opinion" asserts that any distinction between lands created by natural versus artificial means is now obsolete.
There is one exception that the Commonwealth owns the land under navigable streams forever and that is the doctrine of accretion, which is the natural and imperceptible deposit of alluvion brought down by the river over time. Black, 264 Pa. at 263, 107 A. at 737. Changes in the low water line resulting from natural accretion or erosion can add or diminish a *1234 riparian landowner's interest and the Commonwealth's title. Id. at 262-63, 107 A. at 738. Artificial placement of fill is not considered accretion under Pennsylvania law, and is subject to different rules. The Supreme Court of Pennsylvania rejected an argument similar to Petitioner's in Black, and pronounced the black letter rule of law on this subject as follows:
While it is true [the riparian landowner] is entitled to and becomes the owner of the natural accretions to his land resulting from the imperceptible deposits of alluvion along his riparian front, it is equally true, as found by the court below, this principle `does not apply where land has been made by human agency by depositing material on a river bottom.' Poor v. McClure; Allegheny City v. Moorehead, 80 Pa. 118. Such accretions are not `gradual and imperceptible,' and are not `brought down by rivers' or other streams.
Petitioner does not contest the fact that the newly exposed land was created by artificial meansthe dumping of fill on the Commonwealth-owned riverbed. Acknowledging that this was not the gradual and imperceptible deposit of alluvion over time and the doctrine of accretion does not apply in this case, Petitioner claims that such a distinction between natural and artificial means is obsolete and that the case law in this area is outdated and ill-suited for modern times.
In support of this position, Petitioner cites to several treatises, none of which specifically address Pennsylvania case law. It specifically points to Section 3:43 of the Law of Water Rights and Resources,[5] which notes that several states have taken the stance that changes in the course of a waterway caused by artificial and natural means should be treated the same way and that the riparian landowner should gain title to the newly exposed land so long as he or she did not cause the change. Petitioner argues that several principles listed in those treatises favor the riparian owner's right to the newly created land and justify a change in Pennsylvania law, namely (1) the one who bears the burden of the loss of the riparian land by contiguity to the water should benefit from an unforeseen gain; (2) all land should have an owner, and where it was created by redirection of the river, the adjacent property owner is the best one to cultivate and develop it; and (3) the contiguous property owner should not be deprived of access to new land because his land would lose its riparian nature. Because neither it nor its predecessor in interest caused the change in the Delaware River, Petitioner argues that the previously submerged land should inure to it and not the Commonwealth under this more modern view of the law of accretion.
Even if we were to agree with those treatises, they do not allow for a property owner to gain ownership of land created by artificial means, i.e., fillbut allow for a property owner to claim new land, not just by gradual and imperceptible deposit, but when it is created by a waterway naturally changing course. Moreover, under Petitioner's approach, a riparian landowner could gain title to Commonwealth-owned land, even when the land was created by the purposeful dumping of fill or even damming. Such a stance could lead to less than honest behavior by landowners in an attempt to gain title to valuable riparian land and could have deleterious effects upon our state's navigable waterways as well as the environment.
Petitioner makes much of the fact that the Commonwealth itself was responsible for the placement of the artificial fill and, as such, it could no longer claim title *1235 to the previously submerged land. However, Pennsylvania courts have continuously held that changes in the low water line associated with artificial filling do not modify the boundaries of navigable waterways, regardless of whether the Commonwealth or a private entity was responsible for the fill. See Black, 264 Pa. at 262-63, 107 A. at 738; Poor v. McClure; Allegheny City v. Moorehead, 80 Pa. 118 (1875). In the present case, the Commonwealth chose to dredge a nearby creek and place the artificial fill along the bed of the Delaware River in order to provide additional subjacent support for the Betsy Ross Bridge. This was well within the Commonwealth's authority, and it did not lose title to the previously submerged land simply because it changed the low water line through the placement of artificial fill.
Given the well-settled law which governs this case, the Commonwealth retains title to the previously submerged land, and the Board was correct in sustaining the preliminary objection and dismissing the complaint for failure to state a claim. However, we note that we are neither addressing the claims, if any, the Petitioner may have for loss of access to the Delaware River nor are we addressing the exact nature of the Commonwealth's interest in the land.
Accordingly, the order of the Board is affirmed.
ORDER
AND NOW, this 10th day of June, 2010, the November 6, 2009 order of the Board of Property at No. BP-2007-003, is affirmed.
NOTES
[1] Section 1207 of the Administrative Code, Act of April 9, 1929, P.L. 177, as amended, 71 P.S. § 337, provides that the Board of Property shall have jurisdiction "to hear and determine cases involving the title to land or interest therein brought by persons who claim an interest in the title to lands occupied or claimed by the Commonwealth." This vests in the Board of Property exclusive jurisdiction to determine the title to real estate or to remove a cloud on title to such real estate where private property owners and the Commonwealth claim an interest in the same real estate. Krulac v. Pennsylvania Game Commission, 702 A.2d 621 (Pa.Cmwlth.1997); McCullough v. Department of Transportation, 116 Pa.Cmwlth. 215, 541 A.2d 430 (1988).
[2] DEP and DCNR filed joint preliminary objections to the complaint alleging improper service because neither agency was named as a party in the case and Petitioner mailed the complaint to counsel for the departments, neither of which was authorized to accept service on behalf of the Commonwealth or its agencies. The Board determined that Pa. R.C.P. No. 422(a) required Petitioner to serve the complaint on the Commonwealth and its agencies "by handing a copy to the person in charge thereof." The Board rejected Petitioner's argument that the General Rules of Appellate Practice and Procedure governed this case and only required service by mail rather than hand delivery. At oral argument, for this appeal only, the Departments abandoned any argument that service was improper.
[3] Our review of a decision of the Board is limited to determining whether errors of law were made, constitutional rights were violated and whether the necessary findings of fact are supported by substantial evidence. 2 Pa. C.S. § 704. In ruling on preliminary objections in the nature of a demurrer, the Court must accept as true all well-pleaded facts and all reasonable inferences deducible therefrom; however, we need not accept conclusions of law. Warminster Fiberglass Co., Inc. v. Upper Southampton Township, 939 A.2d 441 (Pa.Cmwlth.2007). A demurrer will be sustained only where it is clear and free from doubt that the law will not permit recovery under the alleged facts. Id.
[4] See also Freeland v. Pennsylvania Railroad Co., 197 Pa. 529, 47 A. 745 (1901); Palmer v. Farrell, 129 Pa. 162, 18 A. 761 (1889); Pursell v. Stover, 110 Pa. 43, 20 A. 403 (1885); Flanagan v. City of Philadelphia, 42 Pa. 219 (1862); Carson v. Blazer, 2 Binn. 475 (1810).
Under Pennsylvania law, owners of land along the banks of such waters in Pennsylvania do not have exclusive rights in those waters; that right is vested in the Commonwealth for the benefit of the public. Shrunk v. Schuylkill Navigation Co., 14 Rawle 71 (Pa. 1826); Carson v. Blazer; Lehigh Falls Fishing Club v. Andrejewski, 735 A.2d 718 (Pa.Super.1999). Once a river or stream is declared navigable, for purposes of title to submerged lands, it remains legally navigable water. Lehigh Falls Fishing Club, 735 A.2d at 719 n. 2. Once a body of water meets the navigability test, title to the bed is in the Commonwealth, and the boundaries are fixed (subject to the fluctuations associated with naturalnot man-madeerosion and reliction). Black, 264 Pa. at 262-63, 107 A. at 738. The Commonwealth is not divested of title by disuse for commerce. See U.S. v. Appalachian Electric Power Co., 311 U.S. 377, 61 S.Ct. 291, 85 L.Ed. 243 (1940); Poor v. McClure.
Riparian landowners may obtain rights from the Commonwealth to fill or construct structures such as piers, wharves, bridges and the like on Commonwealth submerged lands and may hold property interests in the structures themselves. See Section 3 of The First Class City Code, Act of April 8, 1868, P.L. 755, 53 P.S. § 16833. However, title to the underlying submerged land remains in the Commonwealth and may not be alienated in fee by the Commonwealth government. Illinois Central Railroad Co. v. Illinois, 146 U.S. 387, 13 S.Ct. 110, 36 L.Ed. 1018 (1892); The New York and Erie Railroad Co. v. Young, 33 Pa. 175, 9 Casey 175 (1859) (private mill dam authorization revocable); City of Philadelphia v. Commonwealth, 284 Pa. 225, 130 A. 491 (1925) (occupation of submerged lands by municipal piers under City licenses is subject to revocation by the Commonwealth).
[5] Dan Tarlock, Law of Water Rights and Resources § 3:43 (Thomson Reuters 2009). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542513/ | 60 F.2d 524 (1932)
In re PNEUMATIC TUBE STEAM SPLICER CO.
No. 6655.
District Court, D. Maryland.
June 2, 1932.
*525 Willis R. Jones, of Baltimore, Md., for Steam Splicer Co., A. R. L. Dohme, and John J. Batterman.
Weinberg & Sweeten, of Baltimore, Md., for petitioners.
WILLIAM C. COLEMAN, District Judge.
The questions for determination arise upon the petition of several creditors and stockholders of the bankrupt company, manufacturer and seller of automobile tube vulcanizers and splicers, which was filed five weeks after the adjudication (upon a voluntary petition), and ten days after the assets of the company were sold and the sale ratified, in accordance with the requirements of the Bankruptcy Act (11 USCA § 1 et seq.), and the assets partially, if not entirely, reduced to the possession of the vendee.
Summarized, the petition seeks (1) a reopening of the original proceedings, and vacating of the adjudication of the company as a bankrupt; (2) rescinding the sale of its assets; and (3) disallowance of a claim of $22,314.39 filed by A. R. L. Dohme, president and director of the company and owner of the greater portion of its stock. The basis alleged for all of this relief is that the adjudication, sale of the assets, and the claim of A. R. L. Dohme are a fraud upon the creditors and stockholders of the company, and, more specifically, that the bankruptcy proceeding was instituted ostensibly by the company acting through its board of directors but really by A. R. L. Dohme and his brother-in-law, John J. Batterman, a director, and purchaser of the company's assets, who controlled and dominated the board through their relatives and office employees, for the personal benefit and advantage of Dr. Dohme and Mr. Batterman by means of the valuable patents, machinery, equipment, and good will of the company, and that therefore what was done by the board of directors and by Dr. Dohme and Mr. Batterman was in derogation of the rights and best interests of the petitioning stockholders and creditors, and others for whom they claimed to have filed the petition in a representative capacity.
The corporation, Dr. Dohme, and Mr. Batterman answered the petition, denying categorically the various allegations that their action had been improper in any way. Considerable testimony was taken and extensive arguments heard. As a result, the court reaches the conclusion that the petitioners have failed to meet the burden which rests upon them, to prove that they are entitled to the relief for which they ask.
First, as to the adjudication, we fail to find that there was anything unlawful or irregular in the method by which it was brought about. It is a well-settled principle that a creditor may not challenge the right of a corporation's board of directors to file a petition in bankruptcy on behalf of the company. In re Guanacevi Tunnel Co., 201 F. 316 (C. C. A. 2d); In re United Grocery (D. C.) 239 F. 1016. Also it is equally well settled that a corporation's board of directors has the power to place the corporation in bankruptcy by voluntary petition without submitting the matter to a vote of the stockholders. In re Lone Star Shipbuilding Co. (C. C. A.) 6 F.(2d) 192 (where the corporation was chartered in Maryland); In re De Camp Glass Casket Co. (C. C. A.) 272 F. 558; In re Nonpareil Consolidated Copper Co. (C. C. A.) 227 F. 575. Nor does the fact that a member of the board of directors owns virtually all of the corporation's stock make any difference. In re Pacific Motor *526 Car Co. (C. C. A.) 225 F. 750. We find nothing in the charter or by-laws of the Pneumatic Tube Steam Splicer Company, which was incorporated under the laws of Maryland, creating an exception to the aforegoing principle. There is no statutory provision in the Maryland corporation law contrary thereto. Article 23, §§ 10 (as amended by Acts Md. 1927, c. 581, § 1) and 13 of the Maryland Annotated Code define the power of the directors. Sections 36 and 88 of the same article cover the dissolution and sale of the corporation's property as a whole; and, while they require in such cases the consent of two-thirds of the stockholders, they are not to be taken as in derogation of the right on the part of the directors, by their own vote, without more, to place the corporation in bankruptcy. See In re United Grocery Company; In re De Camp Glass Casket Co. and In re Nonpareil Consolidated Copper Company, supra. In the present case, the resolution of the board is in proper form, and was legally adopted.
Turning to the second claim made by the petitioning creditors and stockholders, namely, that the sale of the entire assets of the corporation by the trustee in bankruptcy to John J. Batterman, should be rescinded because in effect fraudulent, there is an absence of proof that such is the case. There was no irregularity, nor indeed is any alleged, with respect to the formalities surrounding the sale and its ratification by the referee. By the Bankruptcy Act and by the order of this court, the referee had power to advertise the property for disposal at either public or private sale, to conduct such a sale, to accept the highest offer, and to ratify and confirm a sale to the person submitting the same, provided that the notice required by the Bankruptcy Act, to all creditors, of both the proposed sale and proposed ratification of the accepted offer, was duly given. We find that all of these formalities were properly complied with. Nevertheless, the petitioners still contend that the price obtained for the corporation's assets, to wit, $12,000, is so inadequate as to be in fraud of themselves and other creditors and stockholders similarly situated, and that, if the sale is rescinded and the property required to be again offered for sale, it should and will, in their estimation, bring a far more adequate price.
We do not, however, find that the evidence supports this contention. The petition sets forth that the appraisal of the machinery, equipment, and patents of the company, placed at $11,857.75, is far below their actual value; that petitioners are prepared to show not only that the machinery and equipment owned and used by the company is worth considerably more than the value set forth in the schedules of assets filed by the petitioner, namely, approximately $7,100, but that the patents issued and pending, owned by the company, are among the most important and valuable in the rubber tire industry; that the machinery manufactured under these patents has been and still is used by virtually all of the principal manufacturers of rubber automobile tubes in the United States and other countries; and that through the use of these patents the corporation has, in the last ten years, made large profits and paid large dividends to its stockholders. The testimony adduced, however, satisfies us that, while the patents owned by the corporation were originally important and valuable in the industry, their importance and value has, in the last few years, been greatly diminished by reason of the sale of shop rights in these patents; by competition, development of the prior art, great decline in the price of automobile tires and tubes, the general business depression, and to a number of other circumstances arising in the trade. Indeed, for a considerable time prior to the filing of the petition in bankruptcy, the corporation had been operated at a loss, albeit during seven years, 1923 to 1929, inclusive, the company had paid in dividends the large sum of nearly $650,000.
In the sworn schedule of assets, the value of the various patents is stated as "not determinable," but a notation is made that "there is some value to the patents." The net value, taken from the books of the company, of the patents and good will, that is, $138,486.69, is merely referred to in the inventory, but not adopted. Similarly, the appraisers in their report declined to place any value on the patents as such, stating that the $7,000 value which they placed in their report upon the 2,200 machines under leases on a royalty basis included such value as they were, at the time, able to place upon the patents.
It may be that, had appraisers been selected who were more conversant with the particular art, and if the sale of the patents had been advertised in various technical journals devoted to that art, more and higher bids might have been obtained. In fact, such practice, especially where patents are involved, is recommended. However, the evidence discloses that both the trustee and the referee made reasonable, honest efforts to *527 obtain the best possible price for all of the assets, and that Mr. Batterman's offer the only one obtained was not accepted until they were satisfied that it was futile to withdraw the property, and make further attempts to dispose of it at a higher figure. It is significant that the petitioners, while protesting against the sale, do not represent to the court that they have any definite assurance that a higher bid will in fact be forthcoming, if the sale is rescinded and the property again offered for sale. Indeed, the most that any of the witnesses for the petitioners have asserted is that they feel the price obtained is inordinately low, in view of the alleged intrinsic value of the patents, and the earlier record of the company. However, this is not enough to justify a court in upsetting a sale that has been otherwise regular; certainly not where the sale has been ratified and the vendee given possession of property which he acquired in entire good faith.
The testimony covering the value of the patents upon which the petitioners would have the court largely rely as a basis for rescinding the sale, namely, the testimony of Mr. Seward, consulting engineer employed by the company and now a creditor for unpaid fees as a result of professional services rendered to the company, is based upon values which prima facie appear to be so inflated as not to command reliance. For example, Mr. Seward testified that the three principal patents are worth, in his opinion, an aggregate of $1,250,000. He stated that, if properly promoted, one of these patents should yield an annual income of $50,000, another of $20,000 or $25,000, and the third, of $100,000. But this is mere opinion testimony, unsupported by convincing figures, and in fact contradicted by the company's record, the state of the art, and present conditions in the particular industry.
Nothing should be done to weaken confidence in the stability of judicial sales. There must be some real cause before they will be upset. Inadequacy of price alone is rarely sufficient that is, there must be proven gross inadequacy, or circumstances from which palpable mistake or fraud is to be inferred. The order provided that the property should not be sold for less than 75 per cent. of its appraised value. Here the appraised value was slightly exceeded. Were the court to rescind the sale and order another, there is no assurance whatever that the property could then be disposed of at all. Certainly, under these circumstances, the court would not be justified in depriving a bona fide purchaser of his rights. Ballentyne v. Smith, 205 U. S. 285, 27 S. Ct. 527, 51 L. Ed. 803; Speers Sand & Clay Works v. American Trust Co. (C. C. A.) 52 F.(2d) 831; In re Burr Mfg. & Supply Co. (C. C. A.) 217 F. 16. It may be assumed, without deciding, that, were the representations made to the court not merely of a vague and speculative nature, but in the form of an actual offer to pay substantially more for the property, the situation might be different.
Lastly, as to the third assertion of the petitioners, namely, that the claim of Dr. Dohme should be disallowed, we also find that there is no merit in this contention. This claim is represented by a demand note, which was duly executed by the company, in payment of a bona fide obligation; it was pledged to an associate company as collateral security for the sum of $20,000, and Dr. Dohme acquired it by paying this amount to the associate company. The remaining equity in the note was acquired by Dr. Dohme under a valid assignment by the payee. He appears to have paid full value for the note, and therefore we find nothing irregular in his claim upon it, against the bankrupt corporation.
There is a great deal in the pleadings and in the testimony regarding rather involved manipulations of the stock of the bankrupt company, and of the interrelated companies, in all of which Dr. Dohme and Mr. Batterman held the controlling interest. However, it seems unnecessary to go into a detailed analysis of this phase of the case, because we fail to find that anything was done by these persons which entitles the petitioners to the relief asked. Their dominating influence throughout the short and rather meteoric history of the bankrupt company is beyond question, but there is no proof of fraud in their conduct; they lost heavily along with the other stockholders. The business may have been inefficiently conducted. But that is not of consequence in the present inquiry, in the absence of fraud or willful negligence. The fact that Mr. Batterman was so intimately connected with the company and with Dr. Dohme is not, of course, sufficient to create an inference of bad faith on his part, and, in the absence of same, or of some proven mistake or irregularity, there appears to be no justification for upsetting what has been done, the formalities of the Bankruptcy Act having been complied with throughout the various successive stages.
Accordingly, the petition must be dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542515/ | 997 A.2d 647 (2010)
122 Conn.App. 149
DAVID CARON CHRYSLER MOTORS, LLC, et al.
v.
GOODHALL'S, INC., et al.
No. 30232.
Appellate Court of Connecticut.
Argued December 8, 2009.
Decided June 29, 2010.
*648 Walter A. Twachtman, Jr., Glastonbury, for the appellants (plaintiffs).
Edward Muska, Stafford Springs, with whom was F. Joseph Paradiso, Rockville, for the appellees (defendants).
GRUENDEL, BEACH and DUPONT, Js.
GRUENDEL, J.
The plaintiffs, David Caron Chrysler Motors, LLC, and David A. Caron, appeal from the judgment of the trial court in favor of the defendants, Goodhall's, Inc., Goodhall's Garage, Inc., and Lucille Goodhall, administratrix of the estate of Wallace Goodhall, Jr.[1] On appeal, the plaintiffs claim that the court improperly found that there was no enforceable lease between the plaintiffs and the defendants, and, therefore, the defendants could not be liable for any damages arising out of various claimed breaches of the lease. We affirm the judgment of the trial court.
The following facts found by the court are relevant to our discussion. In the mid-1950s, Wallace Goodhall, Jr., opened a service station located at 2 Mashapaug Road in Union. Thereafter, Wallace Goodhall, Jr., secured a Chrysler franchise, and that business became known as Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC. Wallace Goodhall, Jr., maintained ownership of the land through his corporation, Goodhall's Garage, Inc. In 1996, he sold the business to Jerry L. Yost and leased the land and building to Yost with an option to purchase.[2] The lease provided that there will be no assignment of the lease "without the prior written consent of the landlord." It further provided that a transfer of a majority interest in the limited liability company would constitute an assignment of the lease. In 1998, without obtaining the consent of Goodhall's, Inc., David Caron purchased the business from Yost. The business became David Caron Chrysler Motors, LLC, and occupied the property on which it was located. A dispute resulted, and the plaintiffs brought this action for damages. In its memorandum of decision, filed August 18, 2008, the court found that there was no contract between "Caron and Goodhalls...."
In our view, the court must be credited with finding what it stated it found, not what we want to impute from its words. Thus, in analyzing the procedural history and factual background of this case, we also are compelled to look to what the court did not find. In its memorandum of *649 decision, the court defined "Caron" as "David Caron." It wrote: "In 1997, David Caron (Caron) was told by his attorney... that he might want to look into the Yost owned dealership...." Nowhere in the decision did the court indicate that it intended to refer to Caron as anyone or anything other than David Caron. Specifically, the court never used the term Caron as a shorthand way to denominate the entity David Caron Chrysler Motors, LLC.[3] That entity is mentioned in the memorandum of decision but not in connection with the court's determination that there was no contract between "Caron and Goodhalls...." Put simply, the court made no finding that there was or was not a contract between the two corporate parties, David Caron Chrysler Motors, LLC, and Goodhall's, Inc.
At best, the court's finding is ambiguous. It is axiomatic that "[a]n articulation is appropriate where the trial court's decision contains some ambiguity or deficiency reasonably susceptible of clarification." (Internal quotation marks omitted.) Nicefaro v. New Haven, 116 Conn.App. 610, 617, 976 A.2d 75, cert. denied, 293 Conn. 937, 981 A.2d 1079 (2009). Moreover, "[w]here the trial court's decision is ambiguous, unclear or incomplete, an appellant must seek an articulation... or this court will not review the claim." (Internal quotation marks omitted.) Testone v. C.R. Gibson Co., 114 Conn.App. 210, 223, 969 A.2d 179, cert. denied, 292 Conn. 914, 973 A.2d 663 (2009); see also Narumanchi v. DeStefano, 89 Conn.App. 807, 815, 875 A.2d 71 (2005) ("[s]peculation and conjecture have no place in appellate review"); Cianbro Corp. v. National Eastern Corp., 102 Conn.App. 61, 71-72, 924 A.2d 160 (2007) (incumbent on appellant to provide adequate record for review). "In the absence of a motion for articulation, we read an ambiguous trial record to support, rather than to undermine, the judgment." (Internal quotation marks omitted.) Perez v. D & L Tractor Trailer School, 117 Conn.App. 680, 707, 981 A.2d 497 (2009), cert. denied, 294 Conn. 923, 985 A.2d 1062 (2010); Zabaneh v. Dan Beard Associates, LLC, 105 Conn. App. 134, 142, 937 A.2d 706 (same), cert. denied, 286 Conn. 916, 945 A.2d 979 (2008). Here, the court found that there was no enforceable contract. Notably, the plaintiffs failed to seek an articulation, as permitted by Practice Book § 66-5. Because the plaintiffs failed to seek an articulation, we must read the court's memorandum of decision to support, rather than undermine, its judgment that no contract existed between "Caron and Goodhalls...."
The judgment is affirmed.
In this opinion BEACH, J., concurred.
DUPONT, J., dissenting.
I respectfully dissent from the majority's conclusion that the judgment of the *650 trial court in favor of the defendants, Goodhall's, Inc., Goodhall's Garage, Inc., and Lucille Goodhall, administratrix of the estate of Wallace Goodhall, Jr., should be affirmed. The majority reasons that because the plaintiffs, David Caron Chrysler Motors, LLC, and David A. Caron, failed to provide an adequate record for review by not seeking a necessary articulation of the trial court's memorandum of decision, there is a presumption that the court properly determined that no lease existed between the parties.
I do not agree that the plaintiffs needed to seek an articulation and, therefore, I do not presume that the judgment of the court that no enforceable lease between the parties existed should be affirmed for failure of the plaintiffs to seek articulation. I would conclude that the court clearly found that there was no lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc. Furthermore, I would conclude that this finding is clearly erroneous, because a change in the name of the limited liability company, particularly, Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, to David Caron Chrysler Motors, LLC, did not affect the latter's entitlement to claim under a lease that was entered into by its predecessor. I would, therefore, reverse the judgment in favor of the defendants and remand the case to the trial court to determine the rights and liabilities of the parties pursuant to the lease.
I
In resolving whether a motion for articulation was necessary, we must refer to the court's memorandum of decision. I would conclude, for the reasons, hereinafter discussed, that a motion for articulation of the court's memorandum was not needed.
The court made two statements in its memorandum that relate to whether there was or was not a lease between Goodhall's, Inc., and David Caron Chrysler Motors, LLC. The first statement was, "[t]he fact is, there was never any contract between the parties to this action,"[1] and the second was, "[t]here was no contract between Caron and Goodhalls, explicit or implied." The question is whether a plain reading of those statements is the equivalent of a finding that there was or was not a lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc. As to the first statement, it is clear that the parties in this case are the plaintiffs, David Caron and David Caron Chrysler Motors, LLC, and all of the Goodhall defendants. This statement could only mean that there was no lease between either of the two plaintiffs and any one of the defendants. The second statement is not contradictory of the first statement because it would be included in the court's first statement that there was no contract between either one of the plaintiffs, David Caron or David Caron Chrysler Motors, LLC, and any one of the Goodhall defendants. On the basis of a plain reading of the memorandum of decision, I believe the court found that there was no contract between David Caron, individually, and any of the defendants and also found that there was no contract between David Caron Chrysler Motors, LLC, and any of the defendants.
David Caron, individually, did not allege in his complaint that he had a lease with any of the defendants. The corporate entity, David Caron Chrysler Motors, LLC, *651 did allege that it had a lease with Goodhall's, Inc. On the basis of the allegations in the complaint, the court's finding that "there was never any contract between the parties" makes it clear that the term parties included David Caron Chrysler Motors, LLC. See Stein v. Tong, 117 Conn. App. 19, 26, 979 A.2d 494 (2009) ("The purpose of the complaint is to limit the issues to be decided at the trial of a case and is calculated to prevent surprise.... A complaint should fairly put the defendant on notice of the claims against him.... Thus, a plaintiff during trial cannot vary the factual aspect of his case in such a way that it alters the basic nature of the cause of action alleged in his complaint.... In other words, [a] plaintiff may not allege one cause of action and recover upon another." [Internal quotation marks omitted.]). Thus, I would conclude that it is clear from the memorandum of decision that the court found that there was no lease between David Caron Chrysler Motors, LLC, and any one of the defendants.
The majority bases the need for the articulation on the conclusion that the use of the word "Caron" excludes David Caron Chrysler Motors, LLC, because the court's memorandum states that David Caron in 1997 "was told by his attorney ... that he might want to look into the Yost owned dealership," which Jerry L. Yost had purchased from Wallace Goodhall in 1996. In 1997, David Caron Chrysler Motors, LLC, did not yet exist, and, therefore, the statement could not be analyzed to conclude that whenever "Caron" was used in the memorandum, it meant David Caron individually and not the limited liability company. I agree that whenever the name "Caron" is used in the decision, it refers to David Caron individually because the statements refer to events occurring before May 24, 1999, the date Jerry Yost's Chrysler Motors, LLC, became David Caron Chrysler Motors, LLC. Therefore, I do not believe that the limited liability company was excluded from such statements for any reason other than the fact that the limited liability company did not yet exist in the context of the statements.
Furthermore, the court made other findings of fact in its memorandum of decision that make it clear that it found that there was no lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc. Specifically, the court in its memorandum of decision noted that there were negotiations between the parties, namely, Goodhall's, Inc., and David Caron or David Caron Chrysler Motors, LLC, and went on to conclude that there was no contract between Caron and Goodhall's, Inc. The fact that the negotiations were on behalf of both the plaintiffs would indicate that the conclusion that there was no contract between the parties included both David Caron and David Caron Chrysler Motors, LLC. On the basis of the foregoing, I would conclude that the court's memorandum of decision makes clear that it found that there was no lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc.
II
Having determined that the court found that there was no lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc., I can review this finding on appeal. The scope of appellate review depends on the characterization of the rulings made by the trial court. "To the extent that the trial court has made findings of fact, our review is limited to deciding whether such findings were clearly erroneous. When, however, the trial court draws conclusions of law, our review is plenary and we must decide whether its conclusions are legally and logically correct and find support in the facts that appear in the record." Morton Buildings, Inc. v. Bannon, 222 Conn. 49, 53, 607 A.2d 424 (1992). "A lease is a contract and questions concerning it are determined in *652 accordance with usual contract law.... Whether a contract exists is a question of fact or a mixed question of fact and law for the court to determine." (Citation omitted; internal quotation marks omitted.) Amwax Corp. v. Chadwick, 28 Conn.App. 739, 741, 612 A.2d 127 (1992). In the present case, the question of whether a contract existed did not depend on the credibility of the parties but, rather, on the record, and raises a question of law for which our review is plenary.[2] See Morton Buildings, Inc. v. Bannon, supra, at 53-54, 607 A.2d 424.
The following facts were either admitted by the defendants in their answer to the plaintiffs' complaint[3] or found by the court in its memorandum of decision. A five year lease, dated June 20, 1996, was entered into by Goodhall's, Inc., and Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, a predecessor of the plaintiff's limited liability company, for the premises at 2 Mashapaug Road, Union. Wallace Goodhall signed the lease as the president of Goodhall's, Inc., the landlord. Yost signed the lease as a member of Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, the tenant. On July 14, 1997, Yost changed the name of the business from Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle LLC, to Jerry Yost's Chrysler Motors, LLC. The court found that in October, 1998, Caron purchased a majority interest[4] in Jerry Yost's Chrysler Motors, LLC, without obtaining the permission of the landlord, Goodhall's, Inc., as required by the terms of the lease.[5]
On May 24, 1999, Caron changed the name of the business from Jerry Yost's Chrysler Motors, LLC, to David Caron's Chrysler Motors, LLC. Goodhall's, Inc., instituted a summary process action, returnable on March 27, 2000, against David Caron Chrysler Motors, LLC, for nonpayment of rent. On June 20, 2000, a stipulation was entered into between Goodhall's, Inc., and David Caron Chrysler Motors, LLC, which provided that the lease, dated June 20, 1996, be terminated by mutual agreement and that the mutual agreement to terminate the lease "shall not terminate, release, and/or discharge any claims or causes of action which either of the parties to said agreement have against the other as a result of actions or inaction which *653 occurred prior to the termination of said [l]ease." The parties agree in their respective briefs that the lease, dated June 20, 1996, between Goodhall's, Inc., and Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, governs the parties to this action and the use of the premises owned by Goodhall's, Inc.
I would conclude, for the following reasons, that the court's finding that there was no lease agreement between Goodhall's, Inc., and David Caron's Chrysler Motors, LLC, was not legally and logically correct. The defendants admitted in their answer that David Caron Chrysler Motors, LLC, is the same legal entity as Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, the name that appears on the lease. The defendants also admitted in their answer that the entity, Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, has changed its name twice since the signing of the lease, to Jerry Yost's Chrysler Motors, LLC, on July 14, 1997, and then to David Caron Chrysler Motors, LLC, on May 24, 1999.
As a preliminary matter, a review of some general principles governing limited liability companies is warranted. "[Limited liability companies] are hybrid entities that combine desirable characteristics of corporations, limited partnerships, and general partnerships. [They] are entitled to partnership status for federal income tax purposes under certain circumstances, which permits [limited liability company] members to avoid double taxation, i.e., taxation of the entity as well as taxation of the members' incomes.... Moreover ... members, unlike partners in general partnerships, may have limited liability, such that ... members who are involved in managing the [limited liability company] may avoid becoming personally liable for its debts and obligations." (Internal quotation marks omitted.) Weber v. U.S. Sterling Securities, Inc., 282 Conn. 722, 729, 924 A.2d 816 (2007). "A limited liability company is a distinct legal entity whose existence is separate from its members.... A limited liability company has the power to sue or be sued in its own name; see General Statutes §§ 34-124(b) and 34-186; or may be a party to an action through a suit brought in its name by a member. See General Statutes § 34-187." (Citation omitted.) Wasko v. Farley, 108 Conn.App. 156, 170, 947 A.2d 978 (2008). A limited liability company may amend its name at any time. See General Statutes §§ 34-121 and 34-122(b).[6]
It is well established in corporate law that a change in name does not affect the identity, rights, or liabilities of the corporation. See Trinity Church v. Hall, 22 Conn. 125, 132 (1852) ("[n]ames, in such case, are arbitrary, and do not at all affect the identity of the corporation"). That principle is also applicable to limited liability companies.[7] A review of the law concerning *654 change of name of a corporation is instructive. "An authorized change in the name of a corporation has no more effect on its identity as a corporation than a change of name of a natural person has upon his identity; the corporation's identity remains unchanged. A corporate name change does not make a new corporation, but only gives the corporation a new name. A change of name in no way affects the corporation's nature or legal existence; a corporation's legal existence commences upon the filing of articles of incorporation, and amendment of the articles merely to change the corporation's name does not affect its perpetual existence.
"A corporation name change does not affect the rights of the corporation or lessen or add to its obligations, and has no effect on the corporation's property. Thus, a corporate name change does not affect the liability of the corporation, including contractual liability. Moreover, there is no need for a formal assignment of trademark rights from a corporation under an old name to a corporation under a new name." 18A Am. Jur. 2d, Corporations § 240 (2004); see also 18 C.J.S. 438-39, Corporations § 140 (2007) ("The change of a corporation's name is not a change of its identity and has no effect on the corporation's property, rights, or liabilities.... The change does not affect the title of the corporation to property or choses in action, or require any conveyance or assignment to the corporation in the new name. The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. It is also entitled to enforce contracts made or other liabilities incurred to it before the change...."); Coken Co. v. Dept. of Public Works, 9 Mass.App. 586, 590, 402 N.E.2d 1110 (1980) ("[A] change of name by a corporation has no more effect upon the identity of the corporation than a change of name by a natural person has upon the identity of such person. The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original one, but remains and continues to be the original corporation. It is the same corporation with a different name, and its character is in no respect changed." [Internal quotation marks omitted.]).
Because a change in name to David Caron's Chrysler Motors, LLC, from the original name of Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC, does not affect the entity's ability to enforce contracts made in its previous name, the court's finding that "there was never any contract between the parties to this action" is not legally and logically correct. The tenant, David Caron Chrysler Motors, LLC, under the lease, dated June 20, 1996, was entitled to bring an action against the landlord, Goodhall's, Inc., pursuant to the lease. The court found that Caron's purchase of a majority interest of the business was without the landlord's permission and would constitute a breach of the terms of the lease. Nevertheless, according to the terms of the lease, the lease would not automatically terminate.[8] See Rumbin v. Utica Mutual Ins. Co., 254 Conn. 259, *655 267-78, 757 A.2d 526 (2000); see also Fellows v. Martin, 217 Conn. 57, 68, 584 A.2d 458 (1991) ("as a general rule, covenants in a lease are independent)." On the basis of its finding that there was no lease, the court did not make any factual findings concerning the plaintiffs' complaint for breach of the terms of the lease. See Sproviero v. J.M. Scott Associates, Inc., 108 Conn.App. 454, 469, 948 A.2d 379 ("[w]hether there was a breach of contract is ordinarily a question of fact" [internal quotation marks omitted]), cert. denied, 289 Conn. 906, 957 A.2d 873 (2008). In the absence of any factual finding, I cannot determine whether Goodhall's, Inc., breached any provisions of the lease entitling David Caron Chrysler Motors, LLC, to damages pursuant to any breach.
I would reverse judgment in favor of the defendants and remand the case to the trial court to determine the rights and liabilities of the parties pursuant to the lease.
NOTES
[1] It is not clear from the pleadings why Caron and Wallace Goodhall, Jr., were made parties in their individual capacities, but neither party ever sought a ruling from the trial court on that issue, so it is not before us.
[2] The lease ran from Goodhall's, Inc., to Goodhall's Chrysler-Plymouth-Dodge-Jeep-Eagle, LLC.
[3] The dissent argues that the court's use of the term "parties" shows that "the trial court clearly found that there was no lease between David Caron Chrysler Motors, LLC, and Goodhall's, Inc." It supports that contention with two findings made by the court: (1) "[t]here were negotiations between the parties (Goodhall's, Inc., and David Caron [or] Caron Chrysler Motors, LLC)," and (2) "[t]he fact is, there was never any contract between the parties to this action." According to the dissent, the two statements, taken together, make clear that the latter statement "could only mean that there was no lease between either of the named defendants." We do not agree. The court also found that "there was never any contract between the parties to this action. Caron made an unwise business decision to purchase the Yost business in spite of his awareness that Goodhall had to approve any assignment of the lease." (Emphasis added.) In view of that finding, it is far from clear whether the court's use of the term parties includes anything more than David Caron and Goodhall. Rather, it is ambiguous.
[1] In a previous paragraph of the memorandum of decision, before this statement, the court states that "[t]here were negotiations between the parties (Goodhall's, Inc., and David Caron [or] David Caron Chrysler Motors, LLC)...." Therefore, the court describes the term parties to include Goodhall's, Inc., David Caron and David Caron Chrysler Motors, LLC.
[2] Plenary review also would be appropriate if the questions were determined to be a mixed question of fact and law. See Phillips v. Warden, 220 Conn. 112, 131, 595 A.2d 1356 (1991).
[3] "[T]he admission of the truth of an allegation in a pleading is a judicial admission conclusive on the pleader.... A judicial admission dispenses with the production of evidence by the opposing party as to the fact admitted, and is conclusive upon the party making it." (Internal quotation marks omitted.) Mercer v. Cosley, 110 Conn.App. 283, 301, 955 A.2d 550 (2008).
[4] Specifically, the record reveals that Caron bought a 75 percent interest in Jerry Yost's Chrysler Motors, LLC.
[5] The lease stated: "Except as expressly otherwise provided in this Article, neither this Lease nor any part hereof, nor the interest of Tenant in any sublease or the rentals thereunder, shall, by operation of law or otherwise, be assigned, mortgaged, pledged, encumbered or otherwise transferred by Tenant, Tenant's legal representatives or successor in interest, and neither the Demised Premises nor any part thereof shall be encumbered in any manner by reason of any act or omission on the part of Tenant, or anyone claiming, under or through, Tenant, or shall be sublet or be used, occupied or utilized for desk space, mailing privileges, or any other purpose for or by any other [principals] or entities other than Tenant, without the prior written consent of Landlord, which consent shall not be unreasonably withheld. If Tenant is other than an individual, a transfer in any single transaction or in a series of transactions of more than forty-nine percent (49%) in interest of Tenant (whether stock, Partnership interest or otherwise) by any party(ies) in interest shall be deemed an assignment of this Lease."
[6] General Statutes § 34-121 provides in relevant part: "The articles of organization of a limited liability company ... shall set forth... [a] name for the limited liability company that satisfies the requirements of section 34-102...."
General Statutes § 34-122(b) provides: "The articles of organization may be amended in any and as many respects as may be desired, so long as the articles of organization as amended contain only provisions that may be lawfully contained in articles of organization at the time of making the amendment."
[7] Pursuant to General Statutes §§ 33-636 and 33-655, the certificate of incorporation shall set forth a corporate name for the corporation, and a corporation may amend the certificate of incorporation at any time. Similarly, in the articles of incorporation, a limited liability company's name shall be set forth and may be amended at any time. See 1 L. Ribstein & R. Keatinge, Limited Liability Companies (2d Ed. 2007) § 4:19, p. 4-55 ("As with LLCs, the corporate name serves to identify the firm and to notify third parties of the incorporated nature of the firm. Accordingly, rules regarding corporate name are similar to those regarding LLC names.").
[8] Pursuant to the terms of the lease, a tenant's default does not automatically terminate the lease. Section 20.02 of the lease provides that "if Tenant shall (i) do or permit anything to be done, whether by action or inaction contrary to any of Tenant's obligations hereunder, or (ii) default in the performance of any covenant or condition of this Lease ... Landlord may (in addition to any and all rights at law or in equity) re-enter and remove all persons and Tenants Property and/or other property from the Demised Premises and such Tenants Property and other property may be removed and stored in a public warehouse or elsewhere at the cost of, and for the account of Tenant, all with service of notice and resort to legal process and without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby."
Furthermore, § 20.03 of the lease provides: "Should Landlord elect to reenter, as herein provided, or should he take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may terminate this Lease, and/or make such alterations and repairs as may be necessary in order to relet the Demised Premises.... No such re-entry or taking possession of Demised Premises by Landlord shall be construed as an election on its part to terminate this Lease unless written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach."
Last, § 26.01 of the lease requires that "[a]ny notice, statement, demand or other communication required or Permitted to be given, rendered or made by either Party to the other, Pursuant to this Lease ... shall be in writing, (whether or not so stated elsewhere in this Lease)...." See Robinson v. Weitz, 171 Conn. 545, 551-52, 370 A.2d 1066 (1976). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542516/ | 60 F.2d 187 (1932)
COMMISSIONER OF INTERNAL REVENUE
v.
PEOPLE'S-PITTSBURGH TRUST CO. et al.
No. 4838.
Circuit Court of Appeals, Third Circuit.
August 3, 1932.
G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and Morton K. Rothschild, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. *188 Counsel, Bureau of Internal Revenue, of Washington, D. C., of counsel), for petitioner.
Thomas Watson, of Pittsburgh, Pa., for respondents.
Before WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.
THOMPSON, Circuit Judge.
This is a petition of the Commissioner of Internal Revenue to review a decision of the Board of Tax Appeals. The matter originally came before the Board of Tax Appeals upon the petition of Herbert Du Puy, the taxpayer, for the redetermination of a deficiency in his income tax and surtax for the calendar year 1921. The determination of a deficiency was based upon the disallowance by the Commissioner of a deduction in the taxpayer's return of $162,048.12 for expenses incurred in the taxpayer's defense against a criminal charge. The Board of Tax Appeals decided that the deduction should have been allowed. The taxpayer's executors have been substituted as parties on the record.
The taxpayer, Herbert Du Puy, was continuously engaged in the iron and steel business from the time of his graduation in 1873 as a metallurgical engineer until 1919. During 1917 and 1918 he was chairman of the board of directors of the Crucible Steel Company of America, and devoted his time exclusively to the affairs of that company. His salary and bonus from the company amounted to $548,877.25 for 1917 and $596,725.39 for 1918. Part of his duties as the executive head of the company during these two years was to sign and make affidavit to the income and excess profits returns of the company and its subsidiaries. These returns were also signed by one George A. Turville, the secretary and treasurer of the company. They were deemed incorrect, fraudulent, and evasive by the Internal Revenue Bureau, which thereupon preferred charges against the taxpayer and Turville. Both men were indicted. The trial of the taxpayer extended over approximately four weeks. He was finally acquitted, but had expended $150,000 in attorney's fees, $2,987.50 in fees for accountants and auditors, and $9,060.62 for traveling expenses and incidentals. He instituted suit in 1922 to recover these sums from the Crucible Steel Company of America, but was unsuccessful. He deducted this amount in his personal tax return as an expense incurred in his business, but the Commissioner determined a deficiency.
The question is whether the fees paid to attorneys and accountants, and the incidental expenses paid by the taxpayer in his defense against a criminal charge of making a fraudulent income tax return, are deductible from the taxpayer's gross income as ordinary and necessary business expenses in carrying on a trade or business within the meaning of section 214 (a) (1) of the Revenue Act of 1921, 42 Stat. 239.
To determine this question, it is necessary to decide whether the expenses were incurred in the taxpayer's business and whether they were ordinary expenses within the meaning of section 214 (a) (1) and section 215 (a) of the Revenue Act of 1921, 42 Stat. 239, 242, which read as follows:
"Sec. 214. (a) That in computing net income there shall be allowed as deductions:
"(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. * * *" (See 26 USCA § 955 (a) (1) and note.)
"Sec. 215. (a) That in computing net income no deduction shall in any case be allowed in respect of
"(1) Personal, living, or family expenses." (See 26 USCA § 956 (a) (1) and note.)
The Board of Tax Appeals held that the taxpayer's business during 1917 and 1918, the years when the tax returns were made and signed, was that of being executive head of the Crucible Steel Company of America and its subsidiaries, and that expenses paid and incurred in defending a prosecution growing out of acts done in the ordinary course of a trade or business where no crime was committed are ordinary and necessary expenses of such business. The Board held that the case was ruled by the decision of the Supreme Court in Kornhauser v. United States, 276 U. S. 145, 48 S. Ct. 219, 220, 72 L. Ed. 505. In that case, the Supreme Court cited with approval three cases: An opinion by the Solicitor of Internal Revenue holding that legal expenses incurred by a physician in defending a suit for malpractice were business expenses (C. B. V.-1, p. 226); another departmental ruling to the effect that legal expenses incurred in defending an action for damages by a tenant injured while at work on the taxpayer's farm were deductible as business expenses (C. B. 5, p. 121); and a decision by the Board of Tax Appeals which held that expenses incurred in defending a *189 patent infringement suit were deductible as business expenses (Appeal of F. Meyer & Brother Co., 4 B. T. A. 481). The Supreme Court then said: "The basis of these holdings seems to be that where a suit or action against a taxpayer is directly connected with, or, as otherwise stated (Appeal of Backer, 1 B. T. A. 214, 216), proximately resulted from, his business, the expense incurred is a business expense within the meaning of section 214 (a), subd. 1, of the act. These rulings seem to us to be sound and the principle upon which they rest covers the present case."
Upon consideration of the facts of the case, we think the conclusions of the Board of Tax Appeals were justified. The taxpayer's business consisted in the performance of the duties devolving upon him as the executive head of the Crucible Steel Company and its subsidiaries. Though he was acting for the steel company and was doing only that which he was required to do, as its official, in the preparation and signing of the tax returns, he was, nevertheless, conducting his own business. When, therefore, he was faced with criminal charges, and was compelled to pay out large sums of money for attorney's fees and other expenses of the trial, he paid what was necessarily incurred by reason of carrying on his own business, viz., that of acting as chief executive officer of the steel company.
The question whether the expenditure was an ordinary expense is answered by the Supreme Court in the Kornhauser Case, supra: "* * * It was an `ordinary and necessary' expense, since a suit ordinarily and, as a general thing at least, necessarily requires the employment of counsel and payment of his charges."
While the expense for which claim was made might be deemed personal, in the sense that the outlay was made by the taxpayer in defending himself from a charge which, if proved, would have subjected him to liability to imprisonment or fine or both, yet it was an expense made necessary by the nature of the taxpayer's business. He was acquitted on that charge, so that liability upon the criminal aspect of the case was eliminated. The expenses incurred and paid out by him were, in our view, made necessary because a criminal quality was attributed to acts which were performed by the taxpayer in carrying on his trade or business. Guided by the construction placed by the Supreme Court upon the language of the statute, we conclude that they were "ordinary and necessary" expenses.
The petition for review is dismissed, and the decision of the Board of Tax Appeals affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542519/ | 60 F.2d 212 (1932)
CRAWFORD
v.
DULUTH ST. RY. CO.
CITY OF SUPERIOR et al.
v.
MITCHELL.
No. 4618.
Circuit Court of Appeals, Seventh Circuit.
June 30, 1932.
*213 *214 L. R. McPherson, of Superior, Wis., for appellant City of Superior.
John W. Reynolds, Atty. Gen., and Samuel Bryan, Asst. Atty. Gen., for appellant State of Wisconsin.
W. P. Crawford and Crawford & Crawford, all of Superior, Wis., and Mitchell, Gillette & Carmichael, of Duluth, Minn., for appellee.
Before ALSCHULER and SPARKS, Circuit Judges, and WILKERSON, District Judge.
ALSCHULER, Circuit Judge (after stating the facts as above).
The receiver in custody of the street railway property applied to the court for authority to abandon service on certain branch lines and to substitute bus service therefor. His showing, which is conceded on this appeal, is that the actual operating expenses of those branch lines exceeded their earnings; and that, under existing circumstances, it is impossible to operate them so as to cover expenses. He further showed that, if operations are continued on the branches, the whole system will be operated at a loss. It is not possible, without depleting the property in the custody of the receiver (even if money could be raised in that way), to continue the service. The receiver must either abandon the branches or shut down operation on the whole system.
Appellants assert that the District Court was without jurisdiction to hear the petition and grant relief thereon. With this we cannot agree. The property had been drawn into the custody and control of the court. The receiver was entitled to the instructions of the court as to its operation. The city and the state having intervened, it was proper for the court to determine the questions of confiscation presented. The controversy had relation to the property in the custody of the court, and, in justice to the parties before the court, ought to be determined in the principal proceeding. Central Union Trust Co. v. Anderson County et al., 268 U. S. 93, 96, 45 S. Ct. 427, 69 L.Ed. 862; Hoffman v. McClelland, 264 U. S. 552, 558, 44 S. Ct. 407, 68 L. Ed. 845. The court, of course, in giving instructions to the receiver, is bound by the federal statute which requires the receiver to manage and operate the property according to the valid laws of the state in which such property is situated, in the same manner that the owner would be bound to do if in possession thereof. 24 Stat. 554, § 2, Jud. Code § 65 (U. S. Code Ann., title 28, § 124).
Counsel for the receiver argues that the indeterminate franchise law operated to extinguish the provisions of the ordinance as to continuous operation. The Supreme Court *215 of Wisconsin has drawn a distinction between a surrender of a street car franchise and that of other utilities. City of Oshkosh v. Eastern Wis. E. Co., 172 Wis. 85, 90, 178 N. W. 308; Calumet Service Co. v. Chilton, 148 Wis. 334, 354, 135 N. W. 131; La Crosse v. La Crosse Gas & Electric Co., 145 Wis. 408, 423, 130 N. W. 530. When it becomes necessary in a federal court to consider whether a state is depriving or attempting to deprive a litigant of property without due process of law in violation of the Fourteenth Amendment and the question turns on the existence and terms of an asserted contract, that court determines for itself whether there is a contract, and its terms. Railroad Comm. of Texas v. Eastern Texas Railroad Co. et al., 264 U. S. 79, 86, 44 S. Ct. 247, 68 L. Ed. 569. While the position of the receiver is not to be put aside lightly, the decision of the case, in our opinion, does not turn upon it, and we shall dispose of the case on the theory that the provisions of the ordinance as to continuous operation have not been affected by the surrender.
The provision of the ordinance applicable to the branch lines provides that "such new lines after being constructed and placed in operation shall be maintained and operated by said railroad company." The provisions of this ordinance do not operate to create a contract which requires the company to operate when operation means confiscation. In the absence in the ordinance of an express prohibition against abandonment, it was stated in State of Texas v. Eastern Texas R. Co. (D. C.) 283 F. 584, 593: "The law reads into the contract a proviso, which says: `The railroad may terminate this contract, and withdraw its property from public use, unless compensated, or there is a reasonable future prospect thereof.'" The right to abandon a railway system when the operation results in a loss and amounts to confiscation has been repeatedly upheld. Railroad Comm. of Texas v. Eastern Texas Railroad, supra; Bullock v. Florida ex rel. Railroad Comm. of Florida, 254 U. S. 513, 520, 41 S. Ct. 193, 65 L. Ed. 380; Brooks-Scanlon Co. v. Railroad Comm., 251 U. S. 396, 40 S. Ct. 183, 64 L. Ed. 323. And the same principle has been applied to a branch of a system when the entire system is being operated at a loss. Brooks-Scanlon Co. v. Railroad Comm., supra.
Conceding the force of the above decisions and admitting the right of the receiver to abandon the entire system, appellants invoke the Wisconsin statute which forbids the abandonment of any part of a street railway without the consent of the city. Reliance is placed upon Fort Smith Light & T. Co. v. Bourland, 267 U. S. 330, 45 S. Ct. 249, 69 L. Ed. 631, in which the court upheld an order of a city commission refusing the request of a street railway company to abandon a part of its system. Arkansas, in which the railway operated, has a statute similar to that of Wisconsin. The railway earned more than enough to pay operating expenses of the whole system, and sought to abandon the branch on the sole ground that its operation was unremunerative. The court said: "The order complained of does not deal with rates. Nor does it involve the question of the reasonableness of service over a particular line. * * * It merely requires continued operation. We cannot say that it is inherently arbitrary. A public utility cannot, because of loss, escape obligations voluntarily assumed. * * * Nor does the expected deficit from operation affect its validity. A railway may be compelled to continue the service of a branch or part of a line, although the operation involves a loss. * * * This is true even where the system as a whole fails to earn a fair return upon the value of the property. So far as appears, this company is at liberty to surrender its franchise and discontinue operations throughout the city. It cannot, in the absence of contract, be compelled to continue to operate its system at a loss. Brooks-Scanlon Co. v. Railroad Commission of Louisiana, 251 U. S. 396 [40 S. Ct. 183, 64 L. Ed. 323]. But the Constitution does not confer upon the company the right to continue to enjoy the franchise or indeterminate permit and escape from the burdens incident to its use."
Was the action of the city council of Superior in withholding consent to the abandonment of the branch lines arbitrary and unreasonable? And does the enforcement of the Wisconsin statute amount to confiscation of the property in the hands of the receiver? The regulatory power conferred on the city council by the statute is subject to the limitation that the order must not be unreasonable. The showing of the receiver is that the entire system has been operated at a loss for more than ten years. The loss has increased year by year, caused by a steady decrease in revenue passengers and in passenger revenue. This is accounted for by the large and steadily increasing use of private automobiles. In the opinion of experts in street railway operation a reduction *216 of service would not remove the loss. Various increases in fare rate over a number of years have not increased but have lessened passenger revenue. The loss was traced to the three branch lines. By discontinuing that service it is possible to operate the remainder. If the branches are not abandoned the whole system is lost.
We think that the case does not fall within the rule of Fort Smith Light & T. Co. v. Bourland, supra; and that upon the facts averred and proved the action of the city council, particularly in view of the requirement that adequate bus service shall be maintained, must be held to be unreasonable, and the enforcement of the regulatory statute in the circumstances found to amount to a deprivation of rights protected by the Constitution. As stated in State of Iowa v. Old Colony Trust Co. (C. C. A.) 215 F. 307, 313, L. R. A. 1915A, 549, "They cannot force a railroad company to do the impossible."
Nor does Broad R. P. Co. v. South Carolina ex rel. Daniel, 281 U. S. 537, 50 S. Ct. 401, 74 L. Ed. 1023; Id., 282 U. S. 187, 51 S. Ct. 94, 75 L. Ed. 287, apply. That case is clearly distinguishable by reason of the provisions in the franchise of the corporation and the facts found by the state court as the basis for its decision.
Appellants urge that the receiver did not apply to the Wisconsin railroad commission for permission to abandon. As appellants have limited themselves to the sufficiency of the petition and the jurisdiction of the court, we might pass over this objection. The Supreme Court of Wisconsin, however, has ruled the point against the appellants, and held that the railroad commission has no authority to authorize the abandonment. City of Madison v. Railroad Comm., 199 Wis. 571, 572, 227 N. W. 10.
The order of the District Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542404/ | 947 A.2d 291 (2008)
287 Conn. 158
Karen BEDNARZ
v.
EYE PHYSICIANS OF CENTRAL CONNECTICUT, P.C., et al.
No. 17934.
Supreme Court of Connecticut.
Argued March 14, 2008.
Decided June 3, 2008.
*293 Carey B. Reilly, Bridgeport, with whom were Cynthia C. Bott, Milford, and, on the brief, James D. Horwitz, Bridgeport, for the appellant (plaintiff).
Lorinda S. Coon, with whom was David A. Haught, Hartford, for the appellee (defendant Peter G. Burch).
KATZ, PALMER, ZARELLA, SCHALLER and JONES, Js.
KATZ, J.
The plaintiff, Karen Bednarz, appeals from the summary judgment rendered in favor of the defendant Peter G. Burch[1] in her medical malpractice action. The plaintiff claims that the trial court improperly concluded that her action against the defendant was time barred because there were insufficient facts in dispute to toll the period of repose under General Statutes § 52-584.[2] Specifically, the plaintiff contends that there were disputed facts sufficient to warrant invocation of either the continuing course of conduct doctrine, the continuous course of treatment doctrine or equitable tolling. We agree with the plaintiff as to her claim regarding the applicability of the continuing course of conduct doctrine and, accordingly, we reverse the judgment of the trial court and remand the case for further proceedings.
The record, viewed in the light most favorable to the plaintiff for the purposes of reviewing the granting of the motion for summary judgment, discloses the following facts and procedural history. On February 16, 1980, the plaintiff was referred to Eye Physicians of Central Connecticut, P.C. (Eye Physicians), an ophthalmology group, by her then treating ophthalmologist for purposes of evaluating puffiness in the area below her right eyebrow, which the ophthalmologist had noted on an insurance form as a possible tumor. The plaintiff's medical history noted in her records at Eye Physicians indicates that, when she was a young child, she had undergone *294 surgery to remove a "watery mass" that left her with puffiness around her right eye. David Parke, one of the ophthalmologists at Eye Physicians, examined the plaintiff, noted in her medical records that the mass was a possible "lymphangioma"[3] or "hemangioma"[4] and referred her for various imaging tests, including X rays and a computerized axial tomography (CAT) scan. The plaintiff continued under the care of Eye Physicians until June, 2004, and, during that period, she was seen by various ophthalmologists in the group.
At all pertinent times prior to his retirement in June, 2000, the defendant was a practicing ophthalmologist with Eye Physicians. The defendant first treated the plaintiff in 1988; he became her ophthalmologist in 1990, and regularly treated her until his retirement in June, 2000. Sometime in 2004, the plaintiff began to suffer seizures and memory loss. Tests ultimately revealed two meningiomas,[5] a form of benign brain tumors. The plaintiff thereafter obtained her medical records from Eye Physicians and first learned that the records disclosed that two meningiomas of her brain were detected in February, 1980.
On February 3, 2005, the plaintiff brought an action against the defendant, Eye Physicians and another ophthalmologist in the group. See footnote 1 of this opinion. With respect to the defendant, the plaintiff alleged that, commencing in or about 1994 and continuously until approximately April, 2004, the defendant had undertaken the treatment and monitoring of the plaintiff and that he had been negligent in his care during that time period in that he failed to: discuss with her the findings of the 1980 CAT scan showing the meningiomas in her brain and advise her; refer her to a neurologist or neurosurgeon; adequately and properly perform follow-up care; and repeat diagnostic testing. The plaintiff alleged that, as a result of the defendant's negligence, the meningiomas had grown, resulting in seizures, the need for anticonvulsive medications and future neurological surgical procedures, and the risk of injury to the optic nerve and stroke.
Thereafter, the defendant moved for summary judgment, asserting that, because he had not seen or spoken to the plaintiff after May, 1999, and had retired from the practice of medicine in 2000, more than four years before the plaintiff commenced the action against him, her action was time barred by the three year period of repose under § 52-584. The plaintiff objected to the motion for summary judgment, claiming, inter alia, that her action was filed timely because the continuing course of conduct and continuing course of treatment doctrines tolled the period of repose under the statute of limitations.[6] In support of her objection, *295 she submitted an affidavit attesting that, when she had obtained her records from Eye Physicians and learned for the first time that the meningiomas had been detected in 1980, one of the physicians in the practice with whom she spoke had stated that he did not know why "`there had been no follow-up on this.'" In his supplemental reply, the defendant submitted an affidavit attesting that: the plaintiff had been a patient of Eye Physicians since 1980; she had been treated principally by Parke, until Parke's retirement; the defendant first had seen the plaintiff on January 26, 1988; he became her ophthalmologist on February 20, 1990, and remained as such until his retirement on June 30, 2000; and he had no knowledge of a CAT scan or other imaging that had been performed on the plaintiff in 1980 while she was Parke's patient. He further attested that he did not learn of the plaintiff's meningiomas until she commenced the present action against him. Therefore, the defendant claimed in his supplemental memorandum that, "there was no continuing duty where there was no knowledge of an undisclosed diagnosis" and that "any continuing duty ended when [he] retired from the practice of medicine."
The plaintiff filed a supplemental reply to address the defendant's assertion that he had been unaware of the plaintiff's meningiomas prior to the present action. She submitted as documentary support a copy of her medical records with Eye Physicians and the defendant, and an affidavit from Scott Soloway, a board certified ophthalmologist who had reviewed those records. Soloway specifically noted that these records included a report of a 1980 radiological study discussing the probable presence of two meningiomas and pointed to certain "handwritten medical records of a physician from [Eye Physicians] [that] indicate that [Eye Physicians] was aware of the probable meningiomas and of the need for further evaluation from February, 1980, forward." Soloway further attested that "[i]n caring for [the plaintiff], [the defendant] was required to be familiar with the medical records, including the presence of the meningiomas" and that, "[i]n fact, [the defendant's] medical records of April 5, 1993, May 3, 1994, May 16, 1995, May 27, 1997, and May 29, 1999, also included the medical records from 1980 and the report from 1980 reflecting the presence of the meningiomas." In his second supplemental reply memorandum in support of his motion for summary judgment, the defendant asserted that the continuing course of conduct doctrine did not apply in this case because "[t]here is no continuing duty to warn where there is no knowledge of the need to warn." The defendant further suggested that "[t]he lack of any reference in the record after 1980 suggests the possibility that the report had been misfiled." Because the defendant attested that he did not know that a CAT scan had been performed and had never seen the report showing the existence of the meningiomas, the defendant contended that he did not have the actual knowledge required to toll the repose period of § 52-584.
While the defendant's motion for summary judgment was pending, this court decided Neuhaus v. DeCholnoky, 280 Conn. 190, 203, 905 A.2d 1135 (2006), wherein we confirmed that the period of repose under § 52-584 can be tolled by the continuing course of conduct doctrine only if the physician had actual knowledge of the prior wrong. Accordingly, before ruling on the defendant's motion, the trial court allowed the parties to file supplemental *296 memoranda on the impact of that decision on the issue before it. The plaintiff asserted, inter alia, that there was a genuine issue of material fact as to whether the defendant knew about the meningiomas, in light of the contents of her medical records, the physician's comment when she obtained those records from Eye Physicians, and Soloway's statement that the report identifying the meningiomas contained the handwritten notes of a physician in the practice referencing the meningiomas. The plaintiff further asserted that, because Neuhaus did not address the continuing course of treatment doctrine, which also was applicable to her case, it had no impact on her cause of action under that doctrine. In support of her claim under that doctrine, the plaintiff contended that her continuous treatment by Eye Physicians could be imputed to the defendant despite his retirement in 2000.
The trial court concluded that neither the continuing course of treatment doctrine nor the continuing course of conduct doctrine was applicable to the facts of the case and, accordingly, rendered summary judgment in favor of the defendant. With regard to the continuous course of treatment doctrine,[7] the court made the following observations: the plaintiff was not treated by the defendant following his retirement but, rather, continued to be treated by other ophthalmologists at Eye Physicians; although she did not recall ever receiving a notice about the defendant's retirement and "therefore still considered him to be one of her physicians," there was no evidence that the plaintiff expected anything further from him; and finally, if she had an especially close relationship with the defendant like those that courts previously had recognized as supporting this doctrine, she reasonably should have noticed his absence. The trial court also remarked that it was proper to consider whether a reasonable patient at some point in time would have questioned someone at Eye Physicians about the results of her 1980 test.
In connection with the continuing course of conduct claim, the trial court, quoting Witt v. St. Vincent's Medical Center, 252 Conn. 363, 370, 746 A.2d 753 (2000), noted that, in the medical malpractice context, this doctrine requires the plaintiff to prove that "the defendant: (1) committed an initial wrong upon the plaintiff; (2) owed a continuing duty to the plaintiff that was related to the alleged original wrong; and (3) continually breached that duty." (Internal quotation marks omitted.) The trial court determined that "[t]here is no dispute that a wrong was committed upon the plaintiff in [the present] case" in failing to discuss the results of the CAT scan with her. With respect to the second prong, the trial court was guided by the language in Neuhaus v. DeCholnoky, supra, 280 Conn. at 203, 905 A.2d 1135, under which "a continuing duty must rest on the factual bedrock of knowledge." (Internal quotation *297 marks omitted.) The trial court noted the plaintiff's evidence that she had cited in her opposition to the defendant's motion for summary judgment but nevertheless determined that, although the defendant "should have known about the report or at the very least should have seen the report," there was no evidence to suggest that the defendant had actual knowledge of the report. Accordingly, the trial court granted the defendant's motion for summary judgment. This appeal followed.
The plaintiff raises several issues regarding whether the trial court properly determined that the statute of limitations had not been tolled. With regard to the continuing course of conduct doctrine, because the trial court determined that there had been an initial wrong, the first element of the test for satisfying that doctrine, the plaintiff focuses primarily on the second element: whether there was a disputed issue of material fact as to whether the defendant owed a continuing duty to the plaintiff that was related to the alleged original wrong. Specifically, the plaintiff claims that the trial court improperly rejected the application of the continuous course of conduct doctrine based on its improper determination that the issue of whether the defendant had actual knowledge of the meningiomas was not in dispute. We agree with the plaintiff that, because she had presented evidence from which a jury reasonably could infer that the defendant had actual knowledge of the 1980 CAT scan and that the jury would not be required to credit the defendant's testimony to the contrary, there existed a genuine issue of material fact with respect to whether the period of repose under § 52-584 was tolled by the defendant's ongoing failure to warn the plaintiff. Accordingly, we conclude that it was improper for the trial court to have granted the defendant's motion for summary judgment as it related to the continuing course of conduct doctrine.[8]
With regard to the continuing course of treatment doctrine, the trial court stated that the plaintiff did not challenge the defendant's contentions that he had retired from the practice of medicine on July 1, 2000, and that there was no question that the last date he had treated her was on May 29, 1999. On the basis of those undisputed facts, the trial court determined that the doctrine did not apply. The plaintiff claims that the trial court's reliance on the defendant's retirement to conclude that the physician-patient relationship had terminated years before she had commenced the action was improper. We conclude that it was proper for the trial court to have concluded that the continuous course of treatment doctrine did not toll the statute.[9]
*298 I
We begin with the well settled standard of review for reviewing a trial court's decision to grant a motion for summary judgment. "Practice Book § 384 [now § 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. . . . The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law . . . and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Citations omitted; internal quotation marks omitted.) Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 368, 746 A.2d 753.
In reviewing the plaintiff's tolling claim, we also are guided by the law governing the statute of limitations on actions alleging health care malpractice. Section 52-584 requires such actions to be brought "within two years from the date when the injury is first sustained or discovered or in the exercise of reasonable care should have been discovered. . . ." The statute also establishes a repose period under which "no such action may be brought more than three years from the date of the act or omission complained of. . . ." General Statutes § 52-584. "[T]he relevant `date of the act or omission complained of,' as that phrase is used in § 52-584, is `the date when the negligent conduct of the defendant occurs and . . . not the date when the plaintiff first sustains damage.'" Blanchette v. Barrett, 229 Conn. 256, 265, 640 A.2d 74 (1994). "Therefore, an action commenced more than three years from the date of the negligent act or omission complained of is barred by the statute of limitations contained in § 52-584, regardless of whether the plaintiff had not, or in the exercise of [reasonable] care, could not reasonably have discovered the nature of the injuries within that time period." Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 369, 746 A.2d 753.
As we have recognized, however, in the proper circumstances, the statute of limitations may be tolled under the continuous conduct doctrine, thereby allowing a plaintiff to commence his or her lawsuit at a later date. Id. "In its modern formulation, we have held that in order [t]o support a finding of a continuing course of conduct that may toll the statute of limitations there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto. That duty must not have terminated prior to commencement of the period allowed for bringing an action for such a wrong. . . . Where we have upheld a finding that a duty continued to exist after the cessation of the act or omission relied upon, there has been evidence of either a special relationship between the parties *299 giving rise to such a continuing duty or some later wrongful conduct of a defendant related to the prior act. . . . The continuing course of conduct doctrine reflects the policy that, during an ongoing relationship, lawsuits are premature because specific tortious acts or omissions may be difficult to identify and may yet be remedied." (Internal quotation marks omitted.) Neuhaus v. DeCholnoky, supra, 280 Conn. at 201-202, 905 A.2d 1135.
"A comparison of the elements of the continuous treatment doctrine with the elements of the continuing course of conduct doctrine[10] reveals that the primary difference between the doctrines is that the former focuses on the plaintiff's reasonable expectation that the treatment for an existing condition will be ongoing, while the latter focuses on the defendant's duty to the plaintiff arising from his knowledge of the plaintiff's condition. As we have indicated, the policy underlying the continuous treatment doctrine is to allow the plaintiff to complete treatment for an existing condition with the defendant and to protect the doctor-patient relationship during that period. Accordingly, when the plaintiff had no knowledge of a medical condition and, therefore, had no reason to expect ongoing treatment for it from the defendant, there is no reason to apply the doctrine. . . . In contrast, under the continuing course of conduct doctrine, if the defendant had reason to know that the plaintiff required ongoing treatment or monitoring for a particular condition, then the defendant may have had a continuing duty to warn the plaintiff or to monitor the condition and the continuing breach of that duty tolls the statute of limitations, regardless of whether the plaintiff had knowledge of any reason to seek further treatment. See Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 372, 746 A.2d 753 (defendant's suspicion of cancer at time of initial tests gave rise to continuing duty to warn, thereby triggering continuing course of conduct doctrine); Blanchette v. Barrett, supra, 229 Conn. at 279, 640 A.2d 74 (when defendant had knowledge of plaintiff's breast condition, continuous failure to monitor condition triggered continuing course of conduct doctrine)." (Citations omitted; emphasis altered.) Grey v. Stamford Health System, Inc., 282 Conn. 745, 755-56, 924 A.2d 831 (2007).
II
With regard to continuing course of conduct doctrine, this court's decision in Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 363, 746 A.2d 753, is instructive. That case involved a medical malpractice case wherein there was evidence that supported the plaintiff's claim that the defendant physician, "at the time of the diagnosis," had concern that his diagnosis was wrong or incomplete without further testing; id., at 375, 746 A.2d 753; specifically, *300 a note that the physician had written eleven years after his initial diagnosis, expressing his prior and continuing concern about the possibility of the plaintiff developing cancer. Id., at 365, 746 A.2d 753. This court concluded that there existed a genuine issue of material fact as to whether the physician had a concern during the original course of treatment that never had been eliminated, thus suggesting the possibility that there had been an omission known to the physician contemporaneous to the original tort, and that the omission continued to be known to the physician after the fact. Id., at 376, 746 A.2d 753; see also id., at 372, 746 A.2d 753 ("[i]t is this concern of cancer that, if it existed at the time of his initial diagnosis, gave rise to the [physician's] continuing duty to warn, which in turn triggered the continuing course of conduct doctrine"). In short, in Witt, it was the physician's initial and continuing concern that had triggered his continuing duty to disclose, resulting in a tolling of the statute of repose contained in § 52-584. Id., at 376, 746 A.2d 753.
In the present case, the plaintiff's contention that the defendant knew about the CAT scan results, thereby giving rise to a continuing duty, is premised on the following facts in evidence. Handwritten notes in the plaintiff's medical file, dated February 6, 1980, written by Parke, the physician who first had treated the plaintiff, indicated that she had been referred to Eye Physicians for a second opinion because the plaintiff's then treating ophthalmologist had a concern that she might have a tumor. Parke's notes reveal that he had examined the plaintiff and ordered a base line X ray, and the plaintiff's medical records include a radiology report sent to Parke stating that the X ray results showed a "[p]robable large meningioma in the right frontal parietal region and a second one in the region of the right olefactory groove." The plaintiff's records further reflect that Parke thereafter sent the plaintiff for a cerebral blood flow study and a brain scan, which suggested "a right frontal subdural hematoma." The radiologist's report recommended further evaluation, including a CAT scan. The notes in the plaintiff's medical file next reflect that Parke sent the plaintiff to Yale-New Haven Hospital for a CAT scan, that, while conducting the CAT scan on February 25, 1980, the physicians at Yale-New Haven Hospital requested the plaintiff's other test results for comparative purposes, and that they ultimately diagnosed the plaintiff as having two meningiomas. The plaintiff's medical records further confirm that the defendant first saw the plaintiff on January 26, 1988; he thereafter became her treating ophthalmologist on February 20, 1990, remaining as such until his retirement on June 30, 2000. The records further reflect that the defendant saw the plaintiff approximately ten times during that time period, making notes in her file throughout the course of his treatment of her.
As we have noted previously, on the basis of his review of the aforementioned evidence in the plaintiff's medical file, Soloway stated in his affidavit that: Eye Physicians "was aware of the probable meningiomas and of the need for further evaluation from February, 1980, forward"; the defendant "was required to be familiar with the medical records, including the presence of the meningiomas"; the defendant's "medical records of April 5, 1993, May 3, 1994, May 16, 1995, May 27, 1997, and May 29, 1999, also included the medical records from 1980 and the report from 1980 reflecting the presence of the meningiomas"; and "[t]he standard of care imposes an initial and ongoing duty on [the defendant] to completely review the medical *301 records of [the plaintiff]."[11]
On the basis of this evidence, the plaintiff maintains that there was sufficient direct and circumstantial evidence that, at some stage during the course of his longstanding treatment of her, the defendant had learned about the CAT scan results, and thus, that this knowledge gave rise to a continuing duty to advise the plaintiff, to refer her for further treatment, and to perform follow-up care. The defendant, by way of his self-serving affidavit, maintains that, despite both his ten year relationship with the plaintiff and the notes he made in her medical records pertaining to his treatment of her over the course of that time period, he did not have actual knowledge of the presence of the meningiomas. The defendant suggests that this denial was sufficient to demonstrate the absence of any genuine issue of material fact. We agree with the plaintiff that, based on the evidence she has produced, the defendant has not established that his claimed lack of knowledge of the plaintiff's condition was undisputed.
"To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact. . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent." (Internal quotation marks omitted.) Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 372-73 n. 7, 746 A.2d 753. On the basis of the medical records, Soloway's opinion and any reasonable inferences drawn therefrom, there was sufficient evidence upon which a jury reasonably could conclude that, despite his assertion to the contrary, the defendant actually knew of the CAT scan, thereby triggering the continuing course of conduct doctrine, but nevertheless failed to: discuss the CAT scan results with the plaintiff and advise her; refer her to a neurologist or neurosurgeon; adequately and properly perform follow-up care; and repeat diagnostic testing. The extent of knowledge sufficient to trigger these duties would be necessarily a matter of expert testimony, which the plaintiff will have the opportunity to present at trial. That is, whether the defendant actually knew about the 1980 CAT scan and was required by the standard of care to express that knowledge to the plaintiff, to advise her, to follow up, to make appropriate referrals and to repeat testing are facts that the plaintiff will have to prove to the jury at trial in order to establish that the continuing course of conduct doctrine applies. At this stage of the proceedings, however, the plaintiff needed only to refute the defendant's claim of lack of knowledge, which she did by demonstrating that there was a disputed issue of material fact as to whether the defendant owed a continuing duty to the plaintiff that was related to the alleged original wrong.
We therefore conclude that, on the basis of the materials presented to the trial court, there is a sufficient question of fact regarding the applicability of the continuing course of conduct doctrine so as to preclude summary judgment for the defendant. Accordingly, the trial court improperly *302 granted the defendant's motion as to that doctrine.
III
In addition to relying on the continuing course of conduct doctrine, the plaintiff asserted that the continuing course of treatment doctrine tolled the statute of limitations. See footnotes 7 and 10 of this opinion setting forth the continuing treatment factors. "As we have indicated, the policy underlying the continuous treatment doctrine is to allow the plaintiff to complete treatment for an existing condition with the defendant and to protect the doctor-patient relationship during that period." Grey v. Stamford Health System, Inc., supra, 282 Conn. at 755, 924 A.2d 831. The defendant contends that when, however, as in the present case, it is undisputed that the patient had no knowledge of her condition, the patient had no reason to expect ongoing treatment from her physician for that condition and there is no reason to apply the tolling doctrine. We conclude, however, that there is an even more fundamental barrier that the plaintiff in the present case did not overcomethe facts that her last contact with the defendant was on May 29, 1999, and that her last few yearly appointments thereafter were with another physician. See footnote 1 of this opinion.
Although we have recognized that treatment may continue after a patient's last personal visit with her physician, as when the physician's temporary unavailability has led to the patient's referral to another physician; Blanchette v. Barrett, supra, 229 Conn. at 279, 640 A.2d 74; there was no evidence in the present case that, after July 1, 2000, the defendant intended to provide ongoing treatment or monitoring of the plaintiff or that the plaintiff reasonably could have anticipated that he would do so.[12] Although the plaintiff contends that she had a subjective belief to the contrary, that factor alone would not overcome the balance of the objective factors that the court must consider; see footnote 7 of this opinion; all of which reasonably demonstrate termination of their relationship. Accordingly, there is no evidence in the present case to suggest that there still existed a physician-patient relationship between the plaintiff and the defendant nearly four years after the defendant's retirement. The trial court, therefore, properly granted the defendant's motion for summary judgment as it pertained to the continuing course of treatment doctrine.
The judgment is reversed and the case is remanded for further proceedings.
In this opinion the other justices concurred.
NOTES
[1] The plaintiff appealed from the trial court's summary judgment to the Appellate Court. We transferred the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1.
The plaintiff also had named as defendants in the underlying action Eye Physicians of Central Connecticut, P.C. (Eye Physicians), and William C. Hall, an ophthalmologist with Eye Physicians. The trial court's summary judgment pertained only to the plaintiff's claims against Burch. Therefore, for purposes of this appeal, we refer to Burch as the defendant.
[2] General Statutes § 52-584 provides: "No action to recover damages for injury to the person, or to real or personal property, caused by negligence, or by reckless or wanton misconduct, or by malpractice of a physician, surgeon, dentist, podiatrist, chiropractor, hospital or sanatorium, shall be brought but within two years from the date when the injury is first sustained or discovered or in the exercise of reasonable care should have been discovered, and except that no such action may be brought more than three years from the date of the act or omission complained of, except that a counterclaim may be interposed in any such action any time before the pleadings in such action are finally closed."
[3] A lymphangioma is defined as "[a] benign tumorlike mass of lymphatic vessels or channels that vary in size, are frequently greatly dilated, and are lined with normal endothelial cells." The American Heritage Stedman's Medical Dictionary (1995).
[4] A hemangioma is defined as "[a] congential benign skin lesion consisting of dense, usually elevated masses of dilated blood vessels." The American Heritage Stedman's Medical Dictionary (1995).
[5] More specifically, a meningioma is defined as "[a] slow-growing tumor of the meninges [the membranes covering the brain and spinal cord] often creating pressure and damaging the brain and adjacent tissues, occurring most often in adults." The American Heritage Stedman's Medical Dictionary (1995).
[6] The plaintiff also had contended initially that the motion for summary judgment was premature because she had not yet had an adequate opportunity to conduct discovery, and there was some evidence that tended to call into question the defendant's contention that he had retired in June, 2000. The trial court delayed ruling on the defendant's motion until after the plaintiff conducted further discovery and apparently resolved any question as to the date of the defendant's retirement.
[7] "When . . . the injurious consequences arise from a course of treatment, [the limitation period under § 52-584] does not begin to run until the treatment is terminated." (Internal quotation marks omitted.) Zielinski v. Kotsoris, 279 Conn. 312, 323, 901 A.2d 1207 (2006). "The determination of whether the physician-patient relationship has terminated depends upon several factors. These factors include the subjective views of the parties as to whether their relationship had terminated; the length of their relationship; the frequency of their interactions; the nature of the physician's practice; whether the physician had prescribed a course of treatment for or was monitoring the condition of the patient; whether the patient was relying upon the opinion and advice of the physician with regard to a particular injury, illness or medical condition; and whether the patient had begun to consult with another physician concerning the same injury, illness or medical condition." Blanchette v. Barrett, 229 Conn. 256, 278, 640 A.2d 74 (1994).
[8] In light of this conclusion, we do not address the other theories on which the plaintiff predicates the application of the continuing course of conduct doctrine, namely, that the defendant had a continuing duty to review the plaintiff's medical records and that he had a "special relationship" with the plaintiff that would eliminate the need to prove actual knowledge of the meningiomas. Similarly, we do not reach the issue of whether the trial court properly rejected the equitable tolling doctrine. Because that doctrine is one to which the courts may resort when no other tolling doctrines are applicable; see Williams v. Commission on Human Rights & Opportunities, 257 Conn. 258, 284, 777 A.2d 645 (2001); our favorable resolution of the plaintiff's claim under the continuing course of conduct doctrine eliminates the need in this case to address it.
[9] We recognize that, "[a]lthough the continuing course of treatment and the continuing course of conduct doctrines are analytically separate and distinct, their relevance to any particular set of circumstances . . . may overlap. . . . Because of this overlap, when plaintiffs have raised both doctrines in response to a statute of limitations defense and the evidence would support either one, we frequently have found it unnecessary to disentangle the doctrines and to specify which particular facts support which doctrine. See [Blanchette v. Barrett, 229 Conn. 256, 279-80, 640 A.2d 74 (1994)] (expert testimony supported finding under either doctrine); see also Zielinski v. Kotsoris, [279 Conn. 312, 330, 901 A.2d 1207 (2006)] (finding no genuine issue of material fact as to whether statute of limitations was tolled under either doctrine)." (Citation omitted; internal quotation marks omitted.) Grey v. Stamford Health System, Inc., 282 Conn. 745, 753, 924 A.2d 831 (2007). This case, however, requires us to analyze the facts supporting the doctrines separately.
[10] "[T]o establish a continuous course of treatment for purposes of tolling the statute of limitations in medical malpractice actions, the plaintiff is required to prove: (1) that he or she had an identified medical condition that required ongoing treatment or monitoring; (2) that the defendant provided ongoing treatment or monitoring of that medical condition after the allegedly negligent conduct, or that the plaintiff reasonably could have anticipated that the defendant would do so; and (3) that the plaintiff brought the action within the appropriate statutory period after the date that treatment terminated." Grey v. Stamford Health System, Inc., 282 Conn. 745, 754-55, 924 A.2d 831 (2007). By contrast, to establish a continuous course of conduct, the defendant must have: "(1) committed an initial wrong upon the plaintiff; (2) owed a continuing duty to the plaintiff that was related to the alleged original wrong; and (3) continually breached that duty." Witt v. St. Vincent's Medical Center, supra, 252 Conn. at 370, 746 A.2d 753.
[11] The questions of whether the defendant had a duty to review the plaintiff's medical records thoroughly and whether his alleged failure to act in accordance with that duty operate as a basis upon which to assert a claim for negligence are not important to the resolution of the issue on appeal. Rather, for our purposes, Soloway's affidavit as it relates to that duty is significant in that it supports the plaintiff's assertion that there is a basis on which the jury reasonably could find that the defendant had actual knowledge of information contained in the file.
[12] The plaintiff claims in the alternative that the treatment she received at Eye Physicians can be imputed to the defendant to toll the statute of limitations. Because this is a claim that the plaintiff did not make in the trial court, we do not address it. See Konigsberg v. Board of Aldermen, 283 Conn. 553, 597 n. 24, 930 A.2d 1(2007) ("[w]e decline to review the plaintiffs' claim, raised for the first time in this appeal"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542522/ | 997 A.2d 828 (2010)
193 Md. App. 322
STATE of Maryland
v.
Helen L. HOLTON.
No. 861, September Term, 2009.
Court of Special Appeals of Maryland.
July 1, 2010.
*829 Thomas M. McDonough, Deputy State Prosecutor & Robert A. Rohrbaugh of Townson, MD, for appellant.
Joshua R. Treem & Nicholas J. Vitek (Schulman, Treem, Kaminkow & Gilden, on the brief) Baltimore, MD, for appellee.
Panel: DAVIS, WOODWARD, ALAN M. WILNER, (Retired, Specially Assigned), JJ.
DAVIS, J.
Appellant, the State of Maryland, appeals from the dismissal of charges against Baltimore City Councilperson Helen L. Holton, appellee. Appellee was indicted by a Baltimore City grand jury and charged with bribery, malfeasance in office, nonfeasance in office and perjury, arising out of her involvement with a development project in the Harbor East area of Baltimore City. Appellee moved to dismiss all of the charges on the basis that the evidence introduced before the grand jury constituted legislative acts, barred by the common law legislative privilege. The court addressed appellee's motion to dismiss together with a "nearly identical" motion filed by former Baltimore City Mayor, Sheila Ann Dixon, in a separate case. The court ruled in favor of both Dixon and appellee. The State now appeals that ruling as it pertains to appellee and presents one question for our review:
Did the trial court err in holding that legislative immunity protects legislators in subordinate political subdivisions from criminal prosecution from the State?
*830 For the reasons that follow, we answer the State's question in the negative. Accordingly, we affirm.
FACTUAL BACKGROUND
The trial court dismissed the charges against appellant on the grounds that the only evidence obtained by the State, and alleged in the indictment, involved legislative acts. The charges related to a payment of $12,500 made by Doracon Contracting, Inc. (Doracon), a developer owned in-part by Ronald Lipscomb, for a political survey for appellee's benefit. The State alleged that the payment was intended to influence appellee to vote in favor of public subsidies known as "payments in lieu of taxes" (PILOT) for the development of two parcels of land in Baltimore City, for the benefit of Doracon and Lipscomb.
The State presented evidence to the grand jury in the form of records and testimony regarding the proceedings of the Baltimore City Council and appellee's activities in her capacity as a member of the Economic Development and Public Financing Committee and as Chairperson of the Taxation and Finance Committee, including telephone calls and meetings with Lipscomb and Doracon representatives. The circuit court provided the following summary of the legislative acts which it concluded infected the counts in the indictment against appellee:
In Defendant Holton's case, the use of legislative material is apparent in a review of the indictment. It recites that Defendant Holton is and has been a duly elected member of the Baltimore City Council. ¶ 7. It notes that she was Chairperson of the Economic Development and Public Financing Subcommittee, and that after January 2007, she served as the Chairperson of the Taxation and Finance Subcommittee. At that time, she additionally served as chairperson of the Taxation and Finance Subcommittee. ¶¶ 8 and 9. The indictment describes the efforts of Ronald Lipscomb to communicate with Defendant Holton in her capacity as a member of the Baltimore City Council, and then as the chairperson of the Taxation and Finance Committee, regarding those projects. ¶ 11-21.
More specifically, the indictment alleges that beginning on or about June 4, 2007, Bill 07-0700 relating to Parcel D was introduced to the City Council and assigned to Ms. Holton's Committee. ¶¶ 22 and 23. Shortly thereafter, Ms. Holton commissioned an election survey to be prepared for her. ¶ 25. Eventually, Doracon Contracting Inc. paid $12,500.00 to Company Z for the survey. ¶ 31. Subsequently, Ms. Holton received the results of the survey, and thereafter, in the City Council, reported Bill 07-0700 favorably to the City Council on behalf of her committee and later voted for the bill in the City Council. ¶ 33-36.
Legislative material pertaining to Defendant Holton is specifically referenced in many counts of the indictment. For example:
¶ 15. On or about June 12, 2006, at the regularly scheduled 3:00 p.m. meeting of the Baltimore City Council, Councilwoman Helen L. Holton, acting for the Economic Development and Public Financing Subcommittee, reported favorably to the City Council on Bill 05-0301, the proposed PILOT for Parcel B portion of the Inner Harbor East project.
¶ 17. On or about July 10, 2006, Bill 05-301, the proposed PILOT for the Parcel B portion of the Inner Harbor East project was authorized by the City Council with Councilwoman Helen L. Holton abstaining.
¶ 28. On or about July 19, 2007, the Taxation and Finance Committee of the Baltimore City Council held a *831 public hearing on Bill 07-0700. Of the five members of the Committee, Chairperson Helen L. Holton and two other committee members voted to report favorably on the Bill with amendments. One member was absent and the fifth member abstained.
¶ 34. On or about August 13, 2007, Helen L. Holton reported Bill 07-0700 favorably with amendments to the City Council.
¶ 36. On or about September 24, 2007, the City Council approved Bill 07-0700 authorizing tax relief benefits in the form of a Payment in Lieu of Taxes (PILOT) for Parcel D of Inner Harbor East with Councilwoman Helen L. Holton casting her vote in favor of the Bill.
These legislative acts are realleged in each of the four counts of the indictment. They form the factual predicate for the charge in Count 1 that the payment by Doracon Contracting Inc. of $12,500.00 for the survey constituted the receipt of the bribe. ¶ 40; in Count II, that the alleged solicitation and acceptance of that same money constituted a gift and malfeasance in office. ¶ .42; in Count III, that the failure to list the receipt of the $12,500.00 gift on Ms. Holton's 2007 Financial Disclosure Form constituted perjury, ¶ .42; and in Count IV, that this failure also constituted nonfeasance in office. ¶ .46.
In sum, the indictment alleged that appellee received and failed to report on her Financial Disclosure Statement the payment by Lipscomb's company for her survey, the quid pro quo in exchange for the following acts: she reported favorably on the floor of the City Council on a bill that would subsidize parking for one of the development projects at issue, but abstained from voting on the matter; appellee participated in meetings between December 2005 and July 2007 with Lipscomb and others to negotiate the terms of another lot, which was ultimately approved by the Baltimore City Board of Estimates and she favorably reported another bill in favor of the second parcel, then voted in favor of the bill, which was ultimately approved by the City Council. The Indictment ultimately alleged that she signed, under oath, her Financial Disclosure Statement and filed it, without disclosing the aforesaid payment, acts constituting perjury, nonfeasance and malfeasance in office.
The trial court dismissed the indictment and issued a memorandum opinion delineating its reasons. The court rejected the State's argument that local legislators are only entitled to legislative immunity in civil cases. Citing Montgomery County v. Schooley, 97 Md.App. 107, 627 A.2d 69 (1993), the court determined that appellee, a local legislator, was entitled to the protections of common law legislative immunity, which the trial court believed to be "co-extensive" with the immunity afforded to State legislators through the Speech and Debate provision of the Maryland Constitution. The circuit court distinguished the case principally relied upon by the State, United States v. Gillock, 445 U.S. 360, 100 S.Ct. 1185, 63 L.Ed.2d 454 (1980), which holds that a state legislator is not protected by a state legislative privilege in a federal criminal prosecution, because "such a state-created privilege was not part of the federal common law, and its recognition in federal court was not compelled by principles of federalism." Because appellee invoked a state privilege in a state criminal prosecution, the court determined that, "[i]f the legislative immunity doctrine is indeed co-extensive with [the Speech and Debate clause], it is hard to see why the legislative immunity doctrine would not have purchase to some degree to promote the public purposes behind the doctrine when a State criminal prosecution is mounted."
*832 The court further determined that the acts alleged in the indictments constituted legislative acts and that the State made "no fall-back or alternative argument that its conduct of the prosecution could be shown to have complied with the State and federal law...." Thus, the court opined:
The Court reads the failure of the State prosecutor to make such a showing or proffer, despite being provided several opportunities to do so, including at oral argument on the motion on April 23rd, as a functional concession and admission that, on the current record, it cannot show compliance with the requirements to screen the grand jury from prohibited and prejudicial legislative related evidence in either of these cases.
Because it was not clear to the court that the grand jury would have indicted appellee without the evidence emanating from legislative proceedings, the trial court dismissed the indictment against Councilperson Holton.
The State noted a timely appeal, challenging the court's determination that appellee's legislative acts were shielded by common law legislative immunity. After oral argument, this Court, sua sponte, directed the parties to address the applicability and impact of Md.Code (2006 Rep. Vol., 2009 Supp.), Courts and Judicial Proceedings, C.J.P. § 5-501, which was not raised by either party before the trial court or in their briefs to this Court, and to reconcile how, if the statute was intended to immunize local legislators from prosecution for bribery, the General Assembly could, by statute, immunize a class of officers covered by Article III, Section 50 of the Maryland Constitution. Additionally, this Court directed counsel to address the issue, based upon County Council v. Investors Funding Corp., 270 Md. 403, 436, 312 A.2d 225 (1973) and Barranca v. Prince George's County, 264 Md. 562, 570-71, 287 A.2d 286 (1972), whether the traditional rationale for immunity of state legislators based on separation of powers is applicable to a local government and its officials.[1] The parties filed supplemental briefs in response to the Court's instructions. We shall address in this opinion the original question raised on appeal as well as the issues addressed in the supplemental memoranda.[2]
STANDARD OF REVIEW
The trial court determined, as a matter of law, that the charges in the indictment against appellee, based upon evidence of her legislative acts, were barred by the common law doctrine of legislative immunity. The court's ruling was based upon a *833 pure question of law; thus, we shall review its decision de novo.
[The Court of Appeals has said] that "[b]ecause [its] interpretation of the Maryland Declaration of Rights and Constitution, provisions of the Maryland Code, and the Maryland Rules are appropriately classified as questions of law, [it] review[s] the issues de novo to determine if the trial court was legally correct in its rulings on these matters." Davis v. Slater, 383 Md. 599, 604, 861 A.2d 78, 80-81 (2004); see also Schisler v. State, 394 Md. 519, 535, 907 A.2d 175, 184 (2006) ("where an order involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court's conclusions are `legally correct' under a de novo standard of review"). Thus, because we are presented with legal questions ..., we consider them de novo.
Owens v. State, 399 Md. 388, 402-03, 924 A.2d 1072 (2007).
LEGAL ANALYSIS
We are tasked on this appeal with a determination of only the issue presented to the trial judge and decided by him, i.e., whether the prosecution of a local legislator may be based on evidence of his or her legislative acts. We underscore that our ultimate decision in no way intimates that local legislators are shielded from criminal prosecution when acting outside the purview of the legislative function. Based on existing statutory and decisional law, which we shall address in greater detail, infra, it is beyond cavil that local legislators are answerable for violations of the criminal laws committed outside the narrow parameters we recognize herein. Lest there be any doubt, we now make indelibly clear that the issue before this Court is not, and never has been, whether appellee or any member of a local legislature may be criminally prosecuted for bribery, but only whether such a prosecution may be founded upon and proved by evidence of words spoken or actions taken by the legislator acting in his or her legislative capacity.
The principle that legislators are absolutely immune from liability for their legislative activities has long been recognized in Anglo-American law. This privilege "has taproots in the Parliamentary struggles of the Sixteenth and Seventeenth Centuries" and was "taken as a matter of course by those who severed the Colonies from the Crown and founded our Nation." Tenney v. Brandhove, 341 U.S. 367, 372, 71 S.Ct. 783, 95 L.Ed. 1019 (1951). The Federal Constitution, the constitutions of many of the newly independent States, and the common law thus protected legislators from liability for their legislative activities. See U.S. Const., Art. I, § 6; Tenney v. Brandhove, supra, 341 U.S. 367 at 372-375 [71 S.Ct. 783].
Bogan v. Scott-Harris, 523 U.S. 44, 48-49, 118 S.Ct. 966, 140 L.Ed.2d 79 (1998).
In both the trial court and in the parties' briefs submitted to this Court, the issue was framed only in the context of whether Maryland common law, as enunciated in Schooley, supra and Manders, 101 Md. App. 191, 643 A.2d 931 (1994), provides the same protections to local legislators that the State constitutional speech and debate provisions provide to State legislators. Accordingly, in the case sub judice, we must determine whether a local legislator, although not expressly covered by the speech and debate provisions of the Maryland Constitution or the United States Constitution, may invoke the common law doctrine of legislative privilege in Maryland in a criminal prosecution, which is currently an open question in Maryland. We hold that the common law privilege applies to local legislators in state criminal *834 prosecutions. In addition, we hold that the same protection is embodied in C.J.P. § 5-501.
I
The State devotes a significant portion of its brief advancing its argument that appellee, a local legislator, was not entitled to legislative immunity under the Speech and Debate clause of the Maryland Constitution. Appellee does not dispute this position and, in fact, the trial court's ruling was not based on this proposition.
In Blondes v. State, 16 Md.App. 165, 294 A.2d 661 (1972), we interpreted the Speech and Debate provision of the Maryland Constitution. Blondes, a delegate in the State legislature, was indicted for bribery. Id. at 167, 294 A.2d 661. He moved to dismiss the indictment because
... the prosecution was predicated upon legislative activities performed by him while a member of the Legislature, [and] he was afforded constitutional immunity from trial in a court of law by reason of the Speech and Debate clauses contained in Article 10 of the Maryland Declaration of Rights and Section 18 of Article 13 of the Maryland Constitution....
Id. The trial court denied the motion to dismiss and Blondes appealed. We agreed with Blondes and reversed the court's decision.
Article 10 of the Maryland Declaration of Rights provides: "That freedom of speech and debate, or proceedings in the Legislature, ought not to be impeached in any Court of Judicature."[3] Section 18 of Article 3 of the Maryland Constitution provides: "No Senator or Delegate shall be liable in any civil action, or criminal prosecution, whatever, for words spoken in debate."
Addressing the origin of these clauses, we opined:
The immunity of legislators from prosecution by the executive and judicial branches of government for the performance of legislative acts evolved from the long struggle in England for parliamentary supremacy and first found written form in the English Bill of Rights of 1689: "That the Freedom of Speech, and Debates or Proceedings in Parliament, ought not to be impeached or questioned in any Court or Place out of Parliament." 1 W. & M., Sess. 2, c. 2. As adopted in Section 6 of Article I of the Constitution of the United States, and the Constitutions of the various states, including Maryland, the legislative privilege afforded by speech and debate clauses has served both to protect the integrity of the legislative process by insuring the independence of individual legislators and to reinforce the separation of powers embodied in our tripartite form of government. United States v. Johnson, supra.
Blondes, 16 Md.App. at 174-75, 294 A.2d 661.
Quoting United States v. Johnson, 383 U.S. 169, 86 S.Ct. 749, 15 L.Ed.2d 681 (1966), we observed that legislative immunity was
born to prevent intimidation by the executive and accountability before a possibly hostile judiciary; that "the instigation of criminal charges against critical or disfavored legislators by the executive in a judicial forum was the chief fear prompting the long struggle for parliamentary privilege in England and, in the context of the American system of separation of powers, is the predominate thrust of the Speech or *835 Debate Clause." 383 U.S. at 182 [86 S.Ct. 749].
Blondes, 16 Md.App. at 175, 294 A.2d 661.
Although "the Speech and Debate provision in Article 10 of the Maryland Declaration of Rights ha[d] been equated with the federal constitution's Speech or Debate clause" before, in Blondes, we held, for the first time, that the provisions were to be construed in pari materia. Id.
In view of their common derivation and purpose, we hold that the legislative privilege afforded under the dual provisions in the organic law of the State should be construed in pari materia with Article I, Section 6 of the federal Constitution, subject to any limitation imposed by other provisions of the Maryland Constitution. Compare Freedman v. State, 233 Md. 498 [197 A.2d 232 (1964)], reversed on other grounds, 380 U.S. 51 [85 S.Ct. 734, 13 L.Ed.2d 649 (1965)]; Brown v. State, 233 Md. 288 [196 A.2d 614 (1964)]; Bass v. State, 182 Md. 496 [35 A.2d 155 (1944)]; Blum v. State, 94 Md. 375 [51 A. 26 (1902)]; Lightman v. State, 15 Md.App. 713 [294 A.2d 149 (1972)], all involving Maryland constitutional provisions held to stand in pari materia with similar federal constitutional provisions.
Id. at 175-76, 294 A.2d 661.
We relied upon the Supreme Court's interpretation of the legislative privilege contained in the United States Constitution in reversing the court's decision in Blondes. Id. For guidance, we looked to United States v. Brewster, 408 U.S. 501, 92 S.Ct. 2531, 33 L.Ed.2d 507 (1972), where a United States Senator was charged with violating a federal bribery statute. Id. at 176, 294 A.2d 661. The trial court dismissed the indictment on the grounds that United States v. Johnson, 383 U.S. 169, 185, 86 S.Ct. 749, 15 L.Ed.2d 681 (1966), barred the Senator "from any prosecution for alleged bribery to perform a legislative act." Id. at 176, 294 A.2d 661. We observed, however, that in Brewster:
The Supreme Court concluded that Johnson was not authority for that holding; that what Johnson held was that the Speech or Debate clause in Article I, Section 6 of the federal Constitution protected members of Congress from inquiry into legislative acts or the motivation for actual performance of legislative acts; that how a legislator acted, voted, or decided was inadmissible evidence in a federal bribery prosecution; that a member of Congress could nevertheless be prosecuted under a criminal statute provided the Government's case did not rely on legislative acts or the motivation for legislative acts, i.e., acts generally done in Congress in relation to the business before it; that the Speech or Debate clause reaches and prohibits inquiry only into those things said or done in the legislative body in the performance of official duties and the motivation for those acts.
Id. at 176-77, 294 A.2d 661 (citing Brewster, supra). Thus, we stated, "it was the holding in Brewster that where no inquiry into legislative acts or motivation for legislative acts is necessary for the government to make out a prima facie case, the Speech or Debate clause does not prohibit prosecution." Id. at 177, 294 A.2d 661.
Further evaluating the conduct that falls within the definition of legislative acts, we looked to the Supreme Court's decision in Gravel v. United States, 408 U.S. 606, 92 S.Ct. 2614, 33 L.Ed.2d 583 (1972), where the Supreme Court held that the federal Speech or Debate clause protected members of Congress "`against prosecutions that directly impinge or threaten the legislative process.'" Id. at 178, 294 A.2d 661 (quoting Gravel, 408 at 616, 92 S.Ct. 2614). These acts, the Supreme Court held, include "`committee reports, resolutions, and *836 the act of voting" in addition to "`a member's conduct at legislative committee hearings....'" Id.
"Accepting the Supreme Court's interpretation of the legislative privilege as authoritative, and applying it to Article 10 of the Maryland Declaration of Rights and Section 18 of Article III of the Maryland Constitution," we reversed the trial court in Blondes because the "substantive evidence of legislative acts" introduced against Blondes "was inadmissible" and could not be considered harmless. Id. at 179, 294 A.2d 661.
We further addressed in Blondes the trial court's determination that the Senator could not be shielded by the speech and debate provisions in the Maryland Constitution because the Maryland Constitution also expressly requires the General Assembly to enact bribery laws applicable to certain enumerated public officials.
Article III, Section 50 provides:
Section 50. Legislature to provide penalty for bribery, etc., and for compelling testimony in such cases
It shall be the duty of the General Assembly, at its first session, held after the adoption of this Constitution, to provide by Law for the punishment, by fine, or imprisonment in the Penitentiary, or both, in the discretion of the Court, of any person, who shall bribe, or attempt to bribe, any Executive, or Judicial officer of the State of Maryland, or any member, or officer of the General Assembly of the State of Maryland, or of any Municipal corporation in the State of Maryland, or any Executive officer of such corporation, in order to influence him in the performance of any of his official duties; and, also, to provide by Law for the punishment, by fine, or imprisonment in the Penitentiary, or both, in the discretion of the Court, of any of said officers, or members, who shall demand, or receive any bribe, fee, reward, or testimonial, for the performance of his official duties, or for neglecting, or failing to perform the same; and, also, to provide by Law for compelling any person, so bribing, or attempting to bribe, or so demanding, or receiving a bribe, fee, reward, or testimonial, to testify against any person, or persons, who may have committed any of said offenses; provided, that any person, so compelled to testify, shall be exempted from trial and punishment for the offence, of which he may have been guilty; and any person, convicted of such offense, shall, as part of the punishment thereof, be forever disfranchised and disqualified from holding any office of trust, or profit, in this State.
In Blondes v. State, 16 Md.App. at 182-85, 294 A.2d 661, we examined Article III, Section 50 and considered whether it conflicted with granting a speech and debate privilege to Blondes in a bribery prosecution:
We note, as hereinafter set forth, that bribery was a common law offense at the time the Maryland Constitution was enacted in 1867. See Perkins on Criminal Law, (2nd Ed. 1969), pp. 468-469. Reading the mandate of Section 50 literally, no directive was given that the offense of bribery be provided for by statute; rather it directed legislative enactment of a statute to punish that common law crime, "by fine, or imprisonment in the Penitentiary, or both, in the discretion of the Court," with the further direction that such punishment render the person convicted "forever disfranchised and disqualified from holding any office of trust or profit in this State."
We find little to support the lower court's conclusion that Section 50 constitutes an express exception to the legislative immunity provisions contained in Article 10 of the Maryland Declaration *837 of Rights and Section 18 of Article III of the Maryland Constitution; those provisions, like the provisions of Section 50 of Article III, were included in the Constitution at the time of its enactment in 1867. Under well-established principles of constitutional construction, courts must construe the constitution as a whole, Boyer v. Thurston, 247 Md. 279 [231 A.2d 50 (1967)], Reed v. McKeldin, 207 Md. 553 [115 A.2d 281 (1955)], Co. Com'rs v. Supervisors of Elec., 192 Md. 196 [63 A.2d 735 (1948)], Johnson v. Duke, 180 Md. 434 [24 A.2d 304 (1942)], harmonizing each provision with the other provisions thereof where possible to do so, Reed v. McKeldin, supra, Co. Com'rs v. Supervisors of Elec., supra, Dyer v. Bayne, 54 Md. 87 [(1880)], the construction being favored which will render every part and every word operative as against a construction which will render some portions or words nugatory, Reed v. McKeldin, supra, Groome v. Gwinn, 43 Md. 572 [(1875)].
Id. at 182-83, 294 A.2d 661.
We ultimately construed the section "as a limited mandate providing for punishment of State legislators guilty of bribery if indictment and prosecution therefore can be accompanied without impinging on the legislative privilege by introducing evidence of legislative acts." Id. at 183, 294 A.2d 661. This holding, we opined, insured "the degree of separation of powers inherent in our form of government...." Id. (citation omitted).
As we made clear in Blondes, supra, the speech and debate clause in the Federal Constitution applies only to members of Congress and the comparable provisions in the Maryland Constitution apply only to members of the General Assembly. We therefore agree with the State's position that neither of these provisions applies to members of local legislative bodies.
II
A
Our decision in Montgomery County v. Schooley, 97 Md.App. 107, 627 A.2d 69 (1993), where we first applied a comparable legislative privilege to local legislators as part of their common law official immunity, is at the center of the issue presented to this Court by the parties, i.e., the scope of the common law protection. In Schooley, a Montgomery County councilman was sued for his involvement in a redistricting plan that was ultimately adopted by Montgomery County. Id. at 108, 627 A.2d 69. A discovery dispute arose during the course of the litigation. Id. The plaintiffs attempted to depose the members of the County Council, and the County sought a protective order based on their status as local legislators. Id. The circuit court denied the motion and the county appealed. Id.
In Schooley, the Court observed that "[m]embers of local legislative bodies in Maryland, like the Montgomery County Council, are not directly within the ambit of either the State or Federal Constitutional immunity provisions, which apply only to the members of legislative bodies mentioned within them." Id. at 114, 627 A.2d 69. The Court, however, continued:
The doctrine articulated in those provisions has, however, been regarded as applicable to members of local and regional legislative bodies (as well as to State legislatures, in addition to any specific State Constitutional provision) as a matter of common lawthe "common law doctrine of official immunity." Thillens, Inc. v. Community Currency Exchange, 729 F.2d 1128, 1129 (7th Cir.), cert. dismissed, 469 U.S. 976, 105 S.Ct. 375, 83 L.Ed.2d 342 (1984).
The source, nature, and scope of this common law privilege are not altogether clear and, to some extent, may depend on the context in which the privilege is *838 asserted. When invoked in defense of a Federal criminal prosecution, for example, the common law privilege has been held to be inapplicable"trumped" by the Supremacy Clause in the U.S. Constitution. United States v. Gillock, 445 U.S. 360, 100 S.Ct. 1185, 63 L.Ed.2d 454 (1980). When there is no such paramount Federal interest, however, the privilege has been respected by both Federal and State courts.
Id. at 114-15, 627 A.2d 69.
In examining the scope of the common law legislative privilege as applied to local legislators, this Court opined:
In Lake Country Estates v. Tahoe Planning Agcy., 440 U.S. 391, 403, 99 S.Ct. 1171, 1178, 59 L.Ed.2d 401 (1979), the Court observed that the privilege had its roots in the parliamentary struggles of 16th and 17th century England and that "such immunity was consistently recognized in the common law and was taken as a matter of course by our Nation's founders." See also Bruce v. Riddle, 631 F.2d 272 (4th Cir.1980); Baker v. Mayor and City Council of Baltimore, 894 F.2d 679 (4th Cir.), cert. denied, 498 U.S. 815, 111 S.Ct. 56, 112 L.Ed.2d 31 (1990); Hollyday v. Rainey, 964 F.2d 1441 (4th Cir.), cert. denied, 506 U.S. 1014, 113 S.Ct. 636, 121 L.Ed.2d 567 (1992). In Baker, the Court, citing Bruce, declared it "beyond dispute that municipal legislators enjoy the protection of immunity when acting in the sphere of legitimate legislative activity." Id. at 681. Subject to the consequences of the Supremacy Clause, that immunity, conferred as a matter of common law, appears to be co-extensive in scope with the Constitutional immunity enjoyed by members of Congress and the Maryland General Assembly. In Bruce v. Riddle, supra, 631 F.2d at 279, the Fourth Circuit Court of Appeals referred to it as an "absolute" immunity.
Id. at 115, 627 A.2d 69 (emphasis added).
The State initially presents a perfunctory argument that there is no historical evidence that local or "subordinate legislators" have ever been accorded a common law legislative privilege, disregarding our holding in Schooley, supra, wherein we clearly recognized such a privilege. Alternatively, the State vehemently argues that the foregoing statements are dicta and ought not to be applied in this case because this case involves the application of the privilege to a local legislator in a criminal case and Schooley was a civil case. The State posits that "[t]he dicta in Schooley, appearing to state established law concerning the scope of common law `official immunity', erroneously suggested that the doctrine extended far more broadly than it had been applied in any previous decision." Instead, the State contends that the common law legislative privilege had only been applied in Maryland to local legislators in civil cases and that Maryland has never, and should never, allow local legislators to invoke the protections of legislative privilege in a state criminal prosecution.[4]
*839 Appellee argues that the language suggesting that the common law legislative privilege applies to local legislators in criminal cases was not dicta, in part, because the language was later restated with approval by this Court in Manders v. Brown, supra. In Manders, the plaintiff sued city council members of the City of Crisfield, alleging that the Council violated the City Code when it secretly modified an urban renewal plan. Id. at 204, 643 A.2d 931. One of the three issues addressed by this Court was whether the actions of the members of the City Council were protected by common law legislative immunity. The Council members argued that the trial court properly dismissed Manders' complaint based upon the doctrine of legislative privilege. Id. at 205, 643 A.2d 931. Citing Schooley, supra, this writer penned for the Court:
The privilege as it applies to Congress is found in the Speech or Debate Clause of the United States Constitution, Art. I, § 6; as to the Maryland General Assembly, the privilege is found in Article 10 of the Maryland Declaration of Rights and Art. III, § 18 of the State constitution. The majority of the Supreme Court case law focuses on the application of the federal constitutional privilege as it applies to Congress. Despite the common law origins of legislative privilege as it applies to local legislative bodies, federal and local privileges are essentially co-extensive. Schooley, 97 Md.App. at 115 [627 A.2d 69]. Thus, in this context, a statement of law regarding a Member of Congress is applicable to a local legislator.
Id. at 205, 643 A.2d 931 (emphasis added). We again noted the purpose of the privilege is to "insure that the legislative function may be performed independently without fear of outside interference" by shielding legislators from "... `the consequences of litigation's results but also from the burden of defending themselves.'" Id. (quoting Schooley, 97 Md.App. at 116, 627 A.2d 69).
Manders turned on whether the alleged "scuttling" of the prescribed legislative procedures for the City of Crisfield constituted "legislative acts" that should have been protected. Id. at 206-11, 643 A.2d 931. We remanded the case because
... the privilege, if it applies to appellees in this case, cannot turn on Manders's assertions that the appellees "scuttled" the redevelopment plan to accommodate the influential crab house owners and Dana Tawes, the owner of the adjacent Tawes Lumberyard, or to benefit their individual careers and social status. If it is determined that appellees acted in their legislative capacity in modifying the urban renewal plan, the privilege may very well protect them even if they modified it to accommodate a particular group.
On remand, a determination must be made as to whether the appellees were acting within the sphere of legitimate legislative activity.
Id. at 215, 643 A.2d 931.
The parties dispute the meaning of this Court's statements in Schooley, supra, later reiterated in Manders, that, "[d]espite the common law origins of legislative privilege as it applies to local legislative bodies, federal and local privileges are essentially co-extensive." Manders, 101 Md.App. at 205, 643 A.2d 931 (citing Schooley, 97 Md. App. at 115, 627 A.2d 69). The State argues that, although both the federal and Maryland speech and debate clauses expressly protect federal or state legislators in both civil and criminal cases, common law legislative immunity should only protect local legislators in civil matters; thus, despite this Court's earlier statements in Schooley and Manders, supra, the State urges us to hold that common law legislative *840 immunity and the federal privilege are not truly "co-extensive."
The essence of the State's argument is that, despite this Court's statements in Schooley and Manders, supra, "[c]loser examination of the [Schooley] opinion, the authorities cited therein, and their contexts reveals that Schooley stands for little more than the unremarkable proposition that Maryland, like virtually every other State and federal government, recognizes a common law legislative privilege applicable to local officials in civil proceedings."
The authorities that we principally relied upon in Schooley in extending the legislative privilege to local legislators were Thillens, Inc. v. Community Currency Exchange Ass'n, 729 F.2d 1128, 1129 (7th Cir.), cert. dismissed, 469 U.S. 976, 105 S.Ct. 375, 83 L.Ed.2d 342 (1984) and United States v. Gillock, 445 U.S. 360, 100 S.Ct. 1185, 63 L.Ed.2d 454 (1980). In Thillens, the United States Court of Appeals for the Seventh Circuit addressed the application of legislative privilege to Illinois state legislators in a civil suit and held that "the doctrine of official immunity is clearly implicated in this federal civil action" because the "causes of action focus[ed] on the defendants' attempts to use their legislative positions to influence regulation of currency exchanges." Thillens, 729 F.2d at 1130.[5] The State aptly points out that in Thillens the court did not hold that common law immunity extends to criminal prosecutions, but merely addressed its application in civil cases.
Legislative immunity in criminal prosecutions was, however, addressed by the Supreme Court in Gillock, 445 U.S. 360, *841 100 S.Ct. 1185. The facts of Gillock are as follows.
A Tennessee state legislator was indicted on federal charges arising out of allegations that (1) he accepted money and, in exchange, used his public office to block the extradition of a criminal defendant from the state and (2) he agreed to introduce legislation that would permit individuals who had failed their examinations to become master electricians to obtain their licenses. Id. at 362, 100 S.Ct. 1185. The state senator moved to suppress all of the evidence relating to his legislative activities and the district court granted the motion based upon Rule 501 of the Federal Rules of Evidence, holding that the federal common law legislative immunity was the equivalent of the immunity granted to Congress under the Speech or Debate Clause, Art. I., § 6, cl. 1. Id. at 363, 100 S.Ct. 1185. The Government appealed the grant of the suppression motion and the Court of Appeals for the Sixth Circuit vacated the order and remanded the case for further consideration and application of the privilege to "particularize items of evidence." Id. On remand, the Government made a proffer and the District Court granted the renewed motion to exclude evidence of legislative acts, excluding Gillock's
. . . official request for an opinion from the Attorney General regarding extradition and the answer to that request, and Gillock's statements . . . that he could exert pressure on the extradition hearing officer to block the extradition . . . [and] . . . all evidence regarding Gillock's introduction and support of the electricians' reciprocal licensing bill, his conversation with the private individuals who opposed the legislation, and the Governor's veto letter. . . .
Id. at 365, 100 S.Ct. 1185.
The Government appealed the ruling on remand and the Court of Appeals affirmed. Id. at 366, 100 S.Ct. 1185. The Supreme Court
. . . granted certiorari to resolve a conflict in the Circuits over whether the federal courts in a federal criminal prosecution should recognize a legislative privilege barring the introduction of evidence of the legislative acts of a state legislator charged with taking bribes or otherwise obtaining money unlawfully through exploitation of his official position.
Id. at 361-62, 100 S.Ct. 1185 (footnote omitted).
Gillock argued that state legislators should have the benefit of an evidentiary privilege in a federal criminal prosecution because (1) "a speech or debate type privilege for state legislators in federal criminal cases is an established part of the federal common law and is therefore applicable through Rule 501" and (2) ". . . that even apart from Rule 501, a legislative speech or debate privilege is compelled by principles of federalism. . . ." Id. at 366, 100 S.Ct. 1185. The Supreme Court rejected both arguments.
Initially, the Court observed that "[t]he language and legislative history of Rule 501" did not provide support for Gillock's argument. Id. at 367, 100 S.Ct. 1185. "The Rule provides in relevant part that `the privilege of a witness . . . shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience.'" Id. (quoting Federal Rule 501). The Court explained that, under the original draft of Rule 501 proposed by the Advisory Committee of the Judicial Conference of the United States "federal courts would have been permitted to apply only nine specifically enumerated privileges. . . ." Id. The privilege claimed by Gillock was not listed among those enumerated privileges. Thus, the Court observed, *842 "the claimed privilege was not thought to be either indelibly ensconced in our common law or an imperative of federalism." Id. at 368, 100 S.Ct. 1185 (footnote omitted). The Court further pointed out that, "the fact that there is an evidentiary privilege under the Tennessee Constitution, Art. II., § 13, which Gillock could assert in a criminal prosecution in state court does not compel an analogous privilege in a federal prosecution." Id.
Turning to Gillock's next argument, the Court also rejected Gillock's contention that "the historical antecedents and policy considerations which inspired the Speech or Debate Clause of the Federal Constitution should lead [the Supreme Court] to recognize a comparable evidentiary privilege for state legislators in federal prosecutions." Id. Initially, the Court traced the origins of the legislative immunity provided for in the Speech or Debate Clause.
Our cases, however, have made clear that "[although] the Speech or Debate Clause's historic roots are in English history, it must be interpreted in light of the American experience, and in the context of the American constitutional scheme of government rather than the English parliamentary system." United States v. Brewster, 408 U.S. at 508 [92 S.Ct. 2531]. In deciding whether the principles underlying the federal constitutional speech or debate privilege compel a similar evidentiary privilege on behalf of state legislators, the analysis must look primarily to the American experience, including our structure of federalism which had no counterpart in England.
Id. at 369, 100 S.Ct. 1185 (emphasis added).
The Supreme Court reiterated the two underlying rationales for the speech and debate privilege.
Two interrelated rationales underlie the Speech or Debate Clause: first, the need to avoid intrusion by the Executive or Judiciary into the affairs of a coequal branch, and second, the desire to protect legislative independence. Eastland v. United States Servicemen's Fund, 421 U.S. 491, 502-503 [95 S.Ct. 1813, 44 L.Ed.2d 324] (1975). Cases considering the Speech or Debate Clause have frequently arisen in the context of a federal criminal prosecution of a Member of Congress and have therefore accented the first rationale. Only recently in such a case, we re-emphasized that a central purpose of the Clause is "to preserve the constitutional structure of separate, coequal, and independent branches of government. The English and American history of the privilege suggests that any lesser standard would risk intrusion by the Executive and the Judiciary into the sphere of protected legislative activities." United States v. Helstoski, 442 U.S. [477], at 491 [99 S.Ct. 2432, 61 L.Ed.2d 12 (1979)]. Accord, United States v. Johnson, supra, at 180-181 [86 S.Ct. 749]. The Framers viewed the speech or debate privilege as fundamental to the system of checks and balances. The Works of Thomas Jefferson 322 (Ford ed. 1904); 1 The Works of James Wilson 421 (R. McCloskey ed. 1967).
Id. 369-70, 100 S.Ct. 1185.
The Court observed that declining to apply the privilege to state legislatures in federal prosecutions does not create a separation of powers problem. Id. Although "the Federal Government has limited powers with respect to the states, unlike the unfettered authority which English monarchs exercised over Parliament[,]" because the Supremacy Clause "dictates that federal enactments will prevail over competing state exercises of power[,]" the Court opined, "we do not have the struggles for power between the federal and state systems such as inspired the need for *843 the Speech or Debate Clause as a restraint on the Federal Executive or to protect federal legislatures." Id. at 370, 100 S.Ct. 1185. The Court concluded that "federal interference in the state legislative process is not on the same constitutional footing with the interference of one branch of the Federal Government in the affairs of a co-equal branch." Id. (citing Baker v. Carr, 369 U.S. 186, 210, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962)). Finally, the Supreme Court rejected Gillock's assertion that the denial of the evidentiary privilege was tantamount to the federal government invading "essential state functions." Id. at 371, 100 S.Ct. 1185.
Turning to the second rationale for legislative immunitythe need for legislative independencethe Court held that the concern did not compel application of the privilege to a state legislator in a criminal case. Id. at 371, 100 S.Ct. 1185. In support of his argument, Gillock relied on Tenney v. Brandhove, 341 U.S. 367, 71 S.Ct. 783, 95 L.Ed. 1019 (1951). Id. "The issue there, however, was whether state legislators were immune from civil suits for alleged violations of civil rights under 42 U.S.C. § 1983." Id. The Court drew a distinction between Gillock's case and Tenney, where the Supreme Court held that, in enacting the [42 U.S.C. § 1983], it doubted that Congress, "`itself a staunch advocate of legislative freedom, would impinge on a tradition so well-grounded in history . . . by covert inclusion in the general language of [§ 1983].'" Id. (quoting Tenney, 341 U.S. at 376, 71 S.Ct. 783.) The Court distinguished Tenney. "First, Tenney was a civil action brought by a private plaintiff to vindicate private rights. Moreover, the cases in this Court which have recognized an immunity from civil suit for state officials have presumed the existence of federal criminal liability as a restraining factor on the conduct of state officials." Id. at 372, 100 S.Ct. 1185.
The Gillock Court, citing O'Shea v. Littleton, 414 U.S. 488, 503, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974),[6] observed that "in protecting the independence of state legislators, Tenney and subsequent cases on official immunity have drawn the line at civil actions." Id. at 373, 100 S.Ct. 1185 (footnote omitted). The Court further explained, to the extent that denying the federal common law privilege's application to state legislators infringed upon the state legislative process, it was permissible when weighed against the interest of the Federal Government "in enforcing its criminal statutes" as compared to the "only speculative benefit to the State legislative process." Id. at 373, 100 S.Ct. 1185 (citing United States v. Nixon, 418 U.S. 683, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974)) (holding that the risk of limiting candor in the Executive Branch was outweighed by the interest in the judiciary securing all relevant evidence in a criminal proceeding).
Ultimately, the Court concluded, id. at 374, 100 S.Ct. 1185:
The Federal Speech or Debate Clause, of course, is a limitation on the *844 Federal Executive, but by its terms is confined to federal legislators. The Tennessee Speech or Debate Clause is in terms a limit only on the prosecutorial powers of that State. Congress might have provided that a state legislator prosecuted under federal law should be accorded the same evidentiary privileges as a Member of Congress. Alternatively, Congress could have imported the "spirit" of Erie R. Co. v. Tompkins, 304 U.S. 64 [58 S.Ct. 817, 82 L.Ed. 1188] (1938), into federal criminal law and directed federal courts to apply to a state legislator the same evidentiary privileges available in a prosecution of a similar charge in the courts of the state. But Congress has chosen neither of these courses.
In the absence of a constitutional limitation on the power of Congress to make state officials, like all other persons, subject to federal criminal sanctions, we discern no basis in these circumstances for a judicially created limitation that handicaps proof of the relevant facts.
Id. 374, 100 S.Ct. 1185.
B
Few state courts have reported decisions since Gillock, supra, on the application of the legislative privilege to local legislators in state criminal prosecutions. The number of reported cases decided by the nation's federal courts are legion,[7] but we find those cases to be inapposite for the same reason cited by the circuit court, to wit: in Gillock, the Supreme Court concluded that such a state-created privilege was not a part of the federal common law, and its recognition in federal court was not compelled by principles of federalism in a federal criminal prosecution of a state senator.[8] While instructive, Gillock sheds little light on whether the privilege is available to a local legislator in a Maryland criminal prosecution.
The trial court cited D'Amato v. Superior Court, 167 Cal.App.4th 861, 84 Cal. Rptr.3d 497 (2008) for the proposition that local legislators should be entitled to the same privilege in criminal prosecutions as they are in civil suits because the threats to legislative independence are equally as significant. In D'Amato, a City Administrator was charged with two counts of aiding and abetting a board member of a group, assembled by the City for the purpose of acquiring federal funding for a project, in violating California conflict of interest laws because the board member had a financial interest in a contract for which D'Amato had advocated in his capacity as City Administrator. Id. at 503-04. The D'Amato Court explained that, by enacting the conflict of interest statute, the California legislature created a "conclusive presumption of divided loyalty where a public official holds a personal financial interest, [and] the Legislature avoided the prospect of executive and judicial officers delving into the subjective motivations of public officials performing their legislative duties." Id. at 505. This, the court recognized, was purposefully done so as not to violate separation of powers. Id. "This respect for the deliberative processes of local governmental agencies derives from the separation of powers doctrine, embodied in the California Constitution. . . ." Id.
The court observed that the California Constitution does not contain an express *845 separation of powers provision applicable to local government, but that the state legislature provided municipalities the authority to conduct their own government. Id. "When the Legislature confers legislative power on a municipal body, a judicial or executive body may not interfere with that power, except as the Legislature authorizes." Id. at 505. Further, the Court explained that, in order to make a determination of guilt under a theory of aider and abettor liability, there must be proof of the aider and abettors intent or motive and "this inquiry directly contravenes the separation of powers principles. . . ." Id. at 506. Thus, the court observed that an "important corollary of the separation of power doctrine is courts cannot inquire into the impetus or motive behind legislative action.'" Id. at 505 (quoting Steiner v. Superior Court, 50 Cal.App.4th 1771, 58 Cal. Rptr.2d 668, 676 (1996)).
The D'Amato Court also explained, citing Steiner, 58 Cal.Rptr.2d at 678, that the "level of intimidation against a local legislator arising from the threat of a criminal proceeding is at least as great as the threat from a civil suit." D'Amato, 84 Cal.Rptr.3d at 507. Ultimately, the Court determined that the legislature did not make clear that it intended to overrule the common law doctrine of legislative immunity and it "should not be abrogated absent clear legislative intent to do so." Id. at 508.
The State argues that the holding in D'Amato that "the separation of powers doctrine bars criminal prosecution of a public official for aiding and abetting another's [conflict of interest statute] violation based on that official's legislative activities . . ." id. at 510, is inapposite because there is no separation of powers problem implicated when a State prosecutor prosecutes a local legislator in Maryland. Instead, the State urges this Court to follow two other state court decisions, People v. Scharlau, 141 Ill.2d 180, 152 Ill.Dec. 401, 565 N.E.2d 1319 (1990) and Girardeau v. State, 403 So.2d 513 (Fla.Ct.App.1981).
The State postulates that "The Supreme Court of Illinois had occasion to consider the effect of Gillock in a State criminal case against a local legislator in People v. Scharlau . . . ." In Scharlau, the Supreme Court of Illinois reviewed the convictions of four elected commissioners of the City of Danville for "official misconduct" under the state's conflict of interest laws. 152 Ill.Dec. 401, 565 N.E.2d at 1320. The commissioners were convicted based upon their involvement in the settlement of a lawsuit, the terms of which "changed Danville's municipal government from a mayor-commissioner system, where commissioners were elected city-wide, to a mayor-alderman system with the City divided into separate aldermanic districts. However, the settlement also guaranteed that defendants would be placed, by appointment, in newly created administrative positions... ." Id., 152 Ill.Dec. 401, 565 N.E.2d at 1320-21.
The Scharlau Court, far from "considering the effect of Gillock in a state criminal case," actually engaged in an exhaustive interpretation of the language of an Illinois conflict of interest statute and the propriety of the defendants' actions in settling a law suit. Only in the very last paragraph of the opinion did the court have occasion to comment, in dicta, on the issue of legislative immunity:
Finally, the defendants cannot rely on the doctrine of legislative immunity to protect them from prosecution. This issue was never raised by defendants prior to their appeal; therefore, the issue is waived. (People v. Dale (1986), 112 Ill.2d 460, 467, 98 Ill.Dec. 39, 493 N.E.2d 1060 (nonjurisdictional questions not properly presented to trial court are not *846 considered on appeal).) Even if the issue had been preserved for review, however, defendants would not prevail. If courts are not allowed to inquire into the negotiation process of public officials engaged in their official legislative duties, the State could never prosecute public officials under the statutes which prohibit self-dealing. While defendants may have been immune from civil liability under the doctrine of legislative privilege, we cannot allow them to conceal their criminal violations and escape punishment merely because they committed their crimes while performing legislative duties. United States v. Gillock (1980), 445 U.S. 360, 372-73, 100 S.Ct. 1185, 1193-94, 63 L.Ed.2d 454, 464-65.
Id., 152 Ill.Dec. 401, 565 N.E.2d at 1330.
Noticeably absent from the Scharlau opinion is any analysis of either a state or federal speech and debate clause, or the existence of common law legislative immunity. Rather, as the circuit court correctly recognized, the issue was not preserved for appeal and thus the Scharlau Court's analysis of the immunity issue was cursory and perfunctory.
The State further asserts that, "in a similar vein, the Florida Court of Appeal refused to extend legislative privilege in a criminal case in Girardeau v. State, [403 So.2d 513]. . . ." The Girardeau Court addressed the question of whether a Florida state legislator "may lawfully assert a privilege of non-disclosure of information received by him in connection with the discharge of his duties as a legislator, when that information is sought by a grand jury in connection with its investigation of a crime." Id. at 514. Girardeau, a member of the Florida House of Representatives, became involved in a legislative investigation of the Department of Corrections regarding inmate abuse and allegations of an inmate's death. Id. At the same time, a grand jury also began an investigation regarding the same inmate's death and, as a result, Girardeau was served with a subpoena to appear and "to bring any tapes, documents or materials in his possession relating to the [inmate's] death." Id. The trial court denied Girardeau's motion to quash the subpoena. Girardeau refused to testify and "was adjudged in contempt of court. . . ." Id.
Girardeau argued that he was entitled to legislative immunity and thus should not have been compelled to testify. He conceded ". . . the absence of any express constitutional or statutory provision authorizing the invocation of the privilege asserted." Id. The court explained that Girardeau's "assumptions concerning the existence of the privilege are based primarily upon premises extracted from two Florida constitutional provisions, aided by principles drawn from federal and state constitutional law. . . ." Id. Although the Florida constitution does not contain a speech and debate clause, Girardeau argued that the Florida constitution provides legislators the authority to conduct investigations. Id. By contrast, he pointed out that, although the United States Constitution does not expressly provide Congress the authority to conduct investigations, "the United States Supreme Court has ruled that inherent in the power of congress to legislate is the power to investigate any matter which may result in the development of future legislation." Id. at 515 (citing Sinclair v. United States, 279 U.S. 749, 49 S.Ct. 471, 73 L.Ed. 938 (1928); McGrain v. Daugherty, 273 U.S. 135, 47 S.Ct. 319, 71 L.Ed. 580 (1926)). Similarly, Girardeau argued, the United States Constitution does not contain an express provision mandating the separation of powers, but it is "firmly established that the power of one branch of government cannot be usurped or interfered with by a different branch." Id. (citing Youngstown Sheet & Tube Co. v. *847 Sawyer, 343 U.S. 579, 72 S.Ct. 863, 96 L.Ed. 1153 (1952)).
An express speech and debate clause in the Florida constitution, Girardeau claimed, was unnecessary because of the "interplay" between the provision regarding the legislature's power to conduct investigations and the express separation of powers clause. The court observed:
[Girardeau] then urges this court to adopt what he refers to as an "expansive interpretation" of these two constitutional provisions and to conclude that the express power to conduct legislative investigations, when considered in connection with the express separation of powers doctrine embodied in the Florida Constitution, implies the ability of the legislature to refuse to disclose its findings "when necessary." [Girardeau] argues for a broad construction of Article III, Section 5, absent which, in [Girardeau's] view, the ability of the legislature to conduct its investigations would be severely diminished and legislative integrity would be disrupted by the judicial branch of government, through its grand jury.
Id. at 516 (footnotes omitted).
The court essentially rejected Girardeau's argument, holding:
These arguments, briefly summarized above, would merit serious consideration were we called upon in this case to sanction the invocation of privileges and immunities similar to those which have been found to exist under the federal speech or debate clause. However, in the context of this case, they are not compelling.
In reaching our decision we are not called upon and do not decide the scope or even the existence of a "legislative privilege" similar to that provided to members of Congress under the speech and debate clause. There is every reason to believe that all due deference will and should be extended by the judicial branch to any properly asserted legislative claim of privilege, and it is imperative that it be kept in mind that such claims of privilege are supported by substantial authority. "Legislators are immune from deterrents to the uninhibited discharge of their legislative duty, not for their private indulgence but for the public good." Tenney v. Brandhove, 341 U.S. 367, 377, 71 S.Ct. 783, 788, 95 L.Ed. 1019 (1931)([1951]); and see 72 Am. Jur. 2d, States, etc., § 55. However, even assuming (without deciding) the existence of a legislative power to conduct confidential investigations and a generalized privilege on the part of a member to refuse to disclose evidence received in the course of such an investigation, any such claim of confidentiality cannot override or defeat the pressing need of the criminal justice system, of which the grand jury is an integral part, for evidence of a crime alleged to have been committed in the state.
Id. at 516-17 (footnote omitted).
The Girardeau Court cited United States v. Nixon, 418 U.S. 683, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974) and noted that "even the power of the President of the United States cannot override the power of the judicial branch to compel a full disclosure of the facts in a criminal investigation." Girardeau, 403 So.2d at 517.
While the considerations of a legislator's duties and the need to prosecute criminal violations are relevant, the precise issue before this Court was not before the court in Girardeau, supra. Girardeau was limited to the question of whether a Florida legislator has the right to conduct confidential investigations. The absence of a state constitutional speech and debate provision and a concomitant common law legislative privilege in Florida, in our view, *848 renders the Girardeau decision inapposite to the issue at hand.
C
The State urges this Court to "follow Gillock," as it claims the Scharlau and Girardeau courts did, and reject the application of common law legislative immunity to local legislators in state criminal prosecutions. Focusing on the primary authorities upon which the Supreme Court relied, i.e. the Supremacy Clause and separation of powers, the State argues that both considerations are applicable in the context of the case sub judice and militate toward holding that the common law privilege should not apply to local legislators in this context.
Initially, the State argues that "the relationship between the State and the Baltimore City Council is closely analogous to the relationship between Federal government and the State." Citing Worton Creek Marina v. Claggett, 381 Md. 499, 850 A.2d 1169 (2004), the State argues that, although there is no supremacy clause in the Maryland Constitution, while there is one in the federal constitution, "the same principle is equally applicable to the relationship between the State law [sic] and those of local jurisdictions."
In Worton Creek Marina, the Court of Appeals held that a local ordinance, enacted by Kent County, that allowed commercial boat moorings to remain "within another riparian's extended property line" for two months of the waterfowl season was preempted by the State Boat Act "because it permit[ted] an act prohibited by State law." Id. at 502, 850 A.2d 1169. Beyond simply citing Worton Creek Marina, the State presents no argument or explanation of its position. Implicit, however, in the State's allusion to the federal Supremacy Clause is that we should infer, from the Court's statements in Worton Creek Marina, that the State government reigns supreme and that any privilege asserted by a local legislator should not stand in the face of a prosecution initiated by the State. This is so, urges the State, because local ordinances "`must not directly or indirectly contravene general law.. .'" or "`. . . directly or indirectly [] permit acts or occupations which the State statutes prohibit, or to prohibit acts permitted by statute or constitution. . . .'" Id. at 513, 850 A.2d 1169 (quoting Rossberg v. State, 111 Md. 394, 416-17, 74 A. 581 (1909)).
Appellee argues that there is no support for the State's contention that it stands in a similar position as the federal government in relationship to local governments, at least with respect to the common law legislative privilege. Appellee further counters that she did not invoke "a protection created by Baltimore City" but rather "a protection that exists statewide. . . ." Thus, maintains appellee, there is no conflict or issue of preemption. Appellee further asserts that "[t]he State is seeking a wholesale grant of power that when it believes its interests are superior to the privileges and protections that might stand in the way of its prosecution, the protections of the defendant should fail." According to appellee, in the absence of any authority in support of the State's position that a local legislator is less deserving of the protections of the legislative privilege, we should hold that a local legislator, like a state legislator, may not be compelled to explain his or her motivations in voting, even in a state criminal prosecution.
We agree with appellee that there is no issue of a conflict between a local ordinance or enactment and State law, as there is no local privilege at issue in this case that is competing with a State privilege. Rather, appellee sought the common law protections, previously accorded by this Court to local legislators in civil cases, *849 to prevent evidence of her voting and other legislative acts from being used as evidence of a criminal act. Thus, we need not consider whether a local ordinance conflicts with a state law or whether state law has preempted a particular area. Cf. Worton Creek Marina, 381 Md. at 514, 850 A.2d 1169; Rossberg, 111 Md. at 416-14, 74 A. 581; Montgomery County Bd. of Realtors v. Montgomery County, 287 Md. 101, 411 A.2d 97 (1980); Montgomery County v. Bd. of Elections, 311 Md. 512, 536 A.2d 641 (1988). See also J. Scott Smith, State and Local Legislative Powers: An Analysis of the Conflict and Preemption Doctrines in Maryland, 8 U. BALT. L.REV. 300, 306-14 (1979).
The Supreme Court pointed out in Gillock that "the fact that there is an evidentiary privilege under the Tennessee Constitution.. . which Gillock could assert in a criminal prosecution in a state court, does not compel an analogous privilege in a federal prosecution." 445 U.S. at 368, 100 S.Ct. 1185. Patently, the Court's decision in Gillock turned on the question of whether to recognize a state privilege in the face of the competing federal interest in a criminal prosecution when such a privilege existed at the state level and would otherwise have applied if the prosecution were in a Tennessee court or, if Gillock had been a member of Congress and was prosecuted in a federal court. This, however, significantly differs from the case sub judice, as appellee invokes a Maryland common law privilege in a Maryland court that a member of the General Assembly could assert in a criminal prosecution. As we stated in Schooley, 97 Md.App. at 115, 627 A.2d 69, in our discussion of Gillock, "[w]hen there is no such paramount federal interest, however, the privilege has been respected by both Federal and State courts." The State's interest in a criminal prosecution, in our view, cannot be considered paramount to the state common law privilege. Accordingly, we are unpersuaded by appellant's argument based on the supremacy clause.
The second prong of the State's argument based on Gillock is that "[i]n Maryland, as under federal law, the separation of powers doctrine does not furnish a basis for extending the doctrine of official immunity to a State prosecution of a member of a local city council." According to the State, this is because the Court of Appeals clearly held, in Wicomico County v. Todd, 256 Md. 459, 464-65, 260 A.2d 328 (1970), that separation of powers, provided for in Article 8 of the Maryland Declaration of Rights, does not apply to local governments in Maryland. The State seizes upon the need identified in Gillock to "avoid intrusion by the Executive or Judiciary into the affairs of a coequal branch . . . ." 445 U.S. at 369, 445 U.S. 360 (emphasis added) and points out that the Baltimore City Council and the State Prosecutor are not members of coequal branches of government because the Baltimore City Council is a local legislator, while the State Prosecutor is a member of the State Executive branch of government.
Todd, however, does not address separation of powers of state vis a vis local government, but instead examines the propriety of the actions of the Wicomico County government regarding the alleged executive interference with the legislative process within the local government. Todd, 256 Md. at 464-65, 260 A.2d 328. In Todd, the Court cited Pressman v. D'Alesandro, 193 Md. 672, 679, 69 A.2d 453 (1949) for the proposition that "`the constitutional requirement of separation of powers is not applicable to local government,' the question of just how much power has been granted being one of statutory construction." Todd, 256 Md. at 464-65, 260 A.2d 328 (quoting Pressman, 193 Md. at 679, 69 A.2d 453).
*850 In Pressman, in addressing alleged conflicts between two provisions of the Baltimore City Charter, the Court of Appeals opined:
The basic question now presented is not whether the City Council can delegate legislative power, but whether the Legislature has conferred, by the Baltimore charter or otherwise, powerof whatever nature, legislative or executive or bothto make the choice of alternatives. There can be no question as to the power of the Legislature to make such grants of powers of local government, whether to an existing municipal corporation or agency, a specially constituted body, or an existing executive or administrative body such as county commissioners. The constitutional requirement of separation of powers is not applicable to local government. Baltimore City v. Flack, 104 Md. 107, 119-123, 64 A. 702 [(1906)]; Gordon v. Montgomery County, 164 Md. 210, 212-214, 164 A. 676 [(1933)]; Schneider v. Lansdale, 191 Md. 317, 326, 61 A.2d 671, 675 [(1948)]. Just how much power is granted by a particular statute is a question of statutory construction, (Renshaw v. Grace, 155 Md. 294, 142 A. 99 [(1928)]), not a constitutional question. In the past municipal charters, through imitation of state and federal constitutions, often made a separation of powers similar to the constitutional separation. Such charters gave rise to questions of statutory construction similar to constitutional questions of separation of powers. Baltimore v. Wollman, 123 Md. 310, 316, 91 A. 339 [(1914)]. The new Baltimore charter and other recent charters reflect less imitation of state and federal frames of government and greater recognition of functions and problems characteristic of municipal government.
Id. at 678-79, 69 A.2d 453 (emphasis added). Thus, the State contends that, unlike in California, separation of powers is of no concern at the local level in Maryland.
Appellee counters that the State's argument ignores the circuit court's determination that the Baltimore City Council (the legislator) is a co-equal branch of the Baltimore City Grand Jury (the judiciary) and thus, there is a problem of separation of powers between coequal branches in this case. The Baltimore City Circuit Court is part of the State judiciary branch. M.D. CONST. art. IV.
The circuit court determined that, although it is a Maryland court, it should be considered part of the local government of Baltimore City because its jurisdiction is over Baltimore City and the Baltimore Grand Jury is "a body whose jurisdiction is limited to crimes committed in Baltimore City." The circuit court erred in concluding that the Baltimore City Grand Jury and the circuit court were co-equal branches of government with the Baltimore City Council. The State correctly points out that the Baltimore City Charter provides for two "branches" of local government: the City Council as the "legislative department", Article III, Section 1(a) and the Mayor as the "chief executive," Article IV, Section 1(a).
While the City Council is not a part of the State government and not "co-equal" with the State Prosecutor, we cannot discount the fact that local governments have been granted the power to engage in legislative functions. Article XI-A of the Maryland Constitution provides for the adoption of local charters and Article XI-A, Section 2 provides:
The General Assembly shall by public general law provide a grant of express powers for such County or Counties as may thereafter form a charter under the provisions of this Article. Such express powers granted to the Counties and the powers heretofore granted to the City of *851 Baltimore, as set forth in Article 4, Section 6, Public Local Laws of Maryland, shall not be enlarged or extended by any charter formed under the provisions of this Article, but such powers may be extended, modified, amended or repealed by the General Assembly.
In Ritchmount Partnership v. Bd. of Supervisors of Elections for Anne Arundel County, 283 Md. 48, 57, 388 A.2d 523 (1978), the Court of Appeals explained:
The exercise of local legislative powers is subject at all times to provisions of the Constitution and general law, and is limited to those matters allocated by the express powers which the Legislature has delegated under Article 25A of the Annotated Code. Md. Const., Art. XI-A, §§ 1 & 3; Mont. Citizens League v. Greenhalgh, 253 Md. 151, 158, 252 A.2d 242 (1969); J. Spencer, Contemporary Local Government in Maryland 22 (1965). Article XI-A does not in and of itself confer legislative power upon the counties. Instead it mandates that the General Assembly expressly enumerate and delegate those powers exercisable by counties electing a charter form of government. Md. Const., Art. XI-A, § 2. In compliance with this constitutional injunction, the Legislature enacted in 1918 the Express Powers Act, which, as amended, endows charter counties with a wide array of legislative and administrative powers over local affairs. Art. 25A, § 5. These "legislative powers" are those usually associated with the objects of governmentthat is, powers to legislate for the benefit of the health, safety and general welfare of the local community.
Id. (footnote omitted).
In Maryland, as in California, "the local law-making power exists by reason of a statutory grant of authority. . . ." Id. at 58, 388 A.2d 523. Thus, we hold that, in the words of the D'Amato Court, "[w]hen the Legislature confers legislative power on a municipal body, a judicial or executive body may not interfere with that legislative power, except as the Legislature authorizes." 84 Cal.Rptr.3d at 505 (citation omitted).
The State has not cited to this Court any statute that would indicate that the common law legislative privilege is not applicable in the case at hand. Moreover, in our previous decisions, when we applied the common law doctrine of legislative privilege to local legislators, albeit in the civil context, considerations of ensuring separation of powers among co-equal branches and the State's "supreme" position in preempting conflicting local ordinances did not cause us to hold the privilege inapplicable to local legislators. In short, appellant presents this Court with no reason to renounce our previous decision to "adopt" the common law privilege and consider it "co-extensive" with the state and federal constitutional privileges. Schooley, 97 Md.App. at 115, 627 A.2d 69. Neither do we discern any reason why our statement in Manders, that, "in this context, a statement regarding a Member of Congress is applicable to a local legislator" to no longer be a correct statement of the law. 101 Md.App. at 205, 643 A.2d 931. Neither a State nor Federal legislator may have his/her legislative acts introduced as evidence against said legislator. See, e.g., United States v. Brewster, 408 U.S. at 512, 92 S.Ct. 2531 ("a Member of Congress may be prosecuted under a criminal statute provided that the Government's case does not rely on legislative acts or the motivation for legislative acts."). Accordingly, we hold that, as a matter of common law, local legislators may invoke that same privilege in a criminal prosecution.
III
Subsequent to oral argument before this Court, the applicability of Courts *852 and Judicial Proceedings Article, § 5-501, vel non, to the issues at hand, was deemed to warrant consideration. A fair reading of § 5-501 intimates a legislative imperative that local legislators enjoy the same protection as the protection that State legislators have against being forced to defend or explain their legislative conduct. Section 5-501 provides:
Action for defamation against local government official.
A civil or criminal action may not be brought against a city or town councilman, county commissioner, county councilman, or similar official by whatever name known, for words spoken at a meeting of the council or board of commissioners or at a meeting of a committee or subcommittee thereof.
This statute has not been judicially interpreted in a criminal context and was not addressed in either Schooley or Manders, supra. In response to our instructions, the State Prosecutor and appellee briefed the issue of whether the statute applies to the case sub judice and both parties are of the view that the statute is inapplicable to this case. The State Prosecutor avers that the statute applies only to actions for defamation but not actions for bribery and, thus, has no relevance to the case. The State Prosecutor bases his position on the manner in which the statute is captioned and the fact that it immunizes local officials from "words spoken," which he asserts can only be construed as an action for defamation. Appellee likewise is of the view that the statute's application is limited to defamation actions, but acknowledges that "the need to protect the legislative process appears to be the motivating factor," rendering it consistent with the state constitutional speech and debate protections. We agree, in part, with appellee.
We do not share the parties' view that the statute is limited to defamation actions against local legislators. Such a view improperly elevates the effect of a mere caption and ignores the plain language of the statute itself as well as its legislative history. The statute was initially enacted by 1973 Md. Laws, ch. 287 for the purpose, according to its title, of providing that "certain officials shall not be liable in any civil action or criminal prosecution for words spoken in debate." (Emphasis added). Intending to cover all local legislators it added, in nearly identical language, to each of the Code articles dealing with municipal and county legislative bodies (Articles 23A, 25, 25A and 25B) that no such local legislatortown councilman, county commissioner, county councilman, code county commissioner or similar official "shall be liable in any civil action or criminal prosecution for words spoken in debate at [a meeting of the applicable legislative body]." The meaning and effect of that statute could not be clearer. That language was lifted directly from Article III, Section 18 of the Maryland Constitution and must be construed as having the same effectto provide the same level and scope of protection to the local legislators as is enjoyed by members of the General Assembly.
A few months after the enactment of that statute, the General Assembly returned for a special summer session in order to begin implementation of the code revision processthe non-substantive re-writing of the 1957 Code in a more topical and coherent manner. One of the volumes produced at that special session was the Courts and Judicial Proceedings Article, which was intended as a generally non-substantive collection and revision of the laws relating to judicial proceedings. See 1973 Md. Laws (1st Sp. Sess.) Ch. 2, § 1. In furtherance of that purpose and intent, the sections added to Articles 23A, 25, 25A and 25B just months earlier were consolidated and re-styled as Section 5-304 of the new Article. The new section read:
*853 A civil or criminal action may not be brought against a city or town councilman, county commissioner, county councilman, or similar official by whatever name known, for words spoken at a meeting of the council or board of commissioners.
That no substantive change was intended by the rewording of the language is evident from the Revisor's Note that immediately followed the section: "This section is new language derived from Art. 23A, § 1A, Art. 25, § 1A, Art. 25A, § 3, and Art. 25B, § 10A. . . ."
In 1976, the statute was expanded to provide protection not only for legislative conduct at meetings of the council or board itself but also subcommittee meetings. See 1976 Md. Laws, Ch. 355. In 1977, the section was moved to its present location, Section 5-501, without any substantive change.
Unfortunately, the advisory body tasked with drafting the new Courts and Judicial Proceedings Article added as a caption to the section "Action for defamation against local government official" and that caption has remained with the section. The parties have seized upon that caption as limiting the scope of the statute itself, which we find to be inappropriate and inadmissible. In determining the meaning of a statute, we look to the words of the statute itself, not a caption. W. Corr. Inst. v. Geiger, 371 Md. 125, 141, 807 A.2d 32 (2002) ("In seeking to ascertain legislative intent, we first look to the words of the statute . . . .") (citations omitted); Derry v. State, 358 Md. 325, 335, 748 A.2d 478 (2000) (Courts view the words of a statute ". . . in ordinary terms, in their natural meaning, in the manner in which they are most commonly understood."); Degren v. State, 352 Md. 400, 417, 722 A.2d 887 (1999) ("Where the statutory language is plain and free from ambiguity, and expresses a definite and simple meaning, courts do not normally look beyond the words of the statute itself to determine legislative intent.") (citations omitted). Captions and headings are mere catchwords and can never be taken to limit or expand the plain meaning of the statutory language. The Legislature itself has made that clear. Article 1, Section 18 provides:
The captions or headlines of the several sections of this Code which are printed in bold type, and the captions or headlines of the several subsections of this Code which are printed in italics or otherwise, are intended as mere catchwords to indicate the contents of the sections and subsections. They are not to be deemed or taken as titles of the sections and subsections, or as any part thereof; and, unless expressly so provided, they shall not be so deemed or taken when any of such sections and subsections, including the captions or headlines, are amended or reenacted.
Id. See also Montgomery County v. Eli, 20 Md.App. 269, 275, 315 A.2d 136 (1974) ("Quite obviously such headings are not the words of the legislature and cannot be read to inject an intent not expressed in the body of the law.").
In light of the foregoing, we read the language "any civil or criminal action" to mean "any action" and not simply a defamation action. C.J.P. § 5-501 closely tracks the legislative privilege provided in Article III, Section 18: "No Senator or Delegate shall be liable in any civil action, or criminal prosecution, whatever, for words spoken in debate." That it was originally enacted, with the express purpose of shielding a local official against liability for words spoken in debate, shortly after our decision in Blondes, supra, is a strong indication that the Legislature intended that local legislators enjoy the same protection as State legislators for legislative conduct. The purpose of relieving *854 such officials from the burden of having to defend their legislative actions is served by the above interpretation and is perfectly consistent with this Court's prior explications of the common law legislative privilege.
Finally, our reading of C.J.P. § 5-501, in our view, creates no conflict with Article III, Section 50 of the Maryland Constitution because, if construed consistently with the State legislative privilege, it would only provide immunity from prosecution based on their legislative conduct, which also renders inadmissible evidence of such conduct to prove the criminal offense. It does not immunize local legislators from prosecution for bribery or any other offense. This is perfectly consistent with our previous decision in Blondes, wherein we stated:
Our holding today insures the degree of separation of powers inherent in our form of government (see Fletcher v. Peck, 10 U.S. 87 [6 Cranch 87, 3 L.Ed. 162 (1810)]) by dispensing with the impropriety of executive or judicial inquiry into the motives of legislators. But nothing in our holding in any way derogates the egregious nature of bribery by a member of the Legislature nor suggests that it go unpunished. The Legislature has the power to keep its own house in order, Maryland Constitution, Article III, Sections 19 and 26, and the courts may still act under Article 27, Section 23 if the prosecution can prove its case without inquiry into legislative acts. The closing provision of Article 27, Section 23 providing for compellable testimony, interpreted as a grant of wide immunity in Brown v. State, supra, should facilitate any necessary court prosecutions without impingement on the legislative privilege. Since the trial judge erred in relying upon substantive evidence of Blondes's legislative acts, we shall order a new trial purged of references to legislative acts prohibited by the legislative privilege.
16 Md.App. at 183-84, 294 A.2d 661.
Accordingly, we also hold that appellee enjoyed the protection provided by C.J.P. § 5-501 and, thus, the indictment was properly dismissed.
IV
The State does not dispute that the acts alleged in the indictment constitute legislative acts. We read the State's failure to challenge whether appellee's actions constitute "legislative acts" as a concession that the acts fall within the privilege; thus, we express no opinion in the matter. Accordingly, we affirm.
CONCLUSION
To recapitulate and provide, contextually, amplification of the rationale which impels the result herein, as we have stressed, supra, members of legislative bodies whether Congress, State legislatures or local councilsmay be prosecuted for criminal behavior, including offenses such as bribery, misfeasance in office and criminal corruption. These legislators have no general immunity from criminal prosecution. Under what are often referred to as the "speech and debate" clauses in the Federal Constitution (Art. I, § 6) and the Maryland Constitution (Md. Decl. Of Rts. Art. 10 and Art. III, § 18), there is a caveat to that principle, however. Members of those bodies generally may not be compelled to answer for or defend, in a non-legislative governmental forum, what they say or do in the legislative process. C.J.P. § 5-501 provides the same level of protection to members of local legislative bodies. With one exception, the case law is clear that both the Federal and the Maryland speech and debate provisions and, as we now hold, C.J.P. § 5-501, provide a limited form of privilege or immunity *855 in both civil and criminal proceedings United States v. Johnson, 383 U.S. 169, 86 S.Ct. 749, 15 L.Ed.2d 681 (1966); Montgomery County v. Schooley, 97 Md.App. 107, 627 A.2d 69 (1993) (Schooley); Manders v. Brown, 101 Md.App. 191, 643 A.2d 931 (1994) (Manders).[9] The one exception is that, because of the supremacy clause in the Federal Constitution, State and local legislators, even if enjoying that protection under State law, do not enjoy it as a defense to Federal criminal prosecutions. United States v. Gillock, 445 U.S. 360, 100 S.Ct. 1185, 63 L.Ed.2d 454 (1980). It is clear, however, that members of the General Assembly, and by statute, local legislators, are not subject to civil liability or criminal prosecution in any State court for their legislative speech or conduct.
Although C.J.P. § 5-501 provides a clear statutory basis for affirming the judgment of the circuit court, because the issue was raised and argued in the context of the common law, we have addressed that as well. Neither of the Constitutional speech and debate provisions apply to members of local legislative bodies. The Federal provision applies only to members of Congress, and the Maryland provisions apply only to members of the General Assembly. United States v. Gillock, supra; Schooley, supra. Although the Court of Appeals has never ruled whether members of local legislative bodies have any comparable privilege or immunity, this Court has twice determined that they do, in civil cases. In Schooley and Manders, this Court concluded that local legislators have a common law public official privilege or immunity from having to answer, in a civil case, for what they have said or done in legislative sessions. In Schooley, this Court made clear that, in civil cases, that common law privilege or immunity is coextensive with the protection afforded members of the General Assembly under the Maryland Constitution. Until such time as the Court of Appeals rules on that issue, that is the prevailing common law in Maryland.
Neither the Court of Appeals nor this Court has ever determined whether the common law privilege or immunity enjoyed by local legislators applies to criminal proceedingswhether they may be called upon to explain or defend their legislative conduct in a criminal prosecution. That is an open question in Maryland. There is no precedent on that issue, which is the one now before us.
We have set forth the positions of the parties and discussed the case law around the country with regard to that issue. The proper resolution of the issue requires us to consider the purpose of the common law protection which, as this Court makes clear in Schooley, is consonant with the purposes of the Constitutional speech and debate provisions.
Two interrelated purposes have been identified: protection and implementation of the separation of powers principle implicit in the Federal Constitution and explicit in the Maryland Constitution (see Md. Decl. Of Rts. Art. 8); and preservation of the independence of the legislative branch of the government. Although, to a large extent, the second purpose is subsumed in the first, we do not view it as entirely swallowed. As the State Prosecutor correctly points out, the State and the local subdivisions are not co-equal branches *856 of the same government, so the Constitutional doctrine of separation of powers does not strictly apply, as it would between the Legislative, Executive and Judicial Branches of the State Government.
Ultimately, however, local legislative bodies are products of State law. They are authorized by the Maryland Constitution and the General Assembly. See Md. Constitution, Articles XI and XI-A with respect to Baltimore City and Charter Counties, Art. XI-E with respect to municipal corporations, and XI-F with respect to Code Counties, and Maryland Code, Articles 23A (municipal corporations), 25 (county commissioners), 25A (charter counties) and 25B (home rule counties). Undergirding the raison d'etre of the privilege or immunity at issue is that the People of the State and the State itself, through duly enacted statutes, have authorized these local legislative bodies and have conferred upon them, within their respective geographic jurisdictions the same responsibility for debating and setting basic public policy that is vested in legislative bodies generally under a separation of powers modality. The need for legislative integrity and independence is thus as important in the local context, for the advantage of the citizens of the local community, as it is at the State level.
Given this context, we conclude that the privilege or immunity enjoyed by local legislators should be extended to criminal proceedings, as a matter of common law and C.J.P. § 5-501. Local legislators constitute the most direct form of representative democracy. They are the closest to the People and they often set the policies that most directly affect the health, safety and quality of life of the people residing in their communities. They must enjoy the same ability to speak and act in their legislative capacities, without fear of retribution, either criminally or civilly, because of what they say or how they vote. They may be called upon to answer for their legislative conduct to the citizens who elected them, which is what democracy is all about, but they may not be compelled to defend their legislative conduct to a prosecutor, to a grand jury or to a court. The record in this case shows that that is precisely what Ms. Holton was asked to do, and the circuit court was correct in not permitting it.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY AFFIRMED.
COSTS TO BE PAID BY APPELLANT.
NOTES
[1] The Court of Appeals has previously acknowledged that, on certain occasions, it is both necessary and appropriate for an appellate court to raise and address an issue not previously presented by the parties in order to resolve the legal question before it. In Master Financial v. Crowder, 409 Md. 51, 57 n. 1, 972 A.2d 864 (2009), the Court opined:
For good reason, it is rare that the Court will add an issue not raised by the parties in either the lower courts or this Court. As we observed in Robinson v. Bunch, 367 Md. 432, 440, 788 A.2d 636, 641-42 (2002), however, "in circumstances where we have determined that the proper resolution of a case requires our consideration of certain matters not dealt with by the parties, we have, by order, added issues that were neither presented in certiorari petitions and cross-petitions nor raised in the courts below." See also County Council v. Dutcher, 365 Md. 399, 405, 780 A.2d 1137, 1140 (2001).
[2] To the extent that the statute provides a protection similar or in pari materia to that afforded by the common law, the question of its scope and application does not constitute a new issue but merely an alternative theory or argument for sustaining the ruling of the circuit court. See Crown Oil & Wax Co. of Del. v. Glenn Const. Co. of Va., 320 Md. 546, 561, 578 A.2d 1184 (1990).
[3] Unlike its federal counterpart, the constituents of the Maryland Speech and Debate Clause are stated in the conjunctive.
[4] The State also cites Baker v. State, 27 Ind. 485 (1867), as the only case wherein a court considered the application of such a privilege in a criminal prosecution of a legislator not covered by a statutory or constitutional privilege prior to 1976. In Baker, the Supreme Court of Indiana reversed the trial court's ruling refusing to grant a new trial to members of the common council of the city of Evansville. The court stated that the council members "were in the exercise of a discretion given them by law. In such case, there is not individual liability, either civilly or criminally, unless they acted corruptly." Id. at 489. Thus, the State contends, without any further argument or explanation that, at most, if a local legislator is entitled to any immunity in a criminal prosecution, it would be qualified immunity. As we shall explain infra, we do not hold that local legislators may not be prosecuted; thus we find Baker inapposite as it relates to the potential for liability.
[5] In Thillens, the court cited Judge Tone's concurring opinion in United States v. Craig, 528 F.2d 773, 781 (7th Cir. 1976) (Tone, J., concurring), cert. denied, 425 U.S. 973, 96 S.Ct. 2171, 48 L.Ed.2d 796 (1976), which was later adopted as the opinion of the Seventh Circuit following an en banc review in United States v. Craig, 537 F.2d 957 (1976). The question before the Craig Court was "whether state legislators have a Speech or Debate privilege, conferred either by the Illinois Constitution or as a matter of federal common law, which bars admission of certain evidence against state legislators in a federal criminal prosecution." 528 F.2d at 775. Judge Tone's concurring opinion explained that the speech or debate clause of the Illinois Constitution did not apply in federal criminal prosecutions of Illinois state legislators and further, that the state legislators were not entitled to a federal common law speech or debate privilege. Id. at 781. Judge Tone wrote that "whether the claimed privileged should be recognized as a development in the federal common law of evidence depends on whether there is an underlying immunity." Id. at 782. Common law immunity of state legislators, Judge Tone wrote, "has not been held to be coextensive with that which members of Congress enjoy under the federal speech or debate clause. Even with respect to civil liability, speech-or-debate immunity is broader than official immunity." Id. (citing Eastland v. United States Servicemen's Fund, 421 U.S. 491, 95 S.Ct. 1813, 44 L.Ed.2d 324 (1975); Powell v. McCormack, 395 U.S. 486, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969)). Judge Tone analogized the common law immunity afforded to state legislators in federal courts to "official immunity" applied to the judiciary and stated that, "[u]nlike federal speech or debate immunity [See United States v. Johnson, 383 U.S. 169, 86 S.Ct. 749], common-law official immunity has not been extended to criminal liability." Id. (citing O'Shea v. Littleton, 414 U.S. 488, 503, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974)).
The State's brief contains extensive verbatim quotations from Judge Tone's opinion and the State argues that this Court should follow the opinion later adopted by the Seventh Circuit, regarding common law immunity of state legislators in federal prosecutions in holding that the indictment against appellee was erroneously dismissed. Because the Supreme Court subsequently addressed the issues presented in Craig in Gillock, 445 U.S. 360, 100 S.Ct. 1185, we shall focus our analysis on the Court's decision in Gillock, in which the Supreme Court "granted certiorari to resolve a conflict in the Circuits...." 445 U.S. at 361-62, 100 S.Ct. 1185.
[6] In O'Shea v. Littleton, the Supreme Court held that a class action filed against a magistrate and associate judge alleging racial discrimination in the criminal justice system failed to present a justiciable case in controversy. The Court also held that the Court of Appeals erred in deciding that the District Court should have entertained the plaintiff's claims, explaining that it is not true "that unless the injunction sought is available federal law will exercise no deterrent effect. . . ." Id. at 503, 94 S.Ct. 669. The Court observed that "whatever may be the case with respect to civil liability generally . . . . we have never held that the performance of the duties of judicial, legislative, or executive officers, requires or contemplates immunization of otherwise criminal deprivations of rights." Id. (citations omitted).
[7] See, e.g., United States v. Burgin, 621 F.2d 1352, 1359 (5th Cir. 1980); In re Grand Jury, 821 F.2d 946 (3d Cir. 1987); United States v. Cartledge, 928 F.2d 93, 96-97 (4th Cir.1991); United States v. Fumo, 628 F.Supp.2d 573, 580-82 (E.D.Pa.2007).
[8] For an in-depth discussion on Gillock and the value of state legislative privileges, see Steven F. Huefner, The Neglected Value of the Legislative Privilege in State Legislatures, 45 WM. & MARY L.REV. 221, 300-04 (Oct. 2003).
[9] When the Constitutional provision has been raised in support of an objection to evidence of legislative activity, it has sometimes expressed as an evidentiary privilege, precluding the admission of evidence of legislative conduct, but it would seem to be broader than a mere evidentiary privilege, as it applies to both Executive and Judicial proceedings. Whether one characterizes it as a privilege or an immunity, for purposes of this case, is unimportant. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644759/ | 994 So. 2d 526 (2008)
Joey BORDELON
v.
Kristen CATE.
No. 2008-CC-1767.
Supreme Court of Louisiana.
October 31, 2008.
*527 Not considered; not timely filed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542437/ | 947 A.2d 1177 (2008)
Joseph R. MAZZA, Appellant,
v.
Valerie B. HOLLIS, Appellee.
No. 05-FM-1574.
District of Columbia Court of Appeals.
Argued April 22, 2008.
Decided May 15, 2008.
*1178 Edouard J.P. Bouquet for appellant.
Robin A. Clark, with whom Eric M. Glass was on the brief, for appellee.
Before FARRELL and BLACKBURNE-RIGSBY, Associate Judges, and NEBEKER, Senior Judge.
FARRELL, Associate Judge:
D.C.Code § 46-204(a) (2007) provides, in relevant part, that "[a]ny order requiring payment of an amount of child support . . . may be modified upon a showing that there has been a substantial and material change in the needs of the child or the ability of the responsible relative to pay since the day on which the order was issued."[1] Similarly, D.C.Code § 16-916.01(a) (2007), part of the District's Child Support Guideline, provides that "in any case that seeks to modify an existing support order, if the judicial officer finds that there is an existing duty of child support, the judicial officer shall conduct a hearing on child support, make a finding, and enter a judgment in accordance with the child support guideline."[2]
This appeal presents a very narrow question: Do the quoted provisions permit modification in accordance with their terms of a child support agreement (1) reached by the parties in the state of Georgia before divorcing there and (2) which by Georgia law became part of the judgment or "order" of the court granting the divorce. We answer that question "yes," and accordingly reverse the order of the Superior Court declining to modify child support and remand for consideration of the request to modify in accordance with the Child Support Guideline.
I.
Appellant Joseph Mazza and appellee Valerie Hollis were married in Virginia in 1991 and had one child born in 1997. They *1179 separated in 1999 and were divorced later that year in Georgia. Before the divorce, they had entered into a Settlement Agreement in Georgia (the Agreement) dealing with, among other things, custody and support of the child.
In August 1999, Hollis moved to Washington, D.C. with the child. Three months later, Mazza also relocated to the Washington, D.C. metropolitan area. In 2001 the Georgia divorce decree was registered in the Superior Court of the District of Columbia. On July 1, 2004, Mazza filed a Motion to Modify Custody and Child Support in the Superior Court, seeking a reduction in the amount of his monthly support obligation because of a "substantial and material change in circumstances."[3] Hollis opposed the motion, relying on this court's decision in Cooper v. Cooper, 472 A.2d 878 (D.C.1984), and in moving for summary judgment she also asked for an increase in Mazza's monthly child support obligation under the terms of the Agreement. The trial judge initially denied Hollis's motion for summary judgment, reasoning that D.C.Code §§ 46-204(a) and 16-916.01(a), rather than Cooper, established the legal standard for modification of Mazza's child support obligation. After an evidentiary hearing, however, the judge changed his mind, ruled that the Cooper standard governed, and found that Mazza had not made the restrictive showing that Cooper requires for a reduction in child support. The judge simultaneously ordered a modest increase in Mazza's support obligation in accordance with the terms of the Agreement.
On appeal, Mazza challenges both the denial of his request for a reduction of the child support amount and the increase in his obligation which the judge ordered.
II.
Under our decision in Cooper, a child support provision of a separation agreement that has been incorporated, but not merged, into an order of divorce gives the trial court only "limited authority" to modify the agreed child support. Duffy v. Duffy, 881 A.2d 630, 638 (D.C. 2005).[4] We agree with the trial judge's determination, on the record before him, that Mazza did not meet the Cooper test for reducing the amount of child support the parties had agreed upon in 1999. But that conclusion does not decide this case. For, unlike in the situation Cooper dealt with, if "a settlement agreement is merged into the trial court's order [of divorce], . . . the binding force of the amount of child support is . . . based on the . . . authority of the court's order," Duffy, 881 A.2d at 639; in that situation, the parties' agreement has been "adopted by the court as its own determination of the proper disposition. . . ." Hamel v. Hamel, 539 A.2d 195, 199 (D.C.1988). And, when that is so, "the principles embodied in the Child Support Guideline [and § 46-204(a)] apply [to a modification request] rather than the requirement[s] set forth in Cooper." Clark v. Clark, 638 A.2d 667, 670 (D.C.1994) (footnote omitted); see Duffy, 881 A.2d at 639 ("[T]he court [then] has discretion to modify its own *1180 order based on a showing by either party of a material change in the circumstances of either the child or the parents.") (citation omitted).
Examination of Georgia law demonstrates that when Mazza and Hollis became divorced there, their existing child support agreement was effectively "adopted by the [divorce] court as its own determination of the proper disposition" of child support. Hamel, 539 A.2d at 199. Under Georgia law, "[i]n a divorce action, the [settlement] agreement, if accepted by the court, becomes the judgment of the court itself and . . . the court has the discretion to approve or reject the agreement, in whole or in part." Bridges v. Bridges, 256 Ga. 348, 349 S.E.2d 172, 174 (1986); see also Pannell v. Pannell, 162 Ga.App. 96, 290 S.E.2d 184, 185 (1982) ("agreements between husband and wife . . . are, by presumption of law, merged in the final verdict of the jury in the divorce suit" (quotation marks omitted); "[u]nderstandings . . . not incorporated into the divorce decree are not binding"). Georgia, in other words, does not recognize the distinction between merger and incorporation embodied in the Cooper limitation; at least where child support is concerned, an agreement accepted by the divorce court may be modified in accordance with the support guidelines contained in Georgia law. See, e.g., Moccia v. Moccia, 277 Ga. 571, 592 S.E.2d 664, 665 (2004); Gowins v. Gary, 288 Ga.App. 409, 654 S.E.2d 162 (2007).
The parties here do not dispute that the Agreement was incorporated in their divorce decree, hence that the child support provision was accepted by the court and became "the judgment of the court itself." Bridges, supra. It therefore was an "order" of the court within the meaning of §§ 46-204(a) and 16-916.01(a), and subject to modification in accordance with those statutes. That would not be true if the term "order" under these provisions refers only to orders of the Superior Court, but Hollis has not made that argument, and we see no basis in the statutes for that limitation. Section 46-201(15B) defines a "support order" as "a judgment, decree, or order . . . issued by a court or an administrative agency of competent jurisdiction . . . for the support and maintenance of a child, including a child who has attained the age of majority under the law of the issuing state" (emphasis added) clear indications that the legislature meant no limitation that would exclude an order of a Georgia court. Moreover, the word "any," as in "[a]ny order," § 46-204(a), "read naturally . . . has an expansive meaning, that is, `one or some indiscriminately of whatever kind.'" Ali v. Federal Bureau of Prisons, ___ U.S. ___, ___-___, 128 S. Ct. 831, 835-36, 169 L. Ed. 2d 680 (2008) (citations omitted). We conclude that the Georgia divorce decree incorporating and approving the parties' child support agreement was an order within the meaning of District law, thus permitting a change in Mazza's obligation if warranted by the Child Support Guideline.
This conclusion makes it unnecessary for us to answer the question left open as well in Clark, 638 A.2d at 670 n. 6, and Nevarez v. Nevarez, 626 A.2d 867, 871 (D.C.1993), of whether §§ 46-204(a) and 16-916.01(a) legislatively overruled our Cooper decision. Nor need we consider the retroactive application to the parties' conduct in 1999 of D.C.Code § 16-916.01(t), a later Guideline amendment enacted in 2002 that by its terms appears to overrule Cooper.[5] Finally, *1181 District of Columbia law envisions generally that a child support order issued by a tribunal of another state will be registered in the District pursuant to D.C.Code §§ 46-301 et seq. (2001) in order to be subject to modification. See § 46-306.11; Prisco v. Stroup, 947 A.2d 455, 458 (D.C. 2008). The parties' divorce decree was registered with the Superior Court in 2001, and because no argument has been made that this did not do service under the registration statute, we do not consider the point further.
Accordingly, we vacate the order of the trial court and remand for consideration of Mazza's request for modification in accordance with § 46-204(a) and the Child Support Guideline. Further, because decision on Mazza's request necessarily will affect any entitlement of Hollis to an increase in child support as provided in the Agreement, we vacate as well the order increasing Mazza's support obligation and require further consideration of that issue too.
So ordered.
NOTES
[1] Section 46-204(a) recodified, without material change, former § 30-504(a) enacted in 1987.
[2] Section 16-916.01(a) recodified, without material change, former § 16-916.1(a) enacted in 1990. The Guideline, in keeping with § 46-204(a), provides that "a parent [may] seek a modification of a support order upon a showing of a material and substantial change in the needs of the child or the ability of the parent with a legal duty to pay support to pay." D.C.Code § 16-916.01(r)(4)(C).
[3] He asserted, in particular, that the child now lived with him 40% of the time, and that Hollis had since become a lawyer, thus increasing her earning potential.
[4] The Cooper standard allowed modification only upon a showing (1) of "a change in circumstances which was unforeseen at the time the agreement was entered and (2) that the change is both substantial and material to the welfare and best interests of the children." Cooper, 472 A.2d at 880 (citations omitted). "[A] change in the parents' financial circumstances alone cannot provide the basis for modifying a contract between the parties." Id. at 881 (citation and internal quotation marks omitted). But see note 5, infra.
[5] That provision allows modification of a child support provision "[u]pon the occurrence of a substantial and material change in circumstances sufficient to warrant the modification . . . without regard to whether the agreement or settlement is entered as a consent order or is incorporated or merged in a court order" (emphasis added). The legislative history confirms that § 16-916.01(t) was intended to "overturn[] the decision of the D.C. Court of Appeals in Cooper. . . ." KATHY PATTERSON, CHAIRPERSON, COMMITTEE ON THE JUDICIARY, REPORT ON BILL 14-635, THE "DOMESTIC RELATIONS LAWS CLARIFICATION ACT OF 2002," at 4 (May 29, 2002).
In Duffy, supra, the court had no occasion to consider the effect of § 16-916.01(t) on the continued vitality of the Cooper limitation. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304419/ | PER CURIAM.
This case filed under our Declaratory Judgment Statutes questions the authority of the City of Knoxville by ordinance and implementing resolution thereunder to require Southern Railway Company to construct, operate and maintain automatic signals and crossing gates at several street-railway crossings at the sole expense of Southern Railway Company.
The ordinance in question is Section 31-2 of the Knoxville City Code, which reads as follows:
There shall be erected at all grade crossings on the line of any railroad in the City over which trains are operated, electric signals, crossings gates or flagmen or some other warning approved by the City Council. Such warning shall be provided and maintained by the railroad without expenses to the City, and when warning devices are used they shall be erected and maintained under the supervision of the City Engineer.
Pursuant to this ordinance the City Council, by resolution, required Southern Railway Company to erect and maintain signals and gates at the street-railway crossings on Morrell Road, Agnes Avenue, Ault Road, and Spring Hill Road. The resolution also required signals at Beverly Road and Greenway Drive. After a hearing the chancellor directed Southern Railway Company to comply with the resolution. Upon appeal from this decree this Court, under authority of Nashville, Chattanooga, *93& St. Louis Railway Co. v. Walters, 294 U.S. 405, 55 S.Ct. 486, 79 L.Ed. 949 (1935), remanded the cause for further hearing on the issue of whether or not under the facts with respect thereto the ordinance and resolution requirements are unreasonable and general, or as to any crossing, 221 Tenn. 232, 426 S.W.2d 172. Other issues raised on this first appeal were reserved and will he considered in this opinion.
Upon remand further proof was taken and the chancellor found the requirements of gates and signals at Morrell Road, Ault Road and Spring Hill Road were reasonable; that the requirements of signals on Agnes Avenue was reasonable, but the requirement of gates at this crossing was unreasonable; that the requirement of signals on Beverly Road and Greenway Drive were unreasonable. From this decree of the chancellor Southern Railway Company has perfected its appeal.
Southern Railway Company alleges the City does not possess power under its charter to require erection of such protective devices at street-railway crossings at the sole expense of Southern.
The City claims charter power by Section 5(41) of its charter. This section expressly empowers the City to require at the expense of the railroad grade separations at street-railway crossings, but does not mention protective devices such as at issue in the case at bar. The chancellor found this section of the charter did not empower the City to enact the ordinance at issue and we concur. The chancellor did find the City was empowered to enact this ordinance under the following general provisions of its charter:
*94Sec. 5. Be it further enacted, That the city as incorporated under this Act shall have the power by ordinance :
******
(16) To define, prohibit, suppress, prevent, and regulate all acts, practices, conduct, business, occupation, callings, trades, uses of property and all other things whatsoever detrimental to the health, morals, comfort, safety, convenience or welfare of the inhabitants of the city, and to exercise general police powers under the provisions of this Act and the general law.
#**###
(49) To pass all ordinances necessary to the health, convenience, safety and general welfare of the inhabitants of the city, and to carry out the full intent, corporate purposes, and meaning of this Act as fully as if specifically authorized, and as if the powers were expressly conferred.
(50) To make regulations for the general welfare, health and safety of the public within the corporate limits and not otherwise herein specifically provided for.
# * # * # *
(52) To have and exercise all powers which now are or hereafter would be competent for this charter specifically to enumerate, as fully and completely as though said powers were specifically enumerated herein; and no enumeration of particular powers by this charter shall be held to be exclusive.
The general rule with respect to power exercised by municipal corporations is stated in the case of City of *95Chattanooga v. Tennessee Electric Power Co., 172 Tenn. 524, 112 S.W.2d 385 (1935), as follows:
It is well settled that a municipal corporation can exercise only such powers as are expressly granted in its charter or arise by necessary implication in order to carry out the declared objects and governmental purposes for which the corporation was created. 172 Tenn. at 533, 112 S.W.2d at 388.
We think under the above copied sections of the City of Knoxville Charter, the City has power by necessary implication to require the protective devices where reasonably needed at street-railway intersections, and an ordinance requiring such has a reasonable and substantial relationship to the promotion of health, safety and comfort of the general public.
Southern Railway Company alleges the ordinance is invalid as being inconsistent with and repugnant to Sections 65-1208(1) and 65-1105, T.C.A. These statutes are as follows:
65-1208. In order to prevent accidents upon railroads, the following precautions shall be observed:
(1) The officials having jurisdiction over every public road crossed by a railroad shall place at each crossing a sign, marked as provided by sec. 65-1105; and the county court shall appropriate money to defray the expenses of said signs; and the failure of any engine driver to blow the whistle or ring the bell at any public crossing so designated by either the railroad company or the said public official, shall constitute negligence # # #
65-1105: The railroad and public utilities commission and the commissioner of the department of highways *96and public works are empowered and directed after such hearings as they may see fit to have, to determine upon a form of railroad crossing sign, which shall he the standard for the state.
Municipal ordinances in conflict with and repugnant to a State law of a general character and state-wide application are universally held to be invalid. The difficulty arises in the application of this principle to the facts in the particular case. See Long v. Taxing District of Shelby County, 75 Tenn. 134 (1881); Katzenberger v. Lawo, 90 Tenn. 235, 16 S.W. 611, 13 L.R.A. 185 (1891); Hurt v. Yazoo & Miss. Valley Railway, 140 Tenn. 623, 205 S.W. 437 (1918); Henderson v. City of Knoxville, 157 Tenn. 477, 9 S.W.2d 697, 60 A.L.R. 652 (1928); City of Memphis v. Southern, 167 Tenn. 181, 67 S.W.2d 552 (1934); State ex rel. Beasley v. Mayor and Aldermen of the Town of Fayetteville, 196 Tenn. 407, 268 S.W.2d 330 (1953); City of Red Bank-White Oak v. Abercrombie, 202 Tenn. 700, 308 S.W.2d 469 (1957).
Southern Railway Company cites and relies upon the City of Memphis v. Southern Railway, supra case. In this Memphis case the City under a general grant of charter powers enacted an ordinance requiring the railroad at its own expense to construct a grade separation at a street-railway crossing. At the time of the enactment of this ordinance, Chapter 132, Public Acts of 1921, was in effect, by which statute the Legislature provided a scheme for the elimination of railway-highway crossings by constructions of grade separation crossings with the expense to be divided between the railroad and the State. Chapter 132 is now carried as T.C.A. 65-1107 through 65-1112. The Court held the ordinance void as being in conflict with this State statute and required Memphis *97to bear the cost of the grade separation. In this opinion the Court said:
The ordinance herein relied on by the city of Memphis was not enacted until several months after passage of the Public Act of 1921. At the time of the passage of this ordinance, the policy of the state had been definitely settled, and the Legislature had determined that the railroad companies were not to be onerated with the entire expense incident to the elimination of grade crossings. Since this declaration of legislative policy, in the absence of special authority, we are not able to conclude that a municipal corporation, endowed merely with general power to regulate the use of its streets and the operation of railroad trains within its limits, can require of a railroad company at its sole expense such an undertaking as is herein contemplated.
The separation of grades at the crossing of a public road and a railroad is always an expensive proceeding. It involves either a considerable fill or a considerable excavation, often both, an overhead bridge, and approaches. The expense is greatly enhanced when there is such an undertaking in a populous city. In the latter case the compensatory outlay for the approaches is usually staggering. Since the state has so restricted its immediate power in the premises, when proceeding through its immediate agents and in the- maintenance of its own highways, it cannot be conceived that the state would delegate unlimited power in this respect to a subordinate governmental agency except by plain language. We think no such unlimited power can be drawn by implication from general provisions in a municipal charter. 167 Tenn. at 188, 67 S.W.2d at 554.
*98The gist of the argument here is that under the holding in City of Memphis v. Southern Railway Co., supra, the City of Knoxville cannot under a general grant of charter powers enact the ordinance and implementing resolution here at issue in face of the general statutes of state-wide application on the same subject, to-wit: T.C.A. 65-1208 (1) and 65-1105.
This Court, speaking through now Chief Justice Burnett, in State ex rel. Beasley v. Mayor and Aldermen of the Town of Fayetteville, supra, said:
An ordinance enacted in the exercise of police power is not necessarily inconsistent with a State law on the same subject unless the city provides for greater restrictions or makes higher standards than is provided or made by the statute.
In LaCrosse Rendering Works, Inc. v. City of LaCross, et al., 231 Wis. 438, 285 N.W. 393, 124 A.L.R. 511 (1939), the Court said:
“The mere fact that the state, in the exercise of the police power, has made certain regulations does not * * * prohibit a municipality from exacting additional requirements. So long as there is no conflict between the two, and the requirements of the municipal by-law are not in themselves pernicious, as being unreasonable or discriminatory, both will stand but municipal authorities, under a 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.”
“As a general rule, additional regulation to that of the state- law does not constitute a conflict therewith. The fact that an ordinance enlarges upon the provisions of a statute bv requiring more than the statute *99requires creates no conflict therewith, unless the statute limits the requirement for all cases to its own prescriptions. ’ ’ 285 N.W. at 401.
We do not find the statutes, T.C.A. 65-1208(1) and 65-1105, relied on here to be in conflict with the ordinance at issue. The ordinance simply requires more than the statute- in placing of protective devices at street-railway crossings. The ordinance does not authorize anything the statute forbids nor does it forbid anything the statute requires. Both the statute and the ordinance can co-exist and be effective.
Southern Railway Company alleges this ordinance per se violates both the due process and the commerce clauses of the Constitution of the United States, citing Nashville, Chattanooga & St. Louis Railway v. Walters, supra, and Atchison, Topeka & Santa Fe Railway v. Public Utilities Commission of the State of California, 346 U.S. 346, 74 S.Ct. 92, 98 L.Ed. 51 (1953).
Southern Railway Company admits the entire cost of the protective devices at street-railway crossings can, under proper circumstances, he charged to a railroad. The argument here is that the ordinance is so drawn that it requires, on the issue of who is to bear the expense of a crossing, one of two possible findings; that it, the railroad bear the entire expense of the crossing at issue, or the ordinance as to the crossing at issue is unreasonable and void. There is, in fact, no middle ground wherein it might be found as to a particular crossing to he reasonable to charge the railroad with part but not all the cost.
We agree that under the holdings of Nashville and Atchison there could be a case arising from a partic*100ular set of facts where it would be reasonable to charge only a part of a crossing to the railroad, and an ordinance requiring all the cost be charged to a railroad would be void as applied to that particular case, but this would not result in making the ordinance void per se but only as to a particular case. On this point Southern Railway Company in its brief states:
It might be argued that the ordinance is saved by the possibility of voiding an order entered pursuant thereto as unreasonable. Thus, the evaluation required by Atchison is still possible. As a practical matter, however, this possibility is illusory since it would require an abandonment of the crossing protection which, by hypothesis, the City considers essential. Faced with such an unacceptable alternative, it is inevitable that both the City council and a reviewing court will stretch to uphold the reasonableness of charging the expense to the railroad. The result, therefore, is to deprive the railroad of a fair and meaningful inquiry regarding the fairness and reasonableness of the allocation of costs.
We agree under the holding of Nashville and Atchison the wisdom of enacting the type of ordinance here at issue is questionable, but we do not agree with the conclusion of Southern Railway Company stated in its brief above quoted that faced with two alternates of all or nothing the courts will stretch to uphold reasonableness or charging of all the expense to the railroad. This has already been shown in the case at bar where the chancellor, upon remand, deleted entirely protective devices from two crossings required by the ordinance and implementing resolution.
*101Atchison, Topeka and Santa Fe Railway Co. v. Public Utilities Commission, supra, involved enlarging railway underpasses and installation of an underpass where there had been a grade crossing, with the railroad required. to bear one-half of the expense. In this case the court said:
Rather, in the case at bar the improvements were instituted, by the State or its subdivisions to meet local transportation needs and further safety and convenience, made necessary by the rapid growth of the communities. In such circumstances, this Court has consistently held that in the exercise of the police power, the cost of such improvements may be allocated all to the railroads. (Citing cases). There is the proper limitation that such allocation of cost must be fair and reasonable. Nashville, C. & St. L. Ry. Co. v. Walters, 294 U.S. 405, 415, 55 S.Ct. 486, 79 L.Ed. 949, 955, and The cases there cited. 346 U.S. at 352, 74 S.Ct. at 96.
In the case at bar we do not deem it necessary to detail the proof taken on the issue of reasonableness. This proof is by a traffic court, both rail and vehicle, the terrain of the area of the crossings, and the fact all the crossings were on city streets. Upon remand the chancellor applied the test of fairness and reasonableness to the action of the City in charging all of the cost to the railroad. Where the action of the City was found unreasonable to a particular crossing or a particular safety device, such was deleted from the force of the ordinance and the implementing resolution.
The judgment of the lower court is affirmed.
Ckeson, Justice, not participating. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/2857896/ | Gilbert
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-257-CR
DWAYNE GILBERT,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT
NO. 0912316, HONORABLE TOM BLACKWELL, JUDGE PRESIDING
A jury found Dwayne Gilbert, a/k/a "Hambone", guilty of aggravated sexual
assault of a child. Tex. Penal Code Ann. § 22.021 (1989). The trial court assessed punishment
at thirty years' incarceration. Appellant brings three points of error. We will affirm the trial
court's judgment.
The jury convicted appellant of aggravated sexual assault of the six-year-old
daughter of his girlfriend. The girl's mother noticed a strange smell in the girl's underwear and
proceeded to take her daughter, Angela, to the hospital. Later, it was determined that Angela had
gonorrhea.
The emergency-room physician, Dr. Craig Corey, asked Angela during his
examination if someone had had sexual contact with her. The girl answered affirmatively and
indicated that "Hambone" had touched her. Testimony disclosed that "Hambone" was appellant's
nickname. After the physical examination, Corey referred Angela to a social worker, Nita
Penniman, who asked Angela what had happened. Angela indicated that Hambone had touched
her vagina with his penis ten times, and described other details of the sexual assault. Dr. Beth
Nauert, a pediatrician with expertise in the field of child sexual abuse, examined Angela eight
days later. Angela gave Nauert similar information concerning the nature of the act and the
identity of the actor. Corey, Penniman, and Nauert all consistently testified to Angela's
description of the assaults and identification of appellant as the assailant.
Gilbert contends that the trial court erred in allowing these hearsay statements into
evidence because only one outcry witness is permissible. Appellant also argues that the doctors'
testimony should not have been allowed because the information was not obtained for medical
diagnosis. We hold that the testimony of all three witnesses at trial was admissible.
Gilbert argues in his first point of error that the trial court incorrectly admitted
three outcry statements when only one is admissible under article 38.072. Tex. Code Crim. Proc.
Ann. art. 38.072 (Supp. 1992). He argues that only the outcry testimony of Dr. Corey was
admissible under this theory because the statute permits only the recounting of the first outcry by
the child. Therefore, appellant argues, Penniman's detailed outcry testimony should have been
excluded as well as Nauert's testimony.
The court of criminal appeals recently dealt with a similar circumstance in Garcia
v. State, 792 S.W.2d 88 (Tex. Crim. App. 1990). In Garcia, the complainant told her school
teacher that someone had molested her. The trial court allowed a social worker, who later
received a detailed description of the assault from the complainant, to testify as the outcry witness.
The court of criminal appeals found no error and, mindful of the legislative purpose of curbing
sexual abuse of children, said that general allegations of child abuse are not "statements about the
offense" under article 38.072. Id. at 91. The court's holding necessarily implies that the trial
judge determine who is the "first person" to hear a "statement about the offense". Id.
Angela's statement to Dr. Corey did not rise past the level of a general allusion of
sexual abuse. In response to the doctor's questions, Angela indicated that someone had touched
her "private parts". When he further asked if someone touched her with his or her private parts,
she replied "Yes, Hambone did." Corey made no further inquiry into the sexual abuse. This
discourse between Angela and the doctor was so attenuated and brief that it was nothing more than
a general allusion of sexual abuse. Thus, the detailed description of the sexual offense --including
the time, place, number of times, and name of the assailant-- given to Penniman was properly
admitted as the testimony of the first person to hear a statement about the offense within the
meaning of article 38.072 as construed in Garcia.
Appellant further contends that the trial court abused its discretion by admitting the
outcry statement because the statement was not reliable under article 38.072 § 2(b)(2). Tex. Code
Crim. Proc. Ann. art. 38.072 (Supp. 1992). The court of criminal appeals has explained that
reliability of the testimony will be implied when the trial judge allows the hearsay into evidence.
Villalon v. State, 791 S.W.2d 130, 136 (Tex. Crim. App. 1990). Here, the trial judge explicitly
stated that the hearsay was reliable. We find nothing in the record that clearly shows an abuse
of the trial court's discretion. In fact, "[a]s a statutory exception to the hearsay rule, the
testimony contained sufficient guarantees of trustworthiness to be admissible at trial for all
purposes." Id. at 135. Therefore, the evidence met the reliability requirement of article 38.072.
Similarly, Gilbert's right to confrontation was not infringed because Angela
testified and was available for cross-examination. His failure to cross-examine Angela because
she was somewhat nonresponsive on direct examination does not violate the right to confrontation
as he had full opportunity to cross-examine. Gilbert simply chose not to cross-examine Angela.
Therefore, the application of article 38.072 in this case did not violate the state or federal
constitution. See Holland v. State, 802 S.W.2d 696, 700 (Tex. Crim. App. 1991); Buckley v.
State, 786 S.W.2d 357 (Tex. Crim. App. 1990). Also, no evidence exists which suggests that
appellant's due-process guarantees were infringed by duplicative or improper evidence proffered
by the State, as the evidence was not improper or unnecessary in this case. Accordingly, we
overrule appellant's first point of error.
The testimony of Drs. Corey and Nauert was admitted under the hearsay exception
for medical diagnosis. See Tex. R. Crim. Evid. Ann. 803(4) (Pamph. 1992). Appellant contends
in his second point of error that the complainant's identification of appellant as the abuser was not
necessary for medical diagnosis and was therefore inadmissible hearsay. This Court recently held
that "the identity of the abuser is pertinent to the medical treatment of the child." Fleming v.
State, 819 S.W.2d 237, 247 (Tex. App. 1991, pet. ref'd). "We conclude that the child's
statements to [the doctors] describing the abusive acts and identifying the abuser were reasonably
pertinent to medical diagnosis and treatment, and were properly admitted pursuant to Rule
803(4)." Id.
We, therefore, overrule appellant's second point of error.
We need not reach appellant's final point of error as it is moot due to our resolution
of point of error number two.
We affirm the judgment of the trial court.
Jimmy Carroll, Chief Justice
[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/1542460/ | 947 A.2d 503 (2008)
404 Md. 427
Renee KENNEDY, Next Friend, et al.
v.
LASTING PAINTS, INC., et al.
No. 88, Sept. Term, 2007.
Court of Appeals of Maryland.
May 7, 2008.
*505 Ronald E. Richardson (Law Offices of Peter G. Angelos, Baltimore), on brief for Petitioners.
Philip H. Curtis (Nancy G. Milburn, Arnold & Porter LLP, New York City); John B. Isbister and Toyja E. Kelley, Tydings & Rosenberg LLP, Baltimore, Counsel for Atlantic Richfield Company.
Richard W. Mark, Orrick, Herrington & Sutcliffe, LLP, New York City; Raymond G. Mullady, Jr., Orrick, Herrington & Sutcliffe, LLP, Washington, DC, Counsel for American Cyanamid Company.
Peter F. Axelrad and Ronald A. Baradel, Council, Baradel, Kosmerl & Nolan, P.A., Annapolis, Counsel for the Doe Run Resources Corp., sued as St. Joe Minerals Corporation.
Michael T. Nilan (Scott A. Smith, Halleland, Lewis, Nilan & Johnson, P.A., Minneapolis, MN), Counsel for SCM Corporation.
Andrew Gendron and Matthew T. Murnane, Venable LLP, Baltimore; Carl A. Henlein and Susan S. Wettle, Frost Brown Todd LLC, Louisville, KY, Counsel for The Glidden Company.
George M. Church, Miles & Stockbridge, P.C., Baltimore; Paul M. Pohl, Charles M. Moellenberg, Jr. and Jones Day, Pittsburgh, PA, Counsel for the Sherwin-Williams Company.
James P. Ulwick, Kramon & Graham, P.A., Baltimore; Elizabeth L. Thompson, Andre M. Pauka, Bartlit, Beck, Herman, Palenchar & Scott, Chicago, IL; Timothy S. Hardy, Denver, CO, Counsel for NL Industries, Inc.
Deborah L. Robinson, Robinson Woolson O'Connell, LLP, Baltimore, Counsel for Duron, Inc.
Charles S. Hirsch, Ballard Spahr Andrews & Ingersoll, LLP, Baltimore; Steven R. Williams, McGuire Woods, Richmond, VA, Counsel for E.I. DuPoint de Nemours & Company.
Robert H. Bouse, Anderson, Coe & King LLP, Baltimore; James R. Miller and Michael J. Sweeney, Dickie, McCamey & Chilcote, P.C., Pittsburgh, PA, Counsel for PPG Industries, Inc.
Gerard P. Martin and Thy Christine Pham, Rosenberg, Martin, Greenberg, LLP, Baltimore, Counsel for Benjamin Moore & Company.
James K. Archibald, Venable LLP, Baltimore; Thomas F. Karaba, Crowley, Barrett & Karaba, Ltd., Chicago, IL, Counsel for Fuller-O'Brien Corporation.
William C. Parler, Jr., Parler & Wobber, LLP, Towson, Counsel for Valspar Corporation.
Frank F. Daily (Law Offices of Frank F. Daily, P.A., Hunt Valley), for Respondents.
Argued before BELL, C.J.[*] RAKER, HARRELL, BATTAGLIA, GREENE, MURPHY, DALE R. CATHELL, (Retired, specially assigned), JJ.
*506 HARRELL, Judge.
I.
Nearly ten years ago, seven minor plaintiffs (Reginald Smith, Jr., Shatara Smith, Shatavia Smith, Christian Brantley, Brandon Hamilton, Gerald Shorter, and Octavia Shorter) from four families (the Smiths, the Brantleys, the Hamiltons, and the Shorters) filed a complaint in the Circuit Court for Baltimore City. Based on exposure to the element, lead, these four families sought to recover damages from twenty-one defendant companies on varied products liability-related claims.[1] The fifteen-count complaint, filed 20 September 1999, alleges that the defendant companies are liable to the plaintiffs because they either 1) produced tetraethyl lead (TeL) used in motor vehicle gasoline;[2] 2) produced lead pigment used in manufacturing paint; 3) produced paint that contained the lead pigment;[3] 4) produced lead-free paint without warning consumers on the containers how to remove safely previously applied lead paint in the surface preparation instructions; or 5), in the case of two trade organization defendants, allegedly promoted the use and unsafe removal of lead paint.
In 2005, this Court considered an earlier appeal in this matter, Smith v. Lead Indus. Ass'n, Inc., 386 Md. 12, 871 A.2d 545 (2005). The relevant procedural history from our opinion in Smith is worthy of reiteration here:
Early in the proceeding, the plaintiffs moved to sever the action into four separate cases, one for each family, or, in the alternative, to allow them to dismiss the action without prejudice in order that separate actions could be brought. The court denied that relief. Instead, it treated the motion as one for separate trials pursuant to Maryland Rule 2-503(b)[[4]] and granted that relief. In a subsequent pre-trial scheduling order, the court set four separate trial dates one for the Smith children, one for the Brantley child, one for the Hamilton child, and one for the Shorter children and established different discovery schedules with respect to the quadrifurcated claims. Although that scheduling order was amended from time to time, the question of severance was never revisited, and the case proceeded in accordance with the ruling denying the motion for severance but granting separate trials on a per family basis. The effect of the court's ruling was to maintain the *507 action as a unitary one, involving all plaintiffs against all defendants. . . .
The case then proceeded with a blizzard of motions to dismiss and for summary judgment, which ultimately were granted, in whole or in part. In August, 2001, the court denied a motion by Duron, Inc. to dismiss Count I of the Third Amended Complaint but "reassigned" Counts I, II, and III (Conspiracy, Concert of Action, and Aiding and Abetting) as part of the descriptive "Nature of the Action" appearing in preliminary paragraphs. The effect of that order was to dismiss those counts as substantive causes of action at least as to Duron.
On October 24, 2001, the court granted a motion for summary judgment in favor of Lasting Paints, Inc. "against the plaintiffs." The order granting the motion (1) is not in the record, although a copy was included in the record extract, and (2) was never docketed in this action. It appears to apply to the six plaintiffs then in the case. One child, Shatavia Smith, did not join the case as a plaintiff until a month later, and the order was never extended to include her. A motion by the plaintiffs to reconsider the granting of Lasting Paints' motion was denied.
The next day, October 25, 2001, the court granted a motion for partial summary judgment in favor of American Cyanamid Company. That company was sued in two capacities for its own conduct and as a successor-in-interest to John R. MacGregor Lead Company. The motion and the order granting it addressed only the successor-in-interest liability, which is why it was labeled a partial summary judgment. As with the grant of Lasting Paints' motion, it went against only the six plaintiffs then in the case, not Shatavia Smith, who was added a month later.
In February, 2002, the court dismissed (1) Counts IV through XV against PPG Industries, Inc. (PPG), E.I. DuPont de Nemours & Company (DuPont), and Ethyl Corporation with respect to the TeL claims made against them, (2) those same counts against Atlantic Richfield Company (Atlantic Richfield), NL Industries, Inc. (NL), SCM Corporation (SCM), Glidden Corporation (Glidden), The Sherwin-Williams Company (Sherwin-Williams), American Cyanamid Company (American Cyanamid), and Fuller-O'Brien Corporation (Fuller-O'Brien) with respect to the lead pigment claims made against them, (3) those counts generally against National Paint and Coatings Association (NPCA) one of the two trade associations, (4) Counts V, VIII, and XI through XV against Lead Industries Association, Inc. (LIA), the other trade association, and (5) Counts XI through XIV the fraud counts against all defendants. A week later, the court dismissed all remaining counts as to Atlantic Richfield and American Cyanamid and all counts as to ASARCO, Inc. and Doe Run Resources.
That left Counts IV through X and XV (Alternative Liability, Negligent Product Design, Negligent Failure to Warn, Supplier Negligence, Strict Liability/Defective Design, Strict Liability/Failure to Warn, Commercial Seller Liability, and Consumer Protection Act) alive against ten paint manufacturing defendants (Sherwin-Williams, SCM, Glidden, DuPont, Fuller-O'Brien, PPG, Valspar Corporation, Benjamin Moore & Company, and Duron, Inc.) and Counts IV, VI, VII, IX, and X alive against LIA.
On November 15, 2002, the court granted summary judgment on Counts IV through X and XV in favor of all defendants except Fuller-O'Brien and LIA, but only as to the Smith plaintiffs. On November 21, it granted summary *508 judgment to Fuller-O'Brien on those counts, but, as Fuller-O'Brien's motion went to "all plaintiffs," presumably the judgment did as well. That was the last order entered by the Circuit Court. On December 10, 2002, all of the plaintiffs filed an appeal "from all appealable Orders, including but not limited to the final judgments entered on November 15, 2002."
The Court of Special Appeals, in an unreported opinion, recognized that there was no final judgment in the case in that many of the counts against many of the defendants were still unresolved with respect to the Brantley, Hamilton, and Shorter plaintiffs. It assumed, however, that all claims against all defendants had been finally resolved with respect to the Smith children, and concluded, as a result, that "to condition the Smith appeal upon the entry of final judgment in the claims brought by the other plaintiffs would be inefficient, at best, and possibly foolish." That was so, it said, because the facts for each family of plaintiffs were different and because a decision in the Smith appeal might clarify issues that remain in the other cases. On that ground, the intermediate appellate court, invoking Maryland Rule 8-602(e)(1)(C),[[5]] purported to enter final judgment on the Smith claims and proceeded to address the substantive issues presented in the appeal.
The Court of Special Appeals affirmed the trial court's grant of summary judgment with respect to the fraud, negligent misrepresentation, and intentional concealment claims on the ground that the plaintiffs failed to produce sufficient evidence of reliance on their part, which the appellate court held was necessary to establish liability. The court also agreed that the manufacturers of non-lead-based paint had no duty to warn the plaintiffs of the hazards associated with the removal of lead paint, not made by them, when preparing the surface for repainting. The court found no duty owing to the plaintiffs by the two trade associations. The one area in which the appellate court disagreed with the trial court concerned the liability of the defendants that produced lead pigment and lead paint claims of alternative liability, negligent product design, supplier negligence, strict liability for defective design, and liability of commercial sellers for harm caused by products into which harmful components are integrated. Judgments with respect to those claims against those defendants were reversed and the case was remanded for further proceedings.
Id. at 17-21; 871 A.2d at 547-50 (original footnotes omitted).
We determined in Smith that the Court of Special Appeals erroneously invoked Maryland Rule 8-602(e)(1)(C), on its initiative, to render a final judgment as to less than all claims by all of the parties. Id. at 22, 871 A.2d at 551. In reaching this conclusion, we noted that all the claims by the Smith plaintiffs against all of the defendants had not been resolved due to the automatic stay that accompanied the filing for bankruptcy protection by Lead Industries Association, Inc. (LIA).[6] We noted that a final judgment could not be entered *509 unless LIA was severed as a defendant because, "given the nature of the allegations against LIA, that would have amounted to splitting a single claim, which is not allowed." Id. at 23, 871 A.2d at 551. Further, final judgment could not be entered because the 24 October 2001 order granting summary judgment in favor of Lasting Paints was never docketed (thus it did not have the status of a judgment) and did not include Shatavia Smith's claims, as she was not yet a party.[7] The Court observed that side-stepping these issues was contrary to established case law in which we "made quite clear" that discretion to allow an appeal by entering a final judgment as to less than all of the claims or parties "was to be reserved for the `very infrequent case.'" Id. at 24, 871 A.2d at 552 (quoting Diener Enters. v. Miller, 266 Md. 551, 555-56, 295 A.2d 470, 473 (1972)).
We also discussed Maryland Rule 2-602,[8] the rule that grants to trial courts the authority to enter a final judgment as to less than all the parties or claims. As a policy underpinning, the rule, despite its authorization, is intended to prevent piecemeal appeals, which we noted are "inefficient and costly [and] can create significant delays, hardship, and procedural problems." Smith, 386 Md. at 25, 871 A.2d at 553. On the other hand, "the infrequent harsh case" may justify departing from the usual rule where the record "`establishes the existence of any hardship or unfairness which would justify discretion[ ].'" Id. at 25-26, 871 A.2d at 552-53 (quoting Diener Enters., 266 Md. at 555-56, 295 A.2d at 473). We also considered Maryland Rule 8-602(e), which permits an appellate court to enter judgment if the trial court properly could have done so under Rule 2-602(b), but noted its even more limited application. Smith, 386 Md. at 25, 871 A.2d at 553. We concluded that "[t]he decision of the Court of Special Appeals to enter judgment under Rule 8-602(e) avoided neither inefficiency nor foolishness. . . . [and] delayed resolution of the claims of the other plaintiffs for more than a year." Smith, 386 Md. at 27, 871 A.2d at 553-54. By inappropriately allowing a premature appeal, the Court of Special Appeals increased the uncertainty of unresolved claims and enabled at least one, and perhaps three, additional appeals as the other families' claims were resolved. Id., 871 A.2d at 553. We vacated the judgment of the Court of Special Appeals and remanded the case to that court with instructions to dismiss the appeal. Id., 871 A.2d at 554.
Returning to the Circuit Court, the plaintiffs, on 2 September 2005, filed a *510 "Motion for Entry of Final Judgment Consistent with the Maryland Court of Appeals' Opinion and Mandate." In the motion, they submitted that this Court
stated that the Smith plaintiffs are unable to appeal final judgments relating to them unless, and until, the other plaintiffs' cases have been severed or dismissed. To that end, plaintiffs have simultaneously filed a Motion to Sever and to Stay, which, in part, seeks to sever the cases of Brandon Hamilton, Christian Brantley, and Gerald and Octavia Shorter from the cases of Reginald, Shatara[,] and Shatavia Smith. . . . Many, if not all, of the issues to be appealed in connection with the Smith plaintiffs are directly relevant and pertinent to the other four cases. Therefore, plaintiffs further request in said Motion that this Court stay the cases of Brandon Hamilton, Christian Brantley[,] and Gerald and Octavia Shorter pending the resolution of the Smith cases' appellate process. . . . [[9]]
*511 Concurrently with the motion for final judgment, the plaintiffs filed a "Motion to Sever and to Stay." The Motion posited that "the facts associated with each family are unique, distinguishable[,] and are not in any way related to each other." Plaintiffs then reiterated their view of Smith's directions:
5. The Maryland Court of Appeals has determined that, by denying plaintiffs' Motion to Sever, there can be no finality of judgments as to plaintiffs Reginald, Shatavia[,] and Shatara Smith until all seven cases have been finalized. It stated that only by severing the Smith plaintiffs' cases from those of Brandon Hamilton, Christian Brantley[,] and Gerald and Octavia Shorter can the judgments entered by this Court in the Smith cases be final. To that end, plaintiffs respectfully request that [this] Court grant this Motion to Sever the cases of Brandon Hamilton, Christian Brantley[,] and Gerald and Octavia Shorter from those of Reginald, Shatavia[,] and Shatara Smith;
6. As the judgments entered in the Smith plaintiffs' cases were directly relevant and applicable to all plaintiffs' cases, judicial economy dictates that the four remaining cases be stayed pending the appeal of the Smith cases. Plaintiffs respectfully request that this Court grant this Motion to the extent it seeks to stay the remaining four plaintiffs' cases pending the appeal of the three Smith plaintiffs' cases;
7. Finally, the Court of Appeals determined that, upon the filing of bankruptcy by defendant LIA, all plaintiffs' claims, but particularly those claims of the Smith plaintiffs, as against that defendant must be severed before any judgments entered in their cases will be final. This same reasoning would also apply to the subsequent filing for bankruptcy by defendant ASARCO. Plaintiffs, therefore, respectfully request that [this] Court grant plaintiffs' motion to sever all plaintiffs' claims as against bankrupt defendants LIA and ASARCO. All plaintiffs will pursue claims against the remaining defendants in each respective case.
Defendants vigorously opposed plaintiffs' motions, asserting that Smith is devoid of any indication that an appeal would be appropriate if the various plaintiffs' claims were severed. The companies argued that "the Court of Appeals could not possibly have made such a statement without overruling Blades [v. Woods, 338 Md. 475, 659 A.2d 872 (1995) ], and it is impossible to read the Court of Appeals decision as overruling Blades because it cites and relies on Blades. . . . Smith, supra, 386 Md. at 17, 871 A.2d 545."[10]
*512 On 6 and 21 February 2006, the trial judge granted plaintiffs' Motion to Sever and Stay and plaintiffs' Motion for Entry of Final Judgment, respectively. Believing that these two orders created a final appealable judgment within the meaning of Maryland Rule 2-602, the Smith plaintiffs[11] again appealed to the Court of Special Appeals. Defendants countered that the extant judgments remained not properly appealable because a number of claims made by the other three families were outstanding. Agreeing with the arguments of the defendant companies, the intermediate appellate court, in an unreported opinion, held that "[n]one of the various orders docketed in the Circuit Court in this case, either individually or collectively, resolved all claims against all parties." The court found that the Smith plaintiffs mischaracterized this Court's judgment in Smith. The court concluded:
If the circuit court believed that a piecemeal appeal was justified in this case where claims by various plaintiffs have not been resolved as to many defendants, it should have signed an appropriate Rule 2-602(b) order finding that there was "no just reason" for delay of the appeal. But based on what was said in Smith . . . , it is unlikely that we would have upheld such an order.
We granted certiorari (402 Md. 352, 936 A.2d 850 (2007)) to consider first whether the Circuit Court's two orders created final, appealable judgments as to the Smith plaintiffs (Petitioners), and, if able to answer that in the affirmative, determine whether the trial court committed reversible error by dismissing: 1) Petitioners' fraud and misrepresentation claims against Respondents for failure to allege reliance upon the alleged fraudulent behavior; 2) Petitioners' product design defect, negligence, and strict liability claims concerning the manufacture, sale, and distribution of lead-based pigments; and 3) Petitioners' claims against various companies because their surface preparation instructions did not address the safe removal of lead-based paint.
II.
A.
Petitioners asserted before the Circuit Court and Court of Special Appeals that we, in Smith, encouraged the severance granted in the trial court on remand, without the necessity of further action on the merits of the other plaintiffs' claims that remained unresolved at the time of Smith. As that assertion aptly was critiqued by the Court of Special Appeals in its unreported opinion here, "[n]owhere in that opinion [Smith] did [the Court of Appeals] either say or suggest `that the Smith plaintiffs are unable to appeal final judgments relating to them unless, and until, the other plaintiffs' cases have been severed or dismissed.'" In discussing whether the trial court might enter a Rule 2-602(b) final judgment for the purposes of an immediate appeal by the Smith plaintiffs, we *513 noted that any bankrupt defendants would need to be severed. Smith, 386 Md. at 23, 871 A.2d at 551. This statement is inapposite, however, as to the motion to sever the claims of the Smith plaintiffs from those of the other plaintiffs. In any event, the Circuit Court erred in granting the motion.
The pertinent Maryland procedures, styled after Federal Rules of Civil Procedure 20 and 21, for joinder and misjoinder in Maryland are Maryland Rules 2-212[12] and 2-213.[13] Rule 2-212 permits joining parties in one action as plaintiffs or defendants if the rights asserted are to "relief jointly, severally, or in the alternative in respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences, and if any question of law or fact common to all these persons [or against all defendants] will arise in the action." From a policy standpoint, "rules permitting the joinder of multiple parties and claims [were] to remedy the procedural and substantive defects in the law which prevented the resolution in one action of the rights and obligations of all parties whose connection with the case arose out of the same source and occurrence." Great Atl. & Pac. Tea Co. v. Royal Crown Bottling Co., 243 Md. 280, 287, 220 A.2d 598, 601-02 (1966). The criteria for permissive joinder, as well as the procedure when joinder is improper, are discussed in Niemeyer & Schuett's Maryland Rules Commentary:
Criteria for permissive joinder.
Permissive joinder may be allowed when two conditions are shown: (1) the issues in the litigations arise out of the same transaction, occurrence, or series of transactions, and (2) there is a common question of law or fact with respect to all or part of the action. The core purpose of the rule is to permit a single trial of claims having a similar foundation or similar issues. See, e.g., Garay v. Overholtzer, 332 Md. 339, 631 A.2d 429 (1993) (parents' claim for medical expenses for child may be brought in same actions with minor's claim for personal injuries).
The similarities of the claims of the persons joined need not be total. The rule envisions the possibility that, when judgments are entered on joined claims, they may be favorable to one defendant and unfavorable to another, or favorable to one plaintiff and unfavorable to another, depending on the individual factual circumstances of each party joined. In other words, the rule is not so restrictive that joinder may be employed only when the results on all claims would be the same. It is a rule to facilitate trying similar issues at the same time in the discretion of the court.
Procedure when joinder improper.
Persons who are joined as authorized by this rule . . . may seek protection from the joinder under this rule or other rules. The court . . . may order that parties be dropped because of a misjoinder *514 under Rule 2-213; or the court may order a severance under Rule 2-503(b).
PAUL D. NIEMEYER & LINDA M. SCHUETT, MARYLAND RULES COMMENTARY 143-44 (3d ed.2003).
Rule 2-213 permits dropping parties and severing claims as a remedy for misjoinder and grants a trial court discretion to do so on its motion or on motion of a party. Niemeyer & Schuett's Commentary suggests that:
Parties are misjoined when the claims or obligations of two or more defendants or two or more plaintiffs should not be tried together as measured against the criteria set forth in Rule 2-212. When either the issues do not arise out of the same transaction, occurrence, or series of transactions, or there is no common question of law or fact, there may be a misjoinder. The rule expressly provides that an action is not to be dismissed for misjoinder. Instead, the misjoinder should be corrected in one of two ways. If at all possible, the parties should correct the misjoinder without the necessity of court involvement through amendment of the pleadings as permitted by Rule 2-341. If court involvement is necessary, the court upon motion or on its own initiative may order that the misjoined party be dropped under this rule; or it may enter a special order under Rule 2-212(b); or it may order separate trials under Rule 2-503(b).[[14]]
NIEMEYER & SCHUETT, supra at 145.
Petitioners essentially argue that the four families in this case were misjoined, alleging distinct particularized circumstances leading to lead exposure regarding each family's bundle of claims. Before Smith, the plaintiffs moved to sever the claims of each of the four families into separate actions. That motion to create separate actions was denied by the trial court and, instead, the court ordered separate trials for each family as part of a single action, under Maryland Rule 2-503(b). Petitioners distinguish their post-Smith motion for severance, asserting that this time the Circuit Court created completely separate actions.
B.
There is some merit to Petitioners' argument that the trial court had the ability to sever actions in this way. As previously mentioned, Rule 2-213 is styled after Federal Rule of Civil Procedure 21. The Maryland Rules cite the Federal Rule as the source from which 2-213 was derived, and the Maryland Rules Commentary notes that
[t]his rule, adopted in 1984, is derived from the then existing version of [Federal Rule of Civil Procedure] 21 and may be construed by the principles developed under the federal rule. The only difference between this rule and the federal rule is the restriction made explicit in the second sentence of this rule that dropping any party or adding any party is subject to the restriction on amendments contained in Rule 2-341(c)(5) [requiring that at least one of the original plaintiffs and one of the original defendants remain party to the action].
NIEMEYER & SCHUETT, supra 144; see also Maryland Rule 2-213 ("Source. This Rule is derived from the 1937 version of Fed. R.Civ.P. 21."); Burns v. Scottish Dev. Co., 141 Md.App. 679, 712, 787 A.2d 786, 805 *515 (2001) (Rule 2-213 is derived from Fed. R. Civ. Pr. 21. . . . ).
A properly granted severance under Federal Rule of Civil Procedure 21 creates separate and independent suits. In United States v. O'Neil, 709 F.2d 361, 366 (5th Cir.1983), the district court ordered that "[t]he defendants' counterclaim against the plaintiff is severed from the cause of action alleged by plaintiff and will be tried separately and at a later date." The Fifth Circuit Court of Appeals described the effect of the severance:
Severance under Rule 21 creates two separate actions or suits where previously there was but one. Where a single claim is severed out of a suit, it proceeds as a discrete, independent action, and a court may render a final, appealable judgment in either one of the resulting two actions notwithstanding the continued existence of unresolved claims in the other.
O'Neil, 709 F.2d at 368.
Where Maryland law is wanting of discussion of the effects of a Rule 2-213 severance,[15] federal law is replete with cases like O'Neil. See, e.g., Allied Elevator, Inc. v. East Texas State Bank of Buna, 965 F.2d 34, 36 (5th Cir.1992) ("`Where a single claim is severed out of a suit, it proceeds as a discrete, independent action, and a court may render a final, appealable judgment in either one of the resulting two actions notwithstanding the continued existence of unresolved claims in the other.'" (quoting O'Neil, 709 F.2d at 368)); Spencer, White, & Prentis, Inc. of Conn. v. Pfizer, Inc., 498 F.2d 358, 361-62 (2d Cir.1974) ("We [recognize] that a claim . . . properly severed from another by virtue of Rule 21 may be proceeded with separately; . . . that appeal from a judgment on a validly severed single claim may be timely taken as of right notwithstanding the pendency of the remaining claims. . . ." (internal citations omitted)); German by German v. Fed. Home Loan Mortg. Corp., 896 F. Supp. 1385, 1400 n. 6 (S.D.N.Y.1995) (noting that severance, unlike separate trials in the same case, results in two judgments); Am. Fidelity Fire Ins. Co. v. Construcciones Wert, Inc., 407 F. Supp. 164, 190 (D.Virgin Islands 1975) (invoking Federal Rule of Civil Procedure 21 to sever claims of various parties into two distinct actions that would proceed individually).
In the federal courts, certain considerations ordinarily must be pondered before a severance may be ordered under Federal Rule of Civil Procedure 21. In German by German, a case where the plaintiffs alleged that they were exposed to lead at their residence, the trial court was encouraged to sever claims against certain defendants from those against other defendants in the case. 896 F.Supp. at 1400. The U.S. District Court for the Southern District of New York noted that "[i]n deciding whether severance is appropriate, courts generally consider (1) whether the issues sought to be tried separately are significantly different from one another, (2) whether the separable issues require the testimony of different witnesses and different documentary proof, (3) whether the party opposing the severance will be prejudiced if it is granted and (4) whether the *516 party requesting the severance will be prejudiced if it is not granted." Id. The court denied the Rule 21 motion for severance, noting:
At this point, severing the Plaintiffs' claims against the 1710 Defendants would neither serve the interests of justice nor further the prompt and efficient resolution of this litigation. There are numerous questions of law and fact common to the German Plaintiffs' claims against the 1710 Defendants and against the other defendants. . . .
Proof of many of these points as they pertain to the 1710 Defendants likely will in significant part require the testimony of the same witnesses and presentation of the same evidence as will be required in proving them against the other defendants. To require the German Plaintiffs to prove these points at separate trials . . . would be repetitious, prolong the ultimate termination of this litigation, and place an unnecessary burden on the German Plaintiffs. In addition, severance of the claims against the 1710 Defendants would pose a significant danger of inconsistent judgments in the separate actions.
Balanced against these concerns, the danger that the 1710 Defendants will be prejudiced by having the German Plaintiffs' claims against them litigated in the same action as the claims against the other defendants is relatively insubstantial.
Id. at 1400-01.
In Spencer, White, & Prentis, Inc., the plaintiff appealed from a summary judgment entered by the district court. 498 F.2d 358. The district court, as part of the order granting summary judgment, severed other claims finding that "a severance will both serve the ends of justice and further an efficient disposition of the litigation." Id. at 359. On appeal, the Circuit Court of Appeals for the Second Circuit outlined considerations that must precede severance under Rule 21. Id. at 362. To avoid abuse of discretion, the trial court must consider convenience, fairness, and "separability in law and logic." Id. The appeals court found that the circumstances in Spencer, White, & Prentis, Inc. justified, at best, separate trials, rather than severed actions.[16]Id. The court held, "[w]e . . . conclude that the `severance' was so transparently . . . an attempt to separate an essentially unitary problem, that it should be disregarded out of hand as devoid on its face of any foundation for appellate jurisdiction or, at least, an abuse of discretion with the same result." Id.
C.
The considerations highlighted in Spencer, White, & Prentis, Inc. and German by German before a severance may be deemed proper are similar to those that prevent circumvention of the final judgment principle in Maryland. "`[T]he right to seek appellate review ordinarily must await the entry of a final judgment, disposing of all claims against all parties,'" unless one of three narrow exceptions applies. Smith, 386 Md. at 21, 871 A.2d at 550 (quoting Shoemaker v. Smith, 353 Md. 143, 165, 725 A.2d 549, 560 (1999)); see also Silbersack v. ACandS, Inc., 402 Md. 673, 678, 938 A.2d 855, 857-58 (2008); Hudson v. Hous. Auth. of Balt. City, 402 Md. 18, 24-25, 935 A.2d 395, 398-99 (2007). The exceptions are "appeals from interlocutory rulings specifically allowed by statute (Maryland Code [(1974, 2006 Repl.Vol., Courts & Judicial Proceedings], § 12-303), immediate appeals permitted under Maryland *517 Rule 2-602(b), and appeals from interlocutory rulings allowed under the common law collateral order doctrine." Smith, 386 Md. at 21, 871 A.2d at 550.
In Smith, we discussed, for purposes of an appeal under Maryland Rule 2-602(b), the considerations that must accompany entry of a final judgment on less than all claims. We noted that entry of a judgment under 2-602(b) must be supported by facts in the record that establish "`the existence of a hardship or unfairness which would justify discretionary departure from the usual rule establishing the time of appeal.'" Smith, 386 Md. at 24-25, 871 A.2d at 552 (quoting Diener Enters., 266 Md. at 555, 295 A.2d at 473). We stated that
[t]he purpose of Rule 2-602(a) is to prevent piecemeal appeals, which, beyond being inefficient and costly, can create significant delays, hardship, and procedural problems. The appellate court may be faced with having the same issues presented to it multiple times; the parties may be forced to assemble records, file briefs and record extracts, and prepare and appear for oral argument on multiple occasions; resolution of the claims remaining in the trial court may be delayed while the partial appeal proceeds, to the detriment of one or more parties and the orderly operation of the trial court; and partial rulings by the appellate court may do more to confuse than clarify the unresolved issues.
Id. at 25-26, 871 A.2d at 553.
In Silbersack v. ACandS, Inc., 402 Md. 673, 938 A.2d 855 (2008) and Collins v. Li, 158 Md.App. 252, 857 A.2d 135 (2004), this Court and the Court of Special Appeals, respectively, discussed circuit court denials of requests for entry of judgment under Rule 2-602(b). In each case, the appealing party sought to out-flank the final judgment rule. In Silbersack, we noted that
[e]ven if there were a case in which the denial by a circuit court of a request to enter judgment under Rule 2-602(b) could be regarded as a final judgment for purposes of allowing an immediate appeal, this is not that case. As to appellants' request that the court "administratively" dismiss the bankrupt asbestos defendants, subject to their being reinstated if and when they emerge from bankruptcy, we note only that we are unaware of any such procedure of "administrative" dismissal subject to reinstatement. For one thing, if the dismissal is for the purpose of allowing a final judgment to be entered, there would be no case left to which the dismissed defendants could be rejoined or reinstated. Moreover, although proceedings against a defendant can be stayed for one reason or another, we have never created any kind of mystic "never-never land" where a defendant is both in and not in a case. Suspended animation does not go that far.
Silbersack, 402 Md. at 687, 938 A.2d at 863. In Collins, the intermediate appellate court wrote:
"In the present case the parties wish to challenge on appeal issues that are still within the lawsuit and, if successful, challenge them again in further litigation. This approach defeats the very purpose of finality. . . . Consequently, it is clear that the order is not final and that only a partial judgment has been rendered from the previous proceedings. Under the circumstances, the court has no alternative other than to dismiss the appeal as lacking finality in the judgment."
Collins, 158 Md.App. at 269, 857 A.2d at 145 (quoting Orion Fin. Corp. of S.D. v. Am. Foods Group, Inc., 201 F.3d 1047 (8th Cir.2000)); see also Crowder v. Master Fin., Inc., 176 Md.App. 631, 644, 933 A.2d *518 905, 913 (2007) ("In Collins, we focused on the appellants' undisguised intent to use voluntary dismissals as a vehicle for obtaining an advisory opinion from this Court and then later resurrect the dismissed claims in circuit court." (citing Collins, 158 Md.App. at 273-74, 857 A.2d 135, 147-48)). The panel in Collins reasoned that, "`[i]f a `voluntary dismissal exception' were to provide a mechanism for securing appellate review of any trial court order, the `exception' would quickly subsume the rule, and we would be left without any meaningful way to regulate interlocutory appeals.'" Collins, 158 Md.App. at 273, 857 A.2d at 147 (quoting Smith v. Lincoln Meadows Homeowner's Ass'n, Inc., 267 Neb. 849, 678 N.W.2d 726, 732 (2004)). The court concluded that "[t]he final judgment rule cannot be circumvented by voluntary dismissal. . . . Rule 2-602 may not be used to certify questions of law from the circuit courts to the appellate courts." Collins, 158 Md.App. at 273-74, 857 A.2d at 148.
D.
Petitioners argue that the Court of Special Appeals erroneously held that the orders entered by the Circuit Court on remand, following our decision in Smith, were not final and appealable. Petitioners urge this Court to recognize a misjoinder remediable under Maryland Rule 2-213. Specifically, Petitioners contend that proper joinder of parties requires "that the parties assert a right to relief jointly, in respect to or arising out of the same transaction or occurrence and that they include any question of law or fact common to all of these persons which will arise in the action," but that "[t]he circumstances of the exposures suffered by the children in their separate residences [in this case have] no similarity to the exposures suffered by the other plaintiffs." Petitioners would have this Court conclude that "[t]he claims presented by the plaintiffs in the individual families bore no similarity to the claims presented by members of the other families." Thus, Petitioners assert that, because the particularized circumstances of each child's lead exposure allegedly varied, the trial court was well within its discretion to sever the families' claims.
Respondents maintain that severance of the plaintiffs' cases into separate actions is wholly inappropriate in the circumstances present here. They assert that Petitioners are attempting to fabricate a final judgment and that such an effort should be rejected. According to Respondents, "[t]o accept Petitioners' attempted shortcuts around the final judgment rule . . . would allow parties to manipulate cases and create appellate jurisdiction in circumstances [where] the rules intend to prohibit [it]."
We conclude that, on this record, severance of the plaintiffs' claims along family lines under Maryland Rule 2-213 was inappropriate and that Petitioners (the Smith plaintiffs), perhaps understandably, are attempting to circumvent the final judgment rule. The plaintiffs (including Petitioners) joined in filing a single complaint alleging fifteen counts on behalf of all the plaintiffs against the defendants. Nothing has changed since we noted in Smith that allowing each family's claims to proceed in piecemeal fashion may lead to delayed resolution of the plaintiffs' claims, greater uncertainty as to the status of parties (two defendants already have entered bankruptcy), and set the stage for multiple additional appeals. Smith, 386 Md. at 27, 871 A.2d at 553-54. Additionally, Petitioners and the other plaintiffs admitted that common issues affect the outcome of all the claims in their Motion to Sever and Stay and their Motion for Final Judgment. Paragraph 6 of the Motion to Sever and Stay notes that "[a]s the judgments entered in the Smith plaintiffs' cases were *519 directly relevant and applicable to all plaintiffs' cases, judicial economy dictates that the four remaining cases be stayed pending the appeal of the Smith cases." Paragraph 1 of plaintiffs' Motion for Final Judgment acknowledges that "[m]any, if not all, of the issues to be appealed in connection with the Smith plaintiffs are directly relevant and pertinent to the other four cases." For this reason, "severance of the claims . . . would pose a significant danger of inconsistent judgments in the separate actions." German by German, 896 F.Supp. at 1400-01; see also Smith, 386 Md. at 25-26, 871 A.2d at 553 (noting that "partial rulings by the appellate court may do more to confuse than clarify . . . unresolved issues").
Petitioners nevertheless argue that severance under Maryland Rule 2-213 was justified because the facts necessary to show liability in each family's claims may vary. Even assuming that the trial court did not rely on plaintiffs' errant interpretation of our holding in Smith and found, as Petitioners' urge, that individual questions of fact accompany each family's claims, such a finding is justification for separate trials under Maryland Rule 2-503(b) (as the trial court initially granted), but not for severance under Rule 2-213. "[T]he issues in [the plaintiffs'] litigations arise out of the same transaction, occurrence, or series of transactions, and . . . there is a common question of law or fact with respect to all or part of the action." NIEMEYER & SCHUETT, supra at 143. "The similarities of the claims of the persons joined need not be total," and "the rule is not so restrictive that joinder may be employed only when the results on all claims would be the same." Id. (emphasis added).
Plaintiffs "so transparently . . . attempt to separate an essentially unitary action [for the purpose of circumventing the final judgment rule], that [the Circuit Court's grant of the motion for severance in this case] should be disregarded out of hand as devoid on its face of any foundation for appellate jurisdiction or, at least, an abuse of discretion with the same result." Spencer, White, & Prentis, Inc., 498 F.2d at 362; see Silbersack, 402 Md. at 687, 938 A.2d at 863; Smith, 386 Md. at 24-25, 871 A.2d at 552; Collins, 158 Md.App. at 273-74, 857 A.2d at 147-48. For these reasons, we affirm the judgment of the Court of Special Appeals. "There is a certain implausibility in a white blackbird, a two-year old yearling, or a separated inseparable." Spencer, White, & Prentis, Inc., 498 F.2d at 364.
We shall not answer, therefore, Petitioners' remaining questions going to the merits of the underlying claims.
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS TO BE PAID BY PETITIONERS.
NOTES
[*] Raker, 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, she also participated in the decision and adoption of this opinion.
[1] Specifically, plaintiffs alleged "conspiracy, concert of action and aiding and abetting tort liability, negligent product design, negligent failure to warn, supplier negligence, strict liability [for] defective design, strict liability [for] failure to warn, commercial seller or distributor liability, conscious misrepresentation involving risk of physical harm, negligent misrepresentation involving risk of physical harm and fraud by concealment in tort, fraud by misrepresentation in tort[, and violation of] the Maryland Consumer Protection Act."
[2] The phase-out of leaded gasoline began in the 1970s. U.S. Envtl. Prot. Agency, Press Release: EPA Takes Final Step in Phaseout of Leaded Gasoline (29 Jan. 1996). Lead as an additive to gasoline was banned altogether on 1 January 1996. Id.
[3] "The federal government banned lead-based paint from housing in 1978." U.S. ENVTL. PROT. AGENCY, LEAD IN PAINT, DUST, AND SOIL: BASIC INFORMATION http://www.epa.gov/lead/pubs/ leadinfo.htm (last visited 17 March 2008).
[4] Rule 2-503(b) states:
In furtherance of convenience or to avoid prejudice, the court, on motion or on its own initiative, may order a separate trial of any claim, counterclaim, cross-claim, or third-party claim, or of any separate issue, or of any number of claims, counterclaims, cross-claims, third-party claims, or issues.
[5] Rule 8-602(e)(1)(C) reads:
If the appellate court determines that the order from which the appeal is taken was not a final judgment when the notice of appeal was filed but that the lower court had discretion to direct the entry of a final judgment pursuant to Rule 2-602(b), the appellate court may, as it finds appropriate, . . . enter a final judgment on its own initiative. . . .
[6] LIA is one of the defendant trade organizations.
[7] The same was true of the partial summary judgment granted in favor of American Cyanamid dated 25 October 2001.
[8] Maryland Rule 2-602 states that:
(a) Generally. Except as provided in section (b) of this Rule, an order or other form of decision, however designated, that adjudicates fewer than all of the claims in an action (whether raised by original claim, counterclaim, cross-claim, or third-party claim), or that adjudicates less than an entire claim, or that adjudicates the rights and liabilities of fewer than all the parties to the action:
(1) is not a final judgment;
(2) does not terminate the action as to any of the claims or any of the parties; and
(3) is subject to revision at any time before the entry of a judgment that adjudicates all of the claims by and against all of the parties.
(b) When Allowed. If the court expressly determines in a written order that there is no just reason for delay, it may direct in the order the entry of a final judgment:
(1) as to one or more but fewer than all of the claims or parties; or
(2) pursuant to Rule 2-501(f)(3), for some but less than all of the amount requested in a claim seeking money relief only.
[9] The motion also contained six sections addressing the points in Smith where it was noticed that multiple issues remained outstanding as to the Smith plaintiffs:
2. The Court of Appeals was concerned that this Court's Order reassigning Counts 1-3 into the "Nature of the Action" applied only to defendant Duron and not to all parties. To resolve this concern, plaintiffs respectfully request that this Court enter and docket an Order, attached hereto as Exhibit 4, reassigning these Counts of the Third Amended Complaint into the "Nature of the Action" section applicable to all parties;
3. It was always plaintiffs' understanding that this Court intended that its Order granting Lasting Paints' Motion for Summary Judgment was applicable to all three of the Smith cases. However, the Court of Appeals determined that said Order was never docketed and applied only to Reginald and Shatara Smith. Therefore, to further this Court's intention, plaintiffs respectfully request that this Court clarify its ruling by entering and docketing an Order, attached hereto as Exhibit 4, applying this Court's ruling on Lasting's Motion for Summary Judgment to Reginald, Shatara[,] and Shatavia Smith;
4. Plaintiffs also understood that it was this Court's intention that its Order granting American Cyanamid's Partial Motion for Summary Judgment applied to all three of the Smith cases. However, the Court of Appeals again determined that this Court's Order applied only to Reginald and Shatara Smith. Therefore, to further this Court's intention, plaintiffs respectfully request that this Court clarify its ruling by entering and docketing an Order, attached hereto as Exhibit 4, applying the Court's ruling on American Cyanamid's Partial Motion for [Partial] Summary Judgment to Reginald, Shatara[,] and Shatavia Smith;
5. The Court of Appeals stated that it was unclear whether this Court's November 15, 2002 Order applied to defendants Fuller-O'Brien and Lead Industries Association. As a consequence, plaintiffs respectfully request that this Court enter and docket an Order, attached hereto as Exhibit 4, which clearly states that its ruling, as set forth in its November 15, 2002 Order, is applicable to all defendants. To the extent defendant Fuller-O'Brien did not adopt defendants' Motions for Summary Judgment as to Product Identification or file its own Motion on this issue, plaintiffs stipulate that this Court's Order will be applicable to Fuller O'Brien as well. As a result, plaintiffs submit that there will be no need to address this Court's November 21, 2002 Order which sought only to include Fuller-O'Brien in its previous order;
6. The Court of Appeals was also of the opinion that this Court's February 14, 2002 Order did not apply to the trade association defendants; namely, the Lead Industries Association (LIA) and the National Paint Coatings Association (NPCA). To the extent it was this Court's intention to include these defendants in its Order, plaintiffs request that this Court enter and docket an Order establishing that its February 14, 2002 Order applies to all parties. A proposed Order is attached as Exhibit 4; and
7. The Court of Appeals held that, in light of the LIA's bankruptcy, the Smith plaintiffs' cases will never be ripe for appeal unless plaintiffs' claims as against the LIA are severed. Plaintiffs note that, in the interim, defendant ASARCO has also filed for bankruptcy. As a result, the above-referenced Motion also seeks to have all seven plaintiffs' claims as against bankrupt defendants Lead Industries Association and ASARCO, severed from their cases against the remaining Defendants.
[10] This statement is, in part, overreaching. We cited Blades in Smith in our discussion of plaintiffs' earlier attempt at severance. We relied on Blades for the principle that a severance under Maryland Rule 2-503(b) (the relief granted petitioners prior to Smith) does not create separately appealable actions, although it permits separate trials. Smith, 386 Md. at 17, 871 A.2d at 547. Blades solely addresses a Rule 2-503 severance. See Blades v. Woods, 338 Md. 475, 659 A.2d 872 (1995).
Blades exemplifies a common confusion between a Rule 2-503(b) severance and a Rule 2-213 severance. We hinted at the distinction between the two in Smith, noting that "the plaintiffs moved to sever the action into four separate cases . . . or, in the alternative, . . . to dismiss the action without prejudice in order that separate actions could be brought. The court denied that relief [and i]nstead . . . treated the motion as one for separate trials pursuant to Maryland Rule 2-503(b) and granted that relief." 386 Md. at 17, 871 A.2d at 547-48. In federal courts, confusion between the federal analogues to these rules (Federal Rule of Civil Procedure 42(b) and Federal Rule of Civil Procedure 21) caused similar problems. "Use of the term `severance' to denote separation of trials under Rule 42(b), not resulting in discrete, separately appealable actions, sometimes masks the point [that severance under Rule 21 creates such actions]." Spencer, White, & Prentis, Inc. of Conn. v. Pfizer, Inc., 498 F.2d 358, 362 n. 9 (2d Cir.1974). "While application of Rule 42(b) involves primarily the consideration of convenience and fairness, that of Rule 21 also presupposes basic conditions of separability in law and logic." Id. at 362.
[11] During the course of litigation, the case caption was changed to reflect the last name of Renee Kennedy, mother and next friend of the Smith children.
[12] Rule 2-212 states, in relevant part:
(a) When Permitted. All persons may join in one action as plaintiffs if they assert a right to relief jointly, severally, or in the alternative in respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences, and if any question of law or fact common to all these persons will arise in the action.
[13] Rule 2-213 notes:
Misjoinder of parties is not ground for dismissal of an action. So long as one of the original plaintiffs and one of the original defendants remain as parties to the action, parties may be dropped or added (a) by amendment to a pleading pursuant to Rule 2-341 or (b) by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a party may be severed and proceeded with separately.
[14] Rule 2-503(b) reads, in pertinent part:
In furtherance of convenience or to avoid prejudice, the court, on motion or on its own initiative, may order a separate trial of any claim, counterclaim, cross-claim, or third-party claim, or of any separate issue, or of any number of claims, counterclaims, cross-claims, third-party claims, or issues.
[15] Maryland cases have discussed Maryland Rule 2-213 in a very limited way. See Fish Market Nominee Corp. v. G.A.A., Inc., 337 Md. 1, 14, 650 A.2d 705, 711 (1994) (noting that dismissal is not the proper remedy for misjoinder); Gress v. ACandS, Inc., 150 Md.App. 369, 380 n. 6, 820 A.2d 616, 622 n. 6 (2003) (same), rev'd on other grounds sub nom Brown & Williamson Tobacco Corp. v. Gress, 378 Md. 667, 838 A.2d 362 (2003); Burns v. Scottish Dev. Co., 141 Md.App. 679, 712, 787 A.2d 786, 805 (2001) (noting that a trial court sua sponte may realign parties under the Rule).
[16] A federal district court also may order separate trials under Federal Rule of Civil Procedure 42(b), which is analogous to Maryland Rule 2-503(b). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542476/ | 410 B.R. 765 (2009)
In re AMERICAN CAMSHAFT SPECIALTIES, INC., et al,[1] Debtor.
Basil Simon, Chapter 7 Trustee for American Camshaft Specialties, Inc., Assembled Camshaft, Inc., ASC Grand Haven, Inc. and ACS Orland, Inc., Plaintiff,
v.
ASIMCO Technologies, Inc., ASIMCO Technologies Holding Limited, ASIMCO International, Inc., ASIMCO Camshaft (Yizheng) Co., Ltd., Jack Perkowski, Michael Conaton, Leland Lewis, Robert Longwell, Kern Lim and Robert Pyle, Defendants.
Bankruptcy No. 06-58298, Adversary No. 08-5622.
United States Bankruptcy Court, E.D. Michigan, Southern Division.
September 1, 2009.
*768 Joseph K. Grekin, Tracey L. Porter, Bloomfield Hills, MI, for Plaintiff.
Jong-Ju Chang, Melissa S. Byrd, Sheryl L. Toby, Bloomfield Hills, MI, for Defendants.
OPINION GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
PHILLIP J. SHEFFERLY, Bankruptcy Judge.
Introduction
The Chapter 7 Trustee for four jointly administered estates filed an eight count *769 adversary proceeding against four corporations related to the Debtors and against six individuals who are members of the board of directors of each of the Debtors. Two of the corporate defendants have moved to dismiss the complaint because of insufficiency of service of process upon them. One of the corporate defendants and one of the individual defendants have moved to dismiss the complaint because of lack of personal jurisdiction over them. All of the individual defendants have moved to dismiss count I. All of the corporate defendants have moved to dismiss count II. This opinion addresses all of these motions.
Jurisdiction
This Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (F), and (H).
Facts
The following facts are not in dispute. On December 9, 2006, four related companies each filed a voluntary petition for relief under Chapter 11. The principal business of the Debtors pertained to the design, production and sale of steel and iron camshafts for original equipment manufacturers in the automotive industry. The names of the four Debtors are:
American Camshaft Specialities, Inc., a Delaware corporation ("American Camshaft");
Assembled Camshaft, Inc., a Delaware corporation ("Assembled Camshaft");
ACS Orland, Inc., a Delaware corporation ("Orland"); and
ACS Grand Haven, Inc., a Delaware corporation ("Grand Haven").
At the time that the Debtors filed their Chapter 11 petitions, Assembled Camshaft, Orland and Grand Haven were all wholly owned by American Camshaft. American Camshaft was a non-manufacturing entity that provided funds and services to its subsidiaries. Of the three subsidiaries, only two were operating at the time that the Chapter 11 petitions were filed. Assembled Camshaft operated in Grand Haven, Michigan and assembled product for Chrysler. Grand Haven also operated in Grand Haven, Michigan and produced steel and iron camshafts for various customers. Orland had ceased its business operations in 2003.
At the time that the bankruptcy cases were filed, American Camshaft was wholly owned by ASIMCO Technologies, Inc. ("ASIMCO Technologies"). ASIMCO Technologies is a Delaware corporation that is a holding company for American Camshaft and for various other entities that did not file bankruptcy cases. ASIMCO Technologies in turn is a wholly owned subsidiary of ASIMCO Technologies Holding Limited ("ASIMCO Holding"). ASIMCO Holding is a Cayman Islands corporation that is the ultimate parent of the Debtors and numerous other corporations in the United States, the Cayman Islands and China. Jack Perkowski was the president of each of the Debtors as well as the Debtors' parent, ASIMCO Technologies, and the Debtors' ultimate parent, ASIMCO Holding. The Debtors, their parent, ASIMCO Technologies, and their ultimate parent, ASIMCO Holding, shared the same board of directors. Some of the other corporations within the family of ASIMCO companies that were ultimately owned by ASIMCO Holding were engaged in similar business activities as the Debtors in China and in other countries. Those companies did not file bankruptcy cases when the Debtors filed their Chapter 11 cases.
On December 14, 2006, at the request of the Debtors, the Court entered an order in each of the four Chapter 11 cases providing for joint administration of the four *770 cases under Fed R. Bankr.P. 1015(b). Those orders enabled the four Debtors to have their cases jointly administered for procedural purposes only but did not provide substantive consolidation of the four cases.
The Debtors sought and obtained post-petition financing from Citizens Bank to continue their business operations. Financing orders setting forth the terms of the post-petition financing were entered by the Court after notice and opportunity for all parties to be heard. The Debtors continued their operations post-petition to prevent an interruption in production for their customers. The customers in turn provided certain financial accommodations to assist the Debtors in obtaining the post-petition financing from Citizens Bank. The Debtors then sought to obtain a purchaser for their business operations. The Debtors and the creditors' committee each engaged professionals to assist in the sale process. Although the Debtors did not find a single purchaser of all of their assets as a going concern, the Debtors' assets were sold in various sales approved by the Court upon motions filed by the Debtors. After substantially all of the Debtors' tangible assets were sold in § 363 sales, the Court converted all four Chapter 11 cases to Chapter 7 on October 9, 2007 when the Debtors failed to file a Chapter 11 plan by the deadline first set and then extended by the Court. Basil Simon was appointed Trustee in each of the four Chapter 7 cases. The four Chapter 7 cases continue to be jointly administered. Except for the complaint filed in this adversary proceeding, there has never been a request made by any party to substantively consolidate any of the four bankruptcy cases with each other.
After the Trustee was appointed in each of the four cases, the Trustee brought numerous adversary proceedings to set aside fraudulent transfers, preferential transfers and to seek other Chapter 5 remedies. On December 9, 2008, the Chapter 7 Trustee filed this adversary proceeding. The Trustee is represented in this adversary proceeding by the same law firm that represented the creditors' committee during the time that the four cases were in Chapter 11. The adversary proceeding complaint names four non-debtor corporations as defendants. One of the corporate defendants is ASIMCO Technologies, the parent of American Camshaft, and another is ASIMCO Holding, the ultimate parent of all of the Debtors. The third corporate defendant is ASIMCO Camshaft (Yizheng) Co., Ltd., a Chinese corporation ("Yizheng"). Yizheng makes castings and their products in China that are similar to those products that were previously made in Grand Haven, Michigan by Assembled Camshaft and by Grand Haven. ASIMCO Holding is the ultimate parent of Yizheng. The fourth corporate defendant named in the adversary proceeding is ASIMCO International, Inc., a Delaware corporation ("ASIMCO International"). The complaint does not explain what ASIMCO International does but does state that it is wholly owned by ASIMCO Technologies.
The complaint also names six individual defendants: Jack Perkowski, Robert Pyle, Michael Conaton, Leland Lewis, Robert Longwell, and Kern Lim. The complaint alleges that all six individual defendants are officers and members of the boards of directors of each of the Debtors as well as the four non-debtor corporate defendants.
The complaint contains eight separate counts. Count I seeks relief against the six individual defendants for breach of fiduciary duty. Count II seeks an order of substantive consolidation of the four non-debtor corporate defendants with the Debtors. Count III seeks recovery of a *771 preferential transfer under § 547 of the Bankruptcy Code from ASIMCO International in the amount of $833,299.80. Count IV seeks recovery of an unauthorized post-petition transfer under § 549 of the Bankruptcy Code from ASIMCO International in the amount of $98,795.57. Count V seeks recovery of a preferential transfer under § 547 of the Bankruptcy Code from Yizheng in the amount of $524,920.00. Count VI seeks recovery of an unauthorized post-petition transfer under § 549 of the Bankruptcy Code from Yizheng in the amount of $58,300.00. Count VII seeks recovery of fraudulent transfers under § 548 of the Bankruptcy Code from Yizheng in the total amount of $824,092.79. Count VIII seeks recovery of fraudulent transfers under § 548 of the Bankruptcy Code from ASIMCO International in the total amount of $833,299.80.
ASIMCO Holding has moved to dismiss the entire complaint against it because of lack of service of process and because of lack of personal jurisdiction over it. Kern Lim has moved to dismiss the entire complaint against him because of lack of personal jurisdiction over him. Yizheng has moved to dismiss the entire complaint against it because of lack of service of process upon it. All of the individual defendants have moved to dismiss the breach of fiduciary duty claim against them in count I. All of the non-debtor corporate defendants have moved to dismiss the substantive consolidation claim against them in count II.
Lack of Service of Process on ASIMCO Holding and Yizheng
ASIMCO Holding and Yizheng argue that the complaint must be dismissed as to them under Fed.R.Civ.P. 12(b)(5), incorporated in this adversary proceeding by Fed. R. Bankr.P. 7012, for insufficient service of process. Fed. R. Bankr.P. 7004(b)(3) governs service of an adversary proceeding complaint on a domestic or foreign corporation: "[S]ervice may be made within the United States by first class mail postage prepaid ... by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process...."
According to the certificate of service (docket entry #3) filed by the Trustee, service was made on ASIMCO Holding and Yizheng by service on "Jack Perkowski, CEO," by first class mail on December 16, 2008, at 355 Rock Rd., E., Lambertville, N.J. XXXXX-XXXX. ASIMCO Holding and Yizheng do not deny that Perkowski received the summons and complaint mailed to him at that address. Instead, they each argue that Perkowski had resigned from the chief executive officer position with each of them early in October, 2008. Accordingly, they contend that Perkowski was not an officer at the time of service of process. Although they concede that Perkowski remained a director of each of them at the time of service of process, ASIMCO Holding and Yizheng each argue that such position is not enough by itself for Perkowski to be considered a managing or general agent, the alternative individuals who may be served under Rule 7004(b)(3).
The Trustee contends that Perkowski was still listed as CEO of ASIMCO Holding and Yizheng as of December 1, 2008, according to an ASIMCO website that the Trustee consulted before filing and serving the complaint on December 16, 2008. The Trustee also notes that ASIMCO Holding and Yizheng have provided no supporting documents, such as an affidavit, a board resolution, press release, or resignation letter to evidence their claim that Perkowski resigned in October, 2008. The Trustee also cites an internet article from China *772 Briefing News, dated January 17, 2009,[2] after the date of service of process, describing a company statement issued to ASIMCO employees announcing that, "effective immediately," Perkowski was stepping down as president and CEO. The Trustee contends that this article shows that Perkowski did not resign until January 17, 2009, long after service of process upon Perkowski. In the alternative, the Trustee argues that, even if service was somehow not proper, ASIMCO Holding and Yizheng received actual notice at the adversary proceeding, so that service of the summons and complaint was not needed.
Unlike a motion to dismiss under Rule 12(b)(6) or 12(c), the Court may consider matters outside the pleadings when addressing a motion to dismiss for insufficient service of process. See Harris v. Grand-O-Lac Co., 211 F.2d 238 (6th Cir. 1954) (relying on affidavits provided by the defendant and its agent in quashing service). ASIMCO Holding and Yizheng have provided the Court no evidence to corroborate their bare assertion that the Trustee mailed the summons and complaint to the attention of the wrong officer because Perkowski no longer held a position as an officer of either company at the time of service. In the absence of any support to the contrary, coupled with the Trustee's uncontroverted statement that Perkowski was still shown as CEO on the ASIMCO website, and corroborated by the January 17, 2009 article that appears to fix Perkowski's resignation as occurring on January 17, 2009, the Court finds that ASIMCO Holding and Yizheng were properly served on December 16, 2008 through service of process upon Perkowski as an officer of each of the corporations on such date. Therefore, this Court need not reach the Trustee's alternative argument regarding ASIMCO Holding and Yizheng having each received actual notice. Accordingly, ASIMCO Holding's and Yizheng's motion to dismiss for lack of service is denied.
Personal Jurisdiction over ASIMCO Holding and Kern Lim
ASIMCO Holding is incorporated in the Cayman Islands. It argues that the complaint contains no allegations relating to its conduct in the United States. Further, it argues that its ownership of a subsidiary doing business in the United States is not by itself sufficient to confer jurisdiction on it as the parent corporation. Lim argues that the complaint does not allege that Lim was ever a resident of the United States, nor does the complaint allege any specific conduct by him. ASIMCO Holding and Lim each ask that the complaint be dismissed under Rule 12(b)(2), incorporated by Fed. R. Bankr.P. 7012, for lack of personal jurisdiction over them.
The complaint alleges that both ASIMCO Holding and Lim acted in the United States. The complaint alleges that ASIMCO Holding held its board meetings in New York, and that a "super board" of the ASIMCO family of companies met there as well (paragraph 25). According to the complaint, because there were no separate meetings of the boards of the Debtors, the decisions concerning the management of the affairs of the Debtors were made at the New York super board meetings. Lim, as a member of the board of each Debtor, is alleged to have attended these meetings (paragraph 20), and to have taken an active role in decision making at the *773 meetings. The decisions made at the board meetings form the basis for the transactions and the consequences of those decisions that are central to the complaint. Further, the Trustee asserts that there are no unusual circumstances that would make the Court's exercise of personal jurisdiction over ASIMCO Holding and Lim unfair or unreasonable.
At oral argument, the Trustee acknowledged that Lim has not been served with the summons and complaint. The certificate of service filed by the Trustee does not show that the summons and complaint were mailed to Lim. Therefore, since Lim has never been served with the summons and complaint, the Court need go no further in deciding whether or not it has personal jurisdiction over Lim.
Fed. R. Bankr.P. 7004(d) allows for national service of a complaint and summons for adversary proceedings. Therefore, the "forum" to consider is the United States. Both sides use the Sixth Circuit test from Southern Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir.1968):
First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant's activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable.
The Sixth Circuit has since found "the Mohasco test continues to provide a useful starting point for analyzing jurisdictional questions...." Kerry Steel, Inc. v. Paragon Industries, Inc., 106 F.3d 147, 150 (6th Cir.1997). In Kerry Steel, the court focused on the first factor, noting that
Supreme Court decisions have reinforced the centrality of [the purposeful availment] factor. To be subject to in personam jurisdiction, the Supreme Court has said in a formulation somewhat more precise than that used in Mohasco, a defendant must "purposefully avail [ ] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."
Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)) (other internal quotation marks and citation omitted).
"The burden of establishing jurisdiction is on the plaintiff." Third National Bank in Nashville v. WEDGE Group Inc., 882 F.2d 1087, 1089 (6th Cir. 1989) (internal quotation marks and citation omitted). In the context of a motion to dismiss, where the court is "relying solely on the pleadings, affidavits, and other written submissions[,] ... the burden on the plaintiff is relatively slight.... [T]he plaintiff should be required only to make a prima facie case of jurisdiction, that is, he need only demonstrate facts which support a finding of jurisdiction in order to avoid a motion to dismiss." Id. (internal quotation marks and citation omitted).
The first part of the Southern Machine test, "purposeful availment," "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous' or `attenuated' contacts or of the `unilateral activity of another party or third person.'" Air Products & Controls, Inc. v. Safetech International, Inc., 503 F.3d 544, 551 (6th Cir.2007) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985)). The complaint alleges that ASEVICO Holding is the ultimate parent of the Debtors and the other ASIMCO companies. The complaint further alleges that all the *774 ASFMCO companies, including ASIMCO Holding, convened their board meetings through the "super board" meetings held in this forum, the United States, at which the affairs of the Debtors and the other corporate defendants were decided. This is not a random, fortuitous or attenuated contact. Nor were the super board meetings the unilateral activity of a third party. This activity by ASIMCO Holding is sufficient to meet the purposeful availment requirement.
Under the second element, "`[j]urisdiction is proper [ ] where the contacts proximately result from actions by the defendant himself that create a "substantial connection" with the forum State.' ... [P]hysical presence in a forum state is not required...." Id. (quoting Burger King v. Rudzewicz, 471 U.S. at 475, 105 S. Ct. 2174) (citation omitted and emphasis in original). "`Only when the operative facts of the controversy are not related to the defendant's contact with the state can it be said that the cause of action does not arise from that contact.'" Calphalon Corp. v. Rowlette, 228 F.3d 718, 723-24 (6th Cir.2000) (quoting Southern Machine, 401 F.2d at 384 n. 29).
The complaint emphasizes the relationship between ASIMCO Holding and the Debtors as parent and subsidiaries. ASIMCO Holding is correct that a parent/subsidiary relationship alone may not be sufficient to establish personal jurisdiction over the parent based on the actions of the subsidiary in the forum. See Velandra v. Regie Nationale des Usines Renault, 336 F.2d 292, 296 (6th Cir.1964) ("[T]he mere ownership by a corporation of all of the stock of a subsidiary amenable to the jurisdiction of the courts of a state may not alone be sufficient to justify holding the parent corporation likewise amenable") (emphasis added). But the Trustee has not based personal jurisdiction over ASIMCO Holding only on the parent/subsidiary relationship. The complaint alleges that the Debtors did not have separate boards of directors, but instead shared a common board with all the ASIMCO entities. That "super board" met in New York and, at those meetings, decided the conduct and management of the Debtors' operations, including causing the Debtors to subsidize other ASIMCO family corporations, especially Yizheng (paragraphs 47-51); treating the Debtors as divisions of ASIMCO Holding (paragraph 30); causing the assets of the Debtors to be transferred to other ASIMCO family corporations for no consideration (paragraphs 45-52); and making undocumented inter-company loans (paragraphs 55-58). The complaint seeks to recover preferential transfers, fraudulent transfers and unauthorized post-petition transfers; impose liability on the officers and directors for breach of fiduciary duty; and substantively consolidate ASIMCO Holding and the other corporate defendants with the Debtors. The causes of action in the Trustee's complaint arise directly from the alleged activities in the forum, meeting the second part of the jurisdictional test.
The third question of the Southern Machine test is whether acts or the consequences of the acts have a substantial enough connection to the forum to make the exercise of jurisdiction over ASIMCO Holding reasonable. The forum must have "an interest in resolving the conflict at issue; but, once the first two questions have been answered affirmatively, resolution of the third involves merely ferreting out the unusual cases where that interest cannot be found." Southern Machine, 401 F.2d at 384.
This requirement exists because minimum requirements inherent in the concept of fair play and substantial justice may defeat the reasonableness of jurisdiction *775 even if the defendant has purposefully engaged in forum activities. However, where a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.... In determining whether the exercise of jurisdiction is reasonable, the court should consider, among others, the following factors: (1) the burden on the defendant; (2) the interest of the forum state; (3) the plaintiffs interest in obtaining relief; and (4) other states' interest in securing the most efficient resolution of the [controversy].
Air Products & Controls, 503 F.3d at 554-55 (internal quotation marks and citations omitted).
In its reply, ASIMCO Holding focuses on the fact that it is a foreign corporation that has never maintained an office in the United States, the complaint alleges "only isolated contacts" with the forum, and the burden it faces in defending itself in a foreign legal system.
When "the first two criterion [of Southern Machine] are met, an inference of reasonableness arises and only the unusual case will not meet this third criteria." Id. at 554 (internal quotation marks and citation omitted). The Court is not convinced that this is that "unusual case." ASIMCO Holding has not presented a "compelling case" that would render jurisdiction unreasonable. The jurisdictional grounds in the complaint are not that ASIMCO Holding has an office in the United States. And the complaint alleges more than isolated contacts with the United States. The inconvenience and cost of defending itself in a forum in which it has purposefully availed itself of the privilege of acting, against charges related to its actions in that forum, are not unusual or compelling circumstances. The Court concludes that the Trustee has pleaded facts that support a finding of jurisdiction, sufficient to deny ASIMCO Holding's motion to dismiss.
Individual Defendants' Motion to Dismiss Count I for Failure to State a Claim for Breach of Fiduciary Duty
The individual defendants rely on Fed. R. Bankr.P. 7012, which incorporates Fed. R. Civ. Rule 12. In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), the Supreme Court addressed the standard under Rule 12(b)(6). Twombly does "not requir[e] a universal standard of heightened fact pleading, but [ ] instead requir[es] a flexible `plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Weisbarth v. Geauga Park District, 499 F.3d 538, 541 (6th Cir.2007) (emphasis in original) (internal quotation marks and citation omitted).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. 1955). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citation omitted). "Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (citation omitted). "[W]here the well-pleaded facts do not *776 permit the court to infer more than the mere possibility of misconduct, the complaint has allegedbut it has not shown that the pleader is entitled to relief." Id. at 1950 (internal quotation marks and citation omitted).
In order to determine whether to dismiss count I, a preliminary determination must be made as to what law applies to the alleged breach of fiduciary duty. Both sides agree that, as the state in which the Court sits, the conflict of law rules of Michigan apply. "Michigan courts have not been entirely consistent" in applying choice of law rules. Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292, 301 (1987). "Since no specific methodology [has been] adopted, each case must be evaluated on the circumstances presented." Id. at 302.
Michigan law [applies] unless a "rational reason" to do otherwise exists. In determining whether a rational reason to displace Michigan law exists, [the court must] undertake a two-step analysis. First, [the court] must determine if any foreign state has an interest in having its law applied. If no state has such an interest, the presumption that Michigan law will apply cannot be overcome. If a foreign state does have an interest in having its law applied, [the court] must then determine if Michigan's interests mandate that Michigan law be applied, despite the foreign interests.
Sutherland v. Kennington Truck Service, Ltd., 454 Mich. 274, 562 N.W.2d 466, 471 (1997); see also Radeljak v. Daimlerchrysler Corp., 475 Mich. 598, 719 N.W.2d 40, 46 (2006) (looking to "see which jurisdiction has a greater interest in the case" and finding Croatian law applies over Michigan law "because the case involves residents and citizens of Croatia who were injured in an accident in Croatia"). The case should "be examined to determine whether the foreign elements are so substantial as to override a presumption that forum law applies." Olmstead v. Anderson, 400 N.W.2d at 302.
The individual defendants acknowledge that Michigan does have an interest in the application of its laws, but argue that Delaware has a more significant interest. The individual defendants point to Delaware's "well-developed law regarding corporate governance issues," and conclude that the internal affairs doctrine requires application of Delaware corporate law. (Defs.' Br. at 11-12.)
As a general matter, the law of the state of incorporation normally determines issues relating to the internal affairs of a corporation. Application of that body of law achieves the need for certainty and predictability of result while generally protecting the justified expectations of parties with interests in the corporation. Different conflicts principles apply, however, where the rights of third parties external to the corporation are at issue.
First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 621-22, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983) (emphasis in original) (declining to apply Cuban law in a suit to recover on a letter of credit because to do so "would permit the state to violate with impunity the rights of third parties under international law while effectively insulating itself from liability in foreign courts").
Delaware has an interest in seeing that the directors of corporations incorporated in Delaware have the protection of Delaware laws. On the other hand, Michigan has a strong interest in policing corporations doing business within its borders, and protecting its citizens against harm done by foreign corporations and their directors. The Debtors conducted business in Michigan, their creditors are here, factories *777 were closed here and jobs lost here. The injuries occurred here, allegedly as a result of the individual defendants' breach of duty. On the other hand, the individual defendants did not conduct business in Delaware and did not even hold their board meetings there. Delaware's interests are not "so substantial" that they override the presumption that Michigan law applies. The Court concludes that Michigan law applies to count I.
The complaint is not entirely consistent in identifying the fiduciary duty allegedly breached, at times appearing to refer to the duty of care, and at other times appearing to refer to the duty of loyalty. Paragraph 5 of the complaint specifically alleges a breach of the duty of loyalty. At the oral argument on this motion to dismiss, the Trustee conceded that the compliant does not plead a breach of duty of care, but instead alleges a breach of duty of loyalty.
Michigan law recognizes a fiduciary duty of loyalty for officers and directors of a corporation. See Digital Commerce, Ltd. v. Sullivan (In re Sullivan), 305 B.R. 809, 819 (Bankr.W.D.Mich. 2004) (citing the Michigan Business Corporation Act, Mich. Comp. Laws Ann. § 450.1541a(l), and finding the president of a corporation breached his fiduciary duty of loyalty when he usurped a corporate opportunity). In the context of a wholly owned subsidiary, the parent corporation "may not be permitted to place itself in a position where its interests conflict with the interests of the [subsidiary.]" Wagner Electric Corp. v. Hydraulic Brake Co., 269 Mich. 560, 257 N.W. 884, 886-87 (1934) (citations omitted). A conflict giving rise to a breach of the duty of loyalty may arise either where an officer or director of the parent corporation acts for their own personal benefit, or acts for the benefit of another related or competitive corporation. Id.
The Trustee alleges in count I that the individual defendants, as directors and officers of the Debtors, breached that duty by managing the Debtors in such a way as to benefit the other corporations in the ASIMCO family to the Debtors' detriment. The complaint contains enough factual matter, required to be taken as true for purposes of this motion, to state a claim for relief under count I for breach of duty of loyalty that is plausible on its face. This is sufficient under the standard in Twombly to deny the individual defendants' motion to dismiss count I.
Count IISubstantive Consolidation
In count II, the Trustee seeks an order providing for substantive consolidation of the four non-debtor corporate defendants and the Debtors. The complaint states that the Court has the equitable power to grant this relief under § 105 of the Bankruptcy Code. The complaint then identifies a number of factors that the Court should examine to determine whether substantive consolidation is warranted. In their motion to dismiss, the non-debtor corporate defendants appear to concede that a bankruptcy court has the power to order substantive consolidation, but argue that count II in the complaint must be dismissed because the Trustee has not sufficiently pleaded facts necessary to support a cause of action for substantive consolidation under a leading case on substantive consolidation, Union Savings Bank v. Augie/Restivo Baking Co. (In re Augie/Restivo Baking Co.), 860 F.2d 515 (2nd Cir. 1988). The corporate defendants note that there is no controlling decision by the Sixth Circuit Court of Appeals establishing the necessary elements for a cause of action for substantive consolidation, but point out that the Augie/Restivo analysis *778 was followed by the District Court for the Eastern District of Michigan in Simon v. New Center Hospital (In re New Center Hospital), 187 B.R. 560 (E.D.Mich.1995). The corporate defendants explain that Augie/Restivo formulates two alternative bases for invoking substantive consolidation: "(i) whether creditors dealt with the entities as a single economic unit and did not rely on their separate identity in extending credit, or (ii) whether the affairs of the debtors are so entangled that consolidation will benefit all creditors." Augie/Restivo, 860 F.2d at 518 (internal quotation marks and citations omitted). The corporate defendants assert that count II of the Trustee's complaint fails to allege sufficient facts under either prong of Augie/Restivo.
The Trustee's reply begins by agreeing with the corporate defendants' statement that § 105 of the Bankruptcy Code provides the Court with equitable power to order substantive consolidation, even of a non-debtor with a debtor. Without a Sixth Circuit statement of the elements of substantive consolidation, the Trustee also looks to Augie/Restivo. The Trustee argues that his complaint states a cause of action under either prong of Augie/Restivo, but also asserts that his complaint states a cause of action under the substantive consolidation test articulated in Drabkin v. Midland-Ross Corp. (In re Auto-Train Corp.), 810 F.2d 270 (D.C.Cir.1987). The Trustee points out that the Auto-Train test was also discussed in New Center Hospital.
Although both the corporate defendants and the Trustee rely heavily on Augie/Restivo and New Center Hospital, they each also cite to a number of other cases that discuss the concept of substantive consolidation, some involving substantive consolidation of a non-debtor with a debtor. A number of these cases articulate "tests," or list "factors," or identify "circumstances," that must be shown in order to warrant an order of substantive consolidation. Many of the opinions in these cases begin by summarizing a history of substantive consolidation, perhaps because of the absence of the term substantive consolidation in the Bankruptcy Code. Lacking any express provision in the Bankruptcy Code governing, or even mentioning, substantive consolidation, this Court too considers it necessary to first review the law that has developed regarding substantive consolidation in order to decide whether or not to grant the motion to dismiss count II of the complaint.
As noted, there is no Bankruptcy Code section that expressly creates a cause of action in favor of a Chapter 7 trustee or a debtor for substantive consolidation. The term substantive consolidation does not appear anywhere in the Bankruptcy Code or the Bankruptcy Rules. It is a judicially created doctrine that treats separate legal entities as if they were merged into a single entity, pooling the assets and liabilities of the two entities, so that the assets of the two entities may result in a common fund available to satisfy the debts of both entities. Fundamentally, it is a judicial doctrine that has been applied by courts to ensure the equitable treatment of all creditors.
The authority to substantively consolidate two entities is frequently traced back to the U.S. Supreme Court's opinion in Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215, 61 S. Ct. 904, 85 L. Ed. 1293 (1941). However, a careful reading of Sampsell reveals that the Supreme Court did not actually hold substantive consolidation to be an available remedy for bankruptcy courts, nor did it address what showing would be necessary to invoke the doctrine of substantive consolidation. Instead, the issue in Sampsell was limited to determining the priority of a creditor's *779 claim against a corporation relative to the claims of creditors of an individual debtor, after the bankruptcy court had already found that the individual debtor had fraudulently transferred property to the corporation that he had formed just prior to filing his bankruptcy case. The order of the bankruptcy court that authorized the administration of the corporation's property for the benefit of the individual debtor's creditors, "consolidating the estates," had not been appealed. Only the issue of the priority of one of the creditor's claims was before the court in Sampsell. Nonetheless, Sampsell is frequently cited as giving birth to the judicial doctrine of substantive consolidation.
Although Sampsell was decided before the Bankruptcy Code was enacted, those courts that have addressed substantive consolidation after the Bankruptcy Code was enacted, in a search for statutory authority for the doctrine, frequently cite to § 105 of the Bankruptcy Code. Section 105(a) of the Bankruptcy Code states that a "court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." Nowhere does § 105(a) specifically authorize the consolidation of two debtors, let alone a non-debtor with a debtor, but its citation as statutory authority for substantive consolidation is widespread. See 2 Collier on Bankruptcy ¶ 105.04[2] (15th ed. rev.2009).
The Sixth Circuit Court of Appeals has not squarely held that a Chapter 7 trustee may use § 105 as the basis to bring a cause of action for substantive consolidation of a non-debtor entity with the bankruptcy estate. However, one opinion by the Sixth Circuit, First National Bank of Barnesville v. Rafoth (In re Baker & Getty Financial Services, Inc.), 974 F.2d 712 (6th Cir.1992), did consider whether a substantive consolidation order should be given retroactive effect nunc pro tunc for purposes of determining what date a preferential transfer was made. In dicta, the court in Baker & Getty quoted In re Evans Temple Church of God, 55 B.R. 976 (Bankr.N.D.Ohio 1986) regarding when substantive consolidation is warranted, as a prelude to discussing the nunc pro tunc issue that was actually before the court in Baker & Getty.
"Substantive consolidation is employed in cases where the interrelationships of the debtors are hopelessly obscured and the time and expense necessary to attempt to unscramble them is so substantial as to threaten the realization of any net assets for all of the creditors. In any consolidated case, there is implicit in the Court's decision to consolidate the conclusion that the practical necessity of consolidation to protect the possible realization of any recovery for the majority of the unsecured creditors far outweighs the prospective harm to any particular creditor."
"Thus, when a case is substantively consolidated, the Order for consolidation is, in effect, a determination by the Court that consolidation is warranted by the circumstances of the cases and that it is in the best interest of unsecured creditors to join the assets and liabilities of two debtors. It is, in effect, a statement by the Court that the assets and liabilities of one debtor are substantially the same assets and liabilities of the second debtor...."
Baker & Getty, 974 F.2d at 720 (quoting Evans Temple Church of God, 55 B.R. at 981-82).
There are several other bankruptcy court and district court decisions within the Sixth Circuit that have also recognized a cause of action for a substantive consolidation. In addition to Sampsell and § 105, those decisions have relied greatly *780 upon opinions from appellate courts of other circuits that have attempted to define what makes up a cause of action for substantive consolidation.
One of the most frequently cited appellate decisions discussing substantive consolidation, and one that was discussed in Baker & Getty, is In re Auto-Train Corp., 810 F.2d 270 (D.C.Cir.1987). In that case, Auto-Train was the Chapter 11 debtor. Railway Services was a wholly owned subsidiary of Auto-Train, but was not a debtor in a bankruptcy case. The Chapter 11 trustee for Auto-Train filed a motion to substantively consolidate Railway Services, the non-debtor, wholly owned subsidiary, with the Chapter 11 debtor, Auto-Train. The bankruptcy court conducted an evidentiary hearing and granted the motion effective nunc pro tunc back to the date that Auto-Train filed its Chapter 11 petition. The Chapter 11 trustee then filed a preference action against Midland-Ross to recover $499,671 that had been transferred by Railway Services to Midland-Ross prior to the time that Auto-Train filed its Chapter 11 petition. The bankruptcy court granted summary judgment in favor of the Chapter 11 trustee and against Midland-Ross. Midland-Ross appealed. The district court affirmed. Midland-Ross then appealed to the Court of Appeals for the D.C. Circuit. Id. at 272-73.
There were several issues addressed by the D.C. Circuit in Auto-Train. The entry of the substantive consolidation order by the bankruptcy court was not an issue on appeal. However, one of the issues on appeal did pertain to the nunc pro tunc aspect of the substantive consolidation order that had been granted. The court of appeals began its discussion of this issue by stating: "We assume, arguendo, that consolidation was proper. Although the Bankruptcy Code nowhere specifically authorizes the consolidation of separate estates, courts may order consolidation by virtue of their general equitable powers." Id. at 276 (citations omitted). The Auto-Train court explained that when courts order substantive consolidation, "it is typically to avoid the expense or difficulty of sorting out the debtor's records to determine the separate assets and liabilities of each affiliated entity." Id. (citations omitted). The court further explained that before granting the remedy of substantive consolidation, "a court must conduct a searching inquiry to ensure that consolidation yields benefits offsetting the harm it inflicts on objecting parties." Id. (citations omitted). The court then identified two showings that must be made before substantive consolidation may be ordered: "The proponent must show not only a substantial identity between the entities to be consolidated, but also that consolidation is necessary to avoid some harm or to realize some benefit." Id. (citations omitted).
After identifying the two showings that must be made to warrant substantive consolidation, the Auto-Train court explained that if a creditor objects to substantive consolidation because it has relied on the separateness of the entities and will be prejudiced by their consolidation, then "the court may order consolidation only if it determines that the demonstrated benefits of consolidation `heavily' outweigh the harm." Id. at 276 (citations omitted). The court then returned to the propriety of granting such relief nunc pro tunc and observed that "a bankruptcy court must undertake an additional and slightly different balancing process" to give a substantive consolidation order a retroactive nunc pro tunc effect, because of "the risk of unpredictable shifts" in the dates of transfers that nunc pro tunc relief may create. Id. at 277.
In light of these considerations, a court should enter a consolidation order nunc *781 pro tunc only when it is satisfied that the use of nunc pro tunc yields benefits greater than the harm it inflicts. This inquiry will closely parallel that conducted with respect to consolidation. Because the consolidation proceeding will already have established a substantial identity between the entities to be consolidated, this inquiry begins with the proponent of nunc pro tunc making a showing that nunc pro tunc is necessary to achieve some benefit or avoid some harm.
Id. at 277. The Auto-Train court then held that the bankruptcy court had erred by making its substantive consolidation order retroactive, nunc pro tunc, to the date of Auto-Train's bankruptcy case. Specifically, the court of appeals found that the bankruptcy court placed too much emphasis on the relationship between Auto-Train and its subsidiary, Railway Services, and not enough emphasis on Midland-Ross's reliance on the separate credit of Railway Services. Id. at 277-78.
The Auto-Train opinion does not set forth specific elements necessary to be pleaded to support a cause of action for substantive consolidation so much as it establishes a balancing test for determining whether substantive consolidation should be given retroactive effect once a creditor objects. In contrast to other substantive consolidation opinions, the Auto-Train balancing test only considers how creditors may have dealt with the two entities after a determination is first made that there is a substantial identity of the entities and that consolidation is necessary to avoid harm or realize a benefit. The Auto-Train analysis does not require as an element of a prima facie case for substantive consolidation any proof that creditors in any way dealt with the two entities as a single entity.
Shortly after Auto-Train, the Second Circuit Court of Appeals decided Augie/Restivo, 860 F.2d 515 (2d Cir.1988). That case involved the substantive consolidation of two debtor entities, unlike Auto-Train, which involved substantive consolidation of a debtor with a non-debtor entity. Augie and Restivo were initially two unrelated wholesale bakeries. In 1984, they entered into an agreement to combine their operations with the idea that Augie's business would be wound up and Restivo would become the sole operating company. The two companies never complied with state merger laws nor did either of them dissolve. In 1986, both entities filed Chapter 11 petitions. After operating for some time in their Chapter 11 cases, the two debtor entities moved for substantive consolidation of their two bankruptcy cases. Union Bank, a secured lender for Augie, objected because with a substantive consolidation order, Union Bank's deficiency claim against its borrower, Augie, would become subordinated to a super priority administrative expense claim in favor of MHIC, the lender to the other debtor, Restivo. The bankruptcy court overruled the objection and ordered substantive consolidation of the two bankruptcy estates. The district court affirmed. Id. at 516-17.
On appeal, the Second Circuit began its discussion by noting that there is no express statutory authority for substantive consolidation but instead it is "a product of judicial gloss." Id. at 518. The court stated in a footnote that courts have found the power to order substantive consolidation in § 105 of the Bankruptcy Code. The court cautioned that substantive consolidation should "be used sparingly" and explained that "[t]he sole purpose of substantive consolidation is to ensure the equitable treatment of all creditors." Id. (citations omitted). Next, Augie/Restivo looked at various substantive consolidation cases and the circumstances mentioned as relevant in *782 those cases to determining whether equitable treatment of creditors will result from substantive consolidation. The court concluded its discussion of these cases by identifying two critical factors that emerge in all of these cases:
An examination of those cases, however, reveals that these considerations are merely variants on two critical factors: (i) whether creditors dealt with the entities as a single economic unit and did not rely on their separate identity in extending credit; or (ii) whether the affairs of the debtors are so entangled that consolidation will benefit all creditors.
Id. (internal quotation marks and citations omitted).
The Second Circuit then discussed the application of these two factors in the circumstances of its case, and held that the facts did not justify substantive consolidation under either of these two factors. In analyzing the first factor, the court considered it important that Union Bank's loans to Augie were based solely upon Augie's financial condition and, at the times that the loans were made, that Union Bank had no knowledge of any relationship between Augie and Restivo. "With regard to the first factor, creditors who make loans on the basis of the financial status of the separate entity expect to be able to look at the assets of their particular borrower for satisfaction of that loan." Id. at 518. The court concluded that the "course of dealing and expectations in the instant case do not justify consolidation." Id. at 519. The Augie/Restivo court then discussed the second factor regarding entanglement of the debtors' affairs and concluded that any "evidence of commingling of assets and business functions" between these two debtors did not approach the "level of hopeless obscurity" that had been found necessary in other cases to warrant consolidation. Id.
Auto-Train and Augie/Restivo are not entirely consistent with one another in their analysis of substantive consolidation actions. Auto-Train's analysis, which is largely dicta, requires a showing of both "substantial identity" and a need to avoid some harm or realize some benefit. Under this analysis, reliance by creditors upon the separateness of the entities only becomes relevant if a creditor objects, but is not part of a prima facie case for substantive consolidation. In contrast, Augie/Restivo appears to place the burden on the moving party to prove that creditors did not rely on the separateness of the entities, at least when the substantive consolidation request is based upon the first of the two prongs identified in Augie/Restivo. Further, unlike Auto-Train, it appears that under Augie Restivo, substantive consolidation may also be ordered in the alternative based upon a demonstration that creditors dealt with the two entities sought to be consolidated as a single economic unit even without a demonstration that the affairs of the two entities are so entangled that consolidation will benefit all creditors.
Lower courts in the Sixth Circuit have cited frequently to both the Auto-Train and the Augie/Restivo tests in their discussions of substantive consolidation. In the Eastern District of Michigan, the District Court in In re New Center Hospital, 187 B.R. 560 (E.D.Mich.1995), affirmed a summary judgment by a bankruptcy court imposing the remedy of substantive consolidation on non-debtor affiliates of the debtor. In that case, New Center Hospital was the Chapter 11 debtor. The United States, on behalf of the Internal Revenue Service and other federal agencies, brought an adversary proceeding to substantively consolidate certain non-debtors *783 with the debtor. The bankruptcy court found that the assets and operations of the defendants had been extensively commingled with those of the debtor, that the debtor and the defendants were alter egos of one another, and that their business dealings were so inextricably intertwined that no entity that had extended credit to the debtor's alter egos could reasonably be said to be without notice. The bankruptcy court also found that the debtor's and non-debtors' banking activities had been conducted in an effort to defraud their creditors and avoid the payment of their legal obligations by such commingling. Further, the bankruptcy court found that the debtor and the non-debtors had disregarded the corporate entities of their respective corporations in the operation of their business. In affirming the bankruptcy court, the district court found that even the post-petition conduct of the debtor and the non-debtors was "shameful" and ultimately concluded that the bankruptcy court's summary judgment should be affirmed. Id. at 564-65.
In New Center Hospital, the district court pinned its authority to impose substantive consolidation on § 105(a) of the Bankruptcy Code without discussion. Id. at 567. The court noted that substantive consolidation was a judicially created remedy that should be used sparingly before turning its attention to the various tests that had been developed by other circuit courts to determine if there was a basis for substantive consolidation. The New Center Hospital court then observed that "[t]wo tests have been developed to determine if a basis for substantive consolidation exists." Id. The court identified those two tests as the Auto-Train test and the Augie/Restivo test. The New Center Hospital court explained that Augie/Restivo set forth a disjunctive two prong test but went on to state that the second prong (i.e., whether the entities' affairs are entangled) requires a seven-part inquiry into the relationship of the entities as follows:
(1) presence or absence of consolidated business or financial records;
(2) unity of interest and ownership between the debtors;
(3) the existence of parent and inter-corporate guarantees on loans;
(4) degree of difficulty in segregating and ascertaining separate assets and liabilities;
(5) existence of transfers of assets without observance of corporate or other legal formalities;
(6) commingling of assets and business functions; and
(7) the profitability of consolidation at a single principal location.
Id. at 569.
The district court found that the bankruptcy court's analysis of these seven elements supported the bankruptcy court's finding that the debtor and the non-debtors were "inextricably intertwined" and "entangled" so as to require substantive consolidation under the second prong of Augie/Restivo. Id. at 570. The New Center Hospital court also concluded that "under an Auto-Train analysis, the facts also support a finding of substantial identity the alter ego issue." Id. Unfortunately, this last statement appears to conflate the various substantive consolidation "tests" with an analysis of principles of state corporate law and also state alter ego law in Michigan.
In Simon v. Brentwood Tavern, LLC (In re Brentwood Golf Club, LLC), 329 B.R. 802 (Bankr.E.D.Mich.2005), the bankruptcy court granted summary judgment for a Chapter 11 trustee in an adversary proceeding brought to substantively consolidate a non-debtor entity with the debtor. The debtor was a limited liability company *784 that owned and operated a golf course. The defendant was another limited liability company with the same ownership as the debtor. The defendant was a tavern that sold liquor and food at the golf course and clubhouse owned by the debtor. Id. at 805. The adversary proceeding apparently contained several theories of liability. The court first dealt with whether or not the defendant tavern was an alter ego of the debtor golf course and clubhouse. The court reviewed various principles under Michigan corporate law concerning the application of an alter ego analysis. Id. at 808-09. The court concluded that these two limited liability companies were alter egos under applicable Michigan law, and held that "[b]ecause Tavern is the alter-ego of Debtor, this Court is piercing Tavern's corporate veil." Id. at 809-11. The court then explained that
[o]nce Tavern's corporate veil is pierced, there is no need for a determination that the entities need to be substantively consolidated because the assets and operations of one are, as a matter of law, the assets and operations of the other and, thus, any alleged assets of Tavern are property of the estate.
Id. at 811.
Even though Brentwood was decided based upon a state law theory of piercing the corporate veil, the Brentwood court in dicta also went on to separately consider substantive consolidation. Like many other cases, Brentwood observed that § 105(a) of the Bankruptcy Code provides the authority to order substantive consolidation. Id. The court then noted that the Sixth Circuit Court of Appeals has not set forth a specific test for determining whether to impose substantive consolidation. Id. at 811. However, the Brentwood court found that the Sixth Circuit did approve of the substantive consolidation doctrine in dicta in Baker & Getty even if it had not set forth the elements necessary to bring an action for substantive consolidation. Id. at 811-12. Lacking a statement of the elements of substantive consolidation, but noting the Sixth Circuit's approval of the doctrine in Baker & Getty, the Brentwood court proceeded in dicta to consider both the Augie/Restivo test and the Auto-Train test. The Brentwood court concluded that under either the Augie/Restivo test or the Auto-Train test, substantive consolidation of the non-debtor was warranted and supported the grant of summary judgment. Id. at 812-15.
More recently, the bankruptcy court in Gold v. Winget (In re NM Holdings Co.), 407 B.R. 232 (Bankr.E.D.Mich.2009), had an adversary proceeding before it that sought substantive consolidation against a number of non-debtor entities. The defendants in that case claimed that the Bankruptcy Court did not have the power to order substantive consolidation. The court held that § 105(a) does provide a statutory basis for substantive consolidation and explained that subsequent Supreme Court cases have not either repealed Sampsell or held that substantive consolidation is not an available remedy for the bankruptcy court. Id. at 273-77.
Looking to cases outside the Sixth Circuit, in addition to the Auto-Train and Augie/Restivo tests, another circuit court of appeals has also set forth certain principles that it believes should be considered in reviewing any request for substantive consolidation. In In re Owens Corning, 419 F.3d 195 (3rd Cir.2005), the Third Circuit Court of Appeals discussed in depth the history of substantive consolidation and canvassed the various cases that have acknowledged substantive consolidation as a possible remedy. Id. at 205-09. The Owens Corning opinion correctly observed that "most courts slipstreamed between *785 two rationalesthose of the Second Circuit in Augie/Restivo and the D.C. Circuit in Auto-Train." Id. at 207. The Third Circuit then explained its own view of substantive consolidation. It began by noting that substantive consolidation is an equitable remedy. Id. at 210. However, it rejected the "checklist" approach used by many courts because it "often result[s] in rote following of a form containing factors where courts tally up and spit out a score without an eye on the principles that give the rationale for substantive consolidation." Id. (citation omitted).
The Owens Corning court then identified certain principles that it considered to be important for a court to consider in deciding whether substantive consolidation is warranted. Those principles include the general expectation under state law, the Bankruptcy Code, and commercial markets, "that courts [will] respect entity separateness absent some compelling circumstances...." Id. at 211. Further, the harms that substantive consolidation may remedy are nearly always caused by the debtors themselves by disregarding their own separateness, in contrast to the harms that are caused by creditors, which are typically remedied by specific provisions in the Bankruptcy Code (e.g., §§ 510, 544, 547 and 548). Mere benefit to the administration of a bankruptcy estate should not itself be considered sufficient to warrant substantive consolidation. Because substantive consolidation is both extreme and imprecise, it should only be used rarely, where there are no other remedies available under the Bankruptcy Code. Finally, substantive consolidation should not be used as a weapon to tactically disadvantage a group of creditors, but instead should only be used defensively to remedy an identifiable harm that is caused by entities that entangle their affairs. Id. After reviewing those principles in depth, the Owens Corning court distilled them to the following:
The upshot is this. In our Court what must be proven (absent consent) concerning the entities for whom substantive consolidation is sought is that (i) prepetition they disregarded separateness so significantly their creditors relied on the breakdown of entity borders and treated them as one legal entity, or (ii) postpetition their assets and liabilities are so scrambled that separating them is prohibitive and hurts all creditors.
Id. at 211.
A number of observations can be made about the various substantive consolidation cases. First, a cause of action for substantive consolidation is not the same as a cause of action to pierce a corporate veil, nor is it the same as a cause of action to determine whether, under state corporate law, there is a basis to find that two or more corporations are alter egos of one another. Those are different causes of action than substantive consolidation, although sometimes the courts have discussed them together and have noted certain similarities of these causes of action. Second, there is an independent, judicially created cause of action for substantive consolidation that the courts have recognized. Third, there is no express statutory authority for substantive consolidation. Section 105 is the most frequently cited statutory authority, but even its use seems expansive in light of the Sixth Circuit Court of Appeals' statements that § 105 may be used only to implement powers already expressed in the provisions of the Bankruptcy Code, not add to those powers or create rights that Congress did not expressly confer. Childress v. Middleton Arms, L.P. (In re Middleton Arms, Ltd. Partnership), 934 F.2d 723, 725 (6th Cir. 1991) (citing Norwest Bank Worthington *786 v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 99 L. Ed. 2d 169 (1988)). "[T]he Bankruptcy Code is the product of substantial consideration by Congress, and is not prone to judicial tinkering...." Palmer v. I.R.S. (In re Palmer), 219 F.3d 580, 586 (6th Cir.2000) (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240-41, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989)). Despite such concerns, the weight of the case law holds that § 105 can be used to order substantive consolidation, even of a non-debtor with a debtor. Fourth, even those courts that impose substantive consolidation consistently observe that it is an extraordinary remedy and one that is to be used sparingly. The reason for such reluctance is obvious since the doctrine authorizes a court to look past the limited liability that is a hallmark of corporate law in the United States and the legal separateness of an entity that it provides for. Fifth, perhaps because it is a judicially created doctrine, courts have endeavored to find precision by creating a myriad of "tests" for substantive consolidation. As a result, substantive consolidation has become a "checklist" or "factor" counting exercise in many cases. But even those opinions that have developed these tests offer little guidance as to the probative value of each single item or factor, or the relative importance of each of the checklist items or factors to one another. Sixth, the dependence upon checklists and factors leaves the impression of an untethered, ad hoc approach in the case law which can greatly diminish predictability in the law. Seventh, the absence of a clear rule of law regarding substantive consolidation, combined with the premise that substantive consolidation is an equitable remedy, encourages parties to treat the bankruptcy court as a "roving commission to do equity." See generally Hon. Joe Lee 2 Bankr.Service Lawyers Ed. § 12:508 (2009) (subtitled "Roving commission to do equity," and collecting cases addressing the use of § 105(a) to create substantive rights); Timothy E. Graulich, Substantive ConsolidationA Post-Modern Trend, 14 Am. Bankr.Inst. L.Rev. 527 (Winter 2006) (discussing the development and expansion of the so-called "liberal" or "modern" trend of substantive consolidation, detailing the adverse consequences of that trend, and advocating use of the Third Circuit's decision in Owens Corning as a template for future decisions). Eighth, actions to substantively consolidate non-debtor entities raise serious due process considerations for parties that continue to transact business with a non-debtor entity where such creditors are not parties to any action brought to substantively consolidate such non-debtor with a debtor entity. Finally, those due process considerations are further exacerbated by the inevitable need to determine whether substantive consolidation, if warranted at all, is to be made on a nunc pro tunc basis, further exposing parties presently doing business with a non-debtor entity to shifting and incalculable risks at the time that they do business with such entity.
The purpose of reviewing the divergent case law regarding substantive consolidation and the various tests that have been adopted and applied is not to be critical of the cases that have considered these issues. Nor is the recitation of the complex issues that emerge from these cases in any way intended to suggest that a court should refuse to ever order substantive consolidation because of the murkiness of the case law. Rather, the point of this exercise is twofold: first, to illustrate the difficulty in finding the correct rule of law to apply to a substantive consolidation action; and, second, to provide a framework for the Court to evaluate the Trustee's substantive consolidation complaint in this case against the Rule 12(b)(6) standard *787 under Twombly for a motion to dismiss. Before turning then to the allegations in the Trustee's complaint, the Court adopts the following principles regarding the law of substantive consolidation that will control the Court's decision regarding the motion to dismiss count II in this adversary proceeding.
There is sufficient settled authority for a bankruptcy court to impose the equitable remedy of substantive consolidation, even on a non-debtor, in a rare case. But it is an extraordinary remedy to be utilized only where there are no other adequate remedies, particularly where the entity sought to be consolidated is not itself already a debtor in a bankruptcy case. Until the Supreme Court or the Sixth Circuit Court of Appeals enunciates a standard to determine when the elements of substantive consolidation are present, this Court will only substantively consolidate a non-debtor entity with a debtor where it is shown that either: (i) the debtor and the non-debtor entity in their pre-petition conduct disregarded the separateness of their respective entities so significantly as to lead their creditors to treat them as one legal entity; or (ii) that post-petition, the assets and liabilities of the debtor and the non-debtor entity sought to be consolidated are so hopelessly scrambled and commingled that it is impossible to separate them and tell them apart thereby resulting in harm to all creditors. The identification of these two alternative circumstances warranting substantive consolidation, one pre-petition and one post-petition, is not, in this Court's view, inconsistent with the circumstances that the Sixth Circuit identified in dicta as warranting substantive consolidation. In fact, in Baker & Getty, the Sixth Circuit noted that in that case, there was evidence both that the creditors of the two entities treated them as one entity and that the two entities were "hopelessly intertwined." Baker & Getty, 974 F.2d at 720. In sum, the Court adopts the Owens Corning analysis.
The Court will next examine count II of the complaint in this adversary proceeding in light of the principles of law set forth above. What facts does the complaint allege that, if taken as true, demonstrate that pre-petition, the Debtors and the non-debtor corporate defendants disregarded their own separateness so significantly as to lead their creditors to treat them as one legal entity? The complaint contains the following allegations that may arguably relate to this issue:
The officers and directors of the ASIMCO companies "managed" the Debtors and non-debtors as divisions of a single large company (paragraph 24).
The Debtors and non-debtors have the same board of directors (paragraph 25).
The Debtors did not have separate board meetings but instead a "super board" of all of the Debtors and non-debtors met quarterly (paragraphs 25, 70(b)).
The "ultimate goal of the super board" was to do what was best for all of the ASIMCO companies and not necessarily any particular company (paragraph 26).
When the super board considered whether the Debtors should file Chapter 11, one of the considerations was the potential for non-payment of loans to ASIMCO International (paragraph 28).
When the super board considered whether the Debtors should file Chapter 7, the board considered the impact upon Yizheng and the other ASIMCO companies (paragraph 29).
*788 The officers and directors of the ASIMCO companies "acted" as if the companies "were merely divisions of one big company" (paragraphs 30, 70(c)).
The ASIMCO companies decided that some work should go to a Chinese company and not to Assembled Camshaft because it would be a "better place to put the work because of cost considerations" (paragraph 31).
The ASIMCO companies determined that either Assembled Camshaft or Grand Haven should refurbish a grinder for Yizheng and, "upon information and belief," they were not paid for their work (paragraph 32).
Yizheng and the Debtors were "considered" to be part of the "same camshaft division of ASIMCO" (paragraph 33).
Yizheng and the Debtors were "regularly treated" as divisions of a single company at board meetings and in presentations to lenders and auditors (paragraph 33).
Yizheng and the Debtors "regularly exchanged" employees, products, money, work and equipment as if they "were all part of the same company" (paragraph 34).
The Debtors also "regularly exchanged" employees and money with ASIMCO International and ASIMCO International loaned a substantial amount of money to the Debtors with no loan documents (paragraph 35).
Even though the Debtors had by-laws and other corporate organizational documents, Assembled Camshaft never had its own shareholder meetings (paragraph 36).
The Debtors and the other ASIMCO companies "presented" themselves to "the outside world" as one large company on their website (paragraph 37).
Some customers of the Debtor and non-debtor entities "thought ASIMCO was one large company" and the Debtors and other ASIMCO companies "cultivated this impression" to create business (paragraph 38).
The Debtors provided cash, machines and management expertise to Yizheng (paragraph 51).
ASIMCO Holding is the ultimate parent of the Debtors and the non-debtor corporate defendants (paragraph 68).
The Debtors did Yizheng a "costly favor" by writing off a "sizeable amount" (paragraph 50).
The Debtors and non-debtors used the same employees as one another as needed (paragraph 70(a)).
The Debtors and non-debtors exchanged employees, products, money, work and equipment with one another "as if [they] were part of the same company" (paragraph 70(d)).
Management "consistently treated" the Debtors and non-debtors as if they were all part of a larger company called ASIMCO (paragraph 71).
The Debtors and non-debtors transferred assets without observance of corporate or legal formalities (paragraph 72).
The Debtors and non-debtors "transferred" employees from one company to another on an as-needed basis without a written contract (paragraph 73).
The Debtors and non-debtors loaned or transferred money among each other without loan documents (paragraph 74).
The Debtors and Yizheng shared business and, "upon information and belief," no contract existed (paragraph 75).
*789 The Debtors and Yizheng purchased and shared equipment with each other without a written contract (paragraph 76).
The fact that the Debtors and the non-debtors conducted their boards of directors meetings together does not by itself prove a disregard of the separateness of the entities at such meetings. The complaint does not allege that at these board meetings, the respective boards of directors took action that disregarded the separateness at the entities, but only that the board meetings were conducted jointly. Nor is the conclusory allegation that these related companies were "managed" in a way designed to "do what was best for all of them" probative of any disregard of the separateness of these entities so as to lead their creditors to treat them as one entity. The fact that the board of directors considered the impact of its decision to have the Debtors file bankruptcy upon the non-debtors does not tend to show a disregard of the separateness of the entities, but instead may arguably tend to show a recognition that the entities were separate and distinct. Nor does the conclusory allegation that these entities were "managed" as though they were "divisions" of "one large company," even if true, evidence in any way a disregard of the separateness of the entities. The labels of "managed" and "divisions" are not probative one way or the other about whether the conduct of these entities showed that they disregarded their separateness in a way that misled their creditors.
Similarly, the fact that some customers of these entities viewed them as "one large company" does not tend to show that the Debtors and non-debtors disregarded the separateness of their entities so as to lead their creditors to treat them as one entity. The complaint contains no allegations that the Debtors and non-debtors failed to keep separate bank accounts, or that they failed to fully or accurately record their financial transactions with their creditors in separate books and records. Nor does the complaint allege that any of the Debtors or non-debtors disseminated any financial or other information to their creditors in a manner calculated to mislead their respective creditors about which of those entities would be legally responsible for any debts incurred by such entities. The closest the complaint comes to making such an allegation is the vague statement in paragraph 37 that the Debtors and other ASIMCO companies "presented" themselves as "one large company" on their website. But this allegation does not state what information on the website might mislead any of their creditors into believing that the Debtors and non-debtors were not separate entities. Nor is there any allegation that any creditors of any of these Debtors or non-debtors somehow believed that they were not separate entities or relied on them as one single entity. In fact, the complaint makes no allegations at all about either how the Debtors or non-debtors dealt with their creditors, or how their creditors dealt with them.
Instead, the allegations in the complaint about the pre-petition conduct of the Debtors and the non-debtors focus on the transacting of business inter se among the Debtors and the non-debtors. Specifically, the complaint alleges that they loaned each other money, transferred assets to each other and exchanged employees, and that these transactions among them were either not documented or lacked adequate consideration. If all of those allegations are true, then the Trustee may well be entitled to a judgment against one or more of the non-debtor corporate defendants to recover a debt owed, or to avoid a preferential transfer or a fraudulent transfer. But the presence of such transactions, even when coupled with the conclusory *790 assertion that the "goal" was to do what was best for the ASIMCO family of companies, is insufficient to prove that the Debtors and the non-debtors engaged in pre-petition conduct that disregarded the separateness of their respective entities so significantly as to lead their creditors to treat them as one legal entity. In short, the Trustee may have valid causes of action against the non-debtor corporate defendants. But the Trustee has not pleaded sufficient facts to state a claim for substantive consolidation of the Debtors and the non-debtors based upon the pre-petition conduct of the Debtors and the non-debtor corporate defendants.
What facts does the complaint allege which, if taken as true, demonstrate that post-petition, the assets and liabilities of the Debtors and the non-debtor corporate defendants are so hopelessly scrambled and commingled that it is impossible to separate them and tell them apart, thereby resulting in harm to all creditors? The complaint contains the following allegations that may arguably relate to this issue:
The Debtors and non-debtor corporate defendants had combined financial statements (paragraph 78).
When the Debtors' and non-debtors' books and records were audited, they were audited together (paragraph 79).
"Presentations" made to the super board showed financial information of the Debtors and non-debtors collectively (paragraph 80).
Because the Debtors and non-debtors made numerous loans to each other that were not recorded, it is difficult, if not impossible, to accurately determine the liabilities among them (paragraph 84).
Because employees worked for both the Debtors and for the non-debtors, it is difficult to separate which company truly employed them so as to determine the amount of money owed by the Debtors and non-debtors to each other for wages that were paid to such employees (paragraph 87).
As a result of the commingling of money, assets and employees "it is impossible to segregate the assets and liabilities" of the Debtors and non-debtors (paragraph 88).
The fact that the Debtors and non-debtors had combined financial statements does not tend to prove that the assets and liabilities of the Debtors and non-debtors are hopelessly scrambled and commingled. Nor does the fact that when the Debtors and non-debtors were audited, they were audited together. Nor does the fact that presentations of financial information to the super board of directors contained collective financial information. None of those facts, if all true, are either uncommon or remarkable in any way. They do not tend to show that the assets and liabilities of the separate entities that are reflected in such consolidated financial statements are hopelessly scrambled or commingled in any way. The complaint does not allege that either the Debtors or the non-debtors failed to record and keep books and records of their financial transactions. The crux of the Trustee's allegations regarding the books, records and financial statements of the Debtors and non-debtors is that they were, for some purposes at least, kept in a combined or consolidated manner, and that such books, records and financial information were presented, at least for some purposes, in a collective way. But that is a far cry from alleging that because of the fact that the books, records and financial statements were kept in a combined or consolidated fashion, the assets and liabilities of the Debtors and non-debtors are hopelessly *791 scrambled and commingled so that it is now impossible to tell them apart.
The Trustee does plead that he cannot determine how much the Debtors and non-debtors owe to one another for wages that their employees have received and for loans that they have made to one another. If true, those allegations may require a remedy. They may result in the imposition of liability among the Debtors and non-debtors and even among the officers and directors of the Debtors. But saying that the Trustee cannot determine what these entities may owe to one another regarding the transactions among them inter se is not the same thing as saying that the assets and liabilities of the Debtors and non-debtors are so hopelessly scrambled and commingled that it is impossible to separate them and tell them apart. The Trustee does not allege that because the Trustee cannot determine how much the Debtors and non-debtors may owe to each other that he is unable to determine how much the Debtors owe to their creditors other than the non-debtors. The Trustee does not allege that there is any difficulty in determining what assets the Debtors own or what liabilities they may owe, except for the allegation that the Trustee cannot determine how much the Debtors and non-debtors owe to one another. That is not enough. Assuming the Trustee cannot determine how much the Debtors and non-debtors owe to one another does not demonstrate that the assets and liabilities of the Debtors and the non-debtor defendants are hopelessly scrambled and impossible to separate.
The complaint is long, but it does not allege that the Trustee has been unable to determine the assets and liabilities of the Debtors post-petition in any way other than ascertaining the amounts that might be owed by the non-debtors to the Debtors and vice versa. In other words, the complaint does not allege that the Trustee has been unable to determine what the Debtors owe to creditors and parties other than the ASIMCO related companies. Nor does the complaint allege that the Trustee has been unable to administer this case. To the contrary, the Trustee has been able to administer the estates of the Debtors, having filed 80 adversary complaints based on Chapter 5 causes of action even before filing this case requesting substantive consolidation of the Debtors. The Trustee does not say he has somehow been stymied in his ability to determine the assets and liabilities of the Debtors because of any absence of loan documents with the non-debtor defendants or the absence of contracts with the non-debtor defendants regarding their exchange of employees. Even if true, the allegations regarding the Trustee's difficulty in determining how much the Debtors and the non-debtor defendants owe one another are just not sufficient to conclude that post-petition the assets and liabilities of the Debtors and non-debtors are so hopelessly scrambled that it is impossible to tell them apart. The Trustee does allege in conclusory terms (paragraph 88) that it is "impossible to segregate the assets and liabilities" of the Debtors and the non-debtor corporate defendants. But the complaint just does not contain sufficient factual matter to enable the Court to conclude that the Trustee's claim is plausible on its face. Even if all of the allegations taken in these paragraphs are true, they do not make out a case for substantive consolidation of the non-debtor defendants with the Debtors because the assets and liabilities of all these entities are so hopelessly scrambled and commingled that separating them from each other is impossible and thereby hurts all of the creditors.
The Court has already noted that many cases recognize that there is authority to bring a substantive consolidation action *792 even against a non-debtor. They trace this authority to Sampsell, 313 U.S. 215, 61 S. Ct. 904, and § 105. The Court does not hold that a debtor can never bring a substantive consolidation action against a non-debtor entity, but only that the complaint in this case does not meet the Twombly standard of pleading. It is not plausible that the Trustee will be entitled to relief by demonstrating all of the facts set forth in this complaint, as to the substantive consolidation count against the non-debtor corporate defendants. The Court therefore holds that count II of the complaint must be dismissed.[3]
To recap, the Court denies the motion to dismiss ASIMCO Holding and Yizheng for lack of service of process. The Court denies the motion to dismiss ASIMCO Holding for lack of personal jurisdiction. The Court need not consider the motion to dismiss Lim for lack of personal jurisdiction because he has never been served with the complaint. The Court denies the motion to dismiss count I against the individual defendants. The Court grants the motion to dismiss count II against the corporate defendants. The Court will enter a separate order consistent with this opinion.
NOTES
[1] The Debtors in this jointly administered bankruptcy proceeding are: American Camshaft Specialties, Inc., Case No. 06-58298; Assembled Camshaft, Inc., Case No. 06-58330; ACS Orland, Inc., Case No. 06-58301; and ACS Grand Haven, Inc., Case No. 06-58302.
[2] Http://www.china-briefing.com/news/2009/01/17/perkowski-leaves-asimco.html. (Exhibit 3 to Trustee's Resp., docket entry # 12).
[3] Although unnecessary to the Court's decision, it is worth noting that there are many consequences and difficulties that can flow from a decision to substantively consolidate a non-debtor entity with a debtor. In this case, the four Debtors themselves have not even been substantively consolidated with one another. Their estates are only jointly administered. The Trustee has been administering assets in each of them for two years. Further, before the Trustee was appointed, most of the tangible assets of each of the Debtors were sold during the Chapter 11 case. If substantive consolidation were now ordered in these cases, as requested by the Trustee, it would undoubtedly raise troubling questions of how the creditors of the non-debtors that are substantively consolidated could be treated equitably since the proceeds from the sales of assets of the Debtors have already been disbursed to certain of the Debtors' creditors. What substantive consolidation may mean in these circumstances is that the assets of the non-debtor corporate defendants would now be brought into these Debtors' estates so that the creditors of the Debtors could share in the proceeds of those assets. But it would not necessarily work the other way around. The assets of these Debtors have already been disposed of in § 363 sales and by payment of post-petition secured debt in the Chapter 11 cases. A substantive consolidation remedy now would not enable the Trustee to go back and somehow recover from those creditors the proceeds that they have already received in these bankruptcy cases so that the creditors of the non-debtors that are being substantively consolidated could also share in those proceeds. Further, it is worth noting that two of the non-debtor entities sought to be consolidated in this case are foreign corporations. ASIMCO Holding is a Cayman Islands corporation. Yizheng is a Chinese corporation that operates its business in China. If substantive consolidation stems from a policy of doing equity for creditors, it would necessarily have to consider the effect upon creditors of the businesses in the Cayman Islands and in China before it could be applied. The Trustee does not make any allegations about how these foreign corporations have dealt with such creditors, nor explain how substantive consolidation of such foreign companies could be accomplished. While those considerations are important, they of course are irrelevant to whether the Trustee's complaint sufficiently states a cause of action for the equitable remedy of substantive consolidation. Therefore, the Court does not consider them today. But they do illustrate the point that substantive consolidation, as a judicially created remedy that appears nowhere in the Bankruptcy Code, should be used only in extraordinary and rare circumstances where other remedies are insufficient. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542707/ | 997 A.2d 368 (2010)
COMMONWEALTH of Pennsylvania, Appellee
v.
Deiyo DIXON, Appellant.
No. 574 EDA 2007.
Superior Court of Pennsylvania.
Argued October 23, 2008.
Filed June 15, 2010.
*370 Marissa Bluestine, Public Defender, Philadelphia, for appellant.
Suzan Willcox, Assistant District Attorney, Philadelphia, for Commonwealth, appellee.
BEFORE: STEVENS, MUSMANNO, KLEIN[*], BENDER, BOWES, GANTMAN, SHOGAN, FREEDBERG and CLELAND, JJ.
OPINION BY STEVENS, J.:
¶ 1 Deiyo Dixon appeals from the judgment of sentence imposed by the Court of Common Pleas of Philadelphia County. We have granted en banc review to address suppression and sentencing issues raised by Dixon. Following careful examination of the record before us, as well as pertinent case and statutory law, we find no error on the part of the lower court, and affirm the judgment of sentence.
¶ 2 The underlying facts of this case are not in dispute. Firearms charges were leveled against Dixon following events which occurred on December 4, 2005. The Affidavit of Probable Cause issued for Dixon's arrest describes those events as follows:
While in plain clothes assignment as 23bd2 the officers were patrolling the area, 1200 North 29th St., on 12-04-05 12:25 pm; when they observed a possible drug transaction between the offender and another male, Arthur Kett. The officers exited their vehicle to approach the males, P/O Nelson observed Kett holding in plain view a small zip-loc pkt of possible marijuana, P/O Parker then went to the other male to stop him for investigation, he immediately adopted a hostile attitude ignored the officer's request to stop; a struggle ensued during which time a small blk and silver semi auto pistol fell from the defendant waist area. The offender fled and after a short foot pursuit was lost in the area of 2815 Stile St.
The officers then came to Central Detectives, with the revolver weapon, identified as a .40 Cal Taurus Millennium with a total of ten rounds ser # svc-59203.
Record check of this weapon revealed it stolen on 06-20-2004, under OCA 04-25-58539 from the residence of Juan *371 Jose Pitre. Additionally the officer identified the other offender as Deiyo Dixon of 2815 Stile St, whose [sic] had a prior arrest history under PPN 932769.
Further the assigned conducted a court history of the offender which revealed that he is currently under Probation for Narcotics violations, under DC XX-XX-XXXXXX, Through 05-16-2007W
Affidavit of Probable Cause signed 12/6/05.
¶ 3 Dixon was arrested on December 6, 2005. He filed an omnibus pretrial motion seeking suppression of evidence on several grounds. Following an October 4, 2006 hearing, the learned Honorable Leon Tucker denied the suppression motion, concluding that under the totality of the circumstances, Dixon's arrest was with probable cause. N.T. 10/4/06 at 23-28.
¶ 4 A waiver trial was conducted, and Dixon was found guilty of possessing a firearm in violation of 18 Pa.C.S.A. § 6105,[1] carrying a firearm without a license in violation of 18 Pa.C.S.A. § 6106,[2] and carrying a firearm on a public street in Philadelphia in violation of 18 Pa.C.S.A. § 6108.[3]. On February 1, 2007, he was sentenced to two and a half years to 5 years imprisonment for violation of Section 6105, and a consecutive four years probation for violation of Section 6106. N.T. 2/1/07 at 12. No further penalty was imposed for his violation of Section 6108. Id.
¶ 5 On February 28, 2007, Dixon appealed the judgment of sentence, and was ordered to file a Rule 1925(b) statement of matters complained of on appeal.[4] In an *372 unpublished memorandum, the three judge panel of this Court originally assigned to hear Dixon's appeal determined that the Commonwealth had failed to sustain its burden of proof at the suppression hearing, and, therefore, Judge Tucker erred in refusing to grant Dixon's suppression request. Commonwealth v. Dixon, No. 574 EDA 2007, unpublished memorandum at 1-2 (Pa.Super. filed March 13, 2008). Dixon's judgment of sentence was vacated and the matter was remanded for a new trial. Id.[5]
¶ 6 Before that occurred, however, the Commonwealth filed a timely application for panel reconsideration or en banc reargument, and en banc reargument was granted on May 22, 2008, without limitation as to the issues to be addressed.[6] Dixon now asks us to determine:
1. Whether, where the Commonwealth fails to put forth any evidence to meet its burden of proof on a properly presented motion to suppress physical evidence, the trial court erred in denying the motion?
2. Whether, even given the Commonwealth's misinterpretation of the presented ground for the motion to suppress evidence, reasonable suspicion was lacking where there was no exchange of anything and where there were no facts presented to establish a belief that appellant was armed and dangerous?
3. Did not the trial court err in sentencing Appellant to two consecutive sentences for a single criminal act in violation of his right not "to be twice put in jeopardy of life or limb?
Appellant's brief at 3.
¶ 7 Dixon's first two allegations pertain to the denial of his suppression motion.
"Our standard of review in addressing a challenge to a trial court's denial of a suppression motion is whether the factual findings are supported by the record and whether the legal conclusions drawn from those facts are correct. ... [W]e must consider only the evidence of the prosecution and so much of the evidence of the defense as remains uncontradicted when read in the context of the record as a whole." Commonwealth v. Eichinger, 591 Pa. 1, 915 A.2d 1122, 1134 (Pa.2007), cert. denied, 552 U.S. 894, 128 S.Ct. 211, 169 L.Ed.2d 158 (2007). Those properly supported facts are binding upon us and we "may reverse only if the legal conclusions drawn therefrom are in error." Id.
*373 Commonwealth v. Thompson, 985 A.2d 928, 931 (Pa.2009). See also Commonwealth v. Hernandez, 594 Pa. 319, 328, 935 A.2d 1275, 1280 (2007). "Moreover, even if the suppression court did err in its legal conclusions, the reviewing court may nevertheless affirm its decision where there are other legitimate grounds for admissibility of the challenged evidence." Commonwealth v. Wilson, 927 A.2d 279, 284 (Pa.Super.2007) (citing Commonwealth v. Andersen, 753 A.2d 1289, 1291 (Pa.Super.2000)). See also Commonwealth v. Laatsch, 541 Pa. 169, 172, 661 A.2d 1365, 1367 (1995).
¶ 8 In the matter at hand, Judge Tucker entered his findings of fact on the record at the conclusion of the suppression hearing, in compliance with Pa.R.Crim.P. 581(I). N.T. 10/4/06 at 23-24. A review of those findings shows that they are supported by the record with the minor exception that Dixon was arrested on December 6th, not December 4th. As such, we turn to an assessment of the legal conclusions Judge Tucker has drawn from those facts, first addressing the propriety of his determination that, contrary to Dixon's assertion, the Commonwealth did not run afoul of Rule 581(H).[7]
¶ 9 Rule 581 as a whole "addresses the right of a criminal defendant to move to suppress evidence alleged to have been obtained in violation of his or her rights, and sets forth the procedure attendant to the disposition of a suppression motion." Commonwealth v. Baumhammers, 599 Pa. 1, 960 A.2d 59, 76 (2008).[8] The Rule imposes burdens on both the defendant and the Commonwealth.
*374 ¶ 10 In refusing to suppress the evidence here, Judge Tucker correctly referenced the burdens placed on the parties by Rule 581. Rule 1925(a) Opinion at 3-4. He then addressed how the particular procedural circumstances before him affected the application of Rule 581, and concluded that because Dixon failed to comply with Rule 581(D), the burden imposed on the Commonwealth by Rule 581(H) never shifted, and suppression was thus denied. Id. at 4-5, 960 A.2d 59.
¶ 11 After careful consideration of the procedural history of this case, and the applicable case and statutory law, we find Judge Tucker's refusal to suppress the evidence proper, albeit on slightly different grounds.[9] Specifically, we do not find that Dixon wholly failed to comply with Rule 581(D), such that the Commonwealth was entirely relieved of the burden placed on it by Rule 581(H). Instead, we find that that Dixon's partial failure to comply with Rule 581(D) resulted in the imposition of a lesser burden on the Commonwealth. Further, we find that the Commonwealth has met that burden.
¶ 12 As Judge Tucker recognized, Rule 581(D) requires that a motion seeking suppression "state specifically and with particularity the evidence sought to be suppressed, the grounds for suppression, and the facts and events in support thereof." Pa.R.Crim.P. 581(D); Commonwealth v. McDonald, 881 A.2d 858, 860 (Pa.Super.2005) (emphasis added).
¶ 13 We agree with Judge Tucker that Dixon's motion did not comply with the requirements of Rule 581(D).[10] Initially, it did not state "specifically and with particularity" the evidence sought to be suppressed, but instead merely indicated that Dixon sought the suppression of "physical evidence." Motion filed 4/19/06. It does not appear to be disputed that the gun taken as evidence on December 4th was the only piece of "physical evidence" seized pertaining to the charges leveled against Dixon, however.
¶ 14 Dixon's motion also failed to state with specificity and particularity the "facts and events" in support of his suppression request. Indeed, as a review of the motion quickly reveals, it sets forth no facts or events, even in the most basic form. Although Dixon's interactions with the police occurred on two datesDecember 4th and December 6th, the motion did not state if it pertained to one or both dates. As we noted above, however, since the only evidence which could be the subject of a motion to suppress was taken on December 4th, the motion can only pertain to the events of that date.
¶ 15 Finally, and of greatest significance, is the manner in which the motion set forth the grounds for suppression. Dixon's motion asserted that suppression was necessary because (1) Dixon's "arrest was illegal" because he was "(a) arrested without probable cause, (b) he was subject to a *375 stop and frisk on less than reasonable suspicion, and (c) he was arrested without a lawfully issued warrant or other legal justification;" and (2) "the search was conducted without probable cause." Motion filed 4/19/06.[11] Thus the specific and particular "grounds for suppression" set forth in compliance with Rule 581(D) were that suppression of the physical evidence was necessary based on lack of reasonable suspicion and/or probable cause as those requirements pertained to the "stop," "frisk," "search" and "arrest." The motion did not assert as a ground for suppression that the manner of the seizure of the physical evidence violated Dixon's constitutional rights, only that the seizure was not warranted in the first place.[12]
¶ 16 Based on the contents of Dixon's motion, we find that he wholly failed to comply with the requirement imposed on him by Rule 581(D) to state specifically and with particularity the evidence to be suppressed and the facts and events in support of the suppression request. With regard to the requirement that the motion state specifically and with particularity the grounds for suppression, we find that Dixon's motion complied with that directive to the extent that it put the Commonwealth on notice that Dixon's claim hinged on the alleged lack of probable cause or reasonable suspicion to stop and search Dixon on December 4th. Thus Dixon partially complied with the requirements imposed on him by Rule 581(D).
¶ 17 We are thus left to determine the effect of this partial compliance on the Commonwealth's burden under Rule 581(H). Rule 581(H) pertains to the Commonwealth's response to a suppression request. It states, in pertinent part, that "[t]he Commonwealth shall have the burden of going forward with the evidence and of establishing that the challenged evidence was not obtained in violation of the *376 defendant's rights." Pa.R.Crim.P. 581(H); Commonwealth v. Iacavazzi, 297 Pa.Super. 200, 443 A.2d 795 (1981). As Judge Tucker explained, however, the Commonwealth's burden under Rule 581(H) is not automatically triggered by the mere filing of a suppression motion. The requirements of 581(H) are affected by, and dependent on, compliance with Rule 581(D). McDonald, 881 A.2d at 860; Commonwealth v. Bradshaw, 324 Pa.Super. 249, 471 A.2d 558, 560 (1984); Commonwealth v. Ryan, 296 Pa.Super. 222, 442 A.2d 739, 744 n. 6 (1982); Iacavazzi, 443 A.2d at 797-798; Commonwealth v. Marini, 251 Pa.Super. 201, 380 A.2d 448, 450-451 (1977).
¶ 18 In the extreme case, a complete failure to comply with the specificity requirements of Rule 581(D) will result in waiver, as those requirements have been held to be mandatory. Commonwealth v. Irving, 485 Pa. 596, 601, 403 A.2d 549, 551 (1979) (citing Commonwealth v. Baylis, 477 Pa. 472, 384 A.2d 1185 (1978)); Commonwealth v. Harper, 485 Pa. 572, 581 n. 12, n. 13, 403 A.2d 536, 541 n. 12, n. 13 (1979).
¶ 19 As we noted above, however, we do not have before us an instance of complete noncompliance with Rule 581(D)'s requirements. Dixon's suppression request did state specifically and with particularity the grounds for suppression, i.e., lack of probable cause and/or reasonable suspicion. A review of the suppression hearing transcript clearly shows that the Commonwealth presented testimony addressing this issue. Once the Commonwealth presented evidence supporting its position that the police had probable cause and/or reasonable suspicion to stop Dixon, we disagree that it was additionally required to present evidence detailing the actual manner of the stop and specific way in which the gun was recovered. As the Superior Court noted in Bradshaw:
To require the Commonwealth to prove the legality of all its investigatory techniques, in a situation where no specific or particular course of conduct is clearly challenged, is not within the contemplation of 323(h) [now 581(H)]. Under these circumstances we may assume that the Commonwealth obtained the evidence in a legal manner, without requiring proof of legal procedures.
Bradshaw, 471 A.2d at 560. Here, Dixon's suppression request did not challenge the manner in which the stop was conducted, only that there were no grounds to conduct it in the first place.[13]
¶ 20 We find that, in light of Dixon's partial compliance with Rule 581(D), the suppression testimony presented by the Commonwealth in support of its position that probable cause and/or reasonable suspicion existed was sufficient to satisfy the burden placed on it by Rule 581(H). In sum, the Commonwealth addressed the grounds for suppression which Dixon's motion set forth specifically and with particularity. As such, we find no merit to Dixon's argument that suppression was required based on the Commonwealth's failure to meet its burden of proof under Rule 581(H).
¶ 21 In addition to challenging Judge Tucker's suppression order on the grounds that the Commonwealth had *377 failed to meet its burden under Rule 581(H), Dixon also asks us to determine whether suppression was warranted when "reasonable suspicion was lacking where there was not exchange of anything and where there were no facts presented to establish a belief that appellant was armed and dangerous." Appellant's brief at 3. Despite Dixon's emphasis on reasonable suspicion, Judge Tucker's decision to deny Dixon's suppression request was clearly based on the existence of probable cause.[14] N.T. 10/4/06 at 26. Charged as we are with determining the propriety of the rulings presented to us on appeal, we turn to an examination of Judge Tucker's conclusion that probable cause supported Dixon's arrest. Looking first to the judge's factual findings, we conclude that they are supported by the record.[15] We thus turn to the legal conclusion drawn therefrom that Dixon's arrest was supported by probable cause.
¶ 22 Judge Tucker based this determination on multiple factors. The judge first emphasized that Officer Nelson, having conducted more than 300 narcotics arrests during his 12 years on the force, had "vast experience" with narcotics arrests "in that *378 particular area," including 40 arrests in that immediate vicinity. Id. In addition, Judge Tucker noted Officer Nelson personally observed Kett checking up and down the block before he and Dixon engaged in the hand to hand gesture in question. Id. Finally, Judge Tucker called attention to the fact that the neighborhood where the arrest occurred was a known high drug crime location. Id. at 27 (citing Commonwealth v. Dunlap, 846 A.2d 674 (Pa.Super.2004) (en banc); Commonwealth v. Nobalez, 805 A.2d 598 (Pa.Super.2002), appeal denied, 575 Pa. 692, 835 A.2d 709 (2003); distinguishing Commonwealth v. Banks, 540 Pa. 453, 658 A.2d 752 (1995)).[16] Accordingly, concluded Judge Tucker, the totality of the circumstances gave the officers probable cause to stop and arrest Dixon, and to search him incident to that arrest.
¶ 23 In the several years that have passed since Judge Tucker made his October 2006 suppression ruling in this matter, the cases to which he cites have been the subject of hot debate. The Superior Court's en banc decision in Dunlap, upon which Judge Tucker relied, was subsequently reversed by the Pennsylvania Supreme Court on December 28, 2007. Commonwealth v. Dunlap, 596 Pa. 147, 941 A.2d 671 (2007). Therein, the Supreme Court held that "police training and experience, without more, is not a fact to be added to the quantum of evidence to determine if probable cause exists, but rather a `lens' through which courts view the quantum of evidence observed at the scene." Dunlap, 596 Pa. at 153-154, 941 A.2d at 675 (emphasis in original).
¶ 24 The implications of a police officer's experience when making a probable cause determination were addressed yet again in late 2009, when the Pennsylvania Supreme Court heard Thompson, supra. That case involved a 2005 arrest by a police officer *379 with nine years' experience, patrolling in a high crime area, who saw the appellant hand money to another individual in exchange for a small object. Id., 985 A.2d at 930. Based on his prior experience with drug arrests involving this very activity, the officer believed that a drug transaction had occurred, stopped the appellant, and recovered heroin from his pocket. Id. The appellant filed a suppression motion, which was denied prior to trial, then appealed to the Superior Court following his eventual conviction. Based on its March 2004 holding in Dunlap, 846 A.2d 674, the Superior Court affirmed the denial of the appellant's suppression motion in June of 2007. Commonwealth v. Thompson, 931 A.2d 54 (Pa.Super.2007). Before Thompson was heard by the Supreme Court, however, that Court reversed the Superior Court's decision in Dunlap. Dunlap, 596 Pa. 147, 941 A.2d 671 (2007).
¶ 25 When the Supreme Court subsequently took up Thompson, it was to specifically determine "[w]hether the initial seizure and immediately ensuing search lacked probable cause and whether the lower courts applied erroneous standards to judge the constitutionality of police conduct." Thompson, 985 A.2d at 931. In so doing, the Court acknowledged the murky state of the law on the subject of police experience and probable cause.
In attempting to discern the precise holding and proper significance of the Dunlap majority opinion, we observe that the expression purports to hold that police experience is not a factor relevant to probable cause, while at the same time directs that police experience is relevant to the probable cause inquiry. The Dunlap majority rejected the notion that police experience is worthy of the label "factor," but it conceded that such experience informs the court's decision so much that it enables the court to find probable cause where it otherwise would be unable to do so. It is difficult to reconcile Dunlap's professed holding with its own explanation and rationale. Further, and perhaps more importantly, two of the justices in the Dunlap majority (as well as the three other justices who wrote their own expressions) were of the opinion that police experience and training indeed are proper factors to consider in determining probable cause.
In light of the Dunlap majority's equivocal explanation of its holding, and given the manner in which the votes were cast in that case, it is not surprising that both parties claim Dunlap supports their positions on appeal. Our careful consideration of this issue, as well as the uncertainty of our jurisprudence in this area of the law, leads us to conclude that a clarification is warranted.
Thompson, 985 A.2d at 934-935 (footnote omitted, emphasis in original).
¶ 26 To that end, the Supreme Court held that "a police officer's experience may fairly be regarded as a relevant factor in determining probable cause," with the caution that "`an officer's testimony in this regard shall not simply reference `training and experience abstract from an explanation of their specific application to the circumstances at hand' ... [but] must demonstrate a nexus between his experience and the search, arrest, or seizure of evidence." Id. at 935.[17] Having so concluded, the Supreme Court turned to the specific circumstances before it.
¶ 27 As we noted above, the appellant in Thompson was arrested and searched by an experienced officer who had observed *380 him exchange money for a small object in a high drug crime area. Thompson, 985 A.2d at 930. In finding that the search and seizure were supported by probable cause, the Supreme Court noted the officer's nine years experience, including his familiarity with the nature of the neighborhood and the type of hand-to-hand drug exchange in question. Id., 985 A.2d at 936. The Court also noted that the officer drew a nexus between his experience and the observations he made leading to the appellant's arrest, testifying that he had seen that type of exchange done several hundred times, and performed that many arrests of "this very type." Id. at 936.
¶ 28 Thus, pursuant to Thompson, Officer Nelson's experience may be regarded as a relevant factor in determining probable cause, so long as there is a nexus between that experience and his decision to stop and search Dixon. Id. at 935. We find that such a nexus has been demonstrated. Officer's Nelson testified that his experience included twelve years on the police force, including over 300 narcotics arrests (40 to 50 of which occurred in the high crime neighborhood in question). N.T. 10/4/06 at 6-7, 9-10. Additionally, Officer Nelson explained that over 250 times he had personally observed drug dealers engaged in the closed fist to closed fist hand transaction that he observed Dixon and Kett perform. Id. at 9. Such testimony clearly demonstrates the type of nexus contemplated by Thompson.
¶ 29 Thus, for purposes of a probable cause analysis, the totality of the circumstances presented at Dixon's suppression hearing established that Officer Nelson, with the benefit of extensive drug crime experience, observed suspicious behavior (the furtive glances up and down the street), followed by a hand to hand gesture the officer knew from experience was indicative of a drug transaction, in a known high crime neighborhood. We find that these facts and circumstances, which were within the knowledge of Officer Nelson at the time Dixon was stopped and a search was attempted, are sufficient to warrant a person of reasonable caution in the belief that Dixon had committed a crime. As such, probable cause existed, and suppression was properly denied. Thompson, 985 A.2d at 931, 935-936; Commonwealth v. Wells, 916 A.2d 1192, 1196 (Pa.Super.2006) (Identifying as factors relevant to a determination of probable cause the professional experience of a police officer in interpreting the actions of those who traffic in controlled substances, an officer's knowledge of drug-trafficking activity in a particular neighborhood, and the movements and manners of the parties to the transaction); Nobalez, 805 A.2d at 600 (citing the experience of a narcotics officer, which allowed him to interpret the way a drug trafficker was acting and to "know in a way a layperson could not that [the officer] was watching a drug sale.").[18]
¶ 30 In addition to raising claims regarding the suppression of evidence, Dixon also questions "[d]id not the trial court err in sentencing Appellant to two consecutive sentences for a single criminal act, in violation of his right not `to be twice put in jeopardy of life or limb.'" Appellant's brief at 3.[19] Merger of sentences is *381 governed by Section 9765 of the Judicial Code, which directs that:
No crimes shall merge for sentencing purposes unless the crimes arise from a single criminal act and all of the statutory elements of one offense are included in the statutory elements of the other offense. Where crimes merge for sentencing purposes, the court may sentence the defendant only on the higher graded offense.
42 Pa.C.S. § 9765. "Despite the enactment of Section 9765, the doctrine of merger remained a thorny issue." Commonwealth v. Baker, 963 A.2d 495, 508 (Pa.Super.2008).
In 2006, our Supreme Court attempted to clarify the law of merger in Commonwealth v. Jones, 590 Pa. 356, 912 A.2d 815 (Pa.2006). However, Jones was a plurality decision that generated two different approaches to a merger analysis: a "lead opinion" approach, authored by Justice Castille, and a "dissenting opinion" approach, authored by Justice Newman. The lead opinion approach requires an evaluation of the statutory elements of each crime with an eye to the specific facts of the case. The dissenting approach utilizes a stricter, statutory elements test. Neither approach garnered the support of more than half of the justices. Therefore, there is no holding in Jones upon which this Court can rely.
Commonwealth v. Coppedge, 984 A.2d 562, 564 (Pa.Super.2009). More than a year after Jones was decided, a panel of this Court was asked to address a merger claim in Commonwealth v. Brandon Williams, 920 A.2d 887, 888 (Pa.Super.2007), a case involving a crime which occurred after the effective date of Section 9765. Citing Jones as the Pennsylvania Supreme Court's most recent pronouncement on the subject, Williams adopted the elements-based approach taken by Justice Newman's dissenting opinion, indicating that it "reflects and gives proper deference to § 9765, a statute that has not been ruled unconstitutional by our Supreme Court," and "more accurately reflects this Court's jurisprudence on merger." Williams, 920 A.2d at 891.
¶ 31 Since Williams, the Superior Court has employed an elements-based test to determine whether crimes merge for sentencing purposes. Coppedge, 984 A.2d at 564-565 (citing Commonwealth v. Gary Williams, 980 A.2d 667 (Pa.Super.2009)); Baker, supra; Commonwealth v. Springer, 961 A.2d 1262 (Pa.Super.2008); Commonwealth v. Martz, 926 A.2d 514 (Pa.Super.2007), (appeal denied, 596 Pa. 704, 940 A.2d 363 (Pa.2008)). See also Commonwealth v. Pitner, 928 A.2d 1104, 1111 (Pa.Super.2007) (appeal denied, 596 Pa. 716, 944 A.2d 757 (2008)). Then, on December 28, 2009, the Supreme Court decided Commonwealth v. Baldwin, 985 A.2d 830 (Pa.2009), expressly stating that:
A plain language interpretation of Section 9765 reveals the General Assembly's intent to preclude the courts of this Commonwealth from merging sentences for two offenses that are based on a single criminal act unless all of the statutory elements of one of the offenses are included in the statutory elements of the other.
Baldwin, 985 A.2d at 837.
¶ 32 Thus, applying this standard to the matter at hand, we find that the charges *382 against Dixon arose out of a single act, but not all the statutory elements of the Section 6105 violation coincide with those of the Section 6106 violation.
Section 6105(a) contains a statutory element that § 6106(a) does not: namely, conviction of an enumerated offense. Under § 6105, the Commonwealth need not prove that the defendant lacks a valid license. Rather, it must only prove that Appellant was convicted of an enumerated offense. Similarly, Section 6106(a) contains a statutory element that § 6105(a) does not: namely, lack of a valid license.
Williams, 920 A.2d at 891. As such, Dixon's sentences were not appropriate for merger, and no reversal is required on this ground. 42 Pa.C.S. § 9765.
¶ 33 For the foregoing reasons, we affirm Dixon's judgment of sentence.
¶ 34 Affirmed.
¶ 35 CLELAND, J. concurs in the result.
¶ 36 BENDER, J. notes his dissent.
NOTES
[*] Judge Klein did not participate in the consideration or decision of this case.
[1] Section 6105, pertaining to "Persons not to possess, use, manufacture, control, sell or transfer firearms," states:
(a) OFFENSE DEFINED.
(1) A person who has been convicted of an offense enumerated in subsection (b), within or without this Commonwealth, regardless of the length of sentence or whose conduct meets the criteria in subsection (c) shall not possess, use, control, sell, transfer or manufacture or obtain a license to possess, use, control, sell, transfer or manufacture a firearm in this Commonwealth.
(2)(i) A person who is prohibited from possessing, using, controlling, selling, transferring or manufacturing a firearm under paragraph (1) or subsection (b) or (c) shall have a reasonable period of time, not to exceed 60 days from the date of the imposition of the disability under this subsection, in which to sell or transfer that person's firearms to another eligible person who is not a member of the prohibited person's household.
18 Pa.C.S. § 6105.
[2] Section 6106, pertaining to "Firearms not to be carried without a license," directs:
(a) OFFENSE DEFINED.
(1) Except as provided in paragraph (2), any person who carries a firearm in any vehicle or any person who carries a firearm concealed on or about his person, except in his place of abode or fixed place of business, without a valid and lawfully issued license under this chapter commits a felony of the third degree.
(2) A person who is otherwise eligible to possess a valid license under this chapter but carries a firearm in any vehicle or any person who carries a firearm concealed on or about his person, except in his place of abode or fixed place of business, without a valid and lawfully issued license and has not committed any other criminal violation commits a misdemeanor of the first degree.
18 Pa.C.S. § 6106.
[3] Section 6108, pertaining to "Carrying firearms on public streets or public property in Philadelphia," states:
No person shall carry a firearm, rifle or shotgun at any time upon the public streets or upon any public property in a city of the first class unless:
(1) such person is licensed to carry a firearm; or
(2) such person is exempt from licensing under section 6106 of this title (relating to firearms not to be carried without a license).
18 Pa.C.S. § 6108.
[4] Dixon's timely Rule 1925(b) statement asserted several allegations of error regarding the denial of Dixon's suppression request, including claims that (1) the Commonwealth had failed to meet the burden imposed on it by Pa.R.Crim.P. 581(H); (2) the Commonwealth had failed to demonstrate that the police had reasonable suspicion that criminal activity was afoot in order to justify Dixon's seizure, or that he was armed and dangerous in order to justify a frisk; (3) the police lacked probable cause to arrest and search Dixon; and (4) Judge Tucker erred in factually finding that Dixon was arrested on December 4th. Pa.R.A.P. 1925(b) Statement of Matters Complained of on Appeal at 1-5. In addition Dixon's 1925(b) statement also challenged the sentences imposed upon him. Id. at 7, 8, 9.
[5] Since it vacated Dixon's sentence, the three judge panel did not address his challenges to that sentence.
[6] Pursuant to the Pennsylvania Rules of Appellate Procedure, "[r]eargument may be allowed limited to one or more of the issue presented in the application, in which case the order allowing the reargument shall specify the issue or issues which will be considered by the court." Pa.R.A.P. 2546(b). Such was not the case here. Order filed 5/22/08. If en banc consideration is granted without limitation, "we review all issues as if the parties were presenting them to this Court for the first time." Krysmalski v. Tarasovich, 424 Pa.Super. 121, 622 A.2d 298, 300 n. 1. (1993).
[7] We note that this allegation has been preserved for purposes of appeal because it was raised before the trial court, and was included in Dixon's Rule 1925(b) statement. Pursuant to the Pennsylvania Rules of Appellate Procedure, issues not raised in the lower court are waived and cannot be raised for the first time on appeal. Pa.R.A.P. 302(a). In the case at hand, when the Commonwealth rested at the suppression hearing, Dixon's counsel clearly alerted Judge Tucker that he believed the Commonwealth had failed to meet its burden of proof because it had not introduced evidence of "what was actually found as a result of the search and the circumstances of the search." N.T. 10/4/06 at 13. Thus Dixon raised before the lower court a claim that the Commonwealth failed to meet its burden of proof by failing to introduce evidence of the item that was found as a result of the search, and the circumstances of the search, and such a claim has been preserved for appeal in so far as the requirements of Rule 302(a) are concerned.
In addition to preservation under Rule 302(a), Commonwealth v. Lord, 553 Pa. 415, 420, 719 A.2d 306, 309 (1998), and its progeny require that issues must be presented in a timely filed Rule 1925(b) statement, if such a statement is properly demanded of the appellant. Here, as we noted above, Dixon filed such a statement, asserting in pertinent part that Judge Tucker erred in denying the motion to suppress "where there was no evidence presented to establish how the handgun was recovered." Motion filed 5/7/07 at 1. Without presenting such evidence, Dixon's statement claimed, the Commonwealth failed to fulfill the burden placed on it by Pa. R.Crim.P. 581(H) to prove that the evidence was obtained in a way that did not violate Dixon's constitutional rights. Id. at 2.
Based on the above, we find that Dixon has properly preserved for appellate review an allegation that Judge Tucker erred in refusing to grant suppression based on Dixon's allegation that the Commonwealth failed to present evidence of the actual item seized from Dixon, and the manner in which that seizure occurred, and, as such, did not meet the burden placed on it by Rule 581(H).
[8] Originally numbered 323, the Rule was enacted in 1965 and renumbered 581 in 2000. It states:
The Commonwealth shall have the burden of going forward with the evidence and of establishing that the challenged evidence was not obtained in violation of the defendant's rights. The defendant may testify at such hearing, and if the defendant does testify, the defendant does not thereby waive the right to remain silent during trial.
Pa.R.Crim.P. 581(H).
[9] We may affirm the trial court's decision on any ground. Commonwealth v. Winkle, 880 A.2d 1280, 1285-1286 (Pa.Super.2005) (citing Commonwealth v. Voss, 838 A.2d 795 (Pa.Super.2003)).
[10] Dixon sought suppression via a "form" motion, which is filled out by marking whatever sections the filer deems applicable. Dixon selected the section which asserted that suppression of the physical evidence was necessary because the "arrest was illegal" for three enumerated reasons. Motion filed 4/19/06 at (I)(A)(1), (B)(1)(a)-(c). In addition, separate from the allegations concerning the legality of Dixon's arrest, another selected option asserted that the physical evidence should be suppressed because "the search was without a warrant" and "the search was conducted without probable cause." Id. at (B)(3), (B)(4). The motion did not set forth any specific date references, nor did it specify the "physical evidence" to be suppressed.
[11] The motion also asserted that "the search was without a warrant," but that allegation does not pertain to our current discussion.
[12] Dixon was given the opportunity to clarify the basis for his suppression request at the start of the suppression hearing, and his counsel confirmed that the grounds asserted were the alleged lack of reasonable suspicion or probable cause to stop and search Dixon in the first place, not the manner in which the stop and search were conducted or the manner in which the evidence was recovered. N.T. 10/4/06 at 4.
In direct response to Dixon's counsel's explanation of the basis for the suppression request, the prosecutor offered the testimony of Officer Nelson, regarding the observations which led to the decision to stop Dixon and Kett, then rested its case. At that point, despite his earlier indication that Dixon's suppression request was based on the allegation that the police lacked grounds to conduct a stop and search, Dixon's counsel abruptly asserted that the Commonwealth had rested prematurely, before introducing evidence of "what was actually found as a result of the search and the circumstances of the search," and, that as a result of such omission, the Commonwealth failed to meet its burden of proof. Id. at 13.
The prosecutor disputed this, indicating that her understanding of the basis of the suppression request was that there was no reasonable suspicion or probable cause to stop Dixon. Id. at 14. She asked that the Judge deny the suppression request "based upon the probable cause that [the officers] had to arrest this defendant." Id. Judge Tucker confirmed that this was also his understanding of the motion, and Dixon's counsel agreed that the ground for the suppression request was lack of reasonable suspicion or probable cause to stop Dixon. Id. at 15. Counsel then added, however, "what I'll now do is base the argument on two grounds," and repeated his claim that the Commonwealth had rested prematurely, resulting in the failure to meet its burden of proof. Id. at 15-16 (emphasis added).
Following further discussion with counsel, however, Judge Tucker clarified that Dixon's motion was limited to the events that took place on December 4th, and Dixon's counsel did not dispute this. Id. at 21-22.
[13] As Judge Tucker explained:
The only violations of Dixon's rights that were communicated to this Court involved the stop, seizure, and search of his person. Dixon did not specifically aver that there was an unlawful seizure of physical evidence. As a result, this court focused on whether the stop, seizure and search of Dixon were lawful, which were the limited grounds he relied on to suppress the evidence.
Rule 1925(a) Opinion at 5.
[14] The existence of reasonable suspicion supports an "investigative detention," or Terry stop (deriving its name from Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968)) which subjects a person to a stop and a period of detention, but does not involve such coercive conditions as to constitute the functional equivalent of an arrest. Commonwealth v. Chase, 599 Pa. 80, 960 A.2d 108, 117 (2008) (citing Commonwealth v. Polo, 563 Pa. 218, 759 A.2d 372, 375 (Pa.2000)). If an arrest or custodial detention occurs, however, it must be supported by probable cause, not just reasonable suspicion. Commonwealth v. Jones, 874 A.2d 108, 116 (Pa.Super.2005) (citing Commonwealth v. DeHart, 745 A.2d 633, 636 (Pa.Super.2000)).
Probable cause is made out when "the facts and circumstances which are within the knowledge of the officer at the time of the arrest, and of which he has reasonably trustworthy information, are sufficient to warrant a man of reasonable caution in the belief that the suspect has committed or is committing a crime." Commonwealth v. Rodriguez, 526 Pa. 268, 585 A.2d 988, 990 (Pa. 1991). The question we ask is not whether the officer's belief was "correct or more likely true than false." Texas v. Brown, 460 U.S. 730, 742, 103 S.Ct. 1535, 75 L.Ed.2d 502 (1983). Rather, we require only a "probability, and not a prima facie showing, of criminal activity." Illinois v. Gates, 462 U.S. 213, 235, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983) (citation omitted) (emphasis supplied). In determining whether probable cause exists, we apply a totality of the circumstances test. Commonwealth v. Clark, 558 Pa. 157, 735 A.2d 1248, 1252 (Pa. 1999) (relying on Gates, supra).
Thompson, 985 A.2d at 931.
[15] Specifically, Judge Tucker made the following findings of fact at the conclusion of the suppression hearing:
[A]t approximately 12:25 p.m., in the vicinity of the 1200 block of North 29th Street in the city and county of Philadelphia, Officer Nelson, along with his partner, Officer Parker, were in plain clothes operating an unmarked vehicle in that vicinity. Offer Nelson, prior to that date, had approximately 12 years on the police force, had been involved in approximately 300 narcotics arrests, and many of those arrests, approximately 40 were in that immediate vicinity. It was at that time when the officers were operating the unmarked vehicle, they observed Mr. Dixon, along with an individual, Arthur Kett, in the middle of the block. It was at that time that ... Officer Nelson observed what he believed to be a narcotics transaction, based upon his years of experience on the police force and his various arrests regarding narcotics, and his experience in that particular area, known to him as a high drug area for the sale of crack cocaine and marijuana. It was at that time when he observed the two males doing, again, what he believed to be a narcotics transaction, and that belief was based upon what he observed, a hand-to-hand transaction, closed fist to closed fist transaction, after looking up and down the street by the individuals.
N.T. 10/4/06 at 23-24.
[16] In Banks, a Philadelphia Police officer observed the appellant and another person exchange an unknown object for money on a Philadelphia street corner. Banks, 540 Pa. at 454, 658 A.2d at 752. As the officer's marked patrol car drew near, the appellant fled, but he was promptly captured and searched, revealing cocaine in his possession. Id. Addressing whether the arrest was with probable cause, the Pennsylvania Supreme Court found that:
mere police observation of an exchange of an unidentified item or items on a public street corner for cash (which alone does not establish probable cause to arrest) cannot be added to, or melded with the fact of flight (which alone does not establish probable cause to arrest) to constitute probable cause to arrest. Such facts, even when considered together, fall narrowly short of establishing probable cause.
Id., 540 Pa. at 456, 658 A.2d at 753.
Subsequent to the Supreme Court's Banks decision, an en banc panel of the Superior Court heard Dunlap, wherein a Philadelphia police officer with five years experience, including nine months as a member of the drug strike force, who had conducted fifteen to twenty narcotics arrests in the known high drug crime neighborhood in question, observed the appellant approach a man standing on a street corner, engage in a brief conversation, and then exchange money for small objects. Dunlap, 846 A.2d at 675. The appellant was stopped by another police officer who recovered from him three packets of crack cocaine. Id., 846 A.2d at 675-676. The observing officer testified that the appellant was stopped because, based on the officer's experience and knowledge, he believed that what he had witnessed was a narcotics transaction. Id., 846 A.2d at 676. Finding that probable cause was established by these circumstances, the en banc panel of the Superior Court distinguished Banks, supra, listing as "key differences" that (a) an experienced narcotics officer made the observations; (b) the transaction took place in what the officer knew from personal and professional experience, as well as reputation, to be a high drug-crime area; and (c) based on his training, experience as an officer, and knowledge of the area, the officer reasonably concluded that he probably witnessed a drug transaction. Dunlap, 846 A.2d at 675.
[17] In so concluding, Thompson expressly disapproved the Supreme Court's decision in Dunlap, insofar as it holds otherwise. Thompson, 985 A.2d at 935 n. 8.
[18] Once probable cause existed to arrest Dixon, a search incident to that arrest was permitted. Commonwealth v. White, 543 Pa. 45, 57, 669 A.2d 896, 902 (1995) (No warrant is required to search a person incident to a lawful arrest, and the scope of the search encompasses the person and the immediate area in which the person was detained).
[19] Although Dixon did not raise this allegation before the trial court, either at sentencing or in a post-sentence motion, a claim that crimes should have merged for purposes of sentencing challenges the legality of a sentence and, thus, cannot be waived. Commonwealth v. Ede, 949 A.2d 926, 932 (Pa.Super.2008) [vacated and remanded on other grounds, 600 Pa. 506, 968 A.2d 228 (2009) ]. Therefore, we are not precluded from reviewing this issue on appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542708/ | 93 F.2d 395 (1937)
LUTERAN
v.
UNITED STATES and four other cases.[*]
Nos. 10865-10869.
Circuit Court of Appeals, Eighth Circuit.
November 29, 1937.
Rehearing Denied December 17, 1937.
*396 *397 MERRILL E. OTIS, Judge.
John A. Luteran, Frank H. Adams, Lorne E. Wells, Joe R. Wells, Jr., and Leo B. Roach were convicted of conspiring to injure citizens by improperly counting their votes in a congressional election (18 F.Supp. 213), and they appeal.
Affirmed.
Harry L. Jacobs, of Kansas City, Mo. (I. J. Ringolsky, William G. Boatright, Ludwick Graves, James Daleo, Ringolsky, Boatright & Jacobs, and Johnson, Lucas, Landon, Graves & Fane, all of Kansas City, Mo., on the brief), for appellant.
Sam C. Blair, Asst. U. S. Atty. of Kansas City, Mo. (Maurice M. Milligan, U. S. Atty., and Randall Wilson, Richard K. Phelps, and Thomas A. Costolow, Asst. U. S. Attys., all of Kansas City, Mo., on the brief), for appellee.
Before GARDNER, SANBORN, and THOMAS, Circuit Judge.
THOMAS, Circuit Judge.
This is the second of the so-called Kansas City, Mo., election cases to be tried in the District Court. The first case tried in this group of cases was Walker et al. v. United States (C.C.A.) 93 F.2d 383. The indictments in this and in the Walker Case are similar except as to the names of the defendants and the details of the overt acts.
The indictment in the present case is in two counts. It was submitted to the jury only upon the second count, which count charges conspiracy in violation of section 19 of the Criminal Code (18 U.S.C.A. § 51) to injure and oppress certain citizens of the 17th precinct of the 12th ward of Kansas City, Mo., by counting their votes at the November 3, 1936, general election not for the Republican candidate for Representative in Congress for whom they were cast, but for his Democratic opponent.
The defendants named in the indictment were John A. Luteran, Democratic precinct captain, who acted as challenger and watcher at the polling place; Leo B. Roach, a policeman stationed at the polling place on election day; and the following precinct election officials: Callie Clark, Democratic judge; Lorne E. Wells, Democratic judge; Frank H. Adams, Republican judge; Joe R. Wells, Jr., Democratic clerk; and Pearl Sperry, Republican clerk. At the commencement of the trial the defendants Callie Clark and Pearl Sperry changed their pleas from not guilty to nolo contendere. The other five defendants were convicted and are the appellants here.
Upon the trial of the case the appellants introduced no evidence in their own behalf. The government's testimony tended to show the following facts:
The voting place of the 17th precinct of the 12th ward was in the large display room of a monument company, in which were exhibited rows of stone monuments. A stove furnished heat for the room. At one side of the room were three offices used for business purposes, one of which, about 100 feet from where the voting took place, was furnished with a telephone and had a glass window in the partition separating it from the large display room.
The election officials arrived at the polling place at about 5:45 a. m. on election day with the election paraphernalia consisting of ballot boxes, poll books, ballots, tally sheets, and other essentials and arranged themselves about two tables just inside the door. The appellant Roach, a member of the police department, sat by the stove about 40 feet from the election officials.
The election proceeded without any unusual incident until about 2 o'clock in the afternoon. At that time appellant Luteran appeared with the key to the political ballot box, unlocked it, and with the assistance of appellant Lorne E. Wells dumped the ballots into a pasteboard carton. Later in the afternoon Luteran and two other men were seen in the back of the room with the box of ballots unfolding the ballots and laying them in piles. The box did not reappear until after the polls closed in the evening when appellant Roach was observed near the stove taking ballots out of the box, unfolding them and laying them in a pile.
*398 The tally sheet, which shows the total vote for each candidate, was made out with the assistance of appellant Roach; and, at the direction of Luteran, was signed by all the officials about the middle of the afternoon. The ballots were not counted by the election officials.
After the polls had closed in the evening, Luteran said some one had called him on the telephone and said he could not be there and asked that a ballot be voted for him. Luteran thereupon put a ballot in the box. About 7:30 in the evening, a half hour after the polls closed, Luteran announced that he would have to have about 150 more votes. Over the protest of some of the officials, but with the assistance of others, about 150 names furnished by Luteran were written into the poll book and a like number of ballots put in the box.
The poll books, tally sheets, and ballots were introduced in evidence. Approximately 95 ballots showed that they had been changed from Republican ballots to Democratic ballots. This had been done by erasing the X under the Republican emblem on the ballot and entering an X in the Democratic circle. About 30 voters testified that they had cast straight Republican ballots. Their ballots were then identified by the serial number thereon and it was shown by an inspection of the ballots that they had been changed by the method described to Democratic ballots.
The official count reported by the election commissioners shows that 544 votes were cast in this precinct for the Democratic candidate for Congress and 35 for the Republican candidate. Had the changed ballots been counted as cast, the Republican candidate would have received approximately 130 votes.
Other details of the evidence will be referred to in connection with the alleged errors.
Five of the Kansas City election cases having been appealed to this court and submitted at the same time, an order was entered permitting counsel for all the parties and the government to file separate briefs covering questions common to all the appeals. All such common questions were considered and determined by this court in the Walker Case, supra, it being the first of the group of such cases to be tried and appealed. The decision of such common points in the Walker Case is controlling and will not be disturbed in this case.
In addition to the questions common to all these appeals the appellants assign as grounds for reversal in this case (1) the insufficiency of the evidence, (2) want of evidence to connect appellant Roach with the conspiracy, (3) admission of the testimony of grand jurors, (4) evidence of stuffing of the ballot box, (5) admission of certain testimony of witnesses Sperry, Clark, and Norstrom, (6) the charge to the jury, and (7) denial of a motion to set the order of cases for trial.
The contention that the evidence of intent to injure citizens is not sufficient to support the verdict cannot be sustained. Upon similar facts the same argument was made in the Walker Case, supra. That decision is controlling here.
Similarly the claims (1) that the testimony of grand jurors was not admissible, (2) that evidence of stuffing the ballot box was not admissible, and (3) that the court erred in denying the motion to set the order of cases for trial were raised, argued, and disposed of in the Walker Case, supra. The record is substantially the same in this case and in the Walker Case upon these points. We held in the Walker Case that all these contentions were without merit, and so do we here.
There remain for consideration the alleged errors peculiar to this case alone. The first of these is that there is not sufficient evidence to sustain the conviction of appellant Roach. It is argued in his behalf that the evidence relating to him is as consistent with innocence as with guilt, and hence is insufficient to sustain the conviction. The contention is that since he was only a policeman stationed at the polling place he had no other official duty than to prevent a breach of the peace; that the fact that the conduct of the election officials in his presence was dishonest cannot be attributed to him, even though he might have been able to interfere and defeat the object of the conspiracy if he had been inclined to do so. It is pointed out that there is no evidence that any acts of violence were committed in his presence or that he refused to help any one who requested his aid, or that he assisted the conspirators by means of any neglect of his duties as a city policeman.
This court has recognized for practical reasons that where proof of a conspiracy has been established a relatively slight amount of evidence connecting the defendant therewith is sufficient to sustain a verdict. McDonald v. United States, 89 F.2d *399 128 (C.C.A.8); Galatas v. United States, 80 F.2d 15 (C.C.A.8). Participation in the formation of the conspiracy is not essential to culpability if after it was formed the defendant aided or abetted it with an understanding of its purpose. McDonald v. United States, supra; Laska v. United States, 82 F.2d 672 (C.C.A.10); Burkhardt v. United States, 13 F.2d 841 (C.C.A.6). The evidence must disclose something further than participation in the offense which is the object of the conspiracy at some stage of its execution, for there must be proof of an unlawful agreement either express or implied. Dickerson v. United States, 18 F.2d 887 (C.C.A.8); Linde v. United States, 13 F.2d 59 (C.C.A.8); Burkhardt v. United States, supra. But where the defendant aided the conspirators knowing in a general way their purpose to break the law the jury may infer that he entered into an express or implied agreement with them. Galatas v. United States, supra; McDonald v. United States, supra.
The testimony respecting appellant Roach and upon which the government bases its claim that he was a member of the conspiracy is briefly as follows: Mrs. Johnson, a Republican watcher at the polling place, testified that she saw Roach during the afternoon in the back part of the room out of the sight of the election officials entering marks upon the official tally sheets. Mrs. Clark, a Democratic election judge, saw him helping to unfold the ballots after the polls closed. He was about 6 feet away when Luteran told the Republican watcher, "We are not going to count these ballots * * * I will give each Republican 35 and we will take all the rest." He was present when Luteran compelled Mrs. Clark to sign the tally sheet before the polls closed. There is also evidence from which the jury would be justified in believing that Roach overheard and saw various other things which characterized the fraudulent conduct of the conspirators, such as Luteran's removal of the ballots from the box in the afternoon, the protests of the Republican judge, and Luteran's directing the clerks to add 150 names to the list of voters.
In view of these facts it cannot be said that there is no substantial evidence that Roach knew of the conspiracy when he handled the ballots and marked the tally sheets. He could have had no lawful purpose in mind in marking the tally sheets when he knew that the election officials had not counted the ballots. Every hypothesis of innocence is destroyed by his knowledge of the manner in which Luteran and the other conspirators had behaved throughout the afternoon. There is in the record substantially more than the "slight evidence" which this court has held to be sufficient to sustain a verdict of guilty.
We have to consider further, also, the alleged errors in the admission of certain testimony of the witnesses Clark, Sperry, and Norstrom.
Over objection of appellants Callie Clark, the Democratic election judge indicted with appellants and who at the commencement of the trial entered a plea of nolo contendere, testified that after the indictment was returned appellant Luteran came to her house several times and had conversations with her. In one of the conversations she testified: "He assured me that I had nothing to worry about, that everything was safe. He said, `Look what we pulled in the primary', he said, `we are going to grab Milligan out and send him to Philadelphia, or another seaport, and we will send Judge Otis back to St. Joe, and put in a judge we can handle.'"
Again, A. J. Norstrom, special agent for the Federal Bureau of Investigation, testified that he interviewed each of the appellants about February 8, 1937, which was after the indictments were returned and before the trial. The substance of his conversations with the various appellants is that they declared in effect that they had observed no irregularities in the election, and some of them said they had participated in counting the ballots. These interviews are claimed to be inadmissible and prejudicial.
The testimony of Mrs. Clark was clearly admissible against Luteran, and the testimony of Norstrom was admissible against all the appellants interviewed by him for the purpose of showing their consciousness of guilt. For the same reason it was proper to admit the testimony of Mrs. Clark that appellant Roach warned her not to testify. Wilson v. United States, 162 U.S. 613, 620, 16 S.Ct. 895, 40 L.Ed. 1090; Madden v. United States, 20 F.2d 289, 294 (C. C.A.9). Such testimony being admissible for a legitimate purpose, the fact that it is prejudicial is not ground for reversal. Cochran v. United States, 41 F.2d 193, 206 (C.C.A.8).
*400 Pearl Sperry, an election clerk who was also indicted and entered a plea of nolo contendere, testified on cross-examination in reference to the writing in of the names in the books. She said that she knew it was wrong, but that she did not call the policeman nor the election commissioners and that she had never called anybody nor complained about it to anybody until after she was indicted in this case. On redirect she testified: "I was asked if I called a policeman, if I called Mr. Roach during the day when I saw what I thought to be irregularities. As to why I didn't call Mr. Roach, it wouldn't have been worth while. He was working right along with the rest of them." After this evidence was received, it was objected to as a conclusion and as being highly improper. The objection came too late, and no motion to strike was made. Mrs. Sperry does not appeal. Therefore no substantial right of appellants was denied. Smith v. United States, 267 F. 665, 670 (C.C.A.8).
Several of the specifications of error relate to instructions to the jury. In one of the instructions complained of the court told the jury that a conspiracy need not be formed by an express agreement, but that "a conspiracy may be entered into by conduct as well as by an agreement in words, by acquiescence and by silent consent." Appellants invoke the rule that mere acquiescense or silence or failure of an officer to perform a duty does not make one a participant in a conspiracy unless he acts or fails to act with knowledge of the purpose of the conspiracy "and with the view of protecting and aiding it." Burkhardt v. United States, 13 F.2d 841, 842 (C.C.A.6). The instructions read as a whole are not subject to this criticism. Here there is evidence from which the jury may have found that each of the appellants actively aided in the furtherance of the design of the conspiracy with full knowledge of its purpose. Besides, the court further instructed the jury that one could not be convicted as a conspirator upon mere knowledge or approval, but that "there must, in addition to such knowledge or approval, be voluntary, willing, knowing and intentional cooperation or agreement to cooperate before there can be any conspiracy." Guinn v. United States (C.C.A.) 228 F. 103, 110 (C.C.A.8).
It is complained that the court informed the jury that certain facts testified to by government witnesses were undisputed, whereas a plea of not guilty in a criminal case denies every fact and circumstance in evidence. Ezzard v. United States, 7 F.2d 808 (C.C.A.8). The rule has no application to the particular instruction complained of in the instant case, because the court further charged the jury without exception that "it has been very frankly stated by counsel for the defendants that they believe every word that the witnesses * * * for the government have testified to." If this be true, and it must be assumed to be true, it is an admission that the facts so testified to are "undisputed." Taylor v. United States, 19 F.2d 813, 817 (C.C.A.8).
In charging the jury that its verdict must be unanimous and must reflect the conscientious judgment of each juror, the court said further in substance that no one juror should set himself against all of his associates without consulting their views, and that he should agree with them if he could conscientiously do so. The court then expressed the hope that the jury would agree as early as possible but cautioned them to "take all the time you need for a careful consideration of the case."
The criticism of this instruction is that it was inappropriate to give it at that stage of the trial; that such an instruction is not appropriate until some such circumstance as an apparent disagreement exists. The timeliness of such an instruction lies within the discretion of the trial judge, and in the absence of an abuse of that discretion resulting in prejudice this court cannot interfere. Abuse of discretion cannot be predicated upon mere conjecture.
It is further urged that the court erred in including in an instruction an illustration. The instruction is as follows:
"To illustrate, I have often found that a principle is made more clear by illustration, it is to me, certainly, suppose we have A, who is a precinct captain, and B and C, who are respectively a Republican and Democratic judge, and this precinct captain, we will say he is a Republican precinct captain, he intends that although he knows that usually there are about 150 Democratic votes cast in a given precinct, he intends that there shall not be more than fifty of them counted. He intends that, and he says to B and C, `That is what I am to accomplish.' Maybe B is the sort of a judge who is real, will fight for the rights of her party, and so he gets rid of her and puts in another judge by the name of D. Now, we have A, the Republican captain, C and D, and he *401 says, `Now, we are not going to give the Democratic candidate for Congress in this (precinct) more than fifty votes although we know there will be about 150 cast,' and C and D protest a little. They say, `We don't want to get mixed up in anything of that kind, it might turn out seriously.' A says, `Don't worry, don't worry. You don't have to do anything. Just keep your eyes shut and your mouths shut and some time during the day if I have an opportunity, I will slip the ballots away, but you don't need to know what is going on, out of your sight.' C and D say all right. C and D have agreed to the result sought, which is that in that precinct a great many Democratic voters shall not have their votes counted. They have agreed to that result and having agreed to that result, they have agreed to anything that A is going to do with those ballots when he gets them out of their sight.
"The point I want to make clear to you is that the conspiracy which is charged here is not that these ballots would not be miscounted in a certain way, but the conspiracy charge is that they will not be counted as they were cast, for the candidates for whom they were cast. So the last question that you will ask yourselves is, were there any others besides Luteran who were parties to this conspiracy, if you believe the conspiracy has been proved at all. In passing upon that question, of course, you will consider all of the facts, what positions they occupied, what their duties were, what opportunity they had to see what was going on, all of those facts and all of the testimony in the case, and upon the basis of that testimony you will say who, if any, were parties to the conspiracy, if the conspiracy, in your opinion, has been proved."
The criticism directed to this instruction is that it is argument, pure and simple. In a sense it may be said of all illustrations that they are argumentative; but if all they accomplish is to clarify the issue for the jury it cannot be said that they are not fair and proper. An illustration is not objectionable merely because "it bore hardly upon the defendant," or "only because the transaction of which he was charged was one of like character, and indicative of the same intent." Allis v. United States, 155 U.S. 117, 15 S.Ct. 36, 38, 39 L.Ed. 91. In considering whether an illustration is fair or prejudicial, it is necessary to consider the instructions as a whole and all the facts and circumstances surrounding the trial and shown by the evidence, such as the complexity or simplicity of the issues and the multiplicity of facts. So considering the illustration here, we see nothing in it to complain of.
Finally, it it contended that the instructions as a whole are argumentative, and particularly that portion of them in which the court reviewed the evidence. The instructions as a whole are too lengthy to set out in this opinion. Even that portion in which the evidence is reviewed would extend the opinion beyond reasonable limits. Nevertheless we have carefully read the instructions with appellants' criticism in mind and we find no basis for the complaint that they are unfair, argumentative or prejudicial to the rights of the appellants.
We have reviewed all of the complaints and found no substantial error in the record; the judgments appealed from are, therefore, affirmed.
NOTES
[*] Writ of certiorari denied 58 S.Ct. 642, 82 L.Ed. ___. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542711/ | 997 A.2d 706 (2010)
RUTLAND COURT OWNERS, INC., Appellant,
v.
William TAYLOR, Appellee.
No. 09-CV-46.
District of Columbia Court of Appeals.
Argued May 18, 2010.
Decided July 8, 2010.
*707 Thomas C. Mugavero, Falls Church, VA, with whom Kevin M. Kernan, was on the brief, for appellant.
Richard A. Samad for appellee.
Before REID and KRAMER, Associate Judges, and NEBEKER, Senior Judge.
NEBEKER, Senior Judge:
Appellant, Rutland Court Owners, Inc., filed suit for possession of the cooperative apartment occupied by William Taylor after *708 it revoked his shares in the wake of a dispute over the building's plan to provide extermination services for a bedbug infestation. After a bench trial, the court made findings of fact and ordered judgment in favor of Taylor based on its conclusion that he was entitled to an accommodation under the Fair Housing Act. 42 U.S.C. §§ 3601-3631 (2000). On appeal, appellant argues the trial court erred in finding a violation of the Fair Housing Act and in denying possession of the unit after the building owners revoked Taylor's shares in the cooperative. We affirm.
Appellant now argues that, although the trial court found Taylor to be eligible for an accommodation under the Federal Fair Housing Act, there was no accommodation requested or proposed and that no accommodation would have been reasonable under the circumstances. Appellant contends, therefore, that the trial court erred in allowing Taylor to maintain possession of his unit in the building. We review the legal determinations of the trial court here de novo but will accept the findings of fact made by the court unless they are clearly erroneous. Lawlor v. District of Columbia, 758 A.2d 964, 974 (D.C. 2000). The court's judgment based on the facts will not be disturbed unless it is plainly wrong or without evidence to support it. Langon v. Reilly, 802 A.2d 951, 953 (D.C.2002). As appellant "takes no issue with the Superior Court's findings of fact," we adopt those findings and set them forth here.
The Rutland Court building, located at 1725 17th Street, N.W., Washington, D.C., is organized as a cooperative association in which residents own shares of stock in Rutland Court Owners, Inc., a corporation owner. The corporation is managed by a Board of Directors (hereinafter "Board") and governed by corporate bylaws. Owners of shares of the corporation stock are entitled to reside in a corresponding unit of the building through an occupancy agreement. Appellee William Taylor was a shareholder in the cooperative and has resided in Unit 114 of the building since 1972. Taylor suffers from several mental health disorders, for which he takes medication, and has both a caseworker and a psychiatrist who are active in helping him manage his conditions.
During August 2007, the Board was notified by one resident that bedbugs had become a problem in her unit. Around August 25, 2007, Taylor notified the Board president that his unit also had bedbugs. The problem was discussed at the monthly Board meeting, on August 27, 2007, and a committee was formed to oversee extermination efforts. The committee established a resolution that "all units must be inspected... by a professional exterminator" and that "[i]f a resident or owner refuses treatment by the exterminator hired by the Cooperative, the Committee shall solicit that person's alternative professional treatment plan, evaluate the plan to determine the effectiveness, and communicate its decision to the resident owner." On August 29, 2007, residents were notified by letter that Home Paramount Exterminators had been hired to inspect the building and begin treating for bedbugs on the first of September. Taylor raised various concerns about the exterminator selection and about the chemicals that would be used in the extermination process. In its letter to residents, the Board provided that alternative treatment plans could be submitted and, if deemed effective by the Board, could be used provided residents submitted proof within one week that the treatment was completed by a professional. Although Taylor indicated he had begun following an alternative treatment plan based on studies from Johns Hopkins University and the University of Kentucky, he did not submit a formal plan for alternative treatment of his unit.
*709 Taylor allowed Home Paramount to inspect his apartment on September 1, 2007, but limited the extermination to only the bedroom. On September 25, 2007, the committee gave Taylor a detailed list of instructions for preparing his unit for further treatment, scheduled for two days later. Taylor refused to grant Home Paramount access to his unit on that date. In October, the property manager and Taylor's caseworker from Community Connections met with Taylor at the unit to discuss the general condition of the apartment, which was described as "extremely cluttered." After Taylor had made concerted but inadequate efforts to clean the unit, the property manager suggested having Elgen Cleaning Services assist him in the effort. The cleaning company did not gain access to Taylor's apartment on either of the two visits it made, although the property manager admitted that for at least one of the visits Taylor had not been notified and Taylor explained that he was unable to accommodate the second visit because it conflicted with a pre-existing appointment he had elsewhere. The property manager subsequently contacted a government-funded cleaning service, but this service left the unit shortly after arriving there for reasons that remain unclear.
On October 23, 2007, the committee informed Taylor by letter that if his unit was not cleaned and prepared for extermination by November 15th he would be fined $100. Taylor was subsequently contacted on November 8 and 14 by the property manager but again expressed his concerns about the health implications of the exterminations and asked to limit extermination to certain areas of the unit. On November 19, 2007, a new extermination company hired by the Board again inspected all building units for bedbugs and, upon entering Taylor's apartment, noted there were "extreme sanitation issues" including "garbage in the kitchen," "open cans of food," "papers and books stacked floor-to-ceiling" and a "serious infestation" of roaches and bedbugs. At trial, the owner of the company testified that treatment in such circumstances would have some effect on the infestation but that the clutter made it likely some bedbugs would survive and eventually cause a resurgence. He also testified that when he explained this, Taylor said he would need additional time to adequately prepare his apartment for extermination services.
On November 27, 2007, the Board proposed a resolution revoking Taylor's shares in the corporation. The resolution was passed at a stockholders' meeting held on December 12, 2007. Taylor was then given until January 12, 2008, to vacate his unit. Around the same time in mid-December, Taylor hired Terminix to carry out extermination services in his unit. At the time of trial, he testified the company had been to his unit approximately five times to conduct treatments, which were still ongoing. However, despite these extermination efforts, the Board's resolution required him to vacate the unit and a subsequent suit for possession of the unit was brought.
At trial in June 2008, Taylor's psychiatrist testified that he suffered from "bipolar disorder ... post-traumatic stress disorder and basic mood instability" which are treated with "a number of medications." He further testified that these conditions impede Taylor's ability to organize, concentrate, focus his attention, and stay motivated to complete tasks. These conditions had been further exacerbated by Taylor's recent unemployment beginning in June of 2007.
The trial court determined that Taylor had taken steps to eliminate the bedbugs and to clean his unit in conjunction with Terminix's extermination services, including vacuuming, throwing out "hundreds of *710 pounds of books" and cleaning out closets in the unit. However, it found that Taylor was in denial concerning the severity of the infestation and the need to temporarily vacate the unit for satisfactory extermination to take place. It then granted Taylor's motion for a stay to provide him with an additional opportunity to clean and exterminate the unit.
On June 27, 2008, the parties returned to court and both the property manager and Taylor agreed that, while improvements were made in the condition of the unit, there remained additional work to be done. The trial court issued an order for Taylor to temporarily vacate his unit by July 10, 2008, and instructed him to comply with treatment by Conquest Pest Control, which would arrange for intensive treatment of the unit over the course of eight weeks. The order also required Taylor to pay half of the extermination costs. This order was supplemented on July 7, 2008, to include compliance with the services of furniture movers and a cleaning crew prior to the extermination effort. The order was extended on July 30, August 12 and 22, and subsequently included sanctions based on Taylor's failure to fully comply with the extermination efforts.
On September 30, 2008, the court was informed that cleaning had been completed and that the extermination process had begun successfully and would be completed soon. A status hearing on December 12, 2008, confirmed that the eight-week extermination program was complete and Taylor was permitted to return to his unit. The court went on to conclude that Taylor was a protected individual under the Fair Housing Act even though his shares had been revoked by the Board, making him a tenant-at-will, because the Act, along with the District of Columbia Human Rights Act, applied to both owners and renters of residences. In analyzing the requirements of the Fair Housing Act, the court relied on our analysis in Douglas v. Kriegsfeld, 884 A.2d 1109 (D.C.2005), to conclude that Taylor suffered from a qualified disability that the Board was aware of based on its interactions with him and the involvement of his caseworker. Further, it determined that Taylor's need for "additional time and professional assistance to clean and exterminate his unit" constituted a reasonable accommodation, which he requested when he asked for additional cleaning services to help prepare his unit for extermination. Although the Board did not provide the reasonable accommodation required by Taylor, it proceeded within three months to fine him and, two weeks later, to propose to revoke his shares. The trial court determined that these actions qualified as a discriminatory act against Taylor because the Board was capable of providing the reasonable accommodation, as shown by its ability to have the unit cleaned and exterminated while working with the court and Taylor during the suit for possession. Thus, the court concluded that, since the accommodation had been granted and the extermination completed, on the equities of the matter the judgment for possession should be denied.
The Federal Fair Housing Act prohibits discrimination against a tenant in "the provision of services or facilities" of a residential dwelling based on the tenant's "handicap," including mental impairments. 42 U.S.C. §§ 3602(h), -3604(b). Discrimination in this context includes failing to make "reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary [for the individual] to use and enjoy a dwelling." 42 U.S.C. § 3604(f)(3)(B). However, it does not require accommodations that "would constitute a direct threat to the health and safety of other individuals *711 or ... [which would] result in substantial physical damage to the property of others." 42 U.S.C. § 3604(f)(9); D.C.Code § 2-1402.21(d)(5) (2001). To establish a defense claim to an eviction based on the denial of reasonable accommodation under the Fair Housing Act, the tenant must show (1) a disability, (2) that the landlord knew or should have known of the disability, (3) that an accommodation is necessary for the use and enjoyment of the apartment, (4) that the accommodation is reasonable, and (5) that the landlord refused the accommodation. Douglas, supra, 884 A.2d at 1129.
In Douglas, we applied the Fair Housing Act in the case of a tenant who had been given a 30-day notice to cure or quit her apartment for violating her lease covenant to "maintain the apartment in clean and sanitary condition." 884 A.2d at 1115. The landlord in Douglas described the apartment as containing garbage, rotting food, and dirty laundry, among other problems. Id. After the landlord filed an action for possession, the tenant sent a letter to the Department of Consumer and Regulatory Affairs requesting a reasonable accommodation under the Federal Fair Housing Act on the basis of her disability (a mood disorder) which made it difficult for her to properly maintain her apartment. Id. Her attorney subsequently sent a letter to the landlord requesting a reasonable accommodation in complying with the terms of her lease, though not specifying the exact accommodation being sought or detailing the assistance to be provided by the District of Columbia agencies. Id. at 1116. The trial court in Douglas rejected the tenant's disability discrimination defense because (1) the request was vague and came after the notice to cure or quit had expired and the landlord had proceeded to a suit for possession; (2) the premises were "a direct threat for the health and safety of others who live in the building;" and (3) there was no expert testimony concerning whether the tenant had a disability and, if she did, whether it affected her ability to maintain her apartment. Id. at 1119. On appeal, we dismissed the notion that the request was not timely made where federal case law held that a discriminatory act can occur at any point prior to when a tenant is "actually evicted." Id. at 1121 (citing Radecki v. Joura, 114 F.3d 115, 116 (8th Cir.1997)). We found that, on the facts of a particular case, little "if any" expertise was required to draw an inference between the evidence of certain mental disabilities and the effect of those disabilities on the tenant's ability to maintain satisfactory living conditions. Id. at 1131. We also held that the exception for denying reasonable accommodations based on "a direct threat to the health or safety" of others was inapplicable until it had been determined that no reasonable accommodation could be made that would "sufficiently [ ] protect the health, safety, and property of others." Id. at 1125.
Appellant now argues that the Douglas case is distinguishable from this one. It argues that there was no evidence that Taylor's disability contributed to the condition of the apartment and that Taylor did not develop a sufficient proposal for his requested reasonable accommodation. Additionally, appellant claims that it did not deny a request for reasonable accommodation, either cleaning assistance or additional time for cleaning and extermination, because no reasonable accommodation was possible without placing the rest of the building at risk. In light of the trial court's findings below, these claims fail.
Under Douglas, there is "no specific diagnosis" needed to establish a disability under the Fair Housing Act. Id. at 1131. At trial, the court credited the testimony of Dr. Cohen that Taylor suffered from *712 "bipolar disorder ... post-traumatic stress disorder and basic mood instability" and was prescribed several medications for the control of those conditions. The doctor further testified that these conditions caused Taylor to have difficulty with motivation, organization, and concentration. The building manager also testified that he knew "there was a problem" with Taylor and the court itself took notice of Taylor's low energy level, unchanged and rumpled clothes, and obvious incomprehension of the magnitude of the problem with his apartment as indicative of his disability. This determination of Taylor's disability, and its connection to the condition of his unit within the cooperative building, is a fact-based one and was so clearly based on sufficient evidence and testimony that we may not disturb it here. Likewise, we hold the trial court had sufficient evidence to show that Taylor's disability was known to the Board and the manager of the building by their dealings with him and his caseworker.
Appellants claim that Taylor failed to develop a proposal for a reasonable accommodation. However, as the trial court noted, the request for an accommodation need not be in any particular form. Douglas, supra, 884 A.2d at 1122. In this case, the court found that Taylor did take "some steps" to eliminate the bedbug problem and had attempted to offer alternative treatment plans at various points prior to the suit for possession and throughout the proceedings in court. In fact, it found that he specifically requested additional time and "assistance in cleaning his apartment and readying it for extermination" prior to the time when the Board revoked his shares. On these facts, it is enough that the Board was aware of Taylor's need for an accommodation of additional time and cleaning assistance and the trial court had no basis for requiring that he develop a detailed proposal for the accommodation in order to avail himself of the reasonable accommodation defense.
The trial court went on to conclude that the reasonable accommodation was denied when it was requested, based on appellant's frustration with previously unsuccessful efforts to have Taylor clean and prepare his apartment for extermination even though Taylor was often given only a day or two of notice that such services were scheduled. However, based on the trial court's orders on behalf of appellant, the trial court found that Taylor complied with the process of having the apartment cleaned and exterminated over a period of several months while the case was before the court. Thus, the trial court determined that appellant engaged in a discriminatory act by not making a more concerted effort to provide the reasonable accommodation prior to revoking his shares and bringing the suit for possession. We have no basis to overturn that decision.
Finally, appellant argues that the reasonable accommodation was, in fact, not reasonable because the additional time and cleaning assistance created a direct threat to the other residents of the building. We held in Douglas that the health and safety exception to reasonable accommodation does not apply until "after the trial court has evaluated the landlord's response to a requested accommodation." Here the trial court found appellant's initial response inadequate and to constitute a denial of the requested accommodation, but concluded that, with the assistance of the court, the accommodation was ultimately accomplished over roughly the same period that it took for the Board to go from addressing the bedbug problem in the building to revoking Taylor's shares in the cooperative. This process brought Taylor into compliance with the initial request of the Board that he clean and exterminate the *713 apartment, thus accomplishing the reasonable accommodation. On these facts, it is disingenuous to argue that the accommodation could not reasonably be granted when it has already been fully implemented under the guidance of the court. Further, appellant has alleged no actual threat to the health and safety of the other residents from the delay and certainly nothing that we find would approach or surpass the circumstances of the tenant in Douglas.
Accordingly, the judgment on appeal is
Affirmed.[1]
NOTES
[1] We were informed at oral argument that the future of appellee's corporate shares must abide the outcome of further litigation. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542562/ | 60 F.2d 231 (1932)
BRINK
v.
UNITED STATES.
No. 6106.
Circuit Court of Appeals, Sixth Circuit.
June 27, 1932.
*232 Allen C. Roudebush, of Cincinnati, Ohio (Harry H. Shafer, of Cincinnati, Ohio, on the brief), for appellant.
Harry A. Abrams, of Cincinnati, Ohio (Haveth E. Mau, of Cincinnati, Ohio, and William A. Rogers, of Dayton, Ohio, on the brief), for the United States.
Before MOORMAN, HICKS, and SIMONS, Circuit Judges.
HICKS, Circuit Judge.
Appellant and James H. Brink, Harry Schultz, and Walter Keller, were indicted for a conspiracy to violate the National Prohibition Act under section 88, title 18, U. S. C. (18 USCA § 88). Brink alone was put upon trial. He was convicted.
There are numerous assignments of error. Many of them relate to matters unexcepted to in the court below and therefore present nothing for review.
Several assignments challenge the denial of a directed verdict. They are all overruled. We have examined the evidence and find it sufficient to submit the case to the jury.
1. Earl Marshall was the principal witness for the government. He had served a sentence in the penitentiary for a violation of the Prohibition Act. He testified in substance that his conviction grew out of his employment by appellant to transport liquor and that appellant had agreed to pay him $45 per week, or a total of $7,200, for the time he served in prison. During cross-examination Marshall was asked: "Did you get any lawyer to enforce the collection of this $7200.00?" He answered, "No sir." Thereupon counsel asked the witness: "Q. I will ask you if this question was asked you and whether you answered according to what I read?" (Reading from a transcript of witness's testimony before the United States Commissioner): "Q. Who was the man? A. Charles Dornette. Q. You went to see Charles Dornette, that was your lawyer was it not? A. I guess so." Thereupon the court stated in substance that an unwarranted inference might be drawn from the manner in which this matter was being presented and required counsel to read the entire pertinent record of Marshall's testimony before the commissioner. The record when read justified the court's comment and action. It is the duty of the court to see that testimony is not misunderstood. Kettenbach v. U. S., 202 F. 377, 385 (C. C. A. 9); Rudd v. U. S., 173 F. 912, 914 (C. C. A. 8).
2. On recross-examination Marshall was vigorously examined by counsel touching this $7,200. In the course of the examination the court said: "You are making a great deal of confusion out of something that he has testified about, that it was $45.00 a week, and began along about the time he was employed, and it ran through all that time down to and through the time he was in the penitentiary at Atlanta, and it was not paid, and amounted to $7200.00, isn't that the purport of your testimony" to which the witness responded: "Yes." We find nothing in this remark by the court that tends to affect any substantial right of appellant. See Hargrove v. U. S., 25 F.(2d) 258, 262 (C. C. A. 8). Marshall had been questioned fully touching this matter of $7,200 upon his original cross-examination, and it was the duty of the court to keep the cross-examination within reasonable limits.
3. The question arose whether the telephone company's record of a certain long distance telephone call (Exhibit 7A) was admissible in evidence. During the examination of Miller, a supervisor of the telephone company, the court asked: "Has that got something written on it where was that writing put on that piece of paper?" The witness answered: "Brunswick, Georgia." Thereupon the court said: "I should not have put it that way." This answer was objected to upon the ground that it was evidence of a written instrument which had not been introduced. The exception took the form of a motion to strike out all of the testimony of the witness. We think the motion was properly denied.
4. Upon cross-examination of the government's witness Speiser, counsel asked: "How about the time you killed that man?" The district attorney objected. Thereupon the following colloquy took place between the court and counsel:
"The Court: Let us find out. Were you ever convicted of killing a man?
"The witness: Never.
*233 "The Court: Have you any evidence that he was convicted of killing a man?
"Mr. Shafer: I was just told of it over the table.
"The Court: That question put by Mr. Shafer was entirely improper. If he has any evidence of that he may put the question.
"Q. Were you ever charged with that? (Question objected to; objection overruled.) A. Yes, and dismissed in Police Court. Never bound over to the grand jury, it was in self-defense.
"The Court: You could have found that out before you asked the other question. I am going to insist in this case, as in all cases, because it is becoming too frequent in court, that you do not ask questions that you have no right to ask. It leaves an ugly impression.
"Mr. Shafer: I would like to take an exception to the remark of the Court.
"The Court: You may take an exception, and the record may show that this Court takes exception to counsel asking questions for which they have no basis, and on which they have attempted to make no investigation, for the sole purpose, as the Court thinks, and wants the record to show, as the Court does think, of leaving an ugly inference to the jury. You may take an exception to that, if you wish.
"Mr. Shafer: Note an exception. I want to say to your Honor I got in this case on short notice, and I come up here and they spring a surprise witness on me, and I have to do the best I can.
"The Court: You do not have to ask questions for which there is no basis."
These remarks of the court are complained of. We think that under the circumstances they were not improper. The tendency of this line of cross-examination was to create in the minds of the jury an unfavorable and wholly unjustified impression of the witness Speiser.
5. Upon cross-examination Speiser was asked: "You remember about all the other things in the case that you want to remember, can't you remember what you paid Brink for the whiskey?" Thereupon the court remarked: "The question is not a proper question and should not have been put by counsel in that form." This remark is assigned as error. We see nothing either erroneous or prejudicial in it.
6. During the examination of its witness White, the government introduced Exhibit 8A. This exhibit was a receipt dated August 21, 1930, to Harold (Harry) Schultz, one of the alleged conspirators, for fines and costs paid to the municipal court at Mansfield, Ohio. Fillbrandt, a government witness, had testified that on August 20, 1930, he, in company with appellant, went to Mansfield and saw a man named Schultz who had been caught there with a load of liquor and had employed an attorney for him. When Exhibit 8A was introduced, the court inquired in substance whether Schultz was the same man referred to by Fillbrandt. His exact language was: "This man Schultz is the same man?" Upon exception the court said: "The Court: I will withdraw my remarks, Gentlemen, you will not consider what the Court said, as to the man about whom the Reverend Fillbrandt testified, and the man's name Schultz; my statement that that was the man you should not consider, I should not have put it that way. I want to know whether the man they are talking about was the one named Schultz." We find nothing improper or prejudicial in this incident.
7. Upon the introduction of certain documentary exhibits taken from the room of appellant one of appellant's counsel who had come into the case after the beginning of the trial stated that he wished to have the record show that these exhibits took him by surprise. The court permitted this, but called attention to certain incidents of the trial which indicated that other counsel, three in number, could not have been surprised. There was nothing improper in these comments by the court. They appear to have been made in an effort to keep the record free from confusion and there is no intimation from appellant that he, himself, was surprised by the introduction of these exhibits. See Gridley v. U. S., 44 F.(2d) 716, 736 (C. C. A. 6).
8. Robert Budd, witness for appellant, testified that Marshall told him that the liquor for the transportation of which he was convicted and which the government insisted was appellant's liquor, belonged to him (Marshall). Then counsel asked Budd the following question: "I will ask you whether you would believe Mr. Marshall under oath?" The answer was: "I don't think I would." This situation drew from the court the following question: "Then if Mr. Marshall told you that this was his liquor and that he would have made $2000.00 out *234 of it, you would not believe that would you, even if he swore it?" The witness answered: "Not now any more." We do not think that this question and answer violated any substantial right of appellant.
9. On cross-examination the government's witness Albert Faehr was asked: "You say in this letter that you did not threaten Mr. Brink if he did not give you this money?" The court sustained an objection upon the ground that the letter was the best evidence of what it contained. This was not erroneous.
10. Upon cross-examination of the government's witness Mrs. Marshall, she was asked to disclose a conversation, heard by her, between Dornette and Marshall. The court sustained an objection thereto upon which action error is assigned. There is no merit in the complaint because Mrs. Marshall was later permitted to detail substantially all of this conversation. Dornette had been counsel for Marshall in the case which resulted in Marshall's imprisonment, and this conversation between Dornette and Marshall occurred after Marshall had been released from prison. The subject of it was whether appellant would live up to his alleged agreement to pay Marshall $7,200 for the period Marshall had spent in prison.
Upon re-examination of Mrs. Marshall, the government introduced certain letters (Government's Exhibits Nos. 4 and 5) written by Dornette to Marshall while the latter was in prison. Appellant assigns the introduction of these letters as error. We do not think that he is in a position to make this claim. The subject-matter of these letters was identical with that of the conversation between Dornette and Marshall, which Mrs. Marshall was allowed to relate upon the urgent insistence of appellant.
11. Error is assigned upon the introduction of Government's Exhibits 8, 8A, 9, and 12. Exhibit 8 was a receipt to Harold (Harry) Schultz similar to Exhibit 8A heretofore referred to. Exhibit 9 was a telephone toll service statement in which tolls from Savannah and other distant points were charged to appellant's telephone. Exhibit 12 was a certificate of a passenger car registration for 1930 issued to Schultz by the State Department of Ohio for a Ford coupé. These documents were relevant.
Appellant was arrested in his home by a Prohibition Agent without a warrant and these papers with other documents were then and there seized by the agent without a search warrant. Doubtless the search was unlawful (U. S. v. Lefkowitz and Paris, 52 S. Ct. 420, 76 L. Ed. 877, decided by the Supreme Court April 11, 1932), but we find no reversible error in the introduction of these exhibits. When appellant was arrested he was taken before a United States Commissioner on December 12, 1930, for a preliminary examination and was represented by counsel. He was not indicted until May and was not tried until July, 1931. In the meantime no effort had been made to recover any of the documents seized or to suppress their use as evidence upon the ground that they were not subject to seizure although certain ones of them had been delivered by the district attorney to appellant's counsel upon his request for purposes not connected with the trial. We think therefore that the objection upon the trial to the introduction of these exhibits came too late. Segurola v. U. S., 275 U. S. 106, 112, 48 S. Ct. 77, 72 L. Ed. 186.
12. A number of assignments of error are based upon the admission of records of telephone companies purporting to evidence conversations from the telephone in appellant's home to long-distance points. There is no merit in these assignments. These telephone records tend to corroborate the testimony of the government's witnesses Faehr and Marshall. They were competent and their weight was a question for the jury.
13. After the case was closed the court reopened it and allowed the government to introduce highly relevant testimony tending to show the condition in which appellant kept his bank accounts. Errors are assigned upon this action of the court. They are overruled. This was a matter within the trial court's discretion. Horowitz v. U. S., 12 F.(2d) 590, 591 (C. C. A. 5); Jianole v. U. S., 299 F. 496, 500 (C. C. A. 8).
14. We have examined all other assignments of error properly before us and find nothing therein which substantially affects the rights of appellant. Title 28, § 391, U. S. C. (28 USCA § 391).
The judgment of the District Court is accordingly affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542563/ | 410 B.R. 1 (2009)
In re LINTON PROPERTIES, LLC, et al., Debtors.
Marc E. Albert, Chapter 7 Trustee, Plaintiff,
v.
Chesapeake Bank & Trust Company, Defendant.
Bankruptcy No. 08-00095. Adversary No. 08-10032.
United States Bankruptcy Court, District of Columbia.
June 12, 2009.
*4 Stinson Morrison Hecker LLP, Washington, DC, for Plaintiff.
Troy C. Swanson, Cohen & Swanson, PC, Bel Air, MD, Craig Palik, McNamee Hosea, et al., Greenbelt, MD, for Defendant.
MEMORANDUM DECISION
S. MARTIN TEEL, JR., Bankruptcy Judge.
The Chapter 7 Trustee, Marc E. Albert ("trustee"), commenced this adversary proceeding to avoid garnishment liens and recover property subject to the liens.[1] The proceeding is moot except for the garnishment lien on Citibank accounts. Defendant Chesapeake Bank and Trust Company ("Chesapeake") filed a motion for dismissal or summary judgment. In accordance with the following analysis, the court will deny Chesapeake's motion to the extent that it asserts the trustee is barred by res judicata, but the court will grant Chesapeake's motion to the extent it asserts that the trustee is contractually barred from challenging that lien, or asserts that the lien was valid as of the commencement of the case.
I
Facts
The material facts are not in dispute. In April 2005, Ronald M. Linton and Nancy G. Linton (the "Lintons") borrowed $2,807,000 from Chesapeake. The loan was guaranteed by Linton Properties, LLC ("Linton Properties.") In November 2007, Chesapeake declared the loan due and filed a complaint against the Lintons and Linton Properties in the Circuit Court of Kent County, Maryland. That court entered a judgment against the Lintons for the amount owed, including Chesapeake's attorneys' fees.
Based upon that judgment, in mid-November, 2007, Chesapeake served a writ of garnishment on financial institutions at which the Lintons and Linton Properties held accounts, including Citibank where the Lintons had bank accounts.[2] Chesapeake, with the prior permission of Citibank, served the writ on the Citibank Service Center in San Antonio, Texas by overnight mail. Citibank responded to *5 the writ of garnishment by filing an answer (Garnishee's Confession of Assets of Property Other Than Wages) dated November 28, 2007, reporting that it held bank accounts for the Lintons, and containing no reservation or exception regarding the service of the writ of garnishment.
On February 8, 2008, the Lintons and Linton Properties filed voluntary Chapter 11 petitions. On February 27, 2008, as debtors-in-possession, the Lintons and Linton Properties filed complaints seeking avoidance of the garnishment because it was executed within 90 days before the filing of the bankruptcy petition, and because the garnishment violated the bankruptcy case's automatic stay. (See Adv. Proc. Nos. 08-10003; 08-10004.) On June 11, 2008, this court approved a Stipulation and Order that dismissed those adversary proceedings with prejudice and that contained language (discussed later) that Chesapeake asserts bars the trustee, as successor to the Lintons, from challenging the liens.
On August 7, 2008, the bankruptcy estate was converted to a Chapter 7 proceeding. The trustee then commenced this adversary proceeding, seeking to avoid the lien on the basis that the garnishment is invalid because the service of the writ of garnishment on Citibank allegedly did not conform to the requirements of Maryland law.
II
Standard of Review
A
Motion to Dismiss
The purpose of a Fed.R.Civ.P. 12(b)(6) motion is "to test the legal sufficiency of the complaint." Kingman Park Civic Ass'n v. Williams, 348 F.3d 1033, 1040 (D.C.Cir.2003). In deciding a motion to dismiss, although the court "must construe the allegations and facts in the complaint in the light most favorable to the plaintiff...," Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 195 (D.D.C.2002), the complaint must nevertheless plead "enough facts to state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007), and "the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint.... [nor must it] accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). In deciding a 12(b)(6) motion to dismiss, "the Court may only consider the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice." Gustave-Schmidt, 226 F.Supp.2d at 196.
B
Summary Judgment
Summary judgment is appropriate if, assuming all reasonable inferences favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court will not grant summary judgment "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Doe v. U.S. Postal Service, 317 F.3d 339, 342 (D.C.Cir.2003). Although a finder of fact at trial is permitted to draw inferences from the evidence, those inferences "must be reasonably *6 probable, and based on more than speculation." Rogers Corp. v. EPA, 275 F.3d 1096, 1104 (D.C.Cir.2002) (internal quotations and citations omitted). When the evidence allows for contradictory inferences, summary judgment is inappropriate. Id. (citing Londrigan v. FBI, 670 F.2d 1164, 1171 n. 37 (D.C.Cir.1981)).
The moving party bears the burden to show that the material facts are undisputed. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548. The nonmoving party, however, may not rest on mere allegations or denials, but must instead demonstrate the existence of specific facts that create a genuine issue for trial. See Liberty Lobby, 477 U.S. at 256, 106 S.Ct. 2505.
III
The trustee argues the garnishment liens on the Citibank accounts can be avoided because the service of the writ of garnishment upon which they are based did not meet the service requirements of Maryland law. Chesapeake argues that the trustee is precluded from challenging the validity of the writ because (a) the Lintons and Linton Properties, as debtors in possession, agreed not to challenge the validity of Chesapeake's liens in the Stipulation and Order, and the trustee is bound by that; and (b) the Lintons and Linton Properties, as debtors in possession, dismissed their February 27, 2008 challenges of the writs with prejudice, pursuant to the Stipulation and Order, and the trustee is barred by res judicata from challenging it again. Alternatively, Chesapeake argues summary judgment should be granted because the service of the writ was not deficient so as to fail to establish jurisdiction.
A
Contractual Bar
Chesapeake argues that, because the Lintons agreed in the June 11, 2008 Stipulation and Order not to challenge Chesapeake's liens, the trustee is also precluded from doing so. The trustee first argues that he is not a proper successor in interest to the Lintons when they were acting as debtors in possession for the Stipulation and Order. This court has already resolved that issue, holding that the trustee is a successor in interest. See In re Linton Properties, LLC, 400 B.R. 1 (Bankr. D.D.C.2009) (citing Armstrong v. Norwest Bank, Minneapolis, N.A., 964 F.2d 797, 801 (8th Cir.1992)).
The trustee next argues that the Lintons agreed not to challenge Chesapeake's liens only in their capacity as individuals, not as debtors in possession. Chesapeake argues the Lintons were acting as debtors in possession throughout the Stipulation and Order. This issue requires interpretation of the language of the Stipulation and Order.
The relevant provision in the Stipulation and Order reads:
The Bank will retain its lien in the property garnished from the following entities in the Kent County, Maryland, Case No. 14-C-07-007298. ("Kent County Action") Citibank, Johnston, Lemon & Co., Inc., John Hancock Life Insurance Company, and PNC Bank (collectively, the "Garnished Funds") with the same validity and priority as the lien had at the time the Debtors' bankruptcy cases were commenced, and the Lintons agree not to challenge the lien of the Bank. The Lintons and Linton Properties dismiss with prejudice the adversary proceedings shown in the above caption.
(Emphasis added.)
The Stipulation and Order reads: "[t]he Lintons and Linton Properties dismiss with prejudice the adversary proceedings..." The Lintons and Linton Properties *7 must have been acting as debtors in possession when they dismissed their complaints with prejudice, becausehaving filed the complaints under the authority of debtors in possessiononly by that authority could the Lintons and Linton Properties have dismissed them. Thus, the phrase "the Lintons and Linton Properties" refers to the debtors as debtors in possession, not just in their individual capacities, and similarly the term "the Lintons" must include a reference to the Lintons in that same capacity.[3]
Another section of the Stipulation and Dismissal reads: "the Lintons may keep and use that Debtor-in-Possession account..." Only as debtors in possession could the Lintons utilize that account, and thus the phrase "the Lintons" must be identifying them in their role as debtors in possession. Also, under 11 U.S.C. § 1101(1), a debtor in a chapter 11 case serves as a debtor in possession unless displaced from that capacity by the appointment of a trustee. A trustee had not yet been appointed when the Stipulation and Dismissal was approved by this court.
Normally, words or phrases in a document are to be given meaning such that they are consistently defined throughout the document. E.g. America First Inv. Corp. v. Goland, 925 F.2d 1518, 1521 (D.C.Cir.1991) (citing 1010 Potomac Assocs. v. Grocery Mfrs. of America, Inc., 485 A.2d 199, 205 (D.C.1984) and others). Although there is one instance in the Stipulation and Dismissal which refers to "the Lintons" in an individual capacity,[4] the other references to "the Lintons" not only indicate, but require, that the phrase refer to them in their capacity as debtors in possession. Most notably, other uses of "the Lintons" in the same section and even same paragraph dealing with the bank's lien refer to them in their capacity as debtors in possession. (Stipulation and Consent Order, Docket Entry ("DE") No. 109, ¶¶ 6-7.) The phrase "the Lintons" should be consistently interpreted throughout that section; therefore, the Lintons as debtors in possession agreed not to challenge the bank's lien.
Nevertheless, argues the trustee, when analyzing a document, a court must give each word and phrase in the document meaning. Here, the trustee argues, if the phrase "the Lintons agree not to challenge the lien of the Bank" is interpreted as an agreement by the debtors in possession, thus precluding the trustee from challenging the lien, then the phrase "[t]he Bank will retain its lien ... with the same validity and priority as the lien had at the time the Debtors' bankruptcy cases were commenced" (the "validity phrase") is rendered meaningless. In contrast, argues the trustee, if the Lintons, only as individuals, waived their future right to challenge the lien, then the validity phrase clarifies that any future challenges and defenses must be based on the validity of the lien as *8 it was at the filing of the bankruptcy, rather than based upon its validity as a product of the Lintons' agreement in the Stipulation and Order not to challenge the lien as individuals. In essence, argues the trustee, the Lintons were not agreeing in the Stipulation and Order that the lien was valid, only that they would withdraw their challenge at that time as debtors in possession and would not challenge the lien in the future as individuals, in exchange for other concessions in the Stipulation and Order.
The proposition that a contract must be interpreted to give each part meaning is supported by District of Columbia law. As stated in 1010 Potomac Assocs., 485 A.2d at 205:
The writing must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms. Vicki Bagley Realty, Inc. v. Laufer, 482 A.2d 359, at 366 (D.C.1984); Davis v. Davis, 471 A.2d 1008, 1009 (D.C.1984); Restatement (Second) of Contracts §§ 202(2), 203(a) (1981).
District of Columbia decisions, however, have not discussed the application of that principle in depth. It is thus appropriate to examine closely the Restatement (Second) of Contracts § 203 (1981), which was relied upon in 1010 Potomac Associates and which provides:
In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable:
(a) an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect;
(b) express terms are given greater weight than course of performance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade;
(c) specific terms and exact terms are given greater weight than general language;
(d) separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.
(Emphasis added.) The rule applies only "generally." As noted in Comment b to this Restatement section, "[s]ince an agreement is interpreted as a whole, it is assumed in the first instance that no part of it is superfluous," but "[e]ven agreements tailored to particular transactions sometimes include overlapping or redundant or meaningless provisions." Even if the validity phrase would be a redundancy when "the Lintons" is read as meaning the Lintons as debtors in possession (because the validity phrase would state a result flowing from the Lintons' agreement as debtors in possession not to challenge the lien), that would be insufficient to override the natural interpretation of the agreement as referring consistently throughout to "the Lintons" as debtors in possession. Stating that the lien would retain its validity and priority as of the date of commencement of the case merely spells out a consequence of the agreement of the debtors in possession not to challenge the lien so that the consequence was not left in doubt. For example, not only could the lien not be avoided as a preference, it could not be avoided as a fraudulent transfer. This is an instance of stating a specific outcome instead of stating a general outcome, with the specific controlling if there was any doubt as to whether the bar against challenging the lien did not encompass letting Chesapeake enjoy whatever it was entitled to enforce under the lien pursuant to nonbankruptcy law. As the Restatement (Second) *9 of Contracts § 203(c) (1981) makes clear, the specific statement would control if there were any doubt under the general provision that Chesapeake would continue to enjoy the rights it had as of the petition date. The interpretation of "the Lintons" as encompassing the Lintons in their role as debtors in possession, and thus barring them in that role from challenging the lien on any ground (which would include barring them from seeking to avoid the lien as invalid on the petition date), does not deprive the validity phrase of meaning. Emphasizing a specific outcome of a prohibition (instead of only making a general statement of the prohibition) does not deprive a provision of meaning: emphasizing a specific consequence of a general provision is often important to a party.
Moreover, another reason exists why the validity phrase is not superfluous when the term "the Lintons" is interpreted as including reference to the Lintons as debtors in possession. The validity phrase can be read as stating that although on behalf of the bankruptcy estate, no challenge would be made to the lien, nevertheless in any proceeding to enforce the lien, the validity could be challenged by any other party to the enforcement proceeding. If the trustee is correct that the lien on Citibank is jurisdictionally defective, then Citibank (or a creditor who served a later writ of garnishment on Citibank) would be entitled belatedly to raise that jurisdictional defect. In other words, the validity phrase clarifies that the Lintons' agreement as debtors in possession not to challenge the lien would not serve to validate the lien (if there was any defect in the lien) as against the garnishee (or as against any other entities holding liens against the garnished accounts). Thus, the validity phrase would have meaning and not be redundant even if the Lintons in their role as debtors in possession were agreeing not to challenge the lien. Accordingly, the trustee's argument is unpersuasive and does not establish a basis for rejecting the only otherwise reasonable interpretation of the phrase "the Lintons" as including, consistently throughout the contract, the Lintons in their role of debtors in possession.
The trustee submitted the Affidavit of David Lynn, attorney for the Lintons at the time the Stipulation and Order was drafted and issued, to prove that the language was selected to permit a trustee to later challenge the validity of the lien. Chesapeake correctly argues that this affidavit should not be considered. Extrinsic evidence is not considered in interpreting contract language unless that language is ambiguous. See, e.g., Republican Nat. Committee v. Taylor, 299 F.3d 887, 891-92 (D.C.Cir.2002) (citing Dodek v. CF 16 Corp., 537 A.2d 1086, 1092 (D.C.1988)). A contract is ambiguous only if it is "reasonably susceptible of different constructions or interpretations." 1901 Wyoming Ave. Co-Op Ass'n v. Lee, 345 A.2d 456, 461 n. 7 (D.C.1975). Here, based upon the nature and language of the section referring to the bank's lien, the phrase "the Lintons" refers to their role as debtors in possession; the language is not reasonably susceptible to different interpretations and thus is not ambiguous. See id.; Washington Props., Inc. v. Chin, Inc., 760 A.2d 546, 548 (D.C.2000) ("A contract is not ambiguous merely because the parties dispute its meaning, nor is it ambiguous merely because its terms are complex or `could have been clearer.'")
Nevertheless, written terms arguably ought to be construed according to the meaning ascribed to them in the course of the parties' conduct and negotiations:
In considering whether a contract is ambiguous, we examine the document on its face, giving the language used therein its plain meaning. [Sacks v. *10 Rothberg, 569 A.2d 150, 154 (D.C.1990)] (citing Kass v. William Norwitz Co., 509 F.Supp. 618, 625 (D.D.C.1980)); 1010 Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C. 1984) (citing Bolling Fed. Credit Union v. Cumis Ins. Soc'y, Inc., 475 A.2d 382, 385 (D.C.1984)). "Extrinsic evidence of the parties' subjective intent may be resorted to only if the [contract] is ambiguous." Id. at 205-06. However, "[t]he endeavor to ascertain what a reasonable person in the position of the parties would have thought the words of a contract meant applies whether the language is ambiguous or not." Sagalyn v. Foundation for Pres. of Historic Georgetown, 691 A.2d 107, 112 n. 8 (D.C.1997) (citing 1010 Potomac Assocs., 485 A.2d at 205-06). In this context, a reasonable person is: (1) presumed to know all the circumstances surrounding the contract's making; and (2) bound by usages of the terms which either party knows or has reason to know. Intercounty Constr. Corp. v. District of Columbia, 443 A.2d 29, 32 (D.C.1982) (citations omitted). "[T]he reasonable person standard is applied both to the circumstances surrounding the contract and the course of conduct of the parties under the contract." Id. (citing 1901 Wyoming Ave. Coop. Ass'n v. Lee, 345 A.2d 456, 461-62 (D.C. 1975)).
Akassy v. William Penn Apts. Ltd. Partnership, 891 A.2d 291, 299 (D.C.2006). But see Capital City Mortg. Corp. v. Habana Village Art & Folklore, Inc., 747 A.2d 564, 567 (D.C.2000) (stating that only if the face of the contract itself raises an ambiguity does a court resort to extrinsic evidence, and stating that extrinsic evidence includes "the circumstances before and contemporaneous with the making of the contract ..." id. at 567 n. 2 (quoting 1901 Wyoming Ave. Coop. Ass'n, 345 A.2d at 461-62)). I will not attempt to reconcile the seeming conflict in District of Columbia case law, and will assume that the more recent decision, Akassy, is the correct statement of law.
But here, the trustee has offered no evidence of the circumstances surrounding the making of the contract and the course of conduct of the parties from which it could be ascertained that a reasonable person in the position of the parties would have thought the words "the Lintons" in the agreement meant the Lintons as individuals, and not as debtors in possession. Lynn's affidavit does not state that he communicated to Chesapeake the Lintons' intention that the Lintons were agreeing only as individuals (and not as debtors in possession) to refrain from challenging Chesapeake's lien. It is only his view of what was intended, and that does not suffice to establish an ambiguity in the written contract. As observed in Clyburn v. 1411 K Street Ltd. Partnership, 628 A.2d 1015, 1017 (D.C.1993):
Disagreement between the parties as to the meaning of a contract does not, ipso facto, render it ambiguous. Sacks v. Rothberg, 569 A.2d 150, 154-55 (D.C. 1990). "The court may not create ambiguity where none exits." Carey Canada, Inc. v. Columbia Cas. Co., 291 U.S.App.D.C. 284, 292, 940 F.2d 1548, 1556 (1991).
What Lynn subjectively thought is irrelevant; it is not a surrounding circumstance or a course of conduct, of which both parties were aware, that would have led the parties reasonably to conclude that the term "the Lintons" was meant to refer to the Lintons only individually and not as debtors in possession.
In other words, in construing the contract, the court must engage in an objective interpretation of the parties' intention *11 based on what was manifested to both of them by their course of conduct and the written agreement. "[I]ntent is properly an objective, not subjective, issue." Dodek v. CF 16 Corp., 537 A.2d 1086, 1093 (D.C. 1988) (citation omitted). Here, Lynn's affidavit is irrelevant because his affidavit does not state that he communicated his intention to Chesapeake, and instead recites only his subjective intention.
The trustee has proffered no admissible extrinsic evidence of the parties' intention. Accordingly, the court is limited to interpreting the agreement based on the text. Because the text itself is unambiguous, its interpretation is a question of law. See 1010 Potomac Assocs. v. Grocery Manufacturers of America, Inc., 485 A.2d 199, 205 n. 6 (D.C.1984). The only reasonable interpretation of the contract is that it used the term "the Lintons" to refer to the Lintons in their role as debtors in possession. Accordingly, Chesapeake is entitled to summary judgment based upon a contract of the debtors in possession that bars the trustee, as successor to the debtors in possession, from challenging the lien. Recognizing, however, that this was a close question, I will address the other grounds upon which Chesapeake relied in seeking dismissal.
B
Res Judicata
The June 11, 2008 Stipulation and Order dismissed with prejudice the complaints of the debtors in possession; these complaints sought to avoid the liens. Based upon this dismissal, Chesapeake argues the trustee is barred on grounds of res judicata from challenging the liens because the Lintons dismissed their action challenging the liens with prejudice.
The doctrine of res judicata encompasses issue preclusion and claim preclusion. See Taylor v. Sturgell, ___ U.S. ___, 128 S.Ct. 2161, 2171, 171 L.Ed.2d 155 (2008); I.A.M. Nat. Pension Fund, Ben. Plan A v. Indus. Gear Mfg. Co., 723 F.2d 944, 946-47 (D.C.Cir.1983). Issue preclusion prevents a party from re-litigating an issue of law or fact that has already actually been decided by a court of valid jurisdiction, whereas claim preclusion prevents re-litigation of the same claim, regardless of whether that re-litigation would raise the same issues. Id. As such, claim preclusion prevents litigation of issues of fact or law which should have been raised in previous litigation, even when they were not raised. See, e.g., Capitol Hill Group v. Pillsbury Winthrop Shaw Pittman, LLP ("CHG"), 574 F.Supp.2d 143, 148 (D.D.C.2008). "[P]reclud[ing] parties from contesting matters that they have had a full and fair opportunity to litigate protects their adversaries from the expense and vexation attending multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action by minimizing the possibility of inconsistent decisions." Montana v. United States, 440 U.S. 147, 153-54, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979).
The four elements considered in a motion for claim preclusion are: (1) an identity of parties; (2) a judgment from a court of competent jurisdiction; (3) a final judgment on the merits; and (4) an identity of the cause of action. CHG, 574 F.Supp.2d at 148. In relation to the fourth element, the claims need not be identical for res judicata to apply. Id. at 149. "In some instances, the court in determining the identity of two causes of action will examine whether the facts in the two cases are the same. In other instances, the court will examine whether the primary right asserted in the two cases is the same." Indus. Gear, 723 F.2d at 948 (citing Nash County Bd. of Ed. v. Biltmore *12 Co., 640 F.2d 484, 487-488 (4th Cir.1981)). In this analysis, a court must make a pragmatic determination whether the claims are based upon the same nucleus of facts, weighing whether the claims are related in time, space, origin, or motivation; whether they form a convenient trial unit; and, whether their treatment as a unit conforms to parties' expectations or business understanding or usage. See CHG, 574 F.Supp.2d at 149 (citations omitted). The focus is on "the facts surrounding the transaction or occurrence which operate to constitute the cause of action, not the legal theory upon which a litigant relies." Page v. United States, 729 F.2d 818, 820 (D.C.Cir.1984).
Here, on February 27, 2008, the debtors in possession, as part of their Chapter 11 reorganization, filed complaints seeking avoidance of the garnishment executed by Chesapeake because it was executed within 90 days before the filing of the bankruptcy petition, and because continuation of the garnishment violated the bankruptcy's automatic stay. (See Adv. Proc. Nos. 08-10003; 08-10004.) As part of the June 11, 2008 Stipulation and Order, the debtors in possession dismissed those adversary proceedings with prejudice. (Case No. 08-10032, DE No. 6, Exhibit 3, p. 4.) After the bankruptcy estate was converted to a Chapter 7 liquidation, the trustee filed his complaint seeking to avoid the garnishment lien, arguing inadequate service on Citibank of the writ of garnishment.
In addressing the four elements of claim preclusion, the first three elements have been resolved or are undisputed. In relation to the first, although the trustee challenged whether it was properly a successor in interest to the debtors in possession, this court has already determined that the trustee is a successor in interest of the previous litigation. See In re Linton Properties, LLC, 400 B.R. 1 (Bankr.D.D.C. 2009) (citing Armstrong v. Norwest Bank, Minneapolis, N.A., 964 F.2d 797, 801 (8th Cir.1992)). In relation to the second and third elements, neither party has disputed that this is a court of competent jurisdiction, or that the dismissal with prejudice was a final judgment on the merits.
In relation to the fourth element, the facts in this case present a close issue, but ultimately the claims do not share the same nucleus of facts for the purpose of res judicata. Chesapeake is correct that both actions require analysis of the same documents (i.e., the writs of garnishment and the affidavits of service). However, simply because two claims arise from the same documents does not, in itself, mean that both claims must be brought in the same suit. See Indus. Gear, 723 F.2d at 948; see also, U.S. Indus., Inc. v. Blake Const. Co., Inc., 765 F.2d 195, 205 n. 21 (D.C.Cir.1985) ("The fact that two claims arise under the same contract is only one of the factors to be considered; standing alone, of course, it will not always be sufficient to establish a single cause of action.") Here, although the causes of action require analysis of the same documents, each action requires consideration of different information in those documents. In the prior preference and stay action, the documents were needed to provide the date upon which they were served in relation to the bankruptcy filing. In the present action, the filing date is immaterial, but the entity upon whom service was made in an attempt to serve the garnishee, and whether that service invalidates the writ, goes to the crux of the trustee's claim. The factual inquiries of the two claims are distinct; the claims do not form a convenient trial unit such that the claims should have been brought together. Cf. CHG, 574 F.Supp.2d at 149 (the court held res judicata was applicable where both actions *13 relied on the same documents and involved the same analysis); In re Silver Mill Frozen Foods, Inc., 32 B.R. 783, 786-87 (Bankr.Mich.1983) (in discussing a related standard of res judicata, the court held the second suit was not barred where the facts necessary to sustain the first action could not sustain the second.)
Furthermore, the legal bases and underlying purpose for the claims are distinct. Suits may be identical for the purpose of res judicata even if they are based on two different statutes "when the two statutes afford the same right or interdict the same wrong." Nash County Bd. of Ed. v. Biltmore Co., 640 F.2d 484, 488-489 (4th Cir.1981). Here, the prior preference and stay action was based upon bankruptcy law, which prevents a creditor from securing assets of the estate at the unfair detriment of other creditors. The current action is based upon Maryland law, which works to insure the proper service of garnishees and the presence of jurisdiction over those involved.[5] These claims are based upon different laws which pursue or protect different interests or rights. Although success on either claim would lead to avoidance of the lien, the legal inquiries are distinct; the claims do not form a convenient trial unit. See CHG, 574 F.Supp.2d at 149; Silver Mill, 32 B.R. at 787 (recognizing a lack of identity among causes of action when they did not share the same right of the plaintiff which was wronged by the defendant.); see also, Nintendo of America, Inc. v. Spear, 114 F.3d 1195 (Table) (9th Cir.1997) (under a related res judicata standard, the court held that a copyright and trademark infringement suit, which would have removed a lien, did not bar a subsequent preference action which would have avoided the same lien, because the claims were based on different laws and the second suit required consideration of some facts not required in the first suit, even though the court found that the two suits arose from the same nucleus of facts.)
Neither party provided case law addressing the nature of the specific claims herei.e. a preference and violation-of-stay action and a challenge of the validity of the underlying interest. In A.I. Credit Corp. v. Drabkin (In re Auto-Train Corp.), the United States District Court for the District of Columbia upheld the bankruptcy court's ruling that a suit challenging the validity of a security interest did not bar the filing of a preference action related to payments made on that security. 49 B.R. 605, 613 (D.D.C.1985), aff'd 800 F.2d 1153 (D.C.Cir.1986). In applying the res judicata test set forth above, the District Court differentiated the two causes of action because they did not form a convenient trial unit where (1) the subject matter and nature of the relief sought were dissimilar; (2) the preference action required a thorough analysis of the nature of the transfers, value of the collateral, and evaluation of the claims of competing creditors, while the validity action was a straightforward question; and, (3) the trustee was forced to challenge the validity quickly in order to protect his right to do so, while the Bankruptcy Code provides a more complete proceeding for preference actions. Id. Here, the preference action preceded the validity challenge. However, *14 many of the same considerations exist here. First, the claims are based upon distinct factual and legal subject matter. Second, whereas the preference action was straightforward and raised early in the Chapter 11 reorganization in a pressed effort to free up funds for that reorganization, the validity challenge is a more complicated matter of state law and is being raised during the Chapter 7 liquidation, when the trustee has more time to fully explore available claims. These factors indicate the claims do not form a convenient trial unit. See id.[6]
Chesapeake further argues that the validity challenge being brought at the same time as the preference action "would have conformed to the parties' expectations and preserved judicial resources." (DE No. 17, p. 5) (emphasis removed). With respect to parties' expectations, there is no evidence that the parties expected that the dismissal with prejudice of the preference action would itself preclude the pursuit of a challenge to the validity of the lien. (It is a much closer question, discussed previously, whether other language in the Stipulation and Order was intended contractually to bar pursuit of a challenge to the validity of the lien.) With respect to the preservation of judicial resources, the two claims rest on different facts and law; hearing the two claims together would still require a full review of both sets of facts and law. Although Chesapeake might have preferred to resolve any disputes concerning the lien in one suit, res judicata does not bar a validity challenge under these facts.
C
Service Issue
The trustee seeks to avoid the lien, arguing the writs of garnishment were not properly served on Citibank, and thus personal jurisdiction was never established. The trustee argues service was inadequate because (1) Chesapeake did not first attempt to serve the resident agent, president, secretary, or treasurer, pursuant to Maryland Rule 2-124(d); (2) the writ was not sent by certified mail, pursuant to Maryland Rule 2-121(a)(3); and (3) the writ was not sent restricted delivery, pursuant to Maryland Rule 2-121(a)(3). (Id.)[7]
The relevant facts and law are as follows. Maryland Rule 2-124(d) reads:
Service is made upon a corporation, incorporated association, or joint stock *15 company by serving its resident agent, president, secretary, or treasurer. If the corporation, incorporated association, or joint stock company has no resident agent or if a good faith attempt to serve the resident agent, president, secretary, or treasurer has failed, service may be made by serving the manager, any director, vice president, assistant secretary, assistant treasurer, or other person expressly or impliedly authorized to receive service of process.
Maryland Rule 2-121(a) reads:
Service of process may be made within this State or, when authorized by the law of this State, outside of this State... (3) by mailing to the person to be served a copy of the summons, complaint, and all other papers filed with it by certified mail requesting: "Restricted Deliveryshow to whom, date, address of delivery." Service by certified mail under this Rule is complete upon delivery.
Instead of serving, or attempting to serve, the resident agent, president, secretary, or treasurer of Citibank via certified mail with restricted delivery, Chesapeake contacted Citibank and Citibank agreed to service at the Citibank Service Center in San Antonio, Texas via overnight mail. Chesapeake served Citibank in that manner. Citibank filed an answer to the writ which did not raise any challenges to the service of the writ.
Here, the parties do not dispute that the service afforded Citibank deviated from the service method set forth in the Maryland Rulesbecause service was not made first on Citibank's resident agent, president, secretary, or treasurer, pursuant to Rule 2-124(d), and service was not sent certified mail and restricted delivery, pursuant to Rule 2-121(a)(3). "It is an elementary principle that no valid proceeding can be had against a person until he has been notified of the proceeding by proper summons, unless he voluntarily waives such constitutional right." Harvey v. Slacum, 181 Md. 206, 29 A.2d 276, 278 (1942) (emphasis added); accord, Lohman v. Lohman, 331 Md. 113, 626 A.2d 384, 392 (1993) (defective service, unless waived, is a jurisdictional defect, and that defect is not cured by actual knowledge of the proceedings).
Of relevance here are two of the ways under Maryland law for a party to waive service of process in conformance with the Maryland Rules. First, a party is free to waive the right to insist on such service by agreeing in advance to a different method of service:
a corporation may assign the task of accepting process and may establish procedures for insuring that the papers are directed to those ultimately responsible for defending its interests. A process server may, of course, always serve the corporate personnel specifically identified in the statute. The corporation however cannot escape the consequences of establishing alternative procedures which it may prefer. In such a case the process server cannot be expected to know the corporation's internal practices. Reliance may be based on the corporate employees to identify the proper person to accept service. In such circumstances, if service is made in a manner which, objectively viewed, is calculated to give the corporation fair notice, the service should be sustained.
Academy of IRM v. LVI Env. Servs. Inc., 344 Md. 434, 687 A.2d 669, 675-76 (1997)[8]*16 (citing Fashion Page, Ltd. v. Zurich Ins. Co., 50 N.Y.2d 265, 428 N.Y.S.2d 890, 406 N.E.2d 747, 749 (N.Y.1980)). Second, even absent an agreement to the alternative method of service, a party is free to waive the right to assert the defense of improper service by not raising it in its answer. See, e.g., Williams v. Williams, 305 Md. 1, 501 A.2d 432, 435 (1985) (defense as to form of process waived by failure to plead the defense).
Maryland law does not alter these rules in the case of garnishments. In First Nat. Bank v. Equitable Life Assur. Soc. of U.S., 157 Md. 249, 145 A. 779, 780 (1929), the court recognized that by pleading without alleging lack of proper service, a garnishee had "waived any defects of service or summons." (Citations omitted.) The court in First National Bank recognized that the garnishee, by having pled, had not waived its right to file a motion to quash; however, the defense raised by the garnishee addressed by the Court of Appeals was based upon the death of one of the judgment-debtors, not on a defect in service of the writ. 145 A. at 780.
The principle established by First National Bank that a garnishee may waive a defect in the service of the writ is confirmed as well by Cromwell v. Royal Canadian Ins. Co., 49 Md. 366, 1878 WL 4705 (1878), and Thompson v. Central Metal & Supply Co., 158 Md. 186, 148 A. 231, 232 (1930), which stand for the broader principle that a garnishee (like a litigant in other litigation) may waive a procedural requirement designed for the garnishee's protection, and not for the protection of another party or intended to limit the class of cases a court may hear. In Cromwell, the garnishee neither resided in nor did business in Maryland, and as the garnishment statute was written, this deprived the court of subject matter jurisdiction. The court distinguished between statutory provisions going to jurisdiction over the person versus jurisdiction over the subject matter, and held that the statutory limitations there involved the class of garnishment suits that the Maryland courts could then hear, and constituted "not a grant of a privilege or immunity from suit, to parties otherwise liable to be sued in the courts of the State, and subject to their jurisdiction, but the grant of a restricted and limited jurisdiction to the courts themselves over certain suits against foreign corporations not otherwise compelled to submit to the jurisdiction of any court of the State." Id., 49 Md. 366, 1878 WL 4705, at *5 (italics in original). Accordingly, the garnishee's answer was ineffective to waive the defect as it went to subject matter jurisdiction. The Court of Appeals distinguished that circumstance from provisions that constitute a "privilege or exemption" of the party served "which a party cannot avail himself of after the time allowed for dilatory pleas." Id. (citing Ockerme v. Gittings, 35 Md. 169 (1872) (statutory provision that no person shall be sued out of the county of his residence waived by failure to plead)). That latter passage in Cromwell was applied in Thompson to bar invocation of such a *17 "privilege or exemption" of the party served in a garnishment proceeding when not timely pled. See Thompson, 148 A. at 232.
The Maryland Rules regarding service of a writ of garnishment on the garnishee are designed for the protection of the garnishee, not as a restriction on the category of cases the court may hear, or for protection of the judgment debtor. Accordingly, Citibank was free to waive the defense of lack of proper service.
Despite First National Bank, Cromwell, and Thompson, the trustee argues that Cole v. Randall Park Holding Co., 201 Md. 616, 95 A.2d 273 (1953), announces a rule under which a garnishee may not waive a defect in service of the writ. The court in Cole stated that:
Maryland early chose to follow a rule to which it has steadily adhered that pleading by a garnishee in an attachment does not necessarily nor always amount to a manifestation of consent to jurisdiction, and that a motion to quash on fundamental or jurisdictional grounds can be filed either by the garnishee or by the defendant, after pleas by the garnishee. [Citing, among other decisions, Cromwell and First National Bank.]
Cole, 95 A.2d at 278.[9] But like Cromwell, Cole is illustrative that waiver is unavailable when the service requirement deals with a limit on the class of garnishment cases the court may hear. In Cole, as in Cromwell, the garnishee neither resided in nor did business in Maryland; the court held that the garnishee was not subject to suit in Maryland. Id. at 279. Therefore, the debtor was permitted to challenge the service of the garnishee on the grounds that the court lacked jurisdiction over the garnishee. Id. at 279-80. Here, there is no dispute that Citibank has a presence in Maryland, and that the Maryland court could exercise subject matter jurisdiction over the writ against Citibank.
The court in Cole gave no suggestion that it was attempting to overrule First National Bank and Cromwell and, moreover, proceeded to discuss those decisions at length as supporting its view. See 95 A.2d at 280. Its holding, limited to the issue of a foreign corporation being sued in Maryland (a question, as it emphasized, see id. at 279, of subject matter jurisdiction over the res), did not deal with the issue of a garnishee's waiving the requirement of service in the manner specified by the Maryland Rules (a question of jurisdiction over the person). The trustee has pointed to no decision suggesting that the manner of service specified by the Maryland Rules for making service on Citibank could be viewed as not a "privilege or exemption" (as discussed in Cromwell) of Citibank that Citibank could therefore waive.[10] Accordingly, unless the trustee *18 has raised a genuine dispute as to the facts upon which Chesapeake relies, Citibank waived the defense of lack of service as specified by the Maryland Rules both (1) by agreeing in advance to the manner of service of Chesapeake's writ, and (2) by filing an answer that did not raise any defense regarding service.
The facts are not in genuine dispute. As to the first basis for finding a waiver, the trustee argues that "[o]n the record before this Court, [Chesapeake]'s unsupported assertion that PNC and Citibank consented to service that did not comply with the Maryland Rules is insufficient to support its motion to dismiss or in the alternative to grant summary judgment in its favor." (DE No. 15, p. 13) (emphasis added). However, the trustee conceded in response to Chesapeake's statement of material facts not in genuine dispute that Citibank "agreed to the manner of service" of the writ on it, and as noted in the complaint, the affidavit of service of the writ stated that the writ was sent to Citibank via "overnight mail with Garnishee's permission" at the San Antonio address. The trustee seems only to be saying that Chesapeake did not file an affidavit from the Citibank representative who was contacted to prove consent was given, but that does not suffice to disprove Chesapeake's own proof (the return of service) that consent was given. Moreover, "a proper return is prima facie evidence of valid service of process and a simple denial of service by the defendant is not sufficient to rebut the presumption arising from such a return." Sheehy v. Sheehy, 250 Md. 181, 242 A.2d 153, 155 (Md.1968) (citation omitted). The trustee has provided no factual grounds to challenge the existence of consent; his assertion raises no genuine issue of fact. See Liberty Lobby, 477 U.S. at 256, 106 S.Ct. 2505 (the nonmoving party may not rest on mere allegations or denials, but must instead demonstrate the existence of specific facts that create a genuine issue for trial.)
As to the second basis for finding waiver, the trustee does not dispute that Citibank answered the writ without raising a defense of improper service. Accordingly, both grounds of waiver are supported by the facts.
Based on both an affirmative consent to the mode of service and the failure to raise a defect in service in its answer to the writ, Citibank waived any defense of lack of service as prescribed by the Maryland Rules. The trustee as a hypothetical judgment lien creditor under 11 U.S.C. § 544, executing on Citibank on the petition date, would have been confronted with a prior writ on Citibank as to which Citibank had already waived the defect in service. The lack of service as specified by the Maryland Rules no longer being an issue, as of the petition date, affecting the validity and effectiveness of Chesapeake's garnishment lien against the Citibank accounts, the trustee as a hypothetical judgment lien creditor could not defeat Chesapeake's lien. See Pennsylvania Capital Bank v. Glosser (In re Allen), 228 B.R. 115, 128-29 (Bankr.W.D.Pa.1998) (holding, in a trustee's avoidance action, that garnishment lien became perfected, despite improper service, on the date that the garnishee waived the defense of improper service).
IV
Conclusion
Based upon the preceding analysis, a judgment will follow, granting Chesapeake's *19 motion to dismiss as it pertains to a contractual bar and, in the alternative, its motion for summary judgment as it pertains to the sufficiency of service of the writ of garnishment.
NOTES
[1] The trustee brings this action under 11 U.S.C. § 544(b). The trustee's standing seems more directly provided for under § 544(a)(1). Neither party has made any challenge to standing, and there appears no question here that standing is proper.
[2] The trustee's complaint sought to avoid liens on accounts held by both Citibank and PNC Bank. However, the PNC accounts no longer contain funds; any recovery efforts from those accounts are moot. Therefore, only the Citibank garnishment remains at issue.
[3] The reference to only "the Lintons" as agreeing "not to challenge the lien of the Bank" might raise an issue as to whether Linton Properties was still free to challenge the liens on Linton Properties' accounts other than grounds asserted in the adversary proceeding that both "the Lintons and Linton Properties" agreed to dismiss with prejudice. But it does not raise any issue as to whether the Lintons, in both their individual and debtor in possession capacities, were agreeing "not to challenge the lien of the Bank."
[4] In one provision, the parties agreed that "the Lintons shall receive the full exemptions allowed pursuant to the Bankruptcy Code," and agreed that Chesapeake would release a post-petition lien Chesapeake had been granted on the Lintons' exempt property. (Stipulation and Consent Order, DE No. 109, ¶ 13.) That reference to "the Lintons" is limited to them in their individual roles, and not as debtors in possession, because exempt property is not property of the estate over which the Lintons served as debtors in possession.
[5] Chesapeake characterizes the actions as having the same motivation, because both actions seek to avoid the lien. Although both actions have the same general motivation, motivation is only one factor in the res judicata identity analysis; motivational similarities here are outweighed by the differences in the analysis, nature, and interests underlying the two actions. See A.I. Credit Corp. v. Drabkin (In re Auto-Train Corp.), 49 B.R. 605, 608, 613 (D.D.C.1985), aff'd 800 F.2d 1153 (D.C.Cir.1986) (where the validity challenge based on state law did not preclude a later preference action).
[6] The situation here is different from one where, in ruling on the initial action, the court makes a determination as to validity, so that the issue is resolved and res judicata precludes further litigation. See In re Asheboro Precision Plastics, Inc., 2005 WL 1287743, *6 n. 4 (Bankr.M.D.N.C. March 1, 2005) ("[I]f the issue of the validity of a lien is actually litigated by consent of the parties and the court within the context of a motion to lift the automatic stay then an adjudication on the merits might be res judicata in subsequent litigation."); see also In re Midway Airlines, Inc., 167 B.R. 880, 883 (Bankr.N.D.Ill.1994) (res judicata does not bar a validity challenge based upon a previous hearing on a motion to lift the automatic stay). Here, as previously discussed, the validity of the lien was not addressed by the court, nor did the parties resolve the issue in the Stipulation and Order.
[7] The trustee also asserts that the service, made to a Texas address, does not meet the requirements of the "Texas Rules of Practice," pursuant to Maryland Rule 2-121(a) ("Service outside of the State may also be made in the manner prescribed by the court or prescribed by the foreign jurisdiction if reasonably calculated to give actual notice."). (Complaint, p. 6.) The trustee does not cite to which specific provisions of the Texas Civil Practice and Remedies Code or other Texas statute it refers. (See id.) However, because Chesapeake's service under the Maryland Rules was sufficient for jurisdictional purposes, arguments relating to Texas requirements are moot.
[8] The trustee argues Academy of IRM only stands for the proposition that where an authorized agent signs for restricted-delivery mail on behalf of an executive of a large organization, rather than the executive personally receiving and signing for that mail, service is proper under Maryland Rule 2-124(d). (DE No. 15, pp. 12-13.) The trustee correctly states the narrow holding of Academy of IRM. However, that holding rests on a rationale found in case law discussed and favorably cited by the Court of Appeals that supports a much broader flexibility concerning service on large organizations, and supports the manner of service agreed to here. See 687 A.2d at 675-76. Even assuming (without deciding) that the rationale was not a part of the holding, the trustee fails to articulate a reason why the Court of Appeals would deviate from that rationale in the circumstances of this case.
[9] The other Maryland decisions upon which the trustee relies are distinguishable because the garnishee did not waive the jurisdictional defense of lack of proper service. See Sheehy v. Sheehy, 250 Md. 181, 242 A.2d 153, 155-56 (1968) (a deputy sheriff rendered service by going to the wrong street address and wrong apartment number; asking if the person was "Mr. Sheehy" without verifying the first name; and, when the unidentified voice answered "yes" without opening the apartment door, the deputy sheriff read the subpoena and left a copy outside the door); Gordon, Feinblatt, Rothman, Hoffberger & Hollander v. Gerhold, 90 Md.App. 360, 600 A.2d 1194, 1203 (1992) (secretary was not authorized to accept service on the garnishee's behalf); Guen v. Guen, 38 Md.App. 578, 381 A.2d 721, 723, 726 (1978) (no real evidence of the service and the return of service was not signed by the individual); Brown v. American Insts. for Research, 487 F.Supp.2d 613, 614 (D.Md. 2007) (each attempt at service was invalid based upon various shortcomings).
[10] The trustee does not contend that the Lintons were not themselves served with process in the garnishment proceeding in accordance with the Maryland Rules, and thus we are not dealing with Citibank's answer as being ineffective to eliminate any defect in service on the Lintons as impacting the validity of Chesapeake's liens. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542632/ | 410 B.R. 261 (2007)
In re William E. GLASPIE.
No. 06-14871.
United States District Court, E.D. Michigan, Southern Division.
September 28, 2007.
*263 Paul Decailly, Paul Decailly Assoc., Ann Arbor, MI, for William J. Glaspie.
David M. Davis, Hardy, Lewis, Birmingham, MI, for General Motors Corporation.
ORDER AFFIRMING IN PART AND REVERSING IN PART THE ORDER OF THE BANKRUPTCY COURT AND DENYING MOTION FOR CONTEMPT
VICTORIA A. ROBERTS, District Judge.
I. INTRODUCTION
William E. Glaspie ("Appellant") filed a Motion for Contempt in the Bankruptcy Court for the Eastern District of Michigan ("Bankruptcy Court") against General Motors ("Respondent"), alleging violation of the automatic stay provision of 11 U.S.C.S. § 362(a) and the injunction provision of 11 U.S.C.S. § 524(a). His motion was denied. This appeal followed. For the following reasons, the Court affirms in part and reverses in part the Order of the Bankruptcy Court, and DENIES the Motion for Contempt.
II. BACKGROUND
Appellant is a former employee of Respondent. After an accident suffered on September 25, 2001 while working for Respondent, Appellant received $550 per week in Sickness & Accident payments from Respondent under its Life and Disability Benefits Program ("L & DBP"). Beginning September 25, 2002, the L & DBP payments continued at $2180 a month through the long term Extended Disability Benefits provision of the L & DBP. These payments ceased on April 1, 2003 because Appellant became eligible for Respondent's "disability retirement benefits" program under Respondent's Hourly-Rate Employees Pension Plan, and because of a retroactive award of Social Security Disability Benefits covering a period beginning April 1, 2002.
On March 14, 2003, Respondent sent a letter to Appellant informing him that pursuant to Respondent's employment contract, his receipt of Social Security Disability payments made his previously received benefits under Respondent's L & DBP (covering the same time period) immediately due overpayments. This amount totaled $14,991.89. On April 18, 2003, Appellant filed his Petition in Bankruptcy, and on August 18, 2003, the Order Discharging Debtor was entered.
On May 12, 2003between the filing of the petition and the discharge of his bankruptcyAppellant was awarded workers' compensation benefits for the period from September 19, 2001, through April 20, 2003, and thereafter. The Workers' Compensation Agency/Board of Magistrates ("Workers' Compensation Board") award entitled Respondent to reduce the lump sum due Appellant by the amount that it had previously paid under the L & DBP. See MCL § 418.354(1)(b); Opinion/Order, Workers' Compensation Agency/Board of Magistrates, Respondent Exhibit B. Although granting Respondent this right to coordinate benefits, the Workers' Compensation Board noted in its Opinion that it appeared the Michigan coordination law conflicted with federal bankruptcy law because it constituted a prohibited "setoff." Appellant appealed this decision to the State of Michigan Workers' Compensation Appellate Commission ("Appellate Commission"). On March 20, 2006 the Appellate Commission affirmed the Workers' Compensation Board decision, but found there to be no conflict with federal bankruptcy law.
On October 19, 2006, the Bankruptcy Court found the coordination law did not *264 violate 11 U.S.C.S. §§ 362(a), 524(a). It also held that Respondent was entitled to coordinate its payments under Michigan law. Based on these findings, the Bankruptcy Court denied the Motion for Contempt against Respondent. After the decision by the Bankruptcy Court, namely on October 27, 2006, the Michigan Court of Appeals affirmed the ruling of the Appellate Commission "on the merits," in a one sentence opinion. The same day, Appellant filed a timely notice of appeal of the Bankruptcy Court decision. This Court now reviews the Bankruptcy Court decision pursuant to 28 U.S.C.S. § 158(a).
Appellant alleges that the reduction by Respondent of his workers' compensation award pursuant to MCL § 418.354, may be legal in the general context, but violates the automatic stay and injunction imposed by bankruptcy courts after the filing of a bankruptcy petition. See 11 U.S.C.S. § 362(a)-(a)(1) ("a petition ... operates as a stay, applicable to all entities [regarding] the commencement or continuation [of an] action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title."); 11 U.S.C.S. § 524 ("A discharge in a case under this title ... operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.").
The issues before the Court are: (1) whether the decision of the Michigan Court of Appeals resulted in res judicata or collateral estoppel; (2) whether this Court has no jurisdiction to consider this matter because the decision of the Michigan Court of Appeals resulted in the loss of jurisdiction pursuant to the Rooker-Feldman doctrine; and (3) whether the coordination provision of MCL § 418.354 violates 11 U.S.C.S. §§ 362(a), 524(a) when it is applied to the workers' compensation benefits of an individual who filed a bankruptcy petition.
III. BANKRUPTCY COURT OPINION
The Bankruptcy Court decided: (1) it did not lack jurisdiction pursuant to the Rooker-Feldman doctrine; (2) res judicata and collateral estoppel did not apply; and (3) the application of MCL § 418.354 to Appellant's workers' compensation award was not in conflict with the automatic stay and injunction protections of 11 U.S.C.S. §§ 362(a), 524(a).
The Court affirms the reasoning and outcome regarding issues (1) and (2), and the outcome of issue (3). Although the outcome of issue (3) is correct, the reasoning requires clarification. It is not clear whether the Bankruptcy Court based its decision on a finding that the countervailing claims arose from the same "transaction," and were therefore a permissible "recoupment," or whether, as is urged by Respondent, the court found that the workers' compensation award is neither a "recoupment" nor a "setoff," but merely an award that factors in, or "coordinates," the receipt of earlier and alternate benefits into the workers' compensation award.
Respondent continues to challenge the jurisdiction of the Court because of the Michigan Court of Appeals decision issued subsequent to the Bankruptcy Court decision. The Court addresses those challenges first.
IV. STANDARD OF REVIEW
This Court reviews the Bankruptcy Court's findings of law de novo and findings of fact for clear error. See Barnesville v. Rafoth, 106 F.3d 1255, 1259 (6th *265 Cir.1997), cert. denied, 522 U.S. 816, 118 S. Ct. 65, 139 L. Ed. 2d 27 (1997).
V. ANALYSIS
A) Jurisdiction and Preclusion Challenges
Jurisdiction to hear this appeal is established by 28 U.S.C.S. § 158(a). Respondent's preclusion and jurisdiction arguments fail because of one glaring shortcoming: the Michigan Court of Appeals decision came after the decision of the Bankruptcy Court.
i) RookerFeldman
The Rooker-Feldman doctrine arises from two Supreme Court cases which jointly prohibit federal district courts from reviewing the merits of state court judgments. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct. 1303, 75 L. Ed. 2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S. Ct. 149, 68 L. Ed. 362 (1923). As summarized by Respondent, the Rooker-Feldman doctrine:
[I]s a combination of abstention and res judicata doctrines, and stands for the proposition that a federal district court may not hear an appeal of a case already litigated in state court.... [T]he lower federal courts do not have the authority to review state court decisions, even where a federal question is presented. [The doctrine], in essence bars `a party losing in state court ... from seeking what ... would be appellate review of the state judgment in a United States district court."
Respondent's Response at 13 (citing District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct. 1303, 75 L. Ed. 2d 206 (1983); United States v. Owens, 54 F.3d 271, 274 (6th Cir.1995), cert dismissed, 516 U.S. 983, 116 S. Ct. 492, 133 L. Ed. 2d 418; Johnson v. De Grandy, 512 U.S. 997, 114 S. Ct. 2647, 129 L. Ed. 2d 775 (1994)) (internal citations omitted).
The Bankruptcy Court rejected application of the Rooker-Feldman doctrine, holding that it "has no application to judicial review of executive action, including determinations made by a state administrative agency." Bank. Opin. at 3, Resp. Exh. F (citing Verizon Md., Inc. v. Public Service Com'n of Md., 535 U.S. 635, 644 n. 3, 122 S. Ct. 1753, 152 L. Ed. 2d 871 (2002)). When the Bankruptcy Court issued its opinion, only state administrative tribunals had made a determination. Subsequently, the Michigan Court of Appeals affirmed these determinations on the merits.
At the core of this analysis is the unique nature of Bankruptcy Courts, and whether their orders, appealable to district courts, are final. If they are not, then the Michigan Court of Appeals decision rendered several days after the Bankruptcy Court decision, may mean that this case was "already litigated in state court," depriving this Court of jurisdiction to render a decision on the coordination of benefits.
Bankruptcy Courts are not Article III courts. These courts have been permitted by Congress to have the power to hear and make final decisions on all "core" proceedings arising under the bankruptcy code. See 28 U.S.C.S. § 157(b)(1). In contrast, these courts may hear "non-core" proceedings, but may not make final judgments without the consent of both parties, and are otherwise limited to making recommendations to the district court. See id § 157(c)(1). If the Bankruptcy Court decision was a core proceeding, and therefore a final decision, it was rendered before the Michigan Court of Appeals decision and Rooker-Feldman would not operate to deny this court jurisdiction.
Although core proceedings are not specifically defined in 28 U.S.C.S. § 157, the *266 section contains a non-exhaustive list of proceedings that are core proceedings. See 28 U.S.C.S. § 157(b)(2). A denial of sanctions is not listed. Despite this omission, there is substantial support for the view that a determination of a motion for contempt is a core issue of bankruptcy law. The Eleventh Circuit has specifically held that the denial of a motion for contempt is a final order. See Anastasia Cruises, Inc. v. Exxon Mobil Corp. (In re Commodore Holdings, Inc.), 331 F.3d 1257, 1259 (11th Cir.2003) ("The order in this case denied [the] motion for contempt. This ended the particular controversy regarding violation of the automatic stay ..."); see also 10 Collier on Bankruptcy ¶ 9020.04 (15th Ed. Rev.2007) ("Contempt orders, like other orders resulting from contested matters, are final orders subject to appeal."); Lindsey v. O'Brien, Tanski, & Young Health Care Providers (In re Dow Corning Corp.), 86 F.3d 482, 488 (6th Cir.1996) ("finality requirement is considered `in a more pragmatic and less technical way in bankruptcy cases than in other situations.'"). In addition, the bankruptcy decision was also necessarily final, as only final decisions of Bankruptcy Courts are subject to appeal to the district courts. 28 U.S.C.S. § 158 ("The district courts of the United States shall have jurisdiction to hear appeals ... from final judgments, orders, and decrees").
Notably, Respondent does not contest the finality of the order denying the Motion for Contempt. This Court holds that the Bankruptcy Court's denial of the motion for contempt was a final order on a core proceeding subject only to appeal and modification by the district court. Accordingly, Rooker-Feldman does not apply.
In addition, the Court notes the recent decision of the Supreme Court in Exxon Mobil Corp. v. Saudi Basic Industries Corp., 544 U.S. 280, 125 S. Ct. 1517, 161 L. Ed. 2d 454 (2005). Even if the Bankruptcy Court decision had not preceded the Michigan Court of Appeals decision, or even if arguendo, it was not a final decision, the Rooker-Feldman doctrine would not automatically strip this Court of jurisdiction. Exxon made clear that while "comity or abstention doctrines may, in various circumstances, permit or require the federal court to stay or dismiss the federal action in favor of the state-court litigation," "[w]hen there is parallel state and federal litigation, Rooker-Feldman is not triggered simply by the entry of judgment in state court." Id. at 292, 125 S. Ct. 1517. Indeed, the Rooker-Feldman doctrine does not support the notion that concurrent jurisdiction "vanishes if a state court reaches judgment on the same or related question while the case remains sub judice in federal court." Id.
Rooker-Feldman is most appropriately applied in cases in which a dissatisfied litigant files a federal suit after a state court decision. See id. at 291, 125 S. Ct. 1517 ("In both [Rooker and Feldman] the losing party in state court filed suit in federal court after the state proceedings ended.") (emphasis added). Here, the Bankruptcy Court action was filed long before the Michigan Court of Appeals decision. Exxon teaches that this situation is more appropriately analyzed as a question of preclusion and not under the Rooker-Feldman doctrine. See id. at 293, 125 S. Ct. 1517 ("Disposition of the federal action, once the state-court adjudication is complete, would be governed by preclusion law.").
ii) Res Judicata and Collateral Estoppel
The Bankruptcy Court held that it would apply collateral estoppel to the factual findings of the administrative board, but not to its legal conclusions. See Bankruptcy Opinion at 3, Resp. Exh. F *267 (citing Univ. of Tenn. v. Elliott, 478 U.S. 788, 799, 106 S. Ct. 3220, 92 L. Ed. 2d 635 (1986) (quoting United States v. Utah Constr. & Mining Co., 384 U.S. 394, 422, 86 S. Ct. 1545, 16 L. Ed. 2d 642 (1966))); see also Noyes v. Channel Prods., Inc., 935 F.2d 806, 809 (6th Cir.1991). This holding was correct. Respondent now argues that because of the subsequent Michigan Court of Appeals decision, this Court must grant that decision res judicata and/or collateral estoppel effect as to questions of law. Appellant does not address this issue. Because the Bankruptcy Court decision preceded the Michigan Court of Appeals decision, neither res judicata nor collateral estoppel bound the Bankruptcy Court, nor do they bind this Court in its review of the Bankruptcy Court decision.
Indeed, to the extent that res judicata or collateral estoppel apply at all, the Bankruptcy Court decision resulted in the application of collateral estoppel against the Michigan Court of Appeals. Application of collateral estoppel has four requirements: (1) the issue precluded must be the same one involved in the prior proceeding; (2) the issue must actually have been litigated in the prior proceeding; (3) determination of the issue must have been a critical and necessary part of the decision in the prior proceeding; and (4) the prior forum must have provided the party against whom estoppel is asserted a full and fair opportunity to litigate the issue. See Cent. Transp. Inc. v. Four Phase Sys., Inc., 936 F.2d 256 (6th Cir.1991) (citing N.L.R.B. v. Master Slack and/or Master Trousers Corp., 773 F.2d 77, 81) (6th Cir. 1985). Although Respondent attempted to apply the doctrine to this Court, in fact, all the requirements for the application of collateral estoppel against the Michigan Court of Appeals are present.
Whether coordination under MCL § 418.354 was prohibited by 11 U.S.C.S. §§ 362(a), 524(a) was decided first in the Bankruptcy Court, and was fully litigated there. The compatibility of 11 U.S.C.S. §§ 362(a), 524(a) and MCL § 418.354 was the primary contested issue before the Bankruptcy Court. Lastly, Respondent had a full and fair opportunity to litigate the issue in the Bankruptcy Court. Having met the requirements of Central Transport, the final determination of the bankruptcy court (and more importantly the reasoning behind its conclusion) that coordination under MCL § 418.354 did not violate the automatic stay or injunction under 11 U.S.C.S. §§ 362(a), 524(a), was binding on the Michigan Court of Appeals.
B) Compatibility of MCL § 418.354 and 11 U.S.C.S. §§ 362(a), 524(a)
Ironically, every tribunal (except the Workers' Compensation Board) that addressed the issue agrees that MCL § 418.354 does not violate 11 U.S.C.S. §§ 362(a), 524(a). The Workers' Compensation Board held it was bound by Michigan law and applied MCL § 418.354. The Appellate Division held that the use of the word "received" instead of "owed" or "claimed" brought MCL § 418.354 outside the scope of 11 U.S.C.S. §§ 362(a), 524(a). The Bankruptcy Court below mixed the reasoning of the Appellate Division and the application of the traditional "same transaction" test to hold 11 U.S.C.S. §§ 362(a), 524(a) were not violated. The Michigan Court of Appeals subsequently affirmed the holding and reasoning of the Appellate Division. The only question for this Court is the correct reasoning behind a result that has been unanimously upheld by each of the tribunals to address the issue.
In its response, Respondent argues that the Bankruptcy Court erred in describing *268 the reduction in benefits as "coordination/recoupement," and should have instead referred to the reduction as only a "coordination." See Respondent Response at 7 n. 3. The Court finds that the Respondent's critique of the bankruptcy decision holds merit. The Bankruptcy Court conflated application of the theory of "recoupement" with the theory of "coordination" used by the Appellate Division. Understanding this conflation requires close examination of the Bankruptcy Court opinion. The pertinent part reads:
In the present case, General Motors's right to reduce the worker's compensation award by benefits already received was not affected by Glaspie's discharge. The initial overpayment of benefits created a debt that General Motors had an independent right to seek repayment on, that debt was discharged through the bankruptcy. However, the right of recoupement that arose under M.C.L. § 418.354 did not give rise to an independent right to payment. It could only be recouped from a future award. Accordingly, it was not a debt subject to discharge. The workers' compensation award specifically provided for coordination/recoupement of previously paid benefits. The parties do not dispute that Glaspie received the Sickness and Accident Benefits and Extended Disability Benefits. Therefore, General Motors had a right to deduct those payments prior to paying workers' compensation.
Bankruptcy Court Opinion at 6, Resp. Exh. F (emphasis added).
Michigan workers' compensation law allows for the "coordination" of benefits. See MCL § 418.354. When a worker receives workers' compensation benefits, employers are legally entitled to deduct certain amounts from the amount they would otherwise be "obligated" to pay. Id. In pertinent part, the provision allows the amount of workers' compensation the employer is "obligated" to pay to be reduced by previous payments under "a self-insurance plan, a wage continuation plan, or under a disability insurance policy provided by the same employer from whom" workers' compensation payments are due. MCL § 418.354(1)(b). Appellant does not take issue with the general validity of the provision allowing coordination of benefits, but challenges its application to persons who have filed a petition for the protections of the automatic stay and injunction provisions of 11 U.S.C.S. §§ 362(a), 524(a)(2).
Pointedly, §§ 524(a)(2) and § 362(a) prohibit the "offset" of any debt subsequently owed by a pre-petition creditor to the protected petitioner based on a discharged pre-petition debt. While a setoff/offset is prohibited, case law has developed the availability of the alternate action of "recoupement." The distinction between a prohibited "setoff" and a permitted "recoupement," was addressed by the Bankruptcy Court below:
Recoupment should be distinguished from setoff. The latter `reduces or extinguishes a mutual debt arising from different transactions', and is subject to the automatic stay. On the other hand, recoupment "reduces or extinguishes a debt arising from the same transaction", and is not stayed by the bankruptcy.
Bank. Opin. at 5, Resp. Exh. F (citing In re Delicruz, 300 B.R. 669, 679 (Bankr. E.D.Mich.2003)) (internal citations omitted).
The primary method to distinguish between prohibited and acceptable remedies based on discharged debt is to determine whether or not the two claims arise from the "same transaction." Many courts further specify that to meet the same transaction requirement, the claims must also arise from the same "contract." See Lee v. *269 Schweiker, 739 F.2d 870, 874 (3d Cir.1984); First Nat'l Bank v. Master Auto Svc. Corp., 693 F.2d 308, 310 n. 1 (4th Cir. 1982); Thompson v. Bd. of Tr. of the Fairfax County Police Officers' Ret. Sys. (In re Thompson), 182 B.R. 140, 145, 149 (Bankr. E.D.Va.1995). Some courts have even gone as far as requiring an even more specific connection. See Thompson, 182 B.R. at 148 (citing Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065 (3d Cir.1992)).
If the Bankruptcy Court based its decision on the categorization of the workers' compensation award as a recoupement, that reasoning is in error. Reducing post-bankruptcy petition workers' compensation claims because of overpayments of a pre-bankruptcy petition private disability plan is not a recoupement. Rather, it is a prohibited setoff. These payments do not arise from the same transaction or contract. Private disability payments arise from the employment contract between employer and employee. In contrast, workers' compensation payments arise from a legislatively determined compromise liability system for employment related injuries.
Further, this workers' compensation award is not a "transaction" as usually described in the case law addressing the distinction between recoupement and setoff. Indeed, the "coordination" of the workers' compensation award is neither a "recoupement" nor a "setoff." The award involves only a singular workers' compensation award, and does not involve or require a comparison of the pre-bankruptcy and post-bankruptcy aspects of two types of "debt[s]" or "claim[s]." 11 U.S.C.S. § 101(12), 101(5)(A). The reduction of the award is merely the result of the application of one factor in the legislatively determined method of calculating workers' compensation awards: whether the recipient previously received (as opposed to owed or owes) payment of certain other benefits. The Bankruptcy Court opinion should have omitted all reference to the theory of "recoupement," and used only the word "coordination."
The holding of this Court is that:
General Motors' right to reduce the workers' compensation award by benefits already received was not affected by Glaspie's discharge. They are substantively two unrelated events. The initial overpayment of benefits created a debt that General Motors had an independent right to seek repayment on, and that debt was discharged through the bankruptcy. The Michigan workers' compensation law, which determines the amount of the award, specifically provides for the reduction of the award by previous payments under a self-insurance plan. The parties do not dispute that Glaspie received the Sickness and Accident Benefits and Extended Disability Benefits. Therefore, General Motors had a right to coordinate, and therefore, reduce the amount of the award.
VI. CONCLUSION
The Court affirms in part and reverses in part the Order of the Bankruptcy Court, and DENIES Appellant's Motion for Contempt.
IT IS ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542673/ | 410 B.R. 793 (2008)
In re Christopher Robert ESPANDER, Debtor.
Michael Gigandet, Trustee, Plaintiff,
v.
Mortgage Electronic Registration Systems, Inc.; JP Morgan Chase Bank, as Trustee for Mortgage Electronic Systems, Inc.; and Schallen, Inc., Defendants, and
Mortgage Electronic Registrations Systems, Inc.; JP Morgan Chase Bank as Trustee for Mortgage Electronic Systems, Inc.; and Schallen, Inc., Third-Party Plaintiffs,
v.
Victory Home Builders, LLC.; and Superior Title Company, Inc., Third-Party Defendants,
A. Michael Wilson, Plaintiff Intervenor,
v.
Michael Gigandet, Trustee; Mortgage Electronic Registration Systems, Inc.; JP Morgan Chase Bank, as Trustee for Mortgage Electronic Registrations Systems, Inc.; Schallen, Inc.; and Victory Home Builders, LLC., and Morris, Schneider & Prior, L.L.C., Intervention, Defendants.
Bankruptcy No. 305-04423-MH3-7, Adversary No. 307-0039A.
United States Bankruptcy Court, M.D. Tennessee, at Nashville.
December 23, 2008.
*794 Keith David Slocum, Salas Slocum Law Group, Maria M. Salas, Rothschild & Salas, PLLC, Nashville, TN, for Debtor.
Michael Gigandet, Law Office of Michael Gigandet, Pleasant View, TN, for Trustee.
Joseph Carson Stone, J. Carson Stone III, PC, Nashville, TN, for Third-Party Defendants.
MEMORANDUM OPINION
MARIAN F. HARRISON, Bankruptcy Judge.
On December 10, 2008, the Court heard argument on five matters: (1) the Trustee's motion for partial summary judgment, which was taken under advisement; (2) A. Michael Wilson's (hereinafter "Mr. Wilson") supplemental memorandum in support of his motion to alter or amend the previous denial of partial summary judgment, which was taken under advisement; (3) the Trustee's motion to strike Victory Home Builders, LLC's (hereinafter "Victory Home Builders") § 549 defense, which was granted to the extent necessary; (4) the Trustee's motion for authorization to provide a corrected Trustee's Deed to Mr. Wilson, which was taken under advisement; and (5) the Trustee's motion to compel the production of a privilege log, which was ruled on during argument. Accordingly, the matters remaining for decision are: (1) the Trustee's motion for partial summary judgment; (2) Mr. Wilson's supplemental memorandum in support of his motion to alter or amend; and (3) the Trustee's motion for authorization to provide a corrected Trustee's Deed to Mr. Wilson.
For the following reasons, the Court finds that the Trustee's motion for partial summary judgment should be granted and that the other remaining motions should be denied.
I. PROCEDURAL BACKGROUND
Mortgage Electronic Registration Systems, Inc. (hereinafter "MERS"), filed a motion for relief on April 19, 2005, to which the Trustee objected. The motion sought relief from the automatic stay as to real property located at 838-840 Sutton Hill Road, Nashville, Tennessee 37204. On May 24, 2005, the parties announced an agreed order.
Thereafter, on August 17, 2005, the Trustee filed a motion and notice to sell the unimproved lot located at 838 Sutton Hill Road.[1] Responses were due by September 7, 2005, and none were filed. Accordingly, the Trustee submitted an order granting the motion to sell. The Court entered the order on September 14, 2005. The order granted the Trustee's request for authority to sell the property at public auction with "any valid and proper lien [attaching] to the proceeds of the sale." *795 The date of the auction, as set forth in the Trustee's motion to sell, was September 22, 2005.
It was only after the Court granted the Trustee the authority to sell the unimproved lot located at 838 Sutton Hill Road and after the proposed date of the auction had passed that counsel for MERS submitted the agreed order granting relief from the automatic stay. This order was entered by the Court on October 6, 2005, and stated the following:
This cause is before this Honorable Court upon the Motion by Mortgage Electronic Registration Systems, Inc. (hereinafter referred to as "Movant"), by and through counsel, a secured creditor of the Debtor, for Relief From the Automatic Stay and Abandonment of Property by Trustee as to the property located at 838-840 Sutton Hill Road, Nashville, TN 37204, the improved property recorded in Davidson County, Tennessee, on February 13, 2003, # XXXXXXXX-XXXXXXX.
MERS held a foreclosure sale on December 1, 2005, on both the improved and the unimproved property.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c), as incorporated by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
III. DISCUSSION
First, the Court considers the Trustee's motion for partial summary judgment. The Trustee asserts that as a matter of law, the attempt to foreclose on the property of the estate was a violation of the automatic stay and a breach of the creditor's agreement with the Trustee, who had already sold the real estate. Thus, the Trustee submits that as a matter of law, the mortgage foreclosure sale was in violation of the automatic stay and is void ab initio.
When this case was initially heard on summary judgment in 2007, the Court denied the Trustee's motion and scheduled an evidentiary hearing in November on the parties' intent with regard to the agreed order granting MERS relief from the automatic stay. Prior to the evidentiary hearing, MERS conceded that pursuant to the agreed order of relief, the estate retained the unimproved lot at 838 Sutton Hill Road as property of the estate and that it had relief from the stay as to the improved lot at 840 Sutton Hill Road only. On January 8, 2008, the Court entered an order to that effect, and no objections to the language of the order were filed. As it turns out, MERS' valid security interest may have been in the unimproved lot rather than in the improved lot. Based on this information, MERS and the other defendants argue that there is a factual dispute as to whether the sale of the unimproved lot was actually a violation of the automatic stay.
The Court disagrees with this argument and finds that there is no material dispute of fact as to whether MERS violated the automatic stay.
It is generally recognized that unfortunate consequences may follow when a creditor sits idly by during a bankruptcy case and fails to protect its rights. See, e.g., Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253, 1257 (10th Cir. 1999) ("creditor cannot simply sit on its rights and expect that the bankruptcy court or trustee will assume the duty of protecting its interests"); In re Pence, 905 *796 F.2d 1107, 1109 (7th Cir.1990) ("[Creditor] was not entitled to stick its head in the sand and pretend it would not lose any rights by not participating in the proceedings."); In re Szostek, 886 F.2d 1405, 1414 (3rd Cir.1989) (creditors must take an active role in protecting their rights) (citation omitted).
In the present case, MERS agreed as to which property was property of the estate and upon which property MERS was entitled to relief. MERS also had notice of the Trustee's motion to sell the unimproved property, and did not file a written objection to the motion to sell or appear in Court to orally object. While this case is wrought with errors, MERS had a responsibility to protect its own interests, it had more than one opportunity to protect its own interests, and it sat on its hands and did nothing. MERS argues that while original counsel may have understood and agreed to the distribution of the two properties, MERS did not. This is irrelevant. MERS "voluntarily chose this attorney as [its] representative in the action, and [it] cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent and is considered to have `notice of all facts, notice of which can be charged upon the attorney.'" Link v. Wabash R.R. Co., 370 U.S. 626, 633-34, 82 S. Ct. 1386, 8 L. Ed. 2d 734 (1962) (citation omitted).
Because MERS failed to do anything to protect any interest it might have had in the unimproved property, this property became property of the estate, and thus, the attempted foreclosure sale of this property was in violation of the automatic stay and void ab initio absent limited equitable circumstances, which are not applicable here. See In re Hamby, 360 B.R. 657, 660 (Bankr.E.D.Tenn.2007). Accordingly, the Court finds that MERS violated the automatic stay and that the foreclosure sale was void ab initio. Thus, the Trustee's motion for partial summary judgment should be granted.
However, this does not mean that Mr. Wilson is entitled to a corrected Trustee's Deed or that he should be declared the owner of the unimproved lot at this time. Instead, the Court finds that material facts are in dispute regarding these issues, including but not limited to the appropriate relief and whether Victory Home Builders is a subsequent transferee under 11 U.S.C. § 550(b)(1). Accordingly, the Trustee's motion for authorization to provide Mr. Wilson with a corrected Trustee's Deed and Mr. Wilson's motion to alter or amend the denial of his motion for summary judgment should be denied at this time.
IV. CONCLUSION
Accordingly, the Court finds that (1) the Trustee's motion for partial summary judgment should be granted; (2) Mr. Wilson's motion to alter or amend should be denied; and (3) the Trustee's motion for authorization to provide a corrected Trustee's Deed to Mr. Wilson should be denied.
An appropriate order will enter.
NOTES
[1] The footage of the unimproved property was wrong in the motion to sell and in the subsequent order granting relief. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542659/ | 60 F.2d 269 (1932)
In re BROWN.
District Court, W. D. Kentucky.
July 13, 1932.
*270 Ben S. Washer and Arthur B. Bensinger, both of Louisville, Ky., for bankrupt.
DAWSON, District Judge.
This matter is before me on petition of Homer W. Batson, trustee for the bankrupt, to review the action of the referee in entering the order of April 25, 1931, holding that the only interest which passed to the trustee in the home occupied by the bankrupt and his wife was the contingent right of survivorship of the bankrupt in this property, and on the petition of James B. Brown, the bankrupt, to review the same order. The contention of the bankrupt is that no interest in this property passed to the trustee.
*271 The property involved is a tract of approximately six acres bordering Cherokee Park, on which there is a handsome residence, which at the time of the institution of the bankruptcy proceeding was, and now is, occupied by the bankrupt and his wife as a home. This property was conveyed to the bankrupt and his wife by two deeds, one dated September 23, 1924, and the other January 7, 1925. The part of each deed material to this controversy reads as follows:
"This deed between Marie H. Seelbach and Louis Seelbach, her husband, parties of the first part, and James B. Brown and Elizabeth B. Brown, his wife, parties of the second part, witnesseth:
"That for a valuable consideration paid, the receipt of which is hereby acknowledged, the parties of the first part do hereby convey with covenant of general warranty unto the parties of the second part, during their joint lives as tenants in common, with remainder in fee simple to the survivor of them, the following described real estate," etc.
A correct solution of the questions here presented requires an examination of the common-law rule in Kentucky as to the respective rights of husband and wife in real estate deeded or devised to them jointly, and of the Statutes of Kentucky modifying the common-law rule.
At common law a conveyance or devise of real estate jointly to husband and wife made them tenants by the entirety. That is to say, their interest in the title was one and indivisible, the fee in the entire estate thus held passing to the survivor. During their joint lives their holding was regarded as one and indivisible, and the estate thus held during their joint lives was under the full control and domination of the husband. He was entitled to the rents, uses, and profits thereof. During their joint lives he could sell it and deliver possession thereof to the purchaser, to the exclusion of the wife's possession, and the deed thus executed by him during their joint lives operated to convey the entire title in the property to the purchaser in event the husband outlived the wife. This interest of the husband at common law could be subjected to sale by his creditors. Cochran v. Kerney, 9 Bush, 199.
This continued to be the law of Kentucky until the passage by the Legislature of chapter 368 of the Acts of 1846, which, among other things, provided as follows: "That the lands of no married woman within this Commonwealth, which she may have owned at the time of her marriage, or which may come or be given, devised or descend to her during the marriage, shall be subject to the debts of the husband, or be levied on, attached or sold, or executed, for any of his debts, created or arising either before or after the marriage."
As construed by the Court of Appeals in the cases of Moore v. Moore, 14 B. Mon. 259, and Cochran v. Kerney, 9 Bush, 199, this law had the effect of leaving the husband still free to enjoy the use, profits, and rents of real property jointly owned by him and his wife during coverture, with the right during their joint lives to convey same subject to the conveyance being defeated in event his wife should outlive him, but to close the door to creditors of the husband levying on and selling this interest in such property so as to deprive the wife of the enjoyment and occupancy of the land during their joint lives and while it remained undetermined whether she or her husband would ultimately become the sole owner of the fee. The case of Cochran v. Kerney, supra, however, held that a court of equity could subject this interest of the husband in real estate jointly held by him and his wife to the payment of the husband's debts, provided it was so done as to neither affect the wife's right of survivorship nor her right of enjoyment of occupancy during their joint lives.
The law of Kentucky remained in this condition until 1852, when by section 1 of article 2 of chapter 47 of the Revised Statutes (Stanton, vol. 2, p. 8), it was provided: "Marriage shall give to the husband, during the life of the wife, no estate or interest in her real estate, chattels real, or slaves owned at the time or acquired by her after marriage, except the use thereof, with power to rent the real estate for not more than three years at a time, and hire the slaves in like manner for not more than one year, and receive the rent and hire."
Subsections 1 and 2 of this section specifically provided that neither such real estate nor the husband's contingent right of curtesy or life estate therein, nor his right to the use, rent, or hire thereof, could be sold or otherwise subjected to the debts of the husband during their joint lives. This statute, in slightly modified form, was carried into the General Statutes as a part of section 1, article 2, of chapter 52 of that compilation. This law had the effect of not only closing the gap left in the act of 1846, by which the husband's common-law interest in real property jointly held by him and his wife could be *272 equitably subjected to the payment of his debts in the manner pointed out in the case of Cochran v. Kerney, supra, but it also swept away the common-law right of the husband during their joint lives to sell and convey real estate jointly held by him and his wife subject to the defeat of such conveyance if the wife outlived the husband.
There was still left, however, the common-law rule of survivorship in such cases, even though the instrument under which they jointly held contained no express provision of such right of survivorship. This common-law right, however, was abolished in 1852 by section 14 of article 4 of chapter 47 of the Revised Statutes, which provided: "Where any real estate or slave is conveyed or devised to husband and wife, unless a right by survivorship is expressly provided for, there shall be no mutual right to the entirety by survivorship between them; but they shall take as tenants in common and the respective moieties be subject to curtesy or dower with all other incidents to such a tenancy."
This law has continued in force and is found in substantially the same form, in so far as real estate is concerned, in section 2143, Kentucky Statutes, Carroll's 1930 Edition.
Upon the enactment of this statute the only common-law rights of the husband during coverture in real estate held jointly by him and his wife were his right to enjoy the use and control thereof and the right to rent it for a period of not exceeding three years at a time. To this extent the person of the wife was still deemed at common law to be merged in that of her husband during the existence of the marriage relation.
This remaining feature of the common law, however, was swept away by the Weissinger Act of 1894, which is now section 2127, Kentucky Statutes, Carroll's 1930 Edition, which in part provides: "Marriage shall give to the husband, during the life of the wife, no estate or interest in the wife's property, real or personal, owned at the time or acquired after the marriage. During the existence of the marriage relation the wife shall hold and own all her estate to her separate and exclusive use, and free from the debts, liabilities or control of her husband."
Thus, by these successive legislative steps, the harsh common-law rule applicable to real estate jointly held by husband and wife, heretofore adverted to, has been swept away, and real estate now jointly held by husband and wife is in exactly the same status, and held by them in exactly the same relation, as is land held by other joint tenants, except there is still preserved the right to remainder in fee by survivorship, if such right is expressly reserved by the instrument under which they hold. The right of survivorship as it now exists is not a survival of the common law, but is a right secured to them by statute, and, as I view the present law of Kentucky, this right of survivorship in no way whatever colors or affects their respective rights of use and occupancy of the estate during their joint lives. During that time they hold it as tenants in common. If the right of survivorship is secured by the instrument under which they claim, upon the death of either the remainder in fee passes to the other. If such survivorship right is not so secured to them, upon the death of either the other takes only such interest in the fee as is given by the laws of descent and distribution of this state.
Construing the deeds involved here in the light of the rule here announced, I think it is clear that Mr. and Mrs. Brown during their joint lives hold the property as tenants in common, with remainder in fee simple to the survivor. I do not regard the expression "during their joint lives as tenants in common," contained in these deeds, as in any way limiting the right of survivorship, nor do I think the right of survivorship in any way colors or affects the character of their use and occupancy during their joint lives. During this period they have the right of use and occupancy of the entire property as tenants in common. Such being the case, the bankrupt, James B. Brown, has an undivided one-half interest in the right to the use, occupancy, and rents of the entire property during their joint lives, with a contingent fee in the entire property, depending upon whether or not he outlives his wife, and this interest, in my judgment, passed to the trustee in bankruptcy and can be sold as an asset of the bankrupt estate.
While I am firmly convinced that the rule here announced is a correct construction of the statutes which have been referred to, yet if by a settled line of decisions the Kentucky Court of Appeals had construed these statutes differently in the situation here presented, I would be compelled to follow that line of decisions; but a careful study of the decisions of that court on this and related subjects satisfies me that there is no settled construction by that court contrary to the one here announced. It is true that some expressions of the Court of Appeals may be found indicating a contrary view, and such a contrary *273 view is clearly deducible from the case of Francis v. Vastine, 229 Ky. 431, 17 S.W. (2d) 419; but a view entirely in harmony with the one expressed herein is found in the case of Petty v. Petty, 220 Ky. 569, 295 S.W. 863. So I must conclude that the Kentucky Court of Appeals has not definitely and conclusively adopted a contrary rule.
I am fortified in the views herein expressed by many well-reasoned cases from other jurisdictions, particularly by the reasoning in the cases of Hiles v. Fisher, 144 N.Y. 306, 39 N.E. 337, 30 L. R. A. 305, 43 Am. St. Rep. 762; Buttlar v. Rosenblath, 42 N. J. Eq. 651, 9 A. 695, 59 Am. Rep. 52; Branch v. Polk, 61 Ark. 388, 33 S.W. 424, 30 L. R. A. 324, 54 Am. St. Rep. 266.
It has been urged upon me that a purchaser of Brown's rights and interest in the property during the joint lives of himself and wife would secure nothing of tangible value, as the purchaser could not disturb Mrs. Brown's right of occupancy and use of the entire estate during that period. This suggestion, however, grows out of a misunderstanding of Mrs. Brown's right in the estate during their joint lives. I do not subscribe to the suggestion that the purchaser must enjoy the right of use and occupancy jointly with Mrs. Brown during the joint lives of her and her husband, and that he has no alternative. I think section 490 of the Civil Code of Practice of Kentucky expressly covers such a situation. This section provides in part: "A vested estate in real property jointly owned by two or more persons * * * may be sold by order of a court of equity in an action brought by either of them, though the plaintiff or defendant be of unsound mind or an infant. * * * If the estate be in possession and the property cannot be divided without materially impairing its value, or the value of the plaintiff's interest therein."
The estate of Brown and his wife, for their joint lives, in this property is unquestionably a vested estate, in which each has an undivided one-half interest. It is an estate in possession, and I apprehend that there will be no difficulty in establishing the fact that it cannot be divided without materially impairing its value. I have no doubt, in view of these provisions of the Code, that the purchaser, in an equitable proceeding in the state court, can sell this right of joint occupancy for the joint lives of Brown and his wife, and of course the proceeds would be equally divided between the purchaser of Brown's interest from the trustee in bankruptcy, and Mrs. Brown. I have no doubt whatever, under the law of Kentucky, that the interest of Brown in the fee, contingent upon his outliving his wife, can also be sold by the trustee under section 1681 of Kentucky Statutes.
At this time I express no opinion as to Brown's right to have set aside to him out of the proceeds of the sale of his interest in the real estate referred to a thousand dollars in lieu of his homestead.
For the reasons stated, the order of the trustee complained of will be set aside and the case sent back to the referee, with directions to enter an order conforming to the views herein expressed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542677/ | 410 B.R. 797 (2009)
In re Bruce WERNER, Debtor.
Harris Bank, N.A., Plaintiff,
v.
Bruce A. Werner, Individually and as Trustee of the Bruce A. Werner Trust dated January 1, 2000, and Beth R. Werner, Individually and as Trustee of the Beth R. Werner Trust dated January 1, 2000, Defendants.
Bankruptcy No. 07 B 2791, Adversary No. 07 A 390.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
April 8, 2009.
*799 David Audley, Chapman and Cutler LLP, Chicago, IL, for Plaintiff.
Gregory K. Stern, Gregory K. Stern, P.C., Chicago, IL, Richard L. Hirsh, Richard L. Hirsh & Associates PC, Lisle, IL, for Defendants.
MEMORANDUM OPINION
PAMELA S. HOLLIS, Bankruptcy Judge.
This matter comes before the court following trial on the complaint brought by Harris Bank, N.A. On January 23, 2002, Bruce A. Werner ("Werner") transferred his residence at 22460 South 88th Avenue, Frankfort, Illinois (the "Real Property") into tenancy by the entirety. Harris Bank seeks to avoid that transfer in order to collect on a judgment obtained in state court. Having heard the testimony of witnesses, reviewed the exhibits submitted into evidence and read the papers filed by the parties, the court finds in favor of the defendants. Werner's transfer of the Real Property into tenancy by the entirety will not be avoided.
FINDINGS OF FACT
Fifty-six year old Bruce Werner has been fanning in Frankfort for approximately twenty years. He currently works for an electrical contractor because "[f]arming is my passion. I've never made a living doing if. You know, farming is a disease. A[nd] it's probably a good thing that it is because nobody would do it otherwise." Tr. at 70.[1]
Werner has also owned gas stations, working as a Shell Oil dealer for approximately thirty years. He is now out of that business, having sold his Shell Food Mart and car wash on January 3, 2001, in a deal that netted him approximately $400,000. Tr. at 71. He also owned a book store named Practical Magick, beginning in 1998 or 1999. Tr. at 106. Werner employed a manager to run the store. Tr. at 80.
Several years ago, the Werners' accountant James Mommsen suggested that they transfer ownership of their real property into trusts. Tr. at 13-14. At the time, the Werners owned the Real Property, a ten acre piece of real estate (the "Farm Property"), a home in Orland Hills and a condominium in Tinley Park. Tr. at 72.
*800 Werner believed that the goal of the trust formation and of transferring the real estate into the trusts was to be "able to create an estate plan of some sort and be able to move properties in and out of that trust." Tr. at 14. Although he recommended creating the trusts, Mommsen never read the trust instruments. Tr. at 166.
On or about January 1, 2000, Werner signed a Declaration of Trust for the Bruce A. Werner Trust, making him Trustee of the Bruce A. Werner Trust. Creditor's Ex. 1. On the same date, his wife Beth Werner signed a Declaration of Trust for the Beth R. Werner Trust, making her Trustee of the Beth R. Werner Trust. Creditor's Ex. 2. Their attorney, James Friel, prepared the trust instruments for both the Bruce Werner Trust and the Beth Werner Trust. Tr. at 12.
All of the real estate that the Werners ownedthe Real Property, the Farm Property, the Orland Hills home and the Tinley Park condominiumwere transferred into the trusts on February 14, 2000. Tr. at 73; Creditor's Ex. 3.
Several months later, in mid to late November 2000, Werner first met Thomas Planera and Joseph Zarlengo, who were law partners, in a meeting set up by a mutual friend, Brett Rizzi. Tr. at 44, 189-190. Rizzi organized the meeting in order to introduce prospective investors in a business venture. Tr. at 190. According to Werner, "this was a meet and greet, basically. I had never met Tom and Joe. He wanted us to be his partners, and it was to meet, you know, the potential partners in the deal." Tr. at 74. The four eventually formed an LLC and purchased a self-storage facility in Joliet, Illinois. Tr. at 190-191. Zarlengo believed that the property in Joliet "was worth probably about a million dollars." Tr. at 192.
Werner learned at the initial meeting that Zarlengo was a tax attorney who specialized in estate planning and IRS resolution work. Tr. at 193. Werner told Zarlengo about the trusts and his estate plan, and asked if his plan differed from those that Zarlengo set up for his clients. Tr. at 194. Zarlengo never reviewed the Werners' trust instruments. Tr. at 199.
Werner testified that having asked Zarlengo about his estate plan, "[t]he only thing he didn't like about it was he believed thatand he recommended to his clients that a husband and a wife should hold their house in tenancy by the entirety." Tr. at 45. Zarlengo confirmed that
[k]ind of a pet peeve of mine is I just hate to see homes, personal residences, in trusts. And I mentioned that.
.... I just don't like properties in trust primarily because when one spouse dies, then half the house is owned by a trust, and usually the trust will have children as beneficiaries. So essentially you're answerable to your kids about what you want to do with half the house.
Tr. at 194. Zarlengo also testified that while nearly all of the benefits of tenancy by the entirety could be achieved with joint tenancy with right of survivorship, joint tenancy allowed one spouse to encumber the house without the approval of the other spouse. Tr. at 208-210.
Zarlengo told Werner that he could shield the Real Property from creditors by transferring it into a tenancy by the entireties estate. Tr. at 45-46. Indeed, Werner recalled Zarlengo describing numerous benefits of holding a homestead in tenancy by the entirety:
"[T]he benefits to that were that you would have 100 percent ownership of that. You had control [of] 100 percent as opposed to the half interest that you had before. And then there was a survivorship benefit. And by that, I took it *801 to mean that in the event of a death, it made it easier, there was less paperwork, less red tape for the surviving spouse to inher[i]t the home because they already owned 100 percent of it. There was a tax benefit to doing so as well. It created protection, although you know, my wife had no creditors, and I didn't at the time either. I had potential liabilities from businesses. He said it would protect Beth's, you know, interest in the house against my liabilities shouldpotential liabilities should they ever arise."
Tr. at 75.
At the time, Werner did not have any actual liabilities. He had cash in the bank, investments, and regular income from a job. Tr. at 78-79. He paid his bills as they came due, and carried no credit card debt. Tr. at 79. Nevertheless, Werner was mindful of the potential liabilities that might arise as a result of the operation of his businesses. Tr. at 80.
While Werner and Zarlengo had no further conversations about owning property in tenancy by the entirety, Tr. at 50, Werner called Mommsen shortly afterward. Werner trusted Mommsen, who had been his accountant for over thirty years, Tr. at 81-82, and asked Mommsen to verify what Zarlengo had told him about tenancy by the entirety. Tr. at 53-55.
Mommsen returned the call on December 12, 2000, and confirmed that transferring the Real Property into tenancy by the entirety would protect it from liabilities incurred solely by one spouse. Tr. at 82, 159-166.
As Mommsen discussed with Werner at a later date, Werner had a number of potential liabilities that made him a good candidate for holding his residence in tenancy by the entirety:
Well, he had the gas stations, so he hadhe had employees. Whenever you have employees, you haveyou've got liability problems. He had the gas station and all the obvious hazards with that. The retail store he had, I believe, I believe [sic], that he also had a personal guarantee on a lease there, so he had potential there. And the lease was getting a little bit behind. He had the snowplowing asall the other things that were brought up before. But snowplowing, I wasn't worried about the snowplowing myself. 1 was worried about the corporatethe work, the potential for liability from the businesses, whether he made a bad deal or whatever he did, or signed a potentially bad contract.
Tr. at 175. Mommsen clearly remembered this conversation, which took place on March 19, 2002, because he happened to have kept the dated telephone message. "I have a stack of old messages that I've kept as references, and that's one. That's why it's all discolored, it was sitting in the sun underneath the phone." Tr. at 174.
Werner also testified as to the potential liabilities from his various activities. He plowed snow at his business location and his employer's driveway, Tr. at 144, and was concerned about "hauling a thousand-pound snowplow out in front of an 8,000 pound truck ...". Tr. at 80. He drove farm machinery on public roads. Tr. at 59-60. "A very good friend of mine killed a man moving a combine down the road." Tr. at 80.
Following Mommsen's confirmation of the benefits of tenancy by the entirety, and Mommsen's recommendation that it was a good idea, Werner decided to "call Mr. Friel [his attorney] and have that done right away." Tr. at 82-83.
Werner tried to contact Friel in December 2000, Tr. at 51, but learned that Friel *802 was on vacation until the first of the year. Mommsen testified that many of his clients have trouble contacting Friel "because the man is semiretired, and he's very difficult to get ahold of." Tr. at 170.
Meanwhile, after the meeting with Rizzi, Zarlengo and Planera, Werner acquired membership interests in the LLCs that owned and operated storage facilities. Eventually four LLCs were formed, each operating one storage facility. Werner owned a 25% interest in each of the four LLCs. Tr. at 88-89; Creditor's Exs. 4-8.
Werner guaranteed the loans Harris Bank extended to the LLCs, He understood that by doing so he was responsible for any liability that might remain after payments were made and other collateral was liquidated. Tr. at 119 ("I didn't consciously think that, but I'm sure that's the case"). In addition to the guarantee, Werner also caused a mortgage to be placed on the Farm Property in favor of Harris Bank as collateral for the loans. Tr. at 109.
Although Werner had learned about tenancy by the entirety in late 2000, and confirmed its benefits with Mommsen, for months he did nothing further than make one unreturned phone call to Friel. He forgot to call Friel back in January 2001, after Friel returned from vacation, "When I couldn't get through to Mr. Friel initially... then January came, I sold the Shell station." Tr. at 107. Shortly after selling the Shell station,
we got into all of these storage facilities with Brett and Harris Bank. I had two daughters getting married in that time frame. I had a son go away to college in that time frame. I had a farming operation thatbasically, when you work fulltime and you farm, you work 18, 20 hours a day during the spring planting and fall harvest. It was always one thing after another that allowed me to procrastinate, and I do regret that. And, finally, it just rightyou know, my second daughter got married in August of '02. My wife and I discussed it again shortly after that because things in our life seemed to have settled down enough. And so then, finally, right after the harvest of that year is when I initiated the contact again with Mr. Friel's office.
Tr. at 107-108.
Werner finally discussed with his wife Beth the possibility of transferring the Real Property into tenancy by the entirety in August 2002, shortly after their second daughter was married on August 10. Tr. at 134. Beth Werner never spoke directly to Zarlengo, Mommsen or Friel about the benefits of holding property in tenancy by the entirety rather than in trust. Tr. at 133. Indeed, the only time she met Friel was when she went to his office to sign the deed. Tr. at 136; Creditor's Ex. 16.
Beth Werner's understanding was that if the Real Property were held in tenancy by the entirety, she would own
the property 100 percent, and that then in that case things would be easier for me if it wereyou know, if he were to pass away or something. And I believe there were tax credits or something, too, but I don't remember if he explained what kind of tax credits. I don't believe he did.
Q: You mean tax credits or tax benefits?
A: Tax advantages or some sort of thing.
Tr. at 143-144.
Beth Werner could not say whether these protections were different than those available under the trusts. "Well, I don't really understand the trusts." Tr. at 145. Werner had explained to her that owning the property in tenancy by the entirety "would be easier for him and myself in *803 case of death, and that it protected us from any kind of other liabilities that he may incur or that I may incur in the business that he owned, the other businesses." Tr. at 151.
In fact, the only new liability that Werner incurred between 2000 and 2003 was his guarantee to Harris Bank. Tr. at 124.
On July 15, 2002, the president of Harris Bank, Frankfort, wrote to Werner to advise him that the Bank had debited $14,641.02 from two certificates of deposit that Werner had pledged. Tr. at 18; Creditor's Ex. 9. The debits were applied to the amounts that were due on May 26 and June 26, 2002, on the loan made in connection with the Joliet storage facility. Creditor's Ex. 9. Beth Werner was aware that the CDs had been debited because she overheard her husband on the telephone. Tr. at 146.
The bank president wrote again on August 1, 2002, informing Werner that the July 26, 2002 payment had also been missed. Creditor's Ex. 10; Tr. at 19-20.
[Y]ou are now considered in default based on your failure to make the scheduled monthly payment. Payment is expected within (three) business days of the date of this notice.
Failure to do so will result in this bank taking whatever action it deems necessary to quickly collect payment, including all legal expenses.
Creditor's Ex. 10.
On September 17, 2002, Werner filed a state court complaint against Rizzi, Harris Bank Frankfort and certain other defendants. Creditor's Ex. 11. Shortly thereafter, Werner filed a motion seeking entry of a temporary restraining order and a preliminary injunction. Creditor's Ex. 12,
Most of Werner's state court complaint alleged fraud by Rizzi. However, Werner also sought to enjoin Harris Bank from bringing any action on the guarantees he had executed. Creditor's Ex. 11; Tr. at 21. According to the TRO motion, Werner wanted to prevent Rizzi and Harris Bank from "[t]aking any action on personal guarantees or assignments of collateral signed by Werner until his claims for fraud, securities fraud, breach of fiduciary duty, misrepresentation and rescission may be determined." Creditor's Ex. 12.
In the meantime, Werner tried to contact Friel again, in late November or December 2002. Tr. at 51-52. Although Friel was on another extended vacation, this time Werner remembered to call him back after the first of the year. Tr. at 84.
On January 10, 2003, Cook County Judge Julia Nowicki denied Werner's requests for a temporary restraining order and for a preliminary injunction, on the grounds that he failed to show irreparable injury. Creditor's Ex. 15. Harris was free to sue Werner on his personal guarantees.
On January 23, 2003, Werner and Beth Werner transferred the Real Property from the trusts in which it had been held for three years into tenancy by the entirety. Tr. at 27; Creditor's Ex. 16. Werner estimated the value of the residence at that time to be approximately $500,000, and he owned it free and clear. Tr. at 34-35. Indeed, Werner had "no [actual] liabilities and ... no creditors." Tr. at 60.
At the time he made the transfer, Werner "had recently filed legal action against Harris Bank, and on that day you could never have convinced me that I could possibly lose." Tr. at 91. The 21 page brief filed in support of Werner's motion for preliminary injunction argued that Werner was entitled to a declaratory judgment that his guarantees were discharged by virtue of Harris Bank's continual and material *804 misrepresentations. Creditor's Ex. 13.
Werner believed that he could pay any debt owed to Harris Bank because "I had a net worth that was worth more than that net debt." Tr. at 91. Werner calculated his net worth in January 2003 to be between $1.1 and $1.4 million. Tr. at 91-92.
▄ The Real Property $500,000
▄ The Farm Property $200,000
▄ Practical Magick $270,000 (A "New Age book store, a shop," sold in August 2004 to his manager for no consideration. By 2007, the business had closed. Tr. at 106; 122-123.)
▄ Shares of Practical Magick $100,000
▄ Cash and personal property $100,000
Tr. at 93-95. Werner also owned a 25% membership interest in the four LLCs and he believed his stake was worth "[a] couple hundred thousand, maybe." Tr. at 93.
On January 27, 2003, Harris Bank attorney David Audley sent a letter to Werner's attorney and to two other attorneys, advising them that the following amounts remained due on the LLC loans:
Joliet Term Loan: $859,732.07
Joliet Revolving Loan: $227,422.49
Rockford Loan: $573,254.91
Michiana Loan: $990,152.03
Camp Verde Loan: $154,919.21
Stip. Ex. A. The total amount due to Harris Bank on the LLC loans was $2,805,453.71. Werner could not have written a check for that amount on that date, four days after he transferred the Real Property into tenancy by the entirety. Tr. at 66.
Although he could not have written a check on that date for the full amount owed to Harris Bank, Werner believed that the value of the facilities owned by the LLCs exceeded the amount due. "I can only assume that wewhat we owed was less than the value of those facilities because Harris Bank made thatmade these loans." Tr. at 92.
Audley also indicated in his January 27 letter that $165,334.24 in legal fees and costs incurred by Harris Bank had been paid by debiting that amount from a certificate of deposit Werner had posted, and that the remainder of the certificate of deposit was applied to the Joliet Term Loan. Two certificates of deposit posted by Rizzi as well as another posted by Werner were applied to the balance due on the Camp Verde loan, and another Rizzi certificate of deposit was applied to the balance due on the Rockford Loan. Tr. at 90-91; Stip. Ex. A.
The January 27 letter did not contain a demand for payment on Werner's guarantee. Stip. Ex. A.
Harris Bank eventually foreclosed on the storage facilities owned by the four LLCs. At the sale of each property, Harris credit bid the following amounts:
--------------------------------------------------------------------------
Location Credit Bid Amount of note Sale Date
--------------------------------------------------------------------------
Joliet $450,000.00 $900,000.00 March 26, 2003
--------------------------------------------------------------------------
Rockford $425,000.00 $675,000.00 February 27, 2003
--------------------------------------------------------------------------
Michiana $775,000.00 $975,000.00 March 18,2003
--------------------------------------------------------------------------
Camp Verde none $400,000.00 N/A
--------------------------------------------------------------------------
Tr. at 128-129. The Camp Verde property was turned over to the first lienholder, with no recovery to Harris Bank. Tr. at 112-113.
On June 6, 2003, Harris Bank sent a letter to Werner's attorney and the same two other attorneys, advising them of the results of the various foreclosure sales. *805 The subject line of the letter was "Demand on Guaranty Liability." This letter was Harris Bank's first demand for payment on Werner's guarantee, Ex. 10 to Creditor's Ex. 17.
When no payment was made, Harris Bank sued Werner on his guarantee, requesting judgment in the amount of $1,296,479.27. Tr. at 37-38; Creditor's Ex. 17. Werner could not have written a check for that amount on the date the complaint was filed. Tr. at 42, 116. Harris sued the other LLC members as well, each of whom allegedly executed personal guarantees. Creditor's Ex. 17.[2]
On February 16, 2006, a judgment was entered against Werner in state court in favor of Harris Bank in the amount of $840,122.37. Creditor's Ex. 18. Of that amount, $310,479.76 was attributable to attorneys' fees. Stip. Ex. B.
Werner filed for relief under Chapter 11 of the Bankruptcy Code on February 19, 2007. When Werner filed his bankruptcy petition, he valued the Real Property at $575,000. Creditor's Ex. 20 at Schedule A. There is now a mortgage on the residence, securing a line of credit of approximately $275,000, extended in 2003. Tr. at 107.
Planera and Zarlengo eventually filed their own bankruptcy cases as well, discharging any personal liability to Harris. Tr. at 203-204.
Harris Bank filed the instant proceeding on May 9, 2007, seeking to avoid the transfer of the Real Property into tenancy by the entirety. Following resolution of a motion to dismiss and a motion for summary judgment, a trial was held on September 18, 2008. Plaintiff and defendants each filed two post-trial briefs, and the court took the matter under advisement on January 8, 2009.
CONCLUSIONS OF LAW
There are several different ways in which a person may hold title to real property Each method brings different sticks to that owner's bundle of rights. Three methods of concurrent ownership come to us from English common law: tenancy in common, joint tenancy and tenancy by the entirety. U.S. v. Craft, 535 U.S. 274, 279, 122 S. Ct. 1414, 152 L. Ed. 2d 437 (2002).
A tenancy by the entirety is a unique sort of concurrent ownership that can only exist between married persons....
Like joint tenants, tenants by the entirety enjoy the right of survivorship. Also like a joint tenancy, unilateral alienation of a spouse's interest in entireties property is typically not possible without severance. Unlike joint tenancies, however, tenancies by the entirety cannot easily be severed unilaterally. Typically, severance requires the consent of both spouses, or the ending of the marriage in divorce.
Id. at 280-281, 122 S. Ct. 1414 (citations omitted).
Thus, tenancy by the entirety is a method of owning real property available only to a husband and wife. In Illinois, a tenancy by the entirety estate is created when the instrument of conveyance expressly declares that the transfer is made to tenants by the entirety. 765 ILCS 1005/1c. This form of ownership can only *806 be used by the husband and wife for their homestead property. Id.
After meeting these requirements, a transfer into tenancy by the entirety receives special protection in Illinois. According to 735 ILCS 5/12-112 (emphasis added),
Any real property, or any beneficial interest in a land trust, held in tenancy by the entirety shall not be liable to be sold upon judgment entered on or after October 1, 1990 against only one of the tenants, except if the property was transferred into tenancy by the entirety with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor's ability to pay those debts as they become due.
It is the standard elucidated in this statute, rather than in the state or federal fraudulent transfer statutes, that determines whether a transfer of property into tenancy by the entirety may be avoided. See Harris Bank St. Charles v. Weber, 298 Ill.App.3d 1072, 233 Ill. Dec. 194, 700 N.E. 2nd 722, 728-729 (1998). As the Illinois Supreme Court has described it:
The sole intent standard provides greater protection from creditors for transfers of property to tenancy by the entirety. Under the sole intent standard, if property is transferred to tenancy by the entirety to place it beyond the reach of the creditors of one spouse and to accomplish some other legitimate purpose, the transfer is not avoidable. Such a transfer, however, would be avoidable under the actual intent standard, which only requires any actual intent to defraud a creditor. The General Assembly, by adopting the sole intent standard, has made it clear that it intends to provide spouses holding homestead property in tenancy by the entirety with greater protection from the creditors of one spouse than that provided by the Fraudulent Transfer Act.
Premier Property Management, Inc. v. Chavez, 191 Ill. 2d 101, 245 Ill. Dec. 394, 728 N.E. 2nd 476, 482 (2000) (emphasis in original).
In the instant proceeding, Harris Bank asks the court to avoid Werner's transfer of the Real Property from the trusts into tenancy by the entirety on January 23, 2003. In order to determine whether Harris Bank will prevail, 735 ILCS 5/12-112 instructs us to resolve two questions:
1. Was Werner unable to pay existing debts as they became due?
2. Did Werner transfer the Real Property with the sole intent of avoiding payment of those debts?
If both of these questions are answered in the affirmative, Harris Bank will prevail and the transfer will be avoided. If the answer to either or both of these questions is "no," then judgment must be entered for the defendants.
The Transfer of the Real Property Into Tenancy By the Entirety Did Not Leave Werner Unable to Pay Existing Debts as They Became Due.
In his post-trial brief, Werner argued that to answer the question of whether he was unable to pay existing debts as they became due, the court must determine whether he "was solvent and had the financial ability to pay his debts as they became due at the time of the Transfer." But solvency is a balance sheet question, requiring the court to determine whether "the sum of such entity's debts is greater than all of such entity's property, at a fair valuation...". 11 U.S.C. § 101(32). The statute applicable in this proceeding, 735 ILCS 5/12-112, makes no mention of solvency.
*807 Harris rejected Werner's solvency theory, and asserted that "[t]he proper inquiry is whether Debtor had sufficient cash flow to pay his debts in accordance with his obligations." In support of its argument, Harris cites articles that describe the "ability-to-pay solvency test." J.B. Heaton, Solvency Tests, 62 Bus. Lawyer 983, 988-989 (May 2007); Dan Williams, Fraudulent TransferWhat Do the Numbers Say?, 15 Am. Bankr.Inst. J. 15 (March 1996).
These articles consider the Uniform Fraudulent Transfer Act and state fraudulent transfer statutes, which ask whether a debtor "intended to incur, or believed that [it] would incur, debts that would be beyond [its] ability to pay as such debts matured." Neither of the articles consider a transfer made under 735 ILCS 5/12-112, which asks a slightly different question whether the property was transferred with the intent to avoid existing debts as they became due.
Moreover, the examples in these articles focus only on companies rather than on individuals, requiring analysis of "cash flow from operations" and asking "whether the firm will be able to match its cash sources to its maturing obligations." Id. Such questions have no place in the analysis of a transfer into tenancy by the entirety, which by necessity can only be accomplished by a husband and wife, and applies only to their homestead. Indeed, the parties do not cite even one case that engaged in any significant analysis of the phrase, "beyond the transferor's ability to pay those debts as they become due."
The court will therefore first determine what debts Werner had, and then determine whether he had the ability to pay those debts, not just from income, but also from liquidation of his assets.
The parties do not dispute that the only relevant "existing debt" is Werner's guarantee liability. That debt had not yet become due. While Werner was on notice that the LLCs had defaulted, and that certificates of deposit he had posted as collateral were being debited, there had not been a demand on the guarantee at the time of the transfer. That demand did not come until June 6, 2003, more than four months after the Real Property was transferred into tenancy by the entirety.
The court must therefore determine the value of the guarantee on the date of the transfer, January 23, 2003. Although no demand had been made yet, the guarantee cannot be valued at zero. It was a contingent liability, valued somewhere between zero and $2,805,453.71, the total amount due to Harris Bank according to the bank's January 27, 2003 letter.
In order to calculate the value of the guarantee, the court will use the methodology set forth in Matter of Xonics Photochemical, Inc., 841 F.2d 198 (7th Cir. 1988):
There is a compelling reason not to value contingent liabilities on the balance sheet at their face amounts, even if that would be possible to do because the liability, despite being contingent, is for a specified amount (that is, even if there is no uncertainty about what the firm will owe if the contingency materializes). By definition, a contingent liability is not certain-and often is highly unlikely-ever to become an actual liability. To value the contingent liability it is necessary to discount it by the probability that the contingency will occur and the liability become real.
841 F.2d at 200 (emphasis added). "Discounting a contingent liability by the probability of its occurrence is good economics and therefore good law," Covey v. Commercial Nat'l Bank of Peoria, 960 F.2d 657, 660 (7th Cir.1992).
*808 Xonics and Covey were decided in the context of a calculating solvency. Nevertheless, in order to determine whether Werner had the ability to pay this guarantee, the court must calculate the value of that guarantee, and the Seventh Circuit has provided the mechanism for doing so. The value of the guarantee on the date of the transfer is the full amount of the debt, discounted by the likelihoodat the time of the transferthat the liability represented by the guarantee would become real.
In order to calculate that likelihood, Werner urges the court to first calculate the value of the other assets pledged to secure the debt to Harris. Harris asserts that Werner's analysis begs the question of whether Harris would first liquidate other assets before moving to collect from Werner. "Debtor's reliance on the collateral to reduce the amount is misplaced since the terms of the guarantees provide that Debtor was unconditionally liable for the full amount owed under the LLC loans, without resort to the potential liquidation of remaining collateral."
The court rejects Harris's assertion. It is disingenuous to ignore the other collateral securing the note. Certainly, under the terms of the guarantee, Werner was liable for the entire obligation. But on January 23, 2003, what was the probability that Harris would be unable or unwilling to collect anything on all other available assets and would instead attempt to collect the entire amount from Werner?
That probability, multiplied by the amount of the entire obligation, provides the court with the discounted value of Werner's guarantee. Then we can determine whether the value of the guarantee was beyond Werner's ability to pay after the transfer. See In re McCook Metals, LLC, 2007 WL 4287507, *1 (N.D.Ill.Dec.4, 2007) (including 100% of an obligation was "improper without a basis for concluding that there was a 100% certainty that McCook would default on its obligations or that the entire default would fall on Longview's shoulders"). The Seventh Circuit was even more explicit than the district judge in rejecting the McCook Metals expert's valuation of contingent obligations, finding that his treatment of "contingent liabilities as certainties ... invalidated his expert opinion." Baldi v. Samuel Son & Co., Ltd., 548 F.3d 579, 582 (7th Cir.200S). The expert should have made an "effort to discount the risk by the probability that it would materialize." Id. at 583.
Indeed, Harris did pursue other collateral. It did not make a demand on Werner's guarantee until June 6, 2003, By the time Harris actually sued Werner in state court in July 2003, nearly six months after the Real Property's transfer into tenancy by the entirety, the bank sought only the $1,296,479.27 that remained after all of the other collateral had been liquidated, plus attorneys' fees.
The other pledged assets were the parcels of real estate owned by the LLCs, the certificates of deposits pledged by Werner and the other members of the LLCs, and the personal guarantees of certain other members. Werner testified that on the date of the transfer, he believed that the value of the facilities owned by the LLCs alone exceeded the $3,200,000 owed to Harris Bank.
As rebuttal evidence, Harris submitted the value actually recovered at the foreclosure sales from the parcels of real property, $1,650,000. The court has no evidence from Harris Bank or Werner regarding the value of the other collateral securing the obligationsRizzi's trusts, and any personal guarantees from Zarlengo and Planera.
*809 Although the sale of the real estate only paid down slightly more than half of the outstanding balance, there was other collateral remaining, collateral about which the court has no information. Additionally, Werner testified that he had assets valued at approximately $670,000, not including the Real Property or his equity interests in the LLCs.
Moreover, determining the value of the collateral other than Werner's guarantee is only part of the required analysis. The court must also determine the probability on January 23, 2003, that Harris Bank would succeed in its attempt to call in Werner's guarantee.
Werner believed that he had a solid case against Harris Bank, telling the court that on the date of the transfer "you could never have convinced me that I could possibly lose." Although he lost the motion for a temporary restraining order, it was only on the basis of failure to prove irreparable injury. The possibility remainedas the case was litigated for three more yearsthat Werner would prevail.
Finally, although the LLCs were in default, Werner's guarantee was not yet due on the date of the transfer into tenancy by the entirety. Harris Bank had not yet demanded payment on that guarantee, and did not do so for more than four months.
There is a combination of factors to consider: the value of the other collateral securing the loans, Werner's assets other than the Real Property, the fact that the guarantee had not yet ripened into a liquidated debt and the legal question about whether the guarantee was valid. Without the assistance of expert testimony, the court cannot calculate a specific figure at which to value the guarantee on the date of the transfer.
It was Harris Bank's burden to prove that Werner could not pay the guarantee on the date of the transfer. Harris did not call an expert to value the guarantee, but argued instead that unless Werner could pay the entire amount of the outstanding debt, the court must find that the transfer left him unable to pay existing debts as they came due.
The court rejects this analysis. Having reviewed the evidence submitted, and being mindful of the Circuit's admonition to discount this contingent liability by the probability of its occurrence, the court cannot find by a preponderance of the evidence that the transfer of the Real Property into tenancy by the entirety left Werner without the ability to pay existing debts as they became due.
Werner Did Not Transfer the Real Property With the Sole Intent of Avoiding Payment of the Guarantee.
Because the court found that the transfer did not leave Werner unable to pay existing debts as they became due, the court need not consider the second question in the analysis, whether Werner transferred the Real Property with the sole intent of avoiding payment on the guarantee. Nevertheless, since the answer to this second question supports the result reached in the first part of this discussion, the court will continue its analysis.
The question of a debtor's intent at the time of the transfer is a question that must be resolved by the trier of fact. Harris Bank St. Charles, 233 Ill. Dec. 194, 700 N.E. 2d at 729. A review of the pertinent facts is therefore appropriate.
In late 2000, Zarlengo told Werner that he could protect his residence from creditors to whom he was solely liable by holding the property in a form of ownership known as tenancy by the entirety. Within the next few weeks, Werner contacted his trusted accountant to confirm this information, and then called his attorney *810 to make arrangements for a change in ownership status.
Werner's attorney was out of town, and for the next two years, Werner did nothing to move the property from ownership in a trust into tenancy by the entirety. Werner urges the court to consider all the events occurring in life during those two yearsthe marriages of two daughters, the sale of the Shell station, his son leaving for college.
Harris Bank reads the facts differently, focusing instead on Werner's actions when, in the summer of 2002, he learned that the LLC loans were in default and that the bank had drawn down on the certificate of deposit he pledged. In September 2002, Werner filed a lawsuit against Harris Bank, seeking to enjoin it from proceeding against him on its guarantees, and he filed a motion for temporary restraining order and a preliminary injunction. Two weeks after that motion was denied, Werner finally moved the property into tenancy by the entirety.
Harris Bank compares the facts in this case to those in LaSalle Bank N.A. v. DeCarlo, 336 Ill.App.3d 280, 270 Ill. Dec. 636, 783 N.E. 2nd 211 (2003). The DeCarlo defendant argued that "he made the transfer because he was advised to do so by a family attorney," who had suggested it to him more than a year earlier. Id. at 216. He had delayed effecting the transfer "because he was preoccupied by an illness and a death in the family." Id. at 213. The trial court found these reasons "vague, inarticulate, specious and totally incredible," id., especially as the transfer was made within days after the appellate court affirmed a judgment against him.
This court did not hear the testimony given in DeCarlo. But Werner's testimony was forthright and credible. The DeCarlo debtor accomplished his transfer 17 days after a state court judgment was affirmed by the appellate court; Werner had not even had a demand for payment made when he transferred the Real Property. The DeCarlo debtor had $200,000 in equity in his residence and less than $4,000 in other assets. The amount of Werner's equity in his residence, while large, was less than half of his net worth at the time of the transfer. The facts in DeCarlo are significantly different from those before the court today.
It is true that if the court were to consider only the timing of the transfer, Werner's intent is suspicious:
January 10, 2003: Werner loses TRO motion
January 23, 2003: Werner transfers the Real Property into tenancy by the entirety
But if the court were to consider just those two facts, it gives short shrift to the entire context of this transfer. Werner did not make this decision in a vacuum that consisted only of his liability to Harris Bank and his ownership of the Real Property.
Indeed, timing is not the only factor that can or should be considered by a court in determining a debtor's intent:
Debtor ... testified that the purpose of moving to the Lorel Property was because it was a much safer neighborhood with less gang activity
Aetna offered no evidence to refute Debtor's contention. Therefore, while the timing of Debtor's actions may appear suspicious, Aetna has not satisfied its burden in proving by a preponderance of the evidence that Debtor's purchase of the Lorel Property was done with the `sole intent' to avoid the payment of the debt owned to Aetna.
In re Moreno, 352 B.R. 455, 461 (Bankr. N.D.Ill.2006) (emphasis added).
*811 Similarly, Werner testified about his understanding of the benefits of tenancy by the entirety. While Harris Bank questioned Werner, his wife, Zarlengo and Mommsen about the terms of Werner's trusts and whether those trusts actually provided many of the same survivorship and tax benefits that tenancy by the entirety would provide, there was no direct testimony about the content of the trusts. No one who testified had actually read the trust instruments.
Although the trusts were admitted as exhibits, Harris Bank did not call a witness who could confirm that the terms of the trust in which Werner and his wife held their real property provided the same protections as tenancy by the entirety, with the exception of protecting the Real Property from the debts of one spouse.
Additionally, under Harris Bank's questioning, Zarlengo admitted that joint tenancy with right of survivorship could have conferred the same tax benefits as tenancy by the entirety. But Zarlengo was not acting as Werner's attorney when they met in late 2000. There was no testimony that Zarlengo and Werner discussed options for ownership of a homestead other than tenancy by the entirety. Unsurprisingly, a casual conversation held during a meeting to discuss an unrelated matter may not have produced the best legal advice for the situation.
Based on his testimony, it appears that Bruce Werner did not have a complete understanding of what the trusts could accomplish, or whether tenancy by the entirety was his only option for protecting his homestead. An attorney with whom he was about to do a business deal told him that he should hold his residence in tenancy by the entirety. His trusted accountant seconded the idea. It is believable that Werner was convinced the trusts were insufficient to protect his home from all kinds of potential liabilities, not just the guarantee to Harris, and that tenancy by the entirety was the only viable option.
Harris Bank also focused on the fact that the only actual liability Werner took on between the creation of the trusts in 2000 and the transfer into tenancy by the entirety in January 2003 was his guarantee liability to Harris Bank. If that was the only new liability, Harris argues, wouldn't that mean that Werner's decision to transfer the Real Property into tenancy by the entirety was motivated solely by a desire to avoid that new liability?
This is not a case, however, governed by res ipsa loquitor. Simply because the Harris guarantee was Werner's only new liability does not automatically lead to the conclusion that the transfer's only purpose was to avoid that new liability.
Werner testified that less than a year after he created the trusts, he learned about tenancy by the entirety. He had never discussed it before with Mommsen, the financial professional in whom he placed his trust. Indeed, when he raised the issue with Mommsen, the accountant had to do some investigating before telling Werner it was a good idea to hold his homestead in this form of ownership.
Furthermore, Werner testified about the potential liabilities he faced that could become real at any time. Werner operated a farming business as well as a book store. He employed a manager in that store. He drove his farming equipment on public roads. He offered snowplowing services to the owner of his building as well as to family and friends. The court finds credible his testimony that he was concerned about these potential liabilities, obligations that would be his alone, and not held jointly with his wife.
Moreover, Werner testified about the other activities in his life during 2001 and *812 2002, activities that distracted him from accomplishing the transfer when he first considered it. Two daughters were married. His son left for college. He sold his remaining Shell station. Each of these events alone should not have distracted him, but combined with running an operating business as well as a farm, it is understandable that he did not act more quickly to effect the transfer of his home into tenancy by the entirety.
Finally, Werner believed that the collateral securing the debt to Harris was sufficient to pay off that debt. As he testified, "I had a net worth that was worth more than that net debt." At the time of the transfer, the storage facilities had not yet been sold at foreclosure, and Werner believed their sale would net sufficient proceeds to pay off the debt, that there would even be equity remaining after the sales. Although this testimony was undermined by Werner's apparent lack of interest in the saleshe did not attend and did not bidit is corroborated by Zarlengo's testimony that the real property in Joliet was worth at least a million dollars.
With the benefit of hindsight, we know that Werner's belief in the value of the real estate and storage facilities owned by the LLCs was incorrect. But the court must consider Werner's state of mind at the time of the transfer, on January 23, 2003. He believed the debt to Harris Bank could be paid without resorting to a sale of the Real Property.
Werner decided to transfer the Real Property into tenancy by the entirety in late 2000, When his attorney was temporarily unavailable, Werner dropped the ball. He simply forgot about the transfer.
Why did he finally act in January 2003? Certainly the letters that Werner began receiving in the summer of 2002, advising him that the LLCs were missing loan payments, and the beginning of litigation that fall, forced him finally to take action. Werner's guarantee to Harris Bank and the increasing likelihood that it might be called upon were the impetus for finally tracking Friel down and transferring the Real Property.
But trying to avoid payment on the guarantee liability as the impetus for the transferas the final straw, the accelerating factoris insufficient for Harris Bank to prevail. The statute instructs us that protecting the Real Property from liability on the guarantee to Harris Bank must have been Werner's sole intent when he accomplished the transfer. Harris Bank has not proved by a preponderance of the evidence that this is so.
CONCLUSION
Having reviewed the testimony given at trial, the exhibits submitted into evidence and the papers filed by the parties, the court finds that Harris Bank has not proved by a preponderance of the evidence that the transfer of the Real Property into tenancy by the entirety left Werner unable to pay existing debts as they became due, and that Werner transferred the Real Property with the sole intent of avoiding payment of the guarantee. As a result, the transfer of the Real Property into tenancy by the entirety shall not be avoided. The court will enter judgment for the defendants.
NOTES
[1] All references to "Tr. at ____" are to the testimony given at trial on September 18, 2008.
[2] Harris Bank's state court complaint alleged that Rizzi, Planera and Zarlengo executed guarantees for certain (Rizzi) or all (Planera and Zarlengo) of the LLC notes. Creditor's Ex. 17. Allegations in a complaint are not evidence. However, Zarlengo testified that he, Planera and Werner all guaranteed the $900,000 note to the Joliet facility. Tr. at 192, Zarlengo also testified that he and Werner guaranteed an additional $225,000 note on that same property. Tr. at 201-202. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542645/ | 997 A.2d 461 (2010)
297 Conn. 1
STATE of Connecticut
v.
Michael K. CLARK.
No. 18186.
Supreme Court of Connecticut.
Argued February 22, 2010.
Decided June 15, 2010.
*464 Bruce R. Lockwood, senior assistant state's attorney, with whom were Margaret Gaffney Radionovas, senior assistant state's attorney, and, on the brief, Michael Dearington, state's attorney, and Marc G. Ramia, assistant state's attorney, for the appellant (state).
Annacarina Jacob, senior assistant public defender, for the appellee (defendant).
ROGERS, C.J., and NORCOTT, KATZ, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.[*]
VERTEFEUILLE, J.
The sole issue in this certified appeal is whether the Appellate Court correctly concluded that the trial court properly had granted the defendant's motion to suppress the evidence seized from his person and his vehicle on the day of his arrest on various narcotics offenses. The state appeals, following our grant of certification,[1] from the judgment of the Appellate Court, which affirmed the judgment of the trial court dismissing the information that charged the defendant, Michael K. Clark, with possession of narcotics within 1500 feet of a school in violation of General Statutes § 21a-279(d), sale of a controlled substance in violation of General Statutes § 21a-277(b), illegal manufacture, distribution, sale, prescription or administration of a controlled substance within 1500 feet of a school in violation of General Statutes § 21a-278a(b), and operation of a drug factory in violation of § 21a-277(c). State v. Clark, 107 Conn.App. 819, 821, 947 A.2d 351 (2008). On appeal, the state claims that the Appellate Court, in a two to one decision, improperly affirmed the judgment of the trial court dismissing the charges against the defendant following its granting of the defendant's motion to suppress because the action of the police did not constitute a seizure and, in addition, even if the action did constitute a seizure, it was supported by a reasonable and articulable suspicion of criminal activity.[2] We now conclude that the Appellate Court's determination that the evidence was seized as part of an unconstitutional seizure was improper because, even if we were to assume that the police action did constitute a seizure, it was supported by reasonable and articulable suspicion. Accordingly, we reverse the judgment of the Appellate Court.
The opinion of the Appellate Court sets forth the following undisputed facts and procedural history. "On or about December 1, 2006, the defendant orally moved to *465 suppress evidence that [the] police found in his vehicle on the date of his arrest. At the suppression hearing, the state presented testimony from Detective Justen Kasperzyk and Officer Dennis O'Connell of the New Haven police department, both of whom were on duty on February 24, 2006. Kasperzyk testified as to the following facts. Sometime between 9 a.m. and noon, Kasperzyk received a telephone call from a confidential informant from whom he had previously received reliable information on the basis of which search warrants had been issued and arrests made. The informant told Kasperzyk that the defendant was selling drugs in the Hill section of New Haven. The informant further told Kasperzyk that the defendant was driving a tan [Chevrolet] Cobalt with Pennsylvania license plates. Kasperzyk knew the defendant from a prior arrest and because the defendant also had worked as an informant for another police officer.
"When O'Connell arrived for duty between 3 and 4 p.m., Kasperzyk told him that they should go out in the Hill area and look for the [Chevrolet] Cobalt because he had received information that `this vehicle was selling marijuana.' Kasperzyk, O'Connell and Officer Daniel Sacco went in an unmarked police car to the Hill area of New Haven.
"At approximately 5 p.m., the officers came upon a vehicle and an individual matching the description provided by the informant. Kasperzyk recognized the defendant as the operator of the vehicle. They followed the vehicle for a short distance until the defendant stopped behind several cars at a red traffic signal. There was also a car behind the defendant. Kasperzyk testified that he pulled up alongside the defendant's car because `he felt it was safe enough, and he was tied with other cars where he couldn't run and we didn't have police cars to pull him over at that time. So, we pulled up next to him where he couldn't get out, and [Officers O'Connell and Sacco] got out of the car and told [the defendant] to stop the car.'
"O'Connell testified that when he approached the defendant's vehicle, he asked the defendant to roll down his window. There was also a front seat passenger in the car. Although he did not orally identify himself as a police officer, O'Connell and the other officers were wearing sweatshirts or jerseys that said `Police' on them, and their badges were hanging on chains around their necks. O'Connell testified that when the defendant rolled down his window, he smelled marijuana and also saw a small black bag in the rear of the vehicle containing a few `sandwich bags with a green [plant-like] substance in it, kind of like rolled a little bit, rolled up.' Following a field test confirming that the substance was marijuana, the defendant was arrested. When the police searched the defendant, he was found to be in possession of $612 in cash. Kasperzyk also found a large ziplock bag containing one pound of a green [plant-like] substance in the trunk of the defendant's vehicle that also tested positive for marijuana.
"After hearing the evidence and the arguments of the parties [at the suppression hearing], the [trial] court rendered an oral decision granting the defendant's motion to suppress on December 5, 2006. The [trial] court determined that the officers' conduct constituted a seizure that was not based on a reasonable and articulable suspicion. Thereafter, on the state's motion, the [trial] court dismissed the charges because the state indicated that, without the suppressed evidence, it would be unable to proceed with the prosecution. The [trial] court granted the state permission to file [an appeal to the Appellate Court]." State v. Clark, supra, 107 Conn.App. at 821-23, 947 A.2d 351.
*466 On appeal to the Appellate Court, the state claimed that "the [trial] court improperly granted the defendant's motion to suppress all evidence seized as a result of his arrest because ... the police did not subject the defendant to an illegal `stop' that constituted a seizure in violation of the state and federal constitutions...."[3] Id., at 821, 947 A.2d 351. The Appellate Court majority rejected the state's claims and agreed with the trial court's determination that a reasonable person would not have believed that he was free to leave based on the officers' actions in blocking the defendant's vehicle, exiting their vehicle, and, while wearing marked shirts and police badges, approaching the defendant's vehicle and asking him to roll down his window. Id., at 826, 947 A.2d 351. The Appellate Court further concluded that, "[o]n the basis of the totality of the circumstances, the [trial] court properly concluded that the seizure of the defendant was not based on a reasonable and articulable suspicion." Id., at 829, 947 A.2d 351. In support of its conclusion, the Appellate Court pointed to the fact that the informant had not observed any illegal activity, or demonstrated any other firsthand knowledge of the defendant's alleged illegal behavior and that the officers themselves had not witnessed any illegal activity, but had been able to corroborate only "identifying information that was unrelated to the informant's knowledge of the defendant's illegal activity." Id. Accordingly, the Appellate Court concluded that the trial court properly had granted the defendant's motion to suppress the evidence and affirmed the trial court's judgment of dismissal. Id., at 830, 947 A.2d 351. This certified appeal followed.
"Our standard of review of a trial court's findings and conclusions in connection with a motion to suppress is well defined. 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.... State v. Blackman, 246 Conn. 547, 553, 716 A.2d 101 (1998). We undertake a more probing factual review when a constitutional question hangs in the balance. See State v. Damon, 214 Conn. 146, 154, 570 A.2d 700 ([w]here a constitutional issue turns [on] a factual finding ... our usual deference ... is qualified by the necessity for a scrupulous examination of the record to ascertain whether such a finding is supported by substantial evidence ...), cert. denied, 498 U.S. 819, 111 S. Ct. 65, 112 L. Ed. 2d 40 (1990)." (Internal quotation marks omitted.) State v. Burroughs, 288 Conn. 836, 843, 955 A.2d 43 (2008).
"Ordinarily, [w]hen considering the validity of a ... stop, our threshold inquiry is twofold.... First, we must determine at what point, if any, did the encounter between [the police officer] and the defendant constitute an investigatory stop or seizure.... Next, [i]f we conclude that there was such a seizure, we must then determine whether [the police officer] possessed a reasonable and articulable suspicion at the time the seizure occurred." (Internal quotation marks omitted.) State v. Brown, 279 Conn. 493, 516, 903 A.2d 169 (2006).
*467 "We have ... defined a person as seized under our state constitution when by means of physical force or a show of authority, his freedom of movement is restrained.... In determining the threshold question of whether there has been a seizure, we examine the effect of the police conduct at the time of the alleged seizure, applying an objective standard. Under our state constitution, a person is seized only if in view of all of the circumstances surrounding the incident, a reasonable person would have believed that he was not free to leave.... Therefore, [w]hether there has been a seizure in an individual case is a question of fact." (Citation omitted; internal quotation marks omitted.) State v. Santos, 267 Conn. 495, 503-504, 838 A.2d 981 (2004).
In the present case, the trial court found that the officers had blocked the defendant's vehicle in a manner that restricted his freedom of movement, exited their vehicle and approached the defendant's vehicle while asking him to roll down his window. The trial court further determined that the officers were wearing "marked shirts and [their] badges were showing...." The trial court found that a reasonable person in this situation would have believed that he was not free to leave, and therefore determined that a seizure had occurred. For purposes of our analysis, we will assume that the defendant was seized for the purpose of an investigative detention when the officers blocked and then approached his vehicle, and that his rights under the fourth and fourteenth amendments[4] to the United States constitution were implicated. The dispositive question in this appeal therefore is whether the police officers had sufficient justification to warrant the detention of the defendant.
"The determination of whether a reasonable and articulable suspicion exists rests on a two part analysis: `(1) whether the underlying factual findings of the trial court are clearly erroneous; and (2) whether the conclusion that those facts gave rise to such a suspicion is legally correct.' State v. Wilkins, 240 Conn. 489, 496, 692 A.2d 1233 (1997)." State v. Santos, supra, 267 Conn. at 504-505, 838 A.2d 981.
"Under the fourth amendment to the United States [c]onstitution and article first, §§ 7 and 9, of our state constitution, a police officer is permitted in appropriate circumstances and in an appropriate manner to detain an individual for investigative purposes if the officer believes, based on a reasonable and articulable suspicion that the individual is engaged in criminal activity, even if there is no probable cause to make an arrest. Alabama v. White, 496 U.S. 325, 330-31, 110 S. Ct. 2412, 110 L. Ed. 2d 301 (1990); Terry v. Ohio, [392 U.S. 1, 22, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968)]; State v. Mitchell, 204 Conn. 187, 194-95, 527 A.2d 1168, cert. denied, 484 U.S. 927, 108 S. Ct. 293, 98 L. Ed. 2d 252 (1987). Reasonable and articulable suspicion is an objective standard that focuses not on the actual state of mind of the police officer, but on whether a reasonable person, having the information available to and known by the police, would have had that level of suspicion....
"[I]n justifying [a] particular intrusion the police officer must be able to point to specific and articulable facts *468 which, taken together with the rational inferences from those facts, reasonably warrant that intrusion. Terry v. Ohio, supra, 392 U.S. [at] 21 [88 S. Ct. 1868] .... In determining whether a detention is justified in a given case, a court must consider if, relying on the whole picture, the detaining officers had a particularized and objective basis for suspecting the particular person stopped of criminal activity. When reviewing the legality of a stop, a court must examine the specific information available to the police officer at the time of the initial intrusion and any rational inferences to be derived therefrom.... A recognized function of a constitutionally permissible stop is to maintain the status quo for a brief period of time to enable the police to investigate a suspected crime.... State v. Lipscomb, 258 Conn. 68, 75-76, 779 A.2d 88 (2001); see also Adams v. Williams, 407 U.S. 143, 146, 92 S. Ct. 1921, 32 L. Ed. 2d 612 (1972) ([a] brief stop of a suspicious individual, in order to determine his identity or to maintain the status quo momentarily while obtaining more information, may be most reasonable in light of the facts known to the officer at the time).
"In addition, [e]ffective crime prevention and detection ... [underlie] the recognition that a police officer may in appropriate circumstances and in an appropriate manner approach a person for purposes of investigating possibly criminal behavior even though there is no probable cause to make an arrest. Terry v. Ohio, supra, 392 U.S. [at] 22 [88 S. Ct. 1868]. Therefore, [a]n investigative stop can be appropriate even where the police have not observed a violation because a reasonable and articulable suspicion can arise from conduct that alone is not criminal.... In evaluating the validity of such a stop, courts must consider whether, in light of the totality of the circumstances, the police officer had a particularized and objective basis for suspecting the particular person stopped of criminal activity.... State v. Lipscomb, supra, 258 Conn. [at] 76 [779 A.2d 88]." (Internal quotation marks omitted.) State v. Colon, 272 Conn. 106, 149-50, 864 A.2d 666 (2004), cert. denied, 546 U.S. 848, 126 S. Ct. 102, 163 L. Ed. 2d 116 (2005).
"When, as in this case, an officer's decision to detain a suspect briefly is based on information received from an informant, the task of the reviewing court is akin to a probable cause determination. In the probable cause context, we have recently departed from the `two-pronged test' of Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964), and Spinelli v. United States, 393 U.S. 410, 89 S. Ct. 584, 21 L. Ed. 2d 637 (1969), in favor of the `totality of the circumstances' approach of Illinois v. Gates, 462 U.S. 213, 103 S. Ct. 2317, 76 L. Ed. 2d 527, reh. denied, 463 U.S. 1237, 104 S. Ct. 33, 77 L. Ed. 2d 1453 (1983). State v. Barton, 219 Conn. 529, [544-45] 594 A.2d 917 (1991). Just as we made clear in Barton that the informant's `veracity,' `reliability,' and `basis of knowledge' remain `highly relevant'; id., [at] 539-40 [594 A.2d 917]; `[t]hese factors are also relevant in the reasonable suspicion context, although allowance must be made in applying them for the lesser showing required to meet that standard.' Alabama v. White, supra, [496 U.S. at] 328-29 [110 S. Ct. 2412]." State v. Cofield, 220 Conn. 38, 45-46, 595 A.2d 1349 (1991). This court has "consistently held that an informant's record of providing information that led to arrests and seizures of contraband is sufficient to establish the reliability of the informant." State v. Smith, 257 Conn. 216, 224, 777 A.2d 182 (2001). "[A] deficiency in one [factor] may be compensated for, in determining the overall reliability of a tip, by a strong showing as to the other, or by some other indicia of reliability." Illinois v. Gates, supra, at 233, 103 S. Ct. 2317. The police *469 are not required, however, to corroborate all of the information provided by a confidential informant. See id., at 246, 103 S. Ct. 2317; State v. Cofield, supra, at 47, 595 A.2d 1349. Partial corroboration may suffice. See State v. Cofield, supra, at 47-48, 595 A.2d 1349.
On appeal, the state asserts that the Appellate Court improperly applied the totality of the circumstances test in the present case. More specifically, the state contends that the Appellate Court improperly affirmed the trial court's conclusion that, although the informant was reliable, the police officers lacked a reasonable and articulable suspicion to seize the defendant when they did so because they did not know the basis for the informant's knowledge. The state further claims that, under the totality of the circumstances test, the police officers had reasonable and articulable suspicion to seize the defendant because the informant was reliable and had provided a detailed and predictive tip, which the officers were able to corroborate in part. We agree with the state.
In the present case, the police had received information from a known confidential informant. This informant had provided reliable information to Officer Kasperzyk in the past, which had led to the issuance of search warrants and the making of arrests. Indeed, the trial court found that the informant was reliable and his veracity had been demonstrated through previous contacts with the police. Based on the fact that the informant was known to the police officers, the tip in the present case carried a greater indicia of reliability than one from an anonymous informant and therefore required less verification. See, e.g., Adams v. Williams, 407 U.S. 143, 146-47, 92 S. Ct. 1921, 32 L. Ed. 2d 612 (1972) ("The informant was known to [the police officer] personally and had provided him with information in the past. This is a stronger case than obtains in the case of an anonymous telephone tip.... [Accordingly, the informant's unverified tip] carried enough indicia of reliability to justify the officer's forcible stop of [the defendant]." [Citations omitted.]).
The confidential informant in the present case notified the police officers that the defendant was selling drugs in the Hill section of New Haven that day. The informant further indicated that the defendant would be driving a tan Chevrolet Cobalt with Pennsylvania license plates. While on patrol later that same day, the police officers, including Kasperzyk, who was familiar with the defendant from a prior arrest and the defendant's prior work as an informant for another police officer, saw the defendant driving a tan Chevrolet Cobalt with Pennsylvania license plates in the Hill section of New Haven. The police officers therefore corroborated a significant number of the facts reported to them by the informant. On the basis of this corroboration and the officers' prior experience with the informant, we conclude that it was reasonable for the officers to infer that the confidential informant's tip was reliable and that such a tip provided them with a reasonable and articulable suspicion to stop the defendant's vehicle. See, e.g., Alabama v. White, supra, 496 U.S. at 332, 110 S. Ct. 2412 ("the independent corroboration by the police of significant aspects of the informer's predictions imparted some degree of reliability to the other allegations made by the caller").
The defendant and the Appellate Court rely on the fact that the tip did not include the basis for the informant's knowledge as support for the trial court's conclusion that the officers did not have a reasonable and articulable suspicion to stop the defendant. We disagree. In addressing the basis of an informant's knowledge *470 in the probable cause context, the United States Supreme Court has clarified that, "[t]here are persuasive arguments against according [the reliability and basis of knowledge of the informant] such independent status. Instead, they are better understood as relevant considerations in the totality-of-the-circumstances analysis that traditionally has guided probable-cause determinations: a deficiency in one may be compensated for, in determining the overall reliability of a tip, by a strong showing as to the other, or by some other indicia of reliability.... If, for example, a particular informant is known for the unusual reliability of his predictions of certain types of criminal activities in a locality, his failure, in a particular case, to thoroughly set forth the basis of his knowledge surely should not serve as an absolute bar to a finding of probable cause based on his tip.... Likewise, if an unquestionably honest citizen comes forward with a report of criminal activitywhich if fabricated would subject him to criminal liabilitywe have found rigorous scrutiny of the basis of his knowledge unnecessary." (Citations omitted.) Illinois v. Gates, supra, 462 U.S. at 233-34, 103 S. Ct. 2317. In the present case, the trial court found that the informant was reliable, a factual finding that the defendant does not challenge on appeal. The trial court further found, however, that the tip was lacking because it did not provide the basis for the informant's knowledge of the defendant's criminal activity. We conclude, consistent with Illinois v. Gates, supra, at 233, 103 S. Ct. 2317, that when, as here, the police are familiar with the informant and his credibility has been established, and the police are able to corroborate several aspects of the tip by personal observation, the fact that the tip did not state the informant's basis of knowledge does not preclude the officers from having a reasonable and articulable suspicion of criminal activity.
The defendant also claims, and the Appellate Court agreed, that the officers did not have a reasonable and articulable suspicion of criminal activity in the present case because the police officers were able to corroborate only "identifying information that was unrelated to the informant's knowledge of the defendant's illegal activity" prior to stopping the defendant. State v. Clark, supra, 107 Conn.App. at 829, 947 A.2d 351. We disagree. "In cases in which a police stop is based on an informant's tip, corroboration and reliability are important factors in the totality of the circumstances analysis." (Internal quotation marks omitted.) State v. Jensen, 109 Conn.App. 617, 624, 952 A.2d 95 (2008). As the Second Circuit Court of Appeals has concluded: "[I]nformants do not all fall into neat categories of known or anonymous. Instead, it is useful to think of known reliability and corroboration as a sliding scale. Where the informant is known from past practice to be reliable ... no corroboration will be required to support reasonable suspicion. Where the informant is completely anonymous... a significant amount of corroboration will be required. However, when the informant is only partially known (i.e., [the informant's] identity and reliability are not verified, but neither is [the informant] completely anonymous), a lesser degree of corroboration may be sufficient to establish reasonable suspicion." United States v. Elmore, 482 F.3d 172, 181 (2d Cir.2007). In the present case, the informant was known by Kasperzyk and had provided reliable information on numerous occasions in the past regarding criminal activity. The police officers' corroboration of the defendant's presence in the Hill section of New Haven while driving a tan Chevrolet Cobalt with Pennsylvania license plates therefore was sufficient to provide a reasonable and articulable suspicion of criminal activity warranting the *471 investigative stop. Accordingly, we conclude that the Appellate Court improperly affirmed the trial court's judgment of dismissal based upon that court's improper granting of the defendant's motion to suppress.
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to reverse the judgment of the trial court and to remand the case to the trial court with direction to deny the defendant's motion to suppress and for further proceedings according to law.
In this opinion the other justices concurred.
NOTES
[*] The listing of justices reflects their seniority status on this court as of the date of oral argument.
[1] We granted the state's petition for certification to appeal, limited to the following issue: "Did the Appellate Court properly affirm the trial court's ruling that the evidence seized from the defendant's vehicle and person should be suppressed as the fruit of an illegal seizure?" State v. Clark, 288 Conn. 916, 916-17, 954 A.2d 187 (2008).
[2] Judge Beach dissented from the majority opinion of the Appellate Court. State v. Clark, supra, 107 Conn.App. at 830, 947 A.2d 351. He concluded that "[w]hen the police were able to corroborate the details, they reasonably could infer that however the informant came by his information, the tip was reliable. [In addition], the police had independent information regarding prior criminal activity by the defendant." Id., at 832, 947 A.2d 351 (Beach, J., dissenting). Accordingly, Judge Beach would have reversed the judgment of the trial court because there was reasonable and articulable suspicion, and remanded the case to that court with direction to deny the defendant's motion to suppress and for further proceedings. Id.
[3] On appeal to the Appellate Court, the state also claimed that the trial court improperly suppressed the evidence seized because it was in plain view. The Appellate Court did not address this claim because the state had not raised it before the trial court. State v. Clark, supra, 107 Conn.App. at 829-30, 947 A.2d 351.
[4] The fourth amendment to the United States constitution, made applicable to the states through the due process clause of the fourteenth amendment, provides in relevant part: "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated...." See Wolf v. Colorado, 338 U.S. 25, 28, 69 S. Ct. 1359, 93 L. Ed. 1782 (1949). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542642/ | 997 A.2d 416 (2010)
Henry B. DEWEY
v.
COMMONWEALTH of Pennsylvania, DEPARTMENT OF TRANSPORTATION, BUREAU OF DRIVER LICENSING, Appellant.
No. 2409 C.D. 2009.
Commonwealth Court of Pennsylvania.
Submitted on Briefs April 30, 2010.
Decided May 26, 2010.
Philip M. Bricknell, Asst. Counsel and Harold H. Cramer, Asst. Chief Counsel, Harrisburg, for appellant.
No appearance entered on behalf of appellee.
BEFORE: PELLEGRINI, Judge, SIMPSON, Judge, and FRIEDMAN, Senior Judge.
OPINION BY Judge PELLEGRINI.
The Department of Transportation, Bureau of Driver Licensing (Department) appeals *417 from the order of the Court of Common Pleas of Allegheny County (trial court) sustaining the appeal of Henry B. Dewey (Licensee) from the decision of the Department recalling his operating privileges because he suffered a loss of consciousness due to diabetes pursuant to 67 Pa.Code § 83.5(a)(1).[1] For the reasons that follow, we affirm.[2]
Pursuant to 67 Pa.Code § 83.5(a)(1), the Department recalled Licensee's driving privileges when it received a report dated July 17, 2009, from an emergency room physician that Licensee had lost consciousness due to hypoglycemia caused by his unstable diabetes. The report also stated that this condition prevented Licensee from safely operating a motor vehicle. Licensee appealed to the trial court and presented a report from his treating physician, who had treated him for eight years, confirming that Licensee had suffered one episode of loss of consciousness in August 2009,[3] but that he could nevertheless safely operate a motor vehicle. The trial court, relying on our recent decision in Peachey v. Department of Transportation, Bureau of Driver Licensing, 979 A.2d 951 (Pa. Cmwlth.2009), and on our Supreme Court's decision in Department of Transportation, Bureau of Driver Licensing v. Clayton, 546 Pa. 342, 684 A.2d 1060 (1996), both which held that 67 Pa.Code § 83.4(a),[4] an analogous regulation to 67 Pa.Code § 83.5(a)(1) that deals with epileptic seizures, created an impermissible irrebuttable presumption in violation of due process, sustained his appeal. This appeal by the Department followed.[5]
The Department argues that the trial court erred by relying on Peachey, which it contends is wrongly decided and should be overturned or, at the very least, limited to 67 Pa.Code § 83.4(a). It contends that if this Court applies Peachey to 67 Pa. Code § 83.5(a)(1), all of its regulations would be eviscerated and a parade of horribles, such as blind people and children *418 being allowed to drive upon the consent of their treating physicians, would ensue. The Department submits that this Court should instead engage in an equal protection analysis and hold that its regulations, including 67 Pa.Code § 83.5(a)(1), should be upheld because there is a rational basis for recalling the driving privileges of those who the Department determines are medically impaired from safely operating a motor vehicle.
Contrary to the Department's contentions, the trial court correctly held that Clayton and Peachey are squarely controlling in this matter. In Clayton, the licensee suffered a grand mal epileptic seizure. He had no prior history of seizure disorders. As a result, the Department recalled his driving privileges pursuant to 67 Pa.Code § 83.4(a). He appealed the recall to the trial court and presented evidence from his treating physician that he did suffer a grand mal seizure but that he could still safely drive. The trial court sustained Clayton's appeal, and this Court and our Supreme Court both affirmed. Our Supreme Court held that 67 Pa.Code § 83.4(a) created an impermissible irrebuttable presumption that a person who suffered from a seizure was incompetent to drive for a period of at least one year (now, six months) from the date of his last seizure. Any evidence that Clayton could present to attempt to rebut the presumption that he was unfit to drive was deemed irrelevant by the language of the regulation, which made the appeal process a sham and violated due process.
Despite this holding, the Department continued to interpret it in the same way as 67 Pa.Code § 83.4(a). In 2009, this Court in Peachey again held that 67 Pa. Code § 83.4(a) created an impermissible irrebuttable presumption and violated due process. The facts in Peachey were identical to those in Clayton. Peachey experienced a temporal lobe seizure, and the examining doctor submitted a form to the Department stating that he suffered from a seizure disorder that affected his ability to operate a motor vehicle. Peachey appealed to the trial court and submitted a report and deposition testimony by his treating neurologist that indicated that he could safely drive despite the seizure. The trial court sustained Peachey's appeal, and the Department appealed to this Court making the identical arguments that it makes in the instant matter. This Court affirmed, stating:
The issues that Department raises in this appeal were thoroughly addressed and rejected by our supreme court in Clayton, [which held] that the regulation at issue created an impermissible irrebuttable presumption. In so holding, the court observed that a person who suffered a single seizure is presumed to be incompetent to drive for at least one year following that seizure, and, under the regulation, any medical evidence offered to rebut that presumption would be irrelevant, at least with respect to the one-year recall. After stressing that procedural due process must be met before one's operating privilege can be revoked or recalled, the court in Clayton identified the essence of due process as a requirement for a meaningful hearing. The court then pointedly noted that when a hearing excludes consideration of an element essential to the decision of whether a license shall be recalled, it does not meet that standard. The court recognized the interest of Department in protecting the physical well being of the public but determined that this was outweighed by a licensee's interest in his or her operating privilege, especially in the minimal burden to Department in litigating such competency issues....
Finally, Department contends that the six-month seizure-free requirement for *419 those diagnosed with seizure disorders does not create an irrebuttable presumption but, instead, creates a classification of high-risk drivers. Noting that driving is a privilege, not a right, Department argues that legislation regarding that privilege must be analyzed under the rational relationship test.... We note that our supreme court specifically dismissed this argument in Clayton.
Peachey, 979 A.2d 951, 955-57.
67 Pa.Code § 83.5(a)(1) is identical to 67 Pa.Code § 83.4(a), the regulation at issue in Clayton and Peachey, except that it deals with a loss of consciousness caused by diabetes rather than epilepsy. Those cases are controlling, and there is no irrefutable presumption that a licensee cannot drive when he or she loses consciousness from diabetes.
The trial court accepted the opinion of Licensee's treating physician who had treated him for eight years and stated that Licensee could safely operate a motor vehicle, and there was substantial evidence to overcome the emergency room physician report. Accordingly, the trial court, like the trial courts in Clayton and Peachey, did not err in sustaining Licensee's appeal and its order is affirmed.
ORDER
AND NOW, this 26th day of May, 2010, the order of the Court of Common Pleas of Allegheny County, dated November 5, 2009, is affirmed.
NOTES
[1] 67 Pa.Code § 83.5(a)(1) provides:
(a) General Disqualifications. A person who has any of the following conditions will not be qualified to drive:
(1) Unstable or brittle diabetes or hypoglycemia, unless there has been a continuous period of at least 6 months freedom from a related syncopal attack.
[2] Because more than six months have passed since Licensee's loss of consciousness, the restoration of Licensee's driving privileges would be unaffected by a decision of this court in the Department's favor. The case is, thus, moot with regard to Licensee, and he is not participating in this appeal. However, the Department nevertheless seeks our review of this matter in order to clarify the weight that the statutes and regulations governing medical recalls for diabetes-related loss-of-consciousness as well as review of appeals of medical recalls generally should be given. Otherwise, given the six-month timeframe to restore operating privileges if Licensee can demonstrate that he has had no further loss of consciousness events, appeals of recalls would escape review.
[3] It is unclear whether this represents a different episode of loss of consciousness or merely an error in the date, given that the report states that Licensee had suffered only one such episode.
[4] 67 Pa.Code § 83.4(a) provides:
A person who has a seizure disorder will not be qualified to drive unless a licensed physician reports that the person has been free from seizure for at least 6 months immediately preceding, with or without medication. A person will not be disqualified if the person has experienced only auras during that period.
[5] Where the trial court takes de novo evidence, our scope of review is limited to determining whether constitutional rights were violated or whether the court manifestly abused its discretion or committed an error of law. Sklar v. Department of Transportation, Bureau of Driver Licensing, 764 A.2d 632 (Pa.Cmwlth. 1999). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542657/ | 60 F.2d 839 (1932)
McCLINTOCK
v.
UNITED STATES.
No. 565.
Circuit Court of Appeals, Tenth Circuit.
August 13, 1932.
Clyde Taylor, of Kansas City, Mo. (James A. Reed and James E. Taylor, both of Kansas City, Mo., on the brief), for appellant.
L. E. Wyman, Asst. U. S. Atty., of Topeka, Kan. (S. M. Brewster, U. S. Atty., and Donald Little, Asst. U. S. Atty., both of Topeka, Kan., on the brief), for the United States.
Before LEWIS, and PHILLIPS, Circuit Judges, and POLLOCK, District Judge.
PHILLIPS, Circuit Judge.
An indictment containing 19 counts was returned against McClintock, James E. Brady, and Arthur J. Baxter. The first eighteen counts charged violations of section 215 and the nineteenth count charged a violation of section 37, of the Penal Code (title 18, USCA §§ 338 and 88).
Brady filed an affidavit of bias and prejudice for the purpose of disqualifying the United States District Judge for the District of Kansas. On April 5, 1926, the senior Circuit Judge of the Eighth Circuit assigned Judge Merrill E. Otis of the Western District of Missouri to sit in the trial of the case. McClintock secured an order granting him a separate trial. Thereafter Richard J. Hopkins was appointed as United States District Judge for the District of Kansas, and McClintock was tried before Judge Hopkins subsequently to the effective date of the act of Congress creating the Tenth Judicial Circuit (28 USCA § 211).
Counts 8, 16, 17, and 19 were dismissed. A motion for a directed verdict was overruled. McClintock was convicted on counts 1, 2, 3, 4, 5, 6, 7, 9, 13, 14, and 15.
Count 1 charged that the defendants devised a scheme and artifice to defraud Leo A. Mergen and the Union National Bank of Beloit, Kansas (hereinafter referred to as the National Bank); that such scheme was that, in order to induce the National Bank to purchase from them certain notes and certificates of deposit, defendants would falsely represent to Mergen, cashier of the National Bank, that such notes and certificates were valid obligations, were worth their face value and would be paid when due, would deposit with said notes and certificates certain collateral to guarantee payment thereof, would falsely represent that such collateral had a value in excess of the amount of money advanced to them on such notes and certificates, would give the bank certain guaranties executed by Brady and R. N. Stout, would falsely represent that Brady and Stout were financially responsible for the amounts of such *840 guaranties, and would furnish to the National Bank false financial statements covering the financial worth of the makers of such notes. Count 1 further charged that defendants, for the purpose of executing such scheme, caused a letter dated February 8, 1923, addressed to Mergen and signed by McClintock, to be delivered through the United States mails to Mergen at Beloit on February 10, 1923. Such letter purported to transmit to Mergen a certificate for $5,000 issued by the Vernon State Bank (hereinafter referred to as the State Bank) payable to and endorsed by C. Davis.
Counts 2 to 18, inclusive, are substantially the same as count 1, except that they set up different letters.
Count 19 charged that on February 15, 1923, defendants entered into a conspiracy to commit the substantive offenses charged in counts 1 to 18, inclusive. The scheme set out in count 1 was incorporated into this count by reference.
Counsel for McClintock contend that the order of the senior Circuit Judge of the Eighth Circuit, appointing Judge Otis to try the cause, gave him exclusive jurisdiction, and that, since such order had not been revoked, Judge Hopkins was without jurisdiction. When such order was made, Kansas was a part of the original Eighth Judicial Circuit. Thereafter Congress passed an act creating the Tenth Judicial Circuit (45 Stat. 1346, title 28, USCA § 211), and Kansas became a part of the new circuit. The act contained no provision saving the jurisdiction of the judges previously assigned out of their own districts. The senior Circuit Judge of the Eighth Circuit had no authority to assign a judge in his circuit to sit in another circuit. Such an assignment could be made only by the Chief Justice of the United States. Section 17, title 28, USCA. After the creation of the Tenth Judicial Circuit, the effect of such an order was to assign Judge Otis to another circuit. It follows, we think, that the order appointing Judge Otis was ipso facto revoked by the act creating the Tenth Judicial Circuit. Under the provisions of sections 25 and 27, title 28, USCA, Judge Hopkins had jurisdiction to try the cause.
Counsel for McClintock assert that the judgment on counts 1 and 2 must be reversed for the reason that the use of the mails, therein alleged, preceded the formation of the scheme. They predicate this on the allegations of counts 1, 2, and 19. The letter set out in count 1 is dated February 8, 1923, and is alleged to have been delivered February 10, 1923. The letter quoted in count 2 is dated February 13, 1923, and is alleged to have been delivered February 14, 1923. On the other hand, count 19 alleged that defendants entered into the conspiracy, which was also the scheme to defraud (see Brady v. United States (C. C. A. 8) 24 F.(2d) 399, 404), on February 15, 1923.
Each count of an indictment is regarded as if it were a separate indictment and must be sufficient in itself. Dunn v. United States, 284 U.S. 390, 52 S. Ct. 189, 76 L. Ed. 356; Joyce on Indictments (2d Ed.) par. 555. One count may be bad without affecting the other counts. DeJianne v. United States (C. C. A.) 282 F. 737. However, one count may incorporate the allegations of another count by reference. Joyce, supra, par. 555; Crain v. United States, 162 U.S. 625, 16 S. Ct. 952, 40 L. Ed. 1097; Blitz v. United States, 153 U.S. 308, 14 S. Ct. 924, 38 L. Ed. 725; Doe v. United States (C. C. A.) 253 F. 903. Count 1 alleges the scheme, sets out the letter, and charges it was delivered through the mails in execution thereof. The offense is sufficiently charged in that count standing alone. The same is true of count 2, except that it incorporates by reference the allegations of the scheme charged in count 1. Count 19 alleges a conspiracy entered into on February 15, 1923, and by reference incorporates the scheme as alleged in count 1; it is to that extent controlled by the allegations of count 1. But counts 1 and 2 do not incorporate nor depend on any allegation of count 19, and are in no wise affected by the allegations of that count. We are of the opinion that the indictment is sufficient. It was so held in Brady v. United States (C. C. A. 8) 24 F.(2d) 399.
The National Bank closed in November, 1923. Mergen had been its cashier for ten years immediately prior thereto. In 1921 McClintock became attorney for the National Bank. The National Bank being in need of funds, Mergen informed McClintock that he desired to obtain time deposits. Early in 1923 McClintock introduced Brady to Mergen. Nothing was said at the time with respect to any business transactions. Later Mergen asked Brady if he knew anyone who might put money in the National Bank on time deposit; Brady replied that he did, and it was agreed between them that the National Bank would handle paper for Brady up to one-fourth of the amount he caused to be deposited in the bank, and that the transactions would be closed through McClintock's office.
*841 On February 7, 1923, Mergen sent McClintock a draft for $5,000 payable to C. Davis accompanied by written instructions to deliver the draft to Davis upon receipt of a certificate of deposit on the State Bank for $5,000. On February 8, 1923, McClintock forwarded to Mergen the certificate with the name C. Davis endorsed thereon. Stout, a witness for the government, testified that he, Brady, and McClintock were in the latter's office when the certificate was delivered to McClintock and the draft to Brady; that Brady endorsed the name C. Davis on the certificate and Stout endorsed the same name on the draft in McClintock's presence. Brady, a witness for the government, testified that he was engaged in business in Vernon, Kansas, at the time of the transactions in question, and carried on different enterprises under the names of James E. Brady, M. M. Marsh, and C. Davis; that at Mergen's solicitation he caused deposits to be made in the National Bank; that he secured a time deposit of $20,000 at the time the certificate for $5,000 payable to C. Davis was sold to the National Bank. He denied endorsing the name C. Davis on such certificate in McClintock's presence. McClintock testified that he followed Mergen's instructions with respect to the exchange of the certificate and the draft, and he specifically denied that he saw anyone endorse the name C. Davis on the draft or certificate.
On February 27, 1923, Mergen sent McClintock a draft for $2,500 payable to Stout with instructions to deliver it to him upon receipt of a note, a collateral agreement, and a guaranty by Brady. He also requested McClintock to give his opinion of Stout. On February 28, 1923, McClintock, pursuant to letters and telephone calls, forwarded to Mergen a note signed by Stout payable to the National Bank for $2,500, together with a financial statement signed and sworn to by Stout, a guaranty of payment signed by Brady, a certificate for 10,000 shares of Suburban Utilities Company stock issued in favor of Stout and by him endorsed in blank, and a copy of a letter recommending R. M. Burgess, president of the Utilities Company. In his letter, McClintock made a report on Stout, and in part said:
"He (Stout) advises me today that some of the stock of the Suburban Utilities Company has been sold at par, and that it will be the purpose of that organization to sell a considerable portion of the treasury stock at par and none of it to be sold for less than par, during the course of the development of that business."
Stout testified that he signed the note in McClintock's office and at that time stated that if called upon to pay the note, he would not be able to do so; that Brady said, "Well, you know I will always take care of you in anything like that"; that the statements concerning him in McClintock's letter to Mergen were true, except that he did not tell McClintock the stock had sold at par. Burgess testified that when he became president of the Utilities Company he believed the company had merit.
On March 17, 1923, McClintock wrote a letter to Mergen, which in part read as follows:
"Dear Mergen: Your wire received and the business has been carried out as per the offer and your telegram. There are enclosed the following papers:
"Certificate No. 25 for 20,000 shares in Suburban Utility Company issued to R. N. Stout, dated February 19, 1923, endorsed in blank and pledge of same signed by M. M. Marsh, also note of M. M. Marsh for $2500, dated this date, made to the order of myself, due five months after date with 8% until due and 10% after due. * * *
"Two separate guarantees of the payment of said note signed by R. N. Stout and J. E. Brady.
"Two separate guarantees of a certificate of deposit, number 142, dated March 17, 1923, at Vernon, Kansas, issued on behalf of C. Davis for $5,000 payable in one month, bearing 3%, guarantee is signed by R. N. Stout and J. E. Brady."
Stout testified that he endorsed certificate number 25 and signed the guaranty of payment of the Marsh note in McClintock's office; that the guaranty of payment signed by Brady was prepared by McClintock; that, to the best of his recollection, the pledge of stock was prepared in McClintock's office and there signed "M. M. Marsh" by Brady; that he was not certain whether the Marsh note was signed before he and Brady went to McClintock's office. Brady testified that he signed the name M. M. Marsh to the note because he was carrying an account under that name in the State Bank; that Mergen had suggested the signing of two names on notes in order to comply with banking requirements; that the note indicated on its face that it was prepared at Tipton, Kansas, but that he could not recall whether he took the note to McClintock or sent it to him; and that the pledge of stock appeared to have been prepared in his office rather than in McClintock's office. McClintock testified that *842 at the time he believed there was a person by the name of M. M. Marsh and that the note had actually been signed by such person.
McClintock testified that he had received no benefits from any of the transactions except attorney's fees from the National Bank; that he knew of no irregular dealings and that he followed Mergen's instructions in every transaction.
Brady testified that all the arrangements with respect to the several transactions were made by Mergen and that McClintock had no connection therewith, except to act as the National Bank's representative in the exchange of papers by which such transactions were closed. Mergen corroborated Brady's testimony in this respect, and, in addition, testified that McClintock acted only as attorney for the National Bank and followed his instructions. The correspondence indicates that McClintock was acting according to instructions and solely in the capacity of attorney for the National Bank.
The record discloses other transactions but, since they do not aid the case of the government, we deem it unnecessary to consider them.
The motion for a directed verdict presents the question of whether there was substantial evidence of McClintock's guilt to take the case to the jury. Moore v. United States (C. C. A. 10) 56 F.(2d) 794; Isbell v. United States (C. C. A. 8) 227 F. 788. The evidence against McClintock was wholly circumstantial. If it was as consistent with innocence as with guilt, the motion should have been granted. Moore v. United States, supra; Chambers v. United States (C. C. A. 8) 237 F. 513; Isbell v. United States, supra; Read v. United States (C. C. A. 8) 42 F.(2d) 636; Spalitto v. United States (C. C. A. 8) 39 F.(2d) 782.
Stout gave the only testimony which militates against McClintock, and it only casts suspicion on him. An inference of innocence can be drawn therfrom as readily as an inference of guilt, and in view of the other testimony such an inference is more logical. The testimony falls far short of proving that McClintock knew and failed to report to Mergen that Stout had endorsed the name C. Davis on the National Bank's draft for $5,000, that Brady endorsed the name C. Davis on the State Bank's certificate for $5,000, and that Brady signed the name M. M. Marsh to the Marsh note and pledge of stock. Stout did not testify that McClintock saw them sign the name C. Davis on the draft and certificate. Brady testified that he did not sign the certificate in McClintock's presence. Stout, after endorsing the draft, handed it to Brady and McClintock had no occasion to see it after it had been endorsed. The government's testimony with respect to the Marsh note and pledge of stock is uncertain. Stout testified that he was not sure where the note was signed, but that, to the best of his recollection, the pledge of stock was signed in McClintock's office. Brady stated that the note bore evidence of having been prepared at Tipton and that the pledge of stock appeared to have been prepared in his office. McClintock denied that he saw Brady affix such signatures.
McClintock's letter of February 28 to Mergen was written at the latter's solicitation. Stout admitted the letter was true in every respect, except as to that part which stated that he had told McClintock the stock of the Utilities Company had sold at par. The certificate of stock on its face bore no earmarks of fraud. It was signed by a prominent businessman as president, and it was accompanied by a copy of a letter recommending such president signed by one of the leading bankers of Kansas City, Missouri. It was not shown that one of the parties present did not make the statements attributed to Stout, nor that such statements were untrue. McClintock may have innocently misstated the name of the person making such statements.
We are of the opinion that the evidence wholly failed to establish that McClintock was a party to the scheme to defraud that he knew of such scheme or knowingly participated in the execution thereof.
The judgment is reversed with instructions to grant McClintock a new trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542646/ | 60 F.2d 204 (1932)
FALK CORPORATION
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 4737.
Circuit Court of Appeals, Seventh Circuit.
July 6, 1932.
*205 Bernhard Knollenberg, of New York City (Quarles, Spence & Quarles, of Milwaukee, Wis., and Lord, Day & Lord, of New York City, of counsel), for appellant.
G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and Erwin N. Griswold, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Edward L. Updike, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
Before SPARKS, PAGE, and ANDERSON, Circuit Judges.
SPARKS, Circuit Judge (after stating the facts as above).
The first question presented by this appeal is whether petitioner is entitled to deduct in its income tax return for 1923 the amount which it paid to the state of Wisconsin in that year in payment of taxes assessed by the state in 1922 against another corporation, where it appears that the petitioner had earlier acquired part of the assets of the other corporation, and in part payment for those assets had agreed to pay any back taxes which might be assessed against the other corporation.
The ruling of the Board is based on the theory that taxes paid are deductible as such only by those upon whom they are imposed, and that the taxes assessed against Falk Company were paid by petitioner as part consideration for the assets of that company which petitioner by its contract had assumed and agreed to pay, and that therefore it is not such a payment of tax for which petitioner is entitled to a deduction as contemplated by the statute.
Petitioner, on the other hand, relies upon a strict literal interpretation of the statute and insists that all taxes paid are deductible, except those specifically exempted by the statute. It may be conceded that the tax in controversy does not come within any of the exemptions specifically enumerated in the statute now under discussion.
*206 With petitioner's contention we cannot agree, and we think the Board's ruling is right. It is admitted that the money paid by petitioner to the state of Wisconsin was a part of the consideration for the assets received by it from Falk Company. It was made so by virtue of a contract entered into between Falk Company and petitioner. The amount paid, therefore, was a capital expenditure and of course cannot be deducted from petitioner's income in the determination of its income tax unless there is legislative sanction for doing so.
While the statute now in controversy, with certain exceptions not material to this discussion, authorizes deductions for taxes paid or accrued within the taxable year, yet we cannot believe it was the intention of Congress to permit one, in making his income tax return, to deduct from his income all taxes actually paid by him regardless of the fact that they may have been assessed in the first instance against another, and regardless of the further fact that payer may have received full consideration for making such payment, or may have made the payment voluntarily. Suppose A owns his home, upon which a tax sale is imminent. He also owns an automobile which is well worth the amount of taxes due on his home, and which he proposes to sell and transfer to B in consideration that B will pay the taxes on the home. The offer is accepted. The transfer is made and B pays the taxes. Under such circumstances we think it could not be seriously contended that in making his income tax return B would be entitled to deduct from his income the amount paid for A's taxes. It is quite true that B performed the physical act of paying the taxes, but he did so out of property which A had placed in his hands for that purpose. In effect B paid for the automobile and A paid the taxes. The object of the statute is to arrive fairly at taxpayer's net income by permitting him to deduct from his gross income what Congress regards as proper items of expense in producing his income. If, for instance, B is permitted to deduct from his gross income the amount he paid for A's taxes, the balance would not honestly reflect his net income, because he would be receiving credit for an item of expense which in fact cost him nothing.
Suppose corporation X says to corporation Y: "We understand that you have recently organized with a capital stock of 100,000 shares of the par value of One Hundred Dollars per share. We propose to sell and transfer to you all of our assets, free and clear from all liens and encumbrances, which assets we guarantee to be of the fair market value of $7,105,795.77, in consideration that you transfer and deliver to us 60,000 paid up shares of your capital stock and that you assume and agree to carry out all of our sales, purchase, and employees contracts, and provided, further, that you assume and agree to pay all of our debts and obligations of every kind and nature, including an income tax of $152,202.51 due from us to the State of Wisconsin." Corporation Y accepts the proposition of corporation X and the transfers are made. The result of the transaction is that 60,000 shares of the capital stock of Y corporation are paid up and delivered to X, and there remains in Y's hands $1,105,795.77, consisting of real estate and personal property, including cash of the approximate amount of $166,000, out of which Y has obligated itself to carry out the contracts and pay the debts and obligations of corporation X, including the income tax of $152,202.51. Corporation Y subsequently paid the Wisconsin income tax of corporation X as it had promised, but it paid it out of property and funds which X had delivered to Y for that purpose. In effect, Y performed the physical act of paying the taxes, but in doing so it was paying for the assets which it had purchased from X, and, as a matter of fact, X paid the taxes, because it placed the money in Y's hands for that specific purpose. Under such circumstances we think it quite obvious that X cannot be considered a taxpayer within the meaning of the statutes above referred to, nor can the amount of money paid by it to the state of Wisconsin, so far as Y is concerned, be considered as tax, but rather as payment of a contractual obligation which it owed to X. This position is supported in principle in Athol Mfg. Co. v. Commissioner (C. C. A.) 54 F.(2d) 230; King Amusement Co. v. Commissioner (C. C. A.) 44 F.(2d) 709; Rotan v. United States (D. C.) 43 F. (2d) 232; Hill v. Commissioner (C. C. A.) 38 F.(2d) 165; Newark Milk & Cream Co. v. Commissioner (C. C. A.) 34 F.(2d) 854; Scott v. Commissioner (C. C. A.) 29 F.(2d) 472; Mastin v. Commissioner (C. C. A.) 28 F.(2d) 748, and Meriwether v. Garrett, 102 U.S. 472, 26 L. Ed. 197.
The hypothetical statement of facts last referred to is not in every respect the same as the statement of facts now before us. In the instant case the entire capital stock of petitioner was traded for the assets of the Falk Company, and the stockholders in both companies are substantially the same and the *207 interests are identical; but we cannot see that this fact makes any difference. The two corporations herein involved are separate entities, and the court will so regard them unless it is apparent that thereby manifest injustice will result. It is apparent from the record that the stockholders of Falk Company, for reasons known to themselves and which were no doubt beneficial and sufficient, desired to, and did, create another separate corporate entity under the name of the Falk Corporation for the purpose of taking over the entire business of Falk Company and conducting it as the company had formerly conducted it. We think it is fair to assume that the benefits anticipated by the creation of that separate entity have been realized, and no facts or special circumstances have been presented from which the court can fairly say that a manifest injustice will be done by continuing to regard the two corporations as separate entities, unless it be the fact that petitioner's income tax will thereby be increased. This fact we deem insufficient.
In Kissel v. Commissioner, 15 B. T. A. 1270, the Board of Tax Appeals said: "The liability for the payment of the tax rested upon the owner of the land, and he is the only one, in our opinion, who is entitled to the deduction for taxes paid or accrued within the taxable year. Any agreement between him and a third party for the paying of his liability does not entitle such third party to a deduction * * *." That principle is also followed in Appeal of Musser, 3 B. T. A. 498; Hamilton v. Commissioner, 6 B. T. A. 240; Hurley v. Commissioner, 6 B. T. A. 695; Eisenberg v. Commissioner, 11 B. T. A. 574; Grand Hotel Co. v. Commissioner, 21 B. T. A. 890.
It is contended by petitioner that to hold that taxes are deductible as such only by those on whom they are imposed is to read into the statute a limitation which is not warranted, and in support of that contention it cites United States v. Woodward, 256 U.S. 632, 41 S. Ct. 615, 65 L. Ed. 1131, and United States Playing Card Co. v. Commissioner, 15 B. T. A. 975. In each of those cases payment was made by the taxpayer upon whom the tax was imposed, and in that respect those cases are dissimilar to the instant one. We do not regard our holding as in any way limiting the plain words of the statute; but, on the other hand, we say that petitioner has not brought itself within the statutes because in reality it has paid no tax in the true sense of that word.
Petitioner insists, however, that such position is in conflict with United States v. Updike, 281 U.S. 489, 50 S. Ct. 367, 74 L. Ed. 984. In that case the Commissioner, in 1920, assessed additional income and excess profits taxes against a corporation for its fiscal year ending June 30, 1917. In August, 1917, the corporation was dissolved and its net assets were distributed to the stockholders. On the theory that said stockholders were liable for the tax to the extent of the assets received by them, the United States, in 1927, sued Updike, a stockholder at the time of the dissolution, for the taxes so assessed. Updike pleaded the six year statute of limitations, and the government contended that a suit against a transferee, for taxes assessed against the corporation, to enforce Updike's liability therefor to the extent of the corporate property received by him on dissolution was not a suit to collect a tax within the meaning of the statute, and hence the six-year statute of limitations was not applicable. The court held that the suit was one to collect a tax. Petitioner therefore argues that if such obligation be a tax, then the payment of it is the payment of a tax.
There are several features in that case which distinguish it from the instant one. Updike was a stockholder of the dissolved corporation. His interest therein had been reduced to cash and paid to him, but that fact had not increased the value of his estate. The statute made his estate liable for the taxes assessed against the corporation to the extent of the assets received by him, and that liability never lost its characteristic as a tax obligation. In the instant case petitioner was not a stockholder of Falk Company. It is true that it was a transferee of Falk Company's assets and, so far as the state of Wisconsin was concerned, those assets were liable for the payment of the company's taxes; but petitioner is in no position to claim that it was a transferee of corporate assets upon which the transferor had not paid its taxes. As between petitioner and the company, those taxes were paid by the company at the time its assets were turned over to petitioner. By virtue of that transfer petitioner in effect received in value, over and above an amount sufficient to pay par value for all of its stock, the sum of $1,105,795.77, and its gross assets were enriched to that extent, for which petitioner had given nothing in return except its promise to pay all obligations of Falk Company, which included the taxes above referred to.
*208 It must be borne in mind that this is not a suit against a transferee of corporate assets to recover taxes imposed thereon prior to the transfer, as in the Updike case; but it is a suit to reduce a federal income tax imposed upon petitioner for a year subsequent to the transfer by deducting from petitioner's gross income the amount of income tax and surtaxes imposed upon the transferor by the state of Wisconsin for the years prior to the transfer, which petitioner claims to have paid as transferee.
The effect of the contract between the parties in suit was this: Falk Company said to petitioner: "Our gross assets are sufficient in value to pay for the entire issue of your capital stock and to carry out all of our contracts and to pay all of our debts and taxes. We propose, therefore, to transfer all those assets to you in consideration that you issue to us all of your capital stock and that you pay all of our debts and taxes and carry out all of our contractual obligations." Under those circumstances we are convinced that Falk Company in fact paid the taxes in controversy, for it furnished to petitioner the money and property with which to make the payment. When petitioner performed the physical act of making the payment he was merely carrying out his contract by paying Falk Company's taxes with that company's money, and he cannot be considered as a taxpayer who has paid taxes within the meaning of the statute. We find nothing in the other cases cited by petitioner which are inconsistent with the views we have expressed.
The only other question presented is whether the Wisconsin taxes in controversy must be deducted, if at all, as an accrued item in 1921, when the liability was assumed. In view of the fact that we hold them not deductible at all by petitioner, it is not necessary to pass on that question.
The order of the Board is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542649/ | 60 F.2d 866 (1932)
PEDDER
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 6722.
Circuit Court of Appeals, Ninth Circuit.
September 7, 1932.
William S. Bayless, of San Francisco, Cal., for appellant.
G. A. Youngquist, Asst. U. S. Atty. Gen., Sewall Key and Helen R. Carloss, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, and C. E. Lowery, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
Before WILBUR and SAWTELLE, Circuit Judges, and NORCROSS, District Judge.
WILBUR, Circuit Judge.
Petitioner sought a review of the action of the respondent, Commissioner of Internal Revenue, before the Board of Tax Appeals. He seeks by his petition to review the adverse decision of that Board.
The facts involved were stipulated before the Board of Tax Appeals, and, as we understand the record, the Board found it to be a fact that the income which the petitioner sought to segregate into two equal parts, one-half taxable to his wife and one-half to himself, upon the ground that the property was held by the husband and wife in joint tenancy with the right of survivorship, was in fact community property of the husband and wife, and therefore taxable as income to the husband alone at the time such income was received under the law then applicable.
*867 The stipulation shows that the income in controversy was $20,715.15, which was reported in the separate return of petitioner's wife, Mabel H. Pedder, for the year 1924, as her income, consisting of $3,842.80 dividends received upon corporate stock held in the name of the petitioner, Stanley Pedder, capital net gain of $7,869.88 upon stock similarly held, and $9,002.47 profit on stock and real estate also held in the name of the husband, Stanley Pedder, petitioner herein. The husband kept a record of all the income derived from the above-mentioned sources, crediting the aforementioned one-half thereof to his wife during the year 1924. The petitioner deposited all the income received by him during the year 1924 as the result of his legal practice in accounts which were designated as follows: "Mr. Stanley Pedder & or Mrs. Mabel H. Pedder." These accounts were with the Wells-Fargo Nevada National Bank and the Bank of California National Association. The income collected by him upon the property held in his name was also deposited during the year 1924 in the joint bank accounts above referred to. These bank accounts were subject to the check of either party, and the accounts were active so far as petitioner was concerned, but only occasionally checked upon by petitioner's wife. By stipulation, the testimony given by petitioner in another case pending before the Board of Tax Appeals as to the agreement between himself and wife, was considered by the Board in this case. He testified, in part, as follows:
"Q. As a matter of fact, Mr. Pedder, did you ever have any agreement with Mrs. Pedder, either in writing or oral, that she should have a one-half interest that you conveyed to her by way of gift or otherwise one-half or any part of these funds? A. No formal agreement, no; it was just my understanding of the situation.
"Q. Well, you kept a card record, I believe? A. I kept the record.
"Q. Did she ever see that? A. I do not suppose she did. * * *
"Q. As a matter of fact, she did not know it existed? A. Yes, she knew it existed.
"Q. Did she know the amounts that were entered on there? A. Probably not.
"Q. What makes you think she knew it existed? A. Well, she knew, of course, that I kept books.
"Q. She did not know anything about bookkeeping herself? A. Oh, no, she is not a business woman at all.
"Q. Did she know there was any amount in these books or cards in her name? A. I do not know.
"Q. It is very probable that she did not, is not that right? A. Very probable, because she knows nothing about bookkeeping."
Petitioner further testified:
That he kept his books in compliance "with my understanding of the situation which I wanted to develop so that whatever happened to me, my wife was a sole surviving owner of the joint tenancy; that has always been my idea; * * *
"Now, again * * * my whole idea in this proposition was that when I earned money it was turned over to joint tenancy, consisting of myself and my wife; the proceeds of that joint tenancy, I would also argue, belonged thereto; if I took anything out of that joint tenancy, it is charged with the trust for my joint tenant. * * *
"Q. This bank account, was it one of these bank accounts that was subject to check by either party, and that the balance may be paid to the survivor in case of death? A. Yes, sir."
The witness admitted that in his income tax return for 1923 the property from which the income in question was derived was designated by him as community investment.
Under the law of California, at the time of the acquisition of the property from which the income here involved was derived, all the property acquired by husband or wife after marriage was presumed to be community property subject to the disposition and control of the husband with all the powers of ownership. The income upon this community property was the income of the husband. United States v. Robbins, 269 U.S. 315, 46 S. Ct. 148, 70 L. Ed. 285. In order to overcome the presumption that property acquired by husband or wife after marriage was community property, it was essential to show that the property was acquired by one of the spouses by gift, bequest, devise, or descent. Cal. Civ. Code, §§ 162, 163, 164. This property relationship of the husband and wife could be altered by the parties by a mutual agreement "subject, in transactions between themselves, to the general rules which control the actions of persons occupying the confidential relations with each other." Cal. Civ. Code, § 158. It will be observed that the property from which the income in question was derived was acquired by the husband by reason of services rendered by him as an attorney at law, and was, as such, the community property of the husband and wife, *868 and that the property at the time of the receipt of the income in question stood in the name of the husband, and, as such, was presumptively community property. Estate of Jolly, 196 Cal. 547, 238 P. 353; Estate of Pepper, 158 Cal. 619, 112 P. 62, 31 L. R. A. (N. S.) 1092; Estate of Hill, 167 Cal. 59, 138 P. 690; Fountain v. Maxim, 210 Cal. 48, 290 P. 576, 577. In the latter case the Supreme Court of California was dealing with the contention that certain property was the separate property of the wife by reason of the fact that it had been acquired in another state. The court said:
"It may also be conceded that personal property acquired in another state under circumstances which make it the separate property of the wife, when brought into this state remains her separate property. Estate of Drishaus, 199 Cal. 369, 249 P. 515. But the property here in question, having been acquired during coverture, and taken in the name of the husband is presumed, under section 164 of the Civil Code, to be community property; and, unless the presumption is successfully controverted by other evidence, the court is bound to find according to the presumption. Freese v. Hibernia S. & L. Soc., 139 Cal. 392, 395, 73 P. 172; Simonton v. Los Angeles T. & S. Bank, 205 Cal. 252, 258, 270 P. 672.
"It has also long been the rule in this state that, where separate and community property are so commingled that it is impossible to trace the funds, the whole will be treated as community property, upon the principle that the burden is upon the party claiming property is separate property to establish its character as such. 5 Cal. Jur. 298, § 16."
The petitioner claims he has overcome this presumption by showing that the funds invested in the property from which the income in question was derived were at one time deposited by him in a joint account in a bank, and that under the law of California such account creates a joint tenancy in the funds with the right of survivorship, and that the funds having thus been impressed with the character of joint tenancy retain that character notwithstanding the fact that they were withdrawn by him and invested in his own name. The petitioner relies largely upon his statement of his intent at the time the deposits were made in the bank and upon the fact that, although he withdrew the funds from the bank and bought property to which he took title in his own name, he nevertheless deposited the income in the same joint account from which the funds had been withdrawn to make the purchase in question. It may be conceded that, where community funds were thus deposited by the husband in a joint bank account, accompanied by an agreement of the parties in writing that the funds were subject to be withdrawn by either party during their joint lives and by the survivor upon the death of one of the spouses, the property was changed from community property to a joint ownership in the nature of a joint tenancy, (Estate of Harris, 169 Cal. 725, 147 P. 967; Kennedy v. McMurray, 169 Cal. 287, 146 P. 647, Ann. Cas. 1916D, 515; McDougald v. Boyd, 172 Cal. 753, 159 P. 168; Estate of Gurnsey, 177 Cal. 211, 170 P. 402), in view of section 15 (a) of the California Bank Act (Stats. and Amendments to the Codes, 1921, p. 1367; Deering's Gen. Laws of California 1923, p. 170, Act 652), which is as follows: "Deposit in name of two depositors. When a deposit shall be made by any person in the names of such depositor and another and in form to be paid to either or the survivor of them, such deposit and any additions thereto made by either of such persons after the making thereof, shall become the property of such persons as joint tenants, and the same together with all dividends thereon shall be held for the exclusive use of such persons and may be paid to either during the lifetime of both or to the survivor after the death of one of them. * * * The making of the deposit in such form shall, in the absence of fraud or undue influence, be conclusive evidence, in any action or proceeding to which either such savings bank or the surviving depositor is a party, of the intention of both depositors to vest title to such deposit and the additions thereto in such survivor."
The record does not show whether or not the deposits in question were made before or after the enactment of this California statute. It is asserted in petitioner's brief, although the record is silent upon the subject, that the account with the Wells-Fargo Nevada National Bank in San Francisco was opened in 1917 and that the account with the Bank of California National Association of San Francisco was opened May 15, 1924. It is also asserted in the brief that the joint agreement with the bank was signed by petitioner and his wife. The written agreement referred to in the brief was not offered in evidence, and, although counsel ask us to assume that such an agreement was executed and that by its terms it created a joint tenancy, the presumptions in favor of the actions of the Board of Tax Appeals would preclude our doing so, *869 notwithstanding the agreement that the money was deposited in the joint bank account subject to the check of either party, and the testimony of the petitioner that the bank account was subject to the check of either party "and that the balance may be paid to the survivor in case of death."
We think that the evidence in this case did not compel the conclusion by the Board of Tax Appeals that the funds from which the income in question was derived were held by the husband and wife as joint tenants at the time the income was so derived. They were justified in concluding that the presumption of the statute in favor of community property was not overcome. The agreements, if such there were, evidenced by writing made at the time of the deposits in the bank, were not in evidence; consequently the terms thereof were not disclosed. There is no testimony as to the understanding of the husband and wife as to the ownership of funds withdrawn from the joint account. The petitioner himself does not testify that there was any agreement with his wife with relation to funds so withdrawn, nor, in fact, was there any agreement with regard to the establishment of the joint account other than the written agreement, if such existed. Petitioner's conduct is inconsistent with his claim that it was his intention that money withdrawn from the bank account should be impressed with the character of a joint tenancy. He was an attorney at law familiar with the rules of law and able to put his investments in such form that the right of survivorship would be manifest by the muniment of title. It is obvious from his testimony that in the event of his death his wife, who seemed to be wholly ignorant as to the nature of his transaction, would be unable to substantiate the claim that she took as a surviving joint tenant, property which he held in his own name and which was therefore presumptively community property. It is unnecessary for us to determine what interest the other spouse has in funds withdrawn from a joint bank account. That question, so far as we are advised, has not yet been determined by the courts of California and need not be determined by us. We hold simply that under the evidence the decision of the Board of Tax Appeals was justified by the presumption that the property was community property and that the evidence adduced before them was not such as compelled a contrary conclusion. We are bound by their decision upon the facts under these circumstances. Phillips v. Commissioner, 283 U.S. 589, 51 S. Ct. 608, 75 L. Ed. 1289. The fact that the husband deposited the income in question in the same joint account in which the original funds were withdrawn to invest in the property to produce the income is of no significance. The question is as to the status of the income when it was received. Lucas v. Earle, 281 U.S. 111, 50 S. Ct. 241, 74 L. Ed. 731.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542690/ | 60 F.2d 543 (1932)
THE ABANGAREZ.
UNITED STATES
v.
UNITED FRUIT CO.
No. 18877.
District Court, E. D. Louisiana.
August 3, 1932.
J. Frank Staley, Sp. Atty., Admiralty Division, Department of Justice, of Washington, D. C., and Edouard F. Henriques, Sp. Asst. in Admiralty to U. S. Atty., of New Orleans, La., for libelant.
Spencer, Gidiere, Phelps & Dunbar and Walker B. Spencer, all of New Orleans, La., for respondent.
BORAH, District Judge.
This case involves a collision that occurred in Colon Harbor on the morning of October 28, 1923, at 6:24 a. m. between the steamship Abangarez, owned by the United Fruit Company, and the submarine O-5, a war vessel owned by the United States.
The steamship Abangarez prior to and at the time of collision was in charge of a licensed Panama Canal pilot, and was proceeding from her place of anchorage in the harbor to the docks on a course practically due east. The submarine O-5, as the leader of a section of four submarines with a pilot in training on board, was immediately prior to the collision to the eastward of the center of the main channel proceeding on a course approximately south, destined for a transit of the Panama Canal to take part in fleet maneuvers in the Pacific Ocean. While thus proceeding on these headings at practically right angles to each other and at a point about 100 yards north and a little west of channel buoy No. 3, the Abangarez struck the submarine about 90 feet from her stern, causing her to sink, with the resultant loss of three members of her crew. The Abangarez was not damaged.
Following this collision various boards were convened with the purpose in view of fixing responsibility for the accident. On the afternoon of the same day the commanding naval officer constituted a naval board of investigation to investigate and report on the facts of the collision. On November 1, 1923, a local board of inspectors of the Canal Zone, consisting of naval officers of the United States, was organized to investigate the accident as required by law, and subsequently on the 23d day of November, 1923, a naval board of inquiry was convened to inquire into all the facts and circumstances concerning the accident.
At the trial respondent offered in evidence the testimony taken before the board *544 of local inspectors, and the exhibits filed in connection therewith of the commanding officers in charge of the submarines O-5, O-6, and O-8 and five other witnesses on board the submarines O-5 and O-6; the findings of fact and conclusions of the board of local inspectors and the exhibits attached thereto and a copy of the testimony of the commanding officer of the O-5 as given before the naval board of investigation. The government timely excepted to these offers, thus necessitating a ruling at this time as to their admissibility in evidence. I take it to be well settled that in admiralty pro hac vice the master is the owner, and any declarations or admissions made by him are admissible as evidence against the owner. The Potomac, 8 Wall. 590, 19 L. Ed. 511; The Rosalie M. (C. C. A.) 12 F.(2d) 970; The City of Rome (D. C.) 24 F.(2d) 729, 1928 A. M. C. 520. With reference to the other witnesses, the situation is different, and the testimony as offered is only admissible where the proper predicate is laid, and then only for the purpose of showing previous statements inconsistent with and discrediting their testimony in this case, and to that limited extent has their testimony been considered. As to the findings of the board of local inspectors, they are in the nature of public documents, and come within the exception to the hearsay rule; however, they are not binding upon the court, and, while admissible, have not been considered in a determination of the issues presented.
On August 12, 1927, the United States filed its libel in personam against the United Fruit Company and in rem against the Abangarez. At the trial proctor for the libelant abandoned its action in personam, conceding the fact that the owner could not be held liable for the negligence of a pilot taken under compulsion of law. Homer Ramsdell Co. v. Comp. Gen. Trans., 182 U.S. 406, 416, 21 S. Ct. 831, 45 L. Ed. 1155. The issue thus presents the sole question as to the liability of the Abangarez in rem for the negligence of a pilot which she was required to take in proceeding from anchorage to the dock.
The transit and harbor regulations of the Panama Canal and approaches thereto, including all waters under its jurisdiction, are based upon executive orders of the President made under authority conferred by the Panama Canal Act, 37 Stat. 562, 38 Stat. 385 (48 USCA §§ 1315, 1317). By executive order Rules of the Road, including signals, have been prescribed for the navigation of the Panama Canal and approaches thereto. With slight modifications and additions deemed necessary to adjust them to local conditions, these rules are the same as the Inland Rules. 30 Stat. 96 (33 USCA § 171 et seq.). The following are included in those rules:
"Rule 75. One short blast of the whistle signifies intention of or assent to steamer first giving the signal to direct course to her own starboard, except when two steamers are approaching each other at right angles or obliquely, when it signifies intention of steamer which is to starboard of the other to hold course and speed."
"Rule 79. If, when vessels are approaching each other, either vessel fails to understand the course or intention of the other, from any cause, the vessel so in doubt shall immediately signify the same by making the danger signal, namely: Several short and rapid blasts, not less than four, on the steam whistle.
"Rule 80. Whenever the danger signal is given, the engines of both steamers shall be stopped and backed until the headway of the steamers has been fully checked; nor shall the engines of either steamer be again started ahead until the steamers can safely pass each other, and the proper signals for passing have been given, answered, and understood."
"Rule 104. When two steamers are approaching each other at right angles or obliquely so as to involve risk of collision, other than when one steamer is overtaking another, the steamer which has the other on her port side shall hold her course and speed; and the steamer which has the other on her starboard side shall keep out of the way of the other by directing her course to starboard so as to cross the stern of the other steamer, or, if necessary to do so, slacken her speed, or stop, or reverse. The steamer having the other on her own port bow shall blow one blast of her whistle as a signal of her intention to cross the bow of the other, holding her course and speed, which signal shall be promptly answered by the other steamer by one short blast of her whistle as a signal of her intention to direct her course to starboard so as to cross the stern of the other steamer or otherwise keep clear.
"Rule 105. If, from any cause whatever, the conditions covered by this situation are such as to prevent immediate compliance with each others' signals, the misunderstanding or objection shall at once be made apparent by blowing the danger signal, and both steamers shall be stopped and backed, if necessary, *545 until signals for passing with safety are made and understood.
"Rule 106. Every vessel which is directed by these rules to keep out of the way of another vessel, shall, if the circumstances of the case permit, avoid crossing ahead of the other.
"Rule 107. Every vessel which is directed by these rules to keep out of the way of another vessel shall, on approaching her, if necessary, slacken her speed, or stop, or reverse."
"Rule 113. Nothing in these rules shall exonerate any vessel, or the owner or master, or crew thereof, from all the consequences of any neglect of any precaution which may be required by the ordinary practice of seamen, or by the special circumstances of the case.
"Rule 114. In obeying and construing these rules due regard shall be had to all dangers of navigation and collision, and to any special circumstances which may render a departure from the above rules necessary in order to avoid immediate danger."
The theory of the libelant's case rests upon the assertion that the Abangarez was at all times preceding and at the time of the collision a following and not a crossing vessel. This theory is supported by the officers and crews of the submarines, but is contradicted in every essential of fact, not only by the testimony of those on the Abangarez, but also by a host of disinterested witnesses, all of whom were in the employ of the government in and about Colon Harbor. The testimony thus may be considered to exhibit the conflict usual in collision cases; however, considering the testimony in the light of the physical facts, aided by the charts that have been offered in evidence, I have been able to arrive at a satisfactory conclusion.
In this case a number of the material facts are either admitted or not disputed. All witnesses agree that the Abangarez struck the submarine, bow on, and practically at right angles about 90 feet from her stern. They all agree that no signals were exchanged between the vessels, and that the only signal sounded was the danger signal blown by the Abangarez. There is also no serious dispute as to the fact that, when the Abangarez blew the danger signal, she immediately put her engines full speed astern and dropped her starboard anchor. The only material disagreement by any of the libelant's witnesses is to the time and place this was done. It is admitted by the witnesses for the libelant that, while the Abangarez was on her course towards the docks, the submarine's starboard engine was stopped when in close proximity to the Mole buoy and remained stopped for some minutes to take on a pilot. Whether or not the O-5 during this interval of time lost all of her way through the water presents a controverted issue. Libelant's witnesses also concede the fact that, when the pilot came alongside in a launch and boarded the O-5, an order was given "ahead both motors," and that a few minutes before the collision occurred the engines of the submarine were stopped. The evidence is all one way and to the effect that the O-5 made a futile effort to go ahead and change her course to the left, which maneuver could not be carried out either because of inattention in the engine room or because there was a lack of men to carry out orders promptly, and as a consequence the submarine drifted helplessly under way across the course of the Abangarez.
Such being the state of the record, there remain but three issues of fact that need be considered; namely, the anchorage ground of the Abangarez; her course up to the point of collision, and the maneuverings of the submarine O-5 and her locations at various times prior to the collision.
Capt. Card, master of the Abangarez, testified that on entering the breakwater entrance at 4 a. m. on the morning of the day in question he saw six vessels at anchor to the south of the west breakwater and west of the main channel; and that he proceeded with the Abangarez down the main channel until he had passed the most southerly anchored vessel; that upon reaching a point west of the Mole buoy he turned sharply to the west, left the main channel, and anchored at 4:25 a. m. about halfway between the Mole buoy and the buoy on the dumping ground.
The witnesses for the libelant place the Abangarez far north of the location designated by Capt. Card. In my judgment, it will serve no useful purpose to analyze the great mass of testimony that bears on this important factual issue; sufficient be it to say that I am persuaded that the mere estimates of the libelant's witnesses cannot prevail over the testimony of the ship, since that testimony has not in any way been discredited. And especially is that true where, as here, the master's testimony is corroborated by a number of disinterested witnesses whose familiarity with the locus in quo cannot be questioned.
Having determined the anchorage place of the Abangarez, it will be in order to consider her maneuverings from anchorage to the point of collision. Those in charge of her *546 navigation testified that while at anchor she was headed a little west of south; that at 6:10 a. m. the pilot came aboard and immediately ordered the anchor "hove up." At 6:14 the Abangarez was off the bottom and under way, with her helm hard astarboard and her engines full speed ahead, swinging down on a southerly course, and coming out of the swing she was steadied on a course practically due south. At 6:17 her engine speed was reduced to half speed, and the helm was ordered to starboard to give her head a swing to port, and she continued under a starboard helm movement until 6:20, when the stop order was given, at which time she was steadied on a course practically due east. At this time the pilot and captain of the Abangarez noticed that the submarine 0-5 which had been lying practically dormant at a point somewhat south of the Mole buoy was then taking on a pilot. Two minutes thereafter, while the Abangarez was still on an easterly course headed across the channel just north and west of buoys 3 and 4, with her engines stopped, the submarine was observed coming forward with a burst of speed, apparently intending to cross her bow. When confronted with this situation, the pilot in charge of the Abangarez immediately realized that the distance between the indicated crossing point was too short to permit his vessel to hold her course and speed as the privileged vessel if the submarine maintained her course, and concluded that he could not with safety blow a crossing signal, but that a departure from the rule was justified under the then existing circumstances. Thereupon he sounded the danger signal, ordered the engines full speed astern, and the starboard anchor dropped, all of which was done simultaneously. However, in spite of these timely and precautionary measures, the Abangarez, under the momentum she had, went forward to the point of collision and at 6:24 struck the submarine a light blow about 90 feet from her stern, opening a deep cut in her side, which resulted in her sinking. The testimony of the pilot of the Abangarez with reference to her navigation and maneuverings from anchorage to the point of collision is not only borne out by the physical facts, but is corroborated by Capt. Card and Third Officer Oxholm, who was at the telegraph, as well as by Koelle, the pilot on the submarine 0-5, and other disinterested eyewitnesses; furthermore, the probabilities all favor its acceptance.
There is no material dispute as to the course of the submarine 0-5 up to the point of collision or as to her engine movements. The story of her commanding officer as given at the trial of this case, construed in its most favorable light, affords but little assistance to the libelant, and a fortiori is this true when his testimony and admissions before the various boards are considered; however, I take it that his testimony as given at the trial is probably more favorable to the libelant's case, and a recitation thereof will suffice to demonstrate its weakness, thereby obviating the necessity of particularizing as to its inconsistencies.
According to the testimony of the commanding officer, the submarine 0-5, as the leader of a section of four submarines, left the docks at Coco Solo at about 5:50 a. m. and proceeded at a speed of 7½ or 8 knots on her starboard engine until arriving at a point in the main channel estimated at anywhere from 50 to 150 yards north of the Mole buoy where her engine was stopped for the purpose of taking on Koelle, the pilot. That he waited two or three minutes for the pilot to come aboard his ship, and when he did so he still had about 2 knots way on his vessel, and had drifted 50 or 100 yards past the Mole on a heading approximately south. That from his position on the bridge he conversed with the pilot, and while the latter still remained on deck he gave the order "ahead both engines." He estimates that it was one or two minutes after he gave this order, and at about the time that Koelle came up on the bridge, that he again noticed the Abangarez broad on his starboard beam and distant 400 yards. His first thought was that he was being crowded, and he commanded the quartermaster "keep to the left of the channel." That approximately thirty seconds thereafter the Abangarez drew slightly ahead, and seemed to start a swing towards him, and he then gave the order "stop both engines," assuming the Abangarez was making for the entrance to the canal, though he realized differently thirty seconds thereafter. According to his version, which is disputed by Koelle, the swing of the Abangarez then became swifter and faster, and he turned to Koelle and said, "I think I will back," to which the latter replied, "No, I think your only chance is to go ahead," and he thereupon gave the order "ahead both," at which time he was approximately 200 yards from the point of collision. He admits that this order was not complied with because both of the engine clutches had not been disengaged in accordance with absolute submarine doctrine, and in consequence his vessel, incapable of maneuvering on her engines or motors, drifted for three minutes helplessly across the bow of the Abangarez, and at the time of *547 collision was making a speed of approximately 2 knots.
Considering the testimony of the commanding officer of the submarine in the light of all the other facts and circumstances surrounding the case it is obvious that the 0-5 was grossly at fault for running on her engines through a crowded and congested harbor when she was not in a proper maneuvering condition, because the fact is uncontroverted that her engines were incapable of any astern movement and reverse action could only be had on her motors. This being true, it follows that, had the 0-5 been operating on her motors, she would not have remained out of command for a period of three minutes. Another culpable fault contributing to the collision was the fact that the submarine did not maintain a proper and vigilant lookout, and her conduct in starting forward at full speed on both engines without first making proper observation of the position and movements of other vessels in the harbor is inexcusable. She was also at fault for recklessly proceeding ahead on her engines when doubtful of the course and intentions of the Abangarez and in pursuing a course in such dangerous proximity thereto while unable to reverse. The O-5 misjudged the then existing situation and as the burdened vessel violated the crossing rule and took no proper or effective steps which were easily available to avoid the collision. The testimony shows that her anchor could have been dropped in thirty seconds, and, if her speed was no greater than as testified to by her commanding officer, this precautionary measure timely executed would undoubtedly have completely checked her headway. However, she was permitted to remain out of command and helplessly to drift across the bow of the Abangarez, whereas, had she been under control and operating on her motors, there can be slight doubt but she could have completely stopped, or, proceeding forward, could have passed safely ahead of the Abangarez.
The situation was originally one of crossing, and the Abangarez as the privileged vessel was obligated to timely inform the submarine of her intention to hold her course and speed; however, her failure to do so not only did not, but could not, have contributed to the collision, and her course of conduct was justified because a new situation had arisen when the submarine came ahead on her engines with wide open throttles, and it became apparent that it was impossible for the vessels to comply with the rule relative to a crossing situation. Because of this changed condition, the situation was altered to one of special circumstance, and it became the duty of the Abangarez and the submarine as well to take all precautions necessary to avoid the collision. This the Abangarez did by blowing the danger signal, reversing her engines and dropping anchor, while the submarine 0-5 without engine or helm movements remained helplessly for three minutes out of command. Where, as here, the fault of one vessel is so obvious and inexcusable, the evidence to establish fault on the part of the other vessel must be clear and convincing to make out a case for apportionment of damage. The City of New York, 147 U.S. 72, 13 S. Ct. 211, 37 L. Ed. 84; The Oregon, 158 U.S. 186, 15 S. Ct. 804, 39 L. Ed. 943. In my judgment, this collision was occasioned wholly by the fault of the submarine 0-5 and a decree may accordingly be entered dismissing the libel. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542716/ | 997 A.2d 242 (2010)
413 N.J. Super. 556
STATE of New Jersey, Plaintiff-Respondent,
v.
Robert Dwayne GREEN, Defendant-Appellant.
DOCKET NO. A-1892-07T4.
Superior Court of New Jersey, Appellate Division.
Submitted April 20, 2009.
Decided May 12, 2009.
Remanded October 10, 2009.
Argued Telephonically April 27, 2010.
Decided June 7, 2010.
*243 Daniel P. McNerney, Designated Counsel, Hackensack, argued the cause for appellant (Yvonne Smith Segars, Public Defender, attorney; Mr. McNerney, of counsel and on the brief).
Patricia Bowen Quelch, Assistant Prosecutor, argued the cause for respondent (Luis A. Valentin, Monmouth County Prosecutor, attorney; Carey J. Huff, Assistant Prosecutor, of counsel and on the brief).
Before Judges LISA, REISNER and SAPP-PETERSON.
The opinion of the court was delivered by
REISNER, J.A.D.
This case is before us on remand from the Supreme Court. The case arose from a Law Division order denying defendant Robert Green's appeal from his exclusion from the pre-trial intervention program (PTI). In our opinion, we concluded, based on the record then before us, that Green had not been permitted to apply for PTI. State v. Green, 407 N.J.Super. 95, 969 A.2d 519 (App.Div.), remanded, 200 N.J. 471, 983 A.2d 197 (2009). At the heart of our decision remanding the case was our conclusion that under Rule 3:28, every defendant has a right to apply for PTI, even if the application might have a slim chance of being approved. Id. at 98-99, 969 A.2d 519; R. 3:28, Guideline 2.
At the time Green attempted to apply for PTI, it was the practice of the criminal division manager's office not to accept applications from defendants charged with certain offenses unless the prosecutor's office joined in the applications. It was clear from the record that the policy had changed while defendant's case was pending in the trial court, but it appeared that he had not been given the benefit of the new policy. Id. at 99, 969 A.2d 519. We therefore remanded the case to the trial court with direction that he be permitted to apply for PTI. Ibid. We did not address the merits of his application or of the prosecutor's determination that he did not qualify for PTI.
The State petitioned for certification from our decision and filed a motion to supplement the record with materials intended to show that defendant had been permitted to apply for PTI under the new policy. The Court granted the motion and *244 remanded the case to us to reconsider in light of the supplemental materials. On remand, we required the parties to submit supplemental briefs and we heard oral argument. We now conclude that a remand to the trial court remains the appropriate disposition of the appeal.
The supplemental materials include a June 11, 2009 certification from the vicinage PTI director. She attested that in June 2007, the vicinage PTI program adopted a new procedure under which defendants deemed "conditionally ineligible" for PTI were given a document intended to advise them of their right to apply to PTI, but also advising them that they needed to get the prosecutor's consent or to show compelling reasons for admission to PTI. We have reviewed this form. It is captioned "Notice of Pretrial Intervention (PTI) Ineligibility," and the first sentence unequivocally states: "Your case has been pre-screened by the Monmouth Vicinage Criminal Division and found to be ineligible pursuant to R. 3:28."
Several lines below this sentence, the form lists offenses that under Guideline 3 would create a rebuttable presumption of ineligibility. Below that list, the form advises that "[i]n the event you still wish to apply for PTI and have compelling reasons to do so, application should be made no later than 28 days after indictment." The form further advises that the prosecutor must join in the application in writing, or "[i]f the Prosecutor does not join in, this must also be in writing and compelling reasons must be submitted justifying your admission.... The compelling reasons must be submitted to the Criminal Division within ten (10) days of notice from the Prosecutor."
The PTI director's certification also attested that since our 2009 decision in this case, "[t]he June 2007 revised procedure has been suspended." Instead, "[p]resently, every application filed by a defendant is given a full work-up regardless of eligibility or the timeliness of the filing." According to the State's brief, this "work-up" includes an interview with every defendant.
The supplemental materials also reveal the following history pertinent to defendant's situation. After defendant filed a motion in the trial court to require the PTI program to accept and process his application, the criminal division finally allowed him to submit a PTI application, which he completed on April 13, 2007. The first page of the application form notified defendant that if he was not drug dependent and was accused of selling narcotic drugs "the prosecutor must join in your application or you must show compelling reason[s] justifying your admission to the program." However, the application did not ask him to describe his compelling reasons for PTI admission or to provide any supporting documentation.
On April 17, 2007, four days after defendant filed his PTI application, the PTI director issued a Notice of PTI Ineligibility form, noting at the bottom of the form that the prosecutor had not joined in the application; that defendant's "compelling reasons" had been received on April 17, 2007;[1] and that "[t]he Director defers to the Monmouth County Prosecutor for a *245 determination on compelling reasons." Thereafter, by letter dated May 10, 2007, the prosecutor's office rejected defendant's application. However, even though defendant was permitted to apply for PTI, there is no indication on this record that the criminal division manager ever considered the merits of the application, including defendant's statement of compelling reasons and supporting documentation, or the prosecutor's evaluation of the application.
We agree that the criminal division may evaluate the merits of a PTI application when it is first submitted, or may withhold evaluation of an application until the prosecutor has considered it. For example, where a defendant is accused of drug distribution and is not drug dependent, there is a rebuttable presumption against PTI eligibility unless the prosecutor joins in the application or defendant can show compelling reasons for admission to the program. R. 3:28; Guideline 3(i). We perceive nothing unreasonable in the criminal division waiting for the prosecutor's evaluation before considering the application, including the defendant's statement of compelling reasons for admission into PTI. However, at some point the criminal division must consider the merits of the application, even if that evaluation is expressed in a very brief recommendation adopting the prosecutor's rationale for rejecting the application. See R. 3:28(h) ("The criminal division manager shall complete the evaluation and make a recommendation...."); State v. Nwobu, 139 N.J. 236, 250, 652 A.2d 1209 (1995) (The prosecutor may incorporate by reference the criminal division manager's recommendation).
We do not mean to imply that the PTI staff must engage in a full "work-up" of every application, including an in-depth interview with every defendant where under the Guidelines there is a rebuttable presumption against eligibility. Our point is simply that the court's PTI program must actually consider the merits of the defendant's application and provide a recommendation based on that consideration. The criminal division may not "defer" to the prosecutor in the sense of declining in advance to give any consideration to the merits of a defendant's application unless the prosecutor joins in the application. The latter form of "deference" gives the prosecutor complete control over the PTI application process, while abdicating the role of the court-managed PTI program in evaluating PTI applications. It also deprives the Law Division judge of the criminal division manager's independent evaluation of the application, in case there is a PTI appeal.[2]
We further conclude that the Notice of PTI Ineligibility, while no doubt well-intentioned, is confusing. By lumping together applicants who are ineligible with those who are eligible but have hurdles to overcome, the form may discourage eligible defendants from applying for PTI. Any defendant reading the form could readily conclude that he or she was "ineligible" for PTI and should not apply. Moreover, as a practical matter, it makes sense for a defendant in Green's position to provide compelling reasons for admission to PTI at the beginning of the process *246 rather than waiting for the prosecutor to reject his application and then submitting the compelling reasons. Yet the PTI application does not have a section directing or inviting an applicant to list compelling reasons and provide supporting documentation. At a minimum, PTI forms and directions should explain, in plain language that would make sense to a defendant, the criteria for admission to the program and the process for applying.
The Criminal Practice Committee may wish to consider developing a uniform set of PTI application forms and directions, and uniform procedures to be used in processing those applications.
We remand this case to the trial court to reconsider defendant's PTI appeal, after the PTI director considers the merits of the application and provides a recommendation to the trial court.
Remanded.
NOTES
[1] This apparently was a reference to a letter defendant's counsel had sent to the Prosecutor's Office on February 21, 2007, with an enclosed recommendation letter from defendant's employer. The attorney's letter appeared to be an attempt to line up the prosecutor's support for PTI, consistent with the criminal division's then-existing policy that defendants in Green's situation could not apply for PTI unless the prosecutor joined in the application. The prosecutor's office did not respond, and defendant subsequently filed his motion to require the criminal division manager to process his PTI application. The prosecutor's March 16, 2007 response was that the motion was premature because defendant had not yet filed a PTI application.
[2] The State's reliance on State v. Rosario, 237 N.J.Super. 63, 67, 566 A.2d 1173 (App.Div. 1989), certif. denied, 122 N.J. 139, 584 A.2d 212 (1990), is misplaced. The streamlined PTI process at issue in Rosario was part of Camden County's Speedy Trial Program, which the Supreme Court had approved. Ibid. See Nwobu, supra, 139 N.J. at 251, 652 A.2d 1209 (noting our acknowledgement in Rosario that "[i]n the speedy-trial context" the prosecutor and PTI director "need not be equally involved in each PTI application"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542726/ | 997 A.2d 790 (2010)
FATU KALIE KARGBO
v.
STATE.
Pet. Docket No. 59.
Court of Appeals of Maryland.
Denied June 11, 2010.
Petition for writ of certiorari denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542732/ | 997 A.2d 791 (2010)
JAMAL HICKS
v.
STATE.
Pet. Docket No. 77.
Court of Appeals of Maryland.
Denied June 21, 2010.
Petition for writ of certiorari denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542721/ | 93 F.2d 661 (1938)
In re BUSH TERMINAL CO.
In re BUSH TERMINAL BLDGS. CO.
BUSH TERMINAL BLDGS. CO.
v.
CITY OF NEW YORK.
No. 130.
Circuit Court of Appeals, Second Circuit.
January 3, 1938.
*662 Harold H. Levin, of New York City, for subsidiary debtor.
Paul Windels, Corp. Counsel, of New York City (Paxton Blair and Frank J. Derrick, both of New York City, of counsel), for appellee.
Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
MANTON, Circuit Judge.
The debtors are in reorganization proceedings under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. The City of New York filed a claim for utility taxes imposed under Local Law No. 21, published as No. 22 of 1934, p. 151, as amended by Local Law No. 2 of 1935, p. 94, as well as for sales taxes imposed under Local Law No. 24, published as No. 25 of 1934, p. 164. The court below, reversing the master, allowed the claims.
We held Local Law No. 21 of 1934, as amended by Local Law No. 2 of 1935, constitutional in Southern Boulevard R. R. v. City of New York, 2 Cir., 86 F.2d 633, certiorari denied, 301 U.S. 703, 57 S. Ct. 932, 81 L. Ed. 1357.
This act taxes the gross receipts of utility companies, even where the sale producing the receipt is not made for profit. Section 1 (c). It defines "utility" to mean "any person subject to the supervision of either division of the department of public service, and every person whether or not such person is subject to such supervision who shall engage in the business of furnishing or selling * * * steam." Section 1(e). Gross operating income as defined in section 1(d) includes credits as well as cash, and appellant admits the receipt of credits in its sale of steam.
PER CURIAM.
Section 2 of Local Law No. 2 of 1935 is an excise tax equal to 3 per cent. of the gross operating income for the calendar year 1935 and is in addition to all other taxes and fees imposed by any other provision of law, and is to be paid at the time and in the manner provided: "But any utility subject to tax hereunder shall not be liable to any tax under local law number seventeen of the local laws of the city of New York for the year nineteen hundred thirty-four, with respect to its gross income or gross operating income as the case may be."
A sales tax is imposed under Local Law No. 24 of 1934 during the period commencing December 10, 1934, and ending on December 31, 1935, of 2 per cent. upon the amount of receipts from every sale in the City of New York, and it includes steam. Upon failure to collect the tax from the purchaser, the vendor is liable to the city.
The stock of the Bush Terminal Buildings Company, with whom it has common officers and directors, is owned by the Bush Terminal Company. It has a steam *663 plant, built by the Bush Terminal Company on its land, and by which it produces the steam here in question. Appellee supplies the steam to the Bush Terminal Company at cost. The testimony is clear that the transaction is a sale and was treated by both companies in their books of account as such. The Bush Terminal Company resells some of the steam to its tenants. The steam is measured with meters when sold to the Bush Terminal Company.
The debtor and the appellant are separate entities, and there is no occasion to apply the rule which allows the corporate fiction to be disregarded. It should be preserved here. See In re Watertown Paper Co., 2 Cir., 169 F. 252, 256; Fraw Realty Co. v. Natanson, 261 N.Y. 396, 185 N.E. 679. The intercorporate relations of the two companies may have been arranged to gain certain advantages, but that will not avoid the tax in this case. See Douglas & Shanks, "Insulation from Liability through Subsidiary Corporations," 39 Yale Law Journal, 193. There is no legal obstacle against regarding the sale of this steam from a subsidiary to a parent company as a purchase and sale. Since the subsidiary sold or furnished steam to the parent company, the sale is taxable under Local Law No. 21 of 1934 as amended by Local Law No. 2 of 1935. The appellant and its parent company's plan of separate corporations for the conduct of their various activities presumptively is for some gain or advantage, and being separate entities, under the circumstances, appellant is not permitted to deny the right of the appellee to tax for the services rendered. See Fourche River Lumber Co. v. Bryant Lumber Co., 230 U.S. 316, 323, 33 S. Ct. 887, 57 L. Ed. 1498; Jackson v. Hooper, 76 N.J.Eq. 592, 75 A. 568, 27 L.R.A., N.S., 658. We also find there was no joint adventure in the production and sale of this steam.
The court denied the claim which the appellant sought to set off against the tax. The right to recover taxes which have been paid under protest is one which the state has a right to circumscribe narrowly without contravening the Constitution. Anniston Mfg. Co. v. Davis, 301 U.S. 337, 57 S. Ct. 816, 81 L. Ed. 1143. There is no right of action and therefore no set-off. Furthermore, the special master allowed the set-off of taxes paid under protest after reorganization proceedings were begun against taxes due and unpaid before the institution of the proceedings. The Bankruptcy Act § 68a, U.S.Code, title 11, § 108 (a), 11 U.S.C.A. § 108(a), sanctions the set-off of mutual debts, but it is obvious that the debts which were proposed as a set-off were not mutual. A credit in the trustee arising out of the activities carried on after adjudication has no element of mutuality with a debt owing by the bankrupt to a person with whom the trustee has been doing business. McDaniel Natl. Bank v. Bridwell, 8 Cir., 74 F.2d 331.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542685/ | 60 F.2d 109 (1932)
ROGERS
v.
HILL et al.
SAME
v.
TAYLOR et al.
No. 391.
Circuit Court of Appeals, Second Circuit.
June 13, 1932.
*110 Chadbourne, Stanchfield & Levy, of New York City (Nathan L. Miller, Victor J. Dowling, George W. Whiteside, and J. Arthur Leve, all of New York City, of counsel), for appellants Hill, Neiley, Riggio, Taylor, and American Tobacco Co.
Richard Reid Rogers, of New York City, pro se.
Before MANTON, SWAN, and CHASE, Circuit Judges.
MANTON, Circuit Judge.
The appellee is the owner of 200 shares of common and 400 shares of common B stock, and seeks a decree declaring article XII of the by-laws of the American Tobacco Company invalid and ordering that all compensation paid thereunder to appellants be repaid to the corporation and future payments be perpetually enjoined. It is sought to have the court fix the amount of compensation to which the appellants, officers of the corporation, are justly entitled during their respective periods of service and that in the future the officers receive no additional contingent compensation. On motion by the appellee to strike out each of the five separate defenses interposed by the appellants, the court held that they were insufficient.
On March 13, 1912, the stockholders of the American Tobacco Company, appellant, adopted as a by-law article XII, which provided:
"As soon as practicable after the end of the year 1912 and of each year of the company's operations thereafter, the Treasurer of the Company shall ascertain the net profits, as hereinafter defined, earned by the Company during such year, and if such net profits exceed the sum of $8,222,245.82, which is the estimated amount of such net profits earned during the year 1910 by the businesses that now belong to the Company, the Treasurer shall pay an amount equal in the aggregate to ten per cent. of such excess to the President and five Vice-Presidents of the Company in the following proportions, to wit: One-fourth thereof, or 2½ per cent. of such amount, to the President; one-fifth of the remainder thereof, or 1½ per cent. of such amount, to each of the five Vice-Presidents as salary for the year, in addition to the fixed salary of each of said officers."
By section 5 of this by-law, it was provided that the by-law may be modified or repealed only by action of the stockholders of the company and not by the directors. The by-law was adopted by a large majority in interest of the company's shares, 35 preferred shares voting against its adoption. Appellee became a stockholder in 1916. Appellant Hill became a director in 1921, and president on April 7, 1926; appellant Mower, a director on April 6, 1921, and has since become a vice president; appellant Penn, a director on April 6, 1921, and since a vice president; appellant Neiley, a director on April 6, 1921, and a vice president May 1, 1929; appellant Riggio, a director on April 4, 1928, and a vice president May 1, 1929.
Until the present suit was instituted, the legality of this by-law was never questioned. The charges of illegality are: (a) That by the charter of the company, the directors are empowered to apply surplus or net profits only to the acquisition of property or the payment of dividends, and they are not authorized to divert any portion of the profits to officers of the corporation by way of additional compensation; (b) that profit participation by the officers and employees of a New Jersey corporation was not legal prior to the passage of chapter 175, p. 354, of the Laws of 1920, subsection (b), § 1 (Comp. St. Supp. § 47 183); (c) that the power to make and alter by-laws was conferred upon the directors, and the stockholders had no power to adopt the by-laws; (d) that the notice of the meeting at which the by-law was adopted did not specify the officers to whom the profit participation was to be paid, that it did not specify that the profit participation was to be paid to the officers as salaries in addition to their fixed salaries, and *111 did not state that the participation was to be continued beyond the year when adopted.
Among the defenses which were held below to be insufficient were:
(1) That the stockholders of the company, including the appellee, ratified the payments made to the appellants in accordance with and under the authority of article XII.
(2) That the present suit is an attempt to interfere with the internal management of a corporation doing a nationwide business, the affairs of which are dependent upon the statutes of New Jersey, and that by-law XII was legally adopted and is valid.
(3) That the amount of compensation paid to the individual appellants was and is fair and reasonable for their services, that the board of directors had the right to fix the compensation of its agents, and that the payments were made in accordance therewith, as well as under the authority of by-law XII.
When the appellee purchased his stock, he was presumed to know the provisions of the corporation's by-laws, and he made his investment with that knowledge. Giesen v. London & Northwest American Mortgage Co., 102 F. 584 (C. C. A. 8); Kavanaugh v. Commonwealth Trust Co., 223 N.Y. 103, 119 N.E. 237; State v. Shaw, 103 Ohio St. 660, 134 N.E. 643; Chicago, Springfield & St. L. Ry. Co. v. Martin, 249 Ill. App. 109. The charter of the corporation (article II) provides, among other things, that the directors shall have the power "to direct and determine the use and disposition of any surplus or net profits or earnings over and above the capital stock paid in." Directors have power to hire employees. Nothing in the by-laws of this corporation forbade employing them upon a contingent basis. There is no rule of law of which we are aware that forbids directors from providing contingent or fixed compensation for the employees of a corporation, providing the agreements are fair and free from fraud. But the claim is advanced by the appellee that the directors were empowered to employ surplus, net profits or earnings only in the acquisition of property or in payment of dividends, and that the additional salary allotments here are in direct conflict with the charter provisions. Compensation to officers of a corporation is an operating expense of the company, whether at a fixed salary or based upon a percentage of the profits, and until such expenditures are met there are no net profits of the corporation. It is the sum beyond this which constitutes the surplus, net profits, or earnings referred to in this corporation's charter. Profit participation creates an item of expense in the operation of the business, and this has been recognized by judicial decisions in New Jersey, the state of the corporation's creation. Bennett v. Millville Improvement Co., 67 N. J. Law, 320, 51 A. 706; Booth v. Beattie, 95 N. J. Eq. 776, 118 A. 257, 123 A. 925; Berendt v. Bethlehem Steel Co., 108 N. J. Eq. 148, 154 A. 321.
Under the General Corporation Law of New Jersey (Chapter 175, p. 354, Laws 1920 [Comp. St. Supp. N. J. § 47 183 et seq.]), stockholders have adequate power to pay officers an additional and contingent salary out of net profits. Section 1, paragraph 5 (2 Comp. St. N. J. 1910, p. 1598, § 1, par. 5), provides that every corporation shall have power to appoint such officers and agents as the business of the corporation shall require and to allow them suitable compensation. By-law XII is in strict conformity with the express powers delegated to the corporation by the General Corporation Act of New Jersey. Bennett v. Millville Improvement Co., supra. The right to pay compensation by way of a percentage of the net profits is recognized in New Jersey. Smith v. Bedell, 84 N. J. Eq. 268, 96 A. 898, affirmed 84 N. J. Eq. 509, 96 A. 898; Booth v. Beattie, supra. Corporate management may pay a participation of the net profits to officers as additional salary either as a bonus or in the form of shares of stock. Harker v. Ralston, 45 F. (2d) 929 (C. C. A. 7); Church v. Harnit, 35 F.(2d) 499 (C. C. A. 6); Ransome v. Moody, 282 F. 29 (C. C. A. 2); Green v. Wilbraham (C. C.) 190 F. 274; Young v. U. S. Mortg. & Trust Co., 214 N.Y. 279, 108 N.E. 418.
It is argued that the phrase "profit participation" was first mentioned in a New Jersey statute in chapter 175, p. 354, of the Laws of 1920, and this was the first permission for payment of contingent salaries. It is argued that, prior thereto, the payment of moneys out of alleged profits was illegal. Section 4 of the act (Comp. St. Supp. N. J. § 47 186) provides:
"The privileges and powers conferred by this act shall be deemed to be in addition to and independent of any and all powers and authority conferred by any other law or laws, and not in restriction or limitation of any of the powers now permitted to corporations of this State."
Profit participation by employees is not only within the express power of the corporation prior to the enactment of the 1920 *112 statute, but was recognized by the courts of New Jersey as an implied power of the corporation. Chapter 175 of the Laws of 1920 provided for the particular manner in which such plans therein specified could be adopted. That act authorized the adoption of profit participation; it permitted New Jersey corporations to adopt a plan for the purpose of "furnishing to its employees wholly or in part at the expense of such corporation of medical services, insurance against accident, sickness or death, pensions during old age, disability or unemployment, education, housing, social services, recreation or other similar aids for their general welfare." The New Jersey courts, as early as 1899, held the adoption of such plans to be within the implied or express powers of a foreign corporation. Beck v. Pennsylvania R. R. Co., 63 N. J. Law, 232, 43 A. 908, 76 Am. St. Rep. 211.
Section 11 of the General Corporation Law of New Jersey (Revision of 1896, c. 185 [2 Comp. St. N. J. 1910, p. 1606, § 11]), provides that the power to make and alter by-laws shall be in the stockholders, but that any corporation may, in its certificate of incorporation, confer that power upon the directors, and the by-laws made by the directors under such power may be altered or repealed by the stockholders. The charter of this corporation provided that the power to make and alter the by-laws of the corporation shall be conferred upon the directors. This delegation of authority to directors, within the by-laws, is legal. To make or amend bylaws is legal. In re Griffing Iron Co., 63 N. J. Law, 168, 41 A. 931, affirmed 63 N. J. Law, 357, 46 A. 1097. The regulation of official duties and salaries is a proper subject for bylaws as within the power of the stockholders or the power of the directors where they are authorized to act. Lillard v. Oil, Paint & Drug Co., 70 N. J. Eq. 197, 56 A. 254, 58 A. 188.
But it is contended that the notice of the meeting at which article XII was adopted by the corporation's shareholders was insufficient. The meeting was held March 13, 1912, and it was pursuant to section 17 of the General Corporation Act of New Jersey (Laws of 1896, c. 185, p. 282, as amended by Laws of 1901, c. 119, § 1 [2 Comp. St. N. J. 1910, p. 1608, § 17]), which permits every corporation to determine by its certificate of incorporation or by-laws the manner of calling and conducting all meetings. Special meetings to make fundamental changes in the corporation require notice of meetings pursuant to the by-laws (section 27, Laws of 1896, c. 185, p. 285, as amended by Laws of 1908, c. 84, p. 127, § 1 [2 Comp. St. N. J. 1910, p. 1612, § 27]).
Article II, § 3, of the by-laws, provides that due notice of each annual meeting of the stockholders be given by a written or printed notice, mailed at least 20 days prior to the meeting, to each stockholder entitled to vote appearing upon the books of the corporation. It is provided that a public notice of the time and place of holding such meeting be published not less than once a week for two consecutive weeks in a daily newspaper published in the city of New York. Special meetings are called in like manner, and for these "the notice shall state the object of the special meeting, and no other business shall be transacted at such meeting." From this it is apparent that neither the by-laws of the corporation nor the statutes of New Jersey required a notice of any meeting to include a specification of the details of the business to be conducted. Under the by-laws, the object must be stated only for a special meeting. The by-law here (article XII) was adopted at a regular annual meeting, and the by-laws of the corporation provide that at such meeting "any business may be transacted without notice of the object of such meeting." There was ample notice given to the stockholders on the occasion of the adoption of this by-law. All shareholders were given a written notice stating the date, hour, and place of the meeting. It was further said in the notice: "At this meeting there will be presented for consideration, and action upon, a proposed by-law providing for participation by certain officers of the Company in profits, if any, earned by the Company in excess of profits earned during the year 1910 on the brands of businesses now owned by the Company, not exceeding in the aggregate 10% of such excess." The appellee maintains that the by-law could not be passed upon at this meeting because the object set out in the notice was participation by certain officers of the corporation in its profits, and therefore no object which dealt merely with salary increases could be passed. This complaint against the notice is frivolous. It sufficiently informed shareholders that a subject-matter to be considered was the payment to certain officers of a contingent salary. By any reasonable inquiry at the meeting, or prior thereto, one to whom this notice was insufficient might have gained further knowledge or surely would have been in a position to vote his *113 shares of stock intelligently. United States Steel Corp. v. Hodge, 64 N. J. Eq. 807, 54 A. 1, 60 L. R. A. 742.
Moreover, as we have pointed out, the present officers, who are enjoined by the order below, became such years after the adoption of by-law XII, providing additional salaries. When they accepted their offices and employment in the corporation, one of the promises of the corporation was their right to compensation for services, measured by additional profits above the sum specified in the by-law. It became part of the contract of employment. It was a promise which the corporation must keep until the by-law is repealed or changed. Metropolitan Rubber Co. v. Place, 147 F. 90 (C. C. A. 2); Zwolanek v. Baker Mfg. Co., 150 Wis. 517, 137 N.W. 769, 44 L. R. A. (N. S.) 1214, Ann. Cas. 1914A, 793. There is no claim in the bill, nor can the argument be maintained, that there was any fraud or collusion in the passage of this by-law between appellants who have enjoyed the fruits of its enactment and the corporation. The by-law is neither ultra vires, fraudulent, nor illegal, and, since it is not, courts must refuse intervention because they are powerless to grant it. Here the matter of salaries, like that of other corporation affairs, must be disposed of by the majority of stockholders and in the manner that their interests may dictate, and the action of the majority is binding upon all, whether approved or disapproved by the minority. Individual minority shareholders are not permitted to question the acts of directors, if they are within the powers of the corporation and in furtherance of its purposes, and if they are not unlawful or against good morals and are done in good faith and in the exercise of honest judgment. United States Steel Corp. v. Hodge, supra. By-law XII was properly passed and became a valid governing act of the corporation.
This grew to be a very large corporation. On the 1st of January, 1931, its corporate structure was as follows: Preferred stock, par value $100 per share, outstanding $52,699,700; common stock, par value $25, authorized $50,000,000, outstanding $40,242,400; common stock B, par value $25, authorized $100,000,000, outstanding $76,933,950. Its current liabilities were approximately $5,000,000; current quick assets were approximately $147,000,000. It was world-wide in its operations. In 1930, its net earnings, after deducting all charges and expenses for management and taxes, amounted to $43,345,370; it paid dividends on common stock in 1930 of $29,294,000; an extra dividend of $1 was declared in the first quarter of 1931; total dividends paid on its common stock for that year exceeded $28,300,000; and it paid $3,161,982 dividends on its preferred stock. In 1930 it paid to the government $150,000,000 in taxes. During the corporate management of the individual appellants, profits increased some $20,000,000 a year up to 1930. There was divided in 1931 approximately $2,500,000 pursuant to the terms of by-law XII amongst the president and five vice presidents.
The corporation has had a very unusual success due to the skillful management of these able men. With this knowledge at hand, the majority of the stockholders might well have approved the policy year after year of a contingent compensation to the active managers of the corporation's business affairs. They were justified in the retention of by-law XII during this period of years because of the great success attained. That the president and five vice presidents each received unusually large salaries as a result does not justify a court of equity in attempting to substitute its judgment for the judgment of the stockholders whose affair it is in the absence of any claim of fraud. In any case, we think that the by-law was lawfully passed, and that it was valid, effective, and controlling in the allotment of additional compensation to officers of the corporation.
Judgment reversed.
SWAN, Circuit Judge (dissenting).
In 1912 the stockholders of the appellant adopted a by-law which provided that 10 per cent. of the annual "net profits" be distributed, 2½ per cent. to the president and 1½ per cent. to each of the five vice presidents "in addition to the fixed salary of each of said officers." The by-law does not expressly say that the payments provided for are by way of additional compensation to the officers, and the notice of the meeting at which the by-law was adopted referred to the proposed resolution as one for the distribution of profits. If it was really a distribution of profits rather than a method of compensation, the majority stockholders had no power to vote it. I shall assume, however, that the by-law was valid when passed. But it does not follow that it will remain valid for all time regardless of the amount payable under it. If a bonus payment has no relation to the value of services for which it is given, it is in reality a gift *114 in part, and the majority stockholders have no power to give away corporate property against the protest of the minority. See Endicott v. Marvel, 81 N. J. Eq. 378, 384, 87 A. 230; Collins v. Hite, 109 W. Va. 79, 153 S.E. 240.
The present suits attack payments made under the by-law since 1921, totaling more than $10,000,000, and seek an injunction against further payments. The bonuses paid to the president increased from $90,000 in 1921 to $840,000 in 1930. In the latter year his additional emoluments included a fixed salary of $168,000 and "special cash credits" of $270,000. Bonuses paid four of the vice presidents for that year totaled $1,830,000, in addition to which they received fixed salaries and special credits totaling $700,000. Apparently these sums were thought insufficient, for in that same year the board of directors initiated a plan which resulted in the distribution to these five officers and directors of almost 30,000 shares of stock at $87 per share less than its then market value. The court below thought that a sufficient showing of invalidity had been made to justify a temporary injunction against future payments under the by-law. In my opinion a bonus of $840,000 to an officer receiving a fixed salary of $168,000 is presumptively so much beyond fair compensation for services as to make a prima facie showing that the corporation is giving away money, and a by-law which sanctions this is prima facie unreasonable, and hence unlawful. This is all we need to hold to support the injunction pendente lite.
The determination of fair compensation for services is primarily for the directors. Courts hesitate to overrule the discretion of directors fairly exercised. Here the directors have exercised no discretion; they rely upon a by-law to relieve them of that duty, and the by-law, as it now operates, results in so large a payment that the trial court thought it probably invalid as applied to future earnings. Under such circumstances the courts do not and should not refuse to consider whether a bonus plan is fair or oppressive. See Sotter v. Coatesville Boiler Works, 257 Pa. 411, 101 A. 744; Collins v. Hite, 109 W. Va. 79, 153 S.E. 240; Wight v. Heublein, 238 F. 321 (C. C. A. 4); Nichols v. Olympia Veneer Co., 139 Wash. 305, 246 P. 941, 48 A. L. R. 504; McKey v. Swenson, 232 Mich. 505, 205 N.W. 583, 586; Lowman v. Harvey R. Pierce Co., 276 Pa. 382, 120 A. 404; Scott v. P. Lorillard Co., 108 N. J. Eq. 153, 154 A. 515, affirmed 109 N. J. Eq. 417, 157 A. 388; Berendt v. Bethlehem Steel Corp., 108 N. J. Eq. 148, 154 A. 321; Stratis v. Andreson, 254 Mass. 536, 150 N.E. 832, 44 A. L. R. 567; Ransome Concrete Machinery Co. v. Moody, 282 F. 29, 32 (C. C. A. 2); Church v. Harnit, 35 F.(2d) 499, 502 (C. C. A. 6); Booth v. Beattie, 95 N. J. Eq. 776, 118 A. 257, affirmed 95 N. J. Eq. 776, 123 A. 925; Putnam v. Juvenile Shoe Corp., 307 Mo. 74, 269 S.W. 593, 40 A. L. R. 1412. I think the injunction pendente lite should be affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542727/ | 93 F.2d 746 (1938)
R. L. WITTERS ASSOCIATES, Inc.,
v.
EBSARY GYPSUM CO., Inc., et al.
No. 8596.
Circuit Court of Appeals, Fifth Circuit.
January 5, 1938.
*747 Leland Hyzer, of Miami, Fla., for appellant.
Herbert U. Feibelman and W. G. Ward, both of Miami, Fla., for appellees.
Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
HUTCHESON, Circuit Judge.
Appellant, a petitioner for corporate reorganization under section 77B (a)[1] of the National Bankruptcy Act, filed its petition in the form, and with the allegations, required by the section. The District Judge approved the petition, continued the debtor temporarily in possession, and directed that a hearing be had as to whether a trustee should be appointed. Appellees are creditors who, before the filing of the reorganization petition, had instituted involuntary proceedings in bankruptcy against petitioner. They appeared in the proceeding to controvert the facts alleged in the petition, particularly that the petition was filed in good faith.
The principal points of attack upon the good faith of the petitioner are that it made a conveyance some six months before, which has operated to hinder, delay, and defraud its creditors; that it is not a going concern and cannot be made one; and that the reorganization petition was filed not in good faith to obtain the benefits of the act, but in bad faith, for the purpose of coercing creditors to accept an unconscionable settlement. There was a hearing, at the end of which the District Judge found that the petition had not been filed in good faith. He filed findings of fact and conclusions of law of which these are the gist:
"The court, therefore, finds from all of these facts, that this corporation is no longer an active, going concern. If it possessed any good will, which should be protected by this court through reorganization proceedings, certainly such good will has been lost, for the volume of its business compared to its former operations is insignificant. Certainly the prospects of an expedient and economical reorganization are not apparent. There appears to be no certainty whatever that this corporation can be reorganized. In truth and in fact, it has gone a long way towards liquidation without apparent benefit to the creditors themselves. There is no reasonable expectation of continued useful existence, or successful rehabilitation. * * *
"The good-faith clause of section 77B of the National Bankruptcy Act, as amended (11 U.S.C.A. § 207), has been employed as a basis for refusing approval to all petitions except those in which the prospects of economically expedient reorganization appear fairly certain at the time of filing. * * *
"By reference to `good faith' the meaning is not merely sincerity of intention. The expression embraces a reasonable expectation of continued useful existence. There must be reasonable prospect for successful rehabilitation of the debtor. * * *
"Undoubtedly section 77B is aimed at the `continuance of a business as a going concern,' and does not contemplate an inactive corporation, bereft of its chief means of livelihood. * * *
"Where a case presented is one for liquidation or for composition, proceedings under 77B should not be approved and the rights of creditors must be guarded and recognized throughout the proceedings as paramount to those of stockholders. * * *
"The evidence discloses a decreased activity by the debtor to the extent that its situation as a going corporation seeking to secure the benefits of section 77B of the Bankruptcy Act have been materially changed. The court in determining the legal good faith of a debtor seeking the benefits of *748 the said section of the Bankruptcy Act should consider whether the debtor presents itself as applicant as a going corporation, continuing, and proposing to continue, its general activities without a radical change in its structural organization."
Based upon these views, he concluded that there was absent from the filing the "legal good faith the statute requires."
Appellant insists that the District Judge gave too narrow a construction to the statutory words "good faith"; that he gave them a meaning not intended by the lawmakers, and neither expressed nor implicit in the words. It insists that this ruling would exclude from the operation of the statute all corporations except those which are to be reorganized as going concerns; that specifically it would exclude corporations seeking an orderly and conserving liquidation as against the disrupting and dismembering processes of common-law actions and seizures.
We agree with appellant. The statute as to the corporations eligible to file the petition is broad and comprehensive. Under it, "Any corporation which could become a bankrupt * * * may file an original petition." Nowhere in the statute is there any definition of "good faith." What is meant by the term must be drawn from the meaning of the words themselves, as interpreted by the context in which they are used, the purpose back of the statute, the mischiefs it was enacted to prevent, the results it was enacted to accomplish.
The provisions of section 77B (a) pertinent to this appeal are:
"Upon the filing of such a petition or answer the judge shall enter an order either approving it as properly filed under this section if satisfied that such petition or answer complies with this section and has been filed in good faith, or dismissing it. * * * If three or more creditors who have provable claims which amount in the aggregate in excess of the value of securities held by them, if any, to $1,000 or over, * * * shall, prior to the hearing provided for in subdivision (c) clause (1) of this section appear and controvert the facts alleged in the petition or answer, the judge shall determine as soon as may be the issues presented by the pleadings, without the intervention of a jury, and unless the material allegations of the petition or answer are sustained by the proofs, the proceedings shall be dismissed."
It was under the latter of these provisions that the creditors, appellees, filed their motions to dismiss and the dismissal was had. Procedurally, therefore, the attack upon the petition was in order, and the judgment of dismissal must stand, if supported by the record. For though after final approval of the petition, as filed in good faith, the court retains full control over the proceeding to dismiss it if satisfied no feasible reorganization can be effected, it may, upon the issue of good faith made as here by contesting creditors before the stage of filing and considering plans, as provided for in subsections (c), (d), (e), as amended, and (f) of section 77B the act, 11 U.S.C.A. § 207 (c-f), has been reached, inquire into the situation of the debtor, and as to the feasibility of a reorganization under the act. It should not, however, before the stage of plan submitting has arrived, examine into the feasibility of reorganization with the searching intensity required, when a plan or plans having been submitted by the petitioner, the good faith, and feasibility of plans for reorganization come directly up.
A recognition of this difference in emphasis upon the question of plan and of reorganization feasibility, when, by an attack upon the good faith of a proposed submitted plan these matters are directly up, and when, by an attack upon the petition, as not filed in good faith they are only incidentally or collaterally up, is sufficiently, we think, if not always clearly, manifested in the cases. O'Connor v. Mills, 8 Cir., 90 F.2d 665; Manati Sugar Co. v. Mock, 2 Cir., 75 F.2d 284; In re Augustyn, 7 Cir., 87 F.2d 577; Tennessee Pub. Co. v. American Nat. Bank, 299 U.S. 18, 57 S. Ct. 85, 81 L. Ed. 13; c/f Knickerbocker Hotel Co., 7 Cir., 81 F.2d 981; In re South Coast Co., D.C., 8 F. Supp. 43; In re Loeb Apartments, Inc., 7 Cir., 89 F.2d 461; In re Kelly-Springfield Tire Co., D.C., 10 F. Supp. 414; In re Geiser Mfg. Co., D.C., 18 F. Supp. 506. Under the rule they establish, if it is clear that under no reasonable possibility can the debtor conform to and obtain the benefits of the statute, and that therefore the petition was manifestly filed, if by the debtor, for delay, or if by petitioning creditors, for harassment, the petition may be dismissed before the plan stage is reached, as wanting in the good faith the statute requires. Under that rule, where the good faith of the filing is attacked, before the plan stage has been reached, unless the impossibility of *749 conforming to and obtaining the benefits of the statute clearly appears, the petition should not be dismissed as not filed in good faith. It should be retained, and questions of plan and reorganization worked out in the thorough and complete way the statute provides for later steps in the proceedings. What then is meant by the statutory requirement that the petition be filed in "good faith" is that it must appear that the petition, whether an involuntary one, filed by creditors against the debtor, or a voluntary one, filed by the debtor himself, was filed not for the purpose of harassing the debtor, or of hindering and delaying creditors, Re Piccadilly Realty Co., 7 Cir., 78 F.2d 257, but with the purpose and reasonable belief that under the processes provided for by section 77B, the debtor is in a position to conform to the requirements and to obtain the benefits of the statute.
The District Judge did not find in this case, under the evidence he could not have found, that it was beyond the bounds of reasonable possibility that within the time and under the processes the statute afforded, a plan might be presented under which the benefits of the statute could be properly extended to the debtor. He could not properly have done so, for the debtor had submitted no plan, and the decision of the question at the time and under the state of the evidence would have been premature. Apparently of the opinion that there could be no good faith unless there was a reasonable prospect for the successful rehabilitation of the debtor as a going or continuing corporation, his findings were directed to determining that there was no prospect of doing so. In our opinion, it was not necessary for the debtor to show this. It was sufficient for it to show that it was in a position to conform to and obtain the benefits of the statute for a slow, beneficial, and orderly liquidation. Re Central Funding Corporation, 2 Cir., 75 F.2d 256; In re Mortgage Securities Corporation, 2 Cir., 75 F.2d 261.
In addition to insisting that because the petitioner could not reorganize permanently as a going concern, they should be allowed to go ahead with the bankruptcy proceedings they had instituted, much, in fact the most, of what was said by appellees in their attack on the petition had to do with an arrangement the debtor had made with regard to some of its property some six months before the petition was filed. Full information with regard to this arrangement was given by the debtor in connection with the filing of the petition. Nothing was covered or concealed. Whether the arrangement was a good or a bad thing for the creditors, whether it was invalid, as fraudulent, or valid, as fair, and particularly whether in the condition it was in when the petition was filed it could present and effect a plan of reorganization within the statute, were matters to be taken up and fully determined at a later stage of the proceedings. As the record stood on appellees' motion to dismiss the petition, there was no ground for finding that it was not filed in statutory good faith, and it was error to dismiss it.
The order appealed from is reversed, and the cause is remanded for further proceedings not inconsistent herewith.
Reversed and remanded.
NOTES
[1] 11 U.S.C.A. § 207(a). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542720/ | 410 B.R. 43 (2009)
In re Calvin Kwong MANN, Debtor.
Symantec Corporation, Plaintiff,
v.
Calvin Kwong Mann, Defendant.
Bankruptcy No. 6:08-bk-11363-PC. Adversary No. 6:08-ap-01178-PC.
United States Bankruptcy Court, C.D. California, Riverside Division.
July 6, 2009.
*45 Henry H. Gonzalez, Esq., Baute & Tidus LLP, Los Angeles, CA, for Plaintiff, Symantec Corporation.
Stella A. Havkin, Esq., Litwak & Havkin, Woodland Hills, CA, for Defendant, Calvin Kwong Mann.
MEMORANDUM DECISION
PETER H. CARROLL, Bankruptcy Judge.
Plaintiff, Symantec Corporation ("Symantec") seeks a judgment determining that the debt owed by Defendant, Calvin Kwong Mann ("Mann") to Symantec is nondischargeable under § 523(a)(6) of the Bankruptcy Code.[1] The court conducted a trial in this adversary proceeding on June 26, 2009, at which time Henry H. Gonzalez appeared for Symantec and Stella A. Havkin appeared for Mann. The court, having considered the pleadings, the evidence, and arguments of counsel, makes the following findings of fact and conclusions of law[2] pursuant to F.R.Civ.P. 52(a)(1), as incorporated into FRBP 7052 and applied to adversary proceedings in bankruptcy cases.
I. STATEMENT OF FACTS
Symantec designs, manufactures, publishes, and distributes software including Norton System Works, Norton Antivirus, Norton Utilities, CleanSweep, Norton Ghost, LiveUpdate, and GoBack. It owns a registered trademark for each of these products. Symantec owns registered copyrights for Norton Antivirus, Norton Utilities, NortonGhost, and CleanSweep. Symantec contracts with a third-party, DisCopy Laboratories ("DCL") to manufacture the software. DCL ensures that *46 all products are produced to Symantec's standards. Symantec sells its software only to authorized dealers, and produces software to be included with new computers as "original equipment manufacturer" or "OEM" disks. OEM disks are sold only to vendors and not to retail customers. Symantec's software contains certain characteristics that are not present in unauthorized replications of the software. If the software does not contain these characteristics, the software is not authorized by Symantec and is counterfeit.
Mann, who has also used the name Calvin Chik, operated a fictitious business entity known as Rowcal Distribution. Mann was in charge of ordering all Symantec software for the business. Mann's suppliers were Ted Wu ("Wu") and Lily Zheng ("Zheng"), who operated Hi-Tech Computer Services and Tedly Electronics, LLC. Mann advertised, marketed, and sold Symantec software primarily on the website www.rowcal.com. Mann also advertised, marketed, and sold Symantec software on other websites, including Amazon.com, Nutdeal.com, and eBay. Mann purchased counterfeit copies of Symantec's proprietary works. Each disk obtained by Mann contained unauthorized copies of Symantec's copyrighted material. Mann admits that he was banned from selling Symantec products on eBay.
On March 24, 2005, Mann was visited by William R. Baird ("Baird"), a Symantec employee, who informed Mann that the products that he was selling were counterfeit. Mann turned over 45 CDs to Baird on March 24, 2005. Each of these disks bore one or more of Symantec's registered trademarks. Each of these disks were determined by Symantec to be counterfeit and made to look exactly like authorized products of Symantec. On March 25, 2005, Symantec sent a letter to Mann by e-mail reiterating that he was selling counterfeit Symantec products and demanding that he immediately cease and desist from further sales of counterfeit software. Despite verbal and written notice to cease and desist, Mann resumed the marketing and sale of counterfeit Symantec software on March 29, 2005. Mann continued to purchase and sell counterfeit Symantec software for approximately one year after Baird's visit on March 24, 2005. Mann did not contact Symantec to determine whether the software he was continuing to sell was authentic, notwithstanding Baird's specific request that he do so. On June 21, 2005, Symantec sent written notice to Tedley Computer, Hi-Tech Computer Services, Tedley Electronics, LLC, Wu, and Zheng informing them that they were selling counterfeit copies of Symantec software products. Symantec's written demand that they cease and desist from doing so was ignored.
On January 29, 2007, Symantec filed a Complaint against Mann, Rowcal Distribution, and other non-debtor third-parties in Case No. 07-00676-ODW (FFMx), styled Symantec Corporation v. Mann, et al., in the United States District Court, Central District of California ("District Court Action"), seeking damages for alleged 1) trademark infringement; 2) false designation of origin under the Lanham Act; 3) copyright infringement; 4) fraud; 5) trafficking in counterfeit labels, documentation and/or packaging in violation of 18 U.S.C. § 2318; 6) unfair competition; 7) common law unfair competition; 8) state law false advertising; 9) intentional interference with prospective economic advantage; and 10) negligent interference with prospective economic advantage. A default judgment was entered against the non-debtor defendants.
On February 29, 2008, Mann filed a voluntary petition under chapter 7 of the *47 Code. Mann received a discharge on May 28, 2008, and the case was closed as a "no-asset" case on June 12, 2008.
On May 19, 2008, Symantec timely filed its complaint in this adversary proceeding seeking a determination that Mann's debt to Symantec is nondischargeable under 11 U.S.C. §§ 523(a)(2), (a)(4), and (a)(6). Mann filed an answer to Symantec's complaint on August 18, 2008. On January 13, 2009, Symantec moved for summary judgment on its cause of action under 11 U.S.C. § 523(a)(6). On February 3, 2009, Mann filed his response in opposition to the motion. Symantec filed its reply to Mann's opposition on February 12, 2009. After a hearing on March 31, 2009, the matter was taken under submission.[3]
On April 6, 2009, an Order Granting Plaintiff a Partial Summary Judgment on Plaintiffs Claim Under 11 U.S.C. § 523(a)(6) was entered in this adversary proceeding.[4] In the Memorandum Decision of even date therewith, the court found that Mann had infringed Symantec's registered trademarks in violation of 15 U.S.C. § 1114(1) and was liable for false designation of origin in violation of 15 U.S.C. § 1125(a)(1). The court also found that Mann had infringed Symantec's registered copyrights in violation of 17 U.S.C. § 106(3) and trafficked in counterfeit labels in violation of 18 U.S.C. § 2318(a)(1)(B). In making its determinations, the court found that Mann's conduct was both (a) willful in that Mann acted intentionally, deliberately, and with a subjective motive to inflict injury on Symantec; and (b) malicious in that Mann's wrongful acts were done intentionally, necessarily caused injury to Symantec, and were done without just cause or excuse. The court reserved for trial the issue of damages.
At the conclusion of trial on June 26, 2009, Symantec requested an award of statutory damages. Notwithstanding the court's finding of willfulness, Symantec seeks an award of statutory damages in (1) the maximum amount permitted under 15 U.S.C. § 1117(c) attributable to non-willful trademark infringement ($100,000 for Mann's violation of each of the nine trademarks at issue);[5] and (2) the maximum amount permitted under 17 U.S.C. § 504(c) attributable to non-willful copyright infringement ($30,000 for Mann's violation of each of the four copyrights at issue).[6] Symantec also seeks an award of *48 reasonable attorneys' fees of $165,639.25, plus costs of court.
II. DISCUSSION
This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (O). Venue is appropriate in this court. 28 U.S.C. § 1409(a). To prevail under 11 U.S.C. § 523(a)(2), (a)(4), or (a)(6), the plaintiff must establish the allegations of the complaint by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S. Ct. 654, 112 L. Ed. 2d 755 (1991). Objections to the dischargeability of a debt are to be literally and strictly construed against the objector and liberally construed in favor of the debtor. Quarre v. Saylor (In re Saylor), 108 F.3d 219, 221 (9th Cir.1997).
A. Statutory Damages
The Copyright Act provides that "an infringer of copyright is liable for either (1) the copyright owner's actual damages and any additional profits of the infringer... or (2) statutory damages, as provided by subsection (c)." 17 U.S.C. § 504(a). Section 504(c)(1) states, in pertinent part, that "the copyright owner may elect, at any time before final judgment, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually ... in a sum not less than $750 or more than $30,000 as the court considers just." 17 U.S.C. § 504(c)(1). If the court finds that the infringement was willful, "the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000." 17 U.S.C. § 504(c)(2).
The trial court has "wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima." Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir.1984). A court must be guided by "`what is just in the particular case, considering the nature of the copyright, the circumstances of the infringement and the like.'" Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir.1990) (quoting F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 232, 73 S. Ct. 222, 97 L. Ed. 276 (1952)).
Factors which a court may consider in calculating an award of statutory damages include "`the expenses saved and profits reaped by the defendants in connection with the infringements, the revenues lost by the plaintiffs as a result of the defendant's conduct, and the infringers' state of mind whether wilful, knowing, or merely innocent." N.A.S. Import, Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir.1992) (quoting 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 1404[B], at 14-41 (1991)). The court may also take into consideration the "value of the copyright;" "the deterrent effect on others besides the defendant;" "whether a defendant has cooperated in providing particular records from which to assess the value of the infringing material produced;" and "the potential for discouraging the defendant." Tiffany (NJ) Inc. *49 v. Luban, 282 F. Supp. 2d 123, 125 (S.D.N.Y.2003) (quoting Fitzgerald Pub. Co., Inc. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir.1986)). However, a plaintiff may elect statutory damages for copyright infringement "regardless of the adequacy of the evidence offered as to his actual damages and the amount of defendant's profits." Columbia Pictures Television, Inc. v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d 1186, 1194 (9th Cir. 2001) (quoting Nimmer at § 1404[A]). In F.W. Woolworth Co., the Supreme Court discussed the policy underpinning statutory damages, stating:
[A] rule of liability which merely takes away the profits from an infringement would offer little discouragement to infringers. It would fall short of an effective sanction for enforcement of copyright policy. The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful conduct. The discretion of the court is wide enough to permit a resort to statutory damages for such purposes. Even for uninjurious and unprofitable invasions of copyright the court may, if it deems it just, impose a liability within the statutory limits to sanction and vindicate the statutory policy.
344 U.S. at 233, 73 S. Ct. 222.
The Lanham Act also provides for statutory damages. Under the Lanham Act, the plaintiff may recover statutory damages of "not less than $500 or more than $100,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just." 15 U.S.C. § 1117(c)(1). Upon a finding that use of the mark was willful, the court may award statutory damages of not more than $1,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just. 15 U.S.C. § 1117(c)(2). "[T]he plain language of the statute affords plaintiffs the right to pursue statutory damages without proving actual damages; however, the statute does not provide guidelines for courts to use in determining an appropriate award." Louis Vuitton Malletier & Oakley, Inc. v. Veit, 211 F. Supp. 2d 567, 583 (E.D.Pa. 2002). To calculate statutory damages for trademark infringement, courts have used the factors generally employed for determining statutory damages under 17 U.S.C. § 504(c). Id.
A plaintiff is entitled to a separate award of statutory damages under both the Copyright Act and the Lanham Act where the defendant's conduct simultaneously infringed the plaintiff's copyright and its trademark. Nintendo of Am., Inc. v. Dragon Pac. Int'l, 40 F.3d 1007, 1011 (9th Cir.1994); Microsoft Corp. v. Nop, 549 F. Supp. 2d 1233, 1238 (E.D.Cal.2008). "This is because the two statutory schemes serve different public policies, and protect against and remedy different injuries." Microsoft Corp., 549 F.Supp.2d at 1238.
In this case, Symantec is entitled to recover statutory damages under both the Copyright Act and the Lanham Act because Mann simultaneously infringed Symantec's copyrights and trademarks. Mann's actions were intentional, deliberate, and willful. Mann sold counterfeit software that was produced to look exactly like Symantec software. On March 24, 2005, Mann was notified in person by Baird, Symantec's representative, to stop purchasing and selling the counterfeit software. On March 25, 2005, Mann was given written notice from Symantec demanding that he cease and desist selling the counterfeit software. Despite verbal and written notice to cease and desist, Mann resumed the marketing and sale of counterfeit *50 Symantec software on March 29, 2005. According to the evidence at trial, Mann purchased the following 140 pieces of counterfeit Symantec software from Hi-Tech Computer Services for resale within eight days after Baird's visit on March 24, 2009:
March 29, 2005 NIS 2005 20
March 30, 2005 NAV 2005 50
March 30, 2005 NAV 2004 50
April 1, 2005 NSW 2005 20
Mann was given the opportunity to verify through Symantec whether the products he was selling, and offering for sale, were legitimate, but he ignored Symantec's demands to cease and desist and continued marketing the infringing products. Mann admits that, despite being banned from selling Symantec products on eBay and being instructed to stop selling counterfeit copies of Symantec software, he continued to sell counterfeit software for approximately one year after Baird's visit on March 24, 2005. Mann did not close his business until March of 2006.
Mann testified that he "only received at best $10,000 in gross profits from the sale of Symantec products." However, the court cannot determine the extent of Mann's gain, or Symantec's loss, from the counterfeit sales due to inconsistencies in Mann's testimony and the inadequacy of his books and records.[7] By focusing on internet sales, Mann had access to an unlimited number of potential customers. Louis Vuitton, 211 F.Supp.2d at 584 ("While the record contains no evidence of the actual scope of defendants' sales, nor the number of hits the internet site received, given the scope of the internet supermarket, such sale offerings are presumptively quite high. ...").
In view of the limitless number of customers available to Mann through his website and marketing activities on Amazon.com, Nutdeal.com, and eBay, coupled with Mann's unwillingness to terminate his infringement despite ample warning, the court will award statutory damages of $865,000, consisting of $25,000 for each of the four copyrights at issue, and $85,000 for each of the nine trademarks at issue. The court finds that the award is well within the range of awards in similar cases and is reasonable. See, e.g., Microsoft Corp. v. Nop, 549 F. Supp. 2d 1233, 1239 (E.D.Cal.2008) (after default, awarding statutory damages of $970,000, consisting of $100,000 for each of nine trademark infringements and $30,000 for each of nine copyright infringements); Microsoft Corp. v. McGee, 490 F. Supp. 2d 874, 882 (S.D.Ohio 2007) (after default, awarding statutory damages of $100,000 for each of five trademark infringements and $30,000 for each of seven copyright infringements, for a total of $710,000); Microsoft Corp. v. Sellers, 411 F. Supp. 2d 913, 921-22 (E.D.Tenn.2006) (on summary judgment, awarding statutory damages of $460,000 consisting of $100,000 for each of four trademark infringements and $30,000 for each of two copyright infringements); Louis Vuitton, 211 F.Supp.2d at 585 (after *51 default, awarding statutory damages of $1,500,000 for the willful infringement of eight trademarks). The court further finds that the award will serve the goals of compensating Symantec, and deterring Mann and others from trafficking in counterfeit software in the future.
B. Reasonable Attorneys' Fees
The Copyright Act and Lanham Act both authorize the award of attorneys' fees and costs. 17 U.S.C. § 505; 15 U.S.C. § 1117(a). The Copyright Act authorizes attorneys' fees for the prevailing party as a matter of the court's discretion. Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994). The Lanham Act authorizes the award of reasonable attorneys' fees in exceptional cases, which has been defined by the Ninth Circuit as cases where the infringement can be defined as "malicious, fraudulent, deliberate, or willful." Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1023 (9th Cir.2002).
The court finds that Mann's acts of infringement were willful and that an award of attorneys' fees and costs is warranted based upon the statutory authorization to award attorneys' fees and costs in both the Copyright Act and the Lanham Act. See 17 U.S.C. § 505; 15 U.S.C. 1117(a). Symantec seeks an award of attorneys fees in the amount of $165,639.25, consisting of $117,696.75 incurred in the District Court Action and $47,942.50 incurred in this adversary proceeding. Symantec did not, however, apportion the attorneys' fees and expenses incurred in the District Court Action between Mann and the non-debtor co-defendants in the case. Nor did Symantec apportion the attorneys' fees and expenses incurred in the District Court Action between its infringement claims against Mann and the other causes of action against Mann alleged in the complaint filed in the district court.
Given the evidentiary record, the court concludes that Symantec is entitled to reasonable attorneys fees and costs totaling $85,942.50, consisting of $38,000 incurred in the District Court Action and $47,942.50 incurred in this adversary proceeding.
CONCLUSION
Symantec is entitled to a judgment against Mann for statutory damages in the amount of $865,000, reasonable attorneys' fees of $85,942.50, and costs of court, which will be excepted from discharge under 11 U.S.C. § 523(a)(6). All other relief requested in Symantec's complaint will be denied.
A separate judgment will be entered consistent with this opinion.
NOTES
[1] Unless otherwise indicated, all "Code," "chapter" and "section" references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 after its amendment by the Bankruptcy Abuse and Consumer Prevention Act of 2005, Pub.L. 109-8, 119 Stat. 23 (2005). "Rule" references are to the Federal Rules of Bankruptcy Procedure ("F.R.Civ.P."), which make applicable certain Federal Rules of Civil Procedure ("FRBP").
[2] To the extent that any finding of fact is construed to be a conclusion of law, it is hereby adopted as such. To the extent that any conclusion of law is construed to be a finding of fact, it is hereby adopted as such.
[3] Despite alleging causes of action under 11 U.S.C. §§ 523(a)(2), (a)(4), and (a)(6), Symantec's counsel stated at the hearing on March 31, 2009, that Symantec was proceeding against Mann solely on its alleged cause of action under 11 U.S.C. § 523(a)(6).
[4] The court adopts and incorporates herein by reference the Order Granting Plaintiff a Partial Summary Judgment on Plaintiff's Claim Under 11 U.S.C. § 523(a)(6) entered on April 6, 2009, together with the findings of fact and conclusions of law contained in the Memorandum Decision entered on April 6, 2009.
[5] The following nine trademarks are listed on the face of each Norton System Works CD:
1. "Symantec," registration number 1683688;
2. "Norton System Works," registration number 2488092;
3. "Norton AntiVirus," registration number 1758084;
4. "Ghost," registration number 1107115;
5. "Norton Utilities," registration number 1508960;
6. "CleanSweep," registration number 1936913;
7. "LiveUpdate," registration number 2243057;
8. "GoBack," registration number 2271088; and
9. "Symantec Logo," registration number 3009890.
[6] Norton SystemWorks includes the following four copyrighted software programs:
1. "Norton Antivirus," registration number TX 4-908-397;
2. "Norton Ghost," registration number TX 4-715-124;
3. "Norton Utilities," registration number TX 3-772-061; and
4. "CleanSweep," registration number TX 4-426-292.
Although the court determined that Mann had trafficked in counterfeit labels in violation of 18 U.S.C. § 2318(a)(1)(B), Symantec did not seek at trial a separate award of damages under 18 U.S.C. § 2318(f)(4).
[7] Symantec sought to obtain from Mann through discovery all records concerning Rowcal Distribution's purchase and sale of Symantec software. The records obtained by Symantec were inadequate to establish the profits reaped by Rowcal Distribution. Mann testified at trial that he purchased Symantec software from Hi-Tech Computer Services and Global PC for resale. The evidentiary record does not include information concerning the purchases made from Global PC. According to Symantec's Exhibit 63, Mann purchased 6,968 copies of Symantec software from Hi-Tech Computer Services between July 2, 2004 and March 1, 2006. Mann testified that he sold his entire inventory of Symantec software. However, the only record of sales by Mann is Symantec's Exhibit 64 which documents the sale of only 645 Symantec CDs by Rowcal Distribution between July 1, 2004 and August 18, 2005. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542804/ | 997 A.2d 1184 (2010)
COMMONWEALTH of Pennsylvania, Appellee
v.
Christopher DOTY, Appellant.
No. 662 WDA 2009.
Superior Court of Pennsylvania.
Submitted January 11, 2010.
Filed June 9, 2010.
*1185 Tina M. Fryling, Public Defender, and Kenneth A. Bickel, Erie, for appellant.
Erin C. Connelly, Assistant District Attorney, for Commonwealth, appellee.
BEFORE: MUSMANNO, ALLEN, JJ. and McEWEN, P.J.E.
OPINION BY MUSMANNO, J.:
¶ 1 Christopher Doty ("Doty") appeals from the judgment of sentence entered following his conviction of criminal conspiracy and aggravated assault.[1] We quash the appeal.
¶ 2 During the early evening hours of April, 24, 2008, Kyle Miles ("Miles") walked with a female companion and her three children down Wallace Street in Erie, Pennsylvania. As Miles approached the corner of Wallace and East 7th Streets, Kelly Gore ("Gore") stopped Miles to complain of rumors that had been circulating about her. During Miles's brief discussion with Gore, Lionel Hamer ("Hamer") approached and leaned against a nearby stop sign. Doty and Gregory Crosby ("Crosby") also stood nearby. As Miles and his companions walked away, Doty, Hamer and Crosby followed.
¶ 3 Having followed Miles as he turned to walk up East 7th Street, Crosby approached Miles and asked, "[W]hat was that shit you were saying about my cousin?" N.T., 1/16/09, at 179. When Miles failed to respond, Crosby struck Miles. The two men exchanged punches in the middle of the street, after which Miles attempted to flee his attackers. Doty, Crosby and Hamer gave chase, eventually attacking Miles in front of his house. Doty, Crosby and Hamer savagely beat and kicked Miles, rendering him bloody and unconscious.
¶ 4 Before Miles fled to his house, Miles's female companion telephoned 9-1-1. *1186 When police officers subsequently arrived at the scene, they found Miles lying in front of his house, bleeding from the mouth and unconscious. As a result of the beating, Miles remained hospitalized in a coma for six weeks. Miles continues to suffer from serious cognitive and speech impairment, right arm paralysis, impaired vision and memory loss.
¶ 5 One day later, in a police interview, Doty admitted to his participation in the altercation. After his arrest, Doty filed an Omnibus Pre-trial Motion, which the trial court denied. On January 20, 2009, after a joint trial with Hamer and Crosby, the jury found the co-defendants guilty of conspiracy and aggravated assault. The trial court scheduled Doty's sentencing to take place on March 19, 2009.
¶ 6 Notwithstanding his scheduled sentencing date and the bond posted to secure his presence, Doty failed to appear at sentencing. The trial court sentenced Doty, in absentia, to a prison term of 66 to 136 months for his conviction of aggravated assault. For his conviction of criminal conspiracy, the trial court sentenced Doty to a consecutive prison term of 48 to 96 months. The trial court imposed fees and costs, and further ordered Doty to pay $1,500,000.00 in restitution. On March 29, 2009, the trial court issued a bench warrant for Doty. The next day, Doty's counsel filed a post-sentence Motion, which the trial court subsequently denied.
¶ 7 During the 30-day appeal period, on April 21, 2009, Doty's counsel filed a Notice of appeal on Doty's behalf. The trial court Ordered Doty to file a concise statement of matters complained of on appeal, pursuant to Pennsylvania Rule of Appellate Procedure 1925(b). Doty's counsel complied with the trial court's Order. At the time the trial court filed its Rule 1925(a) Opinion, on June 23, 2009, Doty remained a fugitive. However, according to Doty's appellate brief, law enforcement authorities apprehended Doty in another state.
¶ 8 In this appeal, Doty presents the following claims for our review:
[1.] Whether [Doty] waived his ability to file an appeal in this case and make the arguments set forth herein when he failed to appear for his sentencing[?]
[2.] Whether the use of transcripts, rather than the video of [Doty's] statement, violated the "best evidence" rule and Rule 1002 of the Pennsylvania Rules of Evidence[?]
[3.] Whether the trial court erred as a matter of law and/or abused its discretion in ordering [Doty] to pay $1,500,000.00 in restitution[?]
[4.] Whether the trial court erred as a matter of law and/or abused its discretion in sentencing [Doty] in the aggravated range of the sentencing guidelines and to consecutive terms of imprisonment[?]
Brief for Appellant at 3.
¶ 9 Since Doty remained a fugitive throughout the 30-day appeal period, Doty first acknowledges that he may be ineligible to file a direct appeal. Id. at 9-10. However, Doty argues that one of his claims, his challenge to the trial court's sentence of restitution, implicates the legality of that sentence and, therefore, cannot be waived. Id. at 10. Doty also points out that the trial court "did not specifically state that [Doty's] fugitive status definitely precludes him from being able to continue his appeal." Id.
¶ 10 Guaranteed by article 5, section 9 of the Pennsylvania Constitution,[2]*1187 the constitutional right to appeal "is a personal right which may be relinquished only through a knowing, voluntary and intelligent waiver." Commonwealth v. Passaro, 504 Pa. 611, 476 A.2d 346, 347 (1984) (citing Commonwealth v. Cathey, 477 Pa. 446, 384 A.2d 589 (1978); Commonwealth v. Jones, 447 Pa. 228, 286 A.2d 892 (1971); Commonwealth v. Maloy, 438 Pa. 261, 264 A.2d 697 (1970); Commonwealth ex rel. Robinson v. Myers, 427 Pa. 104, 233 A.2d 220 (1967); Commonwealth ex rel. Edowski v. Maroney, 423 Pa. 229, 223 A.2d 749 (1966)). However, as we shall discuss infra, a defendant who is a fugitive from justice during the appellate process may forfeit the right to appellate review.
¶ 11 Our Supreme Court has recognized that "the right to appeal is conditioned upon compliance with the procedures established by [the Pennsylvania Supreme Court], and a defendant who deliberately chooses to bypass the orderly procedures afforded one convicted of a crime for challenging his conviction is bound by the consequences of his decision." Passaro, 476 A.2d at 347. In Passaro, the defendant escaped from custody after filing his appellate brief, but before the disposition of his appeal. Id. at 347-48. On the basis of his fugitive status, a panel of this Court quashed the defendant's appeal. Id. at 348. After his capture, the defendant petitioned for reinstatement of his direct appeal rights. Id. When this Court denied the defendant's petition, he presented his petition for reinstatement to the Pennsylvania Supreme Court. Id.
¶ 12 Notwithstanding the defendant's return to the jurisdiction of the courts, the Supreme Court held that "a defendant who deliberately chooses to bypass the orderly procedures afforded one convicted of a crime for challenging his conviction is bound by the consequences of his decision." Id. Thus, "a defendant who elects to escape from custody forfeits his right to appellate review. It would be unseemly to permit a defendant who has rejected the appellate process in favor of escape to resume his appeal merely because his escape proved unsuccessful." Id. at 349. On this basis, the Supreme Court denied the defendant's Petition to reinstate his direct appeal. Id.
¶ 13 Escape, however, does not result in the forfeiture of all appellate review. In Commonwealth v. Judge, 530 Pa. 403, 609 A.2d 785 (1992) (Judge I), a capital defendant escaped two days after being sentenced to death and, at the time of his direct appeal, had not been returned to custody in Pennsylvania. Id. at 786. The defendant, while still a fugitive, timely filed a pro se notice of appeal. Id. On direct appeal, the Pennsylvania Supreme Court entered a per curiam order limiting its review to the sufficiency of the evidence, as required by Commonwealth v. Zettlemoyer, 500 Pa. 16, 454 A.2d 937 (1982), and the statutory review of death sentences mandated by 42 Pa.C.S.A. § 9711(h).[3]Judge I, 609 A.2d at 786 n.4. When the defendant attempted to raise additional issues in his appellate brief, the *1188 Supreme Court, applying Passaro, again limited its review to the sufficiency of the evidence and the review required by section 9711(h). Id. at 786-87.
¶ 14 Judicial interpretations of Passaro and its effect upon a fugitive's appeal rights led the Supreme Court to modify its holding. In Commonwealth v. Deemer, 550 Pa. 290, 705 A.2d 827, 829 (1997), the Supreme Court set forth the following analysis to be employed by Pennsylvania courts in determining a fugitive's appeal rights:
If [the defendant] became a fugitive between post-trial motions and an appeal and he returns before the time for appeal has expired and files an appeal, he should be allowed to appeal. If he returns after the time for filing an appeal has elapsed, his request to file an appeal should be denied. If he becomes a fugitive after an appeal has been filed, his appeal should be decided and any fugitive status should be addressed separately. In short, a fugitive who returns to court should be allowed to take the system of criminal justice as he finds it upon his return: if time for filing has elapsed, he may not file; if it has not, he may.
Id. at 829 (emphasis added). Thus, "a fugitive who has returned to the jurisdiction of the court should be allowed to exercise his post-trial rights in the same manner he would have done had he not become a fugitive." Id.
¶ 15 On direct appeal, therefore, a defendant's status during the 30-day appeal period controls whether an appellate court will hear his appeal. Id. Further, the defendant's status during the appeal period may impact his right to collateral relief. In Commonwealth v. Judge (Judge II), 568 Pa.377, 797 A.2d 250 (2002) the appellant, who had forfeited his right to a direct appeal because of his fugitive status, see Judge I, supra, had sought collateral relief through a petition filed pursuant to the Post Conviction Relief Act ("PCRA").[4] The PCRA court dismissed the PCRA petition and on appeal, the appellant challenged the PCRA court's determination that he had waived all review of his convictions by fleeing prior to the direct appeal. See Judge II, 797 A.2d at 257-58. The Supreme Court upheld the denial of PCRA relief, citing the petitioner's previous forfeiture of his appellate rights as controlling. Id. at 259, 260. In so holding, the Supreme Court opined that "we refuse to permit Appellant to resurrect issues that were raised, or which could have been raised and would have been addressed, on direct appeal, had Appellant demonstrated some kind of respect for the legal process." Id. at 260 (footnotes omitted).
¶ 16 Here, we are presented with a direct appeal, filed by counsel within the 30-day appeal period, while Doty remained a fugitive. To avoid Passaro, Deemer, Judge II, and their progeny, Doty attempts to salvage one of his claims by directing our attention to well-established case law holding that a challenge to the legality of a sentence is never waived. See Commonwealth v. Berry, 877 A.2d 479, 482 (Pa.Super.2005) (recognizing that challenges to the legality of the sentence are never waived, so long as the court has jurisdiction to hear the claim). Doty's claim, however, is without legal support.
¶ 17 Notwithstanding Doty's citation to cases prohibiting the waiver of a challenge to the legality of a sentence, Doty fails to acknowledge the legal distinction between waiver and forfeiture. In Commonwealth v. Lucarelli, 601 Pa. 185, 971 A.2d 1173 (2009), the Pennsylvania Supreme Court explained this distinction as follows:
*1189 Like the Superior Court in Commonwealth v. Thomas, 2005 PA Super 245, 879 A.2d 246, 257-59 (Pa.Super.2005), we find persuasive the distinction between waiver and forfeiture made by the Third Circuit Court of Appeals in United States v. Goldberg, 67 F.3d 1092, 1099-1101 (3d Cir.1995). Waiver is "an intentional and voluntary relinquishment of a known right." Id. at 1099. By contrast, forfeiture, as defined by the Third Circuit, does not require that the defendant intend to relinquish a right, but rather may be the result of the defendant's "extremely serious misconduct" or "extremely dilatory conduct." United States v. Thomas, 357 F.3d 357, 362 (3d Cir.2004) (quoting Goldberg, supra at 1100-02). See also Commonwealth v. Coleman, 2006 PA Super 214, 905 A.2d 1003, 1006-08 (Pa.Super.2006) (affirming a finding of forfeiture where defendant, who had the means to retain counsel, appeared without counsel or engaged in behavior that forced counsel to withdraw).
Lucarelli, 971 A.2d at 1179.
¶ 18 Cognizant of the legal distinction discussed in Lucarelli, and applying the Supreme Court's analysis in Deemer, we conclude that Doty's challenge to the legality of his sentence, while not waivable, was forfeited through his "extremely serious misconduct" during his direct appeal. See Lucarelli, 971 A.2d at 1179. In fact, all of claims raised in the instant appeal were forfeited because of Doty's fugitive status throughout the 30-day appeal period. See Deemer, 705 A.2d at 829 (stating that "a fugitive who returns to court should be allowed to take the system of criminal justice as he finds it upon his return: if time for filing has elapsed, he may not file [an appeal]").
¶ 19 The fact that Doty's counsel filed a Notice of appeal during the appeal period is of no moment. Doty could not resurrect his appellate rights because he failed to return to the court's jurisdiction prior to the expiration of the appeal period. Id. (holding that if a fugitive returns before the appeal deadline, he regains the appellate right and may, therefore, file a timely appeal); Commonwealth v. Hunter, 952 A.2d 1177, 1178 (Pa.Super.2008) (concluding that because the appellant remained a fugitive from the time of his scheduled sentencing until after his counsel had filed an appeal and the appeal deadline passed, he is not entitled to pursue an appeal).
¶ 20 Because Doty forfeited his right to appellate review of all claims raised in the instant appeal, we quash his appeal.
¶ 21 Appeal quashed.
NOTES
[1] 18 Pa.C.S.A. §§ 903, 2702.
[2] Article 5, section 9 of the Pennsylvania Constitution provides as follows:
There shall be a right of appeal in all cases to a court of record from a court not of record; and there shall also be a right of appeal from a court of record or from an administrative agency to a court of record or to an appellate court, the selection of such court to be as provided by law; and there shall be such other rights of appeal as may be provided by law.
Pa. Const. art. 5, § 9.
[3] At the time of the defendant's conviction in Judge I, section 9711(h) required automatic review of death sentences. The statute required a sentence of death to be affirmed unless the Supreme Court determines that "the sentence of death was the product of passion, prejudice or any other arbitrary factor[,] the evidence fails to support the finding of at least one aggravating circumstance specified" by statute, or whether the defendant's death sentence was "excessive or disproportionate to the penalty imposed in similar cases." 42 Pa.C.S.A. § 9711(h)(3).
[4] 42 Pa.C.S.A. §§ 9541-9546. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542810/ | 997 A.2d 37 (2010)
MODERN MANAGEMENT COMPANY, Vincent L. Abell, and Calvin Baltimore, Appellants,
v.
Maria-Theresa WILSON, Appellee.
Nos. 08-CV-18, 08-CV-85, 08-CV-187.
District of Columbia Court of Appeals.
Argued September 24, 2009.
Decided June 3, 2010.
*40 David H. Cox, with whom Lydia Auzoux, Washington, DC, was on the brief, for appellants.
Jessica L. Ellsworth, Washington, DC, with whom N. Thomas Connally III, McLean, VA, and Jeffrey D. Pariser were on the brief, for appellee.
Before BLACKBURNE-RIGSBY and THOMPSON, Associate Judges, and SCHWELB, Senior Judge.
BLACKBURNE-RIGSBY, Associate Judge:
This case arises from an unconscionable 2003 real estate transaction whereby appellee, Maria-Theresa Wilson, suffering from health problems and facing foreclosure, transferred title to her home (that she owned for twenty-two years) to appellant Vincent Abell, the sole owner of appellant Modern Management Company ("Modern Management"). Appellant Calvin Baltimore, who represented himself as a money lender, knocked on Wilson's door *41 three days before her house was scheduled to go into foreclosure and convinced her to participate in appellants' scheme. Wilson transferred title to her home to Abell, but under the terms of the transaction, she remained liable for the mortgage payments and became a tenant in her own home. In fact, her monthly "rent" exceeded the amount of her previous mortgage payments. Wilson soon defaulted on the "lease," and Abell brought eviction proceedings against her to remove her from her own home.
Following a jury trial, appellants Vincent Abell, Modern Management Company, and Calvin Baltimore were all found liable for common law fraud and for violating the D.C. Consumer Protection Procedures Act ("CPPA") for their various misrepresentations and omissions of material facts and for including "unconscionable terms" in the transaction.[1] The jury awarded Wilson $60,000 in compensatory damages for the common law fraud and CPPA violations, which the trial judge trebled pursuant to the CPPA, D.C.Code § 28-3905(k)(1), and punitive damages in the amount of $2 million against Abell, $1.1 million against Modern Management, and $200,000 against Baltimore, respectively. We affirm.
Appellants raise a sharply contested issue of considerable importance by challenging the award of punitive damages against them as constitutionally excessive. In addition, they contend that 1) the trial court erred in permitting Wilson to pursue her RICO claims and admitting evidence that appellants had completed one hundred similar transactions, which caused the jury to inflate the punitive damages awards; 2) the compensatory damage award must be reduced by the amount of the settlement agreement Wilson reached before trial with appellants' former co-defendant;[2] 3) the trial court erred in submitting to the jury the issue of whether Wilson was a "consumer" as defined in the CPPA; and 4) the jury verdict finding appellants liable for common law fraud and for violations of the CPPA was against the weight of the evidence.
First, we focus our analysis on the issue of whether the punitive damages awarded by the jury are unconstitutionally excessive, and then we address each of the remaining issues in turn. We uphold the punitive damages awards entered against the appellants. For the reasons explained more fully below, we affirm on all issues, but remand and direct the trial court to apply the $40,000 setoff to the treble award.
I.
Background
Appellant Maria-Theresa Wilson purchased her house at 1300 Taylor Street *42 Northwest in 1981. She lived there continuously until 1997, when she suffered a severe head injury at work that prevented her from being able to work consistently. After her injury in 1997, Wilson suffered two additional head injuries causing her to develop epilepsy and suffer seizures. Wilson began spending approximately fifty percent of her time at her elderly mother's house (a few blocks away from the house on Taylor Street) due to Wilson's health problems and in order to care for her mother after the death of her father. In June 2001, Wilson registered her Taylor Street home as rental housing with the District of Columbia Department of Consumer Affairs and leased part of the property to tenants for additional income, but she always kept a set of keys to the house and maintained a room there for space to work on her art.[3] She also continued to receive mail at the house and listed it as her residence on her District of Columbia identification card, which was issued in 2002.
In September 2003, Wilson received a foreclosure notice indicating that she had to pay at least $42,525 by October 2, 2003, to avoid foreclosure. On September 27, 2003, five days before the scheduled foreclosure date, appellant Calvin Baltimore left a business card at Wilson's home, advertising himself on the front of the card as:
"Baltimore Company, Money Lenders, Buy and Sell Homes, 24 Hours, Seven Days a Week, Foreclosures Specialists, Calvin Baltimore, President, CEO, CPA."
The back of the card read:
"We will help you to save the equity in your home. We will buy your home, pay off your mortgage, pay you your equity. We will also pay your mortgage current, stop foreclosure, lease the home back to you, give you some money and give you a chance to buy back when you continue to live in your home. Please call immediately for help."
In fact, Baltimore was not a certified public accountant (CPA) and he claimed at trial that the money lender language was printed on his business card in error by the printing company where he ordered his cards. Baltimore's company prepared pre-foreclosure contracts for Vincent Abell, the owner/manager of Modern Management, but Baltimore did not actually lend money. Baltimore described himself as a "consultant" for Abell, and said that he was responsible for Abell's pre-foreclosure transactions and for approaching homeowners to prepare and sign the foreclosure contracts on Abell's behalf. After seeing his card, Wilson called Baltimore immediately to set up an appointment before the upcoming foreclosure.
On September 30, 2003, Baltimore met with Wilson and her friend at Wilson's home and offered to buy the house for cash. Wilson declined the offer, stating: "I'm not interested in selling my property[,] I'd like to be able to keep it." As an alternative, Baltimore offered Wilson a lease-back option, whereby Wilson would pay $2,100 per month to continue living in her home. Wilson declined this offer as well because she could only afford a maximum monthly payment of $1,800. After getting approval from Abell over the phone, Baltimore offered Wilson the lease-back option for $1,800 a month. Wilson signed an "Agreement to Sell Real Estate," which was prepared and signed by Baltimore, who listed himself as "Agent *43 for Vincent Abell" under his signature.[4] Baltimore left Wilson with an "Authorization to Release Information" form that listed Wilson as the "borrower" under the signature line.[5] The next day, Baltimore returned and drove Wilson and her friend to the transaction "closing" with Abell at the law offices of Houlon Berman.
At the "closing," Wilson signed various documents, including: a "Deed," a "Real Property and Transfer Form," an "Owner/Seller Affidavit," and a "Seller Affidavit of Sales Subject to Mortgage." Wilson asked why the titles of certain documents indicated a sale of her home when she intended only to obtain a loan to stop the foreclosure. In response, both Abell and the attorney from Houlon Berman told Wilson that the sale was only a "legal fiction" which was necessary to speed up the process because the foreclosure was scheduled to go forward in two days. A sales price was never negotiated during the transaction. While the Deed represented that Wilson was to receive "consideration of $199,273.10" for the sale, Wilson only received a payment $5,000 via check.[6] The end result of the transaction was that Wilson remained liable for the mortgage (which Abell did not assume) but then she also had to pay rent to remain in the home. Wilson entered into a one year "Lease Agreement" whereby Abell leased the property back to her. The Lease Agreement included an "Option to Purchase" provision which she could invoke at the end of the year. Pursuant to Section 5 of the lease, Wilson was to pay $2,100[7] for rent ($600 more than her mortgage payments prior to the transaction). However, Wilson contends that she intended the payments to go towards the loan that she obtained to stop the foreclosure, and not to appellants as rent. Ultimately, when Wilson failed to make any of the rent payments during the thirteen months following the sales transaction, Abell sued her for possession of the property and successfully evicted her from her house. Following her eviction, Wilson initiated this action in February 2005 against appellants and their former co-defendant Houlon Berman.
Appellants moved for partial summary judgment on Wilson's CPPA, fraud, and RICO claims. Initially, the trial judge granted partial summary judgment, dismissing the RICO claims. But Wilson filed a motion for reconsideration, contending that the trial judge improperly dismissed the RICO claims because appellants failed to make any legal or factual *44 arguments supporting their dismissal.[8] Wilson's counsel argued that Abell's "scheme" for RICO purposes was to "approach homeowners that are in foreclosure, tell them that they're going to lend them money to save their house, and by trick, take title from the homeowners, make them a tenant in their own house, and then come to landlord/tenant court and try and kick them out of their own house." The trial judge granted the motion for reconsideration and at this stage of the proceedings, she permitted Wilson to pursue her RICO claims.
In addition to the motion for partial summary judgment, appellants filed a series of motions in limine to exclude testimony about Wilson's physical condition, the fair market value of the property, and evidence and testimony regarding Abell and Modern Management's "other transactions," where they allegedly employed the same scheme against other vulnerable homeowners.[9] The trial court denied all of appellants motions in limine, permitting the evidence to be presented to the jury.[10]
*45 Before the case was submitted to the jury, appellants moved for judgment as a matter of law a second time, and the trial judge granted the motion with respect to the RICO claims because she found that the evidence presented did not amount to a "pattern or practice," within the meaning of the RICO statute. 18 U.S.C. § 1961. The jury found appellants liable for common law fraud and for violating the CPPA by making misrepresentations and omissions of material facts and including "unconscionable terms" in the transaction. After trial, appellants filed a motion for judgment notwithstanding the verdict ("JNOV") and a motion for a new trial on damages, both of which were denied. This appeal followed.
II.
Punitive Damages Analysis
A.
In reviewing appellants' constitutional challenge to the punitive damage awards in this case, we think it is useful to revisit and distill the legal principles and guidance gleaned from the relevant Supreme Court cases. The Due Process Clauses of the Fifth[11] and Fourteenth Amendments prohibit a State from imposing a "grossly excessive" civil punishment upon a tortfeasor.[12] The Supreme Court has had several opportunities to consider due process challenges to punitive damage awards. From these cases, we glean several illuminating principles and concerns which have guided the Supreme Court's review of punitive damage awards. These principles include the concern that: 1) courts conduct a "meaningful and adequate review" of a jury's punitive damage award both at the trial and appellate level to ensure that the award is the product of a process that is entitled to a strong presumption of validity; 2) the award punishes truly reprehensible conduct; 3) the punitive damage award has some relation to the harm suffered by the plaintiff and evidences "reasonableness and proportionality," although there is no "bright-line" ratio, to ensure that the award is not grossly out of proportion to the severity of the offense; and 4) the award advances a State policy concern such as protection of the public by deterring the defendant or others from doing such wrong in the future.
*46 In its first case reviewing whether punitive damage awards may violate the Due Process Clause of the Fourteenth Amendment, Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 18, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991), the Supreme Court noted its concern that such awards may "run wild." There, Haslip brought a claim for fraud against Pacific Mutual and its employee after the insurance agent misappropriated checks for a customer's premium payments, which resulted in a lapse of her health insurance coverage. Notices of the lapse in coverage were not forwarded to Haslip, who was forced to pay her hospital bill on discharge because the hospital could not confirm her health coverage.
The jury returned a general verdict for $1,040,000.[13] On appeal, the Supreme Court of Alabama affirmed the punitive damage award. Pacific Mutual Life then petitioned for certiorari arguing that the punitive damage award was "the product of unbridled jury discretion and [ ] violative of its due process rights." Id. at 7, 111 S.Ct. 1032. Noting that the specific award in that case resulted in punitive damages more than four times the compensatory damages, the Court cautioned that "unlimited jury discretionor unlimited judicial discretion for that matterin the fixing of punitive damages may invite extreme results that jar one's constitutional sensibilities." Id. at 18, 111 S.Ct. 1032. However, the Court refused to draw a mathematical line between awards that were "constitutionally acceptable and the constitutionally unacceptable that would fit every case." Id.
In its analysis, the Supreme Court determined that Alabama law contained reasonable and adequate guidelines to appropriately delimit an award of punitive damages within the context of due process (through jury instructions and judicial review). In particular, the jury instructions sufficiently conveyed the purpose of punitive damages"`not to compensate the plaintiff for any injury' but `to punish the defendant' and `for the added purpose of protecting the public by [deterring] the defendant and others from doing such wrong in the future.'" Id. at 19, 111 S.Ct. 1032 (quoting the jury instructions) (alteration added in Haslip). The Court also held that the jury instructions limited the jury's discretion"[i]t was confined to deterrence and retribution, the [S]tate policy concerns sought to be advanced." Id. In addition, the Court noted that "the Supreme Court of Alabama had established post-trial procedures for scrutinizing punitive awards." Id. at 20, 111 S.Ct. 1032. These procedures together allowed the "meaningful and adequate review" by both the trial court and the Supreme Court of Alabama. Id. "The Alabama Supreme Court's postverdict review ensures that punitive damages awards are not grossly out of proportion to the severity of the offense and have some understandable relationship to compensatory damages." Id. at 22, 111 S.Ct. 1032. Accordingly, the Supreme Court upheld the punitive damage award and concluded that it was not unconstitutionally excessive. Id. at 24, 111 S.Ct. 1032. The Court's concern in Haslip that courts conduct meaningful and adequate review of punitive damages awards is consistently echoed in the subsequent Court cases. This concern is one which we deem critical in our analysis here.
*47 Two years later, in TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (plurality opinion), a constitutional challenge to a punitive damages award came before the Supreme Court again, this time in the context of a common law slander-of-title-action. There, TXO argued that the punitive damages award was unconstitutional, both because the amount was excessive and because it was the product of an unfair procedure. TXO argued that the award was the result of a "fundamentally unfair procedure because the jury was not adequately instructed, because its award was not adequately reviewed by the trial or the appellate court, and because TXO had no advance notice that the jury might be allowed to return such a large award or to rely on potential harm as a basis for its calculation." Id. at 462-63, 113 S.Ct. 2711. In upholding the punitive award of $10 million and compensatory award of only $19,000a 526:1 ratiothe Court followed the rationale of Haslip, and examined both whether fair and adequate procedures were followed and whether there was a reasonable relationship between the award and the harm that occurred (or was likely to occur) from the defendant's conduct. Id. at 458, 113 S.Ct. 2711.
In addressing the challenge to the procedure, the Court reasoned that "[a]ssuming that fair procedures were followed, a judgment that is a product of that process is entitled to a strong presumption of validity." Id. at 457, 113 S.Ct. 2711 (emphasis added). Viewing the fact that the trial judge did not articulate his reasons for upholding the award, the Court concluded that "we certainly are not prepared to characterize the trial judge's failure to articulate the basis for his denial of the motions for judgment notwithstanding the verdict and for remittitur as a constitutional violation." Id. at 465, 113 S.Ct. 2711. The Court concluded that the judge gave counsel an adequate hearing on the post-verdict motions and concluded that fair procedures were followed.
The Court in TXO again sought to insure the reasonableness of the amount of punitive awards, but it reiterated that "[w]e need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case." Id. at 458, 113 S.Ct. 2711. Instead, the Court maintained that a "general concer[n] of reasonableness ... properly enter[s] into the constitutional calculus." Id. (citing Haslip, supra, 499 U.S. at 18, 111 S.Ct. 1032) (emphasis added). The Court recognized that the Haslip punitive award was four times the amount of compensatory damages and "`may be close to the line' of constitutional permissibility," Id. at 459, 113 S.Ct. 2711 (citing Haslip, supra, 499 U.S. at 23, 111 S.Ct. 1032), but also noted that it had "eschewed an approach that concentrates entirely on the relationship between actual and punitive damages." Id. at 460, 113 S.Ct. 2711. Specifically, the Court "did not consider the dramatic disparity between the actual damages and the punitive award controlling in a case of this character." Id. at 462, 113 S.Ct. 2711. The Court determined that, "in light of the amount of money potentially at stake, the bad faith of petitioner, the fact that the scheme employed in this case was part of a larger pattern of fraud, trickery and deceit, and petitioner's wealth, [it was] not persuaded that the award was so `grossly excessive' as to be beyond the power of the State to allow." Id. (emphasis added). The Court upheld the punitive award relying in large part on principles set forth in Haslip, notwithstanding the fact that the ratio of punitive to compensatory damages was 526:1 in TXO compared to 4:1 in Haslip.
*48 In contrast to Haslip and TXO, in Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994), the Supreme Court overturned the punitive award based on the inadequacy of the State procedures for reviewing such awards. The jury imposed punitive damages of more than five times the amount of the compensatory damages. Both the intermediate appellate and Oregon Supreme Courts upheld the jury award without review. However, the Supreme Court held that "Oregon's denial of judicial review of the size of punitive damages awards violates the Due Process Clause of the Fourteenth Amendment." Id. at 432, 114 S.Ct. 2331. The Supreme Court reasoned that:
[P]unitive damages pose an acute danger of arbitrary deprivation of property. Jury instructions typically leave the jury with wide discretion in choosing amounts, and the presentation of evidence of a defendant's net worth creates the potential that juries will use their verdicts to express biases against big businesses, particularly those without strong local presences. Judicial review of the amount awarded was one of the few procedural safeguards which the common law provided against that danger. Oregon ha[d] removed that safeguard without providing any substitute procedure and without any indication that the danger if arbitrary awards had in any way subsided over time. Id.
The Supreme Court declined to uphold the punitive damage award and reversed and remanded to the Oregon Supreme Court for further proceedings. Id. at 435, 114 S.Ct. 2331.
When read together, these early punitive damages cases, Haslip, TXO, and Honda, show the Court's concern for preventing "wild" jury awards by upholding awards that have been reviewed through a "fair and adequate" process, because such review protects defendants' rights by ensuring that there is a check on jury discretion. At the same time, the Court's jurisprudence evinces a reluctance to draw a "bright-line" ratio for reviewing awards under the process but instead focuses the inquiry on whether the award is reasonable when compared to both the actual or potential harm suffered and the State's interest in protecting the public by deterring future unlawful conduct.
Continuing its examination of punitive damage excessiveness challenges in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), the Supreme Court reiterated and further developed the principles from its earlier cases and more clearly articulated the principle that "[e]lementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose." In Gore, the Court reasoned that "BMW did not receive adequate notice of the magnitude of the sanction that Alabama might impose" for fraud in adhering to a nationwide policy of non-disclosure in selling repainted automobiles as new. Id. at 574, 116 S.Ct. 1589. The trial court denied the defendant's post-trial motion to reduce the award as excessive. However, the Alabama Supreme Court concluded that the jury improperly computed the amount of punitive damages, and it recalculated the punitive damages to a "constitutionally reasonable" punitive damages award of $2 million. Id. at 567, 116 S.Ct. 1589.
The Supreme Court in Gore articulated three guideposts for reviewing courts to use in evaluating whether punitive damages awards are unconstitutionally excessive. The Gore guideposts are based on concerns expressed by the Court in its *49 earlier punitive awards cases. These guideposts are: 1) the degree of reprehensibility of the conduct; 2) the ratio of the punitive damages to the actual harm inflicted on the plaintiff; and 3) a comparison of the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct.[14]Id. at 574-75, 116 S.Ct. 1589. In applying these guideposts, the Court determined that BMW's conduct was not sufficiently reprehensible because the harm was not performance or safety related, but rather "purely economic," and the plaintiff was not financially vulnerable. Id. at 576, 116 S.Ct. 1589. Therefore, the Court reasoned that the conduct did not show an "indifference to or reckless disregard for the health or safety of others." Id. The Court continued to reject the notion of drawing a constitutional line "marked by a simple mathematical formula," but noted that the punitive award was "breathtaking" at 500 times the amount of actual harm and bore no reasonable relationship to the compensatory damages awarded. Id. at 582-83, 116 S.Ct. 1589. Finally, the Court concluded that the $2 million was "substantially greater" than the statutory fines available in Alabama and elsewhere for similar malfeasance. Id. at 583-84, 116 S.Ct. 1589. Holding that the award was unconstitutionally excessive, the Court reversed the judgment and remanded the case for further proceedings. Id. at 586, 116 S.Ct. 1589.[15]
The Gore guideposts were applied and expounded upon by the Court in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). The Court also incorporated the principles of its earlier punitive award cases, discussed supra. There, the Campbells, who were insured by State Farm, filed a complaint against State Farm alleging bad faith, fraud, and intentional infliction of emotional distress, because State Farm insisted on taking a wrongful death case against the Campbells to trial instead of settling with the plaintiffs within the policy limit (all while assuring the Campbells that they did not need to obtain separate counsel). When the Campbells were found liable and judgment was entered against them in an amount more than $180,000 over the settlement offer, State Farm refused to cover the excess liability. Id. at 413-14, 123 S.Ct. 1513. In the fraud action brought by the Campbells against State Farm, the jury awarded $2.6 million in compensatory damages and $145 million in punitive damages, which the trial court reduced to $1 million and $25 million, respectively. Id. at 415, 123 S.Ct. 1513. The Utah Supreme Court reinstated the $145 million punitive damages award after applying the Gore guideposts. Id. Reversing the Utah Supreme Court, the United States Supreme Court reiterated its concern *50 about the reasonableness of punitive awards by stressing that "[t]he principles set forth in Gore must be implemented with care, to ensure both reasonableness and proportionality." Id. at 428, 123 S.Ct. 1513.
In applying the first Gore guidepost, the Court provided additional guidance on how a reviewing court should evaluate the level of reprehensibility of the defendant's conduct. Specifically, in evaluating whether State Farm's conduct toward the Campbells was sufficiently reprehensible, the Court factored whether: 1) "the harm caused was physical as opposed to economic"; 2) "the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others"; 3) "the target of the conduct had financial vulnerability"; 4) "the conduct involved repeated actions or was an isolated incident"; and 5) "the harm was the result of intentional malice, trickery, or deceit, or mere accident." Id. at 419, 123 S.Ct. 1513. The Court concluded that State Farm's conduct was not so reprehensible to warrant the punitive damages awarded by the jury because the harm was economic and "not from some physical assault or trauma; there were no physical injuries; and State Farm paid the excess verdict before the complaint was filed so the [appellees] suffered only minor economic injuries for the 18-month period in which State Farm refused to resolve the claim against them." Id. at 426, 123 S.Ct. 1513.
In applying the second guidepost, the Court compared the punitive award to actual harm, and again declined to impose a "bright-line" ratio. However, the Court recognized that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages to a significant degree, will satisfy due process." Id. at 425, 123 S.Ct. 1513 (emphasis added). Referencing the 4:1 ratio from Haslip and cited in Gore, the Court reiterated that such awards "might be close to the line of constitutional impropriety," but also noted that "[w]hile these ratios are not binding, they are instructive[,] [t]hey demonstrate... [that] [s]ingle-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in the range of 500 to 1, or, in this case, of 145 to 1." Id. (citing Gore, supra, 517 U.S. at 582, 116 S.Ct. 1589) (emphasis added). Further, the State Farm Court went on to note that "because there are no rigid benchmarks that a punitive damages award may not surpass, ratios greater than those we have previously upheld may comport with due process where `a particularly egregious act has resulted in only a small amount of economic damages.'" Id. However, the Court found the Campbells' compensatory award "substantial" as appellees "were awarded $1 million for a year and a half of emotional distress." Id. at 426, 123 S.Ct. 1513. Ultimately, the Court held that the award was "neither reasonable nor proportionate to the wrong committed, and ... an irrational and arbitrary deprivation" of State Farm's property, so the Court reversed the judgment and remanded to the Utah Supreme Court for further proceedings to determine the appropriate amount of punitive damages. Id. at 429, 123 S.Ct. 1513.
The Court's decisions in Gore and State Farm, reflect its attempt to articulate an additional check against seemingly high awards and its continued concern that some awards, though properly reviewed through a "fair and adequate" process, may still be unreasonable when compared to the level of egregiousness of the conduct at issue and the actual or potential harm suffered. Notwithstanding this concern, the Court still refused to articulate a constitutional limit for punitive awards and *51 has steadfastly exercised restraint in overturning punitive awards.[16]
More recently,[17] in Philip Morris USA v. Williams, 549 U.S. 346, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007), the Court, once again reiterating its concern for a fair process which gives rise to a presumption of legitimacy, concluded that "the Due Process Clause requires States to provide assurance that juries are not ... seeking *52... to punish for harm caused [to] strangers." Id. at 355, 127 S.Ct. 1057. The Court did not address the question of whether the punitive damage award of $79.5 million dollars was excessive when compared to the $821,000 in compensatory damages (nearly a 100:1 ratio) in a negligence and deceit lawsuit against a cigarette manufacturer for knowingly and falsely leading the decedent to believe that smoking was safe. The issue before the Court was "[w]hether the Constitution's Due Process Clause permits a jury to base that award in part upon its desire to punish the defendant for harming persons who are not before the court (e.g., victims whom the parties do not represent)." Id. at 349, 127 S.Ct. 1057. The Court held "that such an award would amount to a taking of `property' from the defendant without due process." Id. In reaching its decision, the Court noted that the trial court rejected defense counsel's proposed jury instruction that specified that "the jury could not seek to punish Philip Morris for injury to other persons not before the court." Id. at 350, 127 S.Ct. 1057. Instead, the judge instructed the jury that "`[p]unitive damages are awarded against a defendant to punish misconduct and to deter misconduct,' and `are not intended to compensate the plaintiff or anyone else for damages caused by the defendant's conduct.'" Id. at 351, 127 S.Ct. 1057. The Court concluded that, "[a]lthough the States have some flexibility to determine what kind of procedures they will implement, federal constitutional law obligates them to provide some form of protection in appropriate cases." Id. at 357, 127 S.Ct. 1057 (included in original). Holding that the State court applied the wrong constitutional standard to the appeal, the Court vacated the judgment and remanded the case to the Oregon Supreme Court to apply the proper standard. Id. at 357-58, 127 S.Ct. 1057.
In Philip Morris, as in previous cases, the Court continued to look first to the process under which the punitive damages were levied and reviewed. The Court held that the process was flawed because the trial judge refused to ensure that the defendant was not being punished for conduct against non-parties. We glean from the Court's jurisprudence that allowing juries to compensate a plaintiff for the defendant's conduct against non-parties invites "wild" or unreasonable awards and prevents the defendant from having notice of possible sanctions that could be levied against him in the suit.
The Court's divided opinions in each of the cases discussed supra have made it challenging for reviewing courts to distill the Court's views on the excessiveness of punitive awards. We think that the divided opinions caution us to exercise restraint in overturning jury awards that have been reviewed under fair and adequate State procedures and processes. Nevertheless, we look beyond the mathematical ratio to determine whether the punitive damages award is excessive. Rather than relying on mathematical ratios alone, we focus on the principles discussed in the Supreme Court cases, and specifically the concern that: 1) courts conduct a "meaningful and adequate review" of a jury's punitive damage award both at the trial and appellate level to ensure that the award is the product of a process that is entitled to a strong presumption of validity; 2) the award punishes truly reprehensible conduct; 3) the punitive damage award has some relation to the harm suffered by the plaintiff and evidences "reasonableness and proportionality," although there is no "bright-line" ratio, to ensure that the award is not grossly out of proportion to the severity of the offense; and 4) the award advances a State policy concern such as protection of *53 the public by deterring the defendant or others from doing such wrong in the future.
B.
In the instant case, in examining whether the punitive damages awarded to Wilson are unconstitutionally excessive, we do so mindful of the principles we have distilled from the key Supreme Court cases and the application of those principles in numerous federal and state cases as well as in our own cases. Many of the more recent federal, state, and District of Columbia cases analyze punitive damages awards using the framework of the Gore guideposts, which reflect the Supreme Court's concerns, that the process afford a "meaningful and adequate" review of a jury punitive damage award and that the award evince "reasonableness and proportionality."
In this case, appellants rely on Philip Morris, supra, 549 U.S. at 346, 127 S.Ct. 1057, to support their contention that they were prejudiced by the admission of evidence regarding the one hundred similar pre-foreclosure transactions, which, they contend, resulted in the jury inflating the punitive damages awards to punish appellants for their conduct in unrelated transactions with non-parties.[18] Appellants' reliance on Philip Morris in this context is misplaced. Further, because the punitive damage awards comport with the principles we have gleaned from the Supreme Court jurisprudence, we conclude that the punitive damages in this case are not grossly excessive or violative of due process.
We disagree with appellants' argument that the punitive awards reflect the jury's attempt to punish them for their previous transactions with non-parties (which were the subject of the RICO claims that were dismissed and never submitted to the jury).[19] Contrary to appellants' assertions, Philip Morris is not applicable here. In reaching its conclusion in Philip Morris, the Court noted that in order to ensure that juries do not use the "rubric of reprehensibility" to punish a defendant for harm caused to others "where the risk of ... misunderstanding is a significant onebecause, for instance, of the sort of evidence that was introduced at trial or the kinds of argument the plaintiff made to the jurya court, upon request, must protect against that risk." Id. at 357, 127 S.Ct. 1057 (emphasis added). Unlike the defendant in Philip Morris, appellants did not request that the trial court give a jury instruction to disregard the other pre-foreclosure-transactions evidence involving "strangers to the lawsuit," after the RICO claims were dismissed. Nor did appellants renew their objection or request a curative jury instruction to correct or avoid what they now argue may have been jury confusion regarding the evidence.[20]
*54 C.
Appellants further challenge the validity of the punitive damages awards on the grounds that the awards are unconstitutionally excessive on their face. The trial judge, they argue, should have scrutinized and reduced the punitive damages. Appellants moved the trial court to set aside the awards, but the court denied appellants' motion, finding that "there was sufficient evidence presented regarding [appellants'] sale/lease-back/option to repurchase transaction to support the jury's punitive damages award."
We review a trial court's rulings on excessiveness of punitive damages de novo. See State Farm, supra, 538 U.S. at 418, 123 S.Ct. 1513 (citing Cooper Indus., supra note 12, 532 U.S. at 436, 121 S.Ct. 1678); see also Daka, Inc. v. McCrae, 839 A.2d 682, 697 (2003). Appellants have had the opportunity to raise the excessiveness challenge both at trial and on appeal. While appellants argue that the trial court should have scrutinized and reduced the punitive awards as "excessive on [their] face[s]," we view this as a close question and ultimately conclude in this case, that the punitive damages awards are constitutionally acceptable. Appellants made the same arguments on punitive damages here that they did in their written motion to the trial court for JNOV. In addition to considering the motion, pleadings and oppositions, the trial judge held a hearing where appellants had the opportunity to advance the arguments that they make here on appeal. We have considered the concerns raised by the Supreme Court and cases in our jurisdiction and have carefully scrutinized the awards in light of these considerations, which are reflected in the Gore guideposts that we use to structure our analysis, and we conclude that the punitive damages awards in this case are constitutionally acceptable.
Reprehensibility
The first Gore guidepost examines the reprehensibility of the defendant's actions. This guidepost reflects the Supreme Court's concern that the conduct the punitive damage award seeks to punish must be sufficiently reprehensible. Clearly, the conduct involved herea scheme to dupe Wilson out of the title to the home she owned for twenty-two years and fought desperately to keepwas reprehensible. *55 "[T]he most important indicium of the reasonableness of a punitive damages award is the degree of reprehensibility of the defendant's conduct." State Farm, supra, 538 U.S. at 419, 123 S.Ct. 1513 (emphasis added) (quoting Gore, supra, 517 U.S. at 575, 116 S.Ct. 1589). In our cases, we have expressed a concern that the plaintiff's conduct must meet a high standard of wrongfulness to justify a punitive award. In Chatman v. Lawlor, where this court discussed the sufficiency of evidence supporting an award of punitive damages, we recognized that "[p]unitive damages may be awarded `only if it is shown by clear and convincing evidence that the tort committed by the defendant was aggravated by egregious conduct and a state of mind that justifies punitive damages.'" 831 A.2d 395, 400 (D.C.2003) (citations omitted). The trial judge here was mindful of the high standard of wrongfulness necessary for imposing a punitive damages awards. Accordingly, the trial judge properly instructed the jury to award punitive damages only if it found by clear and convincing evidence that appellants "acted with evil motive, actual malice, deliberate violence or oppression, or with intent to injure, or in willful disregard for the rights of the plaintiff" and that appellants' conduct was "outrageous" or "grossly fraudulent." The trial judge's instruction to the jury evinces the court's mindfulness of the longstanding principle that only truly reprehensible conduct should be punished by imposition of punitive damages.
The factors we consider when examining reprehensibility include whether: a) "the harm caused was physical as opposed to economic"; b) "the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others"; c) "the target of the conduct had financial vulnerability"; d) "the conduct involved repeated actions or was an isolated incident"; and e) "the harm was the result of intentional malice, trickery, or deceit, or mere accident." State Farm, supra, 538 U.S. at 419, 123 S.Ct. 1513.
Appellants mischaracterize this case as one where the harm was "purely economic" because they "simply bought a house and rented it back without paying enough for its value." This is an understatement of the harm appellants caused Wilson and further underscores the reckless indifference with which appellants acted. The harm to Wilson was not purely economic, though economic harm was clearly a key element of appellants' scheme. "[I]nfliction of economic injury, especially when done intentionally through affirmative acts of misconduct ... or when the target is financially vulnerable, can warrant a substantial penalty." Gore, supra, 517 U.S. at 576, 116 S.Ct. 1589 (citing TXO, supra, 509 U.S. at 453, 113 S.Ct. 2711). Appellants utilized "trickery or deceit" in their business dealings with Wilson by providing her with confusing paperwork that was purposely mislabeled. See TXO, supra, 509 U.S. at 462, 113 S.Ct. 2711 (upholding a $10 million punitive damages award in an action for slander of title because the appellant's scheme was "part of a larger pattern of fraud, trickery and deceit"). Appellant Baltimore sought out Wilson upon hearing of her imminent foreclosure and misrepresented himself as a "money lender" and, along with Abell, urged the transaction forward. In Byrd v. Jackson, we held that the punitive damages amount was justified when the trial court found that the appellant had "orchestrated [a] scheme to gain title to [a] home for a fraction of its value." 902 A.2d 778, 782-83 (D.C.2006) (internal quotation marks omitted). We affirmed the trial judge's award of treble and punitive damages where the trial judge found that the *56 defendant's actions were "particularly malicious because ... [they were] calculated to take advantage of a frail, elderly and vulnerable widow." Id. at 783. Similarly, here, Wilson was disabled, caring for her elderly mother, unable to work, and suffering under the weight of her dire financial situation. Wilson was tricked into selling the home that she owned for over twenty-two years in exchange for a mere $5,000, even though expert trial testimony established that the fair market value of the house was $300,000 at the time of the transaction in 2003. An impartial jury could reasonably find appellants' conduct sufficiently reprehensible to support the awards.
Further, although the evidence of the prior similar transactions in which Abell, Modern Management, and Baltimore were allegedly involved may not be used to punish Abell for harm caused to other homeowners, it may be considered when assessing the reprehensibility of Abell's actions. See Philip Morris, supra, 549 U.S. at 355, 127 S.Ct. 1057 ("Evidence of actual harm to nonparties can help to show that the conduct that harmed the plaintiff also posed a substantial risk of harm to the general public, and was so particularly reprehensible.... Yet ... a jury may not go further than this and use a punitive damages verdict to punish a defendant directly on account of harms it is alleged to have visited on nonparties."); see also Gore, supra, 517 U.S. at 577, 116 S.Ct. 1589 ("Our holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance."). The purpose of the punitive damages provision is deterrence and retribution; therefore, the fact that appellants may have employed the same scheme before and the number of other transactions where appellants employed the same scheme is relevant to the amount that should be awarded to deter the defendant from future similar conduct. See State Farm, supra, 538 U.S. at 416, 123 S.Ct. 1513.
We are satisfied that appellants' actions are reprehensible to a degree that comports with the first Gore guidepost. We next address the second Gore guidepost.
Punitive Damages Compared to the Harm
Under the second Gore guidepost, we compare the punitive award to the actual harm inflicted on the plaintiff (compensatory damages). See Gore, supra, 517 U.S. at 580, 116 S.Ct. 1589. This guidepost reflects the principle discussed supra that a punitive damage award must be reasonable and proportional to the harm suffered. While the Supreme Court has recognized that "a comparison between the compensatory award and the punitive award is significant," the Court has also "consistently rejected the notion that the constitutional line is marked by a simple mathematical formula." Id. at 581-82, 116 S.Ct. 1589.
In evaluating the damages awards under this guidepost, first, we must determine the proper numbers to compare. Examining the differences in purpose behind the various types of damages a plaintiff may receive provides guidance. "Compensatory damages `are intended to redress the concrete loss that the plaintiff has suffered by reason of the defendant's wrongful conduct.'" State Farm, supra, 538 U.S. at 416, 123 S.Ct. 1513 (quoting Cooper Indus., Inc., supra note 12, 532 U.S. at 432, 121 S.Ct. 1678). The purpose of the treble damages provision of the CPPA is remedial. "By contrast, punitive damages serve a broader function; they are aimed at deterrence and retribution." Id. "When treble damages are awarded for remedial purposes, *57 they are not a substitute for punitive damages and the heightened proof requirements for punitive damages do not apply." Dist. Cablevision Ltd. P'ship v. Bassin, 828 A.2d 714, 727 (D.C.2003) The remedial purpose of treble damages, as distinguished from punitive damages, is particularly apparent given the fact that the treble damages provision of the CPPA, D.C.Code § 28-3905(k)(1), authorizes the court to treble damages without the plaintiff having to establish anything beyond the CPPA violation itself: "[O]nce it is established that a consumer [has] suffered any damage, the CPPA authorizes [the] court[] to award treble damages without further findings." Byrd, supra, 902 A.2d at 782 (emphasis added) (quoting Dist. Cablevision, supra, 828 A.2d at 729). Therefore, "[b]oth the treble damages, which under the CPPA `serve as a remedial rather than punitive purpose,' and the separate punitive damages" are justified. Byrd, supra, 902 A.2d at 782-83. Here, neither the $60,000 award nor the $180,000 award after trebling is a "substantial" award when considering the equity that Wilson lost in her house and the non-economic harm that she suffered.
When applying the second guidepost, comparing the punitive award to the harm, we look at both "actual and potential damages." See Gore, supra, 517 U.S. at 582, 116 S.Ct. 1589 (emphasis in original); see also Ayala v. Washington, 679 A.2d 1057, 1070 (D.C.1996). It follows that, within the context of the CPPA, we would compare the treble figure to the punitive award, because the treble figure reflects the legislature's desire to ensure "full compensation." Dist. Cablevision, supra, 828 A.2d at 727. Therefore, the ratio of punitive to treble compensatory damages for each appellant respectively is: 11.1:1 for Abell, 6:1 for Modern Management, and 1.1:1 for Baltimore.[21]
Although the Supreme Court recognized in State Farm that "[s]ingle-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution," the Court also reasoned that the award in each case "must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff." State Farm, supra, 538 U.S. at 425, 123 S.Ct. 1513. "Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have *58 been difficult to determine." Gore, supra, 517 U.S. at 582, 116 S.Ct. 1589. While in Daka, Inc. v. Breiner we upheld a 39:1 ratio, concluding that it did not exceed single digit ratios to a "significant degree" given the conduct in question, and then in Daka, Inc. v. McCrae, we concluded that a ratio of 26:1 did exceed single digit ratios to a significant degree, the explanation is found in the compensatory damages that were awarded. Numerically, the ratios differed because the compensatory damages were only $10,000 in Breiner and $187,500 in McCrae, despite the fact that both were based upon workplace discrimination by the same company. This further evidences the importance of looking beyond the ratio at the specific awards in relation to the conduct for each case.[22]
Other courts applying the Gore guideposts have upheld a wide range of ratios. In EEOC v. Fed. Express Corp., 513 F.3d 360, 377 (4th Cir.2008), the Fourth Circuit noted that "[n]otwithstanding [the defendant's] contention, the 12.5:1 ratio between the compensatory and punitive damages awards does not, as a matter of law, render the punitive damages award unconstitutionally excessive." The court reasoned that "the Supreme Court explained in Gore, [that] a punitive damages award should bear some reasonable relationship to the corresponding award of compensatory damages, but such a relationship is only one factor in an excessiveness analysis." Id. (citations omitted). Some courts have interpreted the "single-digit ratio" language to justify any award less than 10 times the compensatory award. See, e.g., Goldsmith v. Bagby Elevator Co., Inc., 513 F.3d 1261, 1283-84 (11th Cir.2008) (upholding a 9.2:1 ratio where the conduct was "exceedingly reprehensible"); Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1044 (2003) (a ratio "slightly" more than 7:1 was not unconstitutionally excessive); Thomas v. Nat'l Legal Prof'l Assoc., 594 F.Supp.2d 31, 34 (D.D.C.2009) ("[T]he Court cannot say with `legal certainty' that a ratio of 6.5:1 between Plaintiff's punitive and compensatory damages violated Defendants' due process rights." (citations omitted)). Others have interpreted the language as a guide, but not binding, particularly when the conduct is reprehensible and the ratio is far below the triple digit ratios reviewed by the Supreme Court. See Planned Parenthood of the Columbia/Willamette, Inc. v. Am. Coal. of Life Activists, 422 F.3d 949, 962 (9th Cir.2005); see also Romano v. U-Haul Int'l, 233 F.3d 655 (1st Cir.2000) (upholding a 19:1 ratio); see also note 21, supra. These cases demonstrate that there is no set number that is indicative of an unconstitutional award, further proving that the ratios involved in this case are not necessarily excessive on their face, as appellants contend. Our focus in evaluating the punitive awards here remains on the reasonableness of the award, considering the degree of reprehensibility of the conduct and the interest in deterring the conduct.
Our court has recognized, albeit in a different context, that "[a]n excessive *59 verdict is one which `is beyond all reason, or ... is so great as to shock the conscience.'" Scott v. Crestar Fin. Corp., 928 A.2d 680, 688 (D.C.2007) (affirming the trial court's decision to set aside the compensatory award that was "extraordinarily disproportionate to the injuries and losses claimed," after the plaintiff's counsel asked jurors to "send a message" through the compensatory award) (citations omitted).[23] "`Because the purpose of punitive damages is to punish a tortfeasor and deter future [harmful] conduct, the amount of such damages should be enough to inflict punishment, while not so great as to exceed the boundaries of punishment and lead to bankruptcy.'"[24]Breiner, supra, 711 A.2d at 101 (citing Jonathan Woodner v. Breeden, 665 A.2d 929, 941 (D.C.1995)). While appellants might plausibly argue that the award against Abell should "raise a suspicious judicial eyebrow," TXO, supra, 509 U.S. at 481, 113 S.Ct. 2711, Abell testified that he owned fifty to seventy houses and one-hundred-and-fifty apartment units, and that he and his wife had a combined net worth of approximately $10 million dollars. "[A] punitive damages award must remain of sufficient size to achieve the twin purposes of punishment and deterrence." Saunders v. Branch Banking and Trust Co. of Va., 526 F.3d 142, 154 (4th Cir.2008). The jury was instructed to consider the net worth when determining what damages would be sufficient to serve as a deterrent. After considering all of the evidence presented about appellants' scheme, the jury concluded that the punitive awards were warranted in the amounts specified.
Here, Wilson suffered more than just the financial harm. She not only lost the equity in her house, but she also suffered the emotional harm of being evicted from the home that she had maintained for over twenty-two years,[25] while she was physically, emotionally and financially vulnerable. This is a case where the compensatory award was not very large, compared to the equity that Wilson lost in her house. Therefore, the ratio of punitive to compensatory damages comports with the second Gore guidepost and does not indicate that the awards are unconstitutionally excessive.
Penalties for Comparable Conduct
We turn now to the third and final Gore guidepost which compares the punitive damages award and the "civil or criminal penalties that could be imposed for comparable misconduct." Gore, supra, 517 U.S. at 583, 116 S.Ct. 1589. This guidepost is the most difficult to apply, because the excessiveness inquiry must be carefully considered based on the specific facts of the case in question; thus it is hard to draw a comparison to fines imposed in other cases. See Cooper Indus., supra note 12, 532 U.S. at 435, 121 S.Ct. 1678. Although this guidepost is given less weight than the first two,[26] it reflects the Supreme Court's concern that punitive damages awards advance a State policy *60 concern such as protection of the public by deterring the defendant or others from doing such wrong in the future. "The existence of a criminal penalty [has a] bearing on the seriousness with which [the legislature] views the wrongful action," but "the [] possibility of a criminal sanction does not automatically sustain a punitive damages award." State Farm, supra, 538 U.S. at 428, 123 S.Ct. 1513. In articulating this guidepost, the Supreme Court focused on the fact that "a reviewing court engaged in determining whether an award of punitive damages is excessive should `accord substantial deference to legislative judgments concerning appropriate sanctions for the conduct at issue.'" Gore, supra, 517 U.S. at 583, 116 S.Ct. 1589 (quoting Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. at 301, 109 S.Ct. 2909 (O'Connor, J., concurring in part and dissenting in part)); see also note 16, supra. This demonstrates the concern for ensuring that the punitive award is not arbitrary and is tied to a State's interest in protecting potential victims from defendants' reprehensible conduct.
At the time the award was imposed, there was no statute imposing a fine for the specific conduct at issue. In a broader context, the most relevant civil penalty is found in § 3909(b) of the CPPA, which authorizes the District of Columbia Corporation Counsel to recover up to $1,000 for each violation of § 3904 of the CPPA, which covers unlawful trade practices.[27] Statutory civil and criminal penalties do not always account for the seriousness of the conduct in question. The CPPA does not limit allowable damages and specifically provides that the penalties are "cumulative" and that nothing in the CPPA "shall prevent any person who is injured by a trade practice in violation of a law of the District of Columbia ... from exercising any right or seeking any remedy to which the person might be entitled...." D.C.Code § 28-3905(k)(2) (emphasis added); see also Breiner, supra, 711 A.2d at 102 (noting that the specific D.C. statute under which the defendant was found liable did not limit allowable damages, and upholding the award although it exceeded the maximum fine found in a comparable federal statute because of the need to deter future conduct).
In addition to statutory fines, when applying the third guidepost, we also look to the awards in comparable cases involving similar conduct. See McCrae, supra, 839 A.2d at 700. We note that Byrd, supra, is the most factually similar case in this jurisdiction, although it does not specifically address the amount of the punitive damage award. There, we affirmed compensatory damages of $148,175 (representing the equity the victim lost in her home), the treble award of $315,026 (after subtracting a setoff of $129,500 from a settlement with a co-defendant), and additional punitive damages where the appellant violated the CPPA by advertising himself as a "foreclosure specialist" under a "scheme to gain title to the [victim's] home for a `fraction of its value.'" Byrd, supra, 902 A.2d at 782. *61 Here, Wilson received $60,000 in compensatory damages, which is far less than the $106,000 of equity that she had in her home at the time of closing.[28] The punitive award comports with the third guidepost, notwithstanding that it is given less weight than the first two, since there was no statute imposing a civil fine addressing the conduct at issue or limit on the amount of punitive awards for the conduct at the time. Further, as we have noted, the award here satisfies the first two Gore guideposts.
In light of the Supreme Court's jurisprudence, discussed above, and the Gore guideposts, which reflect the Court's guiding principles, we conclude that the punitive damages awards entered against the appellants are not grossly excessive or violative of due process.
III.
Appellants are entitled to a $40,000 setoff
Appellants' final argument concerning the damages awards is that the trial court erred in not reducing the compensatory damages award of $60,000 by the amount of the $40,000 settlement that Wilson reached with Houlon Berman (the law firm involved in the transaction, with whom Wilson settled). We agree and direct the trial court to apply the setoff to the trebled compensatory award. "The question of `how to credit the judgment entered upon a jury verdict against a nonsettling defendant with the proceeds a settling defendant paid to the plaintiff' is purely a question of law, which this court reviews de novo." Paul v. Bier, 758 A.2d 40, 42 (D.C.2000) (citing Berg v. Footer, 673 A.2d 1244, 1247 (D.C.1996) (internal citations omitted)).
On appeal, both parties agree that a setoff is appropriate. They disagree, however, on when the setoff amount should be subtracted from the compensatory damages. Wilson contends that appellants are entitled to a set-off from the $180,000 trebled compensatory damage award, while appellants argue the amount should be subtracted before trebling (which would reduce the compensatory damages to $20,000). In its order denying appellants' motion for JNOV or for a new trial, the trial court was "unable to determine whether Defendant is entitled to a pro rata credit based on Plaintiff's settlement with the joint tortfeasor, [Houlon Berman] because of the absence of either a judicial determination or a stipulation among the parties that [Houlon Berman] was a joint tortfeasor with the other Defendants." Having reviewed the record, however, we note that the "General Release and Agreement" states that damages recovered in the lawsuit "are hereby reduced by the amount of the consideration paid for this release, or to the extent of the pro rata share of [Houlon Berman], whichever is greater" and that Houlon Berman "is to be considered a joint tortfeasor with any other tortfeasors liable to Claimant for damages arising out of the Claims to the same extent as if the Released Party was adjudicated to be a joint tortfeasor by a final judgment of a court of record after a trial on the merits."
We have previously recognized that a setoff"a demand which the defendant has against the plaintiff, arising out of a transaction extrinsic to the plaintiff's cause of action"is applied after the initial damages are multiplied.[29]District Cablevision, *62 supra, 828 A.2d at 730 n. 21 (emphasis included in original) (citations omitted), see also id. at 731 n. 22. Therefore, appellants are entitled to a pro rata setoff from the $180,000 treble compensatory award, reducing appellants' liability to $140,000 in compensatory damages.
IV.
Wilson is a "consumer" under the CPPA
We are unpersuaded by appellants' contention that the trial court erred in submitting to the jury, as a question of fact, the issue of whether Wilson qualified as a "consumer" within the meaning of the CPPA, the statute under which Wilson was able to recover both treble and punitive damages.[30] Appellants argue that Wilson's role as a landlord precludes her from being considered a "consumer," because her rental of a room in the house shows that the house was not her primary residence and thus the house was not a "consumer good" because it was not "primarily for personal, household, or family use." Appellants' argument is misplaced. The question of whether the home was Wilson's primary residence and whether her house was used primarily for "personal, household, or family use" are two different inquiries. Cf. Ford v. ChartOne, 908 A.2d 72, 83 (D.C.2006) (reasoning that "[a] motive may be pecuniary and still be personal").
"Consumer" is defined in the CPPA, D.C.Code § 28-3901(a)(2), to "mean[ ] a person who does or would purchase, lease (from), or receive consumer goods or services including a co-obligor or surety, or a person who does or would provide the economic demand for a trade practice; as an adjective, `consumer' describes anything, without exception, which is primarily for personal, household, or family use[.]" (emphasis added). The purpose of the CPPA is to protect consumers from a broad spectrum of unscrupulous practices by merchants, therefore the statute should be read broadly to assure that the purposes are carried out. See District Cablevision, supra, 828 A.2d at 722-23 (citation omitted). Thus, the statute should be read in conjunction with other provisions within the CPPA which clarify the meaning of "primarily for personal, household, or family use." D.C.Code § 28-3901(a)(2). For example, "goods and services" under the statute are defined as "any and all parts of the economic output of society, at any stage or related or necessary point in the economic process, and includes consumer credit, franchises, business opportunities, real estate transactions, and consumer services of all types." D.C.Code § 28-3901(a)(7) (emphasis added). As we have previously noted, "the specific inclusion of `franchises' and `business opportunities' in this definition demonstrates unequivocally that the consumer in a consumer transaction is allowed to have a financial motive." Ford, supra, 908 *63 A.2d at 83; see also Weschler & Son, Inc. v. Klank, 561 A.2d 1003, 1005 (D.C.1989) (holding that a person purchasing an antique from an auction was engaged in a "consumer transaction" within the meaning of the CPPA).
Given the evidence presented, the jury could reasonably have concluded that Wilson entered into the transaction to prevent foreclosure so that she could continue to live in the house that she had owned for over twenty years. In the alternative, the jury could have concluded that Wilson entered into the transaction to prevent foreclosure on her home and to continue to rent the house to tenants, earning income from a house that she owned for over twenty years. In either conclusion, one thing remains the same: the purpose for which Wilson entered into the transaction was to maintain her ownership of the home. Therefore, the purpose of the transaction was personal to Wilson; she contracted with the appellants not as a landlord in order to gain profit, but as a consumer seeking to "receive" their services as self-proclaimed "foreclosure specialists" and "money lenders," to help her maintain ownership of her house. We applied a similar analysis in Browner v. District of Columbia, where we considered whether the Loan Sharking Act, D.C.Code § 26-901, applied to a defendant who claimed that he had never loaned money to the plaintiff. 549 A.2d 1107, 1114 (D.C. 1988) (substance, not form, of the transactions was critical in determination that they were loans within the meaning of the Loan Sharking Act).
Since, the evidence presented during trial on the consumer issue was contested, the outcome depended upon weighing the evidence and determining the credibility of the witnesses at trialfunctions which are squarely within the purview of the trier of fact. Further, because the jury instruction given by the trial judge on the consumer question quoted directly from the statute, the jury was properly instructed on the correct legal framework with which to determine the facts and evaluate the disputed evidence.
Therefore, we conclude that given the disputed facts presented at trial, the issue of whether Wilson qualified as a "consumer" under the CPPA was a question of fact properly submitted to the jury and the verdict is supported by the evidence.[31]
V.
We conclude, for all of the reasons set forth above, that the punitive damages awards against the appellants were not unconstitutionally excessive. In addition, we conclude that the trial court did not *64 err in initially permitting Wilson to pursue her RICO claims, as the record does not support appellants' claims that the jury improperly inflated the punitive awards because of the RICO evidence. The appellants are entitled to a pro rata setoff from the $180,000 trebled compensatory award in the amount of the $40,000 settlement with the co-defendant law firm Houlon Berman, which reduces the compensatory damage award to $140,000. Finally, the trial court did not err in submitting the question of whether Wilson was a consumer under the CPPA to the jury as a question of fact, and the jury verdict finding appellants liable for common law fraud and for violations of the CPPA was not against the weight of the evidence. We affirm on all issues, but remand for the trial court to reduce the treble compensatory damages by the setoff amount to $140,000.
So ordered.
THOMPSON, Associate Judge, with whom SCHWELB, Senior Judge joins, concurring:
I join the opinion of the court because Judge Blackburne-Rigsby's detailed analysis has persuaded me that the punitive damages awards in this case were not so large as to be constitutionally excessive. I write separately, however, to explain why, on the particular facts of this case, I am left feeling that the size of the punitive awards amounts to an unwarranted windfall for appellee Wilson (who was poised to lose her home, in which she had about $100,000 in equity, even before appellants became involved, and who recovered or stands to recover from appellants over $3 million through the punitive damages awards, in addition to $140,000 in compensatory damages).
There can be no dispute that appellants recognized and preyed on Wilson as a financially distressed and vulnerable homeowner, and for that they richly deserve the sting of a punitive damages judgment. But the record also indicates that Wilson was willing to execute documents that she knew mis-described the transaction as she understood it. As the opinion of the court recounts, Wilson was asked to sign documents whose title "indicated a sale of her home when she intended only to obtain a loan to stop the foreclosure." See ante at 43. She signed the documents upon being informed that the "sale was only a `legal fiction' ... necessary to speed up the process." Id. Apparently, Wilson was willing to agree without protest to a deceptive charade in order to obtain the funds she needed. If that is the case, then, in my view, her complicity somewhat diminishes the comparative reprehensibility of appellants' conduct (though, I agree, not enough to entitle appellants to escape entirely the punitive damages awards). There is also the fact (which is of particular note in the wake of the so-called sub-prime mortgage crisis involving not only predatory lenders but also borrowers who irresponsibly took out loans they knew they would be unable to repay) that Wilson told appellants she could afford to pay $1,800 per month and then, for whatever reason, "failed to make any of the ... payments." See ante at 43 (emphasis added). I believe courts would do well to consider instructing juries, in circumstances such as those here, that notwithstanding the deterrent purpose of punitive damages, victim complicity is a factor which may be considered in assessing such damages.
That is not the state of our law, however. The size of the punitive awards was for the jury to determine under the standards prescribed, and so I agree that the awards must stand undisturbed.
NOTES
[1] Wilson filed suit alleging common law and statutory fraud pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.A. §§ 1961-1964.; the District of Columbia Consumer Protection Procedures Act ("CPPA"), D.C.Code §§ 28-3901 to-3905 (2001 & 2009 Supp.); the Truth In Lending Practices Act ("TILPA"), 15 U.S.C.A. §§ 1635-1640; the District of Columbia Loan Sharking Act, D.C.Code § 26-901 (2009 Supp.); the District of Columbia Consumer Credit Services Amendment Act, D.C.Code §§ 28-4601 to -4603 (2001); the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C.A. §§ 1602, 1639; and the District of Columbia Usury Statute, D.C.Code § 28-3301 (2009 Supp.).
[2] Appellants also contend that the trial court erred in failing to enter judgment post-trial on their counterclaim for unpaid rent despite the fact that they did not present the counterclaim to the jury. The record supports the trial court's finding that appellants' counterclaim had no merit as appellants conceded at trial that the counterclaim was "only relevant in the event of rescission," and Wilson elected damages over rescission.
[3] Wilson charged her tenant $625 monthly rent, while her mortgage payments were approximately $1,500.
[4] Contrary to appellants' contention that there was insufficient evidence to find Abell vicariously liable for Baltimore's actions, the record clearly supports such a finding. Abell testified that he hired Baltimore to work as an "independent contractor" to approach homeowners facing foreclosure and inquire whether they were interested in selling their property. Moreover, Abell ratified Baltimore's actions at the closing. See Lewis v. Washington Metro. Area Transit Auth., 463 A.2d 666, 671-72 (D.C.1983).
[5] According to Baltimore, his failure to change the "borrower" term to "seller" was an oversight because his practice was to use the same form in all of his business transactions to obtain mortgage information.
[6] After the transaction, Abell paid the outstanding liens on the property and the $45,000 required to reinstate the mortgage and stop the foreclosure. Abell claims that these payments constitute consideration in addition to the $5,000 cash paid to the title company that issued Wilson the check because he took the property subject to the liens.
[7] Under the Lease Agreement, Wilson owed $1,800 per month in rent and had to pay the remaining $300 from each month only if she exercised the buy-back option at the end of the year.
[8] Count II of Wilson's complaint alleged that appellants violated 18 U.S.C. § 1962(c), which provides: "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity...." Count III of Wilson's complaint alleged that appellants conspired to violate § 1962(c). See 18 U.S.C. § 1962(d).
In appellants' motion for summary judgment, the only reference to Wilson's RICO claims was in the concluding paragraph, where appellants requested partial summary judgment on "Counts I through IV," Counts II and III being Wilson's RICO claims. Because appellants, as the moving party, failed to meet their burden of establishing "an absence of evidence supporting [Wilson's] claim," we cannot say that the trial court abused its discretion in granting the motion for reconsideration and permitting Wilson to pursue her RICO claims. See Tolu v. Ayodeji, 945 A.2d 596, 600 (D.C.2008) (citations omitted).
[9] Wilson sought to introduce evidence of the fair market value of the home to quantify her harm. Appellants argued to exclude the evidence because Wilson would have received less than fair market value for her house because she faced "inevitable foreclosure." Appellants also sought to exclude testimony regarding Wilson's medical history because such evidence was "irrelevant." We conclude that the trial court did not abuse its discretion in denying the motions in limine. See Coulter v. Gerald Family Care, P.C., 964 A.2d 170, 185 n. 11 (D.C.2009) (citing Ivey v. District of Columbia, 949 A.2d 607, 611 (D.C. 2008)).
The trial court denied the motion in limine to exclude evidence of the fair market value of the house "for reasons set forth in the opposition." Wilson listed several arguments in opposition to the motion in limine, the principal one being that appellants' contention was based on facts in the record that would be disputed at trial. Further, Wilson's medical condition is directly relevant to her CPPA claim where she alleges that appellants took advantage of her inability to protect her interests "by reasons of age, physical or mental infirmities, ignorance, illiteracy, or inability to understand the language of the agreement...." D.C.Code § 28-3904(r)(5).
[10] Appellants also filed a motion in limine arguing that Wilson was required to elect her remedy of either rescission or damages before trial because she requested various "mutually exclusive" equitable and legal relief. This argument has no merit and the trial court properly denied the motion. While it is true that when the remedies a plaintiff seeks are "duplicative," the plaintiff cannot win relief on both claims, we have also recognized that a plaintiff is not required to "elect between [] alternative claims before the case is submitted to the jury." See Giordano v. Interdonato, 586 A.2d 714, 717-18 (D.C.1991); compare id. (concluding that plaintiff should not have been forced before trial to elect between putting claims for breach of fiduciary duty or specific performance of agreement to the jury), with Dean v. Garland, 779 A.2d 911, 916 (D.C.2001) (concluding that the trial court did not err in dismissing the rescission count before trial because the plaintiffs sought both rescission of the contract and damages for breach of the contract and the plaintiffs were no longer entitled to rescission). Here, Wilson sought alternative recovery under several different statutes for the appellants' conduct, specifically asserting that the transaction was an unconscionable loan or, in the alternative, if the jury decided that the transaction was not a loan, a fraudulent sale. Therefore, the trial court did not err in refusing to require Wilson to elect her remedies prior to trial.
[11] We note that while the cases we use in our analysis discuss whether punitive awards are excessive under the Due Process Clause of the Fourteenth Amendment, our holding is based on the Due Process Clause of the Fifth Amendment, which applies to the District of Columbia. See District of Columbia v. Carter, 409 U.S. 418, 424, 93 S.Ct. 602, 34 L.Ed.2d 613 (1973) ("[S]ince the District of Columbia is not a `State' within the meaning of the Fourteenth Amendment, neither the District nor its officers are subject to its restrictions.") (citations omitted); see also McNeil v. United States, 933 A.2d 354, 362 n. 11 (D.C.2007) (noting that, in the District of Columbia, the Due Process Clauses of the Fifth and Fourteenth Amendments provide "equivalent protection").
[12] Cooper Indus., Inc. v. Leatherman Tool Group, 532 U.S. 424, 433, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001); BMW, of N. Am., Inc. v. Gore, 517 U.S. 559, 562, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996); TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 453-55, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (plurality opinion).
[13] The Supreme Court noted that "it is probable that the general verdict for respondent Haslip contained a punitive damage component of not less than $840,000" because the appellant's counsel requested $200,000 in compensatory damages and $3,000,000 in punitive damages. Haslip, supra, 499 U.S. at 6 n. 2, 111 S.Ct. 1032.
[14] The punitive award Supreme Court cases have all been divided opinions with the dissenting and concurring justices expressing skepticism about whether constitutional review of the amount of punitive awards is warranted. Notably, Justice Scalia, who concurred in judgment in Haslip and TXO, and dissented in Gore, expressed his view that the "`[Gore] guideposts' mark a road to nowhere; they provide no real guidance at all." Gore, supra, 517 U.S. at 605, 116 S.Ct. 1589 (Scalia, J., dissenting).
[15] The Court reiterated the guideposts in Cooper Indus., Inc., supra note 12, 532 U.S. at 436, 121 S.Ct. 1678, where the Court held that appellate courts should apply a de novo standard of review when assessing the constitutionality of punitive damage awards. Because the Ninth Circuit applied the abuse of discretion standard, the Court did not address the $50,000 in compensatory and $4.5 million in punitive damages awarded under the Lanham Act; instead it remanded for the Court of Appeals to apply the de novo standard of review.
[16] The Court's restraint in this area is likely due to the fact that the Supreme Court's punitive damages jurisprudence has remained divided on the issue of whether the Constitution constrains the size of punitive damages and whether the Court is warranted in overturning awards that were properly scrutinized by state courts. Justice Scalia has consistently held the view that "[s]ince it has been the traditional practice of American courts to leave punitive damages ... to the discretion of the jury; and since ... a process that accords with such a tradition and does not violate the Bill of Rights necessarily constitutes `due' process," inquiry into "fairness" and "reasonableness" of awards is unwarranted. Haslip, supra, 499 U.S. at 24-25, 111 S.Ct. 1032 (Scalia, J., concurring in judgment). In Gore, Justice Scalia reiterated his consistent view that "a state trial procedure that commits the decision whether to impose punitive damages, and the amount, to the discretion of the jury, subject to some judicial review of `reasonableness,' furnishes a defendant with all the process that is `due.'" Gore, supra, 517 U.S. at 598, 116 S.Ct. 1589 (citing TXO, supra, 509 U.S. 443, 470, 113 S.Ct. 2711, 125 L.Ed.2d 366 (Scalia, J., concurring in judgment); Haslip, supra, 499 U.S. at 25-28, 111 S.Ct. 1032 (Scalia, J., concurring in judgment)).
Justice Thomas, has consistently held the view that "the Constitution does not constrain the size of punitive damages awards." Philip Morris USA v. Williams, 549 U.S. 346, 361, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) (Thomas, J., dissenting) (quoting State Farm, supra, 538 U.S. at 429-30, 123 S.Ct. 1513 (Thomas, J., dissenting)) (quoting Cooper Indus., supra note 12, 532 U.S. at 443, 121 S.Ct. 1678 (Thomas, J., concurring)). Notably, Justice Thomas joined Justice Scalia's concurrence in TXO and his dissent in Gore as well.
Justice Ginsburg has also expressed concern with the Court's "foray into punitive damages `territory traditionally within the States' domain.'" State Farm, supra, 538 U.S. at 431, 123 S.Ct. 1513 (Ginsburg, J., dissenting) (quoting Gore, supra, 517 U.S. at 612, 116 S.Ct. 1589 (Ginsburg, J., dissenting)). In one of three dissenting opinions in State Farm, Justice Ginsburg noted the discrepancy between the award upheld in Haslip of more than 4 times the compensatory damages, and the award upheld in TXO of more than 526 times the actual damages. Id. at 430, 123 S.Ct. 1513. Justice Ginsburg holds the view that "the Court has no warrant to reform state law governing awards of punitive damages," Id. at 438-39, 123 S.Ct. 1513, and that "`the laws of a particular State must suffice [to superintend punitive damages awards] until judges or legislators authorized to do so initiate system-wide change.'" Id. at 431, 123 S.Ct. 1513 (quoting Haslip, supra, 499 U.S. at 42, 111 S.Ct. 1032 (Kennedy, J., concurring in judgment)).
[17] The Court most recently addressed the issue of punitive damage awards in federal maritime cases in Exxon Shipping Co. v. Baker, ___ U.S. ___, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008). There, it held that "the federal statutory law does not bar a punitive damage award on top of damages for economic loss, but [] the award [] should be limited to an amount equal to compensatory damages." Id. at 2611. We do not focus on Exxon in our analysis because the Court's holding is limited to federal maritime cases. See Duckworth v. United States ex rel. Locke, ___ F.Supp.2d ___, ___ n. 13, 2010 WL 1499490 at *15 n. 13 (D.D.C.2010) ("However, Exxon Shipping involved punitive damages under federal maritime law, not civil enforcement penalties, and has no applicability here."); see also Valore v. Islamic Rep. of Iran, ___ F.Supp.2d. ___, ___ n. 17, 2010 WL 1244552 at *32 n. 17 (D.D.C.2010) ("To the extent that some plaintiffs may share in a punitive damages award higher than their compensatory award, and thus a ratio of punitive to compensatory damages higher than 1:1, Exxon is distinguishable from this case. First, Exxon concerned punitive damages awarded under maritime law ... the Supreme Court explicitly limited its holding, noting that `a 1:1 ratio ... is a fair upper limit in such maritime cases.'") (citing Exxon Shipping at 2633) (emphasis added in Valore).
[18] The other transactions evidence was presented in support of Wilson's RICO claims. Once the judge dismissed those claims at trial, appellants did not request a jury instruction to disregard the previously admitted evidence about the other transactions. Thus, they failed to heed the rule that "where the judge has denied a defendant's prayer for relief during an earlier stage of a trial, and where the circumstances have changed as the case has progressed, a defendant must renew his request on the basis of the changed circumstances in order to preserve for appeal any contention based on the record as modified." Comford v. United States, 947 A.2d 1181, 1189 (D.C.2008) (quoting Medrano-Quiroz v. United States, 705 A.2d 642, 648 (D.C. 1997)).
[19] See note 8, supra.
[20] The punitive damages instruction read to the jury stated:
In addition to compensatory damages, the plaintiff also seeks an award of punitive damages against the defendant. Punitive damages are above and beyond the amount of compensatory [or nominal] damages you may award. Punitive damages are awarded to punish the defendant for his or her conduct and to serve as an example to prevent others from acting in a similar way. You may award punitive damages only if the plaintiff has proved with clear and convincing evidence:
(1) That the defendant acted with evil motive, actual malice, deliberate violence or oppression, or with intent to injure, or in willful disregard for the rights of the plaintiff; and
(2) That the defendant's conduct itself was outrageous, grossly fraudulent, or reckless toward the safety of the plaintiff.
You may conclude that the defendant acted with a state of mind justifying punitive damages based on direct evidence or based on circumstantial evidence from the facts of the case....
If you find that the plaintiff is entitled to an award of punitive damages then you must decide the amount of the award. To determine the amount of the award you may consider the net worth, relative wealth of the defendant at the time of the trial, the nature of the wrong committed, the state of mind of the defendant when the wrong was committed, the cost and duration of the litigation, and any attorney fees that the plaintiff has incurred in this case.
[21] Appellants contend that the proper comparison is of the $60,000 compensatory award to the punitive damages awards, which is why they complain of a 33:1 ratio for Abell, 18:1 ratio for Modern Management, and 3.3:1 for Baltimore. However, even if we were to adopt appellants' view and use the pre-treble figure in the comparison, amounting to a 33:1 ratioand we do not adopt itwe would still not be persuaded that the punitive damage awards here are unconstitutionally excessive as similar ratios have been upheld by this court and others where the conduct has been sufficiently reprehensible. See, e.g., Daka, Inc. v. Breiner, 711 A.2d 86, 102 (D.C.1998) (upholding a 39:1 ratio in an age discrimination case where the defendant challenged trial judge's denial of the motion for remittitur, claiming that the award was excessive and in violation of "fundamental standards of fairness and due process"); see also Swinton v. Potomac Corp., 270 F.3d 794, 819 (9th Cir. 2001) (upholding a 28:1 ratio where an employer was found liable for failing to address an employee's claims of daily offensive racial harassment in the workplace); see also Deters v. Equifax Credit Info. Servs., Inc., 202 F.3d 1262, 1273 (10th Cir.2000) (upholding a 59:1 ratio in a Title VII sexual harassment claim where the employer's conduct was "particularly egregious").
[22] The 11.1:1 ratio against Abell exceeds a "single-digit" ratio, but not to a "significant degree." See State Farm, supra, 538 U.S. at 425, 123 S.Ct. 1513 ("[F]ew awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." (emphasis added)); cf. Gore, supra, 517 U.S. at 582-83, 116 S.Ct. 1589 (ratio of 500:1 was "breathtaking"); State Farm, supra, 538 U.S. at 425-26, 123 S.Ct. 1513 (there is a "presumption" against an award with a ratio of 145:1); but see TXO, supra, 509 U.S. at 462, 113 S.Ct. 2711 (a ratio of 526:1 did not "jar one's constitutional sensibilities" when considering factors such as "the amount of money at stake, the bad faith of [the appellant], the fact that the scheme employed [] was part of a larger pattern of fraud, trickery and deceit, and the petitioner's wealth").
[23] Punitive damages were not awarded, because the trial court struck the plaintiff's claim for punitive damages.
[24] Notably, net worth is not a part of the excessiveness challenge analysis. See Motorola Credit Corp. v. Uzan, 509 F.3d 74, 85 (2d Cir.2007).
[25] In fairness, however, we must recognize that Wilson, in all likelihood, would have lost her house even if the appellants had not contacted her.
[26] See Kemp v. Am. Tel. & Tel. Co., 393 F.3d 1354, 1364 (11th Cir.2004) (giving the third guidepost less weight than the first two but reversing the punitive damages award on the ground that the award had no relationship to the amount of harm that occurred).
[27] Although we do not consider it in our analysis because it became effective after this case was tried, currently, the most relevant statute to the scheme in issue here is the Home Equity Protection Act D.C.Code § 42-2431 (2009 Supp.), which is specifically referenced in the current version of the CPPA at D.C.Code § 28-3904(gg) (2009 Supp.).
Like the CPPA, the Home Equity Protection Act does not limit allowable damages and provides that the remedies available "are cumulative and do not restrict any remedy that is otherwise available." D.C.Code § 42-2434(d). The criminal penalty for violating the Act is a $10,000 maximum fine and/or imprisonment for up to one year for a single violation, and a $50,000 maximum fine and/or imprisonment for up to 5 years for second or subsequent violations. See D.C.Code § 42-2435(a) & (b).
[28] The equity was calculated by subtracting the mortgage balance of $194,000 from the fair market value of $300,000 at the time of the transaction.
[29] In contrast, a recoupment is "a reduction or rebate by the defendant of part of the plaintiff's claim because of a right in the defendant arising out of the same transaction." District Cablevision, supra, 828 A.2d at 730 n. 21.
[30] This argument is waived because trial counsel agreed to submit the consumer issue to the jury before trial and did not object to the jury instructions.
Court: Well that means you're going to withdraw your element that you don't think is applicable in terms of her being considered a consumer since that was the only basis for your argument for consumer as to whether she would be a consumer or not.
Defense Counsel: "We're not going to withdraw that argument. We're going to withdraw insisting that that (sic) be decided we're going to agree that that (sic) can be submitted to the jury."
[31] We reject appellants argument that the jury verdict was against the weight of the evidence. The trial court did not err in denying appellants' motion for JNOV because a reasonable jury, viewing the evidence in the light most favorable to Wilson, could have found appellants liable for common law fraud and statutory fraud under the CPPA. See District of Columbia v. Cooper, 445 A.2d 652, 655 (D.C. 1982) (en banc); see also Liu v. Allen, 894 A.2d 453, 459 n. 10 (D.C.2006) (citations omitted) The jury was presented with evidence that appellants represented themselves as "Money Lenders," tendered Wilson a host of confusing documents with improper titles, told Wilson that the sale documents were a "legal fiction" after she told them that she did not want to sell her house, and then induced her to enter into a lease/buy-back agreement that they knew she could not afford. Wilson also only received a $5,000 check for the house and remained liable for the mortgage debt. A reasonable juror viewing this evidence in the light most favorable to Wilson could have reached a verdict in Wilson's favor on both the common law fraud and CPPA claims. See Fort Lincoln Civic Ass'n., Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1073-74 n. 22 (D.C.2008) (citations omitted); see also D.C.Code § 28-3904(e) and (r). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542815/ | 997 A.2d 478 (2010)
297 Conn. 54
Sharon BROWN
v.
UNITED TECHNOLOGIES CORPORATION, PRATT AND WHITNEY AIRCRAFT DIVISION, et al.
No. 18332.
Supreme Court of Connecticut.
Argued April 29, 2010.
Decided June 22, 2010.
Mark Merrow, Middletown, for the appellant (plaintiff).
Jason M. Dodge, Glastonbury, for the appellees (defendants).
ROGERS, C.J., and NORCOTT, KATZ, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.[*]
PER CURIAM.
The plaintiff, Sharon Brown, filed a claim for workers' compensation benefits while she was employed by the named defendant, United Technologies Corporation, Pratt and Whitney Aircraft Division (Pratt & Whitney).[1] The workers' compensation commissioner (commissioner) found the plaintiff's injury to be compensable under the Workers' Compensation Act, General Statutes § 31-275 et seq. Pratt & Whitney appealed from the commissioner's decision to the workers' compensation review board (board), which vacated the commissioner's finding and award of benefits. The plaintiff then appealed from the board's decision to the Appellate Court, which affirmed the board's decision. Brown v. United Technologies Corp., 112 Conn.App. 492, 511, 963 A.2d 1027 (2009). We granted the plaintiff's petition for certification to appeal limited to the following issue: "Did the Appellate Court properly determine that the bar to workers' compensation coverage found within ... § 31-275(16)(B)(i)[2] applied to preclude coverage *479 for the plaintiff's injury?" Brown v. United Technologies Corp., 291 Conn. 906, 967 A.2d 1220 (2009). We conclude that certification was improvidently granted and that the appeal should be dismissed.
The opinion of the Appellate Court sets forth the following relevant facts and procedural history. "The plaintiff . . . was taking a walk on the Pratt & Whitney grounds during her one-half hour unpaid lunch break on July 8, 2005, when she fell and sustained an injury to her right shoulder.. . . The plaintiff testified before the commissioner that she walked daily for the purpose of improving her health; she is a borderline diabetic and her physician recommended that she exercise. She also testified that her walking is purely voluntary, that she does not associate with any other Pratt & Whitney employees during her walk, that when she walks she churns her arms up and down to get her heart rate higher and that she makes a concentrated effort to elevate her heart rate by walking at a rapid pace. She does not have to ask permission of her supervisor or anyone else at Pratt & Whitney to take a lunchtime walk.
"The plaintiff reported her injury to a supervisor and immediately sought medical attention at work. She was sent to the emergency room at Middlesex Hospital and a few days later visited her physician. She eventually learned that she had a torn tendon in her shoulder, and she received physical therapy for her injury.
"The plaintiff presented evidence at the hearing before the commissioner that she was totally incapacitated from July 9 through August 20, 2005. In his September 26, 2006 finding and award, the commissioner found that [t]he health of Pratt & Whitney workers was surely enhanced by any type of reasonable physical activity pursued on company grounds during unpaid breaks by its employees. The commissioner further found that the plaintiff's walking on company grounds during her lunch break was . . . incidental to her employment, and, therefore, her right shoulder injury is found to be a compensable event, and also was not barred from compensation under the social-recreational exception to the act. Pratt & Whitney filed a petition for review . . . .
"On October 23, 2007, the board issued its opinion and vacated the commissioner's finding and award, concluding that the plaintiff's injury was not compensable. The board rejected the commissioner's finding that the plaintiff's injury was incidental to her employment and found no mutual benefit to both parties from the plaintiff's activities. The board further found that the commissioner's finding that [t]he health of Pratt & Whitney workers was surely enhanced by any type of reasonable physical activity was unsupported by any probative evidence on the record." (Internal quotation marks omitted.) Brown v. United Technologies Corp., supra, 112 Conn.App. at 494-96, 963 A.2d 1027.
In affirming the decision of the board, the Appellate Court determined that the major purpose of the plaintiff's activity was recreational and, therefore, held that the social-recreational exception of § 31-275(16)(B)(i) applied to preclude coverage for the plaintiff's injury. Id., at 504-509, 963 A.2d 1027.
This certified appeal followed. The plaintiff claims that the Appellate Court's affirmance of the board's decision was improper because the act of walking for health reasons, alone during a lunch break, was neither social nor recreational and does not fall within the scope of § 31-275(16)(B)(i). After examining the entire record on appeal and considering the briefs and oral arguments of the parties, we have determined that the appeal in this case should be dismissed on the ground *480 that certification was improvidently granted.
The appeal is dismissed.
NOTES
[*] The listing of justices reflects their seniority status on this court as of the date of oral argument.
[1] AIG Claims Service, Inc., the workers' compensation insurer for Pratt & Whitney, also was named as a defendant.
[2] General Statutes § 31-275(16)(B) provides in relevant part: "`Personal injury' or `injury' shall not be construed to include:
"(i) An injury to an employee that results from the employee's voluntary participation in any activity the major purpose of which is social or recreational, including, but not limited to, athletic events, parties and picnics, whether or not the employer pays some or all of the cost of such activity ...." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543026/ | 39 F.2d 720 (1930)
In re DENNISON MFG. CO.
Patent Appeal No. 2301.
Court of Customs and Patent Appeals.
April 10, 1930.
Roberts, Cushman & Woodberry, of Boston, Mass., and Cushman, Bryant & Darby, of Washington, D. C. (Robert Cushman and Charles D. Woodberry; both of Boston, Mass., of counsel), for appellant.
T. A. Hostetler, of Washington, D. C., for Commissioner of Patents.
Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges.
LENROOT, Associate Judge.
This is an appeal from the decision of the Commissioner of Patents affirming the action of the examiner of trade-marks rejecting appellant's application to register as a trade-mark an urn-shaped figure forming a patch for a tag.
The mark is described in appellant's brief as follows: "Said mark is the outline or silhouette of an urn-shape or vase-like figure applied to the packages containing the goods by printing it upon the labels in the usual way and to the tags themselves by forming it integral with the string reinforcement (the `patch' technically so called) of the tag."
The application was filed on December 8, 1926. On August 24, 1928, appellant amended its petition by inserting the following disclaimer: "The trade-mark consists in the substantially urn-shaped outline shown, regardless of how applied to the goods, and no claim is made to a perforated patch apart from substantially such outline."
However, the entire argument of appellant both in its brief and upon oral hearing was to the point of whether the conformation or outline of the patch could constitute a valid trade-mark. It is unnecessary for us to determine whether an application for the registration of the mark, not as an integral part of the patch, would be allowable.
It is a matter of common knowledge that in the manufacture of tags it is customary to reinforce the tag around the opening through which the fastening cord is looped. This reinforcement is called a patch. Appellant has selected a particularly shaped patch, as appears from the samples submitted with the application for registration, and claims a trade-mark upon the outline or conformation thereof.
The Commissioner held that the tag and its reinforcing patch are parts of the completed article and that the mere shape of the patch is not a feature which can be recognized as constituting a trade-mark.
We agree with this holding of the Commissioner.
It is well settled that the configuration of an article having utility is not the subject of trade-mark protection. Adams v. Heisel (C. C.) 31 F. 279; Davis v. Davis (C. C.) 27 F. 490; Nims on Unfair Competition and Trade-marks, § 195.
Appellant concedes the correctness of this doctrine as applied to articles, but apparently contends that it does not apply to a part of an article, even though such part performs a useful function. We see no distinction in principle. If one may secure a valid trade-mark upon the shape or configuration of an essential part of an article, it would permit monopolies never intended to be protected by the common law relating to trade-marks, or by statutes governing their registration.
In the case at bar, appellant affixes nothing to the patch, and if the patch, which is conceded to have utility, be removed, there would be nothing left of the trade-mark.
We do not pass upon the registrability of the urn-shaped outline or vase-like figure as a trade-mark if applied to packages or *721 to the tags apart from the patch. Were there an application for the registration of such a mark, involving nothing more, a different question would be before us.
It is clear to us that the effect of granting appellant's application would not be the recognition of a mark to indicate the origin of goods, but recognition of a monopoly of a particular shape of a useful part of a finished article. We are satisfied that this the law of trade-marks does not permit.
The decision of the Commissioner is affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542775/ | 997 A.2d 642 (2010)
122 Conn.App. 230
Daniel D'AMICO
v.
ACE FINANCIAL SOLUTIONS, INC., et al.
No. 30124.
Appellate Court of Connecticut.
Argued November 12, 2009.
Decided June 29, 2010.
*643 Jennifer B. Levine, with whom was Harvey L. Levine, New Britain, for the appellant (plaintiff).
Philip T. Newbury, Jr., Hartford, for the appellee (named defendant).
ROBINSON, ALVORD and MIHALAKOS, Js.
MIHALAKOS, J.
The plaintiff, Daniel D'Amico, appeals from the summary judgment rendered by the trial court in favor of the defendant ACE Financial Solutions, Inc.,[1] on the plaintiff's claims of breach of contract, breach of the implied covenant of good faith and fair dealing, negligent and intentional infliction of emotional distress, and violation of the Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 et seq., and the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., in the processing of his workers' compensation claim. The plaintiff claims that the court erred in rendering summary judgment on the basis of its determination that his claims were barred by the exclusivity provision of General Statutes § 31-284.[2] We conclude that the court properly rendered summary judgment in favor of the defendant and, accordingly, affirm the judgment of the trial court.[3]
*644 The court's memorandum of decision reveals the following relevant facts and procedural history. "The plaintiff was employed as a correction officer by the state... at the Manson Youth Correctional Facility. On September 24, 1992, the plaintiff sustained injuries to his neck, back, shoulder, arm and hand while attempting to restrain an inmate. The plaintiff was also diagnosed as suffering from post-traumatic stress disorder, depression, fibromyalgia, hypertension and reflex sympathetic dystrophy of his right arm, and filed a claim for his injuries under the Workers' Compensation Act (act), General Statutes § 31-275 et seq. The state ... accepted the plaintiff's expenses related to post-traumatic stress disorder and orthopedic injuries as compensable but did not accept as compensable expenses related to the plaintiff's claims of depression, fibromyalgia, hypertension, reflex sympathetic dystrophy of his right arm and treatment at an out-of-state inpatient program. Following a formal hearing on April 12, 1999, the workers' compensation commissioner ordered that the state provide benefits related to all but the hypertension claim. On May 18, 2000, the workers' compensation review board upheld the commissioner's order.
"Pursuant to [Public Acts, Spec. Sess., June, 2001, No. 01-07], the state ... transferred the responsibility for a number of workers' compensation claims, including the plaintiff's claim, to [the defendant].[4] [The defendant, a corporation involved in the business of financial derivatives], engaged [Berkley Administrators of Connecticut, Inc. (Berkley)] to administer the claims on [the defendant's] behalf. On November 19, 2003, Berkley filed notice with the workers' compensation commission that the plaintiff's psychiatric medication and psychiatric treatment would no longer be paid because it was considered palliative and no longer necessary. On February 2, 2004, Berkley filed an additional notice with the workers' compensation commission that treatment for the plaintiff's fibromyalgia would no longer be paid because it was palliative rather than curative treatment."
The plaintiff filed a nine count complaint dated November 8, 2005. The first five counts were against the defendant, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, negligent and intentional infliction of emotional distress and a violation of CUIPA and CUTPA. Counts six through nine were directed at Berkley and sound in breach of the implied covenant of good faith and fair dealing, negligent and intentional infliction of emotional distress, and violations of CUIPA and CUTPA. The defendant and Berkley filed their answers and special defenses on February 6, 2006.
On April 18, 2007, the defendant and Berkley filed a motion for summary judgment, arguing that the plaintiff's claims were barred by § 31-284(a) and our Supreme Court's decision in DeOliveira v. Liberty Mutual Ins. Co., 273 Conn. 487, 870 A.2d 1066 (2005), and also that the defendant was not a proper party to the action because it was Illinois Union Insurance Company (Illinois Union), not the defendant, that issued the workers' compensation policy under which the plaintiff claimed that he is entitled to benefits. The plaintiff filed an opposition to the motion for summary judgment on June 11, 2007, and a supplemental memorandum of law on March 13, 2008. The court heard argument on the motion on April 14, 2008, and, on July 11, 2008, granted the motion *645 for summary judgment on all counts except that count that alleged intentional infliction of emotional distress against Berkley. This appeal followed.
On appeal, the plaintiff claims that the court erred in rendering summary judgment on the basis of its determination that his claim against the defendant was barred by the exclusivity provision, as construed by our Supreme Court in DeOliveira v. Liberty Mutual Ins. Co., supra, 273 Conn. at 487, 870 A.2d 1066, and its progeny. Specifically, the plaintiff argues that the defendant is an "independent third party," as that term is used in General Statutes § 4a-25a,[5] and, thus, DeOliveira does not control this case. We disagree.
"The standards governing our review of a trial court's decision to grant a motion for summary judgment are well established. Practice Book [§ 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law....
"On appeal, [this court] must decide whether the trial court erred in determining that there was no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.... Because the trial court rendered judgment for the defendant as a matter of law, our review is plenary...." (Citation omitted; internal quotation marks omitted.) Bragdon v. Sweet, 102 Conn.App. 600, 603-604, 925 A.2d 1226 (2007).
Our review of the plaintiff's claim is governed by DeOliveira. In DeOliveira, the issue was whether Connecticut recognizes a cause of action against an insurer for bad faith processing of a workers' compensation claim. DeOliveira v. Liberty Mutual Ins. Co., supra, 273 Conn. at 490, 870 A.2d 1066. The court observed that General Statutes §§ 31-278, 31-288(b), 31-300 and 31-303 authorize a workers' compensation commissioner to provide financial remedies to reimburse an employee for costs associated with unwarranted delay in the receipt of workers' compensation payments. Id., at 497, 870 A.2d 1066. The court concluded that Connecticut did not recognize a cause of action against an insurer for such bad faith processing of a claim. Id., at 499, 870 A.2d 1066. Additionally, the court stated that "we must construe the exclusionary provision's prohibition on damages actions for injuries arising out of and in the course of ... employment to include injuries arising out of and in the course of the workers' compensation claims process." (Emphasis in original; internal quotation marks omitted.) *646 Id., at 504, 870 A.2d 1066. The court also recognized that "there could be an instance in which an insurer's conduct related to the processing of a claim, separate and apart from nonpayment, might be so egregious that the insurer no longer could be deemed to be acting as an agent of the employer and, thus, a claim arising from such conduct would not fall within the scope of the act." Id., at 507, 870 A.2d 1066.
Following DeOliveira, this court had the opportunity to decide whether an employee who has suffered an injury arising out of or in the course of her employment could bring a tort action against her employer to recover for infliction of emotional distress attributable to the employer's bad faith administration of the employee's compensation claim. Yuille v. Bridgeport Hospital, 89 Conn.App. 705, 874 A.2d 844 (2005). Even though Yuille concerned an employer, not an insurer, this court considered it "a distinction without a difference" and found that because the case was indistinguishable from DeOliveira, there was no cause of action against an employer for the bad faith processing of a workers' compensation claim of an employee. Id., at 708, 874 A.2d 844.
In Almada v. Wausau Business Ins. Co., 274 Conn. 449, 876 A.2d 535 (2005), our Supreme Court adjudicated the question of whether an injured worker could recover against a third party administrator for bad faith administration of the workers' compensation claim of the employee. The court concluded, as it did in DeOliveira, that the employee's remedies for the third party administrator's alleged bad faith processing of her workers' compensation claim were limited to those afforded under the act. Id., at 457, 876 A.2d 535.
The plaintiff argues that the present case is distinguishable from DeOliveira and its progeny because the defendant is an "independent third party," not an insurer as in DeOliveira, an employer as in Yuille or a third party administrator as in Almada. He further contends that the exclusivity provision of the act contemplates protection only for employers; see General Statutes § 31-284(a) ("[a]n employer who complies with the requirements of subsection [b] of this section shall not be liable for any action for damages on account of personal injury sustained by an employee arising out of and in the course of his employment" [emphasis added]); and that the decision in DeOliveira cannot be extended to the facts of this case because no agency relationship exists between the plaintiff's employer and the defendant.[6]
Our Supreme Court has "consistently held that the exclusivity provisions of the [w]orkers' [c]ompensation [a]ct operate as a total bar to actions brought by employees against their employers for job *647 related injuries.... This bar operates whether or not the employee actually collects compensation ...." (Citations omitted.) Sgueglia v. Milne Construction Co., 212 Conn. 427, 433, 562 A.2d 505 (1989). As noted, DeOliveira recently construed the "exclusionary provision's prohibition on damages actions for injuries arising out of and in the course of ... employment to include injuries arising out of and in the course of the workers' compensation claims process." (Emphasis in original; internal quotation marks omitted.) DeOliveira v. Liberty Mutual Ins. Co., supra, 273 Conn, at 504, 870 A.2d 1066. DeOliveira makes clear that an action for injuries arising out of and in the course of the workers' compensation claims process is barred by the exclusivity provision.
Although the exclusivity provision speaks solely in terms of employers, DeOliveira, Yuille and Almada have extended its protection to insurers and third party administrators, as well, in the context of the workers' compensation claims process. There can be no question that any injuries attributable to the defendant, as alleged by the plaintiff, arose out of and in the course of the workers' compensation claims process. The exclusivity provision, as interpreted by DeOliveira and its progeny, bars the plaintiff's action against the defendant, even if the defendant is an "independent third party," as alleged by the plaintiff. The court's granting of the defendant's motion for summary judgment was proper.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The plaintiff commenced this action against ACE Financial Solutions, Inc., and Berkley Administrators of Connecticut, Inc. (Berkley), by a complaint dated November 8, 2005. On July 31, 2008, Berkley filed across appeal. The plaintiff moved to dismiss Berkley's cross appeal for lack of a final judgment on August 5, 2008, which this court granted on November 5, 2008. This court also ordered, sua sponte, that the appeal proceed as to ACE Financial Solutions, Inc., only. Accordingly, we refer in this opinion to ACE Financial Solutions, Inc., as the defendant.
[2] General Statutes § 31-284(a) provides: "An employer who complies with the requirements of subsection (b) of this section shall not be liable for any action for damages on account of personal injury sustained by an employee arising out of and in the course of his employment or on account of death resulting from personal injury so sustained, but an employer shall secure compensation for his employees as provided under this chapter, except that compensation shall not be paid when the personal injury has been caused by the wilful and serious misconduct of the injured employee or by his intoxication. All rights and claims between an employer who complies with the requirements of subsection (b) of this section and employees, or any representatives or dependents of such employees, arising out of personal injury or death sustained in the course of employment are abolished other than rights and claims given by this chapter, provided nothing in this section shall prohibit any employee from securing, by agreement with his employer, additional compensation from his employer for the injury or from enforcing any agreement for additional compensation."
[3] The plaintiff also claims that the court erred in granting the defendant's motion for summary judgment because (1) the defendant waived its claim of misjoinder and (2) there were genuine issues of material fact. Because our conclusion that the plaintiff's action against the defendant is barred by the exclusivity provision is dispositive, we need not address these claims.
[4] Public Acts, Spec. Sess., June, 2001, No. 01-07, authorized the commissioner of administrative services to enter into a loss portfolio arrangement program for the purpose of transferring a group of workers' compensation claims to an independent third party.
[5] General Statutes § 4a-25a provides: "The Commissioner of Administrative Services is authorized to enter into a loss portfolio arrangement program for the purpose of transferring a group of workers' compensation claims to an independent third party. Claims that qualify for transfer to such program shall be approved state employees' claims which require payment of future indemnity benefits and payment of medical benefits to certain disabled workers. Such program shall provide that the independent third party shall, as part of the assumption of liability, become responsible for the management and administration of the transferred liability and shall require such party to administer the individual workers' compensation claims in accordance with the Connecticut general statutes." (Emphasis added.)
[6] To the extent that the plaintiff argues that this case is one of those that the court in DeOliveira referred to as "so egregious" as to be outside the coverage of the exclusivity provision, we note that the court cited two cases as examples of that proposition. DeOliveira v. Liberty Mutual Ins. Co., supra, 273 Conn. at 507, 870 A.2d 1066. In one, an agent of the insurer misrepresented his identity to the claimant, caused her to become emotionally involved with him and then induced her to engage in activities beyond her normal physical capabilities resulting in aggravation of her injuries and a physical and mental breakdown requiring hospitalization when she discovered the deceit. Id., citing Unruh v. Truck Ins. Exchange, 7 Cal. 3d 616, 620-21, 498 P.2d 1063, 102 Cal. Rptr. 815 (1972). The other case involved an insurance carrier that allegedly insisted on a psychiatric examination with the deliberate intent that the plaintiff either commit suicide or drop her claim. DeOliveira v. Liberty Mutual Ins. Co., supra, at 507, 870 A.2d 1066, citing Young v. Hartford Accident & Indemnity Co., 303 Md. 182, 193, 492 A.2d 1270 (1985). This case is not of the type the court had in mind when it carved out the exception for egregiousness. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542824/ | 997 A.2d 288 (2010)
414 N.J. Super. 26
In the Matter of Arthur C. SNELLBAKER.
DOCKET NO. A-1443-09T2.
Superior Court of New Jersey, Appellate Division.
Argued May 26, 2010.
Decided July 8, 2010.
*289 Salvatore Perillo, Linwood, argued the cause for appellant Arthur C. Snellbaker (Nehmad, Perillo & Davis, attorneys; Mr. Perillo, on the brief).
Danielle P. Bradus, Deputy Attorney General, argued the cause for respondent State of New Jersey (Paula T. Dow, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Bradus, on the brief).
Before Judges AXELRAD, SAPP-PETERSON[1] and ESPINOSA.
The opinion of the court was delivered by
ESPINOSA, J.A.D.
Appellant Arthur Snellbaker appeals from a final decision of the New Jersey Division of Pensions and Benefits (the Division) that denied him credit toward his pension for retroactive pay increases made pursuant to the settlement of a lawsuit. We reverse.
This matter was referred to the Office of Administrative Law after Snellbaker requested a fair hearing following the Division's determination that a retroactive payment of $185,392.36 was not creditable for pension purposes.
The following testimony and evidence was presented at the hearing before the Administrative Law Judge (ALJ).
Snellbaker was employed by the City of Atlantic City (the City) as a police officer for thirty-eight years and served as Chief of Police from 2000 to 2006. In January 2002, a new mayor, Lorenzo Langford, assumed office. Snellbaker described his relationship with Langford as "stormy" and "antagonistic." In an apparent effort to shift leadership of the police department to a person of his choice, Langford appointed a police captain, Robert L. Flipping, to the *290 civilian position of Director of Public Safety. Pursuant to N.J.S.A. 40A:14-118, the day-to-day operations of the police department remained under the direction of Snellbaker. However, Flipping attempted to exercise authority over the day-to-day operations and, when Snellbaker resisted, Langford suspended him for four days for refusing to follow a direct order from Flipping.
Snellbaker filed a four-count verified complaint in lieu of prerogative writs and order to show cause against the City and Flipping that included a claim under the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14. By order and written decision dated October 20, 2003, Valerie H. Armstrong, A.J.S.C., concluded that a directive issued by Flipping violated N.J.S.A. 40A:14-118; enjoined Flipping from interfering with Snellbaker's duties and responsibilities under that statute; and vacated Snellbaker's suspension.
From 2002 through 2006, Snellbaker was paid a base salary of $109,981 and Langford declined to grant him any increase in salary. The ALJ stated that, during those years, Snellbaker's subordinate deputy chiefs received regular increases: 3.5% in 2002, 10% in 2003, 11% in 2004 and 5% in 2005. A schedule prepared by the City set forth the salaries of the deputy chiefs for those years and revealed that there were six different deputy chiefs in the department, each of whom received a base salary that exceeded the base salary paid to Snellbaker.
Snellbaker added a claim to his ongoing litigation against the City for retroactive salary increases for 2002 through 2005, based upon N.J.S.A. 40A:14-179, which provides, in pertinent part:
[T]he starting base salary of said chief of police and the deputy chief shall be set at a rate that is higher than the highest base salary of the ranking police officer next in command below the chief of police or deputy chief of police as appropriate. Thereafter, whenever new base salary ranges are set by the governing body or appointive authority, unless the chief of police or deputy chief shall consent to a lesser adjustment, the base salary for the chief of police and his deputy chief shall be adjusted to ensure that their base salaries remain higher than the base salaries of other ranking supervisory officers in the department.
[(Emphasis added).]
At a minimum, the statute requires that the chief be paid a higher base salary than the next highest ranking officer throughout his tenure. See Smith v. Twp. of Andover, 283 N.J.Super. 452, 458, 461, 662 A.2d 582 (App.Div.) (discussing statute before 1995 amendment), certif. denied, 143 N.J. 320, 670 A.2d 1061 (1995).
In November 2005, Langford was defeated in his bid for reelection. The new administration promptly addressed settlement of Snellbaker's lawsuit.
Domenic Cappella, Assistant Business Administrator for the City, acknowledged that Snellbaker had not received any salary increases during the time that Langford was mayor and testified regarding the settlement of the retroactive salary increase issue as follows:
Q. Focus if you could on any discussions concerning his salary increases. First of all, did you have any discussions with the mayor and/or the city attorney about the chief's legal entitlement to salary increases for that four-year period of time.
A. I had the discussion with the solicitor, Kim Baldwin, I recall. And I believe once with other personal [sic] matters with the mayor, ... but I was made aware that ... under a Title 40 ... that it said that the deputy chiefs or his *291 subordinates wouldn't make any salaries or monies more than the chief. That's number one. Number two, ... I saw or they showed me where he did not receive any raises while he was the chief, which, I believe, when I was there, it was for four years. I know he was chief before that but
Q. Was there any discussion in terms of how the raises would be arrived at that were ultimately granted to the chief?
A. We would compare them to what the deputy chiefs got and the supervisors, I believe, through the bargaining unit of the officers.
Asked if the salary adjustments for 2002 through 2005 were "extra compensation granted primarily in anticipation of the chief's retirement," Cappella replied, "[A]bsolutely not." He testified that "this was strictly to correct a wrong, make whatever was done correct." As Cappella acknowledged, the wrong to be corrected was the City's failure to comply with N.J.S.A. 40A:14-179. The way it was corrected was to give Snellbaker increases comparable to the new salary ranges set for the other ranking supervisory officers in the department to bring the City into compliance with N.J.S.A. 40A:14-179.
A settlement was reached that was memorialized in two separate documents. The Separation Agreement and Release (the Settlement Agreement) entered into by Snellbaker and the City was executed in April 2006. The Settlement Agreement provided that Snellbaker would receive "unconditional compensation, payments and benefits from CITY if and only if SNELLBAKER ceases to be employed by CITY as of April 7, 2006," and identified those payments as (a) his final pay through the Separation Date, (b) the payment of retroactive annual salary increases effective January 1, 2002 up to and including January 1, 2005 pursuant to the terms of a Supplemental Separation Agreement (the Supplemental Agreement), (c) unused vacation, sick, compensatory and personal days, to be paid based upon 521.5 days at a rate that reflects the retroactive annual salary increases set forth in the Supplemental Agreement and (d) post-retirement benefits. The Settlement Agreement also authorized a lump sum payment of $500,000 to Snellbaker that the ALJ found was in satisfaction of his CEPA claim. The Settlement Agreement explicitly stated that this lump sum payment was "for compensatory damages and do[es] not constitute backpay."
The stated purpose of the Supplemental Agreement is to set forth "the agreement between the parties with regard to back pay and salary adjustments." The adjustments are identified as follows:
Effective January 1, 2002, SNELLBAKER'S salary shall be increased by 3.5%. Effective January 1, 2003 SNELLBAKER'S salary shall be increased by 10%. Effective January 1, 2004, SNELLBAKER'S salary shall be increased by 11%. Effective January 1, 2005, SNELLBAKER'S salary shall be increased by 5%. Total retroactive amount to be paid by the City to SNELLBAKER is approximately $185,392.36 through April 7, 2006.
The ALJ found that, with these adjustments, Snellbaker "received the same percentage increases previously granted to his subordinates[.]" Like the Settlement Agreement, the Supplemental Agreement stated that the City would make the identified payment of back pay and salary adjustments "if and only if SNELLBAKER ceases to be employed by CITY as of April 7, 2006," (the "if and only if" clause).
Snellbaker testified that he wanted to retire as of April 2006 to care for his wife; that he had not worked since December *292 2005 when she was diagnosed with cancer; and that he had used accrued leave time to care for her in the interim. The ALJ specifically found Snellbaker's testimony "on his reason for retiring in April 2006 to be credible and believable."
Snellbaker's application for special retirement was approved by the Board of Trustees of the Police and Fire Retirement System (PFRS Board) in May 2006. Nearly two years later, the Division notified Snellbaker by letter dated January 4, 2008, that the payment of $185,392.36 in retroactive salary increases was not creditable compensation for pension purposes. The letter stated in part
The Division finds that the Agreement between the City and yourself was executed in exchange for your retirement and clearly in violation of the PFRS State Laws and Regulations....
....
The Division finds that the statutes and regulations governing the PFRS do not permit the City of Atlantic City to include the additional salary as part of your creditable PFRS base salary when that salary is payable only upon you retiring. This contingency clause is considered an unauthorized incentive to retire which is in direct violation of State law. As such, the Division views the retroactive payments as extra compensation which is clearly in violation of the regulations.
[(Emphasis added).]
The statute and regulation cited in the letter use similar language to define the compensation upon which retirement benefits will be calculated. N.J.S.A. 43:16A-1(26) defines compensation as "the base salary ... which is in accordance with established salary policies of the member's employer for all employees in the same position but shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement ...." (Emphasis added). N.J.A.C. 17:4-4.1(a) states that the compensation of a member creditable for retirement and death benefits is "limited to base salary, and shall not include extra compensation." "Base salary" is defined as
the annual compensation of a member, in accordance with established salary policies of the member's employer for all employees in the same position ... which is paid in regular, periodic installments in accordance with the payroll cycle of the employer.
[N.J.A.C. 17:4-4.1(a)(1).]
"Extra compensation," the amount to be excluded from determining retirement benefits, is defined as
individual salary adjustments which are granted primarily in anticipation of a member's retirement or as additional remuneration for performing temporary duties beyond the regular workday.
[(Emphasis added).]
The regulation sets forth a non-exclusive list of examples of forms of compensation that have been identified as extra compensation. The following were identified by the Division in its letter in support of its determination that the retroactive salary increases here were not creditable:
vii. Individual retroactive salary adjustments where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;
....
ix. Increments or adjustments granted for retirement credit;
x. Increments or adjustments in recognition of the member's forthcoming retirement;
....
*293 xii. Retroactive increments or adjustments made at or near the end of a member's service, unless the adjustment was the result of an across-the-board adjustment for all similarly situated personnel[2]....
Michael R. Czyzyk, Supervisor of the Division's External Audit Unit, authored the January 4, 2008 letter and testified before the ALJ. Czyzyk was aware of the fact that Snellbaker had not received any salary increases over the period of time for which the retroactive increases were awarded and did not consider the payment to be a windfall. He explained that he reversed the Division's earlier decision to credit the retroactive increase because of his concern that the "if and only if" clause in the Supplemental Agreement rendered the retroactive increase a salary adjustment granted primarily in anticipation of petitioner's retirement as an inducement for Snellbaker to retire.
Czyzyk admitted that he had no knowledge of the specifics of how the retroactive salary increases were awarded. The ALJ specifically questioned him about this point:
Q. ... The assertion is he was denied these increases improperly and that as a resolution of the litigation, he was given the money he should have gotten in the first place.
A. Correct.
Q. Now, under that set of facts, with nothing else
A. Yes.
Q. it's my understanding you said you would have included that money in the pension calculation?
A. We would have foundwe would have found it to be acceptable, yes, the increases.
Pursuant to N.J.A.C. 17:4-4.1(d), the Board was required to conduct an investigation of "increases in compensation reported for credit which exceed reasonably anticipated annual compensation increases for members of the retirement system...." Since Czyzyk testified that the increases here did not constitute a windfall, no investigation was required for that purpose. However, the Board was also authorized by N.J.A.C. 17:4-4.1(e) to conduct an investigation as to the purpose for the increase. Specifically, the Board
May require that a notarized statement under oath be obtained from the member's employer that the reported compensation was not granted primarily in anticipation of retirement, and conforms with the statutes and rules governing the retirement system.
[N.J.A.C. 17:4-4.1(e)(1).]
The record does not indicate that the Board attempted to secure such information. The testimony from Cappella demonstrated that such an inquiry would have produced a statement on behalf of the employer that the retroactive increases were not granted primarily in anticipation of retirement, but rather, to correct a wrong and pay Snellbaker what was lawfully due him.
As the ALJ found, Czyzyk "agreed that the intent of the parties entering into the agreement was controlling, and that he had no knowledge of what their intent was." Although a concern was raised by the "if and only if" clause in the Supplemental Agreement, Czyzyk conducted no investigation to confirm or refute his concerns *294 regarding that language. He was, then, unaware that the increases were made to effectively include Snellbaker in across-the-board adjustments given to his deputy chiefs to bring the City in compliance with N.J.S.A. 40A:14-179. At the hearing, he conceded that if he had known these facts, he would have found the retroactive salary increases to be creditable compensation for retirement benefits.
After hearing the testimony and making credibility determinations, the ALJ reached conclusions regarding the intent of the parties that formed the basis for his findings:
I am satisfied that the City did not agree to pay the retroactive compensation to petitioner in order to induce him to retire. Rather, the City paid the retroactive compensation because petitioner was entitled to the money as a matter of law.
....
... Atlantic City erred when it froze petitioner's salary in 2002 and paid each of his subordinate deputies a base salary in excess of that paid to petitioner. The only possible conclusion is that Atlantic City did not agree to pay petitioner the retroactive compensation to induce him to retire; the City agreed to pay because, as [Cappella] testified, petitioner was entitled to the compensation as a matter of law. If the City had continued to refuse to pay, it would have lost the law suit.
Therefore, I FIND that the retroactive compensation granted petitioner in paragraph 3 of the Supplemental Agreement was not awarded in anticipation of his retirement. I FIND that petitioner's base salary as adjusted by the retroactive pay increase was in accordance with established salary policies of the City of Atlantic City and the State of New Jersey for all employees in the same position. I further FIND that the individual retroactive salary adjustments were granted with sufficient justification. I further FIND that the retroactive salary increases were not increments or adjustments granted for retirement credit, or in recognition of petitioner's retirement.
....
Accordingly, I FIND and CONCLUDE that petitioner was not induced to retire by the promise of an increase to his salary. He retired because of his wife's medical condition.
[(Emphasis added).]
The ALJ concluded that Snellbaker was "entitled to the retroactive increases in his base salary regardless of the language of the Supplemental Separation Agreement" and, therefore, "entitled to have those increases included in the calculation of his pension benefit."
N.J.S.A. 52:14B-10(c) provides:
The agency head may not reject or modify any findings of fact as to issues of credibility of lay witness testimony unless it is first determined from a review of the record that the findings are arbitrary, capricious or unreasonable or are not supported by sufficient, competent, and credible evidence in the record.
Under this statute, it is not for this court "or the agency head to disturb [a] credibility determination, made after due consideration of the witnesses' testimony and demeanor during the hearing." H.K. v. State of N.J. Dept. of Human Servs., Div. of Med. Assistance and Health Servs., 184 N.J. 367, 384, 877 A.2d 1218 (2005) (agency's expertise irrelevant because ALJ's credibility decision mandated a finding based on settled law); see also Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587, 538 A.2d 794 (1988). This deference even extends to credibility determinations that are *295 not explicitly enunciated if the record as a whole makes these findings clear. In re Taylor, 158 N.J. 644, 659-60, 731 A.2d 35 (1999).
The Division explicitly adopted the ALJ's findings of fact, including his findings as to: the intent of the parties in entering into the Supplemental Agreement, i.e., that Snellbaker intended to retire because of his wife's illness; that Snellbaker was entitled to the salary increases pursuant to N.J.S.A. 40A:14-179; and that Atlantic City agreed to pay the retroactive salary increases because he was entitled to them as a matter of law, pursuant to N.J.S.A. 40A:14-179. The ALJ further found that the increases were in accordance with established salary policies of the City and the State, a finding not rejected by the Division.
Despite its adoption of these findings, the Division stated that the ALJ erred because "the reasons behind the entering of the Supplemental Settlement Agreement are irrelevant." Therefore, the Division rejected the ALJ's conclusions of law and determined that the retroactive salary increases were not creditable for retirement benefits. This appeal followed, presenting the following issues for our consideration:
POINT I
THE SALARY RAISE RECEIVED BY CHIEF SNELLBAKER DID NOT CONSTITUTE "EXTRA COMPENSATION" "GRANTED PRIMARILY IN ANTICIPATION OF A MEMBER'S RETIREMENT."
POINT II
THE PFRS BOARD, AWARE OF THE SUPPLEMENTAL SEPARATION AGREEMENT BEFORE THE CHIEF'S RETIREMENT, IS EQUITABLY ESTOPPED FROM CLAIMING IT "DISCOVERED" THE AGREEMENT A YEAR AND A HALF LATTER.
We have a limited role in reviewing the action of an administrative agency. Aqua Beach Condo. Ass'n v. Dep't of Cmty. Affairs, 186 N.J. 5, 15, 890 A.2d 922 (2006). In Utley v. Board of Review, Department of Labor, 194 N.J. 534, 551, 946 A.2d 1039 (2008), the Supreme Court reviewed the levels of deference due to different types of decisions by administrative agencies. We must defer to the agency's findings of facts, and give some deference to its interpretation of its enabling legislation or the exercise of agency expertise, but we are "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Ibid. (quoting Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93, 312 A.2d 497 (1973)). See also Hemsey v. Bd. of Trs., Police & Firemen's Ret. Sys., 198 N.J. 215, 224, 966 A.2d 1020 (2009). We consider such legal issues de novo and without deference to the agency. See Pressler, Current N.J. Court Rules, comment 3.4.2 on R. 2:10-2 (2010).
The Division's reversal of the ALJ's decision turned exclusively on its interpretation of a legal issue, i.e., whether the retroactive salary increases here were creditable for pension and death benefit purposes pursuant to N.J.S.A. 43:16A-1(26) and N.J.A.C. 17:4-4.1. After careful review of the record and the arguments advanced, we conclude that the Division's legal analysis was erroneous.
As a preliminary matter, we reject the Division's premise that "the reasons behind the entering of the Supplemental Settlement Agreement are irrelevant" as a matter of law. The case cited by the Division to support its premise, Dontzin v. Myer, 301 N.J.Super. 501, 694 A.2d 264 (App.Div.1997), is inapposite. Dontzin did not provide guidance for the interpretation *296 of the statute and regulation applicable here, but merely recited a general principle of contract interpretation in determining a completely different legal issue whether plaintiffs made a sufficient showing to pierce the attorney-client privilege pursuant to the three-prong test established in In re Kozlov, 79 N.J. 232, 398 A.2d 882 (1979).
In interpreting this statute, we look first to its plain language to understand and give effect to the intent of the Legislature. Sanders v. Langemeier, 199 N.J. 366, 374, 972 A.2d 1103 (2009); Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 263-64, 952 A.2d 1077 (2008). In excluding "individual salary adjustments which are granted primarily in anticipation of the member's retirement" from creditable compensation, N.J.S.A. 43:16A-1(26) (emphasis added), the Legislature invited an examination of the intent and purposes of the parties in the award of salary increases and a determination as to the primary purpose for the award. Nothing in the statute suggests that the mere fact that a salary adjustment coincides with an employee's retirement renders it an adjustment "granted primarily in anticipation of" the employee's retirement, without regard to the existence of other recognized objectives.
Notably, the Division did not reject the ALJ's finding that the City unlawfully withheld salary increases to Snellbaker and that the increases were given to Snellbaker to "correct a wrong," because Snellbaker was entitled to the compensation as a matter of law. The Supervisor of the Division's External Audit unit acknowledged that such payments would be creditable for retirement benefits. Yet, the Division found the "if and only if" language in the Supplemental Agreement to trump all other considerations in determining that the retroactive salary increases constituted extra compensation granted primarily in anticipation of retirement. This entailed turning a willfully blind eye to factors that were, as the ALJ found, the real motivating factors for including a retroactive salary increase in the agreement reached and for Snellbaker's retirement.
By viewing the "if and only if" language as conditioning the increase upon retirement, the Division ignored the reality that the City did not have the legal authority to require Snellbaker to retire to receive the payments it had wrongfully withheld. The fact that the Division attached too much importance to this language is further reflected by the use of identical language in the Settlement Agreement. Pursuant to that agreement, Snellbaker would receive "his final pay through the Separation Date" also "if and only if" he retired on the Separation Date. Plainly, the City could not lawfully refuse to pay Snellbaker his salary unless he retired. The legal effect of the "if and only if" clause in that context is, therefore, nil.
The Division also relied upon In re Puglisi, 186 N.J. 529, 897 A.2d 1015 (2006), describing it as a "similar case, where a police officer filed a civil rights suit against the employer and entered into a settlement agreement giving him a promotion but requiring him to retire." There are, however, significant differences between Puglisi and this case that dictate a different result here.
Puglisi was a lieutenant in the New Brunswick Police Department when he filed a federal civil rights lawsuit in 1990. As part of the settlement in 1998, he was promoted to captain and immediately began a one-year terminal leave period in which he received a captain's salary. The PFRS concluded that his pensions should have been based only on his lieutenant's salary and not included an increase of pensionable base salary reflecting his promotion *297 to captain. The PFRS Board agreed that Puglisi "can collect the additional salary as captain, but the additional salary earned ... is not creditable in the PFRS as he was on terminal leave from the day he was promoted as captain to the date of his retirement." Puglisi, supra, 186 N.J. at 532, 897 A.2d 1015 (emphasis added).
In rejecting Puglisi's argument, the Supreme Court adopted the following analysis by this court:
The purpose of N.J.S.A. 43:16A-1(26) and the implementing regulations is to protect the actuarial soundness of the pension fund by prohibiting the use of "ad hoc salary increases intended to increase retirement allowances without adequate compensation to the [pension] fund" in calculating pensions. Therefore, any salary increase made primarily in anticipation of retirement must be disregarded in determining the amount of a retiree's pension, even if the increase was also designed to achieve other objectives, such as increasing the overall amount of the employee's compensation.
[Id. at 534, 897 A.2d 1015 (emphasis added).]
This language anticipates that an increase may be designed to achieve multiple objectives and that those objectives will be considered in a fact-sensitive analysis. Using the same language as the statute and regulation, the Court excludes only those increases made "primarily in anticipation of retirement." See also N.J.S.A. 43:16A-1(26); N.J.A.C. 17:4-4.1(a). The Division ignored its obligation to weigh these factors, concluding that the existence of other objectives was irrelevant.
Although the salary increases in Puglisi and here were both awarded in the settlement of a lawsuit, there are fundamental distinctions in the circumstances of the settlement. First, while the Court in Puglisi explicitly found that the promotion and salary increase constituted an "individual salary adjustment," Puglisi, supra, 186 N.J. at 534, 897 A.2d 1015, that was not the case here. The ALJ found that the retroactive pay increase here was not an ad hoc salary increase, but "was in accordance with established salary policies of the City of Atlantic City and the State of New Jersey for all employees in the same position." This brought the salary increase within an exception to "extra compensation" exemplified in N.J.A.C. 17:4-4.1(a)(2)(xii) ("Retroactive increments or adjustments made at or near the end of a member's service, unless the adjustment was the result of an across-the-board adjustment for all similarly situated personnel...."). Second, in Puglisi, the employer had the discretion to decide whether or not to award a promotion and salary increase. Here, the City lacked such discretion and indeed, had a legal obligation to award compensation it had unlawfully withheld.
Finally, a concern that the increase compromised the "actuarial soundness of the pension fund" is unfounded. As Czyzyk testified, the amount was not a windfall but was consistent with what Snellbaker would have received if the compensation had not been wrongfully withheld.
We therefore conclude that the Division employed an erroneous interpretation of the law in concluding that the retroactive salary increases were not creditable for retirement benefits. The mere fact that an increase coincides with retirement is not dispositive of the issue. It is necessary to evaluate all the factors relevant to the award of the increase and the employee's retirement to determine whether the salary adjustment was granted primarily in anticipation of retirement. When the facts found by the ALJ and adopted by the *298 Division are given appropriate weight here, it is an ineluctable conclusion that the retroactive salary increases were not granted primarily for that purpose.
Reversed.
NOTES
[1] Judge Sapp-Peterson did not participate in oral argument. However, the parties consented to her participation in the decision.
[2] In reciting these examples, the Division omitted the underlined portion of xii from its letter. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542828/ | 997 A.2d 1107 (2010)
414 N.J. Super. 219
STATE of New Jersey, Plaintiff-Respondent,
v.
Ender F. POMPA, Defendant-Appellant.
DOCKET NO. A-0139-08T4.
Superior Court of New Jersey, Appellate Division.
Submitted June 9, 2010.
Decided July 2, 2010.
*1109 Yvonne Smith Segars, Public Defender, for appellant (Kevin G. Byrnes, Designated Counsel, of counsel and on the brief).
Thomas S. Ferguson, Warren County Prosecutor, for respondent (Dit Mosco, Assistant Prosecutor, of counsel and on the brief).
Before Judges AXELRAD, FISHER and SAPP-PETERSON.
The opinion of the court was delivered by
FISHER, J.A.D.
Defendant was convicted of various drug offenses after more than thirty pounds of marijuana were seized from the sleeper cabin of his tractor trailer. Among other things, defendant argues the judge erred in denying his motion to suppress the seized evidence. We conclude the closely regulated business exception permitted a warrantless administrative inspection of certain areas of the tractor trailer, but the search turned unlawful when it progressed into unregulated areas without the exigent circumstances required by State v. Pena-Flores, 198 N.J. 6, 28, 965 A.2d 114 (2009). We reverse the order denying the suppression of evidence and, as a result, vacate the judgment of conviction and remand for a new trial.
I
The record reveals that at approximately 8:30 a.m. on January 28, 2007, Trooper Michael Budrewicz stopped a tractor trailer driven by defendant on Interstate Highway 78 in Greenwich Township. Trooper Budrewicz was suspicious because it appeared there was tampering with the vehicle USDOT number;[1] when he entered the number into his computer, it did not correspond with the company name on the *1110 side of the vehicle. Trooper Budrewicz activated his sirens and directed defendant to pull over.
Shortly after Trooper Budrewicz exited his vehicle, defendant emerged from the cab, nervously waving his keys and requesting the Trooper to look inside the trailer. The Trooper signaled defendant to remain inside the cab.
Once defendant was back inside the cab, Trooper Budrewicz approached the driver's side door to speak with him. As he stepped up on the running board, the Trooper could feel it was extremely cold inside the cab, as it was outside, and the windows were noticeably foggy, yet it did not appear defendant was using the heat or defroster. In addition, Trooper Budrewicz detected an "overwhelming" odor of air fresheners and counted roughly twenty of them hanging throughout the cab.[2] He also observed that defendant appeared nervous and, when asked for his driving documents, defendant turned the truck radio up "extremely loud."
After fumbling with his paperwork for a few seconds, defendant provided his driver's license, social security card, permanent residence card, and log book,[3] but was unable to produce a bill of lading. According to Trooper Budrewicz, defendant was the first of approximately 2,000 truck drivers he had stopped who could not produce a bill of lading. Trooper Budrewicz returned to his cruiser and began reviewing defendant's paperwork but, once again, defendant exited the cab and tried to approach. The Trooper again ordered defendant to remain in his vehicle and defendant complied. The log book indicated defendant had driven more than fourteen consecutive hours of drive time without taking at least ten hours of rest in violation of federal regulations.[4] At this point, based on defendant's "nervousness," "the ridiculous odors of air freshener," defendant's repeated attempts to exit the cab, defendant's eagerness "to show . . . the trailer," and the irregularities in the log book, Trooper Budrewicz decided to perform a North American Standard Level II safety inspection of defendant's vehicle.[5]
Trooper Budrewicz began his Level II inspection by sitting in the driver's seat of the cab and checking the safety belts. He testified that, upon entering the cab, and apparently no longer affected by the overwhelming air freshener odor that had raised his suspicions, the Trooper "very quick[ly]" smelled "a strong odor of raw marijuana" coming from the sleeper cabin.[6] He entered the sleeper cabin, "looked *1111 back toward the sleeper bunk," and then into "the closet that didn't have a door on it." Inside the closet, Trooper Budrewicz found a black duffel bag and "stuck [his] nose down to the black duffel ba[g] without even touching it," whereupon, according to his testimony, he could smell marijuana inside.[7] Trooper Budrewicz opened the bag and found twenty to twenty-five hermetically sealed freezer bags filled with what appeared to be marijuana.
After making this discovery, the Trooper arrested defendant, advised him of his Miranda rights,[8] searched him for contraband, and radioed for backup. When backup arrived, Trooper Budrewicz performed a second warrantless search of the vehicle, finding inside the same closet another duffel bag and what was referred to as a rectangular "genesis box."[9] He also found two more bags on top of and underneath defendant's bed. All of these containers held what appeared to be marijuana.
The truck was impounded and defendant was transported back to State Police Barracks to be processed. Trooper Mike DelRio read defendant his Miranda rights, but did not interrogate him, asking only for defendant's personal information, such as his name, date of birth, residence, and occupation.[10] Nevertheless, as Trooper DelRio requested this information, defendant volunteered that the marijuana in the sleeper cabin was placed there by a man he met in Florida. Defendant also told Trooper DelRio he agreed to transport the bags to Connecticut in exchange for $6,000; defendant did not admit he knew the bags were filled with marijuana.
Chemical lab tests confirmed the substance seized from defendant's truck was marijuana.
II
Defendant was indicted for first-degree possession of marijuana with the intent to distribute, N.J.S.A. 2C:35-5(a)(1); N.J.S.A. 2C:35-5(b)(10)(a); second-degree conspiracy to possess marijuana with the intent to distribute, N.J.S.A. 2C:5-2; N.J.S.A. 2C:35-5(b)(10)(a); and fourth-degree possession of marijuana, N.J.S.A. 2C:35-10(a)(3). Before trial, defendant moved to suppress the evidence seized from the sleeper cabin. Following a four-day hearing, the trial judge denied defendant's motion for reasons set forth in a written decision.
Defendant was tried before a jury over the course of six days in March and April 2008 and found guilty on all counts. The trial judge denied defendant's post-trial motions. At sentencing, the judge merged the convictions and imposed a ten-year *1112 prison term with a four-year period of parole ineligibility.
Defendant appealed, arguing, among other things:
THE DEFENDANT'S RIGHT TO BE FREE FROM UNREASONABLE SEARCHES AND SEIZURES AS GUARANTEED BY THE FOURTH AMENDMENT TO THE UNITED STATES CONSTITUTION AND ART. I, PAR. 7 OF THE NEW JERSEY CONSTITUTION WAS VIOLATED BY THE UNLAWFUL SEARCH AND SEIZURE OF THE PERSONAL PROPERTY CONTAINED IN A COMMERCIAL VEHICLE.
Defendant raised numerous other issues. Because we agree defendant's suppression motion should have been granted, we need not reach the other issues posed.
III
Under both the federal and state constitutions, a warrantless search is presumptively invalid unless it "`falls within one of the few well-delineated exceptions to the warrant requirement.'" State v. Pineiro, 181 N.J. 13, 19, 853 A.2d 887 (2004) (quoting State v. Maryland, 167 N.J. 471, 482, 771 A.2d 1220 (2001)). Because of our strong preference for warrants issued by impartial magistrates, the State bears the burden of proving by a preponderance of the evidence that a warrantless search falls within an established exception. State v. Elders, 192 N.J. 224, 246, 927 A.2d 1250 (2007).
In denying defendant's motion, the trial judge found defendant's constitutional rights were not violated because the warrantless search was permitted either by the closely regulated business exception or by the presence of probable cause based upon the Trooper's assertion that he smelled marijuana in the sleeper cabin.
For the reasons that follow, we reverse. The Trooper was lawfully permitted to conduct an administrative inspection of the vehicle based on the closely regulated business exception. However, the warrantless search became impermissible once it exceeded the "spatial scope" authorized by regulation. State v. Hewitt, 400 N.J.Super. 376, 386, 947 A.2d 674 (App.Div.2008). Accordingly, we hold that the Trooper was not lawfully permitted to exceed the scope of the administrative inspection absent a warrant or compliance with the standards recently outlined in Pena-Flores regarding motor vehicle searches. There, the Court canvassed the case law that had developed over decades, 198 N.J. at 21-28, 965 A.2d 114, and concluded that a warrantless motor vehicle search is permitted only when the stop is unexpected, the police possess probable cause that the vehicle contains contraband or evidence of a crime, and exigent circumstances make it impracticable to seek a warrant, id. at 28, 965 A.2d 114. Although the first two elements were found here, the record does not support a finding of exigent circumstances.
A
The closely regulated business exception has "generally been applied to businesses with a `long tradition of close government supervision.'" N.J. Transit PBA Local 304 v. N.J. Transit Corp., 151 N.J. 531, 546, 701 A.2d 1243 (1997) (quoting Marshall v. Barlow's, Inc., 436 U.S. 307, 313, 98 S.Ct. 1816, 1821, 56 L.Ed.2d 305, 312 (1978)). It is based on the understanding that individuals engaged in pervasively regulated enterprises have a diminished expectation of privacy in their affairs. New York v. Burger, 482 U.S. 691, 700, 107 S.Ct. 2636, 2644, 96 L.Ed.2d 601, 612 (1987); Donovan v. Dewey, 452 U.S. 594, 598-99, 101 S.Ct. 2534, 2538, 69 L.Ed.2d 262, 268-69 (1981).
*1113 Warrantless inspections of closely regulated businesses, however, must be reasonable. N.J. Transit, supra, 151 N.J. at 545-46, 701 A.2d 1243. The test for reasonableness was announced in Burger, supra, 482 U.S. at 702-03, 107 S.Ct. at 2646, 96 L.Ed.2d at 614, and later adopted by our Supreme Court, N.J. Transit, supra, 151 N.J. at 545-46, 701 A.2d 1243. In these instances, the State must demonstrate: (1) the existence of a regulatory scheme supported by a substantial government interest; (2) the warrantless inspection will further the regulatory scheme; and (3) the individual received notice of the inspection, and the search was limited in time, place, and scope. Burger, supra, 482 U.S. at 702-03, 107 S.Ct. at 2646, 96 L.Ed.2d at 614. Ultimately, "[w]hether a search has been conducted in an unreasonable manner is a matter to be determined in the light of the circumstances of the particular case." In re Martin, 90 N.J. 295, 314 n. 9, 447 A.2d 1290 (1982).
In determining whether a business is closely regulated, the focus falls on "the pervasiveness and regularity of the . . . regulation" and its effect on a business owner's expectation of privacy. Donovan, supra, 452 U.S. at 606, 101 S.Ct. at 2542, 69 L.Ed.2d at 273. We recently held that the commercial trucking industry is closely regulated, State v. Hewitt, supra, 400 N.J.Super. at 385, 947 A.2d 674, as has every federal court that has considered this issue, see, e.g., United States v. Steed, 548 F.3d 961, 968 n. 5 (11th Cir.2008); United States v. Delgado, 545 F.3d 1195, 1201-02 (9th Cir.2008), cert. denied, ___ U.S. ___, 129 S.Ct. 1383, 173 L.Ed.2d 636 (2009); United States v. Mitchell, 518 F.3d 740, 751 (10th Cir.2008); United States v. Castelo, 415 F.3d 407, 410 (5th Cir.2005); United States v. Mendoza-Gonzalez, 363 F.3d 788, 794 (8th Cir.2004); United States v. Maldonado, 356 F.3d 130, 135 (1st Cir. 2004); United States v. Dominguez-Prieto, 923 F.2d 464, 468 (6th Cir.), cert. denied, 500 U.S. 936, 111 S.Ct. 2063, 114 L.Ed.2d 468 (1991).
For decades, tractor trailers have been subject to extensive federal regulation. See 49 C.F.R. §§ 300-399; see also N.J.S.A. 39:5B-32; N.J.A.C. 13:60-2.1. These regulations govern a vast array of topics, including, among other things: hours of service, 49 C.F.R. § 395; necessary parts and accessories, 49 C.F.R. § 393; driver qualifications, 49 C.F.R. § 391; record retention, 49 C.F.R. § 379; and licensing, 49 C.F.R. § 383. The regulations also purport to authorize warrantless roadside inspections of commercial vehicles to ensure compliance with safety standards. 49 C.F.R. § 396.9.
These regulations contain specifications for sleeper cabins. For example, the regulations contain length, width, and shape requirements for the sleeper cabin and demand that the cabin have at least two access points so that emergency exits are not unduly hindered. 49 C.F.R. § 393.76. The regulations impose bedding requirements and provide that all sleeper cabins not contained within the driver compartment must contain communication devices between the sleeper cabin and the cockpit. Ibid. Thus, truckers may reasonably anticipate administrative inspections for the purpose of ensuring compliance.
We recently considered the application of the Burger test to an administrative inspection. In Hewitt, police stopped a truck for a safety inspection during which an officer suspected the trailer contained a hidden compartment. 400 N.J.Super. at 381-82, 947 A.2d 674. With a density meter the officer determined the existence of a hidden compartment and with a fiber optic scope he peered inside it. Id. at 382, 947 A.2d 674. The officer was thus able to observe within the hidden compartment a large number of cellophane wrapped packages, which he believed contained contraband. *1114 Ibid. The defendant was placed under arrest and his truck impounded; the officers opened the hidden compartment and searched the boxes within, all without first obtaining a warrant. Ibid.
In upholding the search, we relied upon the closely regulated industry exception and concluded "[t]he administrative regulations under which the search was conducted authorize inspection of every part of the trailer to verify proper securing of the cargo." Id. at 386, 947 A.2d 674. We found no reason to give the hidden compartment any enhanced privacy treatment because safety issues could arise from improperly secured cargo within the secret chamber. Ibid. And, although the officer had "acknowledged that his purpose in searching the hidden compartment was to determine whether it contained criminal contraband," we held an officer's intent will not invalidate an otherwise permissible administrative search. Id. at 386-87, 947 A.2d 674. Thus, like our federal counterparts, we have upheld warrantless administrative inspections of the trailer portion of the vehicle. See Steed, supra, 548 F.3d at 966-75; Maldonado, supra, 356 F.3d at 134-36; United States v. Vasquez-Castillo, 258 F.3d 1207, 1210-13 (10th Cir.2001); Dominguez-Prieto, supra, 923 F.2d at 467-70.
The circumstances presented here differ because the Trooper's search was not concerned with the trailer portion of the vehicle, but focused instead on the sleeper cabin and, even more specifically, a closet within the sleeper cabin and closed containers within that closet. These areas were certainly more private than a cargo hold or, as in Hewitt, a secret compartment attached to a cargo hold. Accord United States v. Knight, 306 F.3d 534, 535 (8th Cir.2002) (concluding that the closely regulated business exception does not permit the opening of a truck driver's briefcase without a warrant during an administrative inspection).
Few cases have considered whether the scope of an administrative inspection could lawfully encompass a search of a tractor trailer's sleeper cabin. In Mendoza-Gonzalez, supra, 363 F.3d at 791-92, the defendant's tractor trailer was stopped by police who then performed a Level II safety inspection during which one officer entered the sleeper cabin. When the officer observed the beds did not have proper restraints, he opened the storage compartment underneath to see whether the restraints had fallen into a storage compartment. Id. at 792. Inside one of the storage compartments, the officer found sealed packages containing marijuana. Ibid. In finding this search to be reasonable, the court of appeals held the officer was acting within the scope of the administrative inspection when he entered the sleeper cabin to check for safety restraints. Id. at 794. And, because the officer reasonably believed the belts might have fallen into the storage compartment beneath the bed, the court of appeals sustained as reasonable the search for the belts in those compartments. Ibid.[11]
New Jersey certainly has an interest in guaranteeing the safety of drivers on its roadways and, to that end, warrantless administrative inspections further that interest by ensuring that the largest vehicles on our roads are safe for transit and in compliance with established regulations. We thus conclude the Trooper was *1115 entitled to conduct an administrative inspection of defendant's vehicle pursuant to applicable regulations and the purposes for which those regulations were adopted. Ultimately, the legitimacy of a warrantless administrative inspection "is a matter to be determined in the light of the circumstances of the particular case." Martin, supra, 90 N.J. at 314 n. 9, 447 A.2d 1290. In deferring to the trial judge's findings, we conclude that the Level II inspection was permitted and authorized entry into the sleeper cabin since the federal regulations extend that far.
However, the regulations do not encompass closets or personal belongings located inside a sleeper cabin and, as a result, the closely regulated business exception cannot form the basis for a warrantless search into those areas. Even if we assume Trooper Budrewicz entered the sleeper cabin for the purpose of conducting a safety check, as in Mendoza-Gonzalez, supra, 363 F.3d at 791-94, the search inside the cabin's closet and the opening of the baggage within that closet exceeded the letter and intent of the regulations applicable to sleeper cabins. In short, the search of the cabin's closet exceeded "the spatial scope" of the administrative inspection. Hewitt, supra, 400 N.J.Super. at 386, 947 A.2d 674. Unlike the officer's search of the sleeper cabin in Mendoza-Gonzalez, the search here came untethered from the authority to conduct the administrative inspection because there was no regulatory reason for the Trooper's search in defendant's closet or the duffel bag therein. To be lawful, the search into the closet and the duffel bag required some other constitutional underpinning.
B
The State argues that even if the closely regulated business exception did not give Trooper Budrewicz the right to search through defendant's closet and containers within that closet, the warrantless search may be upheld because the Trooper obtained sufficient information during the administrative inspection to have probable cause to search the closet and its contents. That is, the State argues that where the boundaries of the administrative inspection ended probable cause began, and that probable cause was formed when the Trooper detected a strong odor of unburnt marijuana. See, e.g., State v. Nishina, 175 N.J. 502, 515-16, 816 A.2d 153 (2003). This fact, along with the suspicious nature of the cab's many air fresheners, defendant's nervous and furtive conduct, and the irregularities in defendant's log book, according to the State, permitted the continued warrantless search. We reject this contention because it is based on a misunderstanding of the elements necessary to permit a lawful warrantless motor vehicle search.
Our Supreme Court recently held in Pena-Flores that "the warrantless search of an automobile in New Jersey is permissible where (1) the stop is unexpected; (2) the police have probable cause to believe that the vehicle contains contraband or evidence of a crime; and (3) exigent circumstances exist under which it is impracticable to obtain a warrant." 198 N.J. at 28, 965 A.2d 114. There is no dispute about the first two prongs. The stop was unexpected, and we assume the Trooper's detection of an odor of unburnt marijuana supported the finding of probable cause.[12]*1116 The State, however, failed to demonstrate the presence of exigent circumstances.
When considering whether an exigency existed to permit a warrantless search, a variety of factors must be considered:
the time of day; the location of the stop; the nature of the neighborhood; the unfolding of the events establishing probable cause; the ratio of officers to suspects; the existence of confederates who know the location of the car and could remove it or its contents; whether the arrest was observed by passersby who could tamper with the car or its contents; whether it would be safe to leave the car unguarded and, if not, whether the delay that would be caused by obtaining a warrant would place the officers or the evidence at risk.
[Id. at 29, 965 A.2d 114.]
The State had the burden of demonstrating exigent circumstances, id. at 25, 965 A.2d 114, and its failure in this regard is revealed by the Trooper's testimony. During cross-examination at the suppression hearing, Trooper Budrewicz admitted defendant's vehicle was incapable of being moved because he was in possession of defendant's keys; common sense strongly suggested it was not likely another person with another set of keys was in the vicinity. In addition, the Trooper admitted he could have had the vehicle towed to a safe location while he applied for a warrant prior to conducting a search beyond the scope of the administrative inspection:
Q: But you could have towed [the truck] to Perryville station, secured it there, and gotten a warrant, or you could have left it there, or called a detective, or called the [prosecutor's] office and said I've got probable cause to search this thing, get me a warrant. . . .
A: I could have done that but I had plain smell.
And, when asked why he decided to search instead of first obtaining a warrant, the officer insisted: "I don't need a warrant with probable cause." Again, Pena-Flores requires more than probable cause; exigent circumstances are also required.
The State argues that an exigency existed because of "the time of day, the remote location of the stop, the number of Troopers at the scene, the discrepancy between the DOT number and the company name on the side of the truck, as well as lack of information regarding a second driver and the owner of the truck." These contentions are wanting; indeed, they actually support defendant's position. For example, the truck was stopped at 8:30 a.m., a time of day that would have made it much easier to seek a warrant than if these events occurred late at night.
Likewise, the truck was stopped on an interstate highway. Although there were *1117 likely other vehicles then passing by, the circumstances are not similar to those where a vehicle is stopped in a high crime neighborhood where the accused's confederates or others hostile to police might congregate and pose a threat. See, e.g., State v. Cooke, 163 N.J. 657, 674, 751 A.2d 92 (2000).
There was also no proof that the Trooper was outnumbered. The only persons present during the administrative inspection and the search into the sleeper cabin were the Trooper and defendant; the Trooper did not testify that he felt endangered by the one-to-one ratio of officer-to-suspect or that backup was unavailable. To the contrary, he felt no need to call for backup until after the initial search and after defendant was arrested. And there was no suggestion of a concern that evidence would be lost if the vehicle were left at that location to be searched at a later time although, again, the Trooper testified that nothing prevented the towing of the truck to a secure location.[13]
C
To summarize, we uphold the administrative inspection of the vehicle's cab as well as the Trooper's entry into the sleeper cabin for the purpose of ensuring compliance with federal regulations. We conclude, however, that the permissible administrative inspection could not validly reach into the closet of the sleeper cabin or the duffel bag found in that closet. At that moment, the search exceeded the lawful spatial scope of the administrative inspection.
In deferring to the trial judge's finding that the Trooper was able to smell raw marijuana in the sleeper cabin, we agree probable cause existed to search further into the sleeper cabin. However, in applying the requirements of Pena-Flores, mere proof of an unexpected vehicle stop and probable cause did not permit a warrantless search beyond the limits of the administrative inspection in the absence of exigent circumstances.
As a result, the evidence seized from the closet in the vehicle's cabin and the additional evidence seized without a warrant thereafter could not be lawfully used against defendant at trial.
*1118 Reversed and remanded for the entry of an order suppressing evidence and for the conducting of a new trial.
NOTES
[1] Federal regulations require that all commercial vehicles operating in interstate commerce "register with the [Federal Motor Carrier Safety Administration] and receive a USDOT number," 49 C.F.R. § 385.301, which must be displayed on the exterior of the commercial vehicle, 49 C.F.R. § 390.21(b)(2).
[2] The Trooper testified that "[t]he first thing" he noticed after ascending the running board was "a pungent smella pungent odor of air freshener coming out, overwhelming."
[3] A trucker's log book is a catalog of important information about the trip, including gas expenditures and drive time.
[4] Trooper Budrewicz also later determined defendant's gas receipts did not match the gas expenditure listings in the log book.
[5] State and federal regulations permit random warrantless safety inspections of commercial vehicles. See 49 U.S.C.A. § 31142; 49 C.F.R. §§ 396.9, 396.17; N.J.S.A. 39:5B-32; N.J.A.C. 13:60-2.1. These inspections fall into six categories, the most common of which are: Level III inspections, consisting of an examination of the driver's documentation and some of the truck's simple safety apparatuses; Level II inspections, consisting of a "walk-around driver/vehicle inspection" of nearly all "items which can be inspected without physically getting under the vehicle"; and Level I inspections, consisting of a full safety inspection, including under the truck. See http://www.fmcsa.dot.gov/safety-security/safety-initiatives/mcsap/insplevels. htm.
[6] The sleeper cabin was directly behind the driver and passenger seats. It contained a bed, which was behind a curtain, as well as a closet and small refrigerator.
[7] The Trooper testified he was able to smell raw marijuana through the duffel bag, which was zippered closed, and through the plastic Ziploc bags containing marijuana within the duffel bag. He explained this was possible because one of the Ziploc bags had "a cut in it inside the initial black duffel bag that [he] searched, and that really let the marijuana [smell] come out." Upon cross-examination, the Trooper acknowledged there were no photographs of the "slit open baggie." A State Police lab technician, who examined and catalogued the evidence, later testified that in examining the seized evidence he could not recall whether or not any of the bags were slit open.
[8] Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
[9] The record on appeal does not illuminate what was meant by a "genesis box." Although the trial court record contained photographs, no photographs were included in the appendices filed here. In any event, it has no bearing on the disposition of this appeal.
[10] Trooper DelRio was called in because he was proficient in Spanish, which appeared to be defendant's primary language.
[11] Delgado, supra, 545 F.3d 1195, provides no guidance as to the scope of an administrative inspection of a sleeper cabin. There, police found cocaine hidden in a secret compartment behind one of the walls in a vehicle's sleeper cabin. Id. at 1200. The search was found reasonable not because of the closely regulated business exception but because defendant consented to the search. Id. at 1205.
[12] In accepting that probable cause existed, a fact defendant does not dispute, we assume the judge found the Trooper credible even though the judge never expressly said that. The judge also never resolved questions surrounding the alleged existence of the slit-open Ziploc bag, despite its significant impact on the Trooper's credibility. The judge only stated in his written decision on this point the following:
[The Trooper's] testimony indicated that when he opened one of the duffle [sic] bags, one of the shrink-wrapped interior bags had a[t]ear which could have accounted for the strong smell of marijuana. There were several smaller, shrink-wrapped bags inside each of the duffel bags.
This [c]ourt points out that upon examination of all the bags by the lab technician, none were reported as having a tear. However, the lab technician did testify that he opened each bag to weigh the contents, and would subsequently place tape over the openings which he had made. It is very possible that in the process, tape would cover any tear that may have already been in one of the packages before that.
What the Trooper's testimony "indicated" does not make it so unless the judge found that testimony credible and, as we have noted, the judge did not say whether he found the Trooper's testimony credible. And the judge also recognized that the lab technician was unable to support the Trooper's testimony about the open bag. In addition, the judge did not say whether he found the lab technician credible, and offered only a "possible" explanation for the lack of support for the Trooper's testimony.
[13] The State seems to argue that the smell of marijuana was proof of exigent circumstances, citing State v. Birkenmeier, 185 N.J. 552, 563, 888 A.2d 1283 (2006). There, police made a stop of a vehicle based on a confidential tip that the defendant would be making a large marijuana delivery in Long Branch at a particular time. Id. at 555, 888 A.2d 1283. Events unfolded as forecasted by the informant. Id. at 556, 888 A.2d 1283. When the defendant's vehicle was stopped on its way to Long Branch, an officer saw a laundry tote bag on the seat next to defendant and smelled "a very strong odor of marijuana." Ibid. The Court stated that in "[a]pplying the case-by-case analysis required by [State v.] Dunlap[,] [185 N.J. 543, 888 A.2d 1278 (2006)] and Cooke here, there is no doubt that [the officer's] observation of the laundry tote bag on the front passenger's seat of defendant's car and detection of `a very strong odor of marijuana' sufficed to provide the probable cause and exigent circumstances needed. . . ." Id. at 563, 888 A.2d 1283. This statement hardly supports the argument that the smell of marijuana creates exigent circumstances. The Pena-Flores Court, in listing the many types of things that may be relevant to determining the presence of exigent circumstances, did not mention the odor of marijuana. 198 N.J. at 29, 965 A.2d 114. And it is difficult to accept the State's suggestion that the Court in Birkenmeier intended to find an exigency from circumstances that relate only to probable cause, particularly in a case in which the presence of exigent circumstances was not at issue. 185 N.J. at 563 n. 2, 888 A.2d 1283 (observing in a footnote that followed the sentence quoted above that "[d]efendant never challenged whether exigent circumstances existed in order to trigger the automobile exception"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542851/ | 997 A.2d 246 (2010)
413 N.J. Super. 562
Sheila ARONBERG, as General Administratrix and Administratrix ad Prosequendum of the Estate of Lawrence R. Aronberg, deceased, Plaintiff-Respondent,
v.
Wendell TOLBERT and Fleetwood Taggart d/b/a Fleetwood Trucking, Defendants-Appellants, and
Allstate New Jersey Insurance Company, Defendant.
DOCKET NO. A-4896-08T3.
Superior Court of New Jersey, Appellate Division.
Argued October 28, 2009.
Decided June 8, 2010.
*247 Stephen A. Rudolph argued the cause for appellant (Monte & Rudolph, attorneys; *248 David M. Molnar, Sea Girt, on the brief).
David Maran argued the cause for respondent (Maran & Maran, PC, attorneys; Mr. Maran, Newark, on the brief).
Before Judges FISHER, SAPP-PETERSON and ESPINOSA.
The opinion of the court was delivered by
ESPINOSA, J.A.D.
N.J.S.A. 39:6A-4.5(a) bars uninsured drivers from suing for personal injuries sustained in automobile accidents. This case presents the issue whether that statutory bar applies to a wrongful death action brought by the uninsured decedent's heirs. We conclude that it does not.
Lawrence Aronberg, a New Jersey resident, insured his automobile with Allstate Insurance Company (Allstate). As a result of his failure to pay premiums when due, the insurance was canceled prior to his fatal motor vehicle accident. His mother, plaintiff Sheila Aronberg, brought this action, alleging a survival claim on behalf of the decedent and a wrongful death claim on behalf of his estate, against Wendell Tolbert, a driver involved in the accident, and his employer. Defendants' motion for summary judgment was granted in part, resulting in the dismissal of the survival claim, and denied as to the wrongful death claim. We granted defendants' motion for leave to appeal and now affirm.
Allstate's Statement of Account reflected that, after Aronberg failed to pay the premium due in April 2005, Allstate sent him a "renewal cancellation bill of $324.37 due 5/24/05," which was for the equivalent of two months' premiums. Aronberg paid the full amount of $324.37 on May 13, 2005 and avoided cancellation. The policy was renewed in May 2005 for the period from May 24, 2005 to November 24, 2005.
Aronberg failed to pay the July premium of $143.60 by its due date of July 24, 2005. Allstate sent him an automobile policy cancellation notice for non-payment of premium, dated August 5, 2005. The notice advised Aronberg that he was required to make a payment of the "Minimum Amount Due," $287.20, by August 23, 2005 to avoid cancellation. Like the notice sent after the April delinquency, this notice required him to bring the account current by paying the equivalent of the premiums for July and August by the due date for the August premium. The notice emphasized the need for Allstate to receive the full amount due by that date:
If you want your insurance coverage to continue and do not want it to cancel, please make sure we receive the Minimum Amount Due by the end of the day (midnight) on August 23, 2005 or your policy will cancel at 12:01 a.m. Standard Time on August 24, 2005.
Aronberg made a payment of $143.60 on August 5, 2005. Because this payment fell short of the Minimum Amount Due, Allstate forwarded a "Special Notice" on August 5, 2005 that acknowledged his payment and advised that his continuing delinquency would result in the cancellation of the policy. The Special Notice advised:
Please be advised that your cancellation effective date is/was 12:01 a.m. on August 24, 2005. Your payment of $143.60 was received on August 5, 2005. This amount has been applied to your policy; however, as of the date of this notice, we still have not received the Minimum Amount Due. Please note that the Cancellation Notice previously sent to you on August 4, 2005 will be enforced unless the full Minimum Amount Due is received before 12:01 a.m. on August 24, 2005.
*249 In order to avoid having your policy cancel, we must receive an additional payment of $143.60 before your cancellation effective date which is/was 12:01 a.m. on August 24, 2005.
Otherwise, your policy will terminate according to the Cancellation Notice we previously sent you.
Aronberg made no further payments before the accident and his death on September 15, 2005.
A payment of $143.60 was made on or about September 20, 2005, by an heir or representative of the decedent after his death. Allstate sent a reinstatement notice that recited the dates of cancellation (August 24, 2005) and reinstatement (September 20, 2005). Allstate's Statement of Account reflects a credit of $123.70 for the time that coverage had lapsed. The reinstatement notice noted the following condition of receipt of the September payment:
[O]ur acceptance of this payment does not (a) reinstate the policy, or (b) afford coverage for any accident, occurrence, or loss which took place before this receipt was issued.
At the close of discovery, defendants filed a motion for summary judgment, seeking the dismissal of the survival and wrongful death claims. The court granted the motion as to the survival action but denied the motion to dismiss the wrongful death action. Plaintiffs did not seek leave to appeal from the dismissal of the survival action. We granted defendants' motion for leave to appeal from the denial of their motion to dismiss the wrongful death action, in which they raise the following issues:
POINT I
THE TRIAL COURT ERRED IN NOT DISMISSING THE WRONGFUL DEATH CLAIMS OF DECEDENT'S HEIRS AFTER HOLDING THAT THE DECEDENT'S CLAIMS WERE BARRED FOR HIS FAILURE TO MAINTAIN AUTOMOBILE INSURANCE AND OPERATING AN UNINSURED VEHICLE AT THE TIME OF THE ACCIDENT IN VIOLATION OF N.J.S.A. 39:6A-4.5 ET. SEQ.
A. THE LEGISLATURE'S ENACTMENT OF THE PROSCRIPTIONS OF N.J.S.A 39:6A-4.5 DID NOT INTEND TO PERMIT FAMILY MEMBERS TO CONTINUE TO BENEFIT FROM THE MISCONDUCT OF ONE WHO FAILS TO MAINTAIN MANDATORY AUTOMOBILE INSURANCE COVERAGES.
B. THE ENTITLEMENTS, BENEFITS, LIMITATIONS AND RESTRICTIONS ARISING FROM NEW JERSEY'S NO-FAULT STATUTES APPLY EQUALLY TO NOT ONLY THE NAMED INSURED BUT ALSO TO ANY MEMBERS OF HIS/HER FAMILY.
C. NEW JERSEY'S WRONGFUL DEATH AND SURVIVORSHIP STATUTES MUST BE READ IN PARI MATERIA WITH THE PROVISIONS OF AICRA WHEN VIEWING THE LEGISLATURE'S RESPECTIVE PURPOSES IN ENACTING THOSE RESPECTIVE STATUTORY CAUSES OF ACTION.
When reviewing a grant of summary judgment, we employ the same standard used by the trial court, which grants summary judgment if the record shows that "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). Burnett v. Gloucester County Bd. of Chosen Freeholders, 409 N.J.Super. 219, 228, 976 A.2d 444 (App.Div.2009); Prudential *250 Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167, 704 A.2d 597 (App. Div), certif. denied, 154 N.J. 608, 713 A.2d 499 (1998). Issues of law are reviewed de novo, without deference to the trial court's conclusions on issues of law. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13, 984 A.2d 872 (2009). Following our review, we agree with the trial court that the statutory bar created by N.J.S.A. 39:6A-4.5(a) applies to survival actions but not to wrongful death actions. This result is not anomalous, as the dissent suggests, but rather, fully consistent with both the language of N.J.S.A. 39:6A-4.5 and the Wrongful Death Act, N.J.S.A. 2A:31-1 to -6, and their underlying policies.
N.J.S.A. 39:6A-4.5 implements a public policy rationale "to deter drunk driving, the intentional use of automobiles as weapons, and drivers from operating uninsured vehicles" by barring such drivers from maintaining an action for damages arising from an automobile accident. Caviglia v. Royal Tours of Am., 178 N.J. 460, 474, 842 A.2d 125 (2004).
N.J.S.A. 39:6A-4.5(a) provides:
Any person who, at the time of an automobile accident resulting in injuries to that person, is required but fails to maintain [mandatory] medical expense benefits coverage ... shall have no cause of action for recovery of economic or noneconomic loss sustained as a result of an accident while operating an uninsured automobile.
This provision "advances a policy of cost containment by ensuring that an injured, uninsured driver does not draw on the pool of accident-victim insurance funds to which he did not contribute" and "gives the uninsured driver a very powerful incentive to comply with the compulsory insurance laws." Caviglia, supra, 178 N.J. at 471, 842 A.2d 125.
Because Aronberg was driving his uninsured automobile at the time of the accident, he would have been statutorily barred from asserting a cause of action for losses sustained in the accident if he had lived. Defendants argue that the statutory bar should also apply to both the survival and the wrongful death claims, because both are derivative of and dependent on his death.[1] However, this common factor does not dictate that the two causes of action will be extinguished on the same grounds.
It is well established that a wrongful death action can be viable under circumstances in which a survival action is barred. See, e.g., Miller v. Estate of Sperling, 166 N.J. 370, 382-83, 386, 766 A.2d 738 (2001) (decedent's heirs permitted to bring a wrongful death claim based upon medical malpractice even though decedent failed to assert claim before expiration of statute of limitations); Alfone v. Sarno, 87 N.J. 99, 110, 432 A.2d 857 (1981) (although decedent's right to sue for personal injuries had been extinguished by a previous judgment or settlement, the wrongful death action could be maintained for those elements of damages not recoverable in an earlier action); Gershon v. Regency Diving Ctr., Inc., 368 N.J.Super. 237, 247, 845 A.2d 720 (App.Div.2004) ("Decedent's unilateral decision to contractually waive his right of recovery [did] not preclude his *251 heirs ... from instituting and prosecuting a wrongful death action."); Troum v. Newark Beth Israel Med. Ctr., 338 N.J.Super. 1, 27, 768 A.2d 177 (App.Div.) (where decedent failed to timely file a medical malpractice action, the statute of limitations barred a survival action but a wrongful death action based upon the same alleged negligence was unaffected), certif. denied, 168 N.J. 295, 773 A.2d 1158 (2001).
The difference in these results derives from the fact that actions under the New Jersey Wrongful Death Act and the New Jersey Survivor Act "serve different purposes and are designed to provide a remedy to different parties." Smith v. Whitaker, 160 N.J. 221, 231, 734 A.2d 243 (1999). See also N.J. Div. of Youth & Family Servs. v. M.W., 398 N.J.Super. 266, 289, 942 A.2d 1 (App.Div.), certif. denied, 196 N.J. 347, 953 A.2d 765 (2008); F.F. v. G.A.D.R., 331 N.J.Super. 23, 27-28, 750 A.2d 786 (App.Div.) ("The cause of action for wrongful death and the deceased's own cause of action for personal injuries are separate and distinct claims.... The decedent's personal claim is an asset of his estate; the death claim is not."), certif. denied, 165 N.J. 530, 760 A.2d 784 (2000).
A survival action permits the decedent's estate to pursue any cause of action that the decedent would have had if he had survived. Galante v. May, 364 N.J.Super. 284, 288, 835 A.2d 352 (App.Div.2003). Because of this unity of identity between the claim asserted in the survival action and the claim that would have been asserted by the decedent if he had lived, it is reasonable to apply a bar designed to punish the decedent uninsured driver to the survival action that seeks to vindicate the claim of the uninsured driver who has died. Accordingly, the trial court correctly granted summary judgment dismissing that claim, a result that plaintiff has not sought leave to appeal. It does not follow, however, that the statutory bar should also apply to the wrongful death action.
The Wrongful Death Act, N.J.S.A. 2A:31-1 to -6, is remedial legislation that is designed to "eliminate the inequity of denying all right of recovery for the death of a family member." Alfone, supra, 87 N.J. at 109, 432 A.2d 857. In contrast to the survival action, recovery under the Wrongful Death Act compensates the survivors of the decedent for their losses[2] as a result of the tortious conduct of others, ibid., and does not accrue to the decedent or his estate as a matter of law. Miller, supra, 166 N.J. at 383-84, 766 A.2d 738.
The argument that the wrongful death action here should be barred rests largely on the language in the statute that suggests that the right to sue is limited to circumstances in which the decedent would have been able to maintain a cause of action. Since Aronberg would not have been "entitled ... to maintain an action for [his] damages," it is argued that the Wrongful Death Act does not grant his heirs the right to sue for their damages.
However, a comparison of the language in the statutes does not support this conclusion. First of all, N.J.S.A. 39:6A-4.5(a) has a narrowly circumscribed target. The statutory bar is explicitly limited to the person who fails to maintain compulsory insurance and is applied only when he is *252 injured while driving the uninsured vehicle. "Any person who [fails to maintain mandatory coverage] shall have no cause of action for recovery of ... loss sustained as a result of an accident while operating an uninsured automobile" N.J.S.A. 39:6A-4.5(a). Therefore, the punitive effect of the statute is limitedboth to the person who failed to obtain insurance and to particular circumstances. Even the uninsured motorist who is the target of the statute escapes the bar if he or she happens to be a passenger when injured. See Dziuba v. Fletcher, 188 N.J. 339, 340, 907 A.2d 427 (2006) (N.J.S.A. 39:6A-4.5(a) did not bar recovery of non-economic damages by plaintiff, an uninsured motorist, because he was not operating his uninsured vehicle when he was injured).
Moreover, contrary to the interpretation adopted by the dissent, the language of the Wrongful Death Act does not link the viability of a claim under that statute "to the victim's possession of" a viable claim. The statute authorizes a wrongful death action "[w]hen the death of a person is caused by a wrongful act ... such as would, if death had not ensued, have entitled the person injured to maintain an action for damages resulting from the injury[.]" N.J.S.A. 2A:31-1 (emphasis added). The focus is on the "wrongful act" that caused death and whether that constituted an actionable tort ab initio rather than the broader concept of viability, which could be affected by the decedent's actions or inaction at some point after the wrongful act occurred. Therefore, the facts that give rise to the claim are death, causation and a wrongful act that constitutes an actionable tort.
As the Supreme Court explained in Miller, supra, 166 N.J. at 382, 766 A.2d 738, the limiting language in the Wrongful Death Act pertains only to the character of the injury, and is not intended as a procedural or jurisdictional requirement. In so holding, the Court agreed that "[t]he more reasonable interpretation" of such language is that it is "directed at the necessity of some original tort on the part of the defendant, under circumstances giving rise to liability in the first instance, rather than to subsequent changes in the situation affecting only the interest of the decedent." Id. at 384-85, 766 A.2d 738 (quoting W. Keeton, et al, Prosser & Keeton on the Law of Torts § 127 at 945 (5th ed. 1984)). The limiting language is designed only "to prevent recovery for death where the decedent could never at any time have maintained an action, as, for example, where there was simply no tortious conduct toward him." Id. at 385, 766 A.2d 738 (quoting Prosser & Keeton, supra, § 127 at 954) (emphasis added). Accordingly, in Miller, the Supreme Court concluded that "a wrongful death claim is an independent cause of action that cannot be extinguished" by the decedent's failure to bring an action based upon the underlying tort before the expiration of the statute of limitations. 166 N.J. at 372, 766 A.2d 738. See also Alfone, supra, 87 N.J. at 110, 432 A.2d 857 ("We conclude that the right of action for wrongful death under N.J.S.A. 2A:31-1 to -6 depends upon the occurrence of a wrongful and ultimately fatal act... and is not limited to the availability of decedent's own cause of action had he survived.").
In this case, the character of the injurydeath as the result of allegedly tortious conductprovides the requisite factual basis for an action to recover damages under the Wrongful Death Act. Because the Wrongful Death Act is remedial legislation, it must be liberally construed to serve its purpose of creating a right of recovery for the economic loss caused by the death of a family member. Miller, supra, 166 N.J. at 381, 766 A.2d 738; *253 Smith, supra, 160 N.J. at 232, 734 A.2d 243; Gershon, supra, 368 N.J.Super. at 245, 845 A.2d 720. Our review of the language and legislative intent expressed in N.J.S.A. 39:6A-4.5(a) leads us to conclude that the application of the statutory bar to a wrongful death action would needlessly curtail the Wrongful Death Act's remedial purpose without any appreciable advancement of the goals of N.J.S.A. 39:6A-4.5(a).
There are two goals inherent in N.J.S.A. 39:6A-4.5(a), i.e., to punish the uninsured driver and to create an incentive to comply with compulsory insurance laws. Neither of these goals is served by extending the statutory bar to wrongful death actions.
As noted, by its very language, the punitive reach of N.J.S.A. 39:6A-4.5(a) does not extend to the culpable uninsured motorist who is not operating the uninsured vehicle when injured. The target of the punitive goal is limited to "[a]ny person" who is required to obtain insurance, fails to do so and is injured while operating the uninsured vehicle. There is nothing in the language of N.J.S.A. 39:6A-4.5(a) that supports the conclusion that the Legislature intended to target innocent family members without any culpability for the lack of insurance. We can perceive no rational explanation for why such persons should be deprived of a cause of action for the damages they incur when the uninsured motorist who is injured while a passenger is unaffected by the statutory bar. Moreover, there is little likelihood that applying the bar to the wrongful death action would enhance the incentive to obtain insurance for those drivers who remained unmoved by the bar to their own ability to maintain an action.
We have declined to apply the statutory bar when its punitive aspects conflicted with other matters of public policy or, as here, did not serve the statute's policies. E.g., Walcott v. Allstate N.J. Ins. Co., 376 N.J.Super. 384, 392, 870 A.2d 691 (App. Div.2005) (declining to apply bar to the recovery of PIP benefits by drunk drivers); Camp v. Lummino, 352 N.J.Super. 414, 800 A.2d 234 (App.Div.2002) (declining to bar suit of underage plaintiff against the social host at whose home he had been drinking before an accident); Rojas v. DePaolo, 357 N.J.Super. 115, 119-20, 813 A.2d 1288 (Law Div.2002) (declining to apply bar to uninsured out-of-state driver). We decline to apply the statutory bar to wrongful death actions here as well, based upon the language of the two statutes and our conclusion that an application of the statutory bar would needlessly misdirect punishment to family members the Legislature intended to protect without advancing the goals of N.J.S.A. 39:6A-4.5(a).
Affirmed.
FISHER, J.A.D., dissenting.
According to the complaint, Lawrence Aronberg was tragically killed when the vehicle he was operating on the New Jersey Turnpike first collided with the rear of a tractor trailer, which had slowed due to an accident further ahead, and then was struck in the rear by defendant's tractor-trailer. Approximately three weeks earlier, Allstate Insurance Company cancelled Aronberg's automobile insurance policy for nonpayment of premiums.[1]
This action was filed by Aronberg's mother, who asserted claims on her own behalf based on the Wrongful Death Act, N.J.S.A. 2A:31-1 to -6, and on behalf of Aronberg's estate based on the Survival Act, N.J.S.A. 2A:15-3. Defendant moved *254 for summary judgment, relying on N.J.S.A. 39:6A-4.5(a) (emphasis added), which declares that a "person who, at the time of an automobile accident resulting in injuries to that person, is required but fails to maintain [mandatory insurance coverage]... shall have no cause of action for recovery of economic or noneconomic loss sustained as a result of an accident while operating an uninsured automobile." The trial judge granted the motion in most respects; the judge, however, determined that even though Aronberg could have no cause of action because of N.J.S.A. 39:6A-4.5(a), his heir's wrongful death action could proceed. We granted leave to appeal in order to consider the viability of the wrongful death action.
My colleagues have determined that the wrongful death action is not barred by decedent's failure to maintain mandatory automobile insurance. I respectfully disagree.
I would reverse because N.J.S.A. 39:6A-4.5(a) unmistakably declares that "no cause of action" arises when injuries are sustained by a person operating an uninsured vehicle, and the wrongful death statute, N.J.S.A. 2A:31-1, links the viability of a wrongful death action to the victim's possession of a claim "such as would, if death had not ensued, have entitled the person injured to maintain an action for damages resulting from the injury." Despite the clear language of these statutes, the majority has determined that a wrongful death claim is different or somehow exempt from the broad scope of N.J.S.A. 39:6A-4.5(a). Such a holding creates the anomalous circumstance that had Aronberg livedno matter how seriously injured or maimed and regardless of the extent to which his injuries would have impacted his dependentshe would have no remedy, but his heir may proceed on her cause of action because Aronberg died as a result of the same circumstances.
I do not dispute the majority's premise that the wrongful death statute serves a different purpose than, for example, the survival statute,[2] but that difference largely resides in the pool of persons entitled to relief. Smith v. Whitaker, 160 N.J. 221, 231, 734 A.2d 243 (1999). That is, the survival statute "preserves to the decedent's estate any personal cause of action that decedent would have had if he or she had survived," id. at 233, 734 A.2d 243, whereas "[t]he fundamental purpose of a wrongful death action is to compensate survivors for the pecuniary losses they suffer because of the tortious conduct of others," id. at 231, 734 A.2d 243 (quoting Alexander v. Whitman, 114 F.3d 1392, 1398 (3d Cir.1997)). This distinction makes no difference. A wrongful death action may provide heirs with a remedy resulting from the loss of a life, but the claim still derives from the tortious conduct upon which a personal injury claim would have been based had the victim lived. Id. at 233, 734 A.2d 243; see also Vassiliu v. Daimler Chrysler Corp., 178 N.J. 286, 294, 839 A.2d 863 (2004); Giardina v. Bennett, 111 N.J. 412, 423-24, 545 A.2d 139 (1988).
In considering whether a wrongful death action should have a broader reach than a survival actionor a greater reach than the claim the victim could have asserted had he or she livedwe should not overlook that wrongful death statutes were enacted in response to the English common law rule that "in a civil court, the death of a human being could not be complained *255 of as an injury," Miller v. Estate of Sperling, 166 N.J. 370, 375, 766 A.2d 738 (2001) (quoting Baker v. Bolton, 170 Eng. Rep. 1033 (K.B. 1808)), and to avoid the unjust result, described by one commentator, of making it "cheaper to kill one's victim than to merely injure him or her," Gary A. Meadows, Wrongful Death and the Lost Society of the Unborn, 13 J. Legal Med. 99, 100 (1992) (quoted in Miller, supra, 166 N.J. at 375, 766 A.2d 738). So viewed, it follows that wrongful death statutes were intended to place a claim based on the death of a victim of tortious conduct on the same even plane as a personal injury claim when the victim survives the tortious conduct. The majority, however, concludes that wrongful death actions should be placed on even higher ground, invulnerable to the rigors of N.J.S.A. 39:6A-4.5(a). I find nothing in the policies underlying wrongful death statutes, and the well-established understanding that such claims are derivative of the victim's cause of action, Vassiliu, supra, 178 N.J. at 294, 839 A.2d 863; Smith, supra, 160 N.J. at 233, 734 A.2d 243; Giardina, supra, 111 N.J. at 423-24, 545 A.2d 139, to warrant an exception to N.J.S.A. 39:6A-4.5(a), that would permit an heir to maintain a wrongful death action even though the uninsured victim would not have possessed a cause of action had he or she survived the accident.
The majority's holding seems largely driven by the Court's decision in Miller. There, the Court considered a highly unusual circumstance not applicable here. The record in that case reveals that the plaintiff's wife was treated by a physician from the early 1960's until 1985, during which the physician prescribed a medication later taken off the market due to adverse side effects. 166 N.J. at 372, 766 A.2d 738. The plaintiff's wife died in 1996 without ever having filed a medical malpractice action that had accrued long before. Id. at 372-73, 766 A.2d 738. Plaintiff commenced a wrongful death action within two years of his wife's death and the defendant moved for summary judgment on statute of limitations grounds. Id. at 373, 766 A.2d 738.
We affirmed the summary judgment entered in favor of the defendant. Miller v. Estate of Sperling, 326 N.J.Super. 572, 742 A.2d 572 (App.Div.1999). In so holding, we reasoned that "even though [the wrongful death] claim did not ripen or `accrue' until plaintiff's wife died, decedent's failure to bring a personal injury action before the statute of limitation[s] expired barred the action due to the death claim's derivative nature." Id. at 578, 742 A.2d 572 (internal citations omitted). In reversing, the Supreme Court overruled Knabe v. Hudson Bus Transp. Co., 111 N.J.L. 333, 168 A. 418 (E. & A.1933), and rejected the "unacceptable paradox [that] a wrongful death claim could effectively be time-barred before the death itself." Miller, supra, 166 N.J. at 382, 766 A.2d 738. In so holding, the Court interpreted the scope of N.J.S.A. 2A:31-3, which defines the time for commencement of a wrongful death action, not the scope of N.J.S.A. 2A:31-1, which defines the nature and scope of the claim itself. Thus, in concluding that "the limitations of N.J.S.A. 2A:31-3 do not speak to jurisdictional or procedural matters that might prevent a decedent from instituting an action at death," 166 N.J. at 385, 766 A.2d 738 (emphasis added), the Court was rejecting the anomalous possibility that a wrongful death action could be time-barred before it ever accrued and not recasting the analytical basis for such a claim. Here, we are required to resolve a quite different problem that has no bearing on whether a wrongful death claim can be asserted when the decedent failed in life to pursue an accrued claim.
*256 There is no doubt that because he failed to maintain mandatory auto insurance, Aronberg would not have been able to pursue a claim on his own behalf had he survived the accident. And, because the viability of a wrongful death action is tied to whether the victim would have been entitled "to maintain an action for damages resulting from the injury ... if death had not ensued," N.J.S.A. 2A:31-1, there is nothing in our jurisprudence that would permit a wrongful death action to be maintained when the victim's personal injury action, had the victim survived, would have been barred. Accordingly, the wrongful death action here is only maintainable if the Legislature did not intend to apply N.J.S.A. 39:6A-4.5(a) to wrongful death actions. I can find no evidence of such a legislative intent.
In enacting N.J.S.A. 39:6A-4.5(a), the Legislature intended to address the serious problems and consequences generated by uninsured motorists and "advance[d] a policy of cost containment by ensuring that an injured, uninsured driver does not draw on the pool of accident-victim insurance funds to which he did not contribute." Caviglia v. Royal Tours of Am., 178 N.J. 460, 471, 842 A.2d 125 (2004). The statute, thus, "gives the uninsured driver a very powerful incentive to comply with the compulsory insurance laws: obtain automobile liability insurance coverage or lose the right to maintain a suit for both economic and noneconomic injuries." Ibid. Considering these important goals and finding no evidence of a contrary legislative intent, I would not engraft an exception to N.J.S.A. 39:6A-4.5(a) that would permit the maintenance of a wrongful death action when an action for damages would have been barred had the uninsured motorist lived.
In the final analysis, the majority has determined that we should reach a different conclusion than that which I think is required by the applicable legislation because extinguishing the wrongful death action "would punish family members, rather than the uninsured driver," "add economic woe to the personal loss suffered by family members," and would not likely "enhance the incentive to obtain insurance." I would first suggest that these concerns do not remotely address the goal of cost containment embodied by N.J.S.A. 39:6A-4.5(a). See Caviglia, supra, 178 N.J. at 471, 842 A.2d 125. Any recovery obtained by Aronberg's heir would draw on the insurance pool the Legislature sought to insulate from uninsured motorists. Moreover, there is nothing to suggest that the Legislature did not consider the impact on an uninsured motorist's heirs in enacting N.J.S.A. 39:6A-4.5(a). To the extent that the dismissal of the wrongful death action could be viewed as unduly harsh, the remedyshould there be onelies with the Legislature and should not be imposed through what I believe are the majority's sympathetic interpretations of N.J.S.A. 39:6A-4.5(a) and N.J.S.A. 2A:31-1. Just as it would be anomalous to conclude that a wrongful death action could be time-barred before the death ever occurred, as the Court held in Miller, it would be equally disconcerting to conclude that a wrongful death action could be maintained when a personal injury action arising from the identical circumstances would be barred had Aronberg lived.
For these reasons, I respectfully dissent.
NOTES
[1] Defendants' reliance upon Vassiliu v. Daimler Chrysler Corp., 178 N.J. 286, 294, 839 A.2d 863 (2004), to support this proposition is misplaced. Vassiliu contained language to that effect in considering an entirely different issue, i.e., whether a single policy limit applied to both claims in light of policy language that limited liability "for all damages ... arising out of bodily injury to one person[.]" 178 N.J. at 294, 839 A.2d 863. And, in fact, the Court found no fault in the conclusion that the wrongful death and survivor claims are legally distinct. Ibid.
[2] Damages recoverable under the Wrongful Death Act are expressly limited "to the pecuniary injuries resulting from such death, together with the hospital, medical and funeral expenses incurred for the deceased[.]" N.J.S.A. 2A:31-5. See also Canino v. N.Y. News, Inc., 96 N.J. 189, 194, 475 A.2d 528 (1984); Tenore v. Nu Car Carriers, Inc., 67 N.J. 466, 474, 341 A.2d 613 (1975); Gershon, supra, 368 N.J.Super. at 245, 845 A.2d 720.
[1] Allstate obtained summary judgment in this action on the issue of cancellation.
[2] There is also no dispute that N.J.S.A. 39:6A-4.5(a) precludes Aronberg's estate from seeking relief pursuant to the survival statute, and that the trial judge correctly granted summary judgment on that claim. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542836/ | 67 B.R. 926 (1986)
In re ELSINORE SHORE ASSOCIATES, f/k/a Playboy Elsinore Associates, a New Jersey partnership, d/b/a the Atlantis Casino Hotel, Debtor-in-Possession.
ELSINORE SHORE ASSOCIATES, f/k/a Playboy Elsinore Associates, a New Jersey partnership, d/b/a the Atlantis Casino Hotel, Plaintiff,
v.
FIRST FIDELITY BANK, N.A., SOUTH JERSEY, Defendants.
Bankruptcy No. 85-06058, Adv. No. 86-0043.
United States Bankruptcy Court, D. New Jersey.
December 16, 1986.
*927 Crummy, Del Deo, Dolan, Griffinger & Vecchione by Paul R. DeFilippo, Newark, N.J., for Elsinore Shore Associates.
Scheider & Wiener by Jeremy Galton, Newark, N.J., for First Fidelity Bank, N.A., South Jersey.
Valore, McAllister, Westmoreland, Gould Vesper & Schwartz by Eric A. Browndorf, Northfield, N.J., for Unsecured Creditors Committee.
OPINION
ROSEMARY GAMBARDELLA, Bankruptcy Judge.
The debtor, Elsinore Shore Associates, f/k/a Playboy Elsinore Associates, a New Jersey partnership, d/b/a The Atlantis Casino Hotel, (ESA), has filed a motion for reconsideration of this Court's denial of ESA's motion for summary judgment on the First Count of its Complaint against First Fidelity Bank, N.A., South Jersey (First Fidelity Bank) and for other relief seeking in the alternative entry of summary judgment on the First Count of the Complaint compelling turnover of the sum of $545,000.00 by the defendant First Fidelity Bank, to ESA, alternatively, partial summary judgment on Count One of the complaint in the amount of $545,000.00, or such sum as the court may determine should be turned over to ESA due to the absence of any right of setoff by First Fidelity Bank, an order pursuant to Fed.R. Civ.P. 56(d) and Bankruptcy Rule 7056 specifying those genuine issues of material fact which exist for purposes of trial, and for a preemptory trial date on all issues not resolved by summary judgment.
First Fidelity Bank has concurrently moved for the entry of an order compelling ESA to exonerate First Fidelity Bank from liability under a certain letter of credit issued by First Fidelity Bank on behalf of the debtor in favor of American Home Assurance Company (American Home) by payment of $379,405.00, which American Home has demanded or if American Home draws down on Letter of Credit No. 1219/85, an order allowing First Fidelity Bank to pay American Home $379,405.00 and to setoff against the obligation owed by First Fidelity Bank to the debtor, the sum of $379,405.00 paid by First Fidelity Bank to American Home.
ESA filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Reform Act of 1978 as amended by The Bankruptcy Amendments and Federal Judgeship Act of 1984 (Bankruptcy Code) on November 14, 1985.
On October 12, 1980, Playboy-Elsinore Associates (PEA), ESA's predecessor, applied to First Fidelity Bank for the issuance of an irrevocable letter of credit in the amount of $50,000.00 in favor of Insurance Company of North America (INA). Playboy-Elsinore Associates at that time executed a guaranty of payment to First Fidelity Bank for its reimbursement obligations in the event the letter of credit was drawn upon. On October 24, 1980, First Fidelity Bank issued an Irrevocable Letter of Credit, No. 1075, in the amount of $50,000.00 in favor of INA. That letter of credit has a current expiration date of October 26, 1986.
On December 10, 1984 the debtor, ESA, applied to First Fidelity Bank for an irrevocable letter of credit in favor of American Home. At that time the debtor executed a guaranty of payment in favor of First Fidelity Bank agreeing to pay First Fidelity Bank in the event the letter of credit was drawn upon. On January 28, 1985 ESA obtained an Irrevocable Letter of Credit, No. 1219/85 from the Bank in the amount of $490,000.00 in favor of American Home. That letter of credit has a current expiration date of December 31, 1986.
Pursuant to the terms of Letter of Credit No. 1219/85 and Letter of Credit No. 1075, if either of the beneficiaries draw upon the Letters of Credit, in accordance with the terms of the respective letters of credit, First Fidelity Bank is obligated to honor and pay the drafts as presented. The Irrevocable Letter of Credit No. 1219/85 dated January 28, 1985 naming American Home as beneficiary provided:
*928 We [First Fidelity Bank N.A., South Jersey] do hereby issue in your favor this Irrevocable Letter of Credit for the account of Elsinore Shore Associates for a sum not exceeding a total of Four Hundred Ninety Thousand Dollars and 00/100 ($490,000.00) available by your draft(s) at sight.
Drafts must be drawn and presented to us no later than December 31, 1985. All drafts must be marked "Drawn under First Fidelity Bank, National Association, South Jersey, Credit No. 1219/85, dated January 28, 1985.
All drafts must be accompanied by (a) a statement to the effect that your account is over 30 days past due, (2) you are satisfying the account through presentation of the draft, and (3) you have provided a notice of cancellation and demand for payment which has not been satisfied within the 10 day period specified.
The "Irrevocable Letter of Credit" No. 1075 dated October 24, 1980 naming INA as beneficiary, provided:
At the request of Playboy-Elsinore Associates, we [First National Bank of South Jersey, predecessor to First Fidelity Bank] hereby authorize you to draw on First National Bank of South Jersey of Pleasantville, NJ up to an aggregate amount of U.S. Fifty Thousand and 00/100 dollars ($50,000) available by your drafts at sight accompanied by a statement to the effect that you have been called upon to make payment of loss, attorney's fees or other expenses by reason of executing Atlantic City Performance Bond(s) as surety on behalf of Playboy-Elsinore Associates as principal and in favor of Atlantic City, NJ as obligee in the penalty of U.S. Fifty Thousand and 00/100 dollars ($50,000) and dated on or about the 24th day of October 1980, or that the premium(s) thereon are unpaid and overdue.
ESA had also obtained an Irrevocable Letter of Credit dated January 28, 1985 from First Fidelity Bank in favor of Atlantic City Electric Co., No. 1218/85, in the amount of $150,000 and an Irrevocable Letter of Credit dated June 27, 1985 from First National State Bank of South Jersey, a predecessor to First Fidelity Bank in favor of South Jersey Gas Co., No. 1239/85 in the amount of $70,000. Both of these letters of credit expired on December 31, 1985.
On October 12, 1980 Playboy-Elsinore Associates executed a guaranty of Commercial Letter of Credit to First National Bank of South Jersey (predecessor to First Fidelity Bank) in connection with the INA letter of credit which provided in its Paragraph One:
In consideration of your opening, at the request of the undersigned (PEA) the Commercial Letter of Credit (hereinafter called the "Credit") applied for on the reversed side hereof, it is agreed:
1. As to bills drawn under said Credit payable in United States currency, the undersigned will provide you at your office with United States currency to the amount thereof at least one day prior to the maturity of such bills or any instruments executed in extension or renewal thereof. If any such bills shall be payable at sight, then the undersigned will provide such funds immediately upon receipt of notice of payment.
Paragraph 10 of the guaranty further provided:
Upon demand, the undersigned will deliver, convey and transfer to you as security for the payment and performance of the obligation contained in this guaranty and the payment of any and all other obligations or liabilities of the undersigned to you, collateral security of a value and character satisfactory to you.
On November 27, 1984, ESA executed a Guaranty of Commercial Credit to First National State Bank of South Jersey (predecessor to the Bank) in connection with the American Home letter of credit which contained the identical terms of Paragraph One of the INA guaranty recited above, but struck out the language of Paragraph Ten (10) also recited above.
Similar guaranties were executed by ESA in favor of First National State Bank of South Jersey in connection with the Atlantic *929 City Electric Company letter of credit and the South Jersey Gas Company letter of credit, those guaranties dated December 10, 1984 and June 4, 1985, respectively.
On October 4, 1985 ESA deposited $775,000.00 into its general checking account No. 409421 at First Fidelity. On that same day the Bank debited the account for the sum of $765,000.00. The $765,000.00 debit was transferred by the Bank to a daily Repurchase Agreement.
On October 15, 1985 Alan D. Weiner, Esquire, counsel for First Fidelity Bank sent a letter to ESA which stated:
As requested, this is to confirm the discussion had between yourself, other representatives of Elsinore Shore Associates, and ourselves on October 3, 1985. As we advised you, pursuant to the terms of the applicable letter of credit agreement between First Fidelity Bank, N.A., South Jersey and Elsinore Shore Associates, a demand was made by the bank for the posting of collateral by Elsinore Shore Associates with respect to the outstanding letters of credit issued by the bank on the application of Elsinore Shore Associates. No collateral having been forthcoming, the bank exercised its rights to have the balance of the demand deposit account of Elsinore Shore Associates with the bank, up to the amount of the outstanding letters of credit, held as collateral for the reimbursement obligations of Elsinore Shore Associates with respect to said letters of credit. As further indicated to you at that meeting, any balance of the account over and above the amount of the letters of credit, or any future sums thereafter deposited and increasing the balance of said account would not be held by the bank as collateral, and would accordingly be available for use by Elsinore Shore Associates. If substitute collateral, acceptable to the bank, was pledged in favor of the bank, the credit balance of the account would be released by the bank.
If you have any questions, please feel free to contact me.
By letter to First Fidelity Bank's attorney dated October 21, 1985, ESA objected to the Bank holding as collateral amounts deposited in the demand deposit account of ESA up to the amount of the outstanding letters of credit and demanded release of the sum of $710,000.00, representing the American Home letter of credit, the Atlantic City Electric Company letter of credit and the South Jersey Gas Company letter of credit, on the basis that ESA never agreed to posting collateral upon demand by the Bank in connection with those letters of credit.
As of November 14, 1985, the date of the filing of the Chapter 11 petition by ESA, the debtor maintained a demand deposit account with the First Fidelity Bank, No. 409421, in which there was a credit balance in favor of ESA in the amount of $765,000.00. As of the date of the filing of the Chapter 11 petition, First Fidelity Bank continued to hold the amount of $765,000.00.
On January 27, 1986, First Fidelity Bank filed a motion in this court to modify and terminate the automatic stay provisions of 11 U.S.C. § 362 so as to permit First Fidelity, without further order of the court, to set-off and/or to foreclose against the credit balance of approximately $765,000.00 in ESA's bank account no. 409421 to satisfy the liabilities of ESA to First Fidelity Bank. On February 27, 1986, a consent order entered into by ESA and First Fidelity Bank withdrawing the motion for relief from the automatic stay was entered by this court. Pursuant to that consent order, First Fidelity Bank turned over to ESA, free and clear of any lien, claim or encumbrance, the sum of $220,000.00 from ESA's account no. 409421. Also pursuant to the consent order, First Fidelity Bank held the balance of the money in account no. 409421 of approximately $545,000.00, and continued to credit interest to the account on a daily basis, subject to further order of this court.
On March 4, 1986, ESA filed the instant complaint against First Fidelity Bank.
In its complaint, ESA asserted that as of that date no drafts had been submitted by *930 American Home against Letter of Credit No. 1219/85 and that ESA had timely made all insurance premiums due to American Home or its affiliates. ESA further asserted that no draft had been drawn against the INA Letter of Credit No. 1075 as of that date.
ESA stated in its complaint that First Fidelity Bank asserted that the credit balance was collateral for First Fidelity Bank's contingent unliquidated liability under the aforementioned Letters of Credit. ESA contends in its complaint that First Fidelity Bank's actions violated the parties' agreements, were an "intentional conversion" of ESA's property rights, and caused ESA damage.
In its complaint, ESA contends that First Fidelity Bank owes ESA $765,000.00 or such sum as may be represented by the credit balance in account no. 409421. ESA further contends that First Fidelity Bank holds no collateral to secure its claim, and has no right of setoff against the credit balance in account no. 409421.
Under Count One of the complaint ESA seeks judgment against First Fidelity Bank for (1) an order directing the Bank to pay to ESA the sum of $765,000.00, or such credit balance as may exist in favor of ESA held by the Bank; (2) damages based upon the Bank's wrongful retention of ESA's funds and conversion of ESA's property; (3) interest, attorneys fees and other costs of suit, and; (4) other and further relief as the court deems just.
Under Count Two of the complaint ESA seeks a judgment against the Bank (1) to estimate the Bank's contingent, unliquidated claim against ESA pursuant to 11 U.S.C. § 502(c); (2) to determine the extent validity and priority of the Bank's alleged lien, security interest or right of setoff in or against the property of ESA; (3) to determine the Bank's secured claim or right of setoff, if any, and; (4) for such other and further relief as the court deems just.
On March 6, 1986 ESA filed a notice of motion for summary judgment against First Fidelity on Count One of its complaint seeking an order directing First Fidelity Bank to turnover and pay to ESA all funds represented by any credit balances in favor of ESA in any account with the Bank.
On March 6, 1986, ESA filed a brief in support of its motion for summary judgment, together with the certification of Paul R. DeFilippo, Esquire, counsel for ESA, dated March 5, 1986. ESA argued that, pursuant to 11 U.S.C. § 542(b), ESA is entitled to the turnover of all of ESA's monies which are presently being held by First Fidelity Bank. In his certification, Mr. DeFilippo stated that, based upon conversations with First Fidelity Bank's counsel as of that date, First Fidelity Bank has not received or paid a draft against either the INA or American Home letters of credit.
There was also before this court an affidavit of R. Bruce McKee, the Vice President of Finance of ESA. Mr. McKee stated in his affidavit dated April 10, 1986 that to the best of his knowledge, "no drafts have been submitted to or paid by the Bank [First Fidelity] under either of the two open letters of credit."
ESA also relied upon the Certification of Alexander Hertz, Vice President of First Fidelity Bank, which was filed with this court on January 27, 1986 and submitted in support of First Fidelity Bank's motion for relief from the automatic stay. In that affidavit, Alexander Hertz stated that "if any of the Beneficiaries under the Irrevocable Letters of Credit . . . draw upon the said letters of credit in compliance with its terms, Bank will be required to honor and pay the drafts so presented." Mr. Hertz further stated that the "debtor has a contingent liability to Bank under the said letters of credit for the amount the Bank is required to honor and pay under the letters of credit."
First Fidelity Bank opposed the motion for summary judgment and argued that it has not been dispositively shown that the beneficiaries of the aforementioned letters of credit had not drawn upon the letters of credit or that the letters of credit will not *931 be drawn upon in the future. With regard to this issue, First Fidelity Bank argued that: (1) the burden is upon the plaintiff, ESA, in a summary judgment proceeding to show that there exists no issue of material fact, and; (2) any uncertainty must be resolved in favor of the defendant, First Fidelity Bank, in a summary judgment proceeding. First Fidelity Bank further contended that: (1) 11 U.S.C. § 542(b) does not apply to deposit accounts; (2) even if 11 U.S.C. § 542(b) does apply, 11 U.S.C. § 553 gives First Fidelity a right of setoff; (3) ESA's deposit account with First Fidelity Bank is cash collateral which need not be turned over without adequate protection; (4) 11 U.S.C. § 502(c) is not a basis for requiring First Fidelity to return the money on deposit to ESA, and; (5) the consent order entered into between the parties and entered by this court on February 27, 1986 barred the motion for summary judgment.
On April 14, 1986, First Fidelity Bank filed an Answer, Counterclaim and Third Party Complaint with this Court in connection with the pending complaint. First Fidelity Bank has named American Home and INA as third party defendants seeking a declaratory judgment that the liability of First Fidelity Bank to the beneficiaries under the letters of credit is limited to unpaid claims of the beneficiaries based upon the account of the debtor, ESA, existing at the time of the filing by ESA of its Chapter 11 petition. First Fidelity Bank also seeks a declaratory judgment that claims of the beneficiaries existing at the time of the filing of the Chapter 11 petition have been satisfied, and other relief.
A hearing on ESA's original motion for summary judgment was conducted on April 14, 1986. This court at that time reviewed the affidavit of Messrs. DeFillipo and McKee, the certification of Alexander Hertz, and the deposition testimony of Mr. Vincent Ruggierio, the Secretary-Regional Manager of American Home. Based upon that review, this court, in its decision rendered on the record on May 5, 1986, found that the affidavits and limited deposition testimony presented were not dispositive of the material issue of whether ESA currently owes, or owed at the time of the filing of the Chapter 11 petition, or at any time prior thereto, a debt to First Fidelity Bank to which a right to setoff could attach.[1] This court found that the record was equally unclear regarding whether the beneficiaries of the existing letters of credit presented to First Fidelity Bank any drafts for payment which represent premium payments due from ESA, and that such drafts might form the basis of a claim by First Fidelity Bank against ESA which could entitle First Fidelity Bank to a right of setoff pursuant to 11 U.S.C. § 553.
Based upon those findings, the court, by its decision rendered on May 5, 1986, denied the debtor's motion for summary judgment.
An order dated June 16, 1986 was entered denying the motion. No appeal from that order was taken. Instead, on May 30, 1986 ESA filed its instant motion for reconsideration *932 and other relief. On June 5, 1986, First Fidelity Bank filed its motion seeking an order of exoneration and to permit setoff.
The motion by the debtor seeks alternative relief under Fed.R.Civ.P. 56(d), 59(e) and 60(b).
Fed.R.Civ.P. 60, made applicable to bankruptcy proceedings by Bankruptcy Rule 9024, provides for relief from a judgment or order and provides in pertinent part:
(b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notified as provided in Title 28 U.S.C. § 1655, or to set aside a judgment for fraud upon the court. Writs of coram nobis, coram vobis, audita querela, and bills of review and bills in the nature of a bill of review, are abolished, and the procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action. (As amended Dec. 27, 1946, eff. Mar. 19, 1948; Dec. 29, 1948, eff. Oct. 20, 1949.)
Federal R.Civ.P. 59, made applicable to bankruptcy proceedings by Bankruptcy Rule 9023, provides for New Trials and Amendment of Judgments, and provides in pertinent part:
(e) Motion to Alter or Amend a Judgment.
A motion to alter or amend the judgment shall be served not later than 10 days after entry of judgment.
This court finds that ESA has failed to establish grounds set forth in Rules 59 and 60(b) to form the basis for this court to reconsider its decision of May 5, 1986 based upon the record as it was presented by the parties at that time. ESA has shown no mistake, inadvertence, surprise or excusable neglect, newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Fed.R.Civ.P. 59(b), fraud, misrepresentation, misconduct of an adverse party or other grounds to justify such relief.
ESA seeks alternative relief. ESA has moved again for summary judgment or partial summary judgment on Count One of its complaint while First Fidelity Bank now seeks an order permitting setoff based upon its payment of a draft submitted pursuant to the American Home letter of credit.
The court in connection with these applications makes the following additional findings of fact based upon the record as supplemented by the parties to date.
On April 24, 1986 INA filed an answer to the Third Party Complaint filed by First Fidelity Bank wherein INA admitted that it had issued surety bonds to ESA, and that the INA letter of credit was issued to insure timely payment of premiums due on the bonds and to guarantee payment of loss, attorneys' fees and other expenses to INA on account of the performance and *933 maintenance bonds. INA further admitted that ESA had paid the premium prior to the filing of the Chapter 11 petition, but that the maintenance bond has not been released so that INA could be called upon to make payment under the bond in which case it would seek reimbursement from the subject letter of credit.
INA further claimed by separate defenses that the affirmative pleading failed to state a claim upon which relief can be granted and that the claim was barred as a matter of law.
On May 6, 1986 American Home also filed an answer to the Third Party Complaint seeking dismissal of the Third Party Complaint on the grounds that it fails to state a claim upon which relief can be given, this court lacked jurisdiction over the complaint because the facts alleged have not ripened into a case or controversy, and that the Third Party Plaintiff (First Fidelity Bank) should be barred as to remedy and relief by the doctrine of estoppel.
In connection with the motion for reconsideration of the denial of summary judgment, ESA submitted an affidavit of R. Bruce McKee, the Vice President of Finance of ESA. By Mr. McKee's Affidavit, he stated that as of May 27, 1986, the date of the Affidavit, ESA has not been presented with any invoices or billings from American Home or its affiliates for premiums due under any insurance policies issued by American Home or its affiliates for the policy year ending October 31, 1985 or December 31, 1985, other than the invoice for deposit premium which has been paid. McKee also stated that ESA had not received any notice from American Home or its affiliates that any insurance policies issued by American Home or its affiliates are to be cancelled. McKee further avered that as of the date of his affidavit, ESA had not received any notice from First Fidelity Bank that the Bank had been presented with or made any payment of any drafts under any outstanding letters of credit issued for the account of the debtor.
Mr. McKee, by subsequent Affidavit dated June 13, 1986, however, stated that on June 9, 1986, ESA received a retrospective premium billing in the amount of $379,405.00 from Walter Kaye Associates, agents for American Home, for premiums due under the insurance policies issued by American Home or its affiliates.
In an Affidavit of Jeremy Galton, Esquire, counsel for First Fidelity Bank, dated June 3, 1986, Mr. Galton states that on May 21, 1986, he received from counsel for American Home a copy of American Home's retention adjustment for ESA that indicates a premium due and payable of $379,405.00.
Alexander Hertz, Vice President of First Fidelity Bank, by Affidavit dated June 27, 1986, states that on June 19, 1986, American Home submitted to the bank a documentary draft for $379,405.00 on demand to the order of American Home under Letter of Credit No. 1219/85. That draft was rejected. A second draft in the same amount was submitted to the Bank on June 25, 1986, with supporting documentation. On July 1, 1986 First Fidelity Bank paid the draft under the letter of credit. Mark F.C. Berner, Esquire, counsel for American Home has advised counsel for ESA that the $379,405.00 retention adjustment billing is the maximum amount which will be claimed by American Home under existing policies as additional or retrospective premiums.
Subsequent to the close of the last hearing, by Affidavit dated April 25, 1986, Ronald Tucker, a bond underwriting manager for INA filed an affidavit with this court stating that INA had issued performance and maintenance bonds to Playboy-Elsinore Associates, predecessor to ESA, as of the date of the affidavit, the maintenance bond in the amount of $79,000.00 had not been released by the Obligee, City of Atlantic City, and that until a full and complete release is received from the City of Atlantic City, the City could assert a claim under the bond. Mr. Tucker further stated that if a claim were asserted by the City, INA would draw down on the irrevocable letter of credit and that until a full release was received by the City, INA would not consent to the release of the letter of credit.
*934 Mr. Galton, counsel for First Fidelity Bank, stated to this court at the hearing on the instant motions on July 2, 1986 that there were no drawn-downs on the INA Letter of Credit. The Bank through its counsel further stated that it intended to terminate that Letter of Credit effective in October 1986.
Since First Fidelity Bank at the time of the July 2, 1986 hearing had already paid the draft under the American Home Letter of Credit, its motion for exoneration was rendered moot. First Fidelity Bank, however, urged the alternative relief requested in its motion, that the Bank be allowed to setoff the amount paid by the Bank to America Home in the sum or $379,405.00 against ESA's account.
This court, by order dated July 23, 1986 ordered that the $379,405.00 billing from American Home to ESA was the maximum amount of retrospective premium adjustment which may be claimed by American Home under any or all of its policies, that on July 1, 1986, First Fidelity Bank paid the draft submitted by American Home under Letter of Credit No. 1219/85 in the sum of $379,405.00 which satisfied in full First Fidelity Bank's liability and obligation to American Home under the Letter of Credit, that payment of the aforesaid draft by First Fidelity Bank extinguished American Home and its affiliates' claims against ESA under the subject insurance policies. American Home by the July 23, 1986 order was directed to forthwith return the original Letter of Credit No. 1219/85 to First Fidelity Bank. The court ordered that upon return of the original Letter of Credit No. 1219/85 to First Fidelity Bank, First Fidelity Bank pay or release to ESA the sum of $115,595.00 from ESA's Account No. 409421, and that the balance of funds maintained in ESA's Account No. 409421, in the approximate sum of $429,405.00 representing the sum of $379,405.00 claimed as a setoff by First Fidelity Bank and the sum of $50,000.00 representing the face amount of the INA letter of credit, be held by First Fidelity Bank pending this court's decision on ESA's claims for turnover and the Bank's request for setoff against those funds.
The purpose of summary judgment is to avoid a trial which is unnecessary and results in delay and expense by promptly disposing of any actions in which there is no genuine issue of material fact. Tomalewski v. State Farm Life Insurance Company, 494 F.2d 882, 884 (3d Cir.1974). Summary judgment is a "drastic remedy" which is not to be granted liberally. Id. cited with approval in Ness v. Marshall, 660 F.2d 517, 519 (3d Cir.1981). Pursuant to Rule 56 of the Federal Rules of Civil Procedure, a trial court may enter summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See generally, Hollinger v. Wagner Mining Equipment Company, 667 F.2d 402, 405 (3d Cir.1981). In a motion for summary judgment, any factual disputes, and any inferences to be drawn from underlying facts, must be resolved against the moving party and in favor of the party opposing the motion. Id. at 405; Chirinos de Alvarez v. Creole Petroleum Corporation, 613 F.2d 1240, 1244 (3d Cir.1980). The party moving for summary judgment, ESA, has the burden of demonstrating that there exists no genuine issue of material fact. Fairbanks, Morse & Company v. Consolidated Fisheries Company, 190 F.2d 817, 824 (3d Cir.1951).
The resolution of the issue in the present case involves an examination of several sections of the Bankruptcy Code. Section 362(a) of the Bankruptcy Code provides:
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could *935 have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) 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; and
(8) the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor.
Bankruptcy Code § 542(b) provides in relevant part:
an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of the this title against a claim against the debtor.
Bankruptcy Code § 553 provides:
(a) 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 the filing of the petition; and
(ii) while the debtor was insolvent; or
(3) the debt owed to the debtor by such creditor was incurred by such creditor
(A) after 90 days before the date of the filing of the petition:
(B) while the debtor was insolvent: and
(C) for the purpose of obtaining a right of setoff against the debtor.
(b)(1) Except with respect to a setoff of a kind described in section 362(b)(6), 362(b)(7), 365(h)(2) or 365(i)(2), of this title, if a creditor offsets a mutual debt owing to the debtor against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of
(A) 90 days before the date of the filing of the petition; and
(B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency.
(2) In this subsection, "insufficiency" means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim.
*936 (c) For the purposes of this section, the debtor is presumed to have been involvent on and during the 90 days immediately preceding the date of the filing of the petition.
By the express terms of Section 553, the right of setoff is limited by the automatic stay provisions of Section 362. See United States on Behalf of I.R.S. v. Norton, 717 F.2d 767, 771 (3d Cir.1983).
The funds deposited by ESA with First Fidelity Bank in the debtor's general checking account no. 409421 prior to the filing of the debtor's Chapter 11 petition became property of the Bank and the debtor became a creditor of the Bank for the amount of the deposit. See American Lumberman's Mutual Casualty Company v. Bradley Construction Co., 127 N.J.Eq. 500, 13 A.2d 783 (Ch. 1940), aff'd 129 N.J.Eq. 278, 19 A.2d 242 (Ct. E & A 1941); Federal Deposit Insurance Corporation v. Pioneer State Bank, 155 N.J.Super. 381, 389, 382 A.2d 958 (Law Div.1977).
It is not disputed for purposes of these motions that the deposit at issue at First Fidelity Bank created a debtor-creditor relationship between First Fidelity Bank and the debtor, ESA, as depositor, so that a debt was owed by the Bank to ESA in the amount of the funds deposited at the Bank prior to the filing of the Chapter 11 petition and at all relevant times thereafter.
The critical issue presented to the court herein is whether First Fidelity Bank holds a mutual pre-petition claim against the debtor that is cognizable under 11 U.S.C. § 553 so that the pre-petition debt owing by the Bank to ESA can be offset against a pre-petition claim of the Bank against the debtor.
The threshold issue which the court must examine in any request for a setoff is whether there is mutualty of obligation between the debtor and the creditor. The debt and the claim need not rise out of the same transaction since the test is mutualty, not similarity, of obligation. The debt and claim is not required to be of the same character before the principle of setoff may be applied. Pre-petition obligations may be setoff one against the other. There also exists authority for the concept of setoff to apply to mutual post-petition obligations. A post-petition obligation, however, may not be setoff against a pre-petition obligation of the debtor, because there is no mutualty of obligation. In re Hill, 19 B.R. 375, 380 (Bkrtcy.N.D. Tex.1982).
The word claim has been defined in the Bankruptcy Code pursuant to 11 U.S.C. 101(4)(A) and (B):
(4) "claim" means
(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; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
Factors which make a claim contingent have been discussed by the courts in the Third Circuit as well as in other circuits. In the case of Matter of M. Frenville Company, Inc., 744 F.2d 332, 336 n. 7 (3d Cir.1984), cert. denied 469 U.S. 1160, 105 S. Ct. 911, 83 L. Ed. 2d 925 (1985), the court stated, "[b]ankruptcy judges have defined a contingent claim as a claim which becomes due only on the occurrence of a future event. See e.g., In re Dill, 30 B.R. 546, 549 (Bkrtcy. 9th Cir.1983), aff'd. 731 F.2d 629 (9th Cir.1984). One frequently cited definition of contingent is that `claims are contingent as to liability if the debt is one which the debtor will be called upon to pay only upon the occurrence or happening of an extrinsic event.' In re All Media Properties, Inc., 5 B.R. 126, 133 (Bkrtcy.S. D.Tex.1980), aff'd, 646 F.2d 193 (5th Cir. (Unit A) 1981) (per curiam)." The court in Frenville looked to the statutory history of the definition of claim and noted, "the bill *937 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." 744 F.2d at 336, citing H.R.Rep. No. 595, 95th Cong., 2d Sess. 309, reprinted in 1978 U.S.Code Cong. and Ad.News 5963, 6266; see also S.Rep. No. 989, 95th Cong., 2d Sess. 21-22, reprinted in 1978 U.S.Code Cong. and Ad.News 5787, 5807-08 (virtually identical statement).
In Frenville, an accounting firm, A & B, was engaged by the debtor for several years, 1977 to 1979, as an independent auditor and accountant. As part of its duties, A & B prepared certified financial statements for fiscal years 1978 and 1979 for the debtor, M. Frenville Co., Inc. (Frenville). In July of 1980, creditors of Frenville filed an involuntary petition in bankruptcy against the company under Chapter 7 of the Bankruptcy Reform Act of 1978. Several banks filed suit in the Supreme Court of New York on November 16, 1981, against A & B alleging that A & B negligently and recklessly prepared the Frenville financial statements, that the statements were false and because of their reliance on these statements, the banks had suffered losses. Two of the principals of the company, Rudolph Frenville, Sr. and Rudolph Frenville, Jr. (the Frenvilles) also had involuntary bankruptcy petitions filed against them under Chapter 7 in January of 1981. As a result of this suit by the banks, A & B filed a complaint on January 10, 1983 in the bankruptcy court seeking relief under the automatic stay provisions of section 362(a) in order to include the Frenvilles as third party defendants in the New York state proceeding. The court stated that the issue was whether the automatic stay was applicable where the debtor's acts which formed the basis of a suit occurred pre-petition but the actual cause of action which was being instituted did not arise until after the filing of the bankruptcy petition. Id. at 334. Reversing the district court, the Court of Appeals held that the automatic stay did not apply in this situation. The court looked to New York law to ascertain at what point in time A & B's claim against the Frenvilles arose. The Third Circuit determined that according to New York law, the claim for contribution or indemnification did not accrue at the time of the commission of the underlying act, but rather at the time of the payment of the judgment flowing from the act. Id. at 337. The court noted, however, "the present case is different from one involving an indemnity or surety contract. When parties agree in advance that one party will indemnify the other party in the event of a certain occurrence, there exists a right to payment, albeit contingent, upon the signing of the agreement." Id. at 336.
In the case of In re Flanagan Brothers, Inc., 47 B.R. 299 (Bkrtcy.D.N.J.1985) the bankruptcy court addressed the issue of a contingent claim, in the context of a setoff. In Flanagan, the debtor had filed a petition under Chapter 7 of the Bankruptcy Code. Prior to filing the petition, Don Rodgers, Inc. (Rodgers) executed a contract with the City of Bridgeton, New Jersey, whereby Rodgers agreed to undertake a certain construction project in that municipality. Under the terms of the contract and New Jersey law, Rodgers obtained a performance bond from a surety for protection of all the parties supplying labor and materials for a construction project. Rodgers subcontracted a portion of the project to the debtor who purchased electrical components from Billows Electric Supply Company (Billows). Under the two contracts, Rodgers owed the debtor $18,520.92 and Billows asserted a claim against the debtor of $22,270.45. Bankruptcy Judge Emil F. Goldhaber stated that, "[t]he predominate issue presented in the case before us is whether a general contractor, who under applicable law is a surety for all persons furnishing labor and material on a state building project, may set-off its entire debt to the debtor/subcontractor against the claim of a materialman who supplied goods to the debtor, rather than set-off only a portion of its debt which equals the amount of a dividend the materialman would receive in the bankruptcy proceeding." 47 *938 B.R. at 300. The court noted that if Rodgers were to satisfy its obligation to Billows, it would be subrogated to Billows' right to receive payment from the debtor and since Rodgers and the debtor would each owe a debt to the other, setoff was essentially appropriate. Id. at 301. The sum which the debtor owed to Billows was being litigated in the federal district court and held in abeyance pending a resolution of the matter in the bankruptcy court. The court noted that although the amount of the debtor's liability to Billows was not yet fixed, the parties were apparently in agreement that some amount was owing. Id. at 301 n. 3. The court also noted that Rodgers had not yet satisfied Billows' claim and it would be only after acquiring this claim against the debtor that Rodgers would be in a posture to setoff. Id. The court noted, however, that, "Rodgers, a surety for the debtor's obligations on the project according to state law, is thus liable directly to Billows on its claim, as well as being indebted indirectly to Billows through its indebtedness to the debtor." Id. at 303. The court held, therefore, that in the event that Rodgers paid Billows' claim, Rodgers would be allowed to setoff that sum against its indebtedness to the debtor. Id.
In the case of In re Philip Semmer Glass Company, 135 F. 77 (2d Cir.1905), appeal dismissed sub nom Conboy v. First National Bank of Jersey City, 203 U.S. 141, 27 S. Ct. 50, 51 L. Ed. 128 (1906), the Second Circuit, construing Section 68 of the prior Bankruptcy Act, held that a bank which held promissory notes of the bankrupt on the day of adjudication in bankruptcy need not surrender a deposit balance standing to the credit of the bankrupt on the day of the adjudication in bankruptcy but could set it off against said notes and prove the amount remaining due after such setoff. The court held that even if the notes had not matured and the bankrupt was the indorser, not the maker, the word debt, as used in Section 68, included, "any debt, demand or claim provable in bankruptcy." 135 F. at 77.
Another case construing setoff where the debt owed was not due at the time of the filing of the petition is Matter of Isis Foods, Inc., 24 B.R. 75 (Bkrtcy. W.D.Mo. 1982). In that case, Isis Foods, Inc. filed a Chapter 11 petition on January 22, 1982 and Isis Leasing Incorporated filed a Chapter 11 petition on February 22, 1982. On July 1, 1982, the two cases were consolidated. Prior to the filing of either petition, on June 19, 1981, Isis Leasing Incorporated had executed an installment note to Trader's Bank of Kansas City, the plaintiff, in the amount of $66,931.20, which note was unconditionally guaranteed by Isis Foods, Inc. At the date of the filing of both petitions, the note was not in default. However, after the filing of the petition, no installment payments were tendered. Subsequently, the Bank brought an action for setoff at which time the balance currently due under the installment loan was $46,773.68 excluding interest. As of January 22, 1982, the date of filing of the voluntary bankruptcy, Isis Foods, Inc. had maintained a checking account with the plaintiff and the deposit at that time was $15,078.63. The trustee took the position that the bank had no right of setoff because it had no claim before the commencement of the case. The court noted that it was patent law on the issue of setoff that, "`the right of setoff may be asserted in the bankruptcy case even though at the time the petition is filed one of the debts involved is absolutely owing but not presently due, or where a definite liability has accrued but is as yet unliquidated. Nor is it necessary that the debt sought to be setoff be due when the case is commenced.'" 24 B.R. at 76, citing 4 Colliers on Bankruptcy para. 553.10(2), pp. 553-49, 553-50 (1982). The bankruptcy court noted that in this case, there was no question about the existence of the debt and that it was absolutely owing, albeit as yet unmatured. The court stated, "[a]lthough it has sometimes been held that a bank may not exercise a pre-bankruptcy setoff with respect to unmatured claims against the debtor, a post-bankruptcy setoff with respect to an unmatured claim has been approved as a matter of hornbook law." 24 B.R. at 76-77.
*939 The granting of a right of setoff rests with the broad, equitable discretion of the court. United States on Behalf of IRS v. Norton, 717 F.2d 767, 772 (3d Cir.1983); Matter of Isis Foods, Inc., 24 B.R. 75, 77 (Bkrtcy.W.D.Mo.1982). Policy reasons sometimes argue against the granting of the right of setoff. For instance, in McCollum v. Hamilton National Bank of Chattanooga, 303 U.S. 245, 58 S. Ct. 568, 82 L. Ed. 819 (1938), the trustee sought to recover from the defendant bank a penalty in violation of the usury laws of the State of Tennessee. The Tennessee State Court had held that the trustee should have twice the interest rate in judgment against the bank. The bank responded that the bankrupt owed it money on notes and prayed that it be allowed to setoff its claim against any judgment that the trustee obtained. The United States Supreme Court upheld the state court's judgment that the bank had been guilty of usury but reversed the state court's finding that a setoff was appropriate. The court noted that a setoff would defeat the purpose of the state statute in which punishment was definitely prescribed. The court distinguished this debt from a debt which is owed in contract, stating "[l]iability for the penalty does not arise in contract but is laid in invitum as a disciplinary measure." 303 U.S. at 249, 58 S.Ct. at 571.
In Cooper-Jarrett, Inc. v. Central Transport, Inc., 726 F.2d 93 (3d Cir.1984), the Third Circuit refused to allow a creditor to setoff its claim against the debtor for unpaid freight charges against the amount it owed the debtor as a result of a settlement agreement reached post-petition outside of the bankruptcy court. The facts of Cooper-Jarrett are that in June of 1979, the creditor, Central Transport, Inc. (Central), entered into a contract to buy certain operating rights granted by the Interstate Commerce Commission (ICC) and owned by the debtor, Cooper-Jarrett, Inc., for $150,000.00. Thereafter, Congress deregulated the trucking industry which enabled any common carrier to get operating authority directly from the ICC and which greatly reduced the value of existing operating rights. Central refused to sign the purchase agreement and Cooper-Jarrett sued Central in the United States District Court for the District of New Jersey. In December of 1981, while the contract action was still pending, Cooper-Jarrett filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. The bankruptcy court pursuant to an order entered February 17, 1982, lifted the automatic stay and permitted Cooper-Jarrett's contract action to proceed in district court. In the bankruptcy proceedings, Central had filed a claim of $19,165.75 for pre-petition unpaid freight charges. Central did not, however, raise this as a counterclaim in the district court action. In December of 1982, the parties settled the district court action with the agreement that Central was to pay the debtor $70,000.00 in return for dismissal of the lawsuit. Again, the issue of the claim of Central for the pre-petition freight charges was never mentioned in the settlement negotiations. After the district court dismissed the action, Central asserted the right pursuant to 11 U.S.C. § 553 to credit the freight charges debt allegedly owed by Cooper-Jarrett to Central against the $70,000.00 owed by Central to Cooper-Jarrett under the settlement agreement. District Judge Frederick B. Lacey writing for the district court held the settlement agreement was a post-petition obligation and thus could not be setoff and the court of appeals affirmed. The Third Circuit noted that the district judge's, "reasoning is in accord with general principles governing settlement agreements, since a settlement `extinguishes those legal rights [which the party] sought to enforce through litigation in exchange for those rights secured by the contract.' Village of Kaktovik v. Watt, 689 F.2d 222, 230 (D.C.Cir.1982). See also, Protective Closures Company v. Clover Industries, Inc., 394 F.2d 809, 812 (2d Cir. 1968)." 726 F.2d at 96. The court held, therefore, that "Central's pre-petition contract obligation of $150,000.00 was supplanted by its post-petition settlement obligation. Since § 553 explicitly limits the claims against which a creditor can claim *940 an offset to a `debt owing by such creditor to the debtor that arose before the commencement' of the Title 11 petition, and the debt which Central owed Cooper-Jarrett under the settlement agreement arose thereafter, the district court correctly concluded that there was no right of setoff under Section 553." 726 F.2d at 96-97.
One court has distinguished an absolute but contingent liability from an unliquidated and uncertain liability occurring after the date of the petition, holding that in the latter situation, a setoff cannot be granted. See Matter of American Motor Home Rentals, 10 B.R. 53, 57 n. 11 (Bkrtcy.W.D.Mo.1981). In American Motor Home, the trustee in bankruptcy sought to recover money which the defendant had listed as credits to the debtor on a certain account with the debtor, who was a salesman for the defendant. The money credited was held in a dealer reserve account designated as the Hold Reserve Account by the defendant. After a review of the contract provisions, the bankruptcy court held that any excess amount in the Hold Reserve Account over $4,000.00, as of the 25th of any month, were to be paid to the debtor and thus the trustee could recover that amount.
The defendant had counterclaimed that even if this money was due and owing, it was entitled to a setoff on account of a $13,500.00 loss which it had sustained on the repossession and resale of a mobile home which had been sold by the debtor to certain third parties, Robert E. Bair and Janet M. Bair. The defendant claimed the debtor had made misrepresentations to the third parties which had exposed the defendant to liability for claims made by the third parties. The defendant had made a settlement with the third parties and sold the unit privately at a loss of $13,500.00. The court held, however, "there was no direct evidence of any misrepresentation of the debtor to the Bairs which resulted in the $13,500.00 loss in this regard. All that was shown by the defendant in this regard is that it repossessed the Bair unit and resold it at a loss of $13,500.00." Id. at 55. The court concluded that, "[f]or failure of the defendant to offer evidence in the face of an offer to do so afforded by the court, this claim of a right to setoff must be denied." Id. at 56.
In the case of In re Morristown Lincoln-Mercury, Inc., 42 B.R. 413 (Bkrtcy.E. D.Tenn.1984), also involving a dealer reserve account, the court held that a bank could offset money it owed the debtor from this account against claims owing by the debtor arising out of pre-petition agreements, even though certain of these claims were contingent when the petition was filed. On certain of the bank's claims, the trustee asserted in Morristown that the ultimate liability on the part of the debtor was attributable to post-petition events and, therefore, those claims were not property subject to setoff against the dealer reserve account. The court noted the trustee relied on the case of American Motor Home Rentals, supra, in support of his argument. The court in Morristown distinguished American Motor Home Rentals, noting that in that case the creditor, "failed to establish the validity of its claims underlying its asserted setoff right." 42 B.R. at 417. The Morristown court agreed that § 553 clearly prohibited a setoff of a post-petition claim against a debtor's pre-petition liability but stated, "[h]owever, Code § 553 does not prohibit setoff of a creditor's claim arising prepetition, unliquidated or unmatured as of the petition date, against a debtor's prepetition claim. [citations omitted] Furthermore, a contingent claim which arises prior to the commencement of a bankruptcy case may be setoff against a prepetition claim of the debtor's estate." Id. at 417-18. The court in Morristown held that setoff on all the bank's claims were allowable, concluding:
all seven of the Bank's claims against the debtor arose from prepetition agreements between the Bank and the debtor. As of the petition date the debtor was liable to the Bank on each of its claims. The character of a claim is not transformed from prepetition to postpetition simply because it is contingent, unliquidated, *941 or unmatured when the debtor's petition is filed.
Id. at 418-19.
There are a number of cases involving government agencies where the agencies' claimed right of setoff has been denied. For instance, in In re Howell, 4 B.R. 102 (Bkrtcy.M.D.Tenn.1980), the Department of Labor sought to offset overpayments made to the debtor against future disability benefits under the Federal Employees' Compensation Act. The court concluded that setoff was not appropriate because the amount of setoff is limited to funds available at the time of filing the petition and cannot be asserted against future, unmatured payments due to the debtor. Id. at 108.
Similarly, in In re Rowan, 15 B.R. 834 (Bkrtcy.N.D.Ohio 1981), aff'd 747 F.2d 1052 (6th Cir.1984), the bankruptcy court in a decision affirmed by the Sixth Circuit Court of Appeals held that the Social Security Administration could not utilize the right of setoff to recoup overpayments to the debtor from future benefits due the debtor. The bankruptcy court found that on January 12, 1981, when the petition was filed, there was no fund held by the agency against which it could offset the debt owed to it because the debtor was not yet entitled to receive payment since he had not yet survived the month. The bankruptcy court stated:
As the fund against which the right of setoff is to be exercised must be in existence as of the commencement of the case, 11 U.S.C. § 553(a), the right of setoff could not be utilized herein.
15 B.R. at 840.
In In re Hill, 19 B.R. 375 (Bkrtcy.N.D. Tex.1982), the bankruptcy court held that the Farmer's Home Administration (FmHA) violated the automatic stay by setting off post-petition money due the debtor who was a farmer, against his debt to the FmHA. In Hill the debtor was indebted to FmHA on at least four notes secured by liens against real estate and personal property. The debtor filed a Chapter 11 petition on February 24, 1981, and the court found that FmHA had actual knowledge of this filing. Under another agency of the United States Department of Agriculture, the Agricultural Stabilization and Conservation Service (ASCS), farmers were entitled to receive disaster payments resulting from prevented planting or low-yield and payments representing the difference between the target price and the actual market price of the crop. Whether any monies would be due to farmers under this program could not be determined until late in each crop year. Therefore, in late November or early December of 1981, notice was circulated by the ASCS concerning the prospects for funding of deficiency payments to eligible producers. Id. at 377. The Department of Agriculture had promulgated regulations which permitted other agencies of the Department to make demand upon ASCS for setoffs to recover indebtedness owed to those agencies. Id.; See, 7 C.F.R. § 13.1 et seq. Following these regulations, on December 3, 1981, FmHA sent a "Request for Setoff" to ASCS, requesting an involuntary setoff of any ASCS monies which the debtor might be entitled to apply against monies which the debtor owed to the FmHA. The bankruptcy court held that since the prerequisites for determination of entitlement to ASCS money occurred near harvest time, in this case more than nine months after the bankruptcy petition was filed, the amounts due the debtor were post-petition monies which could not be setoff against a pre-petition indebtedness. 19 B.R. at 380.
Rather than focusing on the nature of the claim of the creditor, the courts in Howell, Hill, and Rowan, appear to focus on the fact that there was no "fund" existing at the time of the bankruptcy petition against which a creditor may offset its claim.
Courts have also held that a right to offset should be denied in the case of a tax refund due the debtor by the Internal Revenue Service (IRS). For instance, in United States on Behalf of IRS v. Norton, 717 F.2d 767 (3d Cir.1983), the debtors filed a petition under Chapter 13 of the Bankruptcy *942 Code on October 2, 1980. In their plan, the debtors scheduled the IRS as the holder of a priority tax claim with respect to deficiencies for 1978 in the amount of $762.00. Their plan stipulated for payment in full of that claim over a three-year period. Before the plan was confirmed on April 23, 1981, the debtors filed an income tax return for 1980 which showed that they were entitled to a refund of $2,052.78. Although the IRS refunded $1,314.81, they retained $737.97 on account of the debtors' 1978 tax liability. The Third Circuit upheld the holding of the bankruptcy court that the IRS was not entitled to retain the $737.97 and ordered that that sum be returned to the debtors. Id. at 769. The court noted that the language of § 553 was permissive and not mandatory and its application when properly invoked, rested in the discretion of the court under general principles of equity. Id. at 772. The court noted that the IRS had failed to object to the Chapter 13 plan and also that its claim would be satisfied in full under the plan. Id. at 774. In Norton, as in the prior cases involving government agencies, no "fund" existed at the time of the filing of the petition, although the refund due did, in part, cover several months after the filing of the petition for the particular tax year.
A similar case is United States v. Reynolds, 764 F.2d 1004 (4th Cir.1985). In Reynolds, the debtors filed a joint Chapter 13 petition on October 30, 1980. Approximately two months earlier, on August 16, 1980, the debtors had filed a tax return which was delinquent for the taxable year 1979 and which showed an amount due of $1,343.80 which was not paid. On December 2, 1980, the debtors' Chapter 13 plan was confirmed without an objection from the IRS. The plan provided for payment of the IRS claim as a priority claim. On August 6, 1981, the debtors filed a joint tax return for the tax year 1980 which showed a refund due of $2,024.99. The IRS remitted only $348.35, retaining $1,681.96, which the IRS asserted represented the portion of the refund allocable to the period prior to the filing of the petition. Id. at 1005. The Reynolds court, relying on the opinion in United States on Behalf of IRS v. Norton, supra, concluded that the action of the IRS in retaining the debtors' refund, "was a setoff subject to the automatic stay and that the IRS violated the stay in retaining the funds." 764 F.2d at 1007. As in Norton, there was no "fund" in Reynolds existing at the time of the filing of the petition even though the subsequent refund did cover approximately ten months prior to the filing of the petition.
Section 553 of the Bankruptcy Code which permits the setoff of mutual debts and credits between a debtor estate and its creditors is merely a statutory recognition of the common law principle of setoff. Courts may look to state law in order to determine whether a setoff has occurred. See United States on Behalf of IRS v. Norton, 717 F.2d 767, 772 (3d Cir. 1983), however, the granting or denial of the right to a setoff depends wholly upon the terms of § 553, and not upon the terms of state laws or statutes. See, e.g., McCollum v. Hamilton National Bank, 303 U.S. 245, 248, 58 S. Ct. 568, 570, 82 L. Ed. 819 (1938); Matter of Van Dyk Research Corp., 13 B.R. 487, 494-95 (Bkrtcy.D.N.J. 1981). It is, therefore, useful to examine New Jersey case law on the issue of setoff.
In Hudson United Bank v. House of Supreme, Inc., 149 N.J.Super. 153, 373 A.2d 438 (Ch.Div.1977), judgment was entered for Hudson United Bank (bank) against the House of Supreme, Inc. in state court for $784,529.00. The court determined that the defendant was insolvent and appointed a receiver pursuant to N.J.S.A. 14A:14-2. The bank made a motion to permit setoff of this judgment against various accounts of the defendant which were held in the bank pursuant to N.J.S.A. 14A:14-8. The receiver asserted that with the exception of the checking account, all of the defendant's accounts were "special deposits" and must be returned to the receiver. The court noted:
The general rule is that a bank has a right of setoff against all monies or funds in its possession belonging to a *943 depositor to secure the payment of the depositor's indebtedness to the bank [citations omitted]. However, the weight of authority on the issue of setoff by banks recognizes a distinction between general deposits and special deposits. This distinction arises as an exception to the general rule as a condition precedent to the accrual of the right of setoff in that before the fund can be setoff it must have been deposited without restrictions and not have been a special fund.
149 N.J.Super at 156-57, 373 A.2d 438. The court concluded in that case that monies deposited in the bank pursuant to agreements which provided that the accounts were to be held by the bank and applied to the payment of any paper obligation of the depositor, due or to become due, were subject to the bank's setoff right. See also, American Lumberman's Co. v. Bradley Construction Company, 127 N.J.Eq. 500, 13 A.2d 783 (Ch. 1940), aff'd. 129 N.J.Eq. 278, 19 A.2d 242 (Ct. E & A 1941) (bank may not setoff for debts against an account which is in the nature of a trust fund where the bank had notice of such facts); Reinhardt v. Passaic-Clifton National Bank, 16 N.J.Super 430, 84 A.2d 741 (App.Div.1951), aff'd. 9 N.J. 607, 89 A.2d 242 (1952) (the bank could not setoff stop payment on a check, which order it neglected to follow where the depositor had opened the checking without any suggestion of a release clause with respect to inadvertent payment on a stop payment order).
Several cases in New Jersey have discussed generally the nature of setoff and its rationale. For instance, in John Wills, Inc. v. Citizens Bank of Netcong, 125 N.J.L. 546, 16 A.2d 804 (Ct. E. & A. 1940), the court stated:
It is entirely settled in this state that as between a bank and a depositor the money deposited by the latter with the former creates a relationship of creditor and debtor between the depositor and the bank. It is also settled that the right of setoff does not exist unless each of the parties owes a stated sum to the other. "Setoff, both at law and in equity, must be understood as that right which exists between two parties each of whom under an independent contract owes an ascertained amount to the other to setoff his respective debts by way of mutual deduction so that in any action brought for the larger debt, the residue only, after such deduction, shall be recovered." 24 R.C.L. 792.
125 N.J.L. at 548, 16 A.2d 804.
A later New Jersey case also discusses the rationale and requirements of setoff under New Jersey law:
A bank has a right of setoff against all monies or funds in its possession belonging to a depositor to secure the payment of the depositor's indebtedness to the bank. [citations omitted]. This is commonly referred to as a "banker's lien," although technically it is not a lien but an application of payment. If regarded as a lien, it is a "possessory lien," only entitling the bank to retain possession of the deposit for application of a proper setoff. [citation omitted].
The right to set-off arises only when the deposit is general, i.e., in the usual course of business without restriction. In such case the deposit becomes the property of the bank and the depositor becomes a creditor of the bank for the amount deposited.
To establish a right to set-off, three conditions must be satisfied: the fund to be set off must be the property of the debtor, the fund must be deposited without restrictions, and the existing indebtedness must be due and owing.
Federal Deposit Ins. Corp. v. Pioneer State Bank, 155 N.J.Super. 381, 389-90, 382 A.2d 958 (Law.Div.1977).
New Jersey law, however, recognizes there is a distinction in the due and owing requirement when an insolvency proceeding is involved. In Shields v. John Shields Const. Co., 83 N.J.Eq. 21, 89 A. 1022 (Ch. 1914), a corporation borrowed money on two notes, one of which matured the day after the corporation was adjudged insolvent *944 and the other subsequently. The company was adjudged insolvent on December 29, 1905, and the one note matured on December 30, 1905. On January 2, 1906, the bank setoff the balance in the insolvent corporation's deposit against the notes and proved its claim for the balance due. The issue in Shields was whether the bank had the right to setoff its claim and then prove for the difference. 83 N.J.Eq. at 22, 89 A. 1022. The chancery court noted that:
The court of errors and appeals has very recently in the case of Butler v. Commonwealth Tobacco Co., 74 N.J.Eq. 423 [70 A. 319], held that our statute [§ 66 of N.J. Corporation Act][2] in so far as it deals with insolvent corporations is essentially a bankrupt act and that its provisions should be construed accordingly. The Bankrupt act (section 68) provides that
"in all cases of mutual debts or mutual credits between the estate of a bankruptcy and a creditor, the account shall be stated and one debt shall be set off against the other and the balance only shall be allowed or paid."
The act not only uses the expression "mutual debts" but the broader phrase, "mutual credits." The expression in our Corporation act, "mutual dealings" is, as Judge Elmer points out, broad enough to include them both. It is well settled that in bankruptcy proceedings debts not yet due are the subject of set-off. A late case, in which the law and the reasons for it are clearly stated is Matter of Philip Semmer Glass Co., 11 Amer.B.R. 665. A still later case is Frank v. Mercantile Nat. Bank, 182 N.Y. 264 [74 N.E. 841], in which Chief-Justice Cullen holds the same way. He says: "If the defendant's rights depended on the equitable rule of set-off as it obtains in this state, it is clear that the notes held by it (the company) which had not matured at the time of the transfer of the title from the bankrupt to his assignee could not be set off against the plaintiff's claim." But, he adds, the defendant's claim is not based upon the rule in equity but on the provisions of the bankrupt law. As to that he says the uniform current of authority in the district and circuit courts of the United States and, he thinks, in the supreme court, is to the effect that as unmatured claims are provable against the bankrupt's estate, they are necessarily the subject of set-off under the provisions of section 68 of the Bankruptcy act.
83 N.J.Eq. at 24, 89 A. 1022. Thus, the court in Shields found that in an insolvency proceeding, whether it was brought under the state or federal bankruptcy laws, the requirement that a debt be due and owing in order for setoff to occur is modified and claims which are contingent can be the subject of setoff. Id. at 24-25, 89 A. 1022.
In the case of United States on Behalf of IRS v. Norton, 717 F.2d 767 (3d Cir. 1983) the Third Circuit discussed at length the interplay of 11 U.S.C. § 553 and 11 U.S.C. § 362. Finding that under applicable Pennsylvania law the retention of a debtor's fund by a creditor provided sufficient evidence of an intent to setoff, the court found that the IRS' retention of a debtors' tax refund and its actions in setting it off against the debtors' pre-petition tax debts violated the automatic stay imposed by Section 362. 717 F.2d at 772-774.
The Norton court specifically commented in regard to bank setoffs:
This Court has already prohibited banks from setting off debts against a corporate account during the pendency of a reorganization, unless those banks first request and receive relief from the automatic stay in a bankruptcy court. In re Penn Central Transportation Co., 453 F.2d 520 (3d Cir.1972). Without the automatic *945 stay of setoff rights during reorganization, the Court reasoned, the loss of bank accounts and of accounts receivable would probably prove fatal to many otherwise viable businesses. If a bank could freeze the debtor's account upon the filing of a petition in bankruptcy, the debtor's chances for successful rehabilitation would be substantially diminished.
717 F.2d at 773.
In the case at bar, the Bank denied the debtor access to its funds on account as early as October 4, 1985, prior to the debtor's filing of its bankruptcy petition, when the Bank debited the debtor's general account in the sum of $765,000.00. The Bank's initial retention of the balance of the demand deposit account of ESA up to the amount of the outstanding letters of credit was, according to the October 15, 1985 correspondence sent to ESA from counsel for the Bank, effectuated to obtain collateral for the reimbursement obligations of ESA under those letters of credit.
The Bank thereafter continued to retain the credit balance in the debtor's account in the Bank's view arguably to preserve its future exercise of setoff rights. Subsequent to the filing of the debtor's Chapter 11 petition on November 14, 1985 the Bank moved before this court for relief from the automatic stay to exercise its setoff rights. This motion resulted in the entry of a consent order on February 27, 1986 which order provided for a portion of the withheld funds to be turned over to ESA, and the balance to be held in an interest-bearing account pending the further order of this court. Subsequently, the Bank by the motion now before this court seeks to setoff against the obligations owed by the Bank to the debtor, the specific sum of $379,405.00 paid to American Home.
Under New Jersey case law, the charging or debiting of a debtor's funds on deposit by a creditor bank has been recognized as constituting a setoff. See John Wills Inc. v. Citizens National Bank of Netcong, 125 N.J.L. 546, 550, 16 A.2d 804 (Ct. E & A 1940). Accordingly, the Bank ostensibly exercised an offset when it retained the debtor's funds prior to the date of the filing of the debtor's Chapter 11 petition. The Bankruptcy Code does not expressly distinguish the right of setoff and the exercise of that right. The courts, however, have recognized a Congressional policy under the Bankruptcy Code which recognizes setoff as a right that should be preserved while at the same time acknowledging that its free exercise could inhibit rehabilitation and bankruptcy policies such as fair distribution of funds. See United States on Behalf of IRS v. Norton, 717 F.2d at 773, citing H.Rep. 595, 95th Cong., 1st Sess. 118, 274 (1977). The Norton court stated in regard to pre-petition setoffs:
[B]efore a setoff can be made against the debts owed by a petitioner in bankruptcy, a creditor must seek relief from the automatic stay. Even setoffs effected before bankruptcy may be investigated and reviewed by the Bankruptcy Court.
717 F.2d at 771.
It is well settled that the filing of the bankruptcy petition fixes "the line of cleavage with reference to the conditions of the bankrupt estate" and that only debts or credits existing at the time of the filing can be setoff against the other. See In re Morristown Lincoln-Mercury, Inc., 42 B.R. 413, 417 (Bkrtcy.E.D.Tenn.1984).
Section 553 clearly prohibits the setoff of a creditor's post-petition claim against a debtor's pre-petition liability. Section 553 does not in the instant case prohibit setoff against the pre-petition debt owed by the Bank to the debtor of the Bank's pre-petition claim against ESA for reimbursement under the open letters of credit, which claims arose pre-petition, although they were contingent and unliquidated as of the date of the filing of the debtor's bankruptcy petition.
In this case there can be no question about the existence of the Bank's claim against the debtor arising by virtue of the execution of the two open letters of credit before the filing of the debtor's Chapter 11 *946 petition. The Bank's claim against ESA is a pre-petition claim upon which the liability of the Bank is absolute, although not presently due, contingent and unliquidated on the date the Chapter 11 petition was filed. It is not necessary that the debt sought to be setoff be due when the bankruptcy case is commenced. The Bank's right of setoff is nonetheless present. This court recognizes the equitable nature of setoff rights under the Bankruptcy Code and the discretion which the court has to deny a creditor's right to setoff where the rehabilitative policies and goals of the Bankruptcy Code are retarded. No showing was made by the debtor in opposition to the Bank's motion for setoff to demonstrate an inability by the debtor to operate its business without these funds. Had such showing been made, the court would have weighed those facts against the Bankruptcy Code's policy of preserving the rights of setoff.
It has not been asserted herein that the provisions of 11 U.S.C. § 553(b)(1) apply to this case regarding setoffs within ninety (90) days of the filing of the bankruptcy petition where the creditor improved its position in the 90-day period, or any other provision that may limit the Bank's right of setoff herein.
Accordingly, the Bank's motion for permission to setoff against the obligation owed by the Bank to the debtor the sum of $379,405.00 representing the sum paid by the Bank to American Home is granted. The debtor's motion for partial summary judgment on Count One of its complaint to the extent it seeks turnover by the Bank to ESA of the sum of $379,405.00 presently maintained in ESA's account no. 409421 is denied.
Remaining before this court is a determination of the disposition of the account balance of $50,000.00 in ESA's account no. 409421, which sum represents the face amount of the INA letter of credit. This sum is being held by the Bank pending final disposition of the entitlement to those funds by this court.
Subsequent to the close of hearings on the motions before this court, counsel for the Bank has advised the court and debtor's counsel, by letter dated October 22, 1986, that INA presented a sight draft in the amount of $50,000.00 to the Bank which draft was paid by the Bank. The Bank, by the aforesaid letter, sought to amend its motion for setoff to include a request to setoff the sum of $50,000.00 resulting from the Bank's payment of the INA draft. The court will grant the Bank leave to forthwith move by formal application for permission to setoff that sum. The balance of funds in excess of $379,405.00 in debtor's account no. 409421 shall be held by the Bank, subject to further order of this court.
The debtor's motion for partial summary judgment as it relates to turnover of the remaining $50,000.00 account balance will be considered concurrently with the Bank's request to setoff the sum of $50,000.00 against obligations it owes to the debtor.
An order shall be submitted in accordance with this decision.
NOTES
[1] In his deposition conducted on April 14, 1986, Mr. Vincent Ruggierio, stated that he was a secretary-regional manager of American Home. See Deposition Testimony of Ruggierio, p. 3. He stated that American Home had not yet billed ESA for approximately $341,946.00, which amount represents premiums due. See Deposition Testimony of Ruggierio, pp. 14, 18-19. The deposition testimony of Mr. Ruggiero failed to conclusively demonstrate whether First Fidelity is "owed" a debt by ESA because American Home has not drawn down on its letter of credit. Counsel for ESA relied upon a stipulation by counsel for Mr. Ruggierio during the course of his deposition that American Home had not issued a draft pursuant to the letter of credit, and had not sent to ESA either a statement that the account is 30 days past due or a notice of demand for payment. See Deposition Testimony of Ruggierio, pp. 70-71. Mr. Ruggierio testified only that if a draw against the letter of credit had been made by American Home, he "probably" would be aware of it. See Deposition Testimony of Ruggierio, p. 76. Mr. Ruggierio further stated at the deposition that billings are sent not through his office in New York City, but through the American Home accounting department at another location. See Deposition Testimony of Ruggierio, pp. 13, 31.
More critically, no affidavits or depositions of officers of the third party defendant, INA, were timely presented regarding claims that the beneficiary might have against ESA by way of draw down on its letter of credit or otherwise.
[2] The court in Shields earlier referred to the relevant portion of this statute:
The question, as I view it, must be resolved by reference to the provisions of our Corporation act. Section 66 directs the receiver "in the case of mutual dealings between the corporation and any person to allow just set-offs in favor of such person in all cases in which the same ought to be allowed according to law or equity."
83 N.J.Eq. at 22, 89 A. 1022. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542876/ | 997 A.2d 1051 (2010)
414 N.J. Super. 125
STATE of New Jersey, Plaintiff-Respondent,
v.
George CALLEIA, Defendant-Appellant.
DOCKET NO. A-6218-07T4.
Superior Court of New Jersey, Appellate Division.
Argued March 2, 2010.
Decided June 22, 2010.
*1053 Edward C. Bertucio, Jr., Eatontown, argued the cause for appellant (Hobbie, Corrigan, Bertucio & Tashjy, attorneys; Mr. Bertucio, of counsel and on the briefs).
Frank J. Ducoat, Deputy Attorney General, argued the cause for respondent (Paula T. Dow, Attorney General, attorney; Mr. Ducoat, of counsel and on the brief).
Before Judges FUENTES, GILROY and SIMONELLI.
The opinion of the court was delivered by
FUENTES, J.A.D.
A Monmouth County jury found defendant George Calleia guilty of murdering his wife, Susan Calleia, N.J.S.A. 2C:11-3(a)(1) and/or (2), tampering with physical evidence, a fourth degree offense under N.J.S.A. 2C:28-6, and hindering apprehension, a third degree offense under N.J.S.A. 2C:29-3(b)(1) and/or (4). The court sentenced defendant to an aggregate term of fifty years, with an eighty-five percent period of parole ineligibility and a five-year period of parole supervision, both pursuant to the No Early Release Act (NERA), N.J.S.A. 2C:43-7.2. The court also imposed the relevant mandatory fines and penalties.
Defendant now challenges his conviction and sentence on appeal. Although we reverse defendant's conviction on other grounds, because defendant presumably will be tried anew on these charges, we also address defendant's attack on the trial court's admission of DNA evidence presented by the State as part of its case against him. Specifically, we hold that the trial court correctly admitted Y-STR DNA evidence, in the form of biological material found under the victim's fingernails, under N.J.R.E. 702 and the standards established by our Supreme Court in State v. Harvey, 151 N.J. 117, 167, 699 A.2d 596 (1997), cert, denied, 528 U.S. 1085, 120 S.Ct. 811, 145 L.Ed.2d 683 (2000). The trial court thus correctly admitted the testimony of the State's expert witness, who opined that this DNA evidence showed that defendant could not be excluded as a "donor" of the biological material.
I
We derive the following facts from the evidence presented at trial.
A
In October 2005, defendant shared his marital residence in the Township of Holmdel with his wife Susan and their eight-year-old daughter "Ana" (a fictitious appellation to protect the child's privacy). At that time, defendant was employed as the director of sales and marketing for a computer software company. Susan was described by those who knew her as a "stay-at-home mom" who took an active part in her daughter's social and academic life.
*1054 At approximately 6:15 a.m. on October 21, 2005, defendant telephoned the 911 Center at the Monmouth County Sheriff's Department to report that his wife was missing. The call was referred to the Holmdel Police Department which in turn dispatched Patrolman David D'Arcy to the Calleia residence. As D'Arcy approached the house, defendant opened the door and motioned for him to come inside. Once inside the house, defendant told D'Arcy that his wife Susan was missing. Defendant stated that he first became aware of her absence when he entered the garage at 5:30 a.m. to leave for work and discovered that Susan's car was gone. He then searched the house to confirm that she was not there.
In response to D'Arcy's questions, defendant indicated that the last time he had seen his wife was the previous evening. He had been watching television while waiting for her to return home; defendant was upset because she had left without telling him where she was going. When Susan returned home at around 8:00 p.m., they had a "verbal dispute" which they "resolved," and then defendant went upstairs to bed. During further questioning by D'Arcy, defendant indicated that his wife had no history of mental illness, was in good physical health, and was not taking any medication. D'Arcy described defendant's demeanor during this encounter as "very nervous"; he was trembling, spoke in a subdued tone, and persistently looked at the ground.
D'Arcy returned to the police station and shared the information he had obtained with the detective bureau. As a result, the Holmdel Police Department issued an alert or "TRAK message," indicating that defendant had reported his wife, Susan Calleia, missing; her name was also entered into the National Crime Information Center (NCIC)[1] database. Later on the morning of October 21, 2005, Holmdel detectives contacted the Monmouth County Prosecutor's Office to request assistance with their investigation.
At approximately 4:00 p.m., Detective Sergeant Brian Veprek, who was assigned to the major crimes unit in the prosecutor's office, reported to the Calleia residence, where Holmdel Detective Sergeant James Smythe briefed him on the case. Veprek testified that when he extended his right hand to shake defendant's hand, defendant did not extend his hand in return and did not shake Veprek's hand. Veprek recalled that defendant was wearing a long-sleeved white shirt that hung below the tips of his fingers on both hands. He also noted that defendant continually looked down without making eye contact with him.
Veprek and Smythe told defendant that they would like to obtain a formal statement from him concerning his wife's disappearance and asked him to accompany them to the police station. According to Veprek, defendant asked if it was really necessary since this was "just a missing persons investigation." Defendant then stated: "I'm not going to your house, I've seen Law and Order and NYPD Blue, and I know what happens when I'm in your house." Veprek asked defendant if a secretary from his office could come to his home with a computer to take his statement; defendant agreed, stating: "if it's necessary."
B
The secretary arrived at the Calleia house at approximately 4:53 p.m. Defendant's *1055 statement consisted of his answers to questions posed to him by the interrogating officers; it covered seventeen pages and was taken down verbatim by the secretary using a laptop computer. The interview lasted one hour and thirty-four minutes, with a one-minute break to permit defendant to walk the family dog. The statement concluded at 6:27 p.m. It is important to note that at the time he gave this statement, the police had no reason to believe that defendant was in any way responsible for his wife's disappearance.
Responding to Veprek's direct questions, defendant indicated that he arrived at his house the night before his wife's disappearance at approximately 6:20 p.m. When he entered the residence through the garage, he noticed that his wife was home. He encountered Susan in the "laundry room/kitchen area," where she told him that she was going out for "three maybe four hours and [he] asked her where she was going and she said she was late and she had to go." She did not tell him where she was going and left without further incident.
When asked to describe "the tone of the conversation," defendant rejected the interrogating officer's characterization of the exchange as a "conversation," describing the interaction instead as something his wife said to him as she was walking out of the house. He described her demeanor as "[c]asual cordial" and denied that either one of them "screamed" or "hollered" at the other. He admitted, however, that it was unusual for his wife to leave the house without telling him where she was going. When asked: "How did it make you feel when your wife told you that she was leaving for three or four hours and did not tell you where she was going," defendant responded: "Concerned . . . I don't know if she didn't want to tell me or if she was in too much of a rush to tell me. But I was concerned." (Emphasis added).
The next and last time defendant saw his wife alive was at approximately eight o'clock that same night. He gave the following description of the encounter:
About 8:10 [p.m.] is when my wife came home and that is when I asked her where she was and [told her] that I was concerned and that the car got stuck the other day, and you should have told me where you were [`]cause I was concerned. She said I don't have to tell you where I was, I don't ask you where you go. I said yes you do and I always tell you. What I didn't tell you [before] was when she came in she was agitated so I don't know where she was or what transpired but she was very agitated when she came back. She said she wasn't in a good mood and I said could you tell me why, what happened, where did you go. And then what I said before, I went backwards I put one thing in front of the other.
[(Emphasis added).]
When asked to explain how his wife was agitated, defendant simply responded: "By the way she was putting her stuff [jacket and notepad] down."
Defendant described his relationship with his wife as "cordial" and "friendly." By contrast, he described his marriage as "strained" and not "as close as we used to be." The following exchange illuminates this point:
What has separated you and your wife that you are not as close as you used to be?
Good question. I think it was on her part, it was an accumulation[.] She said in the past (sic). I spent twenty[-]five years in one firm, and it was a merger and the other firm took control and for the past year and a half[,] two years I have been very depressed over the fact that people that I have worked with for twenty years have been let go, the management, *1056 the people don't know the business. They are trying to run it, they don't understand it. It wasn't a happy time. So what I mean is by it was not a happy time for me is that I might have neglected my wife [`]cause I was focused on that.
What are the sleeping arrangements between you and your wife?
For about a month we have been in separate beds in separate parts of the house.
When asked what led him to think that his wife was "missing," defendant indicated that he noticed that her car was not parked in the garage and that she was not otherwise in the house. Thereafter, following the advice of the officer who responded to his 911 call, he followed his morning routine. Defendant took his daughter to school at approximately 7:30 a.m., returned home therefrom at about 8:20 a.m., and "drove around [for about 45 minutes] but stayed home most of the day."
He called his wife's cell phone two or three times in the early afternoon hours. When asked why he did not call his wife on her cell phone before calling the police, defendant responded that he was "in shock that she wasn't there and I just thought that if she wasn't there it can't be good." (Emphasis added). When asked to clarify what he meant by this, defendant stated:
She has never been out of the house, never, in the morning, never not seen her or her car whatever. I don't know, I wasn't thinking straight. I thought, I don't know what I thought. I was in shock.
In response to questions regarding the argument he and his wife had the night before her disappearance, defendant indicated that his daughter was awakened because "[w]e were getting so loud." He told her to go back to sleep and he and his wife returned to the "laundry room/garage." Although he did not remember whether the garage overhead doors were open, he recalled that he could see "the light from the street."
There was a one minute break at this point in the interrogation, from 5:43 p.m. to 5:44 p.m. When the interrogation resumed, the police refocused the conversation on evidence concerning Susan's activities. According to defendant, the spare bedroom appeared unused, thus leading him to think that his wife had not slept there during the night. As to her personal items, although defendant did not know whether any of her toiletries had been taken, her pocketbook, which held her credit cards, was missing.
The interrogation next focused on the stability of the marriage. According to defendant, his wife voluntarily told him that she was not seeing anyone else. When asked whether his wife had ever asked him for a separation or divorce, defendant responded: "She says she needs her space. Those are her words, never said separated or divorce." When asked whether he or his wife had seen or consulted with an attorney, he said: "I haven't, my wife said she wanted to speak to somebody just to find out any implications about buying another house." He assumed that the reference to "seeing somebody" meant consulting with an attorney. With respect to their daughter, defendant indicated that they had discussed a joint custody arrangement.
Despite the fact that he and his wife had been sleeping in separate bedrooms and were discussing issues such as child custody and maintaining separate residences, defendant claimed that "[f]or the past couple of weeks things have been getting nice again." He further stated that "[u]p until a month ago I thought everything was good." Overall, defendant denied ever physically assaulting his wife and denied *1057 having any knowledge of what could have caused her disappearance.
At the end of the interrogation, the police gave defendant a printed copy of the statement, asked him to review it and initial each page, and requested that he sign the affirmation indicating that "the facts contained herein are true." Defendant read the statement as requested, but he initialed only pages 1-7 of this seventeen page document; he also refused to sign the affirmation, writing instead: "I'm not comfortable signing all of the pages or the end without an attorney present."
As the detectives were leaving his home, defendant suddenly said: "I think my wife was abducted at 5:30 this morning while going to Welsh Farms to get milk." According to Veprek, defendant also asked how they "were making out" on the burglaries that had occurred on Goldsmith Drive. Smythe replied that an investigation was underway and that an arrest was expected soon. Defendant then stated that during the summer, someone had tried to break into his house and perhaps Susan's disappearance was tied to that alleged incident. When Smythe asked him why he had not mentioned these things before, defendant replied that he did not think that they were important.
C
Veprek and Smythe returned to the Calleia residence at 3:20 a.m. on October 22, 2005, with a warrant to search the premises. They were accompanied by other detectives from the prosecutor's office, patrol officers and detectives from Holmdel, and personnel from the New Jersey State Police Laboratory. When defendant opened the door, he was wearing the same long-sleeved white shirt he had worn the previous day. He kept both of his hands inside the sleeves of the shirt or in the pockets of his sweatshirt. Veprek and Smythe accompanied defendant to wake his daughter and take her to a neighbor's house. Defendant returned home and stayed there throughout the search; he was accompanied at all times by Veprek and Smythe.
At one point, defendant asked Veprek if he could change his clothes. Veprek advised him that he had to escort him to observe that nothing was tampered with or removed. Veprek and defendant went into defendant's bedroom closet while Smythe stood in the doorway. Veprek took out the clothes that defendant requested and handed them to him. When defendant reached out to take the clothes with his right hand, Veprek and Smythe observed that his right hand was badly swollen and had a large cut just below the middle knuckle of his middle finger. In response to Veprek's question about the injury, defendant indicated that he received it when he had punched a wall in his house during the argument with his wife the night before her disappearance. According to Smythe, when he asked defendant to show him the wall so that the police could "properly document that and have it photographed and videotaped," defendant "[f]or the first time with (sic) our interaction he looked up and stared at [the detectives] for a good five seconds . . . [t]hen he looked back down at the ground." At this point, Smythe commented to defendant that the injury "looked like it was from someone's teeth." Both Smythe and Veprek testified that defendant then said the following:
I want to recant what I just told you . . . I backhanded Susan in the face on Thursday night in the garage. That is why she left the residence and did not return . . . I want to recant that . . . I went to hug Susan and she bit me on the hand.
When Veprek asked defendant why, if in fact Susan had bitten him, there was only one set of teeth marks on his hand and not *1058 two, defendant put his head down and did not say anything further.
Defendant signed a consent form allowing the police to photograph his right hand, and although he refused to do so in writing, he verbally consented to the taking of a buccal swab of the injury. Thereafter, at defendant's request, Veprek and Smythe drove him to a hospital to be treated for the injury to his hand.
D
At 11:53 a.m. on October 22, 2005, police located a vehicle matching the description of Susan's Lexus SUV in a remote area behind the PNC Arts Center. The patrol officer who found the vehicle looked inside and saw what appeared to be a discolored female hand sticking out from under a mat in the back cargo compartment. Veprek, Smythe, and a team of forensic investigators and other law enforcement personnel responded to the scene.
The vehicle was locked and the keys were inside on the front seat. When the police broke into the back hatch of the car, they discovered Susan's body in the cargo area covered by a pink yoga mat. According to Veprek, there was extensive bruising and trauma to her face and a pool of blood under her head. She was wearing socks, a red sweater, and an unfastened bra. Her boots, black pants, and underpants were found inside the cargo area next to her body.
Later that afternoon, Veprek and Smythe took a statement from the Calleias' next-door neighbors, Frederick and Marilyn Baxter. According to Mrs. Baxter, at about 8:15 on the evening before Susan was reported missing, she was in her driveway when she heard screams coming from the Calleias' garage. Although she recognized Susan's voice as the person screaming, she could not discern whether any words were said. Mrs. Baxter characterized the screams as "blood-curdling." At her request, her husband telephoned the Calleias and left a message on their answering machine. He never received a call back.
Dr. Frederick DiCarlo, an assistant medical examiner with the Monmouth County Medical Examiner's Office, performed the autopsy on the morning of October 23, 2005. According to Dr. DiCarlo, Susan was not suffering from any natural disease or physical abnormality at the time of her death. An examination of her body revealed that she received traumatic injuries to her head, neck, chest, arms, and legs. There was no evidence, however, that she had been sexually assaulted or of sexual activity prior to her death. Dr. DiCarlo opined that the immediate cause of Susan's death was manual strangulation;[2] if she had not been strangled, Dr. DiCarlo believed that the blunt force trauma to her head would have resulted in death within a short time. In Dr. DiCarlo's opinion, the hemorrhaging that occurred around Susan's head injuries indicated that she was beaten for about fifteen or twenty minutes before she was strangled. He estimated the time of death as 9:00 p.m. on October 21; he admitted, however, that her death could have occurred at any time between 4:00 p.m. and midnight.
[AT THE COURT'S DIRECTION, THE ONLY PUBLISHED PART OF THIS OPINION IS THE COURT'S DISCUSSION OF DEFENDANT'S ARGUMENT *1059 THAT THE TRIAL COURT ERRED IN DENYING HIS MOTION TO BAR THE STATE'S EXPERT WITNESS FROM TESTIFYING ABOUT Y-STR DNA EVIDENCE. DEFENDANT ARGUES THAT SUCH EVIDENCE DID NOT SATISFY THE STANDARD FOR ADMISSIBILITY UNDER FRYE V. UNITED STATES, 54 APP.D.C. 46, 293 F. 1013 (D.C.Cir.1923).]
IV
At trial, defendant challenged the admission of Y-STR DNA evidence, which demonstrated that he could not be excluded as a donor of biological material recovered from under the victim's fingernails. At oral argument before us, the State urged us to consider and affirm the trial court's decision to admit the Y-STR DNA evidence, even if we were to reverse defendant's conviction on other grounds. The State argued that appellate approval of this scientific evidence will settle the question among the trial courts, at least until the Supreme Court decides otherwise.
Given the strong likelihood that this evidence will again emerge as a key part of the State's case against defendant, we will address the propriety of its admission by the trial court.
A
In a criminal case, we review a trial court's decision to admit novel scientific evidence by applying an expansive de novo standard of review that goes beyond the record developed before the trial court to account for and consider the latest and most reliable scientific developments in the field under review. Harvey, supra, 151 N.J. at 167-68, 699 A.2d 596. We are thus obligated to
scrutinize the record and independently review the relevant authorities, including judicial opinions and scientific literature.. . By reviewing post-trial publications, an appellate court can account for the rapid pace of new technology. The continuing review also recognizes that general acceptance may change between the time of trial and the time of appellate review. Moreover, by examining such additional information, an appellate court can prevent any injustice rendered by admission or exclusion of the evidence at the trial level.
[Harvey, supra, 151 N.J. at 167-68, 699 A.2d 596 (internal citations omitted).]
Generally, the admission of expert testimony is governed by N.J.R.E. 702, which provides:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise.
In order to be admissible under this Rule:
(1) the intended testimony must concern a subject matter that is beyond the ken of the average juror; (2) the field testified to must be at a state of the art such that an expert's testimony could be sufficiently reliable; and (3) the witness must have sufficient expertise to offer the intended testimony.
[State v. Kelly, 97 N.J. 178, 208, 478 A.2d 364 (1984) (addressing Evid. R. 56(2) now codified as N.J.R.E. 702).]
Here, defendant does not challenge the State's expert's qualifications to offer testimony regarding forensic DNA testing, nor does he contend that the science of Y-STR DNA analysis is within the ken of the average juror. The sole question before us is whether Y-STR DNA analysis has reached a level of development and acceptability within the relevant scientific community that an expert's testimony concerning it can be deemed sufficiently reliable. *1060 Harvey, supra, 151 N.J. at 168, 699 A.2d 596.
Although in 1993 the United States Supreme Court abandoned the general acceptability standard in Frye v. United States, 54 App.D.C. 46, 293 F. 1013 (D.C.Cir.1923) in favor of a more relaxed scientific reliability standard, Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), codified in Fed.R.Evid. 702, the test in New Jersey continues to be whether the scientific community generally accepts the reliability of the proffered evidence. State v. Chun, 194 N.J. 54, 91, 943 A.2d 114, cert. denied, ___ U.S. ___, 129 S.Ct. 158, 172 L.Ed.2d 41 (2008); Harvey, supra, 151 N.J. at 170, 699 A.2d 596.
General acceptability of a particular scientific methodology can be established in three ways:
(1) by expert testimony as to the general acceptance, among those in the profession, of the premises on which the proffered expert witness based his or her analysis;
(2) by authoritative scientific and legal writings indicating that the scientific community accepts the premises underlying the proffered testimony; and
(3) by judicial opinions that indicate the expert's premises have gained general acceptance.
[Harvey, supra, 151 N.J. at 170, 699 A.2d 596 (quoting Kelly, supra, 97 N.J. at 210, 478 A.2d 364).]
The proponent of the evidence bears the burden to "clearly establish" each of these methods. Harvey, supra, 151 N.J. at 170, 699 A.2d 596.
General acceptance does not require a unanimous belief in the absolute infallibility of the technology or methodology at issue. Chun, supra, 194 N.J. at 91-92, 943 A.2d 114; In re Commitment of R.S., 173 N.J. 134, 136, 801 A.2d 219 (2002). To meet this burden of general acceptability, the proponent of the evidence must prove that the technology is a "non-experimental, demonstrable technique[] that the relevant scientific community widely, but perhaps not unanimously, accepts as reliable." Harvey, supra, 151 N.J. at 171, 699 A.2d 596. "It is reliability that must be assured." R.S., supra, 173 N.J. at 136, 801 A.2d 219; see Kelly, supra, 97 N.J. at 210, 478 A.2d 364 (holding that "[t]he technique or mode of analysis used by the expert must have a sufficient scientific basis to produce uniform and reasonably reliable results").
B
Defendant argues that the trial court erred in admitting the Y-STR DNA evidence because that evidence lacked probative value and did not satisfy the standard for admissibility established by Frye. According to defendant, the error was compounded by the State's expert, who opined that the Y-STR DNA profile obtained from biological material found under the victim's fingernails "matched" the profile obtained from defendant's reference sample.
In rebuttal, the State argues that the reliability of Y-STR DNA evidence has been established by its general acceptance in the forensic science community, in scientific and scholarly literature, and in other court proceedings. Although prior to this case no court in this state has addressed the admissibility of Y-STR DNA evidence, the State maintains that Y-STR analysis has been used in criminal trials in other states and in Canada.
The trial court first considered the admissibility of the State's scientific evidence in a N.J.R.E. 104 hearing outside the presence of the jury. The only witness who testified at this hearing was called by the State. The trial court admitted Edward J. *1061 LaRue, the Assistant Director of the New Jersey State Police DNA Laboratory, as an expert in the field of DNA analysis. LaRue testified that Y-STR DNA testing uses exactly the same methodology as STR DNA testing and is closely related to a number of DNA testing methods that have been accepted in judicial proceedings. The following scientific discussion is derived entirely from LaRue's testimony. We refer to that testimony at length here as a basis from which to assess whether the State satisfied the first prong under the Harvey test: whether expert testimony can establish the general acceptance of Y-STR DNA testing. Harvey supra, 151 N.J. at 170, 699 A.2d 596.
General DNA Testing
The nucleus of a human cell contains twenty-three pairs of chromosomes. Chromosomes are tightly wound structures of deoxyribonucleic acid (DNA), a double-stranded molecule that is configured like a twisted ladder. The "rungs" of the DNA ladder form when a nucleotide or "base" on one strand binds to a base on the opposite strand.[3] It is the combination of these bases that creates the entire inherited genetic code.
More than ninety-nine percent of human DNA is the same from person to person. Because the human genome consists of approximately 3.2 billion base pairs, however, even the small percentage of variation results in a large number of base pairs that differ between individuals. Due to the large number of possible base-pair combinations, each individual, with the exception of identical twins, has a unique genetic code. A locus is a specific spot or position on the chromosome. If the locus is responsible for producing a particular protein, it is referred to as a gene. If the locus does not produce a protein, it is referred to as "non-coding DNA." Forensic science focuses primarily on the non-coding areas of DNA because that is where the most variation is found.
Since the early 1990s, scientists have used a technique known as polymerase chain reaction (PCR) to prepare a DNA sample for study. PCR is a method of multiplying a small amount of DNA in order to make a sufficient quantity to be detected by instrumentation. PCR amplification involves: heating the DNA solution to denature the double helix and create a solution of single-stranded molecules; adding a "primer," which is a short sequence of DNA base pairs intended to adhere to specific loci on the strands; and adding an enzyme that "reads" each strand and uses it as a template to build a new strand that is an exact copy of the original. The cycle is then repeated in a chain reaction that can make billions of copies of the original DNA sample. PCR was found to be scientifically reliable and hence admissible in a criminal proceeding in Harvey, supra, 151 N.J. at 160-61, 183, 699 A.2d 596.
One type of DNA testing that uses the PCR method is short tandem repeats (STR) analysis. A short tandem repeat is a non-coding area of DNA that has repeating sequences of nucleotides. Differences can be seen between individuals depending on the number of times a nucleotide sequence is repeated at a given locus. Thirteen core loci have been identified by CODIS[4] for use in STR analysis. These loci are differentiated from one another *1062 through the use of differently colored fluorescent tags that are attached to the primer during PCR amplification. The tagged specimen is placed in a capillary filled with a polymer gel and inserted into an instrument known as a "genetic analyzer." When an electric current is placed across the capillary, the DNA migrates through the gel column. Because short fragments climb faster than long fragments, a physical separation occurs. When a fragment reaches the end of the capillary, a laser excites its fluorescent tag and creates a very specific signal that is detected by the instrument. The signals obtained are represented on an electropherogram, which can be used to generate a DNA profile.
When loci on all twenty-three pairs of chromosomes are tested, the process is called autosomal STR DNA analysis. Y-STR analysis, on the other hand, involves the testing of loci on only one specific chromosome: the male "Y chromosome." Of the twenty-three pairs of chromosomes in a human cell, one pair is comprised of two "sex chromosomes" that determine whether a person is male or female. In a female, both sex chromosomes are "X chromosomes." In a male, one sex chromosome is an "X chromosome" and one sex chromosome is a "Y chromosome." Thus, Y chromosomes can only be found in males.
Since the early 1990s, forensic scientists have been able to use specific short nucleotide sequences to differentiate the sex chromosomes from the other chromosomes and determine whether the DNA donor was male or female. In 2003, forensic technology was markedly advanced when the full Y chromosome nucleotide sequence was established. Since that time, over 200 different STR loci have been identified on the Y chromosome.
Y-STR DNA Testing
The Scientific Working Group for DNA Analysis Methods (SWGDAM)[5] has selected a core number of Y-STR loci for forensic examination. Commercial kits are available that provide primers that specifically target these loci. The State Police Laboratory uses the "Yfiler Kit" that is manufactured by Applied Biosystems, Inc.[6] At all times, the Laboratory follows the SWGDAM guidelines for internal validations; a validation conducted for Y-STR testing showed that the Laboratory used here was in compliance with the federal guidelines.
The analytical procedure followed in Y-STR DNA testing is identical to that followed in autosomal STR DNA testing. The sample is extracted in the same manner, amplified by the PCR method, tagged with a primer, and detected in the genetic analyzer. The data is collected and represented in exactly the same way. The only procedural distinction is that the primer included in the test kit for Y-STR DNA analysis contains markers for the Y-STR loci specified by SWGDAM; the primer included in the test kit for autosomal STR DNA analysis contains markers for loci on all twenty-three chromosome pairs. The major difference between autosomal STR *1063 DNA analysis and Y-STR DNA analysis is in the interpretation and application of the test results.
An individual inherits his or her genetic code from his or her biological parents. Specifically with regard to autosomal STRs, the frequency of repeat sequences found in an individual's DNA is the result of random combinations of the repeat sequences found in the DNA of his mother and father. Because the mixing of the parents' DNA information is random and each loci is independent of the others, it is possible to mathematically calculate the probability that any individual will possess a specific DNA profile through use of the "product rule." This means that the probability that an individual will inherit a particular repeat frequency at locus one is multiplied by the probability that he will inherit a particular repeat frequency at locus two, which is multiplied by the probability at locus three and so on.[7]
The probability is extremely low, one in one quadrillion, that the STRs on all thirteen loci of two different individuals will "match," i.e., that each corresponding locus will have the identical frequency of repeated nucleotide sequences. For this reason, if a thirteen-loci[8] autosomal STR DNA profile from a forensic specimen matches a profile generated by a sample taken from a particular individual, it is virtually certain that the individual was the source of the specimen. Stated differently, if there is a full profile match, the probability that the specimen came from someone else is so remote as to be negligible; identity is established. Because autosomal STR DNA testing provides a high probability of identifying an individual as the DNA source, it is the preferred method of analysis.
Autosomal STR DNA analysis is problematic, however, when forensic scientists are confronted with a mixed DNA sample. For example, blood stains found at a crime scene may be the result of bleeding by both the victim and the perpetrator. An autosomal STR DNA profile generated from the stains will have a combination of both individuals' DNA patterns and it is not possible to attribute which traits go with which person. Further, one individual's profile often overwhelms the other and renders it un-detectible. When one individual is male and one is female, however, it is possible to perform a Y-STR DNA analysis and focus solely on the DNA of the male. Thus, the strength of Y-STR DNA testing derives from the fact that only males have a Y chromosome. Unfortunately, that fact is also the source of the test's weakness.
Because only males possess Y chromosomes, a mother does not contribute to the genetic code of her son's Y chromosome. The DNA sequence on the Y chromosome is passed in complete form from grandfather, to father, to son and on down the male lineage. The Y chromosome loci are not independent of one another and there is no recombination of DNA. It is strictly a male marker and there is no randomness on the chromosomes. Consequently, the product rule used to generate probabilities for autosomal STR DNA analysis is inapplicable to Y-STR DNA analysis. In other words, barring random mutations, all *1064 men in a paternal lineage will possess the same Y-STR DNA profile. Thus, fathers, sons, brothers, uncles, and paternal cousins cannot be distinguished from one another through a Y-STR DNA profile.
For this reason, Y-STR DNA testing has limited usefulness in positively identifying an individual. The testing is extremely useful, however, in excluding someone since an individual cannot be the source of the DNA if the profiles do not match. If the Y-STR DNA profiles do match, then all that can be said is that the individual cannot be excluded as the DNA donor.
Because the product rule is inapplicable, the State Police Laboratory uses the "counting method" to convey the odds that the Y-STR DNA profile of any one individual would coincidentally match the profile obtained from a crime scene specimen. The State Police Laboratory has access to a database of 3561 Y-STR DNA profiles of randomly selected individuals. When a Y-STR DNA profile is generated from a crime scene specimen, the database is searched to determine if that profile has ever been seen before. The laboratory report will then state whether the profile was found in the database, and if so, how often it occurred. The frequency of the occurrence of any particular Y-STR DNA profile in the general population, however, cannot be estimated from this information since the very next person sampled could have that profile. Thus, although Y-STR DNA analysis can detect a match with one hundred percent certainty, the match itself can only be interpreted as indicating that the individual cannot be excluded as the sample donor.
Reliability of Y-STR DNA Testing
Based on the record developed before the trial court, we are satisfied that there is a general acceptance of Y-STR DNA analysis in the scientific community. The State's duly qualified expert in the field explained the theoretical basis of Y-STR DNA analysis, the methodology used by the testing laboratory, the SWGDAM standards that govern DNA testing, and the validation procedures associated with those standards. The State Police Laboratory uses a commercially available testing kit to conduct Y-STR DNA analyses and Y-STR DNA profiles are maintained in a national database.
LaRue's testimony established that Y-STR DNA analysis is a "non-experimental, demonstrable technique" that is widely accepted by forensic scientists. Harvey, supra, 151 N.J. at 171, 699 A.2d 596. The scientific basis of Y-STR DNA analysis is sufficient to prove that the technique produces uniform and reasonably reliable results. Kelly, supra, 97 N.J. at 210, 478 A.2d 364. LaRue's testimony thus satisfied the first prong of the Harvey test.
In the interest of completeness, we also note that the State proved the reliability of the Y-STR DNA technique under the second prong of the test, which allows a proponent to establish general acceptance "by authoritative scientific and legal writings indicating that the scientific community accepts the premises underlying the proffered testimony." Harvey, supra, 151 N.J. at 170, 699 A.2d 596. Here, the State submitted numerous textbooks and scholarly articles concerning the development and use of Y-STR DNA analysis. These materials set forth the theory of Y-STR DNA analysis and explained the various testing techniques.
Jobling and Gill's article is among the more informative of the State's sources. Mark A. Jobling & Peter Gill, Encoded Evidence: DNA in Forensic Analysis, 5 Nature Reviews-Genetics 739 (Oct. 2004) available at http://www.denverda.org/ DNA_Documents/NRG.forensics.pdf. As explained by the authors, Y-chromosomal analysis as a specific type of STR testing *1065 allows for evaluation of male-female body fluid mixtures and the technique is effective even in mixtures with a 4000-fold excess of female DNA. Id. at 746. They conclude that the forensic use of Y-STR analysis will continue to increase, aided by the availability of standardized commercial kits. Id. at 747.
In Paul C. Giannelli & Edward J. Imwinkelried, 2 Scientific Evidence § 18.03 at 33-34 (4th ed. 2007), the authors observe that since its initial recognition in 1996, STR analysis has become the dominant DNA typing methodology. They explain that the Y-STR test is "generally similar to the method employed in conventional autosomal STR analysis," but note that the rarity of Y-STR profiles has not yet been determined from empirical studies. Id. at 44.
In Benjamin E. Krenke et al., Validation of a Male-Specific, 12-Locus Fluorescent Short Tandem Repeat (STR) Multiplex, 148 Forensic Sci. Int'l 1, 2 (2005), the authors state that "short tandem repeat (STR) analysis is the primary technology for genetic human identification" and that Y-specific analysis is a valuable tool in criminal investigations. They discuss standards established by the Director of the FBI and SWGDAM for Y-STR DNA analytical methods and set forth a study of the "consistency and robustness" of one particular technique, the "PowerPlex® Y System." Ibid. They conclude that Y-STR DNA analysis is reliable when used for forensic human identification. Id. at 13.
A similar conclusion was reached by researchers investigating the Y-PLEXTM6 and Y-PLEXTM5 genotyping systems for forensic casework. Sudhir K. Sinha et al., Utility of the Y-STR Typing Systems Y-PLEXTM6 and Y-PLEXTM5 in Forensic Casework and 11 Y-STR Haplotype Database for Three Major Population Groups in the United States, 49(4) J. Forensic Sci. 1 (July 2004) available at http://www. hartnell.cc.ca.us/faculty/jhughey/Files/y-plexgenetics.pdf. They state that these techniques provide reliable and probative results that could not be achieved through the analysis of autosomal STRs. Id. at 9.
By contrast, defendant has not cited any scientific study that questions the validity and/or reliability of Y-STR DNA analysis. The State's proffer of authoritative sources concerning the scientific basis for Y-STR DNA analysis thus demonstrates that the Y-STR technique has been generally accepted in the scientific community.
V
Having determined the general acceptability of Y-STR DNA analysis, we must next consider defendant's argument that such evidence is not probative on the question of whether he was the person who murdered his wife. Specifically, defendant argues that the State cannot prove that he was the source of the DNA material recovered from under decedent's fingernails.
We are satisfied that this evidence is relevant and has probative value because it shows that defendant could not be excluded from the class of individuals who could have "contributed" this biological material. Thus, although this evidence cannot unequivocally establish that defendant was the person who killed his wife, it does show that defendant cannot be excluded from the class of individuals who could have been the killer.
Relevant evidence is that which has "a tendency in reason to prove or disprove any fact of consequence to the determination of the action." N.J.R.E. 401. "In determining whether evidence is relevant, the inquiry focuses upon `the logical connection between the proffered evidence and a fact in issue.'" Verdicchio v. *1066 Ricca, 179 N.J. 1, 33, 843 A.2d 1042 (2004) (quoting State v. Hutchins, 241 N.J.Super. 353, 358, 575 A.2d 35 (App.Div.1990)). If evidence supports the existence of a specific fact, even obliquely, it is relevant. Verdicchio, supra, 179 N.J. at 34, 843 A.2d 1042.
Here, the State's forensic expert, Christopher Szymkowiak, testified that a sample obtained from the fingernail clippings of decedent's right hand yielded a mixture of male and female DNA. Y-STR DNA analysis of the male component of the mixture produced a profile that matched the profile developed from defendant's control sample. According to Szymkowiak, this particular profile did not match any profile recorded in the Applied Biosystems Yfilter Database of 3561 individuals.
This evidence is thus relevant in establishing that defendant cannot be ruled out as his wife's killer. This scientific conclusion is a key part of the State's case when considered in light of the totality of the evidence presented against defendant. Specifically, Susan was manually strangled; defendant had wounds on his right hand. Although Susan and defendant were married, they had not been intimate for some time. The fact that Susan had DNA under her fingernails that links defendant, by way of inclusion in the class of potential killers, justifies a reasonable inference that Susan scratched defendant while trying to remove his hand from her throat. The fact that Szymkowiak could not say with certainty that defendant was the source of the DNA does not render the test results irrelevant. Although all males in a paternal lineage share the same Y-STR DNA, and even seemingly unrelated individuals can have the same Y-STR DNA profile, there are still sufficient variations within the population to make any particular profile distinct.
In that sense, Y-STR DNA matches are analogous to several conventional forms of evidence that are routinely admitted at criminal trials. In State v. Swint, 328 N.J.Super. 236, 252-53, 745 A.2d 570 (App. Div.), certif. denied, 165 N.J. 492, 758 A.2d 651 (2000), we concluded that a box-cutter found in the defendants' possession within eight hours of an assault in which the victim was severely cut was relevant because it "had a tendency in reason to prove a fact of consequence." There had been no showing in Swint that the defendants' box-cutter was unique in any way; in fact, there was no proof that a box-cutter was the weapon used in the assault. Id. at 251, 745 A.2d 570. There was also no testimony concerning how many other individuals in the area might have owned a box-cutter. We noted, however, that the State's failure to provide a specific link between the evidence and the crime went to the weight of the evidence, not its admissibility. Id. at 252, 745 A.2d 570.
In fact, shoe imprint evidence provides the best analogy to Y-STR DNA evidence. Our courts have long admitted evidence connecting shoe imprints found at a crime scene with shoes found in a defendant's possession, despite the fact that any number of persons might own identical pairs of shoes. See, e.g., State v. Johnson, 120 N.J. 263, 293-95, 576 A.2d 834 (1990) (upholding the admission of lay testimony that a footprint found at the crime scene had been made by the defendant's sneaker); State v. Gerald, 113 N.J. 40, 53-54, 549 A.2d 792 (1988) (recounting trial testimony that the pattern on the defendant's sneakers matched imprints found on the victim's forehead); State v. Bruzzese, 94 N.J. 210, 215, 463 A.2d 320 (1983) (recounting trial testimony regarding the similarity between an imprint on the victim's door and a boot found in the defendant's room), cert, denied, 465 U.S. 1030, 104 S.Ct. 1295, 79 L.Ed.2d 695 (1984). In all of these cases, the State was not required to prove that the defendant's shoes were the only ones *1067 that could have made the impressions found at the crime scene. Instead, the courts left to the jury the task of weighing the probative value of the evidence that the defendant possessed shoes identical to those used in the crime.
Here, Y-chromosome DNA with a specific STR profile was found under decedent's fingernails. The coincidence that this profile matches that of defendant is probative of his guilt in the same manner as if he had owned shoes that matched a foot imprint found at the crime scene. It was up to the jury to weigh the probative value of that evidence in light of the fact that a significant number of other individuals may possess the same profile.
Reversed and remanded. We do not retain jurisdiction.
NOTES
[1] The National Crime Information Center is a computerized index of criminal justice information maintained by the FBI. National Crime Information Center (NCIC)FBI Information Systems, http://www.fas.org/irp/agency/doj/fbi/is/ncic.htm.
[2] Dr. DiCarlo defined manual strangulation as "force by [one's] limb that causes compression of the neck resulting in strangulation." He explained that this can be performed by using fingers, the ball of the hand, the wrist, or even the forearm. By contrast, ligature strangulation is performed by wrapping a rope, a belt, a cable cord, or some other type of ligature around the victim's neck.
[3] The four bases are guanine (G), cytosine (C), adenine (A), and thymine (T). An A always binds to a T; a C always binds to a G.
[4] The Combined DNA Index System (CODIS) is a searchable DNA database maintained by the FBI. It stores DNA profiles created by federal, state, and local crime laboratories. CODIS-National DNA Index System, http://www.fbi.gov/hq/lab/codis/national.htm.
[5] According to LaRue, SWGDAM is a scientific board that advises the FBI and sets guidelines concerning how DNA analysis should be conducted. It is composed of both public and private sector scientists who set federal standards governing training and education of DNA analysts, protocols in DNA testing laboratories, and guidelines for technique validations. Before a laboratory may receive federal funding or upload results into the CODIS database, it must be audited and found to be in compliance with SWGDAM standards.
[6] See specifications for Yfiler®PCR Amplification Kit, https://products.appliedbiosystems. com/ab/en/US/adirect/ab?cmd=catNavigate 2&catID=601709 (follow "specifications" tab).
[7] LaRue explained that the probability that a particular repeat frequency will occur at a particular locus is set by a database created by the FBI from random sampling of a large number of individuals of diverse ethnic backgrounds. This database has been published, peer reviewed by the scientific community, and accepted worldwide.
[8] LaRue testified that sometimes DNA degrades in a sample and it is not possible to examine all thirteen loci. If, for instance, it is only possible to generate a six-loci profile, then the probability of a match would be higher, the product of six individual probabilities instead of thirteen. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542892/ | 997 A.2d 1179 (2010)
NORFLEET
v.
ANDERSON.
No. 91 WAL (2010).
Supreme Court of Pennsylvania.
June 30, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542923/ | 93 F.2d 590 (1937)
ST. PAUL FIRE & MARINE INS. CO.
v.
GARZA COUNTY WAREHOUSE & MARKETING ASS'N.
No. 8486.
Circuit Court of Appeals, Fifth Circuit.
December 9, 1937.
Rehearing Denied January 13, 1938.
*591 L. E. Elliott, of Dallas, Tex., for appellant.
Dan MacDougald, of Atlanta, Ga., and Austin Y. Bryan, Jr., of Houston, Tex., for appellee.
Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.
HUTCHESON, Circuit Judge.
The suit was on a fire policy issued by appellant as insurer to appellee as assured, covering cotton held by the assured in trust or on commission, or in storage for the account of customers while contained in plaintiff's warehouse. The claim was that, while so covered, cotton there was on January 17, 1936, destroyed by fire.
Defendant admitted the making of the contract. It defended on the ground that by paragraph 7 of its policy it was provided: "It is understood and agreed that this insurance does not cover any cotton on which the owner has other insurance which would attach if this insurance had not been issued, except on the value, if any, in excess of such insurance"; that the owners of the cotton involved, one lot of 35, and one of 119 bales, had had insurance taken out, as to the 35 bales by Karbach-Biebers, with the Insurance Company of North America, and as to the 119 bales, by Commodity Credit Corporation, with Hartford Insurance Company, which would have attached if defendant's policy had not been issued; and that the Hartford Company, the insurance carrier on the 119 bales, was prosecuting the suit against defendant in plaintiff's name.
Plaintiff in rebuttal asserted of the Hartford policy: (1) That it was one insuring against "errors and omissions," in effect an "excess insurance" policy; (2) that it was not owner, but mortgagee insurance, issued for the benefit of, and protecting loans made by, Commodity Credit, pledgee; (3) that defendant, when it issued its policy, knew of the Hartford policy, knew that the Commodity Credit had issued instructions requiring warehouses to carry insurance on all cotton on which it had loans, and had procured a Hartford policy protecting itself against errors and omissions; (4) that, knowing these facts, it had issued its policy as, and intending it to be, primary insurance; and that, having done so, it is now estopped to claim that the Hartford policy is "other insurance" within the meaning of the exception.
In rebuttal as to the 35 bales owned and insured by Karbach-Biebers, plaintiff asserted that the North American policy Karbach carried provided that it "should be void to the extent of any other insurance, directly or indirectly covering the same property, whether prior to or subsequent in date," and that being conditioned to be void in the event of other insurance, it could not itself be "other insurance" within the meaning of the clause.
The case was tried to the court without a jury. At the conclusion of the evidence the defendant moved for a general judgment, and, in the alternative, made separate motions for judgment as to the Karbach-Biebers cotton and as to the Commodity Credit cotton. All of these motions were overruled, and the District Judge, upon full findings of fact and law, rendered judgment for the plaintiff, with interest from a date sixty days after the loss had occurred.
This appeal tests whether there was error in denying the plaintiff's general motion for judgment, and whether there was any in denying the separate motions.
As to the Karbach-Biebers 35 bales of cotton, this appeal raises only one question, whether the provision in its policy, that it would be void if any other insurance was taken out, prevented its being within the meaning of clause 7 of defendant's policy, "other insurance which would attach if this insurance had not been issued"; whether, in short, defendant's policy was, as to this cotton, primary or excess insurance.
As to the 119 bales, as to which Commodity Credit Corporation carried insurance with the Hartford Company, four questions arise: (1) Whether the Hartford policy was "other insurance which would attach if this insurance had not been issued"; (2) whether Commodity Credit Corporation was the owner of the cotton, so as to make the Hartford policy owner's insurance; (3) whether, if Commodity Credit was not the owner, the insurance was gotten by it for owner's benefit so as to make it owner's insurance within the exception; (4) whether, if the Hartford policy on its face be "other insurance" *592 within the meaning of the excepting clause, the facts found by the court as to defendant's knowledge and actions when and after it issued its policy support the finding of waiver, and of estoppel to raise this defense.
Taking up, first, the Karbach-Biebers cotton, we are of the opinion that the insurance on it was within the excepting clause "other insurance"; that as to it appellant's policy is not primary, but excess insurance; and that its motion for directed verdict as to that cotton should have been granted.
As to the Commodity Credit cotton, we are of the opposite opinion. We think it clear that the Hartford policy on that cotton was not "other insurance" within the meaning of the clause; that Commodity Credit was not the owner of the cotton, and that it did not secure the insurance as agent, or for the benefit of the owner; and that, whatever the nature of the Hartford policy as to it, that policy was not "owner's insurance" within the excepting clause.
Finally, we think that the facts the record discloses and the court finds make it abundantly clear that the defendant issued its policy with knowledge of the existence of the Hartford policy as excess insurance, and intending that its policy should constitute primary coverage, and, if it could otherwise have claimed the Hartford policy as other insurance within clause 7, it waived that claim, and, by its active conduct in the premises, is estopped to claim that it was, in this suit.
We think appellee's argument for an affirmance of the judgment, as to the Karbach-Biebers cotton (that the provision in the North American policy for its avoidance in case of "other insurance" prevents that policy being "other insurance"), disregards and ignores the language of defendant's excepting clause 7. None in the long list of authorities cited by appellee supports its argument. No case having to do with a clause having the precise language of this one is cited. A common-sense construction of it compels the conclusion that defendant's policy does not cover as to the Karbach-Biebers cotton except as excess insurance; that it is as to the North American policy, not "other" but simply "excess" insurance.
As to the Commodity Credit Corporation cotton, the matter is entirely different. The whole structure of the Hartford policy, the precise clause in it, as well as what was actually done by defendant in insuring the Compress cotton, make perfectly plain that what the parties were intending to do was to issue defendant's policy as primary, Hartford's, as "Errors and Omissions, and Excess" insurance.
Defendant's argument that the Hartford policy is "other insurance" within the meaning of clause 7 finds little to base on, when the policy is considered from the standpoint of its language alone. It is shown to be wholly without foundation when it is considered in the light of the construction defendant placed on it, and its acts and conduct in issuing the primary insurance, to which the Hartford was to be excess.
But, if the Hartford policy should be construed to be other insurance, this would not avail appellant, for it is not other insurance which "the owner has." Its claim that as pledgee the Commodity Credit Corporation is owner will not do. Krackau v. Freeman, Tex.Civ.App., 60 S.W.2d 853; City Bank Farmers' Trust Co. v. Bowers, 2 Cir., 68 F.2d 909; Smith v. Blancas, Tex. Civ.App., 87 S.W.2d 781.
In Arcola Sugar Mills Co. v. Burnham, 5 Cir., 67 F.2d 981, we pointed out that, while a pledgee has some of the rights of an owner, he is, until in the manner prescribed in the pledge he has become the owner, still a pledgee.
Nor is defendant in any better case upon its contention that the insurance was owner's insurance, because taken out by Commodity Credit as agent and for the use of plaintiff.
The District Judge found, upon evidence fully supporting the finding, that the Hartford insurance was not owner's insurance in that sense; that it was pledgee's insurance, taken out by the pledgee, to protect its interest. It is settled law that such insurance is not within the prohibition of other insurance by the owner. American Eagle Fire Ins. Co. v. Vaughan, 4 Cir., 35 F.2d 147; De Shields v. Insurance Co. of North America, 125 S.C. 457, 118 S.E. 817; Clower v. Fidelity-Phenix Fire Ins. Co., 220 Mo.App. 1112, 296 S.W. 257; Thompson v. Nat. Fire Ins. Co., 48 S.D. 224, 203 N.W. 464; Suetterlein v. Northern Ins. Co., 251 N.Y. 72, 167 N.E. 176; Commonwealth Ins. Co. v. Evans, Tex.Civ. App., 42 S.W.2d 1088; Wolpers v. Globe & Rutgers Fire Ins. Co., Mo.App., 61 S. *593 W.2d 224; American Ins. Co. v. Newberry, 215 Ala. 587, 112 So. 195.
Upon the matter of interest, we think the facts support the District Judge's findings that on or before the date fixed by him for the running of interest there was a denial of liability under the policy within Delaware Underwriters & Ins. Co. v. Brock, 109 Tex. 425, 211 S.W. 779.
The judgment was right as to the 119 bales of Commodity Credit Corporation cotton. It was wrong as to the Karbach-Biebers 35 bales.
As the amount of the Karbach-Biebers recovery is a mere matter of calculation, the judgment will be reformed and amended to eliminate the amount awarded on account of that cotton, and, as reformed, it will be affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542945/ | 997 A.2d 1174 (2010)
COM.
v.
BUSH.
No. 459 WAL (2009).
Supreme Court of Pennsylvania.
June 23, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542951/ | 93 F.2d 5 (1937)
In re NOELL.
No. 407.
Circuit Court of Appeals, Eighth Circuit.
November 21, 1937.
P. H. Cullen, Clem F. Storckman, and Cullen Coil, all of St. Louis, Mo., for Charles P. Noell.
Leland Hazard and H. G. Leedy, both of Kansas City, Mo., for Bar Committees of Missouri.
Before STONE, GARDNER, SANBORN, WOODROUGH, and THOMAS, Circuit Judges.
SANBORN, Circuit Judge.
Charles P. Noell, an attorney admitted to practice in this court, has filed a response to an order of this court entered April 10, 1937, which order, after reciting that a copy of an order made by the St. Louis Court of Appeals, suspending his license to practice law in the state courts of Missouri for a period of two years, was filed with the clerk of this court, provides that, unless, within forty days from April 10, 1937, he shall show that such suspension is no longer in effect, he will, by virtue of paragraph 4 of rule 7 of the rules of this court, be suspended from practice in this court until the period of suspension under the order of the St. Louis Court *6 of Appeals shall have expired, or until the further order of this court.
The respondent, Noell, asserts that the order of the St. Louis Court of Appeals (96 S.W.2d 213), which it is sought to make the basis of his suspension to practice in this court, was made and entered without a hearing and without giving to him an opportunity to be heard, and was therefore not such an order as this court may recognize as a valid order of suspension or as the basis for striking his name from the roll of counsel of this court.
Paragraph 4 of rule 7 of the rules of this court provides: "Any member of the bar of this court who is disbarred or suspended in any court of record shall, because thereof, be stricken from the roll of counsel, unless within a time to be fixed by this court, and after notice mailed by the clerk to the address on the roll, he shall show that such disbarment or suspension is no longer in effect."
It is suggested that, since the St. Louis Court of Appeals is a court of record and since the respondent has failed to show that he is no longer suspended from the practice of law in the state courts of Missouri, an order striking his name from the roll of counsel of this court must follow. This suggestion, we think, overlooks the rule that this court may not recognize as valid an order of suspension or disbarment where the procedure in the state court, from want of notice or opportunity to be heard, was wanting in due process. Selling v. Radford, 243 U.S. 46, 51, 37 S. Ct. 377, 61 L. Ed. 585, Ann.Cas.1917D, 569. "A sentence of a court pronounced against a party without hearing him, or giving him an opportunity to be heard, is not a judicial determination of his rights, and is not entitled to respect in any other tribunal." Windsor v. McVeigh, 93 U.S. 274, 277, 278, 23 L. Ed. 914; Hovey v. Elliott, 167 U.S. 409, 414, 17 S. Ct. 841, 42 L. Ed. 215.
The procedure which was followed in the state court was, in substance, this: Charges were there filed against the respondent, to which he made answer. That court appointed a commissioner to hear the cause and to report his findings of fact and recommendations thereon. The commissioner heard the cause and reported to and filed with the state court his findings of fact and his recommendation that the respondent be suspended from the practice of law for a period of two years. The commissioner transmitted to that court the testimony taken before him and the briefs which had been filed with him. Those who had filed the charges against the respondent took exception to the recommendation of the commissioner; it being their contention that the respondent should be disbarred instead of suspended. The respondent filed exceptions to the findings and recommendation of the commissioner, challenging their correctness and the sufficiency of the evidence to sustain them. The state court fixed no time for hearing the parties upon their exceptions, and no order was made with respect to either oral or written arguments. Without argument, without a hearing, without affording the respondent an opportunity to be heard, that court overruled all exceptions to the commissioner's report and entered the order of suspension here in question. Thereafter, the respondent filed a petition for rehearing supported by a brief. His petition was denied, and he then filed a request that the proceedings be certified to the Supreme Court of Missouri for review. The request was overruled. He then filed with the Supreme Court of Missouri an application for certiorari, which was denied.
The commissioner appointed by the St. Louis Court of Appeals was without power to enter, or to dictate the entry of, an order of suspension of the respondent, and there is no claim that he attempted so to do. It is conceded, as, of course, it must be, that the power to disbar or suspend the respondent resided in the state court as a court, and was not delegated and could not be delegated. Section 11713, Revised Statutes of Missouri, 1929 (Mo.St.Ann. § 11713, p. 629) provides: "All trials of charges preferred against attorneys shall be by the court, and in all cases of conviction the court shall pronounce judgment of removal or suspension according to the nature of the facts found: Provided, however, that if the charge be filed in the supreme court, or in one of the courts of appeals, such court shall have authority to appoint a commissioner to hear the evidence and make report thereof to the court. In all cases the court shall have authority to tax or abate the cost of the proceedings as it may deem just."
The suggestion is made that, taking into consideration the procedure which the state court adopted, the hearings before the commissioner, the briefs filed with him *7 and transmitted by him to the St. Louis Court of Appeals, and the briefs filed in connection with the proceedings taken by the respondent, subsequent to the entry of the order of suspension, for the purpose of securing a rehearing and a review, it cannot justly be said that the requirements of due process were not adequately met. But the hearings before the commissioner were not hearings before the court. The briefs presented to him were unquestionably concerned with what his findings and recommendation should be, and not with what the ultimate disposition of the cause by the court should be. The proceedings subsequent to the entry of the order of suspension were directed to securing a rehearing after the order of suspension was entered, and to securing a review by the Supreme Court of Missouri of the proceedings which had resulted in the order of suspension. The briefs filed in connection with such proceedings could not, we think, properly be regarded as the equivalent of a hearing by the St. Louis Court of Appeals upon the merits prior to the entry of judgment. In no real sense did that court ever have the merits of the cause before it until the report of the commissioner and the exceptions of the respondent thereto were filed with it. Hence it is apparent that that court at no time afforded the respondent an opportunity to be heard before it upon the merits of the controversy which it alone had power to determine.
This court, of course, has no right to review the proceedings in the state court. Nothing that has been said in this opinion is in any way to be regarded as a criticism of the procedure adopted by that court or of the final conclusion reached by it. For all that appears, the state court may have reached a correct conclusion by methods which it regarded as fully meeting the requirements of due process. We have made an intrinsic examination of the procedure followed by the state court, as we are required to do, for the sole purpose of determining whether it was such that the order of suspension entered by the state court may be regarded by us as a sufficient ground for striking the name of the respondent from the roll of counsel of this court. Our conclusion is that we cannot so regard it.
The disposition which we make of this matter will be no bar to a proceeding in this court for the disbarment or suspension of the respondent from practice therein for the same reasons for which he was suspended in the state court, or for any other reasons deemed adequate.
The order requiring the respondent to show cause is discharged, and this proceeding is dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542953/ | 93 F.2d 923 (1938)
KENTUCKY ELECTRIC POWER CO.
v.
NORTON COAL MINING CO.
NORTON COAL MINING CO.
v.
KENTUCKY ELECTRIC POWER CO.
Nos. 7626, 7627.
Circuit Court of Appeals, Sixth Circuit.
January 18, 1938.
*924 Frank B. Ober, of Baltimore, Md. (Gordon, Laurent, Ogden & Galphin, of Louisville, Ky., Ritchie, Janney, Ober & Williams, of Baltimore, Md., and Robert G. Gordon, of Louisville, Ky., on the brief), for Kentucky Electric Power Co.
F. M. Drake, of Louisville, Ky. (Crawford, Middleton, Milner & Seelbach, of Louisville, Ky., on the brief), for Norton Coal Mining Co. et al.
Before HICKS and ALLEN, Circuit Judges, and FORD, District Judge.
FORD, District Judge.
These appeals grow out of consolidated receivership and mortgage foreclosure actions instituted by creditors against the Norton Coal Mining Company, in which, after the consolidation, the Kentucky Electric Power Company filed an intervening petition asserting the right to an equitable lien or easement upon a portion of the *925 mortgaged real estate of the Coal Company on account of certain expenditures made by its predecessor, Kentucky Electric Power Corporation, in drilling and equipping an artesian well which, by mistake, was located on the property of the Coal Company.
Prior to this litigation, the Kentucky Electric Power Corporation was reorganized in a proceeding under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, and it is stipulated that the intervening petitioner, Kentucky Electric Power Company, a new corporation, has succeeded to all the rights of the old power corporation with reference to the subject matter of this controversy.
The receivers of the Coal Company dispute the claim of the Power Company to any right whatever in the land of the Coal Company on account of the alleged expenditures or improvements, except the right to remove such of its property as may be taken without damage to the realty. As a further defense, the receivers assert the right to an accounting for the reasonable profit derived by the Power Company and its predecessor from the use of the Coal Company's property and the taking of water therefrom "to whatever extent same may be off-set against the lien claimed herein."
The District Court adjudged to the Power Company the right to remove all property used in connection with the well which is susceptible of removal without damage to the realty, but denied other or additional relief.
Although the District Court found that the Power Company and its predecessor took from the well located on the Coal Company's land four million gallons of water per month for a period of five years from June 1, 1931, upon which the profits realized were in excess of the cost of drilling the well, nevertheless it denied the Receivers any recovery on that account.
No error is assigned to that portion of the decree permitting the Power Company to take its removable property.
The Power Company appeals (appeal No. 7626), assigning error to the action of the District Court in denying the additional relief claimed.
The receivers of the Coal Company and the trustee for its bondholders appeal (appeal No. 7627), assigning error to the failure of the District Court to render judgment in favor of the receivers for the value of the water taken from the well.
Prior to 1926, the Coal Company was engaged in operating a large coal mining enterprise upon its extensive holdings of mineral lands near Nortonville, Kentucky. It then maintained upon its property a reservoir and a small power plant for its own needs. In 1926, on account of the strategic location of its power plant and adequate water supply, the Coal Company undertook the development of a central station for the sale and distribution of water and power in that territory and neighboring communities. With that end in view, it caused the incorporation of the Kentucky Electric Power Corporation, in which it took all the common stock and to which it conveyed its power plant and equipment, together with about seventy acres of land upon which the plant and reservoir were located. In order to finance the project, the Coal Company was instrumental in promoting the sale by the Power Corporation of a large bond issue secured by a mortgage on its property. It also made certain guarantees as to the earnings of the Power Corporation. Although, from the time of the organization of the Power Corporation, the same executive and operating officers served both the Coal Company and the Power Corporation, nevertheless the corporations were at all times engaged in separate and independent enterprises. It is not claimed that the Power Corporation was a mere adjunct or instrumentality of the Coal Company. Like the rest of its customers, the Coal Company was charged monthly water rental for the water service rendered it by the Power Corporation. In the nature of the situation, the relationship of the corporations to each other was intimate, but, so far as shown by the record, in all their transactions with each other, the Coal Company dealt fairly with its subsidiary.
In 1931, the Power Corporation, in order to secure a more abundant supply of water, drilled two artesian wells within a short distance of each other. It appears from the record that water was equally available at both wells, but for some reason pumping equipment was attached to only one of them. The location of both wells was selected by Mr. Sterling S. Lanier, Jr., who was then Vice President of both the Power Corporation and the Coal Company. After the Power Corporation passed through re-organization under *926 section 77B of the Bankruptcy Act and was succeeded by the present Power Company, and after the Coal Company was placed in receivership, it was discovered that the well to which the Power Company's equipment was attached was located upon the land of the Coal Company.
It is established by the evidence that the location of the well on the land of the Coal Company was a mistake made by Mr. Lanier at a time when he was acting solely in the performance of his duties as Vice President of the Power Corporation, and for its exclusive interest. He intended to locate both wells on the land of the Power Corporation and his mistake was due to inexcusable carelessness in failing to ascertain the location of the boundary line between the property of the two companies, although the title papers clearly describing the boundary line were at all times easily accessible to him. The Coal Company knew nothing of the error, did not participate in the transaction in any way and took no cognizance of it.
Being entirely without claim or color of title to the land of the Coal Company upon which the well was located, the Power Company disclaims reliance upon the general rule under which appropriate equitable relief may be afforded one, who, acting in good faith and under bona fide claim and color of title, makes valuable improvements upon the property of another. It rests its claim to relief in equity entirely upon the theory that the subsidiary relationship of the Power Corporation to the Coal Company was such that "the Coal Company should be held to be a constructive trustee for its subsidiary Power Company to the extent of any benefit to its land resulting from the mistaken location thereon of the well dug with the subsidiary's funds."
The status of corporations similarly allied to each other has been the subject of consideration by this court in numerous cases in which it has been sought to make the holding corporation responsible for the acts of its subsidiary. Shepherd v. Banking & Trust Co., 6 Cir., 79 F.2d 767; Hooper-Mankin Co. v. Matthew Addy Co., 6 Cir., 4 F.2d 187; New York Trust Co. v. Carpenter, 6 Cir., 250 F. 668; Pittsburgh & Buffalo Co. v. Duncan, 6 Cir., 232 F. 584; Kardo Co. v. Adams, 6 Cir., 231 F. 950, 964; Richmond, etc., Co. v. Richmond, etc., Co., 6 Cir., 68 F. 105, 34 L.R.A. 625.
Whenever property, real or personal, has been obtained by a dominant corporation from its controlled subsidiary through the exercise of duress, undue influence or by taking an unfair advantage of the weakness or necessities of the subsidiary in such a way or through such a means as to render it unconscionable for the dominant corporation to retain and enjoy the beneficial interest so acquired, a court of equity will exercise jurisdiction to reach the property in the hands of the dominant corporation and administer complete justice between the parties. Angle v. Chicago, St. Paul, Minnesota & Omaha Ry. Co., 151 U.S. 1, 14 S. Ct. 240, 38 L. Ed. 55. Such relief is in harmony with incontrovertible principles of equity.
On the other hand, it is likewise well settled that a corporation is ordinarily an entity, separate and apart from its stockholders, and mere ownership of all the stock of one corporation by another, and the identity of officers of one with officers of another, are not alone sufficient to create identity of corporate interest between the two companies or to create the relation of principal and agent or to create a representative or fiduciary relationship between the two. If such stock ownership and potential control be resorted to only for the purpose of normally participating in the affairs of the subsidiary corporation in a manner usual to stockholders and not for the purpose of taking some unfair advantage of the subsidiary or using it as a mere adjunct to the main corporation or as a subterfuge to justify wrongdoing, their identity as separate corporations will not be disregarded but their respective rights when dealing with each other in respect to their separate property will be recognized and maintained. The extent of stock ownership and mere potential control of one company over another has never been regarded as the determining factor in the consideration of such cases. Something must be disclosed to indicate the exercise of undue domination or influence resulting in an infringement upon the rights of the subservient corporation for the benefit of the dominant one. Otherwise, the rights of the separate corporations in respect to their corporate property must be governed by the rules applicable in ordinary cases. Pullman's Palace Car Co. v. Missouri Pacific Ry. Co., 115 U.S. 587, 6 S. Ct. 194, 29 L. Ed. 499; Peterson v. *927 Chicago, Rock Island & Pacific Ry. Co., 205 U.S. 364, 391, 27 S. Ct. 513, 51 L. Ed. 841; United States v. Delaware & Hudson Co., 213 U.S. 366, 413, 29 S. Ct. 527, 53 L. Ed. 836; Interstate Commerce Commission v. Stickney, 215 U.S. 98, 108, 30 S. Ct. 66, 54 L. Ed. 112; United States v. Delaware, Lackawanna & Western R. Co., 238 U.S. 516, 530, 35 S. Ct. 873, 59 L. Ed. 1438.
As a general rule, no right can be initiated by means of a trespass for "the trespasser can acquire no rights by his tortious acts." Searl v. School District, 133 U.S. 553, 562, 10 S. Ct. 374, 377, 33 L. Ed. 740. Another general rule is that "mistake, to be available in equity, must not have arisen from negligence, where the means of knowledge were easily accessible. The party complaining must have exercised at least the degree of diligence `which may be fairly expected from a reasonable person.'" Grymes v. Sanders, 93 U.S. 55, 61, 23 L. Ed. 798. These rules are applicable to an equitable action for the recovery of the value of improvements made through trespass by mistake on the land of an adjoining owner, unless the mistake is shown to be due to misleading acts or declarations of the adjoining owner. Bennett Jellico Coal Co. v. East Jellico Coal Co., 152 Ky. 838, 154 S.W. 922; Swiss Oil Corp. v. Hupp, 253 Ky. 552, 570, 69 S.W.2d 1037.
The record in this case discloses no misleading acts or declarations on the part of the Coal Company to induce the mistake in the location of the well on its property. There is no showing that the wrongful location of the well was attributable to any ulterior motive on the part of any one. Not the slightest purpose or intention on the part of the Coal Company to take advantage of its subsidiary or to profit at its expense is shown. Neither the mistake made by Mr. Lanier nor his negligence in failing to exercise ordinary care to ascertain the boundary line of the land of the Power Corporation, for which he was acting, can justly be charged or imputed to the Coal Company. We think the District Court properly denied to the Power Company the additional relief sought.
The Power Company stresses the point that the action of the District Court results in permitting an unjust enrichment of the parent corporation at the expense of the subsidiary. This view entirely overlooks the fact found by the District Court that the Power Company and its predecessor, for many years, made profitable use of the water taken from the land of the Coal Company as a commercial commodity and that the profits derived from the sale of the water were amply sufficient to compensate for the expense incurred in drilling the well.
By the loss of the use of the well on the Coal Company's land, the Power Company is not deprived of an essential water supply. The evidence shows that it may remove and attach its pumping equipment to the artesian well located on its own property, with comparatively small expense, and by so doing it may secure substantially the same supply of water which was available from the other well.
As to the appeal by the Coal Company, it is sufficient to say that, as we construe it, the answer of the Coal Company does not assert an independent substantive claim against the Power Company. It merely sets up a defensive claim in the nature of a resisting equity to off-set the lien claimed against its land. The District Court properly denied recovery upon the basis of a substantive claim. It is unnecessary to consider the question whether the claim would have been allowable if it had been otherwise asserted.
The decree of the lower court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542956/ | 93 F.2d 850 (1937)
WESTERN AUTO SUPPLY CO.
v.
KNOX.
SAME
v.
KENYON et al.
Nos. 1573, 1574.
Circuit Court of Appeals, Tenth Circuit.
December 31, 1937.
Bower Broaddus, of Muskogee, Okl. (McAllister, Humphrey, Pew & Broaddus, of Kansas City, Mo., Simons, McKnight, Simons, Mitchell & McKnight, of Enid, Okl., and Broaddus & Fite, of Muskogee, Okl., on the brief), for appellants.
H. G. McKeever, of Enid, Okl. (McKeever, Stewart & McKeever, of Enid, Okl., on the brief), for appellee Charles E. Knox.
E. L. Richardson, of Lawton, Okl. (Richardson & Cline, of Lawton, Okl., on the brief), for appellees Jack and Glen Kenyon.
Before BRATTON and WILLIAMS, Circuit Judges, and SYMES, District Judge.
BRATTON, Circuit Judge.
Western Auto Supply Company, a corporation organized under the laws of the *851 state of Missouri, is plaintiff in these two cases of unfair trade practices. The defendants are different, but the cases are so similar that disposition may be made of them in one opinion.
It is alleged in the bill in the first case that in 1909 George Pepperdine organized Western Auto Supply Company as an unincorporated company at Kansas City, and, using that trade-name, conducted the business of furnishing supplies and accessories for all makes of automobiles; that in 1914 Pepperdine and others caused plaintiff to be incorporated; that plaintiff thereupon took over the name and good will of the unincorporated company and ever since has engaged in the business of furnishing tires, supplies, and accessories for all makes of automobiles; that it operates 173 stores located in 28 different states; that three of such stores are in Oklahoma, the first having been opened in Tulsa in 1925, the second in Oklahoma City in 1934, and the third in Tulsa during the same year; that, in addition to its corporate name, it uses the trade-name Western Auto Stores at all of such stores; that at the time such corporate name and trade-name were adopted there was no identical or similar name in use by any other company or individual engaged in that kind of business; that plaintiff has expended more than seven million dollars in nation-wide advertising in catalogues and newspapers, and has become well known under such corporate name and trade-name; that it is one of the largest exclusive distributors of automobile accessories and supplies in the United States; that it has developed a large line of special brands of merchandise, such as tires, tubes, batteries, oils, radios, and other items, all of which bear its copyrighted and registered trademark and the company's name; that from 1912 to 1914 the unincorporated company mailed catalogues of its wares to prospective purchasers throughout the state of Oklahoma, and from 1914 to 1935 plaintiff continued the practice which resulted in a successful mail order business in that state with large profits; that, by reason of their long, continued, and wide use, the corporate name and trade-name of plaintiff signify and indicate to the public throughout the United States and in the State of Oklahoma that the goods offered and sold are those manufactured and sold by plaintiff, and have that excellence of quality which conforms to the reputation of plaintiff for furnishing merchandise of superior grade; that under its rule of business purchases made at one store will be made good or the money refunded at any other store, which is widely understood by tourists; that in the year 1933 defendant Charles E. Knox established a store in Enid, Okl., under the name Western Auto Salvage Company, and is conducting the business of furnishing automobile accessories, tires, radios, and other supplies within that city and adjacent territory; that he subsequently opened other like stores in Perry, Kingfisher, Woodward, Ponca City, and Blackwell, all in that state; that, in addition, he uses trucks from which such merchandise is sold under such trade-name; that he handles, sells, and vends a grade of merchandise which is inferior to that furnished by plaintiff, including secondhand wares; that the trade-name of defendant is deceptively similar to the corporate name and trade-name of plaintiff; that by reason of such similarity great confusion is caused to the public and to the customers and patrons of plaintiff concerning the identity and quality of merchandise furnished by plaintiff; that, in consequence of such confusion, numerous persons have repeatedly called upon plaintiff to replace merchandise furnished by defendant, believing that it had been sold at stores of plaintiff, and that the purchasers were entitled to receive replacement under the general policy of plaintiff that its customers be satisfied or the money refunded; that the trade-name and good will of plaintiff in the state of Oklahoma is valuable; and that the acts of defendant have damaged plaintiff.
The bill in the second case contains substantially identical allegations with two exceptions. It is charged that in 1935 defendants Jack Kenyon and Glen Kenyon established a store at Anadarko, Okl., under the name Western Auto Parts Company and are conducting the business of furnishing automobile accessories, tires, radios, and other supplies within the city and throughout the adjacent trade territory; that thereafter they opened like stores in Lindsey, Frederick, Hollis, Lawton, and Healdton, all in that state; and that, in addition, they are using trucks from which such merchandise is furnished. It is not charged that they sell secondhand or any other inferior grade of merchandise.
Separate motions to dismiss in the nature of demurrers were lodged against the bills. The court sustained the motions; plaintiff declined to plead further; and decrees of dismissal were entered.
*852 It is well settled in the law of unfair competition that a corporate name or trade-name used in connection with the business to which it relates may become an asset of great value; that, when it does, it partakes of the nature of a property right; and that equity will enjoin a newcomer in the field from the appropriation and use of a trade-name which bears sufficient resemblance to that of the pioneer as to be likely to produce uncertainty and confusion of identity with resulting injury to the business of the senior. American Steel Foundries v. Robertson, 269 U.S. 372, 46 S. Ct. 160, 70 L. Ed. 317; Standard Oil Co. of New Mexico v. Standard Oil Co. of California, 10 Cir., 56 F.2d 973; United States Ozone Co. v. United States Ozone Co., 7 Cir., 62 F.2d 881; Iowa Auto Market v. Auto Market & Exchange, 197 Iowa 420, 197 N.W. 321; Daughters of Isabella No. 1 v. National Order of Daughters of Isabella, 83 Conn. 679, 78 A. 333, Ann.Cas.1912A, 822.
Confined to their primary meaning, geographical words and words which are merely descriptive of the merchandise are not capable of exclusive appropriation. But, where words of that character have been used so long and so exclusively by a trader or distributor with reference to his merchandise that they are generally understood to mean and denote such merchandise, they acquire a secondary meaning quite apart from their primary significance and he may restrain their perfidious use by another if it causes deceit and injures his business. Elgin National Watch Co. v. Illinois Watch Case Co., 179 U.S. 665, 21 S. Ct. 270, 45 L. Ed. 365; Hygrade Food Products Corp. v. H. D. Lee Mercantile Co., 10 Cir., 46 F.2d 771; R. H. Macy & Co. v. Colorado Clothing Mfg. Co., 10 Cir., 68 F.2d 690; Computing Scale Co. v. Standard Computing Scale Co., 6 Cir., 118 F. 965; British-American Tobacco Co. v. British-American Cigar Stores Co., 2 Cir., 211 F. 933, Ann.Cas. 1915B, 363; Standard Paint Co. v. Rubberoid Roofing Co., 7 Cir., 224 F. 695; Trappey v. McIlhenny Co., 5 Cir., 281 F. 23; Phillips v. Governor & Co., 9 Cir., 79 F.2d 971; National Biscuit Co. v. Kellogg Co., 3 Cir., 91 F.2d 150; Iowa Auto Market v. Auto Market & Exchange, supra.
The motions to dismiss admitted all matters well pleaded in the bills. It is pleaded that plaintiff has used its corporate name and trade-name since 1914; that for five years prior to that time the unincorporated predecessor engaged in business under the trade-name which became the corporate name; that, at the time such names were adopted and placed in use, no other company or individual engaged in that kind of business was using the identical or a similar name; that plaintiff has expended more than seven million dollars in nation-wide advertising; that it is engaged in business in 28 different states and operates 173 stores; that throughout that period the corporate name and trade-name have acquired a secondary meaning to the public as signifying the high grade merchandise vended by plaintiff; that the respective names adopted by defendants are deceptively similar to that of plaintiff; and that such similarity has caused confusion and uncertainty in identity on the part of the public, from which plaintiff suffers and will continue to suffer. The trade-name Western Auto Salvage Company in one instance and Western Auto Parts Company in the other bear resemblance to the corporate trade-name of plaintiff. In each instance three of the words out of four are identical. They are "Western," "Auto," and "Company." As to the fourth, instead of the word "Supply" in the name of plaintiff, "Salvage" is used in one instance and "Parts" in the other; and, standing alone, the word "Salvage" has a different meaning from the word "Supply." But that difference must be considered in connection with the identity in the other three words. The resemblance is sufficient that confusion and uncertainty are reasonably conceivable. It cannot be said as a matter of law that the dissimilarity is broad enough as to be inconceivable that a person in the exercise of ordinary care and discrimination in purchasing merchandise vended by defendants would be deceived into the belief that it was merchandise of plaintiff. In other words, it cannot be said as a matter of law that the allegation of deceptive similarity causing confusion and uncertainty is without basis of fact.
Argument is advanced that the decrees should be upheld because the parties are not direct competitors. Neither defendant operates a store in Tulsa or Oklahoma City, and the defendant in the first case deals in part in secondhand merchandise while plaintiff vends only new merchandise. But both defendants conduct their business in closely connected towns in Oklahoma; they draw trade from territory not remote from the stores of plaintiff and from territory *853 included in the mail order system of plaintiff; and the secondhand merchandise consists of accessories and parts for all makes of automobiles. The right to restrain a junior in the field is not confined to cases of actual market competition between identical products. It extends to a case in which one trader represents his products as those of another. A merchant has a sufficient economic interest in his trade-name to restrain another from exploiting it in the sale of his merchandise, even though the two are not engaged in the manufacture or distribution of the identical or like products. Standard Oil Co. of New Mexico v. Standard Oil Co. of California, supra; Yale Electric Corp. v. Robertson, 2 Cir., 26 F.2d 972; Wisconsin Electric Co. v. Dumore Co., 6 Cir., 35 F.2d 555; Horlick's Malted Milk Corp. v. Horluck's, Inc., 9 Cir., 59 F.2d 13; Phillips v. Governor & Co., supra; Colorado Nat. Co. v. Colorado Nat. Bank, 95 Colo. 386, 36 P.2d 454; Churchill Downs Distilling Co. v. Churchill Downs, Inc., 262 Ky. 567, 90 S.W.2d 1041. The facts alleged in the bills and admitted by the motions bring the cases well within the rule enunciated in these authorities.
The decrees are severally reversed and the causes remanded, with direction to deny the motions to dismiss the bills. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543212/ | 39 F.2d 546 (1930)
HARRIS
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 101.
Circuit Court of Appeals, Second Circuit.
March 3, 1930.
Arthur F. Driscoll and O'Brien, Malevinsky & Driscoll, all of New York City (Holmes, Brewster & Ivins, of Washington, D. C., of counsel; Frank B. Meseke, of New York City, on the brief), for petitioner.
G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Andrew J. Sharpe, and Randolph C. Shaw, Sp. Assts. Atty. Gen. (C. M. Charest, Gen. Counsel, and Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
Before L. HAND, SWAN, and MACK, Circuit Judges.
L. HAND, Circuit Judge.
This is a companion case to Cohan v. Commissioner of Internal Revenue, 39 F.(2d) 540, decided herewith; it concerns the taxes of Harris, Cohan's partner, in part during the period of the partnership, and in part thereafter. It raises only two questions, the first of which is the computation of the tax for the first six months of 1921. The only difference in the facts from Cohan's Case is that here it does not appear when Harris asked and got leave to change his fiscal year. If this was after January 1, 1921, his position is weaker than Cohan's, and in any event we need add nothing to what we have already said. We pass therefore to the other question.
On July 2, 1919, Harris, being then Cohan's partner, executed a deed poll by which he assigned to his wife "a full and undivided interest in and to the following theatrical enterprises in which I am either the full or part owner." Then followed the names of seven plays in which Harris gave his wife one fourth of his own interest which varied from thirty-seven and a half to a hundred per cent. The assignment was to be "subject to the said Alice Harris being responsible for the same proportion of any losses that may be incurred by the undersigned in the operation of said theatrical enterprises," and she accepted the deed. Cohan and Harris were then producing five of these plays, among them that in which the deed recited Harris to be the full owner. The firm divided the profits equally, and Harris on his individual books kept an account in his wife's name, crediting her on June thirtieth, 1920, with her proper proportion of his half of the profits in six of the plays the five that were being produced in June, 1919, and one other. She had a drawing account of three hundred dollars a week which was similarly charged against her, as well as any other sums which Harris paid her directly. In his return for the calendar year 1920, Harris deducted the amounts appearing on his books to his wife's credit; this the Board refused to allow, and the question is whether its action was right.
Despite the language of the deed, Harris does not assert that he conveyed any interest in the firm assets, however the phrase, "theatrical enterprises," should be construed. Assuming that a partner may do so, when the firm is solvent (Managh v. Whitwell, 52 N.Y. 146, 11 Am. Rep. 683) though that is at least not wholly clear (Fourth Nat. Bank v. New Orleans & Carrollton R. R., 11 Wall. 624, 20 L. Ed. 82) it is universally agreed *547 that the result would be at once to disrupt the firm. Harris had no such purpose; he wanted only to give a present share to his wife of his interest in the firm profits, distributed and undistributed. But he had nothing to convey, except just that interest in the firm assets which he did not mean to affect. A partner at common law (and the same was true under the law in force in New York in July, 1919 [Laws 1909, c. 44]) is a joint owner of the firm assets; the civil law notion of the firm as an entity against which the partners individually have rights, analogous to choses in action, our law has steadily resisted, even in the interpretation of statutes like the Bankruptcy Act (11 USCA) which gave some excuse for the importation of the doctrine (Francis v. McNeal, 228 U.S. 695, 33 S. Ct. 701, 57 L. Ed. 1029, L. R. A. 1915E, 706). Even in insolvency we have resort to the contrivance of an "equity" of each partner against the share of the other to which firm creditors are "subrogated" (Menagh v. Whitwell), and some decisions do not even recognize this (Case v. Beauregard, 99 U.S. 119, 25 L. Ed. 370). A partner who attempts to convey his interest in the profits of the firm, but not in its assets, can therefore do no more than agree that, as soon as he withdraws his share, the assignee shall be at once entitled to them; his assignment has no immediate effect; he has nothing to assign, like a share of stock, a chose in action, or the reversion on a lease or life interest. A misunderstanding of this underlies the argument here made; Harris assimilates the deed to one which had a present subject-matter, assuming that he could transfer his future profits as though he had some right in them against the firm, independent of his joint ownership in the firm assets.
So far, therefore, as any part of the profits credited to his wife in fact remained undistributed, the deed transferred nothing whatever, and Harris was on any theory obliged to return them as part of his income, whether or not they were set apart as his on the books. That did not serve to segregate them from the firm assets; they were still jointly owned, though Revenue Act 1918, section 218 (a), 40 Stat. 1070, required their inclusion. What Harris withdrew is undoubtedly in a different class. The deed was given for a consideration, and, as soon as the profits were withdrawn from the firm assets, they became the property of the wife to the extent of her undivided interest. Barnes v. Alexander, 232 U.S. 117, 34 S. Ct. 276, 58 L. Ed. 530. All this we recognized in Mitchel v. Bowers, 15 F.(2d) 287, though our decision primarily rested upon the power reserved to the husband to end the agreement, which left the disposition of the profits always in his hands.
We went further, however, and held that, regardless of that power, the husband must return his whole share of the profits, those distributed as well as the rest, and the case at bar can only be regarded as an effort to reargue that ruling. We are still of the same opinion. Section 218 (a) did indeed continue to treat the firm income in accordance with the doctrine of the common law, in so far as it did not tax it as a whole; it allowed each partner to return only his own share, with the result that the sum of the individual taxes was less than if the firm had been taxed as an entity. It seems to us, however, that to permit a further reduction by partial assignments of so much as a partner may withdraw during the year, disregards the plan of partnership taxation, which is apparent in the section. In the first place the tax would in that case depend upon the accident of how much the partner chooses to withdraw in a given year, so offering opportunity for manipulation. In the second, the tax is imposed anyway upon the profits before distribution, and all profits must be so declared before they can be withdrawn, though in practice declaration and withdrawal may be simultaneous. To make the tax depend upon the question whether there is an interval, subjects the prescribed plan to exceptions which it would be unreasonable to import. Just what were the grounds of the decision of the Third Circuit in Commissioner of Internal Revenue v. Barnes (C. C. A.) 30 F.(2d) 289, the short opinion does not very clearly disclose. So far as we can gather it did not involve the point now under discussion. In any event until otherwise advised we adhere to our earlier decision.
Decision affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543211/ | 997 A.2d 1028 (2010)
414 N.J. Super. 85
Jamie SIERFELD, Plaintiff-Respondent,
v.
Curtis N. SIERFELD and Michele Sierfeld, Defendants-Appellants, and
Allstate Insurance Company, Allstate New Jersey Insurance Company, Inc., Defendants-Respondents.
DOCKET NO. A-4280-08T3.
Superior Court of New Jersey, Appellate Division.
Argued January 20, 2010.
Decided April 23, 2010.
*1030 Clara S. Licata, Glen Rock, argued the cause for appellants (Ms. Licata, attorney and on the brief).
William P. Exaros, Morristown, argued the cause for respondent Jaime Sierfeld (D'Alessandro & Cieckiewicz, attorneys, Jersey City, join in the brief of appellants).
John V. Mallon, Secaucus, argued the cause for respondents Allstate Insurance Company and Allstate New Jersey Insurance Company (Chasen, Leyner & Lamparello, attorneys; Mr. Mallon, of counsel and on the brief; Cindy Nan Vogelman and Maria P. Vallejo, on the brief).
Before Judges FUENTES, GILROY and SIMONELLI.
The opinion of the court was delivered by
SIMONELLI, J.A.D.
Plaintiff Jamie Sierfeld sought damages against her parents, defendants Curtis N. Sierfeld and Michele Sierfeld (the Sierfelds) for injuries sustained as a result of a dog bite, which occurred in her parents' home. Plaintiff, who claimed to be temporarily living in her parents' home at the time of the incident, also sought a declaratory judgment against defendant Allstate Insurance Company (Allstate) compelling it to provide coverage and benefits under homeowners and umbrella insurance policies issued to the Sierfelds. Allstate denied coverage, claiming that plaintiff was a resident of the Sierfelds' household, and thus excluded from coverage as an "insured person."
The Sierfelds appeal from the January 20, 2009 Law Division order granting summary judgment to Allstate and dismissing plaintiff's declaratory judgment action. We affirm.
The following facts are adduced from a plenary hearing held on December 22, 2008. Plaintiff is the Sierfelds' adult daughter. She grew up in her parents' home located in Wood Ridge. From 1998 to 2002, plaintiff lived away at college in Scranton, Pennsylvania but used her parents' address as her permanent address. The Sierfelds' address appeared on plaintiff's driver's license until November 2008. Mr. Sierfeld owned and insured plaintiff's car, which was registered in his name at the Sierfelds' address. Plaintiff makes the car payments. She also pays for her own health insurance.
After graduating from college in 2002, plaintiff returned to her parents' home and lived there for approximately three months. In September 2002, she began living in a house in Rutherford. In September 2003, she began living in an apartment in Wallington.
In March 2005, plaintiff, then twenty-five years old, lost her job and moved back to her parents' home, bringing with her *1031 some of her furniture,[1] and her clothing and other personal items. Plaintiff claimed that she was starting her own business and intended to live with her parents no longer than six months. However, the time period was flexible and the Sierfelds would have permitted their daughter to stay longer. Plaintiff paid no rent and did not contribute financially to the household.
Plaintiff had access to the entire house without restriction. She had her own bedroom but shared a bathroom with her parents, where she kept her toiletries, and she shared the kitchen, using the refrigerator, kitchen cabinets and utensils. Plaintiff also did her laundry at the home and used her parents' cable account for her television without charge. She also occasionally cleaned the bathroom and kitchen, and cleaned the dining room more often.
Plaintiff purchased her own groceries because she is a vegetarian, unlike her parents. There was no prohibition on the three eating each other's food; however, plaintiff and her parents rarely shared food or ate dinner together, and they never ate lunch together because the parents were at work. The majority of the time, plaintiff ate with her boyfriend. Plaintiff did not socialize with her parents and they only occasionally watched television together.
Plaintiff held meetings at the home with individuals assisting her with her new business venture. She received business mail at a post office box in Wood Ridge but received her personal mail at her parents' address, including unemployment checks.
On July 22, 2005, approximately four months after plaintiff began living in her parents' home, the family dog bit her, causing a severe facial injury requiring several surgeries and psychological counseling. Plaintiff did not leave the home in six months as planned but continued living there until May 2006, allegedly to recuperate from her dog-bite injuries.
Plaintiff sought compensation for her injuries under the Sierfelds' homeowners and umbrella policies. The homeowners policy requires Allstate to "pay damages which an insured person becomes legally obligated to pay because of bodily injury.. . arising from an occurrence to which this policy applies, and is covered by this part of the policy." The policy excludes coverage for bodily injury to an "insured person," which is defined as the named insured and any relative "if a resident of [the named insured's] household." The policy does not define "resident."
The homeowners policy also requires Allstate to "pay the reasonable expenses incurred for necessary medical, surgical, x-ray and dental services; ambulance, hospital, licensed nursing . . . and pharmaceuticals." The policy excludes coverage for any "bodily injury to any insured person or regular resident of the insured premises."
The umbrella policy requires Allstate to "pay damages which an insured person becomes legally obligated to pay because of bodily injury, personal injury . . . subject to the terms, conditions and limits of this policy." The policy excludes coverage for "any occurrence arising out of bodily injury or personal injury to an insured person." The policy defines "insured person" as the named insured, the named insured's resident spouse, and "any person related to [the named insured] by blood, marriage or adoption who is a resident of [the named insured's] household." The policy does not define "resident."
*1032 Allstate filed a summary judgment motion, contending that plaintiff was excluded from coverage as an "insured person" under both policies because she was a resident of the Sierfelds' household. Plaintiff filed a cross-motion for summary judgment,[2] contending that the policies are ambiguous because they do not define "resident," and thus must be construed against Allstate to provide coverage. Alternatively, plaintiff claimed she was not a resident of her parents' household because the parties did not intend for her to live there for an extended period of time. The trial judge denied both motions without prejudice.
After a plenary hearing, the trial judge concluded, incorrectly, that the Sierfelds had abandoned their ambiguity argument and had adopted the definition of "household" set forth in Fireman's Fund v. Caldwell, 270 N.J.Super. 157, 167, 636 A.2d 606 (Law Div.1993) in determining plaintiff's status. The judge also considered and found significant the parties' intent as to the duration of plaintiff's stay but found "that the arrangement was informal, flexible and without any specific duration[,] . . . [and] that the relationship was no different from any child living as a family member of a parents' home." The judge found more significant the fact that there was no lease or structure to plaintiff's use of her parents' home, that plaintiff paid no rent or utility costs, and that the parties occasionally had communal meals together. The judge concluded that "[t]he common dwelling of plaintiff and her parents had a domestic character[,]" and that "under the aggregate of the circumstances, . . . plaintiff had sufficient connection to the insured[s'] premises to be considered a resident member of that household."
After a trial on damages, the trial judge entered judgment in favor of plaintiff and against defendants for $100,000. This appeal followed.
On appeal, Allstate argues as a threshold matter that the Sierfelds lack standing to appeal because they did not file a cross-claim for coverage, an answer to Allstate's cross-claim against them for declaratory judgment, or a cross-motion for summary judgment, and that they lack a sufficient personal stake and adverseness to the other parties in the action. We disagree.
In her complaint, plaintiff asserts a claim against Allstate for coverage under her parents' insurance policies. In its cross-claim against the Sierfelds, Allstate seeks a declaration that it has no duty to defend or indemnify them or to provide coverage under those policies. Allstate also acknowledged in its answer to the complaint that "there now exists an actual, [justicable] controversy between Allstate and [the Sierfelds and plaintiff.]" Also, Allstate never sought a default against the Sierfelds for failure to file an answer to its cross-claim.
In their cross-claim, the Sierfelds seek common law and contractual indemnification against "John Doe." Although Allstate is not specifically named in this pleading, it is clear that the Sierfelds' claim is based on their rights under the policies. Allstate also knew that the Sierfelds had joined in plaintiff's cross-motion for summary judgment.
Further, New Jersey courts have historically taken a liberal approach on the issue of standing. Crescent Park Tenants Ass'n v. Realty Equities Corp. of N.Y., 58 N.J. 98, 101, 275 A.2d 433 (1971). A sufficient stake in the matter and a genuine adverseness are the basic requirements of standing. N.J. Chamber of Commerce v. *1033 N.J. Election Law Enforcement Comm'n, 82 N.J. 57, 67, 411 A.2d 168 (1980). To have standing, a party need only show a substantial likelihood of "some harm" in the event of an unfavorable decision. In re Adoption of Baby T, 160 N.J. 332, 340, 734 A.2d 304 (1999).
Generally, a financial interest in the outcome of litigation is sufficient to confer standing. Assocs. Commercial Corp. v. Langston, 236 N.J.Super. 236, 242, 565 A.2d 702 (App.Div.), certif. denied, 118 N.J. 225, 570 A.2d 979 (1989). Here, by virtue of the $100,000 judgment against them, the Sierfelds have a financial stake in the outcome of this appeal. They also have a contractual relationship with Allstate, which would require it to pay that judgment if coverage for plaintiff's injuries is found to exist. Accordingly, we are satisfied that the Sierfelds have standing to appeal.
That said, we now address the Sierfelds' contentions that: (1) the terms "resident" and "household" in the policies are ambiguous and must be construed against Allstate in favor of extending coverage; (2) the judge erred in failing to find that the parties' intent that plaintiff's stay was not permanent was the determining factor as to whether she was a resident of her parents' household; and (3) the judge erred in finding that plaintiff was a resident of her parents' household as that term is used in the policies.
We reject the Sierfelds' contention regarding the parties' intent, and we decline to rely on cases from other jurisdictions they cite. New Jersey courts have held that "[i]ntent is . . . relevant where a relative seeks coverage after having moved away from an insured's household." Gibson v. Callaghan, 158 N.J. 662, 675, 730 A.2d 1278 (1999); see also Crossfield v. Phoenix, 77 N.J.Super. 476, 479, 187 A.2d 20 (App.Div.1962). However, no New Jersey court has held, and we decline to hold, that in order for a person to be a "resident" of a "household," that person must intend to make the household his or her permanent residence or domicile. Rather, we focus on whether the words "resident" and "household" are ambiguous as used in the policies, and on whether the facts of this case establish that plaintiff was a resident of her parents' household at the time of the dog bite.
The court's interpretation of an insurance contract is a determination of law. Sealed Air Corp. v. Royal Indem. Co., 404 N.J.Super. 363, 375, 961 A.2d 1195 (App.Div.), certif. denied, 196 N.J. 601, 960 A.2d 396 (2008). We afford no special deference to the trial court's interpretation of the law and the legal consequences that flow from the established facts. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378, 658 A.2d 1230 (1995). Accordingly, we review the trial court's interpretation of the policies de novo. Sealed Air Corp., supra, 404 N.J.Super. at 375, 961 A.2d 1195.
Insurance policies are contracts of adhesion, Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537, 582 A.2d 1257 (1990), and as such they should be "construed liberally in [the insured's] favor." Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 482, 170 A.2d 22 (1961). However,
[l]iberal rules of construction of insurance policies do not sanction . . . emasculation of the clear language of the policy. Unambiguous insurance contracts are enforced in accordance with the reasonable expectations of the insured. The court should read policy provisions so as to avoid ambiguities, if the plain language of the contract permits. The court should not torture the language of the policy to create an ambiguity.
[Stiefel v. Bayly, Martin and Fay, 242 N.J.Super. 643, 651, 577 A.2d 1303 (App. Div.1990) (citations omitted).]
*1034 "[T]he words of an insurance policy are to be given their plain, ordinary meaning." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595, 775 A.2d 1262 (2001). "`In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased.'" Ibid. (quoting Gibson, supra, 158 N.J. at 670, 730 A.2d 1278). "A `genuine ambiguity' arises only `where the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage.'" Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 260, 274, 765 A.2d 195 (2001) (quoting Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 247, 405 A.2d 788 (1979)).
Applying these tenets, we review whether the words "resident" and "household" as used in the policies are ambiguous. "[W]hether a relative of a named insured is a resident of that insured's household" is fact-dependent for each case. Gibson, supra, 158 N.J. at 672, 730 A.2d 1278 (citing Sjoberg v. Rutgers Cas. Ins. Co., 260 N.J.Super. 159, 164, 615 A.2d 660, (App.Div.1992)); Miller v. United States Fidelity & Guar. Co., 127 N.J.Super. 37, 41, 316 A.2d 51 (App.Div. 1974). "That two people reside under the same roof is neither necessary nor sufficient for a finding that those people share a `household.'" Gibson, supra, 158 N.J. at 672, 730 A.2d 1278. "In determining whether there is a common household, our courts often consider whether the insured and the relative seeking coverage share a `substantially integrated family relationship.'" Id. at 673, 730 A.2d 1278 (quoting Mazzilli v. Accident & Cas. Ins. Co., 35 N.J. 1, 19, 170 A.2d 800 (1961)).
In determining whether a person is a resident of a "household," courts consider whether the person had his/her own bedroom, kept clothing and toiletries in the home, registered, insured and stored a car at the home, and performed household repairs. Id. at 673-74, 730 A.2d 1278 (citing Arents v. Gen. Accident Ins. Co., 280 N.J.Super. 423, 425-26, 655 A.2d 936 (App.Div.1995)). Courts also consider whether the parties purchased food and household goods jointly or separately, allocated homemaking and housekeeping responsibilities and dined together or independently; whether fair market value rent was charged or utilities paid; and "whether arrangements were purely economic or broader, encompassing shared companionship as well as living facilities." Fireman's Fund, supra, 270 N.J.Super. at 167, 636 A.2d 606.
We are satisfied that under the circumstances of this case, the words "resident" and "household" as used in the policies are unambiguous, and that the parties had a "substantially integrated family relationship" sufficient to make plaintiff a resident of her parents' household at the time of the dog bite. Among other things, plaintiff enjoyed a relationship with the Sierfelds as a family member; she had no rental agreement and did not pay rent or utilities or contribute to household expenses; she had no set plan to move at the time of the dog bite and could have stayed with her parents beyond the six-month period; she had common use of the bathroom, kitchen and laundry room; and her driver's license contained her parents' address, her car was insured and registered there and she received her personal mail there. Plaintiff's use of a bedroom other than her childhood bedroom, and her lack of socializing or sharing meals with her parents or rarely watching television with them does not compel a contrary conclusion.
Affirmed.
NOTES
[1] Plaintiff placed most of her furniture into storage, and stored the rest in her parents' basement or in her boyfriend's parents' garage.
[2] The Sierfelds joined in the cross-motion. Their attorney appeared at oral argument but declined to sit at counsel table or participate in oral argument. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543040/ | 997 A.2d 504 (2010)
121 Conn.App. 659
Mary BROOKS
v.
Scott BROOKS.
No. 30140.
Appellate Court of Connecticut.
Argued April 13, 2010.
Decided June 1, 2010.[*]
*506 Steven D. Ecker, Hartford, with whom, on the brief, was Alinor C. Sterling, Branford, for the appellant (defendant).
Kenneth J. Bartschi, with whom were Wesley W. Horton, Hartford, and, on the brief, David Eric Ross, Westport, for the appellee (plaintiff).
BISHOP, GRUENDEL and SCHALLER, Js.
BISHOP, J.
This marital dissolution appeal requires us to consider the correctness of the trial court's lump sum alimony order where it was expressly based on an asset valuation determined by the court through a flawed process. Because the court expressly premised its valuation of the defendant's minority stock holdings in six limited liability companies solely on the basis of the market value of real estate and cash held by those entities, less attendant mortgages, without regard to his minority shareholder status and the limitations of applicable shareholder buy and sell agreements, the lump sum alimony order cannot withstand appellate scrutiny. Accordingly, we reverse the judgment of the trial court.
The following procedural history and facts are relevant to our discussion of the issues at hand. The plaintiff, Mary Brooks, and the defendant, Scott Brooks, were married in 1993 and have one child who was twelve years old at the time of dissolution.[1] The dissolution trial took place over five days in January and February, 2008. The court heard evidence from both parties, a real estate appraiser and an accountant on behalf of the plaintiff, and several medical professionals regarding the plaintiff's health status and her employability.
The court heard evidence that the forty-eight year old plaintiff, who does not have a college degree, did not hold employment outside of the household during the course of the marriage. Although the court was not persuaded by her testimony that she suffered from Lyme disease, chronic fibromyalgia and chronic fatigue syndrome, the court found that due to her limited education and lack of work experience outside of the home, she was unlikely to ever generate substantial income. As to the claims regarding her medical condition and attendant impairments, the court concluded in sparse terms that "she is simply tired of the marriage."
The court also heard testimony that the fifty year old defendant, a college graduate, is engaged in the real estate business with his father and his brother. As to the defendant's financial condition, and in regard to the defendant's income, the plaintiff adduced evidence that the defendant receives an annual gross salary of $165,000 and, in addition, he has periodically received quarterly dividends of $29,000 and an annual bonus in the range of $3000 to $4000.[2] These payments are in addition to periodic distributions he has received on the occasion of the sale or refinancing of an asset by one or more of the limited liability corporations in which he has an interest.[3]
*507 Much of the evidence adduced at trial concerned the defendant's interests in various family businesses. The defendant holds noncontrolling interests in six closely held entities: Westfair, Inc.; Westbrook, Inc.; Brooks, Torrey & Scott, Inc.; Milford Realty Corporation; Liberty Rock Realty, LLC; and Granite National Realty, LLC.[4] The companies are engaged in either leasing, or in the case of Brooks, Torrey & Scott, Inc., leasing and managing, commercial real estate. As its principal asset, each business holds a piece of commercial real estate that is leased to various business tenants.
As to the defendant's interests in these parcels of real estate, the plaintiff offered the testimony of Patrick J. Wellspeak, a commercial real estate appraiser to value the properties owned by corporations in which the defendant had shareholdings but, significantly, not to value the defendant's interest in these entities. Wellspeak testified that he utilized the market value approach in formulating his appraisal of the real estate held by the limited liability corporations in which the defendant had an interest. Doing so, he concluded that the aggregate fair market value of the properties, as of August 23, 2006, was $61,100,000.[5] The report prepared by Well-speak and admitted into evidence indicated that his report was confined to real estate values and that "[i]t is likely that this is only the first issue to be addressed as there are issues relating to outstanding debt and the valuation of the stock which is beyond my expertise." In response to questioning by the defendant, Wellspeak reiterated that his expertise did not extend to the valuation of stock in a closely held corporation or the value of a person's interest in such a corporation. In short, the record is plain that Wellspeak testified only as to the real estate values of the properties held by the limited liability corporations in which the defendant had minority interests and he disclaimed any ability to value the defendant's shareholdings in the companies that owned the real estate he had appraised.
Also testifying at the behest of the plaintiff was David Gallagher, a certified public accountant who had provided accounting services to the parties and to the businesses in which the defendant had interests. Through Gallagher, the plaintiff introduced into evidence the parties' federal tax returns for several years and federal tax returns and financial statements for several years for the six limited liability corporations in which the defendant had shareholdings. Additionally, the plaintiff introduced a personal financial statement prepared by the Gallagher firm for the defendant as of March 1, 2005. Although none of the documents presented by the plaintiff states a fair market value for the defendant's stock in any of the businesses in which he has an interest, his financial statement posits $449,000 as the net book value of his investments in these closely held businesses as of December 31, 2004.
*508 On the defendant's financial affidavit dated January 21, 2008, he reflects the aggregate value of his investments in closely held businesses to be $408,000, part of his total gross assets valued at $1,026,947.74. In addition to his financial affidavit, the defendant produced evidence bearing on the fair market value of his stock in Brooks, Torrey & Scott, Inc., Westfair, Inc., and Westbrook, Inc., consisting of stock buyback agreements, each one of which requires any shareholder who wishes to convey his stock to first offer it to the corporation for repurchase at book value.[6] Each agreement includes a statement expressing a mutual desire to maintain family ownership of the stock in the corporation and a shared concern that the "introduction of non-family stockholders would tend to disrupt the harmonious relationships which have traditionally existed.. . ." Although these agreements, dating back to 1993, had recently been renewed, there was no evidence that their ongoing existence and effect had any connection to the pending marital dissolution action or that they were based on any factor other than the shareholders' mutual business judgments regarding the best interests of the involved corporations and their desire that the Brooks family continue to own and operate them.
In formulating its financial orders, the court determined that, based on its consideration of all of the statutory factors, "neither lifetime nor any very extended alimony is warranted." The court awarded the plaintiff, as unallocated alimony and child support, the sum of $6000 per month for a period of time not to exceed eight years, with the amount and duration not subject to modification except upon remarriage or pursuant to General Statutes § 46b-82(b). The court also awarded the plaintiff, as lump sum alimony, the sum of $1,730,446, due and payable within sixty days from the date of judgment. The court's lump sum alimony order was based on the court's finding of the value of real estate and cash held by the six limited liability corporations in which the defendant had minority stock interests and the percentage of his interest in each entity.[7] The court then ordered that the husband pay to the wife an amount equal to 15 percent of that aggregate amount.[8] Both *509 the plaintiff and the defendant sought reconsideration of the court's decision, which was denied, and the defendant timely filed this appeal challenging only the court's lump sum alimony award.
As a threshold matter, we set forth our standard of review. "An appellate court will not disturb a trial court's orders in domestic relations cases unless the court has abused its discretion or it is found that it could not reasonably conclude as it did, based on the facts presented. . . . In determining whether a trial court has abused its broad discretion in domestic relations matters, we allow every reasonable presumption in favor of the correctness of its action. . . . In reviewing the trial court's decision under [the abuse of discretion] standard, we are cognizant that [t]he issues involving financial orders are entirely interwoven. The rendering of judgment in a complicated dissolution case is a carefully crafted mosaic, each element of which may be dependent on the other." (Internal quotation marks omitted.) Gervais v. Gervais, 91 Conn.App. 840, 843-44, 882 A.2d 731, cert. denied, 276 Conn. 919, 888 A.2d 88 (2005).
"In distributing the assets of the marital estate, the court is required by [General Statutes] § 46b-81 to consider the estate of each of the parties. Implicit in this requirement is the need to consider the economic value of the parties' estates. The court need not, however, assign specific values to the parties' assets. . . . In assessing the value of the assets that comprise the marital estate, the trial court functions as the trier of fact. The trial court has the right to accept so much of the testimony . . . as [it] finds applicable.. . . [It] arrives at [its] own conclusions by weighing the opinions of the appraisers, the claims of the parties, and [its] own general knowledge of the elements going to establish value, and then employs the most appropriate method of determining valuation. . . . In selecting and applying an appropriate valuation method, the trial court has considerable discretion. . . . The trial court's findings will be overturned only if it misapplies, overlooks, or gives a wrong or improper effect to any test or consideration which it was [its] duty to regard." (Citations omitted; internal quotation marks omitted.) Bornemann v. Bornemann, 245 Conn. 508, 531-32, 752 A.2d 978 (1998).
At the outset of our analysis, we note that, as a general proposition, "the trial court need not necessarily specify a valuation method used. Nor is the court required to set forth specific factors that were considered in arriving at that determination." South Farms Associates Ltd. Partnership v. Burns, 35 Conn.App. 9, 18, 644 A.2d 940, cert. denied, 231 Conn. 912, 648 A.2d 157 (1994). Here, however, the court indicated that it was employing the fair market approach to valuation, an approach with which the defendant took no issue. The question, therefore, is not whether the court utilized a correct approach to valuation, but whether the court's analysis in using the fair market approach was clearly erroneous. In this regard, the defendant contends that the court improperly equated the value of his interests in the companies with the fair market value of the real estate held by those companies. The defendant claims, as well, that, in determining the value of *510 his interests in the corporations, the court ignored three critical factors, namely: the lack of a ready market for closely held interests; his lack of control of the business entities; and the restrictions on his ability to transfer his shares as evidenced by the buyback agreements pertaining to three of the businesses. We agree.
An assessment of fair market value requires the fact finder to determine "the price that would probably result from fair negotiations between a willing seller and a willing buyer, taking into account all the factors, including the highest and best or most advantageous use, weighing and evaluating the circumstances, the evidence, the opinions expressed by the witnesses and considering the use to which the premises have been devoted and which may have enhanced its value." (Internal quotation marks omitted.) Commissioner of Transportation v. Towpath Associates, 255 Conn. 529, 556-57, 767 A.2d 1169 (2001). Our case law instructs us to be broadly inclusive when considering the admissibility of factors that reasonably might influence a property's fair market value. See Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, 272 Conn. 14, 32, 861 A.2d 473 (2004). "Fair market value . . . involves a question of fact. . . . As with other questions of fact, unless the determination by the trial court is clearly erroneous, it must stand." (Citations omitted.) Turgeon v. Turgeon, 190 Conn. 269, 275-76, 460 A.2d 1260 (1983).
Here, the record reflects that the court made no assessment of the marketability of the defendant's interest in any of the corporations in which he has a minority interest. Rather, the court expressly arrived at its determination simply by multiplying the value of each corporation by the percentage of the defendant's interest and positing the result as the fair market value of his shareholdings. Although the court has leeway in determining the value of assets in a marital dissolution, a market value approach to valuation, nevertheless, necessarily requires an examination of the marketability of the asset being appraised. Accordingly, in determining the fair market value of the defendant's stock interests, the court was required to examine and draw some conclusions regarding the amount a willing buyer would and could pay for the defendant's shares in the various family companies.[9] The record in this instance reflects that the court made no attempt to conduct such an analysis and rejected the notion that the defendant's interests were limited to book value simply on the basis that to do so would "simply not do justice." Nevertheless, evidence adduced at trial shows that the defendant had only minority interests in each of the six entities and the buyback agreements of three of those entities restrict the owner of *511 the stock from selling, assigning or in any way transferring that stock without first offering it to the company to be bought back at book value. In its decision, the court made no mention of the marketability of the defendant's shares or the degree of control he maintains by virtue of his minority interests in the companies. Nor did the court note the restrictions on the defendant's ability to transfer his interests. Thus, although the court was within its discretion to apply the market value approach in valuing the defendant's interest in the various companies, the court's flawed analysis resulted in clearly erroneous valuations.[10]
In reaching our conclusion, we recognize that when a party neglects to provide to the court information regarding the value of his or her assets, that person cannot later complain about the court's valuation. See Bornemann v. Bornemann, supra, 245 Conn. at 535-36, 752 A.2d 978. But that teaching is not implicated in this case. Here, the defendant provided the court with three shareholder agreements that require him to sell his stock back to the respective corporations at book value. Importantly, there was no evidence that those agreements were executed for purposes of the divorce proceedings or that they were otherwise the product of collusion or fraud on the plaintiff. Rather, the evidence regarding these agreements showed that they were simply long-standing business arrangements meant to keep the businesses in family hands. Additionally, throughout the plaintiff's presentation of evidence, the defendant vigorously objected to the plaintiff's introduction of the appraisals of the real estate as evidence of the value of his shares in the businesses pointing out to the court that the value of real estate held by the corporations could not simply be equated with the value of each corporation and that the defendant's interest in each corporation could not be determined simply by employing a mathematical formula.[11] Indeed, at the outset of his testimony, Wellspeak, the plaintiff's real estate appraiser, stated that he was not attempting to value the defendant's stock interest, *512 commenting instead that he was performing merely the initial step in the valuation and that there would have to be more analysis to determine the value of the defendant's minority share interest.[12] Before the close of the plaintiff's case, the defendant again brought to the court's attention his view that the plaintiff had not established evidence of the value of his shareholdings and indicated that he was not going to present his expert on valuation because, he believed, the plaintiff had presented no valuation testimony for him to rebut. Upon hearing this, and in response to the plaintiff's concerns that the defendant was not going to present valuation testimony beyond the terms of the buyback agreements, the court offered the plaintiff a reasonable opportunity to call the defendant's rebuttal witness herself at a later date in order to put on evidence of the value of the defendant's minority interests. From the record, it is plain that the plaintiff never took that opportunity.
Although the court has a broad latitude in determining both the method of asset evaluation to employ and the manner in which the court conducts its evaluation, the court is, nevertheless, required to follow some reasonable path in arriving at its asset value determination. Where, as here, the court employs a patently erroneous methodology, its results cannot stand. On the basis of the foregoing, we conclude that the court's asset valuation was clearly erroneous and therefore, its lump sum alimony award was an abuse of discretion. As noted previously, financial orders in dissolution proceedings have been characterized as "resembling a mosaic, in which all the various financial components are carefully interwoven with one another." (Internal quotation marks omitted.) Finan v. Finan, 287 Conn. 491, 509, 949 A.2d 468 (2008). Because it is uncertain whether the court's financial awards will remain intact after reconsidering the issue of its lump sum alimony award consistent with this opinion today, the entirety of the mosaic must be refashioned. See Gershman v. Gershman, 286 Conn. 341, 351-52, 943 A.2d 1091 (2008). Accordingly, a new trial on all financial issues is required. See id., at 352, 943 A.2d 1091.
The judgment is reversed and the case is remanded for a new trial.
In this opinion the other judges concurred.
NOTES
[*] June 1, 2010, the date that this decision was released as a slip opinion, is the operative date for all substantive and procedural purposes.
[1] During the course of the hearing, the parties presented a detailed shared parenting plan that the court adopted. The parenting plan is not at issue on appeal.
[2] The defendant's tax returns, which take into account the defendant's income from his employment as a property manager, in addition to taxable interest, dividends and capital gains, reflect the defendant's annual income as follows: 2003, $383,954; 2004, $496,350; 2005, $270,423; and 2006, $268,119.
[3] The defendant also has a one-third vested remainder interest in a testamentary trust in which his father is the lifetime income beneficiary. As to the trust, there was undisputed evidence that the defendant had received an advance of $750,000 against his expectancy in this trust and that the distribution of these funds had been utilized to purchase the family home that the parties agreed would be assigned to the plaintiff.
[4] At the time of trial, the defendant had a 23.33 percent interest in Westfair, Inc.; a 24.17 percent interest in Westbrook, Inc.; a 23.68 percent interest in Brooks, Torrey & Scott, Inc.; a 33.33 percent interest in Milford Realty Corporation; a 25.5 percent interest in Granite National Realty, LLC; and a 25 percent interest in Liberty Rock Realty, LLC.
[5] As of August 23, 2006, Wellspeak determined the fair market value of the various real estate holdings as follows: by Westfair, Inc., $20.5 million; by Westbrook, Inc., $20 million; by Brooks, Torrey & Scott, Inc., $1.6 million; by Liberty Rock Realty, LLC, $12 million; by Milford Realty Corporation, $2 million; and by Granite National Realty, LLC, $5 million.
[6] Although the buyback agreements of only three of the entities were introduced into evidence, it is noteworthy that the aggregate value of the real estate of those three properties is in excess of $40 million.
[7] In formulating its order, the court credited Wellspeak's testimony as to the value of the real estate as of January 1, 2008, and the cash and other assets and debts of each corporation as of December 31, 2006. From this information, and aware of the percentage of stock owned by the defendant in each corporation, the court made a calculation of the value of the defendant's ownership interests by multiplying his percentage interest in each corporation by the value of each corporation. Through this process, the court calculated the fair market value of Westfair, Inc., to be $19,497,610, and then multiplied that value by the defendant's share in the corporation, 23.33 percent, to come up with $4,548,792.41 as the value of the defendant's interest in that company. In the same manner, the court determined the defendant's interests in the remaining entities as follows: Westbrook, Inc., $5,013,330.52; Brooks, Torrey & Scott, Inc., $717,977.60; Liberty Rock Realty, LLC, $680,400; Milford Realty Corporation, $70,907.24; and Granite National Realty, LLC, $504,900.
[8] In its memorandum of decision, the court stated: "The division shall be based on the appraisal and six schedules set forth by the wife." Later, pursuant to a motion for articulation, the court issued a "supplement" to its judgment, in which it stated: "The above captioned judgment dated May 27, 2008 (page 5, line 11) is supplemented by including a list of the schedules referenced therein by the attached list marked `Exhibit B.'" Exhibit B is comprised of a listing of the entities in which the defendant has an interest. Next to each entity is a valuation that is based on Wellspeak's real estate appraisal of each property, less the mortgage indebtedness regarding each property plus the value of the cash in each corporation. Although the dates of valuation of real estate, cash in the corporations and mortgage indebtedness are different, the defendant makes no distinct claim that combining them for purposes of ascertaining the value of each corporation was erroneous. Rather, the defendant claims that the court erroneously determined that the value of his stock interest in each corporation could reasonably be determined by this method.
[9] Internal Revenue Service ruling 59-60, which was cited by the Turgeon court, provides guidelines for ascertaining the fair market value of closely held corporations. Under Revenue Ruling 59-60, "[t]he following factors, although not all-inclusive are fundamental and require careful analysis in each case [in determining fair market value of a closely held corporation]:
"(a) The nature of the business and the history of the enterprise from its inception.
"(b) The economic outlook in general and the condition and outlook of the specific industry in particular.
"(c) The book value of the stock and the financial condition of the business.
"(d) The earning capacity of the company.
"(e) The dividend-paying capacity.
"(f) Whether or not the enterprise has goodwill or other intangible value.
"(g) Sales of the stock and the size of the block of stock to be valued.
"(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter." Revenue Ruling 59-60 § 4 (26 C.F.R. § 20.2031-2).
[10] We recognize that, in a marital dissolution action, the court is not required to value every asset. See Bornemann v. Bornemann, supra, 245 Conn. at 531, 752 A.2d 978. Our Supreme Court, however, has noted that "although not expressly required by statute, a trial court, when utilizing a method to ascertain the value of a [deferred benefit], should reach that value on the record. Casting the judgment in specific amounts will make the result more comprehensible for the litigants and will facilitate appellate review as often as such review may become necessary." (Internal quotation marks omitted.) Krafick v. Krafick, 234 Conn. 783, 804, 663 A.2d 365 (1995). Here, the court did reach conclusions regarding the value of the defendant's business interests. Because the court did ascribe values to the defendant's shares in each of the six entities, decisional law suggesting that the court need not posit such values is not an aid to our review.
We note, as well, that the court could have fashioned its orders on many other relevant factors such as the evidence that the defendant had received past disbursements from his business interests, that there was some history of loans from corporation to corporation or the defendant's residuary interest in a trust in which he had already received an advance and about which the court heard valuation testimony. But, because the court expressly based its order on its evaluation of the market value of the defendant's shareholdings, we cannot rely on any of these alternate routes to an alimony order to uphold the order entered in this instance. In short, where the court has expressly stated the manner in which it arrived at its orders and the record reflects that the court's analysis was flawed, the judgment may not be saved by reference to alternate analyses the court could have employed, but clearly did not.
[11] Indeed, the record reflects the court's awareness of this deficiency in the plaintiff's proof.
[12] In fact, the plaintiff did not contend that she had established valuation of the defendant's interests. She introduced real estate values, then financial statements to show mortgages and extra cash and then multiplied by the defendant's percentage interest. The plaintiff never claimed this was a proper valuation but invited the court to make a just award. The plaintiff never said the court could arrive at a value by this mathematics formula but the court patently did so. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644769/ | 4 So. 3d 1227 (2008)
SAFFORD
v.
STATE.
No. 1D07-2250.
District Court of Appeal Florida, First District.
June 25, 2008.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543244/ | 39 F.2d 684 (1930)
CHICAGO PNEUMATIC TOOL CO.
v.
BLACK & DECKER MFG. CO.
Patent Appeal No. 2300.
Court of Customs and Patent Appeals.
April 10, 1930.
Ira L. Nickerson, of New York City, for appellant.
John E. Cross, of Washington, D. C., for appellee.
Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges.
GARRETT, Associate Judge.
This proceeding involves a petition by appellee for the cancellation of the trade-mark "Hicycle" registered by appellant under the Trade-Mark Act of February 20, 1905 (15 USCA §§ 81-109 as amended), in the United States Patent Office, the date of its registration being June 30, 1925, No. 200,387.
Appellant is a New Jersey corporation engaged largely in the manufacture of portable power tools, including electrical tools and devices. Petitioner is a Maryland corporation similarly engaged.
The history of the proceedings appears to be that appellant learned that appellee was using the words "High Cycle Tool" upon the name plates of certain of the tools of the latter's manufacture. These words were not registered, nor had appellee offered to register them. Upon obtaining the information as to their use by appellee, appellant on August 25, 1926, gave notice to the former to cease immediately the use of "`High Cycle' and of all other words or expressions identical with or closely simulating the registered trade-mark of Chicago Pneumatic Tool Company, which may deceive or confuse the public as to the origin of the goods."
The Black & Decker Manufacturing Company thereupon filed its petition in the Patent Office, praying that the certificate of registration of the word "Hicycle" to Chicago Pneumatic Tool Company be canceled.
Petitioner alleged that the word "Hicycle" was a misspelled descriptive word, not entitled to registration for use on the goods for which it was registered, that it was not in any sense a trade-mark by which "the goods of the registrant may be distinguished from other goods of the same class" and that it was not entitled to registration under section 5 of the Trade-Mark Act (15 USCA § 85). It further alleged that it deemed itself to be injured and damaged.
*685 Appellant admits that its registered trade-mark "Hicycle" is formed "by combining and phonetically spelling the words `High Cycle,'" but denies that it is descriptive of its goods or of the character and quality thereof; insists that it was and is entitled to the registration, and denies that petitioner has been injured in its business as alleged.
The Examiner of Interferences sustained the petition, and upon appeal his decision was affirmed by the Commissioner. From this latter decision the matter is brought before us by further appeal.
Other allegations and assertions contained in the petition and answer are omitted from our statement because not material to the issue upon which the case must turn, viz. Is the word "Hicycle" a descriptive word, as applied to the goods involved, and so barred by the statute? It is conceded that the goods to which the respective words are applied are of the same descriptive properties, practically identical in some instances, and that "Hicycle" is a phonetic spelling of a combination of the two words "High" and "Cycle."
The pertinent portion of section 5 of the 1905 Trade-Mark Act (15 USCA § 85) reads:
"Provided, That no mark which consists merely * * * in words * * * which are descriptive of the goods with which they are used, or of the character or quality of such goods, * * * shall be registered under the terms of this subdivision of this chapter."
The goods upon which the respective words at issue are applied consists of articles such as portable drills, screwdrivers, socket wrenches, and grinding machines, so manufactured as to contain electrically operated motors for motivating the tool part, or machine. Appellant claims use of its word on the generator sets also.
The particular tools to which the respective words are applied are tools operating at a frequency in excess of 60 cycles per second.
In electrical nomenclature, a cycle, as defined by the Examiner of Interferences, who seems to have followed the definition given in a work on General Physics filed as one of petitioner's exhibits in the case, is that it "consists of two successive reversals of directions of the electromotive force or current."
Funk & Wagnalls' New Standard Dictionary defines "cycle":
"Elec. A full period of an alternating current, beginning at the zero line, going to maximum in one sense, returning to zero, going to maximum in the other sense, and then returning to zero."
What is known as "frequency" depends upon the number of cycles per second; that is, the "number of cycles is called the frequency."
To express the matter in common parlance, as best we can, we understand that the number of revolutions or the speed of operation of the tool, say of the drill, in these "Hicycle" and "High Cycle" devices, is dependent upon the frequency of the alternations of the electric current in the motors which constitute their propelling power, and this frequency depends upon the number of cycles per second that is, upon the number of times per second which the current makes two successive reversals of direction. The electromotive force passing from the starting point to maximum in one sense, thence back by the starting point to maximum in another sense, and thence back to starting point, constitutes a cycle, and the number of cycles per second determines "frequency," which in turn governs the number of revolutions or the speed of the tool as it operates.
Appellant seems to have been first in the field in the manufacture of the particular articles to which the respective words are applied. It began to place its goods upon the market in the latter part of 1924 or early in 1925. Appellee began to place drills on the market in February, 1926, and other classes in March, April, and July, 1926, respectively. In each instance the actual development of the tools in their respective plants had preceded these respective dates; appellant being the earlier in development as well as in marketing.
Much testimony was taken in the case by both parties; portions of it being quite technical in character and dealing with the meaning of electrical terms and phraseology. Many exhibits were filed, and the case was ably presented by both briefs and oral arguments.
To review the evidence in minute detail would unduly lengthen this opinion. It has received our very careful study and analysis.
We think it may be taken as conceded that the phonetically spelled word "Hicycle" has whatever meaning attaches to the two words "High Cycle." If the phrase is descriptive, then the word is equally so and vice versa. In other words, if appellant was *686 entitled to register "Hicycle" it might have registered "High Cycle" also; they mean the same thing, and "Hicycle" is not a coined word except as it is phonetically spelled. We therefore treat the word and the phrase as being synonymous.
Appellant's insistence is that the evidence of the experts in the electrical art who were called shows that "High Cycle" is not synonymous with "High Frequency" and that the phrase from which it made its word is not, when "High" and "Cycle" are considered in the light of their respective definitions, descriptive of its goods or their qualities and characteristics. It insists that "not a single instance is in evidence by Petitioner of the use of the two words `high' and `cycle' together for any purpose, in any dictionaries, textbooks or technical literature"; that the testimony of petitioner's witnesses is contradictory; that there is some testimony that the words mean "high frequency," other testimony that they mean "high speed," and still other testimony that they indicate "danger"; and, the burden being upon appellee, it must clearly establish that they did mean one of these, or have some meaning, in order to prevail.
As we understand appellant's contention, it is that the words in fact have no meaning in the art in which it is engaged as applied to the tools and products to which it is applying "Hicycle," or at least that they had no descriptive meaning "at the time of the adoption of the mark" (italics quoted), and that, if they have any such meaning now, it results wholly from appellant's use, advertising, and explanations of them; that its mark was a word arbitrarily chosen after much thought and investigation by its officials, and with the feeling of certainty that, considering the true meaning of the words of which it is composed, it did not constitute a descriptive phrase, as applied to their products.
Appellant has produced technical testimony, and, by cross-examination of some of petitioner's witnesses, secured admissions which furnish ground for making the argument as we have tried to state it. It is not satisfactorily shown that, prior to its use of the registered mark, the words "High" and "Cycle" appeared together in any publication relating to the electrical art, or were used together in the electrical trade generally.
On the other hand, however, appellee produced testimony also by technical men, and likewise, upon cross-examination, drew admissions from one or more of the witnesses of appellant which strongly indicate that there is such a degree of similarity in meaning between "High Frequency" and "High Cycle" as to justify the contention that among purchasers of the articles, and generally among those not highly educated in electrical terms, nor skilled in the details of the electrical art, the phrases, as applied to the goods in question, are synonymous in meaning. This evidence is quite strong, we think, in indicating both a technical and common understanding of the meaning of the words which fully comports with descriptiveness.
Concededly, the words "High Frequency" would be descriptive applied to the tools here involved, and could not be registered as a trade-mark for use upon them. According to all the expert testimony in this record, the "Cycle" has a direct relation to the "frequency," at least to the extent that frequency depends upon the number of cycles per second.
The Commissioner of Patents said:
"The publication `High-Speed Motors in the Wood-Working Industry' by the Westinghouse Electric and Manufacturing Company, reprinted from a publication of May, 1922, in `The Wood-Worker' seems conclusive that the trade understood the words `high cycle' to indicate an electrically driven rotary tool or device whose speed is dependent upon the frequency or the number of cycles per second of the alternating current by which it is driven."
The Examiner of Interferences, an expert of the Patent Office, had, in his decision, made a similar finding from this publication which is one of petitioner's exhibits in the case.
Appellant insists these findings were erroneous because the publication does not show the words "High" and "Cycle" to be used together. With this contention we cannot agree. It is not necessary that they should have been so specifically arranged to lead to the conclusion which the tribunals of the Patent Office drew, and we agree with the latter.
The word "High" has long had a use in connection with various words incident to the electrical art, and, when so used, as well as when used in common parlance, it has a well-understood meaning. The Examiner said:
"Such expression as high frequency, high current, high voltage, high tension, high resistance, etc., are common in the electrical field and convey the meaning that the phenomena or condition in connection with *687 which it is used is more than, or above, the customary or average."
The word "Cycle" has long had its place in electrical nomenclature. When the word "High" is applied to it bearing in mind the meaning of "High" when used in the electrical field, it would surely convey the meaning that the cycle phenomena "is more than, or above, the customary or average."
As has been stated, the electrical tools involved are manufactured to operate at a speed which is occasioned by a frequency produced as the effect of alternations that constitute more than 60 cycles per second which theretofore had been the ordinary cycle maximum in the electrical tool art.
It seems to us that to hold with appellant in this case would require the application of a higher degree of technical refinement than we think the Trade-Mark Registration Act contemplates. We cannot doubt that whatever distinction those having highly specialized learning as to electrical technique might be able to draw by strict construction of electrical terms, the phrase "High Cycle," as applied to these motor driven tools, does convey to the public generally a definite meaning distinctly descriptive of the tools. The relation between the cycle of the current and the revolution or operation of the tool or mechanism is too direct and immediate, in our view, to admit of any other conclusion. We think it is more than suggestive and amounts to descriptiveness.
Careful thought has been given to appellant's contention that the matter must be determined upon the meaning, or lack of meaning, in the word registered at the time of its registration, and that it may not be decided upon the meaning it has come to have as a result of appellant's teachings.
We do not think this argument applicable here, because, while even if it be conceded that the words had not been used together prior to its appropriating them, nevertheless their meaning as used separately in the electrical art was the same then as it is now, and their descriptive character appeared and became fixed and manifest when they were brought together.
Numerous authorities support the proposition that words descriptive of the use and characteristics of goods are not the proper subject for technical trade-mark registration. Among others are Standard Paint Co. v. Trinidad Asphalt Co., 220 U.S. 446, 31 S. Ct. 456, 55 L. Ed. 536; William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 44 S. Ct. 615, 68 L. Ed. 1161; In re Packard Motor Car Co., 46 Ohio App. D. C. 555; Ex parte Cutler Hammer Mfg. Co., 354 O. G. 499.
Both tribunals of the Patent Office concurred in the decision in this case. Quite naturally and properly this court in all cases gives great weight to their findings, and this is especially true upon questions so technical as that here involved of which the Examiner in particular is charged with and possessed a high degree of special knowledge.
We find no error in the decisions, and that of the Commissioner is affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543234/ | 39 F.2d 403 (1930)
LOUISVILLE & N. R. CO.
v.
ANDERSON.
No. 5814.
Circuit Court of Appeals, Fifth Circuit.
April 7, 1930.
*404 Francis B. Carter, of Pensacola, Fla. (Carter & Yonge, of Pensacola, Fla., on the brief), for appellant.
Philip D. Beall and John M. Coe, both of Pensacola, Fla., for appellee.
Before BRYAN and FOSTER, Circuit Judges, and GRUBB, District Judge.
GRUBB, District Judge.
This is an appeal from a judgment of the District Court of the United States for the Northern District of Florida in favor of plaintiff (appellee) and against the defendant (appellant) for damages for a personal injury, claimed to have been received by him through the negligence of the defendant and without fault on his part. The defendant asked a directed verdict in its favor, asserting a want of negligence on its part and contributory negligence as a matter of law upon the plaintiff's part. The refusal of the District Court to direct a verdict is the only matter complained of here.
The plaintiff was driving an automobile in the city of Pensacola in the early morning, when it was dark and foggy, and, while driving so, accidentally strayed from a public street onto premises occupied by the defendant, and drove into a track that was depressed below the adjoining surface of the ground about two feet, and he and his automobile were injured. The plaintiff was driving east along Belmont street, and, after reaching the intersection of Belmont and Tarragona streets, continued eastward a distance of fifty-seven feet beyond the east line of Tarragona street, which was a north and south street, where the sunken track was. Belmont street did not extend beyond the east line of Tarragona street, so far as being an improved and traveled street. The defendant had for many years occupied the property, which Belmont street would have crossed if extended east of its terminus, first with a structure used as an express office, and, after it was removed, with tracks. The depressed track was built in 1925, and was used for unloading automobiles from railroad cars. There was a cement platform adjoining the sunken track on the west twelve feet wide, and then a black cinder platform extended west to the street line of Tarragona street, a distance of forty-four feet. East of the space occupied by defendant's tracks Belmont street was used for travel. There was a gap between Tarragona street and this point, where it could not be traveled owing to the presence of the tracks of the defendant. There was a street light at the intersection of Belmont street with the north and south street that crossed it east of all the tracks. The intersection of Belmont street and Tarragona street was paved with black dirt. Belmont street west of Tarragona street was a paved street. The plaintiff testified that he was unfamiliar with the location, did not know that Belmont street did not extend east beyond Tarragona street, did not know that there was a depressed track where Belmont street, if extended east, would have been, and that, as he approached the depressed track, he did not see anything to indicate that Belmont street did not extend east of Tarragona, or that there were any railroad tracks where the extended street would have been. The right of the defendant to put its depressed track where it was is of no importance, since it is not disputed there had never been a traveled street where Belmont street, if extended, would have crossed the depressed track.
The defendant was not shown to have been a trespasser, and is to be treated as the *405 owner of the land on which the sunken track was. Its negligence as owner depends upon the existence of a duty on its part to place warning lights or barriers at the end of Belmont street to prevent persons traveling east on Belmont street from proceeding east of Tarragona street under the mistaken idea that Belmont street extended so far. This duty is not confined to the rightful ownership of the premises, but extends also to the actual and peaceable occupancy of them. There is a duty upon the occupant of premises abutting on a highway or street to refrain from creating near the road unguarded excavations which endanger travelers along the road. 13 Rawle C. L. § 347. The English cases limit the liability of the occupant to an excavation "substantially adjoining the way," and the Massachusetts courts follow the English rule. Binks v. South Yorkshire Ry. Co., 122 Eng. Rep. Reprint 92; Richardson v. Whittier (Mass.) 164 N.E. 384. The case of Overton's Adm'x v. City of Louisville, 221 Ky. 289, 298 S.W. 968, holds the landowner exempt from liability where the danger is a natural one and not created by him. Many cases hold that the test is not the exact distance from the highway of the excavation, but the degree of danger it presents to a traveler upon the highway in the exercise of due care. If it is far enough from the highway not to endanger one who remains upon it, then liability can be imposed upon the occupant of the premises only if he creates a deceptive appearance of the situation, such as would justify a reasonably prudent man in straying from the highway, believing himself to be still upon it. If the occupant might reasonably have anticipated, as a prudent person, that a reasonably prudent traveler, owing to the appearance of the situation by him created, might stray from the highway in the belief that he was still on it and fall into the excavation, liability would ensue. Thompson's Negligence, § 6035; Norwich v. Breed, 30 Conn. 535, 547; Crogan v. Schiele, 53 Conn. 186, 1 A. 899, 5 A. 673, 55 Am. Rep. 88; St. L. & S. F. R. R. Co. v. Ray, 65 Okl. 214, 165 P. 129, L. R. A. 1918A, 843; Corcoran v. City of New York, 188 N.Y. 131, 80 N.E. 660.
The landowner might now be held to reasonably anticipate danger to the drivers of automobiles that he could not have reasonably anticipated to pedestrians or those horse-drawn vehicles of the days when the English cases were decided. We adhere to the rule of the cases which make the degree of danger, rather than an arbitrary distance, the test of duty. In this case there was evidence introduced by plaintiff tending to show, and from which the jury might have inferred, that the defendant had created on the lands it was occupying an appearance that a reasonably prudent driver of an automobile on a dark, foggy night might have been misled into believing that Belmont street extended beyond Tarragona street to and beyond the point where the defendant had constructed its sunken track, and that the defendant should have reasonably anticipated the happening of such an occurrence. In that event, a duty would arise on its part to guard against it by the use of warnings, lights, or barriers, and the failure to do so, which is conceded, would be negligence. The issue of defendant's negligence was properly submitted by the District Judge to the jury.
Appellant contends that the plaintiff was guilty of contributory negligence, as a matter of law, in straying from Belmont street onto defendant's property and driving into the depressed track. In view of the evidence tending to show the appearance of the continuance of Belmont street, especially on a dark and foggy night, that the plaintiff was unfamiliar with the locality, and did not know of the sunken track, and that the elevation of his lights might have prevented his seeing the depression as he approached it, until it was too late to stop, we think that reasonable minds might differ as to whether the plaintiff did not exercise due care, and that the District Judge properly submitted this issue to the jury. If the plaintiff was justifiably misled by an appearance of a continuance of Belmont street, negligently created by the defendant, his status while on defendant's land was not that of a licensee or trespasser, but that of a traveler on a highway, as against the defendant.
Finding neither of the errors assigned well taken, the judgment of the District Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542934/ | 997 A.2d 701 (2010)
Candace FRENCH, Appellant,
v.
Louis LEVITT, M.D., et al., Appellees.
No. 09-CV-94.
District of Columbia Court of Appeals.
Argued April 29, 2010.
Decided July 8, 2010.
*702 Anitha Johnson, Hyattsville, MD, for appellant.
Alfred F. Belcuore, Washington, DC, for appellee Louis Levitt, M.D.
Andrew J. Spence, with whom Stephen L. Altman, Fairfax, VA, was on the brief for appellees Paul G. Ruff, IV, M.D. and Metropolitan Institute for Plastic Surgery, PLLC.
Before WASHINGTON, Chief Judge, THOMPSON, Associate Judge, and BELSON, Senior Judge.
BELSON, Senior Judge:
Appellant Candace French sued appellees Dr. Louis Levitt, M.D., Orthopedic Medicine & Surgery/Drs. Levitt, Danziger and Scheer, Dr. Paul Ruff, M.D., and Metropolitan Institute for Plastic Surgery, PLLC, for damages in Superior Court, alleging that the appellees had failed to diagnose a bone infection in her left foot following an ankle fusion performed in May 2004 by Dr. Levitt. Appellant alleged that the failure of the appellees to diagnose her condition required her to receive a below-the-knee amputation in January 2005. Shortly before the trial date, appellant acknowledged that she would be unable to meet her burden of proof because she did not have a medical expert. The court then granted appellees' motion to dismiss. Appellant brings this appeal from the order granting dismissal. We affirm.
I.
In May 2007, appellant identified Dr. Sheldon Stein, M.D., and Dr. Elliot Heller, M.D., as her expert witnesses, and later represented that both experts would testify that both Dr. Levitt and Dr. Ruff had breached the standard of care and proximately caused appellant's injuries. The parties agreed in March 2008 to a trial date of January 26, 2009. Approximately five weeks before trial, on December 17, 2008, appellant filed an "Emergency Motion to Allow for Additional Limited Discovery" in which she asked the court to allow appellant to designate an expert to replace Dr. Stein because he would "not be able to fulfill his duties as Plaintiff's expert." Counsel for appellant stated that Dr. Stein's privileges at the hospital in Guam, where he had recently re-located, *703 "may have ... been suspended," that Dr. Stein had moved to Israel, and "that he may not be available to appear" at trial. In addition, appellant's counsel stated, "it appears that the U.S. Department of Justice recently filed a civil action against Dr. Stein alleging fraud and/or tax evasion." Initially, the motion was denied because of a procedural defect, but was refiled on January 7, 2008. At a scheduled pretrial conference on January 8, 2009, the court denied appellant's emergency motion. At this conference, appellant also withdrew Dr. Heller, her other expert medical witness. During a conference call that occurred four days later, counsel for appellant conceded that "we are unable to meet our burden of proof because we don't have an expert to go forward on the case." The court then granted the defendants' motion to dismiss. Appellant brought this timely appeal.
II.
Appellant argues that the trial court abused its discretion by denying what she styled as her motion for "additional limited discovery," which was in substance a motion to designate a new expert and for a continuance, and also erred by subsequently granting appellees' motion to dismiss. Appellant contends that the court did not properly apply the factors set forth by this court in Weiner v. Kneller, 557 A.2d 1306, 1311-12 (D.C.1989), that must be considered when the designation of additional expert testimony is requested, and that the court erred in denying her motion, as it was based on good cause and excusable neglect.[1] "When determining the propriety of a decision on a discovery motion the standard of review is deferential, and in the absence of a showing of abuse of discretion or legal error, it is this court's duty to sustain the motions judge's disposition." Dada v. Children's Nat'l Med. Ctr., 763 A.2d 1113, 1115 (D.C.2000) [Dada II] (internal quotation marks and citations omitted).
We preface our analysis of the trial court's consideration of the Weiner factors with the observation that after Weiner was decided, this court took note of changes in Superior Court civil rules that were adopted to reduce delay in civil trials that were prejudicial not only to the opposing party, but also to the administration of justice. See Abell v. Wang, 697 A.2d 796, 800 (D.C.1997). We later observed in Dada v. Children's Nat'l Med. Ctr., 715 A.2d 904, 910 (D.C.1998) [Dada I], quoting Abell, supra, 697 A.2d at 802, that "although `the trial court still must consider the "totality of the circumstances" of each case,' the more rigorous and formal track on which civil cases are now placed allows `the trial court [to] accord greater weight than previously allowed for prejudice caused by delay to the overall administration of justice.'"
The record reflects that the court undertook an in-depth and reasoned analysis of the Weiner factors. Before analyzing the five Weiner factors and ruling on appellant's motion, the court listed the factors, referring explicitly to the first three, *704 and more generally to the last two. The trial court proceeded to weigh the prejudice to both parties, emphasizing the fact that appellant had known since October 2008 that there were problems with Dr. Stein, that the defendants had incurred expenses related to this specific expert and would have to incur additional expenses if the trial were to be delayed, that appellant was entitled to her day in court, that Drs. Levitt and Ruff had a right to get to trial expeditiously, and that appellant's motion came only a few weeks before the long-scheduled trial date.
The record reflects that Drs. Levitt and Ruff had already deposed Dr. Stein and had conducted a de bene esse deposition of a defense expert, Dr. George Cierny, M.D., who specifically rebutted Dr. Stein's theories of liability and opinions. In light of this trial preparation by appellees and the appellant's inability to proffer a new expert to the court approximately five weeks before trial, granting appellant's motion would have required the appellees to depose again their own witness or witnesses, would have required both appellee physicians to schedule additional time and expense for a delayed trial, and would potentially subject them to different allegations of negligence at a late stage of the litigation. See Young v. Interstate Hotels & Resorts, 906 A.2d 857, 862-64 (D.C.2006) (argument that prejudice to opposing party could be cured by allowing additional time for deposition of "an as yet unnamed expert witness" rejected where motion to amend pretrial order was filed three months prior to trial). Thus, as the trial court concluded, Drs. Levitt and Ruff would suffer considerable prejudice if the court were to grant the appellant's motion.
The trial court then considered "the reasonableness of the party's explanation for failing to meet the deadline, as well as any pattern of noncompliance." Dada I, supra, 715 A.2d at 910. The court was not convinced by appellant's explanation that Dr. Stein had suddenly become unresponsive and unreliable, since counsel had been apprised of issues relating to Dr. Stein months before she filed her motion with the court.[2] In addition, the court noted that Dr. Stein had testified at his deposition that he does not testify at trials, but rather prefers to give trial testimony by de bene esse deposition. The record makes clear that appellant had ample notice to retain a suitable expert in a timely manner since she had known, or should have known, of Dr. Stein's statement to the defense, his recent but short-lived relocation to distant Guam, and his legal troubles.
The court also mentioned that "[t]here have been numerous motions in the review of the case by the defense to get the plaintiff to comply with certain discovery obligations and with the rules." See Young, supra, 906 A.2d at 863 ("the record makes clear that appellant was not diligent in managing this litigation by ascertaining his theory of the case and identifying an appropriate expert witness who could testify"). In addition to late filings by appellant, the record reflects that the court ordered appellant to provide (1) authorization to obtain appellant's medical information from her treating physician, (2) information about Dr. Stein's research *705 and experience, (3) information about the opinions of appellant's expert economist, and (4) an opportunity for the defendants to re-depose appellant herself. These orders were met with inaction by appellant without adequate explanations for her failure to comply. Indeed, after the final pretrial conference in October 2008, the trial judge ruled that appellant's expert economist would not be allowed to testify because appellant had failed to supply the basis for his opinions. See Dada II, supra, 763 A.2d at 1116 (Appellant's "neglect of scheduling order deadlines and court rules, violation of Rule 26(b)(4)'s substantive requirements, and failure to communicate with, and cultivate a specific opinion from, her own expert witness, all combine to provide ample support for the trial court's decision.").
Finally, the court noted that if it were to grant a continuance and allow for appellant to find a new expert, the case would probably go on for almost another year. The court stated that "the efficiency of the case load and so on should not be the most important factor," but the inevitable delay that would result from granting appellant's motion would require additional time and expense for all parties. The court ultimately weighed all of the Weiner factors to come to the conclusion that the appellant's motion to designate a new medical expert and for a continuance should be denied. This decision has strong support in the record. We cannot say that the court erred in its application of the factors or abused its discretion in its denial of appellant's motion.
Once the court denied appellant's motion, appellant's counsel conceded during the subsequent January 12 conference call that without an expert, she could not meet her burden of proof. This statement by counsel reflects a tactical decision on the part of appellant. Because the court permissibly exercised its discretion to deny the emergency motion for additional discovery, and because appellant decided that she could no longer proceed to trial, the court properly granted the defendants' motion to dismiss. See Moorehead v. District of Columbia, 747 A.2d 138, 148 (D.C. 2000) (after properly denying plaintiff's motion for an extension of time to designate an expert, and "because [plaintiff] concede[d] that his claim against the District... could not survive summary judgment without expert testimony, the court properly dismissed [the claim]"). The dismissal was not a sanction applied by the court, but rather a ruling based upon appellant's concession.
Appellant argues that a lesser form of sanction should have been considered but, because she had not identified a new expert, the court was not acting at a stage of the proceedings at which it was required to consider alternative sanctions. As we have noted, the dismissal was not entered as a sanction, but was a ruling based upon the appellant's concession, doubtless made in light of the posture in which she found herself because of her failure to make discovery and comply with deadlines. See District of Columbia v. Kora & Williams Corp., 743 A.2d 682, 690-91 (D.C.1999) (plaintiff's argument that prejudice from "belated disclosure of [expert] opinions" could be mitigated by a lesser sanction "fails ... in the absence of exhibits or even a proffer of opinion by either witness...").
In light of the foregoing, we hold that the court did not abuse its discretion by denying appellant's motion and did not err by granting the defendants' motion to dismiss. Accordingly, the order is hereby affirmed.
So ordered.
NOTES
[1] We stated in Weiner, supra, that when the trial court considers whether a party has established good cause and excusable neglect for failure to include supplemental testimony of a designated expert witness in a timely Super. Ct. Civ. R. 26(b)(4) statement, it should take into account the following factors: (1) whether allowing the evidence would incurably surprise or prejudice the opposite party; (2) whether excluding the evidence would incurably prejudice the party seeking to introduce it; (3) whether the party seeking to introduce the testimony failed to comply with the evidentiary rules inadvertently or willfully; (4) the impact of allowing the proposed testimony on the orderliness and efficiency of the trial; and (5) the impact of excluding the proposed testimony on the completeness of information before the court or jury. Id. at 1311-12.
[2] The court stated that the problems with Dr. Stein's credentials and his unresponsiveness to counsel, "were apparent in October.... That was raised in the [October 2, 2008] pretrial about the possibility that his privileges had been revoked or may have been revoked or were going to be revoked because the defense was seeking information about that." The court added that appellant "should have, could have, and was clearly aware that there were issues involving her key expert at the time of the last pre-trial, and that at that time the plaintiff should have been working diligently to either secure Dr. Stein's presence in Court or make other arrangements particularly since he's in a location far away." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542955/ | 997 A.2d 573 (2010)
121 Conn.App. 503
Patricia A. BOWEN et al.
v.
Anthony J. SERKSNAS et al.
No. 30707.
Appellate Court of Connecticut.
Argued February 8, 2010.
Decided June 8, 2010.
*575 Neil R. Marcus, Danbury, with whom were Barbara M. Schellenberg, and, on the brief, Austin D. Kim, Bridgeport, for the appellant-appellee (named plaintiff).
Frank C. White, Jr., Middletown, for the appellees-appellants (defendants).
FLYNN, C.J., and ROBINSON and ALVORD, Js.[*]
FLYNN, C.J.
The plaintiff Patricia A. Bowen, (Patricia) appeals from the judgment of the trial court finding that she and her brother, Walter V. Bowen (Walter) did not establish their claim of adverse possession against the defendants, Anthony J. Serksnas and Marnie L. Serksnas.[1] The defendants filed a cross appeal claiming several missteps by the court. Because we conclude that the court properly found that the facts did not demonstrate that Patricia and Walter successfully had proven their claim of adverse possession, we need not address the merits of the defendants' cross appeal or whether a cross appeal was proper under Practice Book § 61-8 when the defendants were successful at trial. Accordingly, we affirm the judgment of the trial court.
The following facts, as found by the court, are relevant to our resolution of this appeal. "The dispute is over portions of adjoining lots 36 and 37. These properties are located at 8 DeRenne Road and 10 DeRenne Road, respectively, in Old Saybrook. The defendants acquired the lots by warranty deed from Elinor [DeRenne] and Charles DeRenne. The transfer occurred on April 19, 2006. . . . The Serksnas[es] also own lot 35. Patricia and Walter Bowen own the neighboring property, lot 38. Their property is located at 5 Elinor Road in Old Saybrook. These lots are part of a common subdivision for seasonal use.
"The Bowens jointly claimed that they have used certain portions of lots 36 and 37 since 1965 without consent. They contend that their conduct has been open, visible and continuous for over fifteen years. Thus, they asked [the] court to quiet title in their favor. Patricia Bowen testified at trial about her adverse use of the property. Walter Bowen did not testify. [The Bowens'] other evidence included photographs and expense records *576 showing that Patricia Bowen paid to maintain portions of lots 36 and 37.
"The Serksnas[es] also testified at trial and provided photographs and other documents to challenge [the Bowens'] claim. Their central rebuttal was that [the Bowens] have failed to make a clear and positive claim over any part of the disputed lots. Alternatively, they argued that the Bowens had permission, consent or license to use the properties while they were maintained." (Citation omitted.)
On the basis of the evidence presented and the credibility of the witnesses, the court found that the Bowens had not proven open and visible use of a positively identified area of the lots, notorious and hostile possession or that they had acted under a claim of right. Accordingly, the court found that the Bowens had not proven their adverse possession claim and rendered judgment in favor of the defendants. Patricia now appeals. Additional facts will be set forth where necessary.
Patricia claims that the court improperly concluded that she and Walter failed to establish the facts necessary to support their claim of adverse possession. Specifically, she argues that the court improperly found that they had failed to prove open and visible use, hostility, and exclusive use without shared dominion and that they possessed the subject lots under a claim of right. The defendants argue that the court properly found that the Bowens had failed to prove their claim of adverse possession. We agree with the defendants.
"[T]o establish title by adverse possession, the claimant must oust an owner of possession and keep such owner out without interruption for fifteen years by an open, visible and exclusive possession under a claim of right with the intent to use the property as his own and without the consent of the owner. . . . A finding of adverse possession is to be made out by clear and positive proof. . . . The burden of proof is on the party claiming adverse possession. . . . Despite that exacting standard, our scope of review is limited." (Internal quotation marks omitted.) Woodhouse v. McKee, 90 Conn.App. 662, 669, 879 A.2d 486 (2005). "Because adverse possession is a question of fact for the trier . . . the court's findings . . . are binding upon this court unless they are clearly erroneous in light of the evidence and the pleadings in the record as a whole. . . . We cannot retry the facts or pass on the credibility of the witnesses. . . . A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.. . . A trial court's findings in an adverse possession case, if supported by sufficient evidence, are binding on a reviewing court. . . ." (Internal quotation marks omitted.) Eberhart v. Meadow Haven, Inc., 111 Conn.App. 636, 641, 960 A.2d 1083 (2008).
In this case, the court found that the Bowens had failed to establish a prima facie case of adverse possession. In fact, the court found that the Bowens had failed to establish any of the elements of an adverse possession claim. On appeal, Patricia claims that the court's findings were clearly erroneous and that she and Walter had established a prima facie case. We do not agree.
Rather than analyze every element of the plaintiff's adverse possession claim as did the trial court, we will focus our analysis on what we consider to be the most fatal flaws in Patricia's claim on appeal, namely, the court's finding that the Bowens did not use these lots exclusively without shared dominion and the acknowledgment of superior title in letters written by Walter.
*577 The court specifically found: "The question of exclusive use deals another damaging blow to the Bowens' claim because innumerable others shared dominion over the lots. . . . It is clear from the testimonies that the DeRennes used their lots infrequently. Yet, the court must note that essentially these lands are for seasonal use. As such, any seasonal use by the DeRennes or others would negate the Bowens' exclusive possession.
"The DeRennes' generosity may have instigated the plaintiffs' adverse intentions. But that same virtue invited several users to the property to prevent the Bowens' adverse possession. For example, Maxine Byrnes testified that she cleared brush and trimmed rose bushes to maintain parking space on lot 37. Others in her family kept the horseshoe pit that the Bowens enjoyed on their picnics. [Byrnes'] family used the lots from the 1960s and well into the 1980s. [The defendants] gave similar testimonies.
"More importantly, the DeRennes entered the properties at their pleasure. Charles DeRenne testified that he visited the lots on several occasions in the 1970s. He met Walter . . . during some of these visits, but he was never asked to leave the properties. Elinor DeRenne also testified that she consistently went to the lots. She even permitted Yale students to conduct research at the marsh on lot 36. As a true owner, Elinor DeRenne paid the property taxes until title passed on to the [defendants] in April, 2006." (Citations omitted.)
As explained by our Supreme Court in Roche v. Fairfield, 186 Conn. 490, 502-503, 442 A.2d 911 (1982): "In general, exclusive possession can be established by acts, which at the time, considering the state of the land, comport with ownership; viz., such acts as would ordinarily be exercised by an owner in appropriating land to his own use and the exclusion of others.. . . Thus, the claimant's possession need not be absolutely exclusive; it need only be a type of possession which would characterize an owner's use. . . . It is sufficient if the acts of ownership are of such a character as to openly and publicly indicate an assumed control or use such as is consistent with the character of the premises in question." (Citations omitted; internal quotation marks omitted.) "The use is not exclusive if the adverse user merely shares dominion over the property with other users." (Internal quotation marks omitted.) Id., at 498, 442 A.2d 911; see also Arcari v. Dellaripa, 164 Conn. 532, 536, 325 A.2d 280 (1973) ("[t]he requisite of exclusive possession for the statutory period is not met if the adverse user merely shares dominion over the property with other users"); Lisiewski v. Seidel, 95 Conn.App. 696, 702, 899 A.2d 59 (2006) ("[i]f dominion is shared, then the exclusivity element of adverse possession is absent").
In Short Beach Cottage Owners Improvement Assn. v. Stratford, 154 Conn. 194, 199, 224 A.2d 532 (1966), the plaintiff claimed, inter alia, that it had acquired an area of beach front property by adverse possession. The trial court found, however, that the plaintiff had not maintained exclusive use of the property. Id. The Supreme Court agreed with the trial court, explaining: "One of the requisites to acquiring property by adverse possession is that the claimant maintain an exclusive possession of the disputed area during the running of the fifteen-year period. . . . This condition is not met if the adverse user merely shares dominion over the property with other users. . . . Since the referee found as a fact that the [plaintiff's predecessors in title] never maintained an exclusive possession over the beach area, in that others occupied cottages on the property without the [predecessors'] permission, the conclusion that the plaintiffs failed to establish title by adverse possession was required. In addition, the [predecessors] did *578 not collect rents for the cottages established on or moved to the subject property. This is inconsistent with a claim of title by adverse possession." (Citation omitted.) Id.
In the present case, the court found that the DeRennes had given broad privilege to many of their neighbors to use the lots in question as long as the neighbors kept the lots well maintained.[2] The court specifically pointed to the testimony of Byrnes that she and her family used and maintained areas of these lots from the 1960s to the 1980s.[3] The defendants also testified that they, too, had similar experience with the use of the lots.[4] Patricia makes much ado about receipts that she kept that allegedly showed how much she spent toward the maintenance of lots *579 36 and 37. The fact that she may have paid a service company to maintain the lots, rather than maintain them herself in exchange for being able to use them, does not demonstrate exclusive dominion. In fact, our own review of the record shows no evidence that the Bowens used the lots in any manner inconsistent with the use afforded to and accepted by other neighbors.[5]
The court also made other relevant findings of fact: "The Bowens made no . . . affirmative showing of hostility. They used the lots in the manner permitted by the DeRennes, not as notorious adverse possessors. Indeed, Walter Bowen's actions are especially telling on this point. He offered to purchase the lots, not only for himself, but also as his sister's agent, albeit without her authorization. It is well established that `an attempt to purchase legal title . . . is recognition of that title.' Allen v. Johnson, 79 Conn.App. 740, 746, 831 A.2d 282, cert. denied, 266 Conn. 929, 837 A.2d 802 (2003). So, in attempting to purchase the properties from the true owners, Walter Bowen acknowledged the DeRennes' superior title. This contributes substantially toward negating the Bowens' adverse disposition and claim of right."
"[T]o establish title by adverse possession, the claimant must oust an owner of possession and keep such owner out without interruption for fifteen years by an open, visible and exclusive possession under a claim of right with the intent to use the property as his own and without consent of the owner." (Emphasis added; internal quotation marks omitted.) Chuckta v. Asija, 97 Conn.App. 232, 235, 903 A.2d 243 (2006). Furthermore, "[a]n adverse possessor may interrupt his or her continuous possession by acting in a way that acknowledges the superiority of the real owner's title. . . . [T]he possession of one who recognizes or admits title in another, either by declaration or conduct, is not adverse to the title of such other. . . . Occupation must not only be hostile in its inception, but it must continue hostile, and at all times during the required period of fifteen years challenge the right of the true owner, in order to found title by adverse use upon it. . . . Such an acknowledgment of the owner's title terminates the running of the statutory period, and any subsequent adverse use starts the clock anew." (Citations omitted; internal quotation marks omitted.) Allen v. Johnson, supra, 79 Conn.App. at 746-47, 831 A.2d 282.
Prior to 1965, Eudora DeRenne[6] owned several lots in Old Saybrook, including lots 36, 37 and 38. In January, 1965, she conveyed lot 38 to Ellen Bowen, the mother of Walter and Patricia, expressly telling Ellen Bowen that the Bowens could use lots 36 and 37 if they maintained those lots. Walter was present at the closing and expressly heard Eudora DeRenne tell his mother, Ellen Bowen, that "if you people maintain the land, you can use the land." Nevertheless, in a March 24, 1980 affidavit, filed on the land records just fifteen years after the January, 1965 closing, Walter averred that he exclusively had adversely possessed these lots for the requisite fifteen year period. Another affidavit filed by Patricia on May 23, 1980, expressly stated that she exclusively had adversely possessed these lots for the requisite fifteen year period.[7] Elinor DeRenne *580 never saw the affidavits filed by Walter and Patricia, and Charles DeRenne did not see them until 2005. Both of these affidavits purportedly were filed pursuant to General Statutes § 47-12a. In accordance with the averments in these affidavits, the alleged adverse possession of lots 36 and 37 by Patricia and Walter would have begun at or near the time their mother purchased that lot from Eudora DeRenne and received express permission from Eudora DeRenne to use neighboring lots 36 and 37 on the condition that the family maintain those lots. Both Walter and Patricia acknowledged that they knew that their mother had been given permission to use lots 36 and 37 at the time she had purchased lot 38.[8]
In their amended complaint, Walter and Patricia alleged that they jointly had adversely possessed lots 36 and 37 for the requisite fifteen year period. The alleged starting point of their adverse possession of these lots is somewhat unclear, however. The complaint references the 1980 affidavits, which indicates that the possession would have started in or before 1965, at the time they both acknowledge that their mother, the then owner of lot 38, had been given express permission to use lots 36 and 37 if she and her family maintained those lots, but the plaintiff also indicates in her appellate brief that the adverse possession may have started in the early 1970s after the deaths of Ellen Bowen and Eudora DeRenne; on January 14, 1980, when Elinor DeRenne filed a notice on the land records to prevent a claim of easement; or "from 1990 onward [when] Maxine Byrnes and her family were not participating in any significant activity on lots 36 and 37."[9]
Nevertheless, in a September 17, 2005 handwritten letter, which Walter sent to Charles DeRenne in response to a letter that Charles DeRenne had written to the Bowens concerning the parking of vehicles on a portion of lot 37 and a statement that Walter allegedly had made to a neighbor, J. Kevin Kinsella, that he owned lot 37, Walter stated: "When your [m]other closed on this property in 1965, she stated to my [m]other, with me present, `[i]f you people maintain the land, you can use the land.' My [m]other was unaware until that day of the closing that this strip of *581 land was not included in the sale, especially, since the leach fields, however long they are, extended into that strip of land from the septic tank system. However, your [m]om stated she wanted the land so she [and] family members could picnic and use the beach which she did twice. On each occasion, my [m]om offered your [m]om and companions use of the bathrooms, and outside showers which they gladly accepted.
"For forty years now, my [m]other who is deceased thirty years, Patricia and I have maintained this strip of land, which has our leach fields on it, with the help of Parker Lawn Service . . . who cleans, prunes, rakes and mows [in the] spring, summer and fall with all expenses being paid by us. Presently, we're under contract with Bombaci Tree Care . . . to remove two dangerous large thick split limbs that are hanging from two trees on that land. The cost that Patricia and I are paying is coming to $550.00, and because we maintain [and] use the land we have no problem assuming the expense, and not bothering Elinor [DeRenne].
"The Duggans and their extended family have always used that land for parking for years, and as recently as last week without any problems. Mr. Kinsella's [modus operandi] is, he doesn't want anyone parking there because . . . it interferes with his view of the marsh. Did Mr. Kinsella (the man with the camera), mention to you he had mature trees cut down . . . to enhance his view? I had told him I had no authority to give the [okay] when he asked. He had it done in the winter when no one was around. The man wants what he wants, and he'll leave no stone unturned.
"Many years ago, your sister Elinor [DeRenne] called me . . . and offered a package deal of two roads, Elinor [and] DeRenne, and along with [two] lots. One lot was in the marsh, protected by the Wetlands Act. The only lot we would have been interested in was the strip of land where our leach fields are [and] it was land we were already maintaining.
"To be honest, at that time we didn't have the money to purchase other real estate. We have had forty wonderful years here, along with the usual sadnesses that all families experience. My goal in retirement is to remove as much stress as possible in my life, and the man with the camera, who had nothing better to do but make waves, will not interfer[e] with that goal.
"The land has not been abused, and it looks good, as it always does. The next time you're in [Connecticut] stop by, [and] hopefully, I will be here.
"I'm sorry you [and] Elinor [DeRenne] had to be bothered with this nonsense, since we have co-existed very nicely for a long, long time, along with our neighbors on this lane. I hope you are in a safe location from this Ophelia. Walt Bowen [telephone number] Patricia Bowen[telephone number]."[10]
On September 27, 2005, Charles DeRenne sent another letter, addressed to Walter and Patricia, advising them that the DeRennes had offers to purchase lots 36 and 37, to which Walter sent the following handwritten response: "I sincerely hope that these communications are not bothersome to you [and] your family. I only recently looked at the field cards at [t]own [h]all in Old Saybrook, and I can see why Mr. Serksnas would be interested in purchasing lot 36 since his property and yours abut each other, and that is why Patricia and I would also be interested in *582 purchasing lot 37 that abuts our property as well.
"If you, Elinor [DeRenne] and family decide in the future to sell the property, I would only hope you would consider us first since we have a history on the land. Since retirement, I winter in Florida from December 1st to mid June. . . .
"Hopefully, everything can be resolved in the positive for you, Elinor [DeRenne and] family, as well as for Mr. Serksnas, and of course, the Bowens."[11]
Although Walter is not a party to this appeal, the adverse possession claim he and Patricia brought was a joint claim of possession. In their complaint, they alleged that they performed all the actions necessary to establish a prima facie case of adverse possession, and they asked the court to quiet and settle title in them. They also presented as evidence the two separate affidavits, one sworn to by Walter and one sworn to by Patricia, each of which was filed separately on the land records between March 24 and 23, 1980. Walter's affidavit stated that he, exclusively, had adversely possessed the relevant lots for the requisite fifteen years, and Patricia's affidavit stated that she, exclusively, had adversely possessed the relevant lots for the requisite fifteen years. Neither affidavit mentioned the other. In their complaint, however, the Bowens alleged that they adversely possessed the lots together. Nevertheless, Walter's letters to Charles DeRenne, with which Patricia had no disagreement, recognized the superior title of the DeRennes and clearly admitted that the use of these lots had been permissive since 1965. Therefore, the Bowens' joint claim of adverse possession necessarily fails, especially when the court credited these admissions and accorded them such significant weight.[12] On appeal, we do not discount the weight afforded such admissions by the trial court *583 simply because Walter, who made the admissions, is not a party to the appeal.
Clearly, each of the letters written by Walter expressed his recognition that the Bowens' use of these lots was permissive since 1965 and that the DeRennes owned the lots at least as of the date of the letter, September 27, 2005, thus defeating any claim that he had adversely possessed these lots, either jointly or severally, prior to his filing of the adverse possession affidavit on the land records or at any time thereafter. Although Patricia argues that "even if Walter Bowen could not prevail on his adverse possession claim because of his actions, those actions should not prevent Patricia Bowen from prevailing on her claim," the fact is Patricia and Walter brought a complaint alleging that they had jointly possessed these lots. Although Walter is not a party to this appeal, he was a plaintiff at trial and, therefore, a party capable of making admissions. The complaint alleged joint adverse possession, which, clearly, was not proven, the court finding quite significant Walter's admissions in the two letters that he wrote to Charles DeRenne. Furthermore, Patricia stated on more than one occasion at trial that she did not disagree with the letters or their content.
Additionally, the court made further relevant findings: "The Bowens' claim of right issue relates invariably to whether the DeRennes acquiesced, consented or gave permission [to use the lots]. It is abundantly clear . . . that the DeRennes gave all three forms of privilege to their neighbors liberally. Patricia Bowen was granted permissive use of lots 36 and 37 as long as she maintained the properties. This inter-familiar use extended back to 1965. [Patricia and Walter] never paid taxes, the association assessment, nor insurance for lots 36 and 37. Elinor DeRenne paid the taxes and the [a]ssociation dues on the lots from 1965 until she sold the lots to [the] Serksnas[es] on April 19, 2006. Patricia Bowen acknowledged that the Bowens were granted broad privileges over lots 36 and 37. Her state of mind obviates an adverse possession analysis." Our own review of the record in this case leads us to the conclusion that the court's findings have evidentiary support and, therefore, are not clearly erroneous.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[*] The listing of judges reflects their seniority status on this court as of the date of oral argument.
[1] Walter was also a plaintiff at trial. He has not appealed from the judgment of the court, however. Therefore, Patricia is the sole plaintiff in this appeal.
[2] Elinor DeRenne testified that between 1965 and 2006 she occasionally went to lots 36 and 37. She took people from the town offices there to show them the property when she was appealing an increase in her property taxes. She filed tax appeals on the lots three or four times. She also went there with her sister to go swimming and with her brother when he was visiting the area. She never saw anyone using the lots when she went there, not even for parking. She estimated that she went there once per year. Elinor DeRenne also testified that she gave J. Kevin Kinsella, a neighbor at Chalker Beach, permission to enter the land to trim or cut down some trees. Anthony Serksnas also had permission to trim and cut trees.
[3] The record reveals that Byrnes testified that she and her husband, Jack Duggan, owned the property at 7 DeRenne Road, lot 35, which previously had been owned by Jack Duggan's parents, who had purchased it from Charles DeRenne, and that the property is now owned by their daughter, Marnie Serksnas, formerly Marnie Duggan, and her husband, Anthony Serksnas, the defendants in this case. Lot 35 is across the street from lots 36 and 37. Byrnes testified that she spent every summer at lot 35 and that she still frequents the property and still parks on lot 37. Byrnes stated that she has been going to these properties since 1964, and lot 37 has been used by her family and friends for overflow parking since that time. In the 1970s, Duggan and his father reconstructed the horseshoe pit on lot 37, and they then used lot 37 for horseshoes and lots 36 and 37 for family picnics nearly every weekend. Byrnes testified that other neighbors also used the horseshoe pit regularly and that some of them also picnicked there. These picnics lasted well into the 1980s, and the children also played ball on these lots. Byrnes testified that she never saw Walter or Patricia at these picnics and that she never saw them park their vehicles on either lot 36 or 37, although she did see them on their own property, lot 38, where they also parked their vehicles. Byrnes further testified that she performed maintenance on lots 36 and 37, trimming and cutting back the rambling roses.
[4] Marnie Serksnas testified that she grew up at lot 35 and that her grandfather, John Duggan, owned the property before she was born. She played on lots 36 and 37 throughout her childhood, playing football, baseball and horseshoes, and her family and the neighbors also picnicked there. She remembered her family parking on lot 37 all the time, and other neighbors parked there as well. Neighbors entered the marsh on lot 36 to crab or to kayak, and she took her brother crabbing in the marshland. Marnie Serksnas also testified that she never saw Walter or Patricia on lots 36 or 37 but that she did see Walter park on lot 37 occasionally.
Anthony Serksnas testified that he began going to lots 35, 36 and 37 in the summer of 1987 when he began dating Marnie and that he continued going there with her in the summers. He stated that he parked on lot 37 and that "[t]hose lots were used by everybody at the end of the streets for overflow parking primarily." Additionally, Anthony Serksnas testified that in 2000 or 2001, he began constructing a new porch on lot 35 and that he contacted Elinor DeRenne for permission to partially clear some portions of lots 36 and 37 to enhance his view and to provide better access to the marshlands, and that she gave him such permission. The Kinsellas then contacted the DeRennes to get permission for further clearing, and he and the Kinsellas split the cost of the continued maintenance of the enhanced views. He also testified that neighbors then crossed the lots to get to the marshlands to kayak.
[5] Furthermore, Patricia testified that other neighborhood residents also used lots 37 and 38 since 1964.
[6] Eudora DeRenne was Charles DeRenne's wife and died in 1971.
[7] Both of these affidavits were filed in response to a notice to prevent claim of easement, pursuant to General Statutes §§ 47-38 and 47-39, filed by Elinor DeRenne on January 14, 1980. The court, however, determined that this notice was not served in accordance with the statutes and that it, therefore, was ineffective. We need not discuss the propriety of this ruling in this appeal.
[8] Patricia testified at trial that although she was not present at the closing when her mother purchased lot 38 from Eudora DeRenne, she was told that her mother was given permission to use lots 36 and 37, provided she maintained those properties. She also answered, "Oh, yes," when asked whether she "maintained lot 37 . . . after [she] had heard that [Eudora] DeRenne had provided permission to [her] mother and the Bowens to use lot 36 and 37 if they maintained it."
Walter did not testify at trial, but he did admit via a September 17, 2005 letter, which we will discuss, that he was present at the closing when Eudora DeRenne gave permission to his mother to use the properties. Patricia admitted during cross-examination that although she did not authorize Walter to send this letter on her behalf, she did not disagree with the contents of the letter.
[9] Patricia testified, however, that prior to 1980, when she received the notice to prevent a claim of easement, she had not thought about using lots 36 and 37 as her own or about acquiring ownership of them:
[The Defendants' Counsel]: "Ma'am, when you were using lots 36 and 37, did you intend to use them with the goal of acquiring them and owning them?
"[Patricia]: We were just using them.
"[The Defendants' Counsel]: You never thought about it? I'm only speaking about you because you're the only one who's testifying. When you were using those lots, were you thinking about using them and acquiring ownership of them?
"[Patricia]: Not until 1980 . . . . [when] [w]e received the notice of easement. . . ."
[10] Patricia testified that she did not authorize Walter to send this letter on her behalf but that she did not disagree with the letter.
[11] Patricia testified that she did not authorize Walter to send this letter on her behalf, nor did she see any need to confront him after he had sent the letter and that she did not disagree with the content of the letter. She also stated that in October, 2005, she and Walter were interested in purchasing the properties and that "[i]ntermittently over the years, there have been conversations about purchasing the land."
[12] We need not determine for purposes of this appeal whether these were judicial admissions or evidentiary admissions, the court having credited them with significant weight. "Judicial admissions are voluntary and knowing concessions of fact by a party or a party's attorney occurring during judicial proceedings.. . . They excuse the other party from the necessity of presenting evidence on the fact admitted and are conclusive on the party making them. . . . The statement relied on as a binding admission [however] must be clear, deliberate and unequivocal. . . . Whether a party's statement is a judicial admission or an evidentiary admission is a factual determination to be made by the trial court. . . . The distinction between judicial admissions and mere evidentiary admissions is a significant one that should not be blurred by imprecise usage. . . . While both types are admissible, their legal effect is markedly different; judicial admissions are conclusive on the trier of fact, whereas evidentiary admissions are only evidence to be accepted or rejected by the trier. . . . In contrast with a judicial admission, which prohibits any further dispute of a party's factual allegation contained in its pleadings on which the case is tried, [a]n evidential admission is subject to explanation by the party making it so that the trier may properly evaluate it. . . . Thus, an evidential admission, while relevant as proof of the matter stated . . . [is] not conclusive. . . . Because the probative value of an admission depends on the surrounding circumstances, it raises a question for the trier of fact. . . . The trier of fact is free to give as much weight to such an admission as, in the trier's judgment, it merits, and need not believe the arguments made regarding the statement by one side or the other." (Citations omitted; internal quotation marks omitted.) O & G Industries, Inc. v. All Phase Enterprises, Inc., 112 Conn.App. 511, 523 n. 5, 963 A.2d 676 (2009). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542973/ | 67 B.R. 432 (1986)
In re PINE RUN TRUST, INC., Debtor.
In re Indenture of Trust Dated November 30, 1979 of Frank E. ELLIOTT and Stephanie H. Elliott, Debtors.
Bankruptcy Nos. 86-02281(T), 86-02280(T).
United States Bankruptcy Court, E.D. Pennsylvania.
December 2, 1986.
*433 Pace Reich, Philadelphia, Pa., for debtors.
William A. Slaughter and David Cohen, Philadelphia, Pa. and Richard Fehling, Reading, Pa., for Official Committee of Pine Run Residents.
Don Marshall, Newtown, Pa., for Horizon Financial, F.A.
MEMORANDUM OPINION AND ORDER
BRUCE FOX, Bankruptcy Judge:
The issue before me arises from the debtors' request to extend the time within which the debtors alone may file a plan of reorganization and obtain acceptances, pursuant to 11 U.S.C. § 1121. Sections 1121(b) and (c) grant the debtors the exclusive right to file a plan of reorganization during the 120 days immediately after filing for bankruptcy and allow the debtors 180 days from the date of the petition to solicit acceptances of their plan. This court, "for cause" only, may extend these exclusive time periods. 11 U.S.C. § 1121(d).
In the case at bar, these related debtors filed voluntary petitions in bankruptcy under chapter 11 of the Code on May 7, 1986. The debtors operated and continue to operate, as debtors in possession, the Pine Run retirement community. In operating the business, the debtors entered into contracts with retired individuals under which the residents made payments to the debtor in return for various housing and other services to be provided by the debtors over the residents' lifetimes. Apparently, the debtors entered into these contracts based upon certain actuarial assumptions which proved erroneous, thus causing the debtors' current financial difficulties.
*434 Pursuant to 11 U.S.C. § 1121(b), the debtors' exclusivity period for filing a chapter 11 plan would have expired on September 4, 1986. However, upon debtors' request, this court extended the exclusive period within which to file a plan until December 3, 1986 and extended until February 2, 1987 the time within which to solicit acceptances.
The debtors now seek a second extension of the exclusivity period[1] which is opposed by a creditor, Horizon Financial, F.A. Horizon asks the court to allow the exclusivity period to expire so that all parties, including but not limited to the debtors, have the right to file a plan and seek creditor acceptance. Joining in the debtors' request for an extension was the Committee of Residents of Pine Run community. This committee was appointed pursuant to 11 U.S.C. § 1102 and has been negotiating with the debtors regarding a plan of reorganization.
My authority to grant the debtors' request stems from 11 U.S.C. § 1121(d) which states:
(d) On request of a party in interest made within the respective periods specified in subsection (c) of this section and after notice and a hearing, the court may for cause reduce or increase the 120-day period or the 180-day period referred to in this section.
Since it is the debtors who seek the extension, the burden is upon them to demonstrate the existence of good cause. E.g., In re Tony Downs Foods Co., 34 B.R. 405 (Bankr.D.Minn.1983); In re Ravenna Industries, Inc., 20 B.R. 886 (Bankr.N.D.Ohio 1982). Furthermore, both the language and purpose of this statutory provision require that an extension not be granted routinely. In re Parker Street Florist & Garden Center, Inc., 31 B.R. 206 (Bankr.D. Mass.1983).
I review the evidence in this matter with reference to the legislative purpose behind the limited grant of exclusivity found in 11 U.S.C. § 1121(b). Under prior provisions of chapter XI, only the debtor was empowered to submit a plan of arrangement. As a result, if the debtor and its creditors could not agree upon plan terms, the creditors were often limited to seeking either liquidation of the debtor or conversion to chapter X. These limited alternatives were usually not in the creditors' interest thereby weakening the creditors' bargaining position during negotiations over the chapter XI plan terms. See Matter of Lake in the Woods, 10 B.R. 338 (E.D.Mich.1981); In re Kun, 15 B.R. 852 (Bankr.D.Ariz.1981).
Section 1121(b) represents a compromise of competing interests. By granting the debtor a limited period of exclusivity in plan filing, the Code seeks to balance the relative negotiating positions of the debtor and creditors. See Matter of Lake in the Woods; In re Ravenna Industries, Inc.
Of course, the bargaining position of the debtor under present Chapter XI may be further enhanced by the debtor's control of the business and the fear that a debtor through inter manipulation may destroy or diminish the value of the business if creditors do not acquiesce to the debtor's Chapter XI plan. The take-it-or-leave-it attitude on the part of debtors as permitted by Chapter XI is fraught with potential abuse. The granting of authority to creditors to propose plans of reorganization and rehabilitation serves to eliminate the potential harm and disadvantages to creditors democratizes the reorganization process (Footnotes omitted).
Bankruptcy Act Revision, Serial No. 27, Part 3, Hearings on H.R. 31 and H.R. 32, 94th Cong. 2d Sess. (March 29, 1976).
At the same time, by allowing debtors in chapter 11 to remain as debtors in possession with some period of exclusivity, the Code makes a chapter 11 filing attractive enough to encourage ailing businesses to seek reorganization without unduly delaying creditors.
Proposed Chapter 11 recognizes the need for the debtor to remain in control to *435 some degree, or else debtors will avoid the reorganization provisions in the bill until it would be too late for them to be an effective remedy. At the same time, the bill recognizes the legitimate interests of creditors, whose money is in the enterprise as much as the debtor's, to have a say in the future of the company. The bill gives the debtor an exclusive right to propose a plan for 120 days. In most cases, 120 days will give the debtor adequate time to negotiate a settlement, without unduly delaying creditors.
H.R.Rep. No. 595, 95th Cong., 2d Sess. 231-232 (1978), U.S.Code Cong. & Admin. News 1978, pp. 5787, 6191.
At the hearing held to consider the debtors' request and the creditor's objection, only the debtors offered any evidence. Mr. Elliott, the debtors' President and Chief Executive Officer, testified, inter alia, that since the bankruptcy petition was filed the debtors had made substantial progress in their negotiations with the Pine Run Residents Committee. Moreover, the cooperation of the residents' committee was essential to the success of any plan of reorganization. Additional time, approximately 30 days, though, was needed to have the residents review the proposal and give their assent. Mr. Elliott also stated that to permit competing plan proposals to be submitted to the residents would only confuse these individuals and undo the progress made by negotiation.
The objector's principal concern, at argument, seemed to be based upon the failure of the debtors to negotiate with Horizon, causing it to lack information as to the status of negotiations and the possibility of reorganization. Horizon also wanted the option of proposing its own plan. The debtors countered these arguments by testifying that Horizon itself asked not to participate in the negotiations between the debtors and the residents committee.
After considering all of the evidence, I am persuaded that the debtors are entitled one final 90 day extension of the exclusivity period. The traditional ground for cause, the large size of the debtor and the concomitant difficulty in formulating a plan of reorganization, was not established in this case. See Matter of American Federation of Television and Radio Artists, 30 B.R. 772 (Bankr.S.D.N.Y.1983). Nor did the debtors show that retired individuals are uniquely susceptible to the confusion that multiple plans may engender if competing plans were submitted to them for their approval. However, the debtors did establish that an extension is appropriate for two reasons.
First, substantial progress has been made in negotiations that, all concede, are critical to a successful reorganization. Moreover, the debtors' witness stated that these negotiations were to be concluded shortly, and counsel for the residents' committee agreed with this assessment and joined in the debtors' motion. Some promise of probable success in formulating a plan of reorganization, if the debtor is provided additional time, has been recognized as an element of cause for an extension of the exclusivity period. In re Swatara Coal Co. 49 B.R. 898 (Bankr.E.D.Pa.1985); In re Manzey Land & Cattle Co., 17 B.R. 332 (Bankr.D.S.D.1982). See also In re Trainer's, Inc., 17 B.R. 246 (Bankr.E.D.Pa. 1982) (dictum).
Second, and equally important, there was no evidence presented that the debtors sought this additional extension in order to pressure their creditors to accede to their reorganization demands. Matter of Lake in the Woods, 10 B.R. at 345-346. Indeed, Horizon argues that it has not even been privy to those demands, and the resident creditors seem satisfied that negotiations have been undertaken in good faith and without delay.[2]
Therefore, I shall grant a ninety day extension to the debtors' exclusive right to submit a plan and solicit acceptances in order to allow the ongoing negotiations to be completed and for the debtors to submit *436 and obtain approval of the disclosure statement. 11 U.S.C. § 1125. This will provide the debtors with a total exclusivity period of 300 days, which should be sufficient time to submit a viable plan of reorganization without prejudicing the rights of its creditors.
NOTES
[1] The debtors' request is to extend both the plan filing and acceptance period, see In re Trainer's, Inc., 17 B.R. 246 (Bankr.E.D.Pa.1982), until March 23, 1987 and May 22, 1987 respectively.
[2] The only evidence presented concerning the delay in negotiating with Horizon Financial, F.A. was the debtors' explanation that Horizon sought the delay. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542968/ | 997 A.2d 747 (2010)
2010 ME 53
William BUCKLEY,
v.
S.D. WARREN COMPANY et al.
Docket: WCB-09-272.
Supreme Judicial Court of Maine.
Argued: January 13, 2010.
Decided: June 24, 2010.
*748 James J. MacAdam, Esq. (orally), Nathan A. Jury, Esq., David E. Hirtle, Esq., MacAdam Law Offices, Portland, ME, for William Buckley.
Thomas E. Getchell, Esq. (orally), Troubh Heisler, Portland, ME, for S.D. Warren and CCMSI.
Cara A. Lovejoy, Esq. (orally), Robinson, Kriger & McCallum, Portland, ME, for S.D. Warren and Liberty Mutual.
Richard D. Tucker, Esq. (orally), Tucker Law Group, Bangor, ME, for S.D. Warren and Constitution State Service Co.
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, and JABAR, JJ.
SILVER, J.
[¶ 1] William Buckley appeals from a decision of a Workers' Compensation Board hearing officer (Collier, HO) granting S.D. Warren Company's petitions to establish permanent impairment and determining that Buckley suffers 7% permanent impairment to his left shoulder from two 1996 work injuries and 7% permanent impairment to his right shoulder from 2000 and 2001 work injuries. The hearing officer further concluded, pursuant to 39-A M.R.S. § 213(1-A)(A) (2009), that the permanent impairment percentages cannot be combined, and therefore, Buckley's permanent impairment level does not exceed the 11.8% threshold for receiving partial incapacity benefits for the duration of his disability. Because we conclude pursuant to section 213 that the permanent impairment values assigned to Buckley's right and left shoulder should have been combined, we *749 vacate the hearing officer's decision in part.
I. BACKGROUND
[¶ 2] William Buckley, sixty-seven, worked for S.D. Warren from 1981 until 2002. He suffered five work-related injuries during that period: (1) in February 1992 to his neck and cervical spine; (2) in October 1996 to his left shoulder; (3) in November 1996 to his left shoulder and left knee; (4) in 2000 to his right shoulder; and (5) in 2001 to both shoulders. He has been out of work since the 2001 injury.
[¶ 3] In a 2005 decree addressing all but the 2000 date of injury, the hearing officer (Sprague, HO) ruled that Buckley's ongoing partial incapacity was related to the 1996 and 2001 shoulder injuries, but not to the 1992 neck injury. Based on a work search, he awarded Buckley 100% partial incapacity benefits. The hearing officer also apportioned responsibility for the incapacity one-third to the October 1996 left shoulder injury, one-third to the November 1996 left shoulder injury, and one-third to the 2001 bilateral shoulder injury.
[¶ 4] Thereafter, S.D. Warren filed a petition to establish the 2000 injury and a petition for apportionment. It also filed petitions to determine the extent of permanent impairment for each shoulder injury, contending that Buckley's permanent impairment level is less than the applicable threshold of 11.8%, and his partial benefits are subject to the durational limit in 39-A M.R.S. § 213(1). The hearing officer (Collier, HO) granted the petition to establish the 2000 injury and apportioned responsibility for Buckley's ongoing incapacity equally among the four shoulder injuries. The hearing officer also determined that Buckley suffers 7% permanent impairment to the left shoulder resulting from the two 1996 injuries, and 7% permanent impairment to the right shoulder resulting from the 2000 and 2001 injuries.[1] The hearing officer did not combine or "stack" the impairment percentages because he found that (1) the 2000 right shoulder injury did not cause any additional permanent impairment to the previously injured left shoulder, and (2) "there is no evidence that the subsequent bilateral shoulder injury in 2001 caused any additional permanent impairment or in any other way aggravated or accelerated the prior injuries to either shoulder."
[¶ 5] According to the hearing officer's decision, Buckley's permanent impairment level falls below the threshold and his partial benefit payments are subject to the durational cap. We granted Buckley's petition for appellate review pursuant to 39-A M.R.S. § 322(3) (2009) and M.R.App. P. 23(c).
II. DISCUSSION
A. Introduction
[¶ 6] We are asked to decide whether 39-A M.R.S. § 213(1-A)(A) permits combining permanent impairment resulting from multiple work-related injuries to separate body parts to determine if the employee's level of permanent impairment exceeds the threshold for receiving partial incapacity benefits for the duration of the disability. The hearing officer construed *750 section 213(1-A)(A), which applies to work injuries that occurred before January 1, 2002, to require consideration of each work injury separately, and to authorize stacking of permanent impairment from separate work injuries only when later injuries aggravate or accelerate the earlier injuries. Buckley asserts this is an erroneous construction because the statute plainly allows for impairment from interrelated work injuries to be stacked, and that all four injuries were "injur[ies] at issue in the determination," pursuant to section 213(1-A)(A).
B. Standard of Review
[¶ 7] When construing provisions of the Workers' Compensation Act, our purpose is to give effect to the Legislature's intent. Jordan v. Sears, Roebuck & Co., 651 A.2d 358, 360 (Me.1994). In so doing, we look first to the plain meaning of the statutory language, and construe that language to avoid absurd, illogical or inconsistent results. Id. In addition to examining the plain language, we also consider "the whole statutory scheme of which the section at issue forms a part so that a harmonious result, presumably the intent of the Legislature, may be achieved." Id. (quotation marks omitted). If the statutory language is ambiguous, we look beyond the plain meaning and examine other indicia of legislative intent, including legislative history. Id. Decisions of the Board interpreting ambiguous provisions of the Workers' Compensation Act are ordinarily "entitled to great deference and will be upheld on appeal unless the statute plainly compels a different result." Id. (quotation marks omitted).
C. Statutory and Regulatory Background
[¶ 8] Title 39-A M.R.S. § 213 governs partial incapacity benefits and the length of time an injured employee may receive those benefits, depending on the extent to which the employee has been permanently impaired by his injuries. It provides, in relevant part:
§ 213. Compensation for partial incapacity
1. Benefit and duration. While the incapacity for work is partial, .... [c ]ompensation must be paid for the duration of the disability if the employee's permanent impairment, determined according to subsection 1-A and the impairment guidelines adopted by the board pursuant to section 153, subsection 8 resulting from the personal injury is in excess of 15% to the body. In all other cases an employee is not eligible to receive compensation under this section after the employee has received 260 weeks of compensation under section 212, subsection 1, this section or both....
1-A. Determination of permanent impairment. For purposes of this section, "permanent impairment" includes only permanent impairment resulting from:
A. The work injury at issue in the determination and any preexisting physical condition or injury that is aggravated or accelerated by the work injury at issue in the determination; or
B. For dates of injury on or after January 1, 2002, the work injury at issue in the determination and:
(1) Any prior injury that arose out of and in the course of employment for which a report of injury was completed pursuant to section 303 and the employee received a benefit or compensation under this Title, which has not been denied by the board, and that combines with the work injury at issue in the determination to contribute to the employee's incapacity, except that a prior injury that was the subject of a *751 lump-sum settlement approved pursuant to section 352 that had a finding of permanent impairment equal to or in excess of the then applicable permanent impairment threshold may not be included; or
(2) Any preexisting physical condition or injury that is aggravated or accelerated by the work injury at issue in the determination.
Except as set forth in this subsection, "permanent impairment" does not include a condition that is not caused, aggravated or accelerated by the work injury.
39-A M.R.S. § 213 (emphasis added).
[¶ 9] "Permanent impairment" is defined in the Workers' Compensation Act as "any anatomic or functional abnormality or loss existing after the date of maximum medical improvement that results from the injury." 39-A M.R.S. § 102(16) (2009). Pursuant to section 213(2), the Board has adjusted the 15% threshold for injuries occurring during the time period applicable in this case, making Buckley eligible to receive partial benefits for the duration of the disability if he suffers greater than 11.8% permanent impairment. See 39-A M.R.S. § 213(1), (2);[2] Me. W.C.B. Rule, ch. 2, § 1.[3] If an employee's permanent impairment level is below that threshold, he is limited to receiving partial benefits for the maximum number of weeks established by statute and rule, which at present is 520 weeks. 39-A M.R.S. § 213(1), (4); Me. W.C.B. Rule, ch. 2, § 2(9).[4] These restrictions are intended to limit the number of workers' compensation cases involving permanent impairment that provide benefits for the duration of the employee's disability to 25% of all permanent impairment cases, with the remaining 75% [of permanent impairment cases] being subject to the durational cap. 39-A *752 M.R.S. § 213(2). "The permanent impairment threshold in section 213 reflects a legislative intent to preserve longer-term benefits for those employees with the most severe disabilities." Harvey v. H.C. Price Co., 2008 ME 161, ¶ 11, 957 A.2d 960, 964 (quotation marks omitted).
D. Title 39-A M.R.S. § 213(1-A)
[¶ 10] Because all of Buckley's injuries occurred before January 1, 2002, subsection 213(1-A)(A) applies when determining whether the permanent impairment percentages from multiple work injuries or a work injury and preexisting condition may be combined. The Legislature amended section 213 in 2002 to add subsection 213(1-A)(A) and (B), P.L.2001, ch. 712, § 2 (effective July 25, 2002), in reaction to our decision in Kotch v. American Protective Services, Inc., 2002 ME 19, 788 A.2d 582. See Sen. Amend. C to L.D. 2202, No. S-623, Summary (120th Legis. 2002). The amendment was given retroactive application to pending cases and to injuries occurring on or after January 1, 1993. P.L. 2001, ch. 712, § 6.
[¶ 11] In Kotch, we held that section 213 permitted the inclusion of permanent impairment from preexisting nonwork injuries that had merely combined with work-related permanent impairment for purposes of applying the durational limitation in section 213. 2002 ME 19, ¶¶ 10-15, 788 A.2d at 585-86. The Legislature, concerned that including nonwork-related permanent impairment when deciding whether the threshold to extend partial benefits was met would add significant costs to the workers' compensation system, offered an amendment to section 213 that was intended to repeal Kotch. L.D. 2202, S.P. 822 (120th Legis. 2002); see also Sen. Amend. C to L.D. 2202, No. S-623, Summary ("This amendment overrides the court decision in Kotch v. American Protective Services, 2002 ME 19, 788 A.2d 582, which interpreted the law to allow work injuries to be combined with unrelated work and nonwork injuries in determining eligibility for duration-of-disability wage-loss benefits under section 213 of the Maine Workers' Compensation Act of 1992.") (emphasis added).
[¶ 12] The state of the law prior to Kotch was reflected in our decision in Churchill v. Central Aroostook Ass'n for Retarded Citizens, Inc., 1999 ME 192, 742 A.2d 475. In that case we held that section 213 permitted combining permanent impairment from a preexisting work injury with permanent impairment from the work injury at issue when the subsequent work injury aggravated or accelerated the preexisting work injury. Id. ¶ 14, 742 A.2d at 479. The facts of the case, and therefore its holding, are limited to including permanent impairment from work injuries when the subsequent work injury aggravates or accelerates the earlier injury. Id. ¶¶ 2, 14, 742 A.2d at 476, 479. However, as became apparent in Kotch, our reasoning in Churchill could be read broadly to allow stacking of permanent impairment from two or more unrelated work injuries, as well as that from a prior work injury aggravated by the current work injury. See id. ¶ 12, 742 A.2d at 479.
[¶ 13] The legislative debates on L.D. 2202 reflect that some members were concerned that merely repealing Kotch, without doing more, would not address the gray area between Churchill and Kotch, and in effect, would expand section 213's coverage to include permanent impairment from multiple unrelated work injuries, instead of merely excluding nonwork-related impairment, and would result in increased costs to the system. See, e.g., 3 Legis. Rec. S-2037-40, 2057, 2088 (2d Reg.Sess. 2002); 3 Legis. Rec. H-2177, 2223, 2172-74 (2d Reg.Sess.2002). After considerable discussion and several proposed amendments, Sen. Amend. C to L.D. 2202, No. *753 S-623 (120th Legis. 2002), which ultimately passed, was introduced. It allowed permanent impairment from two compensable, unrelated work injuries to be combined prospectively, from 2002 forward, so that underwriting could account for what was perceived to be an expansion of employer liability for extended partial benefits to those employees suffering multiple unrelated work injuries when their combined permanent impairment exceeds the threshold. See 3 Legis. Rec. S-2091-93, H-2272-73; see also id. at S-2037-43 (discussing Sen. Amend. A to L.D. 2202, No. S-609, which introduced prospective application from 2004, but did not pass), H-2223-24 (same). Accordingly, section 213(1-A)(B) allows permanent impairment from two unrelated compensable work injuries occurring after January 1, 2002, to be combined. Section 213(1-A)(A) provides that impairment from multiple work injuries occurring before 2002 may be combined only if the work injury at issue aggravates or accelerates the preexisting condition.
E. Analysis
[¶ 14] S.D. Warren asserts that because the hearing officer found that the permanent impairment from Buckley's pre-2002 right shoulder injuries did not aggravate or accelerate the permanent impairment from his earlier left shoulder injuries, the Court should affirm the determination that the impairment levels assigned to each shoulder should not be stacked pursuant to section 213(1-A)(A). We disagree.
[¶ 15] The work injuries at issue in this case, although they occurred at different times, are not unrelated. The pertinent language in paragraph 1 of section 213 is: "Compensation must be paid for the duration of the disability if the employee's permanent impairment, determined according to subsection 1-A and the impairment guidelines adopted by the board ... resulting from the personal injury is in excess of [11.8%] to the body." (Emphasis added.) Paragraph (1-A)(A) provides that permanent impairment includes "permanent impairment resulting from ... the work injury at issue in the determination." Although designated as a separate injury, the hearing officer found that the 2000 injury to the right shoulder, and thus the permanent impairment to the right shoulder, was due to Buckley's attempts to favor the shoulder injured in 1996, and thus was caused by the 1996 injuries to the left shoulder. Because the impairment from the 2000 right shoulder injury "result[ed] from" the 1996 left shoulder injuries, and the 1996 work injuries are "personal injur[ies]" referred to in subsection (1-A) and "work injur[ies] at issue in the determination" referred to in subsection (1-A)(A), it follows that permanent impairment to both shoulders should be combined when deciding whether the threshold has been reached. See 39-A M.R.S. §§ 213(1), (1-A). Both shoulder injuries are part of the "work injury at issue in the determination." See id. § 213(1-A)(A). Thus, we are not addressing multiple unrelated work injuries.
[¶ 16] From the plain meaning of section 213(1-A), it is apparent that the Legislature did not intend to prohibit combining impairment percentages from multiple work injuries where the impairment from later injuries resulted from impairment from earlier work injuries.
The entry is:
The decision of the hearing officer of the Workers' Compensation Board is vacated in part and the case remanded for proceedings consistent with this opinion.
NOTES
[1] Buckley asserts that the hearing officer erred when failing to assign a permanent impairment rating to the 1992 neck injury. The hearing officer, however, found in the 2005 decree that Buckley no longer suffers any incapacity as a result of the neck injury, and therefore denied Buckley's petition for restoration with respect to that injury. In the 2008 decree, the hearing officer explicitly declined to assign any percentage of permanent impairment to the 1992 neck injury based on the 2005 finding. The hearing officer did not err in failing to assign a percentage of impairment to the 1992 neck injury.
[2] Title 39-A M.R.S. § 213(2) (2009) provides, in relevant part:
2. Threshold Adjustment. Effective January 1, 1998 and every other January 1st thereafter, the board, using an independent actuarial review based upon actuarially sound data and methodology, must adjust the 15% impairment threshold established in subsection 1 so that 25% of all cases with permanent impairment will be expected to exceed the threshold and 75% of all cases with permanent impairment will be expected to be less than the threshold....
[3] Me. W.C.B. Rule, ch. 2, § 1(1) provides: "The permanent impairment threshold referenced in 39-A M.R.S.A. § 213(1) and (2) shall be reduced from `in excess of 15%' to 11.8% or greater effective January 1, 1998. This adjustment is based on an independent actuarial review performed by Advanced Risk Management Techniques, Inc."
The Board increased the permanent impairment threshold for cases with dates of injury between 2002 and 2004 to 13.2%, and for cases with dates of injury after January 1,2004, to 13.4%. Me. W.C.B. Rule, ch. 2, § 1(2), (3) (amended March 11, 2006). The Board recently decreased the threshold to 11.8% for dates of injury after January 1, 2006. Id. § 1(4) (amended June 17, 2008).
[4] Title 39-A M.R.S. § 213(4) (2009) provides, in relevant part:
4. Extension of 260-week limitation. Effective January 1, 1998 and every January 1st thereafter, the 260-week limitation contained in subsection 1 must be extended 52 weeks for every year the board finds that the frequency of such cases involving the payment of benefits under section 212 or 213 is no greater than the national average based on frequency from the latest unit statistical plan aggregate data for Maine and on a countrywide basis, adjusted to a unified industry mix. The 260-week limitation contained in subsection 1 may not be extended under this subsection to more than 520 weeks....
The Board has exercised its authority five times pursuant to section 213(4) to extend the 260-week limit by fifty-two weeks, such that at present, the durational limit for partial incapacity benefits for injured workers with permanent impairment ratings of less than 11.8% is at the maximum, 520 weeks. Me. W.C.B. Rule, ch. 2, § 2(2), (3), (7), (8), (9). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542988/ | 67 B.R. 375 (1986)
In re Walter Carl BLAGAICH, Jr., Debtor.
Kenneth MILLER, Plaintiff,
v.
Walter Carl BLAGAICH, Jr., Defendant.
Bankruptcy No. 86-00366-BKC-SMW, Adv. No. 86-0437-BKC-SMW-A.
United States Bankruptcy Court, S.D. Florida.
November 24, 1986.
*376 Patricia A. Redmond, Miami, Fla., for plaintiff, Kenneth Miller.
Robert C. Meyer, Hialeah, Fla., for debtor/defendant, Walter Carl Blagaich, Jr.
William A. Carlin, Trumbull County, Ohio, for plaintiff, Miller.
Warren Martin, Interim Trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
THIS CAUSE came on for trial on October 1, 1986, upon an Adversary Complaint filed by Plaintiff, KENNETH MILLER ("MILLER"), objecting to the dischargeability of a debt, pursuant to 11 U.S.C., § 523(a)(2)(A). The Court having heard the testimony and examined the evidence presented, observed the candor and demeanor of the witnesses, considered the pleadings and arguments of counsel, and being otherwise fully advised in the premises, does hereby make the following findings of fact and conclusions of law:
MILLER is a creditor of the Debtor herein, WALTER CARL BLAGAICH, JR. ("BLAGAICH"), as a result of activities involving MILLER'S investments in a fictitious corporation known as BEAURGARD ENTERPRISES, INC. ("BEAURGARD"). From December 30, 1983, to March 2, 1984, MILLER paid the sum of $31,600.00 to BEAURGARD, then doing business as a fish market/seafood restaurant. MILLER advanced said funds in consideration of securing 20% of the stock in BEAURGARD.
MILLER entrusted Defendant, BLAGAICH, with said monies, to be used as capital for legitimate corporate purposes. At the time of such entrusting, no corporation by the name of BEAURGARD ENTERPRISES, INC., existed and, further, BLAGAICH used said monies for repayment of insider loans rather than for the purpose for which MILLER had directed and intended.
During the time period of May 7, 1984, to August 24, 1984, BLAGAICH took money *377 out of the seafood restaurant business (BEAURGARD) to pay insider loans and intentionally concealed such activity from MILLER, inasmuch as such disbursements were contrary to the purposes for which the monies were entrusted to BLAGAICH.
Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C., § 523(a)(2)(A), 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, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition . . .
Included within the ambit of the actual fraud provisions of § 523(a)(2)(A) of the Bankruptcy Code is the conversion of funds by a debtor who is entrusted with money to be used for a specific purpose where no apparent intention exists for using the money for that purpose. Merchants National Bank & Trust Company of Indianapolis v. Pappas, (In the Matter of Pappas), 661 F.2d 82 (7th Cir.1981).
This Court is not the first to recognize that a cause of action exists under § 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C., § 523(a)(2)(A), where property, which is not owned or in the custody or control of the debtor, is conveyed to a creditor. Rodgers v. Fallon, (In the Matter of Fallon), 29 B.R. 491, 10 B.C.D. 1054 (M.D.Fla.1983).
Further, in Cass v. Jones, (In the Matter of Jones), 50 B.R. 911 (Bankr.N.D.Tex. 1985), the Bankruptcy Judge found that entrusting money or property to a debtor for a specific purpose, where that debtor has no intention of using said money for such purpose, constitutes a misrepresentation upon which a debt can be held to be not dischargeable.
In the case sub judice, clearly BLAGAICH accepted monies from MILLER recognizing a two-fold purpose. Firstly, MILLER sought to purchase 20% of the shares of a corporation which BLAGAICH knew was not in existence; secondly, BLAGAICH, with an intent to conceal his activity from MILLER, used those monies to repay insider loans rather than for the valid corporate purpose for which they were entrusted. For these reasons, the Court determines the debt due and owing from BLAGAICH to MILLER to be nondischargeable, pursuant to 11 U.S.C., § 523(a)(2)(A).
Accordingly, the lawsuit presently pending in the Court of Common Pleas, Trumbull County, Ohio, Case Number 84-CV-1472, entitled, Kenneth Miller v. Walter C. Blagaich, Jr., and Joseph A. Nigrin, shall proceed and the amount of the Judgment, when determined, shall not be affected by the discharge granted the Debtor herein, WALTER CARL BLAGAICH, JR., in this cause.
A separate Final Judgment of even date has been entered in conformity herewith.
FINAL JUDGMENT
In conformity with the Findings of Fact and Conclusions of Law of even date herewith, it is
ORDERED AND ADJUDGED as follows:
1. This Court grants the prayer of Plaintiff, KENNETH MILLER ("MILLER"), and enters Judgment for Plaintiff, finding that the debt due and owing from WALTER CARL BLAGAICH, JR., Debtor/Defendant herein, to be non-dischargeable, pursuant to 11 U.S.C., § 523(a)(2)(A).
2. Plaintiff, MILLER, may proceed to liquidate his claim in the Court of Common Pleas, Trumbull County, Ohio, Case No. 84-CV-1472, and said Judgment, when entered, shall be a non-dischargeable debt of the Debtor herein, WALTER CARL BLAGAICH, JR. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543002/ | 67 B.R. 5 (1986)
In re CONTINENTAL AIRLINES CORPORATION, Debtor.
UNITED STATES of America (Internal Revenue Service), Appellant,
v.
CONTINENTAL AIRLINES CORPORATION, Appellee.
Civ. A. No. 85-5717.
United States District Court, S.D. Texas, Houston Division.
April 22, 1986.
*6 Steven A. Maurer, Dept. of Justice, Dallas, Tex., for U.S.
Lenard M. Parkins, Sheinfeld, Maley & Kay, Houston, Tex., for Continental Airlines Corp.
OPINION AND ORDER
McDONALD, District Judge.
Pending before the Court is the United States of America's appeal from an August 16, 1985, Order of the United States Bankruptcy Court, Case No. 83-04019-H2-5. The Court concludes that the Order of August 16, 1985, should be affirmed.
On November 10, 1983, Continental Airlines, Inc. ("CAL"), as debtor and debtor-in-possession filed its Motion for Order Authorizing Debtor-in Possession to Pay Pre-Petition Taxes. On December 12, 1983, the United States of America (Internal Revenue Service IRS) filed its memorandum of law in support of CAL's motion. Thereafter, on January 18, 1984, the United States filed its Motion for Distribution of Trust Fund Taxes. The United States' Motion and CAL's Motion were consolidated for hearing by Order of the Bankruptcy Court dated February 2, 1984. From February 1984, until November 1984, various motions were filed by other parties regarding the distribution of certain trust fund taxes claimed by the United States. On November 27, 1984, the Bankruptcy Court issued its "Order Denying Debtor's Motion to Pay Pre-Petition Taxes and Motion of the United States of America (Internal Revenue Service) for Distribution of Certain Trust Fund Taxes." In that Order, the Bankruptcy Court found that "no monies or funds were held in trust by CAL on behalf of the Internal Revenue Service and the proceeds deposited in escrow by CAL constitute property of CAL's estate." In the opinion portion of the Order, the Bankruptcy Court also found it appropriate to issue a memorandum opinion on the motions at a later date. Within the same document, the Bankruptcy Court set out its Order. The fourth subdivision of its Order stated that in "the event a timely appeal is taken the Court reserves the right to augment this Order. . . ." Six months later on May 13, 1985, the United States moved the Bankruptcy Court for an Entry of Judgment. Attached to the Motion is an affidavit by Steven A. Maurer, counsel for the United States of America (IRS). Attorney Maurer stated that he appeared at the October 22, 1984, hearing on the consolidated motions and did not receive notice of the November 27, 1984, Order until May 2, 1985, while he was in Houston reviewing another file in the Clerk's office.
On August 27, 1985, the Bankruptcy Court denied the United States' Motion for Entry of Judgment. The United States filed its Notice of Appeal and Designation of Record.
Separate Document Rule
The United States initially argues that the Order of November 27, 1984, was not an appealable judgment. Rule 9021(a) requires that every judgment, entered by the Bankruptcy Court in an adversary proceeding, be set forth on a separate document. Rule 9021(a), Bankruptcy Rules (1984). There is no sound reason why every judgment should be evidenced by a separate document. Rule 9021(a), Advisory Committee Note, Bankruptcy Rules (1984). Moreover, Rule 9021(a) was derived from Rule 58, Federal Rules of Civil Procedure, and the Supreme Court of the United States ruled that the separate document requirement in Rule 58, Fed.R.Civ.P. should not be applied in a strict, mechanical approach where the intention of the Court was to enter an appealable judgment. Bankers Trust Company v. Mallis, et al., 435 U.S. 381, 385, 98 S. Ct. 1117, 1120, 55 L. Ed. 2d 357 (1978).
A careful review of the Bankruptcy Court's November 27, 1984, Order reveals that the Court expressly noted in part four *7 of its Order its intent to issue an appealable judgment. Therefore, the Court finds that the November 27, 1984, Order was an appealable judgment.
ABUSE OF DISCRETION
The United States also asserts that the Bankruptcy Court abused its discretion by not granting to the United States relief from the November 27, 1984, judgment on the basis of Rule 60(b)(6), Fed.R.Civ.P. The United States argues that it is entitled to relief from judgment because it did not receive a copy of the November 27, 1984, Order until May 2, 1985, and the non receipt effectively deprived it of a right to appeal an Order affecting a twelve million dollar claim for taxes.
Rule 9024 of the Bankruptcy Rules makes Rule 60, Fed.R.Civ.P., applicable in this Bankruptcy case. Rule 60(b)(6) Fed.R. Civ.P., authorizes the Court to relieve a party from a final judgment or order for any reason justifying relief from the operation of a judgment. Rule 60(b)(6), Federal Rules of Civil Procedure. In this particular case, the Court concludes that the United States should not be granted additional time to file an appeal based upon Rule 60(b)(6).
Pursuant to Rule 9022, Bankruptcy Rules, the clerk is required to serve notice of the entry of a judgment on the contesting parties. The rule requires that service be noted in the docket. In this case service on the United States is not noted in the docket. Rule 9022 also states that "[l]ack of notice of the entry does not affect the time to appeal or relieve or authorize the Court to relieve a party for failure to appeal within the time allowed, except as permitted in Rule 8002." Rule 8002 requires that a notice of appeal be filed within ten (10) days of the entry of the judgment or order.
The United States contends that relief should be granted under Rule 60(b) Fed.R.Civ.P. because it did not receive notice of the November 21, 1984, Order until May 2, 1985. The use of Rule 60(b) as an extension of a party's appeal period requires a showing of extraordinary circumstances. United States v. O'Neil, 709 F.2d 361 (5th Cir.1983). The type of extraordinary circumstances recognized by the courts is where counsel used due diligence to discover the entry of a judgment but nevertheless failed to discover the entry in time to appeal. That type of extraordinary circumstance does not exist here because the United States completely failed to exercise due diligence in discovering the entry of judgment. The United States had every reason to expect that a written order disposing of the Pre-Petition Tax Motions would be issued in or about November, 1984. The United States was present in Judge Robert's chambers on October 22, 1984, when Judge Roberts orally denied the Pre-Petition Tax Motions and stated that an order would be entered once an appropriate form was submitted. Exhibit Number One of Appellee's response brief (a letter of October 26, 1984) shows that counsel for Appellee presented all parties to the Pre-Petition Tax Motions, including the United States, with a proposed order reflecting Judge Roberts' October 22 ruling. The letter also invited comments from the United States regarding the proposed order and indicated that counsel for Appellee hoped to be in a position to present the order to the Bankruptcy Court during the following week. Notwithstanding the notification to the United States and the invitation for the United States' input into development of the proposed order, it never once contacted Appellee or its counsel regarding the substance of the proposed order or the timing of its submission to the Bankruptcy Court. Moreover, the United States made no ascertainable attempts to ascertain whether an order regarding the Pre-Petition Tax Motions had been entered prior to May 1985.
These facts establish a lack of due diligence on the part of the United States. As stated earlier the Bankruptcy Judge was not authorized to extend the time for appeal merely because notice was not received by a party. Rule 9022. Notice of Entry of Judgment by the clerk is merely *8 for the convenience of the litigants. Wilson v. Atwood, 702 F.2d 77 (5th Cir.1983). The United States had an affirmative duty to monitor the docket, and by neglecting to fulfill this duty, it cannot be entitled to the extraordinary relief from the Order as provided in Rule 60(b), Fed.R.Civ.P. Accordingly,
It is ORDERED, ADJUDGED and DECREED that the United States' appeal from the August 16, 1985, Order of the United States Bankruptcy Court is hereby DENIED and the August 16, 1985, Order is AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543049/ | 67 B.R. 451 (1986)
In re Alice A. BIALON, t/d/b/a The Butterchurn, Debtor.
WESTMORELAND MALL, INC. and Equitable Life Assurance Society of the United States, Movants,
v.
Alice A. BIALON, t/d/b/a the Butterchurn, Debtor and Robert H. Sloan, Trustee, Respondents.
Bankruptcy No. 86-0507, Motion Nos. 86-2480 to 86-2482.
United States Bankruptcy Court, W.D. Pennsylvania.
December 3, 1986.
*452 Joel M. Helmrich, Tucker Arensberg, P.C. Pittsburgh, Pa., for movants.
David B. Salzman, Campbell & Levine, Pittsburgh, Pa., for debtor.
MEMORANDUM OPINION
BERNARD MARKOVITZ, Bankruptcy Judge.
Before this Court is a Motion For Relief From Automatic Stay, Objection To Claim Of Exemptions, and Motion To Withhold Granting Of Discharge brought by Movants, Equitable Life Assurance Society Of America (hereinafter "Equitable Life") and Westmoreland Mall, Inc. The Movants contend they hold a joint claim against Alice A. Bialon (hereinafter "Debtor") and Franklin C. Bialon, her husband, by virtue of a Lease Agreement executed by the Debtor and a document titled "Individual Guaranty" executed by her husband.
Equitable Life seeks to satisfy said claim from entireties property which the Debtor elected to exempt in her Chapter 7 petition pursuant to Pennsylvania law. The Debtor maintains the Movants do not hold a joint claim against entireties property, and therefore, the property is immune from process initiated by a creditor of the Debtor only.
The issue before the Court is whether the Movants hold a joint claim against the Debtor and her husband, which then subjects the entireties property to process under Pennsylvania law. If a joint claim exists, a prohibition arises against said entireties property being claimed as exempt pursuant to § 522(b)(2)(B) of the Bankruptcy Code.
Based on the following analysis, we find that the Movants hold a joint claim allowing them to pursue the entireties property of the Debtor and her husband. Furthermore, as the property is not immune from process under the nonbankruptcy law, it cannot be claimed as exempt under § 522(b)(2)(B).
We hold that the Movants are entitled to relief from the automatic stay to pursue their joint claim against the Debtor and her husband.
FACTS
On June 22, 1983, the Debtor entered into a Lease Agreement ("Lease") with Westmoreland Mall, Inc. for rental of a store located in the Westmoreland Mall. The Lease was for a term of five (5) years, commencing October 1, 1983, under which the Debtor was to pay Westmoreland Mall, Inc. or its successors, $26,725.00 annually, in monthly installments of $2,227.00.
The Debtor's husband executed a document which provided that in the event the Debtor (wife) failed to make appropriate payments pursuant to the Lease within the first two (2) years of its term, he would be liable to make said payments for the first *453 two (2) years of its term, he would be liable to make said payments for the full five (5) year lease term. If a default occurred after the first two years, said husband would not be responsible for any payment. Under section 19.01(a) of the Lease, the failure to pay any sum due within five (5) days of notice of default constituted an "event of default".
The Debtor defaulted in February, 1985, during the effective two-year period, activating the terms of the "Individual Guaranty", and continued in default thereafter.
Subsequently, she received a letter dated November 8, 1985, advising her that Westmoreland Mall, Inc. had transferred its interest in Westmoreland Mall, and had assigned her Lease to Westmoreland Mall Associates, an affiliate of Equitable Life. Westmoreland Mall, Inc. claims the Debtor and her husband are jointly liable to it under the terms of the Lease and Guaranty, in the amount of $1,455.38 plus costs and interest for payments of rent from February 1, 1985 through August 31, 1985. Equitable Life claims the Debtor and her husband are jointly liable under the terms of the Lease and Guaranty in the amount of 36,928.14 pursuant to § 502(b)(6). This figure represents one year's rent from January 1, 1986, in the amount of $26,725.00, and unpaid rent in the amount of $10,203.14, for the period of September 1, 1985 through December 1, 1985.
On March 3, 1986, Debtor filed her petition for relief under Chapter 7 of the Bankruptcy Code, wherein she elected to exempt all her entireties property pursuant to applicable Pennsylvania law. Equitable Life, as successor to Westmoreland Mall, Inc., and Westmoreland Mall, Inc. seek relief from the automatic stay to pursue the Debtor and her husband for payments and interest due and owing them by virtue of the Lease and Individual Guaranty, as more fully described above.
ANALYSIS
A debtor may claim as exempt from the bankruptcy estate, entireties property pursuant to § 522(b)(2)(B), if that property is immune from process under applicable nonbankruptcy law. The question we must decide is whether the Debtor's entireties property in this instance is immune from process under Pennsylvania law.
A succinct statement of Pennsylvania law regarding this issue was presented in Napotnik v. Equibank and Parkvale Savings and Loan Association, 679 F.2d 316 (3d Cir.1982), wherein it was held that property owned as tenants by the entireties may be reached by creditors to satisfy the joint debts of a husband and wife; the interest of the debtor in property so held is not exempt from process under Pennsylvania law; and, the debtor's interest does not qualify for an exemption under § 522(b)(2)(B). Consequently, in the case at bar, if Movants hold a joint debt of the Debtor and her husband, the entireties property is not immune from process and should be available to satisfy the claim arising under the Lease and Guaranty.
The Debtor asserts no joint debt can be found because the obligations undertaken by her and her husband were separate and distinct, evidenced by the documents themselves. We, however, find no merit in this assertion. It is of no importance that the instrument Mr. Bialon executed was entitled "Individual Guaranty", for what in fact was created was not a guaranty, but a suretyship.
Although the specific characteristics of an obligation vary from case to case, several courts have discussed the technical differences between suretyship and guaranty. Generally speaking, a guaranty is a collateral and independent obligation creating only a secondary liability, whereas a suretyship creates primary liability on both the obligor and the principal. See 17 P.L.E. Guaranty § 2. Additionally, if the contract defines the time when the obligor is to assume liability on the debt, a suretyship is created; if however the obligation is not fixed as to commencement, it is a guaranty. See 35 P.L.E. Suretyship § 3; First National Consumer Discount Company v. McCrossan, 336 Pa.Super. 541, 486 A.2d *454 396 (1984); Homewood People's Bank v. Hastings, 263 Pa. 260, 106 A. 308 (1919).
This somewhat ambiguous distinction has been rectified by the Legislature's enactment of Public Law 971, codified at 8 P.S. § 1 (Purdon's) wherein it states:
§ 1. What constitutes contract of suretyship
Every written agreement hereafter made by one person to answer for the default of another shall subject such person to the liabilities of suretyship, and shall confer upon him the rights incident thereto, unless such agreement shall contain in substance the words: "This is not intended to be a contract of suretyship," or unless each portion of such agreement intended to modify the rights and liabilities of suretyship shall contain in substance the words: "This portion of the agreement is not intended to impose the liability of suretyship." 1913, July 24, P.L. 971, § 1.
See also, Plummer v. Wilson, 322 Pa. 118, 185 A. 311 (1936) (Defendant who executed a personal guaranty was a surety and thus primarily liable with his principal for a default under a lease); Bishoff v. Fehl, 345 Pa. 539, 29 A.2d 58 (1943); In re Brock, 312 Pa. 18, 166 A. 782 (1933).
In the case at bar, the instrument the Debtor's husband executed failed to contain a disclaimer indicating it was not intended to be a suretyship; therefore, he became primarily liable upon Debtor's default. By virtue of said Lease and Guaranty respectively, the Debtor and her husband were jointly, and upon default, primarily liable to the Movants.
Furthermore, the Lease and Guaranty created identical obligations as to the duration, contingencies, and amount, thereby producing one debt payment of rent for a five (5) year term to the Lessor. Again, this debt was created when the Debtor and her husband agreed to share liability under the Lease if Debtor defaulted, which in fact, did occur.
This case is distinguishable from A. Hupfel's Sons v. Getty, 299 F. 939 (3rd Cir. 1924), cited in Debtor's brief for the proposition that a husband and wife only encumber entireties property by a "joint act". Although that case also involved a husband and wife, with one spouse agreeing to assume the other's indebtedness, the Court found no joint act because there were separate transactions and consideration for each obligation. The husband had given a bond and chattel mortgage based upon consideration of an existing indebtedness. The wife assumed her husband's indebtedness in order to obtain a liquor tax certificate and start her own business.
In the case at bar however, the consideration that the Debtor and her husband gave and received for executing the instruments, was identical. Each agreed to pay rental fees to the Lessor so that Debtor could operate a business from the leased premises in the Westmoreland Mall.
The instruments here, although physically separate, created a joint obligation and made Debtor and her husband, as surety, jointly and severally liable to the Movants. That is, when the Debtor defaulted, the Movants had the option of pursuing Debtor and her husband, or either party individually, for monies owed them under the Lease.
It becomes evident from the preceding discussion, that the Lease and Individual Guaranty created a joint debt of the Debtor and her husband owed to the Movants for rent and other fees under the Lease. As the debt is jointly owed, the entireties property is not exempt from process under Pennsylvania law. Accordingly, the property does not qualify for an exemption under § 522(b)(2)(B) and, may be reached by the creditor here to satisfy the joint debt of Debtor and her husband.
For these reasons, the Movants will be granted relief from the automatic stay to pursue their claims against Debtor and her husband.
An appropriate Order will be issued. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543056/ | 997 A.2d 754 (2010)
2010 ME 54
In re A.M.B.
Docket: Cum-09-634.
Supreme Judicial Court of Maine.
Submitted on Briefs: May 27, 2010.
Decided: June 24, 2010.
Zack M. Paakkonen, Esq., Alice A. Neal, Esq., West End Legal, LLC, Portland, ME, for A.M.B.
Patricia A. Peard, Esq., Bernstein Shur, Portland, ME, for Amicus Curiae Gay & Lesbian Advocates & Defenders.
No appellee's brief was filed.
Panel: SAUFLEY, C.J., and LEVY, MEAD, GORMAN, and JABAR, JJ.
GORMAN, J.
[¶ 1] A.M.B. appeals from a judgment entered in the Cumberland County Probate Court (Mazziotti, J.) that denied his petition to change his name. A.M.B. argues that he met all of the statutory requirements of the name change statute, 18-A M.R.S. § 1-701 (2009), and therefore the court abused its discretion in denying his petition. Because we cannot determine the basis for the Probate Court's denial, we vacate the judgment and remand for further proceedings.
[¶ 2] To obtain a name change pursuant to section 1-701, a person must petition the judge of probate in the county where the person resides and provide "due notice" of his request. 18-A M.R.S. § 1-701(a), (b). In order to ensure that the person seeking to change his name is not "seeking the name change for purposes of defrauding another person or entity or for purposes otherwise contrary to the public interest," before granting the petition, the probate judge may require the petitioner to undergo one or more of certain background checks. 18-A M.R.S. § 1-701(e), (f).
[¶ 3] In his petition, A.M.B. asserted that he had no children, no pending bankruptcy or other insolvency proceeding, and was not attempting to avoid any legal obligation. A.M.B. stated as his reason for the petition: "I no longer wish to have my current name." The record contains evidence *755 of A.M.B.'s residence in South Portland, and the court's judgment states that due notice had been provided.
[¶ 4] We review the denial of a name change petition for an abuse of the court's discretion. In re Reben, 342 A.2d 688, 695 (Me.1975). The current version of the name change statute is, essentially, a codification of the standards we articulated in Reben, with additional protections for abuse victims, see 18-A M.R.S. § 1-701(b), (c) (allowing a court to limit the notice requirement when the petitioner is an abuse victim in reasonable fear of his or her safety and also to seal the record), and additional powers for the Probate Court to order certain background checks, see 18-A M.R.S. § 1-701(e). The main purpose of the statute, however, is to provide petitioners with the certainty of a judicially-sanctioned name change, as long as the petition is not submitted with fraudulent intent and the change of name does not interfere with the rights of others. See Reben, 342 A.2d at 695.
[¶ 5] In the present case, the proceedings were not recorded, and A.M.B. submitted a statement in lieu of transcript, pursuant to M.R.App. P. 5(d), that the court accepted and augmented. The record contains no evidence that the court requested any sort of background check, the judgment contains neither findings of fact nor conclusions of law, and the court did not provide its basis for denying A.M.B.'s petition. We are cognizant that the Probate Court considers many name change petitions during a single hearing, that most of these petitioners represent themselves, and that the petitions are generally unopposed. In addition, because name change requests are rarely opposed, the hearings often are not recorded, and the petitions are typically granted in decisions without specific findings.
[¶ 6] Without any findings, however, and on this record, we are unable to determine a proper basis for denying A.M.B.'s petition. We therefore vacate the judgment and remand to the Probate Court. If, on remand, the court denies the petition, it should include findings explaining how the petition was fraudulent or otherwise contrary to the public interest. In the future, when the Probate Court denies a person's petition for a name change, the basis for the denial and adequate findings of fact to support its decision should be included in the judgment in order to permit effective appellate review.
[¶ 7] Because we vacate the judgment on other grounds, we do not address A.M.B.'s constitutional arguments. See Town of Burlington v. Hosp. Admin. Dist. No. 1, 2001 ME 59, ¶ 19, 769 A.2d 857, 864.
The entry is:
Judgment vacated. Remanded to the Probate Court for further proceedings consistent with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543062/ | 46 S.W.3d 682 (2001)
In re Testamentary Trust of Mabel R. NITSCHE.
Myrle Linn Nitsche, Myrle Linn Nitsche, Jr., Kevin Lee Nitsche, Carla Kay Keough and Brent Allen Nitsche, Appellants,
v.
St. Clair County State Bank, Respondent.
No. 23765.
Missouri Court of Appeals, Southern District, Division One
June 15, 2001.
*683 John E. Price, Carnahan, Evans, Cantwell & Brown, P.C., Springfield, for appellants.
J.D. Baker, Osceola, for respondent.
PARRISH, Judge.
Myrle Linn Nitsche, Myrle Linn Nitsche, Jr., Kevin Lee Nitsche, Carla Kay Keough and Brent Allen Nitsche (collectively referred to as petitioners) appeal a judgment of the Probate Division of the Circuit Court of St. Clair County. The judgment denied petitioners' request to terminate a testamentary trust established by the will of Mabel R. Nitsche. This court affirms.
Appellate review of a judge-tried case is undertaken on the basis that a trial court's judgment will be affirmed unless there was no substantial evidence to support it, it was against the weight of the evidence, or the trial court erroneously declared or applied the law. Pierce v. State, Dept. of Social Services, 969 S.W.2d 814, 817 (Mo.App.1998). The judgment is to be affirmed on any reasonable theory the record on appeal supports. Id.
The only record filed with this court is the legal file. The judgment in that legal file acknowledges the appearance of petitioners by their attorney and the presence of the other party to the litigation, St. Clair County State Bank (the trustee), by its attorney.[1] It acknowledges the appointment of a guardian ad litem for "unborn, unknown and/or unascertained beneficiaries." The judgment declares, "[Petitioners] and Trustee agreed orally and in open court to submit the issues framed by the pleadings herein to the Court for decision based upon said pleadings and suggestions to be filed by each at a later date." It states, "Guardian Ad Litem [Michael C.] Dawson declines the opportunity to file suggestions. The Court took all issues under advisement pending receipt and review of Suggestions." The judgment states this occurred March 28, 2000.
Docket entries, copies of which are included in the legal file, disclose that suggestions were filed by the attorney for petitioners April 13, 2000, and suggestions by the attorney for the trustee April 27, *684 2000.[2] The trial court rendered judgment June 8, 2000. It found that protected beneficiaries included "the son, grandchildren and great grandchildren (if any) of Mabel Nitsche (testator)." The trial court denied petitioners' request to terminate the trust at an earlier time than was specified by its terms.
The trial court awarded "a reasonable attorney's fee" of $650 to the trustee. Petitioners were ordered to pay that award. The order awarding attorney fees was entered June 13, 2000.
A copy of the will that established the testamentary trust is not attached to, or otherwise quoted in, the pleading on which this case was submitted to the trial court. No copy of the trust that is the subject of this appeal is included in the record on appeal. A copy of a will is included as an appendix to petitioners' opening brief. The brief states it is the will that established the trust. The trustee's brief refers to the document that is copied in the appendix to petitioners' brief as the will that established the trust and quotes from it.
"Documents attached to a party's brief but not contained in the legal file are not part of the record and will not be considered on appeal." Meyers v. Southern Builders, Inc., 7 S.W.3d 507, 512 n. 6 (Mo.App.1999). Nevertheless, a statement of fact asserted in one party's brief and conceded as true in the opposing party's brief may be considered as though it appears in the record. Robinson v. Empiregas, Inc. of Hartville, 906 S.W.2d 829, 835 n. 6 (Mo.App.1995). This court considers the trustee's reference to the will (and trust provisions therein) as a concession of the document's accuracy.
The trust identified Myrle Linn Nitsche as the "income-beneficiary." The terms of the trust require the trustee to pay the income-beneficiary the income of the trust "for and during the term of his natural life." The trust provides:
After the death of the income-beneficiary, then the remaining trust estate, including both the principal and accumulated interest of said trust estate, shall be distributed in equal shares to the natural children of the income-beneficiary. That if any of the natural children of the income-beneficiary shall have predeceased the income-beneficiary with issue surviving, then the issue of the deceased child shall represent the parent per stirpes and take the deceased parent's share. If any child of the income-beneficiary shall predecease the income-beneficiary without issue or lineal descendants surviving, then the share of the deceased child shall drop out, thereby increasing the share of the other children, or their living descendants, of the income-beneficiary....
Paragraph 4 of the petition filed in the trial court alleged, "Myrle Linn Nitsche, Jr., Kevin Lee Nitsche, Carla Kay Keough, and Brent Allen Nitsche are all of the natural children of Myrle Linn Nitsche." A copy of a document titled, "Consent to Termination of Trust," signed by Myrle Linn Nitsche, Jr., Kevin Lee Nitsche, Carla Kay Keough and Brent Allen Nitsche is included in the legal file. Paragraph 6 of the petition asserts, "Because of the cost of administration and the low yield being earned on trust assets, and because of the desires of all of the adult beneficiaries of the trust to benefit Myrle Lynn Nitsche, all remainder beneficiaries have consented to the termination of the trust in the form *685 attached hereto, executed by all of the children of Myrle Linn Nitsche." The amended answer of the trustee admits paragraph 4 but denies paragraph 6.
No hearing was held before the trial court. Although "the issues framed by the pleadings" were submitted for determination "upon said pleadings and suggestions," pleadings are not self-proving. Dement v. Barton County Mut. Ins. Co., 945 S.W.2d 606, 608 (Mo.App.1997); Danner v. Director of Revenue, 919 S.W.2d 285, 287 (Mo.App.1996). Nevertheless, admission in an answer of an allegation in the opposing party's petition concedes, for the purpose of the litigation, that the allegation is true. In re Marriage of Maupin, 829 S.W.2d 125, 127 (Mo.App.1992).
The findings of the trial court include:
1. Section 456.590.2 R.S.Mo.[[3]] is applicable to the issues raised by the parties hereto. This section permits a Court to vary the terms of a private trust, to include early termination of the trust as requested by [Petitioners] in the instant case, upon petition of all the adult beneficiaries who are not disabled, "upon finding that such variation will benefit the disabled minor unborn and unascertained beneficiaries."
...
In the case at bar, the testator made provision for an income beneficiary, Myrle Linn Nitsche. Upon his demise, the trust assets are to be distributed to his natural, not adopted, children.... [T]he Nitsche Trust names an additional class of persons, by providing that if a child of the income beneficiary predeceases the income beneficiary and also leaves issue, these issue will divide their deceased parents' share. These persons are clearly a "named class" ... and as such, a protected class under 467.590.2.
2. Returning to Section 456.590(2)[sic] RSMo. which states:
"when all the adult beneficiaries who are not disabled consent, the Court may, upon finding that such variation will benefit the disabled minor unborn and unascertained beneficiaries ... provide for termination of the trust at a time earlier ... ["]
and considering (as set out in "1" above) that the protected "beneficiaries"[[4]] under 456.590(2)[sic] include the son, grandchildren and great grandchildren (if any) of Mabel Nitsche (testator) and further considering that on the evidence available to it, the Court finds that it is unable to determine who "all the adults" are [ ] (there could be adult great grandchildren of Mabel Nitsche) for purposes of 456.590 or how it could conceivably be possible that termination of the within trust could benefit any existing or possible great grandchildren when termination would result in the payment of all corpus and income to the income beneficiary (the grandfather of these great grandchildren). [Petitioners] bear the burden of proof as to both.
(Emphasis added.)
The trial court based its judgment on two grounds, that there was no showing that all adult beneficiaries who were not *686 disabled had consented and that there was no showing early termination of the trust would benefit disabled, minor, unborn and unascertained beneficiaries. It correctly observed that § 456.590.2 requires both findings in order for it to terminate the trust as petitioners requested; that petitioners bore the burden of proof on both issues.
Petitioners present two points on appeal. Point I is directed to the denial of the petition to terminate the trust. Point II is directed to the trial court's order allowing the trustee attorney fees. Point I asserts the trial court erred in refusing to terminate the trust because of the lack of showing that disabled, minor, unborn and unascertained beneficiaries would benefit. It contends the trial court erred because "the class of unborn or unascertained beneficiaries was adequately represented and the representatives of this class effectively consented to termination of the trust." The trial court's finding that there had been no showing that all adult beneficiaries consented to termination has not been challenged on appeal.
The record before the trial court (and the record on appeal) is not sufficient to permit determination of whether all adult beneficiaries consented to early termination of the trust. Nothing in the record was sufficient to permit the trial court to ascertain if there were adult beneficiaries other than the income beneficiary's children.[5] The trial court's denial of the petition on that basis is supported by the record on which the case was submitted. The judgment is not against the weight of the evidence. The trial court did not erroneously declare or apply the law.
A judgment must be affirmed on any reasonable theory the record on appeal supports. Pierce, 969 S.W.2d at 817. Point I is denied. Petitioners' challenge to the trial court's finding that there was no showing the class of unborn or unascertained beneficiaries had not been adequately represented and had consented to the termination is moot.
Point II alleges the trial court erred in awarding attorney fees to the trustee because the judgment denying the early termination of the trust was erroneous. Point II argues "reversal of that judgment requires reversal of the order granting attorney's fees, because if the trial court's judgment is reversed, there is no statutory or contractual basis upon which to base an award of attorney's fees in favor of the [trustee]." The judgment was not reversed. Point II is denied. The judgment is affirmed.
SHRUM and MONTGOMERY, JJ., concur.
NOTES
[1] The attorney who represents petitioners in this appeal did not represent petitioners in the trial court.
[2] The docket entry erroneously characterized the trustee's suggestions as "in Support of Petition for Termination of Trust." A copy of what the trustee filed is included in the legal file entitled, "Suggestions of Law Relating to Petition for Termination of Trust."
[3] References to § 456.590.2 are to RSMo 1994.
[4] Another part of the trial court's judgment quoted the definition of beneficiaries that appears in Hamerstrom v. Commerce Bank of Kansas City, 808 S.W.2d 434, 438 (Mo.App. 1991), "`[B]eneficiaries', as that term is used in § 456.590.2, refers to those persons, including unborn and unascertained issue, individually named or who are included in a named class, identified by the testator in the testamentary trust, and for whom the testator expressed intent to make provision."
[5] There was no showing that there were no adult great grandchildren of Mabel Nitsche in being. If there were, such a person would be an adult beneficiary whose consent would be required in order to terminate the trust as requested by petitioners. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543073/ | 997 A.2d 792 (2010)
WALKER
v.
CENTRE INS.
Pet. Docket No. 92.
Court of Appeals of Maryland.
Denied June 21, 2010.
Petition for writ of certiorari denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543051/ | 997 A.2d 1035 (2010)
414 N.J. Super. 97
ARCHBROOK LAGUNA, LLC, formerly known as BDI Laguna, Inc., Plaintiff-Appellant,
v.
Charles L. MARSH, Defendant/Third-Party Plaintiff-Respondent,
v.
Peter Castenfelt, Jay Wertheimer, Klaus Kirchberger and Peter Handy, Third-Party Defendants.
DOCKET NO. A-5254-08T3.
Superior Court of New Jersey, Appellate Division.
Argued March 3, 2010.
Decided June 17, 2010.
*1036 Thomas C. Goldstein (Akin, Gump, Strauss, Hauer & Feld) of the Washington, D.C. bar, admitted pro hac vice, argued the cause for appellant (Nicoll, Davis & Spinella, Paramus and Mr. Goldstein, attorneys; Mr. Goldstein, of counsel; Daniel F. McInnis (Akin, Gump, Strauss, Hauer & Feld) of the Washington, D.C. bar, admitted pro hac vice; Allison Walsh Sheedy (Akin, Gump, Strauss, Hauer & Feld) of the Washington, D.C. bar, admitted pro hac vice and Jack T. Spinella, on the brief).
Steven Hall (Baker, Donelson, Bearman, Caldwell & Berkowitz) of the Georgia bar, admitted pro hac vice, Atlanta, GA, argued the cause for respondent (Kraemer, Burns, Mytelka, Lovell & Kulka, Springfield, and Mr. Hall, attorneys; Mr. Hall and Wayne D. Greenfeder, Springfield, of counsel and on the brief).
Before Judges FISHER, SAPP-PETERSON and ESPINOSA.
The opinion of the court was delivered by
FISHER, J.A.D.
In this appeal, we conclude that the trial judge correctly dismissed this action pursuant to the entire controversy doctrine because plaintiff failed to pursue the claims asserted here in an action previously pending in Georgia state court.
*1037 BDI Laguna, Inc. (BDIL) commenced this action against Charles L. Marsh, its former president and a resident of Georgia. This action was subsequently dismissed by way of summary judgment. Because the standards governing summary judgment entitle the motion's opponent to have the facts viewed in the light most favorable to it, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540, 666 A.2d 146 (1995), we accept the description of the relationship of the various business entities contained in BDIL's pleadings.[1]
On April 13, 2004, more than three years before the suit at hand was commenced, Marsh filed a complaint in the Superior Court of Fulton County, Georgia, against BDIL. Marsh also asserted claims against Jay L. Wertheimer, who was alleged to have been the chief executive officer and primary shareholder of BDI Distributors, Inc., BDIL's predecessor, when in 1997 he approached Marsh and solicited him to abandon his business and accept a job with BDI Distributors, Inc. According to the Georgia complaint, Wertheimer enticed Marsh by offering him, among other things, the position of president with broad powers and a right to remain in Atlanta absent his express consent. In addition, Wertheimer allegedly promised Marsh that he would receive at least 8% and up to 15% of the stock of BDI Distributors, Inc. when it was sold, i.e., what the parties have referred to as the "commission promise." Marsh accepted. As the company grew, Marsh was allegedly promised an additional 2% of the company's stock ("the stock promise") in order to entice him to remain in the event of a merger. The Georgia suit commenced by Marsh asserted the breach of these two alleged promises.
In April 2006, BDIL filed a counterclaim against Marsh in the Georgia suit. The counterclaim's first two counts asserted that Marsh breached his fiduciary duty and committed fraud by abusing his expense account. The third and last count asserted that after Marsh was asked to explain his alleged expense account "indiscretions," Marsh filed the Georgia suit in retaliation; the counterclaim's third count also alleged that Marsh's complaint was frivolous and sought the fees, expenses and costs incurred by BDIL in defending the action.
*1038 On December 3, 2007, BDIL commenced the action in the Law Division, alleging that Marsh breached his fiduciary duties and committed fraud because he failed to tell BDIL about the commission promise, which was the subject of the Georgia action, and allowed BDIL to enter into an indemnification agreement with Wertheimer to protect Wertheimer against certain types of claims that might be asserted against him. BDIL alleged in its New Jersey complaint, after expressly referring to the Georgia action, that:
5. . . . Marsh fraudulently concealed this claim for substantial stock ownership against Wertheimer throughout his employment with BDIL. Moreover, Marsh concealed this potential claim from BDIL's management even when BDIL negotiated and entered into a 2003 Indemnification Agreement . . . with Wertheimer. Marsh was directly and personally involved in negotiating this agreement. The Indemnification Agreement contractually required BDIL to not only pay for any legal fees Wertheimer incurred, but also indemnify Wertheimer for judgment against him. Marsh's concealment from BDIL of his potential claim for the 8 to 15% interest against Wertheimer constitutes a breach of his fiduciary duty as a corporate officer under the laws of New Jersey and the State of Georgia . . . .
6. The Indemnification Agreement Marsh negotiated on behalf of BDIL with Wertheimer provided that the Company would indemnify Wertheimer in the event that claims were asserted against him and identified the categories of claims covered by the Indemnification Agreement. As an officer of BDIL, Marsh had a fiduciary duty to warn the company that he had a potential claim against Wertheimer which would trigger the company's indemnification obligations under the agreement. If Marsh had disclosed this potential claim against Wertheimer, BDIL would have removed disputes relating to that claim from the scope of the indemnity agreement or would have declined to enter into the Indemnification Agreement altogether. Marsh's failure to disclose this claim to BDIL constitutes a breach of his fiduciary duty to the Company and also constituted a fraud upon the Company.
7. Marsh's breach of his fiduciary obligation and fraud . . . has directly resulted in: (1) BDIL already incurring more than $700,000 in legal fees under the Indemnification Agreement; and (2) the possibility of additional legal fees and expenses if Marsh's claims filed in Georgia against Wertheimer continue to be prosecuted by Marsh.
On January 28, 2008, nearly two months after filing its New Jersey complaint, BDIL filed a stipulation dismissing its pending counterclaim in the Georgia action without prejudice.
At a case management conference in Georgia on March 19, 2008, Marsh urged the rapid scheduling of a trial date out of a concern he would be forced to litigate with BDIL on two separate fronts. At that time, Marsh's counsel argued that BDIL's counterclaims were compulsory, which the Georgia judge found was a question she need not answer. In addition, BDIL's counsel indicated that his client was "perfectly free to take the risk that [Marsh's counsel] may prevail in convincing somebody that this is a compulsory counterclaim after we have gotten to a final judgment" in Georgia.
The Georgia action was tried in June 2008. The trial judge granted a directed verdict in favor of Wertheimer on the so-called "commission promise" at the conclusion of Marsh's case-in-chief. The jury, however, found in favor of Marsh on his claims against BDIL, awarding $2,208,724; in ruling on a post-trial motion, the judge *1039 reduced that award to $1,577,660. The jury also found BDIL liable to Marsh for his attorney's fees, and the judge quantified that claim, awarding Marsh $400,000. Final judgment was entered as to all issues and all parties on October 28, 2008.
On December 18, 2008, Marsh moved for summary judgment in this action, seeking the dismissal of BDIL's complaint based on res judicata or the entire controversy doctrine. The motion was granted by way of a written opinion and order entered on January 23, 2009. A later motion for reconsideration was denied, and plaintiff filed this appeal.[2]
The application of the entire controversy doctrine is ultimately "one of judicial fairness and will be invoked in that spirit." Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 343, 476 A.2d 250 (1984). The doctrine was judicially created as a "reflection.. . of the unification of the state courts" in light of our Constitution's recognition of "the value in resolving related claims in one adjudication so that `all matters in controversy between parties may be completely determined.'" Mystic Isle Development Corp. v. Perskie & Nehmad, 142 N.J. 310, 322, 662 A.2d 523 (1995) (quoting N.J. Const. art. VI, § 3, ¶ 4). The objectives of the entire controversy doctrine are:
(1) to encourage the comprehensive and conclusive determination of a legal controversy; (2) to achieve party fairness, including both parties before the court as well as prospective parties; and (3) to promote judicial economy and efficiency by avoiding fragmented, multiple and duplicative litigation.
[Mystic Isle, supra, 142 N.J. at 322, 662 A.2d 523.]
In considering the doctrine's application, courts are guided by the general principle that all claims arising from a particular transaction or series of transactions should be joined in a single action. Brennan v. Orban, 145 N.J. 282, 290, 678 A.2d 667 (1996). That mandate encompasses not only matters actually litigated but also other aspects of a controversy that might have been litigated and thereby decided in an earlier action. Vision Mortg. Corp. v. Patricia J. Chiapperini, Inc., 307 N.J.Super. 48, 52, 704 A.2d 97 (App.Div.1998), aff'd, 156 N.J. 580, 722 A.2d 527 (1999). The doctrine does not, however, "apply to bar component claims that are unknown, unarisen, or unaccrued at the time of the original action." Mystic Isle, supra, 142 N.J. at 323, 662 A.2d 523. And it is also understood that the entire controversy doctrine should not be applied when "joinder would result in significant unfairness [to the litigants] or jeopardy to a clear presentation of the issues and just result." Cogdell v. Hospital Ctr. at Orange, 116 N.J. 7, 27, 560 A.2d 1169 (1989) (quoting Crispin, supra, 96 N.J. at 354-55, 476 A.2d 250).
In arguing that the entire controversy doctrine should not have been applied, BDIL contends that (1) its claims against Marsh did not arise out of the same transactional facts as those involved in the Georgia suit; (2) the New Jersey claims had not accrued at the time of the filing of responsive pleadings in Georgia; (3) the entire controversy doctrine does not apply when the other suit remains pending; and (4) if applied, dismissal should only have been without prejudice. We reject all these arguments.
*1040 First, as we have noted, the applicability of the entire controversy doctrine chiefly turns on whether the separately-asserted claims "arise from related facts or the same transaction or series of transactions." DiTrolio v. Antiles, 142 N.J. 253, 267, 662 A.2d 494 (1995). DiTrolio held that a test for determining whether a litigant should assert claims in a suit, rather than save them in reserve for a later suit, is whether "after final judgment is entered, [the parties will] likely ... have to engage in additional litigation to conclusively dispose of their respective bundles of rights and liabilities that derive from a single transaction or related series of transactions." Id. at 268, 662 A.2d 494.
The claims asserted by BDIL in both its Georgia counterclaim and its New Jersey complaint were based on theories that Marsh committed fraud or breached the fiduciary duty he owed to BDIL. Although it is arguable that BDIL's Georgia counterclaim asserted different allegations of fraud or misconduct than those asserted against Marsh in its New Jersey complaint, any distinctions are not of sufficient weight to deflect application of the entire controversy doctrine. The pivotal circumstance in both the Georgia action and this action is the "commission promise." In Georgia, Marsh urged enforcement of the "commission promise" in seeking damages against BDIL; here, BDIL asserted that Marsh's failure to disclose the "commission promise" to BDIL caused it to execute the indemnification agreement and later incur damages by defending Wertheimer as ostensibly required by the indemnification agreement. These claims certainly arose from the same transaction or series of transactions.
In short, application of DiTrolio's test to the present circumstances demonstrates that the claims BDIL withheld from the Georgia suit and pursued in this action were elements of "one mandatory unit of litigation." Ibid.
Second, BDIL's argument that the claims asserted in this action had not accrued by the close of the pleading stage in Georgia is wholly without merit. As Marsh persuasively argues, any damages that BDIL may have incurred if it could prove the allegations of its New Jersey complaint accrued no later than when Marsh filed suit in Georgia. As BDIL argued in the trial court in opposing Marsh's motion for summary judgment, "Marsh's decision to sue Wertheimer in Georgia in 2004 triggered [BDIL's] obligation to pay for Wertheimer's defense, thus causing damage to the Company to the tune of more than $900,000." In short, we find no merit in this aspect of BDIL's argument, because there is no doubt that the claims in question accrued years before BDIL filed suit in New Jersey.
Moreover, this argument is belied by the fact that the complaint was filed here while the Georgia action was still pending. Without question, the New Jersey claims had accrued before the Georgia action ended since they were asserted while the Georgia action was still pending. And, even if we were to take a leap of faith and assume the New Jersey claims only became known to BDIL at or about the time the complaint was filed here, BDIL has not shown that the Georgia court would not have permitted the counterclaim to be amended to include these claims at the time the action here was commenced. The Georgia rules governing the amendment of pleadings are every bit as liberal as our own. Compare O.C.G.A. § 9-11-15 (permitting the filing of amended pleadings "as a matter of course and without leave of court at any time before the entry of a pretrial order [and] ... [t]hereafter [with consent or] by leave of court [which] shall be freely given when justice so requires") *1041 with R. 4:9-1 (permitting the filing of amended pleadings, after a responsive pleading is filed, by written consent "or by leave of court which shall be freely given in the interest of justice"). BDIL has not shown that the New Jersey claims could not have been asserted by way of an amended counterclaim in the Georgia suit.
Third, BDIL contends it had the unfettered right to file this second suit without fear of the entire controversy doctrine solely because the first suit was still pending. We find no support for this contention. Indeed, our acceptance of the argument that such a bright line rule exists would encourage the type of forum shopping and fragmentation of controversies the entire controversy doctrine was intended to preclude.
Although we said in one case that "the entire controversy doctrine only precludes successive suits involving related claims," Kaselaan & D'Angelo Assocs., Inc. v. Soffian, 290 N.J.Super. 293, 299, 675 A.2d 705 (App.Div.1996) (emphasis added), which on the surface would appear to support BDIL's argument, that statement was made in a context quite different than that at hand. In Kaselaan & D'Angelo, as well as Mortgagelinq Corp. v. Commonwealth Land Title Ins. Co., 142 N.J. 336, 662 A.2d 536 (1995), upon which the former relied, the effect of a suit filed in state court during the pendency of a federal suit was considered. Our courts have shown no hostility toward the plaintiff who files such multiple suits because of the risk that the plaintiff may be barred from federal court due to lack of subject matter jurisdiction. Absent a second suit in state court, the dismissal of the initial federal suit on jurisdictional grounds could potentially prove fatal to the plaintiff's attempt to obtain anywhere an adjudication on the merits. This potential outcome provides a sound basis for permitting multiple pending actions arising out of the same operative facts without offending the objectives of the entire controversy doctrine. It is in that context that we said the entire controversy doctrine applies only to "successive" suits.
What occurred in those cases, however, is not what was presented here. The parties to this suit were also parties to the Georgia suit, the claims that BDIL asserted here could have been asserted in the Georgia suit, and no limit on subject matter jurisdiction has been suggested as potentially interfering with a disposition of the New Jersey claims, by way of a Georgia counterclaim.
Moreover, Mortgagelinq and Kaselaan & D'Angelo recognized that in the federal/state setting the entire controversy doctrine was not necessarily precluded, only deferred. That is, those authorities reveal that the entire controversy doctrine could be applied once the first action was concluded depending upon how the first action ended. Upon dismissal of a federal suit on jurisdictional grounds, as a general matter, the second state court action will likely be permitted to be maintained. But, as Mortgagelinq and Kaselaan & D'Angelo held, when a federal suit is adjudicated on its merits, then the potential arises for a dismissal of the second suit on entire controversy grounds. Mortgagelinq, supra, 142 N.J. at 347 n. 4, 662 A.2d 536; Kaselaan & D'Angelo, supra, 290 N.J.Super. at 301 n. 1, 675 A.2d 705.[3] Here, even if we accept the applicability of the fact-specific Mortgagelinq *1042 and Kaselaan & D'Angelo holdings to this case, BDIL's argument must fail because the Georgia courts ultimately adjudicated all the parties' pleaded disputes on their merits.
For these reasons, we reject the argument that BDIL's action may proceed because it was not a "successive suit" but was filed when the Georgia action was still pending.[4]
Fourth, BDIL's argument that the trial judge should have only dismissed the action without prejudice is also without merit. On this point, BDIL is correct in only one sense. The determination that this second action between the parties may not be maintained here because of the entire controversy doctrine is "a final adjudication for purposes of any further New Jersey proceedings." Mortgagelinq, supra, 142 N.J. at 347, 662 A.2d 536. Our authority to dismiss this case goes no further than our jurisdiction and our judgment imposes no limit on the commencement of an action by BDIL in some other jurisdiction. Accordingly, the order under review may be understood as correctly barring with prejudice this action and barring as well any further or future claim in our courts based upon the transactions or series of transactions that are addressed in either the Georgia action or the action commenced here. Whether the order under review poses a bar to a suit outside our jurisdiction is not for us to say but for some other court to construe.
For these reasons, we affirm the dismissal of this action with prejudice. We find all other arguments asserted by BDIL to be of insufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Before concluding our remarks in this case, however, we find it necessary to add one other thing. As we have observed, BDIL had a full and fair opportunity to plead and prove in Georgia the claims contained in the complaint it filed here. It chose, instead, to abort its counterclaim in Georgia and to attempt to litigate its grievances against Marsh in a far away jurisdiction. Our opinion may be viewed as a condemnation of this type of forum shopping and, indeed, it is. However, we would be remiss if we did not also single out Marsh for similar criticism.
Inexplicably, despite BDIL's blatant attempt to bifurcate the parties' disputes and litigate them separately in different jurisdictions, Marsh remained silent for an unduly considerable length of time. As noted earlier, the complaint was filed on December 3, 2007. Marsh, however, did not immediately seek relief. His motion for summary judgment was not filed until December 18, 2008more than one year after the action was commenced. Arguably, Marsh intended to allow events namely the final adjudication of the earlier suit in the Georgia trial courtto preclude BDIL's ability to assert these claims in Georgia. That is, had Marsh expeditiously sought and obtained dismissal of BDIL's complaint here, BDIL might have still had time to seek leave from the Georgia court to assert these claims by way of an amended counterclaim. By delaying here, Marsh may have intended to allow the courtroom door to shut on BDIL in Georgia. If this was the tactic Marsh sought to pursue by postponing his filing of a motion for summary judgment here, it was certainly effective. But, although parties are entitled to zealously litigate in their own best interests, they also owe the judicial system a *1043 further duty. We deem it the obligation of a litigant to expeditiously move for dismissal when an action is filed in violation of the entire controversy doctrine, and we can foresee the possibility, in different circumstances, of finding an equitable basis for refusing to apply the doctrine when a litigant has unreasonably delayed in its assertion.
Affirmed.
NOTES
[1] Although the plaintiff in this action is now ArchBrook Laguna, LLC (ArchBrook), the action was commenced by its predecessor, BDIL. According to the amended complaint filed on September 24, 2008:
ArchBrook was named BDI Laguna, Inc... ., and was incorporated in Georgia, with headquarters in New Jersey. As part of a corporate restructuring, BDIL was merged into BDI Laguna Holdings, Inc. . . . BDI was then reincorporated in Nevada. ArchBrook Laguna Holdings, LLC . . . was started as a new Nevada corporation, and then assumed all of the assets and assumed liabilities of BDI in exchange for granting BDI a preferred stock position. In turn, ArchBrook Holdings contributed assets and liabilities to ArchBrook Laguna, LLC . . ., which is now a wholly owned subsidiary and the operating company of ArchBrook Holdings. ArchBrook is the successor in interest to BDI (and hence, BDIL). ArchBrook has the same headquarters, the same employees, and the same business as the old BDIL. Although ArchBrook is a separate legal entity from BDI, the total business operations, rights, and liabilities of BDIL have been carried over to ArchBrook.
This amended complaint replaced BDIL with ArchBrook as the plaintiff in the action and acknowledged that "ArchBrook is the successor in interest to . . . BDIL." Our disposition of this appeal does not require any further examination of ArchBrook's relationship to its predecessors or the convoluted corporate reorganizations that led to ArchBrook becoming the successor in interest to BDIL because they have no impact on the issues at hand. To avoid any further confusion, we will for the most part refer to the plaintiff in this action as BDIL, which was the company's name when the underlying events in question occurred.
[2] While the appeal here was pending, the Georgia Court of Appeals held that the Georgia trial judge should have granted BDIL's motion for a directed verdict and, as a result, reversed the judgment in favor of Marsh. BDI Laguna Holdings, Inc. v. Marsh, 301 Ga.App. 656, 689 S.E.2d 39 (2009).
[3] In Kaselaan & D'Angelo, we also emphasized the power of the court in the second-filed case to stay the action pending completion of the first as a means of vindicating one of the goals of the entire controversy doctrinethe preservation of judicial resources and the avoidance of duplicative and fragmented litigation. Kaselaan & D'Angelo, supra, 290 N.J.Super. at 299-300, 675 A.2d 705.
[4] Although we see no merit in this aspect of BDIL's argument, we also find that its contention that the entire controversy doctrine could not be implemented until disposition of the first suit was rendered moot once the Georgia suit ended. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543207/ | 39 F.2d 468 (1930)
RUSH et al.
v.
OURSLER et al.
FAYDER et al.
v.
LEWIS et al.
District Court, S. D. New York.
March 28, 1930.
*469 *470 *471 *472 Hayes & Uihlein, of New York City (Ben A. Matthews, James V. Hayes and Morgan J. O'Brien, 2nd., all of New York City, of counsel), for plaintiffs Rush and Hagen.
Joseph Sterling, of New York City, for plaintiffs Fayder and Kane.
O'Brien, Malevinsky & Driscoll, of New York City (Arthur F. Driscoll and Benjamin Pepper, both of New York City, of counsel), for defendants Lewis and Harris.
Hays, St. John & Buckley, of New York City (Arthur Garfield Hays and Alan S. Hays, both of New York City, of counsel), for defendant Oursler.
Paul N. Turner, of New York City, for defendant Brentano.
THACHER, District Judge (after stating the facts as above).
An ordinary observer of the three plays here involved would undoubtedly form the impression that they were of the same type and had utilized the same material that is, a shooting in a theater and the solution of the crime. But no impartial person would think that anything of importance in "The Spider" had been taken from either of the other two plays. The differences in the plays are more striking than their similarities, which relate only to the actual occurrence of the murder, and not to the solution of the mystery.
The inquiry always is: What, if anything, has been appropriated; and then, whether the appropriation was of copyrighted material and was substantial. Dymow v. Bolton (C. C. A.) 11 F.(2d) 690. The interruption of a stage performance by a murder in a crowded theater of a person seated in the audience is a dramatic incident which per se is not copyrightable, and no one could by obtaining a copyright withdraw from others the right to portray such an *473 occurrence in literary or dramatic form. The only right the owner of such a copyright would have is the right to prevent others from copying the form in which the author has chosen to dramatize such an occurrence for production upon the stage. It is not the content of dramatic or literary composition which is protected by copyright, but the form and sequence "the incidental, yet essential, adornment and trimming." It is not the subject, but its treatment, that is protected.
It follows that all of the parties to this suit, regardless of priority in copyright, were free to write and produce plays in which one of the incidents was the occurrence of such a murder, whether they obtained the idea from one of the other plays or not. This being true, intrinsic evidence of similarities must be of doubtful value in the attempt to prove copying. When two authors portray the same occurrence, in the same setting, presupposing the presence of the same people in the same environment, acting under the same emotions, similarities of incident, unaccompanied by similarities in plot, are not persuasive evidence of copying. The authors having worked with the same material to construct the environment or setting in which the action is laid, such similarities are inevitable, and the products of such labor are comparable to paintings of the same scene made by different artists. Similarities in the one case are of little more significance than in the other. When in such a case similarities are found not in the plot or in its dramatic development or in the lines or action of the principal characters, but only in incidental details necessary to the environment or setting, there is no basis upon which to found a charge of plagiarism, and it may usually be said that such material is so unimportant and so trivial that its appropriation by copying, even if shown, would not be a substantial taking of copyrighted material. The unanimous opinion of the Court of Appeals in Fendler v. Morosco, 253 N. Y. 281, 171 N. E. 56 (March 18, 1930), is an instructive application of these principles.
What has been said is a correct characterization of the evidence offered by these plaintiffs in their efforts to show infringement. For the reasons stated it is thought insufficient to show substantial appropriation of copyrighted material. The defendants have met this proof by positive denials, and have explained most of the similarities as the natural development of their own ideas in the writing and rewriting of "The Spider," which had its origin in "The Man with the Miracle Mind." It is true that in attempting to bring the audience itself into the dramatic action, and to create and continue the illusion of the occurrence of an actual murder during a theatrical performance, similarities in incidental detail were developed in the rewriting of "The Spider." These changes undoubtedly heightened and intensified the dramatic effect, and may fairly be assumed to have contributed largely to the success of the play. But in counting these similarities as proof of infringement there is double confusion first, in assuming that in contradiction of the oral testimony they were not the natural and original development of a purpose to accomplish that effect; and, second, in assuming that the effect itself is something that can be protected by a copyright.
If in "The Spider" there is anything copied from either of the other two plays (a fact which I do not believe), it was of such insignificant and unsubstantial importance that it cannot be made the basis of a charge of plagiarism. Accordingly, the complaints in these actions will be dismissed, with costs and an allowance for counsel fees of $1,000 in each case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543377/ | 997 A.2d 546 (2010)
121 Conn.App. 581
STATE of Connecticut
v.
Lenoris STARKS.
No. 29836.
Appellate Court of Connecticut.
Argued December 10, 2009.
Decided June 8, 2010.
*548 Lenoris Starks, pro se, the appellant (defendant).
Timothy F. Costello, deputy assistant state's attorney, with whom, on the brief, were Stephen J. Sedensky III, state's attorney, and Anthony Bochicchio, senior assistant state's attorney, for the appellee (state).
BISHOP, DiPENTIMA and HARPER, Js.[*]
HARPER, J.
The defendant, Lenoris Starks, appearing pro se, appeals from the judgment of the trial court denying his motion to correct an illegal sentence. The defendant claims that (1) the court improperly rejected his claim that his sentence was imposed in an illegal manner because the sentencing court mistakenly believed that it was obligated to impose a mandatory minimum sentence of three years for the defendant's violation of General Statutes § 21a-278a(b) and, consequently, improperly failed to permit the defendant to speak in mitigation of such sentence; (2) the court improperly rejected his claim that his conviction under General Statutes § 21a-278(b) was void ab initio and that the sentencing court committed plain error by sentencing him pursuant to § 21a-278(b); and (3) the sentence imposed for his violation of General Statutes §§ 21a-279(b) and 21a-278(b) violated the constitutional prohibition against double jeopardy. We reverse the judgment of the trial court only as it relates to the portion of the defendant's motion to correct that challenged the sufficiency of the evidence for his conviction under § 21a-278(b). We affirm the judgment of the trial court in all other respects.
The following facts underlie the defendant's appeal. Following a jury trial, the defendant was convicted of possession of a hallucinogenic substance in violation of § 21a-279(b), possession of a hallucinogenic substance with intent to sell by a person *549 who is not drug-dependent in violation of § 21a-278(b), possession of a hallucinogenic substance with intent to sell within 1500 feet of a public housing project in violation of § 21a-278a(b), possession of less than four ounces of marijuana in violation of § 21a-279(c) and possession of marijuana with intent to sell in violation of General Statutes § 21a-277(b).[1] The conviction arose from the defendant's conduct on January 31, 2003, when police officers, who were executing a search warrant at a residence in Danbury, observed the defendant at the residence engaging in conduct that was consistent with the illegal sale of drugs. Police surrounded the defendant as he attempted to leave the residence and, during a patdown search of the defendant, a police officer seized 3.25 grams of marijuana and ten pills containing ecstasy, a hallucinogenic substance, from the defendant's watch pocket. This court affirmed the judgment of conviction following the defendant's direct appeal. State v. Starks, 94 Conn.App. 325, 892 A.2d 959, cert. denied, 278 Conn. 918, 901 A.2d 44 (2006).
In October, 2007, the defendant filed a pro se motion in the Superior Court to correct an illegal sentence.[2] The defendant set forth four grounds in support of his motion: (1) that the sentencing court mistakenly believed that it had to impose a mandatory minimum sentence of three years incarceration for his violation of § 21a-278a(b) and, consequently, improperly failed to permit him to speak in mitigation of such sentence; (2) that the sentencing court improperly sentenced him under § 21a-278(b) because that statutory provision did not criminalize the possession of the amount of illegal drugs that were found in his possession; (3) that the court lacked subject matter jurisdiction to convict him under § 21a-278(b) because that statutory provision did not criminalize the possession of the amount of illegal drugs that were found in his possession and, thus, the conviction was void ab initio; and (4) the sentencing court relied on an inaccurate and incomplete presentence investigation report.[3]
The court held a hearing on the motion following which it denied the motion, stating that the grounds raised in the motion were not the proper subject of a motion to correct an illegal sentence. After the defendant filed the present appeal from that judgment, the court, pursuant to this court's order, filed an articulation related to its rejection of the defendant's claims that the sentencing court had imposed an illegal sentence with regard to § 21a-278a(b) and § 21a-278(b), as well as its rejection of the claim that the sentence was illegal because the sentencing court did not believe it could depart from any applicable mandatory minimum sentences.
Before turning to the defendant's claims, we set forth some principles governing our review. "It is axiomatic that, in a criminal case, the jurisdiction of the sentencing court terminates once a defendant's sentence has begun and a court may *550 no longer take any action affecting a sentence unless it expressly has been authorized to act. . . . Providing such authorization to act, Practice Book § 43-22 states: The judicial authority may at any time correct an illegal sentence or other illegal disposition, or it may correct a sentence imposed in an illegal manner or any other disposition made in an illegal manner.
"An illegal sentence is essentially one which either exceeds the relevant statutory maximum limits, violates a defendant's right against double jeopardy, is ambiguous, or is inherently contradictory. . . . Sentences imposed in an illegal manner have been defined as being within the relevant statutory limits but . . . imposed in a way which violates the defendant's right . . . to be addressed personally at sentencing and to speak in mitigation of punishment . . . or his right to be sentenced by a judge relying on accurate information or considerations solely in the record, or his right that the government keep its plea agreement promises. . . . We review the court's denial of the defendant's motion to correct the sentence under the abuse of discretion standard of review." (Citations omitted; internal quotation marks omitted.) State v. Olson, 115 Conn. App. 806, 810-11, 973 A.2d 1284 (2009).
I
First, the defendant claims that the court improperly rejected his claim that his sentence was imposed in an illegal manner because the sentencing court mistakenly believed that it was obligated to impose a mandatory minimum sentence of three years for his violation of § 21a-278a(b) and, thus, improperly failed to permit him to speak in mitigation of such sentence. We disagree.
At the time of sentencing, the sentencing court stated in relevant part: "On the charge of simple possession of a hallucinogenic, that's § 21a-279(b), I'm going to let the conviction stand. I'm not going to impose a sentence on that. I'm going to combine that with his conviction for possession of a hallucinogenic with intent to sell. That's § 21a-278(b). I'm going to sentence you to the custody of the commissioner of correction for a period of fifteen years on that. And he was also convicted.. . of committing that offense within 1500 feet of a public housing project in violation of § 21a-278a(b), and there's a three year mandatory minimumwell, consecutive [sentence] that I must impose on that. So, I'll impose that. . . . So, that's a total effective sentence of eighteen years, and including five years mandatory minimum for the possession with intent to sell as a . . . person [who is not drug-dependent].
"For the charge of possession of marijuana, I'm going to [let] that conviction stand and combine that with the conviction for possession of marijuana with intent to sell. The possession is § 21a-279(c), and the possession with intent to sell is § 21a-277(b). On the possession with intent to sell, I'm going to commit you to the custody of the commissioner of correction for a period of . . . seven years. . . . That's going to be concurrent with the first sentence. So, the total effective sentence is eighteen years, including five years mandatory minimum, and I will waive any fees and costs."
In its written articulation, the trial court set forth several reasons for rejecting the defendant's claim. First, the court observed that the sentence imposed for the violation of § 21a-278(b), fifteen years, fell within the statutory sentencing limits for the offense. The court noted that § 21a-278(b) authorized the sentencing court to impose a term of imprisonment of between five and twenty years in duration. Second, the court observed that the sentence imposed for the violation of § 21a-278a(b), three years, was within the statutory sentencing limits for the offense. The court *551 noted that § 21a-278a(b) provides that an offender "shall be imprisoned for a term of three years, which shall not be suspended and shall be in addition and consecutive to any term of imprisonment imposed for violation of section . . . 21a-278." General Statutes § 21a-278a(b). Here, the court observed, the sentencing court imposed the statutorily prescribed sentence. Third, the court rejected the defendant's assertion that the sentencing court's remarks during the sentencing proceeding, as set forth earlier in this opinion, reflected its belief that it lacked the authority to deviate from any statutorily prescribed minimum sentence in accordance with General Statutes § 21a-283a[4] for good cause shown. The court noted that the sentencing court "was not required to depart from the mandatory minimum . . . regardless of whether the defendant showed good cause to the court." Furthermore, the court observed that the record of the sentencing proceeding reflected that the sentencing court heard mitigating arguments from both the defendant and his trial counsel. On the basis of the foregoing, the court concluded that the defendant had not demonstrated that the sentencing court abused its discretion by not departing from the mandatory minimum sentence for the violation of § 21a-278a(b) but had acted well within its discretion.
After carefully reviewing the record, we conclude that it does not support the defendant's arguments. The defendant's sentence fell within the relevant statutory sentencing limits. Furthermore, the sentencing court afforded the defendant and his trial counsel an ample opportunity to address it prior to the imposition of sentence, and both the defendant and his attorney addressed the sentencing court at length in an unmistakable effort to mitigate the sentence imposed. Contrary to the defendant's interpretation of the sentencing court's comments at the time of sentencing, the record does not suggest that the sentencing court believed that it could not depart from the mandatory minimum sentence for good cause shown. The sentencing court did not state that it would not consider departing from such mandatory minimum sentence but properly observed, in accordance with § 21a-278a(b), that its sentence for the violation of § 21a-278a(b) shall be consecutive to the sentence imposed under § 21a-278(b). It was within the sentencing court's discretion to reject without discussion the defendant's attempt to demonstrate that a departure from any mandatory minimum sentence should occur in this case. Thus, we conclude that the court's analysis of the claim raised in the motion to correct was logically and legally sound; the defendant has not demonstrated that the court abused its discretion by denying the motion on these grounds.
II
Next, the defendant claims that the court improperly rejected his claim that his conviction under § 21a-278(b) was void ab initio and that the sentencing court committed plain error by sentencing him *552 pursuant to § 21a-278(b). We reject this claim.
The gravamen of the claim is that, at trial, the state did not present evidence sufficient to demonstrate that the defendant had violated § 21a-278(b), of which he stood charged. According to the defendant, the evidence did not support a finding that he had violated § 21a-278(b) because the state demonstrated that he possessed only a small amount of illegal drugs, including ecstasy. Essentially, the defendant is attacking the validity of his conviction by challenging the sufficiency of the evidence with regard to this offense. The defendant did not raise this argument in his direct appeal, and the court lacked the jurisdiction or the authority to consider such argument raised in the defendant's motion to correct an illegal sentence. The defendant was convicted of having violated § 21a-278(b), and the sentencing court imposed sentence under that provision. The defendant's arguments do not concern the legality of his sentence or the manner in which it was imposed. Accordingly, we conclude that the court properly declined to consider the defendant's arguments in this regard. "Our Supreme Court has concluded that to invoke successfully the court's jurisdiction with respect to a claim of an illegal sentence, the focus cannot be on what occurred during the underlying conviction. . . . In order for the court to have jurisdiction over a motion to correct an illegal sentence after the sentence has been executed, the sentencing proceeding, and not the trial leading to the conviction, must be the subject of the attack." (Citations omitted; internal quotation marks omitted.) State v. Koslik, 116 Conn.App. 693, 699, 977 A.2d 275, cert. denied, 293 Conn. 930, 980 A.2d 916 (2009).
Insofar as this portion of the defendant's motion to correct constituted a collateral attack on his conviction and, thus, was outside of the court's jurisdiction, the court should have dismissed, rather than denied, this portion of the motion. See, e.g., State v. Wright, 107 Conn.App. 152, 157-58, 944 A.2d 991, cert. denied, 289 Conn. 933, 958 A.2d 1247 (2008).
III
Finally, the defendant claims that the sentence imposed for his violation of §§ 21a-279(b) and 21a-278(b) violates the constitutional prohibition against double jeopardy in that it constituted a multiple punishment for the same conduct. We decline to review this claim.
The defendant acknowledges that he did not raise this claim in his motion to correct or at any time before the trial court. The defendant argues that this unpreserved claim is reviewable under State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989), or the plain error doctrine, codified in Practice Book § 60-5. 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. In the absence of any one of these conditions, the defendant's claim will fail." (Emphasis in original.) Id. An appellant may obtain review under the plain error doctrine upon a showing that failure to remedy an obvious error would result in manifest injustice. See, e.g., State v. Myers, 290 Conn. 278, 289, 963 A.2d 11 (2009) ("[an appellant] cannot prevail under [the plain error doctrine] . . . unless he demonstrates that the claimed *553 error is both so clear and so harmful that a failure to reverse the judgment would result in manifest injustice" [internal quotation marks omitted]).
As set forth previously, in a motion to correct, a defendant properly may argue that his sentence is illegal because it violates his double jeopardy rights. Also, as set forth previously, "[t]he judicial authority may at any time correct an illegal sentence.. . ." (Emphasis added.) Practice Book § 43-22. Our Supreme Court has interpreted the term "judicial authority," as used in Practice Book § 43-22, to refer to the trial court, not the appellate courts of this state. See Cobham v. Commissioner of Correction, 258 Conn. 30, 38 n. 13, 779 A.2d 80 (2001) ("[t]oday we clarify the meaning of `judicial authority' in [Practice Book] § 43-22 . . . to mean solely the trial court").
Our rules of practice confer the authority to correct an illegal sentence on the trial court, and that court is in a superior position to fashion an appropriate remedy for an illegal sentence. See id., at 39, 779 A.2d 80 (discussing trial court's unique access to certain remedies with regard to sentencing). Furthermore, the defendant has the right, at any time, to file a motion to correct an illegal sentence and raise the double jeopardy claim before the trial court. Typically, our appellate courts afford review under Golding or the plain error doctrine in circumstances in which the failure to undertake such an extraordinary level of review, effectively, would preclude an appellant from obtaining any judicial review of the claim raised. That is not the case here. Given the present circumstances, in which the defendant may seek and obtain any appropriate redress before the trial court, we are not persuaded that extraordinary review of the claim under Golding or the plain error doctrine is warranted or that our declining to review the claim would result in any hardship or injustice to the defendant.
The form of the judgment is improper. The judgment denying the portion of the defendant's motion to correct an illegal sentence in which the defendant argues that the evidence was insufficient to sustain his conviction under § 21a-278(b) is reversed and the case is remanded with direction to render judgment of dismissal. The judgment is affirmed in all other respects.
In this opinion the other judges concurred.
NOTES
[*] The listing of judges reflects their seniority status on this court as of the date of oral argument.
[1] The court imposed a total effective sentence of eighteen years imprisonment.
[2] Also, relying on State v. Casiano, 282 Conn. 614, 627-28, 922 A.2d 1065 (2007), the defendant requested the appointment of counsel with regard to his motion to correct an illegal sentence. The court appointed a public defender to review the motion, and the public defender reported to the court that a sound basis did not exist for the filing of the motion or from an appeal from the denial of the motion. Thereafter, the court informed the defendant that it would not appoint counsel to represent him. Later in the proceeding, the court denied a subsequent request by the defendant for the appointment of counsel. The defendant appeared pro se before the trial court and appears pro se in the present appeal.
[3] The defendant does not challenge the denial of this claim on appeal.
[4] General Statutes § 21a-283a provides in relevant part: "Notwithstanding any provision of the general statutes, when sentencing a person convicted of a violation of any provision of this chapter, except a violation of subsection (a) or (c) of section 21a-278a, for which there is a mandatory minimum sentence.. . the court may, upon a showing of good cause by the defendant, depart from the prescribed mandatory minimum sentence, provided the provisions of this section have not previously been invoked on the defendant's behalf and the court, at the time of sentencing, states in open court the reasons for imposing the particular sentence and the specific reason for imposing a sentence that departs from the prescribed mandatory minimum sentence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3042277/ | United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 06-1820
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Kelly R. Flow, *
* [UNPUBLISHED]
Appellant. *
___________
Submitted: April 6, 2007
Filed: April 10, 2007
___________
Before COLLOTON, HANSEN, and BENTON, Circuit Judges.
___________
PER CURIAM.
Kelly R. Flow appeals the 168-month prison sentence the district court1
imposed after she pleaded guilty to a drug conspiracy. In a brief filed under Anders
v. California, 386 U.S. 738 (1967), her counsel argues that Flow’s sentence is
unreasonable because Flow and a codefendant were equally culpable, yet the
codefendant received a 100-month prison sentence as a result of the government’s
substantial-assistance motion.
1
The Honorable Gary A. Fenner, United States District Judge for the Western
District of Missouri.
We enforce the broad appeal waiver included in Flow’s plea agreement. The
plea colloquy reflects that Flow understood and voluntarily accepted the terms of the
plea agreement, including the waiver; this appeal falls within the scope of the waiver;
and no injustice would result. See United States v. Andis, 333 F.3d 886, 889-92 (8th
Cir. 2003) (en banc) (discussing enforceability of appeal waiver); see also United
States v. Estrada-Bahena, 201 F.3d 1070, 1071 (8th Cir. 2000) (per curiam) (enforcing
appeal waiver in Anders case).
Having reviewed the record independently pursuant to Penson v. Ohio, 488
U.S. 75, 80 (1988), for any nonfrivolous issue not covered by the waiver, we find
none. Accordingly, we enforce the waiver and dismiss the appeal. We also grant
counsel’s motion to withdraw.
______________________________
-2- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1543129/ | 39 F.2d 361 (1930)
JARVIS
v.
HEINER, Collector of Internal Revenue.
No. 4227.
Circuit Court of Appeals, Third Circuit.
March 21, 1930.
George D. Wick and Smith, Shaw, McClay & Seifert, all of Pittsburgh, Pa., for appellant.
Louis Edward Graham, U. S. Atty., of Beaver, Pa., C. M. Charest, Gen. Counsel, E. G. Smith and A. J. Ward, Sp. Attys., *362 Bureau of Internal Revenue, all of Washington, D. C., and John A. McCann, of Pittsburgh, Pa., for appellee.
Before WOOLLEY and DAVIS, Circuit Judges, and JOHNSON, District Judge.
WOOLLEY, Circuit Judge.
In his income tax return for 1923, John A. Bell, later a bankrupt, made deductions for a loss and a bad debt purporting to have been sustained and suffered in that year, and in his return for 1924 he made a deduction for a loss sustained in that year. The Commissioner of Internal Revenue disallowed all deductions and assessed deficiency taxes against the taxpayer for which the Collector filed preferred claims on behalf of the government against his bankrupt estate. On exceptions they were referred to the referee who, by two reports, made sundry findings. On review the District Court sustained all the claims. Thereupon the trustee for the bankrupt appealed.
The first of these tax questions arose out of a transaction wherein Bell in 1920, acting through M. G. Leslie, a friend, put $200,000 in stock of the Lauraine Magneto Company. The stock was taken in the name of Leslie and pledged as collateral on bank loans for the same amount ostensibly made to him with Bell as guarantor. The Magneto Company went into bankruptcy in 1921 and the final dividend was declared in 1923, paying in all about sixty-six per cent. of the proved debts. Manifestly, Leslie or Bell sustained a loss at some time or other. Bell regarded the loss as his and deducted it in his income tax return for 1923.
The Commissioner disallowed the deduction on the theory that the stock was a gift by Bell to Leslie and therefore the loss was not deductible by the donor. The referee held that the transaction was an investment and that Bell had sustained the loss, but that he sustained it not in 1923, the taxable year of his return, but in 1922 when the Magneto Company's stock became worthless as shown by its proceedings in bankruptcy and therefore the loss was not deductible. On review the learned District Court approved the referee's allowance of the Collector's tax claim but on the theory that the loss was sustained in 1921 because of the adjudication of the Magneto Company in that year.
It is clear from the evidence that the transaction was not a gift to Leslie but an investment by Bell; and that Bell, even though he completed the transaction with money borrowed through the medium of Leslie which he has never repaid, sustained a loss in law. The only remaining question relates to the year in which the loss was sustained, for unless it was sustained during the taxable year 1923 for which the return was made it was not, under section 214 (a) of the Revenue Act of 1918 (40 Stat. 1057), deductible.
In mid-year of 1921 an involuntary petition in bankruptcy was filed against Lauraine Magneto Company, a corporation, and in default of an answer it was, a few days later, adjudged a bankrupt. The learned District Court held that the adjudication in bankruptcy was an adjudication of insolvency and that the taxpayer's loss was sustained when insolvency thus occurred; and, further, that as the adjudication was binding on all the world, a stockholder of the bankrupt corporation, himself becoming bankrupt, could not through his trustee be heard to refute the adjudged fact of insolvency in an unrelated controversy between himself and the government's tax collector.
We find ourselves unable to subscribe to this ruling. We agree, of course, that the adjudication was, for the purpose of administering the debtor's property, conclusive upon all the world. But we are not here administering that debtor's property. And so far as the adjudication declared the status of the debtor as a bankrupt, strangers to the decree may not attack it collaterally. Michaels v. Post, 21 Wall. 398, 428, 22 L. Ed. 520, 526; New Lamp Chimney Co. v. Ansonia B. & C. Co., 91 U.S. 656, 661, 662, 23 L. Ed. 336, 338, 339. Compare Hebert v. Crawford, 228 U.S. 204, 208, 209, 33 S. Ct. 484, 57 L. Ed. 800, 803, 804. "But an adjudication in bankruptcy, like other judgments in rem, is not res judicata as to the facts or as to the subsidiary questions of law on which it is based, except as between parties to the proceeding or privies thereto." Gratiot County State Bank v. Johnson, Trustee, 249 U.S. 246, 39 S. Ct. 263, 63 L. Ed. 587, 588; Manson v. Williams, Trustee, 213 U.S. 453, 29 S. Ct. 519, 53 L. Ed. 869, 872. The nominal parties to a bankruptcy proceeding are the petitioning creditors and the bankrupt himself. By force of the statute (USCA title 11, § 41, subsec. (b) not only the bankrupt but "any creditor" may appear and, thus becoming a party, may by pleading to the petition contest the allegation of insolvency. Of course, the same right extends to privies holding under such parties.
*363 But a stockholder of an alleged bankrupt corporation is neither a party nor a privy to a bankruptcy proceeding. As he has no right to be heard on the issue of insolvency, adjudication of that issue is not binding on him as to the facts on which it is based. This brings us to the time of the Magneto Company's insolvency and, accordingly, to the time of Bell's loss.
The company was adjudged a bankrupt in June, 1921. Appraisements of its personal and real estate were filed in August and November following. They showed that the Magneto Company had more assets than liabilities and, inferentially, that the company was solvent. Bankruptcy Act, section 1 (15), 11 USCA § 1(15). The schedules were filed in February, 1922, showing assets two and one-half times greater than debts. The year in which the claims of creditors were to be filed, thus tentatively establishing the aggregate debts, expired in June, 1922. The claims were not passed upon until April, 1923, when the amount of the debts was finally established. But the assets, real and personal, were sold late in 1921 for sums less by $17,400 than their value as disclosed by the schedules filed in 1922, all of which resulted in a calculation as to solvency which we shall not repeat but from which, when reduced to its minimum, the Collector concedes that Bell might in 1921 have expected to realize $10,000 or $11,000 on his investment of $200,000. On these figures we agree with the referee that, so far as Bell was concerned, the Magneto Company's insolvency first became established and known in 1922 and that his loss occurred in that year, but we do not agree with him in allowing the Collector's tax claim based on those facts and on the Commissioner's disallowance of deduction for the loss in Bell's 1923 return.
While Bell's loss was sustained in 1922 and would ordinarily be deductible only in that taxable year, it happened that in 1922 Bell, who had been dealing heavily in stocks, had sustained a "net loss" as shown in his return. By reason of that fact and by force of the Revenue Act of 1921 (section 204, sub-sec. (b) he had a right to carry over his 1922 loss and apply it against income of the year 1923. Whether or not Bell knew what he was doing, that is what he did. It follows that on this exception to the general rule the deduction should have been allowed and the Collector's claim against the taxpayer's bankrupt estate based on its disallowance should have been denied.
The second question concerns a deduction of $82,460.35 made by the bankrupt taxpayer in his 1923 return for a bad debt suffered in a stock transaction with William A. Magee, which the Commissioner disallowed. This is a fact question. As no principle of law is involved it will be enough to say that we stand with the referee and trial judge in finding that the debt was not bad in a legal sense and in sustaining the Collector's tax claim against the bankrupt's estate based on the disallowance of the deduction and the consequent determination of an additional tax.
The third question concerns a loss of $531,150.64 sustained by the bankrupt taxpayer in relation to stock of O. A. Kraeer Company, deducted by him in his 1924 return and disallowed by the Commissioner. The District Court approved the disallowance and sustained the Collector's claim against the bankrupt's estate for the additional tax. The Collector confesses error as to this item.
That part of the order of the District Court by which it allowed the Collector's first and third tax claims, based on disallowance of deducted losses in respect to the Lauraine Magneto Company and O. A. Kraeer Company stock transactions, is reversed and that part of the order by which it allowed the Collector's second tax claim based on the disallowance of the deduction of a claimed bad debt owed by William A. Magee is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543227/ | 46 S.W.3d 394 (2001)
Esequiel GUTIERREZ, Appellant,
v.
The STATE of Texas, Appellee.
No. 13-00-274-CR.
Court of Appeals of Texas, Corpus Christi.
April 12, 2001.
*395 Donald B. Dailey, Jr., Portland, for Appellant.
Michael Hess, Asst. Dist. Atty., Patrick Flanigan, Dist. Atty., Sinton, for the State.
Before Chief Justice VALDEZ and Justices DORSEY and RODRIGUEZ.
OPINION
Opinion by Justice RODRIGUEZ.
Esequiel Gutierrez, Jr., appellant, pleaded guilty to delivery of a controlled substance. The trial court found him guilty, sentenced him to confinement for one year, but suspended his sentence and placed him on community supervision for three years. Thereafter, appellant's community supervision was revoked and he was sentenced to confinement for one year. On appeal, appellant contends the trial court abused its discretion in revoking community supervision because the State failed to exercise due diligence in procuring his arrest and because the only evidence establishing a violation of his community supervision was inadmissible hearsay. We reverse and remand.
As a condition of his community supervision, appellant was committed to the Coastal Bend Regional Restitution Center. On March 8, 1998, the State filed a motion to revoke probation alleging appellant violated conditions of his community supervision in that he intentionally and knowingly withdrew himself from the restitution center without permission, and that he intentionally and knowingly left a community corrections facility in violation of section 38.113(a) of the Texas Penal Code. The trial court signed an order for appellant's arrest on May 7, 1998. He was arrested on the motion to revoke on March 22, 2000, some twenty-two months after the court entered the order of arrest, and seven months after the expiration of his community supervision.
Appellant filed a motion to dismiss the State's motion to revoke probation on the basis that the State failed to exercise due diligence in executing his arrest. The court held a hearing on the motion to dismiss and the motion to revoke on the same date. The court denied appellant's motion to dismiss and revoked his community supervision.
By his first issue, appellant asserts the trial court abused its discretion in revoking community supervision because the *396 State did not exercise due diligence in arresting him after the motion to revoke had been filed.
A trial court retains jurisdiction to revoke community supervision after the period of community supervision has expired so long as a motion to revoke was filed and a capias issued before the expiration of the period. Harris v. State, 843 S.W.2d 34, 35 (Tex.Crim.App.1992); Langston v. State, 800 S.W.2d 553, 554 (Tex. Crim.App.1990) (per curiam). Assuming this jurisdictional requirement is met, the State must use due diligence in executing the capias that results from the motion to revoke. Harris, 843 S.W.2d at 35. The State's failure to exercise due diligence in the execution of the capias gives rise to a plea in bar or defense. Connolly v. State, 983 S.W.2d 738, 741 (Tex.Crim.App. 1999). Once the defendant meets the burden of production by raising the due diligence issue at the revocation hearing, the State has the burden of persuasion to show that it exercised due diligence. Brecheisen v. State, 4 S.W.3d 761, 763 (Tex.Crim.App. 1999); Rodriguez v. State, 804 S.W.2d 516, 518 (Tex.Crim.App.1991).
Here, the motion to revoke was filed and the order of arrest was entered before the expiration of appellant's community supervision. Thus, the issue in this case is whether the State exercised due diligence in apprehending appellant. The evidence showed appellant was living at the restitution center prior to the filing of the motion to revoke and had left the center without permission at the time the motion was filed. The State had the address where appellant resided prior to his admittance at the restitution center and attempted to contact him there by sending him a letter. The letter informed appellant that a motion to revoke had been filed and that there was a warrant for his arrest. The State also conducted a warrant and criminal history check on appellant, possibly to determine if he was in custody in another county. The State made no other attempt to contact appellant. A probation officer testified that appellant did not have a phone, so the State could not call him.
The court of criminal appeals has found that the State did not exercise due diligence in cases in which a significant period of time elapsed between the filing of the motion to revoke and the arrest, and between the expiration of probation and the arrest. See Harris, 843 S.W.2d at 35-36; Rodriguez, 804 S.W.2d at 517; Langston, 800 S.W.2d at 554. In those cases, the State knew the probationers' addresses, yet failed to make any meaningful effort to apprehend them. Harris, 843 S.W.2d at 35-36 (no due diligence when appellant was arrested almost ten years after it filed a motion to revoke, motion to revoke was filed after the appellant ceased reporting to his probation officer, the State performed records checks with the local police and the Texas Department of Public Safety, requested updated address information from the post office, contacted references on the appellant's personal information sheet, and there was no evidence the appellant went into hiding); Rodriguez, 804 S.W.2d at 517-518 (no due diligence when approximately two years passed between the motion to revoke and revocation of probation, there was a one year lapse between the expiration of probation and the revocation of probation, and the State knew the appellant's address and place of employment, yet did not attempt to apprehend him); Langston, 800 S.W.2d at 554-55 (no due diligence when eight months passed between the filing of the motion to revoke and the arrest, over seven months lapsed between the expiration of probation and the arrest, the State knew the appellant's address, and there was no evidence the appellant was in hiding).
*397 This Court has held that a trial court did not err in finding the State exercised due diligence when four months lapsed between issuance and service of the capias, the appellant apparently gave his probation officer misinformation regarding his address, and multiple attempts were made to locate the appellant by contacting his relatives, checking with the post office for a forwarding address, and enlisting the assistance of the Palacios Police Department to find him. Rodriguez v. State, 951 S.W.2d 199, 202 (Tex.App.-Corpus Christi 1997, no pet.).
Under the circumstances in this case, we are unable to conclude the State exercised due diligence in executing appellant's arrest. There was a significant lapse of time between the filing of the motion to revoke and appellant's arrest, as well as the expiration of community supervision and the arrest. During that period, the State's only actions in attempting to apprehend appellant were mailing a letter to his address and conducting a criminal history and warrant check.
Unlike cases upholding a trial court's finding of due diligence, there is no evidence in this case that the delay in apprehending appellant was appellant's own fault. See Strickland v. State, 523 S.W.2d 250, 251 (Tex.Crim.App.1975) (delay was explained when it was proven that defendant's address at the time the motion to revoke was filed was entirely different from the address he had reported to the probation office); Rodriguez, 951 S.W.2d at 201-02 (delay was explained because appellant provided probation officer with six different addresses, none of which were in the city where he was residing). Here, the State presented no evidence appellant evaded service or was in hiding. That appellant left the restitution center without permission, which was the underlying reason for the revocation of his community supervision, does not excuse the State's failing to take any significant action toward apprehending appellant, particularly when it knew his address.
The trial court should have granted appellant's motion to dismiss. Appellant's first issue is sustained. Because his first issue is dispositive, we do not reach appellant's remaining issues. See Tex.R.App. P. 47.1
The judgment of the trial court is REVERSED, and the cause is REMANDED to the trial court for action consistent with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543226/ | 39 F.2d 561 (1930)
In re BEHRENS.
No. 221.
Circuit Court of Appeals, Second Circuit.
March 3, 1930.
Hugh J. O'Brien, of Rochester, N. Y., for appellant.
Richard H. Templeton, U. S. Atty., of Buffalo, N. Y., for the United States.
Before L. HAND, SWAN, and MACK, Circuit Judges.
SWAN, Circuit Judge (after stating the facts as above).
Why the United States of America, which was not a party to the petition, is named as the appellee on appeal, passes comprehension. But we will assume that we may ignore the failure to issue a citation to the real respondents and may consider them as properly before this court and represented by the United States attorney.
*562 This appeal has been presented in complete oblivion on the part of counsel as to any difficulties in the matter of jurisdiction. We are given no intimation of the theory upon which the petitioner thinks he may maintain this summary proceeding for the suppression of evidence, the return of his property, and the issuance of an injunction pendente lite. The argument has proceeded as though the sole question for determination were the legality or illegality of the search and seizure under the circumstances disclosed by the petition and opposing affidavits. But, before this question is reached, others clamor for solution. Viewed as an application to suppress evidence, has the court jurisdiction before any criminal prosecution was commenced, or the petitioner even arrested? Viewed as an effort to recover possession of property illegally withheld by the prohibition administrator, has the court power in a summary proceeding to direct an order to such an official? It is regrettable that the court has received no assistance from either counsel in the solution of these preliminary questions, which go to the jurisdiction of the District Court and must be dealt with before the validity of the seizure can be considered.
At the outset it must be noted that possession of petitioner's property is alleged to be in the prohibition administrator. If the property were under the control of an officer of the court, whether he be the United States attorney, the marshal, the clerk, or an attorney at law admitted to practice before the District Court, the court's disciplinary power over its own officers might supply the necessary jurisdictional fact for a summary proceeding to direct him to return property illegally withheld from its owner, even before criminal prosecution or proceedings for forfeiture had been commenced. This was the basis for Judge Hough's consideration of the owner's motion for return of a book held by the district attorney in United States v. Maresca, 266 F. 713, 717 (D. C. S. D. N. Y.). There the moving party was under indictment, but there is a dictum that the right to move would exist even were no prosecution pending. See, also, United States v. Hee, 219 F. 1019, 1020 (D. C. N. J.); Weeks v. United States, 232 U.S. 383, 398, 34 S. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177; Cogen v. United States, 278 U.S. 221, 225, 49 S. Ct. 118, 73 L. Ed. 275. But a prohibition administrator is not an officer of the court; he is an officer of another branch of the government, and, in the present instance, neither he nor his deputies have assumed to act pursuant to any judicial authority or process. Jurisdiction to order such an officer to return property illegally seized and wrongfully detained must find a basis other than the court's disciplinary power over its own officers.
In United States v. Hee, supra, it was held that the District Court had no jurisdiction in a summary proceeding to order the return of property illegally seized by revenue officers, where no proceedings for forfeiture had been started. Accord, In re Allen, 1 F. (2d) 1020 (D. C. W. D. Pa.); similarly, as to customs officers, In re Chin K. Shue, 199 F. 282, 285 (D. C. Mass.); Sims v. Stuart, 291 F. 707 (D. C. S. D. N. Y.); as to immigration officials and other government officers, Weinstein v. Attorney General, 271 F. 673, 675 (C. C. A. 2); as to prohibition officers, Applybe v. United States, 32 F.(2d) 873 (C. C. A. 9), on rehearing (C. C. A.) 33 F. (2d) 897; Lewis v. McCarthy, 274 F. 496 (D. C. Mass.); United States v. Casino, 286 F. 976, 978 (D. C. S. D. N. Y.). In the case last cited it is said:
"It is clear that the owner of property unlawfully seized has without statute no summary remedy for a return of his property. U. S. v. Maresca (D. C.) 266 F. 713; In re Chin K. Shue (D. C.) 199 F. 282. He may have trespass, or, if there be no statute to the contrary, replevin; but, just as in our law no public officer has any official protection, so no individual has exceptional remedies for abuse of power by such officers. We know no `administrative law' like that of the civilians."
With this statement of the law we entirely agree, provided the property is detained by one not an officer of the court.
The National Prohibition Act, by section 25 of title 2 (41 Stat. 315, 27 USCA § 39), and section 16 of title 11 of the Espionage Act (40 Stat. 229, 18 USCA § 626), provide a summary remedy for the return of property illegally seized on search warrant. Gallagher v. United States, 6 F.(2d) 758 (C. C. A. 2); Cogen v. United States, 278 U.S. 221, 226, 49 S. Ct. 118, 73 L. Ed. 275. Section 26 of title 2 of the National Prohibition Act (27 USCA § 40) provides for seizure, without a warrant, of vehicles engaged in the illegal transportation of liquor, and for the disposition of such property after the conviction of the person in charge of the vehicle. See Margie v. Potter, 291 F. 285 (D. C. Mass.). But the National Prohibition Act is strangely silent as to the seizure or the forfeiture of property declared by the act to *563 be contraband, not seized on warrant or in transportation. It is such type of seizure with which this appeal is concerned, and no statutory provision has been discovered which gives the court jurisdiction to determine in a summary proceeding the legality of the seizure, unless it be section 934, Revised Statutes (28 USCA § 747). That section provides:
"All property taken or detained by any officer or other person, under authority of any revenue law of the United States, shall be irrepleviable, and shall be deemed to be in the custody of the law, and subject only to the orders and decrees of the courts of the United States having jurisdiction thereof."
In view of section 5 of the Willis Campbell Act (42 Stat. 223 [27 USCA § 3]) and the decisions of the Supreme Court in Maryland v. Soper, 270 U.S. 9, 46 S. Ct. 185, 70 L. Ed. 449, and United States v. One Ford Coupé, 272 U.S. 321, 47 S. Ct. 154, 71 L. Ed. 279, 47 A. L. R. 1025, we entertain no doubt that section 934 (28 USCA § 747) is applicable to seizures by prohibition agents of property subject to be taken under authority of any revenue law in force when the National Prohibition Act was enacted and not directly in conflict therewith. The intimation of this court to the contrary in The Blairmore, 10 F.(2d) 35, 37, was uttered before the above-mentioned Supreme Court opinions were rendered, and no longer controls us.
The section under discussion makes the property irrepleviable and subject to the orders of the "courts of the United States having jurisdiction thereof." This latter clause means the court having jurisdiction of proceedings for condemnation of the property, which would seem to be the District Court of the district in which the seizure was made. See Gillam v. Parker, 19 F.(2d) 358, 361 (D. C. E. D. S. C.); Church v. Goodnough, 14 F.(2d) 432, 434 (D. C. R. I.). Hence we conclude that the District Court has jurisdiction to direct the officer who detains the seized property as to its disposition. This is perfectly clear after process in forfeiture proceedings has been issued. See cases cited in United States v. Hee, 219 F. 1019, 1021 (D. C. N. J.). Before such process has been issued, jurisdiction exists to order the officer to elect either promptly to institute proceedings for forfeiture or to abandon the seizure and return the property. This course has been followed, and the reasons therefor are well stated, in several District Court cases. See Standard Carpet Co. v. Bowers, 284 F. 284 (D. C. S. D. N. Y.); Gillam v. Parker, supra; Church v. Goodnough, supra. It has the sanction of so high an authority as Chief Justice Marshall in Slocum v. Mayberry, 2 Wheat. 1, 9, 4 L. Ed. 169, a case which arose under the Embargo Act of April 25, 1808 (2 Stat. 499) and before the enactment of section 934, Revised Statutes (28 USCA § 747). He there said:
"The party supposing himself aggrieved by a seizure cannot, because he considers it tortious, replevy the property out of the custody of the seizing officer, or of the court having cognizance of the cause. If the officer has a right, under the laws of the United States, to seize for a supposed forfeiture, the question, whether that forfeiture has been actually incurred, belongs exclusively to the federal courts, and cannot be drawn to another forum; and it depends upon the final decree of such courts whether such seizure is to be deemed rightful or tortious. If the seizing officer should refuse to institute proceedings to ascertain the forfeiture, the district court may, upon the application of the aggrieved party, compel the officer to proceed to adjudication, or to abandon the seizure."
If the delay in instituting a suit for forfeiture has been so great as to preclude success in such a proceeding it has been held that the goods may be ordered returned to the owner. In re Brenner, 6 F.(2d) 425 (C. C. A. 2). See, also, Margie v. Potter, 291 F. 285 (D. C. Mass.).
None of these cases, however, go to the extent of holding that the legality of the seizure may be determined on a summary petition by the owner for the return of his property. On the contrary, they strongly intimate that the owner's proper and orderly procedure is to determine this question upon proceedings for forfeiture. Cf. Panzich v. United States, 285 F. 871 (C. C. A. 9). In the case at bar, the undesirability of deciding the merits upon affidavits is peculiarly present because the affidavits are insufficient to enable us to know the exact arrangement of the dwelling and garage, just how the officers made their entry into the cellar, and where the various articles seized were located. Such details are often of controlling importance. See Earl v. United States, 4 F.(2d) 532 (C. C. A. 9); Gay v. United States, 8 F. (2d) 219 (C. C. A. 9); Schnorenberg v. United States, 23 F.(2d) 38 (C. C. A. 7); Raniele v. United States, 34 F.(2d) 877 (C. C. A. 8); De Pater v. United States, 34 F. *564 (2d) 275 (C. C. A. 4); Alvau v. United States, 33 F.(2d) 467 (C. C. A. 9).
Our conclusion is that, upon the appellant's petition, the court should not have passed upon the legality of the seizure, but should have directed the prohibition administrator, assuming he was served with the show cause order or voluntarily appeared, either to institute proceedings promptly (and we should suppose ten days would be sufficient time) or to abandon the seizure and return the property. While this was not the precise relief prayed for by the petition, we think the prayer for return of the property was sufficient to authorize it. Dismissal of the petition as was done below and in United States v. Hee, supra, leaves the property owner unduly at the mercy of a procrastinating officer. If forfeiture is to be sought, no reason appears for delay, and every consideration of fairness and of economy requires promptness. It may also be proper to enjoin destruction of the property if there was any real showing of danger that this would be done before the property had been judicially condemned. While it is true that the property is chattels and that the officer might be compelled to respond individually in damages for its tortious destruction, the fact that the res is held for judicial condemnation may justify an injunction to preserve it until the court directs what disposition is to be made of it. However, we need not now decide that question, as the appellant asked this relief and the appellees have not appealed. As the district attorney was alleged to have no control over the seized property, the petition was properly dismissed as to him.
It is apparent that we have dealt with the above-discussed problems on the assumption, justified by the affidavits, that the property was seized and detained under authority of a revenue law. Rev. St. § 934 (28 USCA § 747). What the owner's remedy may be to recover property otherwise seized or detained, we need not now consider. It is apparent also that we have not passed upon the legality of the seizure, and that nothing has occurred in the present proceeding to impair the appellant's right to move for suppression of the evidence in any criminal prosecution which may have been or shall be subsequently brought against him.
The order of dismissal is reversed, and the cause remanded for further proceedings in accordance with this opinion. No costs in this court are allowed to either party. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644776/ | 4 So. 3d 1238 (2009)
UNITED AUTO. INS. CO.
v.
ORTIZ.
No. 3D09-592.
District Court of Appeal Florida, Third District.
March 13, 2009.
Decision without published opinion. Cert.denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543200/ | 39 F.2d 763 (1930)
NICKMAN
v.
NEW YORK LIFE INS. CO.
No. 5492.
Circuit Court of Appeals, Sixth Circuit.
April 11, 1930.
*764 J. A. Cline, of Cleveland, Ohio (Cline & Patterson, of Cleveland, Ohio, on the brief), for appellant.
A. D. Baldwin, of Cleveland, Ohio (Garfield, Cross, MacGregor, Daoust & Baldwin, of Cleveland, Ohio, on the brief), for appellee.
Before DENISON and HICKS, Circuit Judges, and ANDREW M. J. COCHRAN, District Judge.
HICKS, Circuit Judge.
Suit upon three life insurance policies each providing for double indemnity "upon receipt of due proof that the death of the Insured resulted directly and independently of all other causes from bodily injury effected solely through external, violent and accidental cause. * * *" Appellant (plaintiff below) assigns error upon the ruling of the court directing a verdict for defendant upon the ground that the death of the insured, Nickman, did not result from bodily injury effected through accidental cause. There is substantial evidence that the insured died from sunstroke. There is much controversy over whether sunstroke is a disease, or is to be classed as bodily injury effected through violent and external means. We do not deem it necessary to decide the point. Assuming that death resulted from bodily injury, we conclude that there is no substantial evidence that such injury was effected through accidental cause.
Nickman, fifty years old, weighing one hundred and forty-five pounds, in good health, a partner in a real estate firm in Cleveland, Ohio, left his home on Edington Road, Cleveland Heights, about 9 o'clock a. m., August 3, 1928. At that hour, according to the United States Weather Bureau, the temperature in Cleveland registered eighty-three degrees. He took his two sons to a barber shop, returned home and went from there to a point on Fifty-Seventh street off Euclid avenue, where one Zaslovsky was roofing a building for him. He remained there from 9:30 to about 11:45. He spent 35 or 40 minutes of this period standing near a hot kettle in which tar was being prepared for the roof, and engaging in an argument with Zaslovsky over the price of the work. The building was one story, about 8 ½ feet high and 40 feet long, and somewhat surrounded by taller buildings. While there, he went upon the roof three or four times by means of a ladder and watched the work. About 12 o'clock he went to his office in the Schofield building. He then went upon an errand and returned to the building about 12:30. He there had a conference with his partner upon a business matter, and then went to the office of an abstract company about 1,500 feet away. He returned to the office about 2:15 or 2:20, sick and dizzy. His head was hot, his face red, he held his head in his hands, visited the toilet and went out into the hall for water at 10 or 15 minute intervals. He left the office about 2:50, went to a bank some 1,500 feet away and thence home, where he arrived about 4 o'clock. His condition soon became alarming. He was very red, very dizzy, and breathed with difficulty. He vomited and became unconscious. His temperature was between 107 and 108 degrees. He was taken to a hospital where he died in about an hour and a half after his arrival there.
Although it be accepted that Nickman's death was caused by his exposure to excessive heat, it is just as evident that it was not caused by accident. The high temperature was not an accident any more than excessive cold or an extraordinary storm. It was an unusual atmospheric condition, but it was not unnatural, nor did it spring up suddenly after Nickman left home. The lowest temperature was 74° at 6 a. m. It was 79° at 9 o'clock and 83° at 10 o'clock. There was a gradual rise until the maximum, 92°, was reached a few minutes after 4 p. m. The mean temperature for the day was 83° or 11° higher than normal for August 3d. From the time he left home, the excessive heat certainly affected Nickman's sensibilities just as it did that of all other persons in Cleveland similarly exposed. It cannot be reasonably thought that he did not foresee the phenomena of a rising temperature. The workmen on the roof foresaw and wore wet cloths under their hats to protect themselves. Nothing occurred at any time to cause the insured to be involuntarily exposed. He went exactly when, where, and as he intended to go throughout the day. He did just as he intended to do. He was exposed by no mishap or misadventure as in Elsey v. Fid. & Cas. Co., 187 Ind. 447, 120 N.E. 42, L. R. A. 1918F, 646, where the insured suffered a sunstroke because a street car in which he was sitting had been drawn from the shade into the sun; or, as in Richards v. Stan. Acc. Ins. Co., 58 Utah, 622, 200 P. 1017, 17 A. L. R. 1183, where from misinformation as to the distance to be traveled into the desert, the insured took an insufficient supply of water; or, as in the illustration in the English case of Sinclair v. Maritime Passengers Assur. Co., 3 El. & El. 487, of one at sea in an open boat by reason of shipwreck; or, as in *765 Manufacturers Acc. Indem. Co. v. Dorgan (C. C. A.) 58 F. 945, 953, 22 L. R. A. 620, where the insured, unconscious from a temporary affliction, fell into a brook and drowned; or, as in Ashley v. Agr. Life Ins. Co., etc., 241 Mich. 441, 217 N.W. 27, 58 A. L. R. 1208, where a hunter became lost and died from freezing; or, as in the common illustration of one, deprived of his vehicle, being compelled to walk an inordinate distance in the heat of the sun. Other apt illustrations will readily occur. Here nothing affected the insured's power to will, to choose, or to direct his movements. There was nothing accidental in walking the streets, standing near the hot kettle, climbing the ladder, or standing upon the roof. These were all intentional acts. He did not, of course, intend to be stricken, and his death was therefore unexpected, but it was not caused by accidental means. The best that may be said for plaintiff's case is that the insured's death was unexpectedly brought about by acts which the insured himself intentionally committed. While going about his business affairs, he simply exposed himself to the heat longer than his body could endure.
We think, therefore, that the case is controlled by United States Mutual Association v. Barry, 131 U.S. 100, 121, 9 S. Ct. 755, 33 L. Ed. 60, as construed by this court in Pope v. Prudential Ins. Co. of America, 29 F.(2d) 185, 186, wherein Judge Denison said:
"The evidence recited, what the court had said in its charge to the jury, and the comments of the Supreme Court, all indicate that the approved theory of recovery was that there had been some slip or mishap attending Barry's act in jumping to the ground, whereby his intended act was, as to the manner of its execution, transformed into an unintended one."
In the same case, the court also said:
"There is no occasion to deny that a death, so resulting, may be in a very proper sense an accidental death; but there is obviously a substantial distinction between an accidental result and the result of an accidental cause. We think it not only to be the natural meaning of the words, as they would be understood by the ordinary policyholder, but the right construction thereof, supported by the weight of authority, that when the insured or those acting with his consent did precisely what they intended to do and in the way which they intended, knowing that injury often did result and might be unavoidable, and where there was no slip or misstep in the performance, and where there was no ignorance of any material factor, this conduct cannot be said to have been the accidental cause of the injury which unfortunately may follow."
Continental Casualty Co. v. Pittman, 145 Ga. 641, 89 S.E. 716, and Harloe v. Calif. State Life Ins. Co. (Cal. Sup.) 273 P. 560 (both sunstroke cases) are in accord. See also Caldwell v. Travelers' Ins. Co., 305 Mo. 619, 267 S.W. 907, 39 A. L. R. 56; Stone v. Fid. & Cas. Co., 133 Tenn. 672, 182 S.W. 252, L. R. A. 1916D, 536, Ann. Cas. 1917A, 86. We are aware that the highest courts of other jurisdictions entertain divergent views as in the cases of Bryant v. Continental Cas. Co., 107 Tex. 582, 182 S.W. 673, L. R. A. 1916E, 945, Ann. Cas. 1918A, 517, and Higgins v. Midland Cas. Co., 281 Ill. 431, 118 N.E. 11, each of which differs from the Pope Case in its interpretation of the Barry Case. In such cases as Mather v. London Guarantee & Acc. Co., 125 Minn. 186, 145 N.W. 963, and Railway Officials, etc., Ass'n v. Johnson, 109 Ky. 262, 58 S.W. 694, 52 L. R. A. 401, 95 Am. St. Rep. 370, peculiar policy contracts were involved. Other cases tried under some particular statute might be cited, and still other cases such as Continental Cas. Co. v. Clark, 70 Okl. 187, 173 P. 453, L. R. A. 1918F, 1007, are diametrically in opposition. However, we think the true rule is announced in the Pope Case, and is applicable here, and we are content to follow it.
The judgment is, therefore, affirmed. | 01-03-2023 | 10-30-2013 |
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