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https://www.courtlistener.com/api/rest/v3/opinions/1545033/ | 417 A.2d 326 (1980)
Grace WAZ
v.
The ESTATE OF Madeleine JUDGE and Philip Judge, Executor of the Estate of Madeleine Judge.
No. 77-448-Appeal.
Supreme Court of Rhode Island.
July 24, 1980.
*327 Kenneth A. Colaluca, Cranston, for appellant.
John J. Vallone, Jr., Louis J. Vallone, Providence, for appellees.
OPINION
DORIS, Judge.
This is an appeal from a Superior Court order in a probate proceeding, granting the appellee's motion to dismiss the appellant's claim of appeal and denying the appellant's motion to file a belated appeal. We reject the appellant's challenge and affirm the order of the Superior Court.
On September 7, 1961, Madeleine Judge executed a document purporting to be her last will and testament. In that document she named her son, Philip G. Judge (appellee), executor and her daughter, Grace J. Waz (formerly Janicki) (appellant), alternate executrix.
Approximately four months prior to her death, Madeleine Judge executed a second document purporting to be her last will and testament and in which she named her daughter executrix. This document dated January 16, 1967, was substantially different from the 1961 will and was the subject of ten years of litigation. This litigation concluded on June 9, 1977, when we upheld a Superior Court judgment holding that the January 16, 1967 document failed for lack of testamentary capacity. Judge v. Janicki, 118 R.I. 378, 374 A.2d 547 (1977).
A petition to admit the purported September 7, 1961 will was filed in the Cranston Probate Court, and on August 11, 1977, a decree was issued admitting the will to probate.
Pursuant to G.L. 1956 (1969 Reenactment) § 33-23-1,[1] as amended by P.L. 1975, *328 ch. 120, § 1, appellant filed in the Probate Court a claim of appeal to the Superior Court on October 14, 1977, sixty-four days after entry of the probate decree. In her claim appellant "request[ed] an extension of [the] appeal period on the grounds of newly discovered evidence."
Pursuant to § 33-23-1 appellant filed her reasons of appeal on November 2, 1977, eighty-three days after entry of the probate decree.[2] This time appellant claimed the existence of "extraordinary circumstances and factual situation[s] involved in the estate * * *."
The appellee filed a motion to dismiss appellant's appeal on the grounds that she had failed to comply with the time requirements of 33-23-1 and that, therefore, the Superior Court lacked jurisdiction to hear the matter.
On November 17, 1977, ninety-eight days after entry of the probate decree, appellant filed an objection to appellee's motion to dismiss the appeal.
Simultaneously with the filing of her objection appellant filed a "Motion For Leave To File A Belated Appeal" pursuant to G.L. 1956 (1969 Reenactment) § 9-21-6,[3] as amended by P.L. 1972, ch. 169, § 7. In her motion appellant stated "that the circumstances of this case are of such importance and are so unique as to warrant * * * an extension of the appeal period * *."
On November 19, 1977, appellee filed an objection to appellant's motion, claiming that the Superior Court lacked jurisdiction because appellant failed to file a petition within the ninety-day time period set forth in § 9-21-6.
The trial justice entered an order on December 9, 1977, denying appellant's motion for leave to file a belated appeal and granting appellee's motion to dismiss appellant's appeal.
On appeal appellant does not, and indeed cannot, argue that she perfected her claim of appeal under § 33-23-1. The claim of appeal was filed sixty-four days after entry of the August 11, 1977 probate decree, well beyond the time allowed under that statute. The lower court, therefore, lacked jurisdiction to hear the matter under this claim. Steinhof v. Keefer, 101 R.I. 472, 224 A.2d 897 (1966).
The appellant does challenge, however, the trial justice's denial of her motion to file a belated appeal under § 9-21-6. She contends that her claim of appeal and reasons of appeal constituted a petition within the meaning of the statute. She further contends she satisfied the time limits of § 9-21-6 because her reasons of appeal were filed on November 2, 1977, eighty-three days after the 1961 will had been admitted to probate.
The statute in question, § 9-21-6, is quite explicit: an appeal may be allowed "upon petition filed within ninety (90) days after the entry of such * * * decree * * *." Here, appellant's November 17 motion for leave to file a belated appeal was clearly void because it was filed ninety-eight days after entry of the probate decree. The lower court lacked jurisdiction to entertain the matter under this motion. See Walquist v. Hodson, 53 R.I. 322, 323, 166 A. 546, 547 (1933).
It is evident that appellant sought to convert her claim of appeal and reasons of *329 appeal, filed under § 33-23-1, into a petition for leave to file a belated appeal under § 9-21-6. But even though the claim of appeal and reasons of appeal were filed within the time limits of § 9-21-6, neither appeal apprised the trial justice of the fact that appellant sought relief under that statute. "[I]t is incumbent upon counsel to direct the trial court's attention to the specific statute or rule on which the movant relies * * *." Shannon v. Norman Block Inc., 106 R.I. 124, 129, 256 A.2d 214, 218 (1969).
We have recognized "that courts of a state take judicial notice of its public statutes and if the facts alleged in the declaration bring the case within the statute it is, under these circumstances, unnecessary to declare specifically upon the statute." Landi v. Kirwin & Fletcher, 52 R.I. 57, 59, 157 A. 301, 302 (1931).
In the present case, however, the trial justice could not take judicial notice that appellant was implicitly relying on § 9-21-6 in her claim of appeal and reasons of appeal. The averments made in those actions did not constitute grounds allowed under the statute. In her claim of appeal appellant averred "newly discovered evidence" and in her reasons of appeal she averred "extraordinary circumstances and factual situation[s] involved in the estate * * *." Although § 9-21-6 is a curative statute, one must expressly allege that there was a failure to claim an appeal or that such failure was due to accident, mistake, unforeseen cause, or excusable neglect.[4]
Clearly the trial justice was not reasonably informed that the appellant was attempting to invoke § 9-21-6 since the appellant did not state she was relying on the statute and/or did not recite grounds upon which relief could be afforded thereunder. We therefore cannot say that from a review of the entire record, the findings of the trial justice were clearly wrong or the trial justice misconceived or overlooked material evidence in granting the appellee's motion to dismiss the appellant's claim of appeal and in denying the appellant's motion to file a belated appeal. Raheb v. Lemenski, 115 R.I. 576, 579, 350 A.2d 397, 399 (1976).
The appellant's appeal is denied and dismissed, the order is affirmed and the case is remanded to the Superior Court.
MURRAY, J., did not participate.
NOTES
[1] Although appellant did not expressly state she was relying on § 33-23-1 when she filed her claim of appeal, she used a form customarily used in accordance with the statute. The statute reads in pertinent part as follows:
"Any person aggrieved by an order or decree of a court of probate may * * * appeal therefrom to the superior court * * * [w]ithin twenty (20) days after entry of the * * * decree * * * [and] shall file in the office of the clerk of the probate court a claim of appeal * * *."
[2] Reasons of appeal may be filed pursuant to § 33-23-1 "[w]ithin thirty (30) days after the entry of such order or decree * * *."
[3] The statute, § 9-21-6, reads as follows:
"Allowance of appellate proceedings after time expired. When any person is aggrieved by an order, decree, decision or judgment of the district court or of any probate court or town council from which an appeal or other review is available in the superior court, and from accident, mistake, unforeseen cause, excusable neglect has failed to claim his appeal, the superior court, if it appears that justice so requires, may, upon petition filed within ninety (90) days after the entry of such order, decree, decision, or judgment, allow an appeal to be taken and prosecuted upon such terms and conditions as the court may prescribe."
[4] Prior to 1972, § 9-21-6 gave jurisdiction to the Supreme Court to hear a petition to file a probate appeal out of time within a one-year period. The older statute included "lack of evidence newly discovered" as grounds to grant such a petition. The statute was repealed by P.L. 1972, ch. 169, § 7, and in its present form gives jurisdiction to the Superior Court. Lack of newly discovered evidence, however, is no longer recognized as grounds to grant a petition. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545048/ | 23 F.2d 905 (1928)
NUNES
v.
UNITED STATES.
No. 2128.
Circuit Court of Appeals, First Circuit.
February 2, 1928.
William W. Blodgett, of Pawtucket, R. I., for plaintiff in error.
*906 Joseph E. Fitzpatrick, Asst. U. S. Atty., of Providence, R. I. (John S. Murdock, U. S. Atty., of Providence, R. I., on the brief), for the United States.
Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.
BINGHAM, Circuit Judge.
The defendant was indicted in six counts for violating laws relating to the revenue. He was found guilty and sentenced upon counts 1, 2, and 5. In the first count he was charged with unlawfully and knowingly having in his possession and control four stills set up for production of spirituous liquors, without having registered the same (Rev. St. § 3258 [26 USCA § 281; Comp. St. § 5994]); in the second, with carrying on the business of a distillery, without giving bond (Rev. St. § 3281 [26 USCA § 306; Comp. St. § 6021]); and, in the fifth, with carrying on the business of a distiller with intent to defraud the United States of the tax on the product (Revenue Act 1926, title 7, § 701 [26 USCA §§ 192, 206]).
After the government had completed the presentation of its testimony, all of which was admitted without exception or objection, the defendant filed the following motion:
"And now comes the defendant in the above-entitled cause, and moves that the search warrant used in obtaining evidence in said case be quashed, and the evidence obtained thereunder be suppressed, because he says that the premises searched under said search warrant and in which the evidence was seized was a private dwelling house, and that the affidavit on which said search warrant was issued did not allege that a sale of an intoxicating beverage had been made."
The motion was denied and the defendant excepted. Its denial is the only error assigned now relied upon.
Under this assignment it is contended on behalf of the defendant that the affidavit upon which the search warrant was based was inadequate in that it did not set out facts sufficient to show that the dwelling house was used for the sale of intoxicating liquor or in part as a store, shop, saloon, restaurant, hotel, or boarding house, as required by section 25, title 2, of the National Prohibition Act (27 USCA § 39); and (2) that the motion to quash and suppress the evidence was seasonably made.
It appeared in evidence that the defendant and his wife owned a dwelling house at No. 1306 Broad street, Central Falls, Rhode Island; that it was a four-tenement house, each tenement being rented to different families; that the cellar was rented to one Fernandez; that defendant and his wife occupied a room on the fourth floor, rented of a tenant; that the search and seizure made by the officers was confined to the cellar and the first floor; that they seized four stills, which were in operation, and a large quantity of intoxicating liquor; and that the stills and liquor were found in the cellar. In addition to oral evidence of the above facts, one of the stills and a sample bottle of the liquor seized were put in evidence. It also appeared that at the time of the seizure the defendant and his wife were about the premises and knew of the search and seizure.
In view of the fact that the defendant knew of the search and the seizure of the still and liquor prior to the trial, and made no objection to the admission of the oral testimony relating to the search and seizure, or to the introduction in evidence of the things seized, his motion to quash the warrant and to suppress the evidence was made too late, and cannot be availed of, as he had adequate opportunity to present the matter raised by his motion in advance of the trial. Segurola v. United States, 275 U. S. ___, 48 S. Ct. 77, 72 L. Ed. ___, decided November 21, 1927.
In that case it was said:
"The principle laid down by this court in Adams v. New York, 192 U. S. 585, 24 S. Ct. 372, 48 L. Ed. 575, and recognized as proper in Weeks v. United States, 232 U. S. 383, 395, 34 S. Ct. 341, 58 L. Ed. 652, 656, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177, and in Marron v. United States, No. 185, 275 U. S. ___, 48 S. Ct. 74, 72 L. Ed. ___, October term, 1927, decided this day, applies to render unavailing, under the circumstances of this case, the objection to the use of the liquor as evidence based on the Fourth Amendment. This principle is that, except where there has been no opportunity to present the matter in advance of trial (Gouled v. United States, 255 U. S. 298, 305, 41 S. Ct. 261, 65 L. Ed. 647, 651; Amos v. United States, 255 U. S. 313, 316, 41 S. Ct. 266, 65 L. Ed. 654, 656; Agnello v. United States, 269 U. S. 20, 34, 46 S. Ct. 4, 70 L. Ed. 145, 149), a court, when engaged in trying a criminal case, will not take notice of the manner in which witnesses have possessed themselves of papers or other articles of personal property, which are material and properly offered in evidence, because the court will not in trying a criminal cause permit a collateral issue to be raised as to the source of competent evidence. To pursue it would be to halt in the orderly progress of a cause and consider incidentally a question which has happened *907 to cross the path of such litigation and which is wholly independent of it. In other words, in order to raise the question of illegal seizure, and an absence of probable cause in that seizure, the defendants should have moved to have the whisky and other liquor returned to them as their property and as not subject to seizure or use as evidence. To preserve their rights under the Fourth Amendment, they must at least have seasonably objected to the production of the liquor in court. This they did not do, but waited until the liquor had been offered and admitted, and then for the first time raised the question of legality of seizure and probable cause as a ground for withdrawing the liquor from consideration of the jury. This was too late."
This disposes of the case, but as the evidence discloses that the place searched was not occupied by the defendant as his private dwelling, and the motion fails to state that it was his private dwelling, and as no claim was made by the defendant either in his evidence or in the motion that the still and liquor seized were his property, no ground appears upon which it can be said that the affidavit was insufficient to justify the issuance of the warrant and that the evidence should have been rejected, even if objection had been seasonably made. Klein v. United States (C. C. A.) 14 F.(2d) 35, 36; Agnello v. United States, 269 U. S. 20, 23, 46 S. Ct. 4, 70 L. Ed. 145. In the latter case the admission in evidence of narcotics seized at Agnello's home by officers of the United States without a warrant, though a violation of his constitutional rights, was held not to be a violation of the constitutional rights of the other defendants, whose homes were not searched, and did not render the evidence inadmissible as against them.
The judgment of the District Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544577/ | 133 F.2d 235 (1942)
KEMLER
v.
UNITED STATES.
No. 3789.
Circuit Court of Appeals, First Circuit.
December 30, 1942.
Rehearing Denied January 27, 1943.
*236 J. C. Johnston and Aaron J. Bronstein, both of Boston, Mass., for appellant.
Thomas P. O'Connor, Asst. U. S. Atty., and Edmund J. Brandon, U. S. Atty., both of Boston, Mass., for appellee.
*237 Before MAGRUDER, MAHONEY, and WOODBURY, Circuit Judges.
WOODBURY, Circuit Judge.
This appeal is from a judgment of the district court sentencing the defendant to a fine and imprisonment after he had been found guilty by a jury of violating Section 39 of the Criminal Code, 18 U.S.C.A. § 91.[1]
It appears that the defendant, who was born on May 28, 1910, was duly registered on October 16, 1940, in accordance with the provisions of the Selective Training and Service Act of 1940, 50 U.S.C.A.Appendix § 301 et seq., and regulations promulgated thereunder, and that on May 24, 1941, he duly filed his selective service questionnaire. On September 8, 1941, he was classified by his local board as 1-H and on September 15 following he was duly notified thereof. It is conceded that under the regulations then in effect this deferred classification was appropriate for one of the defendant's age.
On January 26, 1942, the defendant received a notice from his local board to report to its examining physician on February 1 following for a physical examination. On the day before this examination was to take place the defendant presented himself at the examining physician's office; told the doctor that he was not a well man due to a heart condition, and offered the doctor $500 "if the doctor would examine him and defer him on the following day", or, in the words of the confession to be considered hereafter, "if he (the doctor) would say that his heart was weak." The doctor refused the offer, apparently with some warmth, and on February 1 when the defendant reported for physical examination according to the notice which he had received he was questioned by local and federal officers, as will appear in more detail hereafter, and then was placed under arrest.
The defendant does not deny, nor can he, that there is sufficient evidence to indicate that he offered the above sum of money to the doctor for the purpose of inducing the latter to certify that he was unfit for military service, but he contends that this action on his part was not in violation of the statute under which he was indicted and tried. We do not agree.
Writing such parts of the statute as are here material in one unbroken sentence it reads: "Whoever shall promise any money to any person acting for or on behalf of the United States in any official function, under or by authority of any department or office of the government thereof, with intent to influence his decision on any matter which may by law be brought before him in his official capacity, shall be fined and imprisoned."
It is admitted that the doctor to whom the money was offered had been regularly appointed as the medical examiner or examining physician of the defendant's local board and that he had duly and regularly qualified as such. From this it seems to us clear that the doctor, as such examining physician, if he was not an "officer of the United States", was at least a person called upon to act "for or on behalf of the United States in an official function under the authority of a department and office of the Government" as alleged in the count of the indictment under which the defendant was found guilty and sentenced. See United States v. Bordonaro, D.C., 253 F. 477. But the defendant contends that because of his *238 deferred classification his local board could not legally order him to report for a physical examination until it had reclassified him as 1-A, which he says it had not done, and notified him thereof, which admittedly was not done, and therefore that if the doctor had examined him he would not in so doing either have been acting in an official function, or have been called upon to give a decision upon a matter which could by law have been brought before him in his official capacity.
We are not by any means persuaded that under the Selective Training and Service Act of 1940, and the regulations promulgated thereunder which were in force at the time the offer to bribe was made, the local board could not legally have ordered the defendant to report for a physical examination as it did, but we need not discuss this question because it seems to us beside the point. The question is not whether the defendant would have been legally justified in refusing to present himself for physical examination. He did present himself for that examination according to the notice which he had received. He did what he was told to do, but attempted to evade what he suspected might be the consequences thereof by offering a bribe and this, in our opinion, is sufficient.
The clear purpose of the statute is to protect the public from the evil consequences of corruption in the public service. Thus the gravamen of the offense described therein is the giving or offering of a bribe to a person acting on behalf of the United States for the purpose of influencing official conduct. Obviously no one would give or offer a bribe unless he expected to gain some advantage thereby, and since attempting to gain an advantage by this means is the evil which the statute is designed to prevent, it can make no difference if after the act is done the doer discovers that for some reason or another, be it a mistake on his part or a mistake on the part of some officer or agency of the United States, there was actually no occasion for him to have done it. The statute is violated when a bribe is given or an offer to bribe is made regardless of the occasion therefor, provided it is done with the requisite intent and provided the acceptor or the offeree of the bribe is a person of the sort described in the statute.
Considering the regulations as a whole, it seems to us clear that it was the examining physician's function to give physical examinations to such registrants as the local board sent to him and to report the results thereof to the board on forms sent by the board to him, but that it was not his function to determine what persons should come up for examination. There is no provision anywhere requiring that the doctor be shown a registrant's questionnaire, nor is there any provision requiring him to interview a registrant for any purpose other than to determine physical or mental condition. And the regulations are clear that the required physical examination included an examination for certain specified heart conditions. Thus we are of the view that if the doctor had examined the defendant he would have been acting in an official function and would have been called upon to render a decision upon a matter which could by law have been brought before him in his official capacity. The fact that before induction into the army the defendant would receive a more thorough physical examination does not affect his guilt under this statute. Sears v. United States, 1 Cir., 264 F. 257.
The suggestion that the doctor could not legally have examined the defendant on February 1, 1942, because he was then required to report the results of that examination upon a specified form which at that time had not been printed and distributed comes to nothing because the instructions to draft boards then in effect authorized the interim use of the old form previously used with two additional questions typewritten or stamped thereon.
The defendant further contends that he should be discharged for the reason "that a prosecution cannot be had under a general statute if there is a special statute governing the acts charged" and he cites as the applicable special statute sections 7 and 11 of the Selective Training and Service Act of 1940. Section 7 forbids the payment of bounties; the hiring or enlistment or induction of substitutes, or the payment of money in substitution for training and service under the Act, or liability therefor, and section 11 provides a penalty for knowingly making false statements of fitness or unfitness, or liability or nonliability for service, or otherwise evading either registration or service under the Act. Neither of these sections specifically covers the crime of bribery or attempted bribery. Under these circumstances it seems to us clear that the defendant was *239 indicted and tried under the appropriate statute.
In concluding this part of the opinion it suffices to say that upon careful consideration we are of the view that the defendant's objections to the form of the indictment are without merit.
We come now to the defendant's principal contention which is that the admission in evidence of his confession was clear error which requires that he be given a new trial.
When evidence of an alleged confession of the defendant was offered he objected and requested that the court hear evidence as to the admissibility thereof on voir dire. Thereupon the court dismissed the jury and said to counsel: "I will admit the evidence of an alleged confession unless I find that there was inflicted upon the defendant physical suffering, or unless he was threatened with physical suffering, or unless threats or promises were made to him which were likely to lead him to make a false statement." Counsel for the defendant then told the court that he took the position "that a confession made when a person is under illegal restraint is as a matter of law involuntary" and the court replied: "I will rule as a matter of law that if the only alleged defect in the confession is that the defendant was under unlawful arrest, that would not make the confession inadmissible."
The evidence offered on voir dire shows that at some time during the afternoon of February 1 the exact hour is not disclosed in the record before us the defendant reported for physical examination at the headquarters of his local board, which was in the local police station, in accordance with the notice which he had received. It does not appear what transpired when he first arrived, but at about 4 o'clock Captain Tappan of the local police, who was also a member of the local board, arrived at the station, confronted the defendant with the doctor's version of the events of the afternoon before, and asked the defendant for an explanation. When it became evident that no satisfactory explanation would be forthcoming the defendant repeatedly answered that he did not remember Captain Tappan notified the local office of the Federal Bureau of Investigation and shortly after 6 o'clock two federal agents arrived. These men, upon being informed of the situation, talked with the defendant, but they also were unable to elicit any satisfactory answers from him.
About half-past seven the defendant asked permission to talk on the telephone with his brother-in-law who was a member of the bar. Permission was immediately granted and soon thereafter the brother-in-law arrived. The situation was explained to him and he was permitted to talk with the defendant in private. As a result of this conference the defendant agreed to confess and promptly did so in the presence of Captain Tappan and the federal agents, one of whom wrote it down. The defendant then read the confession over, or had it read to him by his brother-in-law the evidence is conflicting and signed it.
There is no evidence that the defendant suffered any physical violence of any kind. There is no evidence that he was subjected to many hours of continuous questioning; that he was deprived of needed food or sleep, or that he was held incommunicado. In fact it appears that he was repeatedly offered food which he refused; that he was allowed to call his brother-in-law as soon as he asked permission to do so, and, since his confession was given soon after 8 p. m. on February 1, he could not have been deprived of needed sleep. There is not even any evidence that he was questioned continuously during the few hours that he was at the police station.
The court below found that no misrepresentations of fact were made to the defendant for the purpose of inducing him to confess, but he found that there was a conflict in the evidence as to whether or not promises of leniency were made which induced the confession. On this point the court said: "I am inclined to believe that there may have been an impression created that it would be better for the defendant to confess than for him not to confess but taking into account all the circumstances, more particularly the fact that throughout the latter part of the evening or, rather the early part of the evening the defendant had the advantage of consultation with his brother-in-law who was a member of the bar, and was able freely to discuss matters with his brother-in-law in the absence of any Government officers, I cannot believe that the testimony is sufficient to warrant me to exclude the confession under those rulings of the Supreme Court of the United States or others binding upon me."
*240 The evidence in the record clearly supports the conclusion reached by the court below, and since its conclusion was arrived at after weighing the credibility of witnesses whose testimony was in conflict, that conclusion is not reviewable by us. We find nothing in the record to indicate any abuse of discretion on the part of the court below.
We are not aware of any case which holds that a confession made by a person under illegal restraint is, as a matter of law, made involuntarily. The only case cited to us by the defendant in support of his proposition is Tilley v. Damon, 11 Cush. 247, decided by the Supreme Judicial Court of Massachusetts in 1853. But this case only holds that a promise to marry is not enforceable by civil action when the promise was made by a defendant at a time when he was under illegal arrest on a bastardy charge.[2] We fail to see its pertinence here.
It was argued before us at length that the court below committed fundamental error when it permitted the jury to have before it during its deliberations a copy of the statute under which this indictment was laid. Without objection or exception the statute was read to the jury by the court in its charge. We find no prejudicial error in permitting the jury to have a copy of it.
The defendant's other exceptions have been considered by us, but we find them to be without merit.
The judgment of the District Court is affirmed.
On Petition for Rehearing.
Apparently we misunderstood the oral argument of counsel for the defendant. On petition for rehearing we are informed that the court below did not give to the jury a copy of the statute under which the indictment was laid, but that what happened was that it allowed the jury to have a copy of a memorandum dated December 15, 1941, addressed by National Headquarters of the Selective Service System to all State Directors (Local Board Release No. 66) on the subject of "Classification and Physical Examination Amendment to Regulations III." This, we are now informed, is the alleged error of which counsel for the defendant complained at length in his oral argument before us.
Since this memorandum was offered and admitted as an exhibit in the case it was not error for the court below to have sent it out to the jury for them to examine during their deliberations. It would have been error to have done otherwise. The question is whether or not it was error to have admitted the memorandum in evidence as an exhibit in the first place. We address ourselves to that question.
Turning to the record it appears that when the exhibit was offered, counsel for the defendant objected, but the district court overruled the objection stating, according to the bill of exceptions, "that the memorandum was admitted only for the purpose of showing what instructions were received by Dr. Musgrave as of December 15, 1941, with respect to his work as an examining physician of Local Board No. 128, Revere". We find no error in the ruling of the court below admitting this document in evidence.
As appears above the statute proscribes the act of promising money to any person acting for or on behalf of the United States in any official function with intent to influence that person's decision upon "any matter which may by law be brought before him in his official capacity." So, to make out its case, the government had to show that the condition of the defendant's heart was a matter which the draft board doctor was called upon by law to consider. This the government accomplished by the exhibit which gives in full the text of the regulations, as they were then, with respect to the duties of the examining physicians of local boards, and among the duties enumerated in the regulations was the duty to examine for certain specified heart conditions. We fail to see how the government could prove this necessary element of its case in any more satisfactory way than by introducing in evidence the written instructions to the doctor. It seems to us that the admission of the exhibit was so clearly correct that further discussion is unnecessary.
*241 The other matters urged upon us in support of this petition have either been considered already or else are too trivial to warrant comment.
The petition for rehearing is denied.
NOTES
[1] "Bribery of United States officer. Whoever shall promise, offer, or give, or cause or procure to be promised, offered, or given, any money or other thing of value, or shall make or tender any contract, undertaking, obligation, gratuity, or security for the payment of money, or for the delivery or conveyance of anything of value, to any officer of the United States, or to any person acting for or on behalf of the United States in any official function, under or by authority of any department or office of the Government thereof, or to any officer or person acting for or on behalf of either House of Congress, or of any committee of either House, or both Houses thereof, with intent to influence his decision or action on any question, matter, cause, or proceeding which may at any time be pending, or which may by law be brought before him in his official capacity, or in his place of trust or profit, or with intent to influence him to commit or aid in committing, or to collude in, or allow, any fraud, or make opportunity for the commission of any fraud, on the United States, or to induce him to do or omit to do any act in violation of his lawful duty, shall be fined not more than three times the amount of money or value of the thing so offered, promised, given, made, or tendered, or caused or procured to be so offered, promised, given, made, or tendered, and imprisoned not more than three years."
[2] Cf. Pierce v. United States, 160 U.S. 355, 357, 16 S. Ct. 321, 322, 40 L. Ed. 454, in which Mr. Justice Brown speaking for the Supreme Court said: "the mere presence of officers is not an influence. Confessions are not rendered inadmissible by the fact that the parties are in custody, provided that such confessions are not extorted by inducements or threats." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857925/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-90-283-CR
LARRY LATULIP,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 167TH JUDICIAL DISTRICT
NO. 103,378, HONORABLE BOB JONES, JUDGE
Appeal is taken from a conviction of theft of property of the value of seven hundred
fifty dollars or more but less than twenty thousand dollars. See Tex. Penal Code Ann. § 31.03
(e)(4)(A) (1989). Trial was before the court upon a plea of not guilty. Punishment was assessed
at ten years' confinement and a fine of ten thousand dollars. The period of confinement and nine
thousand dollars of the fine were probated.
Appellant urges three points of error. He asserts that the evidence is insufficient
to prove that: (1) the appellant appropriated property in the manner alleged in the indictment;
(2) Kim Merrill was a special owner of the stolen property at the time appellant acquired or
exercised control over the property; and (3) any property was appropriated from the NCNB Bank.
We overrule appellant's points of error and affirm the judgment of the trial court.
While in jail in Williamson County during the summer of 1989, appellant asked
Christie Drzewucki and Dennis Wighamans to pick up two checks for work he had done at Odeen
Hibbs Trucking Company. Appellant gave Drzewucki and Wighamans a letter authorizing the
trucking company to release the checks to them. At appellant's direction, Drzewucki picked up
the checks, cashed them at the NCNB Bank in Austin and expended the proceeds in accordance
with appellant's instructions.
After his release, appellant went to Odeen Hibbs and claimed that he had never
received the checks. Jannette Gordillo, officer manager and bookkeeper for the trucking
company, advised appellant that she would not give him a check to replace the two checks that
had already been cashed until she was notified by the bank that the Odeen Hibbs account had been
credited for the checks.
Appellant represented to Kim Merrill of the Security Department at NCNB that he
had never received the two checks from Odeen Hibbs and that someone had forged his name to
the checks. Appellant signed notarized statements that he had not endorsed the checks or
authorized endorsement of the checks, had no knowledge of who endorsed the checks, and had
not received any benefit from the checks. Following appellant's execution of the affidavits,
Merrill informed appellant and Odeen Hibbs that the trucking company would be credited in an
amount equal to the sum of the two checks. Appellant returned to Odeen Hibbs and was issued
a check by Gordillo for $2,150.01, the total amount of the two checks.
Pursuant to Merrill's instruction, appellant went to the Austin Police Department
where he gave additional statements relative to the forgery of his name on the checks. On appeal,
appellant concedes that Drzewucki acted with his complicity and approval in her handling of the
two checks.
In his first point of error, appellant asserts that the evidence is insufficient to prove
that he appropriated property in the manner alleged in the indictment. The indictment alleges in
pertinent part that appellant "did then and there intentionally and knowingly acquire and otherwise
exercise control over property . . . without the effective consent of the owner, Kim Merrill."
A person commits the offense of theft "if he unlawfully appropriates property with
intent to deprive the owner of property." Tex. Penal Code Ann. § 31.03 (a) (1989). As alleged
in the indictment in the instant cause, "appropriate" means "to acquire or otherwise exercise
control over property other than real property." Tex. Penal Code Ann. § 31.01 (5)(B) (1989).
It is undisputed that appellant's execution of the affidavits asserting that the checks
had been forged caused Merrill to transfer funds to the Odeen Hibbs account. Appellant
complains that while his acts may have brought about the transfer of funds, this does not amount
to appellant exercising control over the funds. Our attention is directed to testimony elicited from
Merrill on cross-examination that she did not give appellant U.S. currency or a check, nor did
appellant exercise control of any property of the bank.
The thrust of appellant's contention appears to be that he never had any of the
bank's property in his possession. In Miera v. State, 663 S.W.2d 508, 511 (Tex. App. 1983, no
pet.), the court addressed the meaning of "exercising control" as that term is used in the theft
statute:
A person appropriates personal property, under section 31.01(5)(B) of the
Penal Code, if he acquires or otherwise exercises control over the property. . . .
. . . [T]he practice commentary to section 31.03 indicates an intent by the
framers of the present Penal Code to include more than actual control in the
concept of appropriation. It notes, for instance, that "exercising control"
encompasses conduct that does not involve possession, and states, "anyone who is
in a position to take some action that deprives the owner of property is in a
position to exercise control." (Emphasis in original) (citations omitted).
In Salazar v. State, 711 S.W.2d 720 (Tex. App. 1986, pet. ref'd), the defendant
contended the evidence was insufficient to support the allegation in the indictment charging that
the defendant "did then and there unlawfully acquire and exercise control over the property. . . ."
The evidence reflected that merchandise was shipped at the request of the defendant upon the
receipt of defendant's check. There was, however, no evidence that the defendant ever received
the merchandise. The defendant's check was dishonored when presented for payment. The
Salazar court found, "As the victim parted with the merchandise because of these actions of
[defendant], we hold that the [defendant] 'exercised control' over the goods insofar as he induced
the victim to ship them." Id. at 723.
In the instant cause, the appellant's action in executing the affidavits caused Merrill
to transfer funds into the Odeen Hibbs account. We conclude that appellant "exercised control"
over the funds as a result of having induced the owner to take action that deprived the owner of
property. Appellant's first point of error is overruled.
In his second point of error, appellant contends that the evidence is insufficient to
show that Merrill was a special owner of the stolen property at the time appellant acquired or
exercised control over the property. The resolution of whether the State discharged its burden in
proving ownership as alleged in the indictment turns on the sufficiency of the evidence to show
that Merrill had "a greater right to possession of the property than the [appellant]." Tex. Penal
Code Ann. § 1.07(a)(24) (Supp. 1992).
Following appellant's representation to Merrill that he had never received the two
checks issued to him as payee, and that someone had endorsed his name without his consent,
Merrill explained to appellant that upon his signing the forgery affidavits, "We would reimburse
our customer, . . . Odeen Hibbs, and that they would issue him another check." Merrill related
that this was standard procedure when a person claims that a check has been forged and cashed
at the bank. After the execution of the affidavits by appellant and the return of the original checks
by Odeen Hibbs, Merrill instructed the bank to credit the account of Odeen Hibbs in a
"miscellaneous charge-off form." Later, Merrill pulled the Odeen Hibbs account "to make sure
there was a deposit in the exact amount."
In instances where an entity such as a corporation is the owner of the property, it
is proper to allege a natural person who acts for the corporation is the owner of the property.
Compton v. State, 607 S.W.2d 246 (Tex. Crim. App. 1979). "The natural person, alleged to be
the owner, does not have to be an exclusive owner. 'Possession' may be proved by showing that
the alleged owner controlled the property." Sowders v. State, 693 S.W.2d 448, 451 (Tex. Crim.
App. 1985).
In Compton, the alleged owner in the theft indictment, an official in the Dallas
office of the corporation, authorized a disbursement to appellant that had to be made from the
corporation's home office in Atlanta. The check was issued by an official in the accounting
department in the Atlanta office and sent directly to appellant without the alleged owner coming
in contact with the check. In concluding that the official in Dallas who authorized the
disbursement was an owner, the court found that both the alleged owner and the accounting officer
in Atlanta (who issued the check) had responsibility for the money.
We find that the State discharged its burden in proving that Merrill had "a greater
right to possession" of the bank's money than appellant and was properly alleged to be the owner.
Appellant's second point of error is overruled.
In his third point of error, appellant asserts that the evidence is insufficient to prove
that any property was appropriated from the NCNB Bank. Appellant points to the testimony of
Merrill that she did not know of her personal knowledge whether the credit to the Odeen Hibbs
account came from bank funds or from someone else who happened to make a deposit to the
account. Merrill advised the appellant that the bank would reimburse the Odeen Hibbs account
after he signed the forgery affidavits. Following the necessary paper work, Merrill instructed the
bank to credit Odeen Hibbs and later pulled the account to "make sure there was a deposit in the
exact amount."
When reviewing a challenge to the sufficiency of the evidence to support a
conviction, an appellate court must determine whether, viewing the evidence in the light most
favorable to the conviction, any rational trier of fact could have found the essential elements of
the offense beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319 (1979); Butler
v. State, 769 S.W.2d 234, 239 (Tex. Crim. App. 1989). A reviewing court should not substitute
its determination of guilt for that of the fact finder unless it is found to be irrational or
unsupported by the evidence, such evidence being viewed under the standard set forth in Jackson.
Moreno v. State, 755 S.W.2d 866, 867 (Tex. Crim. App. 1988). "[I]t is enough that the
conclusion of guilt is warranted by the combined and cumulative force of all the incriminating
circumstances." Brandley v. State, 691 S.W.2d 699, 705 (Tex. Crim. App. 1985).
We conclude that a rational trier of fact could find from the evidence beyond a
reasonable doubt that the credit to the customer's account came from NCNB Bank funds.
Appellant's third point of error is overruled.
The judgment is affirmed.
Tom G. Davis, Justice
[Before Chief Justice Carroll, Justices B. A. Smith and Davis*]
Affirmed
Filed: April 8, 1992
[Do Not Publish]
* Before Tom G. Davis, Judge (retired), Court of Criminal Appeals, sitting by assignment.
See Tex. Gov't Code Ann. § 74.003(b) (1988). | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2857875/ | Concerned taxpayers
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-90-281-CV
FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
APPELLANT
vs.
CONCERNED TAXPAYERS OF LEE COUNTY, INC.
AND MIKE CUNNINGHAM,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 167TH JUDICIAL DISTRICT
NO. 479,553, HONORABLE F. SCOTT McCOWN, JUDGE PRESIDING
Appellant, Fidelity and Deposit Company of Maryland (Fidelity), appeals a
judgment rendered on cross-motions for summary judgment. The trial court below found in favor
of appellees, Concerned Taxpayers of Lee County, Inc. and Mike Cunningham (Concerned
Taxpayers), on that part of their motion requesting the court find Fidelity liable, as bonding agent,
for attorney's fees awarded as part of a final judgment in an earlier case against Fidelity's
principals. However, the trial court ruled against Concerned Taxpayers and in favor of Fidelity
on the remainder of the motion requesting attorney's fees expended in the case underlying this
appeal.
Fidelity brings forward four points of error complaining of the action of the trial
court in denying its Motion for summary judgment and granting relief to Concerned Taxpayers.
Concerned Taxpayers responds with a cross-point of error contending that the trial court erred
in denying Concerned Taxpayers attorney's fees in the instant litigation. We will affirm the trial
court in all respects.
BACKGROUND
This controversy arises from an attempt to create a hospital district in Giddings,
Lee County, Texas, in order to acquire the failing Lee Memorial Hospital. The Commissioners
Court of Lee County authorized an election held on November 8, 1988, to determine if there
should be a Lee County Hospital District (Hospital District). See 1957 Tex. Gen. Laws, ch. 199,
at 406 (Tex. Rev. Civ. Stat. Ann. art. 4494o, since repealed and codified at Tex. Health & Safety
Code Ann. §§ 282.001-.127 (Pamph. 1992)). The voters of Lee County authorized the formation
of the Hospital District and a property-tax assessment for its support. Five trustees for the
Hospital District were also elected. (1) Fidelity filed statutory public official bonds for each of the
trustees. These bonds were conditioned on the faithful performance of duties by the trustees and
issued pursuant to section nine of then-existing article 4494o. That section, since codified,
required filing $5000 bonds for each hospital district trustee payable for the benefit of the district.
Tex. Health & Safety Code Ann. § 282.022 (Pamph 1992).
The newly elected trustees held meetings to organize the board, elected officers,
and commenced steps to acquire control of the Lee Memorial Hospital. At one such meeting, the
board was put on notice that there might have been constitutional infirmities in the election, but
the board continued to hold meetings and move forward with plans to acquire the hospital.
Concerned Taxpayers challenged the Hospital District in a declaratory judgment
suit in Travis County district court, alleging that the Commissioners Court had not satisfied all
of the statutory prerequisites for calling the election, that the resultant district was
unconstitutionally formed, that its five trustees were without authority to conduct business, and
that the trustees had violated the Open Meetings Act. (2) In the prior suit, the trial court found: 1)
that the Hospital District and its trustees were operating in violation of the Texas Constitution;
2) that the trustees had violated the Open Meetings Act at several of their meetings; 3) that the
Hospital District was permanently enjoined from operating; and 4) that plaintiffs were entitled to
their reasonable and necessary attorney's fees. This prior final judgment was not appealed nor
did Fidelity attempt to intervene in the underlying lawsuit.
The Hospital District, which no longer exists, had no assets from which to satisfy
the monetary award part of the judgment. Concerned Taxpayers next filed the instant suit against
Fidelity as the surety on the trustees' bonds, attempting to collect the attorney's fees awarded in
the earlier case. Both parties agree that if recovery on the bonds is permissible, the bonds can be
aggregated to provide up to $25,000 of coverage.
DISCUSSION AND HOLDING
Fidelity's four points of error can be reduced to two issues. Points of error one
and two contend that the trial court erred in requiring Fidelity to pay the judgment from the prior
action because the monetary award was for attorney's fees which are not mentioned explicitly in
the language of the bond or the statute pursuant to which the bonds were issued. Points of error
three and four contend that the trial court erred in requiring Fidelity to pay the attorney's fees
awarded under the prior judgment because the principals did not unfaithfully perform their duties
and therefore there was no contingency under which to invoke the bond provisions.
Since this case was heard on cross-motions for summary judgment there is no fact
issue on appeal; rather, Fidelity complains of the trial court's incorrect application of the law, an
error always reviewable by this Court. Middleton v. Kawasaki Steel Corp., 687 S.W.2d 42, 44
(Tex. App.), writ ref'd n.r.e. per curiam, 699 S.W.2d 199 (Tex. 1985). Further, because the trial
court did not give a specific basis for its granting of summary judgment, we must affirm the trial
court if its judgment can be upheld on any legal theory raised in the motion and supported by the
record. McCrea v. Cubilla Condominium Corp., 685 S.W.2d 755, 757 (Tex. App. 1985, writ
ref'd n.r.e.).
A. Liability for Attorneys Fees Under The Bond
Fidelity contends that it has no liability for attorney's fees because it did not
explicitly bond for attorney's fees. However, the language of the bond is extremely broad,
following the language of the statute, and can be read as including any damages awarded against
the trustees in performance of their official duties. The award for attorney's fees was a part of
a damage award based on the unfaithful performance of the trustees in their official capacities.
The trial court concluded that Fidelity bonded the Hospital District trustees against all damages
which they might have caused as a result of unfaithful performance of their duties. We agree.
Appellant cites many cases denying attorney's fees awarded against bonds involving
private contractors. Fidelity argues that these cases establish as law in this state that, absent
specific language, attorney's fees are not recoverable against bonds. See, e.g., Mundy v. Knutson
Constr. Co., 294 S.W.2d 371 (Tex. 1956); William Cameron & Co. v. American Sur. Co., 55
S.W.2d 1032 (Tex. Comm. App. 1932, jdgm't adopted). Fidelity's reliance on this line of cases
is misplaced.
The historical rule restricting awards of attorney's fees against bonding companies
stems from the common law rule which provides that each party is responsible for its own
attorney's fees. Under the common law rule, there must exist either a statutory basis or a
contractual provision between the parties to the suit for attorney's fees to be awarded. William
Cameron & Co., 55 S.W.2d at 1035. Before 1977, these conditions were not met in most suits
on bonds, particularly performance bonds. The bonds themselves did not usually authorize
payment of attorney's fees, and no statute authorizing such fees existed. The general attorney's
fees statute for material and labor did not apply due to the lack of a direct relationship between
the bonding company and the plaintiffs in those suits. See New Amsterdam Casualty Co. v. Texas
Indus., Inc., 414 S.W.2d 914, 916 (Tex. 1967).
In 1977, the legislature amended the general attorney's fees statute, to allow
recovery of fees in suits on contracts. 1977 Tex. Gen. Law, ch. 76, § 1, at 153 (amending Tex.
Rev. Civ. Stat. Ann. art. 2226 (since repealed)). This article was codified without change. See
Tex. Civ. Prac. & Rem. Code Ann. §§ 38.001-.006 (1986). (3) The cases cited by Fidelity in
support of its argument all predate this change in the statute. We do not, however, need to
address whether this change in the statute provides a basis for recovery of attorney's fees against
bonding companies since this case arises in a different context.
In this case, the attorney's fees have become a part of the liability bonded against
by Fidelity. The fees were part of an award against Fidelity's principals under the Declaratory
Judgment Act, which authorizes the award of attorney's fees. Tex. Civ. Prac. & Rem. Code Ann.
§ 37.009 (1986). Therefore, there is no question of the basis for awarding the fees. Further, the
attorney's fees were awarded not in a suit against the bonding company, but in a separate suit
against the principals. The real issue in this case is the extent of Fidelity's liability under the
bonds for attorney's fees awarded as part of a judgment against its principals.
The Texas Supreme Court has consistently reiterated that public official bonds, also
known as "fidelity bonds," are governed by different standards than those governing private surety
agreements. In Great American Insurance Company v. Langdeau, 379 S.W.2d 62, 65 (Tex.
1964), the supreme court explained, "In construing fidelity bonds, courts follow the liberal rules
applicable to insurance contracts rather than the strict rules of suretyship." See also Brown v.
Sneed, 14 S.W. 248, 252 (Tex. 1890).
The bonds themselves do not specify or limit the type of damages covered. They
merely bond "for the use and benefit of the district in the event of unfaithful performance of
official duties" by their principals. As the court stated in Gold v. Campbell, 117 S.W. 463, 468
(Tex. Civ. App. 1909, no writ), "For all defaults of a public officer within the limit of what the
law authorizes or enjoins upon him, as such officer, the sureties on his official bond are liable."
Given the broad language of the public official bonds in question, we conclude that the bonding
company's liability extends to all damages caused by the Hospital District trustees' unfaithful
performance of their duties. (4) Points of error one and two are overruled.
B. Unfaithful Performance of Principals Under the Bond
Appellant's third and fourth points of error contend that the trial court erred in
granting recovery against the bond because the principals performed no acts unfaithfully and
therefore the necessary contingency to invoke coverage was not met. This argument in the lower
court was based on the finding in the previous case that the Hospital District was void ab initio.
Fidelity claims that since the district was void from its inception, the individual trustees had no
official status and, therefore, no official duties which they could perform, faithfully or
unfaithfully. Concerned Taxpayers responds that the trustees were acting as de facto officers up
until the trial court's ruling in the first lawsuit and that from their status as de facto officers
liability under the bonds arose. In this appeal Fidelity does not contest the de facto status of the
trustees and, therefore, waives any complaint against the trial court's ruling based on that
determination of de facto officer status.
In this appeal, Fidelity instead contends that it is not liable under the bonds because
the trustees never performed any duties unfaithfully and, in fact, never performed any statutory
duties at all. To support this contention, Fidelity notes that the trustees had no duty to notify the
legislature of the election and insure that the district was constitutionally formed; rather, that was
the duty of the Commissioner's Court. Further, Fidelity claims that the trustees performed no
duties since they never operated the hospital, acquired funds or incurred debts. We reject this
argument. The trustees acted every time they held meetings and, therefore, had a duty to do so
in the proper manner. The final judgment in the earlier lawsuit, relied upon by all parties to this
suit, (5) held that three of the board meetings held by the trustees violated the Open Meetings Act,
constituting unfaithful performance of the trustees' official duties. We hold that the trial court
correctly concluded that a previous judgment finding violations of the Open Meetings Act
constituted unfaithful performance of duties by the trustee-principals sufficient to trigger liability
under the bonds. Points of error three and four are overruled.
C. Appellees' Cross-Point of Error -- Attorneys Fees for this Suit
Appellees bring forward as a cross-point of error the trial court's denial of their
request for attorney's fees under section 38.001 of the Civil Practice and Remedies Code. (6) That
statute allows recovery of attorneys's fees, in addition to the amount of a valid claim, if the claim
is based upon an oral or written contract. Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8)
(1986). The case law on this provision is still fairly sparse since the amendment adding the "suits
on contract" provision did not take effect until 1977. However, it is clear that parties to a contract
who prevail in the trial court for a breach of contract can recover attorney's fees. See Golden v.
Murphy, 611 S.W.2d 914, 915 (Tex. Civ. App. 1981, no writ) (holding that the amendment of
2226 allowed recovery of fees in suits on contracts in contravention of the previous version of the
statute); see also Edwin M. Jones Oil Co. v. Pend Oreille Oil & Gas Co., 794 S.W.2d 442 (Tex.
App. 1990, writ denied); Veale v. Rose, 657 S.W.2d 834 (Tex. App. 1983, writ ref'd n.r.e.).
Concerned Taxpayers, while not in contractual privity on the bond itself, seeks to recover
attorney's fees as a third-party beneficiary to the bonding contract.
Concerned Taxpayers relies primarily on Dairyland County Mutual Insurance
Company v. Childress, 650 S.W.2d 770, 775 (Tex. 1983), which held that a third-party
beneficiary able to enforce a contract was also entitled to attorney's fees under the contract provision of article 2226 of the Civil Statutes, now section 38.001. Concerned Taxpayers further
contends that this Court has previously held that even where the suit was not to enforce the
contract, but was founded on the contract, section 38.001 provided for recovery of attorney's fees
to the prevailing party. See Ischy v. Twin City Fire Ins. Co., 718 S.W.2d 885, 888 (Tex. App.
1986, writ ref'd. n.r.e.). In Ischy, the appellant sued a workers' compensation insurance carrier
over the amount of attorney's fees owed as part of the carrier's subrogated interest in appellant's
third party action. Appellant asked for attorney's fees for the suit against the carrier, based on
section 38.001, as a third party beneficiary of the insurance contract. Relying on Dairyland, this
Court found that section 38.001 applied to the third-party beneficial interest.
Fidelity does not dispute that Dairyland and Ischy allow recovery of attorney's fees
by certain third-party beneficiaries; it merely contends that based on the case law governing third-party beneficiaries, Concerned Taxpayers is an incidental third-party beneficiary and therefore not
entitled to fees. Fidelity distinguishes Dairyland because there the intention to make the third
party a beneficiary was found in the surrounding sections of the motor vehicle statute which
demonstrated an intent to protect those injured in automobile accidents. Dairyland, 650 S.W.2d
at 775. Here, Fidelity contends that the bonding statute precludes third-party beneficiary status
for Concerned Taxpayers because it provides that the bond be made payable to the county judge
with the proceeds of the bonds for the use and benefit of the district. Tex. Health & Safety Code
Ann. § 282.002 (1992).
Further, Fidelity points out that Concerned Taxpayers is neither a creditor nor
donee beneficiary and therefore cannot recover under general third-party beneficiary law.
See Republic Nat'l Bank v. National Bankers Life Ins. Co., 427 S.W.2d 76 (Tex. Civ. App. 1968,
writ ref'd n.r.e.). Fidelity cites the standard from MJR Corp. v. B & B Vending Company, 760
S.W.2d 4, 11 (Tex. App. 1988, writ denied), requiring clear circumstances of donative intent to
find a donative beneficiary and a prior indebtedness owed to the third party by the contracting
principal in order to have a creditor beneficiary. Under the facts set forth, there was no pre-existing creditor relationship and no obvious donee intent. Therefore, we agree that, at most, Concerned Taxpayers is an incidental beneficiary and is not entitled to recover
attorney's fees under section 38.001 in the instant case. Concerned Taxpayers' cross-point of
error is overruled.
The judgment of the district court is affirmed.
Mack Kidd, Justice
[Before Chief Justice Carroll, Justice Aboussie and Kidd]
Affirmed
Filed: May 6, 1992
[Publish]
1. The elected trustees were James Arndt, Gail Butcher, D. W. Emmrich, Ronnie
McKeown, and Arthur Peterson.
2. Tex. Rev. Civ. Stat. Ann. art. 6252-17 (Pamph 1992).
3. Predecessor statute to section 38.001 was art. 2226 of the revised civil statutes, which
was amended by Acts 1977, 65th Leg., p. 153, ch. 76, § 1, to include allowing recovery of
fees in suits on contracts. This article was codified into the Civil Practice and Remedies
Code without change by Acts 1979, 66th Leg., p. 718, ch. 314, § 1.
4. As one commentator stated, "The purpose served by official bonds is nothing more
than a form of insurance to protect parties who may be injured by the wrongful actions of
officials." David B. Brooks, County and Special District Law, 35 Texas Practice at § 7.5
(1989).
5. In its motion for summary judgment, Fidelity relied upon the finding in the prior
judgment that the district was void ab initio to argue that the trustees, having no official
status, could not have unfaithfully performed any official duties.
6. At the trial level, Concerned Taxpayers also asked for fees under the Declaratory
Judgment Act. Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (1986). Recognizing the
discretionary nature of that provision, Appellees do not challenge the trial court's decision
to deny relief on that basis. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1544719/ | 211 Pa. Superior Ct. 188 (1967)
Commonwealth ex rel. Shoemaker
v.
Shoemaker, Appellant.
Superior Court of Pennsylvania.
Argued September 19, 1967.
November 16, 1967.
*189 Before WRIGHT, WATKINS, MONTGOMERY, JACOBS, HOFFMAN, and SPAULDING, JJ. (ERVIN, P.J., absent).
Robert B. Surrick, with him Cramp & D'Iorio, for appellant.
Murray S. Eckell, with him Ronald W. Shipman, and Eckell, Sparks & Monte, for appellee.
OPINION BY MONTGOMERY, J., November 16, 1967:
The appellant, father of two sons age six and eight, appeals from an order awarding custody of them to their mother, and from a second order refusing to strike arrearages which had accumulated on an order on the appellant for their support.
Two questions are submitted to us. The first is whether the court below had jurisdiction of the support matter at the time the aforesaid order relating to it was made. The second is whether the "tender years Doctrine" was properly recognized in awarding custody to the mother in light of the fact that she was a *190 French National who planned to remove the children to Spain where the environmental circumstances in which they were to reside would not be as favorable as those of the father in Delaware County, Pennsylvania.
Appellant raises the question of jurisdiction in the support matter for the reason that an order for support had been entered in a contested divorce action between the parties in the Kingdom of Morocco subsequent to the time the original support order was made by the Delaware County Court; and secondly, because the Delaware County Court had recognized its lack of jurisdiction at the time a previous petition filed by appellant to vacate the original support order had been denied, which order of refusal was not appealed.
When these matters first came before the lower court the parties permanently resided in Media, Delaware County, Pennsylvania. That court awarded the children to the mother and directed the father to pay $75 per week for the support of the mother and children. Later the mother was granted permission to take the children to France to live there with her family, the father to have custody during the months of July and August; and the order of support was reduced to $55 per week. This order was later amended to permit the mother to take the children to Casablanca, Morocco. However, because the mother refused to honor that part of the order providing for custody to be in the father during the summer months, Judge VAN RODEN of the Delaware Court, on December 18, 1964 entered an order removing custody from the mother and giving it to the father. Apparently this was done without a hearing or notice to the mother. Subsequently, in November, 1966 the father succeeded in having the Supreme Court of Spain honor this order, which court compelled the return of the children to their father who immediately brought them back to *191 Delaware County, Pennsylvania. In the interval between July 1, 1964 when appellant went to Morocco to secure custody of his children and November, 1966 when he regained custody of them through the Spanish Court, the parties had been divorced in Morocco, as previously stated. The divorce action was commenced on July 30, 1964 and the final decree is dated July 11, 1966. All during this period the support order made by the Delaware County Court remained in force but unpaid. Appellant's first petition to vacate it was denied July 30, 1965 but on September 8, 1966 it was suspended as of July 7, 1966 on a second petition, with the arrearages remaining. A third petition to cancel the arrearages was denied on May 22, 1967. One of the appeals before us is from that order. No appeal was taken from the order of July 30, 1965 or of July 7, 1966.
Subsequently cross-petitions were again filed for custody of the children and on August 7, 1967 Judge VAN RODEN, after numerous hearings, again awarded their custody to the mother with authority to remove them to Alicante, Spain, but with a proviso that the father would have custody of them for the months of December, June, July and August of each year. The father's appeal from this award of custody is the other appeal now before us.
Custody
This has been a difficult and vexatious case for all who have been concerned with it. The problems have been due in a large measure to the differences between the parents in nationality, religion, financial circumstances and dispositions. However, as we review the record, it has been given extremely careful consideration by the lower court which has gone to the limit of good judgment and understanding to accomplish the *192 desired results, i.e., the welfare of these two children. We see no reason to disturb the disposition of the matter made by Judge VAN RODEN except in one particular.
From the oral arguments and briefs of both able counsel we have been led to believe that it was desired that this Court use its judgment to improve the situation if possible. With that in mind, we inquired about the matter of education and learned that the periods of temporary custody awarded to appellant will interfere with the regular school attendance of these two boys when they are permitted to return to Spain under the order of Judge VAN RODEN. The regular school year in Alicante, Spain, where the boys will attend school, starts about the first of October and terminates near the end of June, with the Christmas and New Year vacation extending from about December 24 until January 8, and the Easter vacation starting about April 4 and ending April 19. Since the June and December periods of temporary custody awarded to appellant will interfere with the school attendance of the boys during most of those months, the order of the lower court should be amended to eliminate those months from appellant's period of custody and his summer privilege amended so as to extend from July first to September thirtieth of each year specified in the order of Judge VAN RODEN.
Arrearages
We are in accord with the conclusion of Judge DIGGINS as expressed in his opinion, that the matter of arrearages having been resolved previously when appellant's earlier petition to suspend the order and vacate the arrearages was denied as to the arrearages and they were certified to the common pleas court for the entry of judgment thereon, from which action no *193 appeal was taken, the same issue may not be raised again by a renewal of the petition. The doctrine of res judicata forbids it. Commonwealth ex rel. Kreiner v. Scheidt, 183 Pa. Superior Ct. 277, 131 A. 2d 147 (1957). We have elected to decide this issue in the manner just stated rather than quash the appeal on appellant's alleged flagrant contempt of a subsisting order, which procedure was approved in Commonwealth ex rel. Goodwin v. Goodwin, 413 Pa. 551, 198 A. 2d 503 (1964).
In Appeal No. 650 the order of May 22, 1967 refusing to cancel arrearages of support payments is affirmed.
In Appeal No. 1005 the record is remanded to the lower court for the amendment of the order of August 7, 1967 in keeping with the suggestion contained in the foregoing opinion and the present situation of the children so as to avoid any unnecessary interruption or disturbance of their educational programs in transferring from the schools of Delaware County to the schools of Alicante, Spain.
ERVIN, P.J., took no part in the consideration or decision of this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545000/ | 235 A.2d 81 (1967)
Conrad CINQ-MARS
v.
STANDARD CAB CO.
No. 73-Appeal.
Supreme Court of Rhode Island.
November 13, 1967.
*82 Irving I. Zimmerman, Woonsocket, for plaintiff.
Eugene J. Sullivan, Bernard F. McSally, Providence, for defendant.
OPINION
ROBERTS, C.J.
This civil action for negligence raises two questions: first, whether the trial justice erred in denying the motion of the plaintiff for an unconditional new trial, a verdict having been returned for the defendant at the close of a jury trial in the superior court; and, second, whether error inhered in the refusal of the trial justice to instruct the jury on the doctrine of last clear chance as requested by the plaintiff. It is our opinion that no error inhered in either ruling.
The action was brought to recover damages for injuries sustained by plaintiff when a motor vehicle operated by him along Route 146, also known as the Eddie Dowling Highway, was in collision with a school bus owned by defendant and operated by one of its employees. The accident occurred in a light rain about 7:10 a.m. on the morning of January 21, 1964. Route 146 in the vicinity is a divided highway and runs more or less north and south. The two western lanes carry southbound traffic toward Providence, while two eastern lanes carry northbound traffic toward Woonsocket. The northbound and southbound lanes are divided by a median strip, and at the location of the accident the median strip is pierced by a paved cross-over that connects the northbound and southbound lanes.
The evidence adduced through the testimony of defendant's driver discloses that he had been operating the bus southerly along Route 146. As he approached the cross-over, he turned right from the southbound lane into the driveway of a bait shop and gasoline station. There, he testified, he turned his bus in a semicircle and proceeded to a stop at the westerly edge of the southbound lanes in such a position that the bus stood approximately at right angles to said southbound lanes. He testified that he remained stationary while a truck moving southerly on the highway passed and then, upon looking to his left, he saw a line of traffic some distance away. He then proceeded to cross the southbound lanes into the connector and there came to a stop, with the front of his bus at the westerly edge of the northbound lanes and the body projecting across the two southbound lanes.
The plaintiff testified that at the time in question he was proceeding southerly along Route 146 and was driving rather slowly in the westerly lane. He testified that he entered the passing lane and started to pass a motor vehicle that was being operated along said route ahead of him. As he was passing this car, he looked into his rearview mirror and observed another car turning into the passing lane behind him. He then turned to look to the south again, and for the first time he saw the bus immediately in front of him, obstructing both lanes. He attempted *83 to stop, but the collision resulted. He testified that when he first saw the bus, it was about 40 to 50 feet away, and there is some evidence in the record to the effect that at this time plaintiff was travelling about 40 miles per hour. He testified that he realized that he could not turn to the right because of the positions of the cars he had been passing and so attempted to turn left to avoid striking the bus. However, he was unable to do this, and the front end of his car came into collision with the front end of the bus.
We will consider first plaintiff's contention that the trial justice erred in denying his motion for new trial. This contention is based primarily on his argument that the trial justice ignored the uncontradicted physical facts in denying the new trial. We are persuaded, however, that plaintiff is, in effect, contending that the trial justice failed to draw proper inferences from the evidence which he argues was uncontradicted. He further contends that the trial justice should have believed witnesses testifying as to the events of that morning who, plaintiff claims, were unbiased. An examination of the decision of the trial justice on this motion discloses that he exhaustively reviewed the evidence adduced on behalf of both parties and concluded therefrom that the jury properly found for defendant.
On a motion for new trial on the ground that the verdict is contrary to the weight of the evidence, the obligation of a trial justice is to pass upon the credibility of the witnesses and to weigh the evidence in an exercise of his independent judgment. Barbato v. Epstein, 97 R.I. 191, 196 A.2d 836. From that decision it is clear, in our opinion, that in the instant case the trial justice complied with this obligation and concluded that the jury properly found defendant negligent and plaintiff contributorily negligent. In such circumstances this court will not disturb the decision of the trial justice unless it is made to appear that he was clearly wrong, that is, that he either overlooked or misconceived relevant and material evidence on a controlling issue. It is the burden of the moving party to establish that the trial justice was clearly wrong in so overlooking or misconceiving such evidence. Labbe v. Hill Brothers, Inc., 97 R.I. 269, 197 A.2d 305.
The trial justice in this case made it clear in his lengthy discussion of the evidence that he recognized the conflicts inhering therein and had concluded that the evidence was so evenly balanced as to warrant reasonable men to reach different conclusions thereon. He concluded therefrom that the negligence of defendant and the contributory negligence of plaintiff had been properly found on this evidence by the jury and that he would not, in the circumstances, substitute his judgment for that of the jury. Thus, in our opinion, he complied with the rule so frequently stated by this court that in such circumstances it would be error for a trial justice to substitute his conclusion for that of the jury even though he might be inclined to conclude to the contrary. Turgeon v. Rocks, 96 R.I. 353, 191 A.2d 606.
We attach significance to a further comment of the trial justice in his consideration of this motion that "* * * had I heard the case in the absence of the jury on a jury trial waived basis, my verdict would of necessity have had to be the same as the jury verdict * * *." This express and emphatic approval of the verdict by the trial justice is strongly persuasive of his recognition of his obligation that the verdict should be sustained unless in his own experienced judgment it fails to do substantial justice between the parties or respond to the true merits of the controversy. We have often said that expression of conviction on the part of a trial *84 justice in such circumstances, absent unusual facts, requires this court to give it great weight. Cf. Lancaster v. Marshall, 69 R.I. 422, 34 A.2d 718.
There remains plaintiff's contention that the trial justice erred in refusing a requested charge on the doctrine of last clear chance. The doctrine of last clear chance as it is recognized in this state is set out in New England Pretzel Co. v. Palmer, 75 R.I. 387, 67 A.2d 39, wherein some of the limitations of its application are also made clear. At page 391, 67 A.2d at 42, this court said that the doctrine applied
"* * * only where the evidence disclosed that the plaintiff had negligently placed himself or his property in a position of peril; that defendant thereafter had become aware or in the exercise of due care ought to have become aware of plaintiff's peril and his lack of comprehension of it or apparent inability to extricate himself from it; that the defendant if he had been in the exercise of due care had a reasonable opportunity thereafter to avoid injuring the plaintiff; and that defendant failed to exercise such care."
The precise situation upon which plaintiff rests his argument that the doctrine has application refers to the fact that the operator of defendant's bus had come to a full stop in the driveway of a gasoline station on the westerly side of the southbound lanes and that its driver either knew or should have known, in an exercise of reasonable care, that plaintiff, operating along the southbound passing lane, was in a position of peril and defendant had a last clear chance to avoid the accident by refraining from driving his bus across the southbound lanes. In our opinion, the doctrine would have no application in these circumstances, it being clear that while the bus remained in the driveway, there was no antecedent negligence on the part of its operator which created the situation that put plaintiff into a position of peril.
The evidence here, however, discloses a situation in which the operator of the bus had driven it across the southbound lanes and stopped with the body of the bus projecting across and obstructing both southbound lanes, this while plaintiff was operating in a southerly direction at a speed of approximately 40 miles per hour and assumed, pursuant to the doctrine, to be contributorily negligent. The prime inquiry then is whether on the evidence the jury could have found that defendant did have a last clear chance to avoid the collision.
We have made an exhaustive examination of the transcript and find no evidence in the record from which a jury reasonably could find that at the time the bus driver became chargeable with knowledge of the peril in which plaintiff had placed himself he could have then acted in such a manner as to have averted the collision and the injury to plaintiff. The doctrine will not apply where "* * * there is nothing in the record to indicate that the evidence showed the defendant thereafter had an existing opportunity, which he failed to exercise, to avert the consequences * * *" of his negligence, if any, and thereby avoid the accident. Sanner v. Guard, 236 Md. 271, 276, 203 A.2d 885, 888.
The specific error urged by the plaintiff in the instant case is that the trial justice erred in refusing to charge the jury on the doctrine of last clear chance. It is well settled in this state "* * * that the charge given to the jury must be applicable to the facts that have been adduced in evidence, D'Angelo v. Director of Public Works, 89 R.I. 267, 152 A.2d 211, and that a request for an instruction is properly denied where there is no basis for such an instruction in the evidence. Myers v. Myers, 63 R.I. 264 [7 A.2d 785]." New England Die Co. v. General Products Co., 92 R.I. 292, 302, 168 A.2d 150, 155. We are unable to agree with the plaintiff that the trial justice erred in refusing to charge the jury on the question of last clear chance. *85 Cf. Nystrom v. Eagle Cornice Co., 52 R.I. 80, 157 A. 574.
The appeal of the plaintiff is denied and dismissed, and the judgment appealed from is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544723/ | 235 A.2d 669 (1967)
James H. METCALF et al.
v.
NICHOLAS R. CERIO, JR.
No. 92-Appeal.
Supreme Court of Rhode Island.
November 30, 1967.
*670 F. Albert Starr, for plaintiffs.
Pat Nero, for defendant.
OPINION
POWERS, J.
This is an appeal from a superior court judgment resulting from the setting aside of two default judgments in a civil action for negligence.
It appears from the record before us that on March 20, 1966, James H. Metcalf was the operator of a motor vehicle in which his minor son was a passenger when said motor vehicle was involved in a collision with one operated by defendant. The collision occurred at the intersection of two highways in the city of Cranston, resulting in property damage to plaintiff's motor vehicle and personal injuries to both father and son.
A civil action to recover damages to property and for personal injuries was commenced by the Metcalfs on May 5, 1966, by delivering a complaint and a summons to the sheriff in accordance with the provisions of rule 3 of the superior court rules of civil procedure, which became effective January 10, 1966. The deputy sheriff's return indicates service was duly made May 6, 1966, and the complaint and summons were filed with the clerk of the superior court on May 13, 1966.
The defendant not having pleaded nor otherwise defended within twenty days of having been served, as required by rule 12 (a) of said superior court rules, plaintiffs on September 28, 1966, filed an application and supporting affidavit for entry or default. It was duly entered and plaintiffs on the same day filed a motion for entry of judgments.
Thereafter, on October 5, 1966, a hearing was held on said motion before a superior court justice and, the issues being resolved, a default judgment of $350 plus interest and costs was ordered entered for each plaintiff, as authorized by rule 55 (b) (2).
Invoking the authority of the superior court as set forth in rule 55 (c), defendant on November 17, 1966, filed a motion to set aside the default judgments in accordance with the provisions of rule 60 (b).
The motion recited that at the time of service defendant was not living at the address where service had been made, it being the residence of his father and mother. It *671 further recited that before entry of the default judgments, defendant had no knowledge that plaintiffs had commenced litigation and, despite diligent inquiry, he had been unable to ascertain that copies of the complaint and summons had been left by the deputy sheriff at the home of his parents. No affidavit setting forth the circumstances on which relief was sought, nor of a meritorious defense, accompanied defendant's motion.
Pursuant to the notice contained in said motion, it came on to be heard before a superior court justice on December 1, 1966. He, noting defendant's failure to accompany his motion with an affidavit, continued the hearing for one week in order to afford defendant an opportunity to supplement the record with an affidavit as aforesaid.
In the superior court, plaintiffs objected to the one-week continuance, but they did not press that objection on this appeal. We deem it advisable to note in passing that, at least in the absence of some compelling circumstances of which there is none here, the action of the superior court justice in continuing the hearing for the purpose of affording defendant an opportunity to furnish the supporting affidavit would not constitute an abuse of his inherent power to regulate procedure in the interest of justice.
Within the time prescribed, defendant supplemented his motion with an affidavit which restated that by reason of his nonresidence at the home of his parents where service was made, he had no knowledge that plaintiffs had commenced action against him until the default judgments were entered. It concluded with the following, "That the above action is the result of an intersection automobile accident which occurred on March 20, 1966, in the City of Cranston, which resulted in personal injuries, damage to my automobile and loss of wages, all of which are part of a claim filed and pending against the plaintiff through his insurance carrier. That I have a defense and a counterclaim to this action. I can swear to the above facts of my own knowledge."
On December 8, 1966, the parties were heard on defendant's motion and affidavit, and the superior court justice entered an order setting aside the default judgments as prayed.
The transcript of the December 1, 1966 hearing, which as heretofore related was continued one week, discloses that defendant failed to furnish affidavits because it was counsel's impression that under rule 60 (b) of the new rules of civil procedure no reference was made to such affidavit and that consequently none was required. Rejecting this contention, the superior court justice, in effect, correctly pointed out that rule 60 (b), albeit somewhat more liberal in scope, required the court in action thereon to exercise the same judicial discretion as was required when relief had been sought under G.L. 1956, § 9-21-2, which latter provision rule 60 (b) amends.
In passing on a petition to set aside a default judgment in the superior court as authorized by G.L. 1909, chap. 294, sec. 2, forerunner of G.L. 1956, § 9-21-2, this court, speaking of the requirements of that statute in Milbury Atlantic Mfg. Co. v. Rocky Point Amusement Co., 44 R.I. 458, 460, 118 Atl. 737, 738 (1922), stated: "We have always regarded the statement of defence as an appropriate, if not necessary, allegation of a petition for relief. We would not prescribe the form of petition to be entertained in the Superior Court. We think, however, as has been the practice here, that before relief is granted by that court it should be made to appear that the petitioner has a defence which is prima facie meritorious, and which in good faith he desires to present at the trial if one be granted to him." Furthermore, the requirements that prevailed in this jurisdiction under pre-existing statutes and that we now hold applicable to said rule 60 (b) of the superior court are substantially the same as those established under federal rule 60, after which the Rhode Island rules *672 were patterned. See 3 Barron & Holtzoff, §§ 1217 and 1323, and cases cited therein.
Rule 60 (b) in pertinent part provides:
"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; * * * (4) the judgment is void * * *."
Apparently at the time of the December 1, 1966 hearing on defendant's motion, the superior court justice assumed that by virtue of the allegations relative to service at the wrong address, defendant was seeking relief on the ground that the defaulted judgments were void. However, when the hearing was resumed the following week, defendant made it clear that he was not questioning the validity of the service; rather, as explained by counsel, defendant, who maintained his own residence, was temporarily residing at the home of his parents when the accident occurred, but shortly thereafter had returned to his own address. He recognized that it was understandable that the deputy sheriff would be directed to his parents' address, but contended that under the circumstances defendant's failure to learn that plaintiffs had commenced action constituted excusable neglect within the meaning of the first section of rule 60 (b).
The trial justice granted the motion to remove the defaults, and from this judgment plaintiffs seasonably appealed to this court. They vigorously contend, and we think correctly, that defendant's affidavit of a meritorious defense, which he in good faith intended to make if the case were reinstated for trial, is defective in that it does not set forth any facts which if established would constitute a defense to the actions on case for negligence. There is no question that the long and well-established rule in this state precludes a valid exercise of sound judicial discretion absent a showing of circumstances which, if established, would constitute a defense to the action in which a nil dicit judgment had been entered. Milbury, supra. There is no significant difference between the rule as thus stated and that applicable in the federal courts. A.C. Samford, Inc. v. United States, 226 F. Supp. 72 (1963); Necchi Sewing Mach. Sales Corp. v. Sewline Co., 194 F. Supp. 602 (1960); Trueblood v. Grayson Shops, 32 F.R.D. 190 (1963). In the last cited case the court, at page 196, commented:
"In the case at bar the only showing of a meritorious defense emanates from (1) a statement by Byrne, the local claims representative for Hartford, to the effect that the nature of the claim suggests a defense, and (2) the statement of defendant's attorney in oral argument that the case was not one of liability."
In the case at bar, defendant's affidavit, coupled with statements made by his counsel, of which counsel had personal knowledge, see McLeod v. Fleetwood Motor Sales Inc., 83 R.I. 447, 118 A.2d 921 (1955), establish only that the accident occurred at an intersection and that defendant had been corresponding with plaintiff's insurer in the conviction that plaintiff rather than defendant was at fault. The fact that an accident occurred at an intersection in and of itself sheds no light on the question of defendant's due care or plaintiff's lack thereof. Similarly, defendant's opinion that the accident was solely attributable to plaintiff's negligence, as evidenced by the claim made on the latter's insurer, is a conclusion barren of probative facts to support it.
Having thus determined that the defendant failed by affidavit or its equivalent to meet the burden inherent in his motion on the question of a meritorious defense, we do not reach, hence do not consider, the question relative to his "excusable neglect."
The plaintiffs' appeal is sustained, the judgments vacated are reinstated, and the case is remitted to the superior court for further proceedings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644807/ | 4 So. 3d 587 (2007)
TOMMIE LEE HAUSEY
v.
STATE.
No. CR-05-1904.
Court of Criminal Appeals of Alabama.
January 12, 2007.
Decision of the alabama court of criminal appeals without opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544855/ | 168 F.2d 483 (1948)
SHELDON
v.
WATERS.
No. 12262.
Circuit Court of Appeals, Fifth Circuit.
June 4, 1948.
S. E. Simmons, of St. Petersburg, Fla., for appellant.
Byron T. Sauls and R. M. Cargell, both of St. Petersburg, Fla., for appellee.
Before SIBLEY and LEE, Circuit Judges, and BORAH, District Judge.
SIBLEY, Circuit Judge.
Mrs. Hazel M. Waters, her husband Leslie A. Waters being in bankruptcy, filed in the bankruptcy case a petition to review a judgment of the referee that $3,660 in the hands of a depositary subject to orders of the court be turned over to the trustee in bankruptcy and administered as an asset of the estate. The active parties to the contention before the referee were the trustee, certain creditors of the bankrupt, and Mrs. Waters, but no pleadings appear in the record. In her petition for review Mrs. Waters asserts that she claims an interest in the money in that she was a tenant by the entirety with her husband of the real property out of which the money was derived by sale and also such tenant of the money, and that to administer it as her husband's asset in bankruptcy will unlawfully deprive her of her rights.
Appellee urges here that in a contest over such a right in Florida a wife must *484 be joined by her husband, so that her petition for review ought to have been disregarded and dismissed. This question was not made or decided in the district court. We do not think it has merit. This is not an original suit, but arises in the bankruptcy proceeding to which her husband is a party. It appears that his attorney was served with this petition for review. The bankruptcy case is essentially an equitable one, and it matters little whether he is a party here as petitioner or respondent. The statute allows any person aggrieved to make the petition for review, and she is aggrieved. 11 U.S.C.A. § 67, sub. c. The objection for want of parties is not good.
These are the facts as found by the referee: Between 1942, when Mr. and Mrs. Waters began residence in Florida, and April, 1945, they had only one bank account, a joint one, upon which both drew at their pleasure for their needs and expenses. They dealt extensively in Florida real estate, uniformly taking title thereto in the names of both as an estate by the entirety, and uniformly depositing the net proceeds of every sale in the joint bank account. In October, 1944, the husband entered the construction business and drew heavily on the joint account, depleting its balance of about $13,000. From the referee's statement of the evidence it appears that Mrs. Waters got knowledge of this on April 15th, 1945. At that time they sold a piece of Florida real estate held as tenants by the entirety for $16,000, but the proceeds were not put into the joint account but in a new account opened by Mrs. Waters in another bank. A few weeks later she turned over to her husband $7,900 of this money which she claimed to be a loan to him, but her claim in bankruptcy as a creditor was disallowed and abandoned. In July, 1946,[1] they entered into a written contract to sell to one Lucas another piece of land held as tenants by the entirety for $12,300, $5,000 being then paid. Mrs. Waters used this $5,000 to complete the construction of some houses on lots which she bought in her own name with money from the proceeds of the sale in April, 1945. She later sold these houses at a profit and deposited the proceeds in her bank account and used them for her purposes. She bought these lots, built the houses, and sold them on her own initiative without interference or control from her husband.
It also appears without dispute that before the balance of $7,300 was paid on the land sold to Lucas in July, 1946, the bankruptcy intervened; and on Oct. 31, 1946, on the petition of Lucas, and on a stipulation signed by him, by Mr. Waters and Mrs. Waters, and by the trustee in bankruptcy, the referee ordered that the $7,300 be paid over to a depositary to stand in lieu of the property itself, that Mr. and Mrs. Waters execute a deed in accordance with their contract, and that the trustee disclaim any interest in the land; that two mortgages on the land be discharged out of the $7,300, and the remainder be held for "determination by this court of the rights of Leslie A. Waters, Hazel M. Waters, and the trustee in bankruptcy thereto."
On the facts which he found the referee concluded as a "conclusion of law" that the acts and conduct of the bankrupt and his wife established "an agreement, expressed or implied, to terminate their estate by the entirety in the property sold to Lucas" and that it followed that the balance of $3,660 on deposit was the separate property of the bankrupt to be administered by the trustee.
The district judge held this conclusion to be erroneous, but gave no reasons, and no directions as to what should be done with the funds. His decision is before us on this appeal.
Estates by the entirety in property conveyed to husband and wife are recognized in Florida as at common law, English v. English, 66 Fla. 427, 63 So. 822. So long as they exist, property so held is not subject to disposal by either alone, nor is the property subject to the debts of either, for neither is recognized as having any separate right. Newman v. Equitable Life *485 Assur. Soc., 119 Fla. 641, 160 So. 745; Anderson v. Trueman, 100 Fla. 727, 130 So. 12. Such estates may exist in personalty, and the proceeds of sale of realty which was so held are ordinarily held in the same way. Dodson v. National Title Ins. Co., Fla., 31 So. 2d 402. Divorce or death will end such a tenancy, and so may both parties by an agreement to do so. If they plainly agree on a division of the proceeds of a sale, their agreement will be effectuated and the agreed part of each will be his or her separate property. Dodson v. National Title Ins. Co., supra. But without an agreement neither alone can do anything to alter the tenancy of identifiable property so held. Logan Moore Lumber Co. v. Legato, 100 Fla. 1451, 131 So. 381; though the husband may accept payment in discharge of a note held by the entirety, the payment taking its place. Merrill v. Adkins, 131 Fla. 478, 180 So. 41.
It will be noticed that the referee did not find that there was any express agreement, but rested his conclusion wholly on the course of conduct which he detailed. He states there was some discrepancy in the testimony of Mr. and Mrs. Waters about her use of the proceeds of the first sale and $5,000 from the second, but he did not find upon it. His conclusion was an inference from facts about which there is no dispute. He called it a conclusion of law and the district judge reversed it as such. We think it is one of fact, but since it does not grow out of any conflict of evidence or involve the credibility of witnesses, the ordinary rule that the fact findings of the referee or a master are to be upheld is of no force here. The proper conclusion from given facts can be made by the judge as well as by the referee. And on appeal to us we have the same power, especially since the judge and referee have disagreed. Stubbs v. Fulton Nat. Bank, 5 Cir., 146 F.2d 558, and cases cited on page 560, Note 1; Stewart v. Ganey, 5 Cir., 116 F.2d 1010, 1013; In re Gustav Shaefer Co., 6 Cir., 103 F.2d 237, 242.
We conclude there was some sort of agreement between Mr. and Mrs. Waters, for there was conduct by one inconsistent with the continuance of the tenancy by the entirety, acquiesced in by the other. There was indeed no sufficient agreement to alter their interests in any realty, for that would require a writing under the statutes of Florida, and there was no writing. And there was no written agreement about any division of any proceeds, as in Dodson v. National Title Ins. Co., supra. Yet it seems to us that there was a course of conduct showing purpose, made effective by acquiescence as it proceeded. Mrs. Waters, having no connection with the new business venture of Mr. Waters, learned on April 15, 1945, that he had withdrawn for his business $13,000 of their deposit of money held by the entirety. Whatever the technical consequence may be, she would naturally feel that he had taken $6,500 belonging to her. Her reaction was prompt. She opened a bank account of her own. They sold a piece of property for $16,000 and she put it all in her new deposit account, but gave him $7,900 back, her claim that it was a loan being disallowed. The $8,100 remaining she invested in her name, he acquiescing. If, as appears, she got $8,100 and he $7,900, her deficit was reduced to $6,400. When the second sale was made she took the whole $5,000 paid in cash and used it on her houses. He acquiesced and made no claim to the houses, and this shows consent, though the referee speaks of it as converting it to her own use. But there is nothing to show that this was done as a division of the proceeds of the last sale. It was not half of the net proceeds, for after paying the mortgages the net proceeds were only $8,660, and half would be $4,330. A more plausible inference is that they intended this $5,000 to go in further replacement of the deficit of $6,400, leaving the balance for final adjustment when the $7,300 should be paid. That $7,300, until paid and divided, was still proceeds of property held by entireties pending a contemplated but unaccomplished termination. The realty had been held by entireties till bindingly sold. It became then security for the purchase price. The $5,000 paid cash and the chose in action for $7,300 were thereupon held by the entirety, but the $5,000 was at once by joint consent applied as above stated, in the over-all purpose to adjust and settle their business as above indicated. Because this conclusion is natural, and is just, and *486 best explains the whole course of their conduct, we believe it is the truth.
In the Dodson case, supra [31 So. 2d 404], the court said: "The proceeds of, the sale of real estate held by the entirety is equally the property of the husband and the wife. It is held by the unity. Either one taking possession holds for the benefit of both. That is the rationale of our prior decisions. * * * But such funds are the proper subject of contract between husband and wife, Section 708.09, F.S.A., and they may provide by contract for termination of the estate by the entirety resulting in equal division of the personal property. That is the effect of the settlement agreement." The contract terminating the entirety in that case was in writing and expressly for equal division. Equality, however, though usually presumable, is not the only basis that may be agreed on, because the husband might be old or ill, so that the value of his prospect of joint enjoyment and ultimate survivorship might be much less than that of the wife. Other considerations might enter, as here, where the husband had gotten more than a fair share in other similar divisions. Their agreement made in good faith controls, and the husband can have as his separate property no more than the wife has agreed he shall.
The creditors here had no claim at all against the land or proceeds until there was a division fixing their debtor's separate part, for the property was not subject to their debts at all. On the filing of the bankruptcy petition the bankrupt estate became entitled to have only what Waters was entitled to as his separate part; but under the Bankruptcy Act, 11 U.S.C.A. § 110, sub. a, it shall also include "all property in which the bankrupt has at the date of bankruptcy an estate or interest by the entirety and which within six months after bankruptcy becomes transferable in whole or in part solely by the bankrupt." Under the facts here at the date of bankruptcy the $7,300 chose in action arising from the sale of land held by the entirety was still so held, but under a tacit agreement, as we have said, to end its entirety by a division but with the division not accomplished. Nothing happened within six months to enable Waters solely to transfer this chose. The balance after paying incumbrances, $3,660, still stands for division.
We therefore decide that the referee was justified in holding there was an implied agreement to terminate their holding by the entirety of this $7,300 debt, but we do not agree that it follows that the $3,660 left of it belongs to Waters. There is no evidence at all that any agreement was made as to how it should be divided, and it has not been appropriated by either with the consent of the other. It follows that the usual presumption of equal division as to this item of property should prevail, and half be awarded to Mrs. Waters and half to Waters and his trustee in bankruptcy. We so direct.
Judgment reversed with direction.
NOTES
[1] The referee's finding is 1945, but other portions of the record show the date as 1946, such as the stipulation of the parties and order of the referee on it mentioned in the next paragraph. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544620/ | 427 Pa. 631 (1967)
Washington County Controller's Case.
Supreme Court of Pennsylvania.
Argued October 2, 1967.
November 28, 1967.
Before BELL, C.J., MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
George B. Stegenga, with him Paul Simmons, Joseph F. Weis, Jr., and Weis & Weis, for appellant.
Oliver N. Hormell, with him Richard DiSalle, for appellee.
*632 OPINION BY MR. JUSTICE ROBERTS, November 28, 1967:
Edward Stuart was treasurer of Washington County from 1960 to January 6, 1964. On January 28, 1965 the controller filed his annual report covering the Washington County treasury records for the calendar year 1964. This report indicated that a deficiency of $50,000 appeared on the treasury books when Stuart left office in January, 1964. Accordingly, the controller surcharged Stuart for this amount.
Stuart immediately filed a petition both to strike the surcharge and vacate the judgment,[1] contending that the surcharge was vague, uncertain and indefinite, and further contending that the controller's reports for 1960, 1961, 1962, and 1963, none of which disclosed any deficiency, were now conclusive since they were never objected to when filed. Since he had been in office for only three business days in 1964, Stuart argued that he could not therefore be liable for the deficiency. The controller filed preliminary objections to Stuart's petition, and on June 28, 1965 a hearing on the petition was held before the court en banc. The testimony at that hearing revealed that no one actually knew the true state of Washington County's finances. Judge SWEET therefore ordered a court appointed accountant to conduct an independent audit of the treasury books for 1963 and 1964.[2] Pursuant to that audit, a second hearing was held on January 27, 1967, again before the court en banc. Finally, on February 15, 1967, the Court of Common Pleas of Washington County, responding to Stuart's amended petition to strike the surcharge *633 and vacate the judgment, filed an order refusing to strike the surcharge. This appeal followed.
Appellees urge that the present appeal be quashed because the order below refusing to strike the surcharge is interlocutory. We do not agree. Section 1730 of the Act of August 9, 1955, P.L. 323, 16 P.S. § 1730 expressly provides that "the reports of the controller . . . shall be filed among the records of the court of common pleas of the county, and from the time of such filing shall have the effect of a judgment against the real estate of the officer who shall thereby appear to be indebted either to the Commonwealth or to the county." (Emphasis supplied.) It is readily apparent from the words of this statute that as soon as the controller's report surcharging Stuart was filed, the appellant, as a matter of law, had a judgment entered against him. So also, it is abundantly clear that when the hearing judge refused to strike that surcharge, the judgment continued to exist. We have always held that a lower court order permitting a judgment to stand is appealable by the judgment-debtor;[3] and, here, because of § 1730 of the 1955 Act, the surcharge equals a judgment, and hence is also appealable. In fact, even before the 1955 Act was passed, this Court had held that county controllers' reports had the effect of judgments and "can be questioned only as a judgment can be." Saint Paul Mercury Indemnity Co.'s Appeal, 325 Pa. 535, 538, 191 A. 9, 10 (1937); O'Gara v. Phillips, 297 Pa. 526, 147 A. 613 (1929).
Since we hold that the petition to strike the surcharge must be treated in the same manner as a motion *634 to strike a judgment, the Act of May 20, 1891, P.L. 101, § 1, 12 P.S. § 1100[4] clearly gives this Court jurisdiction to hear an appeal from the lower court's denial of that motion. Having assumed jurisdiction, we decide that the lower court was correct in refusing to strike the surcharge.
A motion to strike a judgment, as opposed to a petition to open a judgment and be let into a defense,[5] will not be granted unless a fatal defect in the judgment appears on the face of the record. Weinberg v. Morgan, 186 Pa. Super. 322, 325, 142 A.2d 310, 312 (1958). As we said in Lipshutz v. Plawa, 393 Pa. 268, 271, 141 A.2d 226, 228 (1958): "A rule to strike off a judgment is in the nature of a demurrer directed to defects in the record. If the record is self-sustaining, the judgment cannot be stricken." See also, Field *635 Enterprises Educ. Corp. v. Golatt, 199 Pa. Super. 422, 185 A.2d 666 (1962). In the present case the "record" is the controller's report itself, and it was held as far back as 1906 that a motion to strike the judgment resulting from the surcharge of a county official must be treated in exactly the same way that a motion to strike the judgment of a common pleas court would be treated. Sunderlin's Case, 16 Dist. 1004 (C.P. 1906). In Sunderlin, the surcharged officer pressed, as his reason to have the judgment stricken, that the auditor's report was made without proper notice and was based on prejudice rather than legal testimony. The court held that these were defenses not based on patent record defects, and thus could not sustain a motion to strike.[6]
So also, an examination of the present 1964 controller's report shows no record defect whatsoever. In fact, the result of the audit conducted by the court appointed accountant shows clearly that, according to treasury records, a $50,000 deficiency does exist. It is true that the appellant's arguments in support of his motion to strike are somewhat unclear, perhaps due to the emotional tone of his brief; but, as we unravel these arguments, they fail to allege any irregularities in the controller's report itself. Stuart claims that he is not liable for any deficiency either (1) because the shortage can be traceable to a mere bookkeeping error, or (2) because the conduct causing the deficiency took place before he assumed office, or (3) because the previous *636 controller's reports, which he claims are conclusive, show no misconduct or deficiency upon which a surcharge could be based.[7]
It is perfectly apparent that Stuart would be unable to establish the truth of any of these allegations without first presenting evidence of facts not shown in the controller's report itself. Thus, under the well established principle that a judgment will never be stricken when its invalidity can only be shown by evidence dehors the record, the disposition of the lower court in this case must be affirmed. Lipshutz v. Plawa, supra; Hall v. West Chester Pub. Co., 180 Pa. 561, 37 A. 106 (1897); Weinberg v. Morgan, supra; Wisor v. Wisor, 175 Pa. Super. 233, 103 A.2d 498 (1954).
Since the County Code specifically provides a procedure whereby controllers' reports may be challenged on the merits, Judge SWEET quite properly remanded *637 appellant to his statutory remedy.[8] In fact, Stuart has already begun to perfect his appeal to the court of common pleas pursuant to that statute.
Order affirmed.
NOTES
[1] As will be later discussed, a controller's surcharge has the effect of a judgment. Act of August 9, 1955, P.L. 323, § 1730, 16 P.S. § 1730. This accounts for the dual nature of appellant's petition.
[2] Appellant requested the trial judge to order the 1960, 1961, and 1962 treasury books audited also, but this request was denied.
[3] The appellees argue that Stuart is not properly before this Court, regardless of whether the surcharge is a judgment or not, because § 1731 of the Act of August 9, 1955, supra note 1, directs his appeal to the court of common pleas. The 1955 statute however, is concerned with appeals on the merits of a surcharge. An appeal from the denial of a motion to strike the surcharge is governed by a different statute. See note 4, infra.
[4] "In all cases of application for the . . . vacating and striking off of judgments of any kind . . . any party aggrieved by the . . . refusal to . . . vacate or strike off such judgment, may appeal therefrom to the supreme court of this commonwealth. . . ." Act of May 20, 1891, P.L. 101, § 1, 12 P.S. § 1100. (Emphasis supplied.)
[5] In most cases, collateral attacks on final judgments which question the underlying merits of that judgment must be made by a petition to open the judgment and be let into a defense. This proceeding is equitable in nature and the court is given wide range of discretion in deciding whether the petitioner will be permitted to present his defense. Thorn v. Clearfield Borough, 420 Pa. 584, 218 A.2d 298 (1966); McDonald v. Allen, 416 Pa. 397, 206 A.2d 395 (1965). However, in cases of judgments arising from a controller's surcharge, the judgment-debtor is given an absolute right to have his judgment opened and to present his defenses. Act of August 9, 1955, P.L. 323, § 1731, 16 P.S. § 1731. This does not mean, however, that he may not simultaneously appeal the denial of a motion to strike that judgment. We reach this conclusion because it has been held, in cases involving petitions to open judgments, that the order of a court below refusing to strike a judgment is appealable to this Court notwithstanding the fact that the lower court simultaneously granted the judgment-debtor's petition to open that same judgment. Polis v. Russell, 161 Pa. Super. 456, 55 A.2d 558 (1947).
[6] For cases in which judgments were stricken because of defects appearing on the record see, e.g., Lansdowne Bank & Trust Co. v. Robinson, 303 Pa. 58, 154 A. 17 (1931) (instrument upon which judgment was confessed was not an obligation for the unconditional payment of a definite sum at a definite time); A.B. & F. Contracting Corp. v. Matthews Coal Co., 194 Pa. Super. 271, 166 A.2d 317 (1960) (affidavit of default which accompanied confession of judgment did not allege that judgment-debtor had been given the ten days notice agreed upon by the parties).
[7] Stuart argues, apparently as a fourth reason for striking the surcharge, that the very conclusiveness of the previous controller's reports would deprive him of any opportunity to prove his other defenses by opening up his past treasury books. He presses this argument especially hard because the burden of proof in an appeal from a surcharge is on the surcharged officer to show he is guilty of no misconduct. Davis v. Carbon County, 369 Pa. 322, 85 A.2d 862 (1952) (here, even though the county was appealing the lack of surcharge in the controller's report, the court framed the issues in such a way that the surcharged officers became the "plaintiffs" for purposes of pleading). In the first place, we fail to see how such an argument can support a motion to strike a judgment any more than Stuart's other contentions can. Secondly, we believe that this argument is premature. Assuming that Stuart would be unwilling to rest on the conclusiveness of the 1960-1963 controller's reports, which do not surcharge him, to sustain his burden of proof, he may, if he desires, move the court to grant him permission to re-open the treasury records upon which these reports are based. If the court denies this motion, and Stuart's appeal under § 1731 is unsuccessful, he may then appeal the trial court's ruling to this Court under the Act of August 9, 1955, P.L. 323, § 1735, 16 P.S. § 1735.
[8] Act of August 9, 1955, P.L. 323, § 1731, 16 P.S. § 1731: "An appeal may be taken from such [controller's] reports to the court of common pleas, either by the Commonwealth, the county or the officer. . . ." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544627/ | 133 F.2d 515 (1943)
HENDERSON, Price Adm'r,
v.
BURD et al.
No. 143.
Circuit Court of Appeals, Second Circuit.
February 9, 1943.
*516 Henry Lichtig, of New York City (David M. Berger, of New York City, of counsel), for appellants.
David Ginsburg, Gen. Counsel, and Brunson MacChesney, Asst. Gen. Counsel, both of Washington, D. C., Irvin C. Rutter, Regional Enforcement Atty., of New York City, and Harry W. Jones, Chief, Appellate and Briefing Branch, and Carl W. Berueffy, Atty., both of Washington, D. C., for appellee.
Before SWAN, AUGUSTUS N. HAND, and FRANK, Circuit Judges.
SWAN, Circuit Judge.
Pursuant to power conferred by the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 901 et seq., the plaintiff promulgated Revised Price Schedule No. 95[*] fixing maximum prices applicable to sales of nylon hose by manufacturers. By section 1401.10 of such schedule wholesalers or jobbers are permitted to sell at the manufacturers' prices "increased by ten per cent." Sales in violation of any price schedule are declared unlawful by section 4 of the Act, 50 U.S.C.A.Appendix § 904, and may be enjoined pursuant to section 205, 50 U.S.C.A.Appendix § 925. Under these sections the suit at bar was brought against the appellants, who are partners trading as Lycoming Hosiery Company. The complaint charged, in substance, that they were selling nylon hose at jobbers' prices when they were entitled to charge only the maximum prices established for manufacturers. A motion for a preliminary injunction, heard upon supporting and opposing affidavits, was granted, and they were enjoined (1) from selling nylon hose at prices in excess of the maximum prices established for manufacturers by schedule 95, and (2) from buying or selling any hosiery, other than nylon, at prices in excess of those established by any other applicable maximum price regulation.
The facts disclosed by the record without substantial dispute may be summarized as follows: Samuel I. Burd, trading as Lycoming Hosiery Mills, started business in 1933 as a selling agent for manufacturers and mills. He says that later he "expanded to jobbing (purchasing goods for my own account and then selling them)." At the end of 1941 he changed the name under which he traded to Lycoming Hosiery Company in order to meet objections raised by the Federal Trade Commission to his use of the word "Mills." In a stipulation filed with the Commission he described himself "as selling agent for Burdwyn Hosiery Mills" and his business as that "of factor or manufacturer's agent." In January, 1942, he took into partnership his brother Martin. For convenience the partnership will be referred to as Lycoming. The merchandise which Lycoming sells is obtained in part by buying the finished product from manufacturers or jobbers and in part by buying yarns and raw materials and having them made into finished hosiery under contract with manufacturers. One manufacturer, but not the only one, with which Lycoming deals is Burdwyn Hosiery Mills, a corporation organized in 1938 under the laws of Pennsylvania. The capital stock of Burdwyn consists of 32 shares of which Samuel owns 15, Martin 6, another brother 10, and a sister 1. Samuel and Martin are the principal officers. Burdwyn owns a manufacturing plant in Pottstown, Pennsylvania, at which were manufactured the nylon hose involved in the case at bar. They were delivered by it to Park Hosiery Dyeing & Finishing Company for dyeing and finishing, and by Park were delivered to Lycoming's customers. Park is a Pennsylvania corporation organized in 1937 by Samuel Burd. He is its sole stockholder. Park occupies part of Burdwyn's plant in return for which it pays a monthly rental of $50 and contributes to the cost of heating, of janitor service and of a watchman. It does not do all of the finishing for Lycoming and Burdwyn. The principal office of Lycoming is located at the factory premises of Burdwyn. No rent is paid for the space so occupied. The books of account of the partnership are kept there and bills to its customers are sent out from there on Lycoming billheads. Martin Burd spends all his time attending to "the production *517 end" of the Lycoming business and to buying merchandise. He also sees to the proper delivery of all goods from the finisher to the ultimate purchaser. Samuel Burd resides in Philadelphia but spends from two to four days each week at Lycoming's New York office which is the headquarters for its six salesmen. Monthly bills are sent from Burdwyn to Lycoming, and payments are made by it on the basis of an open or running account. No other correspondence takes place between them. From May 15 to August 15, 1942, the monthly business of Lycoming was about four times that of Burdwyn.
The case has been argued by the appellants as though it were necessary for the plaintiff to prove them manufacturers if the preliminary injunction is to be supported. It is urged that no justification is shown for disregarding the corporate entities of Burdwyn and Park, since their earlier creation proves that they were not organized for the purpose of evading the Emergency Price Control Act of 1942; and further that the order of the Federal Trade Commission is a final adjudication that Samuel I. Burd, whose business the partnership has continued, is not a manufacturer. But it is not necessary that the appellants should be proven manufacturers of the nylon hose they sold. Concededly they violated the price restrictions of schedule 95 unless they are either "wholesalers" or "jobbers." These words are not defined by the Act but it seems plain that they do not include a manufacturer's selling agent. From an examination of the stipulation filed with the Federal Trade Commission and appended to one of the affidavits before him, the district judge found that "Lycoming was nothing more than a selling agent for Burdwyn, the manufacturer of the nylon hose." Unless this finding must be reversed it is sufficient to support paragraph (1) of the injunction. On appeal from an interlocutory injunction inquiry of an appellate court is limited to whether the district court abused its discretion. United States v. Corrick, 298 U.S. 435, 437, 56 S. Ct. 829, 80 L. Ed. 1263. And ordinarily the granting or denial of a preliminary injunction will not be disturbed on appeal. Myers v. Bethlehem Corp., 303 U.S. 41, 52, 58 S. Ct. 459, 82 L. Ed. 638. Although the stipulation is only an admission and subject to refutation, we find nothing in the affidavit of Samuel Burd sufficient to refute it. The business relations between Lycoming and Burdwyn are not set forth with sufficient clarity and particularity to overcome the admission of agency, even if Burdwyn be regarded as a distinct corporate entity.
Two other arguments of the appellants require but brief mention. The contention that the plaintiff failed to prove the existence of the usual equitable grounds for relief, such as irreparable damage, is plainly irrelevant. Where an injunction is authorized by statute it is enough if the statutory conditions are satisfied. Securities and Exchange Comm. v. Torr, 2 Cir., 87 F.2d 446, 450. The contention that schedule 95, as construed by the court, compels changes in business practices established in the industry contrary to section 2(h) of the Act, 50 U.S.C.A.Appendix § 902(h), is an attack upon the validity of the regulation, of which the Emergency Court of Appeals established by section 204, 50 U.S.C.A.Appendix § 924, has exclusive jurisdiction.
For the foregoing reasons we find no error in the granting of paragraph (1) of the preliminary injunction. Paragraph (2), however, seems to be broader than the facts justify. It restrains the appellants from buying or selling any hosiery other than hosiery covered by schedule 95, at prices in excess of those established by any other applicable maximum price regulation. The only evidence of violation of the Act related to hosiery manufactured by Burdwyn. The only admission that the Lycoming partners are a manufacturer's selling agent refers to Burdwyn as the manufacturer. They apparently acted in good faith under the honest belief that they were "wholesalers or jobbers" of the Burdwyn goods as well as of the merchandise acquired from others. We see no reason to suppose that they would violate price ceilings fixed for other goods. In our opinion the restraint imposed by paragraph (2) should be limited to hosiery other than nylon hosiery which Burdwyn has manufactured for the appellants. As so modified the preliminary injunction is affirmed.
NOTES
[*] 7 Fed.Reg. 1386, 1842. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544621/ | 133 F.2d 160 (1943)
AMERICAN SURETY CO. et al.
v.
BANK OF CALIFORNIA.
No. 10188.
Circuit Court of Appeals, Ninth Circuit.
January 16, 1943.
*161 Plowden Stott, Cake, Jaureguy & Tooze, E. L. McDougal, and Maurice D. Sussman, all of Portland, Or., for appellants.
Borden Wood, of Portland, Or. (McCamant, King & Wood and Robert S. Miller, all of Portland, Or., of counsel), for appellee.
Before MATHEWS, STEPHENS and HEALY, Circuit Judges.
STEPHENS, Circuit Judge.
In a suit brought by American Surety Company and E. L. McDougal against the Bank of California, the District Court gave judgment in favor of defendant bank. The plaintiffs appeal.
Plaintiff American Surety Company is a New York corporation, and plaintiff E. L. McDougal, a citizen of Oregon. Defendant Bank of California (hereinafter referred to as "Bank") is a national banking association, incorporated under the laws of the United States, with its principal place of business at San Francisco, California, and with a branch bank in Portland, Oregon.
Interior Warehouse Company (hereinafter referred to as "Interior"), an Oregon corporation, was a depositor in defendant Bank's Portland branch. Crowe, a bookkeeper of Interior, was charged with the duty of preparing payroll checks. Over a period of years Crowe fraudulently made out checks to former employees, to present employees paid in some other manner, and to fictitious persons. The checks were duly signed by authorized officials of Interior and were returned to Crowe, who forged the payees' names, cashed the checks and used the money so received for his own purposes. Detection was delayed through Crowe's falsification of Interior's books and by his own checking of the bank statements.
Interior was insured by American Surety Company and the underwriters at Lloyds of London (hereinafter called Insurers), against loss sustained through the dishonesty of its employees. The Insurers paid Interior the full amount of the loss and took assignments of Interior's claim against Bank. Subsequently, Lloyds assigned its claim to plaintiff E. L. McDougal, who joined American Surety Company in suit herein against Bank to recover their payments to Interior, and the United States District Court of the Judicial District of Oregon accepted jurisdiction.
The Jurisdictional Question.
The citizenship of the Bank, for purposes of determining the jurisdiction of the federal court, depends upon the interpretation of 28 U.S.C.A. § 41 (16) "* * * And all national banking associations established under the laws of the United States shall, for the purposes of all other actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located." No case defining "located", in this connection, has come to our *162 attention. The quotation from the cited section reveals a departure from the old rule that the incorporation of national banking associations under the laws of the United States is a basis for federal jurisdiction. Continental Nat. Bank of Memphis v. Buford, 191 U.S. 119, 24 S. Ct. 54, 48 L. Ed. 119. There would appear to be a close analogy between such a bank and a corporation national in scope. The citizenship of a corporation is fixed by its principal place of business, a rule which prevails even though it extends its field of endeavor into other states under the sanction of the laws of such other states. St. Louis & San Francisco Ry. Co. v. James, 161 U.S. 545, 16 S. Ct. 621, 40 L. Ed. 802; Southern Ry. Co. v. Allison, 190 U.S. 326, 23 S. Ct. 713, 47 L. Ed. 1078. In addition, a logical interpretation of the phraseology of 28 U.S.C.A. § 41 (16) leads to the conclusion that the "States in which they [national banking associations] are respectively located" are those states in which their principal places of business are maintained. If the Congress had intended to provide that a national banking institution should be given the privilege and should carry the duties of citizenship in various states upon the basis of branch business offices being established therein, it would be a noteworthy departure from the general rule, and more likely than not Congress would have plainly stated such intent. The mere suggestion of such a provision in the law implies constitutional questions of great academic interest.
In the course of the oral argument to this court the jurisdiction of the District Court was raised as to the cause of action of American Surety Company, it having paid less than $3,000 on the loss caused by Crowe's dishonesty. We hold that the District Court had jurisdiction upon the ground that both claims were based upon one subject matter, which concerned the recovery of more than the jurisdictional requirement of $3,000. For further exposition of the matter, see Troy Bank v. Whitehead & Co., 222 U.S. 39, 32 S. Ct. 9, 56 L. Ed. 81.
The trial court was right in holding that defendant is a citizen only of the state in which its principal place of business is located, the State of California. Diversity of citizenship having been established and the controversy having been shown to be greater in value than $3,000, jurisdiction lay in the trial court from which this appeal is brought.
Bases for the Claimed Bank Liability to Insurers.
Insurers contend that Bank incurred liability to Interior in breaching its contract with its depositor by charging the account of the latter with the amounts dispersed on checks bearing forged indorsements. They maintain, further, that they became subrogated to the rights of Interior against the Bank when they reimbursed Interior in the sum of money paid upon the fraudulent checks. Unless both contentions are correct, Insurers are not entitled to relief in the premises under the doctrine of subrogation.
Assuming, but not deciding, that Interior, had it not been compensated for its loss by Insurers, could have recovered directly from Bank, now that it has been so compensated, it does not seem to us that the facts of this case are sufficient to raise the equitable right of subrogation in favor of Insurers as against Bank. As we shall hereinafter show, in these circumstances the assignments of Interior's claim in no way improve Insurers' position.
The right of subrogation is a creature of equity, applicable where one person is required to pay a debt for which another is primarily responsible, and which the latter should in equity discharge. In theory one person is substituted to the claim of another, but only when the equities as between the parties preponderate in favor of the plaintiff. That is, a surety's right of recovery from a third party through subrogation does not follow, as of course, upon proof that the losing but recompensed party could have recovered from the third party. Accordingly, subrogation will not operate against an innocent person wronged by a principal's fraud. A surety may pursue the independent right of action of the original creditor against a third person, but it must appear that said third person participated in the wrongful act involved or that he was negligent, for the right to recover from a third person is merely conditional in contrast to the right to recover from the principal which is absolute. The equities of the one asking for subrogation must be superior to those of his adversary. If the equities are equal or if the defendant has the greater equity, *163 subrogation will not be applied to shift the loss.
The basic principles set forth above are consistently reiterated in connection with the right of subrogation, and are clearly supported by the majority of reported decisions. The cases, dealing with the surety's alleged right of subrogation to the claim of the original creditor against a third party with whom the indemnitor is not in privity, indicate that the result reached depends upon a careful analysis of the facts involved. Obviously, we do not have before us an indemnity agreement running to any person injured, as so often appears in surety contracts of public officials, rather than to specifically named persons. Cases with the turning point as to subrogation correctly or incorrectly resting upon that fact should not be allowed to confuse the situation. The same may be said as to many opinions to be found in the books which erroneously, as we think, fail to note that the touchstone upon which subrogation, as to parties not under contractual obligations between themselves, depends is the superior equity as between the surety and the claimed subrogee.
In the instant case the surety contracts are confined to Insurers and Interior. Any right of recovery against third parties for money paid Interior by Insurers under the contracts must rest solely upon a weighing of the equities as between the third parties and Insurers. Such equities generally depend upon participation in wrongdoing, negligence, or knowledge, although we do not mean to say that these expressions cover the gamut of equities which may or should be considered.
In Fidelity & Deposit Co. v. Oklahoma State Bank, 10 Cir., 77 F.2d 734, 738, the company's agent converted company funds to his own use. The surety, which had indemnified the company on account of losses due to defaults of the agent, paid the company in accordance with its contract, then sued the bank which had paid company funds to the agent as an individual. The case was held a proper one for subrogation because of the bank's negligence, as it should have known at the outset that the agent was dealing with it purely as an agent. "Its course of dealing with Jordan and the facts and circumstances of which it was informed were sufficient to render it liable for not making inquiry."
The Insurers cite with confidence, Martin v. Federal Surety Co., 8 Cir., 58 F.2d 79. Therein, defendants bought state timber from one possessing a permit to take under a state statute, which declared that until fully paid for, title to all timber cut under a state permit should remain in the state. When the permittee failed to pay, the surety on his bond guaranteeing payment to the state paid the amount due to the state, then sued defendants for conversion on the ground that it was subrogated to the state's remedy against defendants. Subrogation was allowed in favor of the surety.
The court declared on page 89 of 58 F. 2d: "We think that if appellants participated in the original wrong of Erskine by which liability on his part to the state was created, or if they were guilty of negligence in entering into and carrying out the arrangement had with him for the purchase of the timber, appellee would be subrogated to the right of the state to recover against them in an action of conversion." The court then pointed out that the timber was state timber and that the permittee had no title until payment was completed. It stressed the fact that under a state statute the defendants were charged with notice of information on file in the auditor's office and consequently with notice that the due sums had not been paid the state. Finally, the court concluded that defendants were negligent in the existing circumstances.
Notice is also an element of United States Fidelity & G. Co. v. United Nat. Bank, 80 Or. 361, 157 P. 155, L.R.A.1916E, 610. A trustee had two accounts in defendant bank, one in his name as guardian, and one in his name as an individual. After the funds in the latter were exhausted, the bank charged checks signed by the trustee as an individual to his guardianship account. The surety on the trustee's bond recompensed the new trustee in the amount of the loss, took an assignment of the claim against the bank, and brought action against the bank. Judgment was decreed in favor of the surety, which was held subrogated to the rights of the new trustee. The court stated that the bank had actual knowledge of the distinction between the two funds, had contracted with two unlike individuals, and consequently was bound by its agreement.
In all of the situations outlined defendants had actual knowledge of facts sufficient to put them on notice of the wrongdoing and in a way, therefore, were *164 implicated in the wrong done. In the instant case Bank was liable, if at all, not because it was a wrongdoer but because of its absolute liability on an implied contract to repay money on deposit only to the persons to whose order the checks are drawn. The checks improvised by Crowe were cashed in the ordinary course of Bank's business. No indication is found that Bank knew any facts which would suggest the fraud of an employee of its depositor. Insurers, on the other hand, expressly contracted to secure Interior against losses caused by a dishonest employee, such as Crowe. They accepted the responsibility for such losses for a compensation, the premiums paid to them, which they have retained. Both they and Bank are innocent of any wrongdoing, although all were liable to Interior (under assumption of Bank's liability to Interior) on the basis of independent contract obligations the implied contract of Bank to pay only to those entitled, and the contracts of Insurers to indemnify against losses caused by a defalcating employee. Since Insurers expressly, voluntarily and for a compensation guaranteed against loss in the exact situation involved, the equity in the situation cannot lie in favor of Insurers and against Bank for the payment made. Commercial Casualty Ins. Co. v. Petroleum Pipe Line Co., 10 Cir., 83 F.2d 412; Washington Mechanics' Sav. Bank v. District Title Ins. Co., 62 App.D.C. 194, 65 F.2d 827; New York Title & Mortg. Co. v. First National Bank, 8 Cir., 51 F.2d 485, 77 A.L.R. 1052; Meyers v. Bank of America N. T. & S. Ass'n, 11 Cal. 2d 92, 77 P.2d 1084; Louisville Trust Co. v. Royal Indemnity Co., 230 Ky. 482, 20 S.W.2d 71; Northern Trust Co. v. Consolidated Elevator Co., 142 Minn. 132, 171 N.W. 265, 4 A.L.R. 510; American Central Ins. Co. v. Weller, 106 Or. 494, 212 P. 803.
That the law of Oregon is in accord with the principles above set forth, is indicated by American Central Ins. Co. v. Weller, 106 Or. 494, 212 P. 803. There, the State Supreme Court held that the insurer's payment of the amount due on a policy, protecting the assignee of a conditional sales contract against loss caused by conversion of an automobile, satisfied the debt in that amount as against defendant, the guarantor of the debt by the assignment of the sales contract to the assignee. The court determined that the rules as to subrogation had no application to the situation in question and narrowly limited that application. Admittedly, the facts vary widely from those in the instant case, but the court's limitation of the subrogation doctrine is significant.
At first glance, Chicago, St. Louis, etc., R. Co. v. Pullman, etc., Co., 139 U.S. 79, 11 S. Ct. 490, 35 L. Ed. 97, cited by Insurers, seems contrary to the result reached in the case at bar. There, the insurance company paid the Pullman Company the amount due on a fire insurance policy covering a sleeping car, and subsequently was allowed to recover the said amount by subrogation to the rights of the Pullman Company against the railroad. The railroad was using the car under a contract with the Pullman Company, in which it agreed to pay any damage to the car occasioned by accident or casualty. It was found that under the contract the railroad was primarily liable for the fire damage to the car, whereas the liability of the insurance company was secondary. We agree with the Oregon Supreme Court when it stated in the Weller case that an insurer, having paid a loss, is not entitled to the right of subrogation by virtue of a contract between insured and a third party unless the contract shows primary liability on the part of such third person for loss of the property insured. In the case at bar there was no express contract on the part of Bank in favor of Interior as there was on the part of the railroad in the Pullman case. Furthermore, there was no primary liability on the part of a third person, the bank, for the loss; the primary liability rested on the employee Crowe. Therefore, the Pullman case is not authority in favor of Insurers herein.
If Insurers have no right to subrogation, their position is not improved by the assignments to them of insured's claim against Bank. When Insurers paid Interior, the right of Interior to pursue its claim against Bank was destroyed as Interior would not be permitted a dual recovery. Therefore, there was in existence no enforceable claim against Bank which Interior could assign to Insurers, and which would support recovery in favor of Insurers. The distinction between subrogation and assignment is clearly set forth in 6 C. J.S., Assignments, § 3, p. 1051: "So also subrogation presupposes an actual payment and satisfaction of the debt or claim to which the party is subrogated, although the remedy is kept alive in equity for the benefit *165 of the one who made the payment under circumstances entitling him to contribution or indemnity, while assignment necessarily contemplates the continued existence of the debt or claim assigned." In accord: Meyers v. Bank of America N. T. & S. Ass'n, 11 Cal. 2d 92, 77 P.2d 1084; Louisville Trust Co. v. Royal Indemnity Co., 230 Ky. 482, 20 S.W.2d 71. That Oregon law follows the rule stated is evident in American Central Ins. Co. v. Weller, 106 Or. 494, 212 P. 803, where the court held, as already mentioned in connection with this case, that payment by the insurer on the insurance policy satisfied the debt involved, and concluded that the debt could not be assigned.
Insurers have no right of subrogation. The assignment to them of Interior's cause of action against the bank cannot assist them. The trial court correctly applied the law throughout the trial of the case.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544636/ | 133 F.2d 595 (1943)
UNITED STATES
v.
REGINELLI.
No. 8114.
Circuit Court of Appeals, Third Circuit.
Argued November 6, 1942.
Decided January 25, 1943.
Writ of Certiorari Denied April 5, 1943.
*596 William A. Gray, of Philadelphia, Pa. (Carl Kisselman, of Camden, N. J., on the brief), for appellant.
John L. Morrissey, Asst. U. S. Atty., of Trenton, N. J. (Charles M. Phillips, U. S. Atty., of Trenton, N. J., and W. Orvyl Schalick, Asst. U. S. Atty., of Camden, N. J., on the brief), for appellee.
Before BIGGS, JONES, and GOODRICH, Circuit Judges.
Writ of Certiorari Denied April 5, 1943. See 63 S. Ct. 856, 87 L.Ed. ___.
JONES, Circuit Judge.
The appellant was tried upon an indictment in three counts for alleged violation of the White Slave Law of 1910 (the Mann Act) as amended, 18 U.S.C.A. §§ 398, 399.
At trial, the court dismissed one of the counts and submitted the case to the jury on the remaining two (the first and third) with instructions that, if the jury found the defendant guilty of an offense under the indictment, it could not convict on both counts but only upon one of them. The defendant took no exception to the limitation which the court thus placed on any possible verdict of guilt. The jury found the defendant guilty on the first count and not guilty on the third. As the appellant urged at bar that the verdict of guilt on one of the counts and of acquittal on the other was inconsistent, we shall treat with this contention, in passing, before coming to the other questions raised.
*597 Any inconsistency in the verdict, if such there be, is directly attributable to the trial court's specific instructions rather than to any want of logic on the part of the jury. The trial judge had charged, in this connection, that "* * * you cannot find a verdict of guilty on both the first and third counts, as they all arise out of the same set of circumstances. * * * if you come to the conclusion that he is guilty of an offense on either of them you must render your verdict of guilty on that one and not guilty on the other." The jury, finding the defendant guilty on the first count, had no alternative, therefore, but to find him not guilty on the third count as the court's charge had expressly enjoined in the particular situation. Furthermore, even if the instruction was erroneous, it did not constitute reversible error. Its only effect, in the light of the jury's verdict, was to save the defendant from a finding of guilt on both counts. Not possibly can he justifiably assert that the instruction was harmful to him. It deprived him of no substantial right. Consequently, even if erroneous, the instruction does not qualify as the type of error necessary to justify a new trial. Act of Mar. 3, 1911, c. 231, § 269, 36 Stat. 1163, as amended by the Act of Feb. 26, 1919, c. 48, 40 Stat. 1181, 28 U.S.C.A. § 391.
The propositions of law whereon the appellant principally relies are (1) that the evidence was insufficient to support a verdict of guilt and (2) that the Mann Act is not applicable to a case where no commercial element is involved in the immoral purposes for which a woman is transported in interstate commerce. No error is assigned either with respect to the admission or rejection of evidence at trial or as to the language of the court's submission of the case to the jury. It is the appellant's contention that the case should not have been submitted to the jury at all for either of the two reasons above stated.
We need treat but briefly with the contention that the Mann Act does not apply where no commercial or profit motive is involved in the interstate transportation of a woman for immoral purposes. The decision of the Supreme Court in Caminetti v. United States, 242 U.S. 470, 37 S. Ct. 192, 61 L. Ed. 442, L.R.A.1917F, 502, Ann. Cas.1917B, 1168, flatly rules that point adversely to the appellant's contention. The same argument, as to the alleged restricted scope of the Mann Act, which the appellant now makes, based on the same references to the legislative history of the Act, was advanced in the Caminetti case and was rejected by a majority of the Supreme Court in an opinion which leaves us no other course than to overrule the appellant's contention. We have then to consider whether the evidence adduced by the government was sufficient to support the jury's verdict of guilt.
The count in the indictment, whereof the defendant was convicted, alleged that on or about February 2, 1942, the defendant "did wilfully, unlawfully and feloniously, knowingly aid and assist in obtaining transportation for and in transporting in interstate commerce" from Camden, New Jersey, to Miami, Florida, by means of common carriers, "a certain woman * * * with intent and purpose in the said * * * [defendant] to induce, entice and compel the said * * * [woman] to engage in an immoral practice, to wit, the practice of illicit sexual intercourse with him", contrary to the statute in such case made and provided, etc.
The following facts were established by direct proof. In the latter part of January 1942, Reginelli, the defendant, a resident of Camden, New Jersey, left there for a visit in Miami, Florida, having apprised the woman, also a resident of Camden, New Jersey, of his contemplated trip. En route south he sent her a telegram in endearing terms and upon arriving in Miami he again telegraphed her in like vein and also informing her of his arrival. The succeeding day (January 23, 1942) he telegraphed her giving her his hotel address, expressing the wish that she were there and stating that he would call her by telephone that evening, which he did. From then until February 2, 1942, he called her by telephone four additional times and talked with her on each occasion. One of the matters discussed in the telephone conversations was the prospect of her going to Miami while he was there. Acting in pursuance of the understanding arrived at with Reginelli by telephone, the woman went by taxicab from Camden, New Jersey, to a mid-city hotel in Philadelphia where she took the bus to the Philadelphia airport. At the airport she boarded an airplane for Miami, Florida, upon a ticket and under reservations which Reginelli himself had procured and paid for as he had told her he would do. Upon her arrival at the airport in Miami she was met by Reginelli *598 and with him rode in his automobile to his hotel in Miami Beach. She went to his room in the hotel and continued to live there during the whole of her ten day sojourn in Miami. During that time she and Reginelli occupied the same bed in his room and had sexual relations.
The jury was free to accept the facts as above related, which in the main came from the woman as a witness. The appellant insists, however, that the jury could not accredit so much of the woman's oral testimony unless they also accepted as verity the witness' further testimony that the idea of her going to Florida to join Reginelli originated with her and that he had frowned upon it, and also that he had objected to her going to his room when they arrived at his hotel in Miami. The probabilities of the woman's testimony were for the jury whose duty it was to accept and interpret such thereof as seemed credible and to reject the improbable. Cf. United States v. Simon, 3 Cir., 119 F.2d 679, 682. Only by assuming the jury's province could the court have declared that Reginelli's opposition to the woman's trip to Miami and to her sharing his room with him while there, as related by the woman, was real and that it excluded Reginelli from participation in the woman's interstate transportation and its purpose. Opposed to any such conclusion, there is Reginelli's telegram expressing his wish that she were in Miami and the further facts that it was he who made all necessary arrangements and provisions for her transportation from the north; that he was expectantly awaiting her arrival at the Miami airport; and that, without having procured a separate room for her, he went directly with her to his hotel and to his room where he thereafter engaged her in immoral practices.
The appellant contends that, inasmuch as an immoral purpose in causing a woman to be transported in interstate commerce is an essential ingredient of the offense denounced by the statute, it was incumbent upon the government to prove by direct evidence that the illicit relations indulged in by the defendant with the woman after her arrival in Miami was the purpose for which he had caused her to be transported there. He then argues that, in the absence of such direct proof, a proper purpose for the transportation is as readily inferable from the evidence in the case as is an immoral purpose and that, consequently, he was entitled to a directed verdict of acquittal under the widely recognized rule applicable to cases of circumstantial evidence, e. g. United States v. Russo, 3 Cir., 123 F.2d 420, 423. It should be noted that it was only the defendant's purpose in bringing about the woman's transportation that needed to be inferred. As already appears, the facts as to the interstate transportation and the immoral practices were directly proven by the oral testimony of witnesses.
That the intent, motive, or purpose necessary for the establishment of a crime may rest in inference hardly requires citation of authority. In Hammond v. United States, 75 U.S.App.D.C. 397, 127 F.2d 752, 753, upon which the appellant largely relies, the court recognized that the alleged offender's "intent can only be determined by his acts". That was a case of conviction of assault with intent to commit rape. The reason for the reversal in the Hammond case was because the record was barren of any facts from which an intent to commit rape, as distinguished from some other immoral offense, could be inferred.
True enough, the interstate transportation which the Mann Act makes penal is only such as is undertaken or initiated for the purpose of effecting, aiding, or facilitating prostitution, debauchery, or other immoral practices. Fisher v. United States, 4 Cir., 266 F. 667, 670. But the purpose for which the interstate transportation is enlisted may be inferred from the conduct of the parties within a reasonable time before and after the transportation. See Neff v. United States, 8 Cir., 105 F.2d 688, 691. In Grayson v. United States, 8 Cir., 107 F.2d 367, 370, a prosecution under the Mann Act, the Court of Appeals had no doubt that "inferences as to intent may be gathered from subsequent acts and conduct."
Under the evidence in the instant case the jury was warranted in inferring from the conduct of the parties that the defendant's purpose in utilizing facilities of interstate commerce for the transportation of the woman to Miami was so that he might have sexual intercourse with her there. The jury was under no legal compulsion to accept as final the woman's testimony that it was she who instigated the trip and that the defendant did not want her to stay in his room in Miami. And, once the jury disbelieved or deemed inconsequential the portion of the woman's testimony *599 tending to exculpate the defendant, there was nothing in the case to suggest even a want of unlawful purpose on the part of the defendant; and the otherwise justifiable inference of his unlawful purpose thereupon stood unrefuted. In any event, the portion of the woman's testimony which counsel stresses as freeing the defendant of an unlawful purpose was at best but slight evidence of what was actually in the defendant's mind, so that, even accepting the whole of her testimony at face, it was still for the jury to determine from all of the proven facts what the defendant's purpose was in having the woman transported to Miami. Cf. Shama v. United States, 8 Cir., 94 F.2d 1, 4, and cases there cited.
In the circumstances thus shown, the trial court would not have been warranted in declaring, as a matter of law, that a lawful purpose on the part of the defendant for the transportation was as inferable from the evidence in the case as an immoral purpose. It was the jury's province to appraise the credibility of the witnesses and to interpret the true import and intendment of the oral testimony. Consequently, so far as any inference of legitimate purpose on the defendant's part was to be drawn from the evidence, it was for the jury to draw, and the defendant got at least all he was entitled to when the trial court affirmed his twelfth request for charge, and charged accordingly, that "The evidence introduced against the defendant is circumstantial and when a charge of crime is sought to be sustained by circumstantial evidence, the evidence must be such as to exclude to a moral certainty every hypothesis but that of guilt and the facts and circumstances must not only be consistent with and point to the guilt of the accused, but they must be inconsistent with his innocence before you can convict. The evidence must point to guilt, and to guilt alone, before you may convict." In the light of this instruction, the jury's verdict clearly implied their finding that the credible evidence established the defendant's immoral purpose, and no lawful purpose, in having the woman transported in interstate commerce. The evidence in the case was sufficient to justify the exclusive inference.
Nor do the cases which the appellant cites hold that a trial court is required to direct a verdict of acquittal where the defendant's immoral purpose in transporting a woman in interstate commerce is not directly proven but depends upon inference drawn from the evidence in the case.
In the Caminetti case, supra, 242 U.S. page 491, 37 S.Ct. page 197, 61 L. Ed. 442, L.R.A.1917F, 502, Ann.Cas.1917B, 1168, the Supreme Court said that the Mann Act "seeks to reach and punish the movement in interstate commerce of women and girls with a view to the accomplishment of the unlawful purposes prohibited." (Emphasis supplied.) Accordingly, it has since been generally held that illicit sexual relations merely incidental to or consequent upon the interstate transportation of a woman do not constitute a violation of the Act where the transportation was undertaken for a proper and legitimate purpose and without relation to an indulgence in immoral practices. Most of the cases which the appellant cites to that effect are reviewed in Yoder v. United States, 10 Cir., 80 F.2d 665, 670, et seq.[1] While unquestionably the gist of the offense under the Act is interstate transportation for the accomplishment of the prohibited purpose, we do not understand any of the cited cases to hold that the initial unlawful purpose may not be established circumstantially where the evidence which the jury is free to accept is sufficient to support such an inference to the exclusion of an inference of lawful purpose. The inferences to be drawn from the evidence and their relative merit or weight remain matters for the jury. Thus, in the Yoder case, supra, where the judgment of conviction was reversed and the case remanded for a new trial, the defendant's evidence with its implications of legitimate purpose for the particular transportation was virtually excluded from the jury's consideration when the trial judge "charged in substance that whatever may have been the reason that brought about the trip, there must be a conviction if [the defendant] intended to have sexual commerce with her *600 while away." None the less, the Court of Appeals noted (80 F.2d page 670) that the issue as to the purpose of the transportation should have been left to the jury to decide. In the instant case that issue was submitted to the jury in a charge eminently fair to the defendant to which he took no exception. Nor do any trial errors otherwise appear. The evidence in all essential elements is sufficient to support the jury's verdict of guilt.
The judgment of the District Court is affirmed.
NOTES
[1] Hunter v. United States, 4 Cir., 45 F.2d 55, 56, 73 A.L.R. 870; Alpert v. United States, 2 Cir., 12 F.2d 352, 354; Sloan v. United States, 8 Cir., 287 F. 91, 92; Thorn v. United States, 8 Cir., 278 F. 932, 933; Fisher v. United States, supra; Biggerstaff v. United States, 8 Cir., 260 F. 926, 928; Van Pelt v. United States, 4 Cir., 240 F. 346, 349; Welsch v. United States, 4 Cir., 220 F. 764, 769. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544638/ | 133 F.2d 567 (1943)
HEININGER
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 8130.
Circuit Court of Appeals, Seventh Circuit.
February 15, 1943.
*568 Samuel W. Witwer, Jr., and Floyd L. Lanham, both of Chicago, Ill., for petitioner.
Sewall Key, Helen R. Carloss, Earl C. Crouter, and Carlton Fox, all of Washington, D. C., Samuel O. Clark, Jr., Asst. Atty. Gen., and J. P. Wenchel and Chas. E. Lowery, Bureau of Internal Revenue, both of Washington, D. C., for respondent.
Before SPARKS, MAJOR, and MINTON, Circuit Judges.
MINTON, Circuit Judge.
The petitioner, S. B. Heininger, seeks to review a judgment of the United States Board of Tax Appeals which found the petitioner liable for deficiencies in income taxes for the years 1937 and 1938.
The petitioner, a dentist, conducted a mail order business in which he undertook to make false teeth and supply them by mail. The Post Office Department instituted a fraud order proceeding against the petitioner, which resulted in a finding that his methods were fraudulent, and an order against him denying to him the use of the mails. If he could not use the mails, he was out of business. Consequently, he filed suit in the District Court for the District of Columbia against the Postmaster General, and obtained a permanent injunction against him from enforcing the fraud order. On appeal to the Circuit Court of Appeals for the District of Columbia, the judgment of the District Court was reversed, and the fraud order of the Post Office Department was sustained.
In the defense of his business in the proceedings in the Post Office Department and the District Court and the Circuit Court of Appeals, the petitioner incurred and paid several thousand dollars for attorneys' fees and expenses. It is admitted that the expenses were reasonable. By these legal proceedings, the enforcement of the fraud order was enjoined and remained enjoined until the reversal by the Circuit Court of Appeals.
During this time, in the years 1937 and 1938, the petitioner continued in business and returned a gross income for 1937 of $287,582.82, and for 1938 of $150,168.27. While his litigation was ultimately unsuccessful, it did allow him to keep his business going in 1937 and 1938, and enabled him to earn the large income indicated above.
The petitioner sought to deduct from his gross income for 1937 and that for 1938, as an ordinary and necessary expense of carrying on that business, the attorneys' fees and expenses of the litigation. The Commissioner disallowed the deduction, and the Board of Tax Appeals affirmed. The question is; Are such expenses deductible as ordinary and necessary expenses in carrying on that business, within the meaning of Section 23(a) (1), 26 U.S. C.A., Int.Rev.Code, 49 Stat. 1648?[1]
*569 What is an ordinary expense is discussed by Mr. Justice Cardozo in Welch v. Helvering, 290 U.S. 111, 114, 54 S. Ct. 8, 9, 78 L. Ed. 212: "Ordinary in this context does not mean that the payments must be habitual or normal in the sense that the same taxpayer will have to make them often. A lawsuit affecting the safety of a business may happen once in a lifetime. The counsel fees may be so heavy that repetition is unlikely. None the less, the expense is an ordinary one because we know from experience that payments for such a purpose, whether the amount is large or small, are the common and accepted means of defense against attack."
By this standard, we think it plain that the expense in the instant case was ordinary. It was such an expense as related strictly to the life of the business.
Not only must the expense be ordinary; it must also be necessary. In Kornhauser v. United States, 276 U.S. 145, 153, 48 S. Ct. 219, 220, 72 L. Ed. 505, Mr. Justice Sutherland, in discussing the allowance, as a deduction, of attorneys' fees as a business expense, said: "* * * where a suit or action against a taxpayer is directly connected with, or, as otherwise stated, * * * proximately resulted from, his business, the expense incurred is a business expense within the meaning * * * of the act."[2]
We think that where an expense is incurred which saves the life of a business, even for a time, it is, in the light of the above interpretation, not only a business expense, but a necessary business expense. Without the expenditure, there would have been no income in this case because there would have been no business. The business depended directly upon the expense incurred in the litigation. We therefore hold that the expense was both ordinary and necessary.
Our conclusion is supported by the case of Foss v. Commissioner, 75 F.2d 326, 1st Circuit, and Alexandria Gravel Co. v. Commissioner, 95 F.2d 615, 616, 5th Circuit. In the Foss case, Foss was the owner of stock in the American Blower Company and the B. F. Sturtevant Company. He was sued by the minority stockholders of the American Blower Company, and charged with entering a combination to divert the business of that company to the B. F. Sturtevant Company, and to violate the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note. The District Court sustained the charges, and granted relief. The Circuit Court of Appeals modified the relief granted, but otherwise sustained the District Court. Foss incurred large attorneys' fees, which he sought to deduct from his income as ordinary and necessary expenses of his business. This deduction was disallowed by the Board of Tax Appeals, but on appeal to the Circuit Court of Appeals, the deduction was allowed, the court relying upon Kornhauser v. United States, supra.
In the Gravel Company case, the Board of Tax Appeals had refused to allow the company to deduct, as an ordinary and necessary expense of its business of selling gravel, commissions paid to one Dore on sales to the State Highway Commission. The disallowance was because of the fact that Dore was a State Senator. There was no evidence that he was to use or did use his political influence to obtain contracts with the Highway Commission, as all of the contracts were let by competitive bidding. The Circuit Court of Appeals reversed the Board of Tax Appeals, and said: "The revenue laws of the United States are not over-squeamish. By the broad definition of gross income, income arising from an illegal business is taxed even though the illegality be one declared by the Constitution itself. United States v. Sullivan, 274 U.S. 259, 47 S. Ct. 607, 71 L. Ed. 1037, 51 A.L.R. 1020. The provisions of the statute fixing the deductions to be regarded in arriving at the net income which alone is taxed, 26 U.S.C.A. § 23 [26 U.S.C.A. Int.Rev. Code, § 23], are as broad and unqualified as those defining the taxable gross income. Ordinary and necessary expenses of an illegal business would therefore seem to be deductible if they would have been had the business not been prohibited."
The Board of Tax Appeals based its decision in the instant case upon National Outdoor Advertising Bureau v. Helvering, 2 Cir., 89 F.2d 878. In that case, the taxpayer was charged with a violation of the Sherman Act. As to part of the charges, the taxpayer defended successfully. As to the balance, it agreed to a consent decree. The taxpayer sought to deduct attorneys' fees incurred and paid in this litigation. The Circuit Court of Appeals *570 approved a deduction as to the attorneys' fees and expenses incurred and paid in successfully defending certain of the charges, but denied the right to deduct for legal expenses incurred and paid in negotiating the settlement and drafting the consent decree. The court held in effect that an expense cannot be necessary if incurred in the defense of an unlawful business. We are not inclined to follow this case.
The Government also relies strongly upon Textile Mills Securities Corp. v. Commissioner, 314 U.S. 326, 62 S. Ct. 272, 279, 86 L. Ed. 249, where a corporation sought to deduct certain lobbying expenses. Such expenses were clearly prohibited as a deduction by the Treasury Regulations which provided, "Sums of money expended for lobbying purposes * * * are * * * not deductible from gross income." The Supreme Court held that this was a proper regulation for the purpose of carrying out the provisions of the statute.
For many years, the Bureau of Internal Revenue has taxed the income of illegal business in the same manner as the income of legal business. United States v. Sullivan, 274 U.S. 259, 47 S. Ct. 607, 71 L. Ed. 1037. Although this provision was known to Congress, it still made no change in the law so as to subject the income of illegal business to a treatment different from that of legal business. Both, so far as the statutes and the regulations of the Department went, were to be taxed on their net income. If the position of the respondent is sustained, and the attorneys' fees and expenses disallowed as a deduction in the instant case, then no business expense of an illegal business is deductible, and such business would be taxable on its gross income. Congress has not said that that discrimination shall be made. Neither has the Department had the hardihood to make such a material change by way of its regulations. If this change is to be made and the policy altered, let Congress do it. Congress would need only to add the word "legal" before the word "trade" in the third line of Section 23(a) (1).
We are asked, in the guise of construing the words "ordinary and necessary," to amend the statute. In other words, to engage in a little judicial legislation. We decline the invitation.
If the deduction in the case at bar was not an ordinary and necessary expense to the "carrying on" of the business, we are unable to understand the English language. Without this expense, there would have been no business. Without the business, there would have been no income. Without the income, there would have been no tax. To say that this expense is not ordinary and necessary is to say that that which gives life is not ordinary and necessary.
The judgment of the Board of Tax Appeals is reversed.
NOTES
[1] "§ 23. Deductions from gross income.
"In computing net income there shall be allowed as deductions:
"(a) Expenses.
"(1) In general.
"All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * *."
[2] The provisions of the Act referred to are identical with those of Sec. 23(a) (1) under consideration. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544656/ | 133 F.2d 283 (1943)
SCHITA
v.
KING.
No. 12402.
Circuit Court of Appeals, Eighth Circuit.
February 15, 1943.
*284 Valdo B. Schita, appellant pro se.
Otto Schmid, Asst. U. S. Atty. (Maurice M. Milligan, U. S. Atty., on the brief), for appellee.
Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.
GARDNER, Circuit Judge.
This is an appeal from an order dismissing a writ of habeas corpus, by which appellant sought relief from a judgment of a general court martial convicting him of murder. We shall refer to the appellant as petitioner and the appellee as respondent.
Petitioner, a colored man, confined in the United States Hospital for Defective Delinquents at Springfield, Missouri, without the assistance of counsel, prepared and filed his petition for writ of habeas corpus alleging:
(1) That he was being illegally and unlawfully restrained of his liberty.
(2) That he in form had been found guilty of murder by an alleged general court martial.
(3) That he had been denied a fair and impartial trial by said tribunal, (a) in that he was denied the right to be represented by military counsel of his own choosing; (b) in that he was represented by civilian counsel who was wholly unprepared and whose only conference or opportunity for conference with petitioner occurred on the day of trial and lasted only ten minutes; (c) in that he was denied the right to call witnesses in his own behalf; (d) in that witnesses testifying against him were examined in his absence so that he was denied the right of confrontation; (e) in that he was arbitrarily removed from the military camp where the crime was alleged to have been committed in New Jersey to Fort Jay on Governor's Island in the State of New York; (f) in that the witnesses who testified against him were not sworn and did not testify under oath; (g) in that petitioner and his witnesses were intimidated; (h) in that he was convicted of felonious assault on one Eugene Hines, though not tried for that offense, his trial being for the alleged murder of one Joseph Fagan; (i) in that he was charged in one indictment with two alleged offenses, to-wit: the murder of Private Joseph Fagan and of a felonious assault upon Private Eugene Hines with intent to kill; (j) in that he was denied the right of appeal.
Respondent filed a return to the writ issued admitting the retention charged in the petition by the court alleging in effect that the petitioner was tried in general court martial of the United States Army at Governor's Island in New York, and sentenced to serve a life sentence for *285 murder and assault with intent to kill; that the date of said sentence was December 29, 1917; that, thereafter, and on August 25, 1939, petitioner was transferred by direction of the attorney general of the United States to the Medical Center for Federal Prisoners at Springfield, Missouri; that his term of imprisonment has not expired; that respondent has custody of petitioner under and by virtue of the sentence and committment referred to. This return contained a general denial of the allegations of petitioner's original application except as to matters specifically admitted. Thereafter, and before the hearing, petitioner filed an amended petition which contained practically all of the charges above noted, many of which had not been included in his original petition. Apparently this amended petition was not traversed by respondent, either by general or specific denial. Petitioner, by leave of court, prosecuted his application in forma pauperis and his appeal is likewise so prosecuted. Both the original and amended petitions were prepared without the advice or assistance of counsel, but counsel was appointed for him after the initiation of the proceedings. The first counsel soon became disqualified because of appointment to official position. Other counsel was later appointed to represent petitioner at the hearing and in fact appeared at the hearing on behalf of petitioner. Petitioner has, however, prosecuted his appeal without assistance of counsel. In these circumstances we have thought it essential to the protection of the rights of petitioner that the technical rules of procedure be liberally construed in his favor as he is not only restrained of his liberty but is presumably non compos mentis. In such circumstances his rights as a citizen must be jealously guarded by the court.
In respondent's brief it is recited that "at the hearing the original commitment and the order for removal of the petitioner from the United States Penitentiary at Atlanta, Georgia, to the Medical Center for Federal Prisoners at Springfield, Missouri, were offered and received in evidence. The petitioner testified, his attorneys presented the points of fact and law which the petitioner desired the court to consider, and the case was submitted on its merits. * * * At the hearing before Judge Reeves above mentioned, petitioner's counsel read or stated each point to the court and the court's ruling was then and there made as to each point. Counsel neither assented nor objected to the rulings. As to most of the points received, the court held that if the facts were as the petitioner pleaded, he still was not entitled to his release. All points were ruled against the petitioner".
An examination of the transcript filed in this court contained only the primary record. In connection with his appeal petitioner requested that a transcript of the record be prepared including certain specified papers and documents, among them being "6, Bill of Exceptions; 7, Ruling of the Court; 18, Any and all other papers which have been filed in this matter and which are relevant thereto and which are a necessary part of this appeal proceeding to get the facts before the appeal court and show what occurred material to the matter under appeal". This condition of the record being called to the attention of the assistant United States attorney there was filed by leave of this court a supplemental transcript. This recites the appearance of petitioner and his counsel and the appearance of an assistant United States attorney; that the petitioner "being asked by the court if he was ready to proceed with the trial, made a brief statement to the court in accordance with the facts as stated in his petition; that he had nothing to offer in addition thereto, that he desired to have the facts as set out in his petition presented to the court by his attorney. Thereupon, the attorney for the petitioner read to the court the points raised by the petitioner as set out on pages 56, 57, 58 of petitioner's supplementary petition. Counsel read each point to the court and made comments thereon. The court made a ruling after the presentation of each point; the ruling of the court was against the petitioner on each point, and with reference to the facts presented, the ruling was that, if the facts were as presented, the petitioner was not entitled to his release, and that the facts do not show denial of due process".
This transcript also recites that "the points and facts presented were matters of irregularity at the trial; that the military court did not lose jurusdiction and that it had a right to impose sentence". This *286 transcript set out a copy of certain records which are as follows:
"Headquarters Eastern Department
"General Court-Martial
"Orders, No. 1320
"Governors Island, New York City.
"December 29, 1917.
"Before a general court-martial which convened at Governors Island, New York, pursuant to paragraph 3, Special Orders, No. 304, November 27, 1917, Headquarters Eastern Department, was arraigned and tried:
"Sergeant Valdo B. Schita, Company I, 15th Regiment, N. Y. Infantry.
"Charge I: Violation of the 92d Article of War.
"Specification: In that Sergeant Valdo B. Schita, Company I, 15th Regiment, N. Y. Infantry, did, at Camp Merritt, Tenafly, N. J., on or about the 25th day of November, 1917, with malice aforethought, wilfully, deliberately, feloniously, unlawfully and with premeditation, kill one Private Joseph Fagan, Company I, 15th Regiment, N. Y. Infantry, a human being, by shooting him with a rifle.
"Charge II: Violation of the 93d Article of War.
"Specification: In that Sergeant Valdo B. Schita, Company I, 15th Regiment, N. Y. Infantry, did, at Camp Merritt, Tenafly, N. J., on or about the 25th day of November, 1917, with intent to do him bodily harm, feloniously assault and shoot with a rifle Private Eugene Hines, Company I, 15th Regiment, N. Y. Infantry.
"Pleas.
"To all the Specifications and Charges: `Not Guilty.'
"Findings.
"Of the Specification and Charge I: `Guilty.'
"Of the Specification, Charge II: `Guilty, except the words "with intent to do him bodily harm," and of the excepted words of Not Guilty.'
"Of Charge II: `Guilty.'
"Sentence.
"To be dishonorably discharged the service, to forfeit all pay and allowances due and to become due, and to be confined at hard labor at such place as the reviewing authority may direct for the term of his natural life.
"(G.C.M.1320)
"2
"The sentence is approved and will be duly executed. The United States Penitentiary, Atlanta, Ga., is designated as the place of confinement, but pending further orders this general prisoner will be held at the Atlantic Branch, United States Disciplinary Barracks, Ft. Jay, N. Y. (2o1 J.A.)
"By command of Brigadier General Hoyle:
"W. A. Simpson,
"Adjutant General,
"Adjutant."
The court entered findings to the effect that the petitioner was charged, arraigned, and tried before a general court martial of the Eastern Department of the United States Army at Governor's Island, New York; that the charge stated specifically that the petitioner on or about the 25th of November, 1917, wilfully and with malice aforethought, shot and killed Private Joseph Fagan; that it also charged him with a felonious assault with intent to kill Private Eugene Hines; that the court martial imposed sentence including a term of imprisonment at hard labor for his natural life; that prior to August 21, 1939, he had been removed to the Medical Center for Federal Prisoners at Springfield, Missouri, where he has since been and now is an inmate; that able counsel was appointed to represent him at his trial; that his counsel had ample time for preparation of the defense; that the attorney was well qualified by experience to defend petitioner; that he was not denied due process and the right to have witnesses appear in his behalf; that the constitutional rights of the petitioner were fully respected by the general court martial and that the proceedings were regular.
In his assignments of error petitioner challenges the findings on the ground that there was no evidence, according to the rules of evidence, put before the court, and no testimony to rebut or deny the sworn pleadings of the petitioner. Many of the findings are challenged as not being supported by any evidence.
*287 There was no answer to petitioner's amended petition, the allegations, therefore, stood admitted and according to the supplemental transcript no evidence was received other than the two documents, being the record of the general court martial including copy of the charges, plea, findings and sentence.
The supplemental transcript shows that as counsel for petitioner read each point, which we assume includes the points which we have enumerated, to the court and made comments thereon, the court made a ruling that "if the facts were as represented the petitioner was not entitled to his release". This, we take it, was tantamount to holding that conceding the facts as alleged by petitioner, they were insufficient to show that petitioner had been denied due process of law at the court martial hearing resulting in the judgment and sentence of conviction.
In this, we think, there was error. The judgment did not carry with it the presumptions of legality and validity which protect the judgment of a civil court of general jurisdiction against collateral attack. Ver Mehren v. Sirmyer, 8 Cir., 36 F.2d 876; Runkle v. U. S., 122 U.S. 543, 7 S. Ct. 1141, 30 L. Ed. 1167; McClaughry v. Deming, 186 U.S. 49, 22 S. Ct. 786, 46 L. Ed. 1049. As the record stands, it appears that the allegations contained in petitioner's amended petition relative to the proceedings resulting in his conviction, though taxing credulity, stood without dispute. There was no evidence received at the hearing tending to dispute these charges but the court was of the view that they were not sufficient to show lack of due process or want of jurisdiction in the court to enter the judgment of conviction. In view of the trend of modern decisions, particularly the decisions of the Supreme Court, we cannot accept this view as sound. Walker v. Johnston, 312 U.S. 275, 61 S. Ct. 574, 85 L. Ed. 830; Chambers v. State of Florida, 309 U.S. 227, 60 S. Ct. 472, 84 L. Ed. 716; Johnson v. Zerbst, 304 U.S. 458, 58 S. Ct. 1019, 82 L. Ed. 1461; Smith v. O'Grady, 312 U.S. 329, 61 S. Ct. 572, 85 L. Ed. 859; Waley v. Johnston, 316 U.S. 101, 62 S. Ct. 964, 86 L. Ed. 1302. We think, too, the petitioner was entitled to have a bill of exceptions settled.
As this case must be retried we take occasion to suggest that a record of the proceeding be so taken and preserved that a fair bill of exceptions can, if necessary, be prepared and settled. Petitioner is not only entitled to the appointment of counsel in ample time to enable such counsel to prepare for trial, but he is entitled to have the record of the hearing, including the testimony, preserved in such manner as to enable him if occasion shall arise to present his case to an appellate court. Adams, Warden of the City Prison of Manhattan et al. v. United States of America, 63 S. Ct. 236, 87 L. Ed. ___; Miller v. United States of America, 63 S. Ct. 187, 87 L. Ed. ___; Holmes v. United States, 314 U.S. 583, 62 S. Ct. 357, 86 L. Ed. 472.
The order appealed from is, therefore, reversed and the cause is remanded with directions to grant petitioner a new trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544650/ | 133 F.2d 87 (1943)
STEPHAN
v.
UNITED STATES.
No. 9337.
Circuit Court of Appeals, Sixth Circuit.
February 6, 1943.
As Amended February 19, 1943.
Writ of Certiorari Denied April 5, 1943.
*88 *89 Nicholas Salowich, of Detroit, Mich., and James E. McCabe, of Nashville, Tenn., for appellant.
John W. Babcock, of Detroit, Mich. (John C. Lehr and John W. Babcock, both of Detroit, Mich., on the brief), for appellee.
Before HICKS, ALLEN, HAMILTON, MARTIN, and McALLISTER, Circuit Judges.
Writ of Certiorari Denied April 5, 1943. See 63 S. Ct. 858, 87 L.Ed. ___.
HICKS, Circuit Judge.
Appellant was convicted of treason and sentenced to death by hanging. There are twenty-five assignments of error, some of which raise questions not presented to the court below and others of which are not discussed in the brief, nor called to our attention in the oral argument. However, *90 the case involves a penalty of death for appellant, and we shall proceed upon the exception to the general rule and shall notice possible error, although the questions may not properly be raised. See Wiborg v. United States, 163 U.S. 632, 658, 16 S. Ct. 1127, 1197, 41 L. Ed. 289; Crawford v. United States, 212 U.S. 183, 194, 29 S. Ct. 260, 53 L. Ed. 465, 15 Ann.Cas. 392.
It is urged that the indictment does not charge the offense of treason with sufficient certainty, and particularly that the allegations of overt acts are not clear.
Treason is the most serious offense that may be committed against the United States, Hanauer v. Doane, 12 Wall. 342, 79 U.S. 342, 347, 20 L. Ed. 439; In re Charge to Grand Jury, 30 Fed.Cas. pages 1024, 1025, No. 18269; and its gravity is emphasized by the fact that it is the only crime defined by the Constitution. The constitutional definition [Art. 3, Sec. 3, Cl. 1] is: "Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. * * *"
The phrase "in levying War against them" is not here involved. This definition is meticulously exclusive and that it was so intended is indicated by the use of the adverb "only." The Constitution has left no room for constructive treason and Congress could not and has not undertaken to restrict or enlarge the constitutional definition.
The statute upon which the indictment is based is as follows: "Whoever, owing allegiance to the United States, levies war against them or adheres to their enemies, giving them aid and comfort within the United States or elsewhere is guilty of treason." (R.S. Sec. 5331; March 4, 1909, C. 321, Sec. 1, 35 Stat. 1088; U.S.C.A. Title 18, c. 1, Sec. 1.)
The statute follows the Constitution and designates the class of persons subject to its provisions, to wit, "whoever, owing allegiance to the United States, * * *."
Section 2 of the statute provides the punishment for treason.
The indictment charged that appellant, a citizen of, and a person owing allegiance to, the United States, did at and within the City of Detroit, County of Wayne, State of Michigan, Eastern District of Michigan and the United States of America, continuously and at all times during the 18th and 19th days of April, A. D. 1942, unlawfully, feloniously, wilfully, traitorously and treasonably adhere to one Hans Peter Krug, a secret agent and spy for, and a secret representative of the Government of Germany in the furthering and carrying on of its war against the United States, and an officer in the Army of the Government of Germany who had escaped from a war prisoners' camp in Ontario, Canada; and that the adherence of appellant to Krug, and the giving of aid and comfort by appellant to Krug during April 18th and 19th, 1942, consisted: in his receiving and treating with Krug, in his furnishing hospitality and entertainment to Krug, in his furnishing to and obtaining for Krug money, necessities of life and personal effects, in his harboring Krug, in his concealing the identity of Krug, in his giving false information to citizens of the United States and others with the intent to conceal the identity of Krug, in his arranging for and providing transportation of Krug in and about Detroit, Michigan, and means of transportation for Krug from Detroit, Michigan, to Chicago, Illinois, and in his failure to report to proper public and military officials the presence in the United States of Krug; and that appellant, when so adhering to and giving aid and comfort to Krug, well knew all of the facts stated in the indictment.
The indictment is sufficient. United States v. Behrman, 258 U.S. 280, 42 S. Ct. 303, 66 L. Ed. 619; Hagner v. United States, 285 U.S. 427, 431, 52 S. Ct. 417, 76 L. Ed. 861; Dierkes v. United States, 6 Cir., 274 F. 75. It distinctly and clearly alleges each and every element of the offense necessary to be charged, including time, place and circumstances, and advised appellant of the charge he was required to meet, to wit, that he had unlawfully, feloniously, traitorously, treasonably, knowingly and intentionally adhered to and given aid and comfort to Peter Krug, an enemy of the United States, and in furtherance thereof had committed certain overt and manifest acts. These alleged overt acts, twelve in number, were set out in the indictment with exact and careful detail.
Appellant insists that the court erred in denying his motion for a directed verdict. This involves the question, (1) whether the constitutional provision [Art. 3, Sec. 3, Cl. 1] that "No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, * * *." [italics ours] has been met, see *91 United States v. Robinson, D.C., 259 F. 685; Wharton's Crim.Law, 11th Ed., vol. 3, Sec. 2155; Wigmore on Ev., 3rd Ed., vol. 7, Sec. 2038; and if met (2) whether there was substantial evidence to support the verdict. There was no material conflict in the evidence. Appellant cross-examined witnesses for the Government but introduced no testimony on his own behalf.
The evidence discloses that appellant was admitted to citizenship in the United States on June 24, 1935, and took the oath of allegiance on June 28, 1935. The oath is as follows: "I hereby declare on oath that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state or sovereignty, and particularly to Germany of whom (1) I have heretofore been a subject or citizen; that I will support and defend the Constitution and laws of the United States of America against all enemies foreign and domestic; that I will bear true faith and allegiance to the United States of America, and that I take this obligation freely without any mental reservation or purposes of evasion, so help me God."
The Government's principal witness was Hans Peter Krug. He testified that he was a citizen of the Government of Germany and an officer, an "Oberlieutnant," in the German Air Force; that on August 28, 1940, he was piloting a bombing plane over England, with which country Germany was then at war; that he was shot down and captured; that he was injured, was taken to a hospital and afterwards, in January 1941, was transferred to an internment camp for war prisoners near Nays, Ontario; that in November 1941, he was transferred to an officers' camp at Bowmanville, Ontario, from which he escaped on April 17, 1942. His escape was confirmed by the testimony of two Canadian officers stationed at the camp. With the aid of forged papers and the assistance of a priest, who was influenced by false stories, he reached Windsor, Ontario, and proceeded by means of a stolen boat, across the river to Detroit. About 9:00 or 9:30 on the next morning, April 18, dressed in coveralls, he made his way to 259 Phillip Ave., Detroit, the home of a Mrs. Bertelmann, whose name and address he had obtained from his fellow prisoners. At his urgent behest, she admitted Krug to her home and he identified himself by showing her the epaulets of a German officer.
Mrs. Bertelmann was born in Germany, was married there in 1920, and came to Canada in 1928. Her husband, also a German, became an American citizen in 1930 but she never applied for citizenship. She had done knitting for the German war prisoners in Canada and had, through appellant, purchased tobacco and other articles to send to them. She testified that it was required that the name and address of the sender should be attached to these packages.
Krug testified that when he told Mrs. Bertelmann that he was "Oberlieutnant Krug," escaped from Canada, she telephoned appellant, whom she styled as a friend of hers, and said, "that he was coming over." There is evidence that in this telephone conversation Mrs. Bertelmann told appellant that she had a German prisoner in her home. Mrs. Bertelmann testified that when she realized that Krug was a German prisoner, escaped from Canada, she was scared, because she knew that it was not right to have him in her house; that when she told appellant upon his arrival that she had a German prisoner, he chided her for her agitation and said, "what are you shaking for? You're crazy." Krug testified that when appellant came into the kitchen where he was, appellant sat down, "held his hands on the upper part of his legs and smiled."
There was some question on Krug's part whether he told appellant the whole story of his escape then or later in appellant's restaurant, although it appears from both his and Mrs. Bertelmann's testimony that Krug spoke to them both at some length of his experiences after his escape from Bowmanville. Mrs. Bertelmann, who was passing back and forth through the kitchen during this conversation, testified that she heard appellant ask, "Why don't you give up, you haven't a chance?" and that Krug replied, "I have to try, because on account of treatments over there." On cross-examination Krug revealed that appellant told him that it would be impossible for him to go back to Germany by way of South America, and that he should go back where he came from. Later he testified that he didn't know at which place they were when appellant said that to him.
Krug testified that before he left Mrs. Bertelmann's she gave him $20 in money, some shoes, socks and underwear. Her testimony was that there was a pair of shoes on the kitchen floor and when it appeared *92 that the sole of one of Krug's shoes was broken, appellant said, "Do you think those fit?" and then asked her if she had any socks, and when she brought a pair of knitted socks, appellant said, "Those are too long," and she then provided Krug with a pair she had darned for her husband. She testified that appellant then asked Krug, "What are you wearing underneath?" and that he showed that he had no underwear, whereupon she supplied him with underwear which she had planned to send to Canada. Asked by appellant whether she had any money, that he, appellant, had come away so fast that he didn't bring any with him, she replied that she had $20 and laid it on the kitchen table, near appellant, and although she didn't see appellant take it, the money was gone when the man left, nor did she see appellant give any money to Krug. The latter, on the other hand, stated categorically that he did not recall any discussions between appellant and Mrs. Bertelmann about money, socks, underwear or shoes.
Krug testified that when he left Mrs. Bertelmann's he went from her apartment with appellant, to appellant's car, got in and drove to appellant's restaurant. Mrs. Bertelmann testified that she watched them leave the apartment together, observed them go to appellant's car and saw appellant open the door. She did not see them get in, although she assumed that they did.
We must keep in mind that one may not be convicted of treason upon evidence of an overt act, unless such act has been laid in the indictment. Burr's Trial, United States v. Burr, 25 Fed.Cas. page 55, No. 14,693; Wharton's Crim. Law, 11th Ed., vol. 3, Sec. 2153, p. 2310. Further, although not explicitly set forth in either the constitutional or statutory provisions, an intent to give aid and comfort to the enemy is an essential element of the crime of treason. United States v. Werner, D. C., 247 F. 708, 709; United States v. Fricke, D.C., 259 F. 673, 676; cf. United States v. Burr, C.C., 25 Fed.Cas. pages 52, 54, No. 14,692h; United States v. Burr, C.C., 25 Fed.Cas. pages 55, 90, No. 14,693; see United States v. Robinson, supra. Without an intent to give aid and comfort to the enemy, there is no treason. Wimmer v. United States, 6 Cir., 264 F. 11.
Overt acts Nos. (1), (2) and (3) as charged in the indictment, are briefly as follows:
(1) That Stephan traveled by automobile on April 18, 1942, from his home to the home of Mrs. Bertelmann, "for the purpose of taking * * * Peter Krug under * * * his protective care, and for the purpose of giving and with the intent to give said enemy Krug, aid and comfort." (Words similar to those italicized conclude the allegation of each overt act.)
(2) That Stephan on April 18, 1942, obtained from Mrs. Bertelmann money of the United States for the use and benefit of Krug.
(3) That Stephan on April 18, 1942, escorted Krug from Mrs. Bertelmann's home to the automobile then being used by Stephan.
As to overt act (1), there is evidence, as hereinbefore pointed out, that Mrs. Bertelmann talked to appellant by telephone, and that he arrived ten minutes or a quarter of an hour later and that it would have taken around a half hour to come by street car. Krug's estimate was that it was a half to three quarters of an hour after the telephone call before appellant appeared. Krug did not see a car in front of the house when he came in. An inference might have been drawn by the jury that Mrs. Bertelmann reached appellant on the telephone and that he must have come in his car since it was standing in front of the house. But even so, such an inference could hardly be based upon testimony by two witnesses.
There is a confusion of testimony regarding overt act (2) which hardly appears to have been proven by the testimony of two witnesses.
Overt act (3) was legally proven because both Krug and Mrs. Bertelmann were in accord that appellant escorted Krug from her house to the car appellant was using.
A failure to establish all the overt acts alleged is not fatal upon a motion for peremptory instructions. If one or more of such acts have been established, all others may be disregarded as surplusage. Wharton's Crim. Law, supra, at page 2310; Wharton's Crim. Ev., 10th ed., vol. 1, Sec. 131, p. 355.
Krug and appellant drove from Mrs. Bertelmann's to appellant's restaurant at 7209 Jefferson Avenue. Appellant went in the back way and directed Krug to enter by the front entrance. Krug did so and sat down at a table and appellant came over *93 to him and Krug ordered food but did not pay for it. Appellant told Krug that he was busy and Krug took a walk down town, returning to the restaurant about the middle of the afternoon, when appellant said, "Now, I have nothing to do and it is your birthday today and we will take a pleasure trip," Krug having told appellant at Mrs. Bertelmann's that April 18 was his birthday. Appellant gave Krug a necktie and billfold and on the trip outfitted him with a small traveling bag.
It was in the course of this short trip that the second series of overt acts alleged, numbered (7), (8) and (9) in the indictment, took place:
(7) That Stephan on April 18, 1942, escorted Krug to Haller's cafe in Detroit, and bought a drink for Krug and himself, and concealed the identity of Krug by introducing him as "one of the Meyers boys" for the purpose of concealing Krug's identity.
(8) That Stephan on April 18, 1942, escorted Krug to the Progressive Club in Detroit, there buying drinks for Krug and himself, and concealing the identity of Krug "as a friend of his from Milwaukee."
(9) That Stephan on April 18, 1942, escorted Krug to the place of business of Theodore Donay in Detroit, introducing Donay to Krug, who then related to Donay the incidents of his escape, his version of prison conditions in the prison camp in Ontario and of the intended future travel of Krug, at which place Stephan purchased candy for Krug and obtained money from Donay which was given to Krug for his use.
The first place visited was a business house engaged in renting glassware and crockery. Krug remained in the car but while appellant was in the building he had the proprietor make a telephone call for him concerning the departure of trains for Chicago and the fare between the two cities. Then the bag was bought; next they went to a restaurant where each had beer and whiskey. Krug testified that appellant talked in English to the man behind the counter and "may be * * * told him that I am a friend * * * of his from Milwaukee." At this place, which was not identified by Krug by name, Krug left his bag and had to return for it. The place is identified, by the incident of the forgotten bag, as Haller's Cafe. August Haller, who operated this place at 1407 Randolph, testified that Krug, whom he identified from photographs introduced by the Government, was introduced by appellant as one of the Meyers boys. He testified that appellant did not seem disturbed; and on the other hand, that he did not reveal Krug's real identity.
Next they went to a coffee shop or social club, where Krug had coffee and cake. Krug testified that appellant did not talk to anybody at this place. The second witness to this incident was Joseph McGuire, patron of the Progressive Hall. He identified Krug from the photographs. He testified that they ordered a couple of "shells of beer," took a couple of sips and left after five or ten minutes. Krug was not introduced. Some time during the afternoon they went to the place of business of one Donay, where appellant styled Donay a friend of his, after which Krug introduced himself as "Oberlieutnant Krug." Krug testified that he told of his escape from Bowmanville, of conditions at the camp there, of a man who had been shot there, and of his intention to make his way back to Germany. While there, he testified, appellant bought some candy and gave it to him. Krug also obtained $20 at this place which came from Donay's cash drawer, but he could not recall whether appellant actually gave him the money or whether Donay himself handed it to him. Krug could not recall that he saw any other person, clerks or customers in Donay's place. On cross-examination he testified that Donay gave him the $20.
The confirmatory witness to overt act (9) is one Rintelen, clerk in the business house of Donay. He knew appellant and identified Krug from his photographs. He testified that the two came in and appellant asked to see Donay, whereupon the three, standing close together, "engaged in an important conversation which they held secretly." He saw appellant purchase the candy and saw Donay go to his cash drawer and when he next looked Donay was walking back to the others. The next day Rintelen found a slip for $20.68 in the cash drawer, indicating that Donay had withdrawn that amount.
Of these three alleged overt acts we think that (7) was sufficiently proven by the testimony of the two witnesses Krug and Haller. The place was fixed by the circumstance of the forgotten bag and although there was divergence as to whether Krug was introduced as one of the Meyers boys, *94 or as from Milwaukee, it is clear enough that appellant purposely concealed Krug's identity.
Overt act (8) is not so clear, for, although it is reasonably certain that both Krug and McGuire were thinking of the Progressive Club, Krug never identified it by name and there was no other happening from which it could be recognized. Further, we think that the proof of overt act (9) falls short. Rintelen overheard no consecutive part of the conversation that took place between Krug and Donay and we find nothing in his testimony from which a jury could be certain of what was said between them. The circumstances indicate with certainty that the Donay incident occurred but it cannot be established by vague testimony of one witness, plus circumstantial evidence. See United States v. Robinson, supra, 259 F. page 694.
The trip ended with appellant and Krug returning to appellant's restaurant around 6:00 or 6:30 P. M. Here, it appears from the testimony of Krug and of a waitress, Erna Schwartz, that Krug ate a meal and sat around the restaurant until about 9:00 P. M., when he was let out the back door to go to the Field Hotel. During this period Krug sat at a booth and ordered food for which he did not pay. Later he sat at another table and a young couple and another young man sat down with him. He was not introduced to them by name but testified that so far as he could recall appellant introduced him as a friend from Milwaukee. The young couple, Karl and Eva Erhardt, testified. Neither would positively identify Krug from photographs as the man who sat with them at the table; but later Mrs. Erhardt was confronted with Krug in person in the courtroom and she then identified him as the man who had been at the table with them. Each recalled that appellant had pointed Krug out as a friend from Milwaukee. While they were at the table with Krug they spoke to him, but testified that he soon got up and left. The testimony of Erna Schwartz throws some doubt as to whether she or appellant served Krug the evening meal and whether Krug paid for it. She testified that she served Krug a glass of beer and some food and that he paid for it, although she was not sure.
We think that overt act (11), which in the indictment was alleged as follows: (11) That Stephan in the evening hours of April 18, 1942, escorted Krug to his place of business where he entertained him at dinner, giving him food and drink, and concealing his identity by introducing him as a man from Milwaukee was sufficiently proved. There is no question that Krug was served a meal there and that appellant concealed his identity.
Overt act (12) averred as follows: (12) That Stephan on April 18, 1942, gave orders to others in arranging that Krug should register as a guest at the Field Hotel, Detroit, Michigan, and spend the night as a guest there was not relied upon by the Government in its brief as proven by two witnesses. Nevertheless, we think it was so supported.
Krug testified that he and appellant talked about where he should spend the night and appellant proposed that he stay in the nearby Field Hotel. Erna Schwartz testified that appellant told her that Krug was a German fellow from Canada, and that appellant asked where he should put him to sleep for one night. Mrs. Schwartz testified that she told appellant she had a vacant room in her house and offered to put him up there for one night, but that appellant said, "Oh, I think he can go in Field Hotel to sleep."
Krug did spend the night in the Field Hotel, being let out of the restaurant at the rear door by Mrs. Schwartz to go there. He came to the door of the restaurant about 8 o'clock the next morning by prearrangement with appellant who had looked up the bus schedule to Chicago. They drove down town, had breakfast together and appellant bought for Krug a bus ticket to Chicago.
We come now to the question of intent. Was there substantial evidence that appellant intended to adhere to Krug, an enemy of the United States, giving him aid and comfort?
Proof by two witnesses of criminal intent is not necessary. It may be proved by one or more witnesses, or by circumstances, or by a single fact. United States v. Fries, 9 Fed.Cas. pages 924, 931, No. 5,127. Krug was an "enemy" as that term is used in the constitutional clause defining treason. He was the subject of a foreign power in a state of open hostility with us. United States v. Greathouse, C. C., 26 Fed.Cas. page 18, No. 15,254; see also United States v. Fricke, supra. We had been at war with the German Reich since December 11, 1941.
*95 There is substantial evidence found not only in appellant's confession, hereafter to be considered, but in the testimony of Mrs. Bertelmann that appellant knew that Krug was an escaped German prisoner, even before he went to the Bertelmann house; and Krug testified that appellant smiled when he first confronted him. There is evidence from Krug's testimony that the latter told appellant his whole story and of his purpose and intention to attempt to get to Germany through the United States and that when he arrived in Germany he intended to inform the German Government about all the events which had happened during the time he was a prisoner in Canada, about conditions in Canada and about the treatment of officers and men in the Canadian prison camps, and that he also intended to rejoin the German air force. Krug advised appellant that he desired to go to or through Chicago and he further testified, and appellant admitted, in the signed statement before referred to, that he checked the bus schedules for Krug, bought the traveling bag for him, went to the station with him and bought his ticket. This and other testimony hereinbefore recited supply proof that appellant, fully cognizant of Krug's identity and plans almost from the outset, willingly and without stint gave of his time and substance to the furtherance of Krug's plans and substantially support the finding of the jury of appellant's treasonable intent as charged in the indictment.
The motion for peremptory instructions was properly denied.
Appellant contends that because Krug was an officer in the German Luftwaffe and an adherent to Nazi principles, he was therefore so infamous as to bar him from giving testimony and that the court should not have permitted him to testify. This proposition was not raised at the trial, and was probably waived by appellant's cross-examination of Krug. However, we think it not improper to discuss it briefly.
When a witness takes the stand to testify, the law presumes that he is a competent witness and incompetency must be shown by the party objecting to him. Wharton on Crim.Ev., 10th ed., vol. I, Sec. 358, p. 721.
It is said that Krug was incompetent as a witness under the laws of Michigan and that the federal courts are bound thereby. Granted that this was the old rule, an important exception has been engrafted upon it. In Funk v. United States, 290 U.S. 371, 54 S. Ct. 212, 78 L. Ed. 369, 93 A.L.R. 1136, the court said in substance that in criminal cases federal courts are not bound by such rules but that in the development of truth they are to apply them as they have been modified by changed conditions. But, all this to one side, we have been cited to no law of Michigan or decision of any federal court, that a German Army officer, although imbued with Naziism, is disqualified to give evidence in a court of justice and we make no such decision now.
It is urged that because Krug came to the witness stand dressed in the full uniform of an officer of the German Army and gave the Nazi salute he should have at once been disqualified by the court as a witness. Again this complaint is raised here for the first time. We find no evidence in the record that Krug was so attired or that he gave the salute. However, in the argument of the District Attorney there was reference to Krug's dress and behavior. But, assume the fact, the manner and demeanor of the witness was relevant in determining the weight and credibility to be given to his testimony by the jury. It did not require, in the reasonable exercise of the court's discretion, his disqualification and rejection altogether. The court in its charge might have been somewhat more specific with reference to the effect of Krug's misconduct, if in fact there was such misconduct, but there was no exception whatever to the charge.
The appellant complains of the failure of the court to compel Krug to answer certain questions on cross-examination, or in the alternative, to strike his entire testimony.
The questions he refused to answer on cross-examination on the grounds that they involved a military secret were, (1) "How much money, if any, did you have when you arrived in Detroit?"; (2) "How much money, if any, did you have on your person when you left Detroit on the 19th of April?"; (3) "Will you state to the jury, if you can, what part of the City of Detroit you landed in when you first landed from Canada?"; (4) re: the clothes he was wearing when he arrived in Detroit; "And underneath the coveralls did you have a suit of clothes, a coat and a pair of pants?"; (5) "How much did you *96 have when you arrived at San Antonio?"; (6) with reference to his membership in the Luftwaffe, he refused to give the number of "any particular battalion or squadron or section"; (7) with reference to a piece of cardboard with writing thereon in his own handwriting which was found on him in San Antonio, he was asked, "What does it say? What does it say on there?" to which he replied, "I won't read it."
Immediately following his refusal to answer the first question of those enumerated, the court interposed to say, "It is a proper question. * * * I don't see that can be * * * any military secret. * * *" To which the prisoner answered: "I am sorry. I can't answer this question because I can't tell Canadian officials if it is possible or if it is not possible for a prisoner of war to get some money, and if I tell it I had a lot of money with me then they know that in any way I got some money in the prison camp, and if I tell No, I had no money with me, then they know too that there is no way that the prisoners gets some money. Do you understand what I mean? So I can't answer his question."
The court then reiterated its opinion that it involved no military secret and was a proper question, "relevant to the direct examination." Counsel for the appellant then said: "I think we should have a ruling here at this time whether this witness, having submitted himself voluntarily as a witness in this case, stands on any different footing than any other witness who refuses to answer a question when the court rules that it is a proper question." The court replied: "Well, not as a matter of law, but from a practical standpoint as a prisoner of war he stands in a very different situation. It is much the same situation as I once had with other witnesses who were serving a life time in Jackson Prison. * * * I just didn't know what I could do. If anybody can tell me, why I welcome the information." No exception was taken and counsel continued cross-examination.
In explanation of his refusal to answer the second enumerated question, the prisoner defined a military secret as follows: "A military secret, when we make an escape all the facts in connection with an escape are military secrets, because every single thing which we do and which happens during an escape give information to the enemy how we handle such an escape and how we are able to escape, and how we are able to make our way to the states and so on."
Later in the cross-examination counsel for appellant in addressing Krug said, "You understand from your knowledge of international law that there is no power on earth that can make you testify in this law suit unless you wanted to; you know that," to which Krug answered, "That is right."
Then Krug said his purpose in testifying was "to clear about that he (Stephan) didn't do what he is charged with. I was only asked to tell the truth about the case and which is wrong, what FBI has charged him and all other persons who are charged with having known who I am."
Krug had earlier on direct examination refused to answer the following questions because they were military secrets: (1) "How long have you been serving as an officer of the * * * German Air Force?"; (2) in connection with the clothing he was wearing when he went to Mrs. Bertelmann's he was asked, "What was the other clothing?" to which he replied: "* * * I can't tell you how I was dressed to make my escape"; (3) "Now, after you got to Chicago, how long did you stay there, Lieutenant?"; (4) "Now why did you go to New York?" In connection with his refusal to answer this question he stated later that his trip to New York was in connection with his purpose to get out of the country and back to Germany.
Finally, on redirect examination, when he was being asked by Government counsel about the circumstances of the conversation with Donay, Krug interrupted and addressed the court. He asked, "Your Honor, would you be good enough to answer a question?" Krug said, "The defender of Mr. Stephan told me that I stayed and testified against Stephan. If that is so, I will be relieved from further questioning." The court then said to the stenographer, "Will you read what he said" and Krug's answer was read. Krug then said: "I don't intend to testify against Stephan. I was told by the FBI agents that I have only to clear out the facts and to tell the truth, and nothing but the truth." The court responded: "That is what you are sworn to do. * * * I have nothing to do with whom the testimony helps or who it harms. * * * That is what you took your affirmation to do * * * to tell the truth and so that *97 is what I say to you should do, is tell the truth. You may go ahead." But the witness said: "I have another objection. I asked the FBI agents that I never can testify against a man who helped me, but they told me about when I made this question that there is no testifying against him, but it is only in statement of the facts he already has told."
The court reiterated that it couldn't decide who was harmed, that it was only to see that witnesses told the truth and directed counsel to proceed. Krug again interrupted, "Of course I tell the truth, but when * * *," to which the court responded, "Well, all right. There is nothing for me to do, you see."
Thereupon counsel for both parties stated they had no further questions and the witness was excused.
The refusal of Krug to answer these few questions propounded to him was not objected to, and fewer still were of any relevance on the question of appellant's guilt; but keeping in mind that this is a capital case, we think that appellant has sufficiently raised the question whether, upon his failure to answer on cross-examination, Krug's entire testimony should have been stricken out.
The general rule is that "where the witness after his examination in chief on the stand has refused to submit to cross-examination, the opportunity of thus probing and testing his statements has substantially failed and his direct testimony should be struck out." Wigmore on Ev., supra, Sec. 1391, p. 112, and cases cited in the footnotes. But to this general rule there are many exceptions. One is that "on the circumstances of the case, the refusal or evasion of answers to one or more questions only need not lead to this result." Wigmore further states, "Courts treat this situation with varying degrees of strictness. It should be left to the determination of the trial judge, regard being had chiefly to the motive of the witness and materiality of the answer." See Gibson v. Goldthwaite, 7 Ala. 281, 42 Am.Dec. 592; Flannery v. Commonwealth, Ky., 51 S.W. 572; Scott v. McCann, 76 Md. 47, 24 A. 536; Succession of Townsend, 40 La.Ann. 66, 3 So. 488.
Krug had been brought into court from a prison in Canada in the custody of Canadian military authorities. As indicated by the court's remarks, it felt that it could not punish Krug by imprisonment for refusing to answer, because he was already a prisoner. That Krug must have sensed this situation is clear, not only from his own statement but from the statement of the court made in his presence. The record leaves no doubt that Krug had no intention of testifying to anything which might prove detrimental to appellant. He was probably influenced to some extent by a representation made to him by some one in the interest of appellant, "that I stayed and testified against Stephan." That such a representation was made is uncontradicted and its occurrence is unexplained. The record fails to show when, or where, or particularly by whom it was made to Krug, whether during the noon recess or at some other time. Krug had been on the witness stand before the recess and his revelation that some one had approached him took place after his return to the witness stand in the afternoon. But, regardless of the circumstances under which Krug was approached, there can be no other conclusion than that the object of the warning to him of the effect of his previous testimony was to influence to the prejudice of the Government any further testimony by him as the Government's witness. Under the circumstances it was the duty of the court to do that which in its judicial discretion would effectuate the ends of justice and prevent injustice, and we find no reversible error in its refusal to strike the testimony of Krug.
Appellant complains of the admission of alleged incompetent, irrelevant, immaterial and obscene testimony. Reference is specifically had to what is called the Von Werra matter. This related to a story which Krug told to Donay in the presence of appellant about a German lieutenant who was captured in New York City but finally got back to Germany and was killed in action. All this was purely hearsay and had no bearing upon appellant's case. A reversal may not be had for the admission of purely irrelevant hearsay evidence.
It is urged that the testimony of the Government's witnesses, Alvina Ludlow and Ethel Merrifield, was incompetent and prejudicial. The testimony of these two women related to a visit made to an assignation house by Krug and appellant on *98 April 18. The entire testimony of these witnesses was stricken by the court with the admonition, "Forget those two women and forget their testimony, strike it out, leave it entirely out as if they hadn't been called."
It is argued that the testimony of the Government's witness Jack O. Parker was incompetent and prejudicial. Parker's testimony related to alleged declarations of Krug subsequent to his departure from Detroit. Parker's testimony as to these statements and made when Krug was recaptured at San Antonio was also stricken with directions to the jury to disregard it.
In view of the court's instructions, we need not consider whether the evidence of these three witnesses was inadmissible. There is nothing to indicate that the jury disobeyed the injunction to disregard their testimony. See New York, L. E. & W. R. Co. v. Madison, 123 U.S. 524, 8 S. Ct. 246, 31 L. Ed. 258; Turner v. Amer. Sec. & Tr. Co., 213 U.S. 257, 29 S. Ct. 420, 53 L. Ed. 788.
The testimony of the Government's witness, Gasteiger, was not important. It amounted to nothing more than the opinion of an expert witness as to the meaning of certain writing on a paper found in the possession of Krug at the time of his arrest.
There was nothing improper in admitting certain exhibits, to wit, epaulets, a Greyhound Bus Company map, a copy of "Matthews Atlas of the World at War" and a revolver and cartridges taken from Krug at the time of his recapture. These exhibits were relevant to Krug's own testimony that he was trying to get back to Germany and reenter the German Air Force. The weight to be given to them was for the jury.
It is assigned as error that the court failed to declare a mistrial because the District Attorney in his closing argument (1) made repeated references to appellant's failure to produce witnesses; (2) made the direct statement that appellant had not taken the stand; and (3) made intemperate, improper and inflammatory remarks to the prejudice of appellant's substantial rights.
In one particular counsel labors under a misapprehension. A careful reading of the record indicates clearly that at no time in his argument did the District Attorney make the statement that appellant had not taken the stand. With reference to appellant's failure to produce witnesses the District Attorney, in response to the argument of counsel for appellant, said: "Well, if he knew anything about Lieutenant Krug, or if he had that evidence to show that Lieutenant Krug was lying, or was telling a falsehood on the stand, why in the name of Heaven didn't he bring some witnesses in here to contradict what Krug said?" This was objected to as improper argument and the objection sustained. The court said: "I will say to the jury right there that you should pay no attention, I will have to charge you later that that is the law, to the fact that he hasn't taken the witness stand or that he hasn't produced witnesses." Any impropriety in this line of argument was cured. Dunlop v. United States, 165 U.S. 486, 498, 17 S. Ct. 375, 41 L. Ed. 799; Chadwick v. United States, 6 Cir., 141 F. 225, 244.
The District Attorney in his closing argument also said:
"But, ladies and gentlemen, it was not the Government of the United States that was trying to get Lieutenant Krug back to Germany so he could get up in a bomber and come over here and bomb the United States of America, that was Max Stephan that did that.
"And that is why, ladies and gentlemen of the jury, he is a traitor, a blackhearted traitor, if there ever was one."
We do not regard this statement as an unequivocal, unrelated denunciation of appellant as a traitor. The statement was made in connection with that part of the evidence tending to show that appellant was endeavoring to aid Krug in his effort to rejoin the air force of the enemy and it was not objected to and we cannot assume that it caused prejudice. The use of the word "blackhearted" was unfortunate, but we are not here dealing with a weak case (Berger v. United States, 295 U.S. 78, 55 S. Ct. 629, 79 L. Ed. 1314) nor with such gross and persistent conduct as characterized the argument therein. We have said [Knable v. United States, 6 Cir., 9 F.2d 567, 570]: "`This court has never regarded with favor arguments by a district attorney calculated to inflame the minds of the jurors and prejudice them against the accused. On the other hand, the district attorney has *99 the right, and it is no doubt his duty, so long as he confines his argument to the evidence in the case, to present the government's side of the case in forcible and direct language.' Remus v. United States [6 Cir.], 291 F. [501], at page 511."
The Supreme Court, even in a capital case (Crumpton v. United States, 138 U.S. 361, 11 S. Ct. 355, 356, 34 L. Ed. 958), has said: "There is no doubt that, in the excitement of an argument, counsel do sometimes make statements which are not fully justified by the evidence. This is not such an error, however, as will necessarily vitiate the verdict or require a new trial. It is the duty of the defendant's counsel at once to call the attention of the court to the objectionable remarks, and request his interposition, and, in case of refusal, to note an exception."
It is urged that the charge of the court did not (1) clearly define the crime of treason; (2) what is meant by "an overt act"; and (3) what constituted "adhering to the enemy, giving them aid and comfort." Laying to one side the fact that there was no objection to the charge, we have carefully examined it and find these criticisms without merit. Treason was exactly defined in the charge in accordance with both the Constitution and the statute, and the elements "overt act" and "adhering to the enemy, giving them aid and comfort" were carefully set forth in accordance with applicable law.
In the indictment, Krug, in addition to being described as a subject of the Government of Germany and a member of its armed military forces, was alleged also to be a "secret agent for, spy for and secret representative" of the Government of Germany. The entire indictment, including this allegation, was read to the jury by the court in connection with the charge. Appellant insists that this was prejudicial since the jury would naturally regard these allegations as evidence that Krug was in fact a spy. We think the contention is without merit. If the possibility existed that the jury would be so misled, we must assume, in the absence of any evidence to the contrary, that it was dispelled by the court's express declaration in its charge that the indictment was not evidence.
As indicated herein, on April 20, 1942, an officer of the Federal Bureau of Investigation took a written statement from appellant in the nature of a detrimental confession or admission, which statement was received in evidence late in the trial. It is nowhere claimed that the statement was not freely, voluntarily and understandingly made, but the proposition is pressed upon us that the court should have explained to the jury that it was not a "Confession in open Court" [Constitution, Art. 3, Sec. 3, Cl. 1] upon which, standing alone, appellant might be convicted. The contention is without weight, in view of the court's repeated emphasis in its instructions to the jury, that appellant could not be convicted except upon proof of intent, and proof that appellant did something to carry out that intent, that is to say, committed at least one overt act to be established by the testimony of two witnesses.
The jury was permitted to separate during the trial. Appellant urges that it should have been sequestered.
This appeal was heard by us on December 12, 1942. On December 5th appellee filed a motion with this court to be permitted to file a supplemental bill of exceptions to the effect, that after the jury was sworn counsel both for the appellant and the Government, in the absence of the jury, were requested by the court to advise it whether they desired that the jury be sequestered and counsel responded that they did not so desire; that this was not done publicly so as to become a part of the transcript of record, in order to avoid any possible prejudice resulting against any attorney who might desire such sequestration. This supplementary matter contains painstakingly careful instructions and caution to the jury to guard themselves against any possible outside influence.
There appearing to us no reason to deny this motion, it is herewith granted. See Rules of Practice and Procedure in Criminal Cases, rule IX Bill of Exceptions, 18 U.S.C.A. following section 688. 292 U.S. page 664, 54 S. Ct. XXXIX; Ray v. United States, 301 U.S. 158, 165, 57 S. Ct. 700, 81 L. Ed. 976. But this to one side, there is nothing to indicate that appellant was in the least prejudiced by the separation of the jury. Holt v. United States, 218 U.S. 245, 251, 31 S. Ct. 2, 54 L. Ed. 1021, 20 Ann.Cas. 1138; Brown v. United States, 69 App.D.C. 96, 99 F.2d 131, 132; Ader v. United States, 7 Cir., 284 F. 13, 30.
*100 Upon appellant's conviction it was the duty of the court to fix and adjudge the punishment. The statute provides that "whoever is convicted of treason shall suffer death; or, at the discretion of the court, shall be imprisoned not less than five years and fined not less than $10,000 * * *." (Italics ours.) Title 18, Ch. 1, Sec. 2, U.S.C.A. To aid it in the discharge of its duty and in order that the court might feel certain that the sentence to be imposed was a just and proper one, the Judge on one occasion at the request of appellant's wife, had an interview with her. On another occasion he had an interview with the appellant, his wife and a friend. On these occasions the interviews took such direction as the appellant and his wife desired. In addition to these interviews the Judge had other conversations with representatives of the Federal Bureau of Investigation and the Chief Probation Officer as well as with counsel for appellant and the United States Attorneys who prosecuted the case.
The record indicates that these various interviews took place in the Chambers of the Judge. The information thus made available is set forth in great length in connection with the sentence. Appellant insists that this procedure was improper. We take judicial notice that the practice of presentence investigations has long been followed in district courts. See Tractenberg v. United States, 53 App.D.C. 396, 293 F. 476, 480; Stobble v. United States, 7 Cir., 91 F.2d 69, 71; Sharp v. United States, 4 Cir., 55 F.2d 227. See also Title 18, Ch. 22, Sec. 727, U.S.C.A., which makes it the duty of a probation officer to investigate any case referred to him for investigation by the court and his further duty to perform such other duties as the court may direct. The Rules of Practice and Procedure in Criminal Cases, supra, 292 U.S. page 661, 54 S. Ct. XXXVII, under the heading "I. Sentence" also clearly recognize not only the propriety but the importance of such investigation. We think, however, that such information should have been disclosed to the Judge in open court and in the presence of appellant. Such appears to have been the practice in the cases cited. We think that the interest of convicted persons about to be sentenced is more carefully safeguarded by open hearings under such rules as the court may adopt. But the real question here is, whether upon the record as we find it, there was an abuse of judicial discretion in fixing the sentence and we find none.
Finally, after a careful and painstaking review of this entire record, we are unable to find any reversible error.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544728/ | 97 N.J. Super. 510 (1967)
235 A.2d 485
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
HARRY HARRIS, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued October 16, 1967.
Decided November 16, 1967.
*511 Before Judges GAULKIN, LEWIS and KOLOVSKY.
Mr. E. Robert Levy, assigned counsel, argued the cause for appellant.
Mr. Archibald Kreiger, Assistant Prosecutor, argued the cause for respondent (Mr. John G. Thevos, Passaic County Prosecutor, attorney).
The opinion of the court was delivered by LEWIS, J.A.D.
Defendant Harry Harris appeals from an order of the Passaic County Court which denied his petition for post-conviction relief. The critical issue involves the interpretation of the Fourth Offender Act, N.J.S. 2A:85-12.
The facts are as follows: defendant's first conviction was in 1945 for atrocious assault and battery and attempted robbery. In 1948 he was convicted of burglary and assault with intent to rape. He was subsequently, September 21, 1961, found guilty of breaking and entering and larceny; those offenses were committed on April 28, 1961. While incarcerated on the third conviction, Harris was brought to trial for breaking, entering and larceny committed on April 27, 1961. He was convicted on January 26, 1962. Prior to the imposition of sentence thereon, the trial judge directed the prosecutor to file an accusation under N.J.S. 2A:85-13 *512 charging defendant to be a fourth offender since he had, on three prior occasions, been convicted of high misdemeanors in the courts of New Jersey. In March 1962 he was adjudicated a fourth offender and sentenced as such for a term of 15 to 20 years in State Prison. Defendant did not appeal.
Defendant filed his application for post-conviction relief on May 13, 1965. He pointed out that his fourth conviction was for an offense committed before his third conviction, and therefore he was not a fourth offender within the meaning of N.J.S. 2A:85-12. He argues that a conviction as a fourth offender must be based upon an offense committed after the third conviction. We agree and hold that the trial court should have granted defendant's application for post-conviction relief.
N.J.S. 2A:85-12, in pertinent part, reads:
"Any person convicted on three separate occasions of high misdemeanors in this State * * * and who thereafter is convicted of a misdemeanor or a high misdemeanor under the laws of this State, is hereby declared to be an habitual criminal, and the court in which such fourth or subsequent conviction is had, may impose upon the person so convicted a sentence in the State Prison for any term of years or for life."
In State v. McCall, 14 N.J. 538 (1954), our Supreme Court had the occasion to review the history of, and construe the above-quoted statute, together with N.J.S. 2A:85-8 (second offense) and 2A:85-9 (third offense). It held that the intent of the Legislature was to enhance the penalty for subsequent convictions only if they were based on subsequent offenses. The philosophy of the statute was to take "into consideration the persistence of the defendant in his criminal course." Id., at page 546. Note also, the observation of Justice (then Judge) Schettino, in his dissenting opinion for the Appellate Division in McCall: "I had thought that statutes of this kind contemplated a life sentence for an offender who had demonstrated that previous convictions had had no corrective influence." State v. McCall, 27 N.J. Super. *513 157, 173-174 (App. Div. 1953); cf. State v. Deckert, 69 N.J. Super. 105, 108-109 (Cty. Ct. 1961).
The underlying purpose and objective of the Multiple Offender Act, as enunciated in the McCall decisions, is in accord with the rule followed in nearly all other jurisdictions. See Annotation, "Chronological or procedural sequence of former convictions as affecting enhancement of penalty for subsequent offense under habitual criminal statutes," 24 A.L.R.2d 1247 (1952), and 3 A.L.R.2d, Later Case Service, 728 et seq. The State relies heavily upon Castle v. Gladden, 201 Or. 353, 270 P.2d 675 (Sup. Ct. 1954), wherein it was declared that it was not necessary that the fourth offense follow the third conviction. However, we find that case to be clearly distinguishable. There the statutory language, unlike that in New Jersey, evidenced a legislative intent not to require the fourth offense to be subsequent to the third conviction.
The State also argues: "As a third offender assuming the force of defendant's argument that he was not a fourth offender the sentencing court here could have imposed as punishment three times the maximum of 10 years, or 30 years," N.J.S. 2A:85-9, and, therefore, the alleged error in the sentence imposed by the trial court was harmless.
Defendant was sentenced under the assumption that he was a fourth offender. We cannot say that the trial judge would have imposed the same penalty if he knew that defendant was to be sentenced as a third offender.
Accordingly, the matter is reversed and remanded for appropriate proceedings and resentencing of defendant as a third offender. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544744/ | 211 Pa. Super. 126 (1967)
Hyman, Appellant,
v.
Borock.
Superior Court of Pennsylvania.
Argued September 13, 1967.
November 16, 1967.
*127 Before ERVIN, P.J., WRIGHT, WATKINS, MONTGOMERY, JACOBS, and HOFFMAN, JJ. (SPAULDING, J., absent).
Samuel E. Kratzok, for appellant.
David Weinstein, with him Weinstein & Bobrin, for appellees.
OPINION BY WRIGHT, J., November 16, 1967:
We are here concerned with an assumpsit action instituted on June 12, 1964, by Martin Hyman, trading as Martin Hyman Realty Company, against Joseph Borock and Ruth Borock, his wife, wherein the plaintiff sought to recover a commission of $1050.00 on the sale by defendants to Stephen J. Green and Zelda Green of premises at 661 Artwood Drive in the City of Philadelphia. On June 22, 1964, an action was instituted by Bernard Klevan to recover a commission on the same sale. The two actions were consolidated for *128 trial and were ultimately tried, February 9, 1966, before Judge THEODORE O. SPAULDING sitting without a jury. Without deciding the matter, Judge SPAULDING resigned his commission as a Judge of the County Court and became a member of the Superior Court.
The ensuing procedural history in the court below is thus stated in the opinion of President Judge BONNELLY: "The record was turned over to the writer as President Judge of the County Court. After a careful study of the entire record and consultation with Judge SPAULDING, an adjudication was filed August 3, 1966 and a finding was entered in favor of the plaintiff, Klevan, against the defendants in the sum of $1050, with interest, and in the claim of Hyman a finding was entered for the defendants. Exceptions were filed and were dismissed by the Court en banc and judgment was entered on the findings". Hyman has appealed at No. 555 October Term 1967. The Borocks have filed a companion appeal at No. 576 October Term 1967.
We sympathize with the desire of the distinguished President Judge of the court below to effect disposition of these cases without further delay. However, the parties did not agree to such disposition and counsel promptly objected thereto. New trials must therefore be granted. Cf. Cowsill v. Vipond Construction Co., 250 Pa. 32, 95 A. 317. We are clearly of the opinion that, in the absence of consent thereto, the substitution of another judge for the trial judge may not be approved where the testimony has been heard without a jury and the trial judge has not yet rendered a decision on the factual issues. "The facts of a case only partially appear in the transcript of the testimony": Commonwealth v. Claney, 113 Pa. Super. 439, 173 A. 840.
Judgment reversed with a venire. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544738/ | 168 F.2d 152 (1948)
HAYES
v.
HOME LIFE INS. CO.
No. 9585.
United States Court of Appeals District of Columbia.
Argued January 28, 1948.
Decided March 8, 1948.
Mr. Arthur P. Drury, of Washington, D. C., with whom Mr. George E. Hamilton, Jr., of Washington, D. C., was on the brief, for appellant. Mr. Robert Peter, of Rockville, Md., also entered an appearance for appellant.
Mr. Edgar J. Goodrich, of Washington, D. C., with whom Mr. Lipman Redman, of Washington, D. C., was on the brief, for appellee.
Before GRONER, Chief Justice, and WILBUR K. MILLER and PRETTYMAN, Associate Justices.
PRETTYMAN, Associate Justice.
Appellant is the beneficiary named in certain policies of insurance issued by the appellee. The appellee having declined to pay the total face amount of the policies, appellant brought a civil action in the District Court to recover that amount. That court granted the company's motion for summary judgment.
The controversy concerns the following provisions of the policies:
"War, Aviation and Travel Provisions. Anything herein to the contrary notwithstanding, this policy is issued subject to the condition that the amount of insurance hereunder shall be limited to the sum of the *153 premiums paid hereon, or the reserve for the face amount of this policy, whichever is greater, increased by the reserve on any outstanding paid-up additions and less any indebtedness, but in no event shall the amount payable under this policy be more than if this endorsement had not been made hereon, if
"(a) The death of the insured results, directly or indirectly, from military or naval service outside the geographical boundaries of the Continental United States of America in time of war, whether declared or undeclared;
* * * * * *
"(c) The death of the insured results within two years from the date of issue of this policy, directly or indirectly, from war, whether declared or undeclared, while the insured is outside the geographical boundaries of the Continental United States of America."
The policies were issued on June 1, 1942. The record does not show whether at that time the insured was or was not in the military service. In any event, in July, 1945, he was an officer in the United States Navy on duty on the cruiser Indianapolis in the Pacific Ocean and met his death when that ship was sunk as a result of enemy action.
It is agreed that the death of the insured occurred outside the geographical boundaries of the United States in time of war and more than two years after the date of the policies. It is also clear that his death resulted from naval service and also resulted from war. The literal terms of both clause (a) and clause (c) apply. But if (a) alone be applied, the company is not liable for the face amount of the policies, whereas if (c) alone be applied, the company is so liable. Thus, the problem is: Where both of two clauses, one of liability and one of non-liability, apply, which should be given effect? It seems to us that this is the sort of problem to which the rule as to ambiguity must apply. There is no ambiguity in the language of either clause; both apply. But since the clauses are conflicting, an ambiguity in the contract is created.
Appellee avoids the conclusion just indicated by contending that the clauses are in the alternative and that if either one applies, liability is defeated; liability need be defeated only once. The difficulty with the argument is that the clauses are not alternative negations of liability. While the expression of clause (c) is that liability is limited if death results within two years from war, it clearly also means that if death results from war after two years from the date of the policy, the company will pay the full face amount. The clause is not only a bar for two years, but in common, plain and natural understanding it is an affirmation of full liability after two years, so far as war might be the cause of death. The two-year provision in clause (c) makes the two clauses opposites in result after the two years have expired, and not alternative bars to liability. If clause (a) had referred to death resulting from naval service and clause (c) had referred simply to death resulting from war, without the two-year limitation, there would have been two separate bars to liability and the existence of either cause would have been sufficient to defeat liability. But in the case at bar, where the two years had expired, the two clauses were in direct conflict, one denying and the other asserting liability.
Appellee buttresses the foregoing argument by reference to clause (b) of the endorsement, which limits liability if death results from travel or flight in any species of aircraft, except as a fare-paying passenger. It treats that clause as a direct limitation upon liability, with no affirmative implications of liability. But the clause does have such an implication in respect to fare-paying passengers. To get an analogy from clause (b) to the present case, we would have to imagine a person in the naval service and on a naval mission but for some reason a fare-paying passenger in an aircraft. If death resulted, there would be a conflict between clause (a) and clause (b) as to liability, although that conflict might not be as striking as that between clauses (a) and (c) in the case at bar.
Appellee relies upon a line of cases, of which it cites Caruso v. John Hancock Mutual *154 Life Insurance Co.[1] as "on all fours" with the present case, and Jorgenson v. Metropolitan Life Insurance Co.,[2] decided by the same court to the same effect. But those cases dealt with so-called "status" clauses, and the courts held that a "status" clause governs over a "result" clause. Thus, in the Caruso case [25 N.J.Misc. 318, 53 A.2d 223], one clause limited liability on account of "Death while the Insured is serving * * * in the military or naval or air forces", while the other limited liability on account of "Death within two years from the date of the Policy, as a result of war * * *." The court said, "Clause (a) is a `military status clause', as distinguished from a `cause of death clause' and in such cases the status of the insured and not the cause of death is the ground upon which the exoneration of the insurer from liability stands." The court cited Coit v. Jefferson Standard Life Ins. Co.,[3] which in turn referred to a large number of cases which arose after World War I and which involved so-called "status" clauses where the death occurred as the result of influenza, which was common alike to civilians and military personnel, and from accidents not in the course of military duty. We need not analyze or discuss at length these authorities. They are collected and amply considered in the Coit case, supra, and in Boatwright v. American Life Ins. Co.,[4] Gorder v. Lincoln Nat. Life Ins. Co.,[5] Life & Casualty Ins. Co. v. McLeod,[6] and Bending v. Metropolitan Life Ins. Co.[7] The rationale of those cases is that where a policy excludes all persons of a given status, the cause of death is immaterial in case of the death of such persons; and that a further exclusion in the policy of liability for death from specified causes has meaning only in relation to persons not in the status otherwise wholly excluded. But we need not now determine for this jurisdiction whether a status clause prevails over a result clause, because we have no status clause before us. Our case involves two contradictory result clauses. Certainly the cases referred to would prevent the translation of a clear result clause into a status clause in order to extend an otherwise uncertain limitation upon liability.
The rule that a real ambiguity in an insurance policy is to be construed against the company is not a rule of convenience or a mere technicality of legalists. It is based upon sound public policy. Insurance contracts are written by the companies. Those companies are equipped with able counsel and other experts in the field, not only in their separate organizations but in their national associations. From their point of view, there is not the slightest reason why the terms of a contract should not be crystal clear. Nevertheless, the custom has arisen of writing these contracts in long, complicated and technical phraseology. No doubt that custom has a basis in the experience of the companies, just as the use of unintelligible language in many legally drawn contracts has a basis in the dim historical past. But these insurance contracts are then presented and sold to ordinary individuals in printed form and by expert salesmen. Moreover, and most important, life insurance has become a major, if not the major, factor in the concern of men generally for the protection of their families and dependents.[8] But these individual prospects are, in vast majority, not informed in the obscurities of insurance expertise and not equipped to understand other than plain language. If the companies were permitted to write clear clauses of liability at one point and obscure negations of liability at another, and to maintain successfully the prevalence of the latter *155 over the former, the temptation to sell on one clause and defend on the other would be dangerous. If there be an abiguity in a contract, it is the fault of the company and of the company alone, and, as we have said, the companies are fully equipped to avoid ambiguities. The great public concern in life insurance requires that they be compelled to do so.
Appellee relies upon cases such as Fields v. Pyramid Life Ins. Co. of Topeka, Kan.,[9] in which the Supreme Court of Missouri dealt with the so-called suicide statute of that state. Of course, if we had before us a case involving the law of Missouri, we would be compelled to accept the construction of that law by the courts of that state, just as the Circuit Court of Appeals for the Eighth Circuit did in McReynolds v. New York Life Ins. Co.[10] But with deference to the Missouri courts, we would not agree with their conclusion as a matter of unimpeded impression. The suicide statute[11] provided that "in all suits upon policies of insurance on life * * * it shall be no defense that the insured committed suicide * * *, and any stipulation in the policy to the contrary shall be void." The policy in the Fields case excluded liability if death resulted from a number of causes, stated in the alternative, including "self-destruction, while sane or insane" and "poisoning". The decedent's death was from suicide by poisoning while insane. The court held that while the company could not defend upon the ground that decedent committed suicide, it could successfully defend upon the ground that he died from poisoning. It would seem to us that the statutory prohibition of defense for suicide meant suicide by any means, and that to hold to the contrary would mean that a company could successfully nullify the peremptory mandate of the statute by simply listing as alternative exclusions death by any of the conceivable methods of self-destruction. We cannot accept those cases as controlling in the case before us.
We find a clear and real ambiguity between the non-liability provision of clause (a) and the liability affirmation of clause (c) after two years from the date of the policy. That ambiguity must be construed against the appellee.
The judgment of the District Court must be and is reversed and the case remanded to that court for further proceedings in accordance with this opinion.
Reversed.
NOTES
[1] N.J.Sup.1947, 53 A.2d 222, 25 N.J. Misc. 318.
[2] 1947, 136 N.J.L. 148, 55 A.2d 2.
[3] 1946, 28 Cal. 2d 1, 168 P.2d 163, 168 A.L.R. 673.
[4] 1920, 191 Iowa 253, 180 N.W. 321, 11 A.L.R. 1085.
[5] 1920, 46 N.D. 192, 180 N.W. 514, 11 A.L.R. 1080.
[6] 1943, 70 Ga.App. 181, 27 S.E.2d 871.
[7] 1944, 74 Ohio App. 182, 58 N.E.2d 71.
[8] Mr. Justice Cardozo, in Burnet v. Wells, 1933, 289 U.S. 670, 681, 53 S. Ct. 761, 765, 77 L. Ed. 1439: "Insurance for dependents is today in the thought of many a pressing social duty. Even if not a duty, it is a common item in the family budget, kept up very often at the cost of painful sacrifice, and abandoned only under dire compulsion."
[9] 1943, 325 Mo. 141, 176 S.W.2d 281.
[10] 1941, 122 F.2d 895.
[11] Mo.Rev.Stat.1939, § 5851, Mo.R.S.A. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544739/ | 235 A.2d 866 (1967)
WARREN EDUCATION ASSOCIATION
vs.
RICHARD L. LAPAN et al., WARREN SCHOOL COMMITTEE.
No. 194-Appeal.
Supreme Court of Rhode Island.
November 30, 1967.
*868 Bernard F. McSally, Providence, for plaintiff.
Edwards & Angell, James K. Edwards, Providence, for defendants.
OPINION
KELLEHER, J.
This civil action in the nature of mandamus was instituted against the defendants in their capacities as members of the school committee of the town of Warren to require the committee to execute a collective bargaining agreement which would embrace salaries, working conditions and other incidents of employment for the 1967-1968 school year. The plaintiff is the duly-recognized collective bargaining agent for the certified public school teachers who are employed by the town. The case is before us on the plaintiff's appeal from an order of the superior court which granted the defendants' motion to dismiss the instant complaint for failure to state a claim upon which relief could be granted under 12(b)(6) of the new rules of civil procedure of the superior court. We shall sometimes hereafter refer to the plaintiff as the association and to the defendants as the committee.
The instant complaint is based upon the following undisputed facts. On or about December 22, 1966, the association gave written notice requesting a meeting for the purpose of negotiating a contract for the school year which would begin in September 1967. Pursuant to this request several meetings were held in January and February 1967 between the committee and representatives of the association. An agreement was reached on the contents of a contract for the next school year. The *869 committee advised the association that it wished to defer the formal execution of any agreement until after the annual financial town meeting had been held in the month of May. In the meantime, the association on March 14, 1967, gave its unanimous approval of the agreement which had been reached between its agents and the committee. Subsequent to the financial town meeting, the association made a written request to the committee that it meet with its representatives and formally execute the agreement reached earlier. On May 29, 1967, the acting chairman of the committee notified the association of the committee's refusal to execute the contract. The association thereupon instituted this litigation for mandamus to compel the committee to execute in writing the terms upon which they had orally agreed.
The association bases its complaint upon the provisions of G.L. 1956, § 28-9.3-4, which is part of the school teachers arbitration act. This section reads as follows:
"28-9.3-4. Obligation to bargain. It shall be the obligation of the school committee to meet and confer in good faith with the representative or representatives of the negotiating or bargaining agent within ten (10) days after receipt of written notice from said agent of the request for a meeting for negotiating or collective bargaining purposes. This obligation shall include the duty to cause any agreement resulting from negotiations or bargaining to be reduced to a written contract, provided that no such contract shall exceed the term of three (3) years. Failure to negotiate or bargain in good faith may be complained of by either the negotiating or bargaining agent or the school committee to the state labor relations board which shall deal with such complaint in the manner provided in chapter 7 of this title."
The association acknowledges that although an action for a writ of mandamus is now controlled procedurally in the superior court by its rules of civil procedure, the legal sufficiency of a complaint in such an action is still to be tested by the same principles which have heretofore governed the issuance of this prerogative writ. Demers v. Shehab, 101 R.I. 417, 224 A.2d 380. Accordingly, a plaintiff in such an action must show that he has a clear right to have done the act he seeks and that the defendant has a clear, legal and ministerial duty to perform without any discretion to refuse. Castle Realty Co. v. Soloveitzik, 101 R.I. 391, 224 A.2d 44. It also must be demonstrated that the law has provided no other adequate remedy. In those situations where it can be shown that there is an adequate administrative remedy available to a plaintiff, it is settled law that he must exhaust such a remedy before judicial relief can be invoked by way of mandamus. Conley v. McCarthy, 84 R.I. 141, 121 A.2d 875.
Before examining the issue of whether mandamus will lie in this particular action, we feel a comment should be directed to the procedural aspects of the hearing held on the committee's motion.
Under rule 12(b) of the superior court's rules of civil procedure, parties on either side of a law suit may submit to the court for its consideration matters outside the pleadings in support of or in opposition to a motion to dismiss for failure to state a claim meriting relief. The provisions of rule 12(b) expressly authorize the trial justice either to include or exclude such extra pleading matters in his deliberation on a motion to dismiss; however, if the trial justice freely elects to consider the supplemental information, rule 12(b) provides that a motion is converted into one for summary judgment and should be disposed of according to the pertinent provisions of rule 56. Ewing v. Frank, 103 R.I. 96, 234 A.2d 840.
When a motion is converted under rule 12(b) into one for summary judgment, there is a significant and noteworthy change in the issue presented to the court. No longer is the inquiry of the court focused *870 on a determination of the sufficiency of the complaint to set forth a valid claim for relief, as would be the situation under rule 12(b), but instead a decision must be made, after a review of the entire record, on whether there exists a factual issue contested by the parties, and, in the absence of which, whether as a matter of law one party is entitled to a judgment.
On a hearing on a motion under either rule 12(b) or rule 56, it is not the office of the trial justice to determine any issues of fact. In such cases, all favorable inferences which can be drawn from matters properly before the court accrue to the benefit of the party against whom the motion is made. Thus the pleadings under rule 12(b) and the entire record under rule 56 are scrutinized closely by the court in determining whether the movant has met his burden successfully; and correspondingly all pleadings and evidentiary documents filed by the non-moving party are viewed indulgently by the court. 6 Moore, Federal Practice (2d ed.), ¶ 56.15, p. 2281. The record in the instant appeal discloses that the above procedure was not adhered to by the trial justice.
At the hearing of defendants' 12(b) motion, the transcript indicates that the trial justice was shown a letter and that its contents apparently influenced him in dismissing plaintiff's complaint.[1] In taking this action the trial justice stated that in his opinion mandamus would not lie under the facts of this case. Although extrinsic matter was accepted by the court at the hearing, the trial justice purported to dismiss the claim under 12(b)(6).[2] Such action is procedural error. Gager v. "Bob Seidel," 121 U.S.App.D.C. 135, 300 F.2d 727.
It is elementary that if a trial justice wishes to limit the scope of the hearing on a motion to dismiss under 12(b)(6), he has no right to consider facts except those recited in the pleadings; and he has no right to admit evidence not incorporated in the formal pleadings. In short, he must confine his examination to the well-pleaded facts in applying the substantive law to the allegations pleaded to determine if the complaint properly describes the set of circumstances upon which a court could justifiably grant relief. Resort to anything beyond the pleadings is without sanction or authority and is error. Grand Opera Co. v. Twentieth Century-Fox Film Corp., 7 Cir., 235 F.2d 303.
Even if we were to treat defendants' motion as properly transformable into one for summary judgment under rule 56, our action would have questionable validity since there is respectable authority to the effect that letters alone are not within the contemplated class of documents permissible to be filed under rule 56. Marks Music Corp. v. Stasny Music Corp., 1 F.R.D. 720; 3 Barron & Holtzoff, § 1237, p. 164. It also seems to be clear that written documents submitted to and not excluded by a court on motions under rule 56 must be attached to the record and exhibited in full. Taylor v. Royal Ins. Co., 34 F.R.D. 132; 3 Barron & Holtzoff, supra. This allows us the benefit of examining them in the event the ruling of the trial justice on the motion is appealed. *871 In the state of the instant record we can only surmise the contents of the committee's letter.
The test of what a complaint must contain in order to withstand a motion to dismiss under 12(b)(6) has been clearly spelled out by this court in Bragg v. Warwick Shoppers World, Inc., 102 R.I. 8, 227 A.2d 582, and more recently in Buszta v. Souther, 102 R.I. 609, 232 A.2d 396. In both cases we said that in order to justify a dismissal of a complaint under this rule the trial justice, after according the plaintiff the benefit of every inference in viewing the allegations of his complaint in their most promising light, should be satisfied that it is clear beyond a reasonable doubt that the plaintiff could not conceivably prove facts which would qualify him for judicial relief. While the superior court's dismissal of the association's complaint was wrong because the trial justice failed to comply with the proper standards set forth in the new rules of procedure when he considered the committee's motion, we believe that there are other grounds upon which we can and will affirm the ruling of the trial justice. Lancia v. Grossman's of R.I., Inc., 100 R.I. 407, 216 A.2d 517; Budwee v. New England Motors, 99 R.I. 663, 210 A.2d 131.
The association argues that the decision of the trial justice should be overturned for two reasons. First, they contend that the legislature's use of the word "may" in the last sentence of § 28-9.3-4 connotes the idea of permissive recourse to the state labor relations board in disputes arising under the act; therefore, they are not compelled as a condition precedent to seeking relief from the courts to present a complaint to the state labor relations board. Secondly, they assert, even if the statute is construed to mean that a complaint must be filed with the state labor relations board prior to litigation, the remedy afforded by petitioning the board is inadequate in several respects, especially since the board is powerless under our statutory law to compel the committee to execute a written contract encompassing all the terms upon which the parties had orally agreed.
As a preface to our discussion of the statute and the legislative intent behind its enactment, we deem it appropriate to dwell briefly on the history of the teacher-school committee labor relations in the years preceding the enactment of the teachers arbitration act. All we relate are matters of common knowledge.
In years past, work stoppages, or the threats thereof, have plagued several school systems in the state. This court ruled in the 1958 case of City of Pawtucket v. Pawtucket Teachers' Alliance, 87 R.I. 364, 141 A.2d 624, that a public school teacher has no lawful right to strike. Last year we reaffirmed that rule in School Committee v. Pawtucket Teachers Alliance, 101 R.I. 243, 221 A.2d 806.
The legislature in 1965, keenly aware of the strife and disruption caused by such discordant incidents between school committees and teachers and anxious to provide some remedy in this area of great public interest passed Resolution No. 45 which created a special commission to study and recommend ameliorative legislation in this area of governmental concern. The resolution which delineated the authority of the commission contained a directive from the legislature that the commission formulate a suggested procedure designed to be available in the event of a bargaining controversy between a school committee and teachers. Section 28-9.3-4 of the teachers arbitration act is the direct result of the commission's deliberations and legislative proposals. It is this section we are asked to construe.
The prime issues to be decided on this appeal may be defined as follows: first, whether or not, before seeking judicial aid, the teachers must under the statute initially request the state labor relations board to intervene; second, whether § 28-9.3-4 provides the teachers with a plain, timely and effective administrative remedy.
*872 I
"May": Permissive or Mandatory?
As regards the first issue, we believe it was the intent of the legislature to require a complaining party to submit their grievances to the state labor relations board before any judicial remedy could be invoked. Thus, when a breakdown in communication occurs in negotiations between teachers and school committees, the legislature intended, in our opinion, to vest initial jurisdiction of the controversy in the board.
The association argues the use of the word "may" in the section under examination is demonstrative evidence that the legislature intended to permit a party to elect between filing a complaint with either the courts or the labor relations board. We acknowledge the cardinal rule of construction advanced by the association that in construing statutes a court will attribute to words their common, ordinary and natural meaning. Mount Pleasant Cab Co. v. Rhode Island Unemployment Compensation Board, 73 R.I. 7, 53 A.2d 485. Nevertheless, we are also cognizant of another rule of equal dignity in the canons of construction which provides that a court should construe words of a statute according to their plain meaning unless such interpretation would defeat the discovered intendment of the legislature. Irish v. Collins, 82 R.I. 348, 107 A.2d 455; State v. Nadeau, 81 R.I. 505, 105 A.2d 194. Moreover, a court should not allow itself to be enslaved to the literal meaning of words and on occasion, albeit with due caution, must eschew the literal and ordinary meaning of words in order to better fulfill the evident purpose of the legislation sought to be construed. O'Brien v. Waterman, 91 R.I. 374, 163 A.2d 31; 82 C.J.S., Statutes, § 329, p. 651. The present appeal, we feel, is to be included within the rule of the Irish and O'Brien cases.
We readily concur in the association's observation that the verb "may" is connotative of permissiveness, but we recognize occasions when this court has attributed to it a different meaning in order to fulfill better the ascertained intent of the legislature. Such was the situation in Carlson v. McLyman, 77 R.I. 177, 182, 74 A.2d 853, 855, where this court said:
"* * * We concede that the ordinary meaning of the word `may' is permissive and not compulsive; yet whether it should be given the latter meaning and construed as `shall' in a given case depends on the intent of the legislature as ascertained from the language, the nature, and the object of the statute."
See also Nolan v. Representative Council, 73 R.I. 498, 57 A.2d 730. As in the Carlson and Nolan cases, we feel the present case is one requiring a purposeful interpretation of the word "may."
Our efforts to ascertain the intent which prompted the legislature to enact the teachers arbitration bill were greatly aided by the published report of the findings and suggestions of the special study commission which we referred to earlier. We have taken judicial notice of this manuscript. 29 Am.Jur.2d, Evidence, § 28, p. 65. In our opinion the report, which sheds considerable light on the section under examination, strongly reenforces and corroborates our treatment of the verb "may" as a mandatory and not as a permissive directive of the legislature. In that portion of the report devoted to listing recommendations, we find the following comment of the commission appearing on page 7:
"Once an organization representing the teachers has been certified, the school board should be compelled to bargain or negotiate in good faith with such organization. Failure to bargain or negotiate in good faith could be the subject matter of a complaint against either the teachers' organization or the school board and such complaint should be handled in the same fashion as unfair labor practices are presently handled under the State Labor Relations Act."
The above passage seems to us to represent cogent evidence that the legislature intended *873 that if either a school committee or a teachers association fails to negotiate in good faith, the aggrieved group must commence proceedings before the state labor relations board prior to turning to the courts for assistance.
II
Adequacy of the Remedy
The second issue formulated in this case is whether the teachers arbitration act provides a plain and adequate remedy. If we find that the act does offer such a remedy, then it is clear under our law that the association must explore and exhaust that remedy prior to seeking judicial recourse. Conley v. McCarthy, 84 R.I. 141, 121 A.2d 875.[3] We have in the past stated that an available remedy which would bar the issuance of a writ of mandamus must be one which is plain, speedy and adequate. Putnam Foundry & Machine Co. v. Town Council, 28 R.I. 422, 67 A. 733. The question of what constitutes a plain, adequate and speedy remedy is not susceptible to application as a general rule but instead must be considered in the circumstances of each case. 55 C.J.S., Mandamus, § 17.
There has been no persuasive showing by the association in this case of any facts which would induce us to find exception to the applicability of the general rule as it was announced in the case of Conley, supra. In our opinion the association has in chap. 9.3 of title 28 a plain and adequate relief for their alleged grievances.
It is clear to us from our examination of the statute and from a review of the facts before us, that contrary to the association's assertions, the state labor relations board may compel the committee to sign a written contract formalizing any prior oral agreement reached by the parties at the bargaining table. Section 28-9.3-4 specifically provides that the obligation to meet and confer in good faith includes the duty to reduce any earlier oral agreement to a written contract. Once either party complains to the state labor relations board under this section, the board shall treat the complaint in the same manner as if it were a charge of an unfair labor practice brought pursuant to § 28-7-13. We further note that § 28-7-26, provides the board with authority to petition the superior court for a decree enforcing their orders. It is to be observed also that §§ 28-7-25 and 28-7-32 provide that all proceedings either before the board or before the court shall be disposed of in an expeditious fashion. The latter section expressly states that any petition filed pursuant to chap. 7 of title 28 shall take precedence over all other matters on the calendar except those of similar character.
In view of the foregoing, therefore, we are of the opinion that the association has in the teachers arbitration act a very adequate and effective course of relief in this case. The legislature has created therein a remedy for their grievances which significantly enhances their power to bargain with school committees. By petitioning the labor relations board, whose expertise in this sensitive area is unquestioned, the association may well find such assistance so efficacious in solving their negotiation problems that the necessity of any judicial intervention will be averted. If its efforts are unsuccessful in bringing about proper relief, seasonable judicial aid can be swiftly brought to bear on a recalcitrant party through the preferred status which is given to suits filed at the behest of the state labor relations board. To allow the association to bring this action without first pursuing the administrative remedy which the legislature intended they so employ, would be tantamount to redrafting the *874 legislation under study. This, of course, we refuse to do. Our duty is to construenot to redraft statutes. Moretti v. Division of Intoxicating Beverages, 62 R.I. 281, 5 A.2d 288.
The order appealed from is sustained, and the case is remitted to the superior court for further proceedings.
NOTES
[1] The trial justice is reported in the transcript as having stated that the contents of a letter sent to the association by the school committee induced him to dismiss the complaint on the basis that the association sought to compel an act which was not ministerial in nature but instead was one which involved discretion; hence, he concluded that mandamus was an improper vehicle for relief under such a set of circumstances.
[2] The fact that the trial justice regarded his decision to be one under rule 12(b)(6) and not rule 56 is made obvious by his permitting the association leave to file an amended complaint. If he had intended to enter judgment under rule 56, it would be inconsistent to allow the filing of an amended pleading.
[3] See also Izzi v. Warwick School Committee, 82 R.I. 76, 105 A.2d 818; New England Tel. & Tel. v. Kennelly, 75 R.I. 422, 67 A.2d 705; 55 C.J.S., Mandamus, § 17. In the Izzi case, this court under a substantially analogous set of circumstances, refused to grant a writ of mandamus to a teacher because a plain and adequate remedy had been made available by the legislature. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544762/ | 155 Conn. 531 (1967)
STATE OF CONNECTICUT
v.
WALTER T. LAFFIN
Supreme Court of Connecticut.
Argued October 5, 1967.
Decided November 9, 1967.
ALCORN, HOUSE, COTTER, THIM and COVELLO, JS.
*532 Frank J. Mongillo, Jr., with whom, on the brief, was David E. FitzGerald, Jr., for the appellant (defendant).
George R. Tiernan, state's attorney, for the appellee (state).
COVELLO, J.
The defendant, Walter T. Laffin, was charged with the crime of aggravated assault and was tried by a jury, which returned a verdict of guilty. The court denied the defendant's motion to set aside the verdict, and from the judgment rendered on the verdict the defendant appealed. The sole assignment of error is the court's denial of the motion. This claim is tested by the evidence printed in the appendices to the briefs. State v. Vars, 154 Conn. 255, 258, 224 A.2d 744.
An examination of the evidence printed in the appendices to the briefs disclosed that the jury *533 could reasonably have found the following facts: On June 2, 1965, Patrick F. Hedge and David W. O'Keefe, patrolmen of the Connecticut state police, were driving on the Connecticut Turnpike in the vicinity of interchange 59 in Guilford when they observed a vehicle parked just off the traveled portion of the eastbound lanes. On stopping, they learned that the vehicle had a flat tire. The operator of the vehicle, Mrs. Irma Y. Schoner, requested Hedge to call Walt's Garage for assistance. After the call was completed, the police officers departed in an easterly direction and continued to a nearby toll booth where they turned around and proceeded westerly. As they were again approaching the disabled car, Hedge observed a service truck enter the westbound roadway at interchange 59 and thereafter make a U-turn, crossing the median divider. The police followed. The service truck was operated by a Robert Raymond, who was accompanied by a William Goodale. Thereupon Hedge told Raymond that he observed him cross the median divider and further told him that he was going to issue him a summons for crossing the median divider. While Raymond changed the flat tire, Hedge wrote out the summons. After the flat tire was changed, Mrs. Schoner and Goodale drove away in the car. Raymond remained at the scene while Hedge explained the summons to him. In the meantime, Mrs. Schoner transported Goodale back to Walt's Garage, where they informed the defendant, Walter T. Laffin, that Raymond was getting a ticket. The defendant then conversed with his son, Walter D. Laffin, hereinafter referred to as Donald, and with Goodale, and thereafter the three of them, together with a Francis Spreda, Jr., got into a station wagon, which the defendant operated, and drove off at a *534 high rate of speed. They proceeded to the scene of Mrs. Schoner's flat tire where the two officers and Raymond still were. When they arrived at the scene, the vehicle stopped, all four doors of the vehicle were then opened, and the four men jumped out. Three of them immediately ran over to the police car, while the fourth, the defendant, first had some conversation with Raymond. The defendant then went to the police car and asked Hedge why he had arrested one of his wrecker drivers. Hedge informed him that Raymond had crossed the median divider. The defendant denied it and declared that he would take the word of his driver rather than that of a state trooper. The defendant then turned away and muttered something in a sarcastic tone. Hedge stepped out of the police car to find out what the defendant had said, whereupon he noticed that the registration plate on the station wagon was hanging loosely and told the defendant that he should get it fixed before he lost it. The defendant replied sarcastically, and Hedge then said he would issue a written warning so the defendant would be sure to fix it. The defendant uttered a profanity, and Hedge asked for his operator's license and vehicle registration. The defendant denied driving the station wagon and twice refused to exhibit or surrender his license to the officer. Thereupon, Hedge informed the defendant that he had no choice but to place him under arrest and reached out to place his hand on the defendant's shoulder. At that time, Donald, the defendant's son, was standing facing the defendant and slightly to the right and rear of Hedge, holding a wrench in his right hand. As Hedge reached out to touch the defendant, Donald struck Hedge on the side of the face near the right eye with the wrench, fracturing the right frontal *535 bone and rendering him unconscious. O'Keefe then took a blackjack from his pocket and struck Donald over the head, dazing him. When Hedge was struck, Raymond, Goodale and Spreda fled the scene, but the defendant then advanced on O'Keefe swinging his fists. As O'Keefe warded off the attack, Donald also began approaching O'Keefe, who then drew his revolver and held them at bay until he saw Hedge get back on his feet. O'Keefe then holstered his weapon, whereupon the defendant and his son resumed their attack. After some further struggling, the two officers finally subdued them. Throughout the occurrence leading up to the striking of Hedge by Donald, the defendant was hostile, sarcastic and contentious.
The state does not claim that the defendant actually committed the aggravated assault on Hedge. Rather, the state claims that the defendant is chargeable as a principal offender under § 54-196 of the General Statutes, which provides: "Any person who assists, abets, counsels, causes, hires or commands another to commit any offense may be prosecuted and punished as if he were the principal offender."
The question presented in this case is whether the jury could reasonably have concluded upon the evidence that the defendant, in violation of the statute, assisted or abetted Donald in the commission of the aggravated assault on Hedge. In the construction of statutes, words and phrases shall be construed according to the commonly approved usage of the language. General Statutes § 1-1. One may be an accessory even though not present actively aiding, abetting or being guilty of a positive act in the commission of the offense. Everyone is a party to an offense who actually commits the offense or *536 does some act which forms part of the offense, or assists in the actual commission of the offense or any act which forms part thereof, or directly or indirectly counsels or procures any person to commit the offense or do any act forming a part thereof. One who is present when a crime is committed but neither assists in its commission nor shares in the criminal intent of its perpetrator cannot be convicted as an accessory. Mere presence as an inactive companion, passive acquiescence, or the doing of innocent acts which may in fact aid the one who commits the crime must be distinguished from the criminal intent and community of unlawful purpose shared by one who knowingly and wilfully assists the perpetrator of the offense in the acts which prepare for, facilitate, or consummate it. State v. Pundy, 147 Conn. 7, 11, 156 A.2d 193; State v. Thomas, 105 Conn. 757, 762, 136 A. 475; State v. Enanno, 96 Conn. 420, 425, 114 A. 386.
Whether a person who is present at the commission of a crime aids or abets its commission depends on the circumstances surrounding his presence there and his conduct while there.
It was within the province of the jury to draw reasonable and logical inferences from the facts proven. State v. Pundy, supra, 12. No explanation was offered as to why the defendant so abruptly left his garage with his son and two other men to go to the scene of the occurrence. From what happened, the jury could reasonably conclude that the defendant went to the scene of the occurrence for the unlawful purpose of obstructing the officers in the execution of their duties. Upon all the evidence presented, together with such inferences as could be reasonably drawn, the jury could reasonably have concluded that the events hereinbefore *537 described, including the defendant's reaction to Goodale's report on his return to the garage, the defendant's transporting his son and the two other men to the scene, their rushing to the police car on their arrival at the scene, the defendant's conduct and behavior in initiating the discussion with Hedge concerning the summons issued to Raymond, the defendant's refusal to exhibit or surrender his operator's license to Hedge, the striking of Hedge with the wrench, the ensuing struggle between O'Keefe and Hedge on one side and the defendant and his son Donald on the other constituted but a single transaction; that the defendant not only participated in but initiated it; that there existed between the defendant and Donald a community of unlawful purpose; and that the defendant, by his acts, words and conduct, incited, encouraged and thereby abetted Donald in committing the aggravated assault on Hedge.
There is no error.
In this opinion ALCORN, HOUSE and THIM, Js., concurred.
COTTER, J. (dissenting).
I disagree with the majority opinion. The aggravated assault was committed by the defendant's son, and the defendant stands convicted of an offense in which he did not participate. The law seems to be correctly stated, but I fail to see how the facts are sufficient to show that the defendant "knowingly and wilfully" "incited" and "encouraged" Donald to commit the aggravated assault. His presence at the scene is not enough unless he knew that his presence would encourage his son to commit the crime. The wrench referred to was a narrow, eight and one-half inch long box wrench and was apparently partially *538 enclosed in Donald's fist at the time of the aggravated assault, which occurred in a matter of seconds. The evidence was sufficient to establish that the defendant was guilty of an assault beyond a reasonable doubt. There was not sufficient evidence, however, to establish the additional element necessary to a conviction as an accessory to the crime of aggravated assault, that is, evidence that he was, beyond a reasonable doubt, guilty, as such, of "an assault upon another with any deadly or dangerous weapon." General Statutes § 53-16. "One who is present when a crime is committed but neither assists in its commission nor shares in the criminal intent of its perpetrator cannot be convicted as an accessory. 1 Bishop, Criminal Law (9th Ed.) p. 469. Mere presence as an inactive companion, passive acquiescence, or the doing of innocent acts which may in fact aid the one who commits the crime must be distinguished from the criminal intent and community of unlawful purpose shared by one who knowingly and wilfully assists the perpetrator of the offense in the acts which prepare for, facilitate, or consummate it. State v. Enanno, 96 Conn. 420, 425, 114 A. 386. Persons of whom the former may be said are innocent of any wrongdoing, but those as to whom the latter is proved may be convicted as accessories." State v. Pundy, 147 Conn. 7, 11, 156 A.2d 193. The evidence was not sufficient to establish the defendant's guilt beyond a reasonable doubt. State v. Pambianchi, 139 Conn. 543, 546, 95 A.2d 695. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544904/ | 235 A.2d 668 (1967)
K. Roland CLARKE
v.
Edward SULLIVAN et al.
Ex. & C. No. 10743.
Supreme Court of Rhode Island.
December 1, 1967.
Aram K. Berberian, for plaintiff.
Hinckley, Allen, Salisbury & Parsons, Thomas J. Hogan, Thomas D. Gidley, of counsel, William E. McCabe, City Solicitor, Vincent A. Ragosta, Assistant City Solicitor, Vincent J. Piccirilli, Assistant City Solicitor, for defendants.
OPINION
PER CURIAM.
This is the third time this case has come to us. When it was last here, Clarke v. Sullivan, 99 R.I. 96, 205 A.2d 828, we sustained a demurrer to the plaintiff's declaration. Thereafter, a superior court justice both denied the plaintiff's motion for leave to file an amended declaration and granted each defendant's separate motion for entry of judgment on the pleadings. The plaintiff is here on his exceptions to those rulings.
Notwithstanding that plaintiff deems the issues involved to be sufficiently important *669 and novel to have justified the prosecution of three separate appeals to this court, the brief which counsel filed in this appeal consisted of less than 1 ½ double spaced typewritten pages. It recited the travel of the case, set out in full the statute permitting the amendment of pleadings (G.L. 1956, § 9-6-2), referred to the syllabus of our earlier opinion, and concluded with the request that we reverse for an abuse of discretion. In his oral argument, by his own choice limited to 1 minute, he repeated the substance of what appeared in the brief. Not only did he fail to analyze the legal questions involved, but, in addition, he neither suggested in what manner the amended version of the declaration differed from the demurrable one, nor indicated what attempts were made to cure its deficiencies. These inadequacies in the presentation of plaintiff's contentions are completely at variance with both the letter and spirit of our rule 15 which requires that a brief contain a statement of the points made and the authorities relied on in support thereof, and that the oral argument emphasize and clarify what appears in the brief. The bar of this state, including plaintiff's counsel who is no stranger in our court, has for many years construed our rule as requiring much more than was provided in this case. Northrop v. Uncas Mfg. Co., 84 R.I. 418, 419, 124 A.2d 876, 877.
Counsel's defaults deprive us of a basis for an intelligent understanding of either the facts or the legal issues involved. The errors he assigns, moreover, can be ascertained only by a careful scrutiny of the record and by a line-by-line comparison of the two declarations. Those demands upon the members of this court defeat a principal purpose of the brief, which is to permit consideration of the questions in issue from an examination of the brief alone, without the necessity of an independent search of the record. Jaques v. Firestone Tire & Rubber Co., 183 Cal. App.2d 632, 636, 6 Cal. Reptr. 878; Joslin v. Ketcham, 130 Ind. App. 446, 161 N.E.2d 445; Dudley Bros. Lumber Co. v. Long, 268 Ala. 565, 109 So.2d 684; Brooks v. Dee Realty Co., 71 N.J. Super. 37, 176 A.2d 300.
The plaintiff's counsel has not made either a fair and sincere attempt to show where the trial justice erred or a good faith effort to comply with the requirements of our rule 15. After reading his brief and listening to his argument, we are no more advised as to his contentions than we would have been had he neither briefed nor argued his exceptions. It is as if the case came here solely upon a bill of exceptions, unaccompanied by either brief or argument. Our settled rule is that issues neither briefed nor argued are deemed to be waived.
The plaintiff's exceptions are overruled, the judgment appealed from is sustained, and the case is remitted to the superior court for further proceedings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544753/ | 388 B.R. 813 (2008)
In re Jeffery ECKERT, Debtor.
David E. Grochocinski, Chapter 7 Trustee, Plaintiff,
v.
David Schlossberg, Gary Laliberte, Christine Eckert, and Marcelo Carlos, Defendants.
Bankruptcy No. 05 B 54618. Adversary No. 07 A 00450.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
June 3, 2008.
*822 Jane D. Yanovsky, Neal H. Levin, Freeborn & Peters LLP, Chicago, IL, for Plaintiff.
Mazyar M. Hedayat, M. Hedayat & Associates, Bolingbrook, IL, for Defendants.
MEMORANDUM OPINION
JOHN H. SQUIRES, Bankruptcy Judge.
This matter comes before the Court on the amended complaint filed by David E. Grochocinski, the Chapter 7 case trustee (the "Trustee") of the bankruptcy estate of Jeffery Eckert (the "Debtor") against David Schlossberg ("Schlossberg"), Gary Laliberte ("Laliberte"), Christine Eckert ("Christine")[1], and Marcelo Carlos ("Carlos") (collectively the "Defendants") that seeks to avoid alleged fraudulent conveyances pursuant to 11 U.S.C. § 548(a)(1) and 740 ILL. COMP. STAT. 160/5 and 160/6. The matter involves the transfers of two parcels of real property that the Debtor allegedly orchestrated to hinder, delay, and defraud his creditors with the assistance and knowing participation of the Defendants.
For the reasons set forth herein, the Court grants judgment in favor of the Trustee and against Schlossberg pursuant to Count 1 of the amended complaint. The Court finds that the transfer of the Debtor's interest in real property located at 2072 Tunbridge Trail, Algonquin, Illinois to Schlossberg was a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(A) and (B). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1). Under 11 U.S.C. § 550(a)(1), the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sum of $109,000 for the fraudulent transfer of this real property, which represents the value of the Debtor's interest in that property received by Schlossberg.
In addition, the Court grants judgment in favor of the Trustee and against Schlossberg pursuant to Count II of the amended complaint. The Court finds that the transfers of the Debtor's interests in real property located at 1073 Union Court, Bartlett, Illinois and 2072 Tunbridge Trail, Algonquin, Illinois to Schlossberg were fraudulent conveyances under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfers are avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(1) and 740 ILL. COMP. STAT. 160/9(b), the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54 for the fraudulent transfer of the first property and $109,000 for the fraudulent transfer of the second property, which represent the *823 value of the Debtor's interests in those properties received by Schlossberg. Under 11 U.S.C. § 550(d), the Trustee is limited to only a single satisfaction from Schlossberg pursuant to Counts I and II of the amended complaint.
With respect to Count III of the amended complaint, the Court grants judgment in favor of Laliberte and against the Trustee. The Court finds that the July 2003 transfer of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois to Laliberte was not made on or within two years before the date of the Debtor's bankruptcy filing under 11 U.S.C. § 548(a)(1)(A) and (B).
Under Count IV of the amended complaint, the Court grants judgment in favor of the Trustee and against Laliberte. The Court finds that the transfer of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois was a fraudulent conveyance under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(1) and 740 ILL. COMP. STAT. 160/9(b), the Trustee may recover from Laliberte, for the benefit of the Debtor's estate, the sums of $120,000 and $52357.54, which represent the value of the Debtor's interest in that property received by Laliberte.
With respect to Count V of the amended complaint, the Court enters judgment in favor of the Trustee and against Carlos. The Court finds that the transfer to Carlos of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois was a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(A) and (B). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1). Pursuant to 11 U.S.C. § 550(a)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the real property.
Finally, the Court grants judgment in favor of the Trustee and against Carlos pursuant to Count VI of the amended complaint. The Court finds that the transfer of the real property located at 1073 Union Court, Bartlett, Illinois to Carlos was also a fraudulent conveyance under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(2) and 740 ILL. COMP. STAT. 160/9(b)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the real property. Under 11 U.S.C. § 550(d), the Trustee is entitled to only a single satisfaction from Carlos pursuant to Counts V and VI of the amended complaint.
I. JURISDICTION AND PROCEDURE
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (H), and (O).
II. FACTS AND BACKGROUND
Most of the facts and background are undisputed. The Debtor filed a voluntary Chapter 7 bankruptcy petition on October 14, 2005. Thereafter, the Trustee was appointed in the underlying bankruptcy case. The Trustee is the plaintiff in the instant adversary proceeding.
*824 A. The Union Court Property Transfers
On August 4, 2002, the Debtor entered into a sales contract with Bartlett One L.L.C. for the construction of a new home at 1073 Union Court, Bartlett, Illinois (the "Union Court Property"), (Trustee Ex. No. 6.) Over the next twelve months, prior to the completion of the house, the Debtor made cash payments pursuant to the sales contract totaling $120,000 against the adjusted purchase price of $804,674.50. (Trustee Ex. Nos. 7, 17, & 62 at 49:6-49:19.) By the lime the house was finished, however, the Debtor had been experiencing financial difficulties. The Debtor testified that despite repeated attempts, he was unable to obtain a mortgage on the Union Court Property to pay the balance due on the construction contract.
1. July 2003 Sale of the Union Court Property to Schlossberg and Laliberte
On July 8, 2003, two business associates of the Debtor, Schlossberg and Laliberte, entered into a partnership agreement whereby they agreed to purchase the Union Court Property for the purpose of reselling such Property to the Debtor under a contract for deed. (Trustee Ex. Nos. 13, 62 at 50:12-51:9, & 66 at 52:6-52:19.) Pursuant to the unwritten portion of the agreement, Schlossberg and Laliberte would purchase the Union Court Property and apply the $120,000 down payment provided by the Debtor, and would secure a mortgage for the balance of the purchase price, which would be paid on a monthly basis by the Debtor. (Trustee Ex. Nos. 16, 18, 19, 20, 21, 62 at 51:13-51:20, & 66 at 54:6-54:13.) Only Schlossberg and Laliberte, however, would be listed as purchasers on the deed. As an inducement to Schlossberg and Laliberte to purchase the Union Court Property with the intention to resell it to the Debtor, the Debtor agreed to pay a premium on the underlying obligation undertaken by Schlossberg and Laliberte. This premium was paid monthly, over and above the mortgage obligation, and created a "spread" that would amount to Schlossberg and Laliberte's profit on the transaction. (Trustee Ex. Nos. 62 at 51:13-51:20 & 65 at 13:1-13:20.)
On July 23, 2003, the closing date of the sale of the Union Court Property, Schlossberg, Laliberte, and the Debtor signed an assignment of real estate contract wherein the Debtor assigned to Schlossberg and Laliberte his interest in the Union Court Property in exchange for entering into articles of agreement for deed. (Trustee Ex. No. 16.) The articles of agreement for deed provided that the Debtor could repurchase the Union Court Property from Schlossberg and Laliberte if he made monthly payments to Schlossberg and Laliberte and a final balloon payment due on an unspecified date. (Trustee Ex. No. 19.) The contract for deed also preserved the Debtor's $120,000 equity in the Union Court Property. (Id.) At the closing, Schlossberg and Laliberte purchased the Union Court Property using the equity invested by the Debtor and two mortgages that they obtained from American Chartered Bank, (Trustee Ex. Nos. 17, 21, & 22.) Schlossberg and Laliberte were the only parties named as purchasers on the warranty deed issued by the seller, Bartlett One L.L.C. (Trustee Ex. No. 20.) The Debtor's name did not appear on the deed, despite his continuing equity interest in the Union Court Property. (Id.) This sum of $120,000 is part of the focus of Counts I and II against Schlossberg and Counts III and IV against Laliberte.
Following the closing of the Union Court Property sale and pursuant to the articles of agreement for deed, the Debtor made *825 the monthly mortgage payments whereby the Debtor paid Schlossberg and Laliberte who in turn paid American Chartered Bank less the "spread." (Trustee Ex. No. 65 at 14:15-14:24.) The Debtor, Christine, and their children resided in the house on the Union Court Property at all relevant times to this transaction. (Trustee Ex. Nos. 3 ¶ 58 & 62 at 47:23-48:8.)
In a February 10, 2004 e-mail correspondence to Schlossberg, the Debtor acknowledged that he entered into the agreement with Schlossberg and Laliberte in order to hinder, delay, and defraud his creditors. (Trustee Ex. Nos. 23, 62 at 55:1-59:18, & 66 at 93:1-93:7.) Specifically, the Debtor wrote, "[t]his contract for deed is a great way to protect my assests [sic] since I trust you and you hold title I am asset free almost ... i.e. `why sue Jeff, he aint [sic] got nothin!' [sic] ... I like the idea of keeping my house safe." (Trustee Ex. No. 23.) Several months later, on June 23, 2004, the Debtor sent another email correspondence to Schlossberg to confirm "the deal with asset protection in mind...." (Trustee Ex. No. 25.)
In July of 2004, Schlossberg and Laliberte refinanced the mortgage on the Union Court Property. On July 7, 2004, the Debtor, Schlossberg, and Laliberte executed a modification agreement that retained the structure of their previous arrangement under the articles of agreement for deed and extended the agreement for another year. (Trustee Ex. Nos. 26 & 65 at 117:23-118:18.) During and following the refinancing, the Debtor exercised control over the Union Court Property and resided therein with his family. (Trustee Ex. No. 62 at 62:23-63:1.) Thereafter, he subsequently entered into a lease and option to buy the Union Court Property with Schlossberg and Laliberte. (Trustee Ex. No. 28.)
a. The Debtor's Indebtedness to Gregory Steiner and AgriStar Frozen Foods, Inc. and His Financial Problems Worsen
On November 13, 2003, the Debtor and Gregory Steiner ("Steiner") entered into an agreement whereby Steiner committed to form a new entity, AgriStar Frozen Foods, Inc. ("AgriStar"), to act as the sales, marketing, and invoicing arm of a joint venture, while the Debtor's company, Platinum Frozen Foods, Inc. ("Platinum"), promised to perform all actions in connection with the actual repackaging, shipping, and transportation of frozen fruits and vegetables. (Trustee Ex. No. 27 ¶¶ 11 & 12 & Ex. A.) AgriStar was to realize a profit of $0.01/pound of frozen vegetables packed. (Id.) At the time this agreement was entered into, however, the Debtor knew that Platinum would not be able to live up to its obligation under that agreement. Despite this fact, the Debtor represented to Steiner that Platinum was a solvent operation, capable of carrying out its obligations under the agreement. The Debtor testified that he did not invest any of his own money in Platinum because he did not have any money to invest. The Debtor further testified that at the time he entered into the agreement with Steiner, a judgment in favor of Peterson Farms had been entered against him personally.
Steiner and AgriStar commenced a lawsuit against Platinum and the Debtor in 2004. (Trustee Ex. No. 27.) According to the amended complaint, the Debtor repeatedly failed to fulfill the terms of the agreement with Steiner and he engaged in numerous bad-faith acts, including fraud, forgery, and misappropriation of AgriStar's money. (Id.) As a result, AgriStar was forced to pay all of the expenses related to the joint venture, including the wages, rent, and other costs of operation, *826 which should have been paid by Platinum. (Trustee Ex. No. 82.)
The Debtor experienced insolvency as far back as 2003 and endured numerous judgments, liens, foreclosures, and other financial difficulties related to Platinum and other ventures. (Trustee Ex. No. 50, Amended Statement of Financial Affairs.) The Debtor owed payroll taxes from Platinum to the Internal Revenue Service for the period of 2003-2004 in the sum of $140,000. (Trustee Ex. No. 50, Amended Schedule E.) In addition, the Debtor owed "941 estimated taxes" in the amount of $250,000 for the period of 2002-2004. (Id.) Further, he owed child support in the sum of $120,000 from 2000-2005 to Christine. (Id.)
In 2004, the United States Department of Agriculture filed an administrative action against Platinum for violations of the Perishable Agricultural Commodities Act ("PACA"). (Trustee Ex. No. 74.) The action alleged that Platinum failed to pay several sellers approximately $607,800 for perishable agricultural commodities purchased during the period of November 2002 through November 2003. (Id.) Moreover, in 2005, Platinum was cited for willful, repeated, and flagrant violations of PACA. (Trustee Ex. No. 73.) The Debtor testified that as the administrator of the PACA license for Platinum, he knew that he was personally liable for any PACA violation. The Debtor's financial situation weakened as time went on, which led to his bankruptcy filing in October of 2005.
The Debtor knew at all relevant times that Platinum was incapable of performing the tasks for which it contracted with Steiner and AgriStar. As a result, the Debtor and Platinum incurred debts to Steiner and AgriStar beyond the Debtor's ability to pay. After an initial investment paid to the Debtor in the amount of $500,000, AgriStar was forced to cover an additional $500,000 worth of expenses caused by Platinum's breach of the agreement and by the Debtor's embezzlement and fraudulent transfer of funds out of AgriStar's account. (Trustee Ex. Nos. 27 & 82.) Hence, at the time the Debtor transferred his interest in the Union Court Property to Schlossberg and Laliberte, the Debtor knew or reasonably should have known that he was about to incur debts beyond his ability to pay, and that his assets remaining after the transfer were unreasonably small to satisfy such debts.
2. June 2005 Sale of the Union Court Property to Carlos By Schlossberg and Laliberte
After the Debtor's initial transfer of the Union Court Property to Schlossberg and Laliberte, the Debtor consistently fell behind in his payments to them. (Trustee Ex. Nos. 3 ¶ 44, 63 at 235:15-235:18 & 65 at 122:13-123:11.) The parties eventually agreed that the articles of agreement for deed arrangement was not working. (Trustee Ex. No. 3 ¶ 45.) As a result, the Debtor found another purchaser for the Union Court Property Carlos. (Trustee Ex. Nos. 63 at 235:15-236:5 & 65 at 149:2-149:4.) Carlos purchased the Union Court Property from Schlossberg and Laliberte for $920,000. (Trustee Ex. No. 32.)
Prior to the June 8, 2005 transfer of the Union Court Property from Schlossberg and Laliberte to Carlos, the Debtor assigned his right, title, and interest in the option to purchase the Union Court Property to Christine, his then live-in girlfriend and now wife, in consideration for alleged outstanding child support payments. (Trustee Ex. Nos. 28, 62 at 65:20-66:12, & 63 at 238:2-238; 18.) As a result, the Debtor received nothing in value from Christine in exchange for the transfer of his equity interest in the Union Court Property to her. (Trustee Ex. No. 63 at *827 238:19-239:2.) In addition, the Debtor admitted at trial that he forged Christine's signature on the documents allegedly signed by Christine, On June 8, 2005, at the Debtor's direction, Christine then signed a release of option contract between herself and Schlossberg and Laliberte to free the title of the Union Court Property for sale. (Trustee Ex. Nos. 30, 65 at 162:14-162:21, & 61 at 146:2-147:14)
The documents at the June 8, 2005 closing of the Union Court Property sale from Schlossberg and Laliberte to Carlos indicated that the net proceeds of the sale totaled approximately $200,000, which included a payment of approximately $18,000 to Christine. (Trustee Ex. No. 31.) However, none of the payments made at the closing went to the Debtor directly because of his agreement with Schlossberg, Laliberte, Carlos, and Christine.
Carlos, who did not have any funds of his own to purchase the Union Court Property, received $76,207 from the proceeds of the sale of the Property. Specifically, the money changed hands at the June 8, 2005 closing for the sale from Schlossberg and Laliberte to Carlos as follows: the Metropolitan Title Company issued a check for $76,207 to Schlossberg and Laliberte who thereafter endorsed it to Christine. (Trustee Ex. No. 36.) Christine subsequently endorsed the check to Carlos. (Trustee Ex. Nos. 36, 59 at 50:14-51:7, 61 at 148:14-149:19, & 63 at 310:6-311:16.) The payment of this sum to Carlos is the focus of Counts V and VI against him. On June 7, 2005, one day before the Union Court Property closing, Christine received a check from MidAmerica Bank marked "Re Gary Laliberte" for $53,000. (Trustee Ex. No. 37.) Christine also endorsed this check to Carlos, This amount was ultimately paid to Laliberte as repayment for a loan he obtained from a third party in order to close the deal. This sum is not sought by the Trustee. The remaining $52,357.54 of the $200,000 proceeds from the sale of the Union Court Property was paid to Schlossberg and Laliberte. (Trustee Ex. Nos. 30 & 31.) This sum of $52,357.54 is part of the focus of Counts I, II, III, and IV against Schlossberg and Laliberte.
All of the money received by Carlos came directly out of the investment of the Debtor at the time of the sale of the Union Court Property. (Trustee Ex. No. 62 at 77:9-77:23.) However, the Debtor did not receive anything equivalent in value in exchange for transferring to Carlos his interest in the $76,207. Moreover, Schlossberg, Laliberte, and Christine also received payments out of the equity to which the Debtor was concealing pursuant to the Debtor's arrangement with all three of them. (Trustee Ex. No. 65 at 158:12-159:17.) Thus, the net effect of the Debtor's transactions is such that he procured the sale and resale of the Union Court Property through two sets of purchasers who shielded his investment and interest in that Property from his creditors. This distribution of his interest, which was concealed through the above payments to Schlossberg, Laliberte, Carlos, and Christine, was without consideration paid by them for his equity. In the meantime, the Debtor remained in possession of the Union Court Property from the June 2005 closing until he once again stopped making his rent/mortgage payments to Carlos and moved out of the Union Court Property in the fall of 2005. (Trustee Ex. Nos. 34 & 65 at 150:4-150:10.)
B. The Tunbridge Property Transactions
In November of 2004, the Debtor unsuccessfully attempted to sell another asset, 2072 Tunbridge Trail, Algonquin, Illinois (the "Tunbridge Property") for $429,000. *828 (Trustee Ex. Nos. 54-57.) On December 31, 2004, the Tunbridge Property was appraised with a value of $420,000, (Trustee Ex. No. 58.) Shortly thereafter, the Debtor and Schlossberg devised a plan with respect to the Tunbridge Property. On January 19, 2005, the Debtor sold the Tunbridge Property to Schlossberg for $325,000, which was $95,000 less than its appraised value at the time. (Trustee Ex. Nos. 38-41 & 53.) The Debtor and/or Schlossberg convinced the mortgagee to accept less than the balance so as to avoid any cloud on the title.[2] The Debtor did not receive anything in value for the bargain-priced transfer of the Tunbridge Property to Schlossberg. (Trustee Ex. No. 38.)
Less than one year later, on December 9, 2005, Schlossberg resold the Tunbridge Property for $455,000, which resulted in a profit to him of $130,000. (Trustee Ex. No. 43.) The Debtor admitted that he sold the Tunbridge Property to Schlossberg below market price and that he subsequently received a forty percent portion of the profit for his participation in the transaction, (Trustee Ex. Nos. 35, 48, 49, 62 at 138:1-139:9, & 66 at 27:2-28:8.) Schlossberg received at least sixty percent of the $130,000 profit that he and the Debtor made as a result of their plan to sell the Tunbridge Property to Schlossberg below market price who, in turn, sold it at a profit.
C. The Instant Litigation
On May 24, 2007, the Trustee filed a complaint commencing this adversary proceeding to avoid and recover the Debtor's alleged fraudulent transfers of the Union Court Property and the Tunbridge Property and for related relief. (Trustee Ex. No. 1.) The Trustee filed an amended complaint on August 24, 2007. (Trustee Ex. No. 2.) In the amended complaint, the Trustee requested alternative relief by way of attachment, imposing constructive trusts against Schlossberg, Laliberte, and Carlos, injunctive relief, or the appointment of a receiver for their alleged illgotten gains. No evidence in support of or action was taken by the Trustee relative to these alternative remedies. As a result, this relief will not be further discussed here, save to note that 11 U.S.C. § 105(b) prohibits the Court from appointing a receiver in a case under title 11.
Schlossberg, Laliberte, and Carlos filed an answer to the amended complaint on September 7, 2007, (Trustee Ex. No. 3.) Christine did not answer the amended complaint. As a result, on October 24, 2007, the Court entered an order of default judgment in the sum of $275,921.53 against Christine. (Trustee Ex. No. 4.) On November 9, 2007, the Court entered an amended order of default judgment against Christine in the sum of $281,112.99. (Trustee Ex. No. 5.)
On April 14, 2008, a trial was held in this matter on Counts I through VI. Prior to the commencement of the hearing, the Court granted the Trustee's motion to compel and for sanctions against Schlossberg.[3] Specifically, the Court sanctioned Schlossberg for intentional spoliation of relevant and other electronic data from his computers in violation of the Court's protective order. (Trustee Ex. No. 70.) As a sanction for his actions, the facts as alleged by the Trustee relating to Schlossberg were taken as proof against him. Further, Schlossberg was prohibited from *829 introducing testimony or other evidence in opposition to those facts.
III. DISCUSSION
A. Count I: 11 U.S.C. §§ 548(a) and 550(a)
Pursuant to Count I of the complaint, the Trustee alleges that within two years of the filing of his bankruptcy petition, the Debtor transferred his interests in the Union Court Property and the Tunbridge Property to Schlossberg with the actual intent to delay, hinder, and defraud his creditors. The Trustee asserts that the February 10, 2004 e-mail and subsequent correspondence from the Debtor to Schlossberg indicate that the Debtor entered into the Union Court Property transaction in order to transfer his interest therein with the actual intent to hinder and defraud his creditors. The Debtor allegedly retained possession and control of the Union Court Property while concealing his real interest in that asset. Further, the Trustee avers that the Debtor admitted that he received a kickback from Schlossberg on the sale of the Tunbridge Property. The Trustee alleges that as the Debtor's friend and close business associate, Schlossberg was an insider for purposes of the transfers under 11 U.S.C. § 101(31)(A). According to the Trustee, the transfers of the Union Court Property and the Tunbridge Property constituted conveyances of substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of his debts exceeded all of his assets. The Trustee seeks a finding that the transfers of the Union Court Property and the Tunbridge Property from the Debtor to Schlossberg were fraudulent under 11 U.S.C. § 548(a)(1)(A), (a)(1)(B)(ii)(I), (a)(1)(B)(ii)(III), and (a)(1)(B)(ii)(IV). Further, he requests the return of these estate assets or, in the alternative, a judgment in his favor for the benefit of the estate equal to the value of the property transferred under 11 U.S.C. § 550. Pursuant to the sanctions levied by the Court against Schlossberg for his intentional spoliation of electronic data from his computers, the facts alleged by the Trustee are taken as proof against him.
"Section 548 of the Bankruptcy Code enables a trustee to avoid certain pre-petition transfers of property on the ground that the transfers were fraudulent." Schechter v. 5841 Bldg. Corp. (In re Hansen), 341 B.R. 638, 642 (Bankr.N.D.Ill. 2006). "Fraudulent conveyance law protects creditors from last-minute diminutions of the pool of assets in which they have interests." Bonded Fin. Servs., Inc. v. European Am. Bank, 838 F.2d 890, 892 (7th Cir.1988). Section 548(a)(1) of the Bankruptcy Code provides as follows:
(a)(1) The trustee may avoid any transfer... of an interest of the debtor in property, or any obligation... incurred by the debtor, that was made or incurred on or within 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 to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(B) (i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii) (I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
*830 (II) was engaged in business or a transaction, or was about, to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured; or
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
11 U.S.C. § 548(a)(1).
A cause of action under § 548(a)(1)(A) is commonly referred to as "actual fraud" because of the element of the debtor's actual intention to hinder, delay, or defraud creditors. In re FBN Food Servs., Inc., 82 F.3d 1387, 1394 (7th Cir.1996). A cause of action under § 548(a)(1)(B), on the other hand, is often referred to as "constructive fraud" because it omits any element of intent.[4]Id. One decision has described the differences between the two causes of action under § 548(a)(1):
The focus in the inquiry into actual intent is on the state of mind of the debtor. Neither malice nor insolvency [is] required. Culpability on the part of the ... transferees is not essential.
Unlike constructively fraudulent transfers, the adequacy or equivalence of consideration provided for the actually fraudulent transfer is not material to the question whether the transfer is actually fraudulent.... Conversely, the transferor's intent is immaterial to the constructively fraudulent transfer in which the issue is the equivalence of the consideration coupled with either insolvency, or inadequacy of remaining capital, or inability to pay debts as they mature.
Plotkin v. Pomona Valley Imps., Inc. (In re Cohen), 199 B.R. 709, 716-17 (9th Cir. BAP 1996). Thus, the intent of the transferee is immaterial.
The trustee has the burden of proving a fraudulent transfer under § 548. Frierdich v. Mottaz, 294 F.3d 864, 867 (7th Cir.2002); Baldi v. Lynch (In re McCook Metals, L.L.C.), 319 B.R. 570, 587 (Bankr. N.D.Ill.2005). Here, the Trustee has specifically alleged actual fraud under § 548(a)(1)(A) and constructive fraud under § 548(a)(1)(B) in his amended complaint. Hence, the Court must address both theories.
Under § 548(a)(1)(A), a transfer can be fraudulent if it was made with "actual intent to hinder, delay, or defraud" creditors. 11 U.S.C. § 548(a)(1)(A). Because there is rarely direct evidence of the intent underlying a transfer of property, courts look to circumstantial evidence, referred to as the badges of fraud, in determining whether a transfer was intended to hinder, delay, or defraud creditors, Carmel v. River Bank Am. (In re FBN Food Servs., Inc.), 185 B.R. 265, 275 (N.D.Ill. 1995), aff'd, 82 F.3d 1387 (7th Cir.1996). Those badges of fraud include the following: (1) absconding with the proceeds of the transfer immediately after their receipt; (2) absence of consideration when the transferor and transferee know that *831 outstanding creditors will not be paid; (3) a huge disparity in value between the property transferred and the consideration received; (4) the fact that the transferee is or was an officer, agent, or creditor of an officer of the corporate transferor; (5) insolvency of the debtor; and (6) the existence of a special relationship between the debtor and the transferee. Id.; McCook Metals, 319 B.R. at 588 n. 13 (citing FBN Food Servs.).
To establish a fraudulent conveyance under § 548(a)(1)(B), on the other hand, a trustee must prove the following elements: (1) a transfer of the debtor's property or interest therein; (2) made within two years of the filing of the bankruptcy petition; (3) for which the debtor received less than a reasonably equivalent value in exchange for the transfer; and (4) either (a) the debtor was insolvent when the transfer was made or he was rendered insolvent thereby; or (b) the debtor was engaged or about to become engaged in business or a transaction for which his remaining property represented an unreasonably small capital; or (c) the debtor intended to incur debts beyond his ability to repay them as they matured; or (d) the debtor made such transfer to or for the benefit of an insider. Wieboldt Stores, Inc. v. Schottenstein, 94 B.R. 488, 505 (N.D.Ill.1988); Barber v. Dunbar (In re Dunbar), 313 B.R. 430, 434 (Bankr.C.D.Ill. 2004); see also Dunham v. Kisak, 192 F.3d 1104, 1109 (7th Cir.1999). The trustee must prove each element by a preponderance of the evidence. McCook Metals, 319 B.R. at 587.
1. Whether the July 2003 Transfer of the Union Court Property Was Fraudulent Under § 548(a)(1)(A) and (B)
First, the Court will address the Trustee's claim that the Debtor's transfer of the Union Court Property in July of 2003 to Schlossberg constituted actual fraud pursuant to § 548(a)(1)(A) and constructive fraud under § 548(a)(1)(B). The Trustee's cause of action against Schlossberg under § 548(a) for the July 2003 transfer of the Union Court Property fails because the transfer was not made within two years prior to the Debtor's bankruptcy filing. The Debtor filed his bankruptcy petition in October of 2005, which is twenty-seven months after the July 2003 transfer of the Union Court Property. Thus, the Trustee may not sustain a cause of action against Schlossberg under § 548(a)(1)(A) or (B) because the transfer was not within the two years before the date of the bankruptcy filing. The Court notes that Schlossberg did not raise this point at any stage of this proceeding. Despite that failing on the part of Schlossberg, the Court finds that the Trustee cannot sustain a cause of action under § 548 of the Code against Schlossberg for the Debtor's July 2003 transfer of his interest in the Union Court Property to Schlossberg.
2. Whether the Transfer of the Tunbridge Property Was Fraudulent Under § 548(a)(1)(A)
Next, the Court will address the Debtor's transfer of the Tunbridge Property to Schlossberg and whether that transaction constituted fraud in fact or actual fraud pursuant to § 548(a)(1)(A). Under § 548(a)(1)(A), a transfer can be fraudulent if it was made with "actual intent to hinder, delay, or defraud" creditors. 11 U.S.C. § 548(a)(1)(A). Because there is rarely direct evidence of intent underlying a transfer of property, courts look to circumstantial evidence, referred to as the badges of fraud, in determining whether a transfer was intended to hinder, delay, or defraud creditors. FBN Food *832 Servs., 185 B.R. at 275. There was some evidence that the Debtor's transfer of the Tunbridge Property to Schlossberg was made with actual intent to hinder, delay, or defraud his creditors. The Debtor admittedly sold the Tunbridge Property to Schlossberg at a reduced price with the expectation that Schlossberg would resell the Property at a price higher and the Debtor and Schlossberg would share in the profits of that sale. (Trustee Ex. Nos. 48 & 49.) The Court finds that this admission by the Debtor in and of itself does not establish conclusively the Debtor's actual intent to hinder, delay, or defraud his creditors. Thus, the Court turns to the badges of fraud to determine whether the transfer of the Tunbridge Property was intended to harm the Debtor's creditors.
First, there was no evidence that the Debtor absconded with the proceeds of the transfer. On January 19, 2005, the Debtor sold the Tunbridge Property to Schlossberg for $325,000, which was $95,000 less than the Property's fair market value at the time. (Trustee Ex. Nos. 38-41 & 53.) There was no evidence adduced by the Trustee to show what the Debtor did with the proceeds he received from the sale. Thus, the Court cannot determine whether the Debtor absconded with the proceeds of the transfer immediately after their receipt.
Next, Schlossberg was not an officer, agent, or creditor of an officer of a corporate transferor. However, there was a special relationship between the Debtor and Schlossberg. They were business associates and friends. Schlossberg operates Assured Concepts Croup Limited, which provides financial planning services. (Trustee Ex. No. 66 at 4:17-5:9.) In addition, he is a licensed insurance broker. (Id. at 5:10-5:13.) Schlossberg also operates Assured Financial, a company that obtains mortgage loans for its clients, (Id. at 5:21-6:10.) Schlossberg admitted that the Debtor was his client and that he had provided the Debtor with a life insurance policy. (Id. at 22:22-24:8.) According to the Debtor, Schlossberg also tried to procure a loan for the Debtor in order for him to purchase the Union Court Property in July of 2003.
The remaining three badges of fraud-the insolvency of the Debtor, absence of consideration when the transferor and transferee know that outstanding creditors will not be paid, and a huge disparity in value between the property transferred and the consideration received-warrant a more detailed discussion. The Bankruptcy Code employs a balance sheet approach to the question of insolvency. Steege v. Affiliated Bank/N. Shore Nat'l (In re Alper-Richman Furs, Ltd.), 147 B.R. 140, 154 (Bankr.N.D.Ill.1992). Specifically, § 101(32) of the Code defines "insolvent" and states in relevant part that:
"insolvent" means
(A) with reference to an entity ... financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation, exclusive of
(i) property transferred, concealed, or removed with intent to hinder, delay, or defraud such entity's creditors; and
(ii) property that may be exempted from property of the estate under section 522 of this title[.]
11 U.S.C. § 101(32)(A). The Seventh Circuit has interpreted this definition to require courts to determine what a willing buyer would pay for the debtor's entire package of assets and liabilities. Covey v. Commercial Nat'l Bank of Peoria, 960 F.2d 657, 660 (7th Cir.1992). If the price is positive, the debtor is solvent; if the price is negative, the debtor is insolvent. *833 Id. A trustee may utilize appropriate means to prove insolvency, including balance sheets, financial statements, appraisals, expert reports, and other affirmative evidence. Freeland v. Enodis Corp. (In re Consol Indus. Corp.), 292 B.R. 354, 360 (N.D.Ind.2002).
With respect to whether the Debtor was insolvent, the evidence adduced at the trial showed that the Debtor was balance-sheet insolvent when the transfer of the Tunbridge Property was made to Schlossberg in January of 2005, or he was rendered insolvent thereby. As far back as July of 2003, when construction was complete on the Union Court Property, the Debtor had encountered financial problems. He testified that he was unable to obtain a mortgage on the Union Court Property to pay the balance due on the construction contract. In addition, the Debtor testified that he had a judgment entered against him personally by Peterson Farms. The Debtor admitted that he was "being sued by everybody," and was in financial straits in 2004. (Trustee Ex. No. 62 at 58:17-58:23.)
Moreover, the Debtor's business, Platinum, had financial problems. Platinum failed to perform under the 2003 agreement it had with AgriStar. Further, Steiner accused the Debtor of engaging in fraud, forgery, and misappropriation of AgriStar's money. In 2004, the United States Department of Agriculture filed an administrative action against Platinum for PACA violations, and in 2005, Platinum was cited for PACA infractions. The Debtor, as the administrator of Platinum's PACA license, was personally liable for these violations. Thus, the Court finds that the Debtor experienced insolvency as far back as 2003 and endured numerous judgments, liens, foreclosures, and other financial difficulties related to Platinum and other ventures. (Trustee Ex. No. 50, Amended Statement of Financial Affairs.)
Additionally, a review of the Debtor's Schedules and Statement of Financial Affairs will assist in the determination of the Debtor's solvency. Pursuant to the Debtor's Amended Schedule A, he did not own any real property nine months after the transfer of the Tunbridge Property to Schlossberg. (Trustee Ex. No. 50, Amended Schedule A.) On his Amended Schedule B, the Debtor listed personal property in the total amount of $15,600. (Id. Amended Schedule B.) The Debtor listed unsecured debt in the amount of $848,268. (Id. Amended Schedule F.) The Debtor's schedule of current income shows that this monthly income totaled $5,600. (Id. Amended Schedule J.) The Debtor listed monthly expenses of $13,102. (Id. Amended Schedule J.) Based on this evidence, the Debtor's liabilities of $848,268 exceeded his listed assets of $15,600. Moreover, his monthly expenses of $13,102 greatly surpassed his monthly income of $5,600. Hence, the Court concludes that the Debtor was balance-sheet insolvent when the transfer of the Tunbridge Property was made to Schlossberg in January 2005, or he was rendered insolvent thereby.
Furthermore, the Court finds an absence of consideration when the Debtor knew that by selling the Tunbridge Property to Schlossberg at a bargain rate, his outstanding creditors would not be paid. The transfer to Schlossberg was made nine months prior to the Debtor's bankruptcy filing. As evidenced by his Schedules and Statement of Financial Affairs, the Debtor had outstanding debts when he sold the Tunbridge Property. (Trustee Ex. No. 50.)
Finally, the Court must determine whether there was a huge disparity in value between the property transferred *834 and the consideration received. The Debtor sold the Tunbridge Property to Schlossberg in January of 2005 for $325,000, which was $95,000 less than it was appraised for in December of 2004. Schlossberg turned around and sold the Property less than one year later for $455,000 at a $130,000 profit. Schlossberg and the Debtor had an agreement whereby the Debtor would receive a forty percent portion of the profits and Schlossberg would receive sixty percent of the profits. Thus, the Court finds that Schlossberg received more than the Debtor received for the sale of the Tunbridge Property. Based on this, there was a huge disparity in value between the property transferred and the consideration received.
In sum, four out of six badges of fraud have been shown here. Thus, the Court finds this constitutes a sufficient number to infer actual fraud. In short, the Court finds that the trial testimony and the documentary evidence establish that the Debtor deliberately and fraudulently sold the Tunbridge Property to Schlossberg at a below market rate with the intent to share in the profits when Schlossberg resold the Property. Hence, the Court finds that the Trustee has established by both clear and convincing evidence and a preponderance of the evidence that the Debtor's transfer of the Tunbridge Property to Schlossberg constituted actual fraud under § 548(a)(1)(A). Thus, the Trustee may avoid the transfer.
3. Whether the Transfer of the Tunbridge Property Was Fraudulent Under § 548(a)(1)(B)
Next, the Court will address whether the Debtor's transfer of the Tunbridge Property to Schlossberg was constructively fraudulent under § 548(a)(1)(B). The Court finds that the Trustee has demonstrated all of the requisite elements to establish a constructively fraudulent transfer. First, the Court finds that the Debtor made a transfer of his interest in the Tunbridge Property. Next, the transfer was made in January of 2005, approximately nine months prior to the Debtor's bankruptcy filing in October of 2005. Moreover, the Court found supra that the Debtor was insolvent when the transfer was made or was rendered insolvent thereby. Also, the Court finds that when the Debtor transferred his interest in the Tunbridge Property to Schlossberg, he had already incurred debts that would be beyond his ability to pay as they matured. The Debtor had several pending judgments entered against him. Further, as evidenced by his Schedules and Statement of Financial Affairs, his expenses far exceeded his income, and his assets were substantially less than his liabilities. (Trustee Ex. No. 50.) Thus, the Court infers that after the transfer, the Debtor must have known that he would continue to incur debts beyond his ability to pay them as they matured.
Additionally, the Court finds that Schlossberg was an "insider" of the Debtor. With respect to an individual debtor, the term "insider" is defined to include a relative of the debtor or of a general partner of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control. 11 U.S.C. § 101(31)(A). Clearly, Schlossberg was not a relative of the Debtor, and the Debtor was not a director, officer, or person in control of a corporation. The Trustee argues that Schlossberg was a partner of the Debtor, and thus, should be considered an insider.
The Bankruptcy Code's statutory definition of "insider" is intended to be illustrative rather than exhaustive. In re Krehl, 86 F.3d 737, 741 (7th Cir.1996). *835 In ascertaining insider status, courts look to the closeness of the relationship between the parties and whether the transactions between them were conducted at arm's length. Id. at 742, The Court finds that as a result of the close relationship between Schlossberg and the Debtor, Schlossberg was an insider of the Debtor. Their transactions involving the Tunbridge Property were not conducted at arm's length. Rather, their dealings amounted to a scheme devised by the Debtor to shield this asset from his creditors and then share in the profits of the resale. Schlossberg was aware of the scheme and was a willing participant.
Lastly, the Court must determine whether the Debtor received consideration from Schlossberg that had a value that was reasonably equivalent to the value of the Tunbridge Property. The Bankruptcy Code does not define the term "reasonably equivalent value." The Seventh Circuit, however, has stated that the test utilized to determine "reasonably equivalent value" requires courts to determine the value of what was transferred and compare that value to the value the debtor received. Barber v. Golden Seed Co., 129 F.3d 382, 387 (7th Cir.1997). The determination of "reasonably equivalent value" is not a fixed mathematical formula. Id. Section 548(d)(2)(A) of the Code defines "value" as "property, or satisfaction or securing of a present or antecedent debt of the debtor...." 11 U.S.C. § 548(d)(2)(A).
Indeed, determination of "reasonably equivalent value" under § 548(a)(1)(B) is a two-step process. Anand v. Nat'l Republic Bank of Chi, 239 B.R. 511, 516-17 (N.D.Ill.1999). A court must first determine whether the debtor received value, and then examine whether the value is reasonably equivalent to what the debtor gave up. Id. at 517. The second inquiry whether what the debtor gave up was reasonably equivalent to what he received is more difficult. Id. "Equivalent value must be measured as of the time of the transfer." McCook Metals, 319 B.R. at 589. Accord Doctors Hosp. of Hyde Park, Inc. v. Desnick (In re Doctors Hosp. of Hyde Park, Inc.), 360 B.R. 787, 840 (Bankr.N.D.Ill.2007).
Whether "reasonably equivalent value" has been given is a question of fact that depends on the circumstances surrounding the transaction. Barber, 129 F.3d at 387. The factors utilized to determine reasonably equivalent value are: (1) whether the value of what was transferred is equal to the value of what was received; (2) the fair market value of what was transferred and received; (3) whether the transaction took place at arm's length; and (4) the good faith of the transferee. Id.; Grigsby v. Carrnell (In re Apex Auto. Warehouse, L.P.), 238 B.R. 758, 773 (Bankr.N.D.Ill.1999), "Fair market value is defined as `the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's-length transaction; the point at which supply and demand intersect.'" Doctors Hosp. of Hyde Park, 360 B.R. at 840 (quoting BLACK'S LAW DICTIONARY 1587 (8th ed.2004)). The Trustee bears the burden of proof on this issue. See Barber, 129 F.3d at 387.
The Court finds that based on the evidence, the Debtor did not receive a reasonably equivalent value for the transfer of his interest in the Tunbridge Property. The Court will examine the factors utilized to make this determination. As previously discussed, the Court found that the fair market value of the Tunbridge Property at the time of the January 2005 transfer was $420,000 pursuant to the appraisal dated December 2004. (Trustee Ex. No. 58.) The Debtor sold the Tunbridge Property to Schlossberg for $95,000 less than its fair *836 market value. Less than one year later, Schlossberg resold the Property to an apparent bona fide purchaser for $130,000 more than he purchased it. Schlossberg and the Debtor agreed to split the profits of the resale. The Debtor received forty percent and Schlossberg received sixty percent of the profits. That split is not reasonable or equivalent on the exchange.
Furthermore, the Court finds that the transaction did not take place at arm's length. The initial sale of the Tunbridge Property to Schlossberg was for $95,000 less than its fair market value. The Debtor and Schlossberg had an agreement whereby Schlossberg would resell the Property and share with the Debtor forty percent of the profits he made on the sale. Finally, the Court finds that, based on this side agreement between the Debtor and Schlossberg, Schlossberg lacked good faith. Based on these factors, the Court concludes that the consideration the Debtor received from Schlossberg did not have a value that was reasonably equivalent to the value of the Debtor's interest in the Tunbridge Property.
In sum, the Court finds that the Trustee had met all of the elements to establish that the transfer of the Tunbridge Property to Schlossberg was constructively fraudulent under § 548(a)(1)(B). Thus, the Trustee may avoid the Debtor's transfer of the Tunbridge Property to Schlossberg.
4. Recovery Under 11 U.S.C. § 550(a)
Pursuant to 11 U.S.C. § 550(a), the Trustee seeks to recover from Schlossberg, for the benefit of the Debtor's estate, the value of the property transferred by the Debtor to Schlossberg. A court must first make a determination whether the transfer was fraudulent under § 548(a) and, therefore, avoidable before that transfer can be recovered under § 550(a). When a transfer is avoided under $548(a), the next step is to look to § 550(a). Section 550(a) sets forth the parties from whom fraudulent transfers can be recovered, Fisher v. Hamilton (In re Teknek, LLC), 343 B.R. 850, 880 (Bankr.N.D.Ill. 2006), and provides as follows:
(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section ... 548 ... of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or
(2) any immediate or mediate transferee of such initial transferee.
11 U.S.C. § 550(a) (emphasis supplied). Moreover, under § 550(d), a trustee is "entitled to only a single satisfaction under subsection (a) of this section." 11 U.S.C. § 550(d).
Section 550(a) is a secondary cause of action after a trustee has prevailed pursuant to the avoidance sections of the Bankruptcy Code. Santee v. Nw. Nat'l Bank (In re Mako, Inc.), 127 B.R. 471, 473 (Bankr.E.D.Okla.1991). "Section 550(a) stands as a recovery statute only and not as a primary avoidance basis for an action, as it will only survive when coupled with the transfer avoidance sections of the Code." Id. Even though an action to avoid a transfer may be, and often is, brought in conjunction with an action to recover the property transferred or its value, a court must evaluate the two bases of relief separately. SKK Liquidation Trust v. Green & Green, LPA (In re Spinnaker Indus., Inc.), 328 B.R. 755, 764 (Bankr.S.D.Ohio 2005); Barber v. McCord Auto Supply, Inc. (In re Pearson Indus., Inc.), 178 B.R. 753, 759 (Bankr. C.D.Ill.1995).
*837 Section 550(a) effectively limits actions to only those that benefit the estate. P.A. Bergner & Co. v. Bank One, Milwaukee, N.A. (In re P.A. Bergner & Co.), 140 F.3d 1111, 1118 (7th Cir.1998); Kmart Corp. v. Intercraft Co. (In re Kmart Corp.), 310 B.R. 107, 126 (Bankr. N.D.Ill.2004). Section 550 allows the trustee to recover the entire value of the property transferred, even if it exceeds the debt to the creditor that provided the basis for the action. Kleven v. Stewart (In re Myers), 320 B.R. 667, 670 (Bankr.N.D.Ind. 2005). "Once the whole transfer has been pulled into the estate, the money is distributed according to the priorities established by the Code and the debtor's own commitments." FBN Food Servs., 82 F.3d at 1396.
The Bankruptcy Code does not define the term "transferee" for purposes of § 550(a). The Seventh Circuit, however, explains that a "transferee" has "dominion over the money or other asset, the right to put the money to one's own purposes," Bonded Fin., 838 F.2d at 893. The "initial" transferee is the first entity to have such a dominion or right. Kepler v. Aetna Fin. Co. (In re Ausman Jewelers, Inc.), 177 B.R. 282, 286 (Bankr.W.D.Wis. 1995). The Court finds that. Schlossberg was the initial transferee of the Tunbridge Property. He had dominion over the asset and was able to resell the Property to another purchaser in December of 2005.
Because the Conn determined that the transfer of the Tunbridge Property from the Debtor to Schlossberg was a fraudulent conveyance pursuant to § 548(a)(J)(A) and (B), the Trustee may recover the value thereof under § 550(a)(1) from Schlossberg. The evidence demonstrated that the Debtor sold the Tunbridge Property to Schlossberg for $95,000 less than its fair market value. Thus, the Trustee may recover this sum from Schlossberg as the lost value on the sale of the Tunbridge Property. Further, the evidence showed that the Debtor was entitled under his agreement with Schlossberg to forty percent of the difference between the $455,000 price at which Schlossberg sold the Tunbridge Property and the $420,000 fair market value. Hence, the Trustee may recover an additional $14,000 from Schlossberg ($455,000-$420,000 = $35,000 × .40% = $14,000).
In sum, the Court allows the Trustee to recover, for the benefit of the Debtor's estate, the value of the Debtor's interest in the Tunbridge Property from Schlossberg. Thus, the Trustee may recover the sum of $109,000 ($95,000 + $14,000) from Schlossberg for the benefit of the Debtor's estate under § 550(a)(1).
B. Count II: 740 ILL. COMP. STAT. 160/5 and 160/6 and 11 U.S.C. § 544
Pursuant to Count 11 of the amended complaint, the Trustee alleges that within four years of the date of the filing of his bankruptcy petition, the Debtor repeatedly transferred valuable assets, namely, the Union Court Property and the Tunbridge Property out of his possession and into the possession of Schlossberg with the actual intent to delay, hinder, and defraud his creditors. The Trustee asserts that the February 10, 2004 e-mail correspondence from the Debtor to Schlossberg indicates that the Debtor entered into the Union Court Property transaction in order to transfer his interest therein with the actual intent to hinder and defraud his creditors. The Debtor allegedly retained possession and control of the Union Court Property while concealing his real interest in that asset. Further, the Trustee avers that the Debtor admitted that he received a kickback from Schlossberg on the sale of the Tunbridge Property. The Trustee alleges that as the Debtor's friend and close *838 business associate, Schlossberg was an "insider" for purposes of the transfers. According to the Trustee, the transfers of the Union Court Property and the Tunbridge Property constituted conveyances of substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of his debts exceeded all of his assets. The Trustee contends that the transfers of the Union Court Property and the Tunbridge Property to Schlossberg were fraudulent under 740 ILL. COMP. STAT. 160/5 and 160/6 and should be avoided under 11 U.S.C. § 544 to the extent necessary to satisfy the claims against the Debtor's estate pursuant to 740 ILL. COMP. STAT. 160/8.
Section 544(b)(1) of the Bankruptcy Code expressly authorizes a trustee to avoid a transfer voidable under applicable state law and provides in pertinent part as follows:
[T]he trustee may avoid any transfer of an interest of the debtor in property ... that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.
11 U.S.C. § 544(b)(1). In essence, this provision allows a trustee to take advantage of state law with respect to fraudulent conveyances. In re Xonics Photochemical, Inc., 841 F.2d 198, 202 (7th Cir.1988).
In a matter under § 544(b)(1), the trustee has the rights of an unsecured creditor to avoid transactions that can be avoided by such creditor under state law. Frierdich, 294 F.3d at 867; Leibowitz v. Parkway Bank & Trust Co. (In re Image Worldwide, Ltd.), 139 F.3d 574, 576-77 (7th Cir.1998). The trustee need not identify the creditor, as long as an unsecured creditor exists. Image Worldwide, 139 F.3d at 577; In re Leonard, 125 F.3d 543, 544 (7th Cir. 1997). The transaction can be avoided completely even if the trustee cannot produce creditors whose liens total more than the value of the property. Leonard, 125 F.3d at 544-45.
In the matter at bar, the Trustee has demonstrated, and Schlossberg does not dispute, that the Debtor has numerous unsecured creditors. The Debtor's Amended Schedule F shows that he had $848,268 in unsecured debt as of the date of the bankruptcy filing. (Trustee Ex. No. 50, Amended Schedule F.) Accordingly, the Trustee may proceed against Schlossberg under Illinois law.
The applicable state law asserted by the Trustee under § 544(b)(1) is the Illinois Uniform Fraudulent Transfer Act (the "UFTA"). 740 ILL. COMP. STAT. 160/1 et seq. Section 160/5(a) of the UFTA addresses claims that arose before or after the alleged fraudulent transfer and § 160/6 speaks to claims that arose before the alleged fraudulent transfer was made. These sections provide as follows:
§ 5. (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(B) intended to incur, or believed or reasonably should have believed that *839 he would incur, debts beyond his ability to pay as they became due.
§ 6. (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation,
(b) A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.
740 ILL. COMP. STAT. 160/5(a) and 160/6.[5]
Sections 160/5 and 160/6 of the UFTA parallel § 548(a)(1) of the Code.[6] doctors Hosp. of Hyde Park, 360 B.R. at 839; Martino v. Edison Worldwide Capital (In re Randy), 189 B.R. 425, 443 (Bankr. N.D.Ill.1995). "Because the provisions of the UFTA parallel § 548 of the Bankruptcy Code, findings made under the Bankruptcy Code are applicable to actions under the UFTA." Levit v. Spatz (In re Spatz), 222 B.R. 157, 164 (N.D.Ill.1998) (citing Randy, 189 B.R. at 443). Accord Image Worldwide, 139 F.3d at 577 (finding that because the Illinois UFTA is a uniform act which has derived phrases from § 548, courts may look to cases decided under § 548, as well as cases interpreting other states' versions of the UFTA, for assistance).
Pursuant to § 160/5(a) of the UFTA, a trustee may recover a transfer made by a debtor under two circumstances: (1) if the debtor made the transfer with actual intent to hinder, delay, or defraud a creditor; or (2) if the debtor did not receive a reasonably equivalent value in exchange for the transfer and was insolvent at the time of the transfer or became insolvent as a result of the transfer. 740 ILL. COMP. STAT. 160/5(a). The UFTA speaks to two types of fraud "fraud in fact" and "fraud in law." Scholes v. Lehmann, 56 F.3d 750, 756-57 (7th Cir.1995).
"Fraud in fact" or actual fraud pursuant to § 160/5(a)(1) of the UFTA occurs when a debtor transfers property with the intent to hinder, delay, or defraud his creditors. Bay State Milling Co. v. Martin (In re Martin), 145 B.R. 933, 946 (Bankr.N.D.Ill.1992). The trustee must prove that there was a specific intent to hinder, delay, or defraud. Stone v. Ottawa Plant Food, Inc. (In re Hennings Feed & Crop Care, Inc.), 365 B.R. 868, 874 (Bankr. C.D.Ill.2007). This Court has held that the movant has the burden of proving all elements of actual fraud under Illinois law by clear and convincing evidence. Grochocinski v. Knippen (In re Knippen), 355 B.R. 710, 732 (Bankr.N.D.Ill.2006), aff'd, No. 07 C 1697, 2007 WL 1498906 (N.D.Ill. May 18, 2007); Grochocinski v. Zeigler (In re Zeigler), 320 B.R. 362, 372-73 (Bankr. N.D.Ill.2005) (collecting cases). Accord *840 Hennings Feed, 365 B.R. at 874; Martin, 145 B.R. at 946. But see McCook Metals, 319 B.R. at 587 n. 11 (declining to decide whether the higher standard of proof would apply to an actual fraud claim under the UFTA).
In determining whether a transfer is made with actual intent to defraud, the UFTA sets forth several factors also known as the "badges of fraud" from which an inference of fraudulent intent may be drawn. Section 160/5(b) of the UFTA sets forth the following indicia:
(1) the transfer or obligation 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 was made or obligation was incurred, the debtor had been sued or threatened with suit;
(5) the transfer was of substantially all 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 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 transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
740 ILL. COMP. STAT. 160/5(b).
When these "badges of fraud" are present in sufficient, number, they may give rise to an inference or presumption of fraud. Knippen, 355 B.R. at 732-33 (citing Steel Co. v. Morgan Marshall Indus., Inc., 278 Ill.App.3d 241, 214 Ill. Dec. 1029, 662 N.E.2d 595, 602 (1996)). The presence of seven badges of fraud has been held sufficient to raise a presumption of fraudulent intent. See Berland v. Mussa (In re Mussa), 215 B.R. 158, 170 (Bankr.N.D.Ill. 1997), Under the Federal Rules of Evidence, "a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift... the burden ... in the sense of the risk of nonpersuasion, which remains ... upon the party on whom it was originally cast." FED.R.EVID. 301.
Under the UFTA, an "insider" of an individual debtor includes a relative of the debtor or of a general partner of the debtor, or a general partner in a partnership, 740 ILL. COMP. STAT. 160/2(g)(1)(A) & (B). In addition, the UFTA provides that "[a] debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation." 740 ILL. COMP. STAT. 160/3(a). This definition of insolvency mirrors the balance-sheet test for insolvency under the Bankruptcy Code. 11 U.S.C. § 101(32). The UFTA also provides that "[a] debtor who is generally not paying his debts as they become due is presumed to be insolvent." 740 ILL. COMP. STAT. 160/3(b). Courts have broad discretion when considering evidence to support a finding of insolvency. Doctors Hosp. of Hyde Park, 360 B.R. at 853. Insolvency is a question of fact. Id.
*841 Under § 160/5(a)(2) of the UFTA, "fraud in law," on the other hand, docs not require any showing of fraudulent intent. Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1079 (7th Cir.1997); Scholes, 56 F.3d at 757. Rather, fraud is presumed if a debtor transfers property for less than adequate value and is thereby unable to meet his obligations. Daley v. Chang (In re Joy Recovery Tech, Corp.), 286 B.R. 54, 73 (Bankr.N.D.Ill. 2002). Because of its nature, the conveyance is deemed constructively fraudulent. Daley v. Chang (In re Joy Recovery Tech. Corp.), 257 B.R. 253, 268 (Bankr.N.D.Ill. 2001). The trustee has the burden of proving fraud in law by a preponderance of the evidence. Hennings Feed, 365 B.R. at 875; Joy Recovery, 286 B.R. at 73; Martin, 145 B.R. at 946. A different standard of proof applies to this theory because intent to defraud is presumed when the elements of constructive fraud are established. Martin, 145 B.R. at 946. The distinction between "fraud in fact" and "fraud in law" is derived from whether or not there is any consideration for the conveyance at issue. Knippen, 355 B.R. at 733 (citing Second Nat'l Bank of Robinson v. Jones, 309 Ill.App. 358, 33 N.E.2d 732, 736 (1941)).
In order for a trustee to establish that a conveyance is fraudulent in law under § 160/5(a)(2), four elements must be present: (1) the debtor made a voluntary transfer; (2) the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer; (3) at the time of the transfer, the debtor had incurred obligations elsewhere; and (4) after the transfer, the debtor failed to retain sufficient property to pay his indebtedness. Lease Resolution, 128 F.3d at 1079; Hennings Feed, 365 B.R. at 874.
The term "reasonably equivalent value" is not defined in the UFTA nor has it been defined by Illinois case law. Hennings Feed, 365 B.R. at 878. The Illinois Supreme Court, in discussing a prior statute, stated that one of the necessary elements to establish a fraudulent conveyance is that "there must be a transfer made for no or inadequate consideration[.]" Gendron v. Chi. & N.W. Transp. Co., 139 Ill. 2d 422, 151 Ill. Dec. 545, 564 N.E.2d 1207, 1215 (1990). See also Image Worldwide, 139 F.3d at 577 (discussing Illinois's interpretation of "reasonably equivalent value"); Regan v. Ivanelli, 246 Ill.App.3d 798, 187 Ill. Dec. 351, 617 N.E.2d 808, 814 (1993) (citing Gendron). In determining whether reasonably equivalent value was received under the UFTA, courts should consider how that phrase has been construed under the Bankruptcy Code. Image Worldwide, 139 F.3d at 577.
Section 160/6(a) of the UFTA provides another cause of action for fraud in law. Hennings Feed, 365 B.R. at 874. The elements of a cause of action under § 160/6(a) of the UFTA are: (1) a transfer was made by the debtor; (2) the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transferred property; and (3) the debtor either was insolvent at the time of the transfer or became insolvent as a result of the transfer. Id.; Joy Recovery, 286 B.R. at 77; In re Liquidation of MedCare HMO, Inc., 294 Ill.App.3d 42, 228 Ill. Dec. 502, 689 N.E.2d 374, 380 (1997); Falcon v. Thomas, 258 Ill.App.3d 900, 196 Ill. Dec. 244, 629 N.E.2d 789, 795 (1994). The first two elements of § 160/6(a) are the same as those of § 160/5(a)(2). Joy Recovery, 286 B.R. at 77. Intent is not an element under § 160/6(a). Nostalgia Network, Inc. v. Lockwood, 315 F.3d 717, 719 (7th Cir. 2002). One difference between § 160/6 and § 160/5 is that § 160/6 includes the requirement that a creditor who has the right to assert some claim must have a *842 claim that arose before the alleged fraudulent transaction. Joy Recovery, 286 B.R. at 77:
Lastly, a fraudulent transfer claim brought under § 160/6(b) of the UFTA is commonly referred to as an insider preference claim. Arachnid, Inc. v. Valley Recreation Prods., Inc., No. 98 C 50282, 2001 WL 1664052, at *6 (N.D.Ill.Dec.27, 2001). This cause of action must be filed within one year after the transfer was made, 740 ILL. COMP. STAT. 160/10(c). Under § 160/6(b), the elements of the cause of action are: (1) the creditor's claim arose before the transfer; (2) the debtor made the transfer to an insider for an antecedent debt; (3) the debtor was insolvent at the time of the transfer; and (4) the insider had reasonable cause to believe that the debtor was insolvent, 740 ILL. COMP. STAT. 160/6(b).
Once the fraudulent nature of a transaction is established, further reference to the UFTA is necessary. Section 160/8(a)(1) provides as follows:
§ 8. (a) In an action for relief against a transfer or obligation under this Act, a creditor, subject to the limitations in Section 9, may obtain:
(1) avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim[.]
740 ILL. COMP. STAT. 160/8(a)(1).
In addition, § 160/9 states in pertinent part as follows:
(b) Except as otherwise provided in this Section, to the extent a transfer is voidable in an action by a creditor under paragraph (1) of subsection (a) of Section 8, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (c), or the amount necessary to satisfy the creditor's claim, whichever is less. The judgment may be entered against:
(1) the first transferee of the asset or the person for whose benefit the transfer was made; or
(2) any subsequent transferee other than a good-faith transferee who took for value or from any subsequent transferee.
(c) If the judgment under subsection (b) is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.
740 ILL. COMP. STAT. 160/9(b) & (c).
These provisions of the UFTA establish that, once transfers have been deemed fraudulent, and thus voidable, a trustee is entitled to recover the property transferred or obtain a money judgment for the value of the assets transferred, less certain adjustments for the amounts paid by the transferee, Hennings Feed, 365 B.R. at 890. Here, the Trustee seeks money judgments against Schlossberg, Laliberte, and Carlos.
1. Whether the Transfer of the Tunbridge Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(1)
First, the Court will address the Trustee's claim that the transfer of the Debtor's interest in the Tunbridge Property to Schlossberg constituted fraud in fact or actual fraud pursuant to § 160/5(a)(1) of the UFPA. Because § 160/5 parallels § 548(a)(1) of the Code, the findings made by the Court with respect to § 548(a)(1)(A) apply to the Trustee's cause of action under § 16075(a)(1). See Spatz, 222 B.R. at 164; Randy, 189 B.R. at 443. Accordingly, the Court finds that the Trustee has demonstrated that the transfer of the Debtor's interest in the Tunbridge Property to Schlossberg constituted actual fraud *843 under § 160/5(a)(1) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sum of $109,000, which represents the value of the Debtor's interest in the Tunbridge Property.
2. Whether the Transfer of the Tunbridge Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(2)
Next, the Court will address the Trustee's claim that the transfer of the Debtor's interest in the Tunbridge Property to Schlossberg constituted constructive fraud pursuant to § 160/5(a)(2) of the UFTA. Because § 160/5 parallels § 548(a)(1) of the Code, the findings made by the Court with respect to § 548(a)(1)(B) apply to the Trustee's cause of action under § 160/5(a)(2). Id. Accordingly, the Court finds that the Trustee has demonstrated that the transfer of the Debtor's interest in the Tunbridge Property constituted constructive fraud under § 160/5(a)(2) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sum of $109,000, which represents the value of the Debtor's interest in the Tunbridge Property.
3. Whether the Transfer of the Tunbridge Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(a)
Next, the Court finds that the Trustee has demonstrated all of the requisite elements to sustain a cause of action against Schlossberg under § 160/6(a) of the UFTA. First, the Trustee established that creditors' claims arose before the transfer of the Tunbridge Properly. Specifically, the Debtor's Amended Schedule F shows unsecured debt in excess of $848,000, (Trustee Ex. No. 50, Amended Schedule F.) Many of those debts were incurred several years prior to the transfer of the Tunbridge Property. (Id.) Second, the Trustee established that a transfer was made of the Debtor's interest in the Tunbridge Property to Schlossberg. Third, as discussed supra, the Trustee demonstrated that the transfer was made without the Debtor receiving a reasonably equivalent value in exchange for the transfer. Finally, the Court determined previously that the Debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer.
Thus, the Trustee has established all of the elements necessary to sustain a cause of action against Schlossberg under § 160/6(a) of the UFTA. Pursuant to § 160/9(b), the Court enters judgment against Schlossberg in the sum of $109,000 and in favor of the Trustee. The transfer of the Tunbridge Property is avoidable under § 544(b)(1) and § 160/8(a)(1). Under § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit, of the Debtor's estate, $109,000, which represents the value of the Debtor's interest in the Tunbridge Property.
4. Whether the Transfer of the Tunbridge Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(b)
Finally, the Court must determine whether the Trustee has established all of the necessary elements to sustain a cause of action against Schlossberg under § 160/6(b) of the UFTA. This cause of action must be filed within one year after the transfer was made. 740 ILL. COMP. STAT. 160/10(c). The Court finds that the Trustee failed to file this cause of action within *844 one year after the transfer was made. The Tunbridge Property was transferred by the Debtor to Schlossberg in January of 2005, and Schlossberg sold the Tunbridge Property in December of 2005. The Trustee filed the instant adversary proceeding in 2007, which is more than one year after the transfer was made to Schlossberg. Therefore, the Trustee may not sustain a cause of action against Schlossberg under § 160/6(b) of the UFTA.
5. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(1)
Now, the Court will address the Trustee's claim that the transfer of the Debtor's interest in the Union Court Property to Schlossberg constituted fraud in fact or actual fraud pursuant to § 160/5(a)(I) of the UFTA. Initially, the Court notes that the Trustee can proceed under the UFTA with respect to the Debtor's July 2003 transfer of the Union Court Property because the Trustee filed this cause of action in May of 2007, within four years of the transfer of the Property to Schlossberg. See 740 ILL. COMP. STAT. 160/10. Under § 160/5(a)(I), a transfer can be fraudulent if it was made with "actual intent to hinder, delay, or defraud" a creditor of the debtor. 740 ILL. COMP. STAT. 160/5(a)(1).
The Debtor made cash payments totaling $120,000 toward the purchase price of $804,674.50 pursuant to the sales contract for the Union Court Property. By the time construction on the Union Court Property was complete, however, the Debtor had begun to experience financial problems personally and with his business, Platinum. Accordingly, he sought to shield his assets from his creditors. The Debtor entered into an agreement with business associates Schlossberg and Laliberte, whereby Schlossberg and Laliberte would purchase the Union Court Property acting as strawmen for the Debtor's benefit. As an inducement to act as the strawmen for the Debtor, the Debtor agreed to pay a premium on the underlying obligation undertaken by Schlossberg and Laliberte. The premium was to be the difference between a fixed rental amount and the mortgage obligation to be undertaken by Schlossberg and Laliberte, thereby creating a "spread" that would amount to Schlossberg and Laliberte's profit on the transaction.
On the July 23, 2003 closing date of the sale of the Union Court Property, Schlossberg, Laliberte, and the Debtor signed an assignment of real estate contract (Trustee Ex. No. 16) that allowed Schlossberg and Laliberte to purchase the Union Court Property at closing instead of the Debtor. (Id.) Schlossberg and Laliberte did not pay anything for this assignment and received the benefit of the $120,000 mat the Debtor had already paid to the seller of the Union Court Property. The Debtor, Schlossberg, and Laliberte also executed a document titled articles of agreement for deed that purported to sell the Union Court Property from Schlossberg and Laliberte back to the Debtor. (Trustee Ex. No. 19.) This document was executed several days prior to the July 23, 2003 closing of the Union Court Property even though Schlossberg and Laliberte did not own the Property at that time. The Debtor testified that it was the intent of the parties that the Debtor retain his equity interest in the Union Court, Property. At the July 23, 2003 closing, Schlossberg and Laliberte purchased the Union Court Property with the $120,000 of equity invested by the Debtor, and obtained mortgages for the remaining $643,079.60. (Trustee Ex. Nos. 21 & 22.)
*845 Unlike most cases, here there is direct evidence that the transfer of the Debtor's interest in the Union Court Property in July 2003 to Schlossberg and Laliberte was made by the Debtor with actual intent to hinder, delay, or defraud his creditors. In the February 10, 2004 e-mail correspondence to Schlossberg, the Debtor admitted that he entered into an agreement with Schlossberg and Laliberte in order to protect his assets from his creditors. Specifically, the Debtor stated, "[t]his contract for deed is a great way to protect my assests [sic] since I trust you and you hold title I am asset free almost ... i.e. `why sue Jeff, he aint [sic] got nothin!' [sic] ... I like the idea of keeping my house safe." (Trustee Ex. No. 23.)
Even though direct evidence of the Debtor's fraudulent intent exists, the Court turns to the badges of fraud to determine whether the July 2003 transfer of the Union Court Property was intended to harm the Debtor's creditors. The Court finds that the documentary evidence and the testimony of the witnesses at trial demonstrate that most of the badges of fraud are present with respect to the July 2003 transfer of the Union Court Property.
First, the Court, found supra that Schlossberg was an insider of the Debtor based on their friendship as well as their business dealings. The Court also finds that Schlossberg was an insider because he was a partner of the Debtor, Schlossberg and Laliberte entered into a partnership agreement whereby they agreed to purchase the Union Court Property for the Debtor's benefit. (Trustee's Ex. No. 13.) The Debtor was not a party to this partnership agreement between Schlossberg and Laliberte. Nevertheless, the Court finds that Schlossberg and Laliberte were general partners or joint venturers of the Debtor by virtue of the side agreement they had with the Debtor to purchase the Union Court Property and then resell it to the Debtor at a later date under the contract for deed. The Debtor's "equity" in the Union Court Property was preserved via the doctrine of equitable conversion. See generally In re Streets & Beard Farm P'ship, 882 F.2d 233 (7th Cir.1989) (stating that a debtor became the equitable owner of property upon entry into an installment land contract under the doctrine of equitable conversion).
Second, the Debtor retained possession of and control over the Union Court Property and resided there with Christine and their children under his side agreement with Schlossberg and Laliberte. Third, even though the warranty deed for the sale of the Union Court Property to Schlossberg and Laliberte was recorded and therefore disclosed, the side agreements that the Debtor had with Schlossberg and Laliberte were concealed. The assignment of the real estate contract was not disclosed. Fourth, before the transfer was made, the Debtor had been sued and threatened with suit. He was threatened with suit or had been sued by AgriStar and Steiner, and he was involved in litigation with the United States Department of Agriculture with respect to Platinum's PACA violations. Indeed, the Debtor stated that he was "being sued by everybody...." (Trustee Ex. No. 62 at 58:16-58:23.)
Next, there was no evidence adduced to show that the transfer of the Union Court Property constituted a transfer of substantially all of the Debtor's assets or that the transfer occurred shortly before or after a substantial debt was incurred.
Moreover, there was no evidence adduced to show that the Debtor absconded with any proceeds. The Debtor transferred his interest in the Union Court Property, including his $120,000 equity investment, to Schlossberg and Laliberte, *846 but did not receive any value in exchange for that transfer. Rather, the Debtor removed the $120,000 equity interest he had in the Union Court Property and transferred that interest to Schlossberg and Laliberte.
Further, the Court finds that the Debtor was insolvent or became insolvent after the transfer was made. The Debtor testified at trial that he was unable to obtain a loan in order to fund the full purchase price of the Union Court Property. Additionally, as the Court noted supra, the Debtor experienced insolvency as far back as 2003 and endured numerous judgments, liens, foreclosures, and other financial difficulties related to Platinum and other ventures. (Trustee Ex. No. 50, Amended Statement of Financial Affairs.)
Next, the Court finds that based on the evidence adduced at trial, the Debtor did not receive a reasonably equivalent value for the transfer of his interest in the Union Court Property to Schlossberg. The Court will examine the factors utilized to make this determination. As previously discussed, the purchase price for the Union Court Property was $804,674.50 (Trustee Ex. No. 17), and the Debtor made cash payments totaling $120,000 toward the purchase of the Property. (Trustee Ex. Nos. 7, 17, & 62 at 49:6-49:19.) Schlossberg and Laliberte did not. give the Debtor any value for their right to purchase the Union Court Property. They had the benefit of the $120,000 the Debtor had previously paid to the seller, Bartlett One L.L.C. Schlossberg and Laliberte obtained mortgages in the sum of $643,079.60 to close the purchase of the Union Court Property. This amount was lower than the full purchase price because it was reduced by the $120,000 that the Debtor had already paid. Schlossberg and Laliberte thus received the benefit of the $120,000 that the Debtor paid for the Union Court Property without giving the Debtor anything of value in exchange. Even though the Debtor resided in the Union Court Property with his family, he paid rent to Schlossberg and Laliberte. Moreover, the Court finds that the transaction did not take place at arm's length. The Debtor devised a scheme whereby Schlossberg and Laliberte were to act as his contract purchasers to buy the Union Court Property in their names in order to assist the Debtor in "keeping (his) house safe." (Trustee Ex. No. 23.)
The Court further finds that there was evidence proffered to show that Schlossberg lacked good faith. Schlossberg admitted to being a party to the agreements he had with Laliberte and the Debtor. (Trustee Ex. Nos. 16, 19, 26 & 66 at 52:6-54:13.) Based on these factors, the Court concludes that the consideration that the Debtor received from Schlossberg and Laliberte under the terms of their agreement did not have a value that was reasonably equivalent to the value of the Debtor's $120,000 interest in the Union Court Property.
Finally, the Court must determine whether there was a huge disparity in value between the property transferred and the consideration received. The Court finds that there was no actual consideration given for the Debtor's July 2003 transfer of the Union Court Property to Schlossberg and Laliberte. The Debtor paid $120,000 toward the purchase of the Union Court Property, but Schlossberg and Laliberte did not pay the Debtor or otherwise convey to him any consideration for their right to purchase the Union Court Property with the benefit of the $120,000 that the Debtor had already paid to the seller. In fact, the Debtor paid rent to Schlossberg and Laliberte after their acquisition of the Union Court Property. No value was paid or otherwise conveyed *847 to the Debtor by Schlossberg and Laliberte in consideration for their right to purchase the Union Court Property with the benefit of the $120,000 that the Debtor had already paid. As a result, there was a huge disparity in value between the property transferred and the consideration received. Schlossberg and Laliberte benefitted from the Debtor's $120,000 payment toward the purchase of the Union Court Property, and in return, the Debtor was required to pay rent to them in order to reside in the house.
In sum, most of the badges of fraud have been shown here. Hence, based on the badges of fraud, as well as the direct evidence of the Debtor's intent to keep his assets from his creditors, the Court finds that the Trustee has established that the Debtor's transfer of the Union Court Property in July 2003 to Schlossberg and Laliberte was tantamount to actual fraud. Accordingly, the Court finds that the Trustee established by both clear and convincing evidence and by a preponderance of the evidence that the Debtor's transfer of the Union Court Property to Schlossberg constituted actual fraud under § 160/5(a)(1) of the UFTA.
The June 8, 2005 resale of the Union Court Property to Carlos netted proceeds in the amount of approximately $200,000. (Trustee Ex. No. 31.) Those proceeds ultimately were distributed as follows: $18,435.46 to Christine; $53,000 to Laliberte as repayment for his loan obtained to close the deal; $76,207 to Carlos; and $52,357.54 to Schlossberg and Laliberte. The $52,357.54 Schlossberg and Laliberte received should have been paid to the Debtor as a result of his additional equity in the Union Court Property, Schlossberg and Laliberte profited on the resale to Carlos even though they were entitled to receive the "spread," i.e., the difference between the Debtor's rental payments and their mortgage obligation. There was no evidence in the record to show that Schlossberg and Laliberte gave the Debtor equivalent value for the $52,357.54 in proceeds they received from the resale to Carlos.
Because the Court determined that the transfer of the Union Court Property from the Debtor to Schlossberg was a fraudulent conveyance under § 160/5(a)(1), the Trustee may recover the Union Court Property or the value thereof pursuant to § 160/9(b) from Schlossberg. The evidence demonstrated that Schlossberg benefitted from the Debtor's $120,000 investment in the Union Court Property. Hence, the Trustee may recover this sum from Schlossberg for the benefit of the Debtor's estate. Additionally, the evidence showed that Schlossberg and Laliberte received $52,357.54 from the proceeds of the resale of the Union Court Property to Carlos. The Trustee may also recover this amount from Schlossberg for the benefit of the Debtor's estate.
In sum, the Court finds that the Trustee has demonstrated that the transfer of the Debtor's interest in the Union Court Property to Schlossberg constituted actual fraud under § 160/5(a)(1) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 for the first transfer of the Union Court Property and $52,357.54 for the second transfer of the Property, which represent the value of the Debtor's interest in the Union Court Property.
6. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(2)
Next, the Court will address the Trustee's claim that the transfer of the *848 Debtor's interest in the Union Court Property to Schlossberg constituted constructive fraud pursuant to § 160/5(a)(2) of the UFTA. The Court finds that the Trustee has shown all of the elements to establish a constructively fraudulent transfer. First, the Court finds that the Debtor made a voluntary transfer of his interest in the Union Court Property to Schlossberg and Laliberte. Next, at the time of the transfer, the Debtor had incurred obligations elsewhere. As the Court noted supra, the Debtor experienced insolvency as far back as 2003, (Trustee Ex. No. 50, Amended Statement of Financial Affairs.) The Debtor's company, Platinum, owed payroll taxes in the sum of $140,000 to the Internal Revenue Service for the period of 2003-2004. (Trustee Ex. No. 50, Amended Schedule E.) In addition, he owed child support to Christine in the sum of $120,000 for the period 2000-2005. (Id.) The Debtor also Owed "941 estimated taxes" in the amount of $250,000 for the period 2002-2004. (Id.) Hence, the Debtor had incurred obligations elsewhere at the time of the transfer of the Union Court Property to Schlossberg.
Further, the Court found supra that the Debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer. Finally, the Court finds that after the transfer, the Debtor failed to retain sufficient property to pay his indebtedness. The Debtor's February 2004 e-mail correspondence to Schlossberg indicated that he did not have any asset to pay his creditors. (Trustee Ex. No. 23.) In short, the Court finds that the Trustee demonstrated all of the requisite elements to establish a constructively fraudulent transfer.
Accordingly, the Court finds that the Trustee has demonstrated that the transfer of the Debtor's interest in the Union Court Property to Schlossberg constituted constructive fraud under § 160/5(a)(2) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54, which represent the Debtor's interest in the Union Court Property.
7. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(a)
The Court finds that the Trustee has demonstrated all of the requisite elements to sustain a cause of action against Schlossberg under § 160/6(a) of the UFTA. First, the Trustee established that creditors' claims arose before the transfer of the Union Court Property. Specifically, the Debtor's Amended Schedule F shows unsecured debt in excess of $848,000. (Trustee Ex. No. 50, Amended Schedule F.) Many of those debts were incurred several years prior to the transfer of the Union Court Property. (Id.) Second, the Trustee established that a transfer was made of the Debtor's interest in the Union Court Property to Schlossberg. Third, as discussed supra, the Trustee demonstrated that the transfer was made without the Debtor receiving a reasonably equivalent value in exchange for the transfer. Finally, the Court determined previously that the Debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer.
Thus, the Trustee has established all of the elements necessary to sustain a cause of action against Schlossberg under § 160/6(a) of the UFTA. Pursuant to § 160/9(b), the Court enters judgment against Schlossberg in the sums of $120,000 and $52,357.54 and in favor of the Trustee. The transfer of the Union Court *849 Property is avoidable under § 544(b)(1) and $160/8(a)(1). Under § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54, which represent the Debtor's interest in the Union Court Property.
8. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(b)
Finally, the Court must determine whether the Trustee has established all of the necessary elements to sustain a cause of action against Schlossberg under § 160/6(b) of the UFTA. This cause of action must be filed within one year after the transfer was made. 740 ILL. COMP. STAT. 160/10(c). The Court finds that the Trustee failed to file this cause of action within one year after the transfer was made. The Union Court Property was initially transferred to Schlossberg and Laliberte in July of 2003. Thereafter, they transferred it to Carlos in June of 2005. The Trustee filed the instant adversary proceeding in 2007, which is more than one year after the transfer was made. Therefore, the Trustee may not sustain a cause of action against Schlossberg under § 160/6(b) of the UFTA.
C. Count III: 11 U.S.C. §§ 548(a) and 550(a)
Under Count III of the amended complaint, the Trustee alleges that within two years of the filing of his bankruptcy petition, the Debtor transferred the Union Court Property to Laliberte with the actual intent to delay, hinder, and defraud his creditors. The Trustee asserts that the February 10, 2004 e-mail correspondence from the Debtor to Schlossberg indicates that the Debtor entered into the Union Court Property transaction in order to transfer his interest therein with the actual intent to hinder and defraud his creditors. The Debtor allegedly retained possession and control of the Union Court Property while concealing his real interest in that asset. According to the Trustee, the transfer of the Union Court Property constituted a conveyance of substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of his debts exceeded all of his assets. The Trustee seeks a finding that the transfer of the Union Court Property from the Debtor to Laliberte was fraudulent under 11 U.S.C § 548(a)(1)(A), (a)(1)(B)(ii)(I), (a)(1)(B)(ii)(III), and (a)(1)(B)(ii)(IV). In addition, the Trustee seeks to avoid the transfer of that property. Further, he requests the return of this estate asset or, in the alternative, a judgment in his favor for the benefit of the estate equal to the value of the property transferred pursuant to 11 U.S.C. § 550.
For the same reasons articulated with respect to Schlossberg under Count I of the amended complaint, the Court finds that the July 2003 transfer of the Union Court Property to Laliberte was not made within two years prior to the Debtor's bankruptcy filing. The Debtor filed a bankruptcy petition in October of 2005, which is twenty-seven months after the July 2003 transfer of the Union Court Property. Thus, the Trustee may not sustain a cause of action against Laliberte under § 548(a)(1)(A) or (B) because the transfer was not within the two years before the date of the bankruptcy filing. Therefore, the Court grants judgment in favor of Laliberte under Count III of the amended complaint.
D. Count IV: 740 ILL. COMP. STAT. 160/5 and 160/6 and 11 U.S.C. § 544
Pursuant to Count IV of the amended complaint, the Trustee alleges that within *850 four years of the date of the filing of his bankruptcy case, the Debtor transferred a valuable asset, namely, the Union Court Property, to Laliberte with actual intent to delay, hinder, and defraud his creditors to whom he was either indebted or became indebted shortly thereafter. The Trustee avers that in the February 10, 2004 e-mail correspondence to Schlossberg, the Debtor admitted that he transferred his interest in the Union Court Property with the actual intent to hinder and defraud his creditors. Further, the Trustee contends that the transfer to Laliberte conveyed substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of this debts exceeded all of his assets. According to the Trustee, the Debtor retained possession and control of the Union Court Property while he concealed his real interest in this asset. The Trustee contends that the transfer of the Union Court Property to Laliberte was fraudulent under §§ 160/5 and 160/6 of the UFTA and should be avoided under § 544(b) to the extent necessary to satisfy the claims against the Debtor's estate pursuant to § 160/8.
For the same reasons set forth supra with respect to Schlossberg under Count II of the amended complaint, the Court finds that the transfer of the Union Court Property to Laliberte was both actually and constructively fraudulent under §§ 160/5(a)(1) and (2) and 160/6(a) of the UFTA. The Court must elaborate on two points with respect to Laliberte. First, the Court finds that the Debtor and Laliberte had a special relationship. Laliberte testified that he knew the Debtor prior to the Union Court Property transaction because they did business together. Laliberte stated that he sold packing to the Debtor for his company, Platinum. Second, for the same reasons articulated with respect to Schlossberg, the Court finds that Laliberte was an insider of the Debtor by virtue of the agreement between Schlossberg, Laliberte, and the Debtor, whereby Schlossberg and Laliberte purchased the Union Court Property with the intention of selling it back to the Debtor at a later date.
Thus, the Court finds that the transfer of the Union Court Property to Laliberte was both actually and constructively fraudulent under §§ 160/5(a)(1) and (2) and 160/6(a) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b), the Trustee may recover the Debtor's interest in the Union Court Property from Laliberte or the value thereof for the benefit of the Debtor's estate. The Court awards judgment in the sums of $120,000 and $52,357.54 to the Trustee and against Laliberte, the entity for whose benefit the transfer was made.
E. Count V: 11 U.S.C. §§ 548(a) and 550(a)
Under Count V of the amended complaint, the Trustee alleges that within two years of the date of the Debtor's bankruptcy filing, he transferred a valuable asset in the form of large shares of his equity in the Union Court Property out of his possession and into the possession of Carlos with the actual intent to delay, hinder, and defraud his creditors to whom he was either indebted or became indebted shortly thereafter. According to the Trustee, the transfer of the Union Court Property to Carlos conveyed substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of his debts then exceeded all of his assets at a fair valuation. The Trustee alleges that in spite of this transfer to Carlos, the Debtor retained possession and control of the Union Court. Property while concealing his real interest in that asset. The Trustee seeks a finding that *851 the transfer of the Debtor's interest in the Union Court Property to Carlos was fraudulent under § 548(a)(1)(A), (a)(1)(B)(ii)(I), (a)(1)(B)(ii)(III), and (a)(1)(B)(ii)(IV). In addition, the Trustee seeks to avoid the transfer of that Property. Further, he requests the return of this asset or, in the alternative, a judgment in his favor for the benefit of the estate equal to the value of the property transferred pursuant to § 550.
1. Whether the Transfer of the Union Court Property Was Fraudulent Under § 548(a)(1)(A)
First, the Court will address the Trustee's claim that the transfer of the Union Court Property by Schlossberg and Laliberte to Carlos constituted fraud in fact or actual fraud pursuant to § 548(a)(1)(A). There was no direct evidence that the transfer of the Debtor's interest in the Union Court Property by Schlossberg and Laliberte to Carlos was made with actual intent to hinder, delay, or defraud the Debtor's creditors. In February of 2004, over one year prior to the June 2005 transfer of the Union Court Property to Carlos, the Debtor wrote in an e-mail correspondence to Schlossberg that the articles of assignment for deed between the Debtor, Schlossberg, and Laliberte was a "great way" to protect his assets from his creditors. (Trustee Ex. No. 23.) The Trustee argues that this document demonstrates the Debtor's intent to hinder, delay, and defraud his creditors with respect to this June 2005 transfer to Carlos, Unfortunately, for the Trustee, while this e-mail correspondence shows the Debtor's intent to keep his assets from his creditors, it does not speak dispositively to the Debtor's intent at the time of the transfer over one year later. While this document constitutes strong evidence of the Debtor's overall scheme to hinder, delay, and defraud his creditors, the Court must also turn to the badges of fraud to determine whether the transfer was intended to harm the Debtor's creditors.
First, there was no evidence of the Debtor absconding with proceeds of the transfer because there were no proceeds. Rather, with the Debtor's knowledge and consent, Schlossberg and Laliberte transferred the Debtor's equity interest in the Union Court Property to Carlos and the Debtor retained possession and control of that Property. Next, there was no consideration given for the transfer of the Union Court Property. After the Debtor's initial transfer of the Union Court Property to Schlossberg and Laliberte, the Debtor consistently fell behind in his payments to them. The parties eventually agreed that the articles of agreement for deed arrangement was not working. The Debtor found a substitute strawman for the Union Court PropertyCarlos.
The documents at the June 8, 2005 closing on the sale from Schlossberg and Laliberte to Carlos indicated that the net proceeds of the sale equaled approximately $200,000, which included a transfer of $76,207 to Carlos, who did not have any funds of his own to purchase the Union Court Property. All of the money received by Carlos came directly out of the equity owing to the Debtor at the time of the sale of the Union Court Property. (Trustee Ex. No. 62 at 77:9-77:23.) However, the Debtor did not receive anything equivalent in value in exchange for transferring to Carlos his interest in the $76,207. Moreover, Schlossberg, Laliberte, and Christine also received payments out of the equity to which the Debtor was entitled pursuant to the Debtor's arrangement with the three of them. (Trustee Ex. No. 65 at 158:12-159:17.)
*852 Prior to the June 8, 2005 transfer of the Union Court Property from Schlossberg and Laliberte to Carlos, the Debtor assigned his $200,000 interest in the Union Court Property to Christine in consideration for alleged outstanding child support payments. As a result, the Debtor received nothing in value from Christine in exchange for the transfer of his equity interest in the Union Court Property to her. On June 8, 2005, at the Debtor's direction, Christine then signed a release of option contract between herself and Schlossberg and Laliberte to free the title of the Union Court Property for sale.
Thus, the net effect of the Debtor's transactions is such that he masterminded the purchase and resale of the Union Court Property to two sets of strawmen who shielded this asset from the Debtor's creditors. This distribution of his equity through the previously detailed payments to Schlossberg, Laliberte, Carlos, and Christine was without consideration paid by them to him for his equity in the Union Court Property. In the meantime, the Debtor remained in possession of the Union Court Property from the June 2005 closing until he once again stopped making his rent/mortgage payments to Carlos and moved out of the Union Court Property in the fall of 2005. Hence, mere was a huge disparity in value between the property he transferred and the consideration received from them.
Further, Carlos, the transferee of the Union Court Property, was not an officer, agent, or creditor of an officer of a corporate transferor. Indeed, there was no special relationship between Schlossberg, Laliberte, and Carlos. Laliberte testified that he never met Carlos prior to the closing date. Finally, as discussed supra, the Debtor was balance-sheet insolvent when the transfer of the Union Court Property was made to Carlos in June of 2005, or he was rendered insolvent thereby.
In sum, four out of the six badges of fraud have been shown. Thus, the Court finds this is a sufficient number to infer actual fraud by the Debtor. Therefore, the Court finds that the Trustee has established by both clear and convincing evidence and by a preponderance of the evidence that the transfer of the Debtor's interest in the Union Court Property by Schlossberg and Laliberte to Carlos constituted actual fraud under § 548(a)(1)(A).
2. Whether the Transfer of the Union Court Property Was Fraudulent Under § 548(a)(1)(B)
Next, the Court will address whether the transfer of the Union Court Property to Carlos was constructively fraudulent. In short, the Court finds that the Trustee demonstrated all of the requisite elements to establish a constructively fraudulent transfer.
First, the Court finds that Schlossberg and Laliberte made a transfer of the Debtor's continuing equity interest in the Union Court Property to Carlos. Next, the transfer was made on June 8, 2005, approximately four months prior to the Debtor's bankruptcy filing in October of 2005. Moreover, the Court found supra that the Debtor was insolvent when the transfer was made or was rendered insolvent thereby. Furthermore, as the Court already noted, after the transfer of the Debtor's interest in the Union Court Property to Carlos, the Debtor had already incurred debts that would be beyond his ability to pay as they matured. The Debtor's Schedules show that his monthly income at the time of his bankruptcy filing was $5,600 and his monthly expenses totaled $13,102. (Trustee Ex. No. 50, Amended Schedules I & J.) Further, the Debtor's unsecured debts totaled approximately *853 $848,000 and his assets totaled $15,600. (Id. Amended Schedules F & B.) The Debtor's expenses far exceeded his income, and his assets were substantially less than his liabilities. Thus, the Court infers that after the transfer, the Debtor must have known that he would continue to incur debts beyond his ability to pay them as they matured.
Lastly, the Court must determine whether the Debtor received consideration from Carlos that had a value that was reasonably equivalent to the value of the Union Court Property. The Court finds that based on the evidence adduced at trial, the Debtor did not receive a reasonably equivalent value for the transfer of his interest in the Union Court Property to Carlos. The Court will examine the factors utilized to make this determination. See Barber, 129 F.3d at 387.
As previously discussed, the net proceeds of the resale of the Union Court Property were $200,000. Moreover, the Court also found supra that on the resale of the Union Court Property to Carlos, Carlos received $76,207 of the Debtor's additional equity in the Property. The Debtor did not receive any of the proceeds from the resale of the Union Court Property to Carlos. Thus, the Court finds that the Debtor did not receive a reasonably equivalent value for the transfer of his equity interest in the Union Court Property to Carlos.
Additionally, the Court finds that the transaction did not take place at arm's length, Carlos purchased the Union Court Property without using any funds of his own. Indeed, Carlos received a windfall of $76,207 of the Debtor's equity in the Union Court Property. Further, the Court finds that the fact that Carlos purchased the Union Court Property without any funds of his own demonstrates a lack of good faith on his part. After all, Carlos admitted at trial that he thought the deal was too good to be true. Based on these factors, the Court concludes that the consideration that the Debtor received from Carlos did not have a value that was reasonably equivalent to the value of the Debtor's equity interest in the Union Court Property.
In sum, the Court finds that the Trustee has met all of the elements to establish that the transfer of the Debtor's interest in the Union Court Property by Schlossberg and Laliberte to Carlos was constructively fraudulent under § 548(a)(1)(B). Thus, the Trustee may avoid the transfer of the Union Court Property by Schlossberg and Laliberte to Carlos.
3. Recovery Under 11 U.S.C. § 550(a)
The Trustee seeks an order under § 550(a) allowing him to recover the Union Court Property from Carlos or, in the alternative, entering a judgment in favor of the Trustee for the benefit of the Debtor's estate equal to the value of the Debtor's interest in the transferred asset. The Trustee alleges in the amended complaint that Carlos was an initial, immediate, or mediate transferee of the Union Court Property.
The Court finds that Carlos was not the initial transferee of the Union Court Property. Rather, Schlossberg and Laliberte were the initial transferees of the Property when it was first sold on July 23, 2003 because they had dominion over and control of the Union Court Property. See Bonded Fin., 838 F.2d at 893. The subsequent June 8, 2005 transfer of the Debtor's interest in the Union Court Property by Schlossberg and Laliberte to Carlos makes Carlos an immediate or mediate transferee of the initial transferees. Under § 550(a)(2), an immediate or mediate transferee is "one who takes in a later transfer down the chain of title or possession." *854 First Nat'l Bank of Barnesville v. Rafoth (In re Baker & Getty Fin. Servs., Inc.), 974 F.2d 712, 722 (6th Cir.1992). The Court finds that Carlos was the immediate or mediate transferee of Schlossberg and Laliberte, the initial transferees. Title to the Union Court Property was transferred to Carlos in June of 2005 after the Debtor transferred his interest in that asset to Schlossberg and Laliberte in July of 2003.
Accordingly, the Court grants judgment in favor of the Trustee and against Carlos under Count V of the amended complaint. The Court finds that the transfer of the Debtor's interest in the Union Court Property from Schlossberg and Laliberte to Carlos was a fraudulent conveyance under § 548(a)(1)(A) and (B). As such, the transfer is avoidable under § 544(b)(1). Pursuant to § 550(a)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the Union Court Property.
F. Count VI: 740 ILL. COMP. STAT. 160/5 and 160/6 and 11 U.S.C. § 544
Lastly, under Count VI of the amended complaint, the Trustee alleges that within four years of the date of the filing of his bankruptcy case, the Debtor transferred a valuable asset in the form of large shares of his equity in the Union Court Property to Carlos with actual intent to delay, hinder, and defraud his creditors to whom he was either indebted or became indebted shortly thereafter. The Trustee avers that the transfer to Carlos conveyed substantially all of the Debtor's valuable assets, and as a result, the Debtor became insolvent because the sum of his debts exceeded all of his assets. According to the Trustee, the Debtor retained possession and control of the Union Court Property while he concealed his real interest in this asset. The Trustee contends that the transfer of the Union Court Property to Carlos was fraudulent under §§ 160/5 and 160/6 of the UFTA and should be avoided under § 544 to the extent necessary to satisfy the claims against the Debtor's estate pursuant to § 160/8.
1. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(1)
First, the Court will address the Trustee's claim that the transfer of the Debtor's interest in the Union Court Property to Carlos constituted fraud in fact or actual fraud pursuant to § 160/5(a)(1) of the UFTA. There was no direct evidence of the Debtor's intent at the time of the transfer of the Union Court Property to Carlos on June 8, 2005. However, in a February 2004 e-mail correspondence to Schlossberg, the Debtor acknowledged his intent to protect his assets from his creditors. (Trustee Ex. No. 23.) The Court finds that this transaction constitutes yet another attempt by the Debtor to protect and hide his assets from his creditors. The transfer was effectuated by Schlossberg and Laliberte, strawmen, to another strawman, Carlos. Unfortunately for the Trustee, however, this e-mail correspondence in and of itself does not demonstrate actual fraud at the time of the June 2005 transfer of the Union Court Property to Carlos.
Because there is rarely direct evidence of the intent underlying a transfer of property, courts look to circumstantial evidence in determining whether a transfer was intended to hinder, delay, or defraud creditors. At this point, it is helpful to analyze the evidence in terms of the eleven *855 "badges of fraud," many of which are present in this matter,
First, the Debtor did retain possession of the Union Court Property after the transfer. He resided in the Property with Christine and their children until the fall af 2005 when he could no longer make the mortgage/rent payment to Carlos. Next, the transfer was recorded, but the side agreements whereby Christine received proceeds from the sale and turned them over to Laliberte and Carlos were concealed. In this deal, the initial straw buyers, Schlossberg and Laliberte, sold the Union Court Property to another straw buyer, Carlos, in order to shield the Debtor's equity therein from his creditors. Further, evidence was adduced to show that at the time of the transfer, the Debtor and his company, Platinum, were involved in litigation with AgriStar. Several judgments had been entered against the Debtor as evidenced by his Schedules. One of those judgments was the result of PACA litigation, for which the Debtor was potentially personally liable. Moreover, the transfer occurred shortly before or shortly after substantial debt was incurred by the Debtor. In addition, Schlossberg and Laliberte's transfer of the Debtor's equity interest in the Union Court Property to Carlos amounted to substantially all of the Debtor's assets. The Debtor's Schedules show that he did not own any real property approximately four months after the transfer, and he listed personal property valued at $15,600. (Trustee Ex. No. 50, Amended Schedules A & B.)
The transfer of the Union Court Property on June 8, 2005 was made by Schlossberg and Laliberte, business associates and partners of the Debtor, to Carlos. The Debtor testified that he met Carlos prior to this transaction when he was working for MidAmerica Bank as a loan officer. The Debtor went to Carlos' real estate office in order to solicit business from him. It is undisputed that Carlos was neither a relative nor a partner of the Debtor. Thus, the Court finds that Carlos was not an insider of the Debtor, and the transfer by Schlossberg and Laliberte to Carlos was not to an insider.
Further, the Court previously determined that the Debtor was insolvent at the time or became insolvent shortly after the transfer was made. The Debtor removed and concealed assets and even admitted to forging Christine's name to documents. Lastly, the Court also found that the value of the consideration received by the Debtor was not reasonably equivalent to the value of the Debtor's interest in the Union Court Property.
In short, it appears that most of the badges of fraud are present here. Therefore, the Court finds that the Trustee has demonstrated that the transfer of the Debtor's equity interest in the Union Court Properly by Schlossberg and Laliberte to Carlos was made with actual intent to hinder, delay, or defraud the Debtor's creditors. Because § 548 of the Code and § 160/5 of the UFTA are analogous, the findings with respect to § 548(a)(1)(A) apply equally to the requirements of § 160/5(a)(1). See Spatz, 222 B.R. at 164; Randy, 189 B.R. at 443. Hence, for the same reasons articulated pursuant to § 548(a)(1)(A), the Court finds that the Trustee established that the transfer of the Debtor's equity interest in the Union Court Property by Schlossberg and Laliberte to Carlos constituted actual fraud under § 160/5(a)(1) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Under § 550(a)(2) and § 160/9(b)(2) of the UFTA, the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the Union Court Property.
*856 2. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/5(a)(2)
Next, the Court must determine whether the transfer of the Debtor's interest in the Union Court Property to Carlos was constructively fraudulent under § 16075(a)(2) of the UFTA. Under this alternate theory, the Trustee must show that Schlossberg and Laliberte made a transfer of the Debtor's interest in the Union Court Property to Carlos without the Debtor receiving a reasonably equivalent value in exchange for the transfer, and that the transfer rendered the Debtor insolvent.
The Court finds that the Trustee has met all of the elements to establish a cause of action against Carlos under § 160/5(a)(2). Because § 548 of the Code and § 160/5 of the UFTA are analogous, the findings made with respect to § 548(a)(1)(B) apply equally to the requirements of § 160/5(a)(2). Id. Thus, for the same reasons articulated supra with respect to § 548(a)(1)(B), the Court finds that the Trustee has demonstrated that the transfer of the Debtor's interest in the Union Court Property by Schlossberg and Laliberte to Carlos was constructively fraudulent under § 160/5(a)(2) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Under § 550(a)(2) and § 160/9(b)(2) of the UFTA, the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the Union Court Property.
3. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(a)
Next, the Court finds that the Trustee has demonstrated all of the requisite elements to sustain a cause of action against Carlos under § 160/6(a). First, the Trustee established that creditors' claims arose before the transfer by Schlossberg and Laliberte of the Debtor's interest in the Union Court Property to Carlos. Specifically, the Debtor's Amended Schedule F lists unsecured debt in excess of $848,000. (Trustee Ex. No. 50, Amended Schedule F.) Many of those debts were incurred by the Debtor several years prior to the transfer of the Union Court Properly in June of 2005. (Id.) Second, the Trustee established that a transfer was made by Schlossberg and Laliberte, strawmen of the Debtor, of the Debtor's interest in the Union Court Property. Third, as discussed supra, the Trustee demonstrated that Schlossberg and Laliberte made the transfer without the Debtor receiving a reasonably equivalent value in exchange for the transfer. Finally, the Court determined previously that the Debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer.
Therefore, the Trustee has established all of the element necessary to sustain a cause of action against Carlos under § 16076(a) of the UFTA. The Court enters judgment against Carlos in the sum of $76,207 and in favor of the Trustee. The transfer of the Union Court Property by Schlossberg and Laliberte to Carlos is avoidable under § 544(b)(1) and § 160/8(a)(1). Under § 550(a)(2) and § 16079(b)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the resale of the Union Court Property.
4. Whether the Transfer of the Union Court Property Was Fraudulent Under 740 ILL. COMP. STAT. 160/6(b)
Finally, the Court must determine whether the Trustee has established all of *857 the necessary elements to sustain a cause of action against Carlos under § 16076(b) of the UFTA. This cause of action must be filed within one year after the transfer was made. 740 ILL. COMP. STAT. 160/10(C). The Court finds that the Trustee failed to file this adversary proceeding within one year after the transfer of the Union Court Property was made to Carlos. The Union Court Property was transferred to Carlos by Schlossberg and Laliberte in June of 2005. The Trustee filed the instant adversary proceeding in 2007, which is more than one year after the transfer was made. Therefore, the Trustee may not sustain a cause of action against Carlos under § 16076(b) of the UFTA.
IV. CONCLUSION
For the foregoing reasons, the Court grants judgment in favor of the Trustee and against Schlossberg under Count I of the amended complaint. The Court finds the transfer of the Debtor's interest in the Tunbridge Properly to Schlossberg was a fraudulent conveyance under § 548(a)(1)(A) and (B). As such, the transfer is avoidable under § 544(b)(1). Under § 550(a)(1), the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sum of $109,000 for the fraudulent transfer of the Tunbridge Property, which represents the value of the Debtor's interest in that Property received by Schlossberg.
In addition, the Court grants judgment in favor of the Trustee and against Schlossberg pursuant to Count 11 of the amended complaint. The Court finds that the transfers of the Debtor's interests in the Union Court Property and the Tunbridge Property to Schlossberg were fraudulent conveyances under §§ 160/5(a)(1) and (2) and 160/6(a) of the UFTA. As such, the transfers are avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 160/9(b) of the UFTA, the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54, which represent the value of the Debtor's interest in the Union Court Property, and $109,000, which represents the value of the Debtor's interest in the Tunbridge Property received by Schlossberg. Under § 550(d), the Trustee is limited to only a single satisfaction from Schlossberg pursuant to Counts I and II of the amended complaint.
With respect to Count III of the amended complaint, the Court grants judgment in favor of Laliberte and against the Trustee. The Court finds that the transfer of the Debtor's interest in the Union Court Property to Laliberte was outside the two-year period under § 548(a)(1)(A) and (B).
Under Count IV of the amended complaint, the Court grants judgment in favor of the Trustee and against Laliberte. The Court finds that the transfer of the Debtor's interest in the Union Court Property was a fraudulent conveyance under §§ 160/5(a)(1) and (2) and 160/6(a) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to § 550(a)(1) and § 16079(b) of the UFTA, the Trustee may recover from Laliberte, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54, which represent the value of the Debtor's interest in the Union Court Property received by Laliberte.
With respect to Count V of the amended complaint, the Court enters judgment in favor of the Trustee and against Carlos. The Court finds that the transfer of the Debtor's interest in the Union Court Property to Carlos was a fraudulent conveyance under § 548(a)(1)(A) and (B). As such, the transfer is avoidable under *858 § 544(h)(1). Pursuant to § 550(a)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the Union Court Property.
Finally, the Court grants judgment in favor of the Trustee and against Carlos pursuant to Count VI of the amended complaint. The Court finds that the transfer of the Union Court Property to Carlos was a fraudulent conveyance under §§ 160/5(a)(1) and (2) and 160/6(a) of the UFTA. As such, the transfer is avoidable under § 544(b)(1) and § 160/8(a)(1). Pursuant to $550(a)(2) and § 160/9(b)(2) of the UFTA, the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the Union Court Property. Under $550(d), the Trustee is entitled to only a single satisfaction from Carlos pursuant to Counts V and VI of the amended complaint.
This Opinion constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. A separate order shall be entered pursuant to Federal Rule of Bankruptcy Procedure 9021.
NOTES
[1] As discussed in detail infra, the Court entered an amended default judgment against Christine and in favor of the Trustee. Thus, Count VII of the amended complaint, which seeks relief against Christine, has been disposed of and will not be further addressed in this Opinion.
[2] The Trustee does not seek recovery of the amount paid to the mortgagee.
[3] The Court orally granted the Trustee's motion at the April 14, 2008 trial and the order evidencing that ruling was submitted and signed one day later on April 15, 2008.
[4] The FBN Food Servs. case references § 548(a)(2). Section 548(a)(1)(B)(i)-(ii) was formerly designated as § 548(a)(2)(A)-(B) before amendment by the Religious Liberty and Charitable Donation Protection Act of 1998, Pub.L. No. 105-183, effective for cases pending or commenced on or after June 19, 1998.
[5] The Trustee docs not specify in his amended complaint whether he is seeking relief under subsection (a) or (b) of § 160/6. Thus, the Court will address both subsections.
[6] An important difference between § 548 and the UFTA is that § 548 authorizes avoidance of transfers made within two years before the bankruptcy filing. 11 U.S.C. § 548(a). Certain causes of action for fraudulent conveyances can be brought under the UFTA, however, within four years after the transfer was made. 740 ILL. COMP. STAT. 160710(a) & (b). Three of the four transfers at issue were made within the two-year period under the Bankruptcy Code. Hence, the Trustee may proceed under both the Code and the UFTA. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544785/ | 388 B.R. 603 (2008)
In re Marvin A. SMITH, Debtor.
No. 04-3323LBF.
United States Bankruptcy Court, E.D. Pennsylvania.
February 1, 2008.
David A. Scholl, Regional Bankruptcy Center of SE PA, Law Office of David A. Scholl, Newtown Square, PA, for Debtor.
MEMORANDUM
BRUCE FOX, Bankruptcy Judge.
Marvin Smith, the chapter 13 debtor, has filed two motions that are interrelated. On November 12, 2007, he filed a motion to modify the terms of his confirmed chapter 13 plan. On the same day, he filed a motion to "reinstate the automatic stay." Both motions are opposed by U.S. Bank, N.A., trustee as successor to Wachovia Bank, N.A., former trustee. And, at the *604 conclusion of the consolidated evidentiary hearing on these motions, the standing chapter 13 trustee, William C. Miller, Esquire, also opposed both motions.
The following facts were either proven at the hearing or are the proper subject of judicial notice.
I.
On October 1, 2004, Mr. Smith filed a voluntary petition in bankruptcy under chapter 13.[1] Wachovia filed a secured proof of claim dated January 3, 2005, in the amount of $10,264.80. This claim contended that Wachovia served as trustee for the assignee from the City of Philadelphia of claims for unpaid real estate taxes on the realty located at 5555 Ardleigh Street, Philadelphia, Pennsylvania. The Ardleigh Street property is owned by Mr. Smith but is not his residence. The proof of claim further asserted that the tax delinquency on this property covered the years 1990-96,[2] and with principal, interest, counsel fees and penalties, totaled $8,241.49. The claim then included post-bankruptcy interest at 9% over the anticipated 60 month life of the debtor's chapter 13 plan.
The debtor filed a 60 month chapter 13 plan of reorganization, which was amended many times. Wachovia objected to confirmation of his amended plans, alleging that the bankruptcy filing had stayed a tax lien sheriff sale scheduled for November 8, 2004, that Wachovia held a valid secured claim, and that the debtor's proposed amended plan did not provide for Wachovia's lien claim. Indeed, the debtor's proposed fourth amended plan stated in paragraph 5: "The Debtor will not treat any of the secured claims of the City of Philadelphia or Wachovia Bank in his plan."
This proposed plan also provided for monthly payments of only $25 postconfirmation. See Fourth Amended Plan, ¶ 12. These low monthly payments were consistent with the debtor's amended Schedules I and J, which averred that his income exceeded his monthly expenses by only $28.67.
After a hearing on March 21, 2006, I overruled Wachovia's objection to confirmation. By order dated March 23, 2006, I noted that "the debtor agreed that his proposed plan did not provide for Wachovia's allowed secured claim[.]" However, by virtue of 11 U.S.C. § 1325(a), a chapter 13 debtor may elect not to provide for allowed secured claims. See Matter of Foster, 670 F.2d 478, 489 (5th Cir.1982). The order confirming the debtor's proposed plan included the following quotation from 8 Collier on Bankruptcy, ¶ 1325.06[1][b] (15th ed. rev.2005) on this point:
A chapter 13 plan may, but need not, modify the rights of most holders of secured claims. Because a plan need not modify allowed secured claims, it is discretionary with the debtor whether to make provision in the chapter 13 plan for allowed secured claims. In the event the plan makes no provision for one or more allowed secured claims, the plan is to be confirmed by the court regardless of its acceptance or rejection by holders of allowed secured claims not provided for by the plan and without any other showing being required under section 1325(a)(5). The holders of allowed secured claims not provided for by the plan may seek appropriate relief from the automatic stay in furtherance of any *605 contractual or other remedies available against the chapter 13 debtor or their collateral. Id., at 1325-3 to 1325-31 (footnotes omitted)[.]
The March 2006 confirmation order also stated that:
[T]he debtor's proposed fourth amended plan is confirmed, subject to the following conditions:
1. The provisions of paragraph 7 and 9 of the plan are not binding upon any creditor whose claim is not provided for by the plan; and
2. Paragraph 8 of the plan is approved only to the extent its terms are consistent with the provisions of sections 1327(a) (the debtor is bound of the terms of his confirmed plan) and 1329 (permitting modifications of confirmed plans only in limited circumstances).
After some delay, U.S. Bank, N.A., as successor trustee to Wachovia, sought relief from the bankruptcy stay to execute upon its secured claim for delinquent taxes concerning the debtor's interest in the Ardleigh Street realty. The debtor opposed this motion, alleging that he had recovered possession of the Ardleigh Street property from his daughter, that there was equity in this realty, and that he was willing to negotiate with U.S. Bank concerning repayment of his delinquent taxes.
U.S. Bank prosecuted its motion and, after an evidentiary hearing, the automatic stay was terminated by an order dated November 7, 2007. This order explained that the debtor had made a conscious choice to not provide for Wachovia's secured tax claim in his confirmed plan and, thus, the secured creditor was entitled to have the stay terminated so as to execute upon its collateral under state law. See In re James, 255 B.R. 837 (Bankr.M.D.Tenn. 1999); see generally, In re Vincente, 260 B.R. 354, 357-58 (Bankr.E.D.Pa.2001); In re Waldman, 75 B.R. 1005, 1008 (Bankr. E.D.Pa.1987) ("Therefore, what we are holding, in essence, is that, when a debtor opts to deal with a creditor `outside the Plan' and, thus, as if the bankruptcy never existed as to that creditor, the debtor must forebear use of the Code to affect the rights of the secured creditor in any other way.").
The debtor then filed the two motions presently before me. Attached to the motion to modify his plan postconfirmation, and served (according to a letter attached to the motion) only upon all secured creditors, priority creditors, the chapter 13 trustee and the United States trustee, was a copy of a proposed fifth amended chapter 13 plan. This proposed amended plan contained the following provisions relevant to this contested matter:
2. The Debtor shall submit to the supervision and control of the Trustee payments in the total amount of $1075 through October, 2007, and $200 monthly for the 23 months, beginning in November, 2007, and a final lump sum payment of not less than $4324..04[sic], or whatever sum is necessary to pay off the amount owed to Wachovia Bank, as referenced in paragraph 5 of the plan below.
* * *
5. The Debtor will pay the secured claim of $8924.04 to Wachovia Bank in his plan. He will not treat the secured claims of the City of Philadelphia in the plan. Those parties will retain their liens and the Debtor will attempt to make or continue to maintain agreements with those parties for payments of other amounts due outside of the plan. Any liens against Ardleigh by these creditors will be satisfied from the proceeds of the sale of Ardleigh.
*606 At the evidentiary hearing held on these motions, however, the debtor sought to alter the terms of his proposed modified plan. Paragraph 2 was changed to read: "The Debtor shall submit to the supervision and control of the Trustee payments in the total amount of $1075 through October, 2007, and $450 monthly for the 22 months, beginning in January, 2008." Ex. D-1.[3] In support of this proposal, Mr. Smith testified that he received a modest annual cost of living raise from his employer in mid-2006 and one in mid-2007. Although the testimony was not clear, it is likely that neither pay raise exceeded $100-$150 per month in net income. He also testified that he evicted his daughter from the Ardleigh Street property and intended to renovate it and rent it as an investment property. As his amended bankruptcy Schedules I and J reflected available income after expenses of only $28.67, the debtor offered no explanation, beyond that of his cost-of-living raises, to explain his ability to now increase his plan payments to the trustee from $25 per month, stated in his presently confirmed plan, to $450 per month, orally proposed at the modification hearing.
II.
The debtor's confirmed fourth amended plan provided that the Ardleigh Street property would revest upon confirmation and no longer be property of the estate. Furthermore, this confirmed plan did not provide for the secured tax lien claim now held by U.S. Bank (as trustee). Thus, the debtor has conceded in open court that, absent court approval for modification of his confirmed plan to provide for this secured claim, the bankruptcy stay was properly terminated. Accordingly, I shall first consider the debtor's motion to modify his plan post-confirmation. If that motion is denied, his additional motion to "reinstate the automatic stay" should also be denied.[4]
As to the debtor's motion to modify his confirmed plan postconfirmation, U.S. Bank and the chapter 13 trustee at the hearing raised a number of procedural and substantive objections to the debtor's proposed post-confirmation modification. Their procedural issues stem from Fed, R. Bankr.P. 3015(g), which provides:
(g) Modification of plan after confirmation
A request to modify a plan pursuant to § 1229 or § 1329 of the Code shall identify the proponent and shall be filed together with the proposed modification. The clerk, or some other person as the court may direct, shall give the debtor, the trustee, and all creditors not less than 20 days notice by mail of the time fixed for filing objections and, if an objection is filed, the hearing to consider the proposed modification, unless the court orders otherwise with respect to creditors who are not affected by the *607 proposed modification. A copy of the notice shall be transmitted to the United States trustee. A copy of the proposed modification, or a summary thereof, shall be included with the notice. If required by the court, the proponent shall furnish a sufficient number of copies of the proposed modification, or a summary thereof, to enable the clerk to include a copy with each notice. Any objection to the proposed modification shall be filed and served on the debtor, the trustee, and any other entity designated by the court, and shall be transmitted to the United States trustee. An objection to a proposed modification is governed by rule 9014.
Here, the debtor did not attach to his motion the actual proposed modified plan for which he now seeks court approval. Nor did he serve his motion and proposed plan upon unsecured creditors.[5] Therefore, the notice provisions of Rule 3015(g) have not been met. See In re Pranger, 2006 WL 3755327 (Bankr.N.D.Ind.2006) (discussing the need to notice all creditors with a modification motion under section 1329); In re Breeden, 304 B.R. 318 (Bankr. N.D.Ohio 2003) (modification denied due to lack of compliance with Rule 3015(g)); see generally In re Sunahara, 326 B.R. 768, 771 n. 3 (9th Cir. BAP 2005) (concluding that proper notice of modification had been given).
They also complain that the debtor's proposed modification is impermissible under 11 U.S.C. § 1329. That statutory provision states:[6]
Modification of plan after confirmation
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments;
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan.
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title apply to any modification under subsection (a) of this section.
(2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved,
(c) A plan modified under this section may not provide for payments over a period that expires after three years after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time.
Courts are divided, in enforcing the binding nature of a confirmed plan under section 1327(a), whether there need be any unanticipated material change of circumstances to justify modification of a confirmed chapter 13 plan. Compare, e.g., In *608 re Murphy, 474 F.3d 143, 149 (4th Cir. 2007) (substantial and unanticipated postconfirmation change of circumstances is necessary for section 1329 modification); In re Anderson, 21 F.3d 355, 358 (9th Cir.1994) (same); with, e.g., Barbosa v. Soloman, 235 F.3d 31, 41 (1st Cir.2000) (court "refrain[s] from adopting the substantial and unanticipated test for seeking a modification pursuant to § 1329"); Matter of Witkowski, 16 F.3d 739, 744 (7th Cir.1994) ("The Code, in this instance § 1329, does not require any threshold requirement for a modification[.]").[7]
*609 If Congress intended to limit post-confirmation plan modifications to those instances in which there have been substantial, unanticipated changes in circumstances, the objectors here argue that the debtor has not met this requirement. The only changes mentioned by the debtor involve his receipt of annual cost of living increases and his recovery of possession of his realty, which may neither be unanticipated nor significant. See generally In re Flennory, 280 B.R. 896, 898 (Bankr.S.D.Ala.2001) (debtor's receipt of post-confirmation tax refund should have been anticipated; nor was it a substantial change in circumstances). Moreover, it is not apparent from the evidence that a plan calling for the debtor to increase his monthly payments from $25 to $450 would be feasible under section 1325(a)(6), as incorporated by section 1329(b). See In re Felder, 2006 WL 897227 (Bankr.M.D.La. 2006). purposes of resolving this contested matter, I need not determine the correct threshold standard, if any.
A more fundamental problem with the debtor's modification request comes from the language of section 1329(a). Even those courts holding that there is no threshold for modification (and relied upon by the debtor) conclude that only those types of plan modifications identified by section 1329(a)(1)-(3) are permissible:
[B]y the express terms of the statute, modifications are only allowed in three limited circumstances to: "(1) increase or reduce the amount of the payments on claims of a particular class provided for by the plan; (2) extend or reduce the time for such payments; (3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan." § 1329(a).
Matter of Witkowski 16 F.3d at 745.[8]
Here, the debtor's modification essentially proposes to create a new secured creditor class, containing the allowed secured claim of U.S. Bank on the Ardleigh Street realty, and to provide for that creditor class over the remaining life of his confirmed plan as modified. The debtor's confirmed plan provides for payments to the mortgagee on realty located at 2700 West Cheltenham Avenue, Philadelphia, Pennsylvania, and so classifies that secured claim. U.S. Bank, however, holds a secured claim upon a different property, and so must be classified separately. See, e.g., In re Commercial Western Finance Corp., 761 F.2d 1329, 1338 (9th Cir.1985) ("creditors with claims against different properties generally are entitled to separate classification"); Matter of Bugg, 172 B.R. 781, 783-84 (E.D.Pa.1994) (same).
Section 1329(a) does not permit a post-confirmation modification to create a new secured creditor class and provide for it. See In re Taylor, 99 B.R. 902, 903-04 (Bankr.C.D.Ill.1989) ("[W]hat the Debtors are attempting to do is to reclassify the claims of BENEFICIAL and CREDITHRIFT *610 as unsecured, cosigned debts to be paid 100%, along with the secured creditors. The Debtors' proposed modification is not within the literal wording of the Code."); 8 Collier on Bankruptcy, ¶ 1329.04[1], at 1329-8 to 9 (15th ed. rev. 2007) ("Section 1329 does not authorize the debtor to designate classes of claims different from the classifications defined by the confirmed plan."); see also In re Plummer, 378 B.R. 569, 575 (Bankr. C.D.Ill.2007) (post-confirmation modification cannot add creditors); In re Moore, 247 B.R. 677, 690 (Bankr.W.D.Mich.2000) (same); cf. In re Rodriguez, 225 B.R. 628, 632 (Bankr.S.D.Tex.1998) (permitting modification to add creditors to a class previously provided for by the confirmed plan).
Therefore, the debtor's previous express and intentional election not to provide for the allowed secured claim of Wachovia (now U.S. Bank) in his confirmed chapter 13 plan cannot be retracted post-confirmation over the objection of the creditor and the chapter 13 trustee, and after the secured creditor has obtained relief from the bankruptcy stay. He is bound by his decision not to provide for the secured tax lien claim of U.S. Bank by virtue of 11 U.S.C. § 1327(a).
Accordingly, for these various reasons, his motion to modify under section 1329 shall be denied, as will his motion to "reimpose the bankruptcy stay." An appropriate order will be entered.
ORDER
AND NOW, this 1 st day of February 2008, for the reasons stated in the accompanying memorandum, it is hereby ordered that the debtor's motion to modify his confirmed chapter 13 plan post-confirmation, pursuant to 11 U.S.C. § 1329, is denied.
It is further ordered that the debtor's motion to "reimpose the automatic stay" is also denied.
NOTES
[1] According to the debtor's bankruptcy petition, he had filed four prior chapter 13 cases.
[2] The City of Philadelphia has filed its own proof of claim for unpaid real estate taxes on the Ardleigh Street property beginning with 1997. See Proof of Claim Docket # 6.
[3] Of course, this modification would not provide for any payments to the trustee during the months of November and December 2007. After the hearing on these contested matters, the debtor filed yet another proposed plan, styling it a "revised fifth amended chapter 13 plan" which stated that: The Debtor shall submit to the supervision and control of the Trustee payments in the total amount of $1075 through December, 2007, and $450 monthly for the 22 months, beginning in January 2008.
[4] That is, if the debtor's motion to modify his confirmed plan is not granted, there is no basis under either Fed. R. Bankr.P. 9023 or 9024, as I believe the debtor concedes, to revisit the November 7th order terminating the stay. Moreover, without a confirmed plan that provided for the secured claim of U.S. Bank, there would be no basis to afford this debtor injunctive relief against that creditor under the standard set out by In re Wedgewood Realty Group, Ltd., 878 F.2d 693, 701 (3d Cir. 1989).
[5] The claims docket reflects an unsecured claim filed by International Check Svc, c/o NCO Financial System, Inc. See Claim # 4.
[6] This bankruptcy case commenced in 2004. Thus, the pre-BAPCPA provisions of section 1329 is germane. See In re White, 370 B.R. 713, 718 n. 15 (Bankr.E.D.Mich.2007); In re Turek, 346 B.R. 350, 355 n. 6 (Bankr.M.D.Pa. 2006).
[7] The application of a threshold for modification that requires a substantial and unanticipated change in circumstances, albeit nontextual, purports to be the majority approach. See In re Parada, 2008.WL 126626, *7 (Bankr. S.D.Fla.2008); see also In re Perry, Bankr.No. 06-14777, 2008 WL 185617, *4-5 (Bankr. E.D.Pa. Jan. 18, 2008) (Sigmund, CJ). Not addressed by any reported decision, however, is that if some threshold standard was intended by Congress, it may have expected that the former Bankruptcy Act standard be applied.
Section 1329, as codified in 1978, is derived from former Bankruptcy Rule 13-214. And this procedural rule replaced former section 646(5) of the Bankruptcy Act of 1898. See Former 11 U.S.C. § 1046(5) (repealed 1978); 10 Collier on Bankruptcy, ¶ 28.06 (14th ed.1977). Both the former statute and procedural rule permitted post-confirmation modifications of chapter 13 plans when the "circumstances of the debtor so warrant or require." There is no reference in the legislative history surrounding the enactment of section 1329 in 1978, in either the House or Senate reports, see H.R.Rep. No. 95-595, at 431, 95th Cong., 1st Sess. (1977); S. Rep. No, 95-989, at 143, 95th Cong., 2d Sess. (1978), that reflects any congressional intent to change that pre-Code standard, although the language was not retained. The Report of the Commission on the Bankruptcy Laws, H.R. Dec. No. 93-137, 93d Cong., 1 Sess. (1973), which report "was circulated with a draft of a statutory rewrite that later became the new Bankruptcy Code," In re Barrett, 487 F.3d 353, 358 n. 4 (6th Cir.2007), and introduced in the 94th Congress as H.R. 31, contained a proposed § 6-205(a) that expressly retained the pre-Code standard, as did a competing proposal from the National Conference of Bankruptcy Judges, introduced in the 94th Congress as H.R. 32.
As the Supreme Court has instructed:
When Congress amends the bankruptcy laws, it does not write "on a clean slate." See Emil v. Hanley, 318 U.S. 515, 521, 63 S. Ct. 687, 690-691, 87 L. Ed. 954 (1943). Furthermore, this Court has been reluctant to accept arguments that would interpret the Code, however vague the particular language under consideration might be, to effect a major change in pre-Code practice that is not the subject of at least some discussion in the legislative history.
Dewsnup v. Timm, 502 U.S. 410, 419, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992). Indeed, the "circumstances warrant" standard was expressly made applicable to modification of chapter 11 plans postconfirmation under section 1127(b).
Those courts interpreting section 1329 as having no threshold standard for modification are concluding that the statutory language is sufficiently clear to demonstrate that Congress intended to change pre-Code practice. See id., at 419-20, 112 S. Ct. 773 ("where the language is unambiguous, silence in the legislative history cannot be controlling."). Those courts applying the unanticipated material change of circumstances standard usually refer to the legislative history relating to the 1984 amendment to section 1329(a) for support. See, e.g., Matter of Baldwin, 97 B.R. 965, 966-67 (Bankr.N.D.Ind.1989):
The purpose of the 1984 amendments to § 1329 was to allow the trustee or the holder of an unsecured claim to seek modification of the confirmed plan.... The legislative history reveals that the post-1984 amendment version of § 1329 was based on the same ability to pay standard as the pre-1984 version, allowing upward or downward adjustments in the terms of the "... plan payments in response to changes in the debtor's circumstances which substantially affect the ability to make future payments."
(quoting Oversight Hearings on Personal Bankruptcy Before the Subcommittee on Monopolies and Commercial Law of the House Committee on the Judiciary, 97th Cong. 1st and 2nd Sess. 215, 221 (1981-82)) (citation omitted).
In either instance, the result implies a conclusion that Congress, without expressly stating in legislative history, intended to modify the longstanding pre-Code modification standard in chapter 13 cases and chapter 12 cases (section 1229 is similar to section 1329), but not chapter 11 cases, presumably because chapter 11 confirmation issues involve creditor voting. For
[8] See In re Moore, 247 B.R. 677, 682 (Bankr. W.D.Mich.2000):
Moreover, in drafting other provisions of the Bankruptcy Code, Congress inserted "includes" or "including" before a list when it intended that list to be illustrative. See, e.g., 11 U.S.C. §§ 101(1), 362(d)(1), 1112(b), and 1307(c). The absence of "including" in Section 1329(a) supports the conclusion that Congress intended these subsections to be exclusive as opposed to illustrative. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544796/ | 388 B.R. 737 (2008)
In re TODAY'S DESTINY, INC., Debtor.
Joseph M. Hill, Plaintiff,
v.
Michael Day, et al., Defendants.
Bankruptcy No. 05-90080. Adversary No. 06-3285.
United States Bankruptcy Court, S.D. Texas, Houston Division.
April 11, 2008.
*742 J. Craig Cowgill, Houston, TX, for Debtor.
MEMORANDUM OPINION ON MOTIONS TO DISMISS
MARVIN ISGUR, Bankruptcy Judge.
Factual Background
On October 13, 2005, Today's Destiny, Inc. ("Debtor") filed a chapter 7 bankruptcy petition. Debtor was in the business of selling "predictive dialing equipment." "Predictive dialing equipment" is designed to increase the efficiency of telemarketers by assuring that marketing agents are connected only to "live" persons rather than to unanswered phones, voice mail, or answering machines. The chapter 7 Trustee alleges that Debtor engaged in the fraudulent sale and leasing of this equipment. The Debtor's principals ("Insiders")[1] deny these allegations. The Trustee also asserts claims against lenders who financed the equipment sales and leases ("Lenders").[2]
Procedural Background
On March 21, 2006, the Trustee filed an adversary complaint. The Trustee alleged that Debtor was formed and operated by various individuals and did business through its affiliates, including The Next Generation, Medicus, IBD, and Straightway. The complaint alleged that the Insiders and affiliates acted as alter egos of Debtor to fraudulently convey or conceal assets belonging to Debtor and the bankruptcy estate.
On September 22, 2006, the Trustee filed a motion to amend the First Amended Complaint and a Motion for Authority to Enter into Agreement to Prosecute Related Claims and Causes of Action. Through these motions, the Trustee sought to add Lenders as defendants and enter into a joint prosecution agreement with non-debtor individuals (the "Interveners")[3] who wished to prosecute similar claims.
*743 The Court held a hearing on the motions on October 17, 2006. During the hearing, the Trustee withdrew the joint prosecution motion, the Court denied the Trustee's motion seeking leave to file a second amended complaint, and the Court entered a Case Management Order setting deadlines for parties seeking to intervene. The Court also ordered the complaint amended to include all claims to be asserted by the putative Intervenors. Between December 27, 2006, and January 3, 2007, ten motions to intervene were filed with over 85 individuals seeking to intervene.
In early 2007, Insiders and Lenders filed motions to dismiss. The motions primarily argued:
The Trustee lacks standing because his claims were claims owned by individual Intervenors, not the estate.
In pari delicto bars the Trustee from bringing the claims.
Venue is improper.
The Court should abstain.
A substantial part of the Motions to Dismiss were based on arguments that the Trustee lacked standing to assert certain claims for injuries sustained directly by Intervenors. On July 6, 2007, the Court issued a Memorandum Opinion and Order on Motions to Intervene. Within that Opinion, the Court determined whether the Trustee or Intervenors had standing to assert claims asserted in the Trustee's complaint. The Court rejected the Trustee's assertions as to ownership of certain claims. The Court attached a chart as "Exhibit A" stating which claims the Trustee owned and which claims the putative Intervenors owned. Parties were given until August 2, 2007 to object to the Court's characterization of the claims. After consideration of the objections filed, the Court's characterizations stand.[4] Pursuant *744 to the Court's Memorandum Opinion and Order on Motions to Intervene, the Court grants Defendants' Motions to Dismiss with respect to the Trustee's standing to assert claims on behalf of Intervenors and the related venue arguments.[5] Consistent with "Exhibit A" of the Memorandum Opinion, the following claims are dismissed from the Trustee's complaint:
A portion of the Breach of Fiduciary Duties claim against Michael Day, Max K. Day, Max O. Day, Chaz Robertson, Joshua Smith, and Terry Vanderpool.
A portion of the claim for Aiding and Abetting Breach of Fiduciary Duties against Jared Day and Lenders.
Fraud and Fraudulent Inducement against Max K. Day, Michael Day, Max O. Day, Chaz Robertson, Jared Day, Joshua Smith, and Terry Vanderpool.
Conspiracy to Defraud and to Breach Fiduciary Duties against Michael Day, Max O. Day, Max K. Day, Chaz Robertson, Joshua Smith, Terry Vanderpool, and Lenders.
Rescission against Lenders.
Violations of the Texas Deceptive Trade Practices-Consumer Protection Act against Lenders.
A portion of the additional claims against Sterling National Bank for Aiding and Abetting Breach of Fiduciary Duties and Fraud.
Request for Declaratory Judgment against Lenders.
Contemporaneously with this Opinion, the Court is issuing an order requiring the Trustee to file an amended complaint and the Intervenors to file initial complaints.
Scope of this Opinion
This Memorandum Opinion considers the Motions to Dismiss with respect to the Trustee's surviving claims. The Court divides the Motions to Dismiss into two categories: (1) Motions to Dismiss filed by the Insiders; and (2) Motions to Dismiss filed by the Lenders. The primary issues remaining include whether: (1) the doctrine of in pari delicto bars the Trustee from asserting his claims; (2) the Trustee may bring contribution claims under the Texas Civil Practice and Remedies Code; and (3) the Court should abstain.[6]
Motions to Dismiss filed by Insiders
A default judgment has been entered against Chaz Robertson and Joshua Smith. The Court addressed the Motion to Dismiss by Terry Vanderpool at a separate hearing on July 26, 2007.[7] Therefore, only *745 the following claims survive in the Trustee's Second Amended Complaint as to the Insiders:
Breach of Fiduciary Duties against Michael Day, Max K. Day, Max 0. Day, Chaz Robertson, Joshua Smith, and Terry Vanderpool.
Defendants' Liability as Alter Egos or for Sham to Perpetrate a Fraud against Michael Day, Max K. Day, Max O. Day, Medicus Marketing, IDB, and Joshua Smith.
Denuding the Corporation and Conspiracy to Denude the Corporation against Michael Day, Max K. Day, and Max O. Day.
Michael Day, Max K. Day, Max 0. Day, and Jared Day filed a joint Motion to Dismiss. The Insider's primary argument in their Motion to Dismiss and stated at the hearing is based on Rule 7009. Prior to the July 12, 2007 hearing, the Court issued a scheduling order in which it stated that it would not consider Rule 7009 issues at the July 12, 2007 hearing. There was little argument asserted by the Insiders under Rule 7012(b)(6).[8] Insiders' Motion contains two remaining defenses the Court considers in this Opinion: in pari delicto and abstention.[9]
Motions to Dismiss filed by the Lenders
The remaining causes of action asserted by the Trustee against the Lenders include:
Aiding and abetting breach of fiduciary duties.
Contribution.
Lenders' Motions contain three remaining defenses the Court considers in this Opinion: in pari delicto, invalidity of the Trustee's contribution claims, and abstention.[10]
Jurisdiction and Venue
The Court has subject matter jurisdiction pursuant to § 1334. As established in the Court's Memorandum Opinion on Motions to Intervene, this is a "related to" proceeding. Venue is proper in this District pursuant to 28 U.S.C. § 1409.
Law: Standard for Motion to Dismiss
A motion asserting a 12(b)(6) defense allows for dismissal due to a "failure to state a claim upon which relief can be granted." FED.R.CIV.P. 12(b)(6). The issue in a 12(b)(6) motion is whether a plaintiff is entitled to offer evidence to support its claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974). The Court must determine, "in the light most favorable to the plaintiff, whether the complaint states any valid claim for relief." Cinel v. Connick, 15 F.3d 1338, 1341 (5th Cir.1994). All well-pleaded allegations contained in the plaintiffs complaint must be accepted by the court as true. Albright v. Oliver, 510 U.S. 266, 268, *746 114 S. Ct. 807, 127 L. Ed. 2d 114 (1994). In addition, all facts pled must be specific, not merely conclusory. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.1992). When evaluating Rule 12(b)(6) motions, the Court should not grant a dismissal "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45^6, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957).
Analysis
A. In Pari Delicto
To determine whether the in pari delicto defense is proper, the Court must consider whether:
In pari, delicto exists in Texas despite the enactment of the Proportionate Responsibility Statute.
This proceeding is a proper venue to assert the defense.
In pari delicto applies to a Trustee asserting claims that benefit the estate's creditors rather than a party who committed wrongdoing.
i. Effect of the Proportionate Responsibility Statute
The Trustee contends that in pari delicto was abolished by passage of Chapter 33 of the Texas Civil Practice and Remedies Code (the "Proportionate Responsibility Statute"), last amended in 1995.
The Court rejects the Trustee's argument. The Texas legislature did not include within the Proportionate Responsibility statute a provision excluding tortfeasors who engaged in criminal conduct. Moreover, Texas state courts, and the Fifth Circuit applying Texas law, have continued to apply in pari delicto after the statute's passage and most recent amendment. See Rico v. Flores, 481 F.3d 234 (5th Cir.2007); Gladu v. Wallace, No. 11-02-00211-CV, 2003 WL 2010946 (Tex. App.-Eastland May 1, 2003, no pet.); Villanueva v. Gonzalez, 123 S.W.3d 461, 467 (Tex.App.-San Antonio, 2003, no pet.); Int'l Bank of Commerce-Brownsville v. Int'l Energy Dev. Corp., 981 S.W.2d 38, 52 (Tex.App.-Corpus Christi, 1998, pet. denied).[11]
ii. Venue
Insiders and Lenders framed the in pari delicto defense as a standing and 12(b)(6) (failure to state a claim for which relief can be granted) issue. The Trustee contends that in pari delicto is an affirmative defense that cannot be raised in a motion to dismiss. Rather, the Trustee contends that further discovery is necessary before the Court can determine if in pari delicto is applicable.
The Trustee is correct that in pari delicto can not independently defeat the Trustee's standing to raise a claim. In the bankruptcy context, the Trustee's standing is a claim ownership issue. The question is whether a claim is "property of the estate" or a claim that only a creditor can bring on the creditor's own behalf. In the Fifth Circuit and the majority of circuits, in pan delicto operates as an affirmative defense to a claim's merits, but can not independently preclude a Trustee's *747 standing to bring a claim. "[T]he questions of whether a party has standing and whether the party's claims are barred by an equitable defense are separate questions." In re IFS Financial Corp., Bank. No. 02-39553, Ad. No. 04-3841, 2007 WL 1308321 (Bankr.S.D.Tex. May 3, 2007) (citing Schertz-Cibolo-Universal City Indep. Sch. Dist. v. Wright (In re Educators Group Health Trust), 25 F.3d 1281, 1286 (5th Cir.1994)). In Educators, the Fifth Circuit noted: "That the defendant may have a valid defense on the merits of a claim brought by the debtor goes to the resolution of the claim, and not to the ability of the debtor to assert the claim." Id. at 1286. See also In re Andrews, Adv. No. 94-2160, 2007 WL 596706 at *4 (Bankr.S.D.Tex. Feb.21, 2007); In re Senior Cottages of America, LLC, 482 F.3d 997 (8th Cir.2007) (and cases cited); Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir.1991). To the extent that wrongful conduct was considered by the Educators Court, it was only considered in the context of whether the estate was harmed by the wrongful conduct and therefore had a claim belonging to the estate. Based on Educators, the consequences of wrongful acts may influence the standing issue, but in pari delicto can not, alone, defeat standing. Consequently, the Trustee's claims can not be dismissed for lack of standing.
However, Lenders have asserted a separate basis for dismissal: Rule 12(b)(6) failure to state a claim for which relief can be granted. Neither the Educators nor Shearson Courts dealt with the issue presented here: whether, assuming the Trustee has standing, in pari delicto independently bars the Trustee from asserting a claim on behalf of the estate. With respect to the 12(b)(6) argument, the question is not whether the Trustee has the right to assert a claim. The question assumes the Trustee can assert the claim. Instead, the issue is whether the defense of in pari delicto absolutely defeats the Trustee's claims so that the Trustee has not stated a claim for which relief can be granted. In this case, the facts that would support the in pari delicto defense are within the four corners of the Trustee's complaint.[12] Because the facts are necessary for the viability of the complaint, the Court will consider the defense under 12(b)(6).
iii. In Pari Delicto Application
The Fifth Circuit has not ruled on whether in pari delicto applies to trustees asserting claims on behalf of a bankruptcy estate. However, the majority of circuits *748 apply in pari delicto to trustees. Official Comm. of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145, 1151 (11th Cir.2006) ("If a claim of ETS would have been subject to the defense, of in pari delicto at the commencement of the bankruptcy, then the same claim, when asserted by the trustee, is subject to the same affirmative defense.") (citing Grassmueck v. Am. Shorthorn Ass'n., 402 F.3d 833, 837 (8th Cir.2005); Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 356-57 (3rd Cir.2001); Terlecky v. Hurd (In re Dublin Sec. Inc.), 133 F.3d 377, 381 (6th Cir.1997); Sender v. Buchanan (In re Hedged-Inv. Assocs.), 84 F.3d 1281, 1285 (10th Cir.1996); Official Comm. of Unsecured Creditors of Color Tile v. Coopers & Lybrand, LLP, 322 F.3d 147, 158-66 (2nd Cir.2003)). This Court has no reason to believe that the Fifth Circuit would depart from the majority of its sister courts.
Texas law governs whether in pari delicto bars the Trustee's claims. In re IFS Financial Corp., 2007 WL 1308321 *3 (citing Nisselson v. Lernout, 469 F.3d 143, 154 (1st Cir.2006)). Texas courts refer to the doctrine of in pari delicto as the "unlawful acts rule." Rico v. Flores, 481 F.3d 234, 241 (5th Cir.2007). Generally, the rule bars a party from asserting an action based upon the party's own criminal conduct. Id. at 242 (citing Gulf, Colorado & Santa Fe Railway Co. v. Johnson, 71 Tex. 619, 9 S.W. 602, 603 (1888); Rodriquez v. Love, 860 S.W.2d 541, 544 (Tex. App.-El Paso 1992, no writ); Marathon Oil Co. v. Hadley, 107 S.W.2d 883, 885 (Tex.Civ.App.-Fort Worth 1935, writ dism'd)). "[W]here it is shown that, at the time of the injury, the plaintiff was engaged in the denounced or illegal act, the rule is, if the illegal act contributed to the injury, he can not recover; but if plaintiff's act did not contribute to the injury, the fact alone that at the time he was engaged in an act in violation of law will not of itself preclude recovery." Gulf, Colorado & Santa Fe. Railway Co., 9 S.W. at 603. "But, if a party can show a complete cause of action without being obliged to prove their own illegal act, although the illegal act may appear incidentally and may be important in explanation of other facts in the case, they may recover." Rodriquez, 860 S.W.2d at 544 (citing Associated Milk Producers v. Nelson, 624 S.W.2d 920, 924 (Tex.Civ.App.-Houston [14th Dist.] 1981, writ ref'd n.r.e)). The doctrine "enforce[s] a public policy of precluding recovery for damages resulting from the willful commission of crimes." Lindley v. Hackard & Holt, No. 3:05-CV-1476-L, 2007 WL 1119287 (N.D. Tex. April 13, 2007). "[C]ourts should not lend their good offices to mediating disputes among wrongdoers" and "denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality." Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306, 105 S. Ct. 2622, 86 L. Ed. 2d 215 (1985).
However, even when parties are in pari delicto, "relief will sometimes be granted if public policy demands it." Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 151 (1947). The Texas Supreme Court has stated:
The rule is adopted not for the benefit of either party and not to punish either of them, but for the benefit of the public... There is often involved, in reaching a decision as to granting or withholding relief, the question whether the policy against assisting a wrongdoer outweighs the policy against permitting unjust enrichment of one party at the expense of the other. The solution of the question depends upon the peculiar facts and equities of the case, and the answer *749 usually given is that which it is thought will better serve public policy.
Id. (emphasis added).
Insiders Max K Day, Mike Day, Max O Day, and Jared Day, contend that in pari delicto denies the Trustee standing to assert claims against them. Based on Educators and the discussion above, this argument is negated. In pari delicto does not bar standing to bring a claim. The Court's standing rulings set forth in its Memorandum Opinion on Motions to Intervene resolved the standing issues. Moreover, Insiders fail to cite any authority supporting the proposition that in pari delicto bars a Trustee from asserting claims against Insiders for their wrongful conduct because of the same wrongful conduct. The Trustee is not asserting claims against third-parties for injuries arising from Insiders' wrongful conduct. The Trustee is asserting claims against the very Insiders for their own wrongful conduct. No case, logic, or equitable proposition supports the conclusion that insiders of a bankrupt corporation can insulate themselves from liability by virtue of the illegal character of their conduct. Granting Insiders relief based on in pari delicto would directly oppose in pari delicto's purpose of denying assistance to wrongdoers. The Court denies Insiders' in pari delicto defense.
As for the Lenders, the Trustee's aiding and abetting and contribution claims arise from the fraudulent conduct allegedly executed by the debtor, Today's Destiny. The Trustee stands in the shoes of the debtor corporation and therefore holds only those claims that the debtor could assert on its own behalf. Yaquinto v. Segerstrom (In re Segerstrom), 247 F.3d 218, 224 (5th Cir.2001); Askanase v. Fatjo, 130 F.3d 657, 668 (5th Cir.1997). See also 11 U.S.C. § 541. Claims asserted by the Trustee are subject to all the defenses that could have been asserted against the debtor. Id.
The four corners of the Trustee's complaint affirmatively state that Today's Destiny was engaged in illegal conduct. However, the fact that the Trustee is in pari delicto does not justify 12(b)(6) dismissal. Under Lewis, in pari delicto is not an automatic bar. Under Lewis, the Court must consider how the facts and equities of the individual case interact with the policy in pan delicto was designed to serve. Lewis, 199 S.W.2d at 151. The need to consider the "peculiar facts and equities" is particularly acute when a defendant is asserting the defense against a Trustee who seeks recovery for the benefit of creditors of a wrongdoer rather than the wrongdoer himself. See IFS Financial Corp., 2007 WL 1308321 at *4.
A Lewis policy analysis can not be undertaken prior to discovery and an evidentiary hearing. In the present case, consideration of the equities and public policy may exempt the Trustee from in pari delicto's application. The Trustee may be able to demonstrate that any recovery would benefit only innocent creditors, not the wrongdoers. Prior to an evidentiary hearing in which the Court can consider how the particular facts and equities of this case influence in pari delicto, the Court can not dismiss the Trustee's claims under Rule 12(b)(6).[13]
*750 The Court can, as a matter of law, rule that in pari delicto does not bar the Trustee's contribution claim. The Lenders have not cited and the Court has not found case-law applying in pari delicto to contribution claims. The Texas legislature affirmatively enacted a public policy of contribution among joint tort-feasors by enacting the contribution statute of the Texas Civil Practice and Remedies Code. The legislature did not exempt from the statute joint tort-feasors who participated in criminal acts with other joint tort-feasors. The Trustee is not asserting a tort claim against innocent parties injured by the estate. The Trustee is asserting contribution claims against an alleged joint tort-feasor. The differences in application of a contribution claim versus a direct claim have significant consequences with respect to the policy in pari delicto serves.
The policy motivating in pari delicto is that criminal actors should bear full responsibility for their criminal conduct. Saks v. Sawtelle, Goode, Davidson & Troilo, 880 S.W.2d 466, 470 (Tex.App.-San Antonio, 1994, writ denied) ("[The] basic policy is that individuals who have committed illegal acts shall not be permitted to profit financially or be otherwise indemnified from their crimes.") (citing Peeler v. Hughes & Luce, 868 S.W.2d 823, 831-33 (Tex.App.-Dallas, 1993, writ granted, judgment affirmed)). "Punishment for crime is intended to be personal and absolute." Id. (quoting Houston Ice & Brewing Co. v. Sneed, 63 Tex. Civ. App. 17, 132 S.W. 386, 388-89 (1910)).
Allowing contribution between joint tort-feasors for liability arising from a single course of allegedly shared criminal conduct does not conflict with in pari delicto's policy goals. Here, a defendant who participated in alleged wrongful conduct is seeking contribution from a second defendant who allegedly participated in the same wrongful conduct. The defendant seeks contribution only in proportion to the defendant's responsibility for the criminal conduct. Contribution is limited to the joint tort-feasor's proportional responsibility. Additionally, any recovery obtained by the Trustee's lawsuit will not benefit wrongdoers. Recovery will go to the estate to pay creditors. Insiders who committed the alleged malfeasance are named as defendants from whom recovery is sought. Any damages obtained by the Trustee will be paid by, not to, malfeasant Insiders. Today's Destiny's estate will not "profit" from a contribution claim that will be redistributed to creditors.
Consequently, the Court denies Lenders' Motions to Dismiss with respect to the Trustee's contribution and aiding and abetting claims. The contribution claim is not subject to in pari delicto. The Court reserves judgment, until further inquiry, as to whether in pari delicto applies to the aiding and abetting claim.
B. Contribution
Individuals and entities who purchased Today's Destiny's "predictive dialing equipment" ("Customers") have filed over 280 proofs of claims amounting to over $11 million. The Trustee expects additional claims to be filed. The Trustee alleges that the claims arise from Today's Destiny's alleged fraud and that Lenders aided and abetted the fraud. Consequently, the Trustee asserts that the Lenders are joint *751 tort-feasors and Today's Destiny's estate is entitled to contribution from the lenders under the Proportionate Responsibility Statute.
Lenders argue that the Proportionate Responsibility Statute is inapplicable. Lenders contend that the statute: (i) excludes settling Lenders; (ii) only applies to tort claims, while Customers only hold contract claims; and (iii) requires a pending lawsuit against the party seeking contribution, while Customers have filed only proofs of claim in this adversary proceeding.
Based on the analysis below, the Court holds that Today's Destiny's estate may plead a contribution claim against Lenders. However, the Court does not hold that the Trustee has a contribution claim. The Court does not hold that the Trustee's assertion of a contribution claim could survive a summary judgment motion or other pre-trial pleadings that may be submitted in the future. Some or all arguments raised by Lenders may be proven true, but the arguments are constructed for a procedural context that has not yet been reached. Lenders' motions asserted a Rule 12(b)(6) defense: failure to state a claim for which relief can be granted. When faced with a 12(b)(6) motion, the plaintiff need only show that it has a valid claim under allegations assumed correct. Conley, 355 U.S. at 45-46, 78 S. Ct. 99 (Courts should not grant a dismissal "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."). Consequently, when analyzing the statute, the Court only considers whether the Trustee could assert a contribution claim based on allegations assumed true.
The Court considers Lenders' arguments in tandem with an analysis of the Texas Proportionate Responsibility Statute.
i. Texas Proportionate Responsibility Statute
Neither the Bankruptcy Code nor Federal common law creates a right of contribution. Walker v. Cadle Co., 51 F.3d 562, 566 (5th Cir.1995) (citing Wieboldt Stores, Inc. v. Schottenstein, 111 B.R. 162, 167 (N.D.Ill.1990); Barber v. Riverside Int'l Trucks, Inc. (In re Pearson Indus.), 142 B.R. 831, 848 (Bankr.C.D.Ill.1992)). Consequently, the Trustee's contribution claim is dependent upon Texas statute. Chapter 33 of the Texas Civil Practice and Remedies Code governs contribution rights in Texas (the "Texas Proportionate Responsibility Statute").
The Texas Proportionate Responsibility Statute carefully defines who may seek what contribution against whom and when contribution claims may be asserted.
Section 33.016(b) defines who may assert contribution claims and when, and under what circumstances, contribution claims may be brought. The provision provides:
"Each liable defendant is entitled to contribution from each person who is not a settling person and who is liable to the claimant for a percentage of responsibility but from whom the claimant seeks no relief at the time of submission. A party may assert this contribution right against any such person as a contribution defendant in the claimant's action."
(emphasis added).
Section 33.002(a) further defines part of the where. Section 33.002(a) generally defines the scope of the statute's applicability. The provision states that the statute applies only to a "cause of action based on tort in which a defendant, settling person, or responsible third party is found responsible for a percentage of the harm *752 for which relief is sought ..."[14] (emphasis added).
Based on a close reading of the two above provisions and the statute in its entirety, a liable defendant may seek contribution from a non-settling contribution defendant based on tort liability subject to adjudication within an action.
ii. Whom: Non-Settling Contribution Defendants
a. Settling Defendants
The Texas Proportionate Responsibility Statute precludes the Trustee from asserting a contribution claim against Lenders that have settled all claims asserted against them by Customers. Section 33.016(b) specifically provides that a liable defendant may not seek contribution from "settling persons." Section 33.015(d) further reiterates that: "No defendant has a right of contribution against any settling person."
Section 33.011(5) defines settling person as: "a person who has, at any time, paid or promised to pay money or anything of momentary value to a claimant in consideration of potential liability with respect to the personal injury, property damage, death, or other harm for which recovery of damages is sought."
Various Lenders have filed Statements of Settlement indicating settlement of all claims held by Customers against the Lender. To the extent that any Lender has settled all Customer claims asserted against the Lender, and the settlements cover all potential claims held by the Customer rather than only contract claims, that Lender is a "settling person." The statute precludes contribution from a "settling person."[15]
Pursuant to this Memorandum Opinion, the Trustee shall file an amended complaint. The amended complaint should not seek contribution from Lenders that qualify as "settling persons."
b. Contribution Defendant
Section 33.016(a) provides: "In this section, 'contribution defendant' means any defendant, counter-defendant, or third-party defendant from whom any party seeks contribution with respect to any portion of damages for which that party may be liable, but from whom the claimant seeks no relief at the time of submission." (emphasis added).
*753 Lenders note that they have not been named as joint-defendants with Today's Destiny in any lawsuits filed by Customers. However, the statute does not limit "contribution defendants" to defendants joined in a lawsuit with the party seeking contribution. Section 33.016(a) specifically includes within the definition of "contribution defendants" defendants who "may be liable but from whom the claimant seeks no relief at the time of submission." (emphasis added). The key element to "contribution defendant" is potential liability to another defendant based on shared tortious conduct.
The Proportionate Responsibility Statute provides for joint and several liability for certain defendants. Under the statute, a plaintiff can assert a cause of action against a defendant who is jointly and severally liable and collect 100% of its damage award from that defendant. § 33.013(b). The statute, alone, does not require plaintiffs to join joint tort-feasors. The statute then gives a defendant held jointly and severally liable the right to assert a contribution claim against liable defendants for any amount paid in excess of the defendants' proportionate responsibility. § 33.015(a). See also In re Martin, 147 S.W.3d 453 (Tex.App.-Beaumont 2004, pet. struck) ("We see nothing in the applicable provisions of Chapter 33 requiring that a contribution claim be asserted in the primary lawsuit, or precluding a post-judgment contribution claim against a joint tort-feasor who was not a party to the primary lawsuit."); Pacesetter Pools, Inc. v. Pierce Homes, Inc., 86 S.W.3d 827 (Tex. App.-Austin, 2002, no pet.) (holding that a defendant could seek contribution after being held liable in an arbitration proceeding).[16]
Customers have filed proofs of claims against Today's Destiny amounting to over $11 million. Under the joint and several liability provisions of the Proportionate Responsibility Statute, Today's Destiny may face liability amounting to 100% of the Customer's claims. § 33.013(b). The Trustee has asserted that Lenders aided and abetted and conspired with Today's Destiny to defraud Customers. If these allegations are proven true and 100% of the liability to Customers is imposed on Today's Destiny, Today's Destiny would be entitled to contribution from Lenders for their proportionate share. § 33.015(a).
iii. Who: Liable Defendant Liable to a Claimant
a. Liable Defendant
Section 33.011(3) defines who may be a "liable defendant." The provision provides: "`liable defendant' means a defendant against whom a judgment can be entered for at least a portion of the damages awarded to the claimant." Under the Proportionate Responsibility Statute, anyone who contributed to a tortious harm could be subject to a judgment for a portion of the damages. § 33.013.
Today's Destiny may be a "liable defendant." There is no question that Today's Destiny may be liable to the Customers. Customers have filed numerous proofs of claim based on alleged fraud. Section 502(a) states: "A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general *754 partner in a partnership that is a debtor in a case under chapter 7 of this title, objects." 11 U.S.C. 502(c). Federal Rule of Bankruptcy Procedure 3001(f) further states: "A proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim." Fed. R. Bankr.Proc. 3001(f). In other words, a proof of claim is presumed a valid liability of the debtor unless an interested party objects.
Lenders note that an "essential prerequisite for a contribution claim" is a judgment against the defendant who seeks contribution. The Texas Proportionate Responsibility statute provides that only a party subject to a judgment may assert a contribution claim. Section 33.016(b) grants contribution rights only to "liable defendants." Section 33.011(3) defines "liable defendants" as a "defendant against whom a judgment can be entered." See also Arnold v. Garlock Inc., 288 F.3d 234, 237 (5th Cir.2002) (citing Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19 (Tex. 1987)). An uncontested proof of claim does not result in a judgment fixing Today's Destiny's liability on the proofs of claims. Consequently, Lenders contend that they can not be subject to a contribution claim based on the proofs of claims.
Lenders have cited cases supporting their contention. In UNR, the Court held that a contribution claim could not be filed based on a proof of claim because the claim had not been objected to. UNR Industries, Inc., 92 B.R. 319, 328 (N.D.Ill. 1998). The Court held:
Finally, UNR points out that under bankruptcy law, a properly filed proof of claim is "deemed allowed, unless a party in interest objects ..." 11 U.S.C. § 502(a). Since there are no objections to the asbestos claims, UNR argues that they are allowed and therefore the equivalent of civil judgments. But the importance of a civil judgment in an indemnity case is that it establishes a critical fact: the indemnitee's liability to the injured party. Here, UNR's liability is not fixed by the mere filing of proofs of claims because UNR continues to have the right to object to those claims and litigate its liability. There is no time limit on UNR's right to object (see, 3 Collier on Bankruptcy, ¶ 502.01[3] (15th ed.1987)), and its counsel vigorously denied at oral argument that UNR's failure to object so far constitutes an admission of liability ... Because UNR can object to the asbestos claims at any time, and deny liability, the issue of UNR's underlying liability (a necessary predicate to American Mutual's liability) remains ... abstract and hypothetical
Id. at 328. See also In re SRC Holding Corp., No. 06-3962, 2007 WL 1464385 (D.Minn. May 15, 2007) (holding that because "the `presumptive validity' of the asserted claim can be rebutted by `substantial evidence' ... a proof of claim that has not been objected to does not, by itself, establish liability for purposes of adjudicating indemnity and/or contribution.") (citing In re Hart Ski Mfg. Co., 5 B.R. 326, 328 (Bankr.D.Minn.1980)).
However, neither UNR nor related cases hold that a bankruptcy estate can never assert a contribution claim based on liability arising from a proof of claim. UNR's concern focused on the need for a "fixed" liability. A proof of claim can lead to a "fixed" liability. UNR's own holding implied that a contribution claim would arise from a proof of claim if the proof of claim was objected to and subsequently fixed in a final judgment or order that resolved the objection. Following this *755 Memorandum Opinion and related Orders, Customer's proofs of claims will be fixed.[17]
This Court has discretionary authority to establish deadlines for claim objections. In re Hovis, 356 F.3d 820, 822 (7th Cir.2004) ("[s]etting dates for filing of claims, and objecting to them, is within the discretion of the bankruptcy judge"). The Trustee's complaint has alleged that Lenders were an instrumental party in effectuating the fraudulent scheme from which Customers' proofs of claims arise. If the Trustee's allegations are proven true, interests of justice and administrative efficiency favor adjudication of Lender's proportional responsibility within this adversary proceeding.
Pursuant to this Memorandum Opinion, the Court has issued an order setting a deadline for filing objections to proofs of claim. Any Lender or other "party in interest" may object to the proofs of claim. Any "party in interest" who fails to object to Customers' proofs of claim will be estopped from later objecting to Today's Destiny's liability on the Customers' proofs of claim. See Adair v. Sherman, 230 F.3d 890, 894 (7th Cir.2000) (citing In re Andersen, 179 F.3d 1253, 1258-59 (10th Cir. 1999)); In re Varat Enters., Inc., 81 F.3d 1310, 1315-17 (4th Cir.1996); In re Justice Oaks II, Ltd., 898 F.2d 1544, 1553 (11th Cir.1990), cert denied, 498 U.S. 959, 111 S. Ct. 387, 112 L. Ed. 2d 398 (1990); In re Szostek, 886 F.2d 1405, 1413 (3d Cir.1989); In re Gregory, 705 F.2d 1118, 1121 (9th Cir.1983). Failure to object to a Customers' proofs of claim will not estop any Lender or other "party in interest" from contesting any claims brought against the Lender based on Today's Destiny's liability on the Customers' proofs of claim.
After the objection deadline has passed, and if no objections are filed, the Court will issue an order allowing the Customers' undisputed proofs of claim. If objections are filed, the objection will be adjudicated in a contested matter and the Court will issue an order resolving the objection. Consequently, after the objection deadline passes and all objections have been resolved, Today's Destiny's liability for Customers' claims will be fixed pursuant to Court orders. If Today's Destiny's allegations with respect to Lenders are proven true, Today's Destiny will then have a contribution right from Lenders, but only to the extent that the Court's orders allow the Customer's proofs of claim.
The claims may ultimately be disallowed. However, the Texas Statute defines "liable defendant" as a defendant who may be held liable, not a defendant who has been adjudicated liable. Section 33.016(a) defining "contribution defendants" further clarifies that a "liable defendant" need not have been actually found liable before asserting a contribution claim. Section 33.016(b) allows defendants to assert contribution claims within a pending proceeding on the defendant's liability. If facts plead by the Trustee are proven true, Lenders may be found liable to Today's Destiny's estate. The key prerequisite of a contribution claim is a pending proceeding that will result in fixed liability. After the claim objection deadline passes and claim objections have been *756 resolved, Today's Destiny's liability to Customers will be fixed.
The Trustee's contribution claim must still survive any pre-trial motions filed after discovery commences. The Trustee must still establish Lenders' proportionate responsibility. However, the Trustee's contribution claim is not subject to Rule 7012(b)(6) dismissal for failure to state a claim for which relief can be granted.
b. Claimant
Section 33.011 defines "claimant" as:
a person seeking recovery of damages, including a plaintiff, counterclaimant, cross-claimant, or third-party plaintiff. In an action in which a party seeks recovery of damages for injury to another person, damage to the property of another person, death of another person, or other harm to another person, "claimant" includes:
(A) the person who was injured, was harmed, or died or whose property was damaged; and
(B) any person who is seeking, has sought, or could seek recovery of damages for the injury, harm, or death of that person or for the damage to the property of that person."
(emphasis added).
A creditor filing a proof of claim is a "claimant." The "claimant" definition is broad, "including," not limiting the term to plaintiffs, counterclaimants, cross-claimant or third-party plaintiffs, and including entities who "could seek recovery" but has not yet engaged in litigation. The "claimant" definition's primary characteristic is that the claimant seeks damages. The Customers' proofs of claims seek recovery of damages from Today's Destiny.
Consequently, Today's Destiny is a "liable defendant" liable to Customer "claimants."
iv. What: Tort
The Texas Proportionate Responsibility Statute only applies to causes of action based on tort. § 33.002(a)(1). "A breach of contract claim is not a basis for contribution under chapter 33 of the Texas Civil Practice and Remedies Code." CBI NA-CON, Inc. v. UOP Inc., 961 S.W.2d 336, 341 (Tex.App.-Houston [1 Dist.] 1997, pet. denied) (citing Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex. 1984)). Moreover, "[a] defendant's claim of contribution is derivative of the plaintiffs right to recover from the joint defendant against whom contribution is sought." CBI NA-CON, 961.S.W.2d at 339 (citing Shoemake v. Fogel, Ltd., 826 S.W.2d 933, 935 (Tex.1992)).[18] Consequently, a defendant can only seek contribution from a joint tort-feasor defendant that could be liable to the plaintiff in tort. Id.
Based on the Texas Proportionate Responsibility Statute and case law interpreting the statute, Today's Destiny may not bring contribution claims against Lenders who could only be subject to contract claims by Customers. Today's Destiny may bring contribution claims against Lenders who could be subject to tort claims by Customers.
*757 Customers have asserted numerous state court lawsuits against various Lenders. Some Lenders have asserted that Customers executed leasing agreements that precluded tort liability. Nevertheless, some Lenders may be subject to tort liability. The Trustee's Amended Complaint has alleged that Lenders participated in a fraudulent scheme that, if proven, would constitute tortious conduct. The Trustee's Amended Complaint has asserted factual allegations supporting his theory. Dismissal under Rule 12(b)(6) for failure to state a claim for which relief can be granted is improper at this stage of the litigation.
v. When: Claimant's Action
The Lenders focus primarily on the context in which the contribution claim is sought. The Lenders primary argument goes as follows: Even if Today's Destiny's estate is entitled to contribution, the Trustee has not asserted the contribution claim in the proper procedural context. The Texas Proportionate Responsibility Statute allows a defendant to assert a contribution claim against another defendant only if the defendant asserting the claim has been named a defendant in an actual lawsuit and has been adjudged liable for a fixed amount. The Customers have not instituted adversary proceedings against Today's Destiny. The Customers have only filed proofs of claim in Today's Destiny's bankruptcy case. Lenders contend that filing an uncontested proof of claim does not constitute a lawsuit and is insufficient to invoke contribution rights under the Proportionate Responsibility Statute.
Based on a close reading of the Proportionate Responsibility Statute, the Court finds that a proof of claim is a sufficient basis of liability to raise a contribution claim under the statute.
The Texas Proportionate Responsibility Statute does not explicitly require a formal lawsuit prior to assertion of a contribution claim. The statute does not mandate or otherwise limit the procedural contexts in which a contribution claim may be raised. Section 33.016(b) states that a party "may" assert the contribution claim in the "claimant's action." (emphasis added). May is permissive, not mandatory. Moreover, the statute does not define "action." The Texas legislature drafted the contribution statute with much care. The statute provides its own definition section carefully defining numerous terms. The statute consistently refers to "cause of action" and "lawsuit" throughout the statute. Nowhere does the statute define "cause of action" or "lawsuit" or otherwise define a proceeding limiting the adversarial contexts in which a contribution claim can be brought. Where the legislature wished to carefully circumscribe an object, subject, or consequence of the statute, the legislature did so. The Court will not add definitions or limit rights in the absence of explicit or implicit expressed legislative intent.
Moreover, the Fifth Circuit has explicitly stated that "filing of a proof of claim is analogous to the filing of a complaint in a civil action." In re Continental Airlines, 928 F.2d 127, 129 (5th Cir.1991); In re Simmons, 765 F.2d 547, 552 (5th Cir.1985) (citing Nortex Trading Corp. v. Newfield, 311 F.2d 163, 164 (2d Cir.1962)). Indeed, the procedural consequences of filing a proof of claim or civil action are materially similar. A proof of claim, like a lawsuit seeking monetary damages, is a demand for payment. A trustee, like an ordinary civil defendant, may contest the claim. In a civil action, the defendant must file an answer. In a bankruptcy case, the debtor or parties in interest may file objections. If the defendant in a civil action does not file an answer, a default judgment may be *758 entered for the amount claimed in the lawsuit. If no party objects, the proof of claim will be fixed by the court for the amount claimed in the proof of claim. If the defendant in a civil action files an answer, the Federal Rules of Civil Procedure provide detailed instructions for how the parties must conduct the dispute. If a party in interest objects to a proof of claim, a contested matter is initiated and the dispute becomes subject to substantially the same Federal Rules of Civil Procedure. The procedural differences between filing a proof of claim in a bankruptcy court and filing a civil complaint in a district court are not significant enough to warrant excluding the Texas Proportionate Responsibility Statute from bankruptcy courts, particularly where there is no evidence that the legislature intended an exclusion.[19]
Lenders note numerous due process concerns associated with contribution claims arising from proofs of claims. Lenders note that the procedural protections afforded by the Federal Rules of Civil Procedure within a traditional lawsuit are absent in the proof of claim process. This assertion is only partially true. A proof of claim will be allowed if a "party in interest" does not object. However, filing a proof of claim alone does not automatically trigger Lender's liability for contribution. Lenders will have an opportunity to be heard in a procedural context cushioned with the protections implemented by the Federal Rules of Bankruptcy Procedure. Proofs of claim may be objected to. Lenders, as "parties in interest," may object to the claims. An objection to a claim institutes a "contested matter." Rule 3007. A "contested matter" triggers Rule 9014. Rule 9014 subjects the contested matter to Federal Bankruptcy Rules that incorporate most Federal Rules of Civil Procedure.
Moreover, the Trustee's contribution claim is not being asserted within a proof of claim or an objection to a proof of claim. The contribution claim is being asserted within an adversary proceeding. To succeed on the contribution claims, the Trustee will have to establish each Lender's proportionate responsibility with respect to Customers the Lenders contracted with. The Trustee will have to meet his burden within the present adversary proceeding. Adversary proceedings within a bankruptcy court are afforded the procedural protections of the Federal Rules of Bankruptcy Procedure.
In short, Lenders' argument assumes that the Trustee's argument imposes immediate liability based solely on the proofs of claims. In reality, the proofs of claim impose liability only on Today's Destiny. Lenders may later be liable for contribution. However, Lenders must be *759 adjudicated proportionately responsible for Today's Destiny's liability before any contribution claims can be awarded. The Trustee is attempting to establish that liability in the present lawsuit. The Trustee may succeed or the Trustee may fail in that attempt. Regardless, the Texas Proportionate Responsibility Statute affords the Trustee the right to assert and litigate the contribution claim in this adversary proceeding based on Today's Destiny's liability for Customer's proofs of claim.[20]
The Court also rejects any Lender argument that a lawsuit is a prerequisite to a contribution because of the need for a final judgment. As the Court discussed in the "liable defendant" section, the Customers' proofs of claim will be fixed after the claim objection deadline has passed and claim objections have been resolved.
Lenders also rely on Garlock. Arnold v. Garlock Inc., 278 F.3d 426 (5th Cir.2001). In Garlock, Garlock was sued in asbestos related litigation and named a co-defendant with Gasket Holdings. Id. at 430-31. When Gasket Holding's parent company, Federal Mogul filed chapter 11 bankruptcy, Garlock began removing suits in which it was a co-defendant with Gasket Holdings to federal courts. Id. at 431. Garlock moved for the case to be transferred to the District Court of Delaware. Id. In response, the plaintiffs moved to dismiss FederalMogul/Gasket Holdings as a defendant. Id. at 432. In many of the cases, Federal-Mogul/Gasket Holdings was dismissed with prejudice and the cases were remanded to Texas State Courts. Id. Garlock then attempted to stay the remand proceedings pending an appeal in the district courts. Id. The Fifth Circuit noted that in the cases in which the debtor was dismissed with prejudice, Garlock's contribution claim against debtor was "eliminated". Id. at 439. The Court stated "[i]t is well established under Texas case law that neither contribution nor indemnification can be recovered from a party against whom the injured party has no cause of action." Id. (citing Safway Scaffold Co. of Houston, Inc. v. Safway Steel Products, Inc., 570 S.W.2d 225, 228-29 (Tex.Civ. App.Houston [1st Dist] 1978, writ ref'd n.r.e.)).
The Fifth Circuit was emphasizing that contribution is not a claim for affirmative relief. Contribution is dependent upon shared liability to a common plaintiff. Federal-Mogul/Gasket Holdings' dismissal with prejudice from the suit precluded liability to Arnold. Consequently, Federal-Mogul/Gasket Holdings and Garlock no longer faced shared liability to Arnold. Because only Gasket Holdings faced liability, Garlock's contribution claim could no longer survive. Id. (citing Quanto Int'l Co., Inc. v. Lloyd, 897 S.W.2d 482, 484-85 (Tex.App.-Houston [1 st Dist.] 1995, no writ); TEX.R. CIV. P. 162).
In this proceeding, however, the Intervenors who have filed proofs of claim with the bankruptcy estate, have not precluded the ability to seek liability from the Lenders. In fact, the opposite is true. What has occurred in the bankruptcy court is that the Intervenors have filed proofs of claim based on the alleged fraudulent scheme of Debtor and Lenders. Claims asserted against Today's Destiny for which *760 contribution is sought have not been dismissed.
vi. Cash Requirement
A liable defendant is entitled to contribution from a joint tort-feasor when the liable defendant pays a damage award in excess of the liable defendants' proportionate responsibility. Section 33.015(a) provides:
If a defendant who is jointly and severally liable under Section 33.013 pays a percentage of the damages for which the defendant is jointly and severally liable greater than his percentage of responsibility, that defendant has a right of contribution for the overpayment against each other liable defendant to the extent that the other liable defendant has not paid the percentage of the damages found by the trier of fact equal to that other defendant's percentage of responsibility.
(emphasis added).
Lenders make both a timing and feasibility argument with respect to § 33.015(a). Lenders contend that a liable defendant can not assert a contribution claim until the defendant pays damages in an amount greater than the liable defendant's proportionate responsibility, or at least until the liable defendant is adjudicated liable. Today's Destiny's estate has not yet paid cash on a damage claim. Additionally, Lenders assert that liable defendants can not bring a contribution claim when the liable defendant is incapable of paying a damage award greater than the liable defendant's proportionate responsibility. Today's Destiny has minimal assets.
The Lender's timing argument misinterprets the Proportionate Responsibility Statute's mechanics and precedent. Lenders fail to distinguish the right to assert a contribution claim in a proceeding and when a right to payment on a claim arises. Lender's rely on § 33.015(a), providing that a contribution right does not arise until a liable defendant makes a payment disproportionate to the liable defendant's proportionate responsibility. However, § 33.015(a) does not prescribe the mechanics or timing of asserting a contribution claim. Section 33.015(a) simply provides wheri liability on a contribution claim arises. Section 33.016(b) describes when and where a potentially liable defendant can assert a claim. That provision provides: "A party may assert this contribution right against any such person as a contribution defendant in the claimant's action." (emphasis added). The provision explicitly authorizes a potentially liable defendant to assert a contribution claim within the plaintiffs pending action against the defendant asserting the contribution claim. Suggesting that a defendant can not assert a claim prior to a disproportionate damage payment is inconsistent with the statute and without merit.
Lender's argument also misconstrues precedent. Texas courts routinely assume that a contribution claim may be brought against a joint tort-feasor simultaneously with the determination of primary liability and before a liable defendant has been adjudicated liable or paid a judgment. Cf. In re Martin, 147 S.W.3d 453, 457-58 (Tex.App.-Beaumont 2004, pet. denied) (evaluating limitations periods for contribution claims and determining whether a claimant must assert his contribution claim in the primary lawsuit or "not at all."); Casa Ford, Inc. v. Ford Motor Co., 951 S.W.2d 865, 876 (Tex.App.-Texarkana 1997, pet. denied) (finding that "Chapter 33 does not permit a tort-feasor to seek post-judgment contribution from a tort-feasor that was not a party to the judgment."). See also Omega Contracting, Inc. v. Torres, 191 S.W.3d 828, 835-36 (Tex.App.Fort Worth 2006, no pet.); Panatrol *761 Corp. v. Emerson Elec. Co., 147 S.W.3d 518, 519 (Tex.App.-San Antonio 2004, no pet.).
Today's Destiny has only asserted a contribution claim. Liability on the claim has not been established. If liability on the claim is adjudicated in Today's Destiny's favor, then Today's Destiny will be entitled to contribution. Section 33.016(b) unequivocally allows a defendant to assert such a claim in a pending suit prior to the liable defendant's adjudication of liability and payment on that liability. Furthermore, as discussed within the feasibility argument below, Today's Destiny, will, by law, pay 100% of the damages sought by Customers in their proofs of claim.
Lenders' feasibility argument and the statute's payment requirement must be evaluated in the context of bankruptcy law. Unsecured creditors in bankruptcy cases often receive less than 100% dividends on their unsecured claims. Does a co-tort-feasor obtain a windfall from the fact that a debtor may pay less than a 100% cash dividend on outstanding claims?
The general principle that must be followed in bankruptcy is that allowance of a claim entitles the claimant to a proportionate share of the dividends from the case. The allowance of a right to proportional sharing is the state law equivalent of "payment." Mathematics helps to explain why. Assume two scenarios:
Scenario "A" Scenario "B"
Total Claims Against $100,000 $100,000
Bankruptcy Estate[21]
Total Distributable Cash $60,000 $65,000
on Hand'
Application of $0.00 $40,000
Defendant's Theory of
Contribution Claims
against Co-Wrongdoer
Proportionate 40% 40%
Responsibility of
Wrongdoer
At first blush, the $40,000 set forth above appears to be mathematically incorrect. But that apparent incorrectness is the nub of the defendants' error. Under the Lender's theory, the payment of the $65,000 would be a payment of $5,000 more than the Debtor's proportionate share of liability. Under their theory, the Lenders would be required to pay the $5,000 to the Debtor. However, because of the operation of the distribution scheme under the Bankruptcy Code, the Debtor would take that additional $5,000 and distribute it back to the claimant (who still holds a $35,000 unpaid claim). When the additional $5,000 is distributed, then the Debtor would have paid a total of $70,000. However, the Lenders would have only paid contribution of $5,000. Accordingly, an additional $5,000 would be owed. This circle would continue until the Lenders had paid a total of $40,000. The following chart exemplifies:
Debtor Pays
Debtor from Funds Total Paid Total Paid Claimant Owed Contribution
Claimant Pays from Received to Date to Date Following Claim Received
is Owed Initial Funds From Lenders by Debtor by Lenders Distribution from Lenders
$100,000.00 $65,000.00 $ 0.00 $ 65,000.00 $ 0.00 $35,000.00 $ 5,000.00
$ 35,000.00 $ 0.00 $5,000.00 $ 70,000.00 $ 5,000.00 $30,000.00 $ 5,000.00
$ 30,000.00 $ 0.00 $5,000.00 $ 75,000.00 $10,000.00 $25,000.00 $ 5,000.00
$ 25,000.00 $ 0.00 $5,000.00 $ 80,000.00 $15,000.00 $20,000.00 $ 5,000.00
$ 20,000.00 $ 0.00 $5,000.00 $ 85,000.00 $20,000.00 $15,000.00 $ 5,000.00
$ 15,000.00 $ 0.00 $5,000.00 $ 90,000.00 $25,000.00 $10,000.00 $ 5,000.00
$ 10,000.00 $ 0.00 $5,000.00 $ 95,000.00 $30,000.00 $ 5,000.00 $ 5,000.00
*762
$ 5,000.00 $ 0.00 $5,000.00 $100,000.00 $35,000.00 $ 0.00 $ 5,000.00
$40,000.00
The defendants' theorywhen applied would trigger 100% of their proportionate liability if the debtor paid one cent of the claimants' claims above debtor's proportionate sharebut would trigger 0% of their proportionate liability if no cents were paid. This "no cents" arrangement makes no sense.
In a bankruptcy case, "payment" does not necessarily mean payment in cash. "Payment" in a bankruptcy scenario is payment in kind by the allowance of a claim that entitles the claimant to a proportionate share of assets. Any other result makes a mockery of the Texas Proportionate Responsibility Statute and would encourage wrongdoers to assure that assets were drained from an estate prior to bankruptcy such that no payment in cash would be available.
The Court rejects the Lenders `"cash payment" theory. Moreover, even if the "cash payment" theory were' ultimately proven correct, it would not entitle Lender's to a preemptive dismissal of the case. The estate might distribute at least one penny in excess of its proportionate share to at least one claimant.
vii. Ancillary Matters
a. 51% Liability
Some Lenders have suggested that a liable defendant whose proportionate responsibility is greater than 50% can not recover contribution. Lenders rely on § 33.001. That section provides that a "claimant may not recover damages if his percentage of responsibility is greater than 50 percent." § 33.001.
However, Today's Destiny is not a "claimant." Today's Destiny is a "liable defendant" seeking contribution from a "contribution defendant" based on claims asserted by the claimant Customers. §§ 33.011(3); 33.016(a). Lenders misconstrue the intent of § 33.001. The provision embodies Texas's modified comparative fault system in which a plaintiff who is more than 50% responsible for his injuries can not recover for his injuries.
The statute expressly provides contribution rights to defendants whose proportionate responsibility exceeds 50%. Under § 33.013(b), a defendant can be found jointly and severally liable if the defendant's proportionate responsibility exceeds 50%. § 33.013(b). Section 33.015 then gives the jointly and severally liable defendant a right to contribution though their proportionate responsibility exceeds 50%. § 33.015(a) and (b). Other Lenders have admitted that any Lender argument based on § 33.001 is misplaced. The Court agrees.[22]
b. GE Capital
Defendant Lender GE Capital ("GE") notes that no Customers that have filed proofs of claim received loans from GE. No one receiving a loan held by GE has sought to intervene. GE did purchase five loans originally made by other lenders. However, the Trustee's remaining claims against Lenders are based on an alleged fraudulent scheme the original lenders participated in. GE can not be held liable for contribution based on conduct that GE did not participate in. Because no GE customers have filed proofs of claim or intervened in Today's Destiny's bankruptcy *763 estate, and GE did not participate in the lending at issue, the Trustee has no basis for asserting a contribution claim against Today's Destiny. The contribution claims against GE are dismissed.
c. Forum and Choice-of-Law Provisions
Certain Lenders' leases contained choice-of-law and forum-selection provisions. For example, Lender Greater Bay Capital's leases contain a provision stating: "This lease shall be governed by the laws of Illinois. Any legal action concerning this lease shall be brought in a court located in Lake County, Illinois ..."
Contribution claims are derivative of a plaintiffs ability to assert a claim against the defendant from whom contribution is sought. Segerstrom, 247 F.3d at 224. Certain Lenders rely upon this principle to contend that the Trustee's contribution claims are subject to the law and courts of the state provided in the forum-selection clauses.
The Court rejects the argument. The Court does not interpret the derivative principle as imputing all aspects of Customers' claims upon the Trustee's distinct contribution claim. Under the derivative principle, a Trustee can not assert a contribution claim if the injured party could not assert a claim against the party against whom the Trustee is seeking contribution. Consequently, if the injured party's claim was dismissed, subject to res judicata, or otherwise defeated by an affirmative defense, the Trustee could not assert a contribution claim. Shoemake v. Fogel, Ltd., 826 S.W.2d 933, 935 (Tex. 1992). The forum and choice-of-law provisions do not create an affirmative defense or otherwise preclude the Customers from asserting a claim against the Lenders. Though the contribution claim is derivate of the Customer's ability to assert a claim against Lenders, the Court fails to see how the derivate nature of the claim imposes the forum and choice-of-law provisions on the Trustee.
The leases were signed by the Customers, not the Trustee or Today's Destiny. The Trustee is not asserting the Customer's claims. The Trustee's contribution claim and the Customer's direct claim against Lenders are distinct claims. A party seeking contribution is not seeking relief on the injured party's behalf. The party seeking contribution is not otherwise asserting the injured party's claim. Indeed, the party seeking contribution generally can not assert the injured party's claim. Nor can an injured party assert a liable defendant's contribution claim. The derivate nature of a contribution claim does not merge the distinct claims held by the injured party and the party seeking contribution. The choice-of-law and forum clause apply only to Customer's direct claims.
The Court denies Lenders' Motions to Dismiss based on the choice-of-law and forum-selection lease provisions.
C. Abstention
Defendants Motions to Dismiss were drafted prior to the Court's Intervention Opinion. The abstention arguments were largely focused on causes of action the Trustee sought to assert on the Intervenor's behalf. The Court's Intervention Opinion mooted these arguments. However, two abstention issues remain. The Court must consider whether to abstain from considering the Trustee's remaining contribution and aiding and abetting breach of fiduciary duty claims, and claims the Intervenors may assert on their own behalf.
Abstention issues with respect to the Intervenors are not ripe for consideration. *764 No Intervenor has yet filed a complaint in this adversary proceeding. Defendants' Motions to Dismiss were based on the assumption that the Trustee, not the Intervenors, would be asserting claims owned by the Intervenors. Intervenors have not had the opportunity to respond to abstention concerns with respect to claims they may seek to assert. Pursuant to this Opinion, the Court is setting a deadline for Intervenors to file complaints. The Court will consider abstention issues with respect to claims asserted by Intervenors when, and if, Intervenors file complaints and defendants have had the opportunity to respond.
The Court will consider abstention with respect to the Trustee's two remaining claims in this Memorandum Opinion.
i. Mandatory Abstention
Title 28 U.S.C. § 1334(c)(2) provides for mandatory abstention when:
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2).
The Fifth Circuit has interpreted this provision to mandate abstention where:
(1) [t]he claim has no independent basis for federal jurisdiction, other than § 1334(b); (2) the claim is a non-core proceeding, i.e., it is related or in a case under title 11; (3) an action has been commenced in state court; and (4) the action could be adjudicated timely in state court.
Edge Petroleum Operating Co., Inc. v. Gpr Holdings et al. (In re Txnb Internal Case), 483 F.3d 292, 300 (5th Cir.2007) (quoting Schuster v. Mims (In re Rupp & Bowman), 109 F.3d 237, 239 (5th Cir.1997)).
The Trustee's claims are not subject to mandatory abstention. The Trustee has not asserted the claims in state court. The Fifth Circuit's third factor is absent.
ii. Permissive Abstention
Title 28 U.S.C. § 1334(c)(1) provides for permissive abstention. Section 1334(c)(1) provides:
[N]othing in this section prevents a district in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
28 U.S.C. § 1334(c)(1).
Bankruptcy Courts have wide latitude in determining whether to remand a state law cause of action. The Fifth Circuit has held that under 28 U.S.C. § 1334(c)(1) the court has "broad discretion to abstain from hearing state law claims whenever appropriate in the interest of justice, or in the interest of comity with State courts or respect for State law." In re Gober, 100 F.3d 1195, 1206 (5th Cir.1996).
In determining whether discretionary abstention or equitable remand is appropriate, Courts have developed a list of nonexclusive factors, including:
(1) the effect or lack thereof on the efficient administration of the estate;
(2) extent to which state law issues predominate over bankruptcy issues;
(3) difficult or unsettled nature of applicable law;
*765 (4) presence of related proceeding commenced in state court or other non-bankruptcy proceeding;
(5) jurisdictional basis, if any, other than § 1334;
(6) degree of relatedness or remoteness of proceeding to main bankruptcy case;
(7) the substance rather than the form of an asserted core proceeding;
(8) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court;
(9) the burden of the bankruptcy court's docket;
(10) the likelihood that the commencement of the proceeding in bankruptcy court involves forum shopping by one of the parties;
(11) the existence of a right to a jury trial;
(12) the presence in the proceeding of nondebtor parties;
(13) comity; and
(14) the possibility of prejudice to other parties in the action.
J.T. Thorpe Co. v. Am. Motorists, No. 02-4598, 2003 WL 23323005 (S.D.Tex. June 6, 2003) (citing Beasley v. Pers. Fin. Corp., 279 B.R. 523, 533 (S.D.Miss.2002)). See also In re Encompass Servs. Corp., 337 B.R. 864, 878 (Bankr.S.D.Tex.2006).
The Court will not exercise permissive abstention with respect to the Trustee's claims. The permissive abstention factors overwhelmingly support this Court's continued jurisdiction over these claims.
The efficient administration of the estate factor weighs heavily against permissive abstention. The Trustee has asserted contribution claims against approximately 20 Lenders. Instituting a separate lawsuit against each Lender in various forums would be a substantial burden to the Trustee, the debtor, creditors, and the Court.
Lenders primarily argue that the Trustee's claims: (i) are state law cause of action; (ii) interfere with the Lenders' forum selection clauses; (hi) will have little impact on the administration of the estate; and (iv) the Trustee is "forum shopping" in the sense that he's seeking to litigate all claims within the bankruptcy Court rather than assert the contribution claim in each individual Customer's actual or future state court lawsuit.[23]
The Court rejects Lenders' contentions. Though the Trustee's contribution claim arises under state law, the state law nature of the claim is only one factor and, alone, insufficient to justify abstention. Moreover, the complexities of a state law proportionate payment scheme with the partial distribution likely in a bankruptcy case, make a bankruptcy court uniquely qualified to address the complex bankruptcy questions that are raised. The forum selection clause argument is inapplicable: neither the Trustee nor Today's Destiny was a party to the agreements with the Lenders' that contained the forum selection clauses. The contribution claim may have a substantial impact on the estate. *766 Even if Lenders' proportional responsibility is minimal, the estate's recovery will be significant considering that the Customers' proofs of claims are in excess of $11 million. The Trustee is not "forum shopping." The Trustee filed the contribution claims in this Court because the bankruptcy case from which the contribution claims arise was filed in this Court. Asserting the contribution claims on behalf of the state in a single bankruptcy Court is an exercise of administrative efficiency, not "forum-shopping."
Conclusion
Based on the foregoing, the Court will issue separate orders accomplishing the following:
Defendants' Motions to Dismiss with respect to the in pari delicto claim will be denied.
Defendants' Motions to Dismiss with respect to the contribution claim will be denied.
Defendants' Motions to Dismiss with respect to abstention from jurisdiction over claims Intervenors' may assert on their own behalf will be denied.
Defendants' Motions to Dismiss with respect to abstention from jurisdiction over the Trustee's claims will be denied.
Defendants' Motions to Dismiss the following claims will be granted: (i) A portion of the Breach of Fiduciary Duties claim against Michael Day, Max K. Day, Max O. Day, Chaz Robertson, Joshua Smith, and Terry Vanderpool; (ii) a portion of the claim for Aiding and Abetting Breach of Fiduciary Duties against Jared Day and the Lenders; (iii) Fraud and Fraudulent Inducement against Max K. Day, Michael Day, Max O. Day, Chaz Robertson, Jared Day, Joshua Smith, and Terry Vanderpool; (iv) Conspiracy to Defraud and to Breach Fiduciary Duties against Michael Day, Max O. Day, Max K. Day, Chaz Robertson, Joshua Smith, Terry Vanderpool, and the Lenders; (v) rescission against Lenders; (vi) violations of the Texas Deceptive Trade PracticesConsumer Protection Act against Lenders; (vii) a portion of certain additional claims against Sterling National Bank for Aiding and Abetting Breach of Fiduciary Duties and Fraud; and (viii) Request for Declaratory Judgment against Lenders.
The Trustee will be ordered to file an amended complaint by May 26, 2008. Responses will be due on June 16, 2008. Defendants will be authorized to assert any Rule 8, 9, 12(e), or 12(f) objections that are unresolved by the Trustee's amended complaint.
Any Lender or other "party in interest" will be authorized to object to proofs of claim filed in Today's Destiny's bankruptcy estate. The Court will require any such objections to be filed by May 12, 2008. Failure to object to a proof of claim will not estop any interested party from contesting its proportionate responsibility or personal liability arising from Today's Destiny's liability on the proof of claim.
Pursuant to paragraph 5 of the Court's July 6, 2007 Order on Motions to Intervene, subject to the rulings of this April 11, 2008 Memorandum Opinion, and filed statements of settlement, the Court will authorize intervention in this adversary proceeding of certain parties listed in "Exhibit C" of the Court's July 6, 2007 Opinion. Intervenors who have settled with Lenders will not be permitted to intervene with respect to Lenders.
Parties granted intervention pursuant to the Court's Memorandum Opinion on Intervention and who wish to assert causes of action in this adversary proceeding will be required to file a complaint by May 12, 2008. Defendants will be required to respond *767 by June 2, 2008 and may assert any applicable defense.
HPSC Inc.'s Motion for Reconsideration (docket no. 397) will be denied.
Sterling National Bank's Motions for Reconsideration (docket no. 398 and 414) will be denied.
AEL's Objection (docket no. 413) will be granted.
GE's Motion to Dismiss (docket no. 396) will be granted.
NOTES
[1] The "Insiders" include the following: Michael Day, president, chief, executive officer and chairman of the board; Max K. Day, senior, vice president and chief operating officer; Max O. Day, vice president; Chaz Robertson, vice president of sales; Joshua Smith, vice president of operations; Jared Day, the "closer" in the sales department and; Terry Vanderpool, General Counsel. On July 12, 2007, a default judgment was entered against Chaz Robertson and Joshua Smith.
[2] The term "Lenders" refers to financial institutions, other lenders, and leasing companies, as used in the Court's Memorandum Opinion on Motions to Intervene and Order issued on July 6, 2007.
[3] The Court will refer to all parties seeking to intervene as "Intervenors." Intervenors are individuals and entities that purchased or leased Debtor's "predictive dialing equipment" through financing provided by Lenders.
[4] Sterling Bank filed a Motion for Reconsideration with Respect to Trustee's Ownership of Claims (docket no. 414). Upon review of the motion, the Court finds the request a supplement to its motion to dismiss rather than a request to re-characterize claim ownership.
HPSC Inc. and Sterling Bank filed Motions for Reconsideration concerning claims with respect to three Intervenors (docket no. 397 and 398). Both motions contend that the Intervenors should not be allowed to intervene because they purchased their equipment from IBD and Medicus, not Today's Destiny. The Court's Opinion dealt largely with Intervenors' right to assert claims against Today's Destiny's Insiders. The Insiders allegedly used IBD and Medicus to carry out the same fraudulent scheme allegedly carried out by Today's Destiny. Whether the Intervenors purchased or leased their equipment from Today's Destiny or a related entity used by the Insiders to carry out the same scheme is irrelevant. The key inquiry in the Court's opinion was the "commonality" shared by the Trustee's and Intervenors' claims against the Insiders and whether the matters were "related to" title 11. The claims, whether based on equipment sold by Today's Destiny, IBD, or Medicus, all involved the same allegedly fraudulent scheme. Claims against IBD and Medicus also fall within the Court's "related to" jurisdiction. The Trustee's Amended Complaint alleges that IBD and Medicus were alter egos's of Today's Destiny used to continue Today's Destiny's fraud. The Court granted a default judgment against IBD and Medicus (docket no. 51) making them Today's Destiny's alter egos. Based on that default judgment, claims against IBD and Medicus are claims against the estate. Additionally, Medicus and IBD's assets may be used to pay Today's Destiny's liabilities. Consequently, claims against IBD and Medicus have a "conceivable effect" on the estate. Arnold, 278 F.3d at 434. The Court denies HPSC and Sterling's Motions for Reconsideration.
AEL filed an Objection that also asks the Court to reconsider its grant of intervention to an Intervenor (docket no. 413). AEL notes that David Tessier did not comply with the Court's Case Management Order requiring Motions to Intervene to be filed by Dec. 31, 2006. Tessier never filed a Motion to Intervene. Tessier has not responded to AEL's motion. Accordingly, the Court grants AEL's objection. A separate order will be issued.
[5] The venue argument was based on the assertion that the Trustee could not litigate individual Intervenors' claims. The Court's Memorandum Opinion and Order on Motions to Intervene mooted this argument. Venue is proper for the claims the Trustee may litigate.
[6] Defendants' Motions' to Dismiss also raised Rule 8, 9, and 12(e) objections to the Trustee's complaint. Prior to the July 12, 2007 hearing, the Court issued a scheduling order in which it stated that it would not consider Rule 7009 issues at the July 12, 2007 hearing. The Court will resolve these objections, if necessary, after the Trustee has filed an amended complaint.
[7] The Court considered Vanderpool's Motion to Dismiss at a separate hearing date due to notice issues. At the July 26, 2007 Vanderpool hearing, the Court overruled in part and sustained in part Vanderpool's Motion to Dismiss. The Court overruled Vanderpool's objections based on Federal Rule of Civil Procedure 12(f). The Court overruled Vanderpool's objections based on Federal Rule of Civil Procedure 12(b)(6) for claims that alleged injuries to Today's Destiny. The Court sustained Vanderpool's objections based on 12(b)(6) for claims that alleged injuries to creditors. The Court considers the balance of Vanderpool's Motion to Dismiss in this Memorandum Opinion and in conjunction with the Motions to Dismiss filed by all Insiders.
[8] Insiders' 12(b)(6) arguments focused on claims the Trustee sought to assert on behalf of Intervenors. The Court's Memorandum Opinion on Intervention resolved these issues.
[9] Insiders' Amended Motion to Dismiss also contains a motion to strike under Rule 12(f). The Court will consider this objection, if necessary, in any responsive pleadings to the Trustee's amended complaint.
[10] The Trustee asserted additional claims against Sterling National Bank. The Court's Memorandum Opinion on Intervention held that the Intervenors, not the Trustee, held the claims asserted against Sterling except for the claims asserted in paragraph 192 of the Trustee's Second Amended Complaint. Paragraph 192 asserts that Sterling aided and abetted Insiders' breach of fiduciary duties. The same claim is asserted against all Lenders. Consequently, the Court's Opinion does not give separate consideration to the claims asserted against Sterling. The Court's consideration of Lenders generally includes Sterling.
[11] The Trustee contends that, post-1995, Texas courts apply in pari delicto only to cases involving illegal contracts. Though post-1995 cases may have involved illegal contracts, no case states that in pari delicto is limited to illegal contracts. The Trustee has not offered nor does the Court see a rationale for limiting the doctrine to illegal contract cases. Whether the illegality stems from the character of a contract or the character of conduct is irrelevant to in pari delicto's purpose: to prevent wrongdoers from benefiting from or mitigating the consequences of their illegal actions. Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 151 (1947).
[12] The Trustee does not dispute Debtor's involvement in the alleged fraud. The first paragraph of the factual background recited in the Second Amended Complaint states the following:
During the years 1997-2005, Today's Destiny in concert with the persons and entities named as defendants in this actionperpetrated a fraud of massive proportion against innocent service professionals across the nation. The scam involved the sale by Today's Destiny of worthless marketing equipment to innocent purchasers, who were induced to finance their purchase through third-party lenders who conspired with Today's Destiny to defraud the service professionals.
Sec. Am. Compl. ¶ 38. Later, the Complaint states:
As of the date of this complaint, Customers of Today's Destiny have filed more than 280 proofs of claim against the Today's Destiny bankruptcy estate, and such claims total almost $11 million. Trustee anticipates that additional claims will be filed. The claims arise out of the Customer's purchase of the Program/System andin most casesout of the claimant's liability for financing those purchases through the lenders.
SEC. AM. COMPL. ¶ 164.
[13] The Trustee also contends that the "adverse interest rule" excepts the Trustee from application of in pari delicto. The "adverse interest" rule protects corporations from imputation of an agent's conduct where the agent acted "entirely for his own or another's purpose." F.D.I.C. v. Shrader & York, 991 F.2d 216, 223 (5th Cir.1993) (quoting RESTATEMENT (2D) OF AGENCY § 282(1) (1957)) and citing Forest Park Lanes, Ltd. v. Keith, 441 S.W.2d 920, 931 (Tex.Civ.App.1969). See also Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 579-581 (Tex.1963); White Point Oil & Gas Co. v. Dunn, 18 S.W.2d 267, 270 (Tex.Civ.App.-San Antonio 1929, writ dism'd); 15 TEX. JUR.3D Corporations § 422 (2006). Because the Court denies Defendants' Motion to Dismiss on other grounds, and because application of this rule is fact intensive, the Court reserves judgment on the "adverse interest rule."
[14] The Statute also applies to "any action brought under the Deceptive Trade Practices-Consumer Protection Act (Subchapter E, Chapter 17, Business & Commerce Code) in which a defendant, settling person, or responsible third party is found responsible for a percentage of the harm for which relief is sought." § 33.002(a)(2).
[15] Today's Destiny's liability to individual Customers may still be reduced to account for Lenders' contributory conduct even when a Lender qualifies as a "settling person." Section 33.012(b) provides: "If the claimant has settled with one or more persons, the court shall further reduce the amount of damages to be recovered by the claimant with respect to a cause by the sum of the dollar amounts of all settlements."
Additionally, § 33.017 provides for a preservation of existing rights of indemnity. It states:
Nothing in this chapter shall be construed to affect any rights of indemnity granted by any statute, by contract, or by common law. To the extent of any conflict between this chapter and any right to indemnification granted by statute contract, or common law, those rights of indemnification shall prevail over the provisions of this chapter.
TEX. CIV. PRAC. & REM.CODE § 33.017. To the extent that Today's Destiny has a right of indemnity against a Lender qualifying as a "settling person," the Trustee's amended complaint should demonstrate this right.
[16] The Court notes that the Texarkana Court of Appeals reached a contrary conclusion. Casa Ford, Inc. v. Ford Motor Co., 951 S.W.2d 865, 876 (Tex.App.-Texarkana 1997, pet. denied). The Court finds the reasoning in Martin more persuasive and more consistent with the Texas Proportionate Responsibility Statute's plain language.
[17] The Court does not hold that an order fixing liability on a proof of claim is equivalent to a "judgment" for all purposes. The Court's holding is limited to the contribution claim context of this case. The importance of a judgment in the contribution context is the determination of a liability. Because no contribution right arises without liability, a determination of liability is a necessary prerequisite to recovery on a contribution claim. An order fixing Today's Destiny's liability on Customers' proofs of claim accomplishes the same purpose of determining liability.
[18] CBI NA-CON, Inc. involved a factual scenario similar to that presented in the Trustee's adversary. Plaintiff Fina sued defendant CBI for, among other things, negligence. CBI filed a third-party claim for contribution against UOP. The Court held that CBI could not bring a contribution claim against UOP. CBI's contribution claim against UOP was derivative of Fina's potential claims against UOP. Fina could only assert contract claims and could not assert tort claims against UOP. Consequently, CBI could not assert a contribution claim against UOP because the Texas Proportionate Responsibility Statute authorizing contribution claims does not apply to contract claims.
[19] Contribution claims have been allowed based on liability imposed outside of a traditional civil lawsuit judgment. Pacesetter Pools, Inc. v. Pierce Homes, Inc., 86 S.W.3d 827 (Tex.App.-2002, no pet.) (holding that a party who paid damages awarded in arbitration could bring a contribution claim under Chapter 33 of the Texas Civil Practice and Remedies Code).
The Court notes that not all courts have been uniform in equating proofs of claims with lawsuits. See In re Bentley, 47 B.R. 269, 271 (Bankr.S.D.N.Y.1985) (holding that filing a proof of claim is not equivalent to commencement of a lawsuit for purposes of a New York procedural rule on counterclaims). This Court does not hold that a proof of claim is equivalent to a commencement of a lawsuit for all purposes. The Court's ruling is limited to whether a proof of claim is equivalent to commencement of a civil lawsuit for purposes of the Texas Proportionate Responsibility Statute. Based on Fifth Circuit precedent and the text of the Texas Statute, the Court holds that a debtor can assert a contribution claim for liability arising from a fixed proof of claim.
[20] Lenders note that the proofs of claim are insufficient to discern whether the claims are based on tort or contract, and do not plead facts sufficient for the Lenders to defend themselves. However, the proofs of claim need not plead detailed facts to give Lenders adequate notice of the charges they face. The Trustee's Amended Complaint has described the fraudulent scheme Lenders are alleged to have participated in and alleged supporting facts. The issue of whether the facts alleged are sufficient to survive a Rule 9 challenge is not decided in this Opinion.
[21] For the sake of mathematical simplicity, this example assumes all claims against the estate are claims for which 40% proportionate responsibility may be assigned to the wrongdoer.
[22] The Court also notes that there has not yet been a determination of proportionate responsibility.
[23] Some Lenders have stated that the Court should abstain to preserve their 7th Amendment jury trial rights. Assuming Lenders are entitled to a jury trial, issues for the jury have not yet been framed. Pursuant to this Opinion, the Trustee will file an Amended Complaint. Rule 9 motions must still be considered. Summary Judgment Motions have not yet been considered. Issues of law remain. The Court need not abstain based on a jury demand when legal issues remain. McFarland v. Leyh, 52 F.3d 1330, 1339 (5th Cir. 1995) ("No right to a jury trial arises if no jury issue is presented to the court"); King v. Fidelity Nat. Bank of Baton Rouge, 712 F.2d 188, 192-93 (5th Cir. 1983); Hayes v. Royala, Inc., 180 B.R. 476, 477 (E.D.Tex. 1995) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544850/ | 168 F.2d 446 (1948)
SMITH
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 258, Docket 20947.
Circuit Court of Appeals, Second Circuit.
June 2, 1948.
Charles M. Siegfried, of New York City (Solomon C. Stember, of New York City, on the brief), for petitioner.
Robert M. Weston, Sp. Asst. to Atty. Gen. (Theron Lamar Caudle, Asst. Atty. Gen., and Sewall Key and Lee A. Jackson, Sp. Assts. to Atty. Gen., on the brief), for respondent.
Before L. HAND, SWAN, and CLARK, Circuit Judges.
CLARK, Circuit Judge.
The issue here is narrow. May the taxpayer deduct from his gross income the periodic payments made to his wife pursuant to a separation agreement, where no decree of divorce or of separate maintenance has been obtained? The Tax Court, in an unreported opinion, has held that he may not. It ruled that the several specific references in I.R.C. §§ 22(k) and 23(u), 26 U.S. C.A. Int.Rev.Code, §§ 22(k), 23(u), to a decree of divorce or of separate maintenance made such a decree a requisite to the deductions. The applicable provisions are set forth in the note.[1]
The facts have been stipulated, and the question turns upon the construction of the statute enacted in 1942. It appears that in July, 1939, the taxpayer and his wife entered into a written agreement of separation wherein they agreed to live separate and apart from each other for the rest of *447 their natural lives. The agreement was executed in the State of New York, and the parties were, and still are, residents of and domiciled in that state. By the terms of the agreement it is specifically provided that the taxpayer is to make periodic payments to his wife in discharge of his legal obligations for her maintenance and support. Pursuant thereto the taxpayer paid his wife sums aggregating $10,454.46 in the year 1942 and $10,000 in 1943, and he took these sums as deductions in his income tax returns for those years. The deductions were disallowed and the Commissioner determined a deficiency of $9,486.83 in income and victory tax for the year 1943. The reason that the deficiency is assessed to the year 1943, rather than to both of the years involved, is a result of the change to the "pay-as-you-go" system whereby 1943 was made the governing tax year, even though the computation of the tax involved income for both the years. Current Tax Payment Act of 1943, c. 120, 57 Stat. 126, § 6(f), 26 U.S.C.A. Int.Rev.Code, § 1622 note. His wife, on the other hand, had reported the payments as income to her and had paid the taxes thereon. In August, 1946, however, she filed claims for the refund of the alleged overpayment of her 1943 tax. It is not disputed that no decree has at any time been secured or entered with respect to a separation or a divorce between the taxpayer and his wife. In New York a decree of separation is possible, but only on specific grounds such as abandonment or cruel and inhuman treatment; the final judgment may contain provisions for the wife's maintenance. N.Y.Civil Practice Act, §§ 1161, 1164.
The taxpayer claims deductions under § 23(u) for the payments made to his wife under the separation agreement during the tax year in question. The allowance of the deductions turns on the question whether or not the payments were includible in the gross income of his wife under § 22(k). For if they were, then the taxpayer could rightly deduct such payments. Examining the single sentence quoted in footnote 1, we find that there are three distinct and unclouded references to the requirement of some sort of judicial sanction for an alteration in the marital status in order that the payments be included in the wife's gross income. Thus it is provided that the wife must be "divorced or legally separated from her husband under a decree of divorce or of separate maintenance." So, too, the payments must have been "received subsequent to such decree." And finally, they must discharge an obligation "under a written instrument incident to such divorce or separation." (Emphasis added throughout.) Clearly, the use of "such" in the last quoted phrase has reference to the prior language, namely, a separation resulting "under a decree * * * of separate maintenance." It would be difficult, it seems, to find language more definite. Thus the periodic payments may be deducted only if made under a decree of divorce or of separate maintenance. Such has been the consistent construction given this section by the Tax Court. Brown v. Commissioner, 7 T.C. 715; Wick v. Commissioner, 7 T.C. 723, affirmed 3 Cir., 161 F.2d 732; Kalchthaler v. Commissioner, 7 T.C. 625; Daine v. Commissioner, 9 T.C. 47, affirmed in our decision herewith, 2 Cir., 168 F.2d 449.
We agree. The payments here were not court decreed obligations, and hence the taxpayer does not come within the statutory terms. The taxpayer's wife was not legally separated from him under a decree of separate maintenance. The payments were not made subsequent to such decree. At no time was the taxpayer legally obligated under any decree or written instrument incident to such decree to make the payments in question. His obligations arose from the agreement. That is not enough. They must be obligations imposed under a decree.
Nevertheless, the taxpayer contends that, even though the statute does specifically refer to a "decree," yet Congress did not intend in separation cases to limit the statutory relief to those cases where a decree had been entered. Rather he insists that the intention was to deal with the situation of a definite and binding separation, however brought about. In short, his argument is that there is an ambiguity in the statute, notwithstanding the fact that the meaning of its words is clear. He contends that where the literal meaning will lead to results that are absurd or plainly at variance *448 with the policy of the legislation, then there is ambiguity, which must be resolved by giving effect to the legislative purpose, rather than the literal meaning of the language employed. For this he cites United States v. American Trucking Ass'ns, 310 U.S. 534, 60 S. Ct. 1059, 84 L. Ed. 1345, rehearing denied 311 U.S. 724, 61 S. Ct. 53, 85 L. Ed. 472. We may note in passing that there a limited meaning was given the apparent generality of the statutory term involved. Further, as the Court took pains to point out, there were many factors supporting the limited interpretation made. Among those factors were the consistent interpretation made by the agency intrusted with the administration of the act involved and evidence from the hearings on the bill strongly supporting the ultimate interpretation.
The taxpayer attempts to show that in this case, too, there is an ambiguity, one that demands the overriding of the statutory terms. In support of this he urges us to note that the statutory objective was to apply the principle that income is to be taxed to its real owner. He calls to our attention the Report of the House Committee on Ways and Means (H.R.Rep.No.2333, 77th Cong., 2d Sess.), 1942-2 Cum.Bull. 372, 409, wherein it is set forth that under the then existing system the husband was taxed in full on his entire net income notwithstanding the fact that a large portion of it might have gone to his wife as alimony or separate maintenance payments; that the increased surtaxes intensified the hardship of husbands who were in that unfortunate predicament, and "in many cases the husband would not have sufficient income left after paying alimony to meet his income tax obligations." He cites further provisions of the report to show that in discussing the allowance of a deduction, no reference is made to the necessity of a decree. This argument seems at most a weak reed when examined in terms of the explicit and definite provisions of § 22(k). It loses even this semblance of validity when assayed in the light of the specific language of the Committee's Report, Id. 427, 428 (repeated in Sen.Rep.No.1631, 77th Cong., 2d Sess., 1942-2 Cum.Bull. 504, 568): "This subsection [i. e., § 22(k)] applies only to a wife who is divorced or legally separated under a decree of divorce or separate maintenance and to the husband from whom she is divorced or legally separated by such decree." Thus it is clear from the Committee's Report, as well as the express language of the statute, that the allowance of the deduction is dependent upon the existence of a decree of divorce or of separate maintenance. And, indeed, such has been the interpretation of the section by the Treasury Department, U.S.Treas.Reg. 111, § 29.22(k)-1. It is also the specific conclusion of able commentators. Gornick, Alimony and the Income Tax; Background and Effect of the Provisions in the Revenue Act of 1942, 29 Corn.L.Q. 28, 1943; Rudick, Marriage, Divorce and Taxes, 2 Tax L.Rev. 123, 1947.
Finally, the taxpayer argues that under the law of New York a separation by contract between the spouses is the full equivalent of a separation by judicial decree, and that if a separation agreement subsists then the courts of New York will not take jurisdiction to grant a decree accomplishing the same purpose, citing Drane v. Drane, 207 A.D. 217, 201 N.Y.S. 756. This appears to be an oversimplification of the New York judicial determination to enforce an interparty agreement as the parties have formed it. Stoddard v. Stoddard, 227 N.Y. 13, 124 N.E. 91; Johnson v. Johnson, 206 N.Y. 561, 100 N.E. 408, Ann.Cas.1914B, 407. The situation thus appears to be one where the statutory grounds are lacking and a spouse's desire to secure a modification of the contract is not enough to justify court action. Be that as it may, the possibility of evasion, the difficulty of disproving the bona fides of an informal separation, may well have persuaded Congress to limit the relief granted to those cases where a decree of legal separation had been obtained. Gornick, supra, 29 Corn.L.Q. 28, 40. The language of § 22(k) is insistently to that effect; and as we have seen, there is nothing to suggest a contrary result. Indeed, to give a separation agreement entered into in New York this special treatment would be to defeat the uniformity intended by the Act. Sen.Rep.No.1631, 77th Cong., 2d Sess., 1942-2 Cum.Bull. 568. There is no reason, for example, why a separation *449 agreement should have one effect, taxwise, in New York and another in Connecticut. Since, therefore, the taxpayer was not legally separated from his wife "under a decree * * * of separate maintenance," he is not entitled to a deduction for the payments made to his wife in the years 1942 and 1943. Accordingly, the decision of the Tax Court must be affirmed.
NOTES
[1] "Section 22. Gross income.
* * * * * * *
"(k) Alimony, etc., income. In the case of a wife who is divorced or legally separated from her husband under a decree of divorce or of separate maintenance, periodic payments (whether or not made at regular intervals) received subsequent to such decree in discharge of, or attributable to property transferred (in trust or otherwise) in discharge of, a legal obligation which, because of the marital or family relationship, is imposed upon or incurred by such husband under such decree or under a written instrument incident to such divorce or separation shall be includible in the gross income of such wife, and such amounts received as are attributable to property so transferred shall not be includible in the gross income of such husband. * * * "
"Section 23. Deductions from gross income. In computing net income there shall be allowed as deductions:
* * * * * *
"(u) Alimony, etc., payments. In the case of a husband described in section 22 (k), amounts includible under section 22 (k) in the gross income of his wife, payment of which is made within the husband's taxable year. If the amount of any such payment is, under section 22 (k) or section 171, stated to be not includible in such husband's gross income, no deduction shall be allowed with respect to such payment under this subsection." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544859/ | 2 Md. App. 502 (1967)
235 A.2d 777
ORVILLE WESLEY THOMAS
v.
STATE OF MARYLAND.
No. 296, Initial Term, 1967.
Court of Special Appeals of Maryland.
Decided December 5, 1967.
The cause was argued before MURPHY, C.J., and ANDERSON, MORTON, and ORTH, JJ.
*504 David N. Bates and Johnson Bowie for appellant.
Edward F. Borgerding, Assistant Attorney General, with whom were Francis B. Burch, Attorney General, and C. Awdry Thompson, former State's Attorney for Dorchester County, on the brief, for appellee.
MURPHY, C.J., delivered the opinion of the Court.
Appellant was convicted on July 21, 1966 by the court sitting without a jury of robbery with a deadly weapon and sentenced to ten years imprisonment in the Maryland Penitentiary. He contends on this appeal from that judgment that (a) his statement to police, which was introduced in evidence against him, was involuntary, and (b) that the evidence was insufficient to support the conviction.
There was evidence adduced at the trial from which the trier of fact could find that on November 15, 1965, the appellant, an owner of a tavern in Cambridge, Maryland, drove from Cambridge with one Matto, a companion and employee, to Salisbury, Maryland, where he rented a 1965 Chevrolet, bearing District of Columbia license tags; that the appellant and Matto then returned to Cambridge in the rented car and later that afternoon drove to a lot abutting on Pleasant Street in Cambridge; that appellant remained in the car with the engine running, while Matto walked down Pleasant Street to the home of Mr. and Mrs. William Jones, where he robbed them at gun point of some $32,800.00, including a $1,000.00 bill, two $500.00 bills, a quantity of $100.00 bills and $20.00 bills, and assorted coins (Matto being identified as the robber by the Joneses); that after the robbery, appellant and Matto drove to a bar in Salisbury where they bought drinks for everyone, including two six-packs of beer for each patron, and exhibited both a $1,000.00 bill and a $500.00 bill; and that after the establishment closed, they returned the rental car and appellant drove his own car back to Cambridge, leaving Matto in Salisbury.
The appellant was arrested on November 18 and taken to the Cambridge police headquarters where, in the presence of *505 his counsel, he gave the police a statement concerning the robbery. It is this statement that he contends was involuntary on the ground that it was induced by promises of bail reduction and lenient treatment. We do not agree. The burden of showing that a confession offered in evidence is a voluntary act of the accused is on the State. Mercer v. State, 237 Md. 479; Cooper v. State, 1 Md. App. 190. The Supreme Court in Malloy v. Hogan, 378 U.S. 1, stated the test of voluntariness in State criminal prosecutions to be as follows (page 7):
"* * * the constitutional inquiry is not whether the conduct of state officers in obtaining the confession was shocking, but whether the confession was `free and voluntary: that is, [it] must not be extracted by any sort of threats or violence, nor obtained by any direct or implied promises, however slight, nor by the exertion of any improper influence. * * *'."
At the trial, both the State's Attorney and appellant's lawyer at the time the statement was taken, William Yates, testified that no specific inducements had ever been made to appellant. More specifically, Yates testified that appellant insisted upon making a statement, and that he had advised him that he could tell the truth, but that he didn't have to make any statement. Yates further testified that he felt that the role of a State's witness would be "a good part" for appellant and that he had consulted the State's Attorney about using appellant as such, but that the State's Attorney "did not promise me anything"; that he, Yates, told the appellant that "if he told the truth * * * he would could get possibly some consideration"; that he further advised the appellant that if he told the truth he thought the State's Attorney would give him some consideration with respect to his bond, "but that there was no promise of immunity, no promises of a lack of prosecution or anything else."
While appellant does not claim that either the police or the State's Attorney induced his statement by any promises made directly to him, he nevertheless argues that both hope and promise were held out to him by his own attorney acting as a "mere conveyor" for the State's Attorney for the purpose of inducing him to make a statement; and that this hope and *506 promise was in the form of a reduction in bail and the implied promise that he would get "consideration" if he told the truth. His position appears predicated upon the fact that initially he refused to make any statement, and that the statement which he finally gave followed a telephone conversation between the State's Attorney and his lawyer, Yates, carried on in appellant's presence, at which time he overheard Yates's side of the conversation and was led to believe therefrom that there was a possibility of bail reduction and lenient treatment. While we cannot say that appellant was not influenced in making a statement by what he heard of the conversation between the State's Attorney and Yates, in view of the testimony of both the State's Attorney and Yates that no promises were made to induce a statement, we conclude that the trier of fact committed no error in determining that the appellant's statement was freely and voluntarily made. In a trial before a court, sitting without a jury, it is a matter for the trial court to decide whether a statement was freely and voluntarily given, and its determination will not be disturbed on appeal in the absence of a showing of an abuse of discretion. Johnson v. State, 1 Md. App. 217. We find no such abuse here.[1]
Appellant next contends that the evidence was insufficient to establish that he was either a principal or accessory to the crime. As appellant was indicted only as a principal, the proof, to be legally sufficient to sustain the conviction, must show that he was a principal and not an accessory. See Agresti v. State, 2 Md. App. 278.
*507 The test of the sufficiency of the evidence in a case tried before the court without a jury is whether the evidence, if believed, either shows directly or supports a rational inference of the facts to be proved, from which the court could fairly be convinced, beyond a reasonable doubt, of the defendant's guilt of the offense charged. Kucharczyk v. State, 235 Md. 334, 337; Chittum v. State, 1 Md. App. 205, 209.
As heretofore indicated, the evidence clearly showed that appellant and Matto rented a car in Salisbury, returned in it to Cambridge, and drove to the robbery scene. While appellant kept the motor running, Matto entered the Jones' home to perpetrate the robbery. From a photograph introduced in evidence at the trial, the Jones' home was shown as being only a short distance away from where appellant had parked the car, and it was in his clear view as he sat in the vehicle. There was evidence indicating that appellant had a paper over his face and appeared to be reading, although in the estimation of a witness who observed him there, it was too dark to read. The evidence further indicated that after waiting for some twenty-five to thirty minutes, Matto returned to the car, told appellant to "Get the hell out of here," and both men then drove to a Salisbury bar where they bought drinks and large quantities of beer for all the patrons, exhibiting a $1,000.00 bill and a $500.00 bill at the time.
It is well settled that persons, actually or constructively present, aiding and abetting the commission of an armed robbery, but not themselves committing it, are principals in the second degree. Vincent v. State, 220 Md. 232; Agresti v. State, supra. While appellant was not actually present at the immediate place of the perpetration of the robbery, he was, as in Vincent, in close proximity and contiguity thereto and in such a position to be of aid and assistance to Matto in the successful perpetration of the crime. One who keeps watch or guard at such convenient distance as to afford aid or encouragement to the actual perpetrator of a robbery is clearly a principal. Vincent v. State, supra, at page 239. The trier of fact could draw a rational inference from the evidence that the appellant was aiding and assisting Matto in the robbery; that he was to have the car ready for a "get away"; and that he was a *508 participant in the division of the proceeds of the robbery as evidenced by his spending spree in the Salisbury bar immediately following the crime. Under these circumstances, the trier of fact was not obliged to believe that appellant's presence with Matto at the scene of the crime was innocent and unknowing. Nor can appellant avail himself of the rule that when guilt is based solely on circumstantial evidence, the circumstances must exclude every reasonable theory of innocence, Brown v. State, 222 Md. 290, since there exists here a measure of direct evidence, including appellant's own statement.
Judgment affirmed.
NOTES
[1] Although the interrogation of the appellant took place prior to the decision in Miranda v. Arizona, 384 U.S. 436, the case was tried subsequent to that decision, so that, if applicable, the protections afforded by Miranda would be available to appellant. As appellant's counsel had a full opportunity to confer with him prior to interrogation, and was present throughout the interrogation, and asked all but a few of the questions, it is not contended that any of his rights under Miranda were violated. Indeed, under such circumstances, no such contention could be fruitfully made since the "protective device" which the Miranda court thought necessary to dispel the compelling atmosphere of police interrogation, viz., the presence of counsel, was not wanting. See Miranda at page 466, 470. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544737/ | 108 N.H. 329 (1967)
RENE M. GAGNON
v.
CROFT MANUFACTURING AND RENTAL COMPANY.
No. 5566.
Supreme Court of New Hampshire.
Argued October 3, 1967.
Decided November 30, 1967.
*330 Devine, Millimet, McDonough, Stahl & Branch and E. Donald Dufresne (Mr. Dufresne orally), for the plaintiff.
Booth, Wadleigh, Langdell, Starr & Peters and Alan Hall (Mr. Hall orally), for the defendant.
GRIMES, J.
It has long been established in this state that "An objection to service or notice is waived when a party . . . submits any other question, except the sufficiency of the service or notice, to the court . . . ." Roberts v. Stark, 47 N.H. 223, 225; Dolber v. Young, 81 N.H. 157; Lyford v. Academy, 97 N.H. 167. The Trial Court in the case before us has correctly ruled that the defendant has waived its claim of lack of jurisdiction by including a plea of the statute of limitations.
The defendant contends that the plea of the statute of limitations does not go to the merits but is an additional ground why the court does not have the "power to hear the case on the merits." A successful plea of the statute would result in a judgment in favor of the defendant and would bar the plaintiff's right to recover in this action. By including such a plea, the defendant submitted a question to the court other than the sufficiency of the service. See Rosenblum v. Company, 99 N.H. 267, 270. It was a question upon which the Court could not act unless it had jurisdiction. By filing such a plea the defendant invoked the jurisdiction of the court and has as a matter of law waived its claim of lack of jurisdiction.
The defendant also argues it was required to file its plea of the statute of limitations within twenty days following the return day of the writ under Superior Court Rule 22 (RSA 491 App. R. 22) and that therefore it should not be held to have waived the question of jurisdiction by following the requirement of the rule. Rule 22, however, provides for the filing of a special plea after the expiration of twenty days "for good cause shown" and it is common practice for parties to file motions prior to the expiration of the twenty days requesting an extension of time until after jurisdictional questions have been determined. The defendant had the right to have the jurisdictional question decided before *331 "participating in other phases of the case." Beggs v. Reading Company, 103 N. H. 156, 158; Maryland Casualty Co. v. Martin, 88 N.H. 346.
Defendant requests that if we rule as we have on the question of waiver we hold that its waiver resulting from its pleading filed after the expiration of the six-year period of limitation imposed by RSA 508:4 did not relate back to the date of the plaintiff's writ which was within the six-year period and thereby foreclose the defense of the statute of limitations.
If the defendant was absent from the state and if its contention that it was not doing business in this state is correct, no valid service could have been made on it prior to the enactment of RSA 300:14 and 15. This time that it was absent from the state would, therefore, be excluded in computing the time limit for bringing the action provided by RSA 508:9, (see Bolduc v. Richards, 101 N.H. 303) and defendant's waiver of the jurisdictional question and resulting general appearance would come well within the statutory period. If the defendant was doing business in the state, then, of course, the service made upon the Secretary of State within six years from the accident was valid under RSA 300:11 (c) and 300:12. Under these circumstances, it is not material whether defendant's waiver relates back to the date of plaintiff's writ.
Exceptions overruled.
All concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544786/ | 427 Pa. 535 (1967)
Smith
v.
Smith, Appellant.
Supreme Court of Pennsylvania.
Argued October 3, 1967.
November 14, 1967.
Before BELL, C.J., JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
C.M. Janavitz, with him David M. Janavitz, and Janavitz & Janavitz, for appellant.
*536 John A. Metz, Jr., with him Harry H. Rosen, Henry G. Beamer, III, and Metz, Cook, Hanna & Kelly, for appellee.
OPINION BY MR. JUSTICE COHEN, November 14, 1967:
This appeal arises out of a decree of the Court of Common Pleas of Allegheny County. The decree was entered by default based upon defendant-appellant's failure to appear at the time of trial. After receipt of the decree, appellant made prompt application to the court below for the issuance of a rule to show cause why the decree should not be opened. The court refused to issue the rule to show cause and the appellant filed the present appeal with our Court.
Plaintiff-appellee, then appellant's husband, commenced an action in equity seeking to enforce an alleged oral trust of real estate against appellant and to compel the conveyance of appellant's home to him, legal title to which, he alleged, was fraudulently vested in appellant.
In the course of the subsequent proceedings appellant has had five attorneys, not including her present counsel, a fact which plays a relevant part in the current problem. We shall simply refer to them by number.
On March 1, 1962, appellant, by her attorneys, No. 1 and No. 2, filed preliminary objections to appellee's complaint. On November 16, 1962, attorneys No. 3 and No. 4 entered their appearance on behalf of appellant. Their appearance was subsequently withdrawn on March 22, 1966. On April 27, 1966, attorney No. 5 entered his appearance for appellant, and on the same date attorney No. 2 withdrew his appearance. On October 14, 1966, attorney No. 5 withdrew his appearance. Thus, after a number of appearances and withdrawals of counsel, the only remaining attorney of record was *537 attorney No. 1 who had entered an appearance in 1962.[1]
On November 17, 1966, the case was listed for trial on the equity trial list, notice of which appeared in the Pittsburgh Legal Journal listing attorney No. 1 as appellant's attorney. The case was called for trial on December 12, 1966, at which time neither the appellant nor any counsel on her behalf appeared. On December 15, 1966, appellee filed a motion for a default judgment for failure of appellant to appear at trial, a request for findings of fact and conclusions of law, and submitted to the court below a proposed decree. Although no testimony on behalf of the appellee appears to have been taken,[2] the court below entered the decree as submitted by appellee.[3]
Appellant's principal contentions are that she didn't receive sufficient notice of the date, time, or place of trial either by the court or appellee's counsel and that the practice of publishing a trial list in the local legal journal is inadequate notice to a defendant who has had a number of attorneys appear and withdraw during the course of a lawsuit. Appellee, on the other hand, argues that the accepted common practice is to *538 provide notice in the local legal journal and that to require actual notice in every case would be an undue burden on the courts and the attorneys involved.
We find it unnecessary to determine if actual notice of trial must be given in all cases. In the unusual circumstances of this case we believe appellant did not receive sufficient notice. A defendant who has been represented, as disclosed by this record, by numerous attorneys throughout the proceedings is entitled to more than mere notification in a legal journal as to the date, time and place of trial.
Moreover, the procedure followed by the court below in entering a "default decree" was improper. Apparently, it relied upon Pa. R.C.P. 1511,[4] as authority for entering a default judgment against appellant for her failure to appear at trial. This rule does not authorize the entry of a default judgment for failure to appear at trial. Hence, the lower court erred if it failed to require appellee to prove the factual allegations supporting his cause of action before it rendered a decree. For these reasons it is our position that appellant should be given an opportunity to present her defense, if any, to appellee's claim.
The decree of the court below is vacated and the case remanded to that court for further proceedings in accordance with this opinion. Each party to pay own costs.
*539 Mr. Justice MUSMANNO took no part in the consideration or decision of this case.
CONCURRING OPINION BY MR. JUSTICE ROBERTS:
Although I believe that the procedure here employed to give notice of a pending adjudication to a basically unrepresented litigant may be constitutionally infirm,[1] I do not believe, as the majority intimates, that the sufficiency of notice should turn on the sequence of attorneys involved. However, refusal to open this default judgment was clearly erroneous.
In Texas and Block House Fish and Game Club v. Bonnell Run Hunting and Fishing Corp., 388 Pa. 198, 130 A.2d 508 (1957) we stressed that a refusal to permit the opening of a default judgment could be reversed only for a clear abuse of legal discretion. But, characterizing Pinsky v. Master, 343 Pa. 451, 452, 23 A.2d 727, 728 (1942) as the leading case on this subject and quoting therefrom, we also insisted in Block House Fish (supra at 201, 130 A. 2d at 509-10): "`It has long been a custom in Pennsylvania to grant relief from a judgment entered by default where the failure is due to a mistake or oversight of counsel and where application is promptly made and a reasonable excuse for the default offered.'"
Appellant promptly petitioned the court to open the judgment,[2] asserted a meritorious defense and demonstrated that her failure to appear could be reasonably excused. Though we review only for an abuse of discretion, I find it inconceivable that the trial court exercised *540 its discretion[3] in this instance and would therefore reverse the decree below on this ground alone.
Mr. Justice O'BRIEN joins in this concurring opinion.
NOTES
[1] The record discloses that attorney No. 1 did not engage in any activity on behalf of appellant in these proceedings subsequent to the filing of an answer to appellee's amended complaint on May 14, 1962. Thus, when the case was called for trial on December 12, 1966, there was no apparent indication that attorney No. 1 still actively represented appellant, although his appearance apparently was not withdrawn.
Other facts of record have been omitted because they are not germane to a proper resolution of the case.
[2] Although appellee's attorney argued vigorously on appeal that testimony had been taken, the record before this Court does not indicate that the trial judge, prior to the rendering of the decree, heard any testimony on behalf of appellee.
[3] The substance of that decree has been omitted because its consideration is not necessary in disposing of the issues presented.
[4] "Rule 1511. Judgment upon Default or Admission
"(a) The prothonotary, on praecipe of the plaintiff, shall enter a judgment by default against the defendant for failure to plead within the required time to a complaint endorsed with a notice to plead. In all other cases of default or of admission the judgment shall be entered by the court. (b) In all cases, the court shall enter an appropriate final decree upon the judgment of default or admission and may take testimony to assist in its adjudication and in framing the decree."
[1] See Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652 (1950).
[2] We emphasized in Block House Fish as a reason supporting our refusal to reverse the lower court's decision not to permit opening that appellant waited until four months and ten days after judgment was entered to present its petition. Appellant here acted within thirty days.
[3] The court below in Block House Fish detailed in an extensive opinion its reasons for denying relief. In this case the court below filed no opinion of record. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544793/ | 168 F.2d 436 (1948)
COMMISSIONER OF INTERNAL REVENUE
v.
BRINCKERHOFF et al. COMMISSIONER OF INTERNAL REVENUE
v.
STEPHAN et al. COMMISSIONER OF INTERNAL REVENUE
v.
DAVIDS. COMMISSIONER OF INTERNAL REVENUE
v.
CLARY.
Nos. 197-200, Dockets Nos. 20821-20824.
Circuit Court of Appeals, Second Circuit.
June 3, 1948.
*437 Theron Lamar Caudle, Asst. Atty. Gen. and Sewall Key, George A. Stinson, and Morton K. Rothschild, Sp. Assts. to Atty. Gen., for Commissioner of Internal Revenue, petitioner.
Stanley H. Hemley, of Jamaica, N. Y., for respondents.
Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
The taxpayers, John H. Brinckerhoff, C. Eleanor B. Stephan, Beatrice Clary Davids, and George B. Clary, were named as beneficiaries under Article Sixth of the will of their aunt, Laura E. Anderson, who died May 14, 1921, a resident of Jamaica, New York. At the time of her death Laura E. Anderson owned property known as 365 and 365a Fulton Street, Jamaica, which *438 then had a fair market value of $66,207.24. Article Sixth provided:
"The property known as 365 and 365a Fulton Street, Jamaica, New York, is to be sold when in the judgment of my executors such sale shall be advisable. The proceeds of which will be divided as follows: To the Jamaica Hospital of Jamaica, New York, the sum of Five thousand dollars, the interest of said sum to be applied to the general use of said Jamaica Hospital of Jamaica, New York. To the Dutch Reform Church of America of Jamaica, New York, the sum of Two thousand dollars. The balance of the proceeds of such sale is to be divided among the following heirs: Charlotte Eleanor Brinckerhoff and John Henry Brinckerhoff children of my brother Starr Brinckerhoff, George B. Clary and Beatrice Edwards Clary children of my sister Irene B. Clary Haines share and share alike. In the event of the death of either of the children of my brother, Starr, the survivor shall take the share of the one so dying. In the event of the death of either of the children of my sister Irene, the survivor shall take the share of the one so dying."
In addition, the will also contained specific devises of realty to other designated persons as well as certain bequests of personal property. The Seventeenth Article provided as follows:
"Seventeenth. I nominate and appoint my brother Starr Brinckerhoff and my husband Frank Bernard Anderson to be the Executors of this my last Will and Testament and I do hereby authorize and empower my said executors to sell all or any part of my said real estate and give good and sufficient deeds and conveyance for the same, or to lease all or part thereof as in their judgment shall seem best and proper, and I also direct that my executors shall not be required to give bonds for the favored performance of their duties."
The executors qualified under the will on June 8, 1921, and held the property until April 6, 1928, when they conveyed it to Brinclar Realty Corporation which thereupon issued to each taxpayer 250 shares of its capital stock. Each accepted the shares in lieu of his share of the proceeds of a sale of the property, and in consideration of the receipt each released the executors from liability to pay him a share of such proceeds, as provided in the will.
On April 6, 1928, the fair market value of the property was $135,092.70, and the value of the 250 shares of the corporation was one-fourth of the property's value, or $33,773.17. The executors filed an income tax return for 1928, but made no reference in it to their conveyance to the corporation. The property was held by the corporation until the corporation was dissolved on June 30, 1941, and it was then conveyed as a liquidating distribution to the four taxpayers. "The total proceeds of the liquidation * * * amounted to" $135,092.70, of which each taxpayer received "by way of a one-fourth (¼) share in said real property" $33,773.17.
Taxpayers reported no gain from the liquidating distribution. The Commissioner determined a long-term capital gain of $71,864.78 by subtracting from the liquidation "proceeds" of $135,092.70 a figure of $63,227.92 representing the property's value at the testatrix' death, less depreciation. Taking 50 percent of the gain, or $35,932.39, as taxable, he added one-fourth thereof, or $8,983.10, to the income of each taxpayer with the explanation:
"Under Section 113(a) (5) of the Internal Revenue Code [26 U.S.C.A.Int.Rev.Code, § 113(a) (5)] the value of the stock in Brinclar Realty Corporation exchanged by you for its assets upon dissolution of the corporation is the value of the property itself on the date of the death of the testatrix."
The foregoing facts are as found by the Tax Court and stipulated by the parties. The Tax Court held that the basis of the shares exchanged in the liquidation of the corporation was not the value of the realty at the date of the testatrix' death in 1921 as claimed by the Commissioner, but was the value of the taxpayers' rights as legatees to the proceeds of a sale of the property in 1928 when they released the executors from these claims as legatees and obtained the shares in lieu of any cash that they might have derived had the land then been sold by the executors. Since there was no evidence *439 of the ultimate disposition of the two charitable bequests mentioned in Article Sixth of the will, totalling $7,000, also to be satisfied from the proceeds of a sale of this realty, the Tax Court determined that the value of the claims to the proceeds surrendered by the four taxpayers, which it held to be the basis for the stock received by them, was $7,000 less than the fair market value of the property at that time. It accordingly assessed a tax upon a $7,000 capital gain realized in the liquidation. This tax is not questioned by the taxpayers, and the item of $7,000 is mentioned merely to state the reason given by the Tax Court for determining any tax deficiency in this case.
We can see no essential difference between the facts in the case at bar and those in Anderson v. Wilson, 289 U.S. 20, 53 S. Ct. 417, 419, 77 L. Ed. 1004. There, as here, executors were directed to sell real estate and divide the proceeds among designated legatees. The Supreme Court in an opinion by Mr. Justice Cardozo construing the will and interpreting the law of New York held that a loss on the realty was a loss of the estate for tax purposes, which could not be deducted by the beneficiary in his personal tax return. The court stated:
"* * * Under the law of New York what passed to these executors was the title to the fee. By the will of this testator all his property, real and personal (with exceptions not now material), was to be converted into money. The five sons and daughters among whom the money was to be divided had no interest in the land, aside from a right in equity to compel the performance of the trust. * * * What was given to them was the money forthcoming from a sale. * * * Their interest in the corpus was that and nothing more.
"* * * What was bequeathed was an interest in a fund to be made up when the trustees were of opinion that it would be advisable to sell. This alone was given, and this has been received. There has been no loss by the taxpayer of anything that belonged to him before the hour of the sale, for nothing was ever his until the sale had been made and the fund thereby created. A shrinkage of values between the creation of the power of sale and its discretionary exercise is a loss to the trust, which may be allowable as a deduction upon a return by the trustees. It is not a loss to a legatee who has received his legacy in full."
In the case at bar, the language of Article Sixth of the will creates a mandatory power of sale in the executors. They are trustees for the purpose of exercising that power and distributing the proceeds, first in specific amounts to two charities, and the balance to the four taxpayers. An indication of further trust duties appears in Article Seventeenth whereby the executors are given power to lease property and presumably to collect any income. Here, as in Anderson v. Wilson, supra, under the New York law the executors alone had the legal title to the land described in Article Sixth and the taxpayers' only rights were in the proceeds of a sale and to compel performance of the trust in that respect.[1]
It is argued on behalf of the Commissioner that the transfer of the realty to the corporation and the shares of stock to the legatees was a tax-free transaction and that the legatees took their shares by bequest under the will. Section 112(b) (5) of the Revenue Code, 26 U.S. *440 C.A.Int.Rev.Code § 112(b) (5), which is substantially the same as the corresponding section of the Revenue Act of 1928, provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock of that corporation, and immediately after the exchange such person or persons are in control of the corporation; in such case the basis of the property acquired is the same as that exchanged, by Section 113(a) (6) of the Code, 26 U.S.C. A.Int.Rev.Code, § 113(a) (6). We agree with the determination of the Tax Court that though the shares were directly issued to the legatees, the substance of the transaction was the same as if they had been first issued to the executors who in turn transferred them to the legatees, for the executors achieved the same dominion over the shares and achieved the same result as though they had taken two steps instead of one.
A transfer of property by the executors to the corporation accompanied as it was by a theoretical receipt by the executors of the stock of the corporation which they then owned or controlled was a tax-free transaction under the provisions of Section 112(b) (5) of the Code. A tax liability however arose against the executors when the stock was transferred to the taxpayers in exchange for a release of their claims as legatee-beneficiaries to the cash proceeds which the executors would have realized had they instead exercised the mandatory power of sale given them under the will. We have heretofore held that the use by the executor of property of the estate to satisfy a legatee's claim for a cash payment is a taxable transaction in which gain or loss of the estate is to be recognized to the extent of the difference between the estate's basis and the value of the cash liability satisfied. Kenan v. Commissioner of Internal Revenue, 2 Cir., 114 F.2d 217; Suisman v. Eaton, D.C., D.Conn., 15 F. Supp. 113, affirmed Suisman v. Hartford-Connecticut Trust Co., 2 Cir., 83 F.2d 1019, certiorari denied Id., 299 U.S. 573, 57 S. Ct. 37, 81 L. Ed. 422; Cf. Commissioner of Internal Revenue v. Matheson, 5 Cir., 82 F.2d 380. Thus the basis of the shares of stock which the taxpayers received is not the value of the realty at the time of the death of the testatrix but the value of their claim to the proceeds of a sale which they exchanged for the stock.
It is argued that the three decisions we have cited immediately above do not apply because they involved only cash legacies of fixed amounts and the executor in such cases had control of the general estate which fluctuated in value in his hands while the legatee was unaffected in the amount of his recovery by the fluctuations. But the facts here involve no legal distinction since the taxpayers had no interest in the real estate during the period of its increase in value but only in such cash as they might receive from the exercise of the executors' power of sale. The real estate itself belonged to the executors in trust who retained the title until it was disposed of through the stock transactions we have described. The present case is therefore to be distinguished not from other legacies which are of a fixed amount in cash but from gifts under a will of property which belongs as such to the legatee. The fact that the ultimate value realized by the taxpayers in the present case depends upon the fluctuating value of the property devised to the executors does not affect our conclusion; this aspect was definitely present and indeed was discussed by Mr. Justice Cardozo in Anderson v. Wilson, 289 U.S. 20, 27, 53 S. Ct. 417, 77 L. Ed. 1004. There, as here, a trust estate intervened before the beneficiaries could realize anything so that the estate and not the beneficiaries was held to be affected for tax purposes by any increase or decrease in the value of the property before its final disposition. That the property in the case at bar was not sold for cash but was exchanged for the legatees' claims to the proceeds is not significant, as we have already shown.
The Commissioner contends that the taxpayers took the shares of stock by bequest or inheritance because there was a compromise of their claims under the will through the substitution of the shares of stock for the cash proceeds to which they were entitled; he cites decisions holding that an heir who receives by a compromise more than his share of the estate under the will does not realize taxable income because *441 he takes the excess due to his status as an heir. We think these decisions are irrelevant to the determination of the question of basis in the present case where stock of the same amount as the legatees' cash claims under the will was given in satisfaction of them.
For the foregoing reasons the orders of the Tax Court are affirmed.
NOTES
[1] Salisbury v. Slade, 160 N.Y. 278, 54 N.E. 741; Delafield v. Barlow, 107 N.Y. 535, 14 N.E. 498; Section 96, New York Real Property Law: Consol.Laws, c. 50.
"§ 96. Purposes for which express trusts may be created
"An express trust may be created for one or more of the following purposes:
* * * * * *
"2. To sell, mortgage or lease real property for the benefit of annuitants or other legatees, * * *"
Section 100, New York Real Property Law:
"§ 100. Trustee of express trust to have whole estate
"Except as otherwise prescribed in this chapter, an express trust, valid as such in its creation, shall vest in the trustee the legal estate, subject only to the execution of the trust, and the beneficiary shall not take any legal estate or interest in the property, but may enforce the performance of the trust." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544853/ | 2 Md. App. 524 (1967)
235 A.2d 764
RONALD LEE DUBS
v.
STATE OF MARYLAND.
No. 301, Initial Term, 1967.
Court of Special Appeals of Maryland.
Decided December 6, 1967.
The cause was argued before MURPHY, C.J., and ANDERSON, MORTON, ORTH, and THOMPSON, JJ.
Joseph F. Lentz, Jr., for appellant.
S. Leonard Rottman, Assistant Attorney General, with whom were Francis B. Burch, Attorney General, J. Thomas Clark, State's Attorney for Queen Anne's County, Edwin H.W. Harlan, Jr., State's Attorney for Harford County, and Donald Smith, Deputy State's Attorney for Harford County, on the brief, for appellee.
ORTH, J., delivered the opinion of the Court.
On August 30, 1965 the appellant was convicted of murder in the first degree, without capital punishment, by a jury in the Circuit Court for Harford County. He was sentenced to imprisonment "for the rest of his natural life" on September 21, 1965. He noted an appeal on September 30, 1965. Upon petition of the appellant on October 22, 1965 the time for transmitting the record to the Court of Appeals was extended to December 28, 1965 and upon petition on January 19, 1966 was further extended to March 1, 1966. By order of the Court *528 of Appeals of February 14, 1966 the appeal was remanded to the lower court for further proceedings to ascertain whether the appellant desired to avail himself of the relief afforded by the rulings of the Court in Schowgurow v. State, 240 Md. 121, and its companion cases. At a hearing on March 9, 1966 the appellant offered a motion for a new trial and the motion was granted. When first charged with the crime, the appellant waived his right to indictment by a grand jury and requested an immediate trial under Code, Art. 27, § 592. An information was filed against him and he was tried thereunder. Therefore, it was not necessary to indict him when he elected to declare his trial invalid and his subsequent trial could proceed under the original information. On May 18, 1966 the appellant filed a motion for a change of venue and by order of court the case was removed to Queen Anne's County. On the same date the appellant moved to dismiss the information on the ground, among others, that he was denied a speedy trial. On June 17, 1966 the transcript of the record and a certified copy of the docket entries were filed in the Circuit Court for Queen Anne's County. On July 1, 1966 the appellant filed a pauper's oath and counsel was appointed to represent him. The motion to dismiss the information was heard and denied and the appellant pleaded "Not Guilty. Not Guilty by reason of insanity. Not Guilty by reason of insanity at the time of the crime and Not Guilty for being a chronic alcoholic." The case was assigned for trial on August 15, 1966 and trial before a jury commenced on that date. It concluded on August 19, 1966 and the jury returned its verdict: "Sane at the time of the trial. Sane at the commission of the alleged offense. Not Guilty of murder in the first degree but guilty of murder in the second degree." On September 16, 1966 the appellant was sentenced to imprisonment for a term of 18 years from January 28, 1965 after motion for a new trial was heard and denied.
I
On October 11, 1965 the Court of Appeals decided Schowgurow v. State, supra, and in reliance on that decision the appellant petitioned for a writ of habeas corpus in the Circuit Court for Harford County. On November 9, 1965 Judge Harry *529 E. Dyer, Jr. rendered an opinion in which he stated that the court was "inclined to agree" with the contention that the appellant's fundamental constitutional rights had been "infringed under the reasoning of the Schowgurow decision" and that the court would order "the issuance of a Writ of Habeas Corpus and the release of the appellant from imprisonment unless the State's Attorney for Harford County can re-indict the Relator by a properly constituted Grand Jury, within a reasonable time." The appellant complains on appeal that the writ never issued although his attorney requested the court by letter of December 20, 1965 to consider signing the writ at that time as no action had been taken by the State's Attorney for Harford County. We point out that the appellant had not been indicted by an illegally constituted grand jury but was charged under a criminal information filed at his request. The information was not affected by the Showgurow decision. Further the appellant had an appeal then pending in the Court of Appeals which he made no attempt to dismiss and which was remanded by the Court for further proceedings as a result of Showgurow on February 14, 1966 after the administrative procedures necessary to be determined had been resolved. In any event, the appellant was legally detained on a valid information pending against him, and his detention was not rendered illegal by the petit jury which convicted him being unconstitutionally constituted, particularly in view of the fact that the conviction was not void per se but was voidable only at the election of the appellant. Even an illegal detention would not, in itself, entitle the appellant to a reversal of the judgment from which he here appeals or to a new trial. See Dixon v. State, 1 Md. App. 623. The contention that the lower court had the right to issue the writ of habeas corpus and the complaint that it did not do so is moot. It is not relevant to this appeal and has no merit with regard to it.
II
The appellant contends that he was denied a speedy trial. That this contention runs only to the trial resulting in the judgment now appealed was acknowledged by appellant's counsel at the hearing on the motion to dismiss. The original trial *530 was valid until declared invalid by the appellant. He made an election to invalidate it, after remand of his appeal from the judgment resulting from that trial, on March 9, 1966. Therefore the question of whether he was denied a speedy trial is limited to the period from March 9, 1966 to the date of his trial, August 15, 1966. The question of a speedy trial was not formally presented to the court until May 18, 1966 when the appellant filed a motion to dismiss the information, although on April 15, 1966, his counsel, under the mistaken assumption that it was necessary that the appellant be indicted or another information be filed against him, stated in a letter to the State's Attorney of Harford County, "I would appreciate your taking the necessary steps to expedite his trial in either having him indicted by the grand jury or presenting him under a Criminal Information Report so that his trial may be expedited as soon as possible." But contemporaneous with the motion to dismiss on May 18, 1966, the appellant filed a motion for change of venue, to which he was entitled as a matter of right, Md. Code, (1965 Repl. Vol.), Art. 75, § 44; Md. Rules, 542, 738, and the case was removed. On July 1, 1966 the trial judge stated that although he was supposed to go on vacation the following Wednesday, he would forego it and try the case. Counsel for the appellant replied, "We agreed some time the early part of August would be perfect." Trial was set for August 15, 1966. Arrangements were also made at that time to refer the appellant to the Department of Mental Hygiene for examination. In Jones v. State, 241 Md. 599, 608, the Court of Appeals quoted 22A C.J.S. Criminal Law § 647 (4):
"A speedy trial is, in general, one had as soon as the prosecution, with reasonable diligence, can prepare for it; a trial according to fixed rules, free from capricious and oppressive delays, but the time within which it must be had to satisfy the guaranty depends on the circumstances."
We pointed out in State v. Long and Nelson, 1 Md. App. 326, 333, that although an accused has the right to a speedy trial, if he does not demand the right, he waives it. "And even where a defendant had made a proper demand for trial or has moved *531 for his discharge or dismissal of the proceedings against him, this does not necessarily prevent a ruling that because of subsequent conduct he waived his right to a speedy trial." State v. Murdock, 235 Md. 116 at page 121. Under the circumstances here present, we think that the trial was held as soon as the State, with reasonable diligence could prepare for it, and feel that it was so free from capricious and oppressive delays as not to deny the appellant his constitutional rights. We find that the period of about 5 months and 6 days before trial commenced was not unreasonable, particularly in view of the actions of the appellant, and that he was in no wise prejudiced thereby. We hold that the appellant was not denied the right to a speedy trial.
III
The appellant contends that the trial court erred in refusing to strike for cause a juror because "There was sufficient doubt as to whether or not (he) was a competent juror to try the case without prejudice." The basis of the contention was the responses of the juror on the voir dire to the effect that "it would depend a little on the situation" whether he was prejudiced against anyone who has taken the life of another and that he would be a "little" prejudiced against "somebody who is shown" to have been the cause of someone else's death, "before any proof of circumstances takes place." He stated that he did not "think a person should take the life of another person other than self defense." But he made it clear in response to inquiry by the court that any prejudice he may have did not extend to the point where he felt he could not render a fair and just verdict according to the evidence, that he would be able to give the accused the benefit of reasonable doubt, notwithstanding the victim was the accused's wife, that there was no such feeling on his part as to prevent the accused from getting a fair trial at his hands according to all the rules of evidence, that he would be able to give the accused the benefit of a doubt as to whether the accused was sane or insane and that if he was convinced beyond a reasonable doubt that the accused was insane at the time of the commission of the offense, he could find that the accused was not responsible for *532 the crime. The appellant supports his contention with a citation from M.L.E., Vol. 13, Juries, p. 473:
"A prospective juror who has such personal opinions with respect to the subject matter of the action or proceedings as would influence his verdict is incompetent."
The prospective juror demonstrated to the trial court's satisfaction that his personal opinions with respect to the subject matter were not such as would influence his verdict. The court felt that the juror was not biased in favor of or against the guilt of the appellant in this case, and we agree. In Bristow v. State, 242 Md. 283, 288, the Court quoted the definition of what constitutes impartial jurors as set out in Garlitz v. State, 71 Md. 293, 300:
"The minds of such men always remain open to the correction of former impressions, and remain entirely impartial, with power to hear and determine upon the real facts of the case, without the least bias in favor of former impressions, whatever they may have been. And therefore, in our present state of society, all that can be required of a juror is that he should be without bias or prejudice for or against the accused, and that his mind is free to hear and impartially consider the evidence, and render a verdict thereon without regard to any former opinion or expression existing in his mind * * *."
In Zimmerman v. State, 56 Md. 537, a juror stated that he had formed and expressed an opinion in regard to the guilt or innocence of the traverser. Upon being sworn on his voir dire he said that the opinion he had formed would not prevent him from rendering a fair and impartial verdict in the case. The Court held he was a competent juror. We find no abuse in the refusal of the trial court to strike the juror for cause. We note that the appellant exercised one of his peremptory challenges and excluded the juror. We further note that when the jury was sworn, the appellant had nine peremptory challenges remaining.
*533 IV
Although records of Spring Grove State Hospital pertaining to the appellant were admitted in evidence, the appellant contends that the court erred in not allowing the admission of three documents which were part of those records. The record shows, however, that the court did not refuse the admission of one of them, a voluntary treatment agreement signed by the appellant, dated August 28, 1964. At a conference at the bench, the court overruled the State's objection to that document, saying that it was "simply a matter of corroborating the Defendant's own statement that he went voluntarily to Spring Grove State Hospital." It was designated "Defendant's Exhibit No. 5 for identification." It was handed to a witness for the appellant on one occasion and apparently considered by him in his testimony and on another occasion when defense counsel was reading the medical record into evidence, he said, "I will show you Exhibit No. 5 which has been offered, is that he (the appellant) voluntarily entered the hospital himself. This is a Voluntary Treatment Agreement when he goes to the hospital and signs himself in and this is how he got into the hospital the second time."
The other two documents were a "Physician's Certificate" dated December 12, 1963 signed by two physicians and a "Commitment Certificate" dated December 15, 1963 signed by one physician, whereby the appellant was committed to Spring Grove State Hospital. Both were forms of the Department of Mental Hygiene and certified that the physicians had personally examined the appellant and "do believe that the said Ronald Dubs is insane, and that the disease is of a character which, in my opinion, requires that the above mentioned person be placed in a hospital or institution in which the insane are detained for care and treatment." That part of the quote here italicized is imprinted on the forms. At a bench conference, the trial court sustained the objection of the State to their admission and told counsel for the appellant that it would not be necessary for him to proffer them before the jury "now that I have ruled on those." The appellant contends that they were properly admissible as records kept in the regular course of business under the provisions of Md. Code, (1965 Repl. *534 Vol.), Art. 35, § 59. Hospital records do qualify under the statute and are admissible in criminal cases. Dunn v. State, 226 Md. 463. The effect of the statute is to provide that such evidence is not inadmissible because it is hearsay, but it does not compel the admission of such evidence if it is otherwise inadmissible. In Old v. Cooney Detective Agency, 215 Md. 517 at page 524, the Court of Appeals quoted from Globe Indemnity Co. v. Reinhart, 152 Md. 439, a case admitting hospital records as an exception to the hearsay rule prior to the passing of the business records statute: "* * * if its contents upon examination would be open to other objections, such as immateriality, irrelevancy, or that it was an expression of opinion by persons not competent to express an opinion; those objections are not precluded by what we have here said." The trial court found that the bald statement of the certifying physicians that they believed the appellant to be "insane" contained no definition of the term and the mere admission of the documents provided no opportunity to cross-examine the certifying physician "on the question of insanity or his definition of it or anything about it." We agree that the problem arising in regard to such a statement in the documents is whether or not a declaration that a physician believes a person is "insane" for purposes of civil commitment is relevant and material to the issue of the determination of a defendant's responsibility for a criminal act.
At the time of the appellant's trial the definition of insanity to determine criminal responsibility was the the McNaughten-Spencer rule.[1] A person is a responsible agent "* * * if at the time of the commission of the alleged offense, he had the capacity and reason sufficient to enable him to distinguish between right and wrong, and understand the nature and consequences of his act, as applied to himself." Spencer v. State, 69 Md. 28, 37; Thomas v. State, 206 Md. 575, 582; League v. State, 1 Md. App. 681; Bergin v. State, 1 Md. App. 74. The *535 certificates here considered were under the provisions of Md. Code (1964 Repl. Vol.) Art. 59, § 31 and substantially the form as therein provided.[2] In Salinger v. Superintendent, 206 Md. 623, a jury had found Salinger, at a criminal trial, insane at the time of the offenses for which he was charged and insane at the time of his trial. The testimony at that trial was that he was insane under the McNaughten-Spencer rule. He was committed to Spring Grove State Hospital as authorized by statute. Some four years later he filed a petition asking to have a jury pass upon his sanity, pursuant to statute. At this civil proceeding it was stipulated that the five psychiatrists who testified agreed that Salinger knew the difference between right and wrong and understood the nature and significance of his acts as applied to himself. They said, however, that if he was freed, he would be a danger to himself and a menace to the person, safety and property of others. The court instructed the jury "that if they found that the petitioner did not have the power or the ability to distinguish right from wrong or to understand the nature and significance of his acts, as applied to himself, they must find him insane; further, that if they found from the evidence that he could distinguish right from wrong and did understand the nature and significance of his acts, as applied to himself, to ask themselves this question: `If he becomes a free agent will he be a danger to himself, to his own safety, or will he be a menace to the safety of the person and or the property of other people? If you answer that question in the negative, having answered the first question positively, then you should find that he is sane.' The jury were told by the court that if they answered the second question in the affirmative, they would have to find that the petitioner was insane." The Court found that the charge correctly set forth the controlling law. Salinger urged that he had been confined only because a jury found he did not know right from wrong; therefore he must be released now that another jury had found that he did. The Court did not *536 agree. It said that one found to have been and to be insane in a criminal proceeding is then confined because it is not safe for him or for the community for him to be at large and once a determination of insanity has been made in the Criminal Court, the status of one insane is the same as if the determination had been made otherwise. It said, at pages 628 and 629:
"This essential fact is not changed because, to avoid the consequences of his act, the accused, under Maryland Law, must be suffering from a mental illness or a disease of a kind and to a degree which brings him within the Spencer rule. Other kinds and degrees of mental illness and disease are, of course, well recognized by medicine and the law and some of them make the victim a menace to society and himself if he is at liberty."
It announced its holding on page 631:
"We hold that one who has been found not guilty of the charge of crime, because of due determination of insanity in a Criminal Court, has the same status as one confined as insane by virtue of some other procedure established by law and, in order to obtain release, must satisfy a judge or jury of his sanity, not only under the Spencer rule but under the tests generally applied as justifying confinement. This being so, the basis of appellant's original commitment did not alone control the answer to the question of whether he should be released."
See Alexander v. Superintendent, 246 Md. 334; Keiner v. Superintendent, 240 Md. 608. See also Md. Code (1964 Repl. Vol.) Art. 59, § 8 as amended by Acts of 1963, ch. 43. We think it clear that a person may be committed as insane under the civil procedures established by law if he is a danger to himself or to the safety and property of others even if he is able to distinguish between right and wrong and understands the nature and consequences of his acts as applied to himself. So "insane" as it appeared in the certificates could be much broader than the McNaughten-Spencer rule and did not have the same *537 meaning as "insane" as a defense in criminal cases. There was nothing in the objectionable documents to show or support a rational inference that the term "insane" as therein used had the meaning of "insane" encompassed by the McNaughten-Spencer rule and there was no proffer of testimony to show that it did. The fact that the appellant had been committed to Spring Grove State Hospital was in evidence together with all the other records of that institution pertaining to the appellant. We think the certificates were properly excluded.
V
The appellant contends that the trial court "committed reversible error in overruling a motion to suppress the testimony of the psychiatrists for the Department of Mental Hygiene who were called as expert witnesses for the State." The basis of the contention is that the examination to determine the sanity of the appellant at the time of the commission of the crime was ordered by the Circuit Court for Harford County on March 9, 1965 in connection with the first trial which the appellant elected to declare invalid under Schowgurow and that the trial court did not order such an examination again for the second trial but confined that examination to the question of sanity at the time of the second trial. The appellant cites no authority and we find none, that the expert witnesses could not testify because the examination made of the appellant was made by order of another court and used at another trial. We can find no prejudice to the appellant by failure to provide another examination to determine the same question. By choosing to invalidate the first trial the appellant did not invalidate the examination and the testimony was properly admissible. We find nothing in Md. Code (1964 Repl. Vol.) Art. 59, Sections 7-12 as then applicable to compel a holding to the contrary. See Hamilton v. State, 225 Md. 302.
The appellant also contends that the psychiatrists testified to privileged communications and cites Md. Code (1965 Repl. Vol.) Art. 35, § 13A, and particularly subsection (c) (2) under which he urges that the testimony was not admissible because the appellant had not been told the communications would not be privileged. He overlooks subsection (c) (3) which provides *538 that there shall be no privilege for any relevant communications under the section "in all proceedings, whether civil or criminal, in which the patient introduces his mental condition as an element of his claim or defense * * *." The contention is frivolous.
VI
The appellant contends that the trial court erred in refusing to grant a motion for judgment of acquittal. He urges that there was insufficient evidence of either first or second degree murder. In order for this Court to overturn a judgment entered on a verdict of a jury for insufficiency of the evidence, it is necessary that there was no legally sufficient evidence or inferences drawable therefrom on which the jury could find a defendant guilty beyond a reasonable doubt. Quinn v. State, 1 Md. App. 373, 375.
In Chisley v. State, 202 Md. 87 at 104-105, the Court said:
"Felonious homicide is divided into two main classes murder and manslaughter. Murder has been defined as the unlawful killing of a human being with malice aforethought; and manslaughter to be the unlawful killing of another without malice aforethought. * * * The law presumes all homicides to be committed with malice aforethought and to constitute murder. The burden is on the accused to show circumstances of alleviation, excuse, or justification, which will reduce the offense to manslaughter. * * * Where the law divides murder into grades, such a homicide is presumed to be murder in the second degree and the burden is on the State to show that the killing was wilful, deliberate and premeditated, if the crime is to be elevated to first degree murder. * * *.
"The essential distinction between murder and manslaughter, therefore, is the presence or absence of malice. Malice has been defined, in this connection, as the intentional doing of a wrongful act to another without legal excuse or justification. It includes any wrongful act done wilfully or purposely."
We have carefully examined the record and find that there was *539 sufficient evidence to submit the case to the jury for its determination whether the killing was wilful, deliberate and premeditated and committed with malice. There was evidence that the appellant was angry with his wife because "he had gotten some kind of letter from his lawyer about how they were going to sell their home and the child and everything." On the night of the homicide, the wife of the appellant and a female companion went to a movie and while standing in the back of the theatre were approached by the appellant who came up the aisle. He asked his wife to sit down and talk to him and they sat down toward the front part of the theatre. They sat there talking until a cartoon then showing was ended and the wife came up the aisle to the place where her companion was seated. She said, "Let me in quick." The appellant was following her up the aisle with a gun in his hand. He said to his wife, "If you don't go with me I am going to blow your heart out." The wife and the companion went to the lobby. The companion told the popcorn girl the appellant had a gun, the popcorn girl went for the theatre manager and the manager called the police. The appellant had followed his wife into the lobby and stood talking to her. At that time his hands were in his pockets. A police car pulled up in front of the theatre and an officer started in the door. The appellant stepped back and shot his wife. She died about a half hour later "of massive internal hemorrhage, due to laceration of the heart and right lung by a gunshot wound. The bullet entered the right side of the chest and exited from the right side of the back." The police officer jumped on the appellant, seized the gun, and subdued him. The gun was of a type that could be refired only by pulling the hammer back to recock it and when the officer seized the gun is was recocked. This evidence was clearly not "entirely insufficient" for the case to go to the jury for its determination of whether the killing was murder in the first or second degree and we feel that the power of the trial court to grant a motion for judgment of acquittal was not abused by its refusal to do so on the ground here considered.
The appellant argues that he was intoxicated at the time of the shooting and could not have formed the intent to murder. This Court said in Michael v. State, 1 Md. App. 243, 248:
*540 "The accused must do more than simply raise the issue of drunkenness to establish a defense. * * * He must persuade the triers of fact that, under the circumstances, he was so intoxicated as to be incapable of entertaining the specific mental intent or of possessing the mental state which is an essential element of the crime for which he is being prosecuted. To establish a valid defense, the appellant must show that he was so intoxicated that he was robbed of his mental faculties, and he will be considered criminally responsible as long as he retains control of his mental faculties sufficiently to appreciate what he is doing. * * *." (citations omitted)
There was evidence that the appellant had been drinking. However, there was also evidence that he walked and talked normally, was neatly dressed, and answered specific questions with relevant answers. The issue in the instant case was not whether the appellant was drunk at the time of the commission of the crime; it was whether he was so intoxicated as to be incapable of forming the requisite intent. It was not error for the trial judge to refuse to grant the motion for judgment of acquittal on the basis of the appellant's intoxication, as there was sufficient evidence from which the jury could have concluded that he was not so intoxicated as to be incapable of forming the intent to murder.
The appellant also argues that the trial court erred in refusing to grant the motion for judgment of acquittal because "there was insufficient evidence to establish, beyond a reasonable doubt, that Appellant was sane at the time of the commission of the alleged offense." We do not agree. The expert witnesses produced by the State testified that the appellant was sane at the time of the commission of the offense. This testimony was sufficient for the trial court to refuse to grant the motion. Avey v. State, 1 Md. App. 178, 187-188. The question of whether or not the testimony of the State's experts was "destroyed" on cross-examination is one of the credibility of the witnesses, a matter for the jury.
*541 VII
The remaining contentions of the appellant pertain to the instructions to the jury.
The Appellant's Requests for Instructions
The appellant presented seventeen requests for instructions to the trial court and contends that it erred in refusing nine of them.
Request No. 1 pertained to intoxication and intent and the matter was correctly covered by the instructions given. The court said that voluntary intoxication, if it existed, was no excuse for the commission of the crime, but could be considered as to "its effect on the formation and existence of wilfulness, deliberation and premeditation." See Chisely v. State, supra, at 106.
Requests Nos. 2, 3, 4, 5, 9 and 10 involved generally the appellant's alleged chronic alcoholism or alleged addiction to alcohol. He apparently takes the position that if he was a chronic alcoholic, the rules of law as to voluntary intoxication are not applicable to him. He requested instructions that an addict is a person who had acquired the habit of using spirituous liquors or narcotics to such an extent to deprive him of reasonable self control, that an alcoholic is a person addicted to alcohol, that when an alcoholic drinks he drinks involuntarily, that if the killing was the result of being intoxicated and the intoxication was involuntary, the verdict must be for the defendant, that the test of involuntary drunkenness is whether there was an exercise of independent judgment and violation in taking the intoxicant, that he was an alcoholic and if the jury find he had been drinking or was under the influence of alcoholic beverages the verdict must be for the defendant. The basis of the requests apparently is that if he be found to be a chronic alcoholic, his drinking is involuntary and is a defense to the commission of the crime.
We do not find the law to be as the appellant contends. "Since the refusal to place intoxication and insanity on the same basis (insofar as criminal incapacity is concerned) is due to the fact that the former is usually a `voluntarily contracted madness,' it follows that they should be dealt with alike when the intoxication *542 is involuntary, and such is the law * * * the fact that one is in a state of involuntary intoxication does not necessarily establish criminal incapacity on his part; it establishes only that his derangement is without culpability and hence is to be dealt with the same as if it were the result of mental disease or defect." Perkins on Criminal Law (1957) pp. 782-783 and 787. "Involuntary intoxication produced by the acts or contrivance of third persons puts the person affected in the same situation as to criminal liability as ordinary insanity." Hochheimer. Law of Crimes and Criminal Procedure, 1st Ed., § 21, p. 12. See also, Wharton's Criminal Law, (1957) 1, § 46, p. 113. Thus in Maryland, at the time of the trial of the appellant, if involuntary intoxication were proved, its effect would have been determined by application of the McNaughten-Spencer rule. The question, is however, whether a person shown to be a "chronic alcoholic" or "alcoholic addict," who drinks and becomes intoxicated is involuntarily intoxicated. Drunkenness will be presumed to be voluntary unless some special circumstance is established to remove it from that category. Special circumstances has been held to be in the case of intoxication by mistake, or under duress or from medicine (because the patient is entitled to assume that an intoxicating dose would not be prescribed). Perkins, supra, pp. 783-786. And it is noted that Hochheimer, supra, § 21, considers involuntary intoxication as "produced by the acts or contrivance of third persons." Clark and Marshall, Crimes, 6th Ed., § 6.0, p. 390 makes the flat assertion in stating that the rule that drunkenness is generally no defense does not apply in the case of involuntary drunkenness:
"Drunkenness is not to be regarded as involuntary, within this exception, however, merely because it is the result of an inordinate and irresistible appetite for drink, overcoming the will and amounting to a disease."
Driver v. Hinnant, 356 F.2d 761 (4th Cir.1966), is not to the contrary except as to the crime of being drunk or crimes symptomatic thereto. Driver held that "the State cannot stamp an unpretending chronic alcoholic as a criminal if his drunken public display is involuntary as the result of a disease." p. 765 (It found that alcoholic addiction chronic alcoholism was accepted medically as a disease). But it said, p. 764:
*543 "This conclusion does not contravene the familiar thesis that voluntary drunkenness is no excuse for crime. The chronic alcoholic has not drunk voluntarily, although undoubtedly he did so originally. His excess now derives from disease. However, our excusal of the chronic alcoholic from criminal prosecution is confined exclusively to those acts on his part which are compulsive as symptomatic of the disease. With respect to other behavior not characteristic of confirmed chronic alcoholism he would be judged as would any person not so afflicted." (emphasis supplied)
As did Driver, Easter v. District of Columbia, 361 F.2d 50 (1966) and Robinson v. State of California, 370 U.S. 660, 82 S. Ct. 1417 (1962) cited by the appellant, recognized the inefficacy of a statute when it is enforced to make involuntary deportment a crime. We do not construe them to compel a holding as urged by the appellant here. Certainly murder is not a crime which is compulsive as symptomatic of the disease of alcoholism.
We find no error in the refusal of the requests for instructions here considered.
Request No. 8 was that the verdict must be for the defendant if the jury find from the evidence that he "as a result of mental disease or defect lacked substantial capacity either to appreciate the wrongfullness of his conduct or to conform his requirements to the requirements of the law." It did not state the applicable law correctly and was properly refused.
Request No. 11 was that the court charge "that settled insanity is a diseased condition of the mind produced by habitual intoxication." We find no error in the refusal of this instruction. It would appear that the appellant attempted to substitute instructions by the court for expert testimony and even if such testimony were before the jury the ultimate determination would be for it. We know of no controlling rule of law to compel this instruction.
Exceptions to the Instructions of the Trial Court
The appellant claims error with regard to certain exceptions he made to the court's charge.
*544 First he contends that the court put the "burden upon the jury to determine whether the Defendant was insane either at the time of the commission of the offense or at the time of the trial," and he quotes from a part of the instructions concerning the pleas of insanity and "as to alcoholism":
"In respect to these pleas, the jury are instructed that they should consider them before they consider the plea of not guilty on the merits for the reason that in the event the jury should find that the Defendant was insane either at the time of the commission of the alleged offense or at the time of trial or both, then, and in any of those events it would be unnecessary for the jury to pass upon his plea of not guilty on the merits."
But the court continued immediately thereafter:
"In respect to these pleas of insanity, the jury is instructed that where insanity is raised as a defense to a criminal charge the law presumes that all persons including those accused of crime are sane. So long as this presumption prevails the State is not required to prove the Defendant's sanity but as soon as some substantial evidence of insanity has been produced by the accused as has been done in this case, then sanity, as I shall hereafter define it, like any other fact material to the question of guilt must be proved by the State beyond a reasonable doubt."
We find no error.
Second, he claims error in the court's statement:
"As one of the grounds or reasons supporting the Defendant's plea of insanity at the time of the alleged offense he asserts that he was a chronic alcoholic and that intoxication at that time had rendered him insane to the point where he could no longer distinguish between right and wrong and could not understand the nature and consequences of his acts as applied to himself."
*545 He says that he "does not feel that this is the test to be used for a chronic alcoholic or for intoxication as a defense." We have found that it is as to involuntary intoxication. And the court continued:
"The Court instructs you that voluntary intoxication in itself is no excuse for the commission of a crime but may be taken into consideration by the jury along with other facts in determining the existence of a particular intent and also in determining whether an accused person at the time of the alleged crime, had the requisite mental capacity and the reason to enable him to distinguish between right and wrong and to understand the nature and consequences of his acts as applied to himself.
"This test, that is the mental capacity last mentioned, is the one and only test as to sanity in Maryland, whether the claimed insanity be alleged to be due to alcoholism, intoxication, or any other cause.
"In determining whether or not the State has established beyond a reasonable doubt that the accused was sane at the time of the commission of the alleged crime in accordance with the rules governing such determination as above recited, the jury should consider all the evidence which has been produced in this case together with all reasonable inferences properly deducible from the facts established by such evidence as well as the conclusions of the expert witnesses who have testified."
We think the Court correctly stated the rules of law.
Third, the appellant complains that the court failed to instruct as to involuntary intoxication. We considered this in our discussion of the requests for instructions. We think the charge in its entirety adequately covered the applicable law.
Fourth, the appellant states without argument or citation of authority that he excepted to the test of mental capacity given by the court. We find that it correctly stated the rule then applicable.
*546 Fifth, the appellant contends that the court erred in the following charge:
"If there is any reasonable doubt in which of several degrees the defendant is guilty, he can be convicted of the lowest only of those degrees."
He argues that under this instruction the jury might convict where the burden of proof has not been met as to the lowest degree. However, any possible ambiguity was cured not only by those parts of the charge as to reasonable doubt, but by the next sentence of the charge:
"If, after consideration of the whole case, the Jury should find that the State has failed to establish the elements and facts necessary for a conviction of either first or second degree murder, or manslaughter or assault, then and in that event their verdict should be `not guilty'."
We find no error.
Judgment affirmed.
NOTES
[1] The test of insanity as a defense in criminal cases was changed by the Acts of 1967, ch. 709, codified in Md. Code (1967 Cumulative Supplement) Art. 59, Sections 7-15. It is applicable to all cases tried or scheduled for trial on and after June 1, 1967 and is not available to the appellant here.
[2] A 1964 amendment made the section applicable to alcoholics. A 1966 amendment substituted "mentally ill" for insane throughout the section, substituted "mentally retarded" for "idiotic", "mentally ill person" for "lunatic", "mental illness" for "insanity" and "mental retardation" for "idiocy" in the first sentence thereof. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544878/ | 168 F.2d 330 (1948)
WOOSLEY
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 10586.
Circuit Court of Appeals, Sixth Circuit.
June 2, 1948.
Chas. L. Claunch, of Chattanooga Tenn. (Albert W. Taber and Charles L. Claunch, both of Chattanooga, Tenn., on the brief), for petitioner.
I. Henry Kutz, of Washington, D. C., (Theron Lamar Caudle, Sewall Key, George A. Stinson and Harry Baum, all of Washington, D. C., on the brief), for respondent.
Before ALLEN, MARTIN, and MILLER, Circuit Judges.
MARTIN, Circuit Judge.
The Tax Court found that, during the three-year period for which income tax deficiencies were assessed and prior thereto, the petitioner, W. B. Woosley, and his wife have been partners in conducting the business and earning the income of Woosley Knitting Mills within the meaning of applicable revenue laws, but, taxwise, not to the extent claimed by the petitioner. Although a part of the capital contributed by the wife to the partnership originated with her and although she contributed managerial and vital additional services, the Tax Court held that the major portion of the income accruing to the wife from the partnership was allocable and taxable to the petitioner for the years embraced herein, 1938, 1939, and 1940.
We shall confine this opinion to a general summary of the salient facts and to a discussion of controlling legal principles.
The petitioner and his wife were married in 1926. Shortly after their marriage, she accompanied him to Pennsylvania and Kentucky, where he worked in hosiery mills to acquire knowledge of manufacturing women's hose. In 1927, he engaged in hosiery manufacture in Shelbyville, Tennessee, under the name of "Woosley Knitting Mills," in partnership with his father, who died in 1935. After his father's death, petitioner continued operation of the business as sole proprietor until January 2, 1937, when he entered into a partnership agreement in writing with his wife, in her individual capacity and also as trustee for their two children for a very small interest, and with two others, R. M. Thomas and Hans Roessler. The trusteeship issue, correctly resolved by the Tax Court, is not involved on this review.
The taxpayer agreed to put in all the assets and liabilities of his individually owned business and that his interest in the partnership would be 119/150ths. The net worth of the business turned over to the partnership by him, as reflected by his ledger accounts, was $141,179.58. His wife agreed to put in $8,877.50, which "Woosley Knitting Mills now has borrowed from her", her husband agreeing to give her a $5,000 interest to make her total interest $14,000, after $112.50 had been deducted from her 1937 salary. Her interest in the partnership would thereby be 14/150ths.
*331 Thomas agreed to put in $5,000, for which he would receive a 5/150th's interest; and Roessler would contribute $15,000, for which he would receive 10/150ths' interest. The contract recited that the partners should share "in all profits & losses of the partnership according to their respective interests." For their capital contributions, Thomas and Roessler executed their respective promissory notes, which Woosley guaranteed at a Chattanooga Bank that loaned them the money. Both Thomas and Roessler had been employed by the mill in 1929. After a year in the mill, Thomas served as salesman until 1935, when he abandoned the road and returned to Shelbyville to assume charge of bookkeeping and sales. Roessler, a skilled mechanic, was superintendent of the knitting room and had supervision of the machinery and equipment.
On May 26, 1937, a new partnership agreement was executed by the same parties, amplifying and superseding the agreement of January 2nd of the same year. Under its terms, the taxpayer, "as manager and executive head" of the business, was to receive an annual salary of $7,200. The salaries of the other partners were fixed at $2,400 each for the taxpayer's wife and Thomas, and $5,720 for Roessler. It was provided that the partners were to share in the profits and losses after these salaries were deducted from the income resulting from the partnership's operations. The same individual interests were retained by the partners.
The petitioner, his wife, and Thomas became dissatisfied with Roessler's actions; and, on December 30, 1939, the petitioner purchased the superintendent's entire one-fifteenth interest in the partnership for $21,667. On December 30, 1939, petitioner sold to his wife an undivided one-third interest in the partnership, for which she delivered her promissory note for $60,000, payable on or before ten years from date and secured by 64/150ths interest in the business, it being specified that the note might be paid in instalments of not less than $100 each at any time before maturity. On the same date, a new partnership agreement was executed.
This agreement recited that the partnership interest of the petitioner was 79/150ths; that of his wife, 64/150ths; that of Thomas, 1/30th; and that of the trusts for the children, 2/150ths. In all other respects, the existing agreement of May 26, 1937, was confirmed. Demand notes were issued to petitioner's wife for her salary and these notes were paid by checks deposited from time to time to her personal account. This account was drawn upon by her to pay household expenses; and, at the end of each year, the taxpayer gave her his personal demand note for the total amount so expended by her. At the end of 1939, Mrs. Woosley held three of these demand notes aggregating the sum of $5,440. She also held three more of her husband's demand notes, totalling $14,000, which he had given her as Christmas presents in 1937, 1938, and 1939. On December 30, 1939, the date of the new partnership agreement, she surrendered all six notes which were credited as payments on the $60,000 note given by her for the purchase of the one-third interest in the partnership. She received further credits on the $60,000 demand note for the surrender on December 31, 1940, of notes aggregating $3,380 issued to her for repayment of household expenses and for payment of her 1940 salary; and, on that same date, her note was credited with $7,480 for surrender of a note for $10,800 given her as a distribution of partnership profits. On September 1, 1941, Mrs. Woosley's note to the partnership was credited with $25,230 upon surrender by her of the partnership's note for $38,400, dated simultaneously, given her in distribution of partnership profits. Interest of $1,759.73 was also credited to her. From June through November, 1940, she received total credits on her note of $570 as payments from rentals from real estate owned by her; and, on December 16, 1940, she was credited with $3,900 as a payment made by her, by check. Thus, total payments, principal and interest, of $61,759.73 were credited to the payment of her $60,000 promissory note, which was marked cancelled and paid in full as of September 1, 1941.
Mrs. Woosley testified that she had not worked prior to her marriage, but that *332 when the mill operation was started in 1927 she was for several years the only person who worked in the office; that she supervised the payrolls and timekeeping; and that she received no compensation for her services prior to the formation of the partnership in 1937. Her testimony was uncontroverted.
The Tax Court found that, since 1931, Mrs. Woosley has regularly supervised the preparation of the payrolls of the Woosley Knitting Mills, has signed all payroll checks, and has worked in the stock room directing the grading, folding, packing and labeling of hose; and that she received no compensation for her services prior to formation of the partnership.
The tax tribunal specifically found: "Since the formation of the partnership on January 2, 1937, Mrs. Woosley has been active in the conduct of its business. In addition to supervising payrolls and working in the stock room she has transacted business for the partnership at the bank. She had authority to, and did, sign checks of the partnership for payrolls and for current expenses of the business. She at all times participated in conferences between the partners involving the policy to be pursued by the business and other important business matters, including personnel problems and purchases of machinery and equipment. She participated in the discussions relating to retirement of Roessler from the partnership and the continuation of the partnership by the other partners. When the petitioner and Thomas were absent, she directed the operation of the business. Both before, as well as after January 2, 1937, she had the responsibility of `styling' hose. This `styling' involved the making of changes in the shape of the sole and various changes in other parts of the stocking, the selection of appropriate colors, and the determination of the quality of hose to be manufactured, all of which is necessary in the hosiery manufacturing business to keep the product in line with changing fashions in women's shoes and clothing. The petitioner and Thomas relied upon her judgment and experience in styling. When the business was first started, Mrs. Woosley's duties did not take up all of her time. She usually spent about half of her time at the office and plant, but, as the business expanded, her duties gradually consumed more and more of her time. During the taxable years she did not report at the opening hour with the other partners, but she went to the office regularly every day and actively engaged in the performance of her duties. She was absent for the entire day on but few occasions."
The Tax Court added that "the services performed and the responsibilities assumed by Mrs. Woosley during the years 1937 to 1940 were reasonably worth the annual salary of $2,400 which she received from the partnership in those years." In its opinion, the Tax Court concluded that "Mrs. Woosley in receiving the $2,400 salary was fully compensated for all services performed by her for the partnership"; and that "the only income involved in the issue here raised is that portion attributable to the capital contributions of the partners."
In our view, this was a plain mis-step in reasoning, in that the Tax Court ignored the fact that Mrs. Woosley was a bona fide partner, according to its own findings. There is no showing whatever that either tax avoidance or tax evasion was the motivation for the formation of the partnership. The wife contributed, not only some capital originating with her; but, more importantly, she contributed managerial and vital additional services to the conduct of the partnership.
The partnership agreement did not provide, as the tax tribunal inferred, that the profits of the partnership were to be divided in proportion to the capital contributions of the partners. The sharing of profits and losses, according to the express provision of the agreement of May 26, 1937, which was continued and confirmed by the last agreement of December 30, 1939, was to be in proportion to the interest of each of the partners in the partnership. The percentage of each partner's interest was specified in the agreement. The fixed salary allowances were to be "charged against the income of the partnership operations before any apportionment of annual profits or losses" was made; and *333 the salary allowances could be changed from time to time by agreement of the majority of the partners. It is obvious that the parties did not contemplate compensating themselves in full by the payment of salaries, but that each expected to receive, in addition to his or her salary, the specified division of profits. There is no stronger reason for presuming that Mrs. Woosley was compensated in full by her salary than for making a similar assumption as to her husband and Thomas.
The contribution to the partnership of managerial services by the respective partners, as well as the contribution of capital, produced the partnership income. There seems no justifiable reason for treating Mrs. Woosley's contribution of services on a different basis from like contributions by the petitioner and Thomas. That a division of the partnership profits on the basis of capital contributions was not contemplated is derivable from the fact that, while the capital contributed by Thomas was $5,000 and his partnership interest 1/30th, the capital contribution of Roessler was $15,000 and his partnership interest in the profits was only 1/15th, a lesser proportion for his money contribution to the firm than the proportion received by Thomas.
In our judgment, the Tax Court clearly erred as a matter of law in attributing to the capital contributions all the income earned by the partnership and in making the allocation which it did contrary to the express provisions of the articles of partnership. Situations may be presented in which the Tax Court might properly make allocations of income in husband and wife partnership cases; but, on its facts, this case is not one of that kind. Here, we find no valid reason for dealing with the partnership income otherwise than as provided for in the partnership agreement.
We think the opinions in Commissioner v. Tower, 327 U.S. 280, 66 S. Ct. 532, 538, 90 L. Ed. 670, 164 A.L.R. 1135, and Lusthaus v. Commissioner, 327 U.S. 293, 66 S. Ct. 539, 90 L. Ed. 679, do not gainsay, but, on the contrary, supply authority for the conclusions which we have reached. Moreover, no one of our long line of decisions on the subject matter of family partnerships, several of which are cited in the brief of the Commissioner, is inconsistent with our determination of the present controversy. There is a marked variance in the facts presented here from any situation in which, in our adjudications, we have held a husband and wife partnership ineffective for the division of the partnership income between husband and wife for tax purposes.
Here, the Tax Court found from the evidence that Woosley and his wife intended to transact business as a partnership and actually effectuated that purpose. The wife actively participated in the control and management of the partnership operations, performed vital additional services, and also, insofar as the record shows, invested in the partnership capital originating with her, although she received a larger proportionate interest in the partnership than was represented by such capital contribution.
The Supreme Court, in Commissioner v. Tower, 327 U.S. 280, 66 S. Ct. 532, 90 L. Ed. 670, 164 A.L.R. 1135, found the facts sufficient to support the findings of the Tax Court that no genuine partnership between the taxpayer and his wife existed or was ever intended within the meaning of sections 181 and 182 of Title 26 U.S.C.A. Int.Rev.Code; and that the husband had earned the income and should be taxed on it under section 22(a) of Title 26 U.S.C.A. Int.Rev.Code. The decision rested upon the basis that findings of fact by the Tax Court, when supported by evidence, are final. The facts of the Tower case have been so frequently discussed by the courts that we shall not indulge in repetition. There, the wife contributed to the partnership neither managerial services nor capital originating with her. After entering into the partnership with his wife, "the husband continued to control and manage the business exactly as he had before." His wife did not participate in its management or operation.
From the language of the Supreme Court in the Tower case, it is manifest that the distribution of partnership profits between petitioner Woosley and his wife, according to their partnership agreement, is lawfully permissible for tax purposes. The opinion *334 stated: "The issue is who earned the income and that issue depends on whether this husband and wife really intended to carry on business as a partnership. Those issues cannot be decided simply by looking at a single step in a complicated transaction. To decide who worked for, otherwise created or controlled the income, all steps in the process of earning the profits must be taken into consideration. * * * There can be no question that a wife and a husband may, under certain circumstances, become partners for tax, as for other, purposes. If she either invests capital originating with her or substantially contributes to the control and management of the business, or otherwise performs vital additional services, or does all of these things she may be a partner as contemplated by 26 U.S.C., §§ 181, 182, 26 U.S.C.A.Int.Rev.Code, §§ 181, 182." 327 U.S. 289, 290, 66 S. Ct. 537, 90 L. Ed. 670, 164 A.L.R. 1135.
In Lusthaus v. Commissioner, 327 U.S. 293, 66 S. Ct. 539, 90 L. Ed. 679, the Supreme Court upheld the Tax Court's finding that, on the evidence, the wife was not a genuine partner. There, the husband, confronted with prospective large profits and consequential heavy income taxes, consulted with his accountant and attorney and worked out a plan for a husband and wife partnership. He furnished her the money in part and accepted her notes in part for a one-half interest in a retail furniture business which he had long owned and operated. It is obvious that no bona fide partnership intent existed, the partnership arrangements being merely superficial and resulting in no change in the husband's economic interest in his business. He retained full control of its management after the partnership was formed, and did not even permit his wife to draw checks on the business bank account. He filed social security tax returns as owner of the business. The case bears no similarity to the case at bar.
Each tax case involving family partnerships must be decided upon its own facts with faithful adherence to the pronouncements of the highest authority. We considered that we had so conformed when we reversed decisions of the Tax Court against the validity for income tax purposes of family partnership agreements in two recent cases, in which the Commissioner of Internal Revenue stood upon stronger ground than he does here. Weizer v. Commissioner, 6 Cir., 165 F.2d 772 (C.C.A.6); Lawton v. Commissioner, 6 Cir., 164 F.2d 380.
The decision of the Tax Court is reversed, and the cause is remanded to that tribunal for recomputation of the taxes in conformity with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544872/ | 97 N.J. Super. 360 (1967)
235 A.2d 195
JOSEPH M. DAVID, APPELLANT,
v.
JUNE STRELECKI, DIRECTOR OF MOTOR VEHICLES, RESPONDENT.
Superior Court of New Jersey, Appellate Division.
Argued September 11, 1967.
Decided October 24, 1967.
*363 Before Judges GOLDMANN, KILKENNY and CARTON.
Mr. Patrick T. McGahn, Jr., argued the cause for appellant.
*364 Mr. Joseph A. Hoffman, Assistant Attorney General, argued the cause for respondent (Mr. Arthur J. Sills, Attorney General of New Jersey, attorney; Mr. Alan D. Kirby, Deputy Attorney General, on the brief).
The opinion of the court was delivered by KILKENNY, J.A.D.
On February 24, 1967, the Director of the State Division of Motor Vehicles (hereinafter "Director"), following an administrative hearing, found that Joseph M. David drove his automobile on August 24, 1965 in Egg Harbor Township carelessly, in violation of R.S. 39:4-97, failed to drive upon the right half of the highway, in violation of R.S. 39:4-82, and operated the motor vehicle after consuming alcoholic beverages, which consumption of alcohol beverages affected his ability to operate the automobile properly and safely, and that these violations caused an accident to occur which resulted in the death of Charles Teti. The Director ordered David's driving privilege suspended for a period of two years.
David appeals from this final decision, pursuant to R.R. 4:88-8. We stayed suspension of his driving privilege pending determination of the appeal.
David contends that evidence suppressed by the County Court in a criminal proceeding stemming from this same accident should not have been admitted at the administrative hearing and could not properly form a basis for the Director's action, especially since such evidence was obtained in a custodial setting while he was under sedation. He also maintains that the findings of fact were not supported by adequate admissible evidence to warrant suspension of his driving privilege.
The happening of the accident itself, with its fatal consequences, and the physical aspects thereof, are not in dispute. On August 24, 1965, a clear, dry day, at about 2:20 A.M., David was driving his automobile in a westerly direction on Somers Point Road in Egg Harbor Township, Atlantic County. At a very sharp curve in the road, at a point where *365 the road passes over Powell Creek, the vehicle left the roadway, traveled 58 feet on the shoulder thereof as evidenced by tire marks on the shoulder only, struck and tore away a 20-foot section of guardrail, then traveled 162 feet further along the shoulder, overturned down an embankment, striking several trees as it turned over and down the embankment, and finally came to rest on its side. Charles Teti, a riding companion of David, was killed in the accident. The automobile was extensively damaged, the rear axle was broken and the left rear tire and wheel were never recovered.
There were no eye witnesses to the accident other than David as driver and his friend Teti, who had been riding on the passenger's side of the front seat. David climbed out of the car to go for help, went to a house about 300 yards up the street, and there either he or an occupant of the house called the police. The police arrived at about 2:45 A.M. At that time the rescue squad was removing Teti from the vehicle. Both he and David were taken by ambulance to Somers Point Hospital.
When Trooper Porter of the State Police, who investigated the accident, arrived at the hospital at about 5 A.M., after having made a partial investigation at the scene, he was informed by the nurse in the emergency room that Teti was dead. His lips were thus sealed by death. Prior to the police officer's arrival David, who had been suffering apparently greatly from shock as the result of the accident, had been given sedatives a pill and an injection. He was asleep when the trooper arrived. The nurse awakened him and the trooper began to question him forthwith, knowing then from the fact that Teti was dead and the information gathered by him at the scene that David faced a possible charge of manslaughter by automobile, N.J.S. 2A:113-9, as well as charges for violating the Motor Vehicle Act, and their serious consequences. The questioning was pursued by this police officer even though, as he frankly admitted, David was in a "groggy" condition, but "not drunk," and was under *366 sedation and "incoherent" in his responses, and without any advice or warning being given to David as to his rights to remain silent, to have counsel and the like. In fact, this same police officer swore to a complaint against David for manslaughter by automobile, N.J.S. 2A:113-9, on the following day. We shall discuss hereinafter the particular inculpatory admissions as to speeding and beer drinking allegedly made orally by David in the hospital emergency room to this trooper and the use of this evidence by the Director as a basis for her findings.
On the following day, August 25, 1965, at about 10:37 A.M., another police officer, Detective Heilfurth, picked up David at the hospital, brought him to State police headquarters at Mays Landing and there, while this shocked individual was still under sedation from a hospital-administered "needle and a pill," took a signed written statement from him. David again made incriminating admissions therein as to speeding and beer drinking. Here again, no specific warning or advice was given to him by this police officer as to his right to remain silent, or that the statement might be used against him. The statement, however, contains a recital that he was advised that the statement must be voluntary and he had a right to consult an attorney before giving the statement. He was apparently not advised that the State would furnish an attorney if he wanted one and was unable to engage his own. Thus some, but not all of the warnings specified in Miranda v. State of Arizona, 384 U.S. 436 (1966), were given. This statement, with its pertinent particulars hereinafter noted, was also used by the Director as another basis for her findings.
When David was thereafter indicted for a violation of N.J.S. 2A:113-9, his attorney moved in the Atlantic County Court before Judge Francis in August 1966 to suppress the oral statement given by David to Trooper Porter at the hospital and also to suppress the written statement of David taken by Detective Heilfurth on August 25, 1965 when David, as this officer expressed it, was "theoretically *367 under arrest," although not "formally" so in those "exact words." He was then in the custody of the police at headquarters whence he had been taken as aforesaid.
Judge Francis took the testimony of the police officers in connection with the motion to suppress and on the basis thereof granted the motion. He found that the warnings expressed in Miranda v. State of Arizona, supra, decided June 13, 1966 before the hearing of the motion, had not been given by either police officer, and that David was in a "custodial setting" when the statements were obtained, considering all of the attendant circumstances. Moreover, Judge Francis found that the evidence of sedation present when both statements were taken, albeit apparently more so in the case of the initial oral statement when David was admittedly incoherent precluded admissibility under the cases prior to Miranda.
The State did not seek leave to appeal the order suppressing the two statements to the police. Instead, in the face of an absence of adequate proof to establish the charge in the indictment, an order was entered on the State's own motion dismissing the indictment without any trial.
The Director went forward with the administrative hearing to suspend David's driving privilege, notwithstanding dismissal of the indictment. The Director had a right to do so notwithstanding a disposition of the criminal proceedings in the motorist's favor. Atkinson v. Parsekian, 37 N.J. 143, 151 (1962). Over the objection of David's attorney, Trooper Porter and Detective Heilfurth testified before the Division hearer as to what David had told them. Their testimony included the admissions of speeding and beer drinking allegedly made by David in the respective oral and written statements. It is abundantly clear from the Director's decision that she relied substantially upon this evidence, previously suppressed by order of the County Court, as well as upon the police testimony as to the physical aspects of the accident in her findings. For example, the Director uses as a basis for a finding of speeding that David *368 told Trooper Porter that "he was proceeding at a speed of 90 miles an hour or more before the accident occurred." Again, she relied heavily upon David's having told the police officers that he had consumed four or five beers some hours before the accident, in her finding that David's ability to drive his car safely had been impaired by his having consumed alcoholic beverages.
Generally, there is no necessity at administrative hearings to apply the rules of evidence strictly. Inadmissible evidence may creep into the record but its presence does not ipso facto mandate a reversal of the administrative determination, as might be the result in a judicial proceeding tried before a jury. However, administrative decisions must be based on admissible, competent and substantial evidence in the record. As a corollary thereto, if the administrative determination lacks legal support and is based upon inadmissible, incompetent or nonsubstantial evidence, it lacks validity.
Procedural due process of law is guaranteed to every person by the Fifth and Fourteenth Amendments to the United States Constitution. The Fifth insures against action by the Federal Government, and the Fourteenth against action by the State or its agencies. Procedural due process is not limited to criminal proceedings. It is equally applicable to civil proceedings, including administrative hearings. Weaver, Constitutional Law (1946), § 286, p. 420. A revocation or suspension of driving privileges is deemed to be civil in nature. But its result can be a deprivation of liberty and of the property rights in a license to drive an automobile. Bechler v. Parsekian, 36 N.J. 242, 257 (1961). As we stated in Parsekian v. Cresse, 75 N.J. Super. 405, 411 (App. Div. 1962):
"The fact remains that today the very livelihood of a man and his family may depend on his license."
*369 David's need to have a driver's license to commute expeditiously to his place of employment as an ironworker was recognized by the Director in her decision.
While suppression by the County Court of the statements made by David to the two police officers in connection with a criminal proceeding is not automatically binding at the administrative hearing, the rationale which prompted the suppression ought not to be lightly disregarded. Judge Francis properly ruled that the evidence of David's having received sedatives and of his "incoherence" justified exclusion of statements made by him while in such a condition upon the basis of decisions long prior to Miranda. This was a recognition that procedural due process requires any hearing, judicial or quasi-judicial, to possess the element of fundamental fairness. For example, it would be fundamentally unfair and violative of procedural due process to try a man for drunken driving speedily while he is still drunk, even though defendant's then presence before the magistrate would leave no doubt as to his condition. See, too, Rochin v. People of California, 342 U.S. 165, 72 S.Ct. 205, 96 L.Ed. 183 (1965), in which the incriminating evidence was literally pumped from the person's innards.
I
The testimony of Trooper Porter as to the results of his questioning David in the hospital emergency room should have been excluded at the administrative hearing as a matter of fundamental fairness. Its admission was violative of procedural due process. It was prejudicial and reversible error for the Director to have relied upon this testimony as a basis for her findings.
The Trooper admitted that he knew from talking with the nurse that David had been given sedatives by her in the hospital emergency room, was asleep when he arrived and was awakened by the nurse for questioning by him in the emergency room. In the words of this witness, "He was a *370 bit groggy after having been awakened." Admittedly, no warning or advice was given to this young man as to his rights to remain silent and to have counsel.
It may be that the Director did not have before her the full record which has been presented to us and which includes this trooper's testimony before the local magistrate and before Judge Francis. The Director makes no objection to the inclusion thereof in the appendix and we have, of course, examined the same in the exercise of our original jurisdiction. New Jersey Constitution of 1947, Art. VI, Sect. V, par. 3.
Before the magistrate the trooper frankly stated:
"I was trying to get a statement from him at that time, but I saw that he was I didn't feel that he actually knew what he was talking about at that time. He said he was going over 90 miles an hour at the time of the accident, and I knew that he wasn't going to stick with that later on, so I didn't question him further." (Emphasis added.)
Before Judge Francis in the County Court Trooper Porter described David at the emergency room questioning as "slightly incoherent, because he didn't seem to be aware of the situation at that time." And again, "he was sort of mumbling."
Even though the trooper immediately abandoned all further questioning of David once he said he was going "over 90 miles an hour," simply because, as the trooper expressed it, "I didn't think he was in any condition," the Director accepted David's alleged admission of such excessive speeding as a basis for concluding that he drove at such a high rate of speed. Fundamental fairness required rejection, as an evidentiary support for a license suspension, of admissions made by a person during a period of sedation which had produced incoherency in the declarant and an awareness in the questioner, "I didn't feel that he actually knew what he was talking about at that time."
*371 II
In the written statement given by David to Detective Heilfurth at the State Police Barracks in Mays Landing on the morning of August 25 which statement had also been suppressed by the County Court, as aforesaid David stated that he could not estimate how fast he was going just before he hit the side of the road, "but I knew I was going over the speed limit." The speed limit was not specified. He also admitted that he had "about 3 beers, 4 beers" at Tony Mart's "12 ounce bottles," and that he and his two friends had consumed a "six-pack" prior to going to Tony Mart's. He did not, according to the statement, remember what caused the accident.
When asked at the time of the statement if he was "presently under medication," David had answered, "They gave me a needle and a pill at the hospital. I don't know what they were, they said they would calm my nerves."
At the administrative hearing David did not remember giving this statement, or the earlier oral statement to Trooper Porter. He testified that he was proceeding within the speed limit of 50 miles per hour and not driving in a careless and heedless manner at the time and place in issue.
Even were we to deem this written statement admissible at the administrative hearing it was admitted in evidence over objection and relied upon by the Director in her decision its probative value was far outweighed by the other evidence in the case. The finding by the Director, that David's ability to drive his automobile safely and properly was impaired, was not justified upon the basis of the entire record, as hereinafter noted. Moreover, the statement, unsworn in character, was taken when David was under sedation and did not remember giving it. Any admission therein as to speed was contradicted by his sworn testimony at the hearing that he was traveling within the 50-mile speed limit.
We find it unnecessary herein to decide whether the constitutional guarantee against self-incrimination, as defined in *372 Miranda v. State of Arizona, supra, extends beyond the realm of purely criminal proceedings to civil forfeitures, such as the loss of a license to drive an automobile. But see Spevack v. Klein, 385 U.S. 511, 87 S.Ct. 625, 17 L.Ed.2d 574 (1967), a disbarment proceeding, and Garrity v. State of New Jersey, 385 U.S. 493, 87 S.Ct. 616, 17 L.Ed.2d 562 (1967), as to the right of a policeman to invoke the Fifth Amendment under threat of a loss of his position, if he does so.
III
The Director's finding that David's consumption of alcoholic beverages "did affect his ability to properly and safely operate said motor vehicle" is not supported by any substantial evidence in the record. The conclusion is a mere "Post hoc, ergo propter hoc." On the contrary, there was substantial credible evidence that the few beers consumed by David had not impaired his ability to drive properly and safely.
The only evidence as to David's drinking consisted of the following. In the inadmissible statement to Trooper Porter in the hospital emergency room David told the trooper that "he had had a few drinks down in the bars around the Somers Point area." The trooper said that David "smelled of alcohol also," but he was "not drunk." In the written statement taken by Detective Heilfurth, David asserted that he and two friends, sometime between 10:30 P.M. and 12 midnight, had consumed a "sixpack" of beer before going to "Tony Marts" at the Point. The three of them were at "Tony Marts" from about midnight until about 1 P.M., during which time he had "about 3 beers, 4 beers," 12-ounce bottles.
On the other hand, Sergeant Bader of the Somers Point police testified that he saw David at about 1:15 A.M. on August 24, 1965 at the City Hall in Somers Point estimated by him to be about six miles from the scene of the fatal accident and talked with him until David left City *373 Hall between 1:45 and 2 A.M. According to this police officer, who incidentally is a qualified drunkometer operator, David was not drunk. As he put it, "He might have had a drink or two but he was not under the influence, no, sir." He stated that if David were under the influence at that time, he would not have let him go out and get in his automobile and drive off. He answered, "No, sir," to an inquiry as to whether in his opinion any of David's faculties were impaired at that time to render him unable to operate a motor vehicle safely.
Sergeant Bader had met David and his two friends outside of Tony Mart's cafe about 1:15 A.M., having gone there in response to a radio dispatcher's call that there was some trouble down there. When he arrived at the cafe the sergeant ascertained that the three had wanted to go inside and were not permitted for some unknown reason. In all events, the three went with the sergeant to City Hall and after some conversation there they went on their way. This police officer, in answer to the hearing officer's question, reiterated that as to physical condition David gave no impression that he had been drinking alcoholic beverages, except for "a slight odor of alcohol on his breath." He testified that David's "attitude in speech and everything was very clear."
Further evidence that David's faculties were not impaired by the consumption of the beers consisted of the testimony of Leo T. Clark, a private investigator who had retired from the F.B.I. after 22 years service as a special agent. He checked the distance from the Somers Point City Hall to the scene of the accident and found it to be 7.6 miles. In traversing that distance there are 18 curves. Obviously, David had negotiated all of these curves safely until the last one. When Clark questioned David on August 27, 1965, David told him that he had dropped off one of his friends before the accident, merely pulling up in front of the house to do so. In response to a question by the State's attorney on cross-examination, Clark further testified:
*374 "He [David] told me at that time that he thought the left tire blew, because he said the car suddenly went out of control and he was unable to keep the car on the road; that it veered over to the left, and he said that he was aware of the fact that the car began to bang against things * * *."
We can appreciate that the Director had a feeling that the consumption of alcohol may have played a part in the accident. But to reach the conclusion that it did upon the paucity of proof herein that David had consumed five or six beers over a period of two or three hours before 1 P.M. and none thereafter would require a complete discounting of Sergeant Bader's testimony, the evidence of the safe negotiation of 17 curves before the mishap, and the plausible explanation that a tire blowout had caused David to lose control of the car.
IV
The Director found that the credibility of David was impaired by his testimony at the hearing when, after testifying that he was traveling west at the time and place in issue within the 50-mile speed limit and not in a careless and heedless manner, David swore that he "didn't remember" what happened. He did not remember having made the statements testified to by the two police officers. His explanation was that he had received an injury to his head and, as he put it, "my head has been bothering me ever since the accident." He now has dizzy spells. The Director noted that David apparently remembered a few days after the accident when he furnished details to the investigator hired in his behalf, Mr. Clark.
Appellate courts must defer, as a general rule, to the better opportunity of the trier of the facts to observe the demeanor of the witnesses and to adjudge of the credibility of any witness. Abeles v. Adams Engineering Co., Inc., 35 N.J. 411, 424 (1961). However, the Director's appraisal of David's credibility was not based upon his having testified before her personally. Therefore, we are under no mandate *375 to defer to her assessment of credibility in place of our own. The hearing officer did not evaluate the credibility of any witness. Moreover, his report and the final decision of the Director do not evaluate the evidence offered in David's behalf or controvert it.
There was proof by an employee of the owner of the wrecker which towed away David's automobile from the scene that the left tire and wheel could not be found, even after a search had been made. Their absence lends further plausibility to the tire blowout as the effective cause of the accident.
We conclude that there was not sufficient competent and substantial evidence offered to sustain the State's burden of proving by a preponderance of the evidence that David drove his automobile carelessly and on the wrong side of the highway in violation of the Motor Vehicle Act, or while his ability to drive was impaired by reason of the consumption of alcoholic beverages.
The order of the Director suspending David's driving privilege for two years is reversed.
CARTON, J.A.D. (dissenting).
In my view there was substantial evidence in the whole record from which the Director of Motor Vehicles could reasonably conclude, as she did, that at the time of the accident which resulted in Teti's death David operated the automobile in a careless manner (R.S. 39:4-97), and that he failed to drive upon the right-hand side of the highway (R.S. 39:4-82). The suspension of appellant's driving privileges for some period of time was consequently warranted and the determination to this effect should not be disturbed on appeal. Atkinson v. Parsekian, 37 N.J. 143, 149 (1962).
However, since it may be debatable whether there was sufficient evidence to support the additional finding that appellant's consumption of alcoholic beverages affected his ability to operate the automobile properly and safely, and since the order of suspension does not indicate to what extent *376 it relies on each of the individual findings, I would remand the matter to the Director for the purpose of imposing a suspension consonant with the first two findings.
Let us briefly review the evidence before the Director to ascertain whether there was substantial evidence which a reasonable mind must accept as adequate to support her conclusions. During the evening of August 23, 1965, appellant David was driving a Pontiac Le Mans in the Bridgeton area accompanied by several acquaintances. Between 10:30 P.M. and midnight, David and his passengers, Charles Teti and Danny Peterson, consumed a six-pack of beer. At about midnight, they drove toward Somers Point. On the way they stopped at Patcong Inn where he and Danny Peterson consumed more beer. At Somers Point David consumed between three and four 12-ounce bottles of beer at a tavern called Tony Mart's.
At about 1:15 that morning officer Lyn Bader of the Somers Point Police was dispatched to Tony Mart's to investigate a disturbance. This officer testified that upon arriving he observed David and two of his friends standing outside in an excited condition. He took the boys to the parking lot near the building and talked with them a short while. At the police officer's request, they accompanied him to the City Hall, Peterson driving appellant's car. According to Bader, appellant and his two friends appeared "perturbed" and "excited" because they were not permitted entry into Tony Mart's tavern. He talked further with them and then released them after they "calmed down." Officer Bader expressed the opinion that at that time appellant was not under the influence of alcohol. However, he also commented that David "might have had a drink or two."
On leaving Somers Point, appellant drove Peterson to his home. After dropping him off, accompanied by Charles Teti in the front seat on the passenger side, he drove in a westerly direction approximately a mile and a half to two miles on County Road No. 559. He then failed to negotiate a sharp curve and the car went off the south side of the road *377 at a point where the road passes over Powell Creek. The vehicle traveled 58 feet along the shoulder of the road, tore away a 20-foot section of the guardrail, then traveled 162 feet along the shoulder and overturned down an embankment. The car was completely turned around, and it was lying on its side, and Charles Teti was lying in the car with his head outside. The appellant climbed out of the car to go for help and went to a house approximately 300 yards away. The occupants called the police at his request. The accident occurred at approximately 2:20 A.M. on August 24, 1965, and the weather and road conditions were described as "clear and dry." The accident resulted in the automobile being "wrecked." The rear axle was broken and the left rear tire and wheel were never recovered.
Appellant was taken to the Somers Point Hospital where he was given sedatives. He was discharged from the hospital on the morning of August 25. Detective Heilfurth of the New Jersey State Police met him at that time and took him to the May's Landing State Police Station where the appellant made a written statement consisting of three typewritten pages.
In that statement, which contains the notation that it was begun at 10:37 and completed at 11:25 A.M., David described, largely in narrative form and in considerable detail, the events leading up to the accident and his actions thereafter. After taking Danny Peterson home, he stated:
"* * * From there we headed home, because Charley had to go to work the next day, and I tried to hurry because Charley had to get some sleep, he had to go to work at 5:00 o'clock then the next thing I remember was the accident.
Q. Do you know how the accident happened?
A. The only thing I remember is hitting the side of the road, then the car started going into a spin and hitting things.
Q. Can you estimate how fast you were going just before you hit the side of the road?
A. I couldn't estimate the speed, but I know I was going over the speed limit, I know that.
Q. Are you familiar with the Somers Point-Mays Landing Rd.?
A. Very familiar." (Emphasis supplied)
*378 Appellant's admissions that just before he hit the side of the road he was trying to hurry, that he was exceeding the speed limit, and that he was very familiar with the road, coupled with the physical evidence that the car traveled on the shoulder of the left side of the road, then tore away a 20-foot section of guardrail and traveled another 162 feet along the shoulder before overturning down the embankment, certainly warranted, if not compelled, the finding of careless driving and failure to drive on the right-hand side of the road.
The evidence in support of the finding that appellant's consumption of alcoholic beverages affected his ability to operate the automobile properly and safely is less compelling. The record does show that between 10:30 P.M. and 2:20 A.M., when the accident occurred, he consumed a not inconsiderable quantity of beer. Before midnight he had shared with his two companions a six-pack of beer, about midnight at the Patcong Inn he consumed more beer in an undisclosed quantity, and thereafter at Tony Mart's tavern he drank still more beer to the extent of three or four 12-ounce bottles. These admitted facts as to his drinking that night and his further admission that he could recollect none of the circumstances as to why or how the car he was driving left the road, as well as the physical evidence at the scene of the tragedy pointing to the conclusion that the car was proceeding at a high rate of speed and that he had lost control of it, give rise to more than a mere suspicion that the consumption of alcoholic beverages was an ingredient in causing the accident.
However, the absence of testimony as to whether or not appellant had also eaten any food during the same period, the lack of testimony as to the alcoholic content of the beverages which were consumed, as well as the opinion expressed by Officer Bader that appellant was fit to drive when he saw appellant at about 1:15 A.M., renders it questionable whether there was a preponderance of evidence to support the conclusion *379 that the consumption of alcoholic beverages affected appellant's ability to operate the car safely.
Since the evidence given by Trooper Porter has not been considered in this analysis of the evidence, it is unnecessary to determine what weight, if any, should be given to his testimony.
Detective Heilfurth's testimony and David's statement to him as to the circumstances of the accident stand on a different footing. The majority opinion expresses the view that Heilfurth's statement, if admissible, was "far outweighed" in probative value by the other evidence in the case. In assessing the probative value to be attributed to this witness' testimony, as well as that of the other evidence of the case, and in making independent findings of fact, the majority, in my view, departed from the well-defined role to be performed by appellate tribunals in the review of the action of administrative agencies. The appellate court's function under such circumstances is to examine the evidence in order to determine whether there existed substantial evidence on the whole record to support the determination of the administrative agency. Where such evidence appears, that determination should not be disturbed and the appellate tribunal should generally refrain from exercising its power to make independent findings of fact. Atkinson v. Parsekian, supra.
Moreover, the record amply justifies the Director in giving credence to Detective Heilfurth's testimony and to the written statement obtained from David. True, the appellant had stated to Heilfurth that he had been given a needle and a pill at the hospital. On the other hand, it must be borne in mind that the statement was made after he had already been discharged from the hospital and there is nothing in the record to support a finding that he was unable fully to understand the nature of the statement which he had given. Detective Heilfurth affirmatively testified that at the time he took appellant's statement "his responses to me were clear and coherent. * * * [H]e was perfectly well aware of what he was doing, that he was aware of the situation of where *380 he was, the facts relating to the accident." In Heilfurth's opinion David "was entirely competent to give a lucid statement in regards to what happened."
A cursory examination of the statement made by David reveals that he clearly, coherently and quite comprehensively described the events leading up to the time of the accident. Much of it is in narrative form and has the unmistakable ring of truth. The contrast between David's richly detailed written statement and his vague testimony before the Director fully justified her critical comment:
"* * * In his testimony at the hearing respondent says he could remember nothing about the accident except that he was driving at the lawful speed limit of 50 miles per hour. The credibility of respondent's testimony is impaired considering that the day after the accident he related specific details of his activities on the night of the accident and was able to recall with remarkable clarity details of the accident in an interview with an investigator which he, himself, had employed. Yet at the hearing he remembers nothing except that he was driving lawfully."
The self-serving declaration attributed to appellant by the expert witness Clark that he thought the left tire blew out and the car suddenly went out of control finds scant support in the evidence. The Director was entitled to attribute little weight to this explanation of the occurrence in the light of the other evidence from this witness. Also, it should be noted that neither in his statement nor in his testimony did David even claim that the accident might have resulted from a tire blowout.
The remaining issue (which the majority found unnecessary to decide) is whether the statement given by appellant to Heilfurth was properly admissible in the administrative hearing before the Director. This statement was suppressed in conjunction with the criminal action against appellant as a consequence of which it appears the indictment against David was dismissed. Judge Francis, in granting the motion to suppress the statement, commented that it did not recite certain constitutional requirements "insofar as advising the *381 right to counsel and the right to free counsel and some of the guarantees cited in Miranda."
The statement admitted into evidence discloses that Heilfurth asked David to give a voluntary statement concerning the fatal motor accident and that before David made the statement, Heilfurth gave him the following warning:
"I must advise you that this statement must be given of your own free will and accord, without force, fear, threats or promise of reward. I must also advise you that you have the right to consult an attorney before giving this statement."
I would hold that the warnings prescribed to be given a defendant in a criminal case under the rule laid down by Miranda v. State of Arizona, 348 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966) should not be applicable to quasi-judicial administrative proceedings such as that here involved. The proceedings before the Director involved no custodial sanctions whatsoever merely the suspension of driving privileges for a period of time. Cf. State v. Zucconi, 93 N.J. Super. 380 (App. Div. 1967), presently on appeal to the New Jersey Supreme Court.
The warnings required by Miranda are clear pronouncements of a person's rights, as well as the State's obligations in connection with an action of a criminal nature. There is no basis in precedent or reason why the precise warnings required in Miranda should be imported into and made a mandatory recital in administrative proceedings involving infractions of the traffic statute, the consequence of which is the suspension of driving privileges. Legally and practically, a failure to comply with the Miranda litany should not automatically cause the exclusion of statements so taken in a driver's license revocation proceeding. The proper standard in such cases is whether the admission of the statement will be so fundamentally unfair as to deprive the appellant of a fair hearing and thus violate the due process requirement of the Fourteenth Amendment.
*382 Appellant was advised that any statement he gave must be given of his own free will and that he had the right to consult an attorney before making such statement. There is nothing in the record which would justify the conclusion that the admission of the statement was fundamentally unfair. On the contrary, there was internal evidence in the statement, as well as the testimony of Heilfurth, which gave support to its trustworthiness and justified the Director in admitting the statement and considering it in arriving at her conclusion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544848/ | 50 N.J. 329 (1967)
235 A.2d 12
ONE ELEVEN WINES & LIQUORS, INC., A NEW JERSEY CORPORATION, APPELLANT,
v.
DIVISION OF ALCOHOLIC BEVERAGE CONTROL AND JOSEPH P. LORDI, DIRECTOR, ETC., RESPONDENTS.
VAL'S BAR, INC., A NEW JERSEY CORPORATION, APPELLANT,
v.
DIVISION OF ALCOHOLIC BEVERAGE CONTROL AND JOSEPH P. LORDI, DIRECTOR, ETC., RESPONDENTS.
MURPHY'S TAVERN, INC., APPELLANT,
v.
DIVISION OF ALCOHOLIC BEVERAGE CONTROL, RESPONDENT.
The Supreme Court of New Jersey.
Argued September 11 and 12, 1967.
Decided November 6, 1967.
Mr. Theodore Sager Meth argued for appellant One Eleven Wines & Liquors, Inc. (Messrs. Busch & Busch, attorneys).
*330 Mr. Norman A. Oshtry of the Pennsylvania Bar argued for appellant Val's Bar, Inc. (Messrs. Jacobson & Silverman, attorneys).
Mr. Louis R. Cerefice argued for appellant Murphy's Tavern, Inc.
Mr. Stephen Skillman, Deputy Attorney General, argued for respondents Division of Alcoholic Beverage Control and Joseph P. Lordi, Director, etc. (Mr. Arthur J. Sills, Attorney General of New Jersey, attorney; Mr. Richard Newman and Mr. Michael Rudolph, Deputy Attorneys General, on the brief).
Mr. Avrom J. Gold, attorney for F. & A. Corporation, and Messrs. Diamond and Pitman, attorneys for The Mattachine Society, Inc., filed briefs amicus curiae.
The opinion of the court was delivered by JACOBS, J.
The Division of Alcoholic Beverage Control disciplined the appellants for permitting apparent homosexuals to congregate at their licensed premises. It suspended the licenses of One Eleven Wines & Liquors, Inc. and Val's Bar, Inc. and revoked the license of Murphy's Tavern, Inc. On One Eleven's appeal to the Appellate Division the suspension of its license was sustained under the authority of Paddock Bar, Inc. v. Alcoholic Beverage Control Div'n, 46 N.J. Super. 405 (App. Div. 1957) and Murphy's Tavern, Inc. v. Davis, 70 N.J. Super. 87 (App. Div. 1961). We granted certification on the licensee's application. 48 N.J. 349 (1966). We also certified, on our own motion, the appeals which had been duly taken to the Appellate Division by Val's Bar and Murphy's Tavern and were awaiting argument there. R.R. 1:10-1.
The disastrous experiences of national prohibition led to the adoption of the twenty-first amendment and to the *331 return of liquor control to the states in 1933. See Grand Union Co. v. Sills, 43 N.J. 390, 399 (1964). When our Legislature during that year first created the Department of Alcoholic Beverage Control, it vested broad regulatory powers in a state commissioner who immediately set about to insure that abuses which had originally contributed so heavily in bringing about national prohibition, would not be permitted to recur. He adopted stringent regulations which he rigidly enforced and which the courts supported with great liberality. See Franklin Stores Co. v. Burnett, 120 N.J.L. 596 (Sup. Ct. 1938); Gaine v. Burnett, 122 N.J.L. 39 (Sup. Ct. 1939). He concerned himself not alone with matters of lawfulness but also with matters of public sensitivity for he firmly believed that the effectiveness of the new mode of control would turn on the extent of the public's acceptance of the manner in which licensed establishments were conducted. Here again the courts sustained his pertinent regulatory actions with broad sweep. See McFadden's Lounge v. Div. of Alcoholic Bev. Control, 33 N.J. Super. 61 (App. Div. 1954); Paddock Bar, Inc. v. Alcoholic Beverage Control Div'n, supra, 46 N.J. Super. 405.
Among the commissioner's early regulations were Rules 4 and 5 which were adopted in 1934. Rule 4 provided that no licensee shall allow in the licensed premises "any known criminals, gangsters, racketeers, pick-pockets, swindlers, confidence men, prostitutes, female impersonators, or other persons of ill repute." And Rule 5 provided that no licensee shall allow "any disturbances, brawls, or unnecessary noises" or allow the place of business to be conducted "in such manner as to become a nuisance." In 1936 Rule 5 was revised to include an express prohibition of "lewdness" and "immoral activities," and in 1950 it was again revised to include an express prohibition of "foul, filthy, indecent or obscene language or conduct." See McFadden's Lounge v. Div. of Alcoholic Bev. Control, supra, 33 N.J. Super., at p. 64; Jeanne's Enterprises, Inc. v. State of N.J., etc., 93 N.J. Super. 230 (App. Div.), affirmed, 48 N.J. 359 (1966).
*332 During the years prior to 1954 the department instituted proceedings under Rule 4 on the basis of evidence that apparent homosexuals had been permitted to congregate at the licensed premises. Apparently the department considered that the effeminate manifestations of the patrons brought them within the prohibition of "female impersonators" although that term relates more properly to transvestites who are, for the most part said to be non-homosexuals. In Re M. Potter, Inc., A.B.C. Bulletin 474, Item 1 (August 7, 1941) the investigators had observed a group of male patrons, "whose voices, gestures and actions were effeminate," dancing and kissing among themselves. Although there was an express finding that "no actual acts of immorality" were committed at the licensed premises, the license was nonetheless suspended. In the course of his formal opinion, the acting commissioner said that the mere "presence of female impersonators in and upon licensed premises presents a definite social problem"; and in line with the then widespread intolerance and limited public understanding of the subject, he made reference to "the deep-rooted personal contempt felt by a normal red-blooded man" and to the notion that "the mere thought of such perverts is repugnant to the normal person."
Since 1954 and despite increasing public tolerance and understanding, departmental proceedings aimed at the congregation of apparent homosexuals have continued apace but have been brought under Rule 5 rather than Rule 4. They have not been based on any specific and individualized charges of lewd or immoral conduct but rather on general charges that by permitting the apparent homosexuals to congregate, the licensees had allowed their places of business to be conducted in such manner "as to become a nuisance" within the contemplation of Rule 5. In Re Polka Club, Inc., A.B.C. Bulletin 1045, Item 6 (December 27, 1954) the then director, in suspending a license on a charge of violation of Rule 5, said that he would not permit licensed premises to become "havens for deviates." In Re Kaczka and Trobiano, *333 A.B.C. Bulletin 1063, Item 1 (April 21, 1955) the licensee introduced expert testimony that homosexuality is not contagious and that seeing groups of homosexuals would not affect normal people but the license was nonetheless suspended. As illustrated in many of his rulings, including Re Louise G. Mack, A.B.C. Bulletin 1088, Item 2 (November 2, 1955), the director entertained the view that since exposure to homosexuals might be harmful to "some members of the public" the congregating of homosexuals must be prohibited as a "threat to the safety and morals of the public." See Paddock Bar, Inc. v. Alcoholic Beverage Control Div'n, supra, 46 N.J. Super., at p. 408.
In the very cases before us the Division of Alcoholic Beverage Control made it clear that it has not in anywise moderated its long standing position that permitting the congregation of apparent homosexuals, without more, is violative of Rule 5. The evidence against Murphy's Tavern disclosed many individual acts which could have been the basis of specified and individualized charges of lewd or immoral conduct at the licensed premises. But no such charges were preferred and when, during the course of cross-examination, one of the division's investigators was asked whether he had observed any lewdness at Murphy's Tavern, the prosecuting attorney pointed out that the division had not alleged "any immoral activity or lewdness itself" but had simply alleged that the licensee had "permitted the licensed place of business to become a nuisance" in that it had allowed "these persons to come in and congregate upon the premises."
In the One Eleven proceeding there was no charge and no substantial evidence that lewd or immoral conduct was permitted at the licensed premises. There was a charge and sufficient evidence that the licensee had permitted apparent homosexuals to congregate there. Investigators had visited the premises on several occasions and had observed the patrons; the testimony included the following partial account of their behavior:
*334 They were conversing and some of them in a lisping tone of voice, and during certain parts of their conversations they used limp-wrist movements to each other. One man would stick his tongue out at another and they would laugh and they would giggle. They were very, very chummy and close. When they drank their drinks, they extended their pinkies in a very dainty manner. They took short sips from their straws; took them quite a long time to finish their drink. * * *
They were very, very endearing to one another, very, very delicate to each other. * * *
They looked in each other's eyes when they conversed. They spoke in low tones like an effeminate male. When walking, getting up from the stools, they very politely excused each other, hold on to the arm and swish and sway down to the other end of the bar and come back. * * *
Their actions and mannerisms and demeanor appeared to me to be males impersonating females, they appeared to be homosexuals commonly known as queers, fags, fruits and other names.
Similarly in the proceeding against Val's Bar there was no charge nor any substantial evidence at the hearing before the director that lewd or immoral conduct was permitted at the licensed premises. Investigators had visited the premises on several occasions and testified in detail as to the behavioral characteristics which led them to the permissible conclusion that the patrons were apparent homosexuals. See 7 Wigmore, Evidence § 1974 (3d ed. 1940); Tyree, The Opinion Rule, 10 Rutgers L. Rev. 601 (1956); cf. State v. Campisi, 23 N.J. 513, 520 (1957); State v. Guerrido, 60 N.J. Super. 505, 511 (App. Div. 1960). The investigators acknowledged that for the most part the patrons were "normally dressed" and showed "very good behavior." Dr. Wardell B. Pomeroy, called as an expert witness by the licensee, testified that, although it could not be said from mere observation that any given individual was a homosexual, he would be of the opinion that tavern patrons with the characteristics described by the investigators were apparent homosexuals.
Dr. Pomeroy was associated with the Kinsey Institute for twenty years and was the co-author of several books dealing with sexual behavior and offenses. He referred to the Kinsey *335 studies which contained startling indications that 13% of the males in the country were "more homosexual than heterosexual" and that 37% had "at least one homosexual experience to the point of orgasm in the course of their life." He also referred to indications that 55% of the population was neutral on the subject of homosexuality and there is now "a more acceptance attitude" than there was twenty years ago. See Mosk, Forward to The Consenting Adult Homosexuals and the Law, 13 U.C.L.A.L. Rev. 644, 645 (1966). In response to an inquiry by the division's hearer, Dr. Pomeroy voiced the opinion that no adverse social effects would result from permitting homosexuals to congregate in licensed establishments. He noted that non-homosexuals would not be harmed by being in the same premises with homosexuals, and that any who found their mere presence to be offensive would presumably leave. He expressed the view that permitting their congregation in taverns would tend to eliminate clandestine associations in unregulated and unsupervised places of public nature. See Cory and Le Roy, The Homosexual and His Society 119, 121 (1963); see also Schur, Crimes Without Victims 86, 87 (1965) where Dr. Schur dealt with the so-called "gay" bars operating in our neighboring states and elsewhere:
"Although such establishments are sometimes condemned as breeding grounds of homosexuality, the charge is not convincing. Most of the people who go there (apart from tourists and some `straight' friends) already are involved in the homosexual life. Anyone who wanders in and who is offended by what he sees is perfectly free to leave. The authors of a recent `view from within' emphasize that although an increase in homosexuality may increase the demand for homosexual bars, the bars can scarcely be said to produce homosexuals. Indeed, as these writers go on to suggest, the bars serve to keep homosexuals `in their place' out of more public places and, to a certain extent, beyond the public view."[*]
*336 The views expressed by Doctors Pomeroy and Schur find significant legal support in various judicial holdings, notably those of the California Supreme Court. In Stoumen v. Reilly, 37 Cal.2d 713, 234 P.2d 969 (1951) the license was suspended because the licensee had permitted "persons of known homosexual tendencies" to patronize and meet at the licensed premises. Under Section 58 of the California Alcoholic Beverage Control Act, it was unlawful to permit the licensed premises to be conducted as a disorderly house or as a place "to which people resort for purposes which are injurious to the public morals, health, convenience or safety." The court, in setting aside the suspension, held that mere patronage "without proof of the commission of illegal or immoral acts on the premises, or resort thereto for such purposes" was not sufficient to show a violation of Section 58. Elsewhere in its opinion it stressed that in order to establish "good cause" for suspension of the license, something more must be shown than that many of the patrons were homosexuals and used the premises "as a meeting place." 234 P.2d, at p. 971.
After the Stoumen case was decided, the California Legislature enacted the provision in section 24200, subdivision (e) of the Business and Professions Code under which licensed premises were prohibited from being used as resorts for "sexual perverts." In Vallerga v. Dept. of Alcoholic Beverage Con., 53 Cal.2d 313, 1 Cal. Rptr. 494, 347 P.2d 909 (1959) a license was revoked because the licensee had permitted his premises to become a resort for homosexuals. The revocation was set aside by the California Supreme Court which held that the legislative provision was unconstitutional *337 under Stoumen. The court also considered the contention that, apart from the provision declared unconstitutional, the revocation could be sustained on the ground that continuance of the license would be "contrary to public welfare and morals" within the lower court holdings in Nickola v. Munro, 162 Cal. App.2d 449, 328 P.2d 271 (1958) and Kershaw v. Department of Alcoholic Beverage Cont., 155 Cal. App.2d 544, 318 P.2d 494 (1957); in this connection it said:
"In the Nickola case the court held generally that seeking sexual gratification in a public tavern with another of the same sex would offend the moral sense of the general public. The court stated, 162 Cal. App.2d at page 457, 328 P.2d at page 276: `There are many things that can be done in the privacy of the home which may not be illegal, but if done in a public tavern are directly offensive to public morals and decency, and demonstrate that the participants are sex perverts. The continuance of the license under such circumstances "would be contrary to public welfare or morals" as provided in our Constitution. * * * Further than that we do not have to go.' Conduct which may fall short of aggressive and uninhibited participation in fulfilling the sexual urges of homosexuals, reported in some instances (see Kershaw v. Department of Alcoholic Bev. Control, supra, 155 Cal. App. 2d 544, 547-548, 318 P.2d 494), may nevertheless offend good morals and decency by displays in public which do no more than manifest such urges. This is not to say that homosexuals might properly be held to a higher degree of moral conduct than are heterosexuals. But any public display which manifests sexual desires, whether they be heterosexual or homosexual in nature may, and historically have been, suppressed and regulated in a moral society." 1 Cal. Rptr., at p. 497, 347 P.2d, at p. 912.
The court in Vallerga was of the opinion that the record before it contained sufficient evidence of overtly offensive acts within the licensed premises upon which specific and individualized charges of conduct "contrary to public welfare or morals" could have been preferred against the licensee. But no such charges had been preferred and the only charge preferred, namely, permitting the premises to become a resort for homosexuals in violation of subdivision (e), was the one held by the court to be constitutionally infirm. The court's setting aside of the revocation was presumably without *338 prejudice to the right to proceed against the licensee on specific and individualized charges and proof of overt acts within the licensed premises offensive to "good morals and decency." See 1 Cal. Rptr., at pp. 498-499, 347 P.2d, at pp. 913-914; cf. Sabes v. City of Minneapolis, 265 Minn. 166, 120 N.W.2d 871, 878 (1963).
While the New York cases contain obscurities, many of them seem to take an approach comparable to that taken by the California Supreme Court. Thus in People v. Arenella, 139 N.Y.S.2d 186 (N.Y.C. Mag. Ct. 1954) the court, in dealing with a criminal charge that a licensee had allowed his premises to become disorderly, differentiated cases deemed disorderly where the premises were frequented by homosexuals in "open and notorious manner, for the purpose of soliciting others to commit lewd and indecent acts" from others, not deemed disorderly, where the evidence established nothing more than that homosexuals patronized the premises without engaging in prohibited acts therein. 139 N.Y.S.2d, at p. 189. Similarly in Kerma Restaurant Corporation v. State Liquor Authority, 27 A.D.2d 918, 278 N.Y.S.2d 951 (1966) the court, while sustaining the revocation of a license on the basis of solicitation and other overtly offensive acts within the licensed premises, acknowledged that the "mere congregation of homosexuals, where there is no breach of the peace, does not make the premises disorderly" within the meaning of New York's Alcoholic Beverage Control Law. 278 N.Y.S.2d, at p. 952. See In re Farley, 217 N.Y. 105, 111 N.E. 479, 481 (1916); cf. Lynch's Builders Restaurant, Inc. v. O'Connell, 303 N.Y. 408, 103 N.E.2d 531 (1952); Fulton Bar & Grill, Inc. v. State Liquor Authority, 11 A.D.2d 771, 205 N.Y.S.2d 37 (1960); Gilmer v. Hostetter, 20 A.D.2d 586, 245 N.Y.S.2d 252 (1963).
In Re Revocation of Licence of Clock Bar, Inc., 85 Dauph. 125 (Pa. 1966) the court sustained a suspension grounded on evidence of improper solicitations by homosexuals at the licensed premises. However, in the course of its opinion it *339 pointed out there was "no law which forbids homosexuals from being patrons of licensed premises," that the mere, though open, congregation of homosexuals at the licensed premises would not sustain a charge that the licensee maintained "a disorderly house," and that homosexuals at licensed premises become objectionable only "when they make a nuisance of themselves" by improper solicitation or other overtly offensive conduct. 85 Dauph. at 131. See Sesaroni v. Smith, 202 A.2d 292 (R.I. 1964); but cf. Inman v. City of Miami, 197 So.2d 50 (Fla. Dist. Ct. App. 1967), petition for certiorari filed, 36 U.S.L.W. 3163 (U.S. Oct. 11, 1967) (No. 717).
Though in our culture homosexuals are indeed unfortunates, their status does not make them criminals or outlaws. Cf. Robinson v. California, 370 U.S. 660, 82 S.Ct. 1417, 8 L.Ed.2d 758 (1962). So long as their public behavior violates no legal proscriptions they have the undoubted right to congregate in public. And so long as their public behavior conforms with currently acceptable standards of decency and morality, they may, at least in the present context, be viewed as having the equal right to congregate within licensed establishments such as taverns, restaurants and the like. See Stoumen v. Reilly, supra, 234 P.2d, at p. 971. In sustaining the suspension of One Eleven's license, the Appellate Division took the position that it was not concerned with the rights of the patrons since technically the legal issue before it was the validity of Rule 5 under which the license was suspended. But the asserted rights of the homosexuals to assemble in and patronize licensed establishments are intertwined with the asserted rights of licensed establishments to serve them. Surely in these circumstances, the licensees are properly to be viewed as having standing to seek vindication of the various rights involved in order that the Court's ultimate determination may soundly rest on the complete mosaic. Cf. Griswold v. Connecticut, 381 U.S. 479, 481, 85 S.Ct. 1678, 14 L.Ed.2d 510, 512 (1965); NAACP v. Alabama, 357 U.S. 449, 458, 78 S.Ct. 1163, *340 2 L.Ed.2d 1488, 1497 (1958); Barrows v. Jackson, 346 U.S. 249, 255, 73 S.Ct. 1031, 97 L.Ed. 1586, 1594 (1953); Pierce v. Society of Sisters, 268 U.S. 510, 535, 45 S.Ct. 571, 69 L.Ed. 1070, 1078 (1925); Sedler, Standing to Assert Constitutional Jus Tertii in the Supreme Court, 71 Yale L.J. 599, 626 (1962).
The Division of Alcoholic Beverage Control, stressing the acknowledged constitutional and statutory breadth of its regulatory powers (Boller Beverages, Inc. v. Davis, 38 N.J. 138, 150 (1962); Guill v. Mayor and Council of City of Hoboken, 21 N.J. 574 (1956)), contends that the mere congregation of apparent homosexuals in taverns is contrary to the public welfare and may therefore reasonably be prohibited under its wide police powers. Cf. Jeanne's Enterprises, Inc. v. State of N.J., etc., supra, 93 N.J. Super., at p. 232. It points to the fact that the very term "apparent homosexuals" contemplates effeminate behavioral characteristics, such as those described earlier in this opinion, but apparently it concedes, as it must in the light of the times, that such behavioral characteristics without more, would not constitute overt conduct offensive to current standards of morality and decency. It expresses various fears which we have carefully considered but which lack significant support in the records before us or in the available materials on the subject.
Thus the division suggests that the presence of apparent homosexuals in so-called "gay" bars may serve to harm the occasional non-homosexual patrons who happen to stray there but it produces nothing to rebut the expert testimony or the published writings to the contrary. See Cory and LeRoy, supra, at p. 121; Schur, supra, at p. 87. It further suggests that offensive conduct by apparent homosexuals within the licensed premises "may lead to violence" against them by non-homosexuals but this ignores the licensee's comprehensive capacity and responsibility, at the peril of its license, for precluding offensive conduct and for conducting its establishment in lawful and orderly fashion. See In re Olympic, Inc., 49 N.J. Super. 299, 305-09 (App. Div.), certif. denied, 27 *341 N.J. 279 (1958). Finally, it points out that it has consistently tried "to increase public respect and confidence in the liquor industry" (cf. X-L Liquors v. Taylor, 17 N.J. 444, 451 (1955)) and suggests that permitting the congregation of apparent homosexuals, even though carefully supervised, will impair such public respect and confidence. But here again it furnishes nothing affirmative in support of its position which appears to disregard the burgeoning movement towards greater tolerance and deeper understanding of the subject. See Mosk, supra, 13 U.C.L.A.L. Rev., at p. 645; Model Penal Code § 207.5, Comment (Tent. Draft No. 4, 1955).
When in the 1930's the Department of Alcoholic Beverage Control first took its severe position, it acted on the assumption that the mere congregation of apparent homosexuals had to be outlawed to achieve effective control. It of course had no experience to support the assumption but it took the prohibitory course as the safer one for the then fledgling system. At the time, the interests of the patrons in question were given little consideration and were in any event overwhelmed by the then highly felt transitional need for sweeping restraint. Now, in the 1960's, the transitional need as such is long past and it is entirely appropriate that full sweep be given to current understandings and concepts. Under them it seems clear that, so long as the division can deal effectively with the matter through lesser regulations which do not impair the rights of well behaved apparent homosexuals to patronize and meet in licensed premises, it should do so. Such narrower course would be consonant with the settled and just principle that restrictions adopted in the exercise of police powers must be reasonable and not go beyond the public need. See N.J. Good Humor, Inc. v. Bradley Beach, 124 N.J.L. 162, 168 (E. & A. 1940); Reingold v. Harper, 6 N.J. 182, 192 (1951); cf. Griswold v. Connecticut, supra, 381 U.S., at pp. 485-486, 85 S.Ct. 1678, 14 L.Ed.2d, at pp. 515-516; NAACP v. Alabama, *342 Flowers, 377 U.S. 288, 307, 84 S.Ct. 1302, 12 L.Ed.2d 325, 338 (1964).
It must be borne in mind that the division has produced nothing to support any need for continuance of its flat prohibition. Nor has it produced anything to indicate that it could not readily prepare and enforce a fair and sensible regulation which, while permitting apparent homosexuals to assemble in and patronize licensed establishments, prohibits overtly indecent conduct and public displays of sexual desires manifestly offensive to currently acceptable standards of propriety. Such a regulation might well be adopted forthwith to the end that future proceedings would rightly be based on specific charges of improper conduct at the licensed premises rather than, as here, upon general charges of mere congregation which we deem to be unreasonable and legally unsupportable. In the meantime, the discipline imposed in the three cases before us must be set aside, without prejudice, however, to any new charges which the division may prefer against the licensees, or any of them, clearly describing the individual acts alleged to be violative of the provisions in Rule 5 aimed at lewd and immoral conduct within the licensed premises. See Vallerga v. Dept. of Alcoholic Beverage Cont., supra, 1 Cal. Rptr., at pp. 498-499, 347 P.2d, at pp. 913-914.
Reversed.
PROCTOR, J. (concurring).
Since the charges against the three taverns did not specify any particular offensive acts by the patrons, I concur with the majority opinion. However, I wish to emphasize that, although well-behaved homosexuals cannot be forbidden to patronize taverns, they may not engage in any conduct which would be offensive to public decency. In the record before us it appears that there was evidence of conduct (men kissing each other on the lips, etc.) which would form the basis for disciplinary action at least against One Eleven and Murphy's had they properly been charged. A tavern should not provide an arena for *343 the behavior disclosed by this record. I appreciate that the majority opinion does not say that such conduct will be tolerated, but nonetheless I am expressing my positive view that it should not be.
For reversal Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, SCHETTINO and HANEMAN 6.
For affirmance None.
NOTES
[*] The authors referred to by Dr. Schur are Cory and LeRoy who at pages 121-122 of their book entitled The Homosexual and His Society had this to say:
"It can be argued that gay bars spread homosexuality and the elimination of them will help arrest this development. However, people who argue this way usually have little or no understanding of the problem and know very little about such bars. Most of those who go to gay bars are already homosexual and those who are not have no interest in remaining in these places for long, and seldom return. It is difficult to imagine a person walking into a gay bar and becoming homosexual, if he had not already been favorably disposed to such activity." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544899/ | 427 Pa. 576 (1967)
Lowery, Appellant,
v.
Pittsburgh Coal Company.
Supreme Court of Pennsylvania.
Argued September 29, 1967.
November 28, 1967.
*577 Before BELL, C.J., MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
Stephen I. Richman, with him Greenlee, Richman, Derrico & Posa, for appellant.
Benjamin Diamond, for Commonwealth, appellee.
Anthony J. Polito, with him Rose, Schmidt and Dixon, for appellee.
*578 OPINION BY MR. JUSTICE O'BRIEN, November 28, 1967:
Appellant, from April, 1929, until June 4, 1955, had been employed as a coal miner by appellee, Pittsburgh Coal Company. On June 4, 1955, he suffered a nyocardial infarction and from that time until his death was totally disabled. In July of 1963, he was informed that he was suffering from advanced silicosis and he filed a claim under the Occupational Disease Act, Act of June 21, 1939, P.L. 566, 77 P.S. § 1201 et seq. Appellant died in August of 1964.
The referee denied appellant's claim on the basis of his refusal to find that appellant became totally disabled from silicosis within 4 years from the date of his last employment, as required by § 301(c) of the Act. 77 P.S. § 1401(c). The Workmen's Compensation Board affirmed the referee's denial of benefits, and an appeal to the Court of Common Pleas of Washington County was taken. That court heard the case en banc and reversed the board. The employer and the Commonwealth appealed to the Superior Court, which reversed the court of common pleas and reinstated the decision of the board, with one judge dissenting. We granted allocatur.
The majority of the Superior Court has undoubtedly correctly stated the law with respect to the review of decisions of the board. Certainly it is the claimant's burden to prove all of the elements necessary to support an award. There is no doubt that the credibility and weight of the testimony are matters for the board to determine. Nor is the board required to accept the testimony of any witness, even though the testimony is uncontradicted. No citations of authority are required to support the proposition that the board, as the final fact-finding body, must determine whether the claimant has sustained his burden, and that the question on review is not whether the evidence would sustain the *579 board's finding, but whether there was a capricious disregard of competent evidence.
As previously stated, the Superior Court majority has clearly defined the applicable principles of review of decisions of the board. The difficulty arises in the application of those principles to the peculiar facts of the instant case.
In order to determine whether the board ignored or capriciously disregarded competent evidence, we must examine the record to determine what the medical evidence was. That evidence, briefly summarized, is as follows: The physician who made the diagnosis of silicosis in 1963 testified that the condition was one of long standing, and that in his opinion, the condition had existed in 1955 and 1956. The physician who had treated the decedent subsequent to his 1955 heart attack testified that he did not diagnose silicosis at that time. He explained that at that time he had no facilities to make such a diagnosis. He further testified that in the light of what he had learned subsequent to that time, it was now his opinion that the decedent's disability for at least the period from one year after his 1955 heart attack until his death was caused by silicosis. There is no dispute that the decedent had silicosis, and that silicosis was, in fact, the cause of death. The employer offered no medical testimony of any kind.
The board found the medical testimony offered by the appellant to be "competent, but not credible". The board offers no explanation for its finding that the uncontradicted medical evidence was not credible. We are in agreement with the dissenting judge of the Superior Court that while it is true that the board should have wide latitude in finding the facts, and that the board is not required to accept the uncontradicted testimony of any witness, there is grave reason for limiting that standard of review in this case. The dissenting *580 opinion aptly states: "It is true that the Board is not required to accept the uncontradicted testimony of any witness at least where it is not corroborated. . . . In this case, however, the Board has exceeded even that authority, and wholly disregarded uncontradicted testimony which was substantiated by another, disinterested witness. In my view, this case demonstrates that the Board's discretion as the `ultimate fact-finder' must be qualified by its obligation to deal rationally and coherently with the evidence before it. To reject the testimony of [the physician who diagnosed silicosis], on this record, by characterizing it as `competent, but not credible' seems to me so arbitrary as to require corrective action by this Court. The Board's terse and cryptic language, if approved by us, renders impossible any meaningful review of its action on appeal." (Emphasis in original)
It may be, as pointed out by the dissent, that the board is applying a rule which would exclude from consideration the testimony of an expert medical witness as to the date of the commencement of a disability where that date is prior to the doctor's first examination of the claimant. If the board is, in fact, applying such a rule, it should, as the dissent points out, "say so, and subject the rule to judicial scrutiny."
We are in agreement with the dissenting opinion in the Superior Court that the board has furnished an insufficient basis for an adequate review of its decision. That opinion states: "The real difficulty here is that we can discern nothing whatever from the Board's opinion. To acquiesce in its disposition of this case on the ground that `it is for the Board as the final fact-finding body to determine from all the evidence whether claimant has sustained the burden resting upon him', seems to me to be an abdication of our judicial responsibility."
*581 We conclude that the case must be remanded to the board so that it may more precisely explain its reasons for rejecting the claim, and so that effective judicial review of the board's decision may be had.
The order of the Superior Court is reversed, the orders of the Court of Common Pleas of Washington County and of the Workmen's Compensation Board are vacated, and the record is remanded to the Workmen's Compensation Board for further proceedings not inconsistent with the views expressed herein. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544895/ | 216 B.R. 556 (1997)
In re Jerry L. MOSS, Jr. and Sandra K. Moss, Debtors.
Bankruptcy No. 96-43121.
United States Bankruptcy Court, E.D. Texas, Sherman Division.
December 17, 1997.
Jeff Wagnon, Barron & Wagnon, Nederland, TX, for Debtors.
Hobart Miller, I.R.S., Dallas, TX, for I.R.S.
OPINION
DONALD R. SHARP, Chief Judge.
NOW before the court for consideration is an Objection by Debtors, Jerry L. Moss, Jr. and Sandra K. Moss, to the Claim of the Internal Revenue Service. At the conclusion of the hearing, the matter was taken under advisement. This opinion constitutes the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure 7052 and disposes of all issues before the Court.
FACTUAL AND PROCEDURAL BACKGROUND
Jerry L. Moss, Jr. and Sandra K. Moss (hereinafter referred to as the "Debtors"), filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code on November 11, 1996. The Debtors had previously filed a Chapter 13 petition on November 11, 1993, but the case was dismissed on July 12, 1995. During the pendency of the first bankruptcy case Debtors filed tax returns for calendar years 1991 and 1992. The Internal Revenue Service (hereinafter referred to as the "IRS") made several attempts to, collect the taxes due during the period between the dismissal of the first case and the filing of this case.
In the current case, the IRS filed an amended proof of claim on April 11, 1997.[1] The Debtors filed an objection to the IRS's proof of claim not disputing the amount of the tax but disputing the priority status of the tax liability. At issue is whether Debtors' income tax liability for 1991 and 1992 should be given priority status. The Debtors' *557 federal income tax return for tax year 1991 was due on April 15, 1992, and the Debtors filed their return on February 9, 1994. The Debtors' federal income tax return for tax year 1992 was due under extension on October 15, 1993, and the Debtors filed their return on February 9, 1994.
DISCUSSION
The issue before the Court is whether section 105 of the Bankruptcy Code may be used in this case to toll time limitations under section 507 during the Debtors' prior bankruptcy case because the automatic stay prevented the collection of § 507 priority debts.
Debtors contend there is no explicit statutory provision in the Bankruptcy Code that provides for tolling under section 507 during the time in which the previous bankruptcy case was pending. Additionally, Debtors claim that the IRS has the burden of proof to factually show that § 105(a) should be used to equitably toll the three year limitation under § 507(a)(8)(A)(i).[2] Finally, they argue that the IRS has not shown they are entitled to equitable tolling and thus, the 1991 and 1992 income taxes should not be entitled to priority but treated as general unsecured claims.
The IRS concedes that it has been more than 240 days since taxes for 1991 and 1992 have been assessed but argues that: its claim is entitled to priority under § 507(a)(8)(A)(i).[3] They contend that income taxes due for these years should be entitled to priority since it has not been more than three years since Debtors' returns for these years were due. This argument is based on the IRS contention that the three-year period was suspended during the pendency of Debtors' previous bankruptcy case, when the automatic stay prevented the government from collecting the tax debt.[4]
It is clear that but for the suspension of the three-year lookback period during the pendency of Debtors' first bankruptcy proceeding, the IRS's tax claim for 1991 and 1992 would not be entitled to priority status under § 507(a). As a result, the Court must determine whether tolling is proper under the present facts.
The Court previously addressed a similar issue in In re Dennis, No. 95-41558, Adversary No. 95-4123 (Bankr.E.D.Tex. April 8, 1996). In that case, the debtor filed a complaint seeking to have his 1989 and 1990 income tax liability declared dischargeable claiming that they were due more than three years prior to filing his current bankruptcy case. In holding that the taxes were nondischargeable, this Court found that the debtor's two earlier chapter 13 petitions which placed the automatic stay in effect, operated to suspend the running of the three year period described in § 507(a)(8). This Court further stated that "all courts which have considered this issue have uniformly held that a debtor cannot invoke the protection of the bankruptcy court, thereby forcing the IRS to suspend all collection activities for a sufficient period to cause his taxes to become dischargeable and then file a new bankruptcy petition and claim that the government's right to enforce the tax liability was barred by the passage of time." Id.
The Third Circuit also addressed this matter and stated ". . . it seems clear that Congress intended to provide the government a full and unimpeded three years to collect income taxes; it did not intend to leave a loophole for debtors to engage in tax avoidance, as the burden of making up the revenues thus lost must be shifted to other taxpayers." In re Taylor, 81 F.3d 20 (3rd Cir. *558 1996) (citing S.Rep. No. 989, 95th Cong., 2d sess. 14 (1978)).
The Court believes that the IRS has met its burden to show that § 105(a) should be used to equitably toll the three year limitation under § 507(a)(8)(A)(i). Based on the evidence presented, the Court finds that the IRS made every effort to collect within three years but was deterred by the Debtors' previous bankruptcy filing. First, the IRS was prohibited from collecting income taxes for 1991 and 1992 during the Debtors' previous bankruptcy case because of the automatic stay. Second, once the first bankruptcy case was dismissed, the IRS proceeded with its usual attempts to collect by conducting the following: (1) sending a fourth notice of demand to pay, (2) sending the file to collections, (3) assigning the file to a field revenue officer, and (4) filing a levy and lien. Despite their efforts, the IRS was unable to follow through on its actions because the Debtors filed this bankruptcy case.
The Court finds that the three-year period prescribed by § 507(a)(8)(A)(i) should be extended for the period of time Debtors previous bankruptcy was pending.[5] The length of the extension is one year, eight months and one day, which is the amount of time the automatic stay was in effect during Debtors' previous bankruptcy case. The due date of each return was within four years, eight months and one day of the filing date and the IRS is entitled to classify income taxes due for 1991 and 1992 as a priority claim. To allow any other result would be contrary to Congress' intent of allowing the IRS three clear years to collect income taxes. Therefore, the Court must overrule Debtors' objection to the proof of claim filed by the IRS.
NOTES
[1] The claim was comprised of a secured claim of $5,268.00, an unsecured priority claim of $34,917.75, and an unsecured general claim of $19,350.42.
[2] See In re Gilmore, 198 B.R. 686 (Bankr. E.D.Tex.1996).
[3] § 507 Priorities
(a) The following expenses and claims have priority in the following order:
. . .
(8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for
(A) a tax on or measured by income or gross receipts
(i) for a taxable year ending on or before the date of the filing of the petition for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
[4] See 11 U.S.C. § 362(a).
[5] The Court would note that it considered, Matter of Quenzer, 19 F.3d 163 (5th Cir.1993), and determined it was not applicable since it dealt with tolling under § 108(c) which applies only to nonbankruptcy law and nonbankruptcy proceedings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544902/ | 211 Pa. Super. 299 (1967)
Commonwealth
v.
Burkett, Appellant.
Superior Court of Pennsylvania.
Argued September 14, 1967.
November 16, 1967.
*300 Before ERVIN, P.J., WRIGHT, WATKINS, MONTGOMERY, JACOBS, HOFFMAN, and SPAULDING, JJ.
Thomas Kellogg, Assistant Defender, with him Leonard Lieberson and Melvin Dildine, Assistant Defenders, and Herman I. Pollock, Defender, for appellant.
Michael M. Baylson, Assistant District Attorney, with him Michael J. Rotko and Alan J. Davis, Assistant District Attorneys, Richard A. Sprague, First Assistant *301 District Attorney, and Arlen Specter, District Attorney, for Commonwealth, appellee.
OPINION BY JACOBS, J., November 16, 1967:
After waiving a jury trial, appellant was tried on October 31, 1966, before the Honorable GREGORY G. LAGAKOS and found guilty of rape, aggravated robbery, aggravated assault and battery, and conspiracy. He appeals from the judgment of sentence.
Appellant's sole argument before this court is that the lower court erred in permitting the assistant district attorney to cross-examine him regarding his statement to the police when the statement was inadmissible for failure to give the warnings required by Miranda v. Arizona, 384 U.S. 436, 16 L. Ed. 2d 694, 86 S. Ct. 1602 (1966). The inadmissibility is apparently admitted by the Commonwealth which withdrew the statement, after objection, when it was offered in its case in chief.
On direct examination the twenty-one year old appellant testified that the prosecutrix had an accident with her automobile and asked for help. He said that he volunteered and at her request drove her automobile away from the scene of the accident. He testified that while in the car she told him that her boy friend had beaten her, that she liked boys, and would give him money and other gifts. Appellant further testified on direct examination that the prosecutrix then offered herself to him sexually and that he got into the back seat of the car with her but left without having intercourse because he was repelled by her body odor. On cross-examination appellant was asked, over objection, if he had told police the same story that he had told the court on direct examination. Appellant admitted that he had not given the same story to the police.
The effect of this question and answer was to demonstrate to the fact finder, in this case the judge, *302 that the statement appellant had given to the police was at variance with his oral testimony. Since the variance was not limited by the question or the answer, the judge might well have concluded that appellant's statement to the police admitted some or all of the essential elements of the crimes charged. It is obvious that the statement itself, which we have never seen, could not have been admitted into evidence for that purpose as part of the Commonwealth's case or on rebuttal. The effect of this question and answer was to do indirectly what the Commonwealth could not do directly, i.e., to force the appellant to incriminate himself.[1] "The privilege against self-incrimination protects the individual from being compelled to incriminate himself in any manner; it does not distinguish degrees of incrimination." Miranda v. Arizona, 384 U.S. at 476, 16 L. Ed. 2d at 725. To permit this question and answer was reversible error.
Appellee argues that this case is controlled by our recent decision in Commonwealth v. Reginelli, 208 Pa. Super. 344, 222 A.2d 605 (1966). We disagree. In Reginelli we followed by analogy Walder v. United States, 347 U.S. 62, 98 L. Ed. 503, 74 S. Ct. 354 (1954), in holding that the prosecution may make use of an unlawfully obtained statement to impeach a defendant's credibility after he opens the door on direct examination by making assertions which go beyond the denial of complicity in the crime charged.[2]Walder v. United States, supra, held that where a defendant goes *303 beyond a mere denial of complicity in the crimes with which he is charged the prosecution may introduce unlawfully seized evidence in rebuttal for impeachment purposes.
In Commonwealth v. Wright, 415 Pa. 55, 202 A.2d 79 (1964), in analyzing Walder, Justice EAGEN speaking for our Supreme Court said:
"To make such evidence available for impeachment purposes and thereby constitute a waiver by the defendant of his constitutional protection against its use, three conditions are essential: (1) The defendant must elect to take the stand; (2) His testimony which conflicts with the illegally secured evidence must do more than deny the elements of the crime for which he is being tried; (3) The inadmissible evidence should be received only to the extent that it does not admit the very acts which are essential elements of the crime charged: Walder v. United States, supra." 415 Pa. at 60, 202 A. 2d at 81.
In Reginelli we held that the conditions required to make such evidence available had been met but they were not present here.[3] Nowhere in the record does it reveal what testimony of the appellant the district attorney intended to impeach. It is essential that the inconsistency be pinpointed in order to determine if the alleged perjury does more than deny the elements of the crime and meets the second condition. Nor has the third condition been met, for, as we pointed out above, the question and answer were received without limitation and might well have been interpreted as an admission of the essential elements of the crimes charged.
Appellant's direct testimony lacked the type of sweeping assertions or broad statements found in Walder *304 and Reginelli. His direct examination consisted of a denial of the elements of the crimes with which he was charged, his denial taking the form of his version of what happened on the night in question. The question and answer should have been excluded under the general rule set forth in Walder, that "the Constitution guarantees a defendant the fullest opportunity to meet the accusation against him. He must be free to deny all the elements of the case against him without thereby giving leave to the Government to introduce by way of rebuttal evidence illegally secured by it, and therefore not available for its case in chief." 347 U.S. at 65, 98 L. Ed. at 507. Neither Walder nor Reginelli governs the factual situation of this case.
Judgment reversed and new trial granted.
WRIGHT and WATKINS, JJ., would affirm on the opinion of Judge LAGAKOS.
CONCURRING OPINION BY HOFFMAN, J.:
The only question presented in this appeal is whether it was error to permit the Commonwealth to impeach the defendant's credibility by introducing statements elicited by the police without Miranda warnings.[1] The Commonwealth conceded that the statements were inadmissible as part of its case in chief.
I concur with the Majority opinion which precludes the prosecution from making use of the suppressed evidence under the guise of impeaching the defendant. I cannot agree with the conclusion of the majority, however, that if the statements conformed to the standards set forth in Commonwealth v. Wright, 415 Pa. 55, 202 *305 A. 2d 79 (1964), they would be admissible.[2] In my opinion, the lower Court, in permitting the cross-examination of defendant as to inconsistent statements made to the police, violated his privilege against self-incrimination. Miranda v. Arizona, 384 U.S. 436 (1966).
The Supreme Court's opinion in Miranda clearly states that unless a defendant is informed of and waives his constitutional rights, an improperly obtained statement cannot be used against him for any purpose, including impeachment. The Court stated in Miranda, supra, at 477:
". . . Statements . . . by the defendant are often used to impeach his testimony at trial or to demonstrate untruths in the statement given under interrogation and thus to prove guilt by implication. These statements are incriminating in any meaningful sense of the word and may not be used without the full warnings and effective waiver required for any other statement." [Emphasis added] The Court further stated that: ". . . unless and until such warnings and waiver are demonstrated by the prosecution at trial, no evidence obtained as a result of interrogation can be used against him." at 479 [Emphasis added].
The import of this language is that the Commonwealth may not seek to utilize an improperly obtained and, therefore, inadmissible statement for any purpose. More specifically, it means the defendant cannot be cross-examined with reference to the contents of the *306 statement in an attempt to reveal a prior inconsistent statement.
In the present case, the cross-examination of defendant elicited answers indicating that an inconsistent statement was given to the police. Since defendant had given another account of the incidents on direct examination, the inconsistent statement amounted to a confession in the eyes of the jury.[3] I find no language in Miranda and the exclusionary rule therein which allow the use of illegally obtained statements for any purpose.[4]
The Commonwealth places great emphasis on Walder v. United States, 347 U.S. 62, 65 (1954), which has been accepted in Pennsylvania in Commonwealth v. Wright, supra. In Walder, the defendant was indicted in 1950 on narcotics violations. Before trial he moved to suppress certain evidence. The motion was granted and the case was dismissed for lack of sufficient evidence. In 1952, the defendant was again indicted *307 on drug charges. On direct examination, defendant testified that he had never possessed narcotics. The government rebutted the defendant's testimony by introducing the evidence suppressed in the 1950 indictment.
The Supreme Court's opinion, written by Mr. Justice FRANKFURTER, stated that a defendant is constitutionally guaranteed the right ". . . to deny all the elements of the case against him without thereby giving leave to the Government to introduce by way of rebuttal evidence illegally secured by it, and therefore not available for its case in chief." at 65. However, the Court stated that the defendant could not resort to ". . . perjurious testimony in reliance on the Government's disability to challenge his credibility." at 65.
Since 1964, the Walder case has often been cited as authority by state and federal courts for receiving inadmissible evidence for impeachment purposes. See Tate v. United States, 283 F.2d 377 (D.C. Cir. 1960); Commonwealth v. Wright, supra. In other words, Walder permitted the "poisoned tree" to produce a few edible apples.
To restrict the exclusionary rule to the Commonwealth's case in chief through Walder and Commonwealth v. Wright, supra, as the Commonwealth strenuously contends, would be inconsistent with the constitutional principles which are inherent in the Miranda case. Miranda proceeds on the assumption that the exclusionary rule is a necessary procedural safeguard to implement the substantive rights written into the Fourth, Fifth, and Sixth Amendments. Without such a rule, constitutional guarantees are empty promises. For example, overzealous police officers could freely interrogate suspects secretly, without counsel or Miranda warnings, if they feel the evidence might later be used to impeach the defendant. Moreover, the threat of these statements or confessions could be used to prevent *308 defendants from testifying when the Commonwealth knows that defendants have other evidence which might tend to absolve them from guilt. Thus, the United States Supreme Court has indicated that the exclusionary rule should not permit any exceptions in order to serve as an effective deterrent to illegal police activity.
Furthermore, Miranda is based in part on the recognition that such confessions or statements often lack verity. There is no reason to suggest that the statement is any more truthful when used for impeachment purposes.[5] A similar reason for exclusion is that any distinctions based on the prosecution's purpose in introducing the evidence are meaningless. "An incriminating statement is as incriminating when used to impeach credibility as it is when used as direct proof of guilt and no constitutional distinction can legitimately be drawn." People v. Kulis, 18 N.Y.2d 318, 22 N.E.2d 541 (1966), dissent by KEATING, J.; see also Shephard v. State, 88 Wis. 185, 59 N.W. 449 (1894).
In my opinion, therefore, to permit the Commonwealth to introduce illegally obtained statements, which may bear on appellant's guilt or innocence, in the guise of impeachment, would seriously jeopardize the important substantive policies and functions underlying the exclusionary rule and the "guilt by implication" doctrine clearly stated in Miranda. See State v. Brewton, 247 Or. 241, 422 P.2d 581 (1967); White v. United States, 349 F.2d 965 (D.C. Cir. 1965); Inge v. United *309 States, 356 F.2d 345 (D.C. Cir. 1966); Johnson & Stewart v. United States, 344 F.2d 163 (D.C. Cir. 1964).
The Commonwealth further contends that the instant case falls within the guidelines for impeaching defendants set forth in Commonwealth v. Wright, supra, and followed in Commonwealth v. Reginelli, 208 Pa. Super. 344, 222 A.2d 605 (1966), and Commonwealth v. Price, 208 Pa. Super. 354, 222 A.2d 610 (1966). Those cases purported to follow the Walder decision. That decision and its relation to the instant case has been dealt with hereinabove.
I am unable to concur in the middle ground suggested in Walder, Wright and the majority opinion, to the effect that if a defendant merely takes the stand and denies his part in the crime he may not be impeached by the fruits of unconstitutional interrogation, but if he testifies about collateral matters or goes beyond mere denial he may be so impeached. "Such a rule would be virtually unworkable. The usual reason a defendant chooses to take the stand is to give the jury a comprehensive statement of his side of the story. Any story that would be responsive to the questions raised by the [Commonwealth's] case would tend to open up collateral matters and would invite impeachment. . . ." State v. Brewton, supra.
The cases in our Commonwealth have done nothing to clarify the meaning of "collateral matters." In Commonwealth v. Wright, supra, the Supreme Court found that the defendant did no more than deny commission of the crime. He did, however, give an account of the incidents surrounding the crime.[6] In Commonwealth *310 v. Reginelli, supra, our Court held that the defendant went beyond mere denial by making sweeping claims that he did not know other persons. The distinction between "mere denial" and "sweeping claims" in my opinion, is meaningless.
In cases like Reginelli, where the evidence is used for impeachment, the defendant may try to rehabilitate himself by protesting that he was confused, misled, and frightened by the police because he received no Miranda warnings. This further testimony, although collateral to guilt or innocence will often taint anything else the defendant has previously stated and cause the jury to disbelieve him altogether. Presumably this is what the Supreme Court in Miranda had in mind when it spoke of "guilt by implication." Thus, the suppressed evidence is revivified by permitting its use for impeachment under the guise of a collateral issue.
Moreover, when suppressed evidence is admitted to impeach the testimony of a defendant, the jury is asked to perform the mental gymnastics of using that evidence solely to impeach his testimony but not for any substantive purpose. When the defendant takes the stand and the trial focuses on him, the task of separating his statements into these categories is practically an insurmountable task. In these circumstances, it is highly unrealistic to admit some suppressed evidence when there are "sweeping claims" and none when there are "mere denials". Such volatile evidence should not depend upon these vague and ambiguous terms.
In my view, circumvention of constitutional liberties is not to be encouraged by permitting the entry of illegally obtained evidence through the back door. The cross-examination of the appellant in this case does not concur with the Miranda decision which, in my view, set forth an exclusionary rule without exception.
NOTES
[1] On direct examination the appellant never referred to his statement and did nothing to justify cross-examination in regard to the statement. Under such circumstances merely taking the stand cannot be considered a waiver of his constitutional protection against self-incrimination. See Agnello v. United States, 269 U.S. 20, 70 L. Ed. 145, 46 S. Ct. 4 (1925).
[2] For a similar application of the rule of Walder to an inadmissible statement see Tate v. United States, 283 F.2d 377 (D.C. Cir. 1960).
[3] There is no distinction between telling the jury of the existence of a confession and disclosing the details. Here there was only mention of an inconsistent statement which amounted to a confession, but no details were given. See Gaertner v. State, 35 Wis. 2d 159, 150 N.W.2d 370 (1967).
[1] The defendant was questioned by two police officers but had not been given the prior warnings required by Miranda v. Arizona, 384 U.S. 436 (1966). At trial, the Commonwealth sought to introduce the inculpatory statements, but the lower court properly suppressed them because they were not obtained through proper means.
[2] In Wright, the Supreme Court set forth three conditions which must be satisfied in order to make suppressed evidence available for impeachment. These essential requirements are that:
"(1) The defendant must elect to take the stand;
"(2) His testimony which conflicts with the illegally secured evidence must do more than deny the elements of the crime for which he is being tried;
"(3) The inadmissible evidence should be received only to the extent that it does not admit the very acts which are essential elements of the crime charged." at 60.
[3] There is no distinction between telling the jury of the existence of a confession and disclosing the details. Here there was only mention of an inconsistent statement which amounted to a confession, but no details were given. See Gaertner v. State, 35 Wis. 2d 159, 150 N.W.2d 370 (1967).
[4] I do not purport to deal with the situation where a defendant, while on direct examination, refers specifically to a prior written or oral statement made to the police. In such circumstances, the illegally obtained statements can then be used to cross-examine the defendant because the defendant himself has initially produced the evidence. In other words, the defendant is deemed to have waived his constitutional right to object to use of the statement on cross-examination. See State v. Ingle, 64 Wash. 2d 491, 392 P.2d 442 (1964). In circumstances similar to the instant case, however, no waiver issue is present because the defendant has not "opened the door" with regard to the suppressed evidence. In these latter type cases, the Miranda exclusionary rule was set forth to deter police activity in obtaining them and because they incriminate defendants who have not waived any of their constitutional rights.
[5] In State v. Brewton, 247 Or. 241, 422 P.2d 581 (1967), the court found that the confession of the defendant was voluntarily made in the sense that it was not coerced. But, in light of the constitutional standards set forth in State v. Neely, 239 Or. 487, 503, 504, 395 P.2d 557, 398 P.2d 482, 486, 487 (1965), setting forth a similar exclusionary rule to that found in Miranda, the illegally obtained evidence could not be used to impeach the defendant's testimony.
[6] See also, Johnson and Stewart v. United States, supra, where the defendant offered his own version of the events charged in the indictment and the court held that this was a "mere denial". The majority in the present case likewise finds that defendant's version of the crime amounted only to a denial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544960/ | 216 B.R. 397 (1997)
In re Lee Michelle NAGEL, Debtor.
Bankruptcy No. 97-11093-FM.
United States Bankruptcy Court, W.D. Texas, Austin Division.
September 16, 1997.
*398 Steven P. Boney, Boney & Larson, Austin, TX, for Debtor.
C. Daniel Roberts, C. Daniel Roberts & Associates, P.C., Austin, TX, for Chapter 7 Trustee.
MEMORANDUM OPINION ON TRUSTEE'S OBJECTION TO EXEMPTIONS
FRANK R. MONROE, Bankruptcy Judge.
The Court held a hearing on July 7, 1997 at 10:00 a.m. upon the Trustee's Objection to Exemptions in the above entitled and numbered case. Subsequent to the hearing, the Court was furnished with briefs of the parties on the legal issue in question. Based upon the record established at the hearing, the briefs of the parties, and the Court's own independent research, this Memorandum Opinion is being issued as written findings of fact and conclusions of law under Bankruptcy Rules 7052 and 9014.
STATEMENT OF JURISDICTION
This is a core proceeding under 28 U.S.C. § 157(b)(2)(B). It is, therefore, a contested matter over which this Court has the jurisdiction to enter a final order under 28 U.S.C. § 1334(a), (b) and (d), 28 U.S.C. § 157(a) and (b)(1), 28 U.S.C. § 151 and the Standing Order of Reference from the United States District Court for the Western District of Texas.
FINDINGS OF FACT
The Debtor filed her Chapter 7 petition on March 27, 1997. One of the assets she owned at that time was a leasehold interest in the real property located at 7205 Walden Drive, No. 208, Austin, TX 78750 pursuant to a lease contract effective August 1, 1996. The lease contract was for a one-year term and was renewable at the option of the Debtor. The Debtor also placed with the landlord, pursuant to the lease contract, a security deposit in the amount of $1,100.00, a pet deposit of $1,000.00, and prepaid rent in the amount of $1,000.00.
The Debtor claimed the leasehold interest as exempt, including the security deposits and the prepaid rent. The trustee objected to the exemption of the security deposits and the prepaid rent contending that there is no provision under the Texas Property Code for exemption of this type of property.
LEGAL ANALYSIS
It is clear that the Debtor's leasehold interest is exempt from claims of creditors as her homestead. See Capitol Aggregates, Inc. v. Walker, 448 S.W.2d 830, 832 (Tex.Civ.App.Austin 1969). The question is whether or not the deposits made by the Debtor to the landlord pursuant to the lease agreement which established the leasehold interest of the Debtor are exempt as well.
No case authority has been cited on this issue. It is apparently a case of first impression.
The argument of the trustee is that the deposits should be viewed separately from the leasehold interest. This is hard to do. The leasehold interest and the deposits both arise from the same lease contract. They cannot, therefore, be separated. This concept is not a concept which is foreign to bankruptcy law. For example, real estate lease contracts are executory contracts. Executory contracts which are not exempt must either be assumed or rejected by a trustee in a Chapter 7 case. See 11 U.S.C. § 365(a). It is hornbook law that an executory contract cannot be assumed in part and rejected in part. It is either all or nothing.
The same analysis should, therefore, be applied to an executory contract which is exempt. Here the lease contract creates a leasehold interest which serves as the debtor's *399 homestead. Clearly that leasehold interest is exempt. Can it be that we should consider that leasehold interest as exempt separate and apart from the lease contract which created it? Obviously not, it only exists because of the lease contract. Therefore, the lease contract itself must also be exempt in toto or not exempt in toto. One or the other; not half exempt and half not exempt.
It is undisputed that the Debtor uses the premises leased from the landlord as her homestead. It is also undisputed that in order to do so, the Debtor was required to, and did, place with the landlord at the inception of the contract, $2,100.00 in security deposits and $1,000.00 in prepaid rent. The most reasonable conclusion of law would be one that is consistent with the Bankruptcy Code's overall treatment of executory contracts. Since they can be assumed and/or rejected only in toto, it seems they should be exemptible or not exemptible only in toto.
Accordingly, since the leasehold interest created by the lease contract is clearly exempt as the Debtor's homestead, all other rights of the Debtor (and obligations) should be allowed to her as exempt as well. Therefore, the security deposits in the amount of $2,100.00 and the prepaid rent of $1,000.00 will be allowed as exempt. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544961/ | 211 Pa. Super. 176 (1967)
Commonwealth
v.
Choice, Appellant.
Superior Court of Pennsylvania.
Argued September 18, 1967.
November 21, 1967.
Before ERVIN, P.J., WRIGHT, WATKINS, MONTGOMERY, JACOBS, HOFFMAN, and SPAULDING, JJ.
Albert H. Branson, Assistant Defender, with him John W. Packel and Melvin Dildine, Assistant Defenders, and Herman I. Pollock, Defender, for appellant.
Martin A. Heckscher, Assistant District Attorney, with him Alan J. Davis, Assistant District Attorney, Richard A. Sprague, First Assistant District Attorney, and Arlen Specter, District Attorney, for Commonwealth, appellee.
OPINION PER CURIAM, November 21, 1967:
Judgment of sentence affirmed.
DISSENTING OPINION BY HOFFMAN, J.:
Appellant, Mackey Choice, was convicted of burglary, aggravated robbery and conspiracy. The conviction *177 arose out of a charge that he had robbed the Citizen's and Southern Bank of Philadelphia. I would order a new trial for the following reasons:
I. The court erred in admitting testimony concerning an out-of-court identification of appellant.
The record reflects that while appellant was being questioned at police headquarters two witnesses were brought into the interrogation room and observed a portion of the interrogation. Appellant was then ordered to stand up, turn around and face the witnesses who were then asked: "Is this the one?" Appellant was, at that time, the only possible suspect in the room.
In my opinion the above circumstances were so unnecessarily suggestive and conducive to irreparable mistaken identification as to deny appellant the protection of due process of law under the Fourteenth Amendment.
I recognize that the absence of counsel at this confrontation does not conflict with the constitutional right to counsel at a lineup, or other identification proceeding, in general. See U.S. v. Wade, 388 U.S. 218 (1967), and Gilbert v. California, 388 U.S. 263 (1967). This is because the Supreme Court, in Stovall v. Denno, 388 U.S. 293 (1967), held that the rule is not retroactive and would not apply to the confrontation in this case which occurred many months earlier.
The Supreme Court in Stovall specifically recognized, however, that notwithstanding the nonretroactivity of the rule, the prejudicial circumstances of the confrontation might constitute a denial of due process of law.
The Court stated: "We turn now to the question whether petitioner, although not entitled to the application of Wade and Gilbert to his case, is entitled to relief on his claim that in any event the confrontation conducted in this case was so unnecessarily suggestive and conducive to irreparable mistaken identification *178 that he was denied due process of law. This is a recognized ground of attack upon a conviction independent of any right to counsel claim. Palmer v. Peyton, 359 F.2d 199 (C.A. 4th Cir. 1966). The practice of showing suspects singly to persons for the purpose of identification, and not as part of a lineup, has been widely condemned." (pp. 301-2) [Emphasis added]
The court further recognized that "a claimed violation of due process of law in the conduct of confrontation depends on the totality of the circumstances surrounding it."
In Stovall, the police had rushed the suspect to the hospital bed of one of the victims. The victim at that time was in critical condition and no one knew how long she might live. The Supreme Court concluded, therefore, that the immediate identification was "imperative" and affirmed the conviction.
In the instant case, however, there was no necessity for an immediate presentation of the appellant singly to the witnesses. The police, in this case, should have followed the standard procedure of allowing him to appear in a lineup with others. Nor was there any justification in allowing them to witness his interrogation. All of these circumstances were grossly suggestive of guilt. In my opinion, the identification procedure followed here was so seriously prejudicial as to constitute a deprivation of the required standards of due process under the Fourteenth Amendment.
II. The trial court erred in permitting the prosecution to make reference to appellant's arrest at his parole office.
At the time of trial, appellant testified that he had two dollars in his pocket when he was arrested, twelve days after the bank robbery which netted $39,000.00. The Commonwealth, on cross-examination, countered by asking defendant where he was arrested. The purpose of this question, ostensibly, was to suggest that it *179 was highly unlikely that appellant would have any large portion of the proceeds upon his person in the parole office where he was arrested. The court allowed this question over objection by defense counsel.
The basis of appellant's argument is that this testimony would suggest that he had a prior criminal record. The lower court and Commonwealth both conclude that this testimony flowed unpremeditated from the nature of the questions asked by the defendant himself and, moreover, that "nothing was disclosed but his mere presence, he may have been there with a friend, brother, as a sponsor or an employee, or delivering coffee."
The rule is well established that an accused may not be required to answer any question tending to show that he has been charged with or convicted of any offense.
In my opinion, the purpose for which the Commonwealth purportedly sought to elicit this testimony, i.e., that appellant would not carry money into the parole office, was both remote and speculative. This evidence, however, was highly suggestive of a criminal record, and, in my opinion, the court abused its discretion in admitting it for its insignificant probative value. Indeed, the District Attorney, in his closing remarks to the jury, again made reference to the place of arrest to the extent that the court felt obliged to warn the jury to ignore such statements. This again would suggest that the District Attorney valued this testimony more for the unpermissible inference of prior conviction than for the avowed purpose which the Commonwealth now presents.
Had the District Attorney openly stated to the jury that appellant had a prior criminal record, no warning or admonition by the judge could rectify this prejudice. In my opinion, the repeated references to appellant's arrest at the parole office were tantamount to a reference *180 to prior conviction which could not be corrected by admonition to the jury.
I would vacate the judgment of sentence and order a new trial.
DISSENTING OPINION BY SPAULDING, J.:
I join in the dissenting opinion of Judge HOFFMAN. An opinion has been filed in our Court today in Commonwealth v. Trowery, 211 Pa. Super. 171, 235 A.2d 171, wherein we determine that a "rogues gallery" photograph may not be admitted at trial for purposes of identification when the effect may be to predispose the minds of jurors to believe the defendant guilty by virtue of previous police contact. The same reasoning would apply in the instant case where, during the trial, references were made in the presence of the jury to defendant's arrest at his parole office. The subsequent admonition of the court to ignore the reference could not possibly erase from the minds of the jurors the prejudice previously created. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544965/ | 248 Md. 260 (1967)
235 A.2d 715
BENNETT, ET VIR
v.
BASS
[No. 667, September Term, 1966.]
Court of Appeals of Maryland.
Decided December 8, 1967.
*262 The cause was argued before HAMMOND, C.J., and BARNES, McWILLIAMS, FINAN and SINGLEY, JJ.
Joseph F. Lentz, Jr., with whom were Monfred & Lentz on the brief, for appellants.
Edward C. Mackie, with whom were Rollins, Smalkin, Weston & Andrew on the brief, for appellee.
FINAN, J., delivered the opinion of the Court.
Appellant Blanche Bennett suffered personal injuries when the car in which she was a passenger attempted a left turn at a traffic-controlled intersection and was struck by an oncoming vehicle driven by appellee Bass. Appellant brought suit against the drivers of both vehicles for damages. At the conclusion of the plaintiffs' case, the lower court granted defendant Bass's motion for a directed verdict on the basis that the evidence was not legally sufficient to permit a jury finding of negligent operation of his vehicle. We affirm the court below.
Mrs. Bennett was a passenger in the right-front seat of a vehicle operated by her daughter, Elizabeth Ellis (a named defendant below, but not party to the appeal). The Ellis vehicle was traveling westbound on Eastern Boulevard, a four-lane thoroughfare separated by a concrete divider. At its intersection with Riverside Drive, Eastern Boulevard becomes six lanes wide, the innermost lane of each direction used for left turns. Mrs. Ellis reached Riverside Drive and, the light being green for both east and westbound traffic, proceeded to make a left turn into Riverside Drive. At that time, however, her view of eastbound traffic was partially obstructed by a large truck in the eastbound left-turn lane, apparently waiting for a left turn arrow. Mrs. Ellis decelerated but did not come to a complete stop before commencing to cross the through lanes of eastbound traffic. It was then that she first noticed appellee's vehicle traveling in the center lane of eastbound traffic.
*263 Appellee testified that he had been driving eastbound on Eastern Boulevard at "approximately thirty miles an hour, the speed limit," for some distance before the accident. As he approached Riverside Drive, he was unable to see part of the intersection including oncoming westbound traffic because of the truck on his left waiting for the left-turn light. When he was no more than two or three car lengths from the intersection appellee first saw the Ellis vehicle enter his lane of traffic. Mrs. Ellis attempted to accelerate so as to avoid Bass, and Bass applied his brakes but could neither turn left because of the stationary truck nor right because that was the direction in which the Ellis car was heading. The front of Bass's vehicle struck the right side of the Ellis vehicle.
The appellants attempt to make out a case by placing the driver of the vehicle in which Mrs. Bennett was a passenger (the Ellis car) lawfully within the intersection when the appellee entered on the green light, thus endeavoring to bring her case within the rule of Baltimore Transit Co. v. Presberry, 233 Md. 303, 196 A.2d 717 (1964) and Valench v. Belle Isle Cab Co., 196 Md. 118, 75 A.2d 97 (1950). See also Md. Ann. Code, Art. 66 1/2, § 193 (1957); Note, 13 Md. L. Rev. 350 (1953). However, the facts of the case do not lend themselves to the application of the rule that one who lawfully enters the intersection with a green light, and the light changes while he is lawfully within the intersection, may continue on through as the favored vehicle.
This case does not present the situation of a vehicle already within the intersection when the signal changes from green to red. Here the drivers of both vehicles were responding to the same green light and the driver of the vehicle in which Mrs. Bennett was riding, by making a left turn against the green light and across the path of oncoming traffic, passed from a favored vehicle to an unfavored one; while the appellee's vehicle, proceeding straight ahead into the intersection with the green light, continued as a favored vehicle.
We think that the facts of this case place it within the teeth of the Md. Ann. Code, Art. 66 1/2, § 232 (1957), which provides:
*264 "The driver of a vehicle within an intersection intending to turn to the left shall yield the right-of-way to any vehicle approaching from the opposite direction which is within the intersection or so close thereto as to constitute an immediate hazard."
The case of Talbott v. Gegenheimer, 245 Md. 186, 225 A.2d 462 (1967), presents a factual situation parallel to the case at bar. There was no traffic signal involved in Talbott, however we do not think that the absence of the signal renders it less apposite because in Talbott, as in the instant case, both drivers were initially on equal footing entering the intersection. In Talbott the plaintiff was a passenger in a vehicle traveling east on Knowles Avenue, a two-lane highway in Montgomery County and the defendant was driving her car westerly on Knowles Avenue. The westbound vehicle turned left at the intersection of Parkwood Drive and Knowles Avenue, intending to proceed down Parkwood Drive, when the collision occurred. The opinion of the Court, written by Judge Marbury, states:
"She (Mrs. Gegenheimer, operator of the left turning vehicle) placed the oncoming bus, which she saw, four car lengths from her before she made her turn and stated that she did not see the Higgins' automobile which was in front of the bus. Mrs. Higgins' automobile, if it was not already within the intersection, was so close thereto as to constitute an immediate hazard; therefore she was the favored driver, and Mrs. Gegenheimer was the unfavored driver who was negligent in failing to yield the right-of-way. Shanahan v. Sullivan, 231 Md. 580, 191 A.2d 564; Meldrum v. Kellam Distr. Co., 211 Md. 504, 128 A.2d 400; Gudelsky v. Boone, 180 Md. 265, 23 A.2d 694; Durham v. United States, 174 F. Supp. 410 (D. Md. 1959)." Id. at 190, 225 A.2d at 465.
"* * *. Moreover, there was nothing to show that there was any reason, which was known or which should have been known in the exercise of reasonable care, for Mrs. Higgins to anticipate the failure of Mrs. Gegenheimer to yield the right-of-way, or that Mrs. *265 Higgins, in light of the suddenness of the Gegenheimer turn when the Higgins vehicle was within the intersection or so close thereto as to constitute an immediate hazard, could have avoided the collision." Id. at 191, 225 A.2d at 466.
In order for us to affirm the lower court which resolved the case in the appellee's favor, it is unnecessary for us to consider his contention that the Boulevard Rule should apply. Unquestionably, the instant case has some overtones found in those cases wherein the Boulevard Rule is applicable. However, it does not present the classic situation of intersection intrusion by the unfavored vehicle into the path of the favored vehicle wherein the Boulevard Rule comes into play. See, e.g., Thompson v. Terry, 245 Md. 480, 226 A.2d 540 (1967).
The record fails to reveal any evidence of excessive speed. Although it is true that appellee's vision, like that of Mrs. Ellis, was obstructed by the large truck standing in the eastbound left-turn lane of Eastern Avenue, the light had been green for some time and the appellee had the right to assume that another vehicle would not unexpectedly pull into his course of travel. The situation is therefore distinguishable from Valench, supra, where the light had just turned green and the defendant proceeded blindly into the intersection while a streetcar blocked his view of vehicles attempting to clear the intersection as the light changed. Under those circumstances, the Court indicated that a motorist at a stop light waiting for it to turn green should expect that a vehicle on the other road might still be crossing the intersection when the light changed. Furthermore, the record is devoid of evidence that the appellee was inattentive in the operation of his vehicle.
Mrs. Ellis stated that the light was already green when she arrived at the intersection; that she slowed down, but did not stop, and proceeded to make her left-hand turn; that her view of oncoming eastbound traffic was obscured by the presence of the large truck stopped in the eastbound left-turn lane on Eastern Avenue and that she did not see the appellee's vehicle until she had pulled in front of the truck, at which time her vehicle was projecting into the center eastbound lane. At this *266 point the appellee's vehicle was about two car lengths away and the collision was almost immediate.
Viewing all of the facts in this case and the inferences to be drawn therefrom, in a light most favorable to the appellants, a reasonable man would not doubt that the appellee was free from any primary or concurrent negligence and that the sole and primary cause of the accident was the failure of the driver of the vehicle in which Mrs. Bennett was a passenger to yield the right of way.
There is one final issue requiring disposition. The appellants ascribed as error the lower court's ruling sustaining appellee's objections to questions concerning the speed of the appelleee's car some distance away from, and prior to the collision. Counsel for the appellants questioned the appellee as to how fast he was traveling on Eastern Boulevard at various points ranging from one and a half miles to six blocks distant from the scene of the accident. The court sustained the objections made to these questions. We do not consider this to be error.
The rule respecting the admissibility of evidence as to speed of a vehicle prior to the time of an accident in which it was involved is set out in Reid v. Humphreys, 210 Md. 178, 185, 122 A.2d 756, 759 (1956):
"Generally, the admissibility of testimony as to the speed or reckless operation of a motor vehicle at some distance from the place where it afterwards collided with another vehicle is discretionary with the trial court, and a ruling admitting such evidence will not be disturbed on appeal in the absence of a clear abuse of discretion."
During the course of examination and cross-examination, appellee testified that just prior to the accident he was traveling approximately thirty miles an hour, and that he was moving at about the same speed two blocks before the accident. Where direct evidence thus indicates no excessive speed immediately before and at the time of the accident, any evidence of the rate of speed at points more distant from the scene of the accident is immaterial and should properly be excluded. See 9C Blashfield, *267 Cyclopedia of Automobile Law and Practice §§ 6231, 6235, pp. 383-384, 399 ff. (1954).
We are of the opinion that Judge Turnbull was right in finding there was no legally sufficient evidence to take the question of the appellee's negligence to the jury, and in granting the appellee's motion for directed verdict at the conclusion of the appellants' case.
Judgment affirmed, costs to be paid by appellants. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544989/ | 235 A.2d 322 (1967)
Milbourne E. LORD, Jr., Appellant,
v.
DISTRICT OF COLUMBIA, Appellee.
No. 4297.
District of Columbia Court of Appeals.
Argued September 6, 1967.
Decided November 27, 1967.
John A. Kendrick, Washington, D. C., for appellant.
Richard W. Barton, Asst. Corp. Counsel, with whom Charles T. Duncan, Corp. Counsel, Hubert B. Pair and John R. Hess, Asst. Corp. Counsel, were on the brief, for appellee.
Before HOOD, Chief Judge, and MYERS and KELLY, Associate Judges.
MYERS, Associate Judge:
Appellant, together with a co-defendant who is not a party to this appeal, pleaded guilty to publicly committing a lewd, obscene and indecent act in the District of Columbia in violation of 22 D.C.Code § 1112(a) (1961 ed.) and paid an imposed fine. Three months later, through his present attorney, appellant moved to vacate the judgment upon the guilty plea and to have a trial on the merits, apparently upon the theory that, because the court appointed the same counsel to represent both defendants, *323 manifest injustice occurred which was subject to correction under Criminal Rule 20(d) of the trial court. From denial of this motion, this appeal followed.
Because it appears that appellant is employed in a position of trust which may be jeopardized by his conviction, we pass the Government's contention that, by payment of the fine, appellant's appeal was rendered moot and address ourselves to appellant's charge of error.
Whether an attorney for co-defendants is retained or court appointed, the trial judge has the responsibility to inquire if counsel has evaluated the potential conflicts involved in such joint representation and has apprised his clients of any risks. The trial judge must make an affirmative, on-the-record determination that the several defendants are aware of the probable dangers and have intelligently elected to assume the risks of joint representation. Campbell v. United States, 122 U.S.App. D.C. 143, 144, 352 F.2d 359, 360 (1965). In the instant case, we do not know if the trial judge ever addressed himself to this question. Where the record does not show that counsel has made an appraisal and has advised co-defendants of the risks of joint representation, we will not assume that a defendant has waived his right to demand separate counsel. However, a silent record standing alone is not reason enough to reverse an otherwise valid conviction. It must also be shown that the defense was hampered by the joint representation. The precise degree of prejudice need not be measured. Glasser v. United States, 315 U.S. 60, 76, 62 S. Ct. 457, 86 L. Ed. 680 (1942). But "some prejudice, some conflict of interest, resulting from the joint representation must exist before one can be said to have been denied effective assistance of counsel." Lollar v. United States, D.C. Cir., 376 F.2d 243, 246 (1967).[1]
Assessing the record in the light of these criteria, we are convinced beyond a reasonable doubt[2] that it discloses no hint of prejudice to appellant arising out of the joint representation. There was nothing to prevent the attorney assigned to represent appellant and his co-defendant from requesting separate trials under Criminal Rule 7(e) of the trial court. No showing was made that the attorney was forced to advise both defendants to follow the same course. He could have counseled one to plead guilty and the other to plead not guilty; and it does not appear that, even if they had proceeded to trial together, they would have urged conflicting defenses. The prior record of appellant's co-defendant may well have been inadmissible even for impeachment purposes under the Luck Doctrine.[3] Appellant was fully informed of the nature of the charge against him, and at no time has he alleged his innocence. Clearly he has not made a showing of "manifest injustice." Other contentions of error are without merit.
We rule that the trial judge's denial of appellant's motion to vacate the judgment of conviction was proper and not an abuse of discretion.
Affirmed.
NOTES
[1] See also Ford v. United States, D.C. Cir., 379 F.2d 123 (1967), where the court refused to accept the argument that a showing of prejudice ought to be irrelevant in joint representation cases.
[2] Lollar v. United States, D.C.Cir., 376 F.2d 243, 247 (1967); Chapman v. State of California, 386 U.S. 18, 24, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967).
[3] Luck v. United States, 121 U.S.App.D.C. 151, 348 F.2d 763 (1965). See also Gordon v. United States, D.C.Cir., 383 F.2d 936 (decided September 18, 1967). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544991/ | 23 F.2d 208 (1927)
CLARKSON COAL MINING CO. et al.
v.
UNITED MINE WORKERS OF AMERICA et al.
No. 537.
District Court, S. D. Ohio, E. D.
December 17, 1927.
Dustin, McKeehan, Merrick, Arter & Stewart, of Cleveland, Ohio, Tracy, Chapman & Welles, of Toledo, Ohio, and Andrews & Belden, of Cleveland, Ohio, for plaintiffs.
Thomas Rock, of Steubenville, Ohio, Henry Warrum, of Indianapolis, Ind., and Thomas C. Townsend, of Charleston, W. Va., for defendants.
HOUGH, District Judge.
Heretofore, upon the bill of complaint of the Clarkson Coal Mining Company, Monroe Coal Company, Atlantic Contracting Company, and others, against the United Mine Workers of America, district No. 6 and subdistrict No. 5 thereof, and various local unions, such various organizations and the personnel thereof being before the court, and notice of hearing having been given to such defendants according to law, and upon the evidence and argument of counsel, a preliminary injunction issued out of the court, enjoining the defendants from interfering with the mining properties of complainants and the operation of the mines owned and controlled by them. The injunction was issued upon the finding that a conspiracy existed among the membership of the union to preclude the complainants in the free use of their properties, and to prevent and hinder the operation of their mines located thereon.
Subsequently the three companies above named filed supplementary bills of complaint praying for the issuance of a mandatory injunction compelling the miners, members of the union and specifically designated by name, to surrender possession of the residence houses situated on said mining properties to the complainants by vacating same. Subpnas in chancery were issued and served on each of the individual members of the union having possession of the houses, and the case came on for hearing on the application for a mandatory injunction, the taking of testimony was begun, and while in process the joint answer of such individual members of the union was filed, the taking of testimony completed, and the issues submitted to the court upon the pleadings, the evidence, and the argument of counsel.
Considering the admissions made in the answer and in the statement of counsel for the defendants in open court, and the fact that the defendants did not avail themselves of their right and the opportunity to call witnesses and produce evidence, the problem for solution resolves itself into the question contended for by counsel for the defendants, namely, that of the jurisdiction of the court in equity upon the subject-matter, for the claimed reason that there exists an adequate remedy at law. It remains, then, to find by a fair interpretation the facts as the same appear, either conceded or uncontradicted, and *209 apply the same to the governing principle of law.
Complainant's mines are located in open country, affording no facilities for the housing of employees and their families. To provide such facilities, dwelling houses have been erected at the respective mines and adjacent thereto for the housing of employees of such mines during the term of such employment. The houses were not built for profit, nor for the purpose of entering the field of leasing, but furnished merely an incidental and economic service to the operation of the mines. The houses were part of the general plant layout, and were for the use of employees and none other. The relation of employer and employee was first created, and then the employee became the occupant of one of the houses. The individual became an employee as a prerequisite to dwelling occupancy. His right of possession took effect subsequent to his contract of employment. In practically all instances he entered into a written contract of occupancy. These contracts were in the nature of leases, and provided for termination upon a specified notice in writing, for failure to pay rent, or in case he shall cease his employment, or be discharged. The rent was deducted from his wages.
The defendants here became employees at the respective mines, and became occupiers or tenants of the houses by reason of their contracts of employment. They remained employees until the 31st day of March, 1927, when their contract of employment expired by its terms, and since that time have remained in occupancy of the houses without paying for the use thereof, and because of differences in respect to wages have not renewed the contract of employment, and since that time have ceased to be employees at the mines. Beginning on the 1st day of April, 1927, and thereafter, no relationship of employer and employee has existed, and the right of possession of the dwelling houses has been in the owners, and not in the occupiers.
Subsequent to that time, and as disclosed by the evidence, the mines, save and except Clarkson Coal Mining Company's mine No. 2, are in operation with nonunion employees, and the record shows a need on the part of the owners for the dwelling houses to house present employees and many others necessary for the operation of the mines. In view of the situation, will the equity jurisdiction of this court furnish a remedy, or is there an adequate remedy at law? If there is an adequate remedy at law in this court, then it will be necessary to take heed of the contention of the defendants, and furnish them such a remedy.
The first requirement is that the remedy shall be "adequate." It is said in Boyce's Ex'rs v. Grundy, 3 Pet. 210, 7 L. Ed. 655: "It is not enough that there is a remedy at law; it must be plain and adequate, or, in other words, as practical and as efficient to the ends of justice and its prompt administration as the remedy in equity." And in Sullivan v. Railroad Co., 94 U. S., 806, 24 L. Ed. 324, the court said: "The objection that there is a remedy at law is only available where such remedy is as plain, adequate, and effectual as the remedy in equity." Again, in the case of Walla Walla v. Water Co., 172 U.S. 1, 12, 19 S. Ct. 77, 82 (43 L. Ed. 341), the court again announced: "This court has repeatedly declared in affirmance of the generally accepted proposition that the remedy at law, in order to exclude a concurrent remedy at equity, must be as complete, as practical and as efficient to the ends of justice and its prompt administration, as the remedy in equity."
The corresponding remedy at law must not only of necessity be adequate, but it must also be a remedy that may be furnished "in this court." The principle has many times been announced in the federal courts that the equity jurisdiction cannot be limited or influenced where jurisdiction has therein attached by a remedy open under state procedure. An early announcement was made in the case of Barber v. Barber, 21 How. (62 U. S.) 582, 592, 16 L. Ed. 226, where the court quotes from the case of Boyce's Ex'rs v. Grundy, supra, and says: "It is no objection to equity jurisdiction in the courts of the United States that there is a remedy under the local law. * * *"
In the case of Smyth v. Ames, 169 U.S. 466, 516, 18 S. Ct. 418, 422 (42 L. Ed. 819), Justice Harlan says: "The adequacy or inadequacy of the remedy at law for the protection of the rights of one entitled upon any ground to invoke the powers of a federal court, is not to be conclusively determined by the statutes of the particular state in which suit may be brought. One who is entitled to sue in the federal Circuit Court may invoke its jurisdiction in equity whenever the established principles and rules of equity permit such a suit in that court, and he cannot be deprived of that right by reason of his being allowed to sue at law in a state court on the same cause of action."
In C., B. & Q. R. R. Co., v. Osborne, 265 U.S. 14, 16, 44 S. Ct. 431, 68 L. Ed. 878, *210 Justice Holmes announced: "But the writ of error of course can be sued out only in the state, and a remedy in the state courts only has been held not to be enough" citing Smyth v. Ames, supra; Ry. Co. v. McElvain (D. C.) 253 F. 123, 136; Franklin v. Power Co. (C. C. A.) 264 F. 643, 645. And again, in Risty v. C., R. I. & P. Ry. Co., 270 U.S. 378, 388, 46 S. Ct. 236, 240 (70 L. Ed. 641), Justice Stone states the principle as follows: "The remedy by appeal to the state court under section 8469 [Rev. Code S. D. 1919], does not appear to be coextensive with the relief which equity may give. In any event, it is not one which may be availed of at law in the federal courts, and the test of equity jurisdiction in a federal court is the inadequacy of the remedy on the law side of that court, and not the inadequacy of the remedies afforded by the state courts."
We know of none, and there is no remedy at law in the federal court to restore possession of real property from one who holds it without right of possession to the one entitled to possession; nor do we think it can be said that, because jurisdiction in this case in the first instance rested upon diversity of citizenship, it is the duty of this court to follow the procedure provided in the courts of the state of Ohio as the remedy to thus restore possession; that is, the remedy of forcible entry and detention. The federal District Court is one of general jurisdiction. The corresponding court for that jurisdiction in the state of Ohio is the common pleas court. That court has no original jurisdiction in forcible entry and detainer. The remedy is to be sought under the exclusive jurisdiction of the justice of the peace court, and it would hardly be proper or efficacious for this court to adopt that procedure. We conclude, therefore, that the remedy sought comes within the sphere of equity, and that the facts justify the relief prayed for.
The remedy being in equity and purely equitable, it is the duty of the court to do equity. These defendants and their families are now found to be subject to an order in the nature of eviction. Equity demands that such an order be enforced only within a reasonable time. This is the midwinter season, near holiday time, and a most inconvenient and hazardous time for families to break up homes and acquire and take up new abodes. The order may issue against all the defendants, except those living in the dwelling houses at Clarkson mine No. 2, in relation to which the record fails to show any present need for the houses, and will go on the record at this time, but will become operative on the 1st day of April, 1928. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545004/ | 23 F.2d 615 (1928)
FEDERAL TRADE COMMISSION
v.
BALME.
No. 86.
Circuit Court of Appeals, Second Circuit.
January 9, 1928.
*616 *617 Bayard T. Hainer, Chief Counsel, Federal Trade Commission, Adrien F. Busick, Asst. Chief Counsel, G. Edwin Rowland and James W. Nichol, all of Washington, D. C., for petitioner.
Munn, Anderson & Munn, of New York City (T. Hart Anderson and Charles A. Morton, both of New York City, of counsel), for respondent.
Before MANTON, L. HAND, and SWAN, Circuit Judges.
MANTON, Circuit Judge.
The Federal Trade Commission issued an order against the respondent, directing him to cease and desist from certain practices found by it to constitute methods of unfair competition, in violation of section 5 of the act (38 Stat. 717). The order directed the respondent to cease and desist (1) from using the coined word "Oréal," either standing alone or in connection with any prefix thereto, as a trade-name or descriptive name for a henna hair dye, when sold and distributed in interstate commerce; (2) from using the same word upon the containers in which the hair dye is sold or distributed in interstate commerce; (3) from using the coined word in advertising, either circular, newspaper, or magazine; (4) from using on the container in which the henna hair dye is sold or distributed in interstate commerce the French words "la plante merveilleuse," or on any labels or circular or newspaper or magazine advertising henna hair dye in such a way as to confuse respondent's product with any competing product; (5) "from putting up the henna hair dye, sold and distributed in interstate commerce, by the respondent, in any container so similar in color and general appearance of lettering or device with that of a competitor as to confuse and mislead the public into believing that the henna hair dye of the respondent is one and the same as that of its competitor"; and (6) from using, either on the label of the container in which the henna hair dye is packed or in advertising, false or descriptive words or phrases, such as "New French discovery," or "the only harmless coloring in the world," or phrase or phrases of similar import, when sold or distributed in interstate commerce.
After the order of the Commission was made, the respondent complied with its prohibitions, except as to the fifth section. It is for this refusal to comply that the Commission has petitioned this court, asking for an order of enforcement. It bases its application under section 5 of the act, which provides:
"If such person, partnership, or corporation fails or neglects to obey such order of the Commission while the same is in effect, the Commission may apply to the Circuit Court of Appeals of the United States, within any circuit where the method of competition in question was used or where such person, partnership, or corporation resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the Commission. Upon such filing of the application and transcript the court shall cause notice thereof to be served upon such person, partnership, or corporation and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the pleadings, testimony, and proceedings set forth in such transcript a decree affirming, modifying, or setting aside the order of the Commission. The findings of the Commission as to facts, if supported by testimony, shall be conclusive." 15 USCA § 45.
The same section gives the right of review to a respondent affected by an order to cease and desist, who seeks a modification or reversal or a setting aside of the order. *618 The statute, in addition to conferring jurisdiction upon the Circuit Court of Appeals to enforce, set aside, and modify orders of the Commission, makes such jurisdiction exclusive, and requires precedence over other cases pending, so that causes may be expedited.
The Circuit Court of Appeals is an appellate court, reviewing decisions of the District Court. U. S. v. Mayer, 235 U. S. 55, 35 S. Ct. 16, 59 L. Ed. 129; 26 Stat. 826. The Federal Trade Commission Act confers special statutory jurisdiction, and the extent of such jurisdiction and the conditions of its exercise over subjects or persons must necessarily depend upon the terms in which the jurisdiction is thus conferred. It does not depend upon the rank of the court upon which it is conferred. It must be strictly pursued, because the court does possess jurisdiction over other subjects or persons more extended and general. Galpin v. Page, 18 Wall. (85 U. S.) 350, 21 L. Ed. 959; Chamber of Commerce of Minneapolis v. Federal Trade Commission (C. C. A.) 280 F. 45. The exercise of such power conferred is to make and enter, upon the pleadings, testimony, and proceedings set forth in the transcript of record, a decree affirming, modifying, or setting aside the order of the Commission, and is not dependent upon proof of the violation of the Commission's order, but upon proof of a violation of the law. The statute grants jurisdiction of the proceeding and of the question determined therein. The proceeding comprises (a) the complaint of the Commission; (b) the testimony taken; (c) the report by the Commission, in which shall be stated the findings as to the facts; and (d) the order to cease and desist. It thus will be seen that the proceeding does not contain any evidence with respect to a violation by the respondent of the Commission's order, but only with respect to respondent's original violation of the law; that is, as it engaged in the use of unfair methods of competition in interstate commerce. Therefore the primary question presented to us is whether the Commission's determination on this point was correctly reached. It is not conceivable that the court would take jurisdiction of the proceeding on the Commission's petition for the enforcement of the order, without first holding that the Commission's order was valid and enforceable. It would not dismiss the petition for want of proof of a violation thereof until it had first found a valid order to be violated. The act provides that "the court shall have the same jurisdiction to affirm, set aside or modify the order of the Commission as in the case of an application by the Commission for the enforcement of its order."
Manifestly, it is very apparent that the question of violation of the Commission's order would not be involved until a valid order was recognized by this court after having acquired jurisdiction. Therefore we must first examine the proceeding before the Commission and determine whether there has been a violation of the law. Until then, no good purpose can be served for determining disputed questions of fact as to a violation of the order. The statute does not impose any penalty for violation of the Commission's order, and the order is not binding until vitalized by the power of this court to punish for contempt, when the court shall have entered a decree affirming the order and commanding permanent obedience thereto, and it is not until the Commission presents a case of justifying the charge of violation that action will be taken to punish. It is then, and not until then, that the question of fact as to violation of order becomes a proper issue to be determined by the court.
The filing of an answer, or the receipt of affidavits disputing the alleged violation of the order, is of no importance until the order to cease and desist has received confirmation by the Circuit Court of Appeals. When confirmed, the order then entered is identical with the one entered by the Commission, unless, for good reasons, there should be a modification required. Q. R. S. Music Co. v. Federal Trade Commission (C. C. A.) 12 F.(2d) 730.
The power to modify the order of the Commission is given by statute, and includes the power to conform an order in point of law to the pleadings and findings. Federal Trade Commission v. Beechnut Packing Co., 257 U. S. 441, 42 S. Ct. 150, 66 L. Ed. 307, 19 A. L. R. 882; L. B. Silver Co. v. Federal Trade Commission (C. C. A.) 289 F. 985; Sears, Roebuck & Co. v. Federal Trade Commission (C. C. A.) 258 F. 307, 6 A. L. R. 358. Even where the court may remand, with instructions to modify in accordance with its opinion, the decree continues to be that of the court. L. B. Silver Co. v. Federal Trade Commission (C. C. A.) 292 F. 753. But, under the act, the jurisdiction of the court is original. Butterick Co. v. Federal Trade Commission (C. C. A.) 4 F.(2d) 910. Where the fault in the Commission's *619 order is in point of law, the court may correct it, but in doing so it recognizes that the Commission is purely a fact-finding body.
The words "unfair method of competition" are not defined by the statute, and their exact meaning is in dispute. It is for the courts, not the Commission, to determine as a matter of law what they include. Federal Trade Commission v. Gratz, 253 U. S. 421, 40 S. Ct. 572, 64 L. Ed. 993. The Commission is an administrative body. Federal Trade Commission v. Eastman Kodak Co., 47 S. Ct. 688, 71 L. Ed. ___, decided May 31, 1927. Therefore our first inquiry is to determine whether, on the facts found, as supported by the evidence, there has been a violation of the law, and the finding of fact by the Commission, having evidence to support it, is conclusive and binding upon the courts. Federal Trade Commission v. Curtis Publishing Co., 260 U. S. 568, 43 S. Ct. 210, 67 L. Ed. 408; Harriet Hubbard Ayer v. Federal Trade Commission (C. C. A.) 15 F.(2d) 274.
L'Oréal Henné is a mark or name of a hair dye originally imported from France, but later manufactured in this country, and it is claimed that the respondent simulated the dress of this product and name as prepared for the market. It was manufactured and sold in France in 1900 by a concern known as the Société Française de Taintures Inoffensives pour Cheveux, which in English means the French Company of Inoffensive Hair Dyes. Pulverized henna is its basic ingredient. It is obtained from an Asiatic thorny tree or shrub, and its leaves are reddish orange in color. Henné is the French for the English henna. L'Oréal Henné was imported, packed in blue tin boxes, 3 1/8 inches in height and 2¼ inches in width, and when subsequently manufactured in this country it was packed in blue pasteboard boxes of approximately the same size. The Commission placed importance upon the simulation of the package as practiced by the respondent, as well as a similarity in dress between the containers in which a competitor sold L'Oréal Henné, and the respondent his product D'Oréal Henna.
There is testimony that, when first imported, there were no henna hair dyes on sale in this country. A competitor of respondent, one Lebeau, commenced this importation, and continued until nearly 1918, first shipping in the small blue tin cans, and later importing it in bulk and reducing it to packages of from 10 to 15 pounds, and also into individual cans and cardboard boxes, which were manufactured here. The product was advertised extensively, and his importations increased steadily, but not in large volume. He sold to wholesalers and in interstate commerce. On January 2, 1918, he procured a contract to sell this product for a period of 10 years. By it he was granted the right to manufacture L'Oréal Henné, and obtained the right to use the trade-mark L'Oréal and all the formulæ, processes, and secrets for the manufacture of the product in the United States, Canada, and Mexico. He made his product in this country under the formulæ as employed in the imported goods. The labels used were "exactly the same."
After the respondent entered the business, he closely simulated the name and dress of Lebeau's product of L'Oréal Henné, which resulted in confusion among the trade and the buying public. Henna D'Oréal was placed upon the market in June, 1915. He traded under the name of B. Paul, following a practice, said to be common in this trade, of using the given name in place of the surname. There is testimony that the formulæ of respondent's product is the same as the formulæ of L'Oréal Henné. It was placed in wooden boxes, with dark blue labels and white markings. Later it was sold in tin boxes with the same color scheme, the containers being one-sixteenth of an inch higher and one-eighth of an inch more in width than L'Oréal Henné. Respondent advertised extensively, and his business grew, and much of his product was sold in interstate commerce. The charge of the Commission's complaint is that the respondent was marketing his product in packages which so closely resembled, in size, shape, color, and printed matter thereon, the general appearance of the packages of L'Oréal Henné, that the similarity was calculated to and did deceive the purchasing public under the ordinary conditions which prevail in the usual course of retail trade, and that purchasers were induced by such similarity of the packages to buy respondent's product upon the mistaken belief that it was L'Oréal Henné.
The Commission has made a finding of fact which supports this charge of the complaint. There is evidence to support the finding as to the shape, size, color, and printed matter on the packages. The containers were about the same in material and size. The respondent adopted the same color scheme. His explanations as to why he did so were found unsatisfactory to the Commission. He explained his change of lettering. But a comparison of the respective containers, with such change, shows the colors of the *620 letters were exactly the same, and when considered with the size and style of the lettering, and the names of the two preparations, the most conspicuous words on the face of each case are almost identical. Both are shaded in white and the resemblance is most striking. They both use the words, "La plante, merveilleuse," which in English means "the marvelous plant," and the French words, "Recoloration Naturelle Des Cheveux," which in English means natural recoloration of hair. Respondent's Henna D'Oréal combined the words and in English reads, "Nature's Hair Restorer"; then follows the name of the manufacturer and the place of manufacture. But the words are in the same relative position upon the can.
The Commission found he carried on the deception by adding the French phrase, "La plante merveilleuse," which was not translated into English. It said that the French phrase was in the exact relative position on respondent's can as it was on the L'Oréal Henné can, and that this was done designedly. On the top of the can of L'Oréal Henné is a picture of a woman's head and flowing hair, although dissimilar in appearance, the phrase Henna D'Oréal over it, and the English words, "Nature's Hair Regenerator," under it. The wording on the top of respondent's can is white, with a dark blue background, a simulation as to color of the lettering on the top of the L'Oréal Henné can. Upon each can, pasted around the top for the purpose of sealing it, is a band of paper with printed matter thereon. On the L'Oréal Henné can the trade-name is used, and under it the words "Dark Chestnut," with the French equivalent, "Chatain Fonce." Turning the can, are found the words, "La plante merveilleuse," and the words, "Bande de sureté." Respondent has printed the words "Henna D'Oréal and "Light Auburn," and on turning the can the words "La plante merveilleuse" and "Guarantee Seal," the latter being the English equivalent of the French "Bande de sureté."
It thus appears that the respondent has copied the color of the can, the arrangement of the words on the face thereof, the woman's head on the top, the paper band around the can, and placed them in the same position as the L'Oréal can, and has adopted the English of the French words used in the manufacture of L'Oréal Henné. There is a finding that it was difficult to tell the difference, and that there was confusion among the purchasing public. The unsatisfactory explanation given by the respondent of the choice of his trade-name, considered with his previous experience in connection with his brother's business, and the suggestion then of using the name respondent now uses, to which his brother objected, was a clear indication of a design and intent to use the name Henna D'Oréal, with a view of capturing the trade flowing from the advertising and marketing of L'Oréal Henné.
Witnesses called before the Commission supported the finding that there was in fact confusion. It also appears that respondent's advertising is misleading and false in character. Such advertising referred to a "new French discovery," "the only harmless coloring in the world," "trade-mark registered," when in fact it was not, and "copyrighted in 1918," when in fact it was not.
There is here presented the question of whether the public interest is concerned which would warrant the Federal Trade Commission prohibiting this respondent from competing in trade in this unfair manner, which strikingly affects his competitors. Is it of sufficient public interest to warrant the Federal Trade Commission in issuing its cease and desist order? The purchasing public should be protected from deception, if that deception results in their securing an article or product which they did not intend to purchase, as well as where an article is misbranded. Federal Trade Commission v. Winsted Hosiery Co., 258 U. S. 483, 42 S. Ct. 384, 66 L. Ed. 729; Royal Baking Powder Co. v. Federal Trade Commission (C. C. A.) 281 F. 744. The test of unfair competition is whether the natural and probable result of the use by a respondent of a label which is deceptive to the ordinary purchaser makes him unwittingly, under ordinary conditions, purchase that which he did not intend to buy. Notaseme Hosiery Co. v. Straus (C. C. A.) 201 F. 99.
We said in Caron Corporation v. Vivaudou, Inc., 4 F.(2d) 995: "While the plaintiff has no right to a monopoly in the use of the word, the color, or the ornament, simpliciter, when it becomes an element in a manifold likely to divert from him his customers, the law will prevent its use."
There we pointed out that color may be effective as a means of fraud, when used as an element in a dress otherwise shown to be fraudulent. And in Florence Manufacturing Co. v. J. C. Dowd & Co., 178 F. 73, we said: "The law is not made for the protection of experts, but for the public that vast multitude which includes the ignorant, the unthinking and the credulous, who, in *621 making purchases, do not stop to analyze, but are governed by appearances and general impressions."
Nims on the Law of Unfair Competition and Trade-Marks (2d Ed.) § 117, says: "The question is, not whether two articles are readily distinguishable when set side by side, but whether the general impression made by defendant's article upon the eye of a casual purchaser, who is unsuspicious and off his guard, is such as to be likely to result in his confounding it with the original article."
The inquiry is whether there is actual confusion, which is brought about by the simulation of one person's goods for those of another. A deliberate effort to deceive is not a necessary element in unfair competition. Thum Co. v. Dickinson (C. C. A.) 245 F. 609; Trappey v. McIlhenny Co. (C. C. A.) 281 F. 23. Nor is it necessary, to support the order below, to find actual deception, or that any competitor of the respondent has been damaged. Charles Broadway Rouss, Inc., v. Winchester Co. (C. C. A.) 300 F. 706; Rice & Hutchins, Inc., v. Vera Shoe Co., Inc. (C. C. A.) 290 F. 124; Sears Roebuck & Co. v. Federal Trade Commission (C. C. A.) 258 F. 307, 6 A. L. R. 358.
L'Oréal is not a descriptive name of the product. When an artificial name has been adopted by a manufacturer, and he makes use of it in merchandising his product, such coined word is his sole property (Nims, The Law of Unfair Competition and Trade-Marks [2d Ed.] § 52), and a deliberate use of such name, although no attempt has been made to register it as a trade-mark, subjects the trespassing competitor to restraint in its use. (G. & C. Merriam Co. v. Saalfield [C. C. A.] 198 F. 369; Hygeia Distilled Water Co. v. Consolidated Ice Co. [C. C. A.] 151 F. 10; Nims, The Law of Unfair Competition and Trade-Marks [2d Ed.] § 53). False and misleading advertising is a dishonest practice, and amounts to unfair competition, of public interest, with which the Federal Trade Commission may deal. Royal Baking Powder Co. v. Federal Trade Commission, supra.
The respondent argues that section 5 of the Federal Trade Commission Act is unconstitutional (a) because it fails to define any standard of conduct for the guidance of the Commission; (b) because it is penal, and fails to define elements of the offense; and (c) because it authorizes an administrative body to legislate judicially, operative ex post facto. Section 5 has so often been considered and held to be constitutional by the courts that it is not necessary now to consider these objections to its constitutionality.
It is conceded by the Federal Trade Commission that sections, 1, 2, 3, 4, and 6 of the order have been complied with, but it is charged that the respondent is now violating section 5. The respondent is now selling its product in a can of the same size, with a blue background and labeled "B. Paul's Henna," with a strip of paper as a sealing band, and with the picture of a woman with flowing hair on the top. It is similar in color and general appearance to the lettering on the container used in marketing L'Oréal Henné. The reading matter differs, but the Commission says that it is a device used to confuse and mislead the public into believing that the henna hair dye of the respondent is one and the same as that of its competitor. The petition submitted on this application for enforcement points out the similarity of dress of the goods as to color, shape, and size. The shape and size of the can are the same as those used and associated with the name L'Oréal Henné. It sets forth confusion among purchasers and among the sales force of establishments using the product.
In view of the previous confusion, the claim of which seems to have been acquiesced in by the respondent's conduct in complying with the order to cease and desist, and the charge made in the present petition, we think there is sufficient substance therein to require the respondent to answer the charge, which he will do within 10 days from the date of the entry of the mandate herein, after which the Federal Trade Commission will take proof for and against the charge made in the present petition, and report to the court its findings as to the facts, and as to whether there is confusion caused to the purchasing public, constituting unfair competition in trade, in which the public has an interest. The affidavits submitted to support the petition, we hold, should be stricken from the record, because we are unauthorized to consider them under the statute.
The order of the Federal Trade Commission, adjudging the respondent guilty of unfair competition, is affirmed; the question of the present violation of section 5, for which enforcement is asked by the petition to this court, is referred to the Federal Trade Commission, with opportunity for the respondent to answer and submit proof, and with directions to the Commission to report its conclusions to this court.
Ordered accordingly.
*622 L. HAND, Circuit Judge (concurring).
I think that we have no jurisdiction to review the Commission's order until we have decided that the respondent has disobeyed it. Section 5 of the act says that, "if such person * * * neglects to obey such order * * * the Commission may apply to the Circuit Court of Appeals." That is not to say that the Commission may so apply, if they merely allege that the respondent has disobeyed; it is the fact, not their assertion, which conditions our jurisdiction. Such, at least, is the form of the act, and such the decision of the Seventh Circuit. Fed. Trade Com. v. Standard Education Soc. (C. C. A.) 14 F.(2d) 947.
The answer is that we cannot decide that question, because section 5 confines our inquiry to the proceedings before the Commission up to the entry of its order, and that the respondent's disobedience necessarily occurred theretofore. In the first place, if the fact is a condition on our jurisdiction, we have inherent power, like any other court, to decide it, else we could not act at all. In the second, we must decide it at some time anyway, and I can perceive no greater express power to act after the order has been held valid than before. We are assuming a power in either event not conferred on us in words.
Passing the form and turning to convenience, I cannot see that it is more awkward in practice to determine disobedience before validity than validity before disobedience. It is quite true that we run the chance of wasting our time either way, for we cannot decide everything at once; but it is fairer, I think, to take up the issue of disobedience first. If the respondent has in fact obeyed the order, why should he be vexed with the suit at all? Presumably the question is of little moment to him. Only after his protestation of compliance has been shown to be untrue ought he to be called on to dispute the order. At least, so it seems to me. The order has no sanction in any case, and we are not to confuse the case with a contempt, which presupposes some coërcive power already exercised.
Therefore I think that all we should do is to enter the order of reference which we propose, and in which I concur. However, on the point of jurisdiction I am overruled, and, as in fact I agree that the order is valid, I concur also in our finding that it is, as well as in the court's opinion so holding. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545020/ | 23 F.2d 486 (1928)
NEWTOWN CREEK TOWING CO.
v.
CITY OF NEW YORK.
No. 91.
Circuit Court of Appeals, Second Circuit.
January 9, 1928.
George P. Nicholson, Corp. Counsel, of New York City (Charles J. Carroll, of Brooklyn, N. Y., and William J. Leonard, of New York City, of counsel), for appellant.
Alexander & Ash, of New York City (Edward Ash, of New York City, of counsel), for appellee.
Before MANTON, L. HAND, and SWAN, Circuit Judges.
PER CURIAM.
The Golden Age was damaged by colliding with the city's bridge at Newtown creek on November 25, 1924. Liability was imposed upon the appellant. In measuring and allowing damages, 12 days' demurrage is allowed the necessary time for repairs. Proof of such damage for detention rested upon the testimony of appellee's bookkeeper, and in substance showed the earnings, expenses, and average profit per day over a period including the time the tug was being repaired November 27 to December 10, 1924. It appears that the appellee owned and operated 21 tugs, and had on hand 4 or 5 daily, as spare tugs. In this table there is no record of the operation of the tugs in the months of November and December, when the tug was not operated. The 4 or 5 tugs were always regarded as spare. It appears that there was not sufficient business for them, and that the whole fleet was never working at one time. An analysis of the bookkeeper's compilation from the original records forms no basis upon which to demonstrate *487 that, during the period this tug was in dry dock for necessary repairs, due to collision, she could have been otherwise employed with profit to her owners. The burden of establishing loss of earnings for detention during these 12 days was upon the appellee. The North Star (C. C. A.) 151 F. 168; Winfield S. Cahill (C. C. A.) 258 F. 318; Aktieselskabet Bonheur v. San Francisco & P. S. S. Co. (C. C. A.) 287 F. 679. In The Conqueror, 166 U. S. 125, 17 S. Ct. 510, 41 L. Ed. 937, the court said that such loss of profits for detention must be proven with reasonable certainty; it is not enough that the vessel might have made profit; it is not the possibility of employment, but an actual loss, to which the appellant must respond.
The collision occurred on November 25, 1924. Repairs were started on November 27th. They were completed December 10th, and it appears that she was not working from December 10th until December 25th, which is a further indication that during the period of repair there was no work for her. Merely showing that the vessel was laid up for repairs and a statement of the appellee's business forms too speculative a basis upon which to assume that, had the tug been in good repair, she would have been employed. The Conqueror, 166 U. S. 125, 17 S. Ct. 510, 41 L. Ed. 937.
The appellee contends that it can establish damages for detention, if afforded an opportunity to submit additional proof. Therefore we will reverse that part of the decree which allows damages for detention, and remand, with directions that it be afforded an opportunity of presenting additional proof before the master to establish loss for detention.
Decree reversed and remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545024/ | 216 B.R. 892 (1998)
In re WEST LAKELAND LAND COMPANY LIMITED PARTNERSHIP, Debtor.
WEST LAKELAND LAND COMPANY LIMITED PARTNERSHIP, Plaintiff,
v.
UNITED STATES of America, Defendant.
Bankruptcy No. 96-14434-8C1, Adversary No. 96-1130.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
February 3, 1998.
*893 Michael C. Markham, Clearwater, FL, for Plaintiff.
Jeffrey W. Frantz, North Miami, FL, Special Counsel to Debtor.
Robert L. Welsh, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC.
Brian P. Kaufman, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC.
DECISION ON MOTIONS FOR SUMMARY JUDGMENT
C. TIMOTHY CORCORAN, III, Bankruptcy Judge.
This adversary proceeding came on for hearing on August 22, 1997, of the cross-motions for summary judgment filed by the parties (Documents Nos. 11 and 12). The parties have also filed supplemental briefs (Documents Nos. 14 and 15). In addition to the Rule 56 materials attached as exhibits to the motions, the parties have filed two stipulations (Documents Nos. 10A and 19).
The plaintiff in this adversary proceeding is the debtor, West Lakeland Land Company Limited Partnership ("plaintiff" or "Debtor Partnership"). The defendant is the United States of America.
In Count I of the complaint, the plaintiff seeks to invalidate federal tax liens filed by the defendant against the plaintiff's property. *894 The defendant filed these liens on account of unpaid Form 706 estate taxes and unpaid Form 1041 income taxes owed by the Estate of Martin Fridovich, deceased, claiming that the plaintiff is the nominee of the Estate of Martin Fridovich, deceased, and that the plaintiff was formerly known as West Lakeland Land Co., Inc., Fridovich Holdings, Inc., General Partner.
In Count II of the complaint, the plaintiff seeks damages for alleged violations of the automatic stay committed by the defendant when it failed to release the tax liens alleged in Count I. The plaintiff subsequently dismissed this count without prejudice on a voluntary basis (Document No. 18). The defendant consented to this dismissal, and the court therefore is no longer required to consider it.
In Count III of the complaint, the plaintiff seeks to avoid the tax liens alleged in Count I as fraudulent transfers within the meaning of Section 548 of the Bankruptcy Code.
Based upon the summary judgment record made by the parties, the court decides the issues as follows:
I.
FACTS
The following facts are without dispute on this summary judgment record:
Martin Fridovich died on December 4, 1981. In 1982, the Estate of Martin Fridovich ("Estate") filed a Form 706 federal estate tax return showing an outstanding liability of $3,883,147.43. On November 15, 1993, the Estate filed a Form 1041 federal fiduciary income tax return reflecting a tax liability in the amount of $219,548 for the period ending May 31, 1993. On September 15, 1995, the Estate filed a Form 1041 federal fiduciary income tax return reflecting a tax liability in the amount of $1,376,047 for the period ending May 31, 1995. As of the date of the events in dispute, May 31, 1995, the outstanding tax assessments against the Estate, including interest and penalties, exceeded $10 million. As of the date of the plaintiff's bankruptcy filing, October 22, 1996, the outstanding tax liability of the Estate with respect to these returns was $12,310,921.50, including interest and penalties.
As of May 31, 1995, the only substantial asset of the Estate was its 100 percent ownership interest in the common stock of West Lakeland Land Co., Inc. ("Company"). The assets of the Company were real estate, notes, and mortgages receivable. The value of the Estate's assets was substantially less than the Estate's tax liability.
Because the Estate had a negative net worth and because the sale of the assets of the Company to pay the Estate's taxes would create additional taxable gain, the Estate wished to compromise its tax liabilities in a comprehensive, once and for all manner. Accordingly, the Estate devised a plan that would satisfy all the technical tax law requirements, settle all tax issues, and allow the acceptance by the defendant of an offer of compromise. This plan required the liquidation of the Company.[1] The defendant ultimately agreed to the offer of compromise.
On May 25, 1995, therefore, the Company began to execute its plan. It filed its Articles of Dissolution with the Secretary of State of the State of Florida. By IRS Form 966 (Corporate Dissolution or Liquidation), dated May 30, 1995, the Company indicated that it would engage in a complete corporate liquidation pursuant to Sections 331 and 336 of the Internal Revenue Code by May 31, 1995. Additionally, the Company stated on this Form 966 that the last month, day, and year of its existence would be May 31, 1995.
On May 25, 1995, before the Company made its liquidating distribution, a limited partnership named West Lakeland Land Company Limited Partnership ("Partnership"), the debtor and the plaintiff in this adversary proceeding, was formed. The sole general partner was Fridovich Holdings, Inc., owning one percent of the partnership. The sole limited partner was the Estate, owning 99 percent of the partnership.
At the end of May, 1995, when the Debtor Partnership was formed and the Company *895 was dissolved, all of the assets of the Company were directly transferred to the Debtor Partnership. The interests in real property of the Company were directly transferred to the Debtor Partnership through deeds and assignments that were recorded in the Public Records of Polk County, Florida. The Company transferred the other assets directly to the Debtor Partnership through other written instruments.
When the Company completed its liquidation on May 31, 1995, both Company and Estate filed federal tax returns. These returns claimed a complete corporate liquidation under Sections 331 and 336 of the Internal Revenue Code demonstrating a transfer of the property and assets of the Company to its sole shareholder, the Estate, notwithstanding the fact that the transfer had actually been made directly to the Partnership.
The defendant contends the Company constructively transferred the property to the Estate because:
1. Form 1120S of the federal income tax return of the Company for the period ending May 31, 1995, Line 20 of Schedule K-1 (Shareholder's Share of Income, Credits, Deductions, etc.) reflects the distribution of all of the Company's assets to its sole shareholder, the Estate, on or before May 31, 1995, the last day of existence of the Company. Further, Line 1 of Schedule K-1 reflects income of $2,896,291 to the Company as a result of this liquidating distribution to the Estate, pursuant to Section 336 of the Internal Revenue Code.
2. Because the Company was an "S" Corporation, the income the Company recognized as a result of its distribution was reported as "flowing through" to the Estate. This result was reflected on Schedule E of the Estate's Form 1041 federal fiduciary income tax return for the period ending May 31, 1995, where the Estate reported income of $2,896,291 on Line 27C. In addition, as a result of the liquidating distribution of the Company's assets to the Estate, the Estate reported on Schedule D (Capital Gains and Losses) of its Form 1041 return an exchange of its shares of stock in the Company for the assets of the Company. Based on this exchange, the Estate recognized a capital loss of $2,588,869, pursuant to Section 331 of the Internal Revenue Code.
3. On May 25, 1995, before the Company made its liquidating distribution, the Debtor Partnership was formed with two partners. The general partner was Fridovich Holdings, Inc. The sole limited partner was the Estate. Contributions of the partners of the Debtor Partnership reflect that the Estate anticipated contributing $4,500,000 to the Debtor Partnership in exchange for a 99 percent interest in the partnership.
4. As reported, the property contributed to the Partnership by the Estate consisted of the assets it received in the liquidating distribution of the Company that occurred on May 31, 1995. As reported on Schedule K-1 of the Form 1065 federal partnership return of the Debtor Partnership for the period June 1, 1995, through December 31, 1995, the Estate contributed $5,083,873 in assets that it received from the Company to the Debtor Partnership in exchange for a 99 percent interest in the Partnership. As reported, the Estate held all the assets of the Company as of June 1, 1995.
5. As demonstrated by the IRS Form 966 and the tax returns described above, on May 31, 1995, the Company appears to have distributed all of its assets to Estate as part of a liquidating distribution under Sections 331 and 336 of the Internal Revenue Code. Then, between June 1, 1995, and December 31, 1995, the Estate appears to have contributed these assets to the Partnership in exchange for 99 percent interest in the Partnership.
The defendant argues that the court should determine that the transfer was constructively made to the Estate because the Estate and the Company represented this transfer for federal tax purposes. Although the transaction was reported as if the Company liquidated by transferring its property and assets directly to the Estate, the property and assets were in fact transferred directly to the Debtor Partnership. The Unanimous Written Consent of the Sole Shareholder of West Lakeland Land Company, Inc., In Lieu of Meeting reflects that this transaction was merely to be deemed to *896 have occurred. In this Consent, the Estate resolved, in part, that:
[T]he Corporation shall completely liquidate in accordance with Section 331 of the Internal Revenue Code of 1986, as amended ("Code"), and that all of the assets of the Corporation shall be distributed to West Lakeland Land Company Limited Partnership, which distribution shall be deemed to be a liquidating distribution to the sole Shareholder of the Corporation. The foregoing distribution shall occur at any time after the effective date hereof, and no later than May 31, 1995. (Emphasis added).
At the time of the transfer of the property in May, 1995, the defendant had filed no tax lien against the Estate, the Company, or the Debtor Partnership. On January 4, 1996, and February 22, 1996, the defendant filed tax liens against the Estate. The defendant has never filed a tax lien against the Company. On March 19, 1996, the defendant filed nominee tax liens against the Debtor Partnership. The defendant filed tax liens against the Debtor Partnership's property as nominee of the Estate because it understood, based upon the way in which the liquidation of Company was reported, that the assets of the Company had been constructively transferred to the Estate in connection with that liquidation. The Debtor Partnership then filed its Chapter 11 petition on October 22, 1996.
Finally, at all times material, neither the Company nor the Debtor Partnership has had any federal tax liability.
II.
DISCUSSION
On these undisputed facts, the court is able to determine the issues as follows:
1. Jurisdiction.
The court has jurisdiction of the parties and the subject matter pursuant to the provisions of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and the standing, general order of reference entered by the district court. This is a core proceeding within the meaning of 28 U.S.C. § 157(b) and an adversary proceeding governed by the Federal Rules of Bankruptcy Procedure, including Part VII of those rules.
2. State Law Controls Which Property Is Available for The Attachment of Federal Tax Liens.
When a taxpayer refuses or neglects to pay his assessed federal tax liabilities, federal tax liens in favor of the United States attach to all property and rights to property belonging to taxpayer. 26 U.S.C. § 6321. As a matter of law, the federal tax liens arise at the time of assessment "and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time." 26 U.S.C. § 6322.
The federal tax liens attach to all property and rights to property belonging to the taxpayer at any time during the period of the lien, including any property or rights to property acquired by such person after the lien arises. Treas. Reg. § 301.6321-1. The tax lien is not affected by the transfer of property subsequent to the attachment of the lien. 26 U.S.C. § 6332(b).
Because the Estate had tax obligations that were assessed and unpaid long before the transfer of the Company's property and assets, it is clear that under these facts there was a federal tax lien on the Estate's property in place at the time of the transfer. The lien attached to all property of the Estate including, at the very least, the stock of the Company.
The central issue in this dispute, however, is whether the Estate at any time owned the property and the assets of the Company that are now owned by the Debtor Partnership. If this issue is decided affirmatively, the lien attached to that property as well. Id. State law controls this issue. Aquilino v. United States, 363 U.S. 509, 514, 80 S.Ct. 1277, 1280-81, 4 L.Ed.2d 1365 (1960).
Under Florida law the dissolution of a corporation does not operate to transfer *897 an interest in the corporation's property to the corporation's shareholder. § 607.1405(2), Fla. Stat.; In re Miner, 185 B.R. 362, 366 (N.D.Fla.1995), aff'd, 83 F.3d 436 (11th Cir. 1996). In addition, an interest in real property cannot be conveyed other than by deed. § 689.01, Fla. Stat.
In this case, there was no actual transfer of title to the Company's assets to the Estate. The Estate therefore has never had any actual ownership interest in the property that was formerly owned by the Company and is now owned by the Debtor Partnership. Although the defendant argues that this ownership occurred when the Company "constructively" transferred the property to the Estate for federal income tax purposes[2], there is no authority that supports the proposition that a "constructive" or "deemed" transfer of property to the Estate for federal income tax purposes is sufficient to create the actual interest in property required by Florida law for the attachment to that property of federal tax liens later filed against the Estate. Because the defendant's sole basis for filing the tax liens that are in dispute is the alleged constructive transfer that occurred solely for federal income tax purposes, the defendant cannot sustain its position as a matter of Florida law.
Regardless of what should have happened for a liquidation to occur under Sections 331 and 336 of the Internal Revenue Code, it is clear that the transfer of property in this case went from the Company directly to the Debtor Partnership and not to the Estate. The court must look to what actually happened to determine if the tax liens are valid. The court cannot decide the tax lien issue, which turns on Florida property law, based on how the parties should have structured the transaction to obtain the tax treatment they claimed and reported on the returns. The fact is they did not in fact structure the transaction that way.
Alternatively, the defendant argues that the Debtor Partnership is estopped from asserting that the Estate did not have a property interest in the assets and property now owned by the Debtor Partnership and previously owned by the Company. The defendant bases this argument on the fact that, to obtain favorable tax treatment pursuant to Sections 331 and 336 of the Internal Revenue Code, the parties reported the transaction as if the Company had transferred the property to the Estate and the Estate then transferred the property to the Debtor Partnership. This estoppel argument fails for several reasons. First, the defendant did not plead estoppel as an affirmative defense, and the defendant did not raise the issue until the time of its summary judgment motion.
Second, even had the defendant properly and timely raised an estoppel defense, that defense would fail. See, National Companies Health Benefit Plan v. St. Joseph's Hospital of Atlanta, Inc., 929 F.2d 1558, 1572 (11th Cir.1991) (elements of estoppel under federal common law). The tax returns and other public documents simply acknowledge a taxable gain or loss; the returns make no express representation of an actual transfer of an interest in property under Florida law to the Estate.
In addition, the defendant points to no detrimental reliance on its part. Indeed, the *898 position in which the defendant finds itself appears to remain the same as it was formerly. Before the liquidation of the Company, the Estate owed the defendant unpaid taxes, and the Estate owned stock in the Company. The Company in turn owned assets. The defendant could enforce the Estate's tax obligations against the Estate's property, the stock of the Company, but not against the Company's assets. After the liquidation, the Estate still owes the defendant unpaid taxes, and the Estate owns the entire limited partnership interest in the Debtor Partnership. The Debtor Partnership in turn owns assets. The defendant can enforce the Estate's unpaid tax obligations against the Estate's property, the partnership interest, but not against the partnership's assets. Were the court to accept the defendant's "constructive" transfer theory, the position of the defendant would be significantly enhanced because it would have liens against the property formerly owned by the Company and now owned by the Debtor Partnership liens it did not have before.
Regardless of whether the Company is or was entitled to the benefit of liquidation under Sections 331 and 336 of the Internal Revenue Code based on the transaction that in fact occurred an issue not before the court the defendant may not recharacterize the transaction to create a property right that would allow a nominee tax lien. Because the Estate never held title to the assets now owned by the Debtor Partnership, the defendant's tax liens filed against the Debtor Partnership's property as "nominee" of the Estate are null and void. They create and constitute no lien on the Debtor Partnership's property.
3. Fraudulent conveyance.
Because the court has determined that the tax liens at issue are null and void, the court is not required to determine if they also constitute fraudulent conveyances under Section 548 of the Bankruptcy Code.
III.
CONCLUSION
For the foregoing reasons, the court grants the plaintiff's motion for summary judgment and denies the defendant's motion for summary judgment. Pursuant to the provisions of F.R.B.P. 7054(b), each party shall bear its own costs of action, the court finding no equities to justify an allowance of costs in the plaintiff's favor. Pursuant to the provisions of F.R.B.P. 9021, the court will enter a separate judgment voiding the tax liens in accordance with this decision.
NOTES
[1] The other details of the Estate's plan and the explanations for the necessity of these details as part of the plan are not important to the issues the court decides here.
[2] The defendant contends that the Company had to have transferred to the Estate the property (and that the Estate later transferred the property to the Debtor Partnership), thus allowing the liens to attach to the property, because all the parties reported the transaction as a Sections 331 and 336 liquidation. The defendant further contends that the transfer of the property to the Estate as shareholder of the Company being liquidated is a requirement for a Sections 331 and 336 liquidation. For a liquidation under Sections 331 and 336 to have occurred, the Company was required to distribute all of its property to the Estate, the sole shareholder of the Company. Section 331 of the Internal Revenue Code states that "[a]mounts received by a shareholder in a distribution in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock." 26 U.S.C. § 331(a) (emphasis added). As a result, a Section 331 liquidation can only occur when a shareholder receives a distribution of a corporation's property in exchange for the shareholder's stock in the corporation. The Debtor Partnership asserts that it is sufficient if the distribution is merely deemed to have occurred and does not actually occur, citing Rev. Rul. 69-534, 1969-2 C.B. 48. The defendant disputes this interpretation. The court is not required to determine this issue because the tax consequences of the transaction are not before the court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545026/ | 23 F.2d 118 (1927)
DE SOUSA et al.
v.
CROCKER FIRST NAT. BANK OF SAN FRANCISCO (HIND et al., Interveners).
No. 16713.
District Court, N. D. California, S. D.
December 16, 1927.
*119 T. T. C. Gregory and C. J. Goodell, both of San Francisco, Cal., and Frank V. Cornish, of Berkeley, Cal., for complainants.
Morrison, Hohfeld, Foerster, Shuman & Clark, and J. F. Shuman, all of San Francisco, Cal., for respondent.
Ira S. Lillick, and Theodore M. Levy, both of San Francisco, Cal., for interveners.
KERRIGAN, District Judge.
This is an action for damages, brought by the sellers of certain sugar against the Crocker First National Bank, as successor to the liabilities of the Crocker National Bank of San Francisco, on account of the refusal of the bank to pay certain drafts. The facts are briefly these:
On May 13, 1920, plaintiffs, De Sousa & Co., sellers, and Hind, Rolph & Co., buyers (interveners in this action), entered into a contract of sale for 500 tons white Java granulated sugar, polarization 97/98 deg., at 20½ cents a pound, c. i. f. San Francisco. On May 20, 1920, in accordance with this contract, the buyers procured from the Crocker National Bank a letter of credit for $208,000 in favor of De Sousa & Co. In this letter of credit the bank agreed that it would accept on presentation, and pay in 60 days, drafts not to exceed $208,000, if accompanied by "full sets of invoices, consular invoices, marine and war risk insurance certificates, surveyor's certificate of quality, weight certificate, and negotiable ocean bills of lading, made out to order of the shippers, and indorsed in blank, against shipment of "500 tons (2,000 pounds each) net, white Java refined granulated sugar, 97/98 deg. polarization, at 20½ cents per pound, gross shipped weight, c. i. f. San Francisco; shipment from Hong Kong during May/June, 1920."
This letter of credit was sent to the San Francisco agency of the Hong Kong & Shanghai Banking Corporation, with the request that it be cabled to Hong Kong. This was done. On May 29, 1920, at the request of the buyers, the Crocker National Bank requested the San Francisco agency of the Hong Kong & Shanghai Bank that the letter of credit be amended by cable in a letter stating: "We shall now be greatly obliged if you will send another cable, `urgent,' amending the credit to cover 500 tons of sugar as follows: 150 tons granulated 350 tons fine granulated." This also was done.
The sugar was duly shipped from Hong Kong, arriving in San Francisco June 29, 1920, in the midst of the "break" in the sugar market which has given rise to so much litigation of just this type. There is evidence in the record that the buyers immediately cabled a flat rejection on the score of deficient quality to the sellers, even before analysis was complete. This fact is not material in the present controversy between the seller and the bank, but the fact that the bank was informed of the buyer's action is significant in considering the reasons and justifications for the refusal of the bank to pay the drafts.
On or about July 6, 1920, the drafts were informally presented to the Crocker National Bank by the Hong Kong & Shanghai Banking Corporation, which had negotiated the *120 drafts. The drafts were accompanied by commercial invoices, consular invoices, marine and war risk insurance certificates, certificates of marine surveyors, weight certificates, negotiable order bills of lading, and certificates of polarization. After examination of these documents the Crocker National Bank notified the Hong Kong & Shanghai Banking Corporation that it could not accept and pay these drafts, because "the documents are not in order." On July 19, 1920, the drafts were formally presented and acceptance was refused by the Crocker Bank. In the meantime, on July 16, 1920, the buyers, Hind, Rolph & Co., entered into a broad indemnity agreement, supplementing an earlier one, by which they agreed to indemnify the bank for all damages and costs on account of litigation arising out of rejection of the drafts by the bank. The ground for the rejection of the drafts was: "That in none of the documents * * * were the goods and/or merchandise described * * * as required and set forth in said letter of credit."
The bank originally took the position that the documents which were required under the letter of credit must, in all of their terms and in each and every document, specify the goods as called for by the letter of credit. In other words, each document must show that 150 tons white Java refined sugar, 97/98 deg. polarization, and 350 tons white Java refined fine granulated sugar, 97/98 deg. polarization, had been shipped. Later, at the trial, the bank receded from this position as to certain of the documents, still insisting, however, that what it calls the "essential documents" i. e., the commercial and consular invoices, the surveyor's certificate of quality, and the polarization certificate must comply literally and word for word with the call of the letter of credit.
The principal question before me in this case is as to whether rejection upon this ground was justified. Any other grounds for objection must be regarded as having been waived. Bank of Taiwan v. Union National Bank (C. C. A.) 1 F. (2d) 65; Geo. A. Moore & Co. v. Mathieu (C. C. A.) 13 F.(2d) 747.
Examination of the documents presented with the drafts shows that the bills of lading, weight certificates, insurance certificates, and commercial invoices describe the article shipped as "bags sugar." The certificates of polarization describe "white Java fine sugar No. 24, * * * sugar (direct polarization) 97.8 deg.," and "granulated sugar, * * * 1,346 bags white Java No. 24, * * * sugar (direct polarization) * * * 98.6 deg." The surveyor's certificates describe "white Java fine sugar No. 24" and "white Java granulated sugar No. 24." The consular invoice covers "white Java fine sugar No. 24" and "white Java granulated sugar No. 24," and contains the declaration: "I further declare, in the case of sugar shipments, that the sugar was refined at Java from raw sugar produced in Java."
The requirements of a letter of credit must be met, like the requirements of any other contract. Conditions in any contract must be performed, and when a letter of credit calls for certain documents the furnishing of all of them is certainly a condition precedent to the payment of the drafts. Furthermore, the documents furnished must comply in every material particular with the conditions in the offer of credit. In construing the letter of credit to determine what are the material conditions precedent to acceptance of drafts, the rules of construction governing the construction and interpretation of ordinary commercial contracts are applicable. Old Colony Trust Co. v. Continental Bank of N. Y. (D. C.) 288 F. 979.
In this connection it should be noted that there is a distinction to be drawn between the legal effect of the contract with reference to what constitutes performance and banking practice as to the nature of the performance preferred. At the trial evidence was introduced tending to show the practice of certain banks to be to require literal, word for word, compliance with the letter of credit in all of the "essential" documents. Doubtless such mathematically accurate compliance with the contract is both convenient and desirable. Convenience and desirability from the standpoint of the bank are not enough, however, to extend the requirements as to the performance of a contract beyond the scope of its plain terms. The question is as to whether the "essential" documents called for by the letter of credit must comply literally and word for word with the call, or whether substantial compliance with every material element of the call, determinable by reading all of the documents together, was sufficient.
Where only one document is to accompany the drafts on a letter of credit, it is clear that that document must comply with the letter of credit. It must show on its face that the goods for which payment is being made were shipped. Lamborn v. Lakeshore Banking & Trust Co., 196 App. Div. 504, 188 *121 N. Y. S. 162, aff'd 231 N. Y. 616, 132 N. E. 911; Bank of Montreal v. Recknagel, 109 N. Y. 482, 17 N. E. 217; Bank of Italy v. Merchants' National Bank, 236 N. Y. 106, 140 N. E. 211. Where, however, several documents are called for, the bank issuing the letter of credit is not entitled to restrict its inspection to one or more documents, and to insist that one or more of them comply literally and word for word with the call of the letter of credit. If all of the documents, read together, show compliance with the call of the letter of credit, the bank is not justified in rejecting the drafts because the documents are not in order.
Any other construction of the letter of credit is strained and contrary to the spirit of common sense controlling commercial transactions. Such a situation was considered by the Supreme Court of Pennsylvania in Camp v. Exchange National Bank, 285 Pa. 337, 132 A. 189. There the letter of credit was for 100 tons of sugar from Java "shipments during July, 1920; * * * the shipments must be completed and drafts drawn on or before August 15, 1920." The documents were a bill of lading, consular invoice, declaration by shipper of food and drug products, certificate of origin, and policies of insurance. The bill of lading was a "received for shipment" bill, and it was contended that the bill of lading made no showing as to time of shipment. The court says:
"If the bill of lading had been the only document accompanying the draft, the bank officers, who were to examine only the papers before them, when the draft was presented, with the sugar not in port, would place the bank in a serious position by payment. But some of the documents accompanying the bill of lading did state sufficient to show shipment as a fact. The seller's declaration, being a part of the documents, speaks of the `shipment' covered by the invoice as being `exported from Pasoeroean,' and the contracts of insurance, likewise a part of the same documents, characterize the sugar as being `in the ship or vessel called Arcturus.' With this information, the bank could very properly regard the sugar as on board the vessel. This would justify the conclusion by the bank that the goods sold were `shipped' within the letter of credit." 285 Pa. 347, 132 A. 192.
The basic principle is stated (285 Pa. 342, 132 A. at page 191) in this case:
"Banks are liable for the unauthorized payment of drafts, but this liability is not unusual or extraordinary. Where the question of strict compliance is one to be decided by bank officials, they are held to the duty of good faith in forming an honest judgment as to whether the papers attached to a draft correspond to the letter of credit. The integrity of foreign drafts or like bills of exchange, accompanied by commercial bills of lading and other documents drawn against letters of credit, should not be embarrassed or made difficult through technical or inconsequential reasons raised against payment. The holders of these drafts have the right to expect that, when drafts conform in all essential requirements to the letter of credit, they will be paid by the drawee bank."
The courts, when called upon to decide whether or no the documents tendered with drafts on letters of credit were sufficient, have repeatedly and as a matter of course, without discussion, examined all of the documents. Where rejections have been justified, it has been because some essential provision of the letter of credit was lacking from all of the documents. Banco National Ultramarino v. First National Bank (D. C.) 289 F. 169; International Banking Corp'n v. Irving National Bank (C. C. A.) 283 F. 103.
Turning then to the documents presented with the drafts in the present case, the question to be determined is whether these documents, construed together, and without resort to parole or extrinsic evidence, showed that the goods called for by the letter of credit had been shipped. The original letter of credit called for "500 tons (2,000 pounds each) net, "white Java refined granulated sugar, 97/98 deg. polarization, at 20½ cents per pound, gross shipped weight c. i. f. San Francisco; shipment from Hongkong during May/June, 1920."
There has been extensive argument as to whether the amendment cabled May 29, 1920, changed this call entirely, or merely amended the original description as to granulation. Since it is my view that these documents were sufficient under the original call, it is not necessary to hold that the amendment did more than specify a change in the degree of granulation, the remainder of the original call remaining in force.
Examination of the documents shows that the surveyor's and polarization certificates and the consular invoice add "No. 24" to the description "white Java granulated (or `fine') sugar." It is not necessary to discuss the significance of this phrase. It is not claimed to be inconsistent with any of the requirements of the letter of credit as to the kind of sugar to be shipped, and may be disregarded *122 as being at the most surplusage. After eliminating this phrase it appears that the elements required by the call of the letter of credit are all present; not in any one document, it is true, but within the four corners of the entire set. Reading of all of the documents leaves no doubt that the sugar shipped corresponds to the call.
It is claimed that none of the documents show the sugar to be "refined" sugar. There is ground for the contention that the descriptions already quoted, although nowhere using the word "refined," do show that the sugar was refined sugar. But the point is put at rest by the seller's declaration, which is part of the consular invoices, was the basis of issuance, and appears on the reverse side. In it the seller makes declaration that "the sugar was refined at Java from raw sugar produced in Java." This is sufficient.
It is also claimed that the documents are insufficient, in that the 350-ton lot of sugar is nowhere described as "fine granulated"; the word "granulated" being omitted from all of the documents referring to this lot. This lot was described as "white Java fine sugar No. 24" in the polarization and surveyor's certificates and in the consular invoice. If this description as "fine sugar" is as a matter of common knowledge synonymous with the description "fine granulated sugar," the description complies with the call of the letter of credit. Bank of Italy v. Merchants' National Bank, 236 N. Y. 106, 140 N. E. 211; First Nat. Bank of Decatur v. Home Savings Bank, 21 Wall. 294, 22 L. Ed. 560. As said by Judge Hand in McNeil & Higgins v. Czarnikow-Rienda Co. (D. C.) 274 F. 397: "It is argued that `fine' means `excellent,' `superior,' or `pure'; but that, I should say, was not so. `Fine granulated' normally would mean `finely granulated,' and refer to the size of the granules. At least, that would be its meaning, unless the trade means something else."
There is no evidence in this case that the trade refers to anything but the fineness of granulation in using the phrase "fine granulated." The natural inference would therefore be that sugar described as "fine sugar" would be "fine (granulated) sugar." The evidence shows that this was the understanding of the trade. The broker who negotiated the sale and the amendment of the call of the letter of credit with reference to the granulation, when asked, "And of course, where it says `350 tons fine' and the word `granulated' is not in it, it evidently meant fine granulated"? answered, "I took it to mean that." An expert called on behalf of interveners to testify as to the quality of the sugar received was asked, "Is there a distinction * * * between a fine sugar and a fine granulated sugar?" and answered, "I do not think there is." In other words, the record shows affirmatively that the trade applied the descriptive word "fine" to sugar in the same sense that the ordinary man would use it; i. e., referring to granulation, and meaning "fine granulated," even though the latter word was omitted. The description in the documents must be considered as synonymous with that called for by the letter of credit.
The insistence on technical accuracy by the bank has placed it in the position of rejecting drafts which should have been accepted. Plaintiffs are entitled to recover.
Two points remain to be settled; the measure of damages, and the rights of the intervener in the premises.
It is argued that plaintiff is entitled to recover only the difference between $208,000 and the gross resale price of the sugar, on the theory that the bank was buying documents, not sugar, and that customs duties, warehouse, hauling, weighing, and brokerage charges incident to the resale could be recovered only against the buyers, Hind, Rolph & Co. With this theory I disagree. Plaintiff is entitled to use the net resale price i. e., the price received, less the proper expenses of sale in computing damages. O'Meara Co. v. National Park Bank, 239 N. Y. 386, 146 N. E. 636, 39 A. L. R. 747; Border National Bank v. American National Bank (C. C. A.) 282 F. 73. Accordingly, plaintiff is entitled to recover damages in the sum of $53,969.59, with interest from July 19, 1920, the date of the rejection of the drafts.
In considering this case I have confined myself to the issues made by De Sousa & Co. and the bank, upon the contract embodied in the letter of credit. Interveners sought to broaden the issues by introducing evidence to show that the sugar received was of poor quality and did not comply with the terms of the contract between De Sousa & Co. and Hind, Rolph & Co. Whatever the rule may be, where the intervention is antagonistic to both plaintiff and defendant, and allowed because intervener claims an interest in the subject-matter of the suit, where the intervener joins either plaintiff or defendant in resisting the claims of the other side, he is not entitled to enlarge the issues. Boskowitz v. Thompson, 144 Cal. 724, 78 P. 290; Leaver v. K. & L. Box & Lumber Co. (D. C.) 6 F.(2d) 666. In the present case evidence of breach of the contract of sale between *123 De Sousa & Co. and Hind, Rolph & Co. is not admissible under the issues framed by the main action, on the letter of credit. Bank of Taiwan v. Union National Bank (C. C. A.) 1 F.(2d) 65. The indemnity agreement between the bank and Hind, Rolph & Co. furnished a basis for permitting Hind, Rolph & Co. to assist in the defense, but defensive matter arising out of the breach of another contract than the one sued upon is not available to assist the bank's case, whether introduced by the bank or by the intervener.
Each of the parties has requested special findings. In view of the discussion of the facts herein contained, special findings will be denied, and exception noted.
Let judgment be entered for plaintiffs in the sum of $53,969.59, with interest from July 19, 1920.
So ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545028/ | 23 F.2d 367 (1927)
UNITED STATES
v.
ONKEN BROS. CO., Inc., et al.
No. 1750.
District Court, D. Wyoming.
October 14, 1927.
Albert D. Walton, U. S. Atty., of Cheyenne, Wyo.
D. L. Webb, H. Berman, and Fred N. Holland, all of Denver, Colo., for defendants.
KENNEDY, District Judge.
This is a suit against the defendants to recover upon a bond, in which the petition has been challenged by a demurrer now before the court for determination. From the petition, as far as may be necessary for the consideration of the point involved, the facts appear to be as follows:
That the defendant, Onken Bros. Company, was engaged in business in Sheridan, Wyo., during the years 1917 and 1918; that in April, 1921, defendant was assessed for additional corporation income and profits taxes for the years first mentioned; that in May, 1921, a claim for abatement of the additional tax was filed; that in order to protect against the collection of the assessed taxes pending a hearing upon the claim for abatement the bond in controversy was filed, with the defendant Royal Indemnity Company as surety, by which it was provided that, in the event the claim for abatement should be rejected, the surety would insure the payment of the tax, with penalties and interest, and save the internal revenue collector harmless from liability under his bond by reason of any default in the payment of such assessed taxes; that subsequently, and in June, 1923, the claim for abatement was passed upon by the Commissioner, who allowed it for the year 1917, but rejected it for the year 1918; that demand was made for the payment of the finally assessed tax, and the defendant surety company notified of the default, and likewise a demand was made upon it, but payment was refused; and that in consequence of such situation the suit is brought upon the bond to recover the penal sum thereof, it being less than the entire amount of the assessed tax, penalties, and interest.
Under their demurrer, which challenges the petition on the ground that the petition fails to state facts sufficient to constitute a cause of action, the point is raised that the cause of action is barred by the statute of limitations, as fixed by section 250(d), Revenue Act of 1921 (chapter 136, 42 Stats. 227-265 [Comp. St. § 6336 1/8tt]), which provides that no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was filed.
Defendants chiefly rely upon the construction of that statute as laid down in the case of Bowers v. New York & Albany Co., 273 U. S. 346, 47 S. Ct. 389, 71 L. Ed. 676, which holds that the statute applies alike to a suit in court or to a proceeding by distraint after the lapse of the five-year period. Were this a suit on the part of the government to collect the tax, or were it a proceeding to enforce collection by distraint, that case would *368 undoubtedly be controlling. This is a suit upon a bond given to the plaintiff for the purpose of suspending further action or proceeding for the collection of the tax until the claim for abatement could be passed upon.
In the opinion of this court the bond is a separate and distinct agreement, representing voluntary action on the part of the government and the defendant against whom the tax was sought to be collected, which superseded and took the place of their rights and privileges under the revenue law limitation. Under that law the government, after the first assessment of the tax, could have sought collection by court procedure or by distraint. If it did not do so for a period of five years after the return was filed, the defendant was entitled to assert his rights guaranteed him by the statute of limitations. Through the promise and agreement represented by the bond, the rights of the parties under the revenue law were postponed and incorporated in the bond, which straightforwardly on its face insures the payment of the tax which may be subsequently determined in a consideration of the claim for abatement, and without mention of the time when such determination should be made. Under such a situation, the only limitation to apply would be the limitation governing suits upon bonds of this character, which is not the point involved here.
For the reasons stated, the demurrer will be overruled, and the defendants given 30 days within which to plead further, reserving to them their proper exceptions. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544928/ | 427 Pa. 352 (1967)
Mallesky
v.
Stevens, Appellant.
Supreme Court of Pennsylvania.
Argued September 28, 1967.
November 14, 1967.
*353 Before BELL, C.J., MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.
Herbert B. Lebovitz, with him Lebovitz & Lebovitz, for appellant.
James F. Manley, with him Burns, Manley & Little, for appellee.
OPINION BY MR. JUSTICE JONES, November 14, 1967:
In the Court of Common Pleas of Allegheny County, Elizabeth Mallesky and Michael Mallesky, her husband (Malleskys), instituted a trespass action against Ernest A. Stevens (Stevens) for personal injuries sustained by Elizabeth Mallesky and property damage inflicted on the Mallesky home, allegedly, as the result of a motor vehicle, owned and operated by Stevens, striking the Mallesky home in the early morning of October 9, 1964. Stevens then filed a complaint to bring upon the record, as an additional defendant, Andrew *354 Hritz, Jr. (Hritz) who, allegedly, also struck the Mallesky home with his motor vehicle in the early morning of October 9, 1964. Hritz, after taking certain depositions, moved for a summary judgment under Pa. R.C.P. Rule 1035. The court below granted this motion for summary judgment and dismissed Hritz from the proceedings. From the judgment so entered the instant appeal was taken.
Rule 1035, in pertinent part, provides as follows:[1] "(a) After the pleadings are closed, but within such time as not to delay trial, any party may move for summary judgment on the pleadings, depositions, answers to interrogatories, admissions on file and supporting affidavits, if any.
"(b) The adverse party, prior to the day of hearing, may serve opposing affidavits. The judgment sought shall be rendered 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."
It is Hritz's theory that the Mallesky-Stevens action is based upon a cause of action different from the cause of action in the Stevens-Hritz action. According to the complaint in the Mallesky-Stevens action, at the time and place of the accident the Stevens motor vehicle left the highway and struck the Mallesky home and, according to the complaint in the Stevens-Hritz action, Hritz's motor vehicle left the highway and struck the Mallesky home. The record indicates that, if the Mallesky home was struck by the Stevens motor vehicle, such event took place prior to the striking of the Mallesky home by the Hritz vehicle, if the latter did strike the Mallesky home.
*355 Elizabeth Mallesky was deposed and, in her deposition, stated that she saw the Hritz motor vehicle "came around the turn on Green Springs Avenue, he come down and through the yard, about the same course as the first car did" but she stated that the Hritz motor vehicle did not strike her home. Stevens, although empowered to do so under Rule 1035 (b), supra, did not take any depositions or serve any opposing affidavits. The court below, pursuant to Rule 1035 and upon the deposition of Elizabeth Mallesky, entered the judgment of which Stevens now complains.
We have presented herein a situation in which two separate accidents occurred in one of which Stevens' motor vehicle was involved and in the other the Hritz motor vehicle was involved and, although the time which elapsed between the happening of each incident was very short, each constituted a separate and distinct incident.
The court below, in entering the summary judgment, relied upon Rodich v. Rodich, 421 Pa. 154, 218 A. 2d 816 (1966). Pa. R.C.P. Rule 2252(a) permits the joinder of "any person not a party to the action who may be alone liable or liable over to him on the cause of action declared upon or jointly or severally liable thereon with him." (Emphasis added). In Rodich, supra, we said: "In the instant case, two separate incidents occurred and two separate actions are pending for the resolution of the issues arising from the two separate occurrences. Each of the separate defendants should be responsible for damages which resulted from his negligence, if any." (p. 156) While Malleskys, insofar as the instant record indicates, have not instituted a trespass action against Hritz, it is clear beyond question that the cause of action in Mallesky-Stevens and the cause of action in Mallesky-Hritz are unrelated causes of action and the cause of action declared upon in the instant case is not the same cause as declared *356 in Mallesky-Stevens. Cf. Altoona Central Bank & Trust Co. v. American Casualty Co, etc., 415 Pa. 39, 202 A. 2d 29 (1964); Prost v. Caldwell Store, Inc., 409 Pa. 421, 187 A. 2d 273 (1963); Steele v. Sheppard, 402 Pa. 33, 165 A. 2d 666 (1960).
It is well settled that a summary judgment upon the pleadings should not be entered unless the case is clear and free from doubt: Vrabel v. Scholler, 369 Pa. 235, 85 A. 2d 858 (1952). Upon the instant record, it is clear that the causes of action are separate and unrelated and that the entry of a summary judgment by the court below was entirely proper.
Judgment affirmed.
CONCURRING OPINION BY MR. JUSTICE ROBERTS:
I agree that summary judgment was properly granted but so conclude for a reason differing from that of the majority. Rule 1035(b) governing summary judgments mandates that such judgment should be granted only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." The deposition of Mrs. Mallesky clearly stated that the Hritz vehicle did not strike her home and in fact, to a point some thirty feet in front of her house, tracked the passage carved by Stevens' automobile. Simply, no damage was done to the persons or property of the Malleskys by the Hritz automobile.[1]
It is elementary that, no matter how grave a defendant's negligence, defendant's conduct must have resulted in damage to plaintiff. Since it is obvious from *357 a reading of Mrs. Mallesky's deposition that the Hritz car created no compensable injury, there was no genuine issue as to any material fact and Hritz was entitled to summary judgment as a matter of law.
Our Rule 1035(b) is in all material particulars identical to Rule 56(c) of the Federal Rules of Civil Procedure. Reference to federal cases is therefore appropriate and clearly supports this result. For a number of years the Third Circuit Court of Appeals followed what Professor Moore has termed the "unfortunate"[2] rule that affidavits or depositions could not penetrate well pleaded allegations. See, e.g., Frederick Hart & Co. v. Recordgraph Corp., 169 F. 2d 580, 581 (3d Cir. 1948). This doctrine nullified one of the prime purposes of a summary judgment proceeding to pierce the pleadings. Therefore, in 1963, Federal Rule 56(e) was amended to state: "When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." This amendment was incorporated verbatim into our Rule 1035(d).
Stevens could thus not rely upon allegations in his third-party complaint that Hritz had also caused damage to the plaintiffs and was compelled, upon penalty of summary judgment, to support his allegations by affidavit or otherwise. The trial court was required to conclude that the Hritz vehicle was not responsible for any of the damage claimed in the Mallesky complaint and properly granted summary judgment.
NOTES
[1] Adopted by this Court on April 18, 1966, to become effective May 9, 1966.
[1] Stevens' brief states the question here involved as follows: "May an additional defendant in a trespass action be dismissed from the said proceedings and his Motion for Summary Judgment be granted solely on the depositions of the wife-plaintiff, which absolves the additional defendant from liability?" (Emphasis supplied.)
[2] 6 Moore, Federal Practice ¶ 56.15[1.-03] (1965). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545040/ | 273 Pa. Superior Ct. 361 (1979)
417 A.2d 690
COMMONWEALTH of Pennsylvania
v.
Robert H. WEAKLAND, Appellant.
Superior Court of Pennsylvania.
Argued August 28, 1979.
Filed December 21, 1979.
*365 Thomas G. Gavin, West Chester, for appellant.
Alan J. Jarvis, Assistant District Attorney, West Chester, for Commonwealth, appellee.
Before HOFFMAN, EAGEN and HESS, JJ.[*]
PER CURIAM:
Appellant contends, inter alia, that (1) his trial counsel was ineffective for failure vigorously to pursue a change of venue motion;[1] (2) the trial court erred in denying *366 his motion for a mistrial;[2] and (3) the trial court erred in imposing an excessive sentence. We agree with appellant's final contention and, accordingly, vacate the judgment of sentence and remand for resentencing.
On August 2, 1976, appellant and his brother, James Weakland, robbed a Chester County service station-general store owned by Cecil and Florence Rash. During the course of the robbery, James shot and killed Mr. Rash and forced another man to help him escape from the scene of the crime. Both James Weakland and appellant were apprehended near the service station shortly after the crime occurred.
On November 30, 1976, James Weakland entered a plea of nolo contendere to certain of the charges arising from this incident. Articles appearing in local newspapers on December 1 and 2, and a local radio station broadcast on December *367 1, 1976, reported James Weakland's plea and mentioned that he was appellant's brother. Appellant's case was called for trial on January 4, 1977. At that time appellant's counsel orally pursued a motion for change of venue, which he had previously filed with the court, on the grounds of prejudicial pre-trial publicity.[3] Trial counsel told the trial judge, however, that his original motion for change of venue had been based upon anticipated extensive publicity that did not materialize. The court denied the motion. Although some veniremen indicated at the voir dire that they knew of the incident, all of the jurors selected stated that they did not have a preconceived notion regarding appellant's guilt or innocence.
At trial, a state police officer testified that he had found some marijuana, a marijuana pipe, and two roach clips in appellant's car along with the items stolen from the Rash establishment. Appellant was convicted of second degree murder, robbery, kidnapping, aggravated assault, theft, and criminal conspiracy. Although he was represented by the Public Defenders Office at trial, new counsel was appointed prior to the argument on post-trial motions. Post-trial counsel alleged in the brief and at the argument on post-verdict motions ineffectiveness of trial counsel. The court imposed the mandatory life sentence on the second degree murder conviction, followed by consecutive sentences aggregating 33½ to 67 years on the other charges. Although the trial judge did not order a pre-sentence report, his opinion on the sentence considered the character of the crime in imposing sentence.
Appellant's first contention is that trial counsel was ineffective for failing vigorously to pursue the motion for change of venue. It is by now axiomatic that in reviewing a claim of ineffectiveness of counsel "our inquiry ceases and counsel's assistance is deemed constitutionally effective once *368 we are able to conclude that the particular course chosen by counsel had some reasonable basis designed to effectuate his client's interests." Commonwealth ex rel. Washington v. Maroney, 427 Pa. 599, 604, 235 A.2d 349, 352 (1967). Thus, "[a] decision by counsel not to take a particular action does not constitute ineffectiveness if it is based on a reasonable conclusion that there will be no benefit and is not caused by sloth or ignorance of available alternatives." Commonwealth v. Yost, 478 Pa. 327, 338, 386 A.2d 956, 962 (1978). In Yost Supreme Court of this state, therefore, determined that it was reasonable for trial counsel not to file a change of venue motion where a similar motion had been denied in the separate case of appellant's co-defendant. Id.
Although granting a change of venue motion is within the sound discretion of the trial judge, Commonwealth v. Martinolich, 456 Pa. 136, 318 A.2d 680 (1974), our cases have set forth several factors relevant to the determination of whether pretrial publicity has been so prejudicial as to warrant such a change. The relevant factors include: whether the publicity was factual and objective rather than inflammatory; whether the news report referred to the accused's confessions; whether the publicity referred to the criminal record of the accused; and whether the information was a product of police or prosecutorial reports. Commonwealth v. Casper, 481 Pa. 143, 392 A.2d 287 (1978). Moreover, the prejudicial impact of pre-trial publicity may be dissipated such that a change of venue is not necessary when there is a cooling-off period between the publicity and the trial. Id.
In this case, there was a reasonable basis for trial counsel's conclusion that vigorous pursuit of the motion for change of venue would have been fruitless. The newspaper and radio reports of James Weakland's plea were merely objective factual reports, not sensational or inflammatory. They did not reveal the past criminal record of appellant nor did they refer to a confession by appellant. Moreover, the reports appeared in the newspaper and were heard on the radio in early December, while appellant's trial did not begin *369 until January.[4] This cooling-off period dissipated any prejudice to the appellant caused by the reports of James Weakland's plea.
Appellant next contends that the lower court erred in denying his motion for a mistrial which was based upon Trooper Fedin's reference at trial to the marijuana found in appellant's car. As a general rule, "`the [Commonwealth] may not introduce evidence of the defendant's prior criminal conduct as substantive evidence of his guilt of the present charge.'" Commonwealth v. Rivera, 470 Pa. 131, 134-135, 367 A.2d 719, 720 (1976) (quoting Commonwealth v. Allen, 448 Pa. 177, 181, 292 A.2d 373, 375 (1972)) (footnote omitted). Where, however, this Court is convinced beyond a reasonable doubt that the error did not contribute to the verdict, we may hold that reversal is not required because the error was harmless. Commonwealth v. Story, 476 Pa. 391, 385 A.2d 155 (1978). In the instant case, although Trooper Fedin's testimony supported an inference that appellant had previously engaged in criminal activity, that inference was innocuous in view of the great volume of other evidence presented at trial and was, therefore, harmless error. Moreover, it is anomalous for appellant to contend that the prosecution's evidence of his drug use constituted grounds for a mistrial when appellant himself offered evidence of his drug use to support his diminished capacity defense.
Finally, appellant contends that the sentence imposed by the trial judge is unconstitutionally excessive and in contravention of the sentencing code. Although sentencing is largely within the discretion of the trial court, "we *370 have held that the court's discretion must be exercised within certain procedural limits, including the consideration of sufficient and accurate information." Commonwealth v. Martin, 466 Pa. 118, 131, 351 A.2d 650, 657 (1976). "The sentence must be imposed for the minimum amount of confinement that is consistent with the protection of the public, the gravity of the offense, and the rehabilitative needs of the defendant. . . . At least two factors are crucial to such a determination the particular circumstances of the offense and the character of the defendant." Id., 466 Pa. at 131, 351 A.2d at 658. See also 18 Pa.C.S.A. § 1321(b); Commonwealth v. Riggins, 474 Pa. 115, 377 A.2d 140 (1977). Finally, the trial judge must place on the record the reasons for the sentence imposed. Id.
In the case at bar, the trial judge considered on the record only the circumstances of the offense in sentencing appellant. Nowhere does it appear that the court considered the minimum sentence necessary for protection of the public and the needs of the defendant. We must, therefore, vacate the judgment of sentence and remand the case in order to afford the lower court an opportunity to resentence appellant, considering on the record the factors necessary to a valid sentence.
Judgment of sentence vacated and case remanded for resentencing.
NOTES
[*] Chief Justice Michael J. Eagen of the Supreme Court of Pennsylvania, and Judge Warren K. Hess of the Court of Common Pleas of Berks County, Pennsylvania, are sitting by designation.
[1] Appellant's other allegations of ineffective assistance of counsel are without merit. He first contends that counsel was ineffective because he did not spend sufficient time conferring with appellant in preparation for trial. Mere shortness of time spent conferring with a client does not, however, constitute a basis for a finding of ineffectiveness. Commonwealth v. Owens, 454 Pa. 268, 312 A.2d 378 (1973).
Appellant further alleges that trial counsel's failure to seek a cautionary instruction or a mistrial when confronted with unresponsive testimony from the deceased's wife demonstrated ineffectiveness. "Every unwise or irrelevant remark does not compel the granting of a new trial." Commonwealth v. Allen, 239 Pa.Super. 83, 93, 361 A.2d 393, 398 (1976). Trial counsel in this case objected to the unresponsive testimony, and it was stricken. Moreover, there was a reasonable basis for his decision not to move for a mistrial or cautionary instruction because the potential prejudice from the remarks was slight and they had little impact on the jury during the course of the five-day trial. A cautionary instruction might have merely emphasized the irrelevant remarks in the minds of the jurors. See Commonwealth v. Riley, 459 Pa. 42, 326 A.2d 400 (1974) (Opinion in support of affirmance).
Finally, appellant contends that trial counsel was ineffective for allegedly failing adequately to explore the defenses of diminished capacity and insanity. The record reveals, however, that trial counsel did present a diminished capacity defense and that the court charged the jury on the issue of diminished capacity. Although no insanity defense was pursued by trial counsel, appellant has not borne his "burden of presenting competent evidence of an omitted meritorious claim." Commonwealth v. Barnes, 248 Pa.Super. 579, 375 A.2d 392 (1977). The only evidence of insanity presented by appellant post-trial was the self-serving testimony of his mother regarding the psychiatric treatment of appellant for a period of four months at least five years prior to trial. This evidence does not support a finding that counsel's failure to explore that defense constituted ineffectiveness.
[2] Appellant's other assignments of court error are without merit. He contends that the trial court erred in failing to appoint new trial counsel pursuant to appellant's pre-trial request. The request for new counsel was based upon appellant's allegation that counsel had not spent sufficient time conferring with him and had consistently advised him to plead guilty. Although criminal defendants have a right to court-appointed counsel, they did not have a right to counsel of their choice. Commonwealth v. Tyler, 468 Pa. 193, 360 A.2d 617 (1976). There was no finding that irreconcilable differences of opinion existed between appellant and trial counsel which would have justified court appointment of new counsel. Id.
Appellant further contends that the lower court erred in denying his motion for a change of venue. Because of the character of the pre-trial publicity and the cooling-off period between the time of the reports and the trial, we find that the court did not abuse its discretion in denying the motion. See discussion of motion for change of venue, infra.
Finally, appellant alleges that the trial judge erred in refusing to permit certain questions on voir dire. The first question in issue was, however, properly rejected by the trial judge because it asserted that the Commonwealth must prove every issue and fact in the case beyond a reasonable doubt, a misstatement of the law. See Commonwealth v. Royster, 472 Pa. 581, 372 A.2d 1194 (1977). The trial judge properly refused the second question as well because it sought to determine the jurors' predispositions on the issue of punishment rather than whether the jurors had fixed opinions as to guilt or innocence. See Commonwealth v. Sparrow, 471 Pa. 490, 370 A.2d 712 (1977).
[3] Reports of jury selection in appellant's case also appeared in the local newspaper on January 8, 1977, and were broadcast on the local radio station on January 3, 4, 5, and 6. These reports were very brief and factual in nature.
[4] Similarly, the mere existence of factual reports of jury selection in appellant's case was not the sort of prejudicial pre-trial publicity which could have given rise to the grant of a motion for a change of venue.
Further, trial counsel was not ineffective for failure to ask the veniremen a specific question about whether they had heard about the nolo contendere plea of James Weakland, as appellant contends. Jurors were asked on voir dire whether they had heard anything about the case generally, rendering a more specific question both unnecessary and unwise. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545043/ | 417 A.2d 1381 (1980)
STATE
v.
Terrence GELINAS.
No. 78-240-C.A.
Supreme Court of Rhode Island.
August 5, 1980.
*1382 Dennis J. Roberts, II, Atty. Gen., David A. Cooper, Sp. Asst. Atty. Gen., for plaintiff.
Thomas J. Kane, Woonsocket, for defendant.
OPINION
BEVILACQUA, Chief Justice.
A Superior Court jury convicted the defendant of assault on a uniformed police officer engaged in the performance of his *1383 duties, the assault causing bodily injury, a violation of G.L. 1956 (1969 Reenactment) § 11-5-5, as amended by P.L. 1979, ch. 249, § 1. The jury also found him not guilty on a second count that charged him with assault with a dangerous weapon,[1] a violation of G.L. 1956 (1969 Reenactment) § 11-5-2.
The trial justice sentenced defendant to one year's imprisonment; he ordered defendant to serve the first three months; he suspended the remaining nine months, and he imposed two years' probation to begin upon defendant's release from prison. The defendant appeals his felony conviction, alleging that the trial court erred in failing to give certain instructions to the jury, in admitting certain evidence at trial, and in denying defendant's motion for a new trial.
The record reveals that two Woonsocket police officers in the early evening hours of August 27, 1976, responded to a complaint that a number of juveniles were consuming alcoholic beverages on the corner of Fairmont Street and Third Avenue in that city. The youths scattered when the uniformed policemen arrived, but four of them remained to gather together their liquor. The officers confiscated the liquor and ordered the four youths into the patrol car. The officers informed the youths that, at the police station, authorities from the Juvenile Bureau would speak to them, telephone their parents, and release them to their parents.
One of the four, defendant's younger brother Billy Gelinas, walked away from the group down Third Avenue to join approximately twenty people gathered in the parking lot of the Bourcier Brothers' warehouse. The officers put the other three juveniles into the cruiser and drove to the parking lot intending to apprehend the fourth. Officer Michael F. Magnan approached Billy, and explained to him that he would have to come to the police station.[2] Billy refused, and when the officer placed his hand on Billy, he struck the officer. A struggle ensued. Billy testified that Officer Magnan had torn his shirt and had dragged him face down across the parking lot.
As Officer Magnan attempted to subdue Billy, the other officer, Emil LeDuc, drew his nightstick and ran in a semicircle around the combatants to fend off the crowd that had closed in on them. Billy's older brothers, Eddy Gelinas and defendant, Terrence Gelinas, joined the affray. The defendant threatened Officer LeDuc, saying, "Leave my brother alone, LeDuc, or I'm going to get you." He insisted on getting past Officer LeDuc to where Billy and Officer Magnan were struggling. He and Officer LeDuc began shoving each other.
Officer LeDuc testified that the crowd began to press in on him and to kick and shove him. He stated that the crowd then separated somewhat and he was able to run to the cruiser to radio for help.
The defendant followed Officer LeDuc to the patrol car repeatedly insisting that he leave Billy alone. After calling for assistance, officer LeDuc turned to see his partner struggling on the ground with both Billy and Eddy Gelinas, the latter striking the officer with a piece of tar about the back and head. Officer LeDuc pushed past defendant and ran to aid Officer Magnan.
He testified that he struck Eddy Gelinas with his club[3] and then turned around to defend against an anticipated attack from defendant whom he knew to have followed close behind. Officer LeDuc stated that as he turned, he received a blow to the face and fell to the ground. He claimed that defendant then sat on him and began striking *1384 him. The officer testified that he could not get up and that he saw defendant pick up a piece of concrete and strike him in the face with it as he lay on the ground. He said thereafter he could not see.
Several defense witnesses testified that Officer LeDuc and defendant struggled momentarily over control of the nightstick before they both fell to the ground fighting. Three eyewitnesses who testified for the defense, as well as both officers, stated that they saw defendant strike Officer LeDuc.
The injured officer and the physician who treated him testified to the extent of his injuries. The area around his right eye was swollen; he had been unconscious for five to ten minutes after the fight; he exhibited the symptoms of a concussion: dizziness, headaches, and nervousness.
I
The defendant first urges us to find error in the trial justice's charge to the jury on the theory that he was privileged to protect his brother, Edward, against the officer's allegedly unlawful force. The Attorney General, in response, asserts that the trial justice clearly and adequately charged the jury on the law governing this theory of defense.[4]
We recognize that the trial justice must maintain the defendant's right to request jury instructions on the law applicable to issues of fact which the evidence, however tenuous or incredible, has raised. State v. Arpin, R.I., 410 A.2d 1340, 1352 (1980); State v. Butler, 107 R.I. 489, 490-91, 268 A.2d 433, 434 (1970).
Cognizant of his responsibility, the trial justice enumerated the four elements of the crime charged in count I: one, that defendant knowingly and wilfully struck the officer; two, that the officer was uniformed; three, that the officer sustained bodily injury; four, that the officer was then engaged in the performance of his duties. He instructed the members of the jury that the state had the burden of convincing them beyond a reasonable doubt of the existence of every element before they could render a guilty verdict. He focused the jury's attention on the fourth element, calling it the primary question in the case. In order to resolve that question, the trial justice stated, the jury must decide whether the injured officer had employed excessive force in arresting Edward Gelinas for interfering in Officer Magnan's struggle with William Gelinas. If the jury found that Officer LeDuc had exerted excessive force, thus forfeiting his privilege to use force in performing his duties, then they could find that defendant justifiably countered that force with protective force and, therefore, was not guilty under count I.
The trial justice in his instructions stated,
"The law is this: a third person does not have a right to interfere and assist the person being arrested, and the person doing the arresting is clearly not using unnecessary force, no intervention is permissible under the law even though the arrest is illegal.
"* * *
"If you find that LeDuc was not using excessive force and was in the performance of his duty in attempting to arrest Edward for interfering with Magnan, and this defendant on that occasion then struck Officer LeDuc, LeDuc being engaged in the performance of his duty; and LeDuc was injured as a result, then he is guilty as charged by the State. If LeDuc used excessive force in the attempt to remove Edward Gelinas from Officer Magnan, LeDuc was not in the performance of his duty, and the defendant is not guilty."
*1385 General Laws 1956 (1969 Reenactment) § 12-7-10 requires an arrestee to submit peacefully and, if he has been unlawfully arrested, to pursue his remedy in the courts. Viewed in the light of § 12-7-10, we believe it is clear that the police-assault statute, § 11-5-5, does not, however, abrogate the defendant's right to defend himself when excessive force is used against him. State v. Ramsdell, 109 R.I. 320, 327, 285 A.2d 399, 404 (1971). If it develops that the arresting officer used reasonable force, the principle of self-defense is inapplicable. Id. at 327, 285 A.2d at 404.
The issue before us, however, is whether the trial justice properly instructed the jury on the right of an individual to come to the aid of another whom uniformed police officers are arresting through the alleged use of excessive force. The defendant contends that the trial justice gave inadequate instructions on the use of force in protection of another. The trial justice in effect instructed the jury that they must decide that the officer in fact used excessive force against defendant's brothers at the time defendant attacked the officer before they could find that defendant committed a justifiable act. If the jury believed that excessive force was not actually used, they had to reject defendant's alleged defense and, on satisfaction of the other elements, return a guilty verdict.
It is a well-accepted principle that in effecting an arrest an officer has the right to use such force as he may reasonably believe necessary in order to discharge properly his duty. General Laws 1956 (1969 Reenactment) § 12-7-8; see State v. Ramsdell, 109 R.I. at 326, 285 A.2d at 404; Tessier v. LeNois, 97 R.I. 414, 417, 198 A.2d 142, 143 (1964). When there is evidence tending to show the law-enforcement officer's use of excessive force, the trial justice must instruct the jury that the force used against the law-enforcement officer was justified provided the defendant limited his assault to the use of reasonable force in defending himself from excessive force. State v. Ramsdell, 109 R.I. at 327, 285 A.2d at 404.
There are two contrasting principles that control the defense of another as it exists in other jurisdictions.[5] One rule adopted by a number of states takes the position that a third-party intervenor stands in the shoes of a person whom he is aiding. Under this view it is immaterial whether the intervenor defendant acted as a reasonable person would have; the right attaches to the defendant only when the person being defended would have had the right of self-defense. See, e.g., People v. Booher, 18 Cal. App.3d 331, 95 Cal. Rptr. 857 (1971); Purdy v. United States, 210 A.2d 1 (D.C.App. 1965) (dictum); State v. Anderson, 40 N.C. App. 318, 253 S.E.2d 48 (1979); State v. Wenger, 58 Ohio St.2d 336, 390 N.E.2d 801 (1979).[6] In contrast, other jurisdictions focus on the conduct of the intervenor without regard to the self-defense claim of the arrestee and hold that an intervenor may aid another if it appears to be necessary, though he acts on a mistaken belief, even in a situation in which the person who is aided would not have had the right to claim self-defense. *1386 See, e.g., United States v. Ochoa, 526 F.2d 1278 (5th Cir.1976); United States v. Grimes, 413 F.2d 1376 (7th Cir.1969); Coleman v. State, Del., 320 A.2d 740 (1974); Commonwealth v. Martin, 369 Mass. 640, 341 N.E.2d 885 (1976); State v. Andrews, 199 Neb. 60, 255 N.W.2d 875 (1977); Ky.Rev.Stat. § 503.070 (1975).
Up until now, this court has never been asked to decide under what conditions a defendant may claim justifiable use of force when intervening on behalf of a third party. Being confronted with different schools of thought, we must decide which theory of law we shall follow.
After reviewing the available authorities, we hereby adopt the rule that one who comes to the aid of an arrestee must do so at his own peril and should be excused only when the individual would himself be justified in defending himself from the use of excessive force by the arresting officer. Purdy v. United States, 210 A.2d at 2; State v. Anderson, 40 N.C. App. at 323-325, 253 S.E.2d at 52; State v. Wenger, 58 Ohio St.2d at 340-41, 390 N.E.2d at 804. A third party intervenor stands in the shoes of the person whom he is aiding. The defendant may use such force to prevent injury to the person he aids as defendant would use in self-defense. See Del. Code tit. 11, § 469 (1979), Model Penal Code § 3.05 (Tent. Draft No. 8, 1958). Furthermore, the jury must resolve the factual issue raised by this defense when it is properly raised by the evidence at trial. See State v. Small, R.I., 410 A.2d at 1338.
The defendant before us was entitled to an instruction that presented the jury with the choice of findings that defendant was justified in interfering with the arrest of his brother if the arrestee was himself justified in resisting arrest. In reading the trial justice's instructions we are of the opinion that he adequately charged the jury as to the rights of a person who defends another against the use of excessive force. He told the jury in clear language that unless they found that Officer LeDuc has used excessive force against defendant's brother, they could not find that defendant had acted justifiably. This instruction is consistent with the rule we adopt today since if Officer LeDuc had not used excessive force, Edward could have had no right to resist the arrest, and, accordingly, defendant could not have been privileged to come to Edward's defense. The jury therefore resolved this factual issue in the light of a charge that properly set out the controlling law in this jurisdiction.
II
The defendant next claims that the trial justice abused his discretion when he allowed the state to place into evidence a piece of concrete with which defendant had allegedly struck Officer LeDuc. He argues that because of the paucity of evidence linking the concrete to him, its admission impermissibly prejudiced his cause. We disagree.
As a general rule the resolution of questions of evidentiary relevance, materiality, and admissibility rests in the sound discretion of the trial justice; his ruling will not constitute reversible error unless it is a prejudical abuse of discretion. See Soucy v. Martin, R.I., 402 A.2d 1167, 1170 (1979). It is well settled that evidence is admissible provided it is competent evidence that reasonably tends to prove a material fact in issue and it is not offered for the purpose of arousing the passions of the jury. State v. Bowden, 113 R.I. 649, 657-58, 324 A.2d 631, 637 (1974).
In evaluating the trial court's exercise of judicial discretion an appellate court must be shown that this discretion was clearly abused before reversal is warranted. In the case at bar, complainant identified the concrete as the instrument of his injury. The defendant was charged with assault with a dangerous weapon. This evidence was logically material and legally relevant to the issue whether defendant assaulted the police officer with a dangerous weapon. See State v. Smith, 115 R.I. 93, 95-96, 339 A.2d 736, 737-38 (1975).
*1387 The admission of this evidence was not prejudical to the extent that it inflamed the emotions of the jury to the prejudice of defendant. On the contrary, as the alleged means of committing the offense, it was highly probative. Moreover, its admission did not in any sense prejudice defendant's case; the jury did not find defendant guilty of assault with a dangerous weapon. We hold therefore that the admission of the concrete was not an abuse of discretion.
III
The defendant further complains that the trial justice should have excluded from evidence the two statements he made while in custody at the Woonsocket Police Station because the police obtained them without first fully advising him of his rights as provided in Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
Police obtained the first statement when one of the officers, Raymond E. Scott, overhead defendant speaking to his mother on a telephone located in the police station. Officer Scott testified that he heard defendant tell his mother in a loud voice, "Ma, you better get a hold of someone. I'm at the police station. I'm in big trouble." He paused, then continued, "He was choking Billy. I picked him up banged him against the wall."
The defendant argues that since he was in police custody, he was entitled to have the police advise him of his Miranda rights before they could use his statement against him. Alternatively, he avers that the police conduct constituted impermissible eavesdropping.
In overruling defendant's objection, the trial justice pointed out that nothing in Miranda precludes the introduction of a statement made in the absence of any police questioning to a person not connected with the police. Moreover, although the trial justice agreed with defendant that Rhode Island law prohibits covert police tactics in eliciting inculpatory statements, he found no evidence in defendant's case that the police were doing anything more sinister than milling around the phone booth.
The defendant made the second statement in controversy to Woonsocket Police Sergeant Rodney C. Remblad when the sergeant relayed a message from his attorney to him in his police station cell. The defendant told the sergeant that he wanted to tell him what had happened. The sergeant responded by telling defendant that he had been informed of his rights and that any statement he offered would be used against him. With that, the sergeant turned to leave, but defendant called him back. Over a repeated insistence that his statements could be used against him, defendant said to the officer that he merely pushed LeDuc against the wall. The sergeant quoted defendant as saying, "I never hit him * * Look at my hands. You know when I hit somebody, I hit so hard that I break them." The sergeant testified that he observed that defendant's hands were neither cut nor bruised.
The defendant contends that he was subjected to an in custody interrogation without being fully advised of his rights and, as a result, did not intelligently waive his rights before making the statement. Specifically, he claims that had the sergeant informed him of his right to speak to counsel, he would not have spoken further to the sergeant.
Finding that defendant made the statements on his own initiative and not in response to questioning, the trial justice ruled that the state bore no burden on these facts to show by clear and convincing evidence that defendant understood and intelligently waived his rights. He concluded that the statement was voluntary because, in fact, defendant intended to make an exculpatory statement.
We agree with the trial justice's rulings that neither of defendant's statements was elicited through any form of interrogation that would pose a Miranda problem. Concededly, police custody is disconcerting and may in some instances exert a subtle compulsion upon a defendant to incriminate himself. See State v. Vargus, 118 R.I. 113, 121, 373 A.2d 150, 154 (1977). But custody *1388 alone, without some police action that might amount to interrogation, does not involve the type of inherent coercion attending custodial interrogation which the Supreme Court in Miranda and its progeny sought to mitigate. Miranda v. Arizona, 384 U.S. at 457, 86 S.Ct. at 1618, 16 L.Ed.2d at 714; see Rhode Island v. Innis, ___ U.S. ___, 100 S.Ct. 1682, 1689-90, 64 L.Ed.2d 297, 308 (1980) (definition of interrogation).
We are in complete agreement with the trial justice that defendant has not shown that the police did anything which even remotely resembles an attempt to induce these statements.[8] In the absence of such evidence, we are constrained to find as the trial justice did; defendant uttered these statements voluntarily.[9]
It is axiomatic under the Miranda rule that
"Any statement given freely and voluntarily without any compelling influences is, of course, admissible in evidence. The fundamental import of the privilege while an individual is in custody is not whether he is allowed to talk to the police without the benefit of warnings and counsel, but whether he can be interrogated. There is no requirement that police stop a person who enters a police station and states that he wishes to confess to a crime, or a person who calls the police to offer a confession or any other statement he desires to make. Volunteered statements of any kind are not barred by the Fifth Amendment and their admissibility is not affected by our holding today." Miranda v. Arizona, 384 U.S. at 478, 86 S.Ct. at 1630, 16 L.Ed.2d at 726 (footnote omitted).
Accordingly, the trial justice properly allowed these statements into evidence.
IV
As a final specification of error, defendant asks us to upset the trial justice's denial of his motion for a new trial. The defendant claims that the trial justice should have accorded great weight to the testimony of Mr. and Mrs. Norman Menard. The Menards happened on this incident while driving on Third Avenue. They testified in turn that they saw two officers and several boys fighting; they saw the officers use nightsticks; they heard defendant tell the officers to leave his brother alone; thereafter, they saw defendant strike the complainant.
When passing on a motion for a new trial, the trial justice sits in independent judgment on the weight and credibility of the material evidence. State v. Edwards, R.I., 405 A.2d 1161, 1165 (1979); State v. DaRocha, R.I., 397 A.2d 500, 502 (1979). Having thus extracted the credible evidence, the trial justice must reason whether the evidence establishes guilt beyond a reasonable doubt and he must specify the rationale for his decision. State v. Barnes, R.I., 409 A.2d 988, 992 (1979); State v. Tate, 109 R.I. 586, 589, 288 A.2d 494, 496 (1972).
On review, we shall peruse his ruling to satisfy ourselves that he has sufficiently expounded his reasoning for us to determine that he has not overlooked or misconceived material evidence on a controlling issue or was not otherwise wrong. State v. *1389 Barnes, R.I., 409 A.2d at 992; State v. Edwards, R.I., 405 A.2d at 1165-66; State v. DaRocha, R.I., 397 A.2d at 502.
The trial justice here explicitly considered the evidence, which defendant claims he overlooked, in light of the law of the case contained in his instructions to the jury. He stated that the credible evidence from the officers and the defense witnesses proved that Officer LeDuc was entitled to use force against defendant's brother, Edward. Thus, under the law of the case, he concluded that defendant was not privileged to attack the officer. We find that he did not vacillate in his assessment of the evidence.
The defendant contends, nevertheless, that the trial court should have discounted all of both officers' testimony as incredible because both he and the jury found one portion of it the claim that defendant struck the officer with a piece of concrete to be false. He asks us to bind the trial justice, when he weighs the testimony of each witness, to the antique maxim, falsus in uno, falsus in omnibus.
In response to the defendant's assertion, we point to State v. Leavitt, 103 R.I. 273, 237 A.2d 309 (1968), as dispositive of our opinion of this particular maxim. Although we did not reverse the trial justice who instructed the jury according to this maxim, we made it clear in Leavitt, supra, that we were not saying that "such an instruction is advisable, let alone desirable. It serves no useful purpose and should be avoided." Id. at 286, 237 A.2d at 317. We agree with Professor Wigmore that, as a rule of law, this maxim is particularly "pernicious * * because there is frequently a misunderstanding of its proper force * * *." 3 A Wigmore, Evidence § 1008 at 982 (3d ed. Chadbourn rev. 1970). We decline the defendant's request.
The defendant's appeal is denied and dismissed, and the judgment of conviction is affirmed.
MURRAY, J., did not participate.
NOTES
[1] At the close of the state's case, the trial justice granted defendant's motion for a judgment of acquittal on the assault-with-intent to murder charge in count II and amended count II to charge the lesser offense of assault with a dangerous weapon.
[2] Officer Magnan apparently attempted to make a misdemeanor arrest under the authority granted in G.L. 1956 (1969 Reenactment) § 12-7-3, as amended by P.L. 1977, ch. 71, § 1. Billy claimed that he never heard Officer Magnan's explanation.
[3] Edward testified that Officer LeDuc had struck him with a billy-club on his arms as he covered his head with them.
[4] The Attorney General apparently does not contest that defendant had a right to have the trial justice frame for the jury the issue whether defendant justifiably assaulted the police officer in defense of his brother. We agree that the evidence warranted an instruction on the defense of defense of another. See State v. Butler, 107 R.I. 489, 490-91, 268 A.2d 433, 434 (1970); cf. State v. Small, R.I., 410 A.2d 1336, 1338 (1980) (no evidence to warrant instruction); Commonwealth v. Monico, 373 Mass. 298, 303, 366 N.E.2d 1241, 1244 (1977) (insufficient evidence to raise issue).
[5] Some jurisdictions adhere to the somewhat antiquated view that a person may only defend others to whom he is somehow related, either by consanguinity, employment, marriage, or acquaintance. E. g., Tipton v. State, 1 Md. App. 556, 562, 232 A.2d 289, 291 (1967); Carter v. State, 507 P.2d 932, 934 (Okl.Cr. 1973).
Apparently, these states believe that the relationship between the protector and his charge not only compels action but also minimizes the likelihood that the actor will misinterpret the situation and intercede on behalf of the wrongdoer. While we do not question the utility of allowing family members to protect one another, we believe that restricting the privilege only to family members ignores the important social goal of crime prevention, a duty of every citizen. See Commonwealth v. Martin, 369 Mass. 640, 650, 341 N.E.2d 885, 891 (1976). See generally Note, Justification: The Impact of the Model Penal Code on Statutory Reform, 75 Colum.L.Rev. 914, 932-33 (1975).
[6] In New York the rule developed in case law has been modified by legislative action. Compare People v. Young, 11 N.Y.2d 274, 229 N.Y.S.2d 1, 183 N.E.2d 319 (1962), with N.Y. Penal Law § 35.15 (McKinney 1975). Opinions in Washington's Supreme Court and Court of Appeals appear at odds. Compare State v. Penn, 89 Wash.2d 63, 568 P.2d 797 (1977), with State v. Westlund, 13 Wash. App. 460, 536 P.2d 20 (1975).
[8] The defendant's claim that the police eavesdropped to obtain his first statement is obviously without merit. Admittedly, the degree of sophistication of the eavesdropping technique employed is not determinative of whether an eavesdrop actually occurred, but we find it difficult to accept on these facts that defendant did not expect that uniformed police officers could hear what he said to his mother. See State v. Travis, 116 R.I. 678, 682-83, 360 A.2d 548, 551 (1976). Furthermore, defendant was not in a place where either he or society could demand that his conversation be kept private. Katz v. United States, 389 U.S. 347, 361, 88 S.Ct. 507, 516, 19 L.Ed.2d 576, 588 (1967) (Harlan, J., concurring); Hester v. United States, 265 U.S. 57, 44 S.Ct. 445, 68 L.Ed. 898 (1924); cf. State v. Johnson, R.I., 414 A.2d 477, 479 (1980) (exposing knife to public view).
[9] Parenthetically, we note that Miranda applies only to incriminating statements: Miranda v. Arizona, 384 U.S. 436, 478, 86 S.Ct. 1602, 1630, 16 L.Ed.2d 694, 726 (1966). The statements in issue here arguably add credence to defendant's claim that he acted in defense of his brother. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544906/ | 427 Pa. 584 (1967)
Ehret Estate.
Supreme Court of Pennsylvania.
Argued May 3, 1967.
November 14, 1967.
*585 Before BELL, C.J., MUSMANNO, JONES, EAGEN, O'BRIEN and ROBERTS, JJ.
Philip A. Bregy, with him Herbert Bass, and MacCoy, Evans & Lewis, for appellant.
Harry Polish, guardian and trustee ad litem, for appellee.
OPINION BY MR. CHIEF JUSTICE BELL, November 14, 1967:
This is an appeal by Provident National Bank, Trustee, from the Decree of the Orphans' Court of Philadelphia County refusing to allow it interim compensation on principal.
In lieu of evidence, the facts were stipulated[*] and submitted to this Court as a statement pursuant to Supreme Court Rule 53.
*586 Michael Ehret died February 17, 1913, leaving a will and codicils which were duly probated. In Item SEVENTH of his will he gave all his real estate (subject to his widow's life estate in one-third thereof) and two-thirds of his residuary personal estate to his trustees, to hold in trust until the expiration of twenty-one years after the death of his last surviving child. The trustees were directed to pay the income to his children and to the descendants of his dead children per stirpes who were living at each distribution date, and upon expiration of the trust to pay the principal to his then living descendants, per stirpes. These provisions were subject to Item NINTH, in which testator gave each of his children a power to appoint by will his or her stirpal share of income and principal among his or her issue. Factually, the trust will continue until July 15, 1985 twenty-one years after the death of the last survivor of testator's children.
On December 12, 1919, Land Title Bank & Trust Company (now Provident National Bank) was appointed substituted trustee. It was not an executor of Ehret's will and (except for a commission on the sale of real estate) has never yet received any compensation or commission on principal for its services as trustee. It filed a trustee's account, which shows assets having a corrected carried account value of $746,550.81; at the time of the audit, these assets had a market value of $1,020,958.16. The Bank claimed an interim commission[*] on principal in the amount of $10,000.[**] This was for ordinary services only, and did not include *587 or represent any compensation or commission for extraordinary services. The guardian ad litem objected to the payment of any interim commission, and the auditing Judge disallowed this credit in the account. His adjudication was confirmed by the Court en banc,[*] whereupon Provident National Bank, we repeat, took this appeal.
The sole issue before this Court is whether a trustee under a testamentary trust created prior to 1945, which was not an executor, may receive for its ordinary services as trustee an interim commission on principal.
With respect to a trust created prior to 1945, the law has been thus clearly established: Unless a testator or settlor clearly provides otherwise (1) a corporate or an individual fiduciary who was both executor and trustee was entitled, under the Act of 1864 and the Act of 1917, infra, to only one commission on principal for its ordinary services in both capacities, and this was payable upon the termination of its services as executor; (2) the Act of April 10, 1945, P.L. 189, which specifically repealed (a) § 45 of the Fiduciaries Act of June 7, 1917, as amended, and (b) §§ 2, 5(1), 5(2) and 6 of the Act of May 1, 1953, P.L. 190, 20 P.S. § 3274, et seq., which permitted (under certain specified circumstances) payment of more than one commission on principal to a fiduciary who served as both executor and trustee in wills or trusts created prior thereto, cannot Constitutionally be retroactively applied; (3) such Constitutional limitations as well as the statutory restrictions or prohibitions contained in the Act of 1864 and of 1917 have no application (a) to fiduciaries who were entitled even, before the termination of the trust, to an interim commission on principal *588 for unusual or extraordinary services, or (b) to fiduciaries who resign or die before the termination of the executorship or trusteeship, as the case may be: Williamson Estate, 368 Pa. 343, 82 A. 2d 49, and cases cited therein; Scott Estate, 418 Pa. 332, 211 A. 2d 429.
The lower Court, in disallowing the interim commission, relied upon Williamson Estate, 368 Pa., supra, and Scott Estate, 418 Pa., supra, and the broad general language used in each of those cases.
In Williamson Estate, 368 Pa., supra, this Court decided that where the same fiduciary is both executor and trustee and had received, for its ordinary services in both capacities, a commission on principal at the termination of its executorship, (1) it could not thereafter receive an interim or an additional commission on principal for its ordinary services in its dual capacity, but (2) it could receive an additional or interim commission on principal for extraordinary or unusual services. This Court further held that the Act of April 10, 1945, supra which repealed § 45 of the Fiduciaries Act of June 7, 1917, supra (which section had prohibited the same fiduciary from receiving a commission on principal as executor and another commission as trustee) may not be applied retroactively, and a fiduciary who was both executor and trustee and had received a commission on principal as executor prior to the enactment of the Act of 1945 may not be paid an additional commission on principal for its ordinary services as trustee. The Court said (pages 350-351, 352-353): "We have repeatedly decided that except in extraordinary or unusual circumstances a trustee is to be compensated only at the termination of the trust or at the ending of the trustee's connection therewith:[*] Bosler's Estate, 161 Pa. 457, 29 A. 57; Thouron's Estate, 182 *589 Pa. 126, 37 A. 861; Penn-Gaskell's Estate (No. 1), 208 Pa. 342, 57 A. 714; Snyder Estate, 346 Pa. 615, 31 A. 2d 132; Kennedy Trust, 364 Pa. 310, 72 A. 2d 124. No interim commission on principal is originally allowable under the law so declared. Where, however, extraordinary services are rendered, or unusual labor is entailed, an immediate allowance [an interim commission] is permissible: Thouron's Estate, 182 Pa. 126, 37 A. 861; Penn-Gaskell's Estate (No. 1), 208 Pa. 342, 57 A. 714; Powers' Estate, 58 D. & C. 379.
"The Legislature by the Act of March 17, 1864, P.L. 53, provided: `That in all cases, where the same person shall, under a will, fulfill the duties of executor, and trustee, it shall not be lawful for such person to receive, or charge, more than one commission. . . .' This provision was re-enacted by section 45 of the Fiduciaries Act of June 7, 1917, P.L. 447. Such statutory provision was enforced by the appellate courts: Hill's Estate, 250 Pa. 107, 95 A. 426; Spark's Estate, 127 Pa. Superior Ct. 364, 193 A. 449, affirmed in 328 Pa. 384, 196 A. 48. This section of the Fiduciaries Act was repealed by the Act of April 10, 1945, P.L. 189, and which appellant contends operates retroactively upon trusts already in operation.
". . . The Act of April 10, 1945, supra, repealing section 45 of the Fiduciaries Act of 1917, supra, which prohibited the same individual from receiving commissions both as executor and trustee may not be applied retroactively. Appellant, the corporate fiduciary, accepted this trust in 1930 under the law as it then existed. It was paid in full (except for commission thereafter received by it on income it received and distributed). Such acceptance fixed the rights, liabilities, exemptions, defenses and expectations of both life tenant and remaindermen. Their rights were vested under what necessarily is an implied contract. Such rights having vested, and appellant having been paid in full, *590 the imposition of additional compensation under a retroactive interpretation of this statute would be unconstitutional under the Fourteenth Amendment of the United States Constitution: Farmers National Bank and Trust Company v. Berks Co. R.E. Co., 333 Pa. 390, 5 A. 2d 94; Willcox v. Penn Mutual Life Insurance Co., 357 Pa. 581, 55 A. 2d 521; Crawford Estate, 362 Pa. 458, 67 A. 2d 124; Borsch Estate, 362 Pa. 581, 67 A. 2d 119; McKean Estate, 366 Pa. 192, 77 A. 2d 447."
Scott Estate, 418 Pa., supra, did not involve an interim commission. The principal question raised in Scott Estate is thus stated (page 334): "May testamentary trustees who, in 1941, were paid a commission on principal at the audit of their account as executors, receive at the termination of the trust in 1963, an additional commission on principal for their ordinary services as trustees?" The Orphans' Court disallowed any additional compensation, basing its decision on the Act of 1917 and this Court's construction of the Act of April 10, 1945. We affirmed, and said (pages 335-336, 336-340): "Section 45 of the Act of June 7, 1917, was the law when testator drew his will and at the time of his death, and at the time the executors received their above mentioned compensation on principal. Section 45 provided in clear language that in all cases where the same person was both executor and trustee, such fiduciary could not receive more than one commission on principal for his services in the double capacity of executor and trustee.
"Five years after Scott's death and 18 years before the termination of Scott's testamentary trust, § 45 of the Act of June 7, 1917, supra, was expressly repealed by § 1 of the Act of April 10, 1945 (as amended), P.L. 189. Moreover, that Act provided in § 2: `This act shall take effect immediately upon its final enactment.' Whatever else the 1945 Act did, it is indisputable that it repealed the 1917 prohibition against a fiduciary receiving *591 more than one commission on principal for his services in the double capacity of executor and trustee.
". . . Neither the appellants nor the appellee nor the Judges of the Orphans' Court agree as to exactly what Williamson Estate decided, and what parts thereof were dicta and should not be followed, or in any event should be overruled. In Williamson Estate, a trust company, which was both executor and trustee, had received a commission on principal at the audit of its executor's account. The trust company thereafter filed a trustees' account in which it sought to obtain (in a test case) interim commissions on principal, prior to the termination of the trust. On appeal, this Court (1) dissapproved and disallowed the interim commissions, but (2) also held that the Act of 1945 could not be applied retroactively to allow the same fiduciary additional commissions on principal for its ordinary services.
"With respect to its second point, the Court said (page 352): `. . . The Act of April 10, 1945, supra, repealing section 45 of the Fiduciaries Act of 1917, supra, which prohibited the same individual from receiving commissions both as executor and trustee may not be applied retroactively. Appellant, the corporate fiduciary, accepted this trust in 1930 under the law as it then existed. It was paid in full (except for commission thereafter received by it on income it received and distributed). Such acceptance fixed the rights, liabilities, exemptions, defenses and expectations of both life tenant and remainderman. . . .'
"Appellant contends that this part of the Court's Opinion in Williamson Estate was dictum[*] and should be repudiated or overruled.
*592 "Irrespective of whether this part of the Williamson Estate Opinion was or was not dictum, we find it persuasive and applicable. It is clear as crystal that the corporate trustee in that case, as in this case, accepted a commission at the termination of the executorship which the applicable Act of 1917, in the clearest imaginable language stated was to be `a full compensation [on principal] for his services in the double capacity of executor and trustee' and that this provision was to apply in all cases where the same person fulfilled the duties of executor and testamentary trustee. To now allow the Act of 1945 to abrogate and nullify what the corporate trustee with its eyes open, had been paid and had accepted in 1941 as full compensation on principal for all its ordinary services in its dual capacity of executor and trustee, would be to make a mockery of the law and of the rights of all parties, beneficiaries and fiduciaries alike. This we are unwilling to do.
"After the Williamson decision, the legislature enacted the Act of May 1, 1953, P.L. 190, 20 P.S. § 3274 et seq. That Act pertinently provides: `Section 2. Whenever it shall appear either during the continuance[*] of a trust or at its end, that a fiduciary has rendered services for which he has not been fully compensated, the court having jurisdiction over his accounts shall allow him such original or additional compensation out of the trust income or the trust principal *593 or both, as may be necessary to compensate him for the services theretofore rendered by him.
"`Section 5. This act shall apply: (1) To all services heretofore rendered by any fiduciary; (2) To all services hereafter rendered by any fiduciary heretofore appointed; (3) To all services hereafter rendered by any fiduciary hereafter appointed in a trust heretofore created; and (4) To all services hereafter rendered by any fiduciary of a trust hereafter created.
"`Section 6. If the Constitution of the United States or of this Commonwealth prevents the application of this act to services falling in one or more of the four categories listed in section 5, hereof, the act shall nevertheless apply to services falling in the other categories or category.'
"We hold that Williamson Estate directly controls the instant case and that the 1953 Act stands on the same footing as the 1945 Act. [Under the aforesaid facts, it cannot be applied retroactively.]
"In the light of hindsight, it appears that the compensation which a corporate fiduciary received in 1941 for all its services as executor, and its future services as trustee of a trust which covered a period of 20 years or more was inadequate and unfair because of the long duration of the trust and the greatly increased cost of operation. However, all the parties concerned, including the present corporate fiduciary and the individual fiduciaries and the beneficiaries, knowingly took this chance they all knew that the Statute (Act of 1917) clearly and unambiguously fixed the present and future rights of all executors-trustees to a single commission on principal, which such fiduciaries received and agreed to accept as full compensation for their combined executor and trustee fiduciary services, past, present and future. If the compensation which the fiduciaries received in 1941 as payment in full for all their ordinary services as executors and trustees *594 can now be changed and increased, must not the converse be true must not the executor-trustee fiduciaries of all pre-1945 testamentary trusts which terminated in a short time because of the sudden and unexpected death of a life tenant repay to the beneficiaries the unearned compensation they had received! Moreover, while a corporate fiduciary can probably prove its present costs as contrasted with its costs 25 years ago, how, at this late date, can such a fiduciary prove what service it rendered during a lengthy 25-50 year trust, when so many persons who handled the trust estate will have died or be unable to accurately remember details?[*]"
An analysis will make clear the material difference between this case and Scott Estate and Williamson Estate, supra an interim commission relates only to the time of payment.
In Williamson, the trustee had asked not only for an interim commission but had asked also for approval to make an annual charge based on percentage as opposed to the established rule in Pennsylvania that a trustee's compensation depends upon the character and extent of the labor, the responsibility incurred and the results obtained. Moreover, the trustee, having received compensation or commission on principal for his services as executor and for his future services as trustee, was asking for a retroactive repeal of the statutorily prohibited double commission rule.[**] The Court refused each and all of this on the grounds that repeal of the double commission rule would violate beneficiaries' Constitutionally vested rights. However, Williamson Estate did not decide or preclude as Unconstitutional the retroactive modification of the interim commission rule, since this does not involve additional *595 compensation but merely the time for payment. Indeed, the Court referred to and approved various exceptions which over the years had been engrafted by the Courts on the double commission and the interim compensation rules, such as (1) allowance of compensation at the end of a trustee's connection with the trust (even though the trust continues) and (2) where extraordinary services have been rendered before the expiration of the trust.
In Scott, the only issue involved was whether there could be Constitutionally a retroactive repeal of the double commission (compensation) rule in pre-1953 trusts; the issue of interim commissions was not therein involved because the trustee's claim was made at the termination of the trust. This Court reiterated the holding in Williamson that the Act of 1945, which repealed the double commission rule, could not Constitutionally be applied retroactively, nor could the Act of 1953, which went beyond mere repeal and affirmatively allowed the payment of double commissions on principal. We repeat, interim commissions were not involved in Scott Estate.
The instant case, where the corporate trustee was never an executor and has never received any compensation or commission on principal for its services as trustee, (1) is clearly distinguishable on its facts from Williamson Estate and from Scott Estate, supra,[*] and (2) the broad language in these cases must be limited to the facts therein, and (3) there is no statute which directly and specifically prohibits an interim commission on principal for ordinary services under the facts here present. On the contrary, the 1953 Act provided for the allowance of an interim commission. Even before these recent Acts of 1945 and 1953, the *596 statutory prohibitory rule was made for all practical purposes and effects a general rule of Court. However, this general rule was early limited or modified by this Court to permit, before the termination of the trust, the payment of an interim commission on principal (a) for ordinary services in the case of an individual who resigned or died prior to the termination of the trust and (b) to a fiduciary who was a trustee or was both executor and trustee for unusual or extraordinary services. See and compare Thouron's Estate, 182 Pa., supra (1897); Penn-Gaskell's Estate (No. 1), 208 Pa., supra (1904); Conner's Estate, 21 Dist. 107 (O.C. Philadelphia, per GEST, J.); Powers' Estate, 58 Pa. D. & C. 379 (O.C. Philadelphia, per HUNTER, J.); Mc. Caskey's Estate, 307 Pa. 172, 182, 160 Atl. 707; Bosler's Estate, 161 Pa. 457, 29 Atl. 57; Snyder Estate, 346 Pa. 615, 31 A. 2d 132; Mylin's Estate, 32 Pa. Superior Ct. 504.
It is a matter of common knowledge that it has been the long and well-settled custom and practice for Orphans' Courts not to allow interim commissions on principal[*] for ordinary services by a trustee, even where the fiduciary had not previously received a commission on principal, and this practice had become sub silentio a rule of law.
Sir EDWARD COKE pointedly stated: "Reason is the life of the law," to which I add: "Where reason faileth, both Justice and Respect for the Law are imperiled."
This Court has stated, particularly in recent years,[**] that where the reason for a Judicially created rule or practice no longer exists, and modern circumstances *597 plus equity and Justice demand its alteration or abrogation, it can and should be changed or abandoned in cases where no one's personal rights or vested property interests will be abrogated or affected. We add that, absent a statute or a controlling provision by a testator or a settlor, there is no vested right in a beneficiary in the time of payment of a commission.
Several Justices of this Court (including the present writer) and the Legislature and the Orphans' Court of Philadelphia have from time to time pointed out the unfairness of this harsh rule and their desire to see it eliminated or further modified. Realistically speaking, it is a matter of common knowledge that financial and modern conditions have changed so greatly since the Act of 1864 and the Act of 1917, supra, that we should limit Williamson Estate, and Scott Estate, and Coulter Estate, supra, to their facts, and under our King's Bench powers, and under the powers granted to us by the Act of May 20, 1891,[*] P.L. 101, 12 P.S. § 1164, should allow, if earned, the payment of a fair and reasonable interim commission on principal to a (non-executor) trustee of a long-term trust. Without such a policy rule to cope with modern conditions and to "make both ends meet," how otherwise in these days can a corporate trustee continue to exist as a fiduciary, and why otherwise would an individual trustee, or indeed a bank or trust company, ever accept a long-term trust?[**]
Decree reversed, costs to be borne equally by (1) the corporate trustee, and (2) the principal of the trust estate.
*598 Mr. Justice EAGEN concurs in the result.
Mr. Justice COHEN took no part in the consideration or decision of this case.
CONCURRING OPINION BY MR. JUSTICE ROBERTS:
Whatever may be the wisdom of our holdings in Scott and Williamson,[*] except perhaps in an unjustifiably broad reading, they in no way control the question of interim commissions. No retroactivity problem is here presented for interim commissions relate only to the time of payment, a matter in which the beneficiaries have no constitutionally vested interest.
I wish to add one word of caution to the majority opinion. Interim commissions should be allowed only on the basis of the worth of the services rendered and should not exceed the total value of the services rendered from the inception to the conclusion of the period of trusteeship. See Comment, "The Constitutionality of Retroactive Trustee Compensation Statutes in Pennsylvania," 114 U. Pa. L. Rev. 530, 537 (1966): "The purpose of awarding an interim principal commission is to compensate the trustee for his services more promptly than was the practice under the terminal principal commission rule. This change is especially advantageous to the individual trustee, who will certainly be more willing to assume his duties knowing that he, rather than his estate, will reap the fruits of his labor. In the case of the retroactive interim principal commission statute, the remainderman has no standing to complain. The trustee is entitled to a principal commission and the fact that it is paid in *599 more than one installment would not seem to affect the total amount of the award. Nor should the slight reduction of income resulting from the early award of a principal commission defeat any reasonable expectations of tile income beneficiary, since the amount of income commissions in Pennsylvania has always been at the discretion of the court and subject to variation." (Emphasis supplied.)
Mr. Justice JONES joins in this concurring opinion.
NOTES
[*] We heartily approve of this practice and recommend its adoption by members of the Bar and other litigants,
[*] Compensation is more accurate, but "commission" is almost always used by lawyers, Judges, Legislatures, fiduciaries and accountants.
[**] For the purposes of this case, the parties have agreed that the $10,000 interim commission claimed by the substituted trustee, Provident National Bank, is, If legally permissible, fair and reasonable.
[*] All the Judges of the Orphans' Court of Philadelphia agree that the preferable rule would be to allow payment of fair and reasonable interim commissions on principal and would adopt this practice it they had authority to do so.
[*] Italics throughout, ours.
[*] "There are two views, each supported by a number of decisions of this Court, as to what constitutes dictum one a broad view and the other a narrow or restrictive view: See: O'Neill v. Metropolitan Life Ins. Co., 345 Pa. 232, 240, 26 A. 2d 898; Cassell's Estate, 334 Pa. 381, 384, 6 A. 2d 60; Commonwealth v. Almeida, 362 Pa. 596, 603, 68 A. 2d 595; New York Central & H.R.R. Co. v. Price, 159 Fed. 330, 332; Schuetz's Estate, 315 Pa. 105, 172 A. 865; Commonwealth v. Moyer and Byron, 357 Pa. 181, 53 A. 2d 736; Commonwealth v. Drum, 58 Pa. 9. For a lengthy analysis and discussion of dictum, see Pew Trust, 411 Pa. 96, 104-105, 191 A. 2d 399."
[*] "This would allow both interim and additional compensation (commissions) out Or income or principal or both, subject, however, to the provisions and exceptions contained in § 4 of the Act."
[*] "The many bank mergers which have taken place will often increase these difficulties."
[**] Under the Act of April 10, 1945, P.L. 189.
[*] And from Coulter Estate, 379 Pa. 209, 108 A. 2d 681, which was not referred to by the parties or by the Court below.
[*] For the reason that such a practice would or might greatly deplete the principal of the trust.
[**] For outstanding examples, see Flagiello v. Pennsylvania Hospital, 417 Pa. 486, 208 A. 2d 193; Catherwood Trust, 405 Pa. 61, 173 A. 2d 86.
[*] "Section 2. The Supreme Court shall have power in all cases to affirm, reverse, amend or modify a Judgment, order or decree appealed from, and to enter such Judgment, order or decree in the case as the Supreme Court may deem proper and Just. . . ."
[**] This decision is not to be considered an approval of annual commissions on principal to a fiduciary for either his or its ordinary or extraordinary services.
[*] Our decisions clearly represent a departure from the great weight of authority. See 3 Scott, Trusts (2d Ed. 1956) § 242, at 1928 (citing cases from California, Michigan, New Jersey and New York); King, "Uniform Principal and Income Act, § 5: Constitutionality of Its Retroactive Application," 1960 Wash. L. Quarterly 339, 346-47. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545070/ | 273 Pa. Super. 422 (1980)
417 A.2d 720
LUCAS ENTERPRISES, INC.
v.
PAUL C. HARMAN COMPANY, INC. and Paul C. Harman, Individually.
Appeal of Paul C. HARMAN, Individually.
Superior Court of Pennsylvania.
Submitted April 12, 1979.
Filed January 4, 1980.
*423 Blair F. Green, Kittanning, for appellant.
Bernard J. McAuley, Pittsburgh, for appellee.
Before CERCONE, President Judge, and WIEAND and LIPEZ, JJ.
LIPEZ, Judge:
Defendant Paul C. Harman filed preliminary objections to the complaint in assumpsit of plaintiff Lucas Enterprises, Inc., on the ground that the complaint failed to make sufficient allegations to lay the venue in Allegheny County. Lucas Enterprises filed an amendment to the complaint, and Harman filed further preliminary objections alleging that the complaint as amended still failed to lay venue properly in Allegheny County. The court below dismissed the preliminary objections on June 6, 1978, and this appeal from that dismissal was taken on June 19, 1978. We have jurisdiction over this interlocutory appeal under the Act of March 5, *424 1925, P.L. 23, § 1, 12 P.S. § 672.[1]See Gaetano v. Herald Construction Company, 426 Pa. 179, 181, n. 1, 231 A.2d 753, 755, n. 1 (1967).
The complaint alleged that Harman "retained" Lucas Enterprises for the purpose of having Lucas Enterprises find a buyer for coal leases held by the Paul C. Harman Company. The complaint also alleged that a 5% finder's fee was agreed on, and that Lucas Enterprises found a buyer, who eventually purchased the leases for $2,300,000. Lucas Enterprises therefore demanded judgment for a $115,000 finder's fee.
To establish venue in Allegheny County, Lucas Enterprises relied in the alternative on contentions that Allegheny was the county "in which the cause of action arose" and that it was a county "where a transaction or occurrence took place out of which the cause of action arose." Pa.R. Civ.P. 1006(a). The court below held that the contract was made in Allegheny County, even though the court correctly stated in its own opinion, "The Complaint does not aver specifically that this contract was made in Allegheny County, nor does it aver who made the offer and who made the acceptance." The making of a contract, which takes place where the offer is accepted, undoubtedly constitutes a "transaction or occurrence" sufficient to establish venue. Craig v. W.J. Thiele & Sons, Inc., 395 Pa. 129, 132-33, 149 A.2d 35, 36-37 (1959). This complaint, even after amendment, failed to allege the place of acceptance, and therefore the lower court's stated basis for sustaining the venue in Allegheny County was incorrect. Id.
We affirm, however, on the alternative ground not discussed by the court below, that Allegheny was the county "in which the cause of action arose." The cause of action alleged here is breach of contract by failure to pay a finder's fee according to the terms of the contract. The complaint also alleges that Lucas Enterprises' place of business is in *425 Allegheny County. In jurisdictions with a venue provision similar to Pennsylvania's, the rule is universal in the absence of agreement to the contrary, that payment is due at the plaintiff's residence or place of business, and venue is proper there in a breach of contract action alleging failure to make payment. Gorham Construction Company v. Superior Fertilizer & Chemical Company, 218 So. 2d 516 (Fla. 1969); State ex rel. Industrial Supply Company v. Circuit Court for Multnomah County, 221 Or. 309, 351 P.2d 39 (1960); Conservative Life Insurance Company v. Alexander, 114 W.Va. 451, 172 S.E. 520 (1933); Clark v. Policyholders' Life Insurance Association, 138 Cal. App. 505, 32 P.2d 653 (1934). The one lower Pennsylvania court which has considered the question is in accord with these appellate decisions from other states. Don W. Dickinson, Inc. v. Moore, 68 Dall. & C.2d 336 (Del.Co. 1974); Kassab v. Wilke, 64 Dall. & C.2d 634 (Del. Co. 1974). We also adopt this rule, which we find most closely comports with the probable intention of the parties to a contract which does not specifically provide for place of payment.[2] Since the complaint alleged that Lucas Enterprises' place of business was located in Allegheny County, payment was due in that county and venue was proper there.
Order affirmed.
NOTES
[1] Effective April 22, 1979, the appealability of an order sustaining venue is governed by new Pennsylvania Rule of Appellate Procedure 311(b). 8 Pa.Bull. 3636, 3637.
[2] Pennsylvania Higher Education Assistance Agency v. Devore, 267 Pa.Super. 74, 406 A.2d 343 (1979), rearg. den'd, is consistent with our decision. In that case, a resident of Allegheny County defaulted on a promissory note to the order of a bank in Allegheny County. The bank assigned the note to PHEAA, which sued the obligator on the note in Dauphin County. This court stated: "Dauphin County has no relation to the transaction except that it is the location of the assignee. This is insufficient . . . to permit venue there. Since PHEAA as assignee can only bring suit where its assignor could bring suit, manifestly Allegheny County is the only place where venue is proper for this Action. See Seale v. Hudgens, 538 S.W.2d 459 (Tex.Civ.App. 1976) (where assignee sues obligtor [sic] on note, venue is proper in county of either assignor's or obligor's residence)." Devore, supra, 267 Pa.Super. at 77, 406 A.2d at 344. That reasoning supports our conclusion that a suit alleging breach of an obligation to pay money may be brought in the county where the one to whom the obligation was originally owed is located. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545074/ | 274 Pa. Super. 34 (1979)
417 A.2d 1238
James A. NARDULLI, t/d/b/a Vanderbilt Slag Company
v.
JOHN CARLO, INC., a corporation, and Firemens Fund Insurance Company, a corporation.
Appeal of FIREMENS FUND INSURANCE COMPANY.
Superior Court of Pennsylvania.
Argued April 9, 1979.
Filed December 28, 1979.
*37 Howard T. Gilfillan, Pittsburgh, for appellant.
George B. Stegenga, Washington, for appellees.
Before PRICE, HESTER and MONTGOMERY, JJ.
HESTER, Judge:
This is an appeal from an order of the Court of Common Pleas of Washington County denying appellant's petition to open judgment.
Appellees initiated this action against John Carlo, Inc., a general contractor (not a party to this appeal) and its surety, appellant. Two extensions of time were granted to Carlo's attorney to file a responsive pleading. However, no appearance being entered for the appellant, appellee took judgment by default on April 22, 1977, twenty-two days after the complaint was filed.
After petition to open by appellant, the lower court refused to open the judgment reasoning that neither a meritorious defense nor a reasonable excuse for the default was presented.
Our review of the record in this case leads us to conclude that the lower court abused its discretion in refusing to open the judgment. We believe the requirements necessary to open a judgment had been met, i.e., 1) the petition to open must be filed promptly; 2) the failure to file an answer must be satisfactorily explained; and 3) a meritorious defense must be alleged. See Epstein v. Continental Bank and Trust Company, 260 Pa.Super. 522, 394 A.2d 1049 (1978).
*38 A reasonable explanation was given by appellant's counsel as to why a responsive pleading had not been filed on behalf of appellant.
Counsel explained that he represented both the contractor and its surety (appellant). He procured from appellee extensions of time to file a responsive pleading. It was his belief that he had communicated the fact that he represented the surety to appellee's counsel. His letters, however, did not mention the appellant. Appellee's counsel testified that this fact was never communicated to him. Thus the default was taken against appellant when no answer was filed.
We believe this failure to answer was based on a misunderstanding between counsel as distinguished from mere inadvertence or negligence.
Errors of counsel which indicate an oversight rather than a deliberate decision not to defend, have been held to constitute sufficient legal justification to open a default judgment. Tice v. Nationwide Life Insurance Company, 253 Pa.Super. 118, 384 A.2d 1257 (1978).
We are unable to arrive at any other conclusion from the within set of facts. There was no reason for appellant not to file a responsive pleading. The appellant's liability was not primary but secondary since it was a surety.
Clearly, the failure here was a result of counsel's belief that he had procured an extension of time to file an answer for both defendants. This misunderstanding should not bar appellant from its day in court.
Secondly, we believe that a sufficiently meritorious defense was alleged.
Appellant asserted that (in defense to a claim that appellee's bill for materials was not paid) appellee erroneously included sales tax in its calculations; that appellee had failed to complete its delivery contract with Lampl, Inc. (the defaulting sub-contractor), and that Lampl, Inc. guaranteed to defend, indemnify and hold appellant harmless.
In Ecumenical Enterprises v. Nadco Construction, Inc., 253 Pa.Super. 386, 385 A.2d 392 (1978), we stated:
*39 "While we do not wish to understate the necessity of setting forth with sufficient specificity facts to constitute a meritorious defense, the lower court need not try the case on its merits when considering an equitable petition to open a default judgment (citation omitted)." Id., 253 Pa.Super. 392, 385 at A.2d 395.
Here, the defense, as alleged, was sufficiently precise and clear as to satisfy this requirement.
Finding that the three requirements for opening a default had been met (the promptness of the petition to open was not in dispute), "We must ascertain whether there are present any equitable considerations in the factual posture of the case which require that we grant a defendant against whom a judgment had been entered an opportunity to have his `day in court' and to have the cause decided upon the merits. In doing so, we act as a court of conscience (citations omitted)." Kennedy v. Black, 271 Pa.Super. at 456, 413 A.2d at 1105 (1979 per Price, J., Hester, J., dissenting).
Several factors are present which support our belief that the judgment should be opened.
One, the judgment was taken 22 days after the complaint was received without giving notice to appellant.
Courts rightly disfavor "snap judgments." The purpose of a default judgment is to speed the cause, preventing a procrastinating defendant from impeding the plaintiff from establishing his claim. Kraynick v. Hertz, 443 Pa. 105, 277 A.2d 144 (1971).
The judgment taken here clearly defeats the purpose of a default judgment. There was no evidence that appellant was attempting to procrastinate in order to impede appellee's claim.
This court also distains judgments taken where no notice to the affected party was given. Moyer v. Americana Mobile Homes, Inc., 244 Pa.Super. 441, 368 A.2d 802 (1976).
Additionally, we note that if the judgment stands, an incongruous situation might be created. In the event that *40 the case proceeds to trial and the contractor is exonerated, we would then have a situation where the secondary party is liable and the primary party goes free. Or, if an indemnification contract exists between the contractor and appellant, we would be faced with a situation where the contractor would be exonerated of any liability in court but would face the prospect of paying the judgment outside of court.
Finally, there is no prejudice which would fall to appellee if we open the judgment.
Order of lower court reversed and judgment entered on behalf of appellee is stricken.
PRICE, J., files a dissenting opinion.
PRICE, Judge, dissenting:
Appellant Firemens[1] Fund Insurance Company appeals from the order of the court of common pleas denying its petition to open a default judgment entered against it by appellee Vanderbilt Slag Company. For the reasons stated herein, I dissent and would affirm the order of the court of common pleas.
The pertinent facts are as follows. On March 25, 1977, appellee filed a complaint under the Pennsylvania Public Contractors Bond Law[2] against John Carlo, Inc., a general contractor, and its corporate surety, appellant, claiming that the parties named were liable jointly and severally to appellee for labor and materials supplied in connection with a construction project. The complaint was served on appellant on March 31, 1977. On April 11, appellee's attorney was contacted by an attorney who identified himself as counsel for John Carlo, Inc., and requested a twenty day extension in which to file an answer to the complaint. This request was granted as well as a similar request made on April 20. *41 By April 22, 1977, the day on which appellee took a default judgment against appellant,[3] no appearance by counsel for appellant had been entered, and no answer had been filed on its behalf. It was subsequently discovered that counsel for John Carlo, Inc., also represented appellant, although this fact was never disclosed either directly or indirectly to appellee prior to the date on which default judgment was entered. Appellant filed a petition to open the default judgment on May 18, 1977, twenty-three days after it received notice of the judgment entered against it.[4] In its petition, appellant alleged that the failure to answer was the result of counsel's inadvertence. It further alleged that a "meritorious defense" existed based upon the facts that sales tax was erroneously included in the calculation of the bill; appellee did not complete its agreement with additional defendant John Lampl (a subcontractor on the project) in that some of the materials were not delivered to appellant but rather to other jobs of Lampl, Inc.; and that Mr. Lampl guaranteed to defend, indemnify and hold harmless appellant from any suit arising under the supply contract between appellee and appellant. The court of common pleas, in denying appellant's petition, found appellant had not averred sufficient legal grounds to prove a meritorious defense, nor had it presented a reasonable excuse for delay in filing a responsive pleading.
On appeal, appellant contends the lower court abused its discretion in denying the petition to open judgment. I disagree. Appellant did not comply with the requirements necessary to grant a petition to open a default judgment and *42 accordingly, I would find that the court of common pleas properly denied him relief.
A petition to open judgment is a matter of judicial discretion, is an appeal to the court's equitable powers, and is to be exercised only when three factors coalesce: (1) the petition has been promptly filed; (2) a meritorious defense exists; and (3) the failure to appear can be excused. Balk v. Ford Motor Company, 446 Pa. 137, 285 A.2d 128 (1971); St. Joe Paper Company v. Marc Box Company, Inc., 260 Pa.Super. 515, 394 A.2d 1045 (1978); Schutte v. Valley Bargain Center, Inc., 248 Pa.Super. 532, 375 A.2d 368 (1977). Our review of the decision of a lower court on a petition to open a default judgment is guided by several well-established principles, foremost of which is that only when there has been an abuse of discretion by the trial court in refusing to open a default judgment will this court reverse. Kraynick v. Hertz, 443 Pa. 105, 277 A.2d 144 (1971); Greater Finance Company v. Harris, 245 Pa.Super. 8, 369 A.2d 266 (1976).
In the instant case, I agree with the court of common pleas that appellant failed to present a reasonable excuse for default and to show a meritorious defense. In its petition to open, appellant alleged that "failure to answer came about through a chain of circumstances which were not by design or purpose but mistakenly or inadvertently done."[5] We have stated in the past that:
"[r]ecent case law . . . has established `that mere confusion, see Triolo v. Philadelphia Coca Cola Bottling Co., 440 Pa. 164, 270 A.2d 620 (1970), bald allegations of inadvertence of counsel, Goldstein v. Graduate Hosp., supra (441 Pa. 179, 272 A.2d 472 (1971)); Carrozza v. Girard Chevrolet Co., 200 Pa.Super. 502, 190 A.2d 577 (1963), [or] mistake or inadvertence of counsel (without more), see, Westinghouse Credit Corp. v. Wenzel, 223 Pa.Super. 87, *43 289 A.2d 759 (1972); Spilove v. Cross Transp., Inc., 223 Pa.Super. 143, 297 A.2d 155 (1972) . . . are not patently reasonable excuses and that failure to open based upon these explanations is not an abuse of discretion.' St. Vladimir Ukranian Ortho. Church v. Preferred Risk Mutual Insurance Co., 239 Pa.Super. 492, 501-502, 362 A.2d 1052, 1058 (1976) (emphasis in original)." St. Joe Paper Company v. Marc Box Co., Inc., supra 260 Pa.Super. at 519-20, 394 A.2d at 1047-48.
I would find appellant's bald assertions of counsel's neglect, mistake or inadvertence insufficient to reasonably excuse his failure to file an answer or to obtain an extension from appellee, and I am unable to conclude that the court of common pleas applied erroneous legal principles to the fact situation presented. Such a finding alone would be enough to affirm the order of the court of common pleas, see Balk v. Ford Motor Company, supra.
I also would find that appellant has failed to show a meritorious defense. The petition to open must not only allege a meritorious defense, but such defense must be set forth in precise, specific, clear and unmistaken terms. Seltzer v. Ashton Hall Nursing and Convalescent Home, 221 Pa.Super. 127, 289 A.2d 207 (1972), and the facts on which the defense is based must be included. Slott v. Triad Distributors, Inc., 230 Pa.Super. 545, 327 A.2d 151 (1974). Appellant's petition to open judgment falls far short of these requirements.[6] The petition states the defense as follows:
"[T]he defendant has a meritorious and just and complete defense to the averments set forth in the complaint and is not liable to the plaintiff in any amount whatsoever and request [sic] that the judgment be opened, the defendant *44 be permitted to file an answer and the issue, if any be tried . . . ."[7]
This allegation, without more, is insufficient to satisfy the requirements of setting forth the defense in precise, clear, and unmistaken terms, and once again, I would conclude that the court of common pleas did not commit a clear abuse of discretion in denying appellant's petition to open judgment.
Accordingly, I would affirm the order of the court of common pleas.
NOTES
[1] Although the correct spelling of appellant insurance company is "Fireman's Fund", I will refer to it as "Firemens Fund" since that is the name that appears on the notice of appeal filed with this court.
[2] Act of June 22, 1931, P.L. 880, § 1 et seq. (53 P.S. § 1291 et seq.) repealed in part by the Act of December 20, 1967, P.L. 869 (8 P.S. § 200).
[3] Although this was a snap judgment, i.e., it was taken only twenty-two days after notice of the complaint was received by appellant, and such judgments are generally disfavored by our courts, see Moyer v. Americana Mobile Homes, Inc., 244 Pa.Super. 441, 368 A.2d 802 (1976), nevertheless, even a snap judgment will not automatically be opened. Nevils v. Chernitsky, 244 Pa.Super. 501, 368 A.2d 1297 (1976). The petition remains an appeal to the discretion of the court, and all the requirements discussed infra must be present before the court will open judgment.
[4] The court of common pleas concluded that appellant's petition to open judgment had been promptly filed.
[5] In a deposition in support of the petition, appellant's counsel testified that he was operating under the assumption that the extension he obtained for John Carlo, Inc. also included appellant (N.T. 5), although he never filed an appearance on appellant's behalf (N.T. 12), and could not recall informing appellee of his representation of appellant. (N.T. 7).
[6] I would also find appellant's petition deficient because it did not have attached to it a copy of a proposed answer to appellee's complaint. Although this defect is not fatal, it should be noted that the practice of annexing a copy of the answer to the petition to open is the preferred practice. Britton v. Continental Mining & Smelting Corp., 366 Pa. 82, 76 A.2d 625 (1950); Ab v. Continental Imports, 220 Pa.Super. 5, 281 A.2d 646 (1971); West Susquehanna Bldg. & Loan Assoc. v. Sinclair, 124 Pa.Super. 133, 188 A. 371 (1936).
[7] As facts in support of this "defense," appellant alleged that appellee erroneously included sales tax in its calculations of the bill; that John Lampl, the additional defendant, guaranteed to defend, indemnify and hold appellant harmless; and that appellee failed to complete its delivery contract with Lampl, Inc. No documents, affidavits or depositions were submitted to substantiate these allegations. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545096/ | 417 A.2d 422 (1980)
COLONIAL BUILDERS AND INVESTORS, INCORPORATED and Donald H. McMurtrie
v.
Joan MEIER.
Supreme Judicial Court of Maine.
Argued March 13, 1980.
Decided July 7, 1980.
*423 Libhart, Ferris, Dearborn, Willey & Fern by Joel A. Dearborn, orally, Ellsworth, for plaintiffs.
Childs, Emerson & Rovzar by Roderick R. Rovzar, orally, Portland, Markos & Roy by Peter R. Roy, Ellsworth, for defendant.
Before GODFREY, NICHOLS, GLASSMAN and ROBERTS, JJ., and DUFRESNE, A. R. J.
DUFRESNE, Active Retired Justice.
The corporate plaintiff Colonial Builders and Investors, Incorporated (Colonial) and the individual plaintiff Donald H. McMurtrie, described in the action as president of Colonial, joined in an action of forcible entry and detainer brought against Joan Meier pursuant to 14 M.R.S.A. § 6012, in which they sought delivery of possession of numerous items of personal property allegedly belonging to the plaintiffs.
After hearing, the Judge of the District Court (Fifth District, Division of Central Hancock) made the following findings: First, he found that all the items of personal property enumerated in Exhibit A attached to the single complaint were purchased by Colonial; that the absence of corporate purpose indicated the corporation's ownership to be a sham; that in fact the personalty was purchased by the corporation for the plaintiff Donald H. McMurtrie for past services rendered. Secondly, he found that, during the period of time when these purchases were made, the individual plaintiff, McMurtrie, the defendant Meier and her daughter were cohabiting in an apartment as a family unit without the benefit of marital ties or blood relationship.
The Judge of the District Court, then, introduced his conclusory order, which, he expressly stated, was "[b]ased on all of the foregoing [findings];" his order, as implemented in the ensuing judgment, was to the effect that an appraisal of the personalty enumerated in Exhibit A be made and that the plaintiff [meaning the individual plaintiff McMurtrie] be given the opportunity to purchase from the defendant Meier the property in dispute for one half of its appraised value or, alternatively, that it be physically divided between the parties [meaning the individual plaintiff McMurtrie and the defendant Meier].
*424 The plaintiffs appealed to the Superior Court, Hancock County. Their appeal was denied and the case was remanded to the District Court "for entry of judgment in accordance with this opinion," meaning that the judgment of the District Court was being affirmed. The Superior Court ruled that there was no error of law on the part of the District Court, stating that
"[a] Court, sitting in equity, may treat the property of parties living together as husband and wife or a family unit in accordance with the marital property analogue, 19 M.R.S.A. § 722-A, which provides for a presumption that after acquired property to the marital relationship is the property of both parties."[1]
The plaintiffs have timely appealed to this Court, contending that the District Court, as well as the Superior Court in affirming the District Court judgment, committed reversible error of law, when a division of the reference personal property was ordered on the sole basis of cohabitation. We reverse, but not on the merits; rather, our reversal is grounded solely on the fact that the District Court did not have jurisdiction to try the issue of the right to possession of the several items of the reference personalty based on the conflicting claims of title between the plaintiffs and the defendant, an issue which the court entertained notwithstanding the defendant's failure to assert by answer an affirmative claim of title in herself.
The complaint alleges that "[o]wnership of these items of personal property is in the Plaintiffs who have evidence of title thereto" and that "[a] dispute now exists between the Plaintiffs and the Defendant as to the rights of the parties to these items of personal property." As previously indicated, even though the defendant Meier did not file an answer claiming title in herself as required by Rule 80D(c),[2] the District Court purported to try the parties' respective rights to possession of the personalty based on conflicting claims of title. Such is evident from the District Court Judge's findings and order hereinbefore recited, wherein he adjudged title and the ensuing right of possession between the corporate and individual plaintiffs, and further ordered disposition of the property between McMurtrie and the defendant Meier in the manner that marital property is divided between the respective spouses in a proceeding for divorce or legal separation.
Section 6012 of Title 14, which created the action of forcible entry and detainer for the recovery of possession of personal property, is structured in its entirety (mutatis mutandis) in the mold of the statutory process of forcible entry and detainer respecting real property (14 M.R.S.A. §§ 6001-6008). The statutory language is the same for both actions, whether involving real or personal property, and the respective judicial process is contained in the same chapter entitled Entry and Detainer (chapter 709). Identical legislative provisions, although applicable to different objects, indicate on the part of the Legislature a common underlying intent to provide in 14 M.R.S.A. § 6012 a judicial process for the recovery of possession of personal property similar to the forcible entry and detainer action long-available in the case of real estate. It is the duty of this Court to view as a single piece of legislation the several *425 statutes governing the same general subject matter such as the summary recovery of property, notwithstanding they may refer to different particular types of property within the general classification. We must presume that the Legislature, in setting up parallel remedies, sought to establish a single consistent remedial pattern, compelling a similar construction of its several provisions worded in the same terminology. See Delano v. City of South Portland, Me., 405 A.2d 222 (1979).
This Court, in Bicknell Manufacturing Company v. Bennett, Me., 417 A.2d 414 (Opinion June 27, 1980), has thoroughly analyzed our statutory legislation respecting the action of forcible entry and detainer as it concerns real property and has ruled that, when there is a conflict of titles upon which the ultimate decision respecting the possessory rights of the parties must depend and such conflict is put in issue by the defendant's assertion in his answer that he claims title to the premises in himself or in another person under whom he claims, the District Court has no jurisdiction to use what was intended to be a summary process to try the possessory right to real estate and convert the same into an extended trial of title to lands. In such circumstances, the issue of conflicting titles is only triable in the Superior Court, and the parties must thereupon proceed in accordance with the conditions provided by law to bring the action within the cognizance of the Superior Court.
Since the Legislature, in providing the action of forcible entry and detainer for the summary recovery of personal property, used identical language as pertains to the summary process of forcible entry and detainer to secure a speedy eviction in the case of real property, the ruling in Bicknell Manufacturing Company v. Bennett is equally applicable to the instant case and the District Court acted outside the bounds of its jurisdiction when it purported to try the contested issue of title to personal property between the parties in the instant case.
The determination by the District Court that the rights of the parties to the personal property in question was to be resolved on the basis of cohabitation of the parties as a family unit in analogy to the disposition of marital property in divorce or separation was an adjudication of title and beyond the jurisdiction of the trial court in an action of forcible entry and detainer.
The entry is:
Appeal of Colonial Builders and Investors, Incorporated, sustained.
Appeal of Donald H. McMurtrie sustained.
Remanded to the Superior Court for entry of remand order to the District Court vacating the District Court judgment and for further proceedings under the plaintiffs' existing District Court complaint, the time for filing answer thereto, if the defendant may so desire, to be within 7 days from the filing of said mandate in the District Court; otherwise, the case to proceed according to law.
All parties to pay their own costs.
All concurring.
NOTES
[1] The Superior Court Justice, and the Judge of the District Court also for that matter, might not have decided the case as they did, had our decision in Grishman v. Grishman, Me., 407 A.2d 9 (1979) been certified before their respective disposition of the matter. In Grishman, we held that an interest in real property acquired by a husband while the parties were unmarried cohabitants was not marital property under 19 M.R.S.A. § 722-A.
[2] Rule 80D(c) Defendant's Pleading. If the defendant claims title in himself or in another person under whom he claims the premises [the personal property], he shall assert such claim by answer filed on or before the return day, and further proceedings in the action shall be as provided by law. Otherwise he may appear and defend without filing a responsive pleading.
14 M.R.S.A. § 6012 provides in pertinent part: Civil rules of procedure as now exist or may hereafter be amended in cases of forcible entry and detainer shall apply in said actions [for possession of personal property] insofar as same shall be applicable. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545102/ | 46 Md. App. 419 (1980)
417 A.2d 470
OFFICE OF FINANCE OF BALTIMORE COUNTY, MARYLAND
v.
KENNETH WAYNE JONES.
No. 426, September Term, 1979.
Court of Special Appeals of Maryland.
Decided July 28, 1980.
The cause was argued before MELVIN, MASON and WILNER, JJ.
Submitted on brief by Leonard S. Jacobson, County Solicitor for Baltimore County, and Alan B. Henderson, Assistant County Solicitor, for appellant.
J. Edward Smith, Jr., for appellee.
MASON, J., delivered the opinion of the Court.
Appellant, Baltimore County, filed a petition seeking forfeiture of $11,066 seized in a narcotics raid at the *420 residence of appellee, Kenneth Wayne Jones. From a denial of its petition the county appeals and argues:
I. That the trial court erred in denying its petition for forfeiture on the basis that the petition was not filed within the ninety days from the date of final disposition of criminal proceedings.
II. That the trial court erred when it applied the ninety day time limit for filing of the forfeiture petition when the seizure was pursuant to a valid search warrant.
The facts, which are not disputed, reveal that on April 9, 1974 the Baltimore County Police pursuant to a valid search warrant for appellee's residence, seized $11,066 found in close proximity to a large quantity of heroin. This money was turned over to the county on April 11, 1974. Later, Jones was convicted on November 18, 1975, of violating the narcotics laws and was sentenced to a total of 24 years. He filed an appeal on December 17, 1975, and was advised by the clerk of the lower court that the record would have to be filed in this Court by February 15, 1976, and that the fees for the appeal and transcript would have to be filed with the clerk of the lower court by February 9, 1976. Jones took no further action to perfect his appeal. Consequently, neither the transcript nor the record was prepared and transmitted to this Court.
On April 1, 1977, the county filed a petition seeking forfeiture of the $11,066. Thereafter, on May 19, 1977 Jones's order for appeal filed on December 17, 1975 was stricken by the lower court upon motion by the State's Attorney for Baltimore County. In an order dated March 7, 1979, the court dismissed the county's petition for forfeiture and directed the county to return the $11,066 to Jones.
I.
The relevant provisions of Article 27, section 297 of the Maryland Code (1976 Repl. Vol.) relied on by the lower court and the parties to this case, are as follows:
"(a) Property subject to forfeiture. The *421 following shall be subject to forfeiture and no property right shall exist in them:
* * *
(6) All money or currency which shall be found in close proximity to contraband controlled dangerous substances or controlled paraphernalia or which otherwise has been used or intended for use in connection with the illegal manufacture, distribution, dispensing or possession of controlled dangerous substances or controlled paraphernalia.
(b) Seizure of property subject to forfeiture. Any property subject to forfeiture under this subheading may be seized upon process issued by any court having jurisdiction over the property except that seizure without such process may be made when
(1) The seizure is incident to an arrest or a search under a search warrant or an inspection under an administrative inspection warrant;
(2) The property subject to seizure has been the subject of a prior judgment in favor of the State in a criminal injunction or forfeiture proceeding under this subheading;
(3) There is probable cause to believe that the property is directly or indirectly dangerous to health or safety; or
(4) There is probable cause to believe that the property has been used or intended to be used in violation of this subheading.
In the event of seizure pursuant to paragraphs (3) and (4) of this subsection, proceedings under subsection (d) of this section shall be instituted promptly, except all proceedings relating to money or currency, which shall be instituted within ninety (90) days from the date of final disposition of criminal proceedings which arise out of Article 27, *422 § 276 through § 302 inclusive."[1] (Emphasis added).
The county argues that the court erred in ruling that it did not institute the forfeiture proceedings within ninety days from the date of final disposition of the criminal proceedings as mandated by section 297 (b) (4) supra. The thrust of its argument is that the forfeiture petition was filed on April 1, 1977 whereas the criminal appeal of Jones was not finally disposed of until May 19, 1977, when the order to strike the appeal was granted. We think the lower court in its memorandum opinion appropriately answered the county's argument when it said:
"Article 27, section 297 now provides that forfeiture proceedings relating to money shall be instituted within 90 days from the date of final disposition of criminal proceedings. This Court believes that it would do violence to logic and legislative intent to hold that `final disposition of criminal proceedings' did not occur until May 19, 1977 when Judge MacDaniel performed the administrative function of striking out the Order for Appeal. Rule 1013 sets forth no time limit within which a Judge shall strike out an Order for Appeal where the would be Appellant has not taken the necessary action to perfect the Appeal. Therefore, many cases could be said to remain open indefinitely for lack of any action by a trial Judge. It would be absurd to contend that a case was not finally disposed of where a convicted defendant had actually completed serving the sentence just because an Order for Appeal had never been formally stricken."
In reaching for a clutchable straw, the county further argues *423 in its brief that under Maryland Rule 1025 (b) the "failure to perfect an appeal, by not paying the proper filing fees, does not completely foreclose all chance of further appeal ... that under the proper circumstances in the right situation the failure to perfect an appeal will not estop the court from hearing the appeal. Therefore, technically under the law, the criminal appeal of Kenneth Wayne Jones was actionable until May 19, 1977, when the order to strike the order of appeal was granted."
Rule 1025 (a) provides that the clerk of the lower court shall transmit the record to this Court within sixty days after the order for appeal is filed. Section (b) of Rule 1025 provides that upon application and for sufficient cause shown this Court may extend the time for transmitting the record, but "no order extending the time for filing the record may be entered if the application is made after the prescribed time for transmitting the record has expired unless it be shown that the failure to transmit the record was occasioned by the negligence, omission or inability of a judge of this Court, the clerk of the lower court, the court stenographer or the appellee."
We do not agree with the county's argument that the appeal filed by Jones remained viable until dismissed. We think the failure of Jones to perfect his appeal was tantamount to not taking an appeal at all. In Town of Lincoln v. Cournoyer, 375 A.2d 410 (R.I. 1977), a case factually similar to the present case, the defendant filed a notice of appeal, but did not perfect it. The Supreme Court of Rhode Island, in holding that the case was not properly before them, said:
"Although the notice of appeal of the denial of his motion to vacate was filed on January 4, 1974, the appeal was never perfected under our Rule 11, which requires transmission of the record to this Court within sixty days of the notice's being filed. Failure to perfect the appeal leaves Arthur in the same position as not having filed notice at all." Id. at 412. *424 Of like import see also Wright v. Mark C. Smith and Sons Partnership, 264 So. 2d 304 (La. App. 1972); and Colavecchio v. Houle, 261 A.2d 649 (R.I. 1970).
Moreover, we do not think that because Rule 1025 (b) permits this Court, under certain defined circumstances, to extend the time for transmitting the record, the unperfected appeal filed by Jones is any less a final disposition of his case than an uncontested enrolled judgment that may be vacated in case of fraud, mistake or irregularity under Maryland Rule 625 (a). The county cannot vicariously assert as a defense for its delay in filing the forfeiture petition, the right of Jones to perfect his appeal under Rule 1025 (b). This is especially true where, as here, there is no evidence or even a contention that Jones, after filing his appeal, ever contemplated perfecting it.
Accordingly, we conclude that when the 60 day period expired for transmitting the record and no application to extend the time was made, this Court lost jurisdiction and the appeal filed by Jones died on the vine. Concurrent with this Court's loss of jurisdiction over the appeal, the case reached final disposition within the meaning of the statute and triggered the 90 day period within which the county was required to file its forfeiture petition. Because no viable appeal was then pending, a pro forma order of dismissal was not required before forfeiture proceedings could be instituted. To hold otherwise would frustrate and defeat the clear intent of the legislature that forfeiture proceedings must be "instituted promptly." See Geppi v. State, 270 Md. 239 (1973) where the Court of Appeals held that the unexplained delay of eight months from the date criminal charges were stetted to the date the forfeiture petition was filed, was an impermissible delay under section 297 (b) (4) then in effect which required forfeiture proceedings to be instituted promptly. See also Gatewood v. State, 268 Md. 349 (1973) which held that a four month delay from the date the defendant's thirty day appeal period expired to the date the forfeiture petition was filed, was not an impermissible delay. In United States Coin and Currency v. Director, 279 Md. 185 (1977) there was a delay of some 119 days from the date the *425 defendants were convicted to the date the forfeiture petition was filed. In holding that the forfeiture petition was untimely filed under section 264 of Article 27, the statute governing the disposition of cash seized in connection with a violation of the gambling or lottery laws, the Court of Appeals said: "[T]he General Assembly has now mandated that the right to institute a proceeding for the forfeiture of seized contraband has as a condition precedent that the petition be filed within the 90-day period set out in the statute. See Geppi v. State, 270 Md. 239, 245, 310 A.2d 768, 771 (1973)." Id. at 187-188.
It is evident that the county's unexplained fourteen month delay in filing the forfeiture petition violated section 297 (b) (4) of the statute in that the proceedings were not instituted within ninety days from final disposition of the criminal proceedings, i.e., ninety days from the date the time expired for Jones to perfect his appeal.
II.
The county also argues in its brief that the trial court erred when it:
"[A]pplied the 90-day time limit from section 297 (b) (4) to the facts of this case. The money in question was seized incident to a search warrant properly signed. The trial court should have used section 297 (b) (1), seizure incident to a search warrant. If the trial court had applied section 297 (b) (1), then there would have been no time limit to impose and the petition for forfeiture would have been granted."
Because this issue was neither raised nor decided below, it was not properly preserved for appellate review. Maryland Rule 1085.
Order affirmed.
Costs to be paid by Baltimore County.
NOTES
[1] We note that the seizure in this case occurred on April 9, 1974, whereas the underscored language was added to the statute by Chapter 666 of the Laws of 1974 which took effect July 1, 1974. Because the issue was never raised, we need not consider the retrospective application of the statute. In any event, the result we reach would be the same. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545089/ | 216 B.R. 425 (1997)
In re John C. ZALESKI, Debtor.
Bankruptcy No. 97-31369.
United States Bankruptcy Court, D. North Dakota.
December 5, 1997.
*426 *427 John Chester Zaleski, Horace, ND, Lowell P. Bottrell, Fargo, ND, for Debtor.
Wayne Drewes, Fargo, ND, Trustee.
MEMORANDUM AND ORDER
WILLIAM A. HILL, Bankruptcy Judge.
This case is before the court to consider confirmation of the Debtor's First Amended Chapter 13 Plan filed November 10, 1997, against which numerous objections have been lodged by five of the Debtor's principal unsecured creditors.[1] All charge that the plan has not been proposed in good faith in that a considerable amount of recently acquired debt was based on the Debtor's fraudulent actions and further, that the Debtor has artificially restricted his disposable income by inflating his monthly expenses with expenditures that are not reasonably necessary for his support or that of his dependents. The matter was heard on November 21, 1997.
1.
The Plan
The Debtor, age 51, is a resident of Horace, North Dakota, a community fifteen miles south of Fargo. There he resides with his wife and college-age daughter. Presently he is employed by the local newspaper, the Fargo Forum, as its editorial page editor earning $50,000 per year. His wife whose income is relevant to the inquiry, makes $35,000 per year. On September 12, 1997, he filed a petition under Chapter 13 listing secured debt of $77,610 comprised principally of a mortgage on his residence and unsecured debt of $134,459.
Through the plan as presently proposed, the Debtor, over three years, will pay the trustee $600 per month. From this sum, approximating $21,000, the unsecured creditors will receive $15,462 which is an 11.5% return. In addition to this plan contribution, the Debtor intends on maintaining his monthly mortgage payment as well as bringing current and maintaining a $292 per month payment on a John Deere lawn tractor and a $416 per month payment on a vehicle lease.
2.
Income and Expenses
The Debtor's projected disposable income of $640 per month, of which he is contributing $600 to the plan, is dependent upon the dual income of both the Debtor's net monthly income of $3,011 and that of his non-debtor spouse of $2,081. Household expenses, projected at $4,443 contain a number of items which the objecting creditors believe are either extraordinary or unnecessary:
Home maintenance and upkeep $150
Medical and dental $130
Transportation $200
Recreation $ 97
Charitable contributions $ 50
Life insurance $ 41
Health insurance $ 40
Auto insurance $187
Automobile lease payment $416
Automobile payment $145
Concordia College $560
John Deere tractor $292
In addition to the foregoing, the Debtor, through payroll deductions, pays $27.91 per month on a cancer policy and $15 to the United Way. The Debtor, his wife and nineteen-year old daughter reside in a home situated on an acre of land. The amount set forth for home maintenance is a general figure representative of what the Debtor estimates the expense would be if he had to make repairs or replacements. At present there are no repairs or replacements being undertaken or immediately anticipated. To maintain the homestead's one-acre tract, the Debtor professes to need a new John Deere tractor with a 42" mower deck. This unit cost $10,000 and carries a monthly payment of $292 per month. At trial, the Debtor acknowledged that mowers are on the market for considerably less. His wife testified that lawn care service could be found for $75 per month.
The Debtor and his wife at present share a single vehicle which is a 1996 Chevrolet Blazer leased for $416 per month. Due to the distance traveled each day and the sometimes questionable winter road maintenance *428 they both feel it is necessary. Transportation expenses of $248 is the Debtor's estimate of basic transportation expense to and from their respective jobs including gas and wear and tear. It also includes gas for their daughter's car which she uses to commute to a local private college in Moorhead, Minnesota. This expense does not include business mileage of the Debtor's wife who is reimbursed twenty-five cents per mile. Assuming the Blazer and the daughter's car get twenty-five miles per gallon on average and gasoline costs $1.20 per gallon, the family is projecting commuter mileage of 5,000 miles per month. It is not explained how wear and tear can be an expense factor for a leased vehicle.
In addition to making the lease payment on the recently acquired Blazer, the Debtor is also contributing $146 per month on his daughter's vehicle recently purchased for $6,000 on which the total monthly payment is $245 with the balance borne by the daughter. The Debtor's wife acknowledged that reliable college transportation could be found for less than $6,000.
The medical and dental expense of $130 per month is said to be reflective of the family's annual eye care costing $300 to $400 per year and monthly medications for the Debtor's wife and daughter. Other than these needs, this expense was unexplained save for some wisdom tooth work needed by the daughter. Accepting these expenses as accurate accounts for only $93 per month of the scheduled $130. The family is not presently paying for health insurance and the $40 per month scheduled for health insurance is apparently representative of a sum they hope to use some day to purchase dental insurance.
A scheduled auto insurance expense of $187 per month totals $2,244 annually. Why it should be so high for only two vehicles was not explained by the Debtor or his wife. However, placed in evidence was an auto policy effective last fall covering four vehicles. Although the vehicles and their number are no longer the same, that policy covering four similar vehicles and reduced for multi-car and single driver, bore an annual premium cost of $3,868. One may assume a similar policy covering two similar vehicles would cost approximately $2,000 per year.
The expense related to maintaining the Debtor's daughter at a private college raises the particular ire of the objecting creditors. The daughter is a second-year student at Concordia College, a private school costing $13,000 per year inclusive of tuition and books. Agreeably, it is an excellent school but as acknowledged by the Debtor and his wife, both Moorhead State University and North Dakota State University, located in the same community, also provide excellent educations for considerably less. Even with student loans and scholarships and with the daughter residing at home by attending Concordia College there is still an annual shortfall of $4,300 or $358 per month which the Debtor must cover. Although the $560 per month scheduled expense said by the Debtor to be a projection of what the family share will be, it is not reflective of what the actual experience is presently. From evidence produced it appears that the daughter could attend either Moorhead State or North Dakota State University and, by living at home, the Debtor would incur no expenses uncovered by loans or scholarships.
3.
The Debts
Until June 1995 the Debtor's outstanding credit obligations were fairly typical and minor. This all changed in June when the Debtor embarked on a spree of unbridled borrowing which the objecting creditors characterize as fraudulent. On June 7, 1995, he borrowed $7,484 from the Forum Credit Union followed in September by another loan from the credit union of $14,500 ostensibly taken for the purpose of purchasing a boat, motor and trailer. The Debtor signed a combination note and security agreement and affixed his wife's signature thereto without her permission. Although the security agreement pledged the boat, motor and trailer as collateral, the property disappeared in the fall of 1996, with the Debtor, evasive in his answers, offering that it might have been stolen or sold but that he was not sure. All he could definitely say was that it "disappeared" *429 with no claim being made against his insurance for stolen property.
In December 1995 he again approached the Forum Credit Union for another loan of $15,200 purportedly to purchase two snowmobiles. As with the September note, he forged his wife's signature to the note. Despite being asked to do so repeatedly, the Debtor never brought the titles into the credit union and claimed on the stand to have "lost" one of the titles and now doesn't know where it went. As with the boat transaction, the snowmobiles also "disappeared" sometime in 1996 with the Debtor professing not to know where they are or what happened to them. He did not put in a claim for theft and has not bothered to see if the loss might he covered by insurance. He suspects the boat and snowmobiles were taken by his twenty-three year old son who has been in and out of trouble for a number of years.
In March 1996 he approached the Town and Country Credit Union obtaining a $14,000 loan ostensibly for the purchase of two John Deere riding lawnmowers. The note and security agreement signed by the Debtor offered the mowers as security. In fact, however, the proceeds were not used to purchase lawn mowers. Instead the money was given to his son. Town and Country sought and obtained a judgment in the sum of $14,531 in August 1996.
Undeterred by service of Town and Country's summons and complaint on July 20, 1996, the Debtor approached Gate City Federal Savings Bank on July 22, 1996, and made application for an automobile loan of $14,918 for the purchase of a 1996 Pontiac. The security agreement purports to give Gate City a security interest in the vehicle yet the Debtor did not have title to such vehicle and has never used the proceeds for the purchase of such vehicle. The loan application was false and, in fact, the loan was obtained for the Debtor's son a fact not disclosed to the lender. Gate City later obtained a judgment in the sum of § 14,000. Less than a month later, on August 22, 1996, the Debtor went to Norwest Bank seeking and obtaining a loan of $10,846. As security he offered the boat, motor and trailer previously purchased back in June 1995 with Forum Credit Union funds. At the hearing the Debtor admitted he did not own the boat, motor or trailer at the time he signed the Norwest security agreement and related financing statement. Norwest obtained a judgment in July 1997.
Town and Country obtained judgment against the Debtor on August 26, 1996. Nonetheless, and still undeterred, on September 9, 1996, Ramsey National Bank was approached for a $15,000 loan to purchase another 1996 Pontiac. As with the earlier Gate City deal, the Debtor did not have title to the vehicle and never did. The proceeds were not used for its purchase. He knew he did not own the vehicle but pledged it anyway assuming he would get the title yet, he never bothered to investigate where the title was nor did he discern that his son had previously pledged the vehicle to GMAC. The proceeds, in fact, were used to pay other debts of his and his son.
Finally, in October 1996, the Debtor sought and obtained an unsecured $4,051 loan from Avco.
Each of the discussed creditors have pursued collection remedies and several have received judgments.
Discussion
Section 1325 of the Code requires as a component of conformability, that a plan be proposed in "good faith." 11 U.S.C. § 1325(a)(3). Because the term itself is not defined in the Code, considerable case law has developed over its meaning and the test to be employed for making a finding one way or the other. The requirement has at its heart the fundamental notion that bankruptcy is intended to afford the honest but unfortunate debtor the opportunity to gain for himself a fresh start; bankruptcy is not meant to reward the dishonest debtor. E.g., In re Craig, 195 B.R. 443, 449 (Bankr.D.N.D. 1996). In other words, courts will not sanction use of the Bankruptcy Code to carry out a dishonest scheme. Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427 (6th Cir.1982). Our circuit in a series of decisions endeavored to provide contour to the "good faith" concept, saying in In re Estus, 695 F.2d 311 (8th Cir.1982), that the analysis *430 ought to focus upon "whether the plan as proposed constitutes an abuse of the provisions, purpose or spirit of Chapter 13." Id. at 316. Following Estus, and in the wake of the then newly enacted § 1325(b), the circuit handed down Education Assistance Corp. v. Zellner, 827 F.2d 1222 (8th Cir.1987) which modified the former analysis recommended by Estus. In Estus, the court suggested the analysis be undertaken on a case-by-case basis focusing upon a nonexclusive list of factors:
(1) The amount of the proposed payments and the amount of the debtor's surplus;
(2) The Debtor's employment history, ability to earn and likelihood of future increases in income;
(3) The probable or expected duration of the plan;
(4) The accuracy of the plan statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court;
(5) The extent of preferential treatment between classes of creditors;
(6) The extent to which secured claims are modified;
(7) The type of debt sought to be discharged and whether any such debt is nondischargeable in Chapter 7;
(8) The existence of special circumstances such as inordinate medical expenses;
(9) The frequency with which the debtor has sought relief under the Bankruptcy Reform Act;
(10) The motivation and sincerity of the debtor in seeking Chapter 13 relief;
(11) The burden which the plan's administration would place upon the trustee.
695 F.2d at 317.
Following enactment of § 1325(b) the focus narrowed with most of the foregoing factors subsumed by the inquiry inherent to § 1325(b) that is, whether the debtor has stated his debts and expenses accurately; whether he has made any fraudulent misrepresentations to mislead the court; whether he has unfairly manipulated the Bankruptcy Code. Zellner, 827 F.2d at 1227. Although the focus became narrowed, the court in In re LeMaire, 898 F.2d 1346 (8th Cir.1990) nonetheless pointed out in its en banc decision that courts should still examine all the circumstances on a case-by-case basis looking not only to the factors relevant to a § 1325(b) inquiry, but also giving consideration to other factors which are best characterized as bearing upon the issue of unfair manipulation of the Bankruptcy Code. This inquiry harkens back to the fundamental purpose of bankruptcy itself. In LeMaire, the court said it is appropriate to consider factors such as the type of debt to be discharged and whether it would be nondischargeable in Chapter 7. Also appropriate for examination is the debtor's motivation and sincerity in seeking Chapter 13 relief. Although, as the Debtor points out, the fact that a debt may be non-dischargeable in a Chapter 7 should not be a sole focus of the inquiry nor should it be determinative of the issue, the fact that Chapter 13 grants a more liberal discharge (sometimes called a "super discharge") does cause the court to consider the type of debts being discharged and whether they emanate from pre-petition fraud. By the same token, while the duration of payments alone may not be indicative of bad faith, the duration and repayment percentage when gauged against the nature and amount of pre-petition debt may be indicative of a lack of sincerity. In Noreen v. Slattengren, 974 F.2d 75 (8th Cir.1992), the circuit, affirming the Bankruptcy Code's determination of bad faith, concluded that abuse of Chapter 13 may be particularly evident in a case where a major portion of the claims to be discharged arise out of wrongful pre-petition conduct and the debtor proposes only a minimal repayment.
Thus, the inquiry involves a review of the debts sought to be discharged, the debtor's likely motivation for filing Chapter 13 in light of those debts and his sincerity in framing his plan as gathered from a review of the § 1325(b) requirements.
By the time the Debtor filed his Chapter 13 petition on September 12, 1997, he had incurred $134,459 in unsecured debt, $96,000 of which was incurred after June 1995. Although none of the objecting creditors have put forth sufficient evidence to satisfy all of the nondischargeability requirements of *431 § 523(a)(2)(A),[2] the Forum Federal Credit Union, Town and Country Credit Union, Gate City Federal Savings Bank, Norwest Bank and Ramsey National Bank did present enough evidence to at least satisfy the court that each would have a plausible and quite possibly provable cause of action for nondischargeability under § 523(a)(2)(A) were this case under Chapter 7. Owing to the liberal nature of the Chapter 13 discharge, they will not be able to pursue this remedy and are left with the treatment available to them under Chapter 13. The total of debts bearing at least a colorable § 523 cause of action is $69,000 which constitutes approximately fifty percent of the total unsecured debt. Even after having been pursued by Town and Country to the point of judgment, the Debtor continued to inveigle other lenders, apparently under no compunction about the methods being employed.
As previously noted, the fact that a debt may not be dischargeable in a Chapter 7 is not by itself sufficient to show bad faith, it does nonetheless have a bearing upon the issue particularly when a "super discharge" is sought. As recalled by the court in LeMaire, supra, the liberal discharge is given to encourage and furnish debtors a greater incentive to pay their debts. The concept of sincerity is closely related to the approach the debtor takes, through the Chapter 13 plan, to pay the debts that might otherwise be nondischargeable.
In the case at bar, the Debtor after retaining what in his view are monies "reasonably necessary" for his maintenance and support and that of his two dependents, offers to pay the unsecured creditors $600 per month over three years for a net return to them of 11.5%. Section 1325(b)(2) defines disposable income as income received by the debtor which is not reasonably necessary for the maintenance or support of the debtor or his dependents. Disposable income then, is what is left over after a debtor reserves or holds back those funds reasonably necessary for maintenance or support. The sense of the § 1325(b)(2) definition is not to leave a debtor with unbridled discretion to carve out for himself and family whatever lifestyle they may choose. How a debtor proposes or intends to carry on his post-confirmation lifestyle in the face of the Chapter 13 "super discharge" has a great bearing on the issue of his motivation, sincerity and whether the plan is proposed in the spirit of Chapter 13. Section 1325(b) is to be applied in a way that allows a debtor to "maintain a reasonable lifestyle while simultaneously insuring that he makes a serious effort to fulfill his obligations to pre-petition creditors by eliminating unnecessary or unreasonable expenses." In re Rybicki, 138 B.R. 225 (Bankr.S.D.Ill. 1992) quoting Matter of Jones, 119 B.R. 996 (Bankr.N.D.Ind.1990). The key term is "reasonable lifestyle." Debtors need not be reduced to poverty and granted, some discretionary or recreational spending is not inappropriate, but courts are loathe to favor kindly expenditures which are for luxury goods or serve to perpetuate a luxury lifestyle. Greater scrutiny of a debtor's proposed lifestyle and his budgetary components is required where, as here, a fairly high-income Debtor is advancing a plan offering a niggling return to pre-petition creditors through a three-year plan. Although as before noted, the duration of a plan is not by itself indicative of bad faith, it is a factor in gauging the debtor's sincerity where, as here, a three-year plan operates to reduce the return to pre-petition creditors. In the case at bar the Debtor with gross family income of $7,145 per month appears to be carrying on much as he did prior to Chapter 13. The court can see very little serious effort being made to reduce or eliminate those monthly expenses which are not reasonably required for the maintenance of the family. A number of the enumerated monthly expense items are nonessential to the family's maintenance and support and some are best characterized as luxury items.
*432 Charitable contributions of $65 per month are unnecessary and cannot be said to be essential to the family's maintenance or support. Nor can it be said that a $97 per month set aside for unspecified recreation is indicative of any earnest belt-tightening on the part of the Debtor. A monthly set aside of $40 for a nonexistent dental policy cannot be countenanced as essential either. The automobile insurance seems unduly high for two vehicles and against the four vehicle policy formerly in place, appears excessive by at least $20 per month. The amount set aside for medical and dental expense is unsubstantiated and is excessive by approximately $30 per month. Retention of a lawn tractor worth $10,000 to service a one-acre lot which requires a monthly payment of $292 is best characterized as an unnecessary luxury easily done without. For considerably less than $292 per month work essential to lawn maintenance can be done.
A monthly budget reserve of $150 per month for unspecified home repairs that are not planned is nonessential to the family's maintenance or support. The $200 per month budget item for transportation is unsupported from the facts. As earlier discussed, wear and tear is not a consideration for leased vehicles, leaving $200 for gas and oil-an amount which can only be regarded as excessive, given the length of the daily commute and the fact that the Debtor's wife is fully compensated for any work-related driving she does. Even if the Debtors' daily commuting mileage is 100 miles (which the court views as extremely unlikely) the total monthly mileage would be 3,000 miles. At 25 miles per gallon, 120 gallons of gas would be consumed which totals $144, assuming the price of $1.20 per gallon. Transportation expense is excessive by at least $100 per month.
Despite the Debtor's belief to the contrary, a 1996 Blazer costing $416 per month is an absurd luxury bordering on the lifestyles of the rich and famous rather than the reasonable lifestyle of a Chapter 13 Debtor. It is wholly unnecessary as the family's vehicle needs, even in a leased vehicle, can be obtained for considerably less. This budgetary item is overstated by at least $100 per month. Blazers, Corvettes, campers and fancy boats have all been regarded by courts as not reasonably necessary expenses. See e.g., In re Reyes, 106 B.R. 155 (Bankr. N.D.Ill.1989); In re Hedges, 68 B.R. 18 (Bankr.E.D.Va.1986); In re Rybicki, supra; In re Rogers, 65 B.R. 1018 (Bankr.E.D.Mich. 1986).
An expensive education at a private school is hardly a basic need of the Debtor or his family, particularly when it appears that a similarly high quality education is available from either of two local state universities. According to the evidence, the daughter's attendance at one of the state's schools would likely cost the Debtor nothing out of pocket, assuming she continued living at home and received financial aid. Accordingly, the $560 per month budgetary item should be stricken.
Other of the Debtor's budgetary components might also be questioned on the grounds of reasonableness such as a monthly food budget of $500 for a family of three. However, from what has been highlighted here it is apparent to the court that the Debtor's budget, reducing thereby his disposable income, is not by any means designed to provide he or his family with what is reasonably necessary for their maintenance or support. Quite the contrary, it is designed to perpetuate a fairly extravagant lifestyle in the face of a parsimonious payment to pre-petition creditors who may have claims that would be nondischargeable in a Chapter 7. At a minimum, the monthly budget is overstated by $1,400 which when added to the acknowledged disposable income of $640 would make $2,040 available to satisfy creditors over a three-year plan. After payment of attorney's fees, the IRS and the trustee, there would be $62,000 available for unsecured creditors giving them a return on the dollar of 46%. A five-year plan, while not required under the Code, would very nearly pay off all creditors.
From a totality of the circumstances with particular focus upon the nature of the pre-petition debt and the Debtor's projected disposable income, the court finds that the plan presently before the court was not proposed in good faith and, therefore, cannot be confirmed. *433 Accordingly, confirmation of the Debtor's First Amended Chapter 13 Plan is DENIED.
SO ORDERED.
NOTES
[1] Fargo Forum Federal Credit Union, Town and Country Credit Union, Gate City Federal Savings Bank, Norwest Bank North Dakota, Ramsey National Bank and Trust.
[2] This section of the Bankruptcy Code provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition; | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545090/ | 274 Pa. Super. 23 (1979)
417 A.2d 1232
COMMONWEALTH of Pennsylvania
v.
William Henry EMMETT, Appellant.
COMMONWEALTH of Pennsylvania
v.
Harold O'Neil CROSSLAND, Appellant.
Superior Court of Pennsylvania.
Submitted April 12, 1979.
Filed December 28, 1979.
*26 Wilbert H. Beachy, III, Public Defender, Somerset, for appellant, Emmett.
Joseph B. Policicchio, Assistant Public Defender, Somerset for appellant, Crossland.
David B. Hartman, Administrative Assistant District Attorney, Somerset, did not file a brief on behalf of the Commonwealth, appellee.
Before PRICE, HESTER and MONTGOMERY, JJ.
HESTER, Justice:
These consolidated appeals arise from the judgment of sentence of the Court of Common Pleas of Somerset County.
Both appellants herein were convicted of burglary, theft and receiving stolen property arising out of the same criminal episode.
Appellants were arrested in Garrett County, Maryland. Incident to the arrest, the contents of their pockets were examined. One of the articles in their possession was a validated, but unused Pennsylvania State Inspection Sticker. Also found was a key for a motel room in Uniontown, Pennsylvania.
*27 After the arrest in Maryland, the Pennsylvania State Police were informed of the events and subsequently they discovered that the inspection sticker had been stolen in a burglary and theft in Confluence, Pennsylvania. The state police, thereafter obtained search warrants for the motel room in Uniontown and appellant Crossland's business and dwelling house.
The searches yielded two shotguns form the business and certain personal property and checks from the motel room, which items subsequently were found to be stolen.
After a non-jury trial on March 27, 1978, appellants were found guilty of burglary, theft and receiving stolen property. Post verdict motions were denied and this appeal follows.
Appellants initially contend that the lower court should have dismissed this action because the Commonwealth failed to bring them to trial within the mandates of Rule 1100.
On February 8, 1977, appellants were arrested in Maryland where they were being held on Maryland charges. Thus, the Commonwealth had 180 days from that date to bring appellant to trial or until August 7, 1977. Appellants were not tried until March 27, 1978.
The dispute here is with the period of time from February 8, 1977 to June 30, 1977. The Commonwealth asserted, and the lower court agreed that this period was to be excluded in computing the time for the Rule, since appellants were incarcerated in Maryland awaiting disposition of the Maryland charges.
Appellants contend, however, that before this time is excluded, the Commonwealth must show that they used due diligence in attempting to secure appellants return and in this case it is clear that no due diligence was shown, thus appellants were not unavailable for trial under Rule 1100(d)(1).
Rule 1100(d)(1) provides that "in determining the period for commencement of trial, there shall be excluded therefrom such period of delay at any stage of the proceedings *28 as results from (1) the unavailability of the defendant or his attorney." Mere incarceration in another jurisdiction, however, does not make appellant unavailable. Appellant will be considered unavailable only for the period of time during which his presence could not be secured despite due diligence by the Commonwealth. Commonwealth v. Warman, 260 Pa.Super. 130, 393 A.2d 1046 (1978); Commonwealth v. Richbourgh, 246 Pa.Super. 300, 369 A.2d 1331 (1977).
We must review the actions of the Commonwealth to determine whether they amounted to due diligence.
Due diligence under the Rule requires the Commonwealth to make a "reasonable effort", Commonwealth v. Martofel, 248 Pa. 207, 375 A.2d 60 (1977).
On February 11, 1977 (3 days after the complaints were filed in this case) Somerset County detectives made a telephone inquiry of the Maryland authorities as to appellants availability for trial in Pennsylvania. They were informed that appellants would not be released until Maryland authorities were finished with them.
After informations were filed in the case on April 20, 1977, arraignment was scheduled for May 2, 1977. However, this was postponed as the Commonwealth reported to the court that appellants were still incarcerated in Maryland.
On May 4 and May 6, 1977, the Somerset County District Attorney's office again asked the Maryland State Attorney when appellants would be available in Pennsylvania. The same response was received from Maryland.
On May 13, 1977, the District Attorney sent to the Maryland authorities a request for temporary custody of appellants under Article IV of the Interstate Agreement on Detainers.
On May 19, 1977, the District Attorney reported to the court that Maryland had refused to release appellants until they were sentenced.
On June 15, 1977, the Maryland State Attorney's Office, by letter, informed the District Attorney that appellants *29 were still awaiting sentence and would be released upon sentence.
On June 30, 1977, appellants were sentenced to three years in jail in Maryland.
On August 1, 1977, the District Attorney finally received notice that appellants had been sentenced in Maryland.
On August 22, 1977, the case was called for trial but the District Attorney reported that Maryland had not yet acted upon the Commonwealth's petition for temporary custody.
On September 15, 1977, the Maryland authorities gave notice to appellants of their rights under the Interstate Agreement on Detainers, and on September 27, 1977, appellants were returned to Somerset County to stand trial.
We believe the Commonwealth made sufficient effort to bring appellants to Pennsylvania. We count no less than five communications between Pennsylvania and Maryland authorities concerning the appellants. As soon as the Commonwealth knew they had been sentenced in Maryland, it moved to proceed under the Interstate Detainer Act. We can hardly equate this with the situation in Commonwealth v. McCafferty, 242 Pa.Super. 218, 363 A.2d 1239 (1976) where Commonwealth failed to invoke the procedures under the Interstate Detainer Act or with that presented in Commonwealth v. Kovacs, 250 Pa.Super. 66, 378 A.2d 455 (1977), wherein the Commonwealth waited six months to secure the defendant's return to Pennsylvania.
Here, however, appellant argues that the Commonwealth should not have relied on Maryland authorities to inform them when appellants had been sentenced, but should have monitored the progress of the Maryland proceedings themselves.
Imposition of such a duty on the Commonwealth would be unduly harsh. We believe that reliance on other authorities to be proper. In Commonwealth v. Warman, 260 Pa.Super. 130, 393 A.2d 1046 (1978), we held that it was proper for Somerset County authorities to rely on Allegheny County authorities to notify them when a particular defendant would be available for trial.
*30 Here we find the reliance on Maryland authorities was proper. Thus, we dismiss appellants' first contention.
Appellants next contend that certain items seized without search warrants and certain items seized with warrants should have been suppressed.
Basically appellants complain that when they were arrested in Maryland the police had no right to search the truck and that the evidence produced from the truck therefore should not have been permitted to form the basis of search warrants executed on appellants' property in Pennsylvania.
The facts incident to the arrest and search in Maryland are as follows:
A watchman at the W.A. Fratz Company facility in Accident, Maryland, was directed to move a pickup truck parked on the company's property so that a truck could deliver fuel to a storage building. The pickup truck did not belong there and the watchman had not seen it before. The watchman noticed footprints in the fresh snow from the truck to the storage building. He found the keys in the truck and moved it to make room for the fuel truck. Following this, the watchman removed the keys, noted the license number and proceeded to advise his superior. While so engaged, he noticed a man walking toward Accident. It was the same man who had a short time prior thereto walked in front of the store proceeding in the opposite direction.
The state police were summoned. They placed a trace on the license number. At this time, appellant Crossland came to the store and requested the key to the pickup truck. Meanwhile, additional police arrived and quickly located the man who had been walking back and forth in front of the building.
Appellants were arrested for breaking and entering. Incident to the arrest their pockets were searched. Among the items found was a validated Pennsylvania inspection sticker. On the seat inside the truck the officers found a key for a motel room in Uniontown, Pennsylvania.
*31 The Pennsylvania State Police having been informed of the sticker and having found that it had recently been stolen in a robbery in Confluence, Pennsylvania, obtained search warrants for the appellants' motel room, place of business, and dwelling house.
As a result of the materials seized, the appellants were charged with the crimes previously enunciated.
After execution of the arrest warrants in Maryland, Pennsylvania State Police interrogated appellants in Maryland. The police told them that certain stolen property had been recovered in Pennsylvania; after this each appellant gave an inculpatory statement concerning the offenses they were charged with in Pennsylvania.
Appellants do not dispute the validity of the search of their persons. They contend, however, that the police had no right to search the vehicle without a warrant.
In the search of the vehicle the motel key was found. The motel key had been lying on the front seat of appellant's truck which at the time of the arrest was parked adjacent to a warehouse which had been broken into. The key was protruding from a purse on the front seat. It plainly displayed the name and address of the motel from which it came.
We believe, given the circumstances of the events which occurred that night, the search was valid.
Vehicles being of a highly mobile nature, are not subject to the same strict requirements of search and seizures as an individual's home would be. Commonwealth v. Clelland, 227 Pa.Super. 384, 323 A.2d 60 (1974). However, it is clear that there is no "automobile exception" as such and that constitutional protections are applicable to searches and seizures of a person's car (or truck). Commonwealth v. Holzer, 480 Pa. 93, 389 A.2d 101 (1978). The reason for this is two-fold. First a vehicle is highly mobile, thus, if police delay a search until a warrant is procured, the contraband and/or the vehicle may be removed. Chambers v. Maroney, 399 U.S. 42, 90 S. Ct. 1975, 26 L. Ed. 2d 419 (1970). Secondly, *32 a person's expectation of privacy toward an automobile is significantly less than that relating to the home. Commonwealth v. Mangini, 478 Pa. 147, 386 A.2d 482 (1978).
Here there is no question there was probable cause to believe that the truck was involved in criminal activity. The vehicle had been parked near the warehouse building which had been broken into; footprints in the fresh snow led from the vehicle to the open door of the warehouse. The vehicle did not belong to anyone who worked in the warehouse and the night guard did not recognize the vehicle. Clearly, there was probable cause to believe that the vehicle was involved in any theft which occurred in the warehouse that night. The nexus between the criminal activity (in the warehouse) and the area to be searched (the truck) was plainly established by the footprints.
In Chambers v. Maroney, supra, the court said:
"For constitutional purposes we see no difference between on one hand seizing and holding the car before presenting the probable cause issue to a magistrate and on the other hand carrying out an immediate search without a warrant. Given probable cause to search, either cause is reasonable under the Fourth Amendment." id. at 399 U.S. 52, 90 S. Ct. 1981.
There is also the fact that police could not be sure of just who was involved in this crime. That is, there could have been more than two people involved. Certainly, the Commonwealth had the duty to protect the evidence. There was a possibility that other actors involved could have removed the vehicle while police were securing a warrant.
We cannot say that the police conduct was unreasonable just because there were sufficient police available to secure a warrant while others remained to guard the vehicle.
"Where an automobile is the subject of a search the possibility of its movement and the concomitant disappearance of the contraband is a more critical factor than a court of the number of agents present who could be dispatched to a warrant issuing authority, United States *33 v. Menke, 468 F.2d 20, 23 (3d Cir. 1972)." Commonwealth v. Berman, 262 Pa.Super. 410, 396 A.2d 1237 (1978).
We therefore find that the search of the vehicle was valid.
Appellants also assert in connection with this, that the affidavit for the search warrants did not set forth sufficient facts to support the issuance of the warrant and that the warrants were not properly authenticated by the issuing magistrate.
Our review indicates that the affidavits supporting the warrants met the test of Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964). We also believe that the warrants were properly authenticated by the magisterial seal in accordance with 42 Pa.C.S. § 1512 which provides that the official acts of the magistrate are to be authenticated by the use of his seal.
Appellants next contend that the information should have been quashed because the Commonwealth failed to comply with Pa.R.Cr.P. 231.
Rule 231 provides for the filing of criminal information without a preliminary hearing by leave of court. Here, the informations against appellants were filed without holding a preliminary hearing and no leave of court was secured.
When appellants were returned to the Commonwealth they did have preliminary hearings. Appellants would have us discharge them because of the technical violations of Rule 231. However, we don't feel the nonfeasance below merits such action.
The principle function of the preliminary hearing is to protect an individual's rights against unlawful arrest and detention. Commonwealth v. Wansley, 248 Pa.Super. 234, 375 A.2d 73 (1977).
Clearly, here there was "good cause" under Rule 221 for the court to grant leave to proceed with the information without a preliminary hearing, as appellants were incarcerated in Maryland. See, Commonwealth v. Boyle, 470 Pa. 343, 368 A.2d 661 (1977).
*34 Our problem is whether appellants should be discharged for a Rule violation when in every sense no prejudice resulted to appellants. They were not unlawfully detained and they had a chance to test the "prima facie case" of the Commonwealth.
While we do not condone the failure of the Somerset County District Attorney's Office to secure leave of court, we see no reason to discharge the appellants where no prejudice resulted. See, Commonwealth v. Decosey, 246 Pa.Super. 412, 371 A.2d 905 (1977).[1]
Judgment of sentence affirmed.
PRICE, J., concurs in the result.
NOTES
[1] The Somerset County District Attorney's Office chose not to file a brief in this case, but to rely on the lower court Opinion. The rules provide for no such unilateral action on their part and we expressly do not condone their failure to comply with the Appellate Rules. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544976/ | 23 F.2d 14 (1927)
DUNN et al.
v.
LYONS, Sheriff.
No. 5127.
Circuit Court of Appeals, Fifth Circuit.
December 19, 1927.
Rehearing Denied January 13, 1928.
P. L. Ferguson, of Leesville, La., and M. G. Adams, of Beaumont, Tex. (M. R. Stewart, of Lake Charles, La., and C. W. Howth and Lamar Hart, both of Beaumont, Tex., on the brief), for appellants.
E. R. Schowalter, Asst. Atty. Gen., of Louisiana (Percy Saint, Atty. Gen., of Louisiana, and J. J. Robira, Dist. Atty., and S. H. Jones, Asst. Dist. Atty., both of Lake Charles, La., on the brief), for appellee.
Before WALKER, BRYAN and FOSTER, Circuit Judges.
BRYAN, Circuit Judge.
The District Judge dismissed upon demurrer the petition of appellants for writ of habeas corpus, but certified that in his opinion there was probable cause for an appeal. Appellants were convicted of murder in a state trial court of Louisiana. The judgment of conviction was affirmed by the Supreme Court of Louisiana (161 La. 532, 109 So. 56), and writ of error dismissed by the Supreme Court of the United States (273 U.S. 656, 744, 47 S. Ct. 344, 71 L. Ed. ___). After that the state Supreme Court denied the writ of habeas corpus on a petition containing substantially the same averments of fact that we now have to consider.
The petition is based on the ground that the trial in the state court was one in form only and deprived appellants of their liberty without due process of law. It is alleged that the trial was dominated by an organization commonly known as the Ku Klux Klan; that the judge, the sheriff, the clerk, and at least one of the jurors were all members of that organization; that the person of whose murder appellants were convicted was a member thereof at the time of his death; that during the trial the courtroom was packed with its members; that the judge allowed one of them to sit with him on the bench, and to pay a fine imposed upon one of the attorneys, and failed to require another member to leave the witness room in order that appellants might have a private interview with their counsel. The petition contains other averments tending to support the general statement that this organization exerted its influence to impress upon the jury that a verdict of guilty would meet with popular approval.
It is not alleged that appellants did not have full knowledge of every matter now complained of, either before or during the trial, or at the time they submitted their motion for a new trial, or that they did not have full opportunity to present such matters on their appeal to the State Supreme Court. They did assign as error the overruling of their challenges for cause of certain jurors on the ground that they were members of the Ku Klux, and many other rulings of the trial court. All the rulings that were excepted to and assigned as error were considered and passed upon by the Supreme Court on that appeal. No objection was made to the qualifications or competency of the trial judge or any of the court officials. It is not suggested that counsel for the accused were intimidated by popular clamor or hostile sentiment, and that they fearlessly represented their clients affirmatively appears from the number and nature of exceptions reserved at the trial and presented for review on appeal. The Supreme Court entertained jurisdiction of the petition for a writ of habeas corpus, but declined to issue that writ on the grounds that all questions of law and fact that were reserved and presented had already been decided, and that the matters complained of in that petition for the first time should have been presented in the regular and appropriate way by proper bills of exceptions on the appeal from the judgment of conviction.
Appellants contend that the state trial court lost jurisdiction on account of the influence and activities of the Ku Klux, and that this case is governed by Moore v. Dempsey, 261 U.S. 86, 43 S. Ct. 265, 67 L. Ed. 543. In the cited case it is said: "In Frank *15 v. Mangum, 237 U.S. 309, 335 [35 S. Ct. 582, 590, 59 L. Ed. 969], it was recognized, of course, that if in fact a trial is dominated by a mob, so that there is an actual interference with the course of justice, there is a departure from due process of law, and that `if the state, supplying no corrective process, carries into execution a judgment of death or imprisonment based upon a verdict thus produced by mob domination, the state deprives the accused of his life or liberty without due process of law.' We assume in accordance with that case that the corrective process supplied by the state may be so adequate that interference by habeas corpus ought not to be allowed. It certainly is true that mere mistakes of law in the course of a trial are not to be corrected in that way. But if the case is that the whole proceeding is a mask that counsel, jury, and judge were swept to the fatal end by an irresistible wave of public passion, and that the state courts failed to correct the wrong, neither perfection in the machinery for correction, nor the possibility that the trial court and counsel saw no other way of avoiding an immediate outbreak of the mob, can prevent this court from securing to the petitioners their constitutional rights."
It is thus established by these two leading Supreme Court cases that a writ of habeas corpus will not lie where the state supplies and its courts make available process adequate to correct errors committed during the trial of a case. In Ashe v. U. S. ex rel. Valotta, 270 U.S. 424, 46 S. Ct. 333, 70 L. Ed. 662, it is said that the regular administration of the criminal law of a state can only be attacked by collateral habeas corpus proceedings in "extraordinary cases where there is only the form of a court under the domination of a mob." Louisiana recognizes that motions for a new trial are reviewable on appeal, as sufficiently appears from the opinion of its Supreme Court that was rendered in reviewing the judgment of conviction of appellants. State v. Dunn, 161 La. 532, 597, 109 So. 56. It was open to appellants to attack the fitness and qualifications of the trial judge by taking exceptions during the trial, or by motion for a new trial after conviction. All the matters complained of here were reviewable by the Supreme Court. Many of them were in fact made the subject of review, and those that were not were not presented as they ought to have been in the regular way provided by law.
Finally, the judgment of the state trial court was affirmed by the Supreme Court of the United States. It therefore is clear, not only that the state of Louisiana affords adequate corrective process, but that such process was made available to appellants in the state Supreme Court.
The order appealed from is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545087/ | 417 A.2d 313 (1980)
Carolyn BIBEAULT
v.
HANOVER INSURANCE COMPANY.
No. 78-469-Appeal.
Supreme Court of Rhode Island.
July 11, 1980.
Reargument Denied August 28, 1980.
*315 Decof, Weinstein & Mandell, Leonard Decof, Providence, for plaintiff.
John F. Dolan, Providence, for defendant.
OPINION
KELLEHER, Justice.
This advisory opinion is rendered to the United States District Court for the District of Rhode Island in accordance with Supreme Court Rule 6. The civil action giving rise to the certified questions currently before us was instituted in the District Court by the plaintiff, Carolyn Bibeault (Carolyn), against the defendant, Hanover Insurance Company (Hanover or the company). Carolyn sought uninsured-motorist coverage and compensatory and punitive damages against Hanover for its alleged bad-faith refusal to settle her insurance claims. A District Court jury awarded Carolyn $15,000 under the uninsured-motorist claims and $20,000 in compensatory and $35,000 in punitive damages for Hanover's bad faith. After hearing Hanover's motions for a directed verdict, a judgment notwithstanding the verdict, and a new trial, the District Court stayed all proceedings pending receipt of our advice.
On June 14, 1975, Carolyn sustained serious injuries as a result of a collision that occurred in Attleboro, Massachusetts, when her automobile was struck head-on by a vehicle that had crossed the center of the road into her lane. The driver of this second vehicle was Oliver Cardoza (Cardoza), a Massachusetts resident and another defendant in the case. Cardoza, who pleaded guilty to the charge of operating negligently so as to endanger, was an uninsured motorist within the meaning of G.L. 1956 (1979 Reenactment) § 27-7-2.1 because his insurance provided a maximum coverage of $5,000 per person. Although Cardoza's insurance company offered Carolyn $5,000 in settlement of her claims against him, she could not accept this proposal until her insurer, Hanover, consented in writing to the transaction as required by the terms of the uninsured-motorist section of her policy.
Aware of Carolyn's deteriorating financial situation, which was intensified further by overdue medical bills and her inability to work, Hanover made its consent conditional upon Carolyn's acceptance of $3,500 in settlement of her claims against it.[1] A few months following the execution of this release, Carolyn learned that she might also be entitled to recovery for injuries sustained in the collision pursuant to the uninsured-motorist sections of the policies issued by Hanover to her two sisters, Donna and Dianne. These policies were identical to that purchased by Carolyn and were in effect on the date of the collision. One issue raised at trial and certified to us by the District Court concerns Carolyn's eligibility to recover under these two policies since, at the time of the collision, she was driving her own automobile, a vehicle that did not satisfy the definition of an "insured automobile" as set forth in each policy.[2]
The uninsured-motorist section of each policy, entitled "Family Protection Against Uninsured Motorists," provides:
"The company will pay all sums which the insured or his legal representative shall be legally entitled to recover as *316 damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called `bodily injury', sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile * * *."
The policy defines an "insured" as
"the named insured as stated in the policy (herein also referred to as the `principal named insured') and any person designated as named insured in the schedule and, while residents of the same household, the spouse of any such named insured and relatives of either * * *." (Emphasis added.)
Donna and Dianne are, therefore, "the principal named insured" within their respective policies. Although Carolyn was not designated as a named insured in the schedule of the policy of either sister, she would, by definition, qualify as an "insured" under both policies if she resided with her sisters at the time of the collision. The jury found that on June 14, 1975, the three Bibeault sisters resided on Front Street in Lincoln, Rhode Island. Thus, Carolyn is clearly an "insured" for purposes of both policies.
The key point of contention arises over the applicability of an exclusion found in the uninsured-motorist section of all three policies which exempts from coverage any
"bodily injury to an insured while occupying an automobile (other than an insured automobile) owned by a named insured or any relative resident in the same household * * *."
Hanover contends that since Carolyn, at the time of the collision, was driving her own vehicle, which was not described as an "insured automobile" in the policy of either sister, the exclusion bars any recovery under her sisters' policies. Hanover claims that the validity of an identical exclusion was recognized in Employers' Fire Insurance Co. v. Baker, R.I., 383 A.2d 1005 (1978), where an insured was seeking to recover uninsured-motorist benefits for injuries she received when her motorcycle collided with an uninsured vehicle and the insured automobile described in the policy was the insured's Ford Mustang. Hanover gains no comfort from the exclusionary language it cites or from the plurality holding in Baker because, as Carolyn points out, there is additional language found in the exclusion which in plain and simple terms creates an "exception," if you will, to the "exclusion." The exceptional language provides:
"but this exclusion does not apply to the principal named insured or his relatives while occupying or if struck by an automobile owned by an insured named in the schedule or his relatives."
A reading of the exclusion in conjunction with the exception reveals that there is a class of individuals who may benefit from the uninsured coverage notwithstanding the taking-away language of the exclusion.
We need look no further than the actual wording of the policy to reach the obvious conclusion that Carolyn is not subject to the exclusion. Substituting the characters of this case into the exception, it reads,
"but this exclusion does not apply to the principal named insured [Donna or Dianne] or [her] relative [Carolyn] while occupying an automobile owned by an insured named in the schedule [Donna or Dianne] or [her] relatives [Carolyn]."
At the time of Carolyn's collision, she was related to both Donna and Dianne and was occupying an automobile owned by a relative of each of the named insured. Thus, in this controversy the exclusion is just so much verbiage, and Carolyn may look to her policy and those of her sisters for the uninsured-motorist coverage each provides as long as the total recovery does not exceed her total loss. Pickering v. American Employers Insurance Co., 109 R.I. 143, 282 A.2d 584 (1971).
The second and final issue certified by the District Court presents the question of whether an insurer's bad-faith withholding of insurance payments gives rise to an independent claim for breach of duty owned to the insured. Hanover contends that this *317 issue is controlled by the recent case of A.A.A. Pool Service & Supply, Inc. v. Aetna Casualty & Surety Co., R.I., 395 A.2d 724 (1978), wherein this court refused to recognize an independent claim for a bad-faith withholding of payments under the standard fire insurance policy. This decision was based not upon our disapproval of the claim in question, but rather upon our reluctance to intrude into the area of fire insurance, a field clearly preempted by the Legislature through G.L. 1956 (1979 Reenactment) § 27-5-3. This section sets forth in detail the form and terms of the standard fire insurance policy which must be included within any policy or contract of fire insurance on property situated within the state. In the A.A.A. Pool Service & Supply case, we concluded that the Legislature must have been cognizant of the fact that § 27-5-3 limited an insured's total potential recovery to the actual value of property damaged. In declining to expand the liability of the insurance company, we answered
"only the question posed by the District Court, and we venture no opinion about whether an independent cause of action will arise by reason of a bad-faith withholding of a payment under any type of insurance policy other than the standard fire insurance policy for the State of Rhode Island." A.A.A. Pool Service & Supply, Inc. v. Aetna Casualty & Surety Co., R.I., 395 A.2d 724, 726 (1978).
Recently, in DiIorio v. Abington Mutual Fire Insurance Co., R.I., 402 A.2d 745 (1979), we also refused to recognize an independent claim in tort for the bad faith of an insurer. This decision was based, however, on the trial justice's finding of insufficient evidence to support a jury question on the issue of bad faith. In DiIorio, there was a genuine question regarding the insured's coverage under a homeowner's policy that included the standard fire insurance policy. Although there is some language in DiIorio which seems to indicate that the principles of A.A.A. Pool Service & Supply would be applied to policies other than the standard fire insurance policy, our holding in A.A.A. Pool Service & Supply was never intended to extend to any contract of insurance other than the standard fire insurance policy described in the statute.
Hanover argues that the reasoning of A.A.A. Pool Service & Supply is equally applicable in this case because the uninsured-motorist provisions of its policies are statutorily mandated by § 27-7-2.1. We cannot agree. Section 27-7-2.1 merely requires that all automobile insurers offer uninsured-motorist coverage equal to or above the minimum limit established by G.L. 1956 (1968 Reenactment) § 31-31-7 (1979 Supp.). This is entirely different, however, from § 27-5-3 wherein the Legislature has expressly prescribed in every detail the terms of the standard fire insurance policy. We are, therefore, unwilling to find that the simple requirement of § 27-7-2.1 that an insurer afford the general public with the opportunity of purchasing uninsured-motorist coverage suggests a legislative intent to limit the liability of an insurer in this area of uninsured-motorist coverage. Indeed, in the case of Pickering v. American Employers Insurance Co., 109 R.I. 143, 152, 282 A.2d 584, 590 (1971), we observed that in § 27-7-2.1, "[t]he Legislature fixes a minimum, rather than a maximum, standard of protection. There is no ceiling upon the insured's right of recovery."[3]
In the absence of a legislative intent to the contrary, Carolyn urges us to adopt the position taken by a growing number of jurisdictions that recognize an independent cause of action in tort for an insurer's bad-faith *318 refusal to deliver payments due under a contract of insurance.[4]
The first case to recognize the need for a new tort in the area of first-party insurance law was Fletcher v. Western National Life Insurance Co., 10 Cal. App. 3d 376, 89 Cal. Rptr. 78 (1970). In that case, a California Court of Appeals held that an insurer's bad-faith withholding of payments due under an insurance policy was a breach of the implied-in-law duty of good faith and fair dealing owed to its insured. This decision extended the well-established duty of an insurer in the context of liability insurance to act reasonably and in good faith in settling third-party claims against insureds. See Crisci v. Security Insurance Co., 66 Cal. 2d 425, 426 P.2d 173, 58 Cal. Rptr. 13 (1967); Wilson v. Aetna Casualty & Surety Co., 145 Me. 370, 76 A.2d 111 (1950); Rova Farms Resort, Inc. v. Investors Insurance Company of America, 65 N.J. 474, 323 A.2d 495 (1974). In the subsequent decision of Gruenberg v. Aetna Insurance Co., 9 Cal. 3d 566, 510 P.2d 1032, 108 Cal. Rptr. 480 (1973), the California Supreme Court followed the reasoning of Fletcher in concluding that an independent cause of action in tort exists against insurance companies for breach of their implied-in-law duty of good faith and fair dealing.
The California courts and those jurisdictions that have chosen to adopt this theory of recovery recognize the problems inherent in an insured's claim based solely on contract. Traditionally, recovery in contract for breach of a unilateral or independent obligation to pay a certain sum of money is confined to the actual amount owed under the contract plus legal interest. A.A.A. Pool Service & Supply, Inc. v. Aetna Casualty & Surety Co., R.I., 395 A.2d 724 (1978); Williston, Contracts § 1410 at 604 (3d ed. 1968). Recovery under a contract theory alone, therefore, effectively guards an insurer's pocketbook against any threat of punitive damages.
In this atmosphere, insurers, backed by sufficient financial resources, are encouraged to delay payment of claims to their insureds with an eye toward settling for a lesser amount than that due under the policy. The potential loss could never exceed the contract amount plus interest. Thus, when the legal rate of interest is lower than the commercial rate, an unscrupulous insurer would be wise to delay payment for the maximum period of time. The inequity of this situation becomes particularly apparent in the area of disability insurance in which the insured, often pursued by creditors and devoid of bargaining power, may easily be persuaded to settle for an amount substantially lower than that provided for in the insurance contract.[5]
*319 The members of this court are of the opinion that an insurer doing business in Rhode Island is obligated to act in good faith in its relationship with its policyholders. A violation of this duty will give rise to an independent claim in tort in which, as in the present controversy, there has been a specific finding that the insurer has in bad faith refused to pay the claims due an insured. Recognition of this tort in Rhode Island does not, however, imply that whenever an insurance company loses a dispute in court regarding the validity of a claim, it breaches the implied-in-law duty of good faith. If a claim is "fairly debatable," no liability in tort will arise. We quote with approval the test established by the Supreme Court of Wisconsin:
"To show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. It is apparent, then, that the tort of bad faith is an intentional one. * * * implicit in that test is our conclusion that the knowledge of the lack of a reasonable basis may be inferred and imputed to an insurance company where there is a reckless disregard of a lack of a reasonable basis for denial or a reckless indifference to facts or to proofs submitted by the insured." Anderson v. Continental Insurance Co., 85 Wis. 2d 675, 691, 693, 271 N.W.2d 368, 376-77 (1978).
The duty of an insurer to deal fairly and in good faith with an insured is implied by law. Since violation of this duty sounds in contract as well as in tort, the insured may obtain consequential damages for economic loss and emotional distress and, when appropriate, punitive damages. Christian v. American Home Assurance Co., 577 P.2d 899 (Okl. 1977). In regard to punitive damages, we would point out that the intent necessary to establish the tort of bad faith is not equivalent to the intent that would sustain an award for punitive damages. Punitive damages may only be awarded when an insurer has acted with malice, wantonness, or wilfulness. Berberian v. New England Telephone & Telegraph Co., 117 R.I. 629, 369 A.2d 1109 (1977); Corwin Chrysler-Plymouth, Inc. v. Westchester Fire Insurance Co., 279 N.W.2d 638 (N.D. 1979). With respect to attorneys' fees, we are reluctant to depart from our well-established rule that, in the absence of contractual or statutory authorization, such fees may not be awarded as a separate item of damages. Orthopedic Specialists, Inc. v. Great Atlantic & Pacific Tea Co., R.I., 388 A.2d 352 (1978); Waite v. Board of Review of Department of Employment Security, 108 R.I. 177, 273 A.2d 670 (1971); 4 Restatement (Second) Torts § 914 at 492 (1977). If attorneys' fees are to be awarded for breach of an insurer's duty to deal fairly and in good faith with its insured, the choice should be made by the Legislature.[6]
Having had our say, we conclude by giving an affirmative response to the District Court's initial inquiry. Our response to the court's second question is a mixed one. An insurer's bad-faith refusal to settle an insurance claim can give rise to an independent tort action that can result upon a proper showing of an award of both compensatory and punitive damages. We perceive, however, no statutory or contractual basis for an award of a fee to Carolyn's counsel.
APPENDIX
The Certified Questions:
"1. Is Plaintiff entitled to recover under the uninsured motorist coverage of two policies of automobile liability insurance purchased by her two sisters, with whom she resided, from the same insurance company (Hanover) from which Plaintiff purchased uninsured motorist coverage, or is Plaintiff precluded from recovery because the automobile which she operated at the time of the injuries to her was designated as an insured automobile under the terms of her *320 policy of insurance but was not designated as an insured automobile under the terms of her sisters' policies?
"2. Does an insurer's bad faith refusal to settle an insurance claim give rise to an independent cause of action for breach of a duty owed to the insured resulting in liability for compensatory damages for economic loss and emotional distress, punitive damages and attorney's fees?"
NOTES
[1] Carolyn had originally claimed $4,000 in uninsured-motorist benefits from Hanover, a figure calculated by subtracting from the policy's $10,000 limit the $5,000 offered by Cardoza's insurance company and $1,000 previously paid by Hanover for medical bills.
[2] Definition (b) of the policy provides:
"`insured automobile' means an automobile (1) described in the schedule as an insured automobile to which the bodily injury liability coverage of the policy applies; (2) while temporarily used as a substitute for an insured automobile as described in subparagraph (1) above, when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction; (3) while being operated by a named insured or by his spouse if a resident of the same household * * *."
[3] In Pickering v. American Employers Insurance Co., 109 R.I. 143, 152, 282 A.2d 584, 590 (1971), we also indicated that through G.L. 1956 (1979 Reenactment) § 27-2-2.1 the Legislature intended to protect an insured against his actual loss. We did not, however, address the question of whether § 27-7-2.1 limits recovery to damages for actual loss, for in Pickering there was no indication of bad faith on the part of the insurer. Consequently, actual damages in that case provided the insured with adequate compensation.
[4] United Services Automobile Association v. Werley, 526 P.2d 28 (Alaska 1974); John Hancock Mutual Life Insurance Co. v. McNeill, 27 Ariz. App. 502, 556 P.2d 803 (1976); Gruenberg v. Aetna Insurance Co., 9 Cal. 3d 566, 510 P.2d 1032, 108 Cal. Rptr. 480 (1973); Grand Sheet Metal Products Co. v. Protection Mutual Insurance Co., 34 Conn. Supp. 46, 375 A.2d 428 (1977); Ledingham v. Blue Cross Plan, 29 Ill. App. 3d 339, 330 N.E.2d 540 (1975), rev'd on other grounds, 64 Ill. 2d 338, 1 Ill. Dec. 75, 356 N.E.2d 75 (1976); Amsden v. Grinnell Mutual Reinsurance Co., 203 N.W.2d 252 (Iowa 1972); Standard Life Insurance Company of Indiana v. Veal, 354 So. 2d 239 (Miss. 1978); United States Fidelity & Guaranty Co. v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975); State Farm General Insurance Co. v. Clifton, 86 N.M. 757, 527 P.2d 798 (1974); Corwin Chrysler-Plymouth, Inc. v. Westchester Fire Insurance Co., 279 N.W.2d 638 (N.D. 1979); Christian v. American Home Assurance Co., 577 P.2d 899 (Okl. 1977); Anderson v. Continental Insurance Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978).
[5] Gruenberg v. Aetna Insurance Co., 9 Cal. 3d 566, 510 P.2d 1032, 108 Cal. Rptr. 480 (1973), and its successors may encourage misguided insurers to alter their policies. As Langdon and Sytsma suggest in The Duty of Good Faith and Fair Dealing and the Pre-Adjudicatory Role of the Insurance Company Advocate, 45 Ins. Counsel J. 309, 313 (1978),
"the best advice to submit to an insurance company client is that contained in a paper recently presented to the Association of Life Insurance Counsel to have the company tighten up its claims practices, treat all of its policy holders with more consideration than may have been the case in the past, and use greater care in the selection and training of its claims personnel. `The old objective of the claims man "to find the loophole" is at an end.'"
[6] In the area of workers' compensation, for example, the Legislature has, in G.L. 1956 (1979 Reenactment) § 28-35-32, awarded attorneys' fees to successful employees in certain cases. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545095/ | 216 B.R. 913 (1997)
In re MUNFORD, INC. formerly d/b/a Majik Market, Debtor.
Bankruptcy No. A90-00078-SWC.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
December 11, 1997.
*914 Heidi A. Feinman, Office of U.S. Trustee, Atlanta, GA, for Trustee.
Michael D. Langford, Kilpatrick Stockton, Atlanta, GA, for Debtor.
Angelyn M. Wright, Long, Aldridge & Norman, Atlanta, GA, for Creditors' Committee.
ORDER
STACEY W. COTTON, Chief Judge.
Before the court is the United States Trustee's "Motion for Order Directing Debtor to Pay Fees" filed June 9, 1997. Trustee seeks payment of quarterly fees pursuant to 28 U.S.C. § 1930(a)(6) from and after January 27, 1996. Debtor filed its voluntary Chapter 11 case on January 2, 1990. By order of August 30, 1993, the court confirmed Debtor's amended plan of liquidation (sometimes referred to as "the plan" or "Debtor's *915 plan"). To date, there has been no report of substantial confirmation or application for final decree. Separate objections to the present motion have been filed by Debtor and the Unsecured Creditors' Committee ("the Committee"). Upon review of the motion, briefs, supporting documents and oral arguments of counsel, the court finds and concludes the following:
DISCUSSION
Debtor and the Committee assert that this court lacks jurisdiction because jurisdiction of the bankruptcy court after confirmation of a Chapter 11 plan is "normally limited `to matters concerning the implementation or execution of a confirmed plan.' " (Debtor's Objection at 2, citing, In re Allegheny International, Inc., 954 F.2d 167, 169, n. 1 (3d Cir.1992); see also, In re Lancy, 208 B.R. 481 (Bankr.D.Ariz.1997); Zahn Associates, Inc. v. Leeds Building Products, Inc. (Matter of Leeds Building Products, Inc.), 160 B.R. 689, 691 (Bankr.N.D.Ga.1993) (Drake, J.)). Debtor also asserts that jurisdiction must be expressly reserved over matters not implicating the confirmed plan. Citing, Gryphon at the Stone Mansion, Inc. v. U.S. Trustee (In re Gryphon at the Stone Mansion, Inc.), 204 B.R. 460, 462 (Bankr.W.D.Pa. 1997). The court disagrees.
The district court in this district has referred "all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11" to this court pursuant to the General Order of Reference, (N.D.Ga. July 12, 1984), LR 83.7, NDGa. and BLR 1070, NDGa. See, 28 U.S.C. §§ 157(a) and 1334(a)(b). The Eleventh Circuit, following the Third Circuit's test in Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984), has held that: "An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 788 (11th Cir.1990). Clearly, the determination of the issue before the court will alter Debtor's rights and liabilities. Further, while the court agrees that after the confirmation order is entered, it "no longer acts in loco parents over any and all squabbles and disputes that may arise in the affairs of the reorganized debtor," Matter of Leeds Building Products, Inc., 160 B.R. at 691, enforcing the provisions of the United States Code is certainly within its jurisdiction.
Moreover, Section XIV of Debtor's First Amended Plan of Liquidation captioned "RETENTION OF JURISDICTION" appears to expressly reserve jurisdiction over the subject matter of this dispute. Specifically, that section provides: "After entry of the Confirmation Order and until the Chapter 11 Case is closed by order of the Bankruptcy Court, the Bankruptcy Court . . . shall retain exclusive jurisdiction of all matters arising under, arising out of, or relating to this Chapter 11 Case. . . ." (Debtor's Exh. 1 at 28) Debtor's Chapter 11 case remains open.
The plan also provides a nonexclusive list of eleven (11) specific reservations of jurisdiction. Several of these arguably apply to the present proceeding including, "(b) the allowance or disallowance of any Claim, or any compromise and settlement thereof;" and "(c) The determination of the validity, priority, and extent of any Claim." (Debtor's Exh. 1 at 28). This nonexclusive list obviously encompasses postconfirmation jurisdictional retention.[1] Regardless, the present matter is sufficiently related to this Debtor's case to fall within Section XIV of the plan. Based upon the foregoing, the court concludes that it has jurisdiction to consider and determine Trustee's motion.
On January 26, 1996, Section 1930(a)(6) of Title 28, United States Code, was amended by § 211 of the Balanced Budget Down payment Act, Pub.L. 104-99, 110 Stat. 26, 37-38 (1996). The amendment struck the phrase *916 "a plan is confirmed or" from § 1930(a)(6), leaving that section to read, in part,
(6) In addition to the filing fee paid to the clerk, a quarterly fee shall be paid to the United States trustee, for deposit into the Treasury, in each case under chapter 11 of title 11 for each quarter (including any fraction thereof) until the case is converted or dismissed, whichever occurs first. . . . [2]
The statute's reach was further clarified by Title I, § 109(d) of the Omnibus Consolidated Appropriations Act, Pub.L. 104-208, 110 Stat. 3009 (September 30, 1996). Section 109(d) of Public Law 104-208 provides, in part:
Section 101(a) of Public Law 104-91, as amended by section 211 of Public Law 104-99, is further amended by inserting ": Provided further, That, notwithstanding any other provision of law, the fees under 28 U.S.C. § 1930(a)(6) shall accrue and be payable from and after January 27, 1996, in all cases (including, without limitation, any cases pending as of that date), regardless of confirmation status of their plans" after "enacted into law."
The plain language of these provisions clearly permits the imposition of fees, after January 26, 1996, pursuant to 28 U.S.C. § 1930(a)(6) regardless of the status of Debtor's plan.
In Landgraf v. USI Film Products, 511 U.S. 244, 269, 114 S. Ct. 1483, 1499, 128 L. Ed. 2d 229 (1994), the Supreme Court held:
A statute does not operate "retrospectively" merely because it is applied in a case arising from conduct antedating the statute's enactment, [citation omitted], or upsets expectations based in prior law. Rather, the court must ask whether the new provision attaches new legal consequences to events completed before its enactment.
In enacting Public Law 104-208, Congress clearly set forth in the statute its intent plain language that the fees provided for in amended § 1930(a)(6) apply to all pending Chapter 11 cases regardless of the confirmation status of the plans.
The overwhelming majority of courts have concluded that the amended statute is not impermissibly retroactive because the amended statute expressly prescribes the statute's reach in that the fees apply only for the period after the effective date of the statute. See, In re Hudson Oil Co., Inc., 210 B.R. 380 (D.Kan.1997) (reversing Bankruptcy Court decision reported at 200 B.R. 52); In re Precision Autocraft, Inc., 207 B.R. 692 (W.D.Wash.1997) (reversing Bankruptcy Court decision reported at 197 B.R. 901); In re McLean Square Assocs., G.P., 201 B.R. 436 (Bankr.E.D.Va.1996); In re Foxcroft Square Co., 198 B.R. 99 (Bankr.E.D.Pa.1996); Matter of Upton Printing, 197 B.R. 616 (Bankr.E.D.La.1996); In re Central Florida Elec., Inc., 197 B.R. 380 (Bankr.M.D.Fla. 1996); but see, In re Burk Development Co., Inc., 205 B.R. 778 (Bankr.M.D.La.1997) (holding that statute lacked "unambiguous directive" as to its temporal scope and was therefore impermissibly retroactive). The court agrees with the majority that the amended statute is not impermissibly retroactive. Landgraf, 511 U.S. at 280, 114 S.Ct. at 1505.
However, even if the court concluded the contrary, the amended statute satisfies a legitimate legislative purpose supported by a rational means, and must be enforced. U.S. v. Carlton, 512 U.S. 26, 114 S. Ct. 2018, 129 L. Ed. 2d 22 (1994). The amendment supports the policies of oversight and self-funding of the administration of bankruptcy cases.[3]Upton Printing, 197 B.R. at 620, *917 citing, In re Prines, 867 F.2d 478 (8th Cir. 1989); H.R.Rep. No. 104-196, 104th Cong., 1st Sess. (1995). Thus, amended § 1930 is a rational means to satisfy this legitimate legislative purpose and must be enforced by this court.
Both Debtor and the Committee contend that allowing postconfirmation quarterly fees would effectuate a modification of the confirmed plan in contravention of 11 U.S.C. § 1127(b). See, In re Uncle Bud's, Inc., 206 B.R. 889 (Bankr.M.D.Tenn.1997). They assert that because the plan was confirmed and substantially consummated several years ago, such modification is not permissible. Citing, 11 U.S.C. § 1127(b); In re Gryphon at the Stone Mansion, 204 B.R. at 463. More specifically, Debtor contends that the order of confirmation contains an express finding that "all fees payable under 28 U.S.C. Section 1930 have been paid." (Debtor's Exh. 3 at 9).
The plan was confirmed by order entered August 30, 1993, more than two years before the amendment to § 1930(a)(6) became effective. Obviously the plan did not address and the court did not consider future amendments to the statute when entering the confirmation order. At that time, all § 1930(a)(6) quarterly fees had been paid in accordance with the preamended statute. The amendment affects quarterly fees imposed by statutory amendment during the postconfirmation period; this was not addressed by the plan. Since postconfirmation fees and charges, by definition, could not be payable prior to the entry of the confirmation order, the amended statute does not conflict with or require the reopening of the confirmation order. Cf., In re CF&I Fabricators of Utah, 214 B.R. 16, 19-20 (D.Utah 1997)(amended § 1930(a)(6) does not constitute an impermissible usurpation of the federal courts' exclusive power to decide cases); In re Hudson Oil Co., Inc., 210 B.R. at 385 (citing In re CF&I Fabricators).
Moreover, Section II of Debtor's plan defines "administrative claim" to include "all fees and charges assessed against the Estate pursuant to Section 1930, Title 28, United States Code." (Debtor's Exh. 1 at 1(1)). The plan does not clearly specify that such fees are limited to those assessed preconfirmation. It is plausible to interpret that definition to include fees assessed postconfirmation. An argument could also be made that the definition limits such fees to those assessed preconfirmation because such fees must be assessed against the estate, which ceases to exist upon a plan's confirmation. However, the plan defines "Estate" as "the estate created in this Chapter 11 Case pursuant to Section 541 of the Bankruptcy Code." (Debtor's Exh. 1 at 4(33)). Debtor proposed a plan of liquidation in which it dedicated the "estate" assets to the satisfaction of the plan. The court finds that a reasonable interpretation of the plan's definition section includes all assets devoted to the plan. Therefore, the court concludes that the confirmation order in no way limits its authority to order the payment of postconfirmation quarterly fees pursuant to amended 28 U.S.C. 1930(a)(6).
Also the court does not agree with those cases which hold that a debtor's obligations under § 1930(a)(6) cease when a plan is substantially consummated. See e.g., In re Lancy, 208 B.R. at 486; In re Hudson Oil., Inc., 200 B.R. 52 (Bankr.D.Kan.1996), reversed, 210 B.R. 380 (D.Kan.1997); In re CF&I Fabricators of Utah, Inc., 199 B.R. 986 (Bankr. D.Utah 1996), reversed, 214 B.R. 16, 1997 WL 476658 (D.Utah Apr. 24, 1997). The court also cannot agree with In re Beechknoll Nursing Homes, Inc., 206 B.R. 886 (Bankr. S.D.Ohio 1997), which reached a somewhat similar result. Addressing whether a debtor's obligation to pay quarterly fees terminated upon full administration of the case, substantial consummation of the plan or some other "event," the Bankruptcy Court posited that "administrative fees paid by a party should bear some relationship to the administration of the case." Id. at 888. Accordingly, the court concluded that debtors should cease paying quarterly fees when the *918 United States Trustee's services are "no longer necessary." Id.
In In re Burk Development Co., 205 B.R. at 785, the court provided:
The Amendment plainly states that the requirement of the fee being paid is that it be paid "in each case under chapter 11 of title 11. . . ." The logical inference from the word "case is that the fee be paid in a pending case, that is, "in each case [pending] under chapter 11 of title 11. . . ." (Simply put, there is no case in which a postconfirmation quarterly fee can be paid unless the case is pending). Once a final decree is issued and the "case" is closed, there is no longer a "case" in which a fee can be paid so the triggering event for terminating postconfirmation quarterly fees, if a case is not dismissed or converted, must be the order closing the case, after the issuance of a final decree.
See also, In re Sedro-Woolley Lumber Co., Inc., 209 B.R. 987, 990 (Bankr.W.D.Wash. 1997); In re Junior Food Mart of Arkansas, Inc., 201 B.R. 522, 524 at n. 2 (Bankr. E.D.Ark.1996) (stating in dicta that a logical construction of the amended statute would require payment of the quarterly fees until conversion, dismissal, or until entry of the final decree). The court agrees with Burk. No final decree has been entered in this debtor's Chapter 11 case; therefore, the case is pending. The fact that Debtor's plan is substantially consummated does nothing to alter the plain language requirements of § 1930(a)(6).
The remaining issue before the court is how should the quarterly fees be computed? Section 1930(a)(6) requires that quarterly fees be determined based upon the amount of "disbursements" made during each quarter. Neither the statute nor the Bankruptcy Code defines the term "disbursements." Courts which have addressed this issue have split into three camps. The first group defines the term broadly.[4] In these cases, the courts define disbursements to include all disbursements of the reorganized debtor. Emphasizing that the legislative purpose behind mandating the payment of postconfirmation quarterly fees was to raise revenues, they held that any restrictions placed on the term would frustrate that purpose. See, In re Corporate Business Products, Inc., 209 B.R. at 954; In re P.J. Keating Co., 205 B.R. at 667.
A second group of cases defines "disbursements" narrowly, holding that postconfirmation quarterly fees are limited to the $250 minimum amount specified by the statute.[5] These courts cite the case of St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1534 (9th Cir.1994), which defines "disbursements" as "all payments made by the bankruptcy estate." Reasoning that upon a plan's confirmation the bankruptcy estate ceases to exist, 11 U.S.C. § 1141(b), these courts conclude that there can be no "disbursements" made postconfirmation by the estate. In re Maruko, 206 B.R. at 230.
Finally, a third group of cases holds that postconfirmation quarterly fees should be computed upon "disbursements" made pursuant to the confirmed plan.[6] This group of cases attempts to harmonize the legislative purpose with the reorganized debtor's right to a "fresh start." The court agrees with this latter approach.
When a debtor files a case under Title 11, a bankruptcy estate is created. If successful, a plan is proposed and confirmed. The confirmed plan of reorganization proposes the method by which a debtor's claims and interests will be satisfied. Thus, payments made pursuant to a confirmed plan are in satisfaction of estate debts or interests. The funds *919 utilized are designated for that sole purpose regardless of the entity in whom the property right is vested. This is particularly true in plans of liquidation such as that presently before the court.
When there are no quarterly disbursements, the minimum $250 quarterly fee is the proper amount assessed.[7] In liquidation plans such may frequently be the case. However, in furtherance of the legislative purposes, and in adherence to the statute's plain language, the court concludes that a reasonable interpretation of the term "disbursements" includes postconfirmation payments made pursuant to a confirmed plan. Thus, the quarterly trustee fees are based upon the greater of the disbursements made pursuant to the plan or the $250 minimum fee. Therefore, the court concludes that Debtor must pay Trustee quarterly fees for the period commencing January 27, 1997, and continuing until the entry of a final decree.
For the foregoing reasons, the objections of Debtor and the Creditors' Committee are overruled. Accordingly, it is
ORDERED that Trustee's motion for payment of postconfirmation quarterly fees pursuant to 28 U.S.C. § 1930(a)(6) is granted, and Debtor shall pay to Trustee postconfirmation quarterly fees based upon the greater of the disbursements made pursuant to Debtor's confirmed plan of liquidation or the $250 minimum fee for the period commencing January 27, 1997, and continuing until the entry of a final decree.
ORDERED that the clerk shall serve a copy of this order upon Debtor, Debtor's counsel, counsel for the Unsecured Creditors' Committee, and the United States Trustee.
IT IS SO ORDERED.
NOTES
[1] The plan of liquidation would only become effective upon the entry of an order of confirmation. Thus, the nonexclusive list provided in the plan could only apply to postconfirmation matters. It appears clear that Debtor envisioned postconfirmation disputes such as the present and expressly provided in the plan that this court retain jurisdiction over such matters.
[2] Prior to the amendment, 28 U.S.C.1930(a)(6) provided, in part,
(6) In addition to the filing fee paid to the clerk, a quarterly fee shall be paid to the United States trustee, for deposit into the Treasury, in each case under chapter 11 of title 11 for each quarter (including any fraction thereof) until a plan is confirmed or the case is converted or dismissed, whichever occurs first. . . . (emphasis added).
[3] In addition to the often cited legislative purpose of self-funding Chapter 11 cases, an equally important purpose motivating this legislation was the need for oversight by the United States Trustee after the plan's confirmation. It is the duty of the trustee to effect an efficient and speedy closure to a debtor's case. Without this oversight, some debtors had shown an unwillingness to perform what it perceived as "nonessential" obligations under the plan, never fully working in good faith to close their cases. This purpose appears to conflict with the argument that upon confirmation no estate exists and therefore only minimum quarterly fees should be assessed. The court believes that the trustee serves an invaluable service to the vast numbers of unsecured creditors and the courts by overseeing performance under the plan and the efficient closing of Chapter 11 cases.
[4] See, In re Gates Community Chapel of Rochester, Inc., 212 B.R. 220 (Bankr.W.D.N.Y.1997); In re Corporate Business Products, Inc., 209 B.R. 951 (Bankr.C.D.Cal.1997); In re Sedro-Woolley Lumber Co., Inc., supra; In re P.J. Keating Co., 205 B.R. 663 (Bankr.D.Mass.1997).
[5] See, Walter Industries, Inc. v. U.S. Trustee (In re Hillsborough Holdings Corp.), Adv. No. 96-1098, Case Nos. 89-9715-8P1 through XX-XXXX-XP1 and XX-XXXXX-XP1, (Bankr.M.D.Fla. Aug. 28, 1997) (unreported); In re Maruko Inc., 206 B.R. 225 (Bankr.S.D.Cal.1997); In re Boulders on the River, Inc., 205 B.R. 948 (Bankr.D.Or.1997).
[6] See, In re Betwell Oil and Gas Co., 204 B.R. 817 (Bankr.S.D.Fla.1997); In re Jamko, Inc., 207 B.R. 758 (Bankr.S.D.Fla.1996); In re SeaEscape Cruises, Ltd., 201 B.R. 321 (Bankr.S.D.Fla.1996).
[7] A possible exception might occur where a confirmed plan has been fully consummated with all funds disbursed and where there remains no funds or source from which payment can be made. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545145/ | 23 F.2d 926 (1928)
ORMSBEE
v.
UNITED STATES et al.
No. 58.
District Court, S. D. Florida.
January 14, 1928.
R. F. Burdine, of Miami, Fla. (R. P. Terry, of Miami, Fla., of counsel), for complainant.
William M. Gober, U. S. Dist. Atty., of Tampa, Fla., and Raymond F. Brown, of Miami, Fla., for the United States.
CLAYTON, District Judge.
This is a suit in equity, wherein the United States was made a party defendant, for the purpose of adjudicating the priority of the mortgage lien of the complainant as against the tax lien of the United States. Permission of this court, after notice under the provisions of section 3207, Revised Statutes of the United States, as amended by section 1030 of the Revenue Act of 1924 (43 Stat. 350 [26 USCA § 136; Comp. St. § 5929]) was granted.
The facts are not in dispute. The defendant, H. B. Yarborough, on the 5th day of January, 1926, was the owner in fee of the real estate involved herein, and on that date executed and delivered to the complainant his real estate mortgage, creating a mortgage lien upon the premises described in the deed, in favor of the complainant, for the purpose of securing the payment of one promissory note, in the sum of $10,000, dated January 5, 1926, signed by said H. B. Yarborough, and payable to the order of the complainant, on or before three years after date, with interest at the Florida legal rate of 8 per cent. per annum, payable semiannually. The mortgage deed was recorded in Dade county, Fla., on the 5th day of January, 1926, as provided by the laws of the state of Florida.
On the 15th day of January, 1927, the United States filed for record in the office of the public recorder of Dade county, Fla., the notice of tax lien, for income tax which was then shown due to the United States by the defendant, H. B. Yarborough, in the sum of $19,282.87, with interest and penalties thereon as provided by the acts of Congress.
Default was made in the payment of the semiannual interest payment which fell due June 5, 1926, and the complainant instituted this suit for the foreclosure of his mortgage and the enforcement of his lien upon the real property.
The question before the court here is that of determining the priorities of the two respective liens herein involved; that is to say, the mortgage lien of the complainant and the tax lien of the United States, the mortgage lien of the complainant having been properly recorded prior to the filing and recording of the tax lien of the United States is superior to such tax lien, and, under a decree foreclosing said mortgage lien, the mortgaged premises may be sold free of such tax lien. See Sherwood v. United States (D. C.) 5 F.(2d) 991.
Upon sale of the mortgaged premises under the direction of this court and the confirmation of said sale, the proceeds derived therefrom shall be applied: (1) To the payment of costs of this suit, including expenses incurred in making the foreclosure sale; (2) to the payment of the sum of $1,180 as reasonable fee for complainant's solicitor for his services herein; and (3) to the payment of $11,615, the amount ascertained to be due to the complainant as principal and interest on the promissory note and mortgage herein described, together with interest thereon from the 20th day of December, 1927, and the further sum of $7 for an abstract of title, paid by the complainant, and which was necessary for the preparation and institution of this suit.
If, after making all the payments above set forth, there remains a surplus over from the proceeds of the sale, such surplus shall be deposited in the registry of this court, and, upon proper application, the United States shall be permitted to have such surplus, if any, or so much thereof as may be necessary for the satisfaction of the income tax lien.
A decree will be entered in accord with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545291/ | 175 N.J. Super. 167 (1980)
417 A.2d 1095
IN THE MATTER OF THE APPLICATIONS OF THE NORTH JERSEY DISTRICT WATER SUPPLY COMMISSION AND THE HACKENSACK WATER COMPANY.
Superior Court of New Jersey, Appellate Division.
Argued December 11, 1979.
April 1, 1980.
Decided June 30, 1980.
*177 Before Judges MATTHEWS, ARD and POLOW.
Bernard F. Conway argued the cause for appellant City of Paterson (Conway, Belsole & Gardner, attorneys; Bernard F. Conway and John G. Holl, on the briefs).
*178 Newton M. Roemer argued the cause for appellant Passaic Valley Water Commission.
Alfred C. Clapp argued the cause for respondent North Jersey District Water Supply Commission (George J. Minish, attorney).
William F. Hyland argued the cause for respondent Hackensack Water Company (Riker, Danzig, Scherer & Hyland, attorneys).
Deborah Poritz, Deputy Attorney General, argued the cause for respondents Commissioner of Environmental Protection and the Water Policy and Supply Council (John J. Degnan, Attorney General, attorney).
Frank Scangarella, Township Attorney, attorney for respondent Township of Wayne.
Anthony T. Drollas argued the cause for respondent Town of Nutley.
Marvin Lehman, City Counsel, argued the cause for respondent City of Elizabeth.
The opinion of the court was delivered by MATTHEWS, P.J.A.D.
On August 1, 1973 the North Jersey District Water Supply Commission (North Jersey) filed an application with the Water Policy and Supply Council (Council) for approval of plans to increase its diversion rights from the Ramapo River at Pompton Lakes by 25 million gallons a day (mgd), to increase its withdrawal limits from the Wanaque Reservoir and to construct a seven billion gallon reservoir on the Wanaque River at Monksville.
The Hackensack Water Company (Hackensack) and the Passaic Valley Water Commission (Passaic Valley) filed objections to the North Jersey application (commonly known as the Monksville Project) on November 28, 1973. Hearings commenced on December 10, 1973 and continued intermittently until July 22, 1974 for a total of seven days.
*179 On June 19, 1974, after the fifth hearing session, Hackensack filed an application with the Council for permission to divert 3,100 million gallons a month from the Pompton and Passaic Rivers at or below the confluence of said rivers from stream flows in excess of 926 mgd. The Hackensack and North Jersey proposals were obviously in potential conflict and the Monksville hearings were adjourned on July 22, 1974 to allow the parties and staff from the Division of Water Resources to meet. The major parties to the proceedings, North Jersey, Hackensack and Passaic Valley, agreed to hold a conference on August 5, 1974 in an attempt to develop a mutually agreeable proposal.
As a result, amended applications were submitted by Hackensack and North Jersey on August 11, 1975 for a joint project known as the Two Bridges proposal. This project called for an increase in diversion rights in the Ramapo River as well as the diversion of a maximum of 3,875 million gallons a month from the confluence of the Pompton and Passaic Rivers. Hearings on these amended applications commenced on September 8, 1975. The City of Paterson (Paterson) and Passaic Valley appeared in opposition to the proposal. A formal resolution opposing the applications was entered into the record. After a total of 52 days of hearings, proceedings terminated on April 10, 1978.[1] Briefs summarizing the positions of the parties were submitted in May 1978. Subsequently, on August 25, 1978, the report of the members of the Council acting as hearing officers was completed. The hearing officers recommended approval of the joint application with modifications and, on September 25, 1978, the Council adopted their report with minor changes.
In the interim, on January 3, 1977, Paterson moved to: (a) dismiss the applications or compel the applicants to amend them to delineate the routes of pipelines; (b) dismiss the applications to compel their amendment to include a request for condemnation; (c) compel the Council to provide all parties with its current plans for the economic and comprehensive development of the Passaic River and service area of the applicants; (d) *180 require full disclosure on the record of the details of all private meetings between the applicants and state agencies prior to filing of the amended applications; (e) require the Council to decide immediately two legal issues raised by the Public Advocate "Does the doctrine of prior public use foreclose granting the applicants' condemnation powers?" and "Is the joint application ... violative of New Jersey statutes and case law?" The Council denied parts (a) through (d) of the motion on January 24, 1977. It never specifically addressed part (e).
In a separate but related procedure before the Department of Environmental Protection (D.E.P.), North Jersey sought permission pursuant to N.J.S.A. 13:1B-15.131 to encroach upon an historic site. The Great Falls at Paterson was included in the State Register of Historic Places on April 17, 1970. The Historic Sites Council (H.S.C.) met on March 10, 1977 and recommended a minimum acceptable flow over the Great Falls and through the Society for Establishing Useful Manufactures raceway (S.U.M.). Thus, both the Council decision and the Historic Sites application came before the Commissioner in the fall of 1978.
On October 31, 1978 Paterson moved before the Commissioner of the D.E.P. asking that (1) the proceedings be stayed until the applicants filed a written acceptance of the Council's report of August 25, 1978; (2) a review by the Commissioner be stayed until the H.S.C. fully reviewed and held hearings on the applications; (3) the Commissioner disqualify himself from the H.S.C. proceedings pursuant to N.J.S.A. 13:1B-15.131 and name a hearing officer to act in his place; (4) the Commissioner undertake a de novo review of these applications should the H.S.C. grant its approval, and (5) an order issue permitting all parties to submit "exceptions, objections and arguments" on any aspect of the applications.
On December 11, 1978 the Chief of the Office of Regulatory Affairs, acting for the Commissioner, denied Paterson's motion except that the parties were permitted to submit exceptions to the amended Council report directly to the Commissioner. On February 23, 1979 Commissioner O'Hern issued an order approving the recommendation of the Council and permitting encroachment *181 on the historic site. The Council informed the applicants on March 12, 1979 of the terms and conditions of approval and required acceptance of such terms within 90 days. Both North Jersey and Hackensack complied.
On April 5, 1979 the City of Elizabeth, the Township of Wayne and the Town of Nutley filed a notice of appeal from that portion of the Commissioner's final decision excluding them from sharing in the diversion planned by the Two Bridges project. On April 16, 1979 Paterson and Passaic Valley filed a joint notice of appeal from the Commissioner's decision approving the project.
Two weeks after the filing of this appeal, on April 30, 1979, Paterson instituted an action in the Chancery Division, Passaic County, by a self-styled "complaint for declaratory judgment, injunctive and other relief," naming North Jersey and Hackensack as defendants. Defendants thereafter moved for an order transferring the action pending in the Chancery Division to this court. That motion was denied by the Chancery Division judge during early September 1979, substantially for the reason that he was too unfamiliar with the action to rule on the question of transfer. Defendants then asked for a leave to appeal the denial of transfer and we refused to review that denial, staying the Chancery Division action pending determination of this appeal. Paterson and Passaic Valley also moved before us to stay the determination by us of certain legal questions which had been raised in the first point of Passaic Valley's brief. We reserved decision on that motion until disposition of this appeal.
In its seven-count complaint filed in the Chancery Division Paterson claimed in the first count that the agreements between North Jersey and Hackensack were void since there was no statutory authority for their existence; the second count claimed that the joint project here under review violated N.J. Const. (1947), Art. VIII, § III, par. 3. The third count claimed that Paterson was the owner of the riparian (sic) rights to the waters of the Passaic River within the geographical confines of the city and that the approval of the diversion granted by the Council would violate those rights. The count then asked that *182 the court declare that Paterson has all of the rights and provisions of a riparian (sic) owner of the waters of the Passaic and that the diversions sought by defendants were unlawful. The fourth count made a bare allegation of a breach of fiduciary duties allegedly owed by North Jersey to Paterson by virtue of an agreement dated June 4, 1925, providing for the construction of the Wanaque Reservoir. The fifth count was claimed to be brought under the provisions of N.J.S.A. 2A:35A-1 et seq., the Environmental Rights Act, and it alleged that the Two Bridges project under review here would cause pollution, and thus violate the provisions of the act. The sixth count was also brought under the Environmental Rights Act and it claimed that the United States Army Corps of Engineers had jurisdiction over the subject matter because the project would affect navigable waters. And the seventh count, also brought under the Environmental Rights Act, apparently asks the Chancery Division to review the Historical Sites decision made by the Commissioner of the Department of Environmental Protection which is under review here.
Disregarding the fact that the Chancery Division action was a transparent effort at delay, Paterson now claims that this court does not have jurisdiction to review the legal questions raised in the Chancery Division complaint for sundry reasons. We note at the outset that there are actually only two legal issues presently ripe for determination with respect to the proposed project which is the subject matter of this appeal and the Chancery Division action. Neither issue requires the development of a factual record since each is a purely legal issue. The first issue, which challenges the authority of North Jersey and Hackensack to enter into a joint venture, requires a determination as to whether there is any constitutional, statutory or decisional inhibition to the proposed arrangement. It is the basic concept of the joint venture that is challenged. We are not asked to pass upon specific contractual provisions of the venture since they do not presently exist. At this juncture we can only presume that if the relationship is valid, the parties will proceed in accordance with law. The second issue, that the joint *183 project violates N.J. Const. (1947), Art. VIII, § III, par. 3, by donating land or appropriating money to Hackensack Water Company, also involves a review of the core arrangement. If that arrangement is constitutional, there exist sufficient legal guidelines to cover the contractual relationship which may be entered into by the parties. See, e.g., Roe v. Kervick, 42 N.J. 191 (1964); Whelan v. N.J. Power & Light Co., 45 N.J. 237 (1965); Bayonne v. Palmer, 90 N.J. Super. 245 (Ch.Div. 1966), aff'd 47 N.J. 520 (1966), and again we must assume that they will be followed if the core arrangement is constitutional.
The questions dealing with Paterson's rights under its conveyance from the S.U.M. is premature since there is no showing, nor can there be, that the proposal as preplanned will violate any rights that Paterson has under the deed. Even if we accept Paterson's argument as correct, its remedy would be an action for damages and not for the remedy of injunction which is asked for in the Chancery Division action.
Paterson has also claimed in the Chancery Division that by designating the Great Falls a National Historic Landmark the Federal Government reserved the water rights to the Passaic River insofar as the Falls are effected. The short answer to this is that the Commissioner passed upon this issue in the proceedings below and, thus, it is clearly subject to review before us on this appeal. If, as Paterson claims, the joint venture will affect its rights under the National Historic Landmark designation, Paterson will not be foreclosed from instituting an appropriate action for compensation or such other relief as may be appropriate.
The argument with respect to jurisdiction of the United States Army Corps of Engineers is grossly premature and not ripe for adjudication. At the time of oral argument we were advised that engineers were being selected by defendants to engage in a feasibility study which will help establish the specifics of construction for the project. It is only after this information is gathered that a submission may be made to the Army Corps so that it may determine whether it should assert jurisdiction.
*184 The bald claim that there is a violation of fiduciary relationship allegedly created under the Wanaque Reservoir contract of June 24, 1925 is also premature since there is no indication that Paterson has been injured, or will be for that matter, at this stage of the proceedings. We have before us the decision of the Council which ostensibly takes into account the fears and claims of Paterson. Our review may well dispose of the basis for this anxiety.
Finally, the issues with respect to the coverage of the federal statutes, 33 U.S.C.A. § 1342 and 42 U.S.C.A. § 4321 et seq., assuming those statutes are applicable to this situation a question we need not here decide are premature. It is apparent that until the preliminary engineering studies are completed, no consideration can be given as to whether application to appropriate federal authorities should be made.
N.J. Const. (1947), Art. VI, § V, par. 3 gives this court original jurisdiction which it may exercise when appropriate. See, also, R. 2:10-5. The legal questions which are ripe for determination in this action are inextricably involved with the record review which we must perform on this appeal from the Council. R. 2:2-3(a)(2). For us to decide that the Council acted correctly and leave to another day the resolution of the validity of the acts approved would make no sense whatsoever. The Two Bridges project is clearly of major public concern and, accordingly, we deem it our obligation in the public interest that we pass upon those legal issues involved here by exercising our original jurisdiction. Compare Blasi v. Ehret, 118 N.J. Super. 501, 502 (App.Div. 1972). In view of this determination, we deny the motion for partial stay of these proceedings made by Passaic Valley and proceed hereafter to the determination of the legal issues involved.
North Jersey is a public authority established pursuant to N.J.S.A. 58:5-2.
... for the purpose of developing, acquiring and operating a water supply or a new or additional water supply for the use of the municipality and such other municipalities as may be authorized to join with it according to [N.J.S.A. 58:5-1 et seq.]
*185 North Jersey develops and operates water resources for specific municipal owners based on projections of need over reasonable periods of time. Hackensack serves 60 municipalities in Bergen and Hudson Counties. It is a public utility required under N.J.S.A. 48:2-23 to "furnish safe, adequate and proper service... and to maintain its property and equipment in such condition as to enable it to do so." North Jersey and Hackensack share a mutual obligation to the citizens of northeast New Jersey to insure the availability of an adequate supply of water.
In its initial Monksville application North Jersey proposed to increase its diversion from the Ramapo River at Pompton Lakes in order to develop an additional water supply of 25 mgd. This proposal was deemed necessary due to the overdrafting of the Wanaque system and the anticipated growth in demand which would place additional strains on the system's safe dependable yield.
Several municipalities petitioned North Jersey for acceptance into the Monksville project pursuant to N.J.S.A. 58:5-9 as follows:
Bayonne 12.50 mgd
Bloomfield 2.75 mgd
Cedar Grove 2.50 mgd
Elizabeth 10.00 mgd
Kearny 5.00 mgd
Nutley 3.00 mgd
Wayne 10.00 mgd
North Jersey rejected Elizabeth's petition, taking the city's geographical location into account and the fact that Elizabeth could obtain water from the State's Raritan Valley project. The subscriptions called for 45.75 mgd and only 25 mgd was anticipated as a result of the Monksville project. North Jersey left it to the Council to determine which municipalities could demonstrate need and gain approval for admission into the project. See N.J.S.A. 58:1-20. As mentioned, a total of seven hearings were held before the Council concerning the Monksville project, beginning on December 10, 1973. Each municipality presented evidence concerning its need for a share of the Monksville water. When the revised Two Bridges proceedings began later, *186 the Council determined that testimony previously entered during the Monksville hearings would be considered a part of the record in the new proceedings.
Hackensack and Passaic Valley entered formal objections to the Monksville application at the initial hearing. The primary concern was that the upper Ramapo River, which had always been considered a prime source for long term expansion of water supplies following the full development of the Hackensack River and other local sources, would be depleted. Hackensack, which serves over 850,000 people in Hudson and Bergen Counties, urged that any proposed project more fully develop the 160 square mile drainage basis above North Jersey's diversion site in the Ramapo River to meet the needs of all northeastern New Jersey water consumers.
Passaic Valley objected to the construction of a dam and reservoir on the Wanaque River and to the inclusion of new non-Wanaque-Ramapo partner municipalities in the benefits of the project.
On June 19, 1974 Hackensack filed an application with the Council seeking to divert 3,100 million gallons during any month at or below the confluence of the Pompton and Passaic Rivers from stream flows in excess of 92.6 mgd, sufficient to develop an additional yield of approximately 46 mgd. This application was placed into evidence during the Monksville hearings on June 24, 1974. Since the Monksville application involved a diversion from the Ramapo River, a tributary of the Pompton River which is itself a tributary of the Passaic River, it would have ultimately diminished the water supply available for Hackensack's proposed diversion at Two Bridges. In view of the potential conflict in the two applications, North Jersey and Hackensack agreed with Passaic Valley to meet on August 5, 1974 to attempt to resolve conflicting issues and develop a modified mutually feasible project.
Further meetings followed, resulting in a proposed joint project between North Jersey and Hackensack which would effectively alleviate the anticipated problems of each applicant on a reasonably long-term basis. On August 11, 1975 North *187 Jersey and Hackensack each filed separate applications which the Council considered as amendatory to their original applications.
The Council commenced hearings on the two amended applications on September 8, 1975. Paterson entered objections to the pending applications on the record. Paterson feared that any diversion would adversely affect the aesthetic and cultural value of the Great Falls and the surrounding historic district, and would have an adverse impact on the quality of its water and the generating capacity of the hydroelectric facility it planned to construct. Passaic Valley's attorney announced it was "... not opposing and ... not in concurrence" at that time. On January 26, 1976, however, Passaic Valley entered a resolution in opposition to the project. It had initially been proposed that Passaic Valley would join in the project by moving its water intake facility from Little Falls to Two Bridges, and the staffs of the three entities had initially reached a verbal agreement which would have resulted in such a move.
During the course of the hearings voluminous evidence was presented dealing with matters ranging from the aesthetics of the Great Falls to the concerns of Passaic Valley relating to the quality of water flowing downstream of the Two Bridges project. Early in the proceedings the Council announced its intention to produce an environmental impact statement of its own which was originally scheduled to be presented on January 9, 1976.
Between January 12, 1976 and January 26, 1976 the Council, after meeting with the Division of Water Resources, decided that the Division would not only prepare the impact statement but would also evaluate the various concerns raised by Paterson and Passaic Valley. In connection with this evaluation, the Council read into the record detailed questions prepared by the Division which it requested the applicants, Paterson and Passaic Valley, to answer by February 23, 1976. The parties all submitted answers to the Division's questions.
*188 The Division decided that the best approach to the presentation of a comprehensive report would be to await the presentation of substantially all the evidence by the various parties before preparing a proposal which "would also substantially satisfy the valid concerns of all parties."
In April 1977 the Division's "Two Bridges-Ramapo Water Diversion Project Environmental Evaluation" was presented to the Council. The Division made two sets of recommendations, one based on the assumption that Passaic Valley would relocate its intake at Two Bridges and the other based on the assumption that it would not.
The Division concluded that the applicants had demonstrated a need for the water to be made available to the project but that the intake structure be changed to permit intake from two points, one where the Passaic River predominates and one where the Pompton River predominates. The numerous alternative projects proposed by Paterson were examined but none was found to be a viable alternative to the proposal made by the joint application of North Jersey and Hackensack.
The proceedings before the Council terminated on April 10, 1978. After receipt of briefs submitted by all the parties in May 1978, a six-member panel of the Council which had heard testimony and received evidence prepared a report for the full Council. That report was filed on August 25, 1978 and incorporated many of the suggestions of the Division's evaluation. The full Council met on September 25, 1978 and, with minor modifications, adopted the report.
While these proceedings had been proceeding, North Jersey made an application to the chairman of the H.S.C. for authorization to encroach on an historic site (the Great Falls and adjacent district). The facts relating to the Commissioner's final approval of the encroachment are set out in detail in Part III of this opinion.
On February 23, 1979 the Commissioner endorsed the Council's decision, approving the application of North Jersey and Hackensack and authorized the encroachment of the Great Falls. *189 The Council forwarded a copy of the conditional approval to each applicant on March 12, 1979. The applicants were given 90 days within which to accept the conditional approval. North Jersey accepted on March 21, 1979 and Hackensack did so on April 16, 1979. Based upon the Division's evaluation, the subscription to the project was limited in order to keep within the expected safe yield of the project.
The Commissioner considered the testimony entered by Paterson concerning the possible harmful effects of the project to the aesthetic value of the Great Falls and its relationship to the historic district. He also considered the project's impact on the hydroelectric facility contemplated by Paterson. While acknowledging that the project would have an impact on both the Falls and the facility, the Commissioner nonetheless determined that the public need for the increased water supply outweighed these considerations.
I
Paterson begins by raising several procedural issues concerning the hearings below. It argues that unfair procedures permeated the hearings so as to destroy the presumption of validity normally given to agency decisions.
Paterson attempts to illustrate what it sees as the fundamentally unfair nature of the proceedings before the Council with a letter from Governor Byrne to the Council chairman in which the Governor expressed concern over the "lengthy period" being consumed by the hearings for the Two Bridges-Ramapo project. The Governor further noted in this letter the necessity of developing alternative water sources such as Two Bridges in light of his rejection of the proposed construction of the Tocks Island Dam. Paterson contends that this letter represents the introduction of pressure politics into the quasi-judicial administrative hearings and was nothing more than a thinly-concealed direction to approve the project.
Considering that the Council issued its decision almost two years after this letter was written, it is doubtful that the letter *190 had much, if any, influence on the final decision. Furthermore, the Governor stated in his letter that he wanted a decision so he would know if "the potential water supplies of this diversion will be available or whether other alternatives will have to be explored." (Emphasis added).
A
Paterson argues that the Council decision is a nullity as none of the Council members heard all the evidence.
There were a total of 59 hearings over a period of approximately four years before the Council. Paterson has compiled statistics taken from the transcripts of the meetings. These statistics show that a total of 17 different Council members heard the evidence and only four attended over half of the meetings. No one attended all of the meetings.
After the conclusion of the hearings the Council designated six of its members to prepare a report. This six-member panel issued a report, including findings of fact and recommendations, on August 25, 1978. The report made numerous references to the transcripts of the proceedings and exhibits introduced at the proceedings. The full Council made a few modifications in this report and issued the formal approval of the application on September 25, 1978.
Paterson contends that this poor attendance record of the Council members and the panel report procedure violated fundamental considerations of procedural due process. The cornerstone of this argument is the first Morgan case in which the United States Supreme Court held that in administrative proceedings, as in judicial proceedings, "the one who decides must hear." Morgan v. United States, 298 U.S. 468, 481, 56 S.Ct. 906, 912, 80 L.Ed. 1288 (1936). Paterson finds further support for this argument in Asbury Park v. Civil Service Dep't, 17 N.J. 419 (1955). There, the Court, in an opinion by Justice Brennan, struck down an agency determination where part of the testimony was heard by one member and part by two other members:
No one would doubt the invalidity of a jury verdict if half the jury heard only the plaintiff's witnesses and the other half heard only the testimony on behalf of *191 the defendant. Fair play is plainly denied to litigants when a trier of fact who has not heard and evaluated all the testimony influences the decision by his participation in the deliberations by which it is reached. [at 423]
However, New Jersey cases and the United States Supreme Court in the first Morgan case have made it apparent that the absolutist approach urged by Paterson, that the same members must attend all the hearings and then only those members could render the decision, is not necessary to fulfill the requirements of procedural due process.
It is clear that the United States Supreme Court did not intend a strict literal interpretation of the phrase "the one who decides must hear." See Fifth St. Pier Corp. v. Hoboken, 22 N.J. 326, 333 (1956). After enunciating that phrase, the Morgan court further stated:
Evidence may be taken by an examiner. Evidence thus taken may be sifted and analyzed by competent subordinates ... [T]he officer who makes the determinations must consider and appraise the evidence which justifies them. [298 U.S. at 481-482, 56 S.Ct. at 912]
New Jersey courts have upheld administrative decisions where testimony was not actually heard by all members of the decision-making body. Fifth St. Pier Corp., above; In re Shelton College, 109 N.J. Super. 488 (App.Div. 1970).
In Shelton this court allowed the Board of Higher Education to conduct hearings with less than a quorum. The transcript and exhibits would then be provided to all members of the board so a decision could be made. The court went on to state: "It is generally held that the requisites of an administrative fair hearing are satisfied so long as one who participates in the ultimate decision reads and considers all of the evidence presented." 109 N.J. Super. at 492.
Our Supreme Court approved a panel procedure in Fifth St. Pier Corp. v. Hoboken, above. There, R.S. 54:2-18 specifically provided for the panel procedure in cases before the former Division of Tax Appeals. The court found that due process is satisfied by having two members of the decisional body summarize the critical factual contentions for the deciding body. In reaching this decision the court proceeded on the premise that the Division members, other than the panel members, were *192 probably not familiar with the 2,500-page transcript involved in the case. The court allowed the Division to rest its decision solely on the panel report.
The court conditioned its decision in Fifth St. Pier Corp. with the requirement that litigants be allowed to file exceptions to such a panel report. This allows the litigants "to make an impressionable contact with the powers of decision" (22 N.J. at 337) and in effect corrects any due process deficiencies that might exist by allowing an administrative decision to be based on a panel report.
The panel procedure employed by the Council in these water diversion hearings did not deprive Paterson of any procedural due process rights, nor did it violate the statutory requirements concerning hearings before the Water Policy Council.
The Two Bridges hearings took 59 hearing days over a period of four years and produced over 9,000 pages of transcript. Designating six members to read and digest the testimony provided a practical means of handling the massive amount of information presented to the Council. Paterson complains that the 11-member Council was only provided with an original and one copy of the transcript, contrary to the provisions of N.J.S.A. 58:1-8 which requires that each member be provided with a copy of the transcript. We find that strict compliance with the terms of N.J.S.A. 58:1-8 would be extremely impractical and would serve no purpose here. Indeed the parties agreed in a preargument conference in this appeal to provide only one copy of the transcript to us. As in Fifth St. Pier Corp., above, we must recognize that even had a transcript been made available to each Council member, it is doubtful that each member would have taken time to become fully acquainted with the testimony. Reliance would still have been placed on the panel report.
The panel report included numerous references to the transcripts. The parties were allowed to and did file exceptions to the report. We find that due process was met.
Nor do we find that the procedure employed violated the applicable statutes. N.J.S.A. 58:1-2 et seq. Each case must *193 be viewed in light of the particular statutory requirements providing for an administrative hearing. For example, in Asbury Park v. Civil Service Dep't, above, 17 N.J. at 422 it was noted that "this statute is not like some under which one or more of the members of a commission or board merely take the testimony and the determination is made by the full body upon report of those members." In In re Shelton College, above, 109 N.J. Super. 488, we noted that the panel procedure used by the Board of Higher Education did not conflict with the enabling statute. N.J.S.A. 18A:3-16 gave the board broad powers requisite to the performance of its duties.
Paterson argues that N.J.S.A. 58:1-2 et seq. does not provide for the specific procedure employed by the Council in this instance and thus the Council cannot appoint a six-member panel to make findings of fact. However, we note that the statute does not specifically prohibit the procedure. N.J.S.A. 58:1-8 permits hearings to be conducted by one or more members and then to have the entire Council act on the application. We think that report is a practical means by which the member who heard the testimony can summarize and present the facts to the full Council. In this case a panel report was unquestionably necessary. Without it the Council would have been unable to digest four years of testimony.
B
Paterson argues that the Council improperly relied on RS-1, the environmental evaluation prepared by the Division of Water Resources of the Department of Environmental Protection, and that RS-1 was presented in such a way so as to deprive Paterson of the opportunity to challenge it.
Paterson argues that RS-1 is, in effect, a brand new application replacing the one put forth by the applicants. We find nothing in the record to support such a contention. RS-1 obviously was an environmental impact report of the proposed project containing suggested modifications.
*194 As pointed out by North Jersey and Hackensack, RS-1 is an example of the prudent use of the expertise of the Division of Water Resources by the Council and all parties were given an adequate opportunity to examine the State's witnesses concerning it. (The examination and cross-examination of Mr. Lubow, the State's expert, took over two hearing days and produced over 400 pages of transcript.) The Council's final approval made changes in the Division's recommendations, notably rejecting the Division's recommendation involving aesthetic augmentation of the Falls. The Council weighed the testimony, including the Division's evaluation, and acted to preserve the watershed while at the same time permitting much needed water supplies to flow to northern New Jersey.
C
Paterson argues that the Council acted improperly in approving Monksville. Paterson does not itself oppose Monksville but rather claims that anomalies in the Council's decision casts doubt on the viability of the entire Two Bridges-Ramapo proposal.
Paterson claims a lack of notice with regards to Monksville. However, Chairman Schwartz clearly indicated at the first hearing on the amended application that "This will be a continuation of the hearing held on July 22, 1974 and all testimony previously entered will be considered as in this case."
The decision to approve Monksville was within the reasoned discretion of the Council. That exercise of discretion will not be disturbed absent a showing that the agency determination so departs from the record as to become arbitrary, capricious or unreasonable. In re Application of Hackensack Water Co., 88 N.J. Super. 362, 369 (App.Div. 1965).
Paterson argues that the underlying reasons for the approval are unclear, and asks the court to exercise its original jurisdiction, N.J. Const. (1947), Art. VI, § V, par. 3; R. 2:10-5, to determine whether Two Bridges is viable without Monksville.
*195 We find no necessity to make an independent determination on the Monksville approval. The Council gave a conditional approval to Monksville as it was unable to determine exactly what effect the Council-imposed restrictions on Two Bridges would have on the project yield. Future engineering studies will be made. We find that this decision was neither arbitrary nor unreasonable based on the facts then before the Council.
Paterson also argues that Hackensack is now being forced to accept a project it does not want. This is not accurate. Hackensack opposed Monksville because it wished to be included in any project involving the development of the Ramapo River. Furthermore, Monksville is not being forced on anyone. The approval signed by the applicants states that "if the applicants find that the project yield of 79 mgd cannot be achieved hereunder, the proposed Monksville Reservoir may be constructed, pursuant to N.J.S.A. 58:4-1 et seq."
D
Paterson argues that the representation of both the Department of Environmental Protection and the Council by the Attorney General's Office deprived Paterson of an opportunity for a fair hearing. We do not agree.
Paterson was fully represented at the hearing and had full opportunity to object to what it saw as any irregularities in the hearings. Paterson points to no explicit statutory or case law prohibiting the practice employed here. The Water Council and Department of Environmental Protection were not adversaries in this hearing. The decision of the Attorney General to provide representation to both was not invalid. Cf. State Health Plan. and Coord. Council v. Hyland, 161 N.J. Super. 468 (App.Div. 1978) (it was proper for the Attorney General to decline to represent the appellant agency since he already represented the Commissioner of Health, an opposing party, at the same hearing). The Attorney General had discretion in choosing when and where to provide representation, Alexander v. N.J. *196 Power & Light Co., 21 N.J. 373, 380 (1956), and his decision will not be disturbed absent a showing that it was arbitrary, capricious or unreasonable. State Health Plan. and Coord. Council v. Hyland, above, 161 N.J. Super. at 476.
II
The Council is charged with the "general supervision over all sources of potable and public water supplies." N.J.S.A. 58:1-10. It supervises all sources of potable and public water supplies, including surface, subsurface and public waters to "the end that the same may be economically and prudently developed for public use." N.J.S.A. 58:1-10. The Council is specifically required by statute to review and approve plans to divert water for any new or additional source of water supply as submitted by any "municipal corporation or other civil division of the state." N.J.S.A. 58:1-17. Such review is conducted for the purpose of determining:
... whether the plans proposed are justified by public necessity, whether they provide for the proper and safe construction of all works connected therewith, whether they provide for the proper protection of the supply and the watershed from contamination or provide for the proper filtration of such additional supply, whether the reduction of the dry-season flow of any stream will be caused to an amount likely to produce insanitary conditions or otherwise unduly injure public or private interests, and whether the plans are just and equitable to the other municipalities and civil divisions of the state affected thereby and to the inhabitants thereof, particular consideration being given to their present and future necessities for sources of water supply. [N.J.S.A. 58:1-20]
Paterson and Passaic Valley contend that the Council ignored crucial evidence in making its decision to grant approval to the project and lacked a substantial credible basis upon which to rest its determination. Paterson cites the "hasty" elimination of three municipalities from the list of subscribers, the rejection of viable alternatives, the "glossing over" of significant revelations on ammonia content, the failure to assess water quality impacts and the lack of demonstrated need for the project as examples of the Council's flagrant abuse of administrative discretion in approving the defendants' application.
*197 The Council is presumed to have achieved a high degree of expertise in the field of water supply. Ararat, Inc. v. Environmental Protection Dep't., 132 N.J. Super. 305, 312 (App. Div. 1975), certif. den. 68 N.J. 157 (1975). As the Supreme Court stated in Juzek v. Hackensack Water Co., 48 N.J. 302, 310-311 (1966): "... the Water Council and its agents have developed a singular expertise and are unusually qualified to pass judgment on such subject."
In reviewing administrative findings we are limited to ascertaining whether the agency decision is based on sufficient credible evidence in the record as a whole. Only where the determination of the agency so departs from the record as to become arbitrary, capricious or unreasonable should an appellate court step in to make its own determinations. In re Application of Hackensack Water Co., above, 88 N.J. Super. at 369.
Both Paterson and Passaic Valley present a substantial amount of material concerning the alleged deleterious environmental effects of the project and point to recent declining populations in the cities to be served as proof that a public need for such a project is lacking. The Council, however, based its decision to approve the joint application of Hackensack and North Jersey on a detailed report made by a six-member panel which heard testimony and received evidence from the parties involved. That report deals at length with the public necessity for such a project, the qualitative and quantitative impact of the project, the proper method of construction and the equities of such a project. Subject to certain provisions which were clearly set forth in its report, the six-member panel recommended approval of the project. The report was submitted August 25, 1978 and amended on September 25, 1978. On September 25, 1978 the Council approved the joint application. The Council specifically stated that it found that the proposed plans, after hearing and examination, were justified by public necessity, provided for proper and safe construction and protection of water supply from contamination and that such plans were just and equitable to surrounding municipalities.
*198 The Council is required by statute to exercise its discretion and to apply its understanding of water supply matters to technical problems. N.J.S.A. 58:1-20. Here, it exercised its discretion in approving the project with modifications designed to limit subscription within the expected safe yield of the project and to safeguard the watershed from contamination. In the context of the record of the evidence and testimony made available to the six-member panel and subsequently to the Council itself, there is no reason to believe that its decision was based upon incomplete or incompetent evidence. If the findings could reasonably have been reached on sufficient credible evidence presented in the record, they should not be disturbed on appeal. In re Tenure Hearing of Grossman, 127 N.J. Super. 13, 23 (App.Div. 1974), certif. den. 65 N.J. 292 (1974); St. Vincent's Hospital v. Finley, 154 N.J. Super. 24, 30 (App.Div. 1977). In its report granting approval of the application the Council stated clearly the bases for its decision. We note that one of the "hasty" and "arbitrary" decisions Paterson complains of in its brief, the elimination of three municipalities from the list of subscribers, was made because their subscriptions would have exceeded the projected safe water yield and, further, that those municipalities have alternative sources of supply. The Council thus clearly took account of the qualitative and quantitative impact of the project, an issue Paterson uses in its attack on the plan. In addition, the panel received and considered various alternatives to the proposed project and rejected them in favor of the present plan. There is nothing in the record to indicate that the panel's decision and the Council's subsequent determination based on the panel report was defective as being unreasonable or arbitrary. New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 563 (1978).
Thus, considering the volume of evidence and the issues presented, the determination made by the Council of technical matters which fall within its area of expertise should be given judicial deference. We find sufficient evidence in the record to warrant the Council's approval of the project.
*199 III
Paterson maintains that the proposed project will have an adverse impact on the Great Falls and the adjacent district which have been designated as an historic site. The State Register Law, N.J.S.A. 13:1B-15.128 to 15.132, provides in part:
The State ... or [any] agency or instrumentality... thereof shall not undertake any project which will encroach upon, damage or destroy any area, site... or object included in the Register of Historic Places without application to, and the prior written authorization or consent of, the Commissioner of Environmental Protection. The commissioner shall solicit the advice and recommendations of the Historic Sites Council in connection with any such application and may direct the conduct of a public hearing or hearings thereon prior to granting or denying authorization or consent.... [N.J.S.A. 13:1B-15.131; emphasis supplied]
Paterson maintains that North Jersey consistently disregarded the mandatory provisions of the State Register Law in that it failed to make proper application to the Commissioner for permission to encroach on an historic site. Paterson further contends that the Commissioner's failure to hold a hearing in accordance with the Administrative Procedure Act denied it due process and mandates that the matter be remanded for an impartial hearing. The city argues that the standards guiding the authorization of the encroachment were ignored.
Since the North Jersey District Water Supply Commission is a "public body politic and corporate established as an instrumentality exercising public and ... governmental functions," (N.J.S.A. 58:5-35), it represents an agency or instrumentality of the State subject to the provisions of N.J.S.A. 13:1B-15.131. North Jersey was therefore obligated to obtain the approval of the Commissioner before undertaking any project that would have the effect of encroaching upon the Great Falls Historic District and the Great Falls, by virtue of any diminution in the flow of water over the Falls.
In recommending to the Council that defendants' application be approved, the August 25, 1978 report of the six-member panel took note of the fact that the Commissioner, in accordance with N.J.S.A. 13:1B-15.128 et seq., must make the final decision on the recommendations made in March 1977 by the Historic Sites *200 Council. Commissioner O'Hern permitted the encroachment upon the Great Falls "to the limited degree necessitated by approval of these applications." In doing so the Commissioner recognized that these applications presented difficult questions concerning the need for an adequate public water supply and the need to maintain the aesthetic value of the Great Falls. The conditions he attached to the approval of the applications represented "a reasoned attempt to resolve the conflict and satisfy both concerns." Defendants contend that the Commissioner thus properly received and acted upon the recommendations of the Historic Sites Council.
On December 18, 1975 the Director of the Great Falls Historic District sent a letter to the State Historic Site Office indicating that Paterson opposed the project because it "would seriously interfere with the flow over the Great Falls at Paterson, and through the S.U.M.[2] raceway system, a registered landmark on both the Federal and State registers." The Director alleged that the applicants' environmental assessment indicated that there would be an effect on river flow and enclosed copies of the assessment, Paterson's objections before the Council and a fact sheet set up in a question and answer format.
During January 1976, after Paterson placed its interpretation of N.J.S.A. 13:1B-15.128 et seq. before the Council, the Council issued a series of questions concerning the effect of the project on flows in the Passaic River upstream of the Great Falls. The purpose of those questions was to insure that the Commissioner of the Department of Environmental Protection had adequate information in order that he could act in his capacity as State Historic Sites Officer. N.J.S.A. 13:1B-15.131. Briefly, all questions directed to Paterson dealt with the possible effect of the Two Bridges diversion of the Falls, the hydroplant and the S.U.M. Historic District. Paterson, North Jersey and Hackensack answered the questions.
*201 On January 27, 1976 North Jersey's attorney sent a letter to the Commissioner inquiring whether the Great Falls had been designated as an historic site under N.J.S.A. 13:1B-15.128. The letter also inquired if there was any specific form of application required by the Department of Environmental Protection pursuant to N.J.S.A. 13:1B-15.131, and requested instructions or recommendations the Commissioner deemed germane to the situation.
David Poinsett, a project reviewer for the Office of Environmental Review, was requested by Messrs. Schmidt and Lubow of the D.E.P. to examine the Two Bridges-Ramapo diversion's effect on the Great Falls and S.U.M. Historic District. Poinsett has been with the State Historic Preservation Program for ten years and was the State Supervisor of Historic Sites from 1969 to 1976. We are informed that any extensive investigation or review prior to the Historic Sites Council making a finding or recommendation to the Commissioner is usually made by a staff member.
Poinsett spent several days reviewing files and documents, including environmental assessments and fact sheets prepared by the applicants, numerous photographs, the questions answered by Paterson and transcripts of the Council hearings. Briefly, Poinsett determined that the proposed project would have no effect on the current use of the S.U.M. Raceway System, would have a definite effect on the aesthetic value of the Falls based on the fact that he believed the Niagara principle was accurate for the Passaic Falls, and based on available photographic evidence he also determined that the project would have no effect on the hydroelectric plant under then current conditions. Both North Jersey and Hackensack noted that they disagreed with the conclusions reached by Poinsett. However, it is nonetheless clear that he did study the possible effects of the project on the historic site and made his determinations based on a substantial amount of testimony and evidence.
After a series of communications between the parties involved, the Chief of the Office of Environmental Assessment advised the Chief Engineer of North Jersey that North Jersey *202 should file an application with the Historic Sites Council regarding permission for an encroachment. The Acting Supervisor of Historic Sites advised Paterson's attorney on October 6, 1976 that no application had yet been made and that appropriate action would be taken upon receipt of such an application by North Jersey.
On November 17, 1976, having been informed a second time of the necessity of applying to the H.S.C. for permission to encroach and not having received a formal reply to its letter of January 27, 1976 to the Commissioner requesting his recommendations, North Jersey filed an application to the H.S.C. by a letter to its chairman.
At its meeting of March 10, 1977 the H.S.C. discussed the Two Bridges project and approval was made for encroachment of the Site. The addendum to the minutes clearly states the decision of the H.S.C. with regard to the Great Falls and the limitations on the project which were deemed necessary to preserve the character of the Falls.
On May 5, 1977 letters were sent to the attorneys of North Jersey and Paterson informing them of the H.S.C. decision of March 10, 1077. The Council noted the H.S.C.'s determination in its report to the Commissioner while specifically reserving decision on that matter for the Commissioner. The Commissioner's order of February 23, 1979 indicates that he carried out his statutory duty in weighing the effect of any encroachment by the proposed project on the historical site.
Paterson challenges the encroachment authorization as being procedurally defective. Initially, Paterson maintains that the Commissioner failed to conduct a hearing on the issue as required by the Administrative Procedure Act, N.J.S.A. 52:14B-1 et seq.
N.J.S.A. 52:14B-9(a) provides for a hearing in contested cases after reasonable notice. N.J.S.A. 52:14B-2(b) defines a contested case as:
... a proceeding, including any licensing proceeding, in which the legal rights, duties, obligations, privileges, benefits or other legal relations of specific parties are required by constitutional right or by statute to be determined by an *203 agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing.
The Administrative Procedure Act is thus a statutory description of the procedural safeguards which must be observed by an agency when the underlying statute or due process of law requires a hearing to be held prior to a determination being made. Public Interest Research Group v. State, 152 N.J. Super. 191, 205 (App.Div. 1977), certif. den. 75 N.J. 538 (1977).
N.J.S.A. 13:1B-15.131, which outlines the procedures to be followed when any project is undertaken which will encroach upon an historic site provides that "the Commissioner ... may direct the conduct of a public hearing or hearings" on the historic site encroachment "prior to granting or denying authorization or consent." (Emphasis added). Clearly, the Commissioner may use his discretion in deciding whether or not to hold a hearing. We also note that the Commissioner's failure to authorize or deny an encroachment application within 120 days after the application is filed constitutes the Commissioner's consent or authorization thereof. If a mandatory hearing were to be read into the statute, it would be inconsistent to permit such a de facto approval after a designated length of time has elapsed. The Commissioner's decision approving the project indicates that he was indeed sensitive to the historical and cultural values of the Great Falls and weighed them against the public need for the project. It is also clear from the record available that expert testimony and evaluations with regard to the encroachment were available to the Council and the Commissioner.
We are not persuaded that the plaintiffs have a constitutional right to an adversarial hearing in regard to this encroachment. A party must have "`particularized property rights or other special interests' which can be affected by the administrative determination" in order to be entitled to a true adversary hearing on a constitutional due process basis. Public Interest Research Group v. State, above, 152 N.J. Super. at 205-206; Cunningham v. Civil Service Dep't, 69 N.J. 13, 22 (1975). The Court in Cunningham also stated that a hearing is *204 not required when an agency is receiving general facts which will help it decide questions of law, policy and discretion. 69 N.J. at 22.
The Register Law seeks to preserve historic sites for the benefit of the public. Thus, when the Commissioner acted to authorize an encroachment he was doing so in a general capacity that will affect all individuals capable of deriving benefits from the historical, architectural and cultural values of the Great Falls and the adjacent district. An adversarial judicial-type meeting was not required.
We find the argument that North Jersey's letter application to the chairman of the H.S.C. rather than directly to the Commissioner renders such application defective to be without merit. Although perhaps technically correct, such an argument needlessly places form over substance, particularly in view of the fact that the statutory scheme provides for the Commissioner to seek the advice and recommendations of the H.S.C prior to making a decision. N.J.S.A. 13:1B-15.131.
Furthermore, despite the fact that statutory rules of procedure have not been promulgated with regard to encroachment applications, the statutory provisions, as noted above, authorize the Commissioner to permit an encroachment upon an historic site by taking no action at all on an application. N.J.S.A. 13:1B-15.131. The purpose of the procedures enumerated in the statute is to bring before the Commissioner such information as will enable him to exercise an informed judgment. This result was accomplished by the various reports of D.E.P. personnel and the H.S.C., as well as material submitted by the attorneys for the City of Paterson. Standards need not be set forth in express terms if they may reasonably be inferred from the statutory scheme as a whole. In re Bernaducci, 85 N.J. Super. 152, 155 (App.Div. 1964), certif. den. 44 N.J. 402 (1965). The entire enactment must be viewed in light of the objectives to be served in deciding whether there are sufficient standards. In re Bernaducci, above, 85 N.J. Super. at 156; Henderson v. Board of Exam'rs of Elec. Cont'rs, 85 N.J. Super. 509, 514 (App.Div. 1964), certif. den. 44 N.J. 399 (1965).
*205 We find there was a record for the Commissioner's review which included the findings of the six-member panel of the Council, the report of the Council itself, as well as material submitted by Paterson and developed by the D.E.P. staff personnel for the H.S.C. The Commissioner weighed the conflicting interests before him and determined that encroachment on the Great Falls and the adjacent district was necessary in order to satisfy the need for an increased public water supply.
Finally, Paterson also contends that the Council and the H.S.C. are two distinct agencies with separate functions which must of necessity be guided by separate standards. Thus, they maintain that the approval of the site encroachment is somehow defective. In view of the fact that the record reveals that the H.S.C. and Council made separate determinations with respect to the feasibility of the project and that the six-member panel deferred to the judgment of the H.S.C. and the Commissioner with respect to the historic site encroachment, this argument is unpersuasive. Even if the evidence reviewed by the H.S.C. and the Council were similar or identical, there is no indication that either body subjected its standards to those of the other in making its final determinations. Rather, the evidence is to the contrary, revealing a consideration of all relevant economic, historical and cultural factors.
IV
Paterson and Passaic Valley argue that the agreement between North Jersey and Hackensack is prohibited by New Jersey law and Constitution. It is claimed it constitutes an illegal joint venture between a public entity and a private corporation.
They first argue that North Jersey's agreement with a private corporation is an illicit sharing of delegated power. It is claimed that the agreement represents an unauthorized subdelegation of powers delegated to North Jersey by the State Legislature.
*206 Under our law "a power or duty delegated by statute to an administrative agency cannot be subdelegated in the absence of any indication that the Legislature so intends." Mercer Council #4, N.J. Civ. Serv. v. Alloway, 119 N.J. Super. 94, 99 (App.Div. 1972), aff'd 61 N.J. 516 (1972). This is especially true when the agency attempts to subdelegate to a private person or entity, since such person or entity is not subject to public accountability. N.J. Dept. of Transp. v. Brzoska, 139 N.J. Super. 510 (App.Div. 1976).
The facts do not support the subdelegation argument. North Jersey is not delegating power: it is sharing ownership. The core agreement between North Jersey and Hackensack provides that North Jersey is to be the sole operating agent of the Two Bridges project. That understanding satisfies the requirement of N.J.S.A. 58:5-24 that North Jersey is to have "sole control and charge" of a completed water supply system. North Jersey does not relinquish or delegate any of its statutory powers.
Paterson and Passaic Valley also argue that the planned joint venture violates N.J. Const. (1947) Art. VIII, § III, pars. 2 and 3. They provide:
Par. 2 No county, city, borough, town, township or village shall hereafter [viz. after the amendment of September 28, 1875] give any money or property, or loan its money or credit, to or in aid of any individual, association or corporation, or become security for, or be directly or indirectly the owner of, any stock or bonds of any association or corporation.
Par. 3 No donation of land or appropriation of money shall be made by the State or any county or municipal corporation to or for the use of any society, association or corporation whatever.
These sections were enacted in 1875 as a response to widespread abuses in government financing of the railroad industry. Roe v. Kervick, 42 N.J. 191, 206-207 (1964); Bayonne v. Palmer, 90 N.J. Super. 245, 269-272 (Ch.Div. 1966), aff'd 47 N.J. 520 (1966). Paterson and Passaic Valley argue that the provisions should be applied to prohibit this joint venture between Hackensack and North Jersey. We do not agree.
Paterson and Passaic Valley cite a line of Ohio cases beginning with Alter v. Cincinnati, 56 Ohio St. 47, 46 N.E. 69 *207 (Sup.Ct. 1897), in support of their argument. In Alter the Ohio court found that a constitutional provision similar to ours barred an arrangement under which a city would own part of the waterworks and a private company would own the balance. The court stated: "There can be no union of public and private funds or credit, nor of that which is produced by such funds or credit. The whole ownership and control must be in the public." 46 N.E. at 70. Ohio courts have reiterated this principle several times. See, e.g., Cincinnati v. Harth, 13 Ohio App. 81, affirmed 128 N.E. 263, 101 Ohio St. 344 (Ct.App. 1920); State ex rel. Wilson v. Hance, 169 Ohio St. 457, 159 N.E.2d 741 (Sup.Ct. 1959); State ex rel. Eichenberger v. Neff, 42 Ohio App.2d 69, 330 N.E.2d 454 (Ct.App. 1977).
However, we are not cited to any New Jersey cases in support of the principle expressed in Alter. Nor have any cases directly on point been found. Actually in Whelan v. N.J. Power & Light Co., 45 N.J. 237 (1965), which did not rule directly on the issue of a joint enterprise between a public and private entity, our Court did question the Ohio cases which barred such a joint venture.
Such cases seemingly mean that, however public the purpose and however defensible the use of public funds to achieve it through arrangements with private sources, still the arrangement may not take the form of a partnership or joint enterprise involving either a sharing of the underlying ownership or a sharing in the operating experience.
It is not immediately clear why this limitation should be found if the public expenditure does not otherwise offend the constitutional ban against the use of property or credit. Our Constitution does not say its prohibitions shall depend upon the form a transaction takes. [At 248]
New Jersey cases construing Art. VIII, § III, pars. 2 and 3, have refused to give those provisions a literal reading such as would tie the hands of government: "the amendments must be applied according to their essence, understood in light of the evil that led to their adoption." Whelan v. N.J. Power & Light Co., above, 45 N.J. at 247.
In Roe v. Kervick, above, 42 N.J. 191, the Supreme Court struck down a challenge, based on Article VIII, to the Area Redevelopment Assistance Act. That statute established a program whereby the Federal Government, the State and a municipality loaned moneys to finance redevelopment projects, privately *208 owned and operated for private profit, which would provide job opportunities in economically distressed areas. The Court found that this program implemented a public duty to relieve the poor. As such, Article VIII did not bar this statute. "The strictures of Article VIII which were adopted in 1875, were simply the retreat to a fundamental doctrine of government, i.e., that public money should be raised and used only for public purposes." 42 N.J. at 207.
The public purpose doctrine alone does not satisfy Article VIII. Wilentz v. Hendrickson, 133 N.J. Eq. 447 (Ch. 1943), aff'd 135 N.J. Eq. 244 (E. & A. 1944). It is clear that there must be consideration between the State and the private entity. Bayonne v. Palmer, above, 47 N.J. at 523.
These paragraphs do not "bar the State or its agencies from discharging their public duties through the medium of contracts with private entrepreneurs." Whelan, above, 45 N.J. at 246 Thus, in Runnemede v. New Jersey Water Co., 123 N.J.L. 383 (E. & A. 1939), the court upheld a municipality's contract with a private water company to secure an additional water supply; there was found adequate consideration (benefit to the municipality) and that the contract fulfilled a public purpose.
If North Jersey needed to supplement its water supply in a dry year and contracted with Hackensack for the purchase of water, such a contract would clearly be valid under the constitutional provisions in question. It makes no sense to prevent North Jersey from doing by joint venture what it clearly is permitted to do by contract increase its water supply through an agreement with a private water company.
There is a clear public purpose in this project, namely, to provide water for the people of northern New Jersey. Furthermore, this is not a free loan from North Jersey to Hackensack. Each entity is to finance its own portion of the project.
One last consideration on the constitutional issue is that Hackensack is a public utility and as such is subject to special *209 regulation by the State beyond that imposed on private corporations generally. Van Riper v. Traffic Tel. Workers' Fed. of N.J., 2 N.J. 335, 345 (1949). A joint venture with a regulated public utility is a far cry from the railroad cases of the 19th Century in which government money was lent or given to the then unregulated railroads. In the latter cases government money could, and many times did, disappear. It is doubtful that the present joint venture can lead to that kind of abuse.
Paterson and Passaic Valley argue that the Legislature did not intend to allow the joint venture in question here. However, an examination of N.J.S.A. 58:5-1 et seq. reveals that the opposite is true.
Specifically regarding the acquisition of water and the construction of facilities, North Jersey has the authority to:
... acquire by purchase or condemnation any part .. . of the water plant, water rights, easements, distribution system or other property of any existing private corporation or of any water company, including any contracts which said corporation or water company may have with any municipal or other corporation for the supply of water and may carry out said contracts; [N.J.S.A. 58:5-16; emphasis supplied]
Moreover, North Jersey may:
... construct or cause to be constructed such reservoirs, pipe lines, mains, pumping or filtration plant, standpipes, tunnels, buildings or other structures, machinery and appliances as may be necessary for the purposes of this chapter, and may hire all employees and purchase all materials necessary for such purpose, and shall have all other powers necessary or proper to provide all of the contracting municipalities in the water supply district with a sufficient water supply, including the right to contract with any municipality, corporation, person or other district water supply commission for the purchase, sale or exchange of any water, lands or other property. ... [N.J.S.A. 58:5-16; emphasis supplied]
Furthermore, N.J.S.A. 58:5-7 constitutes North Jersey:
... a body corporate with ... the right to acquire hold, use, lease and dispose of all such property as may be necessary for the uses and purposes for which the commission was created, and with all other necessary powers incident to corporate bodies.
This incorporates by reference all powers given to corporate bodies. State v. North Jersey Dist. Water Supply Comm'n, 127 N.J. Super. 251, 268 (App.Div. 1974), certif. den. 65 N.J. 578 (1974), cert. den. sub nom. Passaic Valley Water Comm'n v. New Jersey, 419 U.S. 999, 95 S.Ct. 314, 42 L.Ed.2d 273 (1974). *210 N.J.S.A. 14A:3-1(1)(m) gives a corporation "power" "to participate with others in any corporation, partnership, limited partnership, joint venture or other association of any kind ..." (Emphasis supplied).
Paterson and Passaic Valley raise what they see as a number of practical difficulties barring the joint venture. However, the agreement between North Jersey and Hackensack meets many of these problems.
Specifically, the core agreement provides for separate financing thus allowing North Jersey to enjoy the advantages of public funding. N.J.S.A. 58:5-43 et seq. Hackensack has also acknowledged North Jersey's responsibility to engage in public bidding.
In its brief Passaic Valley paints a picture of the proposed relationship as that of a private entity running amok over the interests of a public entity. The doomsday scenario is pure speculation. As a public utility Hackensack has a responsibility to the general public no less than that of North Jersey. The proposed arrangement provides adequate safeguards to protect North Jersey, and North Jersey is content with that arrangement. We see no reason either constitutional or statutory to strike it down.
V
Paterson argues that newly discovered evidence showing that the cost of the project is nearly 400% above what was testified to before the Council warrants a de novo review of the project. We comment on this argument briefly although we deem it irrelevant to the issues involved here.
The "newly discovered evidence" is an application for financial assistance filed February 8, 1979 by Hackensack with the New Jersey Economic Development Authority.
An examination of that application shows that the facts are not as stated by Paterson. The application does not show a 400% increase in the cost of the Two Bridges-Ramapo project. Rather, it is an application for financial assistance for four *211 projects, one of which is Two Bridges-Ramapo. The other three projects are: (a) expansion of the existing Hackensack Water Company Haworth Filtration Plant, (b) renovation of the Hackensack New Milford Filtration Plant and Pumping Station and (c) expansion of the Treated Water Transmission System.
The Council had before it testimony that the costs of these tangential projects were not included in the Two Bridges-Ramapo application. Thus, the projects listed in the application for financial assistance were not new evidence. The project cost of Two Bridges-Ramapo has not increased 400%. There is no justification for a de novo hearing.
The City of Elizabeth, Town of Nutley and Township of Wayne appeal from that part of the Commissioner's decision denying their applications for participation in the Two Bridges-Ramapo project.
The Council was faced with the situation where the applications for participation in the project exceeded the projected safe yield. The Council could not grant all of the applications before it. Based on the facts before the Council, a decision was made that Elizabeth, Wayne and Nutley did not demonstrate a need for the proposed supply. Passaic Valley has indicated a willingness to continue to supply Nutley; Wayne has recently entered into a contract with Passaic Valley which is adequate for its needs, and Elizabeth could not estimate the quantity of water needed for the new high school and industrial area. Furthermore, the Elizabeth-town Water Co. was available as an alternative source of supply.
An agency factual determination will not be set aside if supported by substantial evidence in the record. In re Plainfield-Union Water Co., 14 N.J. 296, 308 (1954); In re Application of Hackensack Water Co., 88 N.J. Super. 362 (App. Div. 1965). An examination of the record here shows that it contains sufficient credible evidence to support the Commissioner's decision and that the decision is not arbitrary, capricious or unreasonable. In fact, the decision was necessary. The proposed diversion was oversubscribed. Someone had to be eliminated. *212 The Council made a reasoned decision to eliminate Nutley, Wayne and Elizabeth based on the fact that they had alternative sources of water while the other municipalities did not.
Affirmed.
NOTES
[1] The proceedings produced 9,216 pages of testimony and 233 exhibits.
[2] Society for Establishing Useful Manufactures | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545315/ | 128 F.2d 188 (1942)
NATIONAL LABOR RELATIONS BOARD
v.
STACKPOLE CARBON CO.
No. 6830.
Circuit Court of Appeals, Third Circuit.
Argued February 27, 1942.
Decided April 30, 1942.
M. Louise Rutherford, Dep. Atty. Gen., for Commonwealth of Pennsylvania (Martin J. Coyne, Asst. Deputy Atty. Gen., Julius H. Tolson, Sp. Deputy Atty. Gen., and Claude T. Reno, Atty. Gen., for Commonwealth of Pennsylvania, on the brief), for petitioner.
A. Norman Somers, of Washington, D. C. (Robert B. Watts, Gen. Counsel, Ernest A. Gross, Associate Gen. Counsel, Gerhard P. Van Arkel, Asst. Gen. Counsel, Ralph Winkler, and Leslie Clifford, all of Washington, D. C., Attys., National Labor Relations Board, on the brief), for respondent.
Before BIGGS, MARIS, CLARK, JONES and GOODRICH, Circuit Judges.
*189 BIGGS, Circuit Judge.
This case arises on a petition filed by the National Labor Relations Board for a rule to show cause why certain purported assignments to the Department of Public Assistance of the Commonwealth of Pennsylvania of back pay by employees of Stackpole Carbon Company should not be declared invalid and of no effect against the Board and its agents. The rule issued. The respondents under the rule, the Commonwealth and the Department, filed an answer and argument was had. The facts are not in dispute. It appears that back pay is due to these employees under an order of the National Labor Relations Board which this court enforced by a decree. See 105 F.2d 167, 177, certiorari denied 308 U.S. 605, 60 S. Ct. 142, 84 L. Ed. 506. The proceeding at bar is ancillary to the main proceeding which arose under Section 10(c) of the National Labor Relations Act, 29 U.S.C.A. § 160(c). The controversy presently at bar raises the question whether the order of the Board directing payment of back wages to workmen may be affected by the assignments and, if so, to what extent.
The Commonwealth of Pennsylvania, the Department of Public Assistance and the public officials of the Commonwealth charged with responsibility under the "Public Assistance Law", the Act of June 24, 1937, P.L. 2051, 62 P.S. § 2501 and "The Support Law", the Act of June 24, 1937, P.L. 2045, 62 P.S. § 1971, by answer have submitted to this court's jurisdiction and have asked for the determination of the issues.
The pertinent facts may be stated as follows. Pursuant to a stipulation entered into between the Board and the Company after the entry of our decree, the Company deposited to an account entitled "Stackpole Carbon Company Labor Board Account, Regional Director, Sixth Region, National Labor Relations Board, Trustee" in a bank at St. Marys, Pennsylvania, the sum of $50,000 to be distributed in stipulated amounts, in twelve instalments from December 13, 1940 to November 13, 1941, to the employees of Stackpole named in a list attached to the stipulation. Since we ordered the stipulation filed in substance we approved it and its provisions therefore have the effect of a decree entered in the proceedings.
Some of the employees of Stackpole, including many of the employees named in the stipulation, executed assignments of back wages. Each contains a recital stating that the employee is presently anticipating the receipt of back wages from the Company and that, in consideration of the employee's indebtedness to the Commonwealth for assistance given to him by the Department, the employee transfers and assigns to the Department "such part of my salary, now due or to become due from said employer, as would have been received concurrently with assistance, had the wages been paid in the usual method of payment and, as shall be necessary to repay the total amount of assistance * * *."
Both the Board and the Department take the position that this court has jurisdiction to determine the controversy. The Board cites Section 274d of the Judicial Code, 28 U.S.C.A. § 400, the Declaratory Judgments Act, and asserts that the instructions prayed for by the Board are necessary to effectuate this court's decree and the provisions of the stipulation; that therefore the relief sought by the Board is within our jurisdiction and we may exercise the powers conferred upon us by Section 262 of the Judicial Code, the All Writs Section, 28 U.S.C.A. § 377, to preserve that jurisdiction.
We have jurisdiction to effectuate our own decree and it is unnecessary in the case at bar to evoke the provisions of the All Writs Section. In the case at bar by our decree and the stipulation, complied with by the Company, a fund was created from which Stackpole's workmen were to be paid in accordance with the Board's order.
The Commonwealth and the Department concede that no "private" right of action is created in employees under Section 10(c) of the Act, but both take the position that as a result of the Board's awards enforced by the decree of this court, a "private" substantive right vested in each of the workmen to the sum awarded him by the Board and that the workman could assign, sell or dispose of that right in any way that he saw fit. To put this in other words, the Commonwealth and the Department contend that once the Board has required reimbursement to the employee for back wages and the employer has carried out the provisions of the order, at least to the extent in the case at bar, the duty of the *190 Board is at an end. The Board has fulfilled its duty under the Act and the claim of a workman for back wages becomes like any other claim which comes into his hands.
Numerous cases are cited by the Commonwealth and the Department but none of them bears out their contentions. Two Supreme Court cases, however, one of them cited by the respondents under the rule, and a decision of this court, point the other way. We will discuss these first.
In Amalgamated Utility Workers v. Consolidated Edison Company, 309 U.S. 261, 267-269, 60 S. Ct. 561, 564, 84 L. Ed. 738, Mr. Chief Justice Hughes held that the Board is a public agency which can act only in the public interest as an instrument to assure employees protection from unfair conduct in order to remove obstructions to interstate commerce. He quoted from the report by the Committee on Labor of the House of Representatives upon the bill (See H.R. No. 972, 74th Cong., 1st Sess., p. 21) as follows, "No private right of action is contemplated [by the bill]. Essentially the unfair labor practices listed are matters of public concern, by their nature and consequences, present or potential; the proceeding is in the name of the Board, upon the Board's formal complaint. The form of injunctive and affirmative order is necessary to effectuate the purpose of the bill to remove obstructions to interstate commerce which are by the law declared to be detrimental to the public weal."
In National Licorice Co. v. National Labor Relations Board, 309 U.S. 350, 362, 60 S. Ct. 569, 576, 84 L. Ed. 799, Mr. Justice Stone said, "The proceeding authorized to be taken by the Board under the National Labor Relations Act is not for the adjudication of private rights. * * * It has few of the indicia of a private litigation and makes no requirement for the presence in it of any private party other than the employer charged with an unfair labor practice. The Board acts in a public capacity to give effect to the declared public policy of the Act to eliminate and prevent obstructions to interstate commerce by encouraging collective bargaining and by protecting the `exercise by workers of full freedom of association, self-organization, * * *'."
In National Labor Relations Board v. Newark Morning L. Co., 3 Cir., 120 F.2d 262, 268, 137 A.L.R. 849, this court, passing upon the right of an employee to reinstatement with back pay stated its conclusion that rights under the Act were public rights, though expressly reserving judgment upon the question whether the law of New Jersey might afford the claimant in the cited case a forum for the redress of her private grievances. We indicated our belief that the Board has exclusive jurisdiction to enforce the provisions of the Act, citing the provisions of Section 10(a) that the power of the Board to prevent unfair labor practices is "exclusive, and shall not be affected by any other means of adjustment or prevention that has been or may be established by agreement, code, law, or otherwise."
The Commonwealth and the Department cite National Labor Relations Board v. Killoren, 8 Cir., 122 F.2d 609, 613, 614, 137 A. L.R. 510, certiorari denied 62 S. Ct. 412, 86 L. Ed. ___, in support of the proposition that back-pay awards prescribed by the Act are wages, but in the cited case the court did no more than assimilate back-pay awards to that section of the Bankruptcy Act as amended which gives wages preference. See Section 64, sub. a(2), 11 U.S.C.A. § 104, sub. a(2).
In National Labor Relations Board v. Hearst, 9 Cir., 102 F.2d 658, also cited by the respondents under the rule, the court held merely that when an award of back pay is made to an employee who dies, his personal representative is entitled to receive it.
In National Labor Relations Board v. American Potash & Chemical Corporation, 9 Cir., 113 F.2d 232, 234, 129 A.L.R. 874, after the entry of a decree by the court of appeals enforcing an order of the Board requiring reinstatement of certain employees with back pay, the employer offered its employees bonuses to resign their rights to reinstatement. The company was found guilty of contempt. The Court stated, "The duty of an employer to reinstate arises from the statute's specific provision for such a mandate to effectuate the purposes of the Act * * *. That purpose is not effectuated by a mere giving of a private right to the unemployed man to be surrendered for a price. The primary purpose is not to create a remedy in the discharged employees. It is to safeguard the employees' right, declared in section 1 of the Act [29 U.S.C.A. § 151], to self-organize or join an existing labor organization * * *." Obviously this decision supports the position of the Labor Board rather than of its opponents.
*191 The case of National Labor Relations Board v. Carlisle Lumber Co., 9 Cir., 108 F.2d 188, does not support the proposition asserted by the respondents; viz. that the Board allowed the employer to set-off debts due to it by employees entitled to back pay. From the reported decision it appears only that the company was allegedly insolvent and had not paid the awards. The court, in a contempt proceeding, appointed a master to report how the employer could meet the requirement of the Board's order.
In Continental Oil Company v. National Labor Relations Board, 10 Cir., 113 F.2d 473, 485 the court held that the Act creates a legal right in the employee and authorizes the Board as a remedial measure to require his reinstatement with back pay. The court ruled also that the Board could require the employer to give to the employee relief reasonably adapted to redress the wrongs done to him by reason of the employer's unfair labor practices, including the restoration of the insurance rights of the discharged employee. This conclusion seems to us to be in line with the purposes of the Act for the insurance rights in substance were part of the employee's wages.
The Board for its part relies principally upon the decision of the Circuit Court of Appeals for the Ninth Circuit in National Labor Relations Board v. Sunshine Mining Company, 125 F.2d 757. In this case after the Board made awards of back pay to employees of the Sunshine Company, the Board's order was enforced by a decree of the court. Numerous persons sought to collect from the Company sums due them from Sunshine employees included in the Board's order. Most of these persons sought money judgments against some of these employees and many procured writs of attachment or garnishment in the Idaho state courts. Former wives of employees, who had secured decrees of divorce in the Idaho courts, obtained orders therein restraining Sunshine from paying to these employees the back wages due them. In another divorce case the Idaho court gave to the wife as her sole and separate property her husband's claim against Sunshine.
To avoid this confusion, the Board presented a petition to the circuit court of appeals praying for an order restraining all persons named in the petition from instituting, prosecuting or maintaining any action or proceeding or invoking any process to carry into effect these writs and injunctions against the Sunshine Company. The court granted the relief which the Board sought, one judge dissenting. It will be observed that the relief which the Board sought in the cited case was broader than that prayed for in the case at bar for in the Sunshine case there was no fund and it was necessary for the court to employ the provisions of Section 262 of the Judicial Code in order to issue its injunction. Moreover, it was necessary for the court to construe the decisions of the Supreme Court in Toucey v. New York Life Insurance Company, 314 U.S. 118, 62 S. Ct. 139, 86 L. Ed. ___, 137 A.L.R. 967, and Kline v. Burke Construction Co., 260 U.S. 226, 43 S. Ct. 79, 67 L. Ed. 226, 24 A.L.R. 1077, so as to permit the issuance of the injunction despite the provisions of Section 265 of the Judicial Code, 28 U.S.C.A. § 379, providing that no injunction shall issue from a court of the United States to stay proceedings in a state court except as authorized under the Bankruptcy Act. The majority of the court concluded that the proceedings of the Board whereby back-pay awards were issued presented an analogy to proceedings in rem, holding, therefore, that the circumstances were within the last exception set up in the Toucey case. The view of the dissenting judge was to the contrary. He concluded that there was no res and that therefore the sixth exception to the general rule embodied in the Toucey case was inapplicable.
Our task of decision is easier than that which confronted the Court of Appeals for the Ninth Circuit. In the case at bar, there is a trust fund created by Stackpole pursuant to the stipulation and deposited to the credit of the Board's Regional Director. Clearly this fund is subject to our jurisdiction. There is no need to attempt to enjoin action in any state court. The case at bar therefore is free of many of the distracting elements of the Sunshine case. Nor can we see any reason to invoke the Declaratory Judgments Act. We are called upon simply to effectuate the Board's order and our own decree.
We conclude that if the purposes of the Labor Act are to be effected the right of the employee to a back pay award must be deemed to be a public right. The award can be ordered only by the Board in the exercise of its statutory power in the public interest. When the Board has made such an award, then the employer must fulfill it as a necessary condition of labor peace in order to avoid interference with interstate commerce. The Board's order *192 cannot be deemed to be complied with by the employer until the employee to whom the award is due has received his money.
The money paid to the employee has no private character whatsoever until it is in the employee's hands. He is paid as a result of the functioning of a public body carrying out the intent of Congress. The right to the award is a public right. But as a matter of policy to compel the employer to answer innumerable garnishments or writs of injunctions as the result of suits brought to recover sums due from individual workmen, would be to hamstring the Act and prevent its effective functioning. In this respect an agency of a state can have no higher standing than a private suitor.
All the decisions look in the direction which we have indicated. In addition to those cases which we have cited see Waterman S. S. Corp. v. National Labor Relations Board, 5 Cir., 119 F.2d 760, 762, wherein the court stated, "The requirement in the Board's order to make whole the men who were illegally discharged was not made to vindicate the private rights of the men, but the policies of the National Labor Relations Act * * *", citing the early case of Agwilines, Inc., v. National Labor Relations Board, 5 Cir., 87 F.2d 146, 147.
The ruling in the Sunshine case is in point. The decision is well reasoned and we will follow it.
The relief sought by the Board will be granted and the rule will be made absolute.
CLARK, Circuit Judge, took no part in the decision of this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545318/ | 273 Pa. Super. 600 (1980)
417 A.2d 1210
COMMONWEALTH of Pennsylvania
v.
Dennis McQUAID, Appellant.
Superior Court of Pennsylvania.
Argued September 12, 1979.
Filed January 4, 1980.
Petition for Allowance of Appeal Denied September 9, 1980.
*602 Joel S. Moldovsky, Philadelphia, for appellant.
James B. Jordan, Assistant District Attorney, Philadelphia, for Commonwealth, appellee.
Before SPAETH, HESTER and CAVANAUGH, JJ.
CAVANAUGH, Judge:
This is an appeal from judgment of sentence entered after a lengthy trial before Kubacki, J. and a jury. Appellant was found guilty of criminal conspiracy; possession of an instrument of crime, generally; robbery and aggravated assault. He was sentenced to 1½ to 3 years for criminal conspiracy; 1½ to 3 years for a possession of an instrument of crime, generally; 2½ to 5 years for aggravated assault; and 10 to 20 years for robbery. All sentences are to run concurrently with the sentence for robbery.
At about 9:00 a.m., July 12, 1977, the doorbell rang at the home of Mr. Zarenkiewicz, an elderly man residing in Philadelphia, Pennsylvania. As he went to answer the doorbell, two men, one of whom was armed with a double barrel shotgun, ran into his home and asked him where his money was. The man with the shotgun threatened to kill Mr. Zarenkiewicz if he did not tell him where he kept his money and subsequently taped the victim's eyes, mouth and feet. The men ripped out the telephone and ransacked Mr. Zarenkiewicz's home. While this was occurring Mrs. Zarenkiewicz arrived home from a shopping trip. When she walked into the living room she observed one of the men holding a shotgun and she started to scream for help. The intruder *603 with the gun threatened to kill Mrs. Zarenkiewicz if she continued screaming. She continued to do so and was struck on the head and pushed down the steps. As a result of this she suffered a broken hip and was hospitalized for over three weeks. An operation was required for the insertion of a pin and plate in her hip.
The two intruders fled from the premises with two encyclopedias and three or four books containing coins which belonged to Mr. Zarenkiewicz. They were observed by a witness whose attention was caught by two men running out the front door of Mr. Zarenkiewicz's house, one of whom was carrying books over his head and the other a shotgun. The witness, who at the time his observations were made, was driving his car, stopped and heard Mrs. Zarenkiewicz moaning. He wrote down the license number of the car in which the two men fled. He also observed that the car was a green foreign make four door automobile and that three men were in it when it was driven away. He observed that the man carrying the shotgun wore a plaid shirt. This information was shortly thereafter given to the police.
The description of the car and of two of the three white males occupying the car and the license number and the direction the car was heading were broadcast over the police radio. At about ten minutes after nine a police officer observed the fleeing vehicle which had been described on the police broadcast and gave chase. The officer put on the dome light of his car to signal the fleeing vehicle to stop but it did not do so. On the contrary, it increased speed. By this time the police officer informed headquarters that he was in pursuit of the vehicle and also put on the sirens in his police car. During the chase the officer observed the doors of the pursued vehicle being opened and an object fell out one of the doors. The pursued vehicle sped into a parking lot and went into a ditch. Three males ran from the car which was then in an area of high grass and bushes. The officers shouted to the men to stop. One of the men turned and threw a machete toward the police officer who then opened fire at the fleeing men. One of the men was shot *604 and killed. This was Raymond Dales, the owner of the vehicle in which the men fled from the Zarenkiewicz house. A second man who was standing a few feet away from Mr. Dales when he was shot fled into the high grass. The third man observed fleeing from the automobile was captured by police a few minutes later. This man was Carl Miller, who was a co-defendant at appellant's trial.
Other police officers joined in the search and about one-half hour later the appellant was found hiding in the heavy undergrowth about 45 feet from where the machete was found. Appellant was wearing a plaid shirt of the same description as that worn by the man who fled from the automobile. Police officers located the stolen coins and books in the automobile in which the men fled. At about 10:00 a.m. appellant was taken to Parkview Hospital in an emergency patrol wagon together with Detective O'Brien and other police officers. On the way to the hospital appellant stated that he had been shot. Although appellant was loud when he arrived at the hospital and insisting that his girl friend be called, he appeared to calm down when the doctor told him his wound did not look too serious. Appellant was examined and was found to have a wound in the back of his head behind his right ear. The wound appeared to be slightly less than a quarter inch in diameter. Appellant's injury was treated and he was administered fluids intravenously. While waiting in the hall of the hospital for x-rays to be taken and while lying on a type of wheeled-stretcher, he made a statement to Officer O'Brien after having been advised of his constitutional rights. In the course of his statement to Detective O'Brien appellant stated that "I was there, I did it. We only got some lousy coins". The interview with Officer O'Brien lasted from about 11:15 to 11:35 a.m. and at 12:25, after appellant had been x-rayed, he was discharged from the hospital. He was subsequently taken to the police administration building and arraigned at approximately 3:00 p.m.
Appellant's first contention is that the court below erred in not suppressing his inculpatory statement that he was *605 involved in the crime. Appellant contends that his statement was involuntary and relies principally upon the case of Commonwealth v. Perry, 475 Pa. 1, 379 A.2d 545 (1977), an opinion by Manderino, J. in which Eagen and Nix, JJ. concurred in the result. Pomeroy, J., filed a dissenting opinion in which O'Brien and Packel, JJ. joined. In the Perry case the defendant was shot in the chest and taken to the hospital and placed in intensive care with the bullet still lodged in his chest. Throughout the night medical personnel monitored the defendant's vital signs. At 4:00 in the morning the defendant received demerol for pain and was given additional medicine at about 9:00 a.m. At 10:00 a.m. a police interrogation began which lasted one hour and twenty minutes. During the interrogation the defendant asked for medicine for the pain and it was refused. During this time there was also a catheter in the defendant and he was being fed intravenously. Intravenous feeding continued constantly for four days and the catheter remained in the defendant for two days. The Supreme Court held that the inculpatory statement made by the defendant was involuntary and also stated that statements made by injured persons in a hospital setting must be considered extremely suspect, 475 Pa. at 6, 379 A.2d at 547.
Appellant argues that the Perry case, supra, suggests a trend toward the inadmissibility of in-hospital confessions as a matter of law. We do not agree with this conclusion. Although Perry, supra, refers to in-hospital confessions as "suspect" it does not make the voluntariness of a confession dependent upon the place where it occurred. To be valid, a confession must be the product of an essentially free and unconstrained choice by its maker. Commonwealth v. Irvin, 462 Pa. 383, 386, 341 A.2d 132, 133 (1975).
The range of judicial inquiry into the voluntariness of a confession is broad and judgment must be based on the totality of the circumstances. Blackburn v. State of Alabama, 361 U.S. 199, 206, 80 S. Ct. 274, 280, 4 L. Ed. 2d 242 (1960). A very important circumstance in determining the totality of the circumstances is the mental and physical *606 condition of the accused at the time the inculpatory statement is made. Commonwealth v. Holton, 432 Pa. 11, 17, 247 A.2d 228, 231 (1968). In order to determine the voluntariness of the appellant's confession we must look at all of the circumstances surrounding the making of the confession including the fact that he was hospitalized at the time. We have considered the fact that he was admitted to the hospital at about 10:10 in the morning and was treated for what appeared to be a small gunshot wound of the head. While waiting in the hallway for x-rays and while lying on a stretcher he gave a statement to Officer O'Brien after being advised of his right not to make any incriminatory statement. At that time the appellant was lying on a stretcher type of vehicle and was quiet, appeared to be alert and responsive to the detective's questions. In Commonwealth v. Moore, 454 Pa. 337, 311 A.2d 620 (1973), the defendant made an inculpatory statement while he was sick and complained of cramps and was apparently suffering from drug withdrawal symptoms. During the period that he made the confession he asked to be taken to the hospital and in fact was taken to the hospital and given medication there. He returned to the police station and continued with his statement. The court found the confession to be voluntary although a short period of hospitalization was involved during the time that the statements were made. The court found credible the testimony of two police officers as to his condition and ability at the time of making the statement.
In Commonwealth ex rel. Gaito v. Maroney, 422 Pa. 171, 220 A.2d 628 (1966), the Supreme Court found a confession to be involuntary where the defendant had been shot in the stomach and the bullet had penetrated his liver, both walls of the stomach and passed through the gastro-colic omentum. The defendant was operated on in the early morning and at that time his condition was considered to be critical. The operation lasted some three and one-half hours and at the conclusion of the surgery his condition was listed in the hospital records as poor. After surgery the defendant received demerol, a narcotic, and various other medications *607 and received various fluids intravenously. About four hours after the operation an assistant district attorney obtained an inculpatory statement from the defendant. An hour after the statement was obtained the hospital records indicated that the defendant was speaking but was very incoherent and the record also indicated that the defendant lapsed into semi-consciousness. The gravity of the facts in the cases of Commonwealth v. Perry, supra, and Commonwealth ex rel. Gaito v. Maroney, supra, stand in sharp contrast to those in the instant case.
We are satisfied from a thorough review of the record that the inculpatory statement made by the appellant in this case was voluntary notwithstanding that it was made in a hospital setting, and was not the result of any overbearing influence by the police.
Appellant also contends that the admission into evidence of the out of court statement of his co-defendant, Carl Miller, violated his Fifth Amendment privilege against self-incrimination and his Sixth Amendment right to confrontation of witnesses. An examination of the record reveals that this contention is without merit. Appellant's co-defendant gave a statement to the police, part of which was read at appellant's trial, after references to the appellant were deleted. In the statement, Miller, who denied knowing any of the participants in the crime, described the events of the morning of the crime. His statement included the following:
". . . I walked down to Wyoming Avenue to where Parkview Avenue starts, like the parking lot. That's when a small green car picked me up. While going over Wyoming toward `D' street where I live. The next thing I know about three blocks after I got in the car, there was a regular police car behind us flashing their lights. The guy said `Don't stop' or `I'm not stopping.' Then we blew a light and went down a one way street . . . ."
"Q. Have you ever seen the person who picked you up before?
"A. No.
*608 "Q. Describe them.
"Mr. Ciccone [appellant's counsel]: Objection.
"THE COURT: I will sustain your objection."
Appellant objects to the use of the word "them" in the statement on the ground that it referred to more than one other person in the car. The question "describe them" follows the previous question "have you ever seen the person who picked you up before?" The question means, of course, describe the person who picked you up. Even if the objected to word "them" is given its literal meaning so that the jury could infer that there was more than one other person in the car besides the driver, we fail to see how this implicates appellant as being one of the persons in the car. All references to appellant were deleted from the statement. We note also that the presence of three males in the green automobile was testified to by at least two witnesses.
Appellant relies on the landmark case of Bruton v. United States, 391 U.S. 123, 88 S. Ct. 1620, 20 L. Ed. 2d 476 (1968), to sustain his position that the statement of the co-defendant was inadmissible. In Bruton the United States Supreme Court held that at a joint trial it was error for a postal inspector to testify that Evans (a co-defendant of the petitioner) confessed that Evans and petitioner committed an armed robbery. The court below was fully aware of the problems in admitting a co-defendant's statement and made a deliberate effort to have Miller's statement redacted to avoid violation of Bruton's rule.
The minor error in using the word "them" rather than "him" does not warrant the granting of a new trial. ". . . [I]nstances occur in almost every trial where inadmissible evidence creeps in, usually inadvertently. `A defendant is entitled to a fair trial but not a perfect trial.'" Bruton v. United States, 391 U.S. at 135, 88 S.Ct. at 1627.
Appellant also relies on Commonwealth v. Bosman, 213 Pa.Super. 258, 247 A.2d 647 (1968) which held that a co-defendant's statement was prejudicial in that it impliedly implicated the defendant in the robbery for which the defendant was being tried. In the Bosman case the co-defendant's *609 statement referred to the fact that the defendant was present in the co-defendant's apartment when the property taken in the robbery was divided. This case does not assist appellant as the redacted statement of appellant's co-defendant did not in any way implicate him.
It is well settled that redaction can be an appropriate method of protecting a defendant's rights under the Bruton decision. If a confession can be edited so that it retains its narrative integrity and yet in no way refers to the defendant, the use of it does not violate the principles of Bruton. Commonwealth v. Johnson, 474 Pa. 410, 412, 378 A.2d 859, 860 (1977).
The third issue raised by the appellant is whether the trial judge erred in not recusing himself from hearing the appellant's motion to suppress evidence and presiding at the appellant's jury trial since he had presided over a jury trial involving the appellant some three years previously. The earlier trial had resulted in a verdict of not guilty.
Initially, it should be noted that the appellant did not request Judge Kubacki, who presided over the motion to suppress and the actual jury trial to recuse himself before the trial. Further, the party seeking the disqualification of a trial judge has the burden of producing evidence tending to show bias, prejudice or unfairness by the judge. Commonwealth v. Conrad, 241 Pa.Super. 324, 328, 361 A.2d 421 (1976). In this case appellant has not produced a scintilla of evidence to establish bias or prejudice by the trial judge. Appellant's counsel stated at page 35 of his appellate brief: " . . . nothing can be directly pointed out regarding instances of the court's intentional prejudice during the jury trial. . . .".
Appellant argues in effect that a trial judge must be found to be biased and prejudiced by reason of the fact that he presided over a prior jury trial involving the same defendant. He has cited no authority to support this argument and we find it to be without merit.
*610 Appellant refers to the trial judge in his brief on appeal as the factfinder in his trial, which is inaccurate. Appellant was tried before a judge and jury and the jury alone was the finder of fact. It is inappropriate for the appellant to cite Commonwealth v. Bobko, 453 Pa. 475, 309 A.2d 576 (1973) which deals with the issue of knowledge by the jury of the defendant's prior criminal record, and not with the situation in the matter now before us for review.
The final issue for our consideration is whether appellant's sentence was excessive when compared with the sentence imposed upon the co-defendant, Carl Miller. Appellant and Carl Miller were jointly tried in the court below. Miller was sentenced as follows: 4 to 10 years for robbery; 2½ to 5 years for aggravated assault; 1½ to 3 years for conspiracy and 1½ to 3 years for possession of an instrument of crime, generally.
Appellant does not contend that his sentence is excessive in itself but only in relation to the lesser sentence which was imposed on his co-defendant. Appellant received a sentence of 10 to 20 years for robbery and as noted previously lesser sentences for criminal conspiracy, possession of an instrument of crime, generally, and aggravated assault. All sentences are to run concurrently with the sentence for robbery.
It is fundamental that the sentencing judge has broad discretion in imposing sentence, and the sentence will not be disturbed on appeal unless it exceeds the statutorily prescribed limits or is so manifestly excessive as to constitute too severe a punishment. Commonwealth v. Wrona, 442 Pa. 201, 206, 275 A.2d 78, 81 (1971). Each case raising the issue of excessive sentence must be reviewed on the circumstances of that case alone, recognizing that the trial judge has broad discretion in imposing sentence. Commonwealth v. Hill, 237 Pa.Super. 543, 564, 353 A.2d 870, 882 (1975).
The trial judge must state the reasons for the sentence he imposes. Com. v. Riggins, 474 Pa. 115, 133, 377 A.2d 140, 149 (1977); Com. v. Wertz, 252 Pa.Super. 584, 585, 384 A.2d 933, 935 (1978). At sentencing, the trial judge stated that appellant *611 had sixteen arrests and nine convictions. His convictions included the crimes of burglary, larceny and possession of narcotics. The court also noted that appellant had violated probation three times and had also violated parole. The reports before the court recommended that appellant be incarcerated. Further, the court considered the seriousness of the assault and robbery of an aged couple and the fact that they had been terrorized and that one of the victims still suffered from a broken hip.
As noted above, a more lenient sentence was imposed on Carl Miller, appellant's co-defendant. In order for a trial judge to impose different sentences on co-defendants, he must find differences between the co-defendants to justify the sentences. Com. v. Thurmond, 257 Pa.Super. 464, 467, 390 A.2d 1330, 1331 (1978). Judge Kubacki noted at Carl Miller's sentencing that he had been arrested four times and had two previous convictions. He also stated that Miller had cooperated with the authorities when he had been on probation. The reports before the judge recommended that Miller be committed to a correctional institution.
Appellant was resentenced after the earlier sentence was vacated. At resentencing, the same sentence was imposed on appellant as originally imposed. At the resentencing, appellant's counsel pointed out the disparity of the sentences between Carl Miller and appellant. The court stated:
"They are different people, considerably different people. I must view them as different people. I have to look at the whole man and that is what I have done."
We find that the court has sufficiently stated his reasons for the sentence imposed on the appellant and the reasons why the appellant received a more severe sentence than his co-defendant.
Judgment of sentence affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545319/ | 128 F.2d 395 (1942)
FLEMING, Adm'r of Wage and Hour Division, U. S. Dept. of Labor,
v.
JACKSONVILLE PAPER CO. et al. JACKSONVILLE PAPER CO. et al.
v.
FLEMING, Adm'r of Wage and Hour Division, U. S. Dept. of Labor.
No. 10118.
Circuit Court of Appeals, Fifth Circuit.
May 25, 1942.
*396 *397 Irving J. Levy and Mortimer B. Wolf, Asst. Sols., U. S. Dept. of Labor, and Abner Brodie, Principal Atty., U. S. Dept. of Labor, all of Washington, D. C., Chas. H. Spitz, Atty., U. S. Dept. of Labor, of Jacksonville, Fla., and Geo. A. Downing, Regional Atty., U. S. Dept. of Labor, of Atlanta, Ga., for appellant.
Louis Kurz and Reuben Ragland, both of Jacksonville, Fla., for Jacksonville Paper Co. et al.
Before SIBLEY, HOLMES, and McCORD, Circuit Judges.
SIBLEY, Circuit Judge.
The Jacksonville Paper Company is a very large wholesale distributor of paper and paper products whose main office and warehouse are in Jacksonville, Florida, but which maintains branch warehouses in twelve other cities in Florida and in two other States. Some of the products it sells are manufactured in Florida by a partnership composed of certain of its officers and stockholders and known as Southern Industries Company. But most of them it purchases in States other than Florida for shipment by boat, rail, or truck across State lines to the various warehouses. The employees of Jacksonville Paper Company order these goods, keep the books concerning them, and make payment for them, and also haul them in from the wharves or freight depots, and unload the freight cars and trucks which bring them to the several warehouses. After sale to the customers the goods are delivered by Jacksonville Paper Company's trucks. Frequently goods have been resold before they are ordered, and are intended for and presently delivered to these very customers. Quite often they are specially manufactured for such customers, and bear their names. Often, too, they are trucked to customers direct from the wharf or freight car without being deposited in the warehouses. But stocks of merchandise are regularly maintained in the warehouses and the major part of the goods handled are deposited there for a greater or less time until resold or ordered out. At some of the warehouses the sales out are all within the State. At others sales are made across State lines. Practically the entire production of Southern Industries Company is taken by Jacksonville Paper Company, and a large part is thus shipped regularly interstate to the warehouses outside Florida.
Warehouses and factory were all inspected by the Wage and Hour Administrator in December, 1939, and January, 1940, and he concluded all had employees engaged in commerce within Sections 6 and 7 of the Fair Labor Standards Act, 29 U. S.C.A. §§ 206, 207, with which there was not compliance. Southern Industries Company and five of the warehouses, which were selling interstate, were conceded to have employees protected under the Act, but it is claimed they have observed it since April 27, 1940. On July 8, 1940, however, the Administrator filed suit to restrain violations against Jacksonville Paper Company and Southern Industries Company. The court granted an injunction against the latter, and against the former as to the warehouses which sold interstate, but refused it as to the other warehouses, and gave judgment for costs equally divided. Both sides appeal.
It will be helpful first to notice some general principles. Sections 6 and 7 of the Act deal with an "employee who is engaged in commerce or in the production of goods for commerce." It is the employment of the particular employee and not the business of the employer, which is to be regarded. Yet the two are closely related, because the employee's work cannot be in commerce unless the employer's business is to that extent in commerce. On the other hand, the employer may be largely engaged in commerce, but the particular employee, engaged in some other work, may not be. The percentage of the employer's business intrastate as compared with that interstate proves little. The question must be whether the work of the particular employee for the time in question is in commerce or in the production of goods for commerce. His whole time and work need not be thus in commerce, because the Act does not make any distinction of that sort. If a substantial part of his work is in commerce *398 or in producing goods for commerce, he must be dealt with according to the Act. And "commerce" must not be limited to "transportation". Section 3, 29 U.S.C.A. § 203, which is the dictionary of the Act, declares that "Commerce means trade, commerce, transportation, transmission, or communication" interstate. Transportation is only a part of it. Trade is another part, and according to the old maxim, it takes two to make a trade. Importer as well exporter, buyer as well as seller, is a participant; and ordering and paying for goods are included. If across State lines all those engaged in such work are in commerce. The Act, Sect. 13(a) (2), 29 U.S.C.A. § 213(a) (2), excepts employees in a retail or service establishment the greater part of whose selling is in intrastate commerce, so that all employees of these are under or not under the Act. A wholesaler like Jacksonville Paper Company is not included in this exception, and must pay its employees who are employed in any phase of commerce according to the Act, although all its sales may be made intrastate.
There can be no hard and fast line drawn between the employees at one of these warehouses and those at another. The employees who work exclusively in intrastate business at any of them are not under the Act. Those who work either at selling or delivering across State lines, or at buying and receiving across State lines, are employed in commerce, whether they write the letters, keep the books, or load and unload or drive the trucks. As we understand the record, some of this is done at every warehouse. The unloading at destination of an interstate shipment is work in interstate transportation, whether done by the carrier or another. Baltimore & O. S. W. R. R. v. Burtch, 263 U.S. 540, 44 S. Ct. 165, 68 L. Ed. 433; Puget Sound Stevedoring Co. v. Tax Commission, 302 U.S. 90, 58 S. Ct. 72, 82 L. Ed. 68. And the purchase of goods to be transported across State lines is interstate commerce as truly as the transportation itself. Currin v. Wallace, 306 U.S. 1, and cases cited on page 10, 59 S. Ct. 379, 83 L. Ed. 441.
Without reviewing the multitude of decided cases as to when interstate transportation ends,[1] we are justified in holding that after imported goods are delivered to and received by the importer, and become part of his property held within the State subject to his disposition, whether in the original containers or not, the subsequent sale and delivery of them within the State is intrastate commerce. The typical case is a stock of goods in a warehouse awaiting sales. It does not matter that the goods were imported with a view to selling them afterwards to particular customers, or that according to past experience they would likely be sold to them, or would surely be sold to someone very soon. If they come to rest in the hands of the importer, they have ceased to be in interstate commerce because of their importation, and his employees thereafter engaging solely in selling them within the State are not employed in interstate commerce.
There are, however, border line distinctions. Where Jacksonville Paper Company takes an order from a customer for goods and purchases them in another State to fill that order, and they are shipped interstate with the definite intention that those goods be carried at once to that customer, and they are so carried, the whole movement is interstate, and the fact that title may have passed during transit, or that vehicles may have been changed, will not prevent the entire work of delivery to their final destination being an employment in commerce. Where, however, the purpose to deliver particular goods to fill a particular precedent order arises only after the goods come to rest at their originally intended destination, the new intrastate transportation afterwards undertaken will not be a part of the original interstate movement, and employees aiding only the intrastate movement are not thereby employed in commerce under the Act.
We therefore do not agree with the District Court that a line can be drawn between all the employees at one warehouse and all those at another. Nor do we agree with the Administrator that all employees at all the warehouses are necessarily under the Act because the goods they handle were imported for sale.[2] The employment of each employee must be looked to, whereever *399 he may work, to see whether a substantial part of his work during the wage period is in commerce, or not. We think it likely that it will appear that some employees at every warehouse are employed in commerce, and the Administrator in that event will be entitled to declaratory or other relief covering such employees at all the warehouses.
Southern Industries Company as to its employees producing goods for commerce and Jacksonville Paper Company as to those warehouses where employees are conceded to be employed in commerce, say that relief by injunction ought not to be granted because violations of the Act had ceased at latest by April 27, 1940, about six weeks before the suit was filed, and because an injunction will not issue to prevent that which is not threatened or has ceased; citing Industrial Ass'n v. United States, 268 U.S. 64, 84, 45 S. Ct. 403, 69 L. Ed. 849; United States v. United States Steel Corp., 251 U.S. 417, 444, 40 S. Ct. 293, 64 L. Ed. 343, 8 A.L.R. 1121; Blease v. Safety Transit Co., 4 Cir., 50 F.2d 852, 856; Champion Spark Plug Co. v. Reich, 8 Cir., 121 F.2d 769. The Administrator points to Sect. 17 of the Act, 29 U.S.C.A. § 217 giving the court jurisdiction "for cause shown * * * to restrain violations," and to such cases as United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 309, 17 S. Ct. 540, 41 L. Ed. 1007; Federal Trade Commission v. Good-year Co., 304 U.S. 257, 259, 260, 58 S. Ct. 863, 82 L. Ed. 1326; National Labor Relations Board v. Pennsylvania Greyhound Lines, 303 U.S. 261, 271, 58 S. Ct. 571, 82 L. Ed. 831, 115 A.L.R. 307; and he contends that injunctions to establish public rights stand on a different footing from those in private matters. We are of opinion that Section 17 gives jurisdiction to grant but does not require in every case the grant of an injunction. Injunction is here, as it usually is, in the discretion of the court. This case is not one where the violations were dead issues at the filing of the suit; nor was cessation entirely voluntary, but was the result of recent official pressure. And Jacksonville Paper Company and the Administrator were still at serious issue as to some applications of the law. The District Court refused to hear evidence as to violations between April 27, 1940, and the filing of the suit. We think it would have been in order to hear whether the violations were continuing and whether if they had ceased there was no purpose to renew them; but it is clear there had been recent violations, and there was still contention, and this was enough to ground the grant of injunction upon.
It was error, however, to grant an injunction as broadly as was done, for it reads: "from violating any of the provisions of the Fair Labor Standards Act of 1938." Such an injunction would put the defendants in contempt of court if thereafter in any way they violated this law, whereas it should have been restricted to a repetition of such violations as were found to have been committed, and similar ones. New York, New Haven & H. R. Co. v. Interstate Commerce Commission, 200 U.S. 361, 362, 404, 26 S. Ct. 272, 50 L. Ed. 515. A limited injunction was also granted, but as to Jacksonville Paper Company it refers to employees at named warehouses and offices only.
We need not pass upon the question whether the judgment for divided costs is good as against the Administrator, who asserts he stands as the United States in being immune against costs, for we shall reverse the judgment on the grounds above discussed, and this question is not likely to recur in the case.
We do not undertake to frame a decree appropriate to the whole situation, thinking it can best be done with the aid of counsel in the court below. We therefore reverse the judgment and remand the cause for such modification of the findings as ought to be made and a new decree in accordance with this opinion.
NOTES
[1] See 11 Am.Jur., Commerce, especially §§ 43, 45, 62, 63, 64, 66, 69, 71, 74.
[2] We so held in Jax Beer Co. v. Redfern, 5 Cir., 124 F.2d 172, and Swift & Co. v. Wilkerson, 5 Cir., 124 F.2d 176. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545292/ | 216 B.R. 628 (1997)
In the Matter of LOCKWOOD CORPORATION, Debtor.
James J. STUMPF, Trustee, Plaintiff,
v.
CREEL & ATWOOD, P.C. and Pegasus Financial Services, Inc., Defendant.
Bankruptcy No. 93-80133, Adversary No. 97-8032.
United States Bankruptcy Court, D. Nebraska.
December 2, 1997.
*629 *630 *631 James Mitchell, for Trustee.
Kathryn Derr, for L.E. Creel, III.
MEMORANDUM
TIMOTHY J. MAHONEY, Chief Judge.
Hearing was held on October 16, 1997, on a motion to dismiss. This memorandum contains findings of fact and conclusions of law required by Fed.Bankr.R. 7052 and Fed. R.Civ.P. 52. This is a core proceeding as defined by 28 U.S.C. § 157(b)(2)(A).
Background
The debtor in the underlying bankruptcy case, Lockwood Corporation (BK93-81033), filed a voluntary petition for Chapter 11 bankruptcy on January 29, 1993. Simultaneously filed with the petition was an Application for Employment to allow the debtor to employ Creel & Atwood, P.C. (hereafter "Creel & Atwood"), a Texas professional corporation. Creel & Atwood received authorization to be employed as debtor's counsel on March 15, 1993. Creel & Atwood served in that capacity until their withdrawal was approved on November 4, 1993. After Creel & Atwood's withdrawal, the debtor was represented by Schmid, Mooney & Frederick, P.C., a Nebraska professional corporation.[1]
Creel & Atwood received compensation and reimbursement for expenses, from the debtor's estate, in the amount of $168,049.92. During the pendency of the Chapter 11 case, Creel & Atwood submitted affidavits to the Court, which certified "that the Firm is able to respond to any reassessment or disgorgement of these fees and expenses, as may be ordered by the Court." (Affidavit of Paul B. Geilich, shareholder of Creel & Atwood, filing no. 140). Creel & Atwood filed a "Final Application of Creel & Atwood, P.C. for Compensation and Reimbursement of Expenses" and the Court signed the submitted order allowing the fees to be paid.
The Chapter 11 case was converted to Chapter 7, on February 20, 1996. The Chapter 7 Trustee, alleging that the Lockwood Chapter 7 estate is administratively insolvent filed this present adversary proceeding against Creel & Atwood and Pegasus Finical Services, Inc. Creel & Atwood has filed this pending Motion to Dismiss and asserts numerous legal grounds for such dismissal. Those assertions will now be dealt with seriatim.
Discussion
I. Standard for Granting a Motion to Dismiss
A motion to dismiss filed after the pleadings have closed is, in essence, a motion for judgement on the pleadings. St. Paul Ramsey County Medical Center v. Pennington County, 857 F.2d 1185, 1187-88 (8th Cir. 1988), citing Fed.R.Civ.P. 12(c); Falls Riverway Realty v. Niagara Falls, 754 F.2d 49, 53 (2d Cir.1985). A court should not grant a Fed.R.Civ.P. 12(c) motion for judgement on the pleadings "unless the movant clearly establishes no material issue of fact remains to be resolved and he is entitled to judgement as a matter of law." Iowa Beef Processors, Inc. v. Amalgamated Meat Cutters and Butcher Workmen of North America, 627 F.2d 853, 855 (8th Cir.1980), citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1368 at p. 690. The court in deciding the 12(c) motion for judgement on the pleadings must "construe all *632 well pleaded factual allegations of the nonmoving party as true, and draw in favor of that party all reasonable inferences from these facts." Id., citing Quality Mercury, Inc. v. Ford Motor Co., 542 F.2d 466, 468 (8th Cir.1976), cert. denied, 433 U.S. 914, 97 S. Ct. 2986, 53 L. Ed. 2d 1100 (1977).
II. Subject Matter Jurisdiction
The complaint must sufficiently allege its jurisdictional basis, to establish subject matter jurisdiction. Bowe v. Northwest Airlines, Inc., 974 F.2d 101, 103 (8th Cir.1992), citing Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir.1990); Haley v. Childers, 314 F.2d 610, 613 (8th Cir.1963). When a court is deciding a "facial attack on a complaint's alleged jurisdictional basis, the [court] [considers] the complaint's factual allegations as true." Bowe, 974 F.2d at 103, citing Lawrence, 919 F.2d at 1529; Haley, 314 F.2d at 613. A court should grant dismissals for lack of subject matter jurisdiction sparingly and cautiously. Bowe, 974 F.2d at 103, citing Huelsman v. Civic Ctr. Corp., 873 F.2d 1171, 1174 (8th Cir.1989).
Bankruptcy courts have only the jurisdiction and powers expressly or by implication granted by Congress. Johnson v. First Nat'l Bank of Montevideo, 719 F.2d 270, 273 (8th Cir.1983) (citations omitted), cert. denied, 465 U.S. 1012, 104 S. Ct. 1015, 79 L. Ed. 2d 245 (1984). The Eighth Circuit recently explained the distinction between core and non-core proceedings vis-a-vis subject matter jurisdiction in Specialty Mills, Inc. v. Citizens State Bank, 51 F.3d 770 (8th Cir. 1995). The Eighth Circuit stated:
Civil proceedings in a bankruptcy case are divided into two categories, core proceedings and non-core, related proceedings. Abramowitz v. Palmer, 999 F.2d 1274, 1277 (8th Cir.1993) (Abramowitz). Core proceedings under 28 U.S.C. § 157 are those which arise only in bankruptcy or involve a right created by federal bankruptcy law. Matter of Wood, 825 F.2d 90, 97 (5th Cir.1987)(Wood); see 28 U.S.C. S 157(b)(2). Non-core, related proceedings are those which do not invoke a substantive right created by federal bankruptcy law and could exist outside of a bankruptcy, although they may be related to a bankruptcy. Wood, 825 F.2d at 97.
Specialty Mills, 51 F.3d at 773-774.[2]
The Chapter 7 Trustee's cause of action against Creel & Atwood is based upon the priority scheme of the Bankruptcy Code and the compensation received by Creel & Atwood from the Lockwood bankruptcy estate. The Chapter 7 Trustee's claim exists solely under Title 11 and it could not exist outside the bankruptcy courts. Therefore, the disgorgement action by the Chapter 7 Trustee is a core proceeding, as defined in 28 U.S.C. § 157(b)(2).
III. Personal Jurisdiction
A. In Personam Jurisdiction
Service of process is the physical means through which personal jurisdiction is obtained over a party. Nordberg v. Granfinanciera, S.A. (In re Chase and Sanborn Corp.), 835 F.2d 1341, 1345 (11th Cir.1988) rev'd other grounds 492 U.S. 33, 109 S.Ct. *633 2782, 106 L. Ed. 2d 26 (1989). The Federal Rules of Bankruptcy Procedure provide for a system of nationwide service of process. Rule 7004(d) states "The summons and complaint and all other process except a subpoena may be served anywhere in the United States." Fed.R.Bankr.P. 7004(d). The nationwide service provided in Rule 7004(d) grants in personam jurisdiction over any party located in the United States, regardless of the entities contacts with forum state. K O Trucking v. Ground Control, Inc. (In re K O Trucking, Inc.), 99 B.R. 78, 79-80 (N.D.Ala. 1988).
The purpose of Rule 7004(d) is to prevent the fragmentation of bankruptcy litigation and to avoid the limitations on service of process found in Fed.R.Civ.P. 4. G.F. Track Service, Inc. v. Dakota, Minnesota & Eastern Railroad Corp. (In re G.F. Track Service, Inc.), Neb. Bankr. 89:62, 63 (Bankr. D.Neb.1989). In lieu of the standard due process requirements, minimum contacts analysis, the Bankruptcy Code and Rules permit the District Court to make a determination concerning abstention under 28 U.S.C. § 1334. Id., citing 9 Collier on Bankruptcy ¶ 7004.06 (15th ed.1988).
Therefore, since Creel & Atwood has been properly served with the complaint, this Court has personal jurisdiction over the movant.
B. Minimum Contacts
While many courts, including this one, have held that the minimum contacts analysis for a due process determination is irrelevant to a determination of personal jurisdiction upon a party properly served through Fed. R.Bankr.P. 7004(d)[3], Creel & Atwood asserts that a minimum contacts approach is Constitutionally required. Assuming, for purposes of this motion only, that minimum contacts analysis is applicable, Creel & Atwood's assertion that it has insufficient contacts with Nebraska for jurisdictional purposes is wholly without merit.
Under the minimum contacts analysis, in order for this Court to obtain personal jurisdiction over the nonresident defendant, Creel & Atwood, the requirements of Nebraska's long arm statute must be met and the exercise of personal jurisdiction must meet constitutional requirements. Wessels, Arnold & Henderson v. National Medical Waste, Inc., 65 F.3d 1427, 1431 (8th Cir. 1995). The applicable long-arm statute is Neb.Rev.Stat. § 25-536 (Reissue 1995). Nebraska has construed this statute to confer jurisdiction to the extent allowed by the Constitution. Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610, 612 (8th Cir.), cert. denied, 513 U.S. 948, 115 S. Ct. 359, 130 L. Ed. 2d 313 (1994); Aaron Ferer & Sons Co. v. American Compressed Steel Co., 564 F.2d 1206, 1209 (8th Cir.1977).
The due process clause requires a defendant to have such minimum contacts with the forum state so that the traditional notions of fair play and substantial justice are not offended. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158, 90 L. Ed. 95 (1945). To establish sufficient minimum contacts, defendant must have, by some act, purposefully avail[ed] itself of conducting activities within the forum state, thus invoking the benefits and protection of its laws. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 2183, 85 L. Ed. 2d 528 (1985). The defendant's contacts must have been more than random, fortuitous, or attenuated. Id. Rather, the contacts must be such that the defendant should reasonably anticipate being haled into court in the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490 (1980).
Personal jurisdiction is divided into two categories: specific jurisdiction and *634 general jurisdiction. Specific jurisdiction is jurisdiction over causes of action arising from or related to defendant's contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S. Ct. 1868, 1872, 80 L. Ed. 2d 404 (1984). Where none of the actions complained of occurred within or had any connection to the forum state, specific jurisdiction may not be exercised. Id. General jurisdiction is the power of a forum state to adjudicate any cause of action regardless of where the cause of action arose. Id.; See also Digi-Tel Holdings, Inc. v. Proteq Telecommunications, Ltd., 89 F.3d 519, 522 n. 4 (8th Cir.1996); Wessels, 65 F.3d at 1432 n. 4. To establish general jurisdiction, the non-resident defendant must be engaged in continuous and systematic general business contacts with the forum state. Id. Helicopteros Nacionales de Colombia, S.A., 466 U.S. at 416, 104 S.Ct. at 1873.
The Eighth Circuit has established a five-factor test to determine if the above due process requirements have been met. Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., 111 F.3d 1386, 1390 (8th Cir. 1997); Digi-Tel, 89 F.3d at 522. The factors are:(1) the nature and quality of the contacts, (2) the quantity of the contacts, (3) the relation of the cause of action to the contacts, (4) the forum state's interest in the litigation, and (5) the convenience of the parties. Id. The first three factors are to be given primary consideration while the last two are to be given secondary consideration. Id. The third factor distinguishes whether the jurisdiction is specific or general. Digi-Tel, 89 F.3d at 522 n. 4 (citing Wessels, 65 F.3d at 1432 n. 4.)
Applying the five factors to Creel & Atwood, it is clear that Creel & Atwood had more than sufficient contacts for specific jurisdiction. Creel & Atwood voluntarily represented the debtor corporation, Lockwood, for approximately the first ten months of the underlying Chapter 11 case. While Creel & Atwood was a Texas law firm, it chose to represent a Nebraska corporation in the United States Bankruptcy Court for the District of Nebraska. During that time, representatives of Creel & Atwood, were at various times physically present in Nebraska representing Lockwood. While the representation lasted less than a year, Creel & Atwood managed to perform significant amount of billable work in the Chapter 11 case and billed the estate for approximately $160,000.00. The adversary proceeding is based upon the representation of the debtor by Creel & Atwood and the fees that Creel & Atwood received. It is these very fees that the Chapter 7 Trustee seeks to disgorge in this adversary proceeding. The District of Nebraska has a continued interest in the adjudication of the adversary proceeding, since the outcome of the adversary proceeding will significantly impact the underlying bankruptcy case. Nebraska is the most convenient forum for all parties, except for Creel & Atwood. The underlying bankruptcy case is pending in the District of Nebraska, the Chapter 7 Trustee and counsel for the Chapter 7 Trustee are in Nebraska, the debtor corporation is located in Nebraska, and this Court is familiar with the parties and the history of the case. All five of the factors strongly indicate specific jurisdiction over Creel & Atwood, for this disgorgement proceeding, exists in Nebraska.
IV. Failure to State a Claim
In considering a motion to dismiss for failure to state a claim upon which relief can be granted, the "court `is constrained by a stringent standard. . . . A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Parnes v. Gateway 2000, Inc., 122 F.3d 539, 545-46 (8th Cir.1997), citing Fusco v. Xerox Corp., 676 F.2d 332, 334 (8th Cir. 1982) (quotations and citations omitted). Additionally, the complaint must be viewed in the light most favorable to the plaintiff and the complaint "should not be dismissed merely because the court doubts that a plaintiff will be able to prove all of the necessary factual allegations." Id.
Under the Parnes analysis, the focus is whether the Chapter 7 Trustee has a cause of action to compel disgorgement from a Chapter 11 professional, who received compensation *635 during the Chapter 11 portion of the case, and whether the Chapter 7 Trustee has pled sufficient facts which, if proven true, would entitle him to the relief sought.
The clear majority of courts that have addressed this issue have uniformly held a cause of action for disgorgement does exist if the Chapter 7 estate is administratively insolvent. See Matz v. Hoseman, 197 B.R. 635, 639 (N.D.Ill.1996)(An award of interim fees by the bankruptcy court under § 331 is not final and is subject to later review by the court.); U.S. Trustee v. Johnston, 189 B.R. 676, 677 (N.D.Miss.1995)(A court has the power to order the disgorgement of professional fees paid pursuant to orders granting interim compensation under § 331, in order to carry out the provisions of § 726(b).); In re Anolik, 207 B.R. 34 (Bankr.D.Mass.1997)(Interim compensation awards for professionals persons are interlocutory and subject to disgorgement, but ordering disgorgement of interim fees, otherwise allowable, in either Chapter 7 or 11 case is discretionary matter in administratively insolvent cases.); In re Metropolitan Elec. Supply Corp., 185 B.R. 505 (Bankr.E.D.Va.1995)(Applications denominated "final applications" for compensation, were still interim fees pursuant to § 331 and therefore subject to disgorgement.); In re Lochmiller Indus., Inc., 178 B.R. 241 (Bankr.S.D.Cal.1995)(Chapter 11 professionals required to disgorge amounts paid to them as Chapter 11 administrative expense claims prior to conversion of case to Chapter 7, upon determination that Chapter 7 estate was administratively insolvent.); In re Kearing, 170 B.R. 1 (Bankr.D.D.C.1994)(Bankruptcy Court has authority to order disgorgement of interim compensation previously paid, upon showing of administrative insolvency.); In re Lighting Ctr., 178 B.R. 320 (Bankr.D.R.I.1995)(Professional ordered to disgorge the amount it has received of interim compensation in excess of its pro-rata distribution, in a Chapter 7 case, which was converted from Chapter 11.); In re Croton River Club, 162 B.R. 656 (Bankr.S.D.N.Y. 1993)(Law Firm's administrative claim was potentially subject to subrogation by super priority provision of Code, therefore firm's final fee application would be allowed and paid by Chapter 7 trustee, subject to possible future disgorgement, if the estate became insufficient to provide full satisfaction of Chapter 7 super priority claimants, and law firm's fee exceeded its pro rata share of Chapter 11 administrative claims.); In re Gherman, 114 B.R. 305 (Bankr.S.D.Fla.1990)(Interim compensation would be allowed, subject to duty to later disgorge such amounts if it was determined that insufficient funds existed to similarly pay other administrative claims.); In re Vernon Sand & Gravel, 109 B.R. 255 (Bankr. N.D.Ohio 1989)(Bankruptcy court can require professional fees to be disgorged to achieve prorated deduction when, upon conversion of Chapter 11 case to Chapter 7, there are insufficient funds to pay Chapter 11 administrative expenses.); In re Kaiser Steel Corp., 74 B.R. 885 (Bankr.D.Colo. 1987)(If some administrative expenses are paid on interim basis and it is ultimately determined that there will be insufficient funds to similarly pay all other administrative claims, those who have received interim payments may be required to disgorge funds so that all administrative claims share pro rata.); In re Wabash Valley Power Assoc., 69 B.R. 471 (Bankr.S.D.Ind.1987)(Interim fee awards are refundable to estate, where it subsequently becomes necessary to prorate administrative expenses.); In re American Internat'l Airways, Inc., 47 B.R. 716 (Bankr.E.D.Pa.1985)(Interim allowances are subject to the Court's re-examination and adjustment during the course of the case, and all expenses of administration must receive the Court's final scrutiny and approval and are refundable to the estate if it subsequently becomes necessary to pro rate administrative expenses.); In re Burlington Tennis Associates, 34 B.R. 839 (Bankr.D.Vt.1983)(While § 331 permits interim compensation, only at conclusion of case can a determination of full value of services rendered be made, thus interim compensation is approved subject to later readjustment or disgorgement); In re Vermont Real Estate Inv. Trust, 26 B.R. 905, 908 (Bankr.D.Vt.1983)(Interim compensation allowed subject to the proviso that applicant will reimburse the Estate in the event that *636 pro-ration of administrative expenses becomes necessary by conversion to Chapter 7 or because of insufficient funds with which to pay all Chapter 11 administrative costs.).
Creel & Atwood cited no legal authority in support of its position that the trustee's complaint failed to state a claim. The Court has found only one case that held that a cause of action for disgorgement, based solely on administrative insolvency, does not exist under the Code. In re Unitcast, Inc., 214 B.R. 992 (Bankr.N.D.Ohio 1997). In Unitcast, the court stated that:
The issue to be resolved upon the UST's Request is whether this Court should adopt the rule already adopted by other courts that interim professional fees paid during a Chapter 11 case which is subsequently converted to a Chapter 7 case should be disgorged to effectuate a pro rata distribution among administrative expense creditors when there are insufficient assets in the Chapter 7 case to pay all the Chapter 11 administrative expenses have been paid. This Court does not believe that Congress intended disgorgement of professional's fees due only to administrative insolvency. Further, this Court finds such disgorgement would harm rather than further the goals of the Bankruptcy Code.
Id. at 1000.
Section 331 allows only "[a] trustee, an examiner, a debtor's attorney, or any professional person employed under section 327 or 1103 of this title to apply" for interim compensation. The court, at its discretion "may allow and distribute" the compensation sought by the applicant. A bankruptcy court's authorization to distribute interim compensation to a professional, based on his administrative claim, does not create in that professional a greater priority right based merely on the fact that the professional has been allowed to receive the compensation. However, under the Unitcast analysis this is precisely the outcome. Professionals, who are given the same priority as other administrative expenses but allowed to seek interim compensation, are given a defacto "super priority" over other administrative claimants who are not allowed to seek interim payment of their claims.
This Court declines to follow Unitcast and instead concurs with the majority of courts that have addressed this issue and finds that a cause of action for disgorgement based on administrative insolvency exists under the Bankruptcy Code.
Additionally, Creel & Atwood argues that even if a cause of action for disgorgement exists for interim fees paid to Chapter 11 professionals, only those paid by an interim order are subject to disgorgement and that the "final" award to Creel & Atwood was via a "final" order, thus not subject to disgorgement. Creel & Atwood argue that the cases of Dahlquist v. First National Bank in Sioux City (In re Dahlquist), 751 F.2d 295 (8th Cir.1985) and Yermakov v. Fitzsimmons (In re Yermakov), 718 F.2d 1465 (9th Cir. 1983) support its position that the fees were awarded by a "final" order. Dahlquist and Yermakov are both factually and legally distinguishable from the case at bar.
In Yermakov, the debtor's attorneys were appealing the bankruptcy court's disallowance of their contingency fee contract, which predated the bankruptcy. The attorneys had not received any of the compensation that was the subject of the appeal. The debtor had filed a motion to dismiss the Chapter 11 case prior to the attorneys seeking approval of their fee allowance pursuant to 11 U.S.C. § 330(a)(1). The bankruptcy court did not ruled on the motion to dismiss, rather the bankruptcy court was awaiting the outcome of the appeal. Yermakov, 718 F.2d at 1468. Additionally, the Ninth Circuit made the determination that the order was final solely for the purpose of determining appellate jurisdiction. Likewise, in Dahlquist, the Eighth Circuit, following Yermakov, held that an interim award of attorneys fees was a final order and thus appealable, when the underlying bankruptcy case had been dismissed. Dahlquist, 751 F.2d at 297.
In the present case, Creel & Atwood sought compensation after withdrawal from the case, but the Chapter 11 case continued for approximately two and a half years before being converted to Chapter 7. The Chapter 7 case is currently ongoing and no *637 motion to dismiss is currently pending. Creel & Atwood's claim is not being disputed from a section 330 stand point, rather the Chapter 7 Trustee seeks to provide for full payment of the higher priority Chapter 7 administrative claims and a pro rata distribution of the Chapter 11 administrative claims.
Creel & Atwood's argument overlooks the fact that if the funds it received were not allowed pursuant to section 331, Creel & Atwood would have had no statutory authority to receive payment on its claim prior to confirmation. Section 330 states, in pertinent part, "[a]fter notice to the parties in interest and the United States Trustee and a hearing, . . . the court may award to a trustee, an examiner, a professional person . . . reasonable compensation" 11 U.S.C. 330(a)(1)(A) (emphasis supplied). In a Chapter 11 case, the payment of section 507(a)(1) administrative claims, which includes professional fees, would occur no sooner than the effective date of the plan. 11 U.S.C. § 1129(a)(9)(A) or if converted to Chapter 7 at distribution pursuant to section 726. However, section 331 states in pertinent part "[a]fter notice and a hearing, the court may allow and distribute to such applicant such compensation or reimbursement." 11 U.S.C. § 331 (emphasis supplied). No plan was confirmed in the Chapter 11 case (thus no effective date for the plan) nor has the Chapter 7 Trustee initiated distribution pursuant to section 726. Thus the only Code provision that would have allowed Creel & Atwood to apply for and receive compensation and reimbursement is section 331. Therefore, Creel & Atwood's compensation was an award of interim compensation pursuant to section 331 and thus is subject to disgorgement.[4]
The Chapter 7 Trustee's complaint sufficiently alleges facts and a basis for recovery, to overrule the Motion to Dismiss on the basis of failure to state a claim.
V. Res Judicata
The term res judicata, when used generally, encompasses two distinct concepts, claim preclusion and issue preclusion. W.A. Lang Co. v. Anderberg-Lund Printing Co. (In re Anderberg-Lund Printing Co.), 109 F.3d 1343, 1346 (8th Cir.1997). The Anderberg-Lund court examined the distinction of the two concepts, and noted:
Claim preclusion (traditionally termed res judicata or merger and bar) "`bars relitigation of the same claim between parties or their privies where a final judgement has been rendered upon the merits by a court of competent jurisdiction.'" Plough v. West Des Moines Community Sch. Dist., 70 F.3d 512, 517 (8th Cir.1995)(quoting Smith v. Updegraff, 744 F.2d 1354, 1362 (8th Cir.1984)). Issue preclusion (or collateral estoppel) applies to legal or factual issues "actually and necessarily determined," with such determination becoming "conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation." Montana v. United States, 440 U.S. 147, 153, 99 S. Ct. 970, 973, 59 L. Ed. 2d 210 (1979).
Id. at 1346.
Creel & Atwood's argument that res judicata is applicable to the fee order is wholly without merit. Claim preclusion "bars relitigation of the same claim between parties" and implicit in that statement is the fact that the claim must have been litigated in the first place. At the time of Creel & Atwood's final fee allowance, the bankruptcy case was still in Chapter 11 and 11 U.S.C. § 726(b) was not yet applicable. Additionally, the bankruptcy estate arguably was not yet administratively insolvent. Finally, it should be clear that this action for disgorgement could have risen only after Creel & Atwood received the payment and thus had something to be disgorged. Issue preclusion is likewise inapplicable to this case. Issue preclusion requires the issue to be barred have been "actually and necessarily determined." Neither the issue of whether the estate was/is administratively insolvent nor any other relevant issue to the disgorgement *638 cause of action have been previously determined.
VI. Miscellaneous Arguments
Creel & Atwood also raised several other arguments for granting the Motion to Dismiss, such as "equitable mootness", estoppel, and reasonable expectations of Creel & Atwood. These issues involve material questions of fact and therefore not appropriate for determination on a motion to dismiss.
Conclusion
For the stated reasons above, Creel & Atwood's Motion to Dismiss is denied.
Separate journal entry to be filed.
NOTES
[1] Schmid, Mooney & Frederick, P.C. and other counsel and accountants are defendants in a separate adversary proceeding. As in this adversary proceeding, the Chapter 7 Trustee seeks disgorgement of interim compensation paid to Chapter 11 professionals.
[2] See also In re United States Brass Corp., 110 F.3d 1261, 1268 (7th Cir.1997) ("Core proceedings are actions by or against the debtor that arise under the Bankruptcy Code in the strong sense that the Code itself is the source of the claimant's right or remedy, rather than just the procedural vehicle for the assertion of a right conferred by some other body of law, normally state law."); United States v. Yochum (In re Yochum), 89 F.3d 661, 670 (9th cir.1996) (citations omitted) ("In determining whether a matter is a non-core proceeding, we look to a variety of factors `such as whether the rights involved exist independent of title 11, depend on state law for their resolution, existed prior to the filing of a bankruptcy petition, or were significantly affected by the filing of the bankruptcy case.'"); Torkelsen v. Maggio (In re The Guild and Gallery Plus, Inc.), 72 F.3d 1171, 1178 (3d Cir.1996) ("If the proceeding involves a right created by the federal bankruptcy law, it is a core proceeding."); Sanders Confectionery Products, Inc. v. Heller Financial, Inc., 973 F.2d 474, 482 (6th Cir.1992) (citation omitted) ("A core proceeding either invokes a substantive right created by federal bankruptcy law or one which could not exist outside of the bankruptcy."); Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10th Cir.1990) (citation omitted) ("Core proceedings are proceedings which have no existence outside of bankruptcy").
[3] See G.F. Track Service, Inc. v. Dakota, Minnesota & Eastern Railroad Corp. (In re G.F. Track Service, Inc.), Neb. Bankr. 89:62, 63 (Bankr. D.Neb.1989); In re Prospect Hill Resources, Inc., 69 B.R. 79 (Bankr.N.D.Ga.1986); In re Rusco Industries, Inc., 104 B.R. 548 (Bankr.S.D.Ga. 1989); B.W. Development Co., Inc., 49 B.R. 129 (Bankr.W.D.Ky.1985); In re Coby Glass Products Co., 22 B.R. 961 (Bankr.D.R.I.1982); In re Whippany Paper Board Co., 15 B.R. 312 (Bankr.D.N.J. 1981); In re Nixon Machinery Co., 15 B.R. 131 (Bankr.E.D.Tenn.1981); See also 10 Collier on Bankruptcy ¶ 7004.06 (15th Ed.1997).
[4] Even if one assumes, for the sake of argument, that Creel & Atwood compensation order was a final compensation order under § 330, as the court in Lochmiller noted "even `final' orders for compensation under section 330 are interlocutory and subject to review and modification while the case is pending." Lochmiller, 178 B.R. at 245 n. 18. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545362/ | 128 F.2d 424 (1942)
COMMISSIONER OF INTERNAL REVENUE
v.
CHICAGO GRAPHIC ARTS FEDERATION, Inc.
No. 7859.
Circuit Court of Appeals, Seventh Circuit.
May 23, 1942.
*425 J. P. Wenchel and Ray N. McMillan, both of Washington, D. C., Bur. of Int. Rev., Samuel O. Clark, Jr., Asst. Atty. Gen., and J. Louis Monarch and Robert R. Barrett, Sp. Assts. to Atty. Gen., for petitioner.
Harry M. Brostoff, of Chicago, Ill., for respondent.
Before EVANS, KERNER, and MINTON, Circuit Judges.
KERNER, Circuit Judge.
Petitioner asks us to review the correctness of a decision of the Board of Tax Appeals involving a claimed deficiency for income and excess profits taxes for the years 1936 and 1937 and penalties for the year 1936.
The respondent was incorporated in 1927 in Illinois as a not-for-profit corporation. Its members are all plant owners and operators in the printing industry, the unit of membership being the printing firm. Its purpose is to promote the welfare of the printing industry, improve the conditions of printers and their service to the public, develop better methods of management and ethical relations among themselves and with others through collective cooperative effort, and to secure uniform and united action in the common interests.
Respondent, being a not-for-profit corporation, has no capital stock nor stockholders and has never made any distribution of dividends. It has held meetings of its members, appeared before legislative bodies and discussed contemplated legislation, promoted printing exhibits, distributed cost and production information to its members, supplied credit information to its members through the maintenance of a credit information bureau, supplied an employment service to its members, conducted an estimating course designed to teach employees of the printing trade how to make estimates on printing, promulgated a code of ethics and adopted trade customs for the printing industry, conducted a waste paper bureau for the sale of members' waste paper through a collective sales arrangement, litigated the applicability of the Illinois Retailers' Occupational Tax to the printing industry, and handled refund claims for members of the industry.
Its operating revenues are derived principally from dues paid by its members, fixed on a basis of the members' mechanical payroll. Its income, arising from dues and other sources, has varied from 59% dues, 29% waste paper sales, and 12% other activities in 1930 to 83% dues, 10% waste paper sales, and 7% other activities in 1939. In 1936 and 1937 it received $35,249.50 (60%) and $39,918.50 (66%) from dues, 4% and 13% from waste paper sales, and 36% and 21% *426 from other activities, respectively. The percentages of income from other activities for 1936 and 1937 include the amounts received for the occupational tax actions and refunds. In 1936 respondent engaged a Tax Service Association to contest the legality of the retailers' occupational tax. The Tax Service secured a favorable decision. For the clerical work and for handling refunds of its members, it received a portion of the amounts recovered.
Its offices are in Chicago and there it keeps its property consisting of office equipment valued on December 31, 1937, at $5,440.18, less a reserve of $3,527.57. Its balance sheets showed a surplus on December 31, 1927, of $3,823.77, increased as of December 31, 1937, to $36,086.41.
Our problem is to determine whether the respondent is a business league within the provisions of § 101(7) of the Revenue Act of 1936, c. 690, 49 Stat. 1648, 26 U.S.C.A. Int.Rev.Code, § 101(7), which provides that "Business leagues, * * * not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual" shall be exempt from taxation. Article 101(7) of the Treasury Regulation 94, promulgated under the Act, provides: "A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. * * * its activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. An organization whose purpose is to engage in a regular business of a kind ordinarily carried on for profit, even though the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining, is not a business league."
Petitioner, notwithstanding he concedes that the respondent is a business league in form, organized as a not-for-profit corporation, nevertheless contends that because the respondent conducted a cost accounting and estimating course and waste paper bureau, supplied a credit and employment service and received a percentage of the fees in connection with the litigation concerning the retailers' occupational tax, it was carrying on and was engaged in a regular business of a kind ordinarily carried on for profit. He argues that respondent's activities fall into three categories: (1) activities directed toward unity and cooperation within the industry; (2) the relations of the industry to the public, both of which he concedes improved the industry, but only in so far as the economically sound management of the individual firms resulted in a general improvement; and (3) the services rendered to individual members. He then argues that since exemptions are to be strictly construed, Helvering v. Northwest Steel Mills, 311 U.S. 46, 49, 61 S. Ct. 109, 85 L. Ed. 29, it follows that where part of the activities are outside of the scope of the exemption, exemption does not automatically arise from the mere preponderance of activities permitted by the statute.
We think that Trinidad v. Sagrada Orden, 263 U.S. 578, 44 S. Ct. 204, 68 L. Ed. 458; Crooks v. Kansas City, etc., Ass'n, 8 Cir., 37 F.2d 83; Santee Club v. White, 1 Cir., 87 F.2d 5; and Retailers Credit Ass'n v. Commissioner, 9 Cir., 90 F.2d 47, 111 A. L.R. 152, are helpful in guiding us to a conclusion.
The statute as interpreted by the regulations says that the purpose of the business league must not be to engage in a regular business of a kind ordinarily carried on for profit. Where the business league has proper purposes without prohibited ones, then, if it operates in conformity to it, it is entitled to exemption. To come within the exemption, however, its activities must be directed to the improvement of business conditions or to the promotion of the general objects of one or more lines of business as distinguished from the performance of particular services for individual persons, but if the services are only incidental or subordinate to the main or principal purposes required by statute, then exemption cannot be denied on the ground that the purpose is to engage in a regular business of a kind ordinarily carried on for profit, Retailers Credit case, supra.
The Trinidad case, supra, it is true, did not involve the statute now in question. It did, however, concern the interpretation of a tax exemption statute, whether the plaintiff was organized and operated exclusively for religious, charitable, scientific, or educational purposes. There, as here, it was contended that the plaintiff was operated also for business and commercial purposes in that it traded in wine and other articles. In holding the plaintiff exempt the court said (263 U.S. page 582, 44 S.Ct. *427 page 206, 68 L. Ed. 458): "The articles are merely bought and supplied for use within the plaintiff's own organization and agencies, some of them for strictly religious use, and the others for uses which are purely incidental to the work which the plaintiff is carrying on. That the transactions yield some profit is in the circumstances a negligible factor. Financial gain is not the end to which they are directed."
Crooks v. Kansas City Hay Dealers' Association, supra, was a suit to recover an income tax illegally collected. The plaintiff was a voluntary association of commission merchants buying and selling hay. Its object was fairly similar to that of the respondent in our case, that is, to promote sound business standards, the benefits to its members being incidental. It employed men to inspect, weigh, and watch cars of hay, for which fees were exacted from the shippers and used for the purpose of paying its employees. The court held that the association was a business league and exempt from taxation.
Petitioner also makes the point that the net earnings in part inured to the benefit of its members. Northwestern Jobbers' Credit Bureau v. Commissioner, 8 Cir., 37 F.2d 880 and Northwestern Municipal Ass'n v. United States, 8 Cir., 99 F.2d 460.
In determining whether net earnings inure to the benefit of any private shareholder or individual, each case must stand on its own facts. In the Northwestern Jobbers case, supra, 37 F.2d page 883, the evidence was convincing that the chief, and not the incidental, purposes of the appellant were represented by its activities, for which it received its gross income, and that it was organized for profit. In the Northwestern Municipal Ass'n case, supra, the appellant was incorporated with an authorized capital of 50 shares of the par value of $50 each. The court said (99 F.2d page 463): "Under the statute, in connection with the inquiry whether the net earnings of the organization claiming exemption as a business league inure to the benefit of private stockholders or individuals, especially where its activities are multifarious and for some of which it makes a charge and for others none, the court often considers which of its activities represents the main purpose of its operations and which are incidental thereto. If its main purpose is to benefit its shareholders or individuals it is not exempt. On the other hand, if benefit to the individuals is secondary and incidental, it is exempt." Continuing, it said: "Since it is clear that appellant was organized to do a regular business ordinarily carried on for profit, and since in the operation of its business its net earnings inured to the benefit of its shareholders and individuals, it was not exempt * * *." It is obvious that those cases are not applicable.
In our case the Board found from all the evidence that the purposes of the respondent were to promote fairness, honesty, and better conditions in the graphic arts industry, that no cash dividend had been paid, that no special individual service was rendered by the respondent to its members without payment therefor adequately representing the cost of the service, and that any business in which respondent had engaged of a kind ordinarily carried on was only incidental or subordinate to its main or principal purpose, and concluded that respondent was a business league within the provisions of § 101(7) of the Revenue Act of 1936.
These findings of fact the Board was free to make; they were warranted by the evidence and are binding upon us. Palmer v. Commissioner, 302 U.S. 63, 70, 58 S. Ct. 67, 82 L. Ed. 50; Helvering v. National Grocery Co., 304 U.S. 282, 294, 58 S. Ct. 932, 82 L. Ed. 1346; and Helvering v. Kehoe, 309 U.S. 277, 60 S. Ct. 549, 84 L. Ed. 751, and since the Board's decision is not based on an erroneous rule of law, it must be affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545298/ | 128 F.2d 860 (1942)
TIME, Inc.,
v.
VIOBIN CORPORATION.
No. 7921.
Circuit Court of Appeals, Seventh Circuit.
June 15, 1942.
*861 Harold R. Medina, of New York City, and Carl S. Lloyd, of Chicago, Ill., for appellant.
Louis A. Busch and Earl C. Harrington, both of Champaign, Ill., for appellee.
Before EVANS, MAJOR, and KERNER, Circuit Judges.
MAJOR, Circuit Judge.
This is an appeal from a judgment, entered September 20, 1941, in a suit for trademark infringement and unfair competition. The relief sought was an accounting for profits and damages, and an injunction restraining the defendant from the use of the trademark described in the complaint, or any imitation thereof.
The District Court rendered an opinion in which the facts are so aptly stated that there appears no occasion to repeat them in detail. Time, Inc., v. Viobin Corp., 40 F. Supp. 249. Briefly, plaintiff, a New York Corporation, is engaged in the publication of the weekly picture magazine "Life" and has been so engaged since October, 1936. The magazine features the trademark "Life" in large white block letters against a flame red background. Plaintiff has registered in the United States Patent Office its trademark "Life" as used in this unique and distinctive manner. Defendant, an Illinois corporation, is engaged in the manufacture and distribution of a cereal product under the designation "Life of wheat" and has been so engaged since the early part of 1941. Its cereal product is distributed in tin cans with labels attached thereto bearing the name "Life of wheat," the size of the letters "of wheat" being smaller than those of "Life." The letters of these words are also white block against a red background. In addition to these letters, defendant's label contains a detailed description of its product. Defendant, in response to complaint by the plaintiff, modified its label by changing certain of the white portions to yellow, including a number of heads of wheat which had appeared formerly in white. After the modification, however, the words "Life of wheat" still appeared in white block letters upon a red background.
The lower court decided against infringement of plaintiff's trademark, largely on the ground of the dissimilarity of defendant's product to which the marks were attached. The court cites numerous authorities in support of its conclusion in this respect, including American Steel Foundries v. Robertson, *862 269 U.S. 372, on page 380, 46 S. Ct. 160, 162, 70 L. Ed. 317, wherein it was said:
"The mere fact that one person has adopted and used a trade-mark on his goods does not prevent the adoption and use of the same trade-mark by others on articles of a different description. There is no property in a trade-mark apart from the business or trade in connection with which it is employed. * * *"
On the matter of unfair competition, the court, after a thorough analysis of many authorities, including most of those relied upon here, also decided contrary to plaintiff's contention. We are convinced, after a careful study of the court's opinion, that the correct conclusion was reached, both as to the charge of infringement and unfair competition.
Under such circumstances, we would adopt the opinion of the lower court except for the fact it appears no consideration was given to the rule in Illinois in reaching its decision. We assume it was not called to the court's attention in fact, it was not mentioned or discussed in the original briefs filed in this court. The matter was raised by the court on oral argument, and the parties have since filed supplemental briefs, dealing with the Illinois authorities.
We think there can be no question but that plaintiff's charge of unfair competition must be determined by the law of Illinois. This court so decided in Addressograph-Multigraph Corp. v. American Expansion Bolt & Mfg. Co., 7 Cir., 124 F.2d 706, 708. It may be pertinent to note of this case that there was no charge of trademark infringement, but it related sclely to unfair competition. We reiterated our holding in this respect in the recent case of Rytex Co. v. Ryan, 7 Cir., 126 F.2d 952. In this case, as in the instant one, both trademark infringement and unfair competition were in issue. The validity of our holding in these two cases appears to have been approved in the recent decision of the Supreme Court in Pecheur Lozenge Co., Inc., Petitioner, v. National Candy Co., Inc., 62 S. Ct. 853, 86 L. Ed. ___, decided March 30, 1942, wherein the court said:
"* * * The only cause of action that this record could possibly support is for unfair competition and common law `trademark infringement', to which local law applies. * * *"
Plaintiff advances the theory that the two phases of the case i. e., infringement and unfair competition are so inextricably bound together that it is not practical to separate them and say that the Federal law is to be applied to infringement, and local law to unfair competition. It is therefore argued that the Federal law must be applied to each. No authority is cited in support of this contention and we do not believe it is sound. In conformity with the authorities cited, we think that unfair competition must be determined by local law.
On the other hand, we are of the opinion that trademark infringement, in view of the Federal Statute providing for registration, presents an exception to the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487, and is to be determined by general Federal law. True, our opinion in this respect is somewhat weakened by the Pecheur Lozenge case, supra. In that case, as appears from the Supreme Court opinion, there was thought to be involved only the infringement of a registered trademark. A decree for plaintiff was reversed by the Circuit Court of Appeals for the Third Circuit, 122 F.2d 318. The Supreme Court said:
"* * * Both courts below having failed to consider or apply local law, we granted certiorari, 314 U.S. 603, 62 S. Ct. 182, 86 L. Ed. ___, in order to determine whether local law or federal law should have been applied in a suit for infringement of a trademark registered under the Trademark Act of 1905, 33 Stat. 724 [15 U.S.C.A. § 81 et seq.], * * *."
It appears, however, that the court, upon an examination of the record, determined no cause of action was stated for trademark infringement and thus the point on which certiorari was granted was not decided. The court then proceeded to make the statement quoted heretofore and vacated the decree so that the Court of Appeals might apply the appropriate local law. While we adhere to the view that trademark infringement is not to be determined by local law, it is of significance that the Supreme Court allowed certiorari on this precise point.
Some of the more important Illinois cases which announce the determinative rule as to unfair competition are: DeLong Hook & Eye Co. v. Hump Hairpin Mfg. Co., 297 Ill. 359, 130 N.E. 765; Johnson Mfg. Co. v. Alfred Johnson Skate Co., 313 Ill. 106, 144 *863 N.E. 787; The Stevens-Davis Co. v. Mather & Co., 230 Ill.App. 45, and Soft-Lite Lens Co., Inc., v. Ritholz, 301 Ill.App. 100, 21 N.E.2d 835. In the Stevens-Davis case is found a lengthy discussion and analysis of Illinois cases, as well as those of other jurisdictions, and a determination that the so-called "palming off" doctrine is the rule in Illinois. On page 65, of 230 Ill.App., the court said:
"The courts in this State do not treat the `palming off' doctrine as merely the designation of a typical class of cases of unfair competition, but they announce it as the rule of law itself the test by which it is determined whether a given state of facts constitutes unfair competition as a matter of law. * * *"
This rule was later approved in the Soft-Lite case, supra.
Plaintiff contends that the rule thus announced does not defeat its cause of action for the reason that defendant is "palming off" its goods as those of the plaintiff by representing that the plaintiff is in some way identified with, and is sponsoring and approving, defendant's product. We are satisfied, however, that the Illinois decisions do not permit an interpretation of the "palming off" doctrine so as to include results so indirect and speculative in their nature. It consists of passing off or attempting to pass off the goods of one person as and for those of another. As was said in the Stevens-Davis case, supra, pages 66, 67 of 230 Ill.App.:
"* * * Each case is not to be left to the discretion of the court to be decided according to the court's idea of justice and right. The `palming off' rule is expressed in a positive, concrete form which will not admit of `broadening' or `widening' by any proper judicial process. It is rigid and inelastic. * * *
"We feel bound, therefore, to follow the rule of law of this State, and to hold that unfair competition `consists in the sale of the goods of one manufacturer or vendor for those of another, and if defendant so conducts its business as not to palm off its goods as those of complainant, the action fails.' DeLong Hook & Eye Co. v. Hump Hairpin Mfg. Co., supra."
Without pursuing the matter further, we are convinced that plaintiff presented no cause of action under the rule of Illinois. Notwithstanding the fact that the lower court predicated its decision as to unfair competition upon the Federal rule, the result is the same upon application of the State rule. Under such circumstances, there is no occasion to discuss or decide what, if any, difference there may be between the two rules.
Plaintiff also complains as to the procedure followed in the court below. Subsequent to the filing of the complaint, an application was made by the plaintiff for a preliminary injunction, supported by affidavits and exhibits. Thereupon, an order to show cause was directed at the defendant. Defendant answered this order and submitted affidavits and certain exhibits in support thereof. Arguments were heard by the court and briefs submitted by the parties. It was at this stage of the proceeding that the court rendered its opinion. Subsequently, a motion was made by the defendant to dismiss the complaint and, later a motion for judgment on the pleadings. This latter motion was allowed and the judgment entered, from whence comes this appeal.
It appears to be plaintiff's position that, inasmuch as no answer was filed by the defendant, its motion for judgment was premature and unauthorized in view of Rule 12 (c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. On the other hand, defendant contends that its motion was proper under the same rule (b) (6). We see no occasion to elaborate on or decide the somewhat technical question presented. The record discloses that upon defendant's motion for judgment, an oral argument was had before the court, and the briefs, submitted on application for injunction, again submitted. Plaintiff raised no question at that time as to the now alleged improper procedure and made no mention of it in its points designated to be relied upon in this court. The court was fully advised as to the contentions of the respective parties, and it is difficult to perceive that an answer by the defendant would have added anything thereto. Furthermore, there is no contention that plaintiff was prejudiced by what it now alleges was the unauthorized procedure. At the most, a harmless error was committed which has no bearing upon the validity of the judgment.
The decision of the District Court is therefore, affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545388/ | 128 F.2d 1008 (1942)
JONES, Collector of Internal Revenue,
v.
GAYLORD GUERNSEY FARMS.
No. 2459.
Circuit Court of Appeals, Tenth Circuit.
June 30, 1942.
*1009 Warren Wattles, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., J. Louis Monarch, A. F. Prescott, and Arthur L. Jacobs, Sp. Assts. to Atty. Gen., and Charles E. Dierker, U. S. Atty., and George McElroy, Asst. U. S. Atty., both of Oklahoma City, Okl., on the brief), for appellant.
Geo. M. Green, of Oklahoma City, Okl. (Robt. M. Rainey, Streeter B. Flynn, H. M. Peck, and Frank G. Anderson, all of Oklahoma City, Okl., on the brief), for appellee.
*1010 Before BRATTON, HUXMAN, and MURRAH, Circuit Judges.
HUXMAN, Circuit Judge.
The question presented in this appeal is whether the services performed by certain employees of E. K. Gaylord during the years 1936, 1937, 1938 and 1939, were such that they were exempt from the general provisions of the Social Security Act. 42 U.S.C.A. § 301 et seq. E. K. Gaylord, the taxpayer, owned and operated Gaylord Guernsey Farms, consisting of approximately eight hundred acres, near Oklahoma City, Oklahoma. During the years in question he owned a herd of two hundred seventy-five dairy cows, which produced approximately 300 gallons of milk per day. The milk was cooled and bottled on the farm. Part of it was processed into cream, buttermilk and cottage cheese. All of these products were sold to individuals, hotels and grocery stores, both at wholesale and retail, and were delivered by trucks. Nothing was processed save what was produced on the farm, and no other products were marketed or sold. During the time in question, the taxpayer also raised blooded livestock for sale. This stock was exhibited at different fairs. The employees in question consist of two bottlers and coolers, four or more truck drivers, two or more carpenters, two showmen, a bookkeeper, and a stenographer.
The coolers and bottlers lived on the farm. The truck drivers did not live on the farm, but came early in the morning and drove the loaded trucks to the city and sold and delivered the milk products and collected therefor. The carpenters did not live on the farm. Their duties consisted of building and repairing sheds and fences, as well as doing repair work generally. They also did ordinary jobs around the farm when not otherwise engaged. The showmen's work consisted of preparing and conditioning the show cattle for exhibit. All their work, except when at a fair, was done on the farm. The stenographer worked in the taxpayer's office in town and devoted part of her time to work not connected with the farm. Her work in connection with the farm consisted in attending to registration of cattle, answering telephones concerning milk orders, and work of that nature. The bookkeeper kept the records and accounts pertaining to the operation of the farm.
It is claimed, and the court so held, that these employees are exempted from the operation of the act by Section 811(b) (1) and Section 907(c) (1) of the Act, 49 Stat. 620. The two sections are identical, and provide that:
"Section 811. When used in this title [sections 1001 to 1010 of this chapter]
* * * * *
"(b) The term `employment' means any service, of whatever nature, performed within the United States by an employee for his employer, except
"(1) Agricultural labor * * *."
The act itself did not define the term "agricultural labor." Regulation 90, promulgated under Title IX of the Social Security Act, defined the term as follows:
"Art. 206(1). Agricultural labor. The term `agricultural labor' includes all services performed
"(a) By an employee, on a farm, in connection with the cultivation of the soil, the harvesting of crops, or the raising, feeding, or management of live stock, bees, and poultry; or
"(b) By an employee in connection with the processing of articles from materials which were produced on a farm; also the packing, packaging, transportation, or marketing of those materials or articles. Such services do not constitute `agricultural labor,' however, unless they are performed by an employee of the owner or tenant of the farm on which the materials in their raw or natural state were produced, and unless such processing, packing, packaging, transportation or marketing is carried on as an incident to ordinary farming operations as distinguished from manufacturing or commercial operations.
"As used herein the term `farm' embraces the farm in the ordinarily accepted sense, and includes stock, dairy, poultry, fruit, and truck farm, plantations, ranches, ranges, and orchards.
"Forestry and lumbering are not included within the exception."
A regulation promulgated by an administrative body charged with the administration of an act is entitled to great weight, and unless contrary to the legislative intent, ought to be upheld. United States v. Stanolind Crude Oil Co., 10 Cir., 113 F.2d 194; Nicholas v. Richlow Mfg. Co., 10 Cir., 126 F.2d 16. The 1939 amendment *1011 to the Social Security Act defined "agricultural labor" in substantially the same terms as did Regulation 90 by the Treasury Department. Whether the employees in question are excluded from the act, therefore, is to be determined from an interpretation of Regulation 90.
The regulation establishes two factors necessary in determining the scope of the exclusion the nature of services rendered by an employee, and the dominant purpose of the enterprise in which the employer is engaged. An employee is excluded if he does work on a farm in connection with the cultivation of the soil or the harvesting of crops, or the raising, feeding or management of livestock, bees, or poultry. If an employee is employed in processing materials produced on a farm, he is exempt if the work is done on the farm for the tenant or owner of the farm, and if the operation is an incident to ordinary farming operations, as distinguished from manufacturing or commercial operations.
What constitutes "agricultural labor" within the meaning of the act is not easy of definition. The question is one largely of first impression. The decisions have not charted a clearly defined course by which such question may be determined. It may be generally said, however, that the term "agriculture" has a wide meaning and should not be restrictively interpreted, but should be given a broad enough meaning to embrace agriculture as the term is understood wherever the calling is followed. United States v. Turner Turpentine Co., 5 Cir., 111 F.2d 400; Wayland v. Kleck, Ariz., 112 P.2d 207. In H. Duys & Co. v. Tone, 125 Conn. 300, 5 A.2d 23, 27, a great number of cases were analyzed and considered, and from them the court defined an employee of a farmer as being one "doing work for a farmer which is ordinarily incidental to farming as that operation is generally understood." The court further defines a farm laborer as "one who labors upon a farm in raising crops or in doing general farm work." In the end, the answer must in each case be arrived at by a process of exclusion or inclusion.
Gaylord's status as a farmer is challenged. It is contended that he is engaged in a commercial enterprise and not in farming. The facts as to the operation of the farm have already been set forth. We conclude that his undertaking is not a commercial enterprise within the meaning of the regulation.
Repairing fences and buildings is a necessary incident to actual farming operations. Without fences, cattle cannot be raised, and without barns and granaries which will hold the grain, there would be no object in planting or harvesting it. Before the milk and milk products can be sold, the milk must be properly handled. This requires that it be cooled and placed in containers. This work was done by the coolers and the bottlers. Their work is an essential step in dairying. So is also the sale and delivery of the milk. The fact that one sells his milk to the ultimate consumer over a route rather than in bulk does not change the dairy operation as defined in Regulation 90 into a commercial operation. Preparing thoroughbred cattle for sale is an essential incident to the raising, feeding and management of livestock and those who are employed on a farm in such work are excluded from the act. The fact that the work here done by the showmen was on thoroughbred show cattle does not change the nature of the employment. While the showmen performed some work away from the farm at fairs, such work is directly and proximately connected with the marketing of farm livestock so as to bring it within the second section of the regulation.
A somewhat different situation is presented as to the bookkeeper and the stenographer. Not every operation or service in or about a farm is agricultural labor within the ordinarily accepted meaning of the term, and as it is used and understood in the regulation. Every farmer has need of a veterinary. It may be essential or highly desirable, especially during these days of increasing government regulations, for a farmer to employ bookkeepers, accountants, income tax experts, or even attorneys. The regulation implies that the term "farm" as used therein embraces the farm in the ordinarily accepted sense. We ordinarily think of a veterinary, a bookkeeper, an accountant, or a secretary, as one who, through special training, has become skilled in a trade, calling, or profession. Work performed by them for a farmer does not constitute farm labor nor make of them farm laborers as we understand those terms, or as they are used in the act and in the regulation promulgated pursuant thereto.
*1012 It is our conclusion that the bottlers and coolers, carpenters, truckmen, and the cattle showmen are exempt from the provisions of the act, but that the bookkeeper and stenographer are subject to its provisions.
Reversed and remanded, with directions to proceed in conformity with the views expressed herein.
BRATTON, Circuit Judge (dissenting in part).
It is my view that all of the employees here in question fall outside the term "agricultural labor," within the meaning of the statute and the regulation promulgated under it, and that the judgment should therefore be reversed and the cause remanded, with directions to dismiss the action in toto. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545076/ | 490 Pa. 519 (1980)
417 A.2d 160
COMMONWEALTH of Pennsylvania, Appellant,
v.
Richard FIELD.
Supreme Court of Pennsylvania.
Argued May 19, 1980.
Decided July 3, 1980.
*520 Robert E. Colville, Dist. Atty., Robert E. Eberhardt, Deputy Dist. Atty., Pittsburgh, James J. West, Deputy Atty. Gen., Wayne T. Scott, Deputy Atty. Gen., Harrisburg, for appellant.
John L. Doherty, Pittsburgh, for appellee.
Before EAGEN, C.J., and O'BRIEN, ROBERTS, NIX, LARSEN, FLAHERTY, and KAUFFMAN, JJ.
*521 OPINION OF THE COURT
ROBERTS, Justice.
We are again presented with a challenge to the constitutionality of section 3732 of the Vehicle Code, 75 Pa.C.S. § 3732. Section 3732 defines "homicide by vehicle" as follows:
"Any person who unintentionally causes the death of another person while engaged in the violation of any law of this Commonwealth or municipal ordinance applying to the operation or use of a vehicle or to the regulation of traffic is guilty of homicide by vehicle, a misdemeanor of the first degree, when the violation is the cause of death."
This is a pre-trial appeal in which the Commonwealth seeks reversal of an order of the Court of Common Pleas of Allegheny County holding this "homicide by vehicle" provision unconstitutionally vague. We reverse.
The victim, Edward Romano, was a cameraman for KDKA-TV, Pittsburgh. On September 9, 1979, Romano went to the Atlantic Richfield Oil Company (ARCO) terminal at 57th and Butler Streets in Pittsburgh to film picketing and other strike-related activity of ARCO employees. Romano began to film while standing in the center of Butler Street.
The court of common pleas had previously issued both an injunction against mass picketing and a writ of assistance. Deputy sheriffs and city police, at the scene to ensure passage of ARCO tractor-trailers, requested Romano to move from the center of Butler Street to the adjoining sidewalk. Romano did so and resumed filming.
Six ARCO vehicles then began to leave the terminal. As the vehicles departed, the passageway through the pickets and onto Butler Street continually narrowed as spectators and picketers, in numbers exceeding the court's order, crowded the terminal exit. The vehicles were not moving at an excessive speed.
By the time the driver of the last vehicle, appellee Richard Field, attempted to negotiate the vehicle through the narrowed *522 exit, police had to push back the crowd of picketers and spectators. Romano, still standing on the sidewalk and about one foot from the curb, continued to film the activity. As appellee's vehicle proceeded through the exit, the side of the trailer struck Romano, throwing him to the sidewalk. Romano was fatally injured when run over by the trailer's rear wheels. Out of fear that a riot might ensue, police did not stop appellee until he had cleared the terminal area.
Once stopped, appellee was arrested and charged with driving on the sidewalk, 75 Pa.C.S. § 3703, reckless driving, 75 Pa.C.S. § 3714, and homicide by vehicle, 75 Pa.C.S. § 3732. After a coroner's hearing, a deputy coroner dismissed the reckless driving charge, but held appellee on the charges of driving on the sidewalk and homicide by vehicle. The district attorney then filed an information against appellee which included the homicide by vehicle charge.
On January 16, 1980, appellee filed a pre-trial motion to dismiss the information on several grounds, including a claim that section 3732 is unconstitutionally vague.[1] Following oral argument on the motion, the court of common pleas agreed with appellee's vagueness claim and, on January 31, granted the motion to dismiss.[2] The Commonwealth then took this direct appeal from a final order of a court of common pleas holding a state statute unconstitutional. See 42 Pa.C.S. § 722(7). The Attorney General has filed a brief in support of section 3732.
*523 Very recently in Commonwealth v. Burt, 490 Pa. 172, 415 A.2d 89 (1980), this Court unanimously reversed an order of the Court of Common Pleas of Warren County similarly holding section 3732 unconstitutionally vague. There, this Court stated:
"With unmistakable clarity, section 3732 defines `homicide by vehicle' as a death caused by any person's conduct violating law or municipal ordinance applying to vehicles or traffic regulation. This section does not employ `ambiguous' words, `archaic classifications,' or words with `numerous and varied' meanings. Compare Colautti v. Franklin, supra [439 U.S. 379, 99 S. Ct. 675, 58 L. Ed. 2d 596] (`viability' determination requirement of statute regulating physicians' performance of abortions void), Papachristou v. City of Jacksonville, supra [405 U.S. 156, 92 S. Ct. 839, 31 L. Ed. 2d 110] (`vagrancy' ordinance drafted in terms of archaic English poor laws invalid), and Lanzetta v. State of New Jersey, 306 U.S. 451, 59 S. Ct. 618, [83 L. Ed. 888] (1939) (violating statute making it crime to be member of `gang'). Accordingly, any vagueness challenge must be rejected. See United States ex rel. Almeida v. Rundle, 383 F.2d 421, 426 (3d Cir. 1967) (upholding former felony-murder statute)."
490 Pa. at 523, 415 A.2d at 92. We agree with the Commonwealth that here too any vagueness challenge must be rejected.
Burt is not dispositive of this case, however, for here appellee contends section 3732 is unconstitutional on an additional ground. Section 3732 is a first-degree misdemeanor punishable by imprisonment of up to five years. See 18 Pa.C.S. § 1104(1). Relying primarily upon Commonwealth v. Koczwara, 397 Pa. 575, 155 A.2d 825 (1959), appellee maintains section 3732 unconstitutionally imposes criminal liability without fault. Like the vagueness challenge, this challenge must also be rejected.
In Koczwara, the undisputed record indicated that minors purchased liquor from a bartender employed by the defendant, a liquor licensee, outside the defendant's presence and *524 without the defendant's personal knowledge. The defendant was convicted of two counts of permitting minors to frequent his licensed premises and one count of permitting sales to minors. The court of common pleas sentenced the defendant, a previous offender, to imprisonment of three months and imposed costs and a fine of $500.
Finding "no case in any jurisdiction which has permitted a prison term for a vicarious offense," 397 Pa. at 586, 155 A.2d at 830, this Court concluded that "punishment of imprisonment deprives the defendant of due process of law under these facts." Id. In so holding, this Court stated:
"It would be unthinkable to impose vicarious criminal responsibility in cases involving true crimes. Although to hold a principal criminally liable might possibly be an effective means of enforcing law and order, it would do violence to our more sophisticated modern-day concepts of justice. Liability for all true crimes, wherein an offense carries with it a jail sentence, must be based exclusively upon personal causation. It can be readily imagined that even a licensee who is meticulously careful in the choice of his employees cannot supervise every single act of the subordinates. A man's liberty cannot rest on so frail a reed as whether his employee will commit a mistake in judgment. See Sayre, Criminal Responsibility For Act of Another, 43 Harv.L.Rev 689 (1930)."
397 Pa. at 585-86, 155 A.2d at 830. Accordingly, the Court invalidated the imprisonment portion of the judgment of sentence.
Here, however, unlike in Koczwara, there is no effort to impose a prison term in the absence of culpable conduct. As the Attorney General recognizes, section 3732 requires the Commonwealth to prove that appellee has deviated from the standard of care established by section 3703, the underlying Vehicle Code provision allegedly violated here.[3] Section 3703 provides:
*525 "No person shall drive any vehicle except a human-powered vehicle upon a sidewalk or sidewalk area except upon a permanent or duly authorized temporary driveway."
Consistent with the culpability requirement, section 3703 leaves for determination at trial whether appellee knew, or should have known, he engaged in the conduct claimed to be in violation of that section.[4] Thus, for example, it remains to be decided if a reasonable driver could, in view of the congestion at the terminal exit, know where the sidewalk was or, indeed, if a sidewalk existed. Section 3732 also requires the Commonwealth to prove that appellee's alleged violation of section 3703 caused the victim's death. As the Attorney General points out, at the very least, death must be a "probable consequence" of appellee's culpable conduct. See 18 Pa.C.S. § 303(d).
Accordingly, our review satisfies us that here, unlike in Koczwara, section 3732 requires the Commonwealth to establish that it was the actor's conduct which caused death. This requirement of personal responsibility under a section 3732 prosecution precludes successful constitutional challenge.
Order of the court of common pleas reversed, charge of homicide by vehicle reinstated, and case remanded for further appropriate proceedings.
FLAHERTY, J., joins this opinion and files a concurring opinion.
EAGEN, C.J., files a dissenting opinion.
FLAHERTY, Justice, concurring.
I join with the majority, as we have construed the Code to, indeed, require culpable conduct, i.e., a mens rea, as a requisite for conviction. Thus, the objectionable feature noted by Mr. Chief Justice Eagen, ". . . imprisonment *526 even in the absence of culpable conduct", has been avoided by our construction, and cannot occur.
EAGEN, Chief Justice, dissenting.
I am persuaded Section 3732 of the Vehicle Code, 75 Pa.C.S.A. § 3732, is unconstitutional in that one result is to permit imprisonment even in the absence of culpable conduct. Cf. Commonwealth v. Koczwara, 397 Pa. 575, 155 A.2d 825 (1959); Commonwealth v. Barone, ___ Pa.Super. ___, 419 A.2d 457 (1980) (concurring opinion of Spaeth, J., joined by Hoffman, J.).
NOTES
[1] Appellee's motion also alleges section 3732 violates (1) due process because it imposes criminal sanctions (including possible imprisonment) upon "unintentional conduct," and (2) equal protection because
"A. The statute involves a suspect classification;
B. Impinges upon a fundamental right;
C. The classification does not have a rational relationship to the legislative purpose of the statute."
Appellee pursues only his due process contention on this appeal. See infra text.
[2] In its explanatory opinion, the court expressed the view that the statute unconstitutionally imposes criminal liability in the absence of culpable conduct. This view we reject. See infra text.
[3] As in every criminal prosecution, the Commonwealth's proof must be beyond a reasonable doubt. See e.g., Commonwealth v. Busler, 445 Pa. 359, 362, 284 A.2d 783, 784 (1971).
[4] In our view it was the legislative judgment in enacting section 3732 to expand the scope of criminal liability for violations of the Vehicle Code causing death. Compare 18 Pa.C.S. § 2504; Commonwealth v. Busler, supra note 3; Commonwealth v. Clowser, 212 Pa.Super. 208, 239 A.2d 870 (1968). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545061/ | 273 Pa. Superior Ct. 393 (1980)
417 A.2d 706
COMMONWEALTH of Pennsylvania
v.
Ronald COPPER, Appellant.
COMMONWEALTH of Pennsylvania
v.
Debbie COPPER, Appellant.
Superior Court of Pennsylvania.
Argued April 11, 1979.
Filed January 4, 1980.
*395 Irving L. Bloom, Greensburg, for appellant in No. 1029.
James N. Falcon, Greensburg, for appellant in No. 1030.
Morrison F. Lewis, Jr., Assistant District Attorney, Greensburg, for Commonwealth, appellee.
Before CERCONE, President Judge, and WIEAND and HOFFMAN, JJ.
WIEAND, Judge:
Ronald Copper entered pleas of guilty to two counts of corrupting a minor, and Debbie Copper entered a plea of guilty to one count of corrupting a minor.[1] Ronald was placed on probation for three years, and Debbie was placed on probation for one year. Thereafter they applied to the trial court to withdraw their guilty pleas, and a hearing was held. When their requests were denied, they appealed. Their appeals were consolidated for purposes of argument.
Ronald Copper had been charged initially with both statutory rape and corrupting a minor by giving alcoholic beverages to a fourteen year old girl. Debbie Copper was charged only with corrupting the child. A trial of both defendants resulted in a hung jury. Thereafter, plea bargains were entered, and pleas of guilty to corrupting a child were entered.
After sentence has been imposed, withdrawal of a guilty plea is mandated only where it is necessary to correct a manifest injustice. Commonwealth v. Bane, 272 Pa.Super. 160, 162, 414 A.2d 1056, 1057 (1979); Commonwealth v. Stokes, 264 Pa.Super. 515, 517-518, 400 A.2d 204, 205 (1979).
Debbie Copper showed no necessity for permitting the withdrawal of her guilty plea. She asserted merely that she had been subjectively confused about the nature of the plea. The colloquy, however, was full and complete and disclosed a plea of guilty that was entered knowingly, intelligently and voluntarily. The lower court properly denied her motion to withdraw such a plea.
*396 The guilty pleas entered by Ronald Copper, however, suggest a different concern. He entered separate pleas to two counts of corrupting a minor. One count charged that he had supplied alcoholic beverages to the child; the other, intended to be a lesser offense than the charge of statutory rape, alleged that he had engaged in sexual conduct with the child. Appellant contended, in support of his request to withdraw his pleas of guilty, that he had not understood what he was pleading to and had not intended to plead guilty to any sexual contact or attempted sexual contact with the child. The record is clear that these offenses were not fully explained to appellant during the guilty plea colloquy. Significantly, the elements of the crime of corrupting a minor were never outlined for him.
In Commonwealth v. Ingram, 455 Pa. 198, 203-04, 316 A.2d 77, 80 (1974), the Supreme Court held that such an explanation was necessary:
"We have often enunciated the principle that an adequate on the record colloquy under Rule 319(a) must include a demonstration `that the defendant understands the nature of the charges. . . .' Commonwealth v. Campbell, 451 Pa. 465, 467, 304 A.2d 121, 122 (1973); Commonwealth v. Maddox, 450 Pa. 406, 408, 300 A.2d 503, 504 (1973); see also Commonwealth v. Belgrave, 445 Pa. 311, 317, 285 A.2d 448, 450 (1971). In order to demonstrate that a defendant possesses such understanding, he certainly must be told more than just that he has been charged with murder or robbery, for example. While such terms clearly connote some meaning to the layman, this meaning does not always embrace the basic legal elements of the crime. If this were not the case, there would be no need for instructions to a jury on such points, for certainly, an average defendant cannot be presumed to understand more than an average juror. Thus, for an examination to demonstrate a defendant's understanding of the charge, the record must disclose that the elements of the crime or crimes charged were outlined in understandable terms. Our decisions in Commonwealth v. Campbell, supra and *397 Commonwealth v. Jackson, 450 Pa. 417, 299 A.2d 209 (1973), both of which dealt with extensive colloquies on this point, imply that such examination is mandatory. We now expressly hold that there is such a requirement." (emphasis in original)
This requirement has been reaffirmed repeatedly by later decisions. See: Commonwealth v. Sutton, 474 Pa. 582, 379 A.2d 107 (1977); Commonwealth v. Eck, 473 Pa. 414, 374 A.2d 1281 (1977); Commonwealth v. Ramos, 468 Pa. 404, 364 A.2d 257 (1976); Commonwealth v. Minor, 467 Pa. 230, 356 A.2d 346 (1976); Commonwealth v. Dilbeck, 466 Pa. 543, 353 A.2d 824 (1976).
The failure to outline the nature of the offense to appellant on the record destroyed the knowing and intelligent nature of appellant's guilty pleas. This constituted a manifest injustice which mandated that appellant be permitted to withdraw his pleas of guilty. See: Commonwealth v. Rosmon, 477 Pa. 540, 384 A.2d 1221 (1978); Commonwealth v. Menosky, 253 Pa.Super. 254, 384 A.2d 1330 (1978). See also: Commonwealth v. Starr, 450 Pa. 485, 301 A.2d 592 (1973).
The order denying the application of Debbie Copper to withdraw her plea of guilty is affirmed. The order denying the application of Ronald Copper is reversed, and the case is remanded for trial.
NOTES
[1] 18 Pa.C.S. § 3125. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545064/ | 417 A.2d 921 (1980)
Marjorie Anne BERGER
v.
William Thomas BERGER.
No. 399-79.
Supreme Court of Vermont.
June 3, 1980.
Motion for Reargument denied June 25, 1980.
Theodore S. Mandeville, Jr., of Keyser, Crowley, Banse & Kenlan, Rutland, for plaintiff.
Stephen A. Reynes of Niles, Johnson & Gibbs, Woodstock, for defendant.
Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.
Motion for Reargument, not being timely filed, denied June 25, 1980.
LARROW, Justice.
Plaintiff below appeals from the trial court's dismissal of her complaint. In that complaint, she sought to enforce claimed arrearages in alimony and support payments under an interlocutory divorce decree obtained in California in 1962, by default. Upon application therefor, the California trial court ordered a writ of execution to issue on February 7, 1977, for a found delinquency of $60,649.13.
Defendant has been a resident of Italy since 1966, and plaintiff has been at all times a resident of California. This action was brought in Vermont because of the 1977 death of defendant's mother. Defendant became a legatee and devisee of a one-fourth interest in her estate, which plaintiff sought to attach. Defendant was served personally, in this action, in Italy. Upon his motion, the trial court dismissed plaintiff's complaint, without specification of grounds, but apparently upon the two grounds raised by his motion, i. e., insufficient Vermont contacts for personal jurisdiction under Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), and lack of entitlement of the California judgment to full faith and credit.
We note at the outset that a serious question exists as to whether or not the second ground for the motion was sufficiently pleaded, as an affirmative defense, to be raised. V.R.C.P. 8(c); Cook v. Cook, 342 U.S. 126, 72 S.Ct. 157, 96 L.Ed. 146 (1951). The only ground for defendant's motion to dismiss which might be construed to raise this issue was stated as "3. Insufficiency of service process [sic] upon defendant, William T. Berger." No reference is made to what service of process is deemed insufficient, and the ordinary and usual construction would be that the pleading refers to the instant case, not to a prior one in another jurisdiction. But the issue was the *922 subject of the memoranda filed below by both parties, and they and the court seem to have considered it as sufficiently raised. We will so treat it. V.R.C.P. 15(b).
As to both issues which the parties brief and argue, the record is lacking of any factual determinations by the trial court, presumably because the parties agreed to a ruling upon the motion to dismiss without further hearing. They appear to have conceded, and to now concede, a total lack of residence of either party in Vermont, at any material time. It further appears that the only claim of "minimum contacts" of the defendant with Vermont is his undistributed share in his mother's estate. The trial court evidently felt that the requirements of Shaffer were not met. We disagree.
In Shaffer, a long line of cases founded on Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878), was overruled. These previous holdings were to the effect that by attaching property of a nonresident defendant within the state, the courts of that state acquired jurisdiction (denominated "quasi in rem") to render a judgment subjecting that property to a claim against the defendant, regardless of the nexus between the claim and the property or the state.
Our previous V.R.C.P. 4, before the 1979 amendment to conform to Shaffer, outlined such a procedure, and this procedure was in effect when the instant suit was filed. We are not, therefore, called upon to decide whether the suit would be properly entertained were it commenced as of now, and we do not do so. Our precise question is whether, in a suit upon a judgment of a sister state, property of a nonresident defendant in this state, without more, is basis for a judgment, either in personam or quasi in rem. No question is raised about the effect of our then applicable V.R. C.P. 4; it clearly permitted such a result by its terms.
We conclude that quasi in rem jurisdiction did in fact exist, and that Shaffer did not hold otherwise. A lengthy analysis by us of the holding in Shaffer would add but little to the great body of already existing commentary, but in general it adopts the requirement of "fair play and substantial justice" enunciated in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), as a requisite for quasi in rem as well as personal jurisdiction. Shaffer, however, was a suit upon an original, unadjudicated claim. It was not a suit upon a judgment, as is the instant action. And the Court was careful to note, Shaffer v. Heitner, supra, 433 U.S. at 210, 97 S.Ct. at 2583, that the Full Faith and Credit Clause makes the valid in personam judgment of one state enforceable in all other states. To this pronouncement it added footnote 36, as follows:
Once it has been determined by a court of competent jurisdiction that the defendant is a debtor of the plaintiff, there would seem to be no unfairness in allowing an action to realize on that debt in a State where the defendant has property, whether or not that State would have jurisdiction to determine the existence of the debt as an original matter.
Recognizing that, under the facts in Shaffer, the footnote in question is dicta, we are nonetheless inclined to follow it. There is nothing in the concept of justice and fair play that requires a second opportunity to litigate the liability established by a valid judgment. The trial court was not justified, under V.R.C.P. 4 as then in effect, in dismissing the plaintiff's complaint.
The foregoing discussion, however, assumes the validity of the California judgment, put into question upon the ground that the execution order issued without service (other than that in the original action) upon the defendant. Disposition of this question could well be rested upon the ground that the validity of a judgment is presumed under Cook v. Cook, supra, and the contrary is not made to appear. The order, incorporated in the complaint as an exhibit, does not recite either the presence or absence of service upon the defendant.
Further than this, however, the argument mistakes the underlying nature of plaintiff's action. Whether or not an execution issued validly, her suit is upon the original judgment in her divorce action, the validity *923 of which is not questioned. This is apparent from the fact that she seeks recovery not only of the sum set out in the execution order, but of an additional $6,750.00 accrued arrearage since the date of the execution. The holding in Griffin v. Griffin, 327 U.S. 220, 66 S.Ct. 556, 90 L.Ed. 635 (1946), is thus inapposite, as that case dealt with the validity of a second judgment lacking in the notice required by due process.
Whether or not the execution order is conclusively determinative of the arrearages then outstanding we are not called upon to decide. At issue is the order dismissing the Vermont action, presumably upon the grounds stated in defendant's motion, or at least one of them. While under California law, the marriage is not finally dissolved unless, after one year, either party moves for such final dissolution (not done in this case), the order which was initially entered seems to have the status of a final judgment, after the times for appeal or motion to vacate have expired, and to be res adjudicata on all questions determined therein. Cal.Juris.3d Family Law § 674 (1972). An interlocutory judgment, unless on appropriate motion or appeal, is a final judgment of the matters therein decided, with final dissolution the only undetermined question. Estate of Hughes, 80 Cal.App.2d 550, 182 P.2d 253 (1947); Cal.Juris.3d, supra. The totally final nature of the original order is further demonstrated by the recital therein that each party had waived any right he or she might have to increase or decrease the amount of support regardless of the circumstances that might arise in the future.
As we previously noted, the dismissal order in the trial court did not specify which ground of the defendant's motion afforded its basis. We would, of course, sustain, were either ground tenable. But we are satisfied that the gravamen of plaintiff's action is a suit upon a valid judgment of a sister state, and that the "minimum contacts" rule of Shaffer does not preclude assertion of Vermont jurisdiction under our then existing V.R.C.P. 4.
Judgment reversed and cause remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545065/ | 23 F.2d 434 (1928)
SARBER
v.
ÆTNA LIFE INS. CO.[*]
No. 5156.
Circuit Court of Appeals, Ninth Circuit.
January 9, 1928.
Eddy Knapp and Lyman I. Mowry, both of San Francisco, Cal., for plaintiff in error.
Redman & Alexander, of San Francisco, Cal., for defendant in error.
Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.
RUDKIN, Circuit Judge.
This was an action for deceit. It appears from the original complaint that on July 23, 1923, the plaintiff was an employee, within the contemplation and under the provisions of the Workmen's Compensation Act of the state of California (St. 1913, p. 279, as amended); that on the above date, in the course of his employment, a small fragment of steel penetrated his leg, causing injury thereto; that the defendant, as insurance carrier, took over and assumed the burdens, duties, and obligations imposed on the employer by the Compensation Act; that the plaintiff immediately demanded of the defendant that the fragment of steel be removed from his leg, but the defendant refused to comply with the demand; that thereafter, in December, 1923, and January, 1924, an operation was performed at the instance of the defendant for the purpose of removing the fragment of steel, but the same was not then removed; that defendant not only concealed from plaintiff the fact that the fragment of steel had not been removed, but actually informed him that it had been so removed; that plaintiff remained in ignorance of the fact that the fragment of steel had not been removed until August, 1925; that on April 26, 1926, a second operation was performed, and the fragment of steel was then removed; that until *435 such fragment of steel was extracted and removed plaintiff suffered great physical pain and was unable to work and earn a living; that he incurred certain expenses for the services of physicians and surgeons; and that by reason of the deceit thus practiced upon him he was damaged in the sum of $10,000 in all. Some of the foregoing facts appear only inferentially from the complaint, but on the argument before this court the facts were assumed to be as above set forth. The defendant demurred to the complaint, on the ground, among others, that the court had no jurisdiction of the subject-matter of the action or of the parties, because jurisdiction was vested exclusively in the Industrial Accident Commission of the state, under the provisions of the Compensation Act. The demurrer was sustained without leave to amend, and the judgment of dismissal is now before us for review.
It should be stated at the outstart that, when the insurance carrier is substituted for the employer under the provisions of the Compensation Act, the carrier is subrogated to all the rights and duties of the employer. Two questions are therefore presented for decision: Was the plaintiff in error entitled to compensation under the Compensation Act for the injuries set forth in his complaint? And, if so; is the remedy there given an exclusive one?
Under the great weight of authority the employer is liable for all legitimate consequences following an accident, including unskillfulness or error of judgment of the physician furnished as required, and the employee is entitled to recover under the schedule of compensation for the extent of his disability, based on the ultimate result of the accident, regardless of the fact that the disability has been aggravated and increased by the intervening negligence or carelessness of the employer's selected physician. Drengwitz v. Lincoln Coal & Brick Co., 317 Ill. 302, 148 N. E. 79, 39 A. L. R. 1270; Pawlak v. Hayes, 162 Wis. 503, 156 N. W. 464, L. R. A. 1917A, 392; Oleszek v. Ford Motor Co., 217 Mich. 318, 186 N. W. 719; Kirby Lumber Co. v. Ellison (Tex. Civ. App.) 270 S. W. 920; Ross v. Erickson Const. Co., 89 Wash. 634, 155 P. 153, L. R. A. 1916F, 319; Smith v. Missouri, K. & T. Ry. Co., 76 Okl. 303, 185 P. 70; Booth & Flinn v. Cook, 79 Okl. 280, 193 P. 36. The rule is the same in common-law actions for negligence. See Hooyman v. Reeve, 168 Wis. 420, 170 N. W. 282, and cases above cited.
For these reasons, we are of opinion that the original accident was the proximate cause of the damages claimed in this action, and the state Compensation Act provides what the Legislature has deemed just and adequate compensation for all such injuries. If we are correct in this conclusion, there is little room to doubt that the remedy thus provided is exclusive of all other remedies, common-law or statutory, as between the employee, on the one hand, and the employer and the insurance carrier, on the other, and that the exclusive provisions of the Compensation Act cannot be evaded by bringing an action in some other form or under some other name. Thus the original Compensation Act of the state (St. 1913, p. 279) provided for an election of remedies by an injured employee, where the injuries were caused through gross or willful misconduct of the employer; but by an amendment in 1917 (St. 1917, p. 831) the right of election was abrogated in such cases, and provision made for additional compensation. The validity of this latter provision was challenged in De Carli v. Associated Oil Co., 57 Cal. App. 310, 207 P. 282, but in overruling the challenge the court said:
"The remedy here provided for has been held to be exclusive of all other statutory or common-law remedies, and the constitutionality of the provision has been upheld in numerous cases. E. Clemens Horst Co. v. Industrial Acc. Com., 184 Cal. 180, 193 P. 105, 16 A. L. R. 611. See, also, Western Metal Supply Co. v. Pillsbury, 172 Cal. 407, 156 P. 491, Ann. Cas. 1917E, 390; San Francisco Stevedoring Co. v. Pillsbury, 170 Cal. 321, 149 P. 586; Dominguez v. Pendola, 46 Cal. App. 220, 188 P. 1025; Helme v. Great Western Milling Co., 43 Cal. App. 416, 185 P. 510. As pointed out in these cases, the Constitution authorizes a complete system of workmen's compensation, and the language employed is comprehensive enough and was intended to include all injuries, irrespective of the manner in which they might occur. The contention of appellant, therefore, that the language employed in the Constitution is a limitation on the power of the Legislature is without merit."
See, also, Ross v. Erickson Const. Co., supra.
The judgment of the court below is affirmed.
NOTES
[*] Rehearing denied February 13, 1928. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545067/ | 120 N.H. 447 (1980)
JOYCE GELINAS DAWE
v.
AMERICAN UNIVERSAL INSURANCE COMPANY
No. 79-455.
Supreme Court of New Hampshire.
June 18, 1980.
*448 Bossie, Kelly & Hodes, of Manchester (Jay L. Hodes orally), for the plaintiff.
Wiggin & Nourie, of Manchester (Richard B. McNamara orally), for the defendant.
PER CURIAM.
The issue in this case is whether the evidence supported the trial court's finding of misrepresentation on the part of the defendant insurance company's claims adjuster. We affirm.
The plaintiff brought this bill in equity seeking to rescind a release executed by her in favor of the defendant American Universal Insurance Company for injuries sustained in an automobile accident which occurred in Londonderry, New Hampshire, on October 15, 1977. At the time of the accident, she was a passenger in her own car which was being operated by her then-fiancé, Mr. Dawe. The operator of the other vehicle was without insurance or assets. At the time of the collision, the plaintiff owned an automobile liability insurance policy issued by the defendant, American Universal Insurance Company, which included uninsured motorist coverage.
At a trial which commenced on April 5, 1979, the following facts emerged. The plaintiff notified the defendant's agent regarding the accident on the day that it occurred. Thereafter, the defendant referred the case to one Norbert Sell, an independent insurance adjuster, who subsequently contacted and had several meetings with the plaintiff. Mr. Sell first obtained a settlement with the plaintiff regarding the damage to her automobile which is not now disputed. Following the property damage settlement, however, Sell met with the plaintiff and offered her a check for $1,485.40 in settlement of her claim for bodily injury. This amount equalled $1,000 more than her medical expenses and lost wages at that time. At this point, the evidence below is contradictory. However, *449 the plaintiff testified that she believed that she was only entitled to recover for property damage, lost wages and medical expenses, and that she was unaware that she might be entitled to compensation for damages such as pain and suffering. She testified that when she asked Sell whether the settlement would release the defendant of liability for further medical expenses, he answered no. She further stated that Sell explained the additional $1,000 as a "surprise" and that she believed that the defendant was offering it out of the goodness of its heart.
In an order dated April 27, 1979, the Trial Court (King, J.) found, inter alia, that there was no evidence that Sell informed the plaintiff of her additional rights under the uninsured motorist provision. Although the release signed by the plaintiff recited that it was in full and final settlement for all injuries arising out of the accident, the court found that Sell had advised the plaintiff to the contrary, assuring her that it released no rights for future medical expenses.
[1, 2] The court found that Sell's explanation of the release constituted misrepresentation which, together with his failure to fully disclose to the plaintiff her other rights, resulted in an unconscionable settlement. Accordingly, the court rescinded the release, contingent, however, upon the plaintiff's reimbursing the defendant in the sum of $1,000. The defendant's exceptions were transferred to this court.
The defendant seeks to overturn the determination below on the primary ground that the adjuster's failure to fully disclose the plaintiff's rights under the policy is not sufficient to void the release. It points to an absence of a confidential relationship between the insured and her insurer. However, it was her own insurance company with which she was dealing and not that of an adversary. We conclude that there was sufficient evidence to support the trial court's finding that the plaintiff was misled by the defendant's agent into executing the release.
There was evidence that Sell told the plaintiff that the release did not apply to future medical expenses, and that he informed her that the release was necessary to enable the defendant to proceed against the operator of the other vehicle. There was evidence that Sell characterized the additional $1,000 as a "surprise."
[3, 4] We recently held that every agreement executed in this State contains an implied covenant of good faith and fair dealing. Bursey v. Clement, 118 N.H. 412, 387 A.2d 346 (1978); Seaward *450 Constr. Co. v. City of Rochester, 118 N.H. 129, 383 A.2d 707 (1978). Moreover, partial disclosure may give rise to a duty to fully disclose when the partial disclosure, standing alone, is deceptive. W. PROSSER, HANDBOOK OF THE LAW OF TORTS, p. 696 (4th ed. 1971); Smith v. Pope, 103 N.H. 555, 176 A.2d 321 (1962). Finally, there was evidence before the trial court that the plaintiff relied on Sell's statements. Under the circumstances of this case, we hold that rescinding the release was appropriate. See Graham v. Weber, 79 N.H. 393, 109 A. 717 (1920); 66 AM. JUR. 2d Release §§ 21-22 (1973); D. DOBBS, HANDBOOK OF THE LAW OF REMEDIES § 9.4 (1973).
Affirmed.
KING, J., did not sit. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545612/ | 87 F.2d 783 (1937)
BYRNE MFG. CO.
v.
AMERICAN FLANGE & MFG. CO., Inc.
No. 7242.
Circuit Court of Appeals, Sixth Circuit.
January 12, 1937.
J. F. Oberlin and George B. Pitts, both of Cleveland, Ohio, for appellant.
George L. Wilkinson, of Chicago, Ill. (Harry W. Lindsey, Jr., of Chicago, Ill., James H. Hayes, of New York City, Rector, Hibben, Davis & Macauley, of Chicago, Ill., and Brockett, Hyde, Higley & Meyer, of Cleveland, Ohio, on the brief), for appellee.
Before HICKS and SIMONS, Circuit Judges, and HAHN, District Judge.
HICKS, Circuit Judge.
Suit by the American Flange & Manufacturing Company, Inc., appellee, versus the Byrne Manufacturing Company, appellant, for infringement of (1) letters patent No. 1,513,637, October 28, 1924, to Morris Schwartz for "bushing," and assigned to appellee; and of (2) letters patent No. 1,644,154, October 4, 1927, to Charles F. Schriner for "bushing for metal receptacles," and assigned to appellee.
Claims 1, 3, 4, 5, and 6 of Schwartz, and both claims of Schriner, are involved. The Schriner claims and claim 1 of Schwartz are article claims for bushing, and claims 3, 4, 5, and 6 of Schwartz are for a method of applying bushing to metal containers. The defenses were invalidity and noninfringement. Appellant also set up a counterclaim.
The District Court held all the claims in suit valid and infringed and dismissed the counterclaim.
Both patents relate to bungs and bung holes for metal barrels or other containers for liquids. Wooden bungs for wooden barrels are as old as the art of barrel making and were sufficient for their purpose, but they are unfit for use in modern metal containers. The stock of the metal containers is too thin to hold a wooden bung or plug without leakage and the plug itself cannot be easily inserted and removed without damage to the container.
To overcome this defect, makers of metal containers fitted the bung holes with a cylindrical metal bushing having an inwardly extending interiorally threaded tubular flange for rotating engagement with an exteriorally threaded metallic *784 bung. The bushing was provided with an annular flange extending laterally to overlay the stock of the container around the bung hole to which it was welded.
Numerous objections arose to the "welded on" bushing. The welding was expensive and leakage often occurred between the bushing and the container wall. The heating incidental to the welding process frequently warped both the flange and the container wall, and also made it impossible to use a gasket there-between since the heat would destroy the gasket. It would also oxidize the metal, producing scale, which would fall into the container.
Schwartz's problem was to obviate these defects by providing a suitable and durable bushing and a leak proof method for applying it to the bung holes. His bushing consisted of a cylindrical part adapted for insertion within a collar formed of the container stock which had been forced inwardly from around the edges of the bung hole. The inner end of the bushing was adapted to be curled under, around, and over the edge of the collar, and the outer end had a laterally projecting flange of noncircular contour adapted to fit within a seat or socket of like contour formed by a boss or raised portion in the container stock. It was screw threaded interiorally to receive a threaded stopper from which a nut projected to permit the use of a wrench in inserting and removing.
Schwartz's method of applying his bushing was to punch a circular hole through the container stock, remove the center, and force inwardly the metal at the edges of the hole to form an annular collar; and to force outwardly a portion of the container stock to form an annular boss around the bung hole but spaced therefrom to provide a noncircular seat. The bushing was then fitted in the bung hole and by means of another set of dies the inner edge was rigidly curled under, around and over the lower edge of the collar and its lateral noncircular flange was forced tightly within the noncircular seat or socket formed in the container stock around the bung hole.
The Schwartz device and its application was economical. It required no skilled labor as did the welding process. Curling the inner edge of the tubular bushing under, around, and over the edge of the container collar, and seating the lateral flange of noncircular contour in its noncircular seat in the stock of the container, prevented any rotative movement of the bushing and permitted the plug to be forcibly and tightly screwed into the bushing. Chance of leakage was effectively forestalled, a needed and long sought result.
Appellee has sold 56,000,000 sets of the Schwartz bushings in the United States and many millions in foreign countries.
Claims 1 and 3 of the Schwartz patent are printed.[1]
Relative to these two claims, on October 28, 1924, appellee, as owner of the patent, filed a disclaimer.[2]
It is urged that this disclaimer enlarges the scope of claims 1 and 3 of Schwartz and is therefore invalid. We think otherwise. The disclaimer adds no new element. The effect of it as to claim *785 1 is to limit the engagement between the perimeter of the laterally projecting flange of the bushing and its seat to certain characteristics; and as to claim 3, to limit the sealing step of the bushing to the process of rolling the inner edge thereof, under, around, and over the edge of the annular collar surrounding the hole. See Wood v. Peerless Motor Car Corp., 75 F.(2d) 554, 556 (C.C.A.6); N. O. Nelson Mfg. Co. v. F. E. Meyers & Bro. Co., 29 F.(2d) 968, 969 (C.C.A.6).
We think that the claims of Schwartz in issue disclose invention, both for the bushing and the method of securing it to the container. They represent more than a refinement of the prior art; they are a step in advance of it. See Alliance Securities Co. v. De Vilbiss Mfg. Co., 76 F.(2d) 503 (C.C.A.6). The product was both new and useful and was a decided commercial success. While commercial success cannot alone be accepted as evidence of invention, it may be considered along with all other evidence in determining whether invention exists. Temco Co. v. Apco Co., 275 U.S. 319, 324, 48 S.Ct. 170, 171, 72 L.Ed. 298. The elements of the claims were not old in combination. In the new combination they produced a new result and therefore were not anticipated. Webster Loom Co. v. Higgins, 105 U.S. 580, 591, 26 L.Ed. 1177; Detroit Carrier & Mfg. Co. v. Dodge Bros., 33 F. (2d) 743, 747 (C.C.A.6); Michigan Carton Co. v. Sutherland Co., 29 F.(2d) 179, 183 (C.C.A.6); Ferro Concrete Construction Co. v. Concrete Steel Co., 206 F. 666, 669 (C.C.A.6); Kellogg Switchboard & Supply Co. v. Dean Elec. Co., 182 F. 991, 998 (C.C.A.6).
Of the prior art patents, concededly the most pertinent is the patent to Phillips, No. 753,308, March 1, 1904. The patent to Willis, No. 1,096,280, May 12, 1914, is also strongly relied upon. But in neither of these patents is the bushing sealed by rolling its marginal portion around and over the edge of the annular collar and it follows of course that in neither is any step disclosed for the method of sealing. It is manifest that neither Phillips nor Willis had in mind a nonrotative bushing in which the plug might be forcibly and securely screwed to prevent leakage for in both Phillips and Willis a valve was located beneath the plug for this purpose.
Appellant relies also upon prior use, but we do not think that proof of it was established beyond the reasonable doubt which the law requires. The relevant evidence is that the Galesburg Cornice Works of Galesburg, Ill., manufactured metal barrels with a bushing pressed into the bung hole from about 1912 to 1916, but the Galesburg bushing was substantially identical with that shown in the Willis patent, No. 1,096,280.
Appellant urges that the Schwartz patent was invalid because its bushing had been sold and publicly used more than two years prior to August 17, 1922, the filing date of the application. This claim is based upon the testimony of the witness Cheviron. Cheviron testified that Schwartz came to Detroit about August, 1920, and explained to him his pressed-in flanges; that Schwartz had samples and stated that he would be in production very shortly and wanted to get barrel manufacturers interested. He left a few of the samples which were substantially like those disclosed in the Schwartz patent but Cheviron was not definite as to the date of the visit. He gives the date as "about August, 1920," as "the fore part of August, 1920," and "an early August date 1920." This evidence is unaided by any records, and we cannot say beyond a reasonable doubt that it established a use or sale more than two years before August 17, 1922. See Austin Mach. Co. v. Buckeye Trac. Ditcher Co., 13 F.(2d) 697, 700 (C.C.A.6); Reo Motor Car Co. v. Gear Grinding Mach. Co., 42 F.(2d) 965, 968 (C.C.A.6).
Appellant relies upon the Behringer patent, No. 1,479,358 January 1, 1924, as an anticipation of Schwartz. We need not discuss this patent in detail because the evidence established that Schwartz disclosed his invention to the witnesses, Dingle, Daniels, and Cheviron in 1921. These witnesses were then connected with the Welded Steel Barrel Corporation and in that year Schwartz sold his bushings to that company and they were then used in making Arcola tanks. One of these tanks, equipped with the Schwartz bushings, was in evidence. The testimony of these witnesses is supported by numerous letters written by Cheviron, the manager of the company, to the Schwartz Company from December 14, 1920, to December 7, 1921, relative to Schwartz flanges. This evidence carries the Schwartz invention back of March 18, 1922, the filing date of the Behringer application.
Schriner patent No. 1,644,154: We think this patent is invalid. It was issued *786 October 4, 1927, upon an application filed October 28, 1925. The Schwartz patent, therefore, was older.
Appellee concedes that Schriner differs from Schwartz "only in the means for securing the bushing against rotation relative to the container." The means provided by Schriner for this purpose involved the use of notches located in the periphery of the lateral flange on the bushing to fit around raised lugs on the container wall. But fitting notches into projecting lugs for anchorage is old. The addition of this familiar device to the Schwartz construction does not justify a patent. Hug v. Lakewood Engineering Co., 7 F.(2d) 98, 99 (C.C.A.6); Stockham Pipe & Fitting Co. v. Ohio Steel Fdry. Co., 78 F.(2d) 111, 113 (C.C.A.6).
We think that claim 1 of the Schwartz patent for bushing is infringed by appellant's combination. The claim reads upon appellant's structure. It is urged that in appellant's bushing the projecting flange is circular and therefore its perimeter cannot be at different distances from its axis. But appellant's projecting flange is not circular. As indicated by the drawing on Exhibit 26, as well as figures 2, 5, and 7 of the Dillhoefer Reissue patent, No. 19,118, under which appellant's bushing was constructed, the claimed circular perimeter had at least four projections upon it and its outer edge so constructed continuously engaged portions of the seat on the container stock.
We also think appellant infringed the method claims 3, 4, 5, and 6 of the Schwartz patent. Witnesses who, from experience, were thoroughly familiar with the methods whereby both the Schwartz bushing and appellant's bushing were applied, agreed that the methods of application in each were substantially the same.
It was not error to dismiss appellant's counterclaim.
Its basis was that appellee gave notice of infringement before it filed its disclaimer, and that it should have known at the time the notice was given that claims 1 and 3 of Schwartz were invalid. In addition appellant offered copies of answers in former suits, brought by appellee under the Schwartz patent, which it insisted gave notice of certain prior art patents which would invalidate the Schwartz claims. Whether such notice of alleged infringement amounted to a legal wrong depends upon whether it was given in bad faith or maliciously, and this question depends in turn upon other matters, none of which appear in the evidence received or offered. See Alliance Secur. Co. v. De Vilbiss Mfg. Co., 41 F.(2d) 668, 670 (C.C.A.6); Oil Conservation Engineering Co. v. Brooks Engineering Co., 52 F.(2d) 783, 785 (C.C.A.6).
The decree is affirmed as to the Schwartz patent, No. 1,513,637, but reversed as to the Schriner patent, No. 1,644,154, and the case is remanded, with directions to dismiss the bill as to it.
NOTES
[1] "1. An annular bushing having a flange with edge portions upon its perimeter at different distances from the axis of the bushing, in combination with a support through which the bushing extends and formed with a seat that has portions which engage the aforesaid edge portions of the flange perimeter to hold the bushing from rotation with respect to the support. * * *
"3. The method of applying bung rings to metal containers, consisting of punching an annular hole in the container wall, stamping the surrounding metal to form a socket of greater diameter than said hole, inserting a ring into said hole, having a flange seating in said socket, the contacting edges of said socket and flange being so shaped as to prevent the turning of said ring in seated position, and sealing said ring within said hole."
[2] "1,513,637. Morris Schwartz, Chicago, Ill. Bushing. Patent dated October 28, 1924. Disclaimer filed February 9, 1934, by the assignee, American Flange & Manufacturing Co., Inc.
"Hereby disclaims from the scope of said claim 1 all annular bushings in combination with a support, in which the support is not a metal container having a hole in which the bushing is sealed by rolling the marginal portion of the bushing over, upon and around the edge of an annular flange surrounding the hole; and does disclaim from the scope of claim 3 all methods of applying bung rings to metal containers which do not include as the sealing step rolling the marginal portion of the ring over, upon and around the edge of the angularly projecting annular flange surrounding the hole." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545616/ | 40 B.R. 1009 (1984)
In the Matter of John L. HOLT, Debtor.
Elizabeth Holt WILLIAMS formerly Elizabeth J. Holt, Appellant,
v.
John L. HOLT, Appellee.
Civ. A. No. CV183-257, Adv. No. 183-0100.
United States District Court, S.D. Georgia, Augusta Division.
July 13, 1984.
*1010 Richard L. Powell, Augusta, Ga., for appellant.
Terrance P. Leiden, Leiden, Hawk & Oellerich, Augusta, Ga., for appellee.
ORDER ON APPEAL
BOWEN, District Judge.
The captioned case is on appeal from the order of the bankruptcy judge entered October 11, 1983. Jurisdiction over such matters is vested in the United States District Court pursuant to 28 U.S.C. § 1334 and Title IV, § 405(c) of the Bankruptcy Reform Act of 1978. Although the appellant may have been slightly late in the filing of a brief, the Court will proceed on the merits of the appeal. The delay was negligible, and there was no resulting prejudice.
The broad issue this case presents is whether obligations of alimony and child support are excepted from or subject to an individuals discharge in bankruptcy. The bankruptcy judge has read 11 U.S.C. § 523(a)(5) and determined that in order to be excepted from the operation of a discharge, a debt must be payable directly to a spouse, former spouse, or child of the debtor.
Under the final divorce decree entered July 15, 1982, by the Richmond Superior Court, the appellee is required to pay the following obligations which the appellant alleges are non-dischargeable:
1) Appellee was ordered to pay to appellant $100.00 per month as child support until April 1, 1983; thereafter $150.00 per month until both minor children reach the age of eighteen (18) or marry.
2) As further child support, appellee was ordered to pay the first mortgage until the youngest living child reaches eighteen years of age; further, the appellee was ordered to pay the second mortgage and the third mortgage until those debts are paid in full.
3) Appellant was awarded title to all furniture, appliances and household contents free and clear of liens.
4) Appellee was ordered to pay all medical, hospital, doctor, dental and prescribed drug bills incurred for the children.
5) Appellee was ordered to pay all state and federal income taxes for the year 1981.
6) Appellee was ordered to pay appellant's attorney in the divorce action $350.00 in attorney's fees.
The bankruptcy judge conducted an evidentiary hearing on July 27, 1983, and made no findings of fact thereon except the fact of the divorce and the terms of the decree. There is testimony in the record about the parties' purposes as to which the bankruptcy judge has made no findings of fact. For example, Mr. Flanagan, the attorney for the appellee in the divorce case, testified that his client agreed to pay $550.00 per month as permanent child support. Flanagan stated that the appellee wished to pay a small amount in cash but agreed to pay the mortgages directly to the mortgagees so as to obtain an income tax *1011 deduction. It seems clear that such payments were intended by the parties and the court as a form of child support. Nevertheless, the bankruptcy judge does not address the intent of the parties or the genuineness of the label of child support which is utilized throughout the superior court decree.
The bankruptcy judge has not dealt with the facts; his opinion is directed only to the law and appears more akin to an order resolving a case on motion than one on the merits after an evidentiary hearing.
Basically, the effect of the bankruptcy judge's order is to determine that any obligation which is not payable directly to a former spouse or child to be extinguished by the discharge in bankruptcy. Thus, without regard to the intent of the parties or that of the superior court, the federal law has been applied in a strictly literal and formal way to defeat the object of state and federal law.
Bankruptcy legislation is rehabilitative in nature and must be construed strictly in favor of its salutary purpose, debtor relief. Nevertheless, such law cannot be applied so as to render an equally well-intended body of state law to be nugatory. That alimony and child support obligations be recognized as unavoidable liabilities, is a principle just as valuable to society, if not more so. There is no federal bankruptcy law of alimony and support. Such obligations and the rights of the parties must be divined by reference to the reasoning of the well-established law of the states.
In this case the bankruptcy judge has imposed an incorrect, wooden application of the literal language of the statute to achieve a legalistic result without exploring the facts.
The approach was incorrect because he concluded that the non-dischargeability of debt under 11 U.S.C. § 523(a)(5) is established only if it is:
1. Payable to a spouse, former spouse or child of the debtor (emphasis added);
2. Designated as alimony to, maintenance for, or support of such spouse or child;
3. The result of a separation agreement, divorce decree, or property settlement agreement;
4. Actually in the nature of alimony, maintenance or support.
Subparagraph "1." is wrong as applied. Subparagraph "2." is too strict.[1]
11 U.S.C. § 523(a) provides in part that a discharge under the Act does not discharge a debtor from any "debt
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement . . . "
First, a debt to a spouse or former spouse is not confined only to obligations payable to such person. In the Bankruptcy Code [11 U.S.C. § 101(11)] "`debt' means liability on a claim[.]" In U.S.C. § 101(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[.]" A commitment to pay the couple's debt to a third party after the divorce is an obligation which one former spouse may enforce *1012 against another under the law of Georgia. Accordingly, notwithstanding the fact that the actual promissory note or contract is literally payable to a third party, the "debt" which is created by the separation agreement or decree and therefore is non-dischargeable, is the undertaking of a former spouse to pay a past or future obligation of the other spouse, or the couple. Thus, the "debt" to a former spouse contemplated in § 523(a)(5) is the obligation arising under the settlement agreement or divorce decree. It may or may not be identical in amount to that owed by one of them to a third party. Everything depends upon the intent of the parties or the court which enters the decree.
The "debt" of the sort envisioned by the drafters of § 523(a)(5) may have an underlying obligation, such as a retail installment contract on furniture, an automobile purchase, or a second mortgage. Such would rarely be "payable" to the former spouse. Nevertheless, the obligation of one former spouse made in connection with a separation agreement or imposed by a divorce decree to the effect that such spouse would pay a debt of the other spouse, or of the couple, is not thereby rendered dischargeable. It is the obligation created by the agreement or decree, and the character thereby imposed, that renders a debt non-dischargeable under the § 523(a)(5). Obviously, when a newly married couple purchases furniture on credit, dischargeability of debt and divorce may be the farthest thing from their minds. Usually, such a debt is dischargeable. It is the legally significant event of the divorce decree or separation agreement by which an old, dischargeable debt is transformed into a different obligation which is rendered non-dischargeable by § 523(a)(5). The old debt is not the same. When the old debt is branded by the divorce decree, it attains a new and different status. It is then transmogrified from dischargeable to non-dischargeable. It need not be payable directly to the former spouse. That which is owed to one former spouse by the other is the obligation incurred by the divorce decree or separation agreement.
The approach was "wooden" or unnecessarily rigid and unbending because his erroneous perception of the law was applied without regard to the facts of the case. The bankruptcy judge must consider whether any "debt" [liability on a claim] to a spouse, former spouse, or child in connection with a separation agreement, divorce decree, or property settlement agreement is genuinely (a) for alimony to, (b) maintenance for, or (c) support of such spouse or child. Of course, if such a debt is assigned to another entity or is not actually in the nature of alimony, maintenance, or support, it is dischargeable. A subjective review of the facts established by the evidence must be made so that the intent of the parties or the divorce court becomes known. If the evidence discloses that a particular label is attached to the obligation for an ulterior purpose, and the debt is not actually in the true or genuine nature of "alimony" or "support" of a child, then the debt should be discharged. 11 U.S.C. § 523(a)(5)(A) and (B).
Where a former spouse or a child seeks to determine the dischargeability of debt, the court should simply look to the agreement or decree, and to the evidence, and determine by a preponderance of the evidence whether the debt is (a) in connection with a separation agreement, divorce decree, or property settlement agreement; (b) actually in the nature of alimony, maintenance, or support; and (c) flows to or for the benefit of a spouse, former spouse, or child of the debtor. Is it really "alimony" or "support," or is it something else with a label applied for someone's convenience or pecuniary purposes? That is the question, most simply stated.
The incorrect holding of the court below is clearly juxtaposed to persuasive authority.[2] While the issues may not have been *1013 determined in this district or the Eleventh Circuit, the United States Courts of Appeals for the Sixth Circuit and the Second Circuit have squarely addressed and decided the issues in a way which is opposite to their resolution in this case by the bankruptcy judge. It is noted that the opinion of the bankruptcy judge contains no citation of any authority to support the position adopted. While there may be no controlling authority in this circuit, a fair reading of the statute, a review of legislative intent, and the existence of appellate opinions directly on point seem to demand comment.
The opinion of the Sixth Circuit Court of Appeals is detailed and scholarly. The opinion of the Second Circuit Court of Appeals is likewise clear, well-reasoned, and academically sound. The opinions of the Second Circuit Court of Appeals in bankruptcy matters should always receive the most careful attention, and consideration of other courts. The geographic area in which the Second Circuit sits is the cradle of bankruptcy and commercial law in this country. That court has historically spoken with great authority in such subject matter areas. A direct statement of the law by that noble body cannot be ignored or lightly dismissed.
Similar subject matter and an identical issue was presented to the United States Court of Appeals for the Second Circuit in In re Spong, 661 F.2d 6 (2d Cir.1981). In that case the court observed that "a husband's obligation to support his wife by providing her with the necessaries of life according to his station has been long recognized as an unescapable (sic) duty both at common law and by statute . . . (citations omitted) An award of attorney's fees may be essential to a spouse's ability to sue or defendant a matrimonial action and thus a necessary under the law." Id. at 9. Further, the court comments that "appellee argues that the phrase `owed directly to a spouse' means, in effect, that the money must be payable to the spouse. (citations omitted) In making this contention, appellee overlooks the well-established principle of bankruptcy law that dischargeability must be determined by the substance of the liability rather than its form." Id. The court states "we conclude that it would be exalting form over substance to fail to treat appellee's agreement to pay his wife's counsel fee as a `debt . . . to a spouse . . . for alimony maintenance . . ., or support', and that, therefore, it is nondischargeable in bankruptcy." Id. at 11.
When the issue was presented to the Sixth Circuit Court of Appeals in In re Calhoun[3], 715 F.2d 1103 (1983), the court, citing Spong, recounted the legislative history of § 523(a)(5) and succinctly stated "we agree with these courts (citations above) and hold that payments in the nature of support need not be made directly to the spouse or dependent to be nondischargeable." In re Calhoun, 715 F.2d at *1014 1107. It is doubtful that a clearer statement on the law as to this issue is available. How these authorities are perceived by the bankruptcy judge not to be persuasive in determining a virtually identical issue is a mystery of no small proportion.[4]
It appears to the district court that the holding of the court below was based upon an insufficient exploration of the facts and erroneous conclusions of law. The facts found by the court below may have bearing on some of the issues, but they are incomplete. The court below should review the record and, if necessary, conduct another evidentiary hearing to determine whether each debt claimed to be non-dischargeable is in connection with a divorce decree or settlement agreement and whether such debts create obligations to the former spouse in the nature of alimony or child support. The facts may differ as to each of the claimed debts. Each must be subjectively considered in accordance with and in light of the principles of law stated herein.
Accordingly, the decision of the bankruptcy judge is VACATED insofar as it determines that any of the debts listed in the plaintiff's complaint are discharged in bankruptcy, and the case is REMANDED to the bankruptcy judge for further proceedings consistent with this opinion. Otherwise, the decision of the bankruptcy judge is AFFIRMED.
NOTES
[1] It is too strict because nothing in 11 U.S.C. § 523(a) requires that a "debt" be "designated" or labeled as alimony or child support to be non-dischargeable. The section does require that the debt be "for alimony to, maintenance for, or support of such spouse or child" if it is to be non-dischargeable. Obviously, most such debts will bear a designation or label. However, the essence of the matter is the actual substance of the agreement or decree, not the form or label attached. None of the debts in this case stood or fell on this element of the four-prong test devised by the bankruptcy judge. This comment is appended in an effort to avoid needless litigation as a result of the application of an erroneous test in the future.
[2] The "persuasive authorities" of other circuits are not mentioned in support of the reasoning of this opinion. They are mentioned as another well-researched and sound approach to the same result. These cases would suffice to support this opinion, but they are not the sine qua non hereof. The decisions announced in In re Spong and In re Calhoun seem to accept the premise that the literal language of the Bankruptcy Code requires that a "debt" be payable to a former spouse or child in order to be nondischargeable. That is simply not the case. When the statute is viewed as a whole, there is no requirement of direct payability. Indeed, that is a strained construction of the sections involved, 11 U.S.C. §§ 101(4), 101(11), and 523(a)(5). These observations do not undermine or derogate the value of the cited cases as precedental authority to achieve the same result. Rather, they are reinforced.
[3] One exception to the otherwise excellent opinion of the Sixth Circuit Court of Appeals in In re Calhoun should be noted. In a narrative discussion of the purposes and contents of Section 523(a)(5), the court states "accordingly, § 523 excepts from discharge payments: (5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of both spouse or child, in connection with a separation agreement, divorce decree . . ." In re Calhoun, 715 F.2d at 1106. Without any explanation or reason, the court of appeals substitutes the word "payments" instead of "debts." The word "debt" is a term of art with specific definition in the Bankruptcy Code, such substitution is enough to spawn confusion and possibly litigation. The record should be set straight. In the context of Section 523(a)(5), the word "debt" in the body of the statute means "debt" as it is defined in the Bankruptcy Code. There is no legal or literary purpose in equating the language of the statute with the word "payment." Such usage could easily mislead a reader and be construed as an indication that such "debts" must indeed be payable directly to the former spouse which is contrary to the very holding announced in Calhoun.
[4] As a matter of fact, the instant case embodies the reoccurrence of the same issue. After laborious preparation, a draft of this order was circulated to the judges of this district, and it was subsequently learned that this issue was similarly decided in a Savannah Division case. In re Bedingfield, No. CV483-109, ___ B.R. ___ (S.D.Ga. Oct. 7, 1983). It is noted again that the order of the bankruptcy judge in this case was signed on October 11, 1983. Why the bankruptcy judge did not sua sponte reconsider his order in this case when faced with a controlling precedent to the contrary in this district is also a question of substantial proportion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545621/ | 988 A.2d 851 (2010)
295 Conn. 50
STATE of Connecticut
v.
John DUPIGNEY.
No. 18363.
Supreme Court of Connecticut.
Argued December 9, 2009.
Decided March 9, 2010.
*852 W. Theodore Koch III, special public defender, with whom, on the brief, was William T. Koch, Jr., special public defender, for the appellant (defendant).
Robert J. Scheinblum, senior assistant state's attorney, with whom were Margaret Gaffney Radionovas, state's attorney, and, on the brief, Michael Dearington, state's attorney, and Linda N. Howe, senior assistant state's attorney, for the appellee (state).
ROGERS, C.J., and NORCOTT, KATZ, PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.
KATZ, J.
This appeal raises an issue of first impression before this court, namely, the meaning and proper application of the standard for obtaining postconviction DNA testing of evidence under General Statutes § 54-102kk(b)(1),[1] pursuant to which a petitioner *853 is entitled to such relief if he demonstrates that a "reasonable probability exists that [he] would not have been prosecuted or convicted if exculpatory results had been obtained through DNA testing...." Following his 2000 conviction for murder and related firearms offenses and an unsuccessful appeal from the judgment of conviction; see State v. Dupigney, 78 Conn.App. 111, 826 A.2d 241, cert. denied, 266 Conn. 919, 837 A.2d 801 (2003); the defendant, John Dupigney (petitioner), filed a petition, pursuant to § 54-102kk(b), requesting DNA testing of a hat found at the murder scene that was introduced into evidence by the state in the petitioner's criminal trial. The petitioner now appeals from the decision of the trial court, Damiani, J., denying his petition.[2] The petitioner claims that the trial court improperly concluded that there was no reasonable probability that exculpatory DNA evidence would have altered the outcome of his trial. We conclude that the trial court properly applied the reasonable probability standard under § 54-102kk, and we therefore affirm the trial court's decision.
The record, including the Appellate Court's opinion in the petitioner's appeal from his underlying judgment of conviction, reveals the following facts that the jury reasonably could have found, as well as the pertinent procedural history. "Morris Lewis, the victim, and Herbert Dupigney, the [petitioner's] brother, were partners in an illegal drug selling enterprise in New Haven. The drug sales were conducted primarily at 304 Winthrop Avenue. Other members of the operation included Nick Padmore, an[d] individuals known to the participants in the trial only as `Ebony' and Eric Raven. In December, 1994, following the victim's incarceration, the [petitioner] moved from Boston to New Haven to assist his brother in the drug operation. The [petitioner] also enlisted an acquaintance from Boston, Derrick D'Abreau, to help with the drug sales. D'Abreau moved to New Haven in the beginning of January, 1995.
"The victim was released from jail on January 23, 1995. That day, the victim telephoned Herbert Dupigney at the home of Carlotta Grinman. Grinman overheard the [petitioner subsequently] tell his brother... that the victim `was not going [to] get a ... thing.'
"On January 24, 1995, at about 9:30 p.m., the victim met with the [petitioner]... Herbert Dupigney, D'Abreau, Padmore, Raven and `Ebony' at 304 Winthrop Avenue. Upon his arrival at the building, the victim told everybody to leave because that was his location to sell drugs. As the argument escalated, the victim slapped the [petitioner] and threw a chair at him. The victim then broke a bottle and attempted to attack the [petitioner]. D'Abreau and Raven retreated to a turquoise Dodge Neon. The victim then started swiping the bottle at the occupants of the vehicle through one of its open windows. While Herbert Dupigney attempted to calm the victim and get him away from the car, the [petitioner] inquired if anybody had a gun. In response, D'Abreau gave the [petitioner] a .380 caliber pistol. The [petitioner] *854 then pointed the gun at the victim and told him to back off.
"Herbert Dupigney and the [petitioner] then entered the turquoise Dodge Neon and left the scene. The group proceeded to [Raven's] apartment at 202 Sherman Avenue. The [petitioner] was visibly upset, and stated that the victim was getting on his nerves and that he was going to kill [the victim]. After a few minutes, the [petitioner] and his brother left.
"The [petitioner] and his brother rejoined [Raven] and D'Abreau at 202 Sherman Avenue approximately one hour later. Between 11:15 p.m. and 11:30 p.m., all four individuals proceeded to 300 Winthrop Avenue, where the drug operation had rented a fourth floor room facing Winthrop Avenue. At that time, the victim was playing dice with Padmore and `Ebony' in front of 304 Winthrop Avenue. Herbert Dupigney went down to the street to try to smooth things over with the victim. It was understood that if the attempt at reconciliation was unsuccessful, then the victim would be shot. The [petitioner], [Raven] and D'Abreau observed the scene from the apartment's window. After a few minutes of conversation between the parties and with no overt indication that an accord had been reached, the victim, Padmore and `Ebony' walked off in the direction of Edgewood Avenue. Herbert Dupigney called out to `Ebony.' After `Ebony' started to return, the [petitioner] and [Raven] abruptly left the apartment.
"As the victim and Padmore approached the corner of Winthrop Avenue and Edgewood Avenue, the turquoise Dodge Neon approached them. The [petitioner] exited the vehicle and fired several shots at the victim. A brief struggle ensued, after which the [petitioner] fired more shots at the victim. The victim died of his wounds shortly thereafter." Id., at 112-14, 826 A.2d 241.
Shortly after the shooting, Padmore "contacted the New Haven police ... claiming to have information regarding the crime. The police interviewed him on February 1, 1995. At that time, [Padmore] provided the police with a [tape-recorded] statement identifying the [petitioner] as the assailant. He also identified the [petitioner] as the shooter from a photographic array and signed the [petitioner's] photograph. Both the [tape-recorded] statement and the photograph were admitted into evidence under State v. Whelan, 200 Conn. 743, 753, 513 A.2d 86, cert. denied, 479 U.S. 994, 107 S.Ct. 597, 93 L.Ed.2d 598 (1986)."[3]State v. Dupigney, supra, 78 Conn.App. at 120-21, 826 A.2d 241.
As a result, the state thereafter charged the petitioner with one count of murder in violation of General Statutes § 53a-54a, one count of carrying a pistol without a permit in violation of General Statutes § 29-35 and one count of criminal possession of a pistol or revolver in violation of General Statutes § 53a-217c. Id., at 114, 826 A.2d 241. At trial, the state offered into evidence a black knit hat, bloodied and with two holes, that the police had recovered from the driveway of 315 Winthrop Avenue on the night of the murder. Two witnesses for the state, D'Abreau and Aisha Wilson, testified that they had observed the shooting from the fourth floor of an apartment building across the street from 315 Winthrop Avenue. Both witnesses *855 identified the petitioner as the shooter and testified that the petitioner had been wearing a black knit hat both just before the shooting and at the time of the shooting.[4]
The petitioner essentially presented a mistaken identity defense. During the criminal trial, the petitioner's counsel made a motion to have the hat tested. The trial court, Owens, J., denied the motion. Thereafter, the petitioner was found guilty on all three counts,[5] and was sentenced to a total effective term of seventy years incarceration. Id., at 114-15, 826 A.2d 241.
After an unsuccessful direct appeal to the Appellate Court, in which the petitioner did not challenge the trial court's denial of his motion for DNA testing, the petitioner filed a habeas corpus petition claiming, inter alia, that his trial counsel had been ineffective for failing to move timely for DNA testing of the hat found at the murder scene. In furtherance of his actual innocence claim in that petition, which is still pending, the petitioner also filed the petition at issue in the present case seeking DNA testing of the hat under § 54-102kk. In 2007, the trial court, Damiani, J., conducted a hearing on the § 54-102kk petition, after which the court denied the petition on the ground that the petitioner had not shown that there was a reasonable probability that he would not have been prosecuted or convicted if the hat had been tested.
On appeal to this court, the petitioner claims that the trial court improperly denied his motion for postconviction DNA testing under § 54-102kk(b). Specifically, he claims that the trial court misapplied the statute, under which he is entitled to DNA testing if a "reasonable probability exists that [he] would not have been prosecuted or convicted if exculpatory results had been obtained through DNA testing...."[6] General Statutes § 54-102kk(b)(1). To support this claim, the petitioner suggests that testing on the hat could reveal DNA matching neither the victim nor the petitioner and that such a finding could create a reasonable probability that the jury could have formed a reasonable doubt that the petitioner was the shooter. We disagree.
I
Neither this court nor the Appellate Court has construed the standard for ordering postconviction DNA testing under § 54-102kk(b). Therefore, before we can determine whether the trial court properly applied the reasonable probability standard under that statute, we must ascertain its meaning. Because this is an issue of statutory interpretation, we exercise de novo review. See State v. Fernando A., 294 Conn. 1, 13, 981 A.2d 427 (2009).
*856 "When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature.... In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply." (Internal quotation marks omitted.) Id., at 13-14, 981 A.2d 427. In construing § 54-102kk(b), we are mindful of the legislature's directive that, "[i]n the construction of the statutes, words and phrases shall be construed according to the commonly approved usage of the language; and technical words and phrases, and such as have acquired a peculiar and appropriate meaning in the law, shall be construed and understood accordingly."[7] General Statutes § 1-1(a). Moreover, words having a determined meaning at common law generally are given that same meaning in a statute. See Southington v. Southington Water Co., 80 Conn. 646, 658, 69 A. 1023 (1908). Drawing on this long-standing principle, this court has stated that "legal terms ... absent any legislative intent shown to the contrary, are to be presumed to be used in their legal sense.... Words with a fixed legal or judicially settled meaning must be presumed to have been used in that sense.... In ascertaining legislative intent [r]ather than using terms in their everyday sense, [t]he law uses familiar legal expressions in their familiar legal sense.... Peck v. Jacquemin, 196 Conn. 53, 70-71, 491 A.2d 1043 (1985); see also Southington v. State Board of Labor Relations, 210 Conn. 549, 561, 556 A.2d 166 (1989) (terms not defined in statutes should be given common or legal understanding); Doe v. Manson, 183 Conn. 183, 186, 438 A.2d 859 (1981); Faulkner v. Solazzi, 79 Conn. 541, 546, 65 A. 947 (1907)." (Internal quotation marks omitted.) Perkins v. Freedom of Information Commission, 228 Conn. 158, 169-70, 635 A.2d 783 (1993); see also State v. Jones, 289 Conn. 742, 755, 961 A.2d 322 (2008) ("the meaning of extreme indifference to human life... can be achieved by reference to any dictionary and to judicial opinions addressing violations of [the manslaughter statute]" [internal quotation marks omitted]).
Although, at the time the legislature adopted § 54-102kk in 2003; see Public Acts 2003, No. 03-242, § 7; there was no jurisprudence concerning the meaning of reasonable probability within the novel context of postconviction DNA testing,[8] this term did have a well established meaning in the context of postconviction challenges, generally. Accordingly, we examine those decisions concerning the meaning of reasonable probability within this broader context to ascertain the meaning of that term as used in § 54-102kk.
The developments within two interrelated lines of cases are particularly relevant: *857 the Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), line of cases governing postconviction challenges on the basis of prosecutorial failure to disclose evidence to an accused; and the Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), line of cases governing postconviction claims of ineffective assistance of counsel. In Brady, the United States Supreme Court held that the prosecution's failure to disclose evidence favorable to an accused violates due process when the evidence is material either to guilt or to punishment, but that court did not define materiality. Brady v. Maryland, supra, at 87, 83 S.Ct. 1194. When later considering the meaning of materiality for Brady violations in United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375, 87 L.Ed.2d 481 (1985), the court looked to the Strickland framework for evaluating prejudice in post-conviction claims of ineffective assistance of counsel, under which "[t]he defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the out come."[9] (Emphasis added.) Strickland v. Washington, supra, at 694, 104 S.Ct. 2052 Applying the Strickland reasonable probability standard to Brady claims, the Supreme Court held that undisclosed evidence is material "only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different. A `reasonable probability' is a probability sufficient to undermine confidence in the outcome." United States v. Bagley, supra, at 682, 105 S.Ct. 3375. The court subsequently clarified this standard by explaining: "[A] showing of materiality does not require demonstration by a preponderance that disclosure of the suppressed evidence would have resulted ultimately in the defendant's acquittal (whether based on the presence of reasonable doubt or acceptance of an explanation for the crime that does not inculpate the defendant).... [The] touchstone of materiality is a reasonable probability of a different result, and the adjective is important. The question is not whether the defendant would more likely than not have received a different verdict with the evidence, but whether in its absence he received a fair trial, understood as a trial resulting in a verdict worthy of confidence." (Citations omitted; internal quotation marks omitted.) Kyles v. Whitley, 514 U.S. 419, 434, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995).
This court adopted the Strickland reasonable probability standard for ineffective assistance of counsel claims in Levine v. Manson, 195 Conn. 636, 640, 490 A.2d 82 (1985), and later applied it to Brady violations in State v. Pollitt, 205 Conn. 132, 142-43, 531 A.2d 125 (1987). Since then, this court regularly and consistently has defined reasonable probability as a probability sufficient to undermine confidence in the outcome in determining materiality in Brady claims and weighing prejudice in Strickland claims. See, e.g., State v. Breton, 264 Conn. 327, 335 n. 20, 824 A.2d 778 (Brady claim), cert. denied, 540 U.S. 1055, 124 S.Ct. 819, 157 L.Ed.2d 708 (2003); State v. Wilcox, 254 Conn. 441, 454, 758 A.2d 824 (2000) (Brady claim); Copas v. *858 Commissioner of Correction, 234 Conn. 139, 155, 662 A.2d 718 (1995) (Strickland claim); Fair v. Warden, 211 Conn. 398, 408, 559 A.2d 1094 (Strickland claim), cert. denied, 493 U.S. 981, 110 S.Ct. 512, 107 L.Ed.2d 514 (1989); State v. Milner, 206 Conn. 512, 539 n. 13, 539 A.2d 80 (1988) (Brady claim). This court also adopted and has applied the United States Supreme Court's subsequent clarification of the reasonable probability standard that focuses on the fairness and reliability of the verdict.[10] See State v. Ortiz, 280 Conn. 686, 720-21, 911 A.2d 1055 (2006); State v. Wilcox, supra, at 454, 758 A.2d 824; State v. Esposito, 235 Conn. 802, 814-15, 670 A.2d 301 (1996).
In elaborating on the practical application of this standard in the Brady context, this court explained that a showing of reasonable probability "does not require demonstration by a preponderance that disclosure of the [unavailable] evidence would have resulted ultimately in the defendant's acquittal.... The question is not whether the defendant would more likely than not have received a different verdict with the evidence, but whether in its absence he received a fair trial, understood as a trial resulting in a verdict worthy of confidence.[11]... The United States Supreme Court also emphasized that the [relevant test under United States v. Bagley, supra, 473 U.S. at 682, 105 S.Ct. 3375] is not a sufficiency of the evidence test.... A defendant need not demonstrate that after discounting the inculpatory evidence in light of the [unavailable] evidence, there would not have been enough left to convict.... Accordingly, the focus is not whether, based upon a threshold standard, the result of the trial would have been different if the evidence had been admitted. We instead concentrate on the overall fairness of the trial and whether [the unavailability] of the evidence was so unfair as to undermine our confidence in the jury's verdict." (Internal quotation marks omitted.) State v. Ortiz, supra, 280 Conn. at 717-18, 911 A.2d 1055; see also State v. Wilcox, supra, 254 Conn. at 454, 758 A.2d 824; State v. Ross, 251 Conn. 579, 595, 742 A.2d 312 (1999).
Nearly twenty years passed between this court's adoption of the Strickland reasonable probability standard for claims of ineffective assistance of counsel and Brady violations and the legislature's adoption of § 54-102kk. We are mindful that, unlike Brady and Strickland, which are premised on federal constitutional rights, there is no federal constitutional right to post-conviction DNA testing. District Attorney's Office v. Osborne, 557 U.S. ___, ___, 129 S.Ct. 2308, 2316, 2323, 174 L.Ed.2d 38 (2009). Moreover, success on a § 54-102kk petition does not afford the ultimate form of relief of a new trial mandated for *859 Brady[12] and Strickland violations. We are nonetheless persuaded that, because the reasonable probability standard had acquired a well settled meaning in the context of postconviction remedies, the legislature was mindful of that legal meaning when it adopted § 54-102kk. Accordingly, we conclude that a "reasonable probability" under § 54-102kk (b)(1) means a probability sufficient to undermine confidence in the outcome. Cf. Richardson v. Superior Court, 43 Cal.4th 1040, 1050-51, 183 P.3d 1199, 77 Cal.Rptr.3d 226 (2008) (reaching same conclusion when construing comparable California statute).[13]
This construction of the reasonable probability standard is supported by dual policy interests relevant to postconviction DNA testing evident in the legislative history of § 54-102kk. Section 54-102kk was enacted as part of broad legislation that, inter alia, expanded the state's DNA bank and established a wrongful conviction review panel. See Public Acts 2003, No. 03-242. The legislative history reveals that the legislation was intended to use DNA testing both to better identify and punish offenders as well as to prevent wrongful convictions. See, e.g., 46 H.R. Proc., Pt. 20, 2003 Sess., pp. 6650-52, remarks of Representative Jeffrey J. Berger (discussing use of DNA to identify offenders and to exonerate innocent); id., at pp. 6659-60, remarks of Representative Patricia Dillon (noting that "[w]hat actually has turned out in the past five or six years is that we have discovered that a number of individuals have been able to use DNA evidence postconviction to establish their innocence"); id., at p. 6675, remarks of Representative Christopher R. Stone ("[w]e are also providing in this bill not only an avenue by which we can monitor those convicted but also an avenue by which those who might be wrongfully convicted can get those convictions overturned").
This legislative history mirrors a nationwide movement toward using DNA technology to increase accuracy in criminal convictions that has been spurred by the revelation of DNA of the "reality of wrongful convictionsa reality which challenges us to reaffirm our commitment to the principle that the innocent should be freed." McKithen v. Brown, 481 F.3d 89, 92 (2d Cir.2007), cert. denied, 552 U.S. 1179, 128 S.Ct. 1218, 170 L.Ed.2d 59 (2008). Much of the progress in this area has been accomplished through legislation: forty-six states and the District of Columbia,[14] and *860 the federal government[15] have enacted statutes providing for post-conviction DNA testing. See generally District Attorney's Office v. Osborne, supra, 129 S.Ct. at 2316 (noting that state legislatures have engaged in "serious, thoughtful examinations... of how to ensure the fair and effective use of this testing within the existing criminal justice framework" [citation omitted; internal quotation marks omitted]); B. Garrett, "Claiming Innocence," 92 Minn. L.Rev. 1629, 1673-75 (2008) (discussing evolution of state postconviction DNA testing statutes).
As the United States Supreme Court recently noted, however, postconviction DNA provisions must "recognize the value of DNA evidence but also the need for certain conditions on access to the [s]tate's evidence." District Attorney's Office v. Osborne, supra, 129 S.Ct. at 2317. Conditioning access to DNA evidence serves important state interests, including respect for the finality of court judgments and the efficient use of limited state resources. See id., at 2326-29 (Alito, J., concurring). Legislatures thus have faced the dilemma of "how to harness DNA's power to prove innocence without unnecessarily overthrowing the established system of criminal justice." Id., at 2316. To reconcile these competing interests, legislatures have imposed various threshold showings, including materiality requirements such as the "reasonable probability" standard at issue in this case. See id., at 2317. Applying the Brady/Strickland meaning of reasonable probability to § 54-102kk (b)(1) serves these conflicting interests by requiring access to DNA testing only in those situations in which, if exculpatory results were discovered by DNA testing, these results would undermine confidence in the outcome of *861 the trial.[16] See State v. Ortiz, supra, 280 Conn. at 717-18, 911 A.2d 1055.
II
Having determined that a reasonable probability under § 54-102kk (b)(1) is a probability sufficient to undermine confidence in the outcome, we turn to the petitioner's claim that the trial court improperly concluded that no reasonable probability existed that the petitioner would have been acquitted had DNA testing of the black hat recovered from the crime scene yielded exculpatory results.[17] Specifically, the petitioner contends that, if testing on the hat were to reveal DNA matching neither him nor the victim, there would be a "reasonable probability that a reasonable doubt could form as to whether [the petitioner] was really the shooter...." He posits that acquittal due to a reasonable doubt would be particularly likely if the DNA were traced to a different known individual.
Before we address the petitioner's claim, we must address the appropriate standard of review for the denial of a petition under § 54-102kk (b), which also is an issue of first impression. In light of our conclusion in part I of this opinion that, in drafting § 54-102kk, the legislature intended to adopt the meaning of reasonable probability set forth in this court's Brady and Strickland precedents, we conclude that the standard of review for Brady and Strickland claims applies to challenges to the trial court's reasonable probability determination under § 54-102kk (b)(1). Accordingly, the determination of whether a "reasonable probability exists that the petitioner would not have been prosecuted or convicted if exculpatory results had been obtained through DNA testing" pursuant to § 54-102kk (b)(1) is a question of law subject to plenary review, while any underlying historical facts found by the trial court are subject to review for clear error.[18] See Crawford v. Commissioner of *862 Correction, 285 Conn. 585, 597-98, 940 A.2d 789 (2008) ("The underlying historical facts found by the habeas court may not be disturbed unless the findings were clearly erroneous.... Whether the representation a defendant received at trial was constitutionally inadequate is a mixed question of law and fact.... As such, that question requires plenary review by this court unfettered by the clearly erroneous standard." [Internal quotation marks omitted.]); State v. Ortiz, supra, 280 Conn. at 720, 911 A.2d 1055 ("a trial court's determination as to materiality under Brady presents a mixed question of law and fact subject to plenary review, with the underlying historical facts subject to review for clear error"). With regard to the ultimate relief at issue, we note that, unlike subsection (c) of § 54-102kk, which sets forth circumstances under which the trial court "may" order DNA testing if certain conditions are met, subsection (b) of that statute provides that the court "shall" order testing if the petitioner has met the conditions stated therein. See footnote 1 of this opinion. This difference in terminology indicates a nondiscretionary decision upon such proof. See State v. Bell, 283 Conn. 748, 799-800, 931 A.2d 198 (2007); see also Office of Consumer Counsel v. Dept. of Public Utility Control, 252 Conn. 115, 122, 742 A.2d 1257 (2000). Indeed, the state agrees that if satisfied, § 54-102kk(b) would require DNA testing.
The record reflects the following additional undisputed facts relevant to this issue.[19] D'Abreau testified at both the petitioner's probable cause hearing and at the trial that he had witnessed the shooting. At the probable cause hearing, D'Abreau testified that, just before the shooting, the petitioner had been wearing a three-quarter length leather coat that D'Abreau had loaned the petitioner, jeans, a dark sweater, and a dark knit hat. He also testified that he had observed the petitioner, while still wearing the same clothing, shoot the victim multiple times in and around the driveway of 315 Winthrop Avenue. In addition, D'Abreau testified that, after the shooting, he had seen a black knit cap in a nearby alley. The alley was part of a route that the petitioner previously had shown D'Abreau to use to avoid the police.
At trial, D'Abreau again testified that the petitioner had worn black boots, blue jeans, a dark sweater, a three-quarter length jacket and a dark cap on the night of the shooting. He testified that he had observed the shooting from the fourth floor of an apartment building across the street from 315 Winthrop Avenue. From this vantage point, he had recognized the petitioner as the shooter in part because the petitioner had been wearing a coat that D'Abreau had loaned him. In addition, D'Abreau testified that the group including *863 the petitioner had discussed the dispute over the drug dealing operation and had reached an understanding that, if the disagreement could not be resolved, the petitioner was going to shoot the victim. D'Abreau did not mention, nor was he asked about, seeing a black knit cap in the nearby alley.
Wilson, who also had witnessed the shooting from a fourth floor apartment across the street from 315 Winthrop Avenue, also identified the petitioner as the shooter. Wilson testified that the shooter was wearing a black coat and a black wool knit hat, and that she had seen the petitioner wearing the same black coat and black hat earlier in the evening. Wilson also testified that she had recognized the petitioner as the shooter because she had seen the petitioner argue with the victim earlier in the evening and previously had observed him in the neighborhood.
The state introduced the black hat into evidence through the testimony of Detective Robert Benson of the New Haven police department, who had processed the crime scene. Benson testified that he had recovered a black knit cap with two holes in it from the driveway of 315 Winthrop Avenue along with a set of keys and shell casings. He also testified that he had taken photographs of a trail of blood droplets at the scene. The police incident report described the cap as a "black ski-type hat (two holes in same and bloodied)." According to Benson, the hat was located in the driveway, approximately twenty-two feet away from the road.
The petitioner essentially claims that the state presented strong evidence that the shooter wore the black hat that was found in the driveway of 315 Winthrop Avenue, and, that accordingly, testing of that hat revealing DNA matching neither the petitioner nor the victim would constitute exculpatory, material evidence under § 54-102kk(b). The state counters that "any connection between the cap seized from the crime scene and the cap that the shooter had been wearing during the attack was tenuous at best" because, inter alia, the state never argued to the jury that the hat recovered in the driveway was indeed the one worn by the shooter, and no witness testified about seeing the hat fall off of the shooter's head.
Although the petitioner does not frame this claim as a challenge to the trial court's findings of fact,[20] the factual predicate of his claim contradicts the trial court's determination that the petitioner failed to demonstrate that the hat at issue belonged to the shooter. See footnote 17 of this opinion. Our review of the record indicates that the link between the hat recovered in the driveway and the hat worn by the shooter is, at best, tenuous. As a preliminary matter, we note that the hat introduced into evidence is a generic, black knit ski cap with no particular distinguishing features. Although the petitioner contends that it was the state's position at trial that the hat recovered in the driveway was indeed the one worn by the shooter, the petitioner has not provided this court with any record to support this contention. Moreover, the state claims that the hat simply was introduced as evidence *864 recovered from the crime scene, along with a set of unidentified keys and shell casings. Finally, although the fact that the hat was bloodied, had holes and was found near the victim could have supported an inference that it was the victim's hat, there is no indication that either the petitioner or the state elicited testimony at trial as to whether the victim was wearing a hat. In light of these facts, the hat may have belonged to the shooter, to the victim, or to a third party. The trial court therefore reasonably determined that the petitioner had not established a conclusive link between the hat introduced at trial and the hat worn by the shooter.
Having determined that any connection between the black hat recovered by the police and the shooter is inconclusive, we next note the strong evidence, entirely unrelated to the hat, identifying the petitioner as the shooter. At trial, the petitioner was identified as the shooter by two witnesses, neither of whom relied solely on the hat in making their identification. D'Abreau, who was well acquainted with the petitioner at the time of the shooting, based his identification of the petitioner primarily on the fact that the shooter was wearing the coat that D'Abreau had loaned the petitioner earlier in the evening. Wilson identified the petitioner as the shooter by the clothing worn as well as by her prior observations of him earlier that night and in the neighborhood on other occasions. See State v. Dupigney, supra, 78 Conn.App. at 116, 121, 826 A.2d 241. The jury also had Padmore's tape-recorded statement to the police identifying the petitioner as the shooter, as well as his identification of the petitioner as the shooter during a photographic array. Id., at 120-21, 826 A.2d 241. Padmore was familiar with the petitioner through his participation in the drug enterprise, and had been walking with the victim immediately before the shooting. Id., at 112, 114, 826 A.2d 241. Second, there was ample evidence of the petitioner's dual motives for shooting the victim: (1) to settle a dispute over drug territory; and (2) in retaliation for the victim's earlier assault of the petitioner. See id., at 112-14, 826 A.2d 241.
Section 54-102kk(b)(1) directs us to analyze reasonable probability based on exculpatory results being obtained from DNA testing. Accordingly, we consider the effect of the most favorable result possible from DNA testing of the evidence, which, in this case, would show that biological material found on the hat belonged to neither the petitioner nor the victim. Nonetheless, in light of the uncertain provenance of the black hat and the strong evidence, including the testimony of three eyewitnesses, that the petitioner shot the victim, the absence from trial of even the most favorable result possible from a DNA testthat biological material from the hat belonged to neither the victim nor the petitionerdoes not undermine our confidence in the fairness of the verdict. We therefore conclude that the trial court properly determined that the petitioner had failed to meet the requirement of § 54-102kk(b)(1). Compare Matheney v. State, 834 N.E.2d 658, 663-64 (Ind.2005) (denying motion for DNA testing under statute imposing reasonable probability standard when results would not be more favorable to petitioner than previous testing and evidence that petitioner committed murder was "overwhelming"); Willacy v. State, 967 So.2d 131, 145 (Fla.2007) (denying motion for DNA testing under statute imposing reasonable probability standard when state presented "plethora of other evidence upon which the jury could have based its decision in convicting [the defendant] of [the victim's] murder"), cert. denied, *865 ___ U.S. ___, 128 S.Ct. 1665, 170 L.Ed.2d 368 (2008).
The decision is affirmed.
In this opinion the other justices concurred.
NOTES
[1] General Statutes § 54-102kk provides: "(a) Notwithstanding any other provision of law governing postconviction relief, any person who was convicted of a crime and sentenced to incarceration may, at any time during the term of such incarceration, file a petition with the sentencing court requesting the DNA testing of any evidence that is in the possession or control of the Division of Criminal Justice, any law enforcement agency, any laboratory or the Superior Court. The petitioner shall state under penalties of perjury that the requested testing is related to the investigation or prosecution that resulted in the petitioner's conviction and that the evidence sought to be tested contains biological evidence.
"(b) After notice to the prosecutorial official and a hearing, the court shall order DNA testing if it finds that:
"(1) A reasonable probability exists that the petitioner would not have been prosecuted or convicted if exculpatory results had been obtained through DNA testing;
"(2) The evidence is still in existence and is capable of being subjected to DNA testing;
"(3) The evidence, or a specific portion of the evidence identified by the petitioner, was never previously subjected to DNA testing, or the testing requested by the petitioner may resolve an issue that was never previously resolved by previous testing; and
"(4) The petition before the Superior Court was filed in order to demonstrate the petitioner's innocence and not to delay the administration of justice.
"(c) After notice to the prosecutorial official and a hearing, the court may order DNA testing if it finds that:
"(1) A reasonable probability exists that the requested testing will produce DNA results which would have altered the verdict or reduced the petitioner's sentence if the results had been available at the prior proceedings leading to the judgment of conviction;
"(2) The evidence is still in existence and is capable of being subjected to DNA testing;
"(3) The evidence, or a specific portion of the evidence identified by the petitioner, was never previously subjected to DNA testing, or the testing requested by the petitioner may resolve an issue that was never previously resolved by previous testing; and
"(4) The petition before the Superior Court was filed in order to demonstrate the petitioner's innocence and not to delay the administration of justice.
"(d) The costs of DNA testing ordered pursuant to this section shall be borne by the state or the petitioner, as the court may order in the interests of justice, except that DNA testing shall not be denied because of the inability of the petitioner to pay the costs of such testing.
"(e) In a proceeding under this section, the petitioner shall have the right to be represented by counsel and, if the petitioner is indigent, the court shall appoint counsel for the petitioner in accordance with section 51-296."
[2] The petitioner appealed from the trial court's decision to the Appellate Court. We thereafter granted the petitioner's motion to transfer the appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-2. We heard oral argument on this case the same day that we heard argument on State v. Marra, 295 Conn. 74, 988 A.2d 865, 2010 WL 668867 (2010), which raises the same legal issue as in this case, and which decision we also released today.
[3] "At trial, Padmore claimed to have been under the influence of illegal drugs while at the New Haven police station and denied any memory of either providing the statement to the police or choosing the [petitioner's] photograph from the array. The police detective who interviewed Padmore at the station testified that he appeared clearheaded and sober while at the station." State v. Dupigney, supra, 78 Conn.App. at 121 n. 3, 826 A.2d 241.
[4] The witnesses described the hat in slightly different terms, but all of these descriptions were consistent with the black knit cap recovered from the crime scene, and neither the state nor the petitioner contends that these minor inconsistencies are relevant.
[5] The petitioner had elected a jury trial on the charges of murder and carrying a pistol without a permit, and a trial to the court on the remaining charge of criminal possession of a pistol or revolver. See State v. Dupigney, supra, 78 Conn.App. at 114, 826 A.2d 241. All of the counts were tried concurrently. Id.
[6] In addition, the petitioner claims that, to the extent that the trial court's decision also may be interpreted as denying the petition on the ground that the hat was not capable of being tested, such a conclusion was improper. In light of our conclusion that the trial court properly determined that the petitioner did not meet the reasonable probability standard, we need not address this claim.
[7] We also are mindful of General Statutes § 1-2z, which directs us to consider "the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered." In the present case, neither the petitioner nor the respondent, the state of Connecticut, contends that the phrase "reasonable probability" has a plain meaning in this context. Rather, both parties appear to presume that it is a legal term of art whose meaning has been established under postconviction jurisprudence. Moreover, as our discussion of this case law reflects, the continued refinements of this standard evidences its lack of a plain meaning.
[8] As we explain later in this part of the opinion, the national trend toward providing DNA testing as a postconviction remedy is a relatively recent development.
[9] In formulating this standard, the court in Strickland v. Washington, supra, 466 U.S. at 697, 104 S.Ct. 2052, had emphasized: "[T]he ultimate focus of inquiry must be on the fundamental fairness of the proceeding whose result is being challenged. In every case the court should be concerned with whether, despite the strong presumption of reliability, the result of the particular proceeding is unreliable because of a breakdown in the adversarial process that our system counts on to produce just results." (Emphasis added.)
[10] This court similarly has emphasized that analysis of prejudice under Strickland must take into account the overall fairness and reliability of the conviction. See Fair v. Warden, supra, 211 Conn. at 408, 559 A.2d 1094 (prejudice standard of Strickland "requires [a] showing that counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable" [internal quotation marks omitted]).
[11] Contrast this court's language in State v. Ortiz, supra, 280 Conn. at 717, 911 A.2d 1055, with Shabazz v. State, 259 Conn. 811, 820-21, 792 A.2d 797 (2002) ("a court is justified in granting a petition for a new trial when it is satisfied that the evidence offered in support thereof: [1] is newly discovered such that it could not have been discovered previously despite the exercise of due diligence; [2] would be material to the issues on a new trial; [3] is not cumulative; and [4] is likely to produce a different result in the event of a new trial" [emphasis added]).
[12] Although the term "Brady material" is often used to refer to any exculpatory evidence that should have been disclosed to a defendant, a Brady "violation" that affords the relief of a new trial requires that the defendant show: (1) the government suppressed evidence; (2) the suppressed evidence was favorable to the defendant; and (3) the suppressed evidence was material either to guilt or to punishment. See State v. Skakel, 276 Conn. 633, 700, 888 A.2d 985, cert. denied, 549 U.S. 1030, 127 S.Ct. 578, 166 L.Ed.2d 428 (2006).
[13] In Richardson v. Superior Court, supra, 43 Cal.4th at 1050, 77 Cal.Rptr.3d 226, 183 P.3d 1199, the California Supreme Court held that "reasonable probability" in that state's postconviction DNA statute has the same meaning that it has in connection with claims of ineffective assistance of counsel under Strickland and under state law precedent controlling the assessment of prejudice. Specifically, the court noted that, under Strickland, a reasonable probability is "a probability sufficient to undermine confidence in the outcome" and adopted this definition for postconviction DNA testing claims. (Internal quotation marks omitted.) Id. The court went on to clarify that a reasonable probability is "a reasonable chance and not merely an abstract possibility." Id., at 1051, 77 Cal.Rptr.3d 226, 183 P.3d 1199.
[14] Ala.Code § 15-18-200 (Cum.Sup. 2009); Ariz.Rev.Stat. Ann. § 13-4240 (2001); Ark. Code Ann. § 16-112-202 (2006); Cal.Penal Code § 1405 (Deering 2008); Del.Code Ann. tit. II, § 4504 (2007); D.C.Code Ann. § 22-4133 (LexisNexis Sup. 2009); Fla. Stat. § 925.11 (2007); Ga.Code Ann. § 5-5-41 (Sup. 2009); Haw.Rev.Stat. § 884D-123 (Cum.Sup. 2008); Idaho Code Ann. §§ 19-2719 and 19-4902 (2004); 725 Ill. Comp. Stat. Ann. § 5/116-3 (West 2008); Ind.Code Ann. §§ 35-38-7-1 through XX-XX-X-XX (LexisNexis Cum. Sup. 2008); Iowa Code Ann. § 81.10 (West 2009); Kan. Stat. Ann. § 21-2512 (2007); Ky.Rev.Stat. Ann. §§ 422.285 and 422.287 (LexisNexis 2005); La.Code Crim. Proc. Ann. art. 926.1 (Cum.Sup. 2010); Me.Rev.Stat. Ann. tit. 15, §§ 2137 and 2138 (Cum.Sup. 2009); Md.Code Ann., Crim. Proc. § 8-201 (LexisNexis Sup. 2009); Mich. Comp. Laws Serv. § 770.16 (LexisNexis Cum. Sup. 2009); Minn.Stat. § 590.01(2008); Miss. Code Ann. § 99-39-5 (Cum.Sup. 2009); Mo. Rev.Stat. § 547.035 (Cum.Sup. 2006); Mont. Code. Ann. § 46-21-110 (2007); Neb.Rev. Stat. §§ 29-4117 through 29-4125 (Sup. 2008); Nev.Rev.Stat. § 176.0918 (2007); N.H.Rev.Stat. Ann. § 651-D:2 (2007); N.J. Stat. Ann. § 2A:84A-32a (West Cum. Sup. 2009); N.M. Stat. § 31-1A-2 (Cum.Sup. 2008); N.Y.Crim. Proc. Law § 440.30 (McKinney 2005); N.C. Gen.Stat. § 15A-269 (2007); N.D. Cent.Code § 29-32.1-15 (2006); Ohio Rev.Code Ann. §§ 2953.71 and 2953.72 (West 2006); Okla. Stat. Ann. tit. 22, § 1371.1 (West Cum. Sup. 2010); Or.Rev.Stat. §§ 138.690 and 138.692 (2007); 42 Pa. Cons. Stat. Ann. § 9543.1 (West 2007); R.I. Gen. Laws § 10-9.1-12 (Sup. 2008); S.C.Code Ann. § 17-28-20 through 17-28-90 (Cum. Sup. 2009); S.D. Codified Laws § 1166 (2009); Tenn.Code Ann. §§ 40-30-303 through XX-XX-XXX (2006); Tex.Crim. Proc. Code Ann. § 64.03 (Vernon Cum. Sup. 2009); Utah Code Ann. § 78-35a-301(2002); Vt. Stat. Ann. tit. 13, §§ 5561 and 5566 (Cum. Sup. 2009); Va.Code Ann. § 19.2-327.1 (2008); Wash. Rev.Code Ann. § 10.73.170 (West Cum. Sup. 2010); W. Va.Code Ann. § 15-2B-14 (LexisNexis 2009); Wis. Stat. Ann. § 974.07 (West Cum. Sup. 2009); Wyo. Stat. Ann. § 7-12-303 (2009). The three states without explicit statutory provisions for postconviction DNA testing provide some access to testing through general provisions for discovery and postconviction relief. See District Attorney's Office v. Osborne, supra, 129 S.Ct. at 2317 (discussing postconviction DNA testing in Alabama, Alaska and Massachusetts).
[15] 18 U.S.C. § 3600.
[16] Under § 54-102kk(b)(1), a petitioner may succeed by demonstrating a reasonable probability that he would not have been convicted or prosecuted if exculpatory DNA evidence had been available. In the present case, because the petitioner claims only that there is a reasonable probability that he would have been acquitted had the evidence been available, we limit our analysis to whether such evidence would undermine our confidence in the outcome of the trial.
[17] In orally denying the petitioner's motion, the court stated: "Looking at the statute, [§ ]54-102kk, looking at the transcripts, the shooter had a black knit cap on. The shooting took place, the shooter left, [the victim] stumbled around and he ends up in the driveway or alley of 315 Winthrop [Avenue] and that's where he expired. A black knit cap is there. I mean, for me to assume that that is the same black knit cap that [the petitioner] had on is pure speculation. We have two people, [Wilson and D'Abreau], who identified your client as the shooter. That capand [D'Abreau] at the hearing for probable cause said he found your client's knit hat on Hotchkiss Street, almost a block away. So you have not made your requisite showing that a reasonable probability exists that [the petitioner] would not have been prosecuted or convicted if that hat were tested....
"I mean, you are assuming that, and I don't see anything in the record that the shooter chased [the victim] into that alley, shot him, andor shot and chased him and then took off his knit hat and dropped it on the ground.... [Y]ou are trying to do your job for your client but your whole premise is built on mere speculation built on quicksand. It doesn't hold, sir. So the request for DNA testing is denied...."
[18] We note that in State v. Ortiz, supra, 280 Conn. at 721-22, 911 A.2d 1055, we reasoned that, "[b]ecause the trial judge had the opportunity... to observe firsthand the proceedings at trial ... our independent review ... is informed by his assessment of the impact of the Brady violation, and we find persuasive the Second Circuit Court of Appeal's approach of engaging in independent review, yet giving `great weight' to the `trial judge's conclusion as to the effect of nondisclosure on the outcome of the trial....'" We are mindful that petitions under § 54-102kk must be submitted to the trial judge who presided over sentencing; Mitchell v. Commissioner of Correction, 93 Conn.App. 719, 722-23, 891 A.2d 25, cert. denied, 278 Conn. 902, 896 A.2d 104 (2006); which generally will be the same judge who presided over the criminal trial. In the present case, however, we need not decide whether the additional deference enunciated in Ortiz applies to appellate review of petitions under § 54-102kk because the trial judge who reviewed the petition in the present case did not preside over the criminal trial or sentencing.
[19] We note that the petitioner did not make the full criminal trial record part of the record in this appeal. Our review, therefore, is based on the limited portions of the trial transcript that the petitioner included in the record. We note that, in a closer case, the presence or absence of a more complete record could have significant bearing on the reasonable probability determination.
[20] The petitioner also asserts that the following factual findings by the trial court were imprecise: (1) that the victim died in the driveway of 315 Winthrop Avenue; and (2) that the shooter chased the victim down the driveway. The petitioner contends that the evidence reflects that the victim walked part of the way down Winthrop Avenue before collapsing, and that the victim chased the shooter down the driveway. Because these facts are collateral to the materiality of the evidence relating to the hat, we need not address whether these findings were entirely correct. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545507/ | 175 N.J. Super. 53 (1980)
417 A.2d 575
IN THE MATTER OF THE APPLICATION OF MEADOWLANDS COMMUNICATIONS SYSTEMS, INC. FOR CERTIFICATES OF APPROVAL IN THE MUNICIPALITIES OF EAST RUTHERFORD, CARLSTADT, LYNDHURST, EAST NEWARK, NORTH ARLINGTON AND RUTHERFORD AND THE APPLICATION OF WEST HUDSON COMMUNICATIONS SYSTEMS, INC. FOR A CERTIFICATE OF APPROVAL IN THE TOWN OF KEARNY. IN THE MATTER OF THE PETITION OF MEADOWLANDS COMMUNICATIONS SYSTEMS, INC. AND WEST HUDSON COMMUNICATIONS SYSTEMS, INC. FOR AUTHORITY TO TRANSFER CAPITAL STOCK ON ITS BOOKS. IN THE MATTER OF THE PETITION OF KALEIDOSCOPE CABLE T.V., INC. ALLEGING ARBITRARY REFUSAL IN THE TOWN OF KEARNY. IN THE MATTER OF THE APPLICATION OF MICRO-CABLE COMMUNICATIONS CORPORATION D/B/A UA-COLUMBIA CABLEVISION OF NEW JERSEY FOR A CERTIFICATE OF APPROVAL IN THE MUNICIPALITIES OF LYNDHURST, CARLSTADT, RUTHERFORD, EAST RUTHERFORD AND NORTH ARLINGTON.
Superior Court of New Jersey, Appellate Division.
Submitted April 15, 1980.
Decided July 9, 1980.
*57 Before Judges MATTHEWS, ARD and POLOW.
Greenwood, Weiss & Shain, attorneys for plaintiff Suburban Cablevision (Robert H. Greenwood, of counsel and on the brief).
Meyner & Landis, attorneys for respondent Meadowlands Communications Systems, Inc.
Norman A. Doyle, Jr., attorney for Town of Kearny filed a statement in lieu of brief.
John J. Degnan, Attorney General of New Jersey, attorney for Board of Public Utilities, filed a statement in lieu of brief (Nielson V. Lewis, Deputy Attorney General, of counsel).
Carella, Bain, Gilfillan & Rhodes, attorneys for plaintiff UA-Columbia Cablevision of New Jersey.
The opinion of the court was delivered by MATTHEWS, P.J.A.D.
Appellants UA-Columbia Cablevision of New Jersey (UA-Columbia) and Suburban Cablevision (Suburban) appeal from an order of the Board of Public Utility Commissioners (Board) granting certificates of approval to Meadowlands Communications Systems, Inc. (Meadowlands) to construct and operate a cable television system in seven Bergen and Hudson County communities. UA-Columbia appeals the issuance of certificates of approval to Meadowlands for the communities of North Arlington, Lyndhurst, Rutherford, East Rutherford and Carlstadt in Bergen County. Suburban appeals the decision as to Kearny and East Newark located in Hudson County.
*58 There is no dispute as to the facts in this case only the Board's interpretation of those facts. Three cable television companies are contending for the right to own and operate cable television systems in seven Bergen and Hudson County communities. The primary issues are arbitrary denial of municipal consents and regionalization.
Meadowlands Communications Systems, Inc. and West Hudson Communications Systems, Inc. are recently established cable television companies. Guy Savino, a native of Lyndhurst, is the president, founder and sole owner of the stock of both corporations. According to Savino, the corporations were established to provide a communication network in Kearny and the Meadowlands peninsula. The underlying concept was to create a system in which local residents and civic leaders would be able to present local origination programs over the cable television network. That was the actual premise on which Meadowlands presented its successful application to the subject communities. It readily admits that it was not chosen to build the cable T.V. system on the basis of its technical or financial strength.
Comcast, with headquarters in Bala-Cynwyd, a suburb of Philadelphia, is a publicly held corporation with an annual volume of business upwards of $12 million. Currently, 70% of its assets are invested in the cable television business. Comcast operates ten cable T.V. systems servicing approximately 70,000 subscribers in some 26 municipalities across the United States. Comcast currently has an agreement with Meadowlands to purchase 85% of Meadowlands' stock, provided that the Board approves the transfer and grants certificates of approval for the construction of cable T.V. systems in all seven communities. Comcast would then provide the financing to build the system. It appears that the day-to-day operation of the system would remain in the hands of Savino.
UA-Columbia is a nationwide multi-system operator that has been operating in New Jersey since 1970-71. At the time of the hearings UA-Columbia had completed construction on 14 cable television franchises throughout northern New Jersey. At the municipal hearings UA-Columbia primarily stressed its technical *59 and financial capability to build and operate a cable television system.
Suburban Cablevision, at the time of the hearings, was a cable television company serving some 22,000 subscribers in Essex and Hudson Counties. MacLean-Hunter Cable Television Limited, a Toronto based firm, owns 75% of the stock of the corporation and provides the financial backing for the construction of the cable T.V. systems. Suburban currently operates a system in Harrison, which is immediately adjacent to Kearny.
Meadowlands and UA-Columbia both first applied for municipal consents in the communities of Lyndhurst, North Arlington, Rutherford, East Rutherford and Carlstadt in 1973. Despite a strong presentation by UA-Columbia as to its financial and technical capability to build a cable television system and the introduction of a letter from the office of Cable Television stating that Meadowlands was financially unable to build a system, UA-Columbia did not receive any municipal consents.
Suburban and Meadowlands were the principal contenders for the municipal consents in East Newark and Kearny. Again, despite its lack of experience in the cable television business, Meadowlands received consents in both communities.
Following receipt of the municipal consents Meadowlands began the search for the financial and technical support needed to construct a cable television system. Meadowlands spent approximately $54,000 in this effort. However, it had little success until January 1976 when Meadowlands received a loan offer from Fidelity Union Trust Company for $1.6 million. Having received the necessary financial support for the construction of a cable television system, Meadowlands filed its applications for certificates of approval with the Board of Public Utilities pursuant to N.J.S.A. 48:5A-15 on March 12, 1976. Seven days later the Office of Cable T.V. (OCTV) advised Meadowlands that "[t]he municipal consents involved are . . no longer effective." The basis for that decision was the recently promulgated regulations (N.J.A.C. 14:18-11.19 and 11.-23) which required holders of municipal consents granted prior *60 to the effective date of the regulations to file for certificates of approval within 30 days after the effective date of the regulations (December 18, 1975). The OCTV advised each affected municipality of the invalidity of the Meadowlands' consents.
Meadowlands sought and obtained an extension of time until June 1, 1976 to satisfy OCTV as to the viability of its plans and to persuade OCTV to accept the petitions for certificates of approval. Meadowlands subsequently advised Kearny of this extension and a further possible extension in a letter dated June 2, 1976.
Following receipt of the extension for consideration, Fidelity Union advised Meadowlands that it was cancelling the $1.6 million loan offer. The reason for the decision was not the uncertainty of the Meadowlands' petitions, but rather, a decision by the bank not to pursue any CATV loans. That action left Meadowlands with no financial backing to pursue the cable T.V. system.
Kearny requested a firm statement from the Board as to the viability of the Meadowlands' application on June 8, 1976.
On June 29, 1976 the OCTV advised Meadowlands that no further extensions would be granted, and since Meadowlands had not been able to present additional information as to its financial status, the franchises (or municipal consents) were deemed null and void. Kearny was advised of that decision on July 1, 1976.
The OCTV reversed its decision as to the Meadowlands' petitions on July 12, 1976. At that time the OCTV concluded that the March 12 petitions had been timely filed since the time periods in the regulations did not begin to run until January 21, 1976, the date the regulations were filed with the Secretary of State. The OCTV would now consider the Meadowlands' applications on their merits. The OCTV forwarded copies of this letter to all seven municipalities, including Kearny.
Meadowlands subsequently filed supplementary information on July 20, 1976. Meadowlands also filed a petition seeking permission to transfer 85% of its common stock to a wholly-owned *61 subsidiary of Comcast Corporation. (An agreement to this effect between Comcast and Meadowlands was executed on November 12 (or 17), 1976.)
Despite the assurances from the OCTV that the Meadowlands' applications would now be considered, Kearny began proceedings to repeal Meadowlands' municipal consents on July 14, 1976, and the municipal consent ordinance was repealed on August 11, 1976.
On October 20, 1976, the night before the commencement of OCTV hearings on Meadowlands' applications for certificates of approval, Kearny held a hearing on the recently filed application of Suburban. Despite objections by Meadowlands as to the propriety of the proceedings, the Kearny mayor and council allowed Suburban to proceed with its presentation. Subsequently, on November 10, 1976, Kearny adopted a resolution awarding the municipal consent to Suburban. An ordinance to this effect was adopted on December 22, 1976.
Hearings on Meadowlands' petitions for certificates of approval began on September 21, 1976 with the first testimony heard on October 21, 1976. UA-Columbia filed its petitions alleging arbitrary denial on November 19, 1976 after the hearings began. In its brief UA-Columbia admits that it did not file these petitions until it saw the problems Meadowlands had in obtaining financing and the vacillation by the OCTV with respect to the validity or invalidity of the Meadowlands' municipal consents.
During the course of the hearings, Kearny and Suburban moved to dismiss the Meadowlands' petition with regards to Kearny on the grounds that Kearny had revoked the Meadowlands' consent. The hearing examiner recommended dismissal of the motion on the ground that even assuming that Kearny effectively revoked the Meadowlands' consent, N.J.S.A. 48:5A-17(b) gives the Board authority to grant certificates of approval in the absence of municipal consents. Regionalization allows the Board to overturn municipal consents.
*62 The consolidated hearings resumed following issuance of this report. They continued until May 26, 1977. Following the conclusion of the hearings the hearing examiner issued his report on November 2, 1977. He recommended that certificates of approval be granted to Meadowlands for all seven communities. He ruled that UA-Columbia was estopped because of laches from filing a petition for a certificate of approval grounded in a claim of arbitrary refusal. Despite this ruling, the hearing examiner went on to rule that the municipalities' decision to award the municipal consents to Meadowlands and not UA-Columbia was not arbitrary.
The hearing examiner further found little difference in the cost of service, quality of service and speed of service among the three cable companies. As a result, the hearing examiner was reluctant to overturn validly-issued municipal consents. Thus, although the hearing examiner did not find that the seven communities constituted a region in the sense of community of interest, he awarded all seven communities to Meadowlands because all seven were necessary to make the system economically viable to Meadowlands and Comcast would withdraw its financial support if Kearny was not included. One last consideration in the hearing examiner's decision was that the award of all seven to Meadowlands would result in the overturning of the fewest number of municipal consents.
The Board of Public Utilities adopted the hearing examiner's decision with minor modifications.
The Town of Kearny submitted a statement in lieu of brief in which it expressed its consent to and support of the hearing examiner's report and recommendations.
I
UA-Columbia first argues that the hearing examiner and the Board erred in dismissing its petitions for certificates of approval on the ground of laches. UA-Columbia argues that it properly relied on the fact that N.J.S.A. 48:5A-17(d), the "arbitrary denial" section of the Cable Television Act, does not contain any *63 time limits on the filing of such petitions. Furthermore, it points out that the Board of Public Utilities did not adopt a rule requiring the filing of such actions within 30 days after municipal action until after the conclusion of this matter. (N.J.A.C. 14:18-11.19(b), effective August 16, 1977).
The doctrine of "[l]aches can be a defense only where there is a delay, unexplained and inexcusable, in enforcing a known right and prejudice has resulted to the other party because of such delay." Flammia v. Maller, 66 N.J. Super. 440, 454 (App.Div. 1961). It is an equitable defense and both elements must be present for the defense to apply. Allstate v. Howard Savings Inst., 127 N.J. Super. 479, 489-490 (Ch.Div. 1974).
It is undisputed that UA-Columbia waited almost three years from the date of the first municipal consent (February 19, 1974) before filing its arbitrary denial petitions. Furthermore, it presents no justification for this delay beyond asserting that N.J.S.A. 48:5A-17(d) does not contain any specific time limits. All indications are that UA-Columbia did not decide to contest the municipal consents until it saw the financial and administrative difficulties Meadowlands had in perfecting its plans for the cable television system. Thus, it unreasonably delayed asserting a known right.
UA-Columbia argues that Meadowlands cannot assert the defense of laches as it acquiesced in and contributed to the delay by not filing for certificates of approval until March 1976. However, UA-Columbia ignores the fact that its right to file a petition based on arbitrary refusal was not dependent on Meadowlands filing for certificates of approval. UA-Columbia could have filed its petition at any time. N.J.S.A. 48:5A-17(d). Furthermore, any delay in Meadowlands filing its petition could not and did not prejudice UA-Columbia.
Mere inexcusable lapse of time does not justify application of the defense of laches. Prejudice to the party asserting laches because of the delay must be shown. The hearing examiner found, and the Board agreed, that Meadowlands justifiably *64 relied on the lack of opposition to its municipal consents in expending significant sums of money towards the construction of the cable television system. We do not agree with that conclusion. A municipal consent is only the first step in the proceedings. Meadowlands could not proceed with complete assurance until it obtained a certificate of approval from the Board. N.J.S.A. 48:5A-15. Thus, despite the lapse of time, Meadowlands cannot be said to have been prejudiced by the delay. A valid and effective consent does not guarantee that the petitioner will be able to build a system. Since Meadowlands was not prejudiced by the delay, the defense of laches does not apply.
The hearing examiner and the Board found additional justification in the fact that the passage of time made it difficult to reconstruct the municipal deliberations. No stenographic transcripts were made at the time and memories of the events would not be reliable. Secondly, the hearing examiner believed that it would be difficult to determine if the municipalities abused their discretion in selecting a start-up company. Yet, as its financial position has changed in the intervening years, it would not be fair to Meadowlands to evaluate it as of 1974.
The Board has adopted the judicial standard of review of municipal decisions set out in the zoning case of Kramer v. Sea Girt Bd. of Adj., 45 N.J. 268 (1965): that the law presumes local public bodies will act fairly, with proper motives and for valid reasons. Thus, a local determination will only be set aside when it is arbitrary, capricious or unreasonable. Even if there is some doubt as to the wisdom of the actions, there can be no judicial declaration of invalidity in the absence of a clear abuse of discretion by the public agencies involved.
The hearing examiner found that the municipalities involved did not abuse their discretion in selecting a start-up company rather than an established company. He based this decision on his reading of the statute and the legislative policies contained therein.
*65 In our evaluation of that decision, the agency determination is entitled to great weight, with due regard given to the agency's expertise on the subject. However, we are not bound by the agency's interpretation of the statute or its determination of a strictly legal issue. In re Application of Saddle River, 71 N.J. 14, 24 (1976); Mayflower Securities v. Bureau of Securities, 64 N.J. 85, 93 (1973); Infocomp Corp. v. Somerset Trust Co., 165 N.J. Super. 382, 391 (App.Div. 1979).
In arguing that it was arbitrary for the municipalities to select Meadowlands as opposed to UA-Columbia, UA-Columbia contends that although the cable T.V. statute's definition of a cable television system includes proposed systems (N.J.S.A. 48:5A-2(d)), a reading of the statute in its entirety shows that an applicant must have the backing and support to transform what may be merely a dream or idea into a tangible and operational system, and this support must be substantially evidenced at the time of the municipal hearing. UA-Columbia contends that Meadowlands did not have the necessary technical and financial support at the time of the municipal hearings, nor did it have the necessary support at the time of its application for certificates of approval.
The hearing examiner rejected this argument as frivolous, stating that in essence it would require an applicant to be an existing, operating system within New Jersey. We agree with the hearing examiner that despite UA-Columbia's protestations to the contrary, this would be the actual effect of holding that in this circumstance it was arbitrary for the municipalities to reject UA-Columbia's application.
In construing statutes a court's initial concern is to seek the legislative intent. To that end we should consider any legislative history which may be of aid. State v. Madden, 61 N.J. 377, 389 (1972).
In enacting the Cable Television Act (N.J.S.A. 48:5A-1 et seq.), the Legislature declared that the State's policy was "to provide fair regulation of cable television companies in the interest of the public." N.J.S.A. 48:5A-2(b). One object of the *66 act was to "protect the interests of the several municipalities of this State in relation to the issuance of municipal consents for the operation of cable television companies...." N.J.S.A. 48:5A-2(c)(5).
The CATV Study Commission, in its report issued in January 1972, had found that a major problem was delays in implementation of service resulting from the awarding of franchises to inadequately financed or technically incompetent companies. Often these companies gambled on the potency of the franchise itself to attract the necessary financing and technical expertise. CATV Report at 31-32.
As a result, the Legislature established a two-tiered approval process. First, a company must obtain a municipal consent. N.J.S.A. 48:5A-22. Second, the company has to file for a certificate of approval from the Board of Public Utilities. N.J.S.A. 48:5A-15. At both levels the company must establish its financial and technical qualifications to operate a cable T.V. system. N.J.S.A. 48:5A-17(a) and N.J.S.A. 48:5A-28(c).
The situation presented here represents a good example of the problem the Legislature hoped to avoid in passing this act. At the time it received the municipal consents Meadowlands had minimal financial and technical capability to construct the cable system. Despite the award of the municipal consents, Meadowlands was unable to begin construction immediately. It spent almost 2 1/2 years searching for the technical and financial backing to build the system. (From February 1974, the date of the first agreement, to November 1976, the date of the agreement with Comcast.) The municipalities are still without cable T.V. service, six years after the initial grant of the municipal consents.
We cannot, however, undo the delays of the past. Such delays can probably be avoided in the future by the requirement that petitions for certificates of approval must be filed within 30 days of the acceptance of a municipal consent (which must be within ten days of final passage of the ordinance (N.J.A.C. 14:18-11.19). In addition, the two-tiered approval process provides *67 the safety mechanism to insure that only financially and technically capable companies are granted municipal consents.
Meadowlands, through its agreement with Comcast, now has the financial and technical capability to build the cable T.V. system. The direct testimony of James R. Holston, an accountant with the Office of Cable Television, specifically concluded that all three companies had the financial capacity to build the proposed systems.
UA-Columbia and Suburban argue that due to the contingent and speculative nature of the agreement between Comcast and Meadowlands, the Board should only look to the financial capability of Meadowlands in making its determination. We disagree. As argued by Meadowlands, the contingent and speculative nature of the agreement revolves around the principal contingency of Meadowlands receiving all sought after certificates of approval. We believe that the Board's decision in this matter has satisfied that contingency.
The decisions by these municipalities to select Meadowlands were not arbitrary. The municipalities appear to have made an honest value judgment that a local company run by local citizens (which is still true despite the agreement with Comcast) was in the circumstances a better choice than an established company. Such a local company might better serve the legislative purpose of promoting the community service potentials of the cable television medium. (N.J.S.A. 48:5A-2). Subsequent events have shown that this decision was probably not a wise one, but an unwise decision is not necessarily an arbitrary decision.
Through this decision the Board encourages competition in the cable T.V. industry. That policy decision does not contravene the legislative policies of the Cable Television Act.
II
The critical section of the Cable Television Act for most of the Suburban argument is N.J.S.A. 48:5A-17(b), known in the industry as the "regionalization" section. The argument is also raised by UA-Columbia. The section permits the Board to issue *68 certificates of approval to neighboring areas without municipal consents in certain circumstances. The provision directs that:
In considering any such application, the board shall take into consideration the probable effects upon both the area for which certification is sought and neighboring areas not covered in the municipal consents; and if it finds that the probable effects, for technical and financial reasons, would be to impede the development of adequate cable television service, or create an unreasonable duplication of services likely to be detrimental to the development of adequate cable television service in any area either within or without the area for which certification is sought, it may deny the certificate or it may amend the certificate in issuing it so as to
(1) direct that areas covered in the application be excluded from the area certified, or
(2) direct that areas not covered in the application be included in the area certified.
It is first argued that the Board erred in basing its determination upon consideration of the "economic impact" on a private corporation rather than on the public to be served.
During the course of the hearings, Comcast made it quite clear that unless Kearny was included within the system, it would not advance any financial support to Meadowlands. The net result would be the demise of Meadowlands, as it appears all other sources of financial support have been exhausted. The Board ordered the issuance of certificates of approval to Meadowlands for Kearny and East Newark, despite the fact that Meadowlands probably did not hold valid consents in those communities, on "regionalization" grounds. In doing so, the Board stated: "Without Kearny, Meadowlands would cease to exist as a viable entity, and this Board would have effected the overturning of either seven or five municipal consents."
Suburban and UA-Columbia argue that, as proven cable television companies, they are ready and willing to serve the residents of these communities. Suburban argues that the Board should be concerned with providing high quality service to the public, not with ensuring the private welfare of a private corporation. Although it might appear that the Board is in effect allowing a private company to define a region, that is the net result of the current statutory scheme: cable companies can pick which communities they desire to enter, thus in effect defining their own region.
*69 Suburban's principle argument is that the Board misapplied the regionalization concept. Suburban advances several points in support of this contention. First it argues that the hearing examiner erred in accepting Comcast's contention that the system was not viable without Kearny. Second, Suburban maintains that the hearing examiner misconceived and misapplied the "regionalization" statute.
The hearing examiner found that Kearny is absolutely necessary to Meadowlands as it represents 32% of the whole system under dispute.
There was contradictory data in the record as to the viability of a cable T.V. system with and without Kearny. Meadowlands presented extensive financial projections to prove that Kearny is economically necessary to the system. (We note that those financial calculations are probably completely outdated in light of the recent changes in the economy.) Suburban points to testimony that there might be other viable systems in New Jersey that are the size that the one proposed here would be without Kearny.
The number of homes needed to make a system viable is an issue that should be left to those with at least some degree of expertise in this area (i.e., the Board). Despite contradictory testimony, there is sufficient credible evidence to support the hearer's finding.
Suburban next argues that the hearing examiner misconceived the regionalization statute. According to the terms of the statute itself, the authority of the Board to deal with "areas not covered in the application" depends upon finding one of two "probable effects, for technical and financial reasons": (1) the impairment of the development of cable television service or (2) the creation of "an unreasonable duplication of services likely to be detrimental to the development of adequate cable television services." Suburban submits that nowhere does the Board adequately articulate the existence of either of those prerequisites in this case.
*70 Instead, the hearing examiner listed six regionalization factors that went into his decision: cost of service, quality of service, time of construction, community of interest, economic impact and overturning municipal consents. We find there is adequate evidence to support the hearing examiner's findings and conclusions as to the specifics of these factors.
Primarily, we agree that there are no significant differences between the companies in terms of cost of service, quality of service and time of construction, and that no "community of interest" was established by either Meadowlands or Suburban.
Rather, the critical question is whether the Board may properly use these factors in making a regionalization decision.
The limits of § 17(b) have not been defined by the courts. Here, the hearing examiner and the Board appear to have gone beyond the literal terms of the statute and have used the section to promote the policy of honoring as many municipal consents as possible. We cannot say that the Board erred in this expansive view of § 17(b). As pointed out by the Attorney General, the Board concluded that the development of cable television in the five municipalities where Meadowlands enjoyed municipal consents would probably be impeded for financial reasons unless it exercised its power under § 17(b) to include Kearny and East Newark.
Suburban next argues that the hearing examiner and the Board placed on it an unfair burden of justifying the overturning of seven municipal consents and ignored its valid municipal consent in Kearny. Suburban then argues that Kearny properly revoked the Meadowlands' consent and subsequently granted the consent to it. As such, Suburban asserts that it is in fact and in law the sole holder of a municipal consent for Kearny and it should be issued the certificate of approval for Kearny.
Suburban incorrectly reads the Board's order. The Board did not place on Suburban the burden of overturning seven municipal consents. Rather, the Board concluded that since it could issue a certificate of approval without a municipal consent pursuant to N.J.S.A. 48:5A-17(b), it did not have to decide *71 whether Kearny and East Newark had effectively revoked the Meadowlands' municipal consents.
The Board implies that it can issue certificates of approval at will, ignoring valid municipal consents pursuant to its regionalization power. We note that § 17(b) is limited by § 17(c). This section provides:
No such amended certificate shall be issued which would impair the terms of any existing certificate or of any municipal consent upon which such existing certificate is based, except with the consent of the holder of such existing certificate and of any municipality having issued such municipal consent.
In Clear Tel. Cable Corp. v. Public Utility Bd., 162 N.J. Super. 84 (App.Div. 1978), certif. granted 79 N.J. 472 (1978), we held that this provision does not apply only to municipal consents for which there are validly issued certificates of approval. Thus, had Kearny not subsequently consented to the Board's order, we may have found it necessary to decide if the Meadowlands' consent had been validly revoked. We do not, however, reach that question here.
The general rule is that the power to adopt an ordinance includes the power to amend or repeal an ordinance. Rutherford Bd. of Rec. Com'rs v. Rutherford, 166 N.J. Super. 476, 480 (App.Div. 1979); Isola v. Belmar, 34 N.J. Super. 544, 549 (App.Div. 1955). However, there are limits to this power where the municipality has granted a franchise right such as is involved in this case. Once a franchise right or privilege has been acquired from a municipality, that ordinance cannot be repealed, at least without due process of law. Rutherford Bd. of Rec. Com'rs, above 166 N.J. Super. at 480. Furthermore, after acceptance of the franchise, expenditure of money and probably also the beginning of construction, the franchise is irrevocable. Phillipsburg Electric Co. v. Phillipsburg, 66 N.J.L. 505 (Sup.Ct. 1901). These common law concepts are further complicated by the question of the Board's role in such a process. The OCTV has expressed the view that:
Once the ordinance granting the municipality's consent is issued, the regulation of the operator and enforcement of the terms of the franchise agreement be exclusively within the jurisdiction of the Office of Cable Television and the Board of Public Utilities. [A Guide to the Writing of the Cable Television Municipal Consent Ordinance, at 2]
*72 A contrary view would produce uncertainty in the two-tiered approval process. A municipality should not have the right to revoke a municipal consent once the applicant has filed a petition for a certificate of approval.
In its last point Suburban argues that it qualifies for a certificate of approval under the Board's "regionalization" criteria which it previously argued were invalid.
The hearing examiner primarily concluded that both companies could provide adequate service to Kearny and that there were no substantial differences between the two in terms of cost of service, quality of service or time of construction. His decision to award all seven communities to Meadowlands was based on other factors. The hearer's findings are supported by sufficient credible evidence on the record. In this highly technical area of factfinding we should defer to agency expertise.
The Board's decision to issue certificates of approval to Meadowlands for all seven municipalities is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545181/ | 417 A.2d 926 (1980)
Michael D. KITTELL
v.
VERMONT WEATHERBOARD, INC.
No. 182-79.
Supreme Court of Vermont.
June 10, 1980.
Cornelius O. Granai and Charles S. Martin, Barre, for plaintiff.
Leo A. Bisson, Jr., of Downs, Rachlin & Martin, St. Johnsbury, for defendant.
Before BARNEY, C. J., DALEY, LARROW and HILL, JJ., and SHANGRAW, C. J. (Ret.), specially assigned.
PER CURIAM.
This is an appeal from a decision of the Lamoille Superior Court that dismissed plaintiff's complaint on the ground that Vermont's Workmen's Compensation Act, 21 V.S.A. ch. 9, provides the exclusive remedy for his injury. In his complaint, plaintiff alleged that he was an inexperienced workman set to work without instruction or warnings at a multiple saw end trim from which the defendant employer had stripped all safety devices. While operating the saw, a splinter flew into plaintiff's eye and penetrated his head, causing severe injuries. These injuries, plaintiff alleges, were due solely to defendant's wanton and wilful acts and omissions.
The question presented is not whether plaintiff can recover an award for these injuries in any forum, but whether his complaint pleads a cause of action outside the scope of the Workmen's Compensation Act, thus entitling him to an award in the common-law courts. Section 622 of Title 21 makes the Workmen's Compensation Act the exclusive remedy for all injuries within the scope of the Act. The Act's coverage extends to "personal injury by accident arising out of and in the course of . . . employment . . .." 21 V.S.A. § 618 (emphasis added). Therefore, we must determine whether plaintiff's allegation of wilful and wanton conduct leading to a sudden but foreseeable injury constitutes "personal injury by accident" within section 618. If it does, the Act applies and the case was properly dismissed; if not, the Act would not apply, and plaintiff would be entitled to his common-law remedy.
The Legislature has provided the following guidance for construing the Workmen's Compensation Act:
*927 In construing the provisions of this chapter, the rule of law that statutes in derogation of the common law are to be strictly construed shall not be applied. The provisions of this chapter shall be so interpreted and construed as to effect its general purpose to make uniform the law of those states which enact it.
21 V.S.A. § 709. The fact that workmen's compensation is in derogation of common-law remedies is not, therefore, grounds for limiting the scope of the Act. Furthermore, any construction we place on this Act should serve the general purpose of harmonizing the law of workmen's compensation.
The overwhelming weight of authority in other jurisdictions is that "the common-law liability of the employer cannot be stretched to include accidental injuries caused by the gross, wanton, wilful, deliberate, intentional, reckless, culpable, or malicious negligence, breach of statute, or other misconduct of the employer short of genuine intentional injury." 2A A. Larsen, Workmen's Compensation Law § 78.13, at 13-5 (1976), and cases cited id. at n.11. Nothing short of a specific intent to injure falls outside the scope of the Act. 2A A. Larsen, supra, § 68.13; accord, e. g., Duncan v. Perry Packing Co., 162 Kan. 79, 86, 174 P.2d 78, 83 (1946); Wilkinson v. Achber, 101 N.H. 7, 9-10, 131 A.2d 51, 53 (1957); Santiago v. Brill Monfort Co., 10 N.Y.2d 718, 718, 176 N.E.2d 835, 835, 219 N.Y.S.2d 266, 266 (1961); Duk Hwan Chung v. Fred Meyer, Inc., 276 Or. 809, 813, 556 P.2d 683, 685 (1976); Foster v. Allsop Automatic, Inc., 86 Wash.2d 579, 581-84, 547 P.2d 856, 857-59 (1976) (en banc); see Annot., 96 A.L.R. 3d 1064 (1979). But see Mandolidis v. Elkins Industries, Inc., W.Va., 246 S.E.2d 907, 96 A.L.R. 3d 1035 (1978). Absent such specific intent, the right to benefits under the Act, and thus the triggering of the exclusivity rule of section 622, "depends on one simple test: Was there a work-connected injury?" 1 A. Larsen, supra, § 2.10 (1978). Plaintiff's complaint admits that there was.
"The purpose of the workmen's compensation law is to provide, not only for the employees a remedy which is both expeditious and independent of proof of fault, but also for employers, a liability which is limited and determinate." Morrisseau v. Legac, 123 Vt. 70, 76, 181 A.2d 53, 57 (1962). These purposes are best served by allowing the remedial system which the Legislature has created a broad sphere of operation. We are not unmindful that in individual cases this may work some hardship, but where the Legislature has determined that the benefits derived from quick and certain basic compensation outweigh those from delayed and contingent full compensation, we are unwilling to disturb this choice.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545232/ | 128 F.2d 584 (1942)
HELVERING, Com'r of Internal Revenue,
v.
REBSAMEN MOTORS, Inc.
No. 12154.
Circuit Court of Appeals, Eighth Circuit.
May 27, 1942.
Louise Foster, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and J. Louis Monarch and Joseph M. Jones, Sp. Assts. to Atty. Gen., on the brief), for petitioner.
John P. Ohl, of New York City (Wright, Gordon, Zachry, Parlin & Cahill and John A. Reed, all of New York City, on the brief), for respondent.
Before SANBORN and WOODROUGH, Circuit Judges, and TRIMBLE, District Judge.
SANBORN, Circuit Judge.
The question in this case is whether the words "gains from the sale of stock" as used in § 351(b) (1) (A) of the Revenue Act of 1934 defining a "personal holding company," c. 277, 48 Stat. 680, 751, 26 U.S. C.A. Int.Rev.Acts, pages 757, 758, include gains derived by a corporation from the final liquidation of a subsidiary corporation.
Congress in the Revenue Act of 1934, § 351(a), imposed a heavy surtax on the adjusted net income of every personal holding company. It was provided, § 351 (b) (1), that a corporation was a "personal holding company" if - "(A) at least 80 per centum of its gross income for the taxable year is derived from royalties, dividends, interest, annuities, and * * * *585 gains from the sale of stock or securities, and (B) at any time during the last half of the taxable year more than 50 per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals."
It is conceded that if a distribution received by respondent in October, 1935, from the final liquidation of a wholly owned subsidiary was a gain "from the sale of stock," the respondent was a "personal holding company," but that if the distribution was not such a gain, the respondent was not a "personal holding company."
The respondent is an Arkansas corporation. For some time prior to October 16, 1935, it owned all of the capital stock of the Union Savings Building & Loan Association. The Association was liquidated during 1935, and on October 16, 1935, respondent received all the net assets of the Association, consisting of cash, real estate, real estate mortgages, and accounts receivable. The fair market value of the assets was $146,061.11. The cost basis to respondent of the entire capital stock of the Association was $128,111.62. The respondent therefore derived a gain of $17,949.49 from the liquidation of this subsidiary. On September 15, 1937, the respondent paid to the Collector of Internal Revenue $4,510.28 for the taxable period May 1, 1935, to December 31, 1935, of which amount $4,157.83 was on account of the surtax imposed by § 351 of the Revenue Act of 1934, and $352.45 was interest thereon. The petitioner determined a deficiency of $725.76. The respondent filed a claim for refund of the entire tax paid and interest, on the ground that it was not a "personal holding company" as defined in § 351(b) (1) of the Revenue Act of 1934. The claim for refund was denied, and the deficiency was assessed. The respondent appealed to the Board of Tax Appeals, which sustained the contention of the respondent. This petition for review followed.
The Commissioner of Internal Revenue and the Board have been unable to see eye to eye with respect to the meaning of the words "sale of stock or securities" contained in the Congressional definition of a "personal holding company." Section 351 (b) (1) (A) of the Revenue Act of 1934. Treasury Regulations 86, promulgated under the Revenue Act of 1934, contains the following pertinent paragraph:
"Art. 351-2. Classification of a personal holding company. * * * *
* * * * *
"(5) Gains from the sale of stock or securities. The term `gains from the sale of stock or securities' applies to all gains (including gains from liquidating dividends and other distributions from capital) from the sale or exchange of stock or securities includible in gross income under Title I. * * * *"
The first difference of opinion between the Commissioner and the Board over the meaning of "gains from the sale of stock or securities" arose in Montague, Miles & Co., Inc. v. Commissioner, 38 B.T.A. 144. The taxpayer in that case had received a gain of $700 from a payment to it on a note which it had purchased. If that gain was from a "sale of stock or securities" the taxpayer was a "personal holding company." The Board ruled that the word "sale," as used in § 351(b) (1) of the Revenue Act of 1934, means sale in its ordinary sense, and that the Commissioner was without authority to extend the meaning to include exchange.[1] In the instant *586 case the Commissioner made substantially the same contention before the Board that he made in the Montague, Miles & Co. case, and the Board adhered to its former ruling. 44 B.T.A. 36.
The petition asserts that the Board is wrong and that Congress clearly intended the words "gains from the sale of stock" to include gains from exchanges and liquidations of stock. It seems to be agreed that the words of the statute are not ambiguous, but the petitioner argues that "sale of stock" means sale or exchange of stock, while the Board and the respondent are of the opinion that "sale of stock" means sale of stock.
The argument of the petitioner is, in substance, as follows: That, since § 351 (b) (4) of the Revenue Act of 1934 provides: "The terms used in this section shall have the same meaning as when used in Title I," and § 115(c) of the Act[3] (which is in Title I) provides: "Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock * * *," this means that a gain to a stockholder from the liquidation of a corporation has been given the legal effect of a gain from the sale of stock, and therefore Article 351-2 of Treasury Regulations 86 did not exceed statutory limits in providing that the words "gains from the sale of stock or securities" as used in § 351(b) (1) (A) should apply to all gains from the sale or exchange of stock or securities (including gains from liquidating dividends). The petitioner points out that the Supreme Court in White v. United States, 305 U.S. 281, 291, 59 S. Ct. 179, 184, 83 L. Ed. 172, ruled that "§ 115(c) requires the tax in case of liquidations to be computed upon the same basis as in case of sales of the stock, * * *" and that that Court used similar language in Hellmich v. Hellman, 276 U.S. 233, 237, 48 S. Ct. 244, 72 L. Ed. 544, 56 A.L.R. 379; and the petitioner argues that Congress in defining a "personal holding company" and referring to "dividends" and "gains from the sale of stock or securities" was using the terms in a broad sense to identify the kind of income which should distinguish such a company for the purpose of the imposition of the surtax; that, since the legal effect for purposes of taxation of the gain received from the liquidation of its subsidiary was the same as though the respondent had sold the stock, the gain must be considered as having arisen from a sale of the stock both under the applicable regulation and the statute; and that when used in a taxing statute the word "sale" may be entitled to a broad meaning. Helvering v. Hammel, 311 U.S. 504, 61 S. Ct. 368, 85 L. Ed. 303, 131 A.L.R. 1481; Helvering v. Nebraska Bridge Supply & Lumber Co., 312 U.S. 666, 61 S. Ct. 827, 85 L. Ed. 1111, reversing 8 Cir., 115 F.2d 288. There is, no doubt, much force in the petitioner's contentions. The reasoning of the Board in the Nebraska Bridge Supply & Lumber Co. case, 40 B.T.A. 40, which this Court affirmed and the Supreme Court reversed, was substantially that which led the Board to disagree with the Commissioner in the *587 instant case. In the Nebraska Bridge Supply & Lumber Co. case, both the Board and this Court thought that the words "losses from sales or exchanges of capital assets," as used in § 117(d) of the Revenue Act of 1934 (relating to deductions for capital losses), 48 Stat. 714, 26 U.S.C.A. Int.Rev.Acts, page 708, did not cover losses resulting from the forfeiture of lands in Arkansas for nonpayment of taxes.
We followed the rule that the use by a legislative body of words having definite meanings creates no ambiguity and that such words are to be taken and understood in their plain, ordinary and popular sense. We have come to realize that that rule is not always a safe guide to follow in construing the language of a taxing statute. United States v. Armature Rewinding Co., 8 Cir., 124 F.2d 589, 591. It is our understanding, however, that the rule is still to be applied unless it can clearly be seen that Congress used the words in question in a broader or different sense than that which would ordinarily be attributed to them. See Foley Securities Corp. v. Commissioner, 8 Cir., 106 F.2d 731, 734, 735.
It may be that, in defining a "personal holding company" in the Revenue Act of 1934, Congress intended the words "gains from the sale of stock" to include gains from the liquidation of a corporation, and that the Board has given the words "gains from the sale of stock" too restricted a meaning. On the other hand, it is apparent that Congress was attempting to segregate from corporations generally, those which were to be regarded as personal holding companies, for the purpose of the imposition of a surtax in the nature of a penalty to prevent such companies from being used to retain income which, if distributed to stockholders, would increase their taxes. See Foley Securities Corp. v. Commissioner, 8 Cir., 106 F.2d 731, 734. It is not unreasonable to believe that Congress, in defining a "personal holding company," spoke with precision and did not intend that corporations which fell outside of the definition of § 351(b) (1) (A), when read literally, should be subjected to the surtax. There is nothing in the pertinent legislative history which demonstrates that Congress clearly intended in 1934 that gains from the exchange of stock or from distributions received in liquidation of stock should be considered in determining whether a corporation was a "personal holding company." Nowhere in the Act of 1934 is the word "sale" defined as including a distribution in liquidation, and all that § 115(c) provides is that, in determining tax liability, such a distribution shall be treated "as in full payment in exchange for the stock." One weakness of the petitioner's position is that Congress did not in its definition of a "personal holding company" refer to "gains from the sale or exchange of stock," although § 351(b) (3) (C), relating to computation of adjusted net income of such companies, provides for the deduction of "Losses from sales or exchanges," which is at least an indication that when the word "sale" was used in § 351(b) (1) (A), it was used advisedly and probably not in the sense of "sale or exchange." We agree with the Board that the fact that in § 353(b) of the Revenue Act of 1937, (c. 815, 50 Stat. 813, 26 U.S.C.A. Int.Rev.Acts, page 974) Congress included "gains from the sale or exchange of stock or securities" in "personal holding company income," is not of controlling significance in determining the meaning of § 351(b) (1) (A) of the Revenue Act of 1934. (See footnote 1 of this opinion.)
The decisions of the Board of Tax Appeals, the members of which are impartial and experienced experts constantly dealing with questions of taxation, should be accorded great respect. This Court is justified in reversing a decision of the Board only when convinced that it was erroneous. See Stern Bros. & Co. v. Commissioner, 8 Cir., 108 F.2d 309, 311. Whatever doubts we may entertain as to the proper construction of § 351(b) (1) (A), we think, should be resolved in favor of the Board's conclusion. Uniformity of construction of taxing acts is important. United States v. Armature Rewinding Co., 8 Cir., 124 F.2d 589, 591. The Board has twice overruled the petitioner's contention as to the meaning of "gains from the sale of stock or securities" as used in § 351(b) (1) (A). The Board may be wrong, as the petitioner contends, but we are not convinced that it is wrong. We think it has reached a justifiable conclusion. It is not our understanding that a taxing statute is only to be read literally when a literal reading favors the Government. See Foley Securities Corp. v. Commissioner, 8 Cir., 106 F.2d 731, 734, and Crooks v. Harrelson, 282 U.S. 55, 60, 51 S. Ct. 49, 75 L. Ed. 156.
One may honestly and reasonably believe that in drafting a taxing act Congress *588 uses the language which most nearly expresses the legislative intent, and that if the language used fails properly to express that intent, corrections should be made by Congressional action and not by Treasury regulations or by judicial construction. This is not to say that the language of such an act should not be accorded its full meaning or should be given an unduly restricted interpretation or one which will defeat a clearly apparent Congressional purpose. It seems to us, however, that neither the taxing authorities nor the courts are justified in virtually amending a taxing act because they are of the opinion that Congress may have had or should have had a different intention than that which was expressed in the act. There would seem to be nothing unreasonable in a rule of construction which requires legislative bodies, in enacting taxing statutes, to use language of sufficient clarity to be understood by an ordinarily intelligent taxpayer as well as by those who are required to administer and to interpret the statutes.
The decision of the Board is affirmed.
WOODROUGH, Circuit Judge (dissenting).
Congress provided for the personal holding company surtax involved in this case for the purpose of meeting prevalent tax avoidance through splitting up anticipated large incomes among multiplied holding companies, often called pocketbook corporations. The characteristics common to such corporations are that they are closely owned and get income by passively receiving it, rather than by working for it. Congress accordingly directed its definition of personal holding companies to those features and laid the surtax against those closely held corporations which derive their gross income from royalties, dividends, interest, annuities and gains from the sale of stock and securities. It excepted gains from the sale of stock in the case of regular dealers in stocks. It gave no definition of "sale" but disclosed its intent as to the kind of "sale" by exception covering the case of sales of regular dealers. The context leaves no doubt in my mind that any of the innumerable modes of extinguishing the ownership of one and vesting it in another for a price falls within the broad scope of the word "sale" in the definition so long as the case of regular dealers in stocks is not present.
There was no specific mention in the definition of disposal of stock by complete liquidation of the corporation issuing it, but that particular mode of extinguishing the ownership of one and vesting it in another for a price had already been treated as a sale in the computation of tax in White v. United States, 305 U.S. 281, 59 S. Ct. 179, 83 L. Ed. 172, and Hellmich v. Hellman, 276 U.S. 233, 48 S. Ct. 244, 72 L. Ed. 544, 56 A.L.R. 379, and Congress doubtless assumed the courts would do the same here.
It is necessary to do so in order to uphold the intent of Congress in respect to the taxation of incomes in the upper brackets. Unless gains derived by pocketbook corporations from complete liquidation of stocks owned by them are treated as gains derived from sale of the stock, the income Congress intends to tax may be passed by such liquidations from one pocketbook corporation to another and the very tax avoidance which Congress expressed its intention to prevent is facilitated. I would sustain the tax.
NOTES
[1] The Board said [Montague, Miles & Co., Inc., v. Commissioner, page 149 of 38 B.T.A.]:
"It is our view that the term `sale' in section 351(b) (1) means a sale in the ordinary sense of the word. In the taxing statutes the terms `sale' and `exchange' appear separately in some instances, and in other instances the terms appear in conjunction with each other. But the two terms are not synonymous and have not been confused in the revenue laws. It appears that wherever Congress has intended to apply the terms `sale' and `exchange' of property it has written the individual terms into the statute, either alone or in conjunction with each other. If either or both terms did not cover a wide enough field Congress has then used such additional phrase as `other disposition' of property. We conclude, therefore, that Congress could not have intended that the term `sale' in section 351(b) (1) should include `exchange' within its meaning. It may be, that, for the purposes of section 351 limitation of subsection (b) (1) to `gains from the sale of stock or securities' left a loophole through which some taxpayers might escape classification as personal holding companies and the surtax imposed on such companies. It appears that Congress recognized this very situation because, in the Revenue Act of 1937, section 351(b) of the then existing law was amended and section 353(b) of the Revenue Act of 1937 was written to include the term `exchange.'2 The 1937 amendment, however, was not retroactive. Reference to the report of the Ways and Means Committee on the revenue laws of 1937 shows that the following explanation for the amendment is given:
2 "Sec. 353. Personal Holding Company Income.
* * * * *
"(b) Stock and Securities Transactions. Except in the case of regular dealers in stock or securities, gains from the sale or exchange of stock or securities." 26 U.S.C.A. Int.Rev.Acts, p. 974.
"Subsection (b) (of section 353, Act of 1937) includes as personal holding company income gains from the exchange of stock or securities. This is merely a clarifying amendment to carry out the intent of the existing law.
"However, neither the amendment in 1937 nor the explanation thereof is decisive of the question as it arises under the Act of 1934 because there is no ambiguity in the pertinent provision of the Act of 1934. Cf. Penn Mutual Life Insurance Co. v. Lederer, 252 U.S. 523, [40 S. Ct. 397, 64 L. Ed. 698]; Casey v. Sterling Cider Co., 1 Cir., 294 F. 426.
"We therefore conclude that in the transaction before us the gain petitioner realized from the partial liquidation of the note was not such gain as is covered by section 351 (b) (1) and that, accordingly, that gain does not bring petitioner within the statutory definition of a personal holding company for purposes of the surtax."
[3] 48 Stat. 711, 26 U.S.C.A. Int.Rev. Acts, page 703. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545257/ | 128 F.2d 415 (1942)
VICTORY
v.
MANNING, Collector of Internal Revenue.
No. 7955.
Circuit Court of Appeals, Third Circuit.
Argued April 9, 1942.
Decided May 1, 1942.
*416 Julius J. Seiden, of Jersey City, N. J. (Harry Lane, of Jersey City, N. J., of counsel), for appellant.
O. W. Hammonds, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Gerald L. Wallace, Sp. Assts. to the Atty. Gen., Charles M. Phillips, U. S. Atty., and Thorn Lord, Asst. U. S. Atty., both of Trenton, N. J., on the brief), for appellee.
Before MARIS, JONES, and GOODRICH, Circuit Judges.
GOODRICH, Circuit Judge.
The plaintiff brought an action in the District Court for the District of New Jersey against the Collector of Internal Revenue to enjoin him from proceeding in the collection of a tax assessed against the plaintiff on income received for the year 1938. The plaintiff alleged in his complaint that the Commissioner of Internal Revenue, on finding an alleged tax deficiency, had failed to proceed toward a legal assessment in that he omitted to send by registered mail a notice of the deficiency. The defendant moved to dismiss the complaint for the reason that the court lacked jurisdiction to entertain the proceeding and attached to his motion a document purporting to be a photostatic copy of "Waiver of Restrictions on Assessment and Collection of Deficiency in Tax" signed by the plaintiff. Attached also was what was purported to be a copy of a letter to the plaintiff from the revenue agent in charge bearing date of March 26, 1941. This being the state of the record, the learned trial judge dismissed the complaint and the plaintiff appeals to this court.
The federal statutes contain a general provision that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.[1] An express exception, however, allows an injunction where the taxpayer has not been sent his 90-day letter, within which time he may ask the Board of Tax Appeals for a redetermination of a deficiency.[2] This is the section relied upon by the taxpayer in this case. The same section, however, provides in another clause that the taxpayer may by a signed notice in writing waive the restrictions.[3]
One question in this case is whether the defendant's point concerning waiver is properly brought before the court in a motion to dismiss, accompanied by the photostatic copy of the waiver. The plaintiff contends that under Rule 8(c) of the Federal Rules of Civil Procedure, 28 U.S. C.A. following section 723c, waiver is described as an affirmative defense and must be set forth by answer. His opponent contends that the question does not fall under Rule 8 but under Rule 12, because it goes to the lack of jurisdiction of the court over the subject matter and may be made by motion at the option of the pleader.
We think the defendant is right in this contention. The prohibition against enjoining assessment or collection of taxes is very broad and we think properly described as affecting the jurisdiction of a court over the subject matter of such a suit. The same description applies to the problem whether the case is an exception to the general prohibition or a limitation upon that exception. This court recently had occasion to examine the problem of whether speaking motions are permitted under the new Rules and concluded that they are. Gallup v. Caldwell, 3 Cir., 1941, 120 F.2d 90. It is true that the issue presented in that case was one of law, but it was also pointed out that no problem arising out of possible claim to jury trial was involved. The latter fact is true here.
The difficulty in this case, however, is to see on what basis the trial judge was justified in granting the collector's motion to dismiss. The motion was accompanied, as has been said, by a photostatic copy of the alleged waiver, but the statute which makes copies of "books, records, papers, or other documents in any of the executive departments" self-authenticating requires the presence of the seal of the particular department thereon.[4] No *417 seal is shown to have been on this alleged waiver nor was it accompanied by any affidavit identifying it, or otherwise vouching for its genuineness.
However, we find no requirement either in the Federal Rules of Civil Procedure or in the Rules of the District Court of New Jersey that facts alleged in motions and not otherwise appearing of record should be sworn to or contained in an affidavit. The general tenor of the Rules, as they pertain to this question, indicates, rather, that the use of affidavits under such circumstances is discretionary with the parties or the court.[5] Certainly, since a fact can be alleged in a motion, without verification,[6] there would be little logic, in the absence of a specific rule to the contrary, to require the exhibits accompanying that motion to be under oath. The waiver was therefore properly before the court in this case.
The plaintiff saw fit to contest the motion to dismiss the complaint solely on the theory that the defense of waiver was pleaded improperly. One of the points in his statement on appeal is that the court decided this question and then dismissed the action, thereby depriving him of his right to attack the alleged waiver itself. We must thus decide whether, under such circumstances, the plaintiff has had his day in court and is precluded from any further opportunity to attack the waiver or whether, because its validity determines the jurisdictional issue, the case should be remanded for further proceedings to permit an adjudication of that question on the merits.
The general policy of the Rules requires that an adjudication on the merits rather than technicalities of procedure and form shall determine the rights of the litigants.[7] Thus, when a motion to dismiss on the ground of lack of jurisdiction over the subject matter is considered, the court, in disposing of the motion should freely allow amendments to show that there is jurisdiction.[8] By parity of reasoning, a further opportunity to attack the substance of the motion in order to show jurisdiction should be accorded to the plaintiff. This would have been the procedure to follow, had the plaintiff, in the court below, requested leave to present additional defenses. But he did not. Otherwise, the power to permit amendments is limited when the question of jurisdiction arises for the first time on appeal. Then, the appellate court may grant the privilege, provided there are facts of record which indicate the presence of jurisdiction.[9] There are no such facts in the present record.
Moreover, the Rules expressly contemplate a "speedy, and inexpensive determination of every action".[10] In accordance with this policy Rule 12 expressly requires that all objections and defenses to be raised by motions shall be joined in one motion with exception of defenses (1) to (5) in subdivision (b) of that Rule and even in the latter instance they must be consolidated.[11] To permit a party to make an objection to a motion, to have a hearing thereon, then to make a further objection and to have another hearing thereon, would constitute a flagrant violation of the general purpose of the Rules, as it would make the litigation more prolonged and more expensive.
It is to be noted again that this is not a case where the plaintiff requested an opportunity to present additional defenses after his first one should be determined. Nor is it one where he asked the court to relieve him from the order "taken against him through his mistake, inadvertence, surprise, or excusable neglect".[12] The record nowhere discloses such facts, or that the plaintiff at any time indicated to the trial court that he had further defenses which he wished to present. Under such circumstance the judge below could properly assume that all propositions which the plaintiff desired to advance were made. We cannot now, as the record stands, find any error in the order of the court dismissing the action.
The order appealed from is affirmed.
NOTES
[1] 26 U.S.C.A.Int.Rev.Code, § 3653(a).
[2] 26 U.S.C.A.Int.Rev.Code, § 272(a).
[3] 26 U.S.C.A.Int.Rev.Code, § 272(d).
[4] 28 U.S.C.A. § 661. Nor would the copy of the waiver be self-authenticating under Federal Rule of Civil Procedure 44(a) which requires that the copy be "attested by the officer having the legal custody of the record, or by his deputy, and accompanied with a certificate that such officer has the custody."
[5] See Rules 6(d), 7(b) (1) (2) and 11, 8 (e) (1), 43(e) and 56 (d).
[6] Rules 7(b) (1) (2) and 11.
[7] See Rules 8(f), 15(a), 46, 60 and 61.
[8] Moore's Federal Practice (1938) § 12.10; Rule 15(a). See also 28 U.S.C.A. § 399.
[9] Jackson v. Allen, 1889, 132 U.S. 27, 34, 10 S. Ct. 9, 33 L. Ed. 249; Crehore v. Ohio & M. Ry. Co., 1889, 131 U.S. 240, 9 S. Ct. 692, 33 L. Ed. 144.
[10] Rule 1.
[11] Defenses 12(b) (1) and (6) can, because of their nature, be raised at subsequent stages of the action.
[12] Rule 60. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857932/ | State v. Morales
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-195-CV
THE STATE OF TEXAS,
APPELLANT
vs.
LINDA MORALES, TOM DOYAL, PATRICIA CRAMER,
CHARLOTTE TAFT, AND JOHN THOMAS,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
NO. 461,898, HONORABLE PAUL R. DAVIS, JR., JUDGE PRESIDING
This appeal involves the limits on the government's right to intrude into an
individual's private life, and the extent of an individual's right to be let alone. We review a Texas
statute that criminalizes private sexual relations between consenting adults of the same sex. Tex.
Penal Code Ann. § 21.06 (1989).
Appellees Linda Morales, Tom Doyal, Patricia Cramer, Charlotte Taft, and John
Thomas challenged the constitutionality of Penal Code § 21.06 in a declaratory-judgment action,
claiming that this law violated their rights of privacy, equal protection, and due process of law.
They based their challenge exclusively on rights granted by the Texas Constitution. The district
court found the statute unconstitutional and enjoined its enforcement. On appeal, the State first
argues that appellees lack standing to challenge the statute and, second, defends the statute's
constitutionality by asserting the State's claimed interest in protecting public morality. We will
affirm the district court's judgment.
A. STANDING -- JURISDICTION
Under the traditional rules governing relief in equity, courts do not have
jurisdiction to determine in a civil action the constitutionality of a penal statute. One well-recognized exception to this general rule arises when the criminal statute is unconstitutional and
its enforcement will cause irreparable injury to vested property rights. E.g., Crouch v. Craik, 369
S.W.2d 311, 315 (Tex. 1963). Citing the general rule and relying in part on Passel v. Fort Worth
Independent School District, the State contends in its first point of error that a court cannot review
this statute in a civil action. Passel, 440 S.W.2d 61 (Tex. 1969), appeal dismissed w.o.j. and
cert. denied, 402 U.S. 968 (1971). Appellees respond that the State misinterprets Passel, which
they say expanded a court's equity jurisdiction to protect personal rights as well as property rights
against unconstitutional criminal statutes. We agree.
The plaintiffs in Passel challenged former Penal Code article 301d that prohibited
the existence of fraternities, sororities, and secret societies in public schools below the college
level. 1949 Tex. Gen. Laws, ch. 429, § 1, at 803 (1925 Texas Penal Code art. 301d, since
repealed and codified as Tex. Educ. Code Ann. §§ 4.20-.21 (1991)). The trial court concluded
it had no jurisdiction to construe and determine the constitutionality of the criminal statute and
dismissed the cause. The Texas Supreme Court reversed the trial-court judgment in an opinion
that discussed the vested-property-rights argument which the State espouses in this cause. The
Passel court dismissed that view as limited, however, and articulated a modern standard under
which equity can protect personal rights as well as property rights. Id. at 62-64.
Appellees assert a number of violations of their personal rights that they claim
deserve equitable relief and demonstrate standing. First, they argue that the existence of § 21.06
implicitly condones hate crimes against lesbians and gay men, encourages discrimination in our
legal system, and raises the potential threat of arrest, fine, and pecuniary loss. Further, they
assert that the statute brands lesbians and gay men as criminals and thereby legally sanctions
discrimination against them in a variety of ways unrelated to the criminal law. For example,
according to appellees, the stigma of criminality arising from the statute encourages discrimination
in the context of employment, family issues, and housing. The State does not dispute appellee's
assertions that § 21.06 causes harm beyond the threat of criminal prosecution. In fact, the State
in the district court stipulated to all of the evidence offered by appellees regarding these harmful
consequences of the statute.
We conclude that appellees have standing to attack the constitutionality of § 21.06
because they have shown that the statute causes actual harm which goes far beyond the mere threat
of prosecution. Because of these consequences to appellees, we cannot agree with the State that
this case is hypothetical, abstract, or generalized.
The State next argues that even if appellees have standing, equity will not enjoin
enforcement of a criminal law. Appellees respond that § 65.011 of the Civil Practice and
Remedies Code is broad enough to authorize an injunction in the present cause. See Tex. Civ.
Prac. & Rem. Code Ann. § 65.011 (1986 & Supp. 1992) (listing the grounds for obtaining a writ
of injunction).
The Passel court relied on former Revised Statutes article 4642 to support its
holding, stating that the "statute is broad enough to authorize the granting of an injunction for the
protection of personal rights." Id. at 63; 1925 Tex. Rev. Civ. Stat., § 1, art. 4642, at 1273 (since
repealed). Because former article 4642 has been nonsubstantively codified at § 65.011 of the
Civil Practices and Remedies Code, we conclude that § 65.011 is also broad enough to authorize
courts in a civil action to enjoin enforcement of unconstitutional criminal laws if the other Passel
standards are met. 1985 Tex. Gen. Laws, ch. 959, sec. 1, § 65.011, sec. 10, at 3292
(codification), 3322 (codification does not change substance of former law).
We also recognize that, irrespective of the nature of the right threatened, the
granting of an injunction depends upon the absence of an adequate remedy at law. See Covarrubia
v. Butler, 502 S.W.2d 229, 230 (Tex. Civ. App. 1973, writ ref'd n.r.e.). However, even though
a party may appear to have a remedy at law, if that remedy is merely illusory, it does not
foreclose a right to equitable relief. See Repka v. American Nat'l Ins. Co., 186 S.W.2d 977, 980
(Tex. 1945).
The State concedes that it rarely, if ever, enforces § 21.06. In fact, this Court has
found no case directly involving a prosecution under § 21.06. The last reported appellate case
involved a 1973 prosecution under a predecessor statute, former Penal Code article 524. Bishoff
v. State, 531 S.W.2d 346 (Tex. Crim. App. 1976) (construing 1943 Tex. Gen. Laws, ch. 112,
at 194 (1925 Texas Penal Code art. 524, since repealed)). Thus, appellees are confronted with
this dilemma: They suffer actual harm from the existence of § 21.06, harm that the State
acknowledges, yet they are unable to attack the statute's constitutionality because of the State's
apparent refusal to enforce the statute. Appellees, therefore, claim that they lack an adequate
remedy at law. We agree.
Applying the equity standard set forth in Passel, as well as the normal equity
requirements of irreparable injury and lack of an adequate remedy at law, we conclude that the
district court had jurisdiction in this matter and that declaratory and injunctive relief were
appropriate. The State's first point of error is overruled.
B. THE CONSTITUTIONAL CHALLENGE
The State contends in its second point of error that the district court erred in
declaring § 21.06 unconstitutional and enjoining its enforcement. The State argues that the United
States Supreme Court effectively foreclosed federal constitutional attacks on state statutes
prohibiting homosexual conduct when the Court upheld the constitutionality of a Georgia statute
in Bowers v. Hardwick, 478 U.S. 186 (1986). The State asserts that the scope of Texas
constitutional protections are no broader than those provided by the federal constitution. We
disagree.
The Texas Constitution has a meaning independent of the United States Constitution
and, in a number of cases, Texas courts have relied on the state constitution to find more
expansive rights than those granted by the federal courts. See, e.g., Edgewood v. Kirby, 777
S.W.2d 391 (Tex. 1989) (ruling that the State educational finance system violated the state
constitution, although the United States Supreme Court found no violation of federal equal
protection); Channel 4, KGBT v. Briggs, 759 S.W.2d 939, 944 (Tex. 1988) (Gonzalez, J.,
concurring) (stating that the rights of free speech and free press are more extensive under the state
constitution than under the federal constitution); Heitman v. State, 815 S.W.2d 681, 690 (Tex.
Crim. App. 1991) (holding that Texas courts analyzing search and seizure under the state
constitution are not bound by United States Supreme Court precedent analyzing the Fourth
Amendment). Thus, the federal constitution provides only a floor below which the State may not
fall in affording protection to individuals. See LeCroy v. Hanlon, 713 S.W.2d 335, 338 (Tex.
1986); Heitman, 815 S.W.2d at 682. We conclude that the Texas Constitution accords individuals
greater safeguards to their personal freedom than its federal counterpart does. We must,
therefore, enforce the provisions of the state constitution, even if the federal courts have given a
different interpretation to a similar provision of the federal constitution.
The controlling opinion in this cause is the Texas Supreme Court's opinion in Texas
State Employees Union v. Texas Department of Mental Health & Mental Retardation, which
recognized that the Texas Bill of Rights guarantees the right of privacy. 746 S.W.2d 203 (Tex.
1987) (TSEU). In TSEU, the supreme court held that the Texas Department of Mental Health and
Mental Retardation's policy of requiring certain employees to take a mandatory polygraph test
impermissibly violated privacy rights protected by the Texas Bill of Rights. Employees were
required to take the test when suspected of patient abuse, criminal activity at the work place, or
an activity threatening the health and safety of the employees. As a part of the polygraph test,
employees were required to answer "control questions" that were not job related and which the
employees found intrusive and highly offensive. Those who refused to submit to the polygraph
faced "adverse personnel action." Id. at 204-06.
The supreme court acknowledged at the outset that the Texas Constitution contains
no express guarantee of a right of privacy. The court held, however, that sections 6, 8, 9, 10,
19, and 25 of the Texas Bill of Rights each give rise to a concomitant zone of privacy and these
sections collectively establish a right of privacy under the Texas Constitution. In a unanimous
opinion, the supreme court then set forth a strict standard of review for governmental intrusion
upon personal privacy: "[The] right to privacy should yield only when the government can
demonstrate that an intrusion is reasonably warranted for the achievement of a compelling
governmental objective that can be achieved by no less intrusive, more reasonable means." Id.
at 205.
Although the supreme court discussed in broad terms those sections of the Texas
Bill of Rights which establish the Texas right of privacy, it did not clarify the full scope of this
privacy right. Certainly, the supreme court in TSEU did not explicitly state that the right of
privacy extends to homosexual conduct. However, we can think of nothing more fundamentally
private and deserving of protection than sexual behavior between consenting adults in private.
If consenting adults have a privacy right to engage in sexual behavior, then it cannot be
constitutional, absent a compelling state objective, to prohibit lesbians and gay men from engaging
in the same conduct in which heterosexuals may legally engage. In short, the State cannot make
the same conduct criminal when done by one, and innocent when done by the other.
To evaluate the constitutionality of § 21.06, we must review what objectives the
State asserts and whether those objectives are compelling enough to override appellees' right of
privacy. The burden of proof rests with the State to demonstrate a compelling governmental
objective. TSEU, 746 S.W.2d at 205.
The State offers the implementation of public morality as the sole compelling
objective to justify § 21.06. We are mindful that homosexual conduct is abhorrent to the morals
and deeply held beliefs of many people. However, the State makes no showing that criminalizing
private conduct engaged in by consenting adults in any way advances public morality. Our laws
against public lewdness and indecent exposure, on the other hand, properly serve to shield the
public's sensibilities from exposure to the intimacies of others. See Tex. Penal Code §§ 21.07,
.08 (1989). We wish to stress that our decision does not affect those criminal statutes prohibiting
sex with minors, child abuse, sexual assault, and prostitution.
Further, it is disingenuous to suggest that § 21.06 serves to protect public morality
when the State readily concedes that it rarely, if ever, enforces this statute. If lesbians and gay
men pose such a threat to the State, why then does the State not enforce the statute on a regular
basis by investigating suspected homosexuals, obtaining search warrants, making arrests, and
prosecuting offenders?
The State has not demonstrated how criminalizing sexual behavior between
consenting adults in private advances or protects public morality. Further, the State has not
argued that § 21.06 is justified on the basis of protecting the public's health from the spread of
sexually transmitted diseases. Even if the State were to make this argument, there is no evidence
in the record that § 21.06 either protects the public's health or that the Legislature in 1973
intended the statute as a disease-prevention measure. We note that § 21.06 does not prohibit
similar heterosexual conduct that may carry a high risk of transmitting sexual diseases.
Since the State has not met its burden of showing that a compelling governmental
objective justifies the intrusion § 21.06 makes into appellees' private lives, we sustain the district
court's ruling that § 21.06 is unconstitutional because it violates appellees' right of privacy. We
expressly decline to determine whether § 21.06 violates the state constitutional guarantees of due
process or equal protection. Point of error two is overruled.
The judgment of the district court is affirmed.
Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Kidd and Davis*]
Affirmed
Filed: March 11, 1992
[Publish]
* Before Tom G. Davis, Judge (retired), Court of Criminal Appeals, sitting by assignment. See
Tex. Gov't Code Ann. § 74.003(b) (1988). | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1545456/ | 342 B.R. 831 (2005)
In re ACE ELECTRICAL ACQUISITION, LLC d/b/a Ace Electric Debtor.
No. 6:04-BK-03224-ABB.
United States Bankruptcy Court, M.D. Florida, Orlando Division.
February 3, 2005.
Elizabeth A. Green, R. Scott Shuker, Wendy Cramer Townsend, Gronek & Latham, LLP, Orlando, FL, for debtor in possession.
Elena L. Escamilla, Orlando, FL, Miriam G. Suarez, Orlando, FL, United States Trustee
Kevin E. Mangum, Mangum & Associates PA, Casselberry, FL, for Official Committee of Unsecured Creditors.
ORDER
ARTHUR B. BRISKMAN, Bankruptcy Judge.
This matter came on the Motion for Summary Judgment Allowing Unsecured Claim of Central Bank and Trust Co., Hutchinson, Kansas, as Indenture Trustee ("Motion") (Doc. 290), the Amended Proof of Claim filed by Central Bank & Trust *832 Co., Hutchinson, Kansas, as Indenture Trustee (Claim no. 118), and Debtor's response to Central Bank & Trust Co., Hutchinson, Kansas, as Indenture Trustee Motion for Summary Judgment and Cross Motion for Summary Judgment on Debtor's Objection to Allowance of Amended Claim No.118 of Central Bank & Trust Co., Hutchinson, Kansas (Doc.311). The following Findings of Fact and Conclusions of Law are made after reviewing the evidence.
FINDINGS OF FACT
Central Bank and Trust Co., Hutchinson, Kansas, as Indenture Trustee ("Indenture Trustee") acts as indenture trustee for (a) the City of Columbus, Kansas Industrial Revenue Bonds, Series 1997 (Ace Electrical Acquisition, L.L.C. Project), in the original principal amount of $4,500,000, and (b) the City of Columbus, Kansas Industrial Revenue Bonds, Series 1998 (Ace Electrical Acquisition, LLC), in the original principal amount of $3,500,000 (collectively "Bonds").
The Bonds were issued pursuant to a Trust Indenture dated December 1, 1997 between the City of Columbus, Kansas ("Issuer") and the Indenture Trustee, and a Supplemental Trust Indenture dated August 1, 1998 between the Issuer and the Indenture Trustee (collectively "Indenture").[1] The Bonds are secured by (i) a Guaranty Agreement by the Debtor in favor of the Indenture Trustee dated December 1, 1997, and (ii) a Guaranty Agreement by the Debtor in favor of the Indenture Trustee dated August 1, 1998 (collectively "Guarantees").[2]
The Issuer used the proceeds of the Bonds to acquire a manufacturing facility in Columbus, Kansas ("Project"). The Issuer leased the Project to the Debtor pursuant to a Tenant Lease dated December 1, 1997 between the Issuer and Ace Electrical Acquisition, LLC, as supplemented by a Tenant Supplemental Lease No.1 dated August 1, 1998 between the same parties (collectively "Lease").[3]
The project was leased to the Debtor for the amount due under the industrial revenue bonds. The Issuer assigned substantially all of its rights as lessor under the lease to the Indenture Trustee. The lease runs through 2017. Debtor could purchase the project for $100 upon payment of the amount due under the lease, the exact amount due under the industrial revenue bonds. The guarantee of the industrial revenue bonds is in fact a guarantee of the lease.
The Bonds remained outstanding as of the petition date in the principal amount of $6,485,000 (consisting of $3,580,000 in Series 1997 Bonds and $2,905,000 in Series 1998 Bonds), plus $104,798 in accrued interest and costs, for a total of $6,589,798. The Court entered an order on September 22, 2004 authorizing the Debtor to reject the Lease ("Order") (Doc. 190). The Indentured Trustee filed an Amended Proof of Claim (claim no. 118) for its claims under the Lease and the Guarantees in the amount of $3,488,495.
CONCLUSIONS OF LAW
The Indenture Trustee is limited by the provisions of 11 U.S.C. § 502(b)(6).
A claim of a lessor for damages resulting from the termination of a lease of real property shall not be allowed to the extent such claim exceeds the rent reserved by such lease, without acceleration, for the greater of one year, or 15 *833 percent, not to exceed three years, of the remaining term of such lease. . . . 11 U.S.C. § 502(b)(6).
The rationale is to compensate the landlord while providing for the unsecured creditors.[4] The limitation set forth in 11 U.S.C. § 502(b)(6)(A) applies to claims against guarantors of leases.[5] The obligation of the guarantor cannot be greater than the obligation of the principal obligor.[6]
Debtor is in fact a guarantor of a lease. The real property leased by the Debtor was built from the proceeds of the industrial revenue bonds (IDR's). An IDR is issued by a municipality to attract industry to the municipality.[7] The issuing authority applies the bond proceeds to the construction of a plant site, which it then leases to a private firm.[8] The rental payments made by the private firm are used to repay the bonds; the IDR bondholder's only recourse for payment of the bonds is the revenue derived from the rental payments.[9] The Debtor's guarantee of the bonds is in fact a guarantee of the lease. The limitation of 11 U.S.C. § 502(b)(6)(A) applies to the Debtor.
The 15 percent limitation of 11 U.S.C. 502(b)(6) speaks in terms of time, not in terms of rent: "the rent reserved, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease." Grammatically, the "greater of" phrase contemplates two time periods, one year and 15 percent of the remaining term.[10] But the latter period (15 percent of the remaining term) is further limited to three years, so that if the remaining lease term exceeds 20 years, the allowable damage claim will not increase since 15 percent of 20 years is three years.[11]
The remaining lease term, measured from the petition date, is 13 years, 8 months, and 8 days. Fifteen percent of the remaining lease term is 2.0533 years. This period is greater than one year, but less than three years. The claim of the Indenture Trustee is limited, pursuant to 11 U.S.C. 502(b)(6), to the rent reserved for 15% of the remaining Lease term or 2.0533 years. The rent due for the period of 2.0533 years is $1,581,104.08.[12] The Indenture Trustee is permitted to add $265,652.52 of unpaid pre-petition rent pursuant to 11 U.S.C. 502(b)(6)(B). The aggregate limit authorized by 11 U.S.C. 502(b)(6) is $1,846,756.60.
The Indenture Trustee's damages of $3,488,495 exceeds the limit authorized by 11 U.S.C. 502(b)(6). The lease rejection claim filed by the Indenture Trustee is limited to $1,846,756.60. Therefore, it is
ORDERED, ADJUDGED AND DECREED that the Motion for Summary Judgment Allowing Unsecured Claim No. 118 of Central Bank and Trust Co., Hutchinson, Kansas, as Indenture Trustee for $3,488,495 (Doc. 290) is DENIED in part; it is further
*834 ORDERED, ADJUDGED AND DECREED that the Debtor's Objection to Allowance of Amended Claim No.118 of Central Bank & Trust Co., Hutchinson, Kansas, as Indenture Trustee for $3,488,495 (Doc.311) is SUSTAINED; it is further
ORDERED, ADJUDGED AND DECREED that the Amended Claim No.118 of Central Bank & Trust Co., Hutchinson, Kansas, as Indenture Trustee is ALLOWED in the amount of $1,846,756.60.
NOTES
[1] Exhibit A submitted by Indenture Trustee.
[2] Exhibit B submitted by Indenture Trustee.
[3] Exhibit C submitted by Indenture Trustee.
[4] In re Clements, 185 B.R. 895, 901 (M.D.Fla. 1995).
[5] In re Henderson, 297 B.R. 875, 885 (Bankr. M.D.Fla.2003); In re Clements, 185 B.R. 895.
[6] In re Henderson, 297 B.R. at 885.
[7] Bradford Sec. v. County Fed. Say. & Loan, 474 F. Supp. 957, 959 (1979).
[8] Id.
[9] Id.
[10] 11 U.S.C. § 502(b)(6); Collier on Bankruptcy, 15th Ed. Revised ¶ 502.03[7][c].
[11] Id.
[12] Exhibit E submitted by Indenture Trustee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545454/ | 417 A.2d 911 (1980)
John T. GRASSO
v.
Gordon BYRD.
No. 78-404-Appeal.
Supreme Court of Rhode Island.
July 29, 1980.
*912 Everett A. Petronio, Cranston, for plaintiff.
Hinckley, Allen, Salisbury & Parsons, Paul V. Curcio, Providence, for defendant.
OPINION
DORIS, Justice.
This is an appeal from an order of a Superior Court trial justice granting the appellee's motion to dismiss appellant's complaint on the ground that it fails to state a claim upon which relief can be granted.
On March 29, 1978, appellee, Gordon Byrd, in his capacity as the executive director of the Rhode Island Port Authority and Economic Development Corporation (the Port Authority), filed a complaint in Superior Court seeking to impose a permanent restriction on the use of the appellant's, John T. Grasso's, land known as the Hillside Acres, in the city of Warwick. The complaint sought to enjoin Mr. Grasso from installing sewer disposal systems within 250 feet of Navy Well 9A because such systems would allegedly discharge noxious matter, thereby causing pollution of the well.
On March 30, 1978, the Port Authority filed a lis pendens with the department of records in the city of Warwick concerning *913 the property owned by Mr. Grasso. The purpose of the lis pendens was to inform prospective purchasers of Mr. Grasso's property that the Port Authority was seeking to restrict the installation of sewer disposal systems on said property permanently.
On June 29, 1978, a Superior Court trial justice dismissed the Port Authority's complaint and ordered that the lis pendens be withdrawn immediately. No appeal was taken from this judgment.
On August 15, 1978, Mr. Grasso filed a complaint with the Superior Court alleging abuse of process and seeking reimbursement from the Port Authority for damages he allegedly sustained as a consequence of the filing of the lis pendens. The complaint states that since the title to Mr. Grasso's property was never in dispute, the Port Authority improperly filed the lis pendens.
Pursuant to Super.R.Civ.P. 12(b)(6), the Port Authority filed a motion to dismiss Mr. Grasso's complaint. This motion was granted by the Superior Court on October 26, 1978. The trial justice held that G.L. 1956 (1969 Reenactment) § 9-4-9 authorizes the use of a lis pendens not only when title to property is at issue but also when interests or easements to property are in controversy. Thus, the trial justice concluded that the Port Authority's filing of the lis pendens could not constitute abuse of process.
On appeal from the granting of the motion to dismiss his complaint, Mr. Grasso essentially raises three issues. First, he states that G.L. 1956 (1977 Reenactment) § 42-64-6 establishes the power of the Rhode Island Port Authority and Economic Development Corporation to sue and be sued.
Second, Mr. Grasso argues that the Port Authority's defense to his abuse-of-process suit, that a lis pendens is properly filed in the case of an easement in dispute, had already been litigated and was determined to have no merit in the prior suit initiated by the Port Authority. Mr. Grasso therefore claims that the doctrine of res judicata now prohibits the Port Authority from raising this defense to his complaint for abuse of process.
Finally, Mr. Grasso contends that the Port Authority's motion to dismiss was improperly granted in that he could prove abuse of process by establishing that § 9-4-9 does not permit the filing of a lis pendens when only an easement, not title, to property is in question.
The first issue raised by Mr. Grasso is easily resolved. Our review of the record does not indicate that the Port Authority ever contested that it could not be sued. Indeed, it is clear that § 42-64-6[1] provides that the Rhode Island Port Authority and Economic Development Corporation may be sued.
Next, in order to assess whether the doctrine of res judicata will bar the Port Authority from contending that a lis pendens is properly filed in the case of a disputed easement, we must establish whether the substance of this defense was judicially determined in the previous case between these two parties.
No transcript is available from the trial on the Port Authority's suit for an injunction on Mr. Grasso's property. A review of the Port Authority's complaint and Mr. Grasso's response to this complaint in this prior action, however, indicates that the issue in respect to the propriety of the filing of the lis pendens was never raised in these two documents. Thus, we can only conclude that this issue was not considered at the trial. Since this issue was never previously decided on the merits, the doctrine of res judicata does not now bar it from being raised in the instant case. See Nardolillo v. Carroll, 70 R.I. 383, 38 A.2d 781 (1944).
Before proceeding to the merits of Mr. Grasso's third contention, we must consider the Port Authority's counterargument *914 that Mr. Grasso is foreclosed by Super.R.Civ.P. 13[2] from claiming that the lis pendens was improperly filed. The Port Authority contends that the issue of the propriety of the filing of the lis pendens was a compulsory counterclaim in its prior suit for an injunction and that since Mr. Grasso did not plead this counterclaim, he is now precluded from doing so.
We do not agree with this contention. Since Mr. Grasso's claim of abuse of process could not come into being until the prior action had been determined in his favor, his claim is not now barred by the compulsory counterclaim provisions of our Rules of Civil Procedure. See Miner v. Commerce Oil Refining Corp., 198 F. Supp. 887, 893 (D.R.I. 1961), vacated on other grounds, 303 F.2d 125 (1st Cir.1962).
In regard to Mr. Grasso's final contention, clearly a motion to dismiss for failure to state a claim upon which relief can be granted will only be allowed if it is clear beyond a reasonable doubt that the petitioner will be unable to prove his right to relief. In addition, the trial justice must construe the complaint in the light most favorable to the petitioner, with all doubts resolved in his favor and allegations accepted as true. Bragg v. Warwick Shoppers World Inc., 102 R.I. 8, 12, 227 A.2d 582, 584 (1967).
Even in light of the fact that appellant's complaint must be viewed with such judicial latitude, our review of the record supports the trial justice's decision to grant the Port Authority's motion to dismiss Grasso's complaint. Section 9-4-9 provides that "[n]o proceeding in court * * * concerning the title to any real estate, in this state, or to any interest or easement therein, shall affect such title * * * as to any rights acquired before notice of the filing [of a lis pendens] * * *." (Emphasis added.) This statute clearly authorizes the use of a lis pendens when title, interests, or easements in property are in dispute. See Picerne v. Redd, 72 R.I. 4, 47 A.2d 906 (1946); Brightman v. Brightman, 1 R.I. 112 (1848).
In the instant case, the Port Authority sought to impose a permanent restriction on Mr. Grasso's property prohibiting him from installing sewer disposal systems within 250 feet of Navy Well 9A. These desired restrictions constitute a negative easement on Mr. Grasso's land. See Ham v. Massasoit Real Estate Co., 42 R.I. 293, 107 A. 205 (1919).
Since § 9-4-9 is applicable to easements and the Port Authority's suit involved enforcement of an easement (albeit a negative one), we conclude that the lis pendens was properly filed. Further, our review of the record indicates that the propriety of the filing of the lis pendens was the sole basis of Mr. Grasso's abuse-of-process suit. We therefore can only agree with the trial justice's order to grant the Port Authority's motion to dismiss Mr. Grasso's complaint.
The appellant's appeal is denied and dismissed, the order granting the appellee's motion to dismiss for failure to state a claim upon which relief can be granted is sustained, and the case is remanded to Superior Court for further proceedings.
KELLEHER, Justice, dissenting.
From the moment Bragg v. Warwick Shoppers World Inc., 102 R.I. 8, 227 A.2d 582 (1967), was published, we have consistently taken the position that a Rule 12(b)(6) motion to dismiss should not be granted unless it appears beyond a reasonable doubt that the plaintiff would not be entitled to *915 any relief, no matter what state of facts can be proved in support of the claim. In determining the presence of such a doubt, the trial court and this court are required to resolve all doubts in the plaintiff's favor and accept all of his or her allegations as true.
This is a claim for damages arising out of an alleged abuse of process. On several occasions this court has pointed out that a plaintiff in an action for abuse of process concedes that the process was properly issued but claims that after its issuance there was a perversion of the process because it was used to accomplish some ulterior purpose for which the process was never intended. Powers v. Carvalho, 117 R.I. 519, 368 A.2d 1242 (1977); Smith Development Corp. v. Bilow Enterprises, Inc., 112 R.I. 203, 308 A.2d 477 (1973); Goldstein v. Rhode Island Hospital Trust National Bank, 110 R.I. 580, 296 A.2d 112 (1972); Manufacturers Supply Co. v. Parker, 103 R.I. 426, 238 A.2d 616 (1968).
Although the plaintiff's complaint cannot be considered as a masterpiece of precise pleading, we are bound to view the complaint in the spirit of the rules of civil procedure. When this is done, it is clear that the plaintiff does allege that the defendants by their actions made "an illegal, improper, perverted use of both court process and the doctrine of lis pendens." He also alleges that the defendants had "an ulterior motive or purpose in exercising such improper use of process."
Thus it is that, with Bragg as my guide, I vote to vacate the judgment dismissing the complaint and leave the complainant to his proof. Whether he can prevail is a matter to be determined on the basis of his proof rather than on his pleadings.[3] Any doubt concerning his ultimate success is no cause, at this stage of the proceedings, for dismissal of his suit.
NOTES
[1] General Laws 1956 (1977 Reenactment) § 42-64-6 provides in pertinent part as follows:
"General powers, Except to the extent inconsistent with any specific provision of this chapter, the corporation [the Rhode Island Port Authority and Economic Development Corporation] shall have power:
(a) To sue and be sued, complain and defend, in its corporate name.
[2] Rule 13(a) of Super.R.Civ.P. provides in pertinent part as follows:
"Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction, except that such a claim need not be so stated if at the time the action was commenced the claim was the subject of another pending action, or if the opposing party's claim is for damage arising out of the ownership, maintenance, operation, use, or control of a motor vehicle by the pleader."
[3] The defendant has also contributed to the confusion by filing a memorandum in support of its motion to dismiss in which it argues at great length that the lis pendens was properly filed. This issue, as well as the questions of res judicata and the need for a compulsory counterclaim, are totally immaterial because the only question was and is whether Grasso has stated a claim upon which relief could be granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545452/ | 177 Conn. 335 (1979)
STATE OF CONNECTICUT
v.
GEORGE W. LEE
Supreme Court of Connecticut.
Argued January 9, 1979.
Decision released April 17, 1979.
COTTER, C. J., LOISELLE, BOGDANSKI, PETERS and PARSKEY, JS.
Jerrold H. Barnett, public defender, with whom, on the brief, were Richard Emanuel and Vincent J. Giedraitis, assistant public defenders, for the appellant (defendant). *336 Robert M. Meyers, assistant state's attorney, with whom, on the brief, was George D. Stoughton, state's attorney, for the appellee (state).
PARSKEY, J.
After a trial to a jury the defendant was convicted of burglary in the third degree in violation of General Statutes § 53a-103a, robbery in the first degree in violation of § 53a-134 (a) (2), and kidnapping in the second degree in violation of §§ 53a-94 and 53a-91 (2) (b). The issues involved in this appeal are (1) whether the in-court identification of the defendant was constitutionally admissible, and (2) whether there was sufficient evidence to convict the defendant of the kidnapping charge.
On December 10, 1974, Frank Salamon was residing with his parents in a two-story, one-family home located in a rural area of Canton. About 11 a.m., as Salamon was awakening in his second floor bedroom, he heard a noise downstairs and the family dog barking. As he started downstairs he encountered a black male, whom he later identified as the defendant, coming up the stairs, who pulled out a pocketknife with a three- or four-inch blade, pointed it at Salamon, and ordered him to return to his bedroom. Salamon was directed to sit on the bed while the black male took things from drawers and cabinets and put them in a pillow case and, while he was in Salamon's bedroom, a white male wearing a scarf that covered the lower part of his face entered. Thereafter, the black male left the room and, about five minutes later, he returned and remained in the room for about another five minutes. While both intruders were together in the bedroom, the white male tied Salamon on the bed with a lamp cord, and a sheet was tied around his head, *337 so that he could not see. Thereafter the pair left, Salamon freed himself and immediately notified the police.
I
The defendant assigns error in the court's failure to exclude Salamon's in-court identification of the defendant as the black male who accosted him on the stairway. His claim is that this identification was tainted by a previous out-of-court identification made under circumstances that violated his rights under the sixth and fourteenth amendments to the constitution of the United States. Certain additional facts are pertinent to this inquiry. After Salamon reported the incident, he gave a description of both the white and black males to Sergeants Stephen Cudworth and John LaDucer of the Canton police department. He described the white male as being five feet, ten inches in height, of medium build, having black hair of short length and wearing a scarf over his face. He described the black male as approximately six feet in height, of medium build, having black hair in a short Afro style and no facial hair. About an hour after the crime, Salamon was taken to Hartford police headquarters where he examined five mug shots of white males. Before he looked at the photographs he told Sergeant Cudworth that the white man who robbed him had a broad forehead with a high hairline. After he examined the photographs, Salamon picked out one of them, Paul DeWitt, as the white male who participated in the crimes. Salamon was also shown about two hundred photographs of black males but he could not identify any of them. Sergeant Cudworth did not ask the Hartford police department to segregate or identify the photographs of black males shown to Salamon, nor did he know whether the *338 defendant George Lee's photograph was among them. On January 28, 1975, the Canton police were notified by the state police that they had apprehended Paul DeWitt and a black male and that both were to be presented to the Court of Common Pleas in Middletown on January 29, 1975, for charges unrelated to the Canton incident.
Sergeant LaDucer telephoned Salamon, told him about DeWitt's arrest with a black male, and requested him to come to Middletown the next day to see if he could identify the black male in a line-up. Later the Canton police learned that a line-up could not be arranged. Upon learning that a line-up would not take place, Sergeant LaDucer decided he would locate the courtroom where DeWitt and Lee were and would ask Salamon if he could identify them. On January 29, 1975, Sergeant LaDucer and a detective from the Simsbury police department drove Salamon to the Court of Common Pleas in Middletown. While the police and Salamon were walking to the court liaison officer's room, they fortuitously encountered DeWitt and the defendant in the second-floor hallway. At the time, DeWitt and the defendant were handcuffed and were standing beside a state police officer. All of the people in the hallway at the time, other than the defendant, were white. After observing DeWitt and the defendant for about five to ten minutes, Salamon told Sergeant LaDucer that they were the pair who had been in his house. When he identified the defendant to Sergeant LaDucer, Salamon volunteered the information that the defendant had grown a beard since the date of the robbery.
The state represented to the court, at the hearing on the motion to suppress the hallway identification, *339 that during the trial it would not proffer it against either Lee or DeWitt. Because of this representation the trial court did not rule on the admissibility of this identification. It did conclude, however, that the state had established by clear and convincing evidence that Salamon's in-court identification of the defendant was based solely upon his observations and recollection of the defendant at the scene of the crime. The court also concluded that under the totality of the circumstances the in-court identification was not based upon the "corridor confrontation" or its fruits.
An in-court identification of an accused in the course of a trial is subject to challenge in any case where a pretrial corporeal identification has occurred without the presence of counsel at a critical stage of a criminal prosecution. This is so whether the pretrial identification is used to corroborate the in-court identification; Gilbert v. California, 388 U.S. 263, 87 S. Ct. 1951, 18 L. Ed. 2d 1178 (1967); or not. United States v. Wade, 388 U.S. 218, 87 S. Ct. 1926, 18 L. Ed. 2d 1149 (1967). The in-court identification is subject to challenge regardless of whether the pretrial corporeal identification without the presence of counsel is in the form of a line-up, a show-up or a one-on-one identification. Moore v. Illinois, 434 U.S. 220, 98 S. Ct. 458, 54 L. Ed. 2d 424 (1977). The in-court identification may be challenged where the pretrial corporeal identification occurred "at or after the initiation of adversary judicial criminal proceedingswhether by way of formal charge, preliminary hearing, indictment, information, or arraignment." Kirby v. Illinois, 406 U.S. 682, 689, 92 S. Ct. 1877, 32 L. Ed. 2d 411 (1972). To overcome the challenge, *340 the burden is on the state to establish by clear and convincing evidence that the in-court identification was based upon the witness' independent recollection. United States v. Wade, supra, 240; State v. Middleton, 170 Conn. 601, 609, 368 A.2d 66 (1976); State v. Duff en, 160 Conn. 77, 83, 273 A.2d 863, cert. denied, 402 U.S. 914, 91 S. Ct. 1397, 28 L. Ed. 2d 657 (1971). The factors to be considered by the trial court in evaluating the independent source of the witness' in-court identification include "the opportunity of the witness to view the criminal at the time of the crime, the witness' degree of attention, the accuracy of the witness' prior description of the criminal, the level of certainty demonstrated by the witness at the confrontation, and the length of time between the crime and the confrontation." Neil v. Biggers, 409 U.S. 188, 199, 93 S. Ct. 375, 34 L. Ed. 2d 401 (1972).
For the state to meet its substantial burden of persuasion it must come forward with more than a bare preponderance of evidence. Schneiderman v. United States, 320 U.S. 118, 125, 63 S. Ct. 1333, 87 L. Ed. 1796 (1943). The evidence must be such as to induce in the mind of the trier "a reasonable belief that the facts asserted are highly probably true, that the probability that they are true or exist is substantially greater than the probability that they are false or do not exist." Dacey v. Connecticut Bar Assn., 170 Conn. 520, 537, 368 A.2d 125 (1976); McCormick, Evidence (2d Ed.) § 340.
The trial court's conclusion that the state had established by clear and convincing evidence that Salamon's in-court identification was based on an independent recollection is amply supported by the *341 unchallenged finding.[1] Salamon, who was wearing his eyeglasses at the time of the incident, had a good view of the defendant, both full face and profile, and watched him under well-lighted conditions, sometimes at a range of two to three feet, for about ten minutes. Immediately after the robbery, Salamon gave the police a description of the defendant, and, except for the dispute about whether he was clean shaven, the defendant makes no claim that the description was otherwise inaccurate. Less than two months later, when Salamon met Lee in the courthouse corridor, he observed, without being questioned, that Lee had grown a beard since the date of the robbery. Some five months later Salamon identified the defendant in court at a preliminary hearing. Salamon was absolutely positive at the time of the trial that the defendant and DeWitt were the two people who broke into his home. Even if we assume, as does the state, that the "corridor confrontation" violated Lee's sixth amendment right to the presence of counsel under the rules enunciated in Wade and Kirby, there was a foundation in the evidence to support the conclusion that it was highly probable that Salamon's recollection of the defendant at the time of the trial was based on his observations at the time of the offense.
We need not dwell on the defendant's further claim that the "corridor confrontation" was so *342 impermissibly suggestive as to give rise to a substantial likelihood of irreparable misidentification. The short answer to this claim is that the trial court was satisfied under the totality of the circumstances that Salamon's in-court identification was reliable. Manson v. Brathwaite, 432 U.S. 98, 97 S. Ct. 2243, 53 L. Ed. 2d 140 (1977). Having already determined that there was clear and convincing evidence that Salamon's in-court identification came from an independent source, the court could hardly have done otherwise.
II
The defendant also asserts that there was insufficient evidence to support his conviction on the kidnapping charge. A person is guilty of kidnapping in the second degree under General Statutes § 53a-94 if he abducts another person. Section 53a-91 (2) defines "abduct" to mean "to restrain a person with intent to prevent his liberation by either (a) secreting or holding him in a place where he is not likely to be found, or (b) using or threatening to use physical force or intimidation." Section 53a-91 (1) defines "restrain" to mean "to restrict a person's movements intentionally and unlawfully in such a manner as to interfere substantially with his liberty by moving him from one place to another, or by confining him either in the place where the restriction commences or in a place to which he has been moved, without his consent." The defendant does not quarrel with the definitions, nor does he suggest that Salamon was not abducted within the literal meaning of that term as defined in the statute. Rather, he argues, citing People v. Levy, 15 N.Y.2d 159, 204 N.E.2d 842, cert. denied, 381 U.S. 938, 85 *343 S. Ct. 1770, 14 L. Ed. 2d 701 (1965), and its progeny,[2] that where the restraint and asportation of the victim is incidental to the accomplishment of another substantive crime, the offense cannot be kidnapping as a matter of law.
We considered the defendant's argument in State v. Dubina, 164 Conn. 95, 318 A.2d 95 (1972), and observed (p. 100) that whether the detention[3] was merely incidental to another crime was, under appropriate instructions from the court, a question for the jury. In the present case, the trial court so charged the jury without a request. More recently, in State v. Chetcuti, 173 Conn. 165, 377 A.2d 263 (1977), we again reviewed the relationship of the kidnapping statute; § 53a-92 (a) (2) (A); to other associated crimes (assault and sexual contact). We there noted (p. 170) that the legislature had seen fit not to merge the offense of kidnapping with other felonies, nor to impose any time requirements for restraint, nor distance requirements for asportation, to constitute the crime of kidnapping.
Kidnapping requires that there be an abduction. Abduction means restraint with the intent to prevent liberation. Whether in a given case the restraint is accompanied by the requisite intent, so as to constitute kidnapping, or is merely incidental to another felony, is ordinarily a question for the jury. State v. Chetcuti, supra, 170; State v. Dubina, *344 supra, 100. Where the requisite intent is present, the fact that the perpetrator's underlying motive for the detention is the consummation of another crime, the prevention of his detection, or the facilitation of his flight, does not preclude a conviction for kidnapping.
In this case, the factsthe movement of Salamon at the point of a knife from the stairway back to his bedroom, his detention in the bedroom for about fifteen minutes during the course of the robbery, and his being left lying on the bed in a prone position with a sheet covering his face and his hands tied behind his back so as to require an additional ten minutes for Salamon to extricate himselfwere sufficient to permit the jury to find the restraint and intent necessary to constitute kidnapping in the second degree. We cannot say, as a matter of law, that the restraint was only incidental to the robbery.
There is no error.
In this opinion the other judges concurred.
NOTES
[1] Although the defendant seeks to correct the finding, we conclude from an examination of the appendix that no additions or corrections are warranted. Some of the requested additions are implicit in the finding. State v. Warren, 169 Conn. 207, 214, 363 A.2d 91 (1975). Others are either disputed or not admitted or would not affect the result. Aillon v. State, 168 Conn. 541, 542, 363 A.2d 49 (1975). Those findings sought to be deleted are substantially supported by the evidence printed in the appendix.
[2] The relationship of kidnapping to other crimes is discussed in annot., 43 A.L.R. 3d 699.
[3] In State v. Dubina, 164 Conn. 95, 318 A.2d 95 (1972), the kidnapping statute; General Statutes § 53-27 (repealed by Public Acts 1969, No. 828, § 214); made fraudulent or forcible restraint with intent to demand a concession or other valuable thing for the release of the victim a crime. We noted (p. 99) that restraint for sexual gratification has been considered within the purview of kidnapping statutes. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545477/ | 128 F.2d 865 (1942)
WRIGHT
v.
GIBSON et al.
No. 10016.
Circuit Court of Appeals, Ninth Circuit.
June 15, 1942.
*866 Herbert T. Silverberg, of Los Angeles, Cal., for appellant.
Musick & Burrell and Harold H. Streight, all of Los Angeles, Cal., for appellee Homer L. Gibson.
Mosher & Shafer, of Los Angeles, Cal., for appellee Frank W. Royer.
Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.
MATHEWS, Circuit Judge.
In an action by appellant against appellees, appellant filed a fourth amended complaint (hereafter called the complaint) which contained two counts. Appellees moved to dismiss the second count. The court heard the motions and, on July 12, 1941, filed a written opinion concluding with the statement that "The motion[1] * * * is granted." Thereupon, on July 12, 1941, the clerk of the court made a minute entry stating that the motions had theretofore been argued and submitted, and that "The court now files its opinion; and, pursuant thereto, said motions are granted." On October 10, 1941, appellant filed a notice of appeal reading as follows:
"Notice is hereby given that [appellant] hereby appeals to the Circuit Court of Appeals for the Ninth Circuit, from the order dismissing the second count of [appellant's] fourth amended complaint, and entered in this action on July 12, 1941."
Actually, no order dismissing the second count was ever entered. Indeed, so far as the record shows, no order, judgment or decree of any kind was ever entered in this case. The opinion was not an order, judgment or decree. Its filing, therefore, did not constitute the entry of an order, judgment or decree; nor did the clerk's statement that "said motions are granted" constitute such an entry. Thus, at the time the notice was filed, there was nothing from which an appeal could be taken.
A judgment dismissing an action is a final decision and hence is appealable.[2] An order which merely grants a motion to dismiss an action is not a final decision and is not appealable.[3] In this case, there was no motion to dismiss the action and, of course, no order granting such a motion, nor any judgment dismissing the action. The action is still pending in the District Court.
*867 Where a complaint sets forth, in separate counts, separate claims for relief, a judgment dismissing one of the counts is a final decision and hence is appealable,[4] but an order which merely grants a motion to that effect is not a final decision and is not appealable.[5] In this case, the complaint, although it contained two counts, set forth only one claim for relief. That was a claim for damages in the sum of $45,729.26,[6] with interest and costs. In the first count, the claim was predicated upon the common law. In the second count, it was predicated upon a statute.[7] Thus the complaint set forth, in separate counts, two grounds upon which relief was claimed, but set forth only one claim for relief. In this case, therefore, a judgment dismissing one count of the complaint, leaving the other count pending, would not be a final decision and would not be appealable.[8] Much less would an order which merely granted a motion to that effect be appealable.
Appeal dismissed.
NOTES
[1] Actually, there were two motions.
[2] Judicial Code, § 128(a), 28 U.S.C.A. § 225(a).
[3] City and County of San Francisco v. McLaughlin, 9 Cir., 9 F.2d 390.
[4] Reeves v. Beardall, 62 S. Ct. 1085, 86 L. Ed. ___, decided May 11, 1942.
[5] City and County of San Francisco v. McLaughlin, supra.
[6] $52,000, less $6,270.74.
[7] Securities Act of 1933, §§ 11 and 15, 15 U.S.C.A. §§ 77k and 77o.
[8] Ex parte National Enameling & Stamping Co., 201 U.S. 156, 26 S. Ct. 404, 50 L. Ed. 707; Memphis Keeley Institute v. Leslie E. Keeley Co., 6 Cir., 144 F. 628; Sheppy v. Stevens, 2 Cir., 200 F. 946; United States v. Bighorn Sheep Co., 8 Cir., 276 F. 710. See, also, Louisiana Navigation Co. v. Oyster Commission, 226 U.S. 99, 33 S. Ct. 78, 57 L. Ed. 138; Collins v. Miller, 252 U.S. 364, 40 S. Ct. 347, 64 L. Ed. 616. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545481/ | 342 B.R. 312 (2006)
In re Priscilla MONTOYA, Debtor.
No. 06-00303-B13.
United States Bankruptcy Court, S.D. California.
April 12, 2006.
*313 D.J. Rausa, San Diego, CA, for debtor.
Thomas H. Billingslea, San Diego, CA, for trustee.
MEMORANDUM DECISION
LOUISE DE CARL ADLER, Bankruptcy Judge.
I.
INTRODUCTION
Priscilla Montoya ("Debtor") has filed this motion to continue the automatic stay as to all creditors beyond the 30th day after the filing of this bankruptcy case pursuant to 11 U.S.C. § 362(c)(3)(B)("Motion").[1] Although the Motion is unopposed, this section requires a court to make its own determination as to whether it may continue the stay. For the reasons more fully set forth below, the Court grants the Motion.
II.
FACTUAL BACKGROUND
A. Debtor's Prior Chapter 13 Bankruptcy Case.
Prior to filing this chapter 13 bankruptcy case, Debtor filed a chapter 13 case on January 27, 2005 ("Prior Case").[2] Debtor's Prior Case scheduled secured claims of $32,122 and general unsecured claims of $11,849. Debtor confirmed a plan of reorganization by order entered March 4, 2005, *314 providing for monthly payments of $430 with a 16% dividend to general unsecured creditors. [P.C. Doc. # 2 and 10]
Debtor's Schedule "I" indicated she was employed in the "Medical Records" field with the same employer for five years, bringing home a net monthly pay of $2,561 as her sole source of income. Debtor's Schedule "J" lists monthly expenses of $2,130, leaving her $431 in disposable income for her monthly plan payments.[3] [P.C. Doc. # 1]
Debtor made all her plan payments in the prior case; however, she determined she could not proceed with her plan for personal reasons, so she moved to dismiss the case.[4] [P.C. Doc. # 18] The trustee did not oppose the motion and, in June 2005, the prior case was dismissed. [P.C. Doc. # 20]
B. Debtor's Current Chapter 13 Bankruptcy Case.
Debtor filed this chapter 13 case on February 24, 2006. Debtor's plan of reorganization proposes monthly payments of $500 with a 45% dividend to general unsecured creditors. [Doc. # 2]
Debtor's petition scheduled no secured claims, a 2005 priority tax claim of $2,036 and general unsecured claims of $29,562. With the exception of her tax debt, Debtor's overall debts have not increased. Rather, they were reclassified from secured to general unsecured claims as a result of two vehicles being returned or repossessed. Debtor no longer owns a vehicle.
Debtor's schedule "I" indicates she is a single mother with two young children. She remains employed in the medical records field with the same employer where she earns a net monthly income of $2,909 as her sole source of income. Debtor's Schedule "J" lists monthly expenses of $2,409, leaving $500 to make her monthly plan payments. Accordingly, Debtor has slightly more disposable income to fund a plan than in her Prior Case.
In accordance with § 362(c)(3)(B), Debtor filed and served this Motion prior to the 30th day after the petition date, and this hearing was held prior to the 30th day at which time the Court took the matter under submission. Debtor does not expressly state that she served the Motion on all of her creditors, although the accompanying proof of service appears complete. The Motion is unopposed.
III.
LEGAL ANALYSIS
Under BAPCPA, the automatic stay no longer applies uniformly to all debtors. New § 362(c)(3)(A) limits the duration of the automatic stay for debtors who had a pending case dismissed within the 1-year preceding the most recent bankruptcy case. Specifically, this section provides:
(3) if a single or joint case is filed by or against debtor who is an individual in a case under chapter 7, 11, or 13, and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, other than a case refiled under a chapter other than *315 chapter 7 after dismissal under section 707(b)
(A) the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case. . . .
Nonetheless, § 362(c)(3)(B) provides the stay "may" be continued beyond the 30-day period prescribed by subparagraph (A) if four minimum requirements are met: (1) a motion is filed; (2) there is notice and a hearing; (3) the hearing is completed before the expiration of the 30-day stay; and (4) the debtor proves that the filing of the new case "is in good faith as to the creditors to be stayed." In re Charles ("Charles I"), 332 B.R. 538, 541 (Bankr.S.D.Tex.2005); In re Montoya, 333 B.R. 449, 453 (Bankr.D.Utah 2005); In re Collins, 335 B.R. 646, 650 (Bankr.S.D.Texas 2005)(parsing the precise language of § 362(c)(3)(B) to determine the "minimum requirements" to continue the stay beyond the first 30 days).
The movant bears the burden of proof of establishing these minimum requirements. Charles I, 332 B.R. at 541-42. Upon meeting these minimum requirements, the court "may" then continue the stay "subject to such conditions or limitations as the court may then impose." § 362(c)(3)(B).
Although the statute contains four minimum requirements, the bulk of the legal analysis is on the fourth requirement (proving that the filing of the new case was in good faith). Collins, 335 B.R. at 650. Section 362(c)(3)(C) provides that for purposes of subparagraph (B), a case is presumptively filed in bad faith:
(i) as to all creditors, if
(I) more than 1 previous case under any of chapters 7, 11, and 13 in which the individual was a debtor was pending within the preceding 1-year period;
(II) a previous case under any of chapters 7, 11, and 13 in which the individual was a debtor was dismissed within such 1-year period, after the debtor failed to
(aa) file or amend the petition or other documents as required by this title or the court without substantial excuse (but mere inadvertence or negligence shall not be a substantial excuse unless the dismissal was caused by the negligence of the debtor's attorney);
(bb) provide adequate protection as ordered by the court; or
(cc) perform the terms of a plan confirmed by the court; or
(III) there has not been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case under chapter 7, 11, or 13 or any other reason to conclude that the later case will be concluded
(aa) if a case under chapter 7, with a discharge; or
(bb) if a case under chapter 11 or 13, with a confirmed plan that will be fully performed; and
(ii) as to any creditor that commenced an action under subsection (d) in a previous case in which the individual was a debtor if, as of the date of dismissal of such case, that action was still pending or had been resolved by terminating, conditioning, or limiting the stay as to actions of such creditor; and. . . . [5]
*316 [Emphasis added.] The presence of any of the above-listed events gives rise to a rebuttable presumption of bad faith. If the presumption of bad faith arises, the movant must rebut the presumption by "clear and convincing evidence to the contrary." § 362(c)(3)(C); Collins at 651; In re Charles ("Charles II"), 334 B.R. 207, 215-217 (Bankr.S.D.Tex.2005). In contrast, if the court finds there is no presumption of bad faith arising under § 362(c)(3)(C)(i) or (ii), then the burden of establishing good faith is reduced to preponderance of the evidence. Collins at 651; Charles II, 334 B.R. at 217.
The burden of establishing the presence of presumptive bad faith rests upon the opponent to the motion. Collins at 650-51; Charles II at 215-17. Notwithstanding, the lack of opposition does not require the Court to continue the stay. Section 362(c)(3)(B) directs that a court may continue the stay "only if the party in interest [movant] demonstrates that the filing of the later case is in good faith . . ." (emphasis added). This necessarily means a court must make its own determination of good faith under the applicable evidentiary standard before it may continue the stay. Consequently, the moving papers must establish the nonexistence of presumptive bad faith, or the moving papers must admit and rebut the presumption, even though the burden of proof technically rests upon the opponent and the motion may be unopposed.[6]
Debtor has two arguments in favor of continuing the stay. First, she argues the presumption of bad faith does not apply because § 362(c)(3) only applies where the prior case was filed on or after October 17, 2005, and thereafter dismissed. [Motion at 2] Alternatively, Debtor argues she has overcome the presumption of bad faith by clear and convincing evidence because she had only one prior case pending within the previous year and she fully performed her duties and obligations until she voluntarily dismissed her case. [Motion at 3-6]
Debtor's first argument flies in the face of § 362(c)(3)(C). This section applies to all cases filed on or after October 17, 2005, and it expressly refers to the situation where there was a prior case "pending within the preceding 1-year period." § 362(c)(3). By use of the term "pending," Congress wrote retroactivity into this statute. See 2005 Bankr.Reform Legis. with Analysis 2d at § 7:16. Because Debtor had a prior case pending within the preceding 1-year period, § 362(c)(3) applies.
With respect to Debtor's second argument, no presumption of bad faith arises in this case. The presumption never arises because none of the events set forth in § 362(c)(3)(C)(i) or (ii) are present in this case. Debtor had only one other pending bankruptcy case within the preceding year which she voluntarily dismissed even though she was current with her plan payments and her duties and obligations. There was no motion for relief from stay filed and there was no adequate protection order in the case. Moreover, Debtor's financial situation has improved resulting in her proposal of a significantly higher 45% *317 plan in comparison to the 16% plan in her Prior Case.[7]
Because the presumption of bad faith does not arise, the Court need only determine whether Debtor has established the four minimum requirements of § 362(c)(3)(B) by a preponderance of the evidence.[8] § 362(c)(3)(B). In the present case, the Motion attests that it was filed and served prior to the 30th day after the petition date, and the hearing was held prior to the 30th day. The Motion does not affirmatively represent it was properly served on all of Debtor's creditors, but in comparing the proof of service with the list of creditors, it appears that it was. In the future, motions of this nature should affirmatively state they are served on all creditors.
Finally, the Debtor must prove by a preponderance of evidence that the new case was filed in good faith as to the creditors sought to be stayed. § 362(c)(3)(B). Section 362(c)(3) does not define good faith for purposes of this determination. The concept of what constitutes a bad faith bankruptcy filing is, however, well defined by pre-BAPCPA case law as being a "totality of circumstances" test. In view of the minimal guidance from Congress, the Court will follow the reasoning of the other courts that have imported pre-BAPCPA case law into § 362(c)(3)(B). Accordingly, the Court will utilize the "totality of circumstances" test to assist its determination of whether the Debtor filed her new case in good faith as to the creditors she seeks to stay. § 362(c)(3)(B); Charles II at 217-18; see also In re Havner, 336 B.R. 98, 103-104 (Bankr.M.D.N.C. 2006); In re Baldassaro, 338 B.R. 178, 187, (Bankr.D.N.H.2006).
In this circuit, the "totality of circumstances" test for determining whether a debtor filed a chapter 13 case in good faith includes: 1) whether debtor misrepresented facts in the petition or the plan, unfairly manipulated the Code or otherwise filed the current chapter 13 plan or petition in an inequitable manner; 2) debtor's history of filings and dismissals; 3) whether debtor only intended to defeat state court litigation; and 4) whether egregious behavior is present. In re Leavitt, 171 F.3d 1219, 1224 (9th Cir.1999); see also In re Villanueva, 274 B.R. 836, 841 (9th Cir. BAP 2002) (listing factors to evaluate whether a chapter 13 plan has been proposed in good faith).
In this case, the Court concludes Debtor has provided evidence of her good *318 faith by a preponderance of the evidence. Debtor states she is determined to complete her plan, which proposes a $500 monthly payment and a 45% dividend to unsecured creditors. This is an improvement over her prior case and evidence of good faith. Further, Debtor says, without much explanation, she must complete the plan for the benefit of her children and she has made the necessary financial changes to improve her financial situation. It would appear she is alluding to the fact that she has surrendered two vehicles since the prior case was dismissed. Given her voluntary dismissal of the prior case and the lack of opposition to this Motion, there is simply no reason for the Court to conclude Debtor's latest bankruptcy filing was anything other than in good faith.
Even though the Court may be satisfied that Debtor has proved the four elements of § 362(c)(3)(B) by a preponderance of the evidence, extension of the stay is not automatic but rather discretionary because § 362(c)(3)(B) utilizes the term "may" and not "shall". Charles II, 334 B.R. at 223. Of course, it would be an abuse of that discretion where, as here, there is no apparent reason to decline to continue the stay. Accordingly, the Motion is granted.
IV.
CONCLUSION
Debtor has satisfied the four minimum requirements contained in § 362(c)(3)(B) to allow the Court to continue the stay. Debtor timely filed the Motion seeking to continue the stay within the first 30 days. Debtor appears to have given proper notice of the Motion and the hearing to all of her creditors; although the Motion should have included an affirmative statement that this requirement is met. And, the hearing on the Motion was also held within the first 30 days. Only the fourth requirement is at issue in this case.
With respect to the fourth requirement of good faith as to the creditors to be stayed, the Court finds this requirement has been met by a preponderance of the evidence. Debtor had a prior pending case which she voluntarily dismissed within in the preceding year, but there is no presumptive bad faith and the "totality of circumstances" indicates Debtor filed this case in good faith as to all of her creditors. These creditors must agree as none has filed objection to her Motion.
It is unfortunate that a debtor in this factual situation had to incur the expense of filing this Motion. It is also unfortunate she had to pay counsel to attend a hearing on an unopposed motion where there is simply no reason to question her good faith. It is a waste of Debtor's limited resources and it is a waste of the Court's time.
The Motion is granted as to all creditors. Debtor is directed to prepare and file an order granting the Motion within ten days of the date of entry of this Memorandum Decision.
NOTES
[1] This section was added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub.L. No. 109-8 (2005), effective in cases commenced on or after October 17, 2005. Hereinafter, all code and section references are to 11 U.S.C. § 101 et seq. unless otherwise specified.
[2] The prior case is Southern District of California Bankruptcy Case No. 05-00590-H13. Hereinafter, the docket entries for the Prior Case are referred to as "P.C. Doc. #___."
[3] This information is not provided in the Motion; although it is pertinent to the Court's ruling. See § 362(c)(3)(C)(i)(III).
[4] Debtor explains that she and her former husband had assisted her parents in financing a house. After their divorce, her parents wanted to refinance to remove her former husband from title. During her Prior Case, Debtor learned the lender required dismissal of her bankruptcy as condition to funding the new loan. [Declaration at ¶¶ 5-6]
[5] Section 362(c)(3)(C)(ii) is factually inapplicable because no creditor filed a motion for relief from stay in the Prior Case.
[6] Necessarily, the movant must provide detailed, competent, evidence to satisfy all elements of § 362(c)(3)(B) and, if applicable, to rebut the presumption of bad faith in § 362(c)(3)(C). The evidence must be filed and served with the motion so that creditors can evaluate the integrity of the current case, and so that the court determine under the applicable evidentiary standard whether the later case was filed in good faith. In re Wilson, 336 B.R. 338, 347-49 (Bankr.E.D.Tenn. 2005).
[7] Although Debtor's financial situation has improved for purposes of this Motion, arguably Debtor's personal affairs have worsened. Debtor faces the challenge of being a single working mother raising two young children without her own vehicle in a city with poor public transportation. This obstacle creates doubt about Debtor's true ability to perform the plan for the full five years, but the Court will not speculate since her financial situation has improved.
[8] In contrast, the "clear and convincing evidence" standard is a much stricter standard to meet. This standard is defined as that degree or measure of proof which will produce in the mind of the trier of fact, a firm belief or conviction that the allegations sought to be established are true; it is "evidence so clear, direct and weighty and convincing as to enable the fact finder to come to a clear conviction, without hesitancy, of the truth of the precise facts of the case." Charles I at 542; Collins at n. 4; Wilson, 336 B.R. at 347. Given the inherent uncertainty concerning what can happen over a period of five years, it is difficult to discern a factual situation that would enable a court to conclude with this degree of certainty that a debtor's bankruptcy case was filed in good faith and the case will result in a confirmed plan that will be fully performed. See § 362(c)(3)(C)(i)(III). Fortunately, the Court need not reach this issue since the preponderance of evidence standard applies to this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545490/ | 342 B.R. 238 (2006)
In re Nader MODANLO.
Nader Modanlo, Appellant,
v.
Michael Ahan, Appellee.
Civ.A. No. DKC 2006-0268.
United States District Court, D. Maryland.
May 2, 2006.
*239 Joel S. Aronson, Ridberg Sherbill & Aronson LLP, Bethesda, MD, for Appellant.
Bradford Frost Englander, Jennifer D. Larkin, Linowes and Blocher LLP, Bethesda, MD, Creighton Reid Magid, Dorsey and Whitney LLP, Washington, DC, for Appellee.
MEMORANDUM OPINION
CHASANOW, District Judge.
This case is before the court on appeal from the Order of United States Bankruptcy Judge Nancy V. Alquist appointing a trustee upon the motion of a creditor, Michael Ahan, in the Chapter 11 case filed by Nader Modanlo ("Debtor"), Case no. 05-26549-NVA. (Paper 6). Ahan also has filed a motion to supplement the record on appeal. (Paper 11). Oral argument is deemed unnecessary because the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument. See Fed.R.Bankr.P. 8012. For the reasons that follow, the court will affirm the bankruptcy court's Order.
I. Background
The following facts are undisputed, unless noted. Debtor has been involved in ongoing litigation over the management of two companies, Final Analysis, Inc. ("FAI"), and Final Analysis Communications Services, Inc. ("FACS"), which he founded with Ahan in the early 1990s. FAI is an engineering company. FACS was established to develop and operate a worldwide satellite telecommunications system. When FACS was formed, FAI owned 100% of FACS's voting shares.
Sometime in the late 1990s, disputes arose between Debtor and Ahan over the management and direction of the companies. In 2001, FAI filed an involuntary petition under Chapter 11 of the Bankruptcy Code. As part of FAI's bankruptcy, the bankruptcy court ordered FAI to sell its assets, which included a majority of the outstanding stock in FACS. A company solely owned by Debtor, New York Satellite, LLC ("NYS"), was the successful bidder for the stock.[1]
Also in 2001, fourteen shareholders of FACS filed direct and derivative claims against FACS, FAI, and Debtor in the Circuit Court for Montgomery County, alleging misappropriation, fraud, and breach of fiduciary duty on the part of Debtor and *240 FAI.[2] On October 22, 2004, a jury found that Debtor had breached a fiduciary duty owed to Ahan, and awarded Ahan $103.93 million. On July 14, 2005, Circuit Court Judge Michael D. Mason held a hearing during which he ordered Debtor to file a $1 million bond while Debtor appealed the $103.93 million judgment, but stayed his order for ten days. On July 22, 2005, Debtor filed a petition under Chapter 11 of the Bankruptcy Code.
On August 8, 2005, Debtor filed schedules and his statement of financial affairs with the bankruptcy court. The personal property identified therein included Debtor's interest in NYS and FACS. In the schedules, Debtor listed the value of his interest in NYS at "0.00." NYS has three assets: It owns a majority of the voting stock in FACS; it owns account receivables from FACS; and it owns two contracts with Polyot, the Russian space agency, for launch services, which Debtor claims are for the benefit of FACS. FACS, in turn, has two significant assets: rights to contract with Polyot, which Debtor has valued at $56 million; and a verdict obtained in the United States District Court for the District of Maryland against General Dynamics on September 6, 2005, Case no. PJM 03-307. The jury in the General Dynamics litigation originally awarded FACS $129 million. The award was reduced to $11.87 million after Judge Peter J. Messitte granted in part a judgment as a matter of law.[3] FACS has filed an appeal.
On August 29, 2005, Debtor's first meeting of creditors took place and was continued on September 12, 2005. During both meetings, Debtor was asked questions about a loan made to NYS by a third party, including whether the loan was secured. Debtor asserted that he could not answer the questions due to confidentiality provisions in the loan documents. A third meeting with the creditors was not held.
On November 23, 2005, Ahan filed a motion to appoint a trustee or, in the alternative, to convert the case to Chapter 7 of the Bankruptcy Code. Judge Alquist held hearings over two days, December 20 and 21, 2005. Most of the hearing was devoted to the testimony of Debtor, one of two witnesses called. Debtor identified NYS's lenders as his brother and Prospect Telecom, AG.[4] He said NYS borrowed approximately $1.8 million from his brother and $10 million from Prospect Telecom.[5] NYS used its stock in FACS as collateral for the Prospect Telecom loan. Debtor further stated that the Prospect Telecom loan has been in default since 2004, NYS was given twelve months to cure the default, and the extension expired in January 2005.
On the first day of testimony, Ahan and the United States Trustee learned, apparently for the first time, that after Debtor filed for bankruptcy, Prospect Telecom began to take steps to perfect and secure the loan. Debtor testified that in August, September, and October 2005, he received several calls from attorneys representing Prospect Telecom about the loan being in *241 default and that Prospect Telecom wished to take possession of the FACS stock certificates, which Prospect Telecom should have done when the loan was signed. In October 2005, Prospect Telecom filed a replevin action in the Circuit Court for Montgomery County seeking to obtain the stock certificates. Debtor testified that he made a business decision not to fight the replevin action because NYS was in default and it could not cure the default. He stated that he made the decision without hiring an attorney, and after consulting on one occasion with his bankruptcy attorney, Joel Aronson. He explained that he didn't hire a lawyer because "I didn't have the money." (Paper 1, ex. 11, at 45). On November 7, 2005, the Montgomery County Circuit Court ordered Debtor to turn over the FACS stock certificates owned by NYS, which he did on November 9, 2005.[6]
On December 22, 2005, the bankruptcy court granted Ahan's motion to appoint a trustee. The Order was entered December 23, 2005. Debtor filed a timely appeal. On February 24, 2006, Bankruptcy Judge Alquist denied Debtor's motion to stay the appointment of the trustee pending appeal.[7]
II. Standard of Review
On appeal from the bankruptcy court, the district court acts as an appellate court and reviews the bankruptcy court's findings of fact for clear error and conclusions of law de novo.[8]See In re Johnson, 960 F.2d 396, 399 (4th Cir.1992); Travelers Ins. Co. v. Bryson Prop., XVIII (In re Bryson Prop., XVIII), 961 F.2d 496, 499 (4th Cir.), cert. denied sub nom., Bryson Prop., XVIII v. Travelers Ins. Co., 506 U.S. 866, 113 S. Ct. 191, 121 L. Ed. 2d 134 (1992). A bankruptcy court's order approving the appointment of a trustee is reviewed for abuse of discretion. See Comm. of Dalkon Shield Claimants v. A.H. Robins Co., 828 F.2d 239, 242 (4th Cir.1987); In re Fraidin, 43 F.3d 1466, 1994 WL 687306, at *1 (4th Cir.1994) (unpublished) *242 ("[T] he question here is not whether the court would have appointed a trustee had it been deciding the question in the first instance, but whether the bankruptcy court abused its discretion in appointing a trustee.").
III. Analysis
Debtor presents the following issue on appeal: "Did the Bankruptcy Court err when it granted Ahan's motion for appointment of a Trustee?"
The bankruptcy court may appoint a trustee in a Chapter 11 case pursuant to 28 U.S.C. § 1104(a)(1), which provides in part:
(a) At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee
(1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause . . .; or
(2) if such appointment is in the interest of creditors, any equity security holders, and other interests of the estate without regard to the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor.
The bankruptcy court found there was cause to appoint a trustee under this section.[9] (Paper 1, ex. 12, at 4). Her reasons included:
[T]he debtor's wearing of multiple hats and holding of multiple and perhaps conflicting duties to the creditors or shareholders of different companies as well as to the creditors of this estate; the debtor's lack of business operations and the licenses necessary to conduct those businesses; the inattention, neglect or other inappropriate treatment of the replevin action in this case that may have led to the loss o[r] diminution in value of this estate's largest assets; and the loss of confidence in the debtor by the creditor in this case and the U.S. Trustee.
Id. at 20. Debtor challenges certain factual findings that the bankruptcy court made in reaching its decision to grant Ahan's motion to appoint a trustee.
A. The Transfer of the FACS Stock Due to Mismanagement
The bankruptcy court stated that "the most compelling reason" for appointment of a trustee was Debtor's handling of the replevin action filed by Prospect Telecom. The court stated:
Mr. Modanlo took no steps to have New York Satellite defend this action in any way. An order was entered in that case in November of 2005 directing Mr. Modanlo to turn the stock of New York Satellite over to Prospect Telecom within 48 hours. *243 Furthermore, Mr. Modanlo testified that he had heard from different lawyers for Prospect Telecom starting in June of 2005 with respect to the alleged loan default by New York Satellite in connection with this loan from Prospect Telecom and Prospect Telecom's demand for the turnover of stock as a result. Although Mr. Modanlo testified that he refused to turn over the stock to Prospect Telecom's lawyers, it is notable that at least some of these demands occurred before the debtor's 341 meetings and that the debtor made no mention of this critical issue to anyone in this case.
The relinquishment of this stock, ostensibly Mr. Modanlo's estate's largest asset, was alienated in a replevin action without defense apparently within the last two months. Maybe this asset is capable of being brought back into the estate; perhaps not. Perhaps there are fraudulent conveyance or avoidance actions available; perhaps not. Perhaps defenses to or attacks on the replevin order are available; perhaps not. But it is clear from his testimony that Mr. Modanlo did nothing to defend or investigate a defense. He didn't do anything, he stated, because he didn't know what to say to the Court.
He did not seek counsel for New York Satellite except to confer with his personal bankruptcy counsel, Mr. Aronson. A Chapter 11 trustee needs to investigate. Mr. Modanlo, by his actions, has demonstrated that he has not or cannot do this. He committed a major asset to leave the estate without investigation or remedies or serious consultation with counsel, and Mr. Modanlo told no one involved in this case about the creditor demands or the replevin action, including the U.S. Trustee.
In this Court's view, his actions with respect to this suit and this asset constitute mismanagement or incompetence. His actions in this regard were certainly not in the furtherance of the interests of his creditors and the estate.
(Paper 1, ex. 12, at 13-14).
Debtor makes several challenges to the bankruptcy court's findings of mismanagement: (1) It was clear from the loan agreement between NYS and Prospect Telecom that NYS was in default, and it would have been improper for Debtor to interpose an answer for the purpose of delay; (2) Debtor had no legal authority to contest the replevin action pursuant to Delaware law or, as Ahan suggested, to place NYS into bankruptcy; (3) there was no transfer of FACS stock, only possession of the stock certificates was given to Prospect Telecom; and (4) attorneys for Ahan were aware of the entire loan agreement, and they knew about the condition and status of the loan.[10] (Paper 6, at 5-14).
The bankruptcy court was not clearly erroneous in stating that Debtor's actions "constitute mismanagement or incompetence." Although Debtor claims he could not present a defense to the replevin action, he reached this conclusion without benefit of legal counsel, other than conferring with his personal bankruptcy counsel, Mr. Aronson. There is no suggestion that Debtor ever considered the possibility of mounting a legal defense to the replevin *244 action. With respect to Debtor's argument that pursuant to Delaware statute he had no legal authority to contest the replevin action because he had filed for bankruptcy, Debtor did not raise this issue before the bankruptcy court, and the court will not consider this new argument that was raised for the first time on appeal. See Wheatley v. Wicomico County, Maryland, 390 F.3d 328, 335 (4th Cir.2004).
With respect to Debtor's argument that there was no transfer of FACS stock (only transfer of the stock certificate), this argument misconstrues the bankruptcy court's rationale. Although the bankruptcy court expressed concern that Debtor relinquished the stock, the bankruptcy court's primary concerns were with Debtor's lack of legal defense to the replevin action and his failure to inform other parties to the bankruptcy action about Prospect Telecom's actions on the loan default.[11]
Finally, the evidence does not support Debtor's assertion that attorneys for Ahan were fully aware fully of the loan agreement, including the loan's status. Although there is evidence that Ahan's attorneys knew some of the information regarding the Prospect Telecom loan, they did not know all of the information, and they knew nothing about Prospect Telecom's replevin action relating to NYS's most significant asset. According to Debtor's testimony during the hearing, most of Prospect Telecom's actions with respect to the loan default took place in August, September, and October 2005, when attorneys representing Prospect Telecom notified Debtor that it wished to take possession of the FACS certificates. (Paper 1, ex. 11, at 40-42, 64-65). To the extent that Debtor argues that he disclosed information relating to the Prospect Telecom loan "prior to the bankruptcy filing," any disclosure would not include Prospect Telecom's more recent actions (e.g., telephone calls made in August, September, and October 2005 and the replevin action) which had not occurred yet. Although Debtor testified several times that he had relayed information about Prospect Telecom's actions to Ahan's attorneys, it is unclear from the transcript of the testimony what exactly he claims to have told Ahan's attorneys. Notwithstanding this ambiguity, there is no evidence in the record that Debtor notified parties involved in the bankruptcy proceeding about Prospect Telecom's filing of the replevin action, or that the end result was the transfer of possession of the FACS stock certificates.
The record amply supports the bankruptcy court's findings that Debtor's actions with respect to the replevin lawsuit and the FACS stock "constitute mismanagement or incompetence," and therefore the finding of the bankruptcy court was not clearly erroneous.
B. Conflicts of Interest
Debtor begins his next argument by stating that the bankruptcy court could not fashion effective relief, thus "it should have withheld from rendering this judgment." (Paper 6, at 15). Debtor contends that appointing a trustee was ineffective because (1) Christopher Mead, the trustee appointed for Debtor's case, is equally conflicted as Debtor, and therefore appointing a trustee is harmful to FACS, NYS, Debtor, *245 and his creditors; and (2) the appointment of a trustee endangered NYS's contracts with Polyot.
Debtor did not raise most of these arguments before the bankruptcy court. To the extent that Debtor objects to certain actions Mr. Mead has taken since his appointment, these objections are not properly before this court. The trustee's actions were never at issue in the bankruptcy court's decisionnor could they bebecause a trustee had not been appointed yet, much less taken action. Moreover, Debtor's argument that a trustee would be equally conflicted as Debtor because he or she would serve multiple masters also was not raised before the bankruptcy court, and the court will not consider new arguments raised for the first time on appeal. See Wheatley, 390 F.3d at 335. Debtor also argues that a trustee is not necessary due to acrimony between the parties, (paper 6, at 19), however, the bankruptcy court never cited a concern about acrimony between the parties as a factor in the decision to appoint a trustee.
Debtor further argues that the appointment of a trustee endangers FACS's Polyot contracts as well as licenses issued by the Federal Communications and permissions issued by the Department of Defense, and therefore the appointment should be overturned. Debtor presented no evidence to the bankruptcy court to support this argument, nor has he designated any evidence in his appeal in support. The bankruptcy court did not give specific factual findings with respect to this issue, and therefore there could be no clear error. Moreover, the bankruptcy court apparently gave this argument little if any weight, and instead relied on other factors, such as Debtor's actions in the replevin actions. Because there is ample evidence regarding Debtor's actions with respect to the replevin action and, as will be discussed in the next section, his dealings with creditors and his valuation of NYS, Debtor's argument is without merit.
C. Lack of Candor and Valuation of NYS
Debtor objects to the bankruptcy court's characterization that he was "less than forthcoming" at the creditors' meetings and that the schedules filed with the court "show at minimum a lack of candor" because Debtor valued his interest in NYS as zero. (Paper 1, ex. 12, at 10). With respect to the creditors' meetings, Debtor contends that he was forthcoming during the meetings and that he declined to answer only a few questions due to confidentiality agreements; Ahan already knew the information sought; and the opportunity to question Debtor further was never pursued by the United States Trustee or by Ahan. (Paper 6, at 22-24). With respect to the schedules, Debtor asserts that his valuation of NYS was his "guesstimate," that Debtor had no way of predicting whether the General Dynamics litigation would result in a positive verdict, and there was no way Debtor could know whether NYS would benefit from a positive verdict.
Debtor asserts that confidentiality agreements prevented him from disclosing certain information at the creditors meetings. During the first meeting, Debtor was asked about NYS's loans, and he responded that he did not know whether he could answer the questions due to the confidentiality agreement. Lynn Kohen, the U.S. Trustee, asked Debtor to look at the confidentiality agreements so he would know whether he could answer the questions at the next meeting, and Debtor's counsel specifically stated that he would determine whether or not the confidentiality agreement allowed Debtor to disclose the loan terms. At the second meeting, *246 Debtor was asked again about NYS's loans, and Debtor's counsel again invoked the confidentiality agreement. When Ms. Kohen asked whether Debtor's counsel had looked at the agreement, counsel answered that he had not, "[s]o I don't know any more now than I knew then." (Paper 1, ex. 26, at 63).[12] This evidence supports the bankruptcy court's findings that Debtor was "less than forthcoming" at the creditors' meetings. Moreover, as discussed previously, the evidence does not support Debtor's assertion that Ahan "knew everything . . . including everything about the Loan Agreement and its status." (Paper 6, at 23). Finally, Debtor's argument that the U.S. Trustee failed to call a third meeting is simply an attempt to shift the responsibility of disclosure away from Debtor, who had already refused to disclose certain information on two previous occasions.
Debtor's explanation for why he estimated the value of NYS at zero is equally unpersuasive. Debtor argues that neither he individually nor NYS was a party to the General Dynamics litigation, and the case went to trial after the bankruptcy case commenced. He asserts that he did not have a "crystal ball" to help him ascertain the potential verdict. He also argues that, even if the General Dynamics litigation was successful, there was no guarantee that NYS, which holds common non-preferred stock in FACS, would benefit from a successful outcome. "In the General Dynamics case, on July 22, 2005 [the date Debtor filed for bankruptcy], no one, including Mr. Modanlo, FACS, and General Dynamics could predict as to what was going to be the verdict or as to what is going to happen to the verdict."[13] (Paper 6, at 27).
11 U.S.C. § 521(1) provides that "[t]he debtor shall file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor's financial affairs." The Code imposes upon a debtor "an express, affirmative duty to disclose all assets, including contingent and unliquidated claims." Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir.1999).
"The duty of disclosure in a bankruptcy proceeding is a continuing one, and a debtor is required to disclose all potential causes of action". Youngblood Group v. Lufkin Fed. Sav. & Loan Ass'n, 932 F. Supp. 859, 867 (E.D.Tex. 1996). "`The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information . . . prior to confirmation to suggest that it may have a possible cause of action, then that is a "known" cause of action such that it must be disclosed'". Id. (brackets omitted; quoting Union Carbide Corp. v. Viskase Corp. (In re Envirodyne Indus., Inc.), 183 B.R. 812, 821 n. 17 (Bankr. N.D.Ill.1995)). "Any claim with potential *247 must be disclosed, even if it is `contingent, dependent or conditional'". Id. (quoting Westland Oil Dev. Corp. v. MCorp Management Solutions, Inc., 157 B.R. 100, 103 (S.D.Tex.1993)) (emphasis added).
In re Coastal Plains, 179 F.3d at 208.
When Debtor filed for Chapter 11 bankruptcy, Debtor was the sole owner of NYS. One of NYS's assets was a majority of the voting stock in FACS. FACS, in turn, was getting ready for trial against General Dynamics. The fact that Debtor could not say with certainty the result of the litigation does not relieve Debtor of his duty of disclosure. See In re Coastal Plains, 179 F.3d at 210 (stating that the debtor should have disclosed information about a claim of up to $10 million against a supplier); Hamilton v. State Farm Fire & Casualty Co., 270 F.3d 778, 784 (9th Cir.2001)(stating that the debtor should have amended his disclosure statements and schedules to provide notice regarding a claim against State Farm); Youngblood Group v. Lufkin Federal Sav. & Loan Ass'n, 932 F. Supp. 859, 868 (E.D.Tex.1996)("Plaintiff was all the while aware of each fact underlying the tying claim which would be later asserted. Yet plaintiff failed to disclose the possibility of litigation, despite the statutory and common-law mandates for such disclosure.").
Debtor relies on In re Walker, 198 B.R. 476, 479 (Bankr.E.D.Va.1996), to assert that "[a] debtor cannot be expected to unerringly predict the future. . . ." At issue was whether the bankruptcy court should reopen the debtor's case to hear a lender liability claim filed by several state court plaintiffs, including the debtor. Id. at 478. Counsel for the state court plaintiffs already had taken steps to dismiss with prejudice the debtor from the state suit. In a footnote, the court noted that the debtor lacked standing to pursue the state court litigation because he did not disclose to the bankruptcy court any potential causes of action against the state court defendants. Id. at 478 n. 3. The court denied the motion to reopen the case. The observation relied on by Debtor here arose in a different set of circumstances and does not excuse Debtor's failure to make candid disclosures.
Debtor valued his interest in NYS as zero, even though he knew of the pending General Dynamics litigation and he was confident about the case. (Paper 1, ex. 10, at 74). Debtor acknowledged that the valuation was a "guestimate" and that he did not obtain a formal appraisal. Id. at 64-65. Based on the evidence, the bankruptcy court was not clearly erroneous in finding that the schedules Debtor filed with the court showed "at minimum a lack of candor."
Finally, with respect to all of Debtor's objections to the bankruptcy court's findings of fact, it is worth noting that there was no single factor underlying the bankruptcy court's decision to appoint a trustee. In reaching her decision, the bankruptcy court cited:
[T]he debtor's wearing of multiple hats and holding of multiple and perhaps conflicting duties to the creditors or shareholders of difference companies as well as to the creditors of this estate; the debtor's lack of business operations and the licenses necessary to conduct those businesses; the inattention, neglect or other inappropriate treatment of the replevin action in this case that may have led to the loss o[r] diminution in value of this estate's largest assets; and the loss of confidence in the debtor by the creditor in this case and the U.S. Trustee.
(Paper 1, ex. 12, at 20). Debtor attempts to question many of the individual factual findings, but he is unable to demonstrate that the bankruptcy court erred when she *248 found that these factors "taken together" constitute cause for the appointment of a trustee under § 1104(a). The bankruptcy court did not abuse its discretion when it appointed a trustee in Debtor's Chapter 11 case.
IV. Conclusion
For the reasons stated above, the court will affirm the ruling of the bankruptcy court. A separate Order will follow.
ORDER
For the reasons stated in the foregoing Memorandum Opinion, it is this 2nd day of May, 2006, by the United States District Court for the District of Maryland, ORDERED that:
1. The Order of the bankruptcy court appointing a trustee upon the motion of a creditor, Michael Ahan, in the Chapter 11 case filed by Nader Modanlo (paper 6) BE, and the same hereby IS, AFFIRMED;
2. The motion of Michael Ahan to supplement the record on appeal (paper 11) BE, and the same hereby IS, GRANTED;
3. The Clerk will transmit copies of the Memorandum Opinion and this Order to counsel for the parties and to the United States Bankruptcy Court, and CLOSE this case.
NOTES
[1] In the papers, NYS is also referred to as New York Satellite Industries, LLC.
[2] Ahan was a party to the Montgomery County litigation. He is identified as a "third-party defendant/counterclaim-plaintiff." (Paper 1, ex. 16).
[3] The final judgment in the General Dynamics litigation was entered April 17, 2006, after Judge Alquist entered her ruling on the motion to appoint a trustee.
[4] Prospect Telecom is a Swiss holding company.
[5] Debtor also asserts that Ahan was given information relating to NYS's loans in post-judgment discovery in the Montgomery County litigation.
[6] Prospect Telecom was unsecured until it filed its financing statement on September 8, 2005. Debtor contends that because NYS was in default and could not cure, NYS could have filed a bankruptcy petition, and if it had done so within 90 days following Prospect Telecom's UCC filing on September 8, 2005, NYS might have been able to avoid the security interest as a preferential transfer pursuant to 11 U.S.C. § 547(b). (Paper 12, at 16).
[7] Ahan filed a motion to supplement the record on appeal with this ruling, which Debtor opposes, contending that considering the ruling without the parties' papers is misleading. With or without a motion to supplement, this court is entitled to take judicial notice of the records of the bankruptcy court: "Moreover, the Bankruptcy Court is considered `a unit of the district court' under 28 U.S.C. § 151, and we believe a district court should properly take judicial notice of its own records." Anderson v. Fed. Deposit Ins. Corp., 918 F.2d 1139, 1141 (4th Cir.1990). Certainly, the stay denial is relevant to the issue before this court on appeal, and Ahan's motion will be granted.
[8] Ahan raises the question of whether the bankruptcy court's order is final for purposes of appellate review. The United States Court of Appeals for the Fourth Circuit has held that an order denying appointment of a Chapter 11 trustee is a final decision appealable under 28 U.S.C. § 1291. See Comm. of Dalkon Shield Claimants v. A.H. Robins Co., 828 F.2d 239, 241 (4th Cir.1987). In so ruling, the court cited with approval In re Paolino, 60 B.R. 828 (E.D.Pa.1986), in which the court treated the appointment of a trustee as final for purposes of review. Dalkon Shield, 828 F.2d at 241. In an unpublished decision, Harford v. Potomac Valley Farm Credit, ACA, 911 F.2d 722, 1990 WL 116729, at *1 (4th Cir.1990), the Fourth Circuit relied on Dalkon Shield to state expressly that a bankruptcy court order appointing a trustee may be considered final and appealable, and therefore it had jurisdiction to consider the appeal. The court finds it has jurisdiction to hear the present appeal.
[9] Relying on Collier on Bankruptcy, Debtor asserts that there is a strong presumption against appointing a trustee, and that "[t]here is no indication from the Bankruptcy Court's ruling that this presumption was considered." (Paper 6, at 4-5). The record shows that the Bankruptcy Court considered this point in handing down her ruling. Judge Alquist read from Collier on Bankruptcy, stating: "Although there is generally a presumption that the debtor is entitled to remain in possession during a Chapter 11 case, there are cases in which it is inappropriate to permit the debtor and its management to continue in possession." (Paper 1, ex. 12, at 16) (quoting Collier on Bankruptcy 1104.02[1] (15th ed. rev. 2005)).
[10] Debtor asserts in his reply memorandum that there is no evidence of current mismanagement, and most of the allegations of mismanagement pertain to the mid-1990s. (Paper 17, at 2). The bankruptcy court, however, relied solely on evidence relating to Debtor's management since he filed for Chapter 11 bankruptcy. (Paper 1, ex. 12, at 9). Debtor also asserts that his past acts do not support the appointment of a trustee. (Paper 17, at 13). As noted previously, the bankruptcy court's decision was based on current management, therefore Debtor's past acts are irrelevant to this appeal.
[11] In her order denying the stay pending appeal, Judge Alquist stated: "Whether by virtue of his action (or inaction) in the replevin suit, the Debtor merely allowed Prospect Telecom to perfect a lien in the stock, or whether he permitted the transfer of ownership, does not change the outcome or the Court's view. The Debtor stood by, to the potential detriment of creditors and other parties in his bankruptcy case, while a significant asset was encumbered or transferred." (Paper 11, ex. A, at 7).
[12] The court has reviewed the compact disc recording of the hearing entered into evidence (paper 1, ex. 27), as well as the unofficial transcript which was referred to during the bankruptcy court's hearing (paper 1, ex. 26). For purposes of citation, the court will utilize the unofficial transcript.
[13] Debtor has filed a supplement to his reply brief in which he notes that the General Dynamics verdict has been reduced. (Paper 21). He argues that, because the General Dynamics verdict was reduced, neither the trustee nor Debtor's creditors can reasonably expect to see any distribution from FACS at the present time. As discussed below, Debtor is required to disclose all assets, including contingent claims, and the eventual outcome of the General Dynamics litigation is of little significance in assessing the appointment of the trustee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545495/ | 342 B.R. 248 (2006)
In re Tracey A. BROWN, Debtor.
No. 06-10534.
United States Bankruptcy Court, D. Maryland.
May 6, 2006.
*249 Jason E. Cuomo, Towson, MD, for debtor.
Ellen W. Cosby, Baltimore, MD, for trustee.
Memorandum of Decision
DUNCAN W. KEIR, Bankruptcy Judge.
This matter has come before the court on the court's own Order To Show Cause Why Foreclosure Sale Should Not Be Found Void As A Violation Of The Automatic Stay (the "Order to Show Cause"). The specific issue for decision is the validity of a foreclosure sale that was conducted after the petition date and before dismissal, where the debtor was subsequently found to be ineligible for bankruptcy relief pursuant to Section 109(h) of the Bankruptcy Code, as enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub.L. No. 109-8, 11 Stat. 23, which became effective October 17, 2005.
The court held a hearing on the Order to Show Cause on April 4, 2006, and for the reasons set forth on the record, as well as in this Memorandum of Decision, the court holds that all of the actions of John S. Burson, the substitute trustee under the deed of trust (hereinafter referred to as "Burson") to foreclose on the Debtor's home[1] after the date of the Debtor's petition, were a violation of the automatic stay. Consequently, the sale is void. Further, certain conduct by Burson taken in connection with the foreclosure warrants imposition of sanctions on Burson pursuant to Section 362(k)(1).
Background
Tracey A. Brown ("Debtor"), by counsel using the court's electronic case filing system ("CM/ECF"), filed a voluntary bankruptcy petition under chapter 13 on February *250 2, 2006. Appended to the Debtor's petition were the statement of financial affairs, schedules and creditor matrix. Approximately thirty minutes later, Debtor, again by counsel, filed an amended voluntary petition to correct a formatting error. At that time, counsel also submitted Debtor's chapter 13 plan. Finally, two hours later (still on February 2, 2006), counsel submitted a second amended voluntary petition which included Debtor's Motion to Waive Budget and Credit Counseling.[2]
On February 9, 2006, the court reviewed the Certification Requesting Waiver, and upon finding that it did not comply with Section 109(h)(3)(A),[3] entered an Order Finding Certification Not Satisfactory and Dismissing Case (the "Dismissal Order"). Debtor thereafter filed a Motion to Reinstate Case and Vacate Order of Dismissal on February 22, 2006, and in support thereof submitted a certificate documenting that she had received credit counseling on February 16, 2006. Burson filed an Opposition to the Debtor's Motion.
Because Debtor had received the credit counseling post-petition, and in accordance with this court's opinion in In re Childs, 335 B.R. 623 (Bankr.D.Md.2005), the court denied the Debtor's Motion and found that the case could not be reinstated because Debtor was ineligible under Section 109(h).[4]
Both the Debtor's Motion and Burson's Opposition thereto informed this court that after the filing of this bankruptcy case and while the Certification Requesting Waiver was pending before this court, Burson proceeded to auction the Property at foreclosure with full knowledge of the filings described hereinabove.[5]
Discussion
There is no dispute that Burson's action in conducting the foreclosure auction after the filing of the petition instituting this bankruptcy case would violate a stay imposed by Section 362(a)(1) and (4). Burson instead asserts that because Debtor filed this case without complying with Section 109(h)(1)[6] and because the Certification Requesting Waiver did not appear to meet the requirements of Section 109(h)(3)(A), no automatic stay was created by the filing of the petition instituting *251 this case. Although not set forth in Burson's Response to the Order to Show Cause, at the hearing upon the Order to Show Cause, Burson argued that the filing of a petition by a debtor who is not eligible under Section 109(h)(1), or alternatively Section 109(h)(3)(A), did not create an automatic stay under Section 362(a), notwithstanding that the question of eligibility pursuant to a Certification Requesting Waiver was pending a determination by the court.
Section 362(a) mandates that except as provided in subsection (b) of that Section, "a petition filed under section 301 . . . operates as a stay, applicable to all entities. . . ."
Section 301 of the Bankruptcy Code provides:
(a) A voluntary case under a chapter of this title is commenced by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter.
(b) The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter.
11 U.S.C. § 301 (2005) (emphasis added). It is argued by Burson that the automatic stay arises only upon the filing of a petition by a person that meets the eligibility requirements of Section 109.
The question of the effect of a filing of a petition by an ineligible debtor has been addressed by courts prior to the changes wrought by BAPCPA. Most often the issue of eligibility arose under either Section 109(e) or Section 109(g). Most courts agreed that the automatic stay arose upon the filing of a petition under chapter 13 by a debtor that was later determined to be ineligible pursuant to Section 109(e),[7] as the question of eligibility was not always determinable at the time of filing and required further evidence and court action.[8]E.g., Shaw v. Ehrlich (In re Shaw), 294 B.R. 260 (W.D.Va.2003), aff'd sub nom., In re Wiencko, 99 Fed.Appx. 466 (4th Cir.2004)(unpublished); In re Verdunn, 210 B.R. 621 (Bankr.M.D.Fla.1997); Franklin Fed. Bancorp v. Lochamy (In re Lochamy), 197 B.R. 384 (Bankr.N.D.Ga. 1995). See also In re Tatsis, 72 B.R. 908 (Bankr.W.D.N.C.1987)(permitting debtor ineligible for chapter 13 under Section *252 109(e) to convert case to chapter 7 and rejecting creditor's argument that the filing was a nullity due to ineligibility).
However, courts remained divided over whether an automatic stay arose upon the filing of a petition filed in violation of Section 109(g).[9] Some courts determined that a filing by an ineligible debtor did not "commence" a case as described in Section 301 and therefore the petition was stricken. E.g., Rowe v. Ocwen Federal Bank & Trust, 220 B.R. 591 (E.D.Tex.1997)(discussing a "dismissal" of the case, but otherwise finding the filing a "nullity"); In re McKay, 268 B.R. 908 (Bankr.W.D.Va. 2001); In re Hollberg, 208 B.R. 755 (Bankr.D.D.C.1997)(but see In re Hawkins, 340 B.R. 642 (Bankr.D.D.C.2006)); In re Pelletier, 2000 WL 33673780 (Bankr. M.D.N.C.2000); In re Miller v. First Federal Savings and Loan Assn. of Monessen, 143 B.R. 815 (Bankr.W.D.Pa.1994); In re Prud'Homme, 161 B.R. 747 (Bankr. E.D.N.Y.1993). Other courts disagreed and found that a case was commenced and subsequently was terminated by dismissal. E.g., In re Flores, 291 B.R. 44 (Bankr. S.D.N.Y.2003); In re Stuart, 297 B.R. 665 (Bankr.S.D.Ga.2003).
Subsequent to the BAPCPA amendments, which include new subsection (h) to Section 109, courts have addressed the issue of the effect of the filing of a petition by a debtor that is ineligible under this new subsection. As with the pre-BAPCPA cases, the courts' decisions have varied. In In re Rios, 336 B.R. 177 (Bankr. S.D.N.Y.2005) and In re Hubbard, 333 B.R. 377 (Bankr.S.D.Tex.2005), the courts found that a petition by an ineligible debtor must be stricken, rather than dismissed, so as to void the filing ab initio.[10] However, other courts have disagreed and held that dismissal was the proper remedy upon determination that the credit counseling requirement had not been satisfied and that the exigency certification was deficient, as opposed to the petitions being stricken, ab initio. E.g., In re Tomco, 339 B.R. 145 (Bankr.W.D.Pa.2006); In re Ross, 338 B.R. 134 (Bankr.N.D.Ga.2006).
Since this court's oral ruling at hearing, two additional courts have issued decisions directly addressing the effect of the filing of a bankruptcy petition by a debtor not eligible pursuant to Section 109(h). The two opinions highlight the judicial split that has developed.
In In re Salazar, 339 B.R. 622 (Bankr. S.D.Tex.2006), the debtors filed a petition without having obtained pre-petition credit counseling. Their home was foreclosed upon after the filing of the petition and *253 without any entry of order that would have terminated or modified an automatic stay. The court decided that no automatic stay had been created by the filing of the petition and hence the foreclosure was not in violation of such stay. Contrary to the interpretation found by the court in In re Tomco, the Salazar court interpreted Section 302[11] to mean that a bankruptcy case was not commenced if a petition is filed by a debtor that is ineligible to be a debtor under the Chapter for which the petition was filed. In reaching this determination, the Salazar court appears to give a narrow reading of Section 302 which reading would be inconsistent with the outcome of numerous cases involving ineligibility under Section 109(e).
In contrast, the other recent opinion is In re Hawkins, 340 B.R. 642 (Bankr. D.D.C.2006). In Hawkins, the court had before it a case where it did not initially appear that the debtor had fulfilled the prepetition credit counseling requirement of Section 109(h). The court concluded that the filing of a case by a debtor that may be ineligible under Section 109(h) does confer subject matter jurisdiction on the court to determine the question of eligibility. Further, Hawkins holds that:
Section 362(b)(21) must be read as implying that the automatic stay is in effect while the court makes this threshold determination of jurisdiction. A petition by an ineligible debtor gives rise to a case in this limited sense and to an automatic stay until the case is dismissed. In other words, § 362 must be read as giving rise to an automatic stay when a petition is asserted to be filed under §§ 301, 302, or 303.
Id. at 645-46.
The ruling by this court in the case sub judice is consistent with the decision expressed by the United States Bankruptcy Court for the District of Columbia in Hawkins and this court respectfully finds the decision in Salazar unpersuasive. This court holds that Congress has decided with surgical clarity, the question of whether the filing of a petition by a debtor that is not eligible under Section 109 creates an automatic stay. Section 362(b)(21) was added to the Bankruptcy Code by BAPCPA and reads as follows:
The filing of a petition under section 301 . . . does not operate as a stay ___ under section (a), of any act to enforce any lien against or security interest in real property
(A) if the debtor is ineligible under section 109(g) to be a debtor under this title; or
(B) if the case under this title was filed in violation of a bankruptcy court order in a prior case under this title prohibiting the debtor from being a debtor in another case under this title. . . .
11 U.S.C. § 362(b)(21).
This Section explicitly provides that where the debtor is ineligible under Subsection(g), the automatic stay does not stay "any act to enforce any lien against or security interest in real property." This provision would be completely superfluous if no automatic stay arose as a result of the filing by a debtor who was ineligible under any part of Section 109 (including subsection (h)), to be a debtor under the chapter selected in the petition. It is a common rule of statutory construction that no section should be construed so as to render another section superfluous. See e.g., *254 Hibbs v. Winn, 542 U.S. 88, 101, 124 S. Ct. 2276, 2286, 159 L. Ed. 2d 172 (2004); Kawaauhau v. Geiger, 523 U.S. 57, 61-62, 118 S. Ct. 974, 977, 140 L. Ed. 2d 90 (1998); U.S. v. Ryan-Webster, 353 F.3d 353 (4th Cir. 2003).
The result reached by the court in Salazar cannot be reconciled with Section 362(b)(21) as enacted by Congress. The exception from the effect of the automatic stay set forth in this provision is limited to where a debtor is ineligible under Subsection(g) of Section 109 and therefore is expressly not applicable to a debtor ineligible under Section 109(h) or (e). The result found in Salazar would, in effect, eliminate the expressed "(g)" from Section 362(b)(21)(A). This court, to the contrary, finds that if Congress had intended that no stay arise by the filing of a petition by a debtor found to be ineligible under any provision of Section 109, Congress would not have expressly enacted the limitation in Section 362(b)(21). Congress limited the exception to the automatic stay to cases filed by debtors that are ineligible under subsection (g) of Section 109 and even in such cases the exception allows only acts to enforce a lien or security interest in real property. The Salazar decision would completely eliminate both restrictions.
Congress has shown that it is both able and willing to restrict the effect of the automatic stay where it intends to do so, not only under the twenty-eight subparts of Section 362(b), but under other provisions including Section 362(c)(4) and Section 362(n). Congress obviously knew of the issue raised by conflicting opinions pre-BAPCPA as to the effect of the filing by an ineligible debtor under Section 109. It has legislated a carefully defined exception to the stay thus also clearly indicating what are the limits of such exception.
The distinction between the effect of a filing by an ineligible debtor under Section 109(h) as opposed to Section 109(g) is not illogical, nor does it lead to an absurd result. Where a debtor files a petition under circumstances rendering the debtor ineligible under Section 109(g), all facts necessary for a creditor or other party-in-interest to correctly assess the ineligibility of the debtor are matters of public record and not subject to factual dispute or pending court decision. Ineligibility under Section 109(g) is triggered by the dismissal of a prior case within 180 days of the filing of the petition in the subsequent case and the dismissal was for reason of disobedience of a court order, or after a motion for relief from stay had been filed in the prior case.[12] All predicate prior events for the triggering of the ineligibility under Subsection (g) are reflected in the public records of the prior case accessible by any creditor including through the PACER System. Therefore, Section 362(b)(21) creates no confusion or uncertainty in the subsequent case.
However, ineligibility under Section 109(e) or Section 109(h) cannot be ascertained by a creditor until a ruling by the court. Whether a debtor is eligible to be a debtor under Chapter 13 under the debt limits set forth in Section 109(e), is often disputed. An issue is frequently litigated as to whether or not certain debts must be included within a calculation of the limitations, or excluded under the provisions requiring such debts to be non-contingent and liquidated.
Ineligibility under Section 109(h)(1) occurs where the debtor has not received a *255 required briefing on credit counseling within 180 days proceeding the filing of the petition and is not granted a waiver under Section 109(h)(3). Even where the debtor has not filed a certificate of credit counseling or certification requesting waiver, there is no indisputable and unambiguous indication of the debtor's ineligibility. Eligibility under Section 109(h) is not dependent upon the filing of a certificate of credit counseling. Rather, the debtor is not eligible if the debtor did not receive the credit counseling and is not entitled to a waiver.
Section 521(b) requires the debtor to file a certificate from the approved non-profit budget and credit counseling agency that provided the services required by Section 109(h), as well as a copy of any debt repayment plan developed through that agency. Rules 1007(b) and (c) of the interim rules adopted by this Court's Administrative Order 05-02, require that the certificate of credit counseling and debt repayment plan be filed with the petition, or that a certification requesting waiver be filed with the petition.
Generally this court will by order dismiss a case for reason of apparent lack of eligibility under Section 109(h) if no certificate of credit counseling, or certification requesting waiver, is filed. However, numerous cases have been filed in this district since the effective date of BAPCPA in which the debtor had received the credit counseling within the 180 days preceding the petition filing as required, but for various reasons including attorney error and/or unfamiliarity with CM/ECF, the filing of the certificate evidencing such prepetition counseling was delayed. In such cases the court may excuse the lateness of the filing of the certificate and vacate any dismissal order because the debtor was eligible. Clearly, where, as in this case, Debtor filed a Certification Requesting Waiver of the pre-petition counseling requirement under Section 109(h)(3), it could not be ascertained by a creditor whether such certification would be found sufficient under the statutory requirements of Section 109(h) and satisfactory to the court, until the court enters an order determining this question.[13]
Where Congress has spoken with precision, the court should not conclude that Congress intended a broader, or different result, particularly where there is an obvious rational basis for the delineations set forth in the statute. For the reasons stated above, this court holds that the filing of a petition by a debtor who is ineligible to be a debtor pursuant to Section 109(h)(1), with or without a certification requesting waiver under Section 109(h)(3), does create an automatic stay under Section 362(a).
As stated above, there is no dispute that the foreclosure actions taken by Burson violated Section 362(a) and the foreclosure is accordingly void.[14] This court has not been asked to grant relief from the automatic stay nunc pro tunc by annulling the stay and sees no basis to do so sua sponte. Further, the violation of the stay occurred with full knowledge by Burson of the filing of the bankruptcy case. For this reason and for the reasons set forth on the record at the conclusion of the hearing, this court has awarded consequential damages to reimburse Debtor for *256 her consequential expenses. However, because the violation of stay did not result from an intentional misconduct although the act itself was willful, this court will not award further damages including punitive damages. An Order in conformity with this holding has been entered.
NOTES
[1] The property foreclosed upon is located at 929 Foxcroft Lane, Baltimore, Maryland 21221 (hereinafter referred to as the "Property").
[2] The Motion was reviewed by the Court as a certification under Section 109(h)(3), hereinafter referred to as "Certification Requesting Waiver."
[3] Section 109(h)(3)(A) provides:
Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that(I) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);
(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 5-day period beginning on the date on which the debtor made that request; and
(iii) is satisfactory to the court.
[4] The Debtor's Motion did not assert that the court erred in finding that the Certification Requesting Waiver did not satisfy the requirements of Section 109(h)(3). Rather Debtor's Motion argued that the post-petition counseling should be sufficient to enable Debtor to have the case reinstated.
[5] No motion for relief from stay, or to determine existence of the automatic stay was filed by Burson or any other party at any time.
[6] According to Burson's response, after being informed of the bankruptcy filing and after a review of the case docket revealed no certificate of credit counseling, a person in Burson's firm spoke with counsel for Debtor to "advise that the sale would not be stopped without a credit counseling certificate and to confirm that there was no mistake." Burson's Response to Order to Show Cause, filed March 31, 2006, at p. 2., ¶ 4.
[7] Section 109(e) provides that only an individual with regular income that owes noncontingent, liquidated debts of less than the limits set therein, may be a debtor under chapter 13.
[8] The United States District Court in Shaw v. Ehrlich (In re Shaw), 294 B.R. 260 (W.D.Va. 2003), explained:
If the automatic stay were not in fact "automatic" upon the filing of a petition, but instead relied on a decision of a bankruptcy court as to the merits of the debtor's petition, the race to collect that Congress feared in the absence of the automatic stay could still occur. . . . The burden would be on the debtor to petition the court and prove his eligibility under the chapter in which he filed. Until the debtor acted, creditors could claim ignorance as to the debtor's eligibility and act to collect on their claims in hopes that the bankruptcy court would find no merit in the debtor's petition.
Id. at 267-68. The court continued:
The Fourth Circuit has not made exceptions of the immediate and automatic application of the stay, even in cases of a petitioner seeking to cause creditors hardship or delay by abusing the protections of the bankruptcy system and filing in bad faith. . . . If the Fourth Circuit views bad faith petitioners as eligible for the protections of the automatic stay until their petitions are dismissed, mistaken filers who are eligible for some form of relief under Title 11 but file under a different chapter should certainly be protected by the automatic stay until a bankruptcy court reaches the merits of their petitions.
Id. at 268 (citing Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir.1989)).
[9] Section 109(g) states:
Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if
(1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.
11 U.S.C. § 109(g).
[10] Interestingly, the Rios court's holding was largely based upon the stated purpose of protecting the debtor from the effect of recent changes to the Bankruptcy Code limiting the duration and availability of the automatic stay in accordance with Sections 362(c)(3) and (c)(4). Rios, 336 B.R. at 180. The court cautioned that parties-in-interest should proceed with caution and cannot be certain that there is no automatic stay until such time as the court has stricken the petition. Rios, 336 B.R. at 180 n. 2. See also Hubbard, 333 B.R. at 388 ("`dismissal' of a case under the new Act may have substantially different implications than the `striking' of a petition, [therefore] the Court must consider the appropriate remedy.").
[11] The Salazar case was a joint case, the commencement of which was governed by Section 302. Section 301, with virtually identical language, governs the commencement of a case by a single individual debtor.
[12] See In re Jarboe, 177 B.R. 242 (Bankr.D.Md.1995)(discussing Section 109(g)).
[13] The fact that Burson guessed correctly as to what would subsequently be the court's finding as to the request contained in the Certification Requesting Waiver is immaterial.
[14] See e.g., In re Lampkin, 116 B.R. 450 (Bankr.D.Md.1990)(finding that actions taken in violation of the automatic stay are void ab initio). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545491/ | 84 N.J. 153 (1980)
MICHAEL MATTHEWS, PLAINTIFF-APPELLANT,
v.
CITY OF ATLANTIC CITY AND STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS, AND THOMAS BUDNICK AND VINCENT GRANESE, INTERVENORS-RESPONDENTS.
The Supreme Court of New Jersey.
Argued April 29, 1980.
Decided July 30, 1980.
*155 George L. Seltzer argued the cause for appellant (Alten, Valentine, Seltzer & Shultz, attorneys; Richard D. Alten, George L. Seltzer and William W. Shultz, on the briefs).
David P. Schneider, Deputy Attorney General, argued the cause for respondent State of New Jersey (John J. Degnan, Attorney General of New Jersey; Stephen Skillman, Assistant Attorney General, of counsel).
Edward N. Fitzpatrick argued the cause for intervenors-respondents (Clapp & Eisenberg, attorneys; Allyn Z. Lite and Frederick S. Kessler, on the brief).
The opinion of the Court was delivered by PASHMAN, J.
The Commission Form of Government Law, N.J.S.A. 40:70-1 et seq., also known as the Walsh Act, L. 1911, c. 221 (as amended), provides that in an applicable municipality a member of the board of commissioners, the elected governing body, "shall have been a citizen and resident of the municipality for at least two years immediately preceding his election." N.J.S.A. 40:72-1; see N.J.S.A. 40:72-2. The question presented is whether this restriction on eligibility for public office violates the Equal Protection Clause of the federal constitution, U.S. Const., Amend. XIV. Although we recognize that the Legislature has the power to impose durational residency requirements *156 on candidates for local elective office, we conclude that a two-year residency requirement substantially infringes upon the voter's right to exercise his franchise. Regardless of whether the State could impose such a requirement on elective officers in all municipalities, it has not justified its unequal treatment of candidates under the Walsh Act. We therefore declare the residency requirement unconstitutional.
I
The facts are not in dispute. Plaintiff became a resident of defendant Atlantic City in November or December of 1979, and registered to vote in the city on December 31, 1979. He was formerly a resident of Linwood, another Atlantic County municipality. In April 1980, Matthews filed with the city a "petition of nomination," N.J.S.A. 40:75-3, for the office of city commissioner.[1] He also commenced the present action, seeking a declaration that the two-year residency requirement for the office, N.J.S.A. 40:72-1, was unconstitutional.[2] The relief requested by *157 plaintiff would permit his name to be placed on the ballot for the May 13 municipal election.[3]
After the trial court issued an order to show cause, Thomas Budnick and Vincent Granese, residents and taxpayers of Atlantic City, petitioned for and received leave to intervene in the action. The trial court heard arguments on April 16, 1980, and in a written opinion dated April 18 held the residency requirement constitutional. It rejected Matthews' argument that conditioning eligibility for local office on two years' residence violated the Equal Protection Clause. Noting that in Stothers v. Martini, 6 N.J. 560 (1951), this Court had upheld N.J.S.A. 40:72-1 against a similar attack, the trial court found no basis for departing from the reasoning or the result in that case. Plaintiff appealed and the Appellate Division affirmed substantially for the reasons expressed by the trial court. We granted certification.[4] 84 N.J. 152 (1980). We reverse.
II
In Stothers v. Martini, supra, this Court rejected an equal protection challenge to the durational residency requirement involved here. The Court noted that because the Legislature was empowered to prescribe qualifications for elective office, the statute would be presumed to be valid and would be "upheld unless it is shown to be arbitrary, capricious or unreasonable." 6 N.J. at 567. Applying that standard, the Court concluded that the two-year requirement was a proper measure for "insur[ing] *158 that city commissioners have at least a rudimentary understanding of local affairs." Id.
Plaintiff contends that an examination of developments in constitutional law since Stothers leads to a result contrary to that reached in 1951. Specifically, he urges that the United States Supreme Court decisions in Bullock v. Carter, 405 U.S. 134, 92 S.Ct. 849, 31 L.Ed.2d 92 (1972), and Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972), require application of a more stringent standard of review to the statute in question a standard which plaintiff claims N.J.S.A. 40:72-1 cannot meet. Accordingly, we begin our inquiry by considering those two decisions.
A
In Bullock the Supreme Court addressed the validity of Texas' requirement of filing fees in primary elections. The fees were set sufficiently high so that primary elections would be financed by the candidates instead of the state. According to the Court, the "threshold question" was
whether the filing-fee system should be sustained if it can be shown to have some rational basis, or whether it must withstand a more rigid standard of review. [405 U.S. at 142, 92 S.Ct. at 855, 31 L.Ed.2d at 99 (footnote omitted)]
The Court noted that prior decisions had established that direct restrictions on the right to vote required the closest judicial scrutiny. Id.; see Harper v. Virginia Board of Elections, 383 U.S. 663, 86 S.Ct. 1079, 16 L.Ed.2d 169 (1966). Rejecting traditional strict scrutiny, the Court explained that the "problem presented by candidate filing fees is not the same * * *." Bullock, 405 U.S. at 142, 92 S.Ct. at 855, 31 L.Ed.2d at 99. The difference was that "[t]he initial and direct impact of filing fees is felt by aspirants for office, rather than voters * * *." Id. This was significant for the Bullock Court because it had never "attached such fundamental status to candidacy as to invoke a rigorous standard of review." Id. at 142-143, 92 S.Ct. at 855, 31 L.Ed.2d at 99.
However, the rights of voters and the rights of candidates do not lend themselves to neat separation; laws that affect candidates always have at least some theoretical, correlative effect on voters. Of course, not every limitation or *159 incidental burden on the exercise of voting rights is subject to a stringent standard of review. * * * In approaching candidate restrictions, it is essential to examine in a realistic light the extent and nature of their impact on voters. [Id. at 143, 92 S.Ct. at 855, 31 L.Ed.2d at 99-100 (footnotes and citations omitted)]
The Court concluded that the barrier to the ballot created by the filing-fee system had affected voters in ways "neither incidental nor remote." Id. at 144, 92 S.Ct. at 856, 31 L.Ed.2d at 100. "[T]his system falls with an unequal weight on voters, as well as candidates, according to their economic status." Id. This observation was sufficient to trigger a more exacting standard of review than the "rational basis" standard:
Because the Texas filing-fee scheme has a real and appreciable impact on the exercise of the franchise, and because this impact is related to the resources of the voters supporting a particular candidate, we conclude, as in Harper [v. Virginia Bd. of Elections], that the laws must be "closely scrutinized" and found reasonably necessary to the accomplishment of legitimate state objectives in order to pass constitutional muster. [Id. (quoting Harper, 383 U.S. at 670, 86 S.Ct. at 1083)]
Applying this standard, the Bullock Court found that the state's interests in regulating the ballot and relieving its treasury of the cost of conducting primary elections were insufficient to justify the "resulting incursion on the prerogatives of voters." 405 U.S. at 149, 92 S.Ct. at 859, 31 L.Ed.2d at 103. It accordingly declared the scheme of filing fees unconstitutional.
Dunn v. Blumstein involved provisions of Tennessee law that extended the right to vote only to those citizens who had resided within the state for one year and within the county in which they would vote for three months. 405 U.S. at 331, 92 S.Ct. at 997, 31 L.Ed.2d at 278. The Court held that the restriction implicated two fundamental rights: the right to vote and the right to travel. In regard to the former, the Court noted that "it is certainly clear now that a more exacting test [than minimal scrutiny] is required for any statute that `place[s] a condition on the exercise of the right to vote.'" Id. at 337, 92 S.Ct. at 1000, 31 L.Ed.2d at 281 (quoting Bullock, 405 U.S. at 143, 92 S.Ct. at 855, 31 L.Ed.2d at 99). It therefore concluded that it "must determine whether the exclusions are necessary to promote a compelling state interest." Id. (quoting Kramer v. Union Free Sch. Dist., 395 U.S. 621, 627, 89 S.Ct. 1886, 1889, 28 *160 L.Ed.2d 583, 589 (1969) (emphasis in original)). Since the durational residency requirement penalized certain residents on the basis of recent travel, the Court held strict scrutiny was also necessary to sustain the requirement as an infringement of the fundamental right to travel. 405 U.S. at 342, 92 S.Ct. at 1003, 31 L.Ed.2d at 284.
Applying strict scrutiny, the Dunn Court examined the state's proffered justifications for the residency requirement preventing fraudulent voting and assuring the knowledgeable exercise of the franchise. They were held inadequate. Since the durational residency requirement prevented voting by newly arrived yet bona fide residents as well as non-residents, the Court considered it an "all too imprecise" means of preventing fraud. 405 U.S. at 351, 92 S.Ct. at 1007, 31 L.Ed.2d at 289. The Court also found the requirement was "much too crude" a device for promoting knowledgeable voting. The state showed no necessity for requiring a year's residency to insure that voters were adequately informed. Id. at 360, 92 S.Ct. at 1012, 31 L.Ed.2d at 294. New residents could not vote regardless of the level of their awareness about community affairs; long-time residents were permitted to vote regardless of the lack of such awareness. Id. at 357-358, 92 S.Ct. at 1010-1011, 31 L.Ed.2d at 293-294. The Court rejected as impermissible the state's asserted objective of insuring that a voter has a "`common interest in all matters pertaining to [the community's] government....'" Id. at 355, 92 S.Ct. at 1009, 31 L.Ed.2d at 291-292. "`[D]ifferences of opinion' may not be the basis for excluding any group or person from the franchise." Id. (quoting Cipriano v. City of Houma, 395 U.S. 701, 705-706, 89 S.Ct. 1897, 1900, 23 L.Ed.2d 647 (1969). Since none of the state's purported justifications for the residency requirement was found sufficiently compelling, the Court declared it unconstitutional.
B
We agree with plaintiff that since this Court decided Stothers, state legislation affecting the electoral process has been subjected to closer constitutional scrutiny. We should therefore reassess *161 the reasoning and result of Stothers in the light of contemporary approaches to issues of equal protection. This reassessment requires both a fresh analysis of the competing interests involved and a reconsideration of the proper standard for reviewing the Legislature's balancing of those interests.
To decide whether a law violates the Equal Protection Clause, we look, in essence, to three things: the character of the classification in question; the individual interests affected by the classification; and the governmental interests asserted in support of the classification. [Dunn v. Blumstein, 405 U.S. at 335, 92 S.Ct. at 999, 31 L.Ed.2d at 280]
Stated differently, the question is whether the Equal Protection Clause demands less deference than that given by Stothers to the legislative judgment underlying a durational residency requirement for local elective office.
Turning first to the character of the classification involved, we note that it is not based on any "suspect" criterion. It draws a distinction between residents solely on the basis of length of residence. This denotes neither a "discrete and insular minorit[y]," United States v. Carolene Products Co., 304 U.S. 144, 152-153 n. 4, 58 S.Ct. 778, 783-784, 82 L.Ed. 1234 (1938), nor "an immutable characteristic determined solely by the accident of birth," Frontiero v. Richardson, 411 U.S. 677, 686, 93 S.Ct. 1764, 1770, 36 L.Ed.2d 583 (1973), that would require the minimum of judicial deference embodied in the notion of strict scrutiny. See, e.g., Weber v. Aetna Cas. & Surety Co., 406 U.S. 164, 92 S.Ct. 1400, 31 L.Ed.2d 768 (1972); Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971).
With regard to the individual interests involved, we recognize that the right to be a candidate for office has never been held by either the United States Supreme Court or this Court to enjoy "fundamental" status. Bullock v. Carter, supra; Wurtzel v. Falcey, 69 N.J. 401 (1976). Nevertheless, the relationship between the right to vote and the right to run for elective office cannot be ignored. As Chief Justice Weintraub observed,
the right to vote would be empty indeed if it did not include the right of choice for whom to vote. * * * [I]n judging the validity of a restraint upon *162 eligibility for elective office, we must be mindful that the restraint is upon the right to vote as well. [Gangemi v. Rosengard, 44 N.J. 166, 170 (1965)]
See Bullock, 405 U.S. at 143, 92 S.Ct. at 855, 31 L.Ed.2d at 100 (quoted supra at 158). In general, an individual's freedom of choice in exercising his franchise is a fundamentally important interest. An individual candidate's fitness including the depth or intensity of his knowledge or interest in local affairs is ultimately an issue for the voters. See Gangemi, 44 N.J. at 174. Yet the existence of legislative authority to prescribe minimum qualifications for elective positions is as clear as the public's right to be the ultimate judge of fitness. Although the line separating basic qualifications for a particular office and the general fitness of a particular candidate is "more easily felt than described," Gangemi, 44 N.J. at 171, we must apply a standard of judicial scrutiny that is properly sensitive to the public and individual interests on either side of that line.
The extent to which the interests of the State may infringe upon the individual's freedom of electoral choice determines the proper standard of judicial review. The parties here disagree over the content of that standard. Plaintiff claims that Bullock and Dunn require "strict scrutiny"; defendant and intervenors contend that because these cases do not address the present question, minimal scrutiny is all that is required. The United States Supreme Court has not yet addressed a challenge to a restriction on candidacy based on the duration of residence. Lower federal courts and courts of other states, however, have considered the issue presented here. Although not binding, those decisions are instructive.
Courts of other jurisdictions have taken widely varying positions on both the interests involved in residency requirements for elective office and the appropriate standard of judicial scrutiny. At one extreme, the California Supreme Court has held that durational residency requirements infringe upon three "fundamental interests": the right to hold public office, the right to vote and the right to travel. As a consequence that court determined that strict scrutiny is required in such cases. See Johnson v. Hamilton, 15 Cal.3d 461, 125 Cal. Rptr. 129, 541 P.2d *163 881 (1975) (in bank); Thompson v. Mellon, 9 Cal.3d 96, 107 Cal. Rptr. 20, 507 P.2d 628 (1973). Applying strict scrutiny compelled that court to conclude that "any durational residence requirement for candidates for local office in excess of [30 days] is violative of the equal protection clause of the Fourteenth Amendment." Johnson v. Hamilton, 125 Cal. Rptr. at 135, 541 P.2d at 887.
The courts in Sununu v. Stark, 383 F. Supp. 1287 (D.N.H. 1974), aff'd mem., 420 U.S. 958, 95 S.Ct. 1346, 43 L.Ed.2d 435 (1975), and Chimento v. Stark, 353 F. Supp. 1211 (D.N.H. 1973), aff'd mem., 414 U.S. 802, 94 S.Ct. 125, 38 L.Ed.2d 39 (1973), rejected the claim that First Amendment rights were implicated, but relied on Dunn and Bullock to hold that a durational residency requirement encroached upon the rights to travel and to vote. While in both cases the court required the application of the "compelling state interest" test, see Sununu, supra, 383 F. Supp. at 1290; Chimento, supra, 353 F. Supp. at 1214; but see Sununu, supra, 383 F. Supp. at 1292-1293 (Campbell, J., concurring); Chimento, supra, 353 F. Supp. at 1218 (Campbell, J., concurring), both upheld seven-year residency requirements for state offices in New Hampshire state senator in Sununu and governor in Chimento. Finding infringements of the same rights of travel and of franchise, the Third Circuit has also applied strict scrutiny to declare unconstitutional a five-year residency requirement for the office of mayor. Wellford v. Battaglia, 485 F.2d 1151 (3d Cir.1973); see also Henderson v. Fort Worth Indep. Sch. Dist., 526 F.2d 286 (5th Cir.1976) (applying strict scrutiny based on right to vote and invalidating four-year residency requirement for member of local board of education); Mogk v. City of Detroit, 335 F. Supp. 698 (E.D.Mich. 1971) (applying strict scrutiny based on right to vote and striking down three-year residency requirement for member of city charter commissions).
In Green v. McKeon, 468 F.2d 883 (6th Cir.1972), the court declined to decide whether Bullock required strict scrutiny because it found, on the authority of Dunn, that a durational residency requirement impinged on the right to travel. Although *164 unlike Dunn, the penalty imposed on recent migration in Green was not the denial of the fundamental right to vote, the court nevertheless held strict scrutiny was required. Applying this test the court struck down a two-year residency requirement for city office candidates.
At the other extreme are those decisions which subjected durational residency requirements to traditional, minimal judicial scrutiny. In Antonio v. Kirkpatrick, 579 F.2d 1147 (8th Cir.1978), the court found that a ten-year residency requirement for the elective office of state auditor impinged only minimally on the rights to vote and to travel. Rejecting strict scrutiny, the court nevertheless found that the ten-year requirement did not bear a rational relationship to a legitimate state objective. The court in Walker v. Yucht, 352 F. Supp. 85 (D.Del. 1972), also applied the traditional rational basis test to a residency requirement. It found that strict scrutiny was not required because no discrete minority of voters was prejudiced and the residency requirement did not amount to a penalty on the exercise of the right to travel. Under the rational basis test the court sustained a three-year residency requirement for the office of state representative. See also Brewster v. Johnson, 260 Ark. 450, 541 S.W.2d 306 (1976) (applied rational basis test and upheld one-year residency requirement for state representative; also noted that statute would pass muster under strict scrutiny).
The only New Jersey case dealing directly with residency requirement since Stothers apparently applied both standards of scrutiny in sustaining a one-year residency requirement on candidates for State Assembly. Ammond v. Keating, 150 N.J. Super. 5 (App.Div. 1977).
The variations in these decisions may largely be ascribed to an attempt to fit residency requirements into what is often called the "two-tier" analysis of equal protection claims. This approach divides all legislative classifications into two categories for purposes of judicial review. Where "fundamental rights" or "suspect classes" are involved in the classification, it is subjected to "strict scrutiny": the state is required to demonstrate that a compelling objective justifies the classification and that the *165 particular classification undergoing examination is necessary to accomplish the objective. Where such rights or classes are not involved, the classification is subjected to "minimal scrutiny": the court merely inquires whether a conceivable, legitimate objective exists for the classification and whether that classification is rationally related to the objective. The rigid assumption of this analysis that legislative classifications are either presumptively invidious or presumptively valid offers little guidance in an area where important individual and governmental interests are in conflict. We are reminded of Justice Holmes' observation that if a consistent pattern does not appear in judicial decisions, this indicates that the law on a subject is in a process of growth. O.W. Holmes, The Common Law 32 (Howe ed. 1963).
Members of the United States Supreme Court have recognized the inadequacy of a rigid dichotomy between strict and minimal scrutiny on more than one occasion. See Illinois State Bd. of Elections v. Socialist Workers Party, 440 U.S. 173, 188-189, 99 S.Ct. 983, 992-993, 59 L.Ed.2d 230, 244 (1979) (Blackmun, J., concurring); Craig v. Boren, 429 U.S. 190, 210-211 n., 97 S.Ct. 451, 463-464 n., 50 L.Ed.2d 397, 415 n. (1976) (Powell, J., concurring);[5]id. at 211-212, 97 S.Ct. at 464, 50 L.Ed.2d at *166 415-416 (Stevens, J., concurring); Dandridge v. Williams, 397 U.S. 471, 519-521, 90 S.Ct. 1153, 1178-1180, 25 L.Ed.2d 491, (1970) (Marshall, J., dissenting); see also Taxpayers Ass'n of Weymouth Tp. v. Weymouth Tp., 80 N.J. 6, 42-44 (1976), app. dism. and cert. den. sub nom. Feldman v. Weymouth Tp., 430 U.S. 977, 97 S.Ct. 1672, 52 L.Ed.2d 373 (1977); Robinson v. Cahill, 62 N.J. 473, 491-492 (1973), cert. den. sub nom. Dickey v. Robinson, 414 U.S. 976, 94 S.Ct. 292, 38 L.Ed.2d 219 (1973). Indeed, it has been suggested that Supreme Court decisions evidence a new mode of equal protection analysis described as adding "bite" to the "traditionally toothless minimal scrutiny standard" that the Court employs in certain cases where fundamental interests or suspect classes are not involved. Gunther, "The Supreme Court 1971 Term Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for a Newer Equal Protection," 86 Harv.L.Rev. 1 (1972). See Trimble v. Gordon, 430 U.S. 762, 97 S.Ct. 1459, 52 L.Ed.2d 31 (1977); Craig v. Boren, 429 U.S. at 210-211, 97 S.Ct. at 463-464, 50 L.Ed.2d at 415 (Powell, J., concurring); Vlandis v. Kline, 412 U.S. 441, 458-459, 93 S.Ct. 2230, 2239-2240, 37 L.Ed.2d 63 (1973) (White, J., concurring in judgment); Chicago Police Dept. v. Mosley, 408 U.S. 92, 92 S.Ct. 2286, 33 L.Ed.2d 212 (1972); Weber v. Aetna Casualty & Surety Co., 406 U.S. 164, 92 S.Ct. 1400, 31 L.Ed.2d 768 (1972); see also Wurtzel v. Falcey, supra, 69 N.J. at 411 n. 6 (Pashman, J., dissenting); Wilkinson, "The Supreme Court, the Equal Protection Clause, and the Three Faces of Constitutional Equality," 61 Va.L.Rev. 945 (1975). This new model would close the wide gap between strict and minimal scrutiny by bringing a "sharper focus" to judicial inquiry into legislative motivations and avoiding a virtual abdication of genuine scrutiny. See *167 Craig v. Boren, 429 U.S. at 210-211n., 97 S.Ct. at 463-464n., 50 L.Ed.2d at 415n. (Powell, J., concurring); Gunther, supra, at 24. Craig v. Boren, supra, is an example of this newer approach. At issue was the constitutionality of an Oklahoma statute which prohibited the sale of 3.2% beer to males under the age of 21 and to females under the age of 18. Writing for the Court, Justice Brennan declared the act unconstitutional. He stated that gender-based classifications "must serve important governmental objectives and must be substantially related to achievement of those objectives." 429 U.S. at 197,[6] 97 S.Ct. at 457. Justice Brennan rejected the state's statistical evidence because it offered a "weak answer to the equal protection question presented here." Id. at 201, 97 S.Ct. at 459. The state failed to show that the difference in treatment between males and females satisfied the Craig Court's standard of scrutiny.
The appropriateness of intermediate scrutiny depends upon the character of the legislative classification and the importance of the rights affected. It may be that an offensive classification is involved that is "not as obnoxious as some the Court has condemned," Craig, 429 U.S. at 212, 97 S.Ct. at 464, (Stevens, J., concurring). See, e.g., Stanton v. Stanton, 421 U.S. 7, 95 S.Ct. 1373, 43 L.Ed.2d 688 (1975); Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971). In other cases calling for intermediate scrutiny, a fundamental right is substantially affected in an indirect manner. Thus, it has been held that restrictions on eligibility for elective office can indirectly infringe on the fundamental right to vote such that minimal scrutiny is not appropriate. See Bullock v. Carter, supra.
Nevertheless, if fundamental interests or suspect classes are present, we are not free to apply an intermediate approach. We may sustain a classification only if the means chosen are "necessary to promote a compelling governmental interest * *." San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 31, 93 *168 S.Ct. 1278, 1296, 36 L.Ed.2d 16, 42 (1973) (quoting Shapiro v. Thompson, 394 U.S. 618, 634, 89 S.Ct. 1322, 1331, 22 L.Ed.2d 600 (1969)); see, e.g., Eisenstadt v. Baird, 405 U.S. 438, 447 n. 7, 92 S.Ct. 1029, 1035, n. 7, 31 L.Ed.2d 349, 31 L.Ed.2d 349, 359 n. 7 (1972); Kramer v. Union Free Sch. Dist., 395 U.S. 621, 627, 89 S.Ct. 1886, 1889, 23 L.Ed.2d 583, 589 (1969). Plaintiff argues that this standard of review must be applied here. We disagree.
There is no fundamental right to run for office. Bullock, supra, 405 U.S. at 142-143, 92 S.Ct. at 855, 31 L.Ed.2d at 99; Turner v. Fouche, 396 U.S. 346, 90 S.Ct. 532, 24 L.Ed.2d 567 (1970); Wurtzel v. Falcey, supra. The residency requirement before us does not directly interfere with the exercise of the fundamental right to vote. Nor do we consider the statute to penalize impermissibly the fundamental right to travel.[7] As the Supreme Court explained in Memorial Hospital v. Maricopa County, 415 U.S. 250, 256, 94 S.Ct. 1076, 1081, 39 L.Ed.2d 306, 314 (1974), durational requirements are not per se unconstitutional, despite the fact that they always burden to some extent the exercise of the right to travel. Because here no fundamental right or basic necessity of life is denied, the burden does not assume constitutional proportions. Id. at 258-259, 94 S.Ct. at 1082, 39 L.Ed.2d at 315. See Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975); Vlandis v. Kline, 412 U.S. 441, 452-453 n. 9, 93 S.Ct. 2230, 2236-2237 n. 9, 37 L.Ed.2d 63, 72 n. 9 (1973); Shapiro v. Thompson, 394 U.S. 618, 638 n. 21, 89 S.Ct. 1322, 1333, 22 L.Ed.2d 600, 617 n. 21 (1969).
The analysis does not end with this determination, however. The individual interests affected by the residency requirement convince us that under federal constitutional law, something more than mere rationality is necessary to support the requirement. *169 "Semantics aside, the question [must be] resolved judicially by determining what is more important to our form of government; the rights protected by the state law in question or the rights infringed by it." Chimento, 353 F. Supp. at 1214.
C
As discussed above, the impact of a durational residency requirement for candidates on the right to vote, although indirect, is nevertheless a significant intrusion into the voter's freedom of choice. Since a residency requirement limits the number of potential candidates, there is an infringement of the right to vote despite the absence of discrimination against a particular class of voters. At the same time, we recognize the importance of legislative interests in maintaining the integrity of the electoral process. To permit the furtherance of these interests without unduly restricting the electorate's freedom of choice, we hold that a requirement or restriction for candidates for elective office must be reasonably and suitably tailored to further legitimate governmental objectives. We believe this to be consistent with the approach outlined in Bullock of "examin[ing] in a realistic light the extent and nature of [the] impact" on voters of barriers to candidacy. Bullock, 405 U.S. at 143, 92 S.Ct. at 856, 31 L.Ed.2d at 100. It also comports generally with this Court's approach to minimum age requirements for candidates in Wurtzel v. Falcey, supra.[8] See also Gangemi, 44 N.J. at 171.
We do not agree with the dissent's view that Bullock v. Carter applied strict scrutiny, see post at 176-177 (Clifford, J., dissenting), nor do we find support for that proposition in the cases relied upon by it, Massachusetts Bd. of Retirement v. Murgia, *170 427 U.S. 307, 96 S.Ct. 2562, 49 L.Ed.2d 520 (1976); Lubin v. Panish, 415 U.S. 709, 94 S.Ct. 1315, 39 L.Ed.2d 702 (1974). In Massachusetts Bd. of Retirement v. Murgia, the Court referred to Bullock solely for the proposition that the right to vote is a fundamental right. 427 U.S. at 312 n. 3, 96 S.Ct. at 2566 n. 3, 49 L.Ed.2d at 524 n. 3. The Court in Panish utilized the same intermediate test applied in Bullock. Compare Bullock v. Carter, 405 U.S. at 144, 92 S.Ct. at 856, 31 L.Ed.2d at 100 ("[T]he Texas filing-fee scheme ... must be `closely scrutinized' and found reasonably necessary to the accomplishment of legitimate state objectives in order to pass constitutional muster." (citation omitted) (emphasis added)), with Lubin v. Panish, 415 U.S. at 718, 94 S.Ct. at 1321, 39 L.Ed.2d at 710 ("Selection of candidates solely on the basis of ability to pay a fixed fee without providing any alternative means is not reasonably necessary to the accomplishment of the State's legitimate election interests." (emphasis added)).
III
We begin application of this standard of constitutional scrutiny by assessing the State interests that the two-year requirement of N.J.S.A. 40:72-1 assertedly furthers. Like age, residence, or citizenship restrictions on public office holding, see Wurtzel, 69 N.J. at 403, a durational residency requirement is directed at maintaining the integrity of the ballot by preventing fraudulent and frivolous candidacies. It ensures that candidates have some knowledge of local affairs and, conversely, that local voters have an opportunity to learn about a candidate to intelligently assess his fitness for office. Properly drawn, a durational residency requirement is directed at providing a sufficient period of time for these two "educational" functions to take place.
Protecting the integrity of the ballot is a valid governmental objective. See Bullock v. Carter, 405 U.S. at 145, 92 S.Ct. at 856, 31 L.Ed.2d at 101; Jenness v. Fortson, 403 U.S. 431, 442, 91 S.Ct. 1970, 1976, 29 L.Ed.2d 554, 562-563. The power to prescribe qualifications for state political office, retained by the *171 states under the Tenth Amendment, see Oregon v. Mitchell, 400 U.S. 112, 91 S.Ct. 260, 27 L.Ed.2d 272 (1970), is a permissible means by which to further this objective. The exercise of this power, however, remains subject to the requirements imposed on the states by other provisions of the federal constitution including the Equal Protection Clause. Turner v. Fouche, supra.
Once a residency requirement is found justified, the precise time period selected by the Legislature need only fall within a reasonable range. A more stringent requirement would place upon the State the virtually impossible burden of showing that a particular number of months or years, as opposed to some other length of time, is constitutionally permissible. "[T]o test the power to establish * * * qualification[s] by the `compelling interest' standard is really to deny a State any choice at all, because no State could demonstrate a `compelling interest' in drawing the line * * * at one point rather than another." Oregon v. Mitchell, 400 U.S. 112, 294-295, 91 S.Ct. 260, 349, 27 L.Ed.2d 272, 379 (1970) (Stewart, J., concurring in part and dissenting in part). After determining that the Legislature has selected a reasonable time period, our inquiry is at an end.
We need not resolve whether a two-year residency requirement passes constitutional muster. The alleged justifications for the residency requirement, N.J.S.A. 40:72-1, lose meaning when it is observed that the statute applies to only 40 out of 567 municipalities in the State with commission form of government. See Fitzgerald, Legislative Manual 891-904 (1980)[9]. In Gangemi v. Rosengard, supra, the plaintiff challenged the requirement in N.J.S.A. 40:69A-167.1 that elected officers in cities of the first class governed by the Faulkner Act be "registered voters" for at least two years. Elective offices in other Faulkner Act municipalities had no such durational requirement. In a *172 unanimous decision, the Court struck down the requirement as violative of equal protection.
The Gangemi Court noted that the statute embodied a "triple test" for determining its applicability:
[It] applies only to (1) a city and then only (2) if the city is of the first class (meaning a city with a population exceeding 150,000; R.S. 40:167-2); and even then, only (3) if the city has adopted one of the sundry and somewhat diverse plans authorized by the Faulkner Act. [44 N.J. at 174]
The Court observed the fact that only two municipalities Jersey City and Newark actually met that test was "not necessarily decisive, since a statute could conceivably deal with a problem peculiar to them because of their population and form of government." Id. However, the statute's classification lacked the "critical connection" to the object of the law. Id. at 175.
The purpose of the two-year registration provision being * * * to assure an adequate interest in or understanding of civil affairs, the question is why like assurance is not equally appropriate to all municipalities; or why, if population is relevant, it should matter that the municipality is or is not a city; or why it should matter whether the municipality has or has not adopted one of the plans of government authorized by the Faulkner Act. We cannot conceive a rational connection between the supposed aim of the law and class of municipalities to which its operation is limited. We cannot understand why a right so fundamental as the right to vote should be thus restricted in two of the State's 567 municipalities because they adopted a Faulkner plan of government. We must therefore find the two-year registration provision is invalid. [44 N.J. at 175 (emphasis added and footnote omitted)]
These observations apply with equal force here. In an attempt to distinguish Gangemi, the State and intervenors contend that the two-year requirement in this case is justified by differences in the authority wielded by commissioners under the Walsh Act; they possess executive and administrative as well as legislative powers. N.J.S.A. 40:72-2. This argument is unpersuasive. Although municipalities may differ widely in their governmental structure, those differences cannot support distinctions among residency requirements under the various forms of local government. The vast majority of municipalities have no durational residency requirement for candidacy.[10] There has *173 been no showing that because of the structure of the governing body in Walsh Act municipalities, an additional two years is reasonably necessary for a candidate to become familiar with local problems or for the voters to become familiar with the candidate. No other justification for this distinction has been advanced, nor does one exist. As a class, Walsh Act municipalities do not differ from others in terms of their size, location or geography.
Because the right to vote is fundamental, the State has the affirmative burden of justifying why voters in some municipalities may vote only for candidates satisfying a two-year residency requirement while voters in other municipalities are not so restricted. It has failed to provide any sound justification why municipalities under the Walsh Act and other forms of local government should be treated differently. It is for this reason the statute must fail. Cf. Gangemi v. Rosengard, 44 N.J. at 175. The importance of the rights affected by the differing treatment of candidate eligibility prevents the Legislature from attacking the problem "one step at a time," see Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563 (1955). Although some conceivable basis might be hypothesized which could sustain this differential treatment under minimal judicial scrutiny, the standard of review we have adopted today leaves no room for such speculation.
IV
Based on the foregoing, we conclude that the durational residency requirement at issue violates the Equal Protection *174 Clause of the Fourteenth Amendment. Since there is no dispute as to plaintiff's eligibility under the 40 days' residency presently required for public office in Atlantic City, Matthews is entitled to have his name placed on the ballot for election to the office of city commissioner. The judgment of the Appellate Division is therefore reversed.
SULLIVAN, J. (concurring in result).
I agree that the two-year residency requirement of the Walsh Act should be stricken, but would do so on the ground that in this day and age a two-year period no longer subserves the purpose of a residency requirement as outlined in Stothers v. Martini, 6 N.J. 560 (1951). In 1911, when the Walsh Act was originally enacted, the pace of life was slower, means of transportation and travel were not what they are today and persons did not change their residences as frequently as they do at the present time. The increasing transience of the average individual today, however, calls for reconsideration of extended residency requirements such as the one here involved. I would hold that a two-year period, such as the Walsh Act calls for, is unduly burdensome and restrictive.
I do not consider that equal protection is involved. When Atlantic City established its present form of government in 1912, it did so by vote of its electorate. It could have adopted another form of government, one which did not have a two-year residency requirement for its elected governing body. It chose to incorporate under the provisions of the Walsh Act. At all times it has retained the right to change its form of government and thereby eliminate the two-year residency requirement. Indeed, as recently as February 26, 1980, the electorate in Atlantic City, at a special election, rejected an effort to have the Walsh Act form of government changed. Under these circumstances, I do not see an equal protection basis for invalidating the two-year residency requirement. See Jamouneau v. Harner, 16 N.J. 500, 521 (1954).
*175 CLIFFORD, J., dissenting.
By manufacturing a "three-tier" analysis of equal protection claims the Court has created a veil of tiers which shrouds this essential issue: whether the two-year residency requirement for municipal office here is reasonably related to legitimate government objectives. I would hold that it is.
The provision under attack is found in N.J.S.A. 40:72-1, part of the Walsh Act, which sets forth the commission form of government. It requires that "[e]ach member [of the municipal governing body] shall have been a citizen and resident of the municipality for at least two years immediately preceding his election." Almost thirty years ago this precise durational residency requirement was upheld in the face of constitutional attack. Stothers v. Martini, 6 N.J. 560 (1951). In Stothers, this Court held that the legislature is free to prescribe reasonable qualifications for elective municipal offices and that the very same requirements challenged here are "wholly proper" when measured against the traditional rational basis test. Id. at 567. Fifteen years ago this Court acknowledged the correctness of Stothers. Gangemi v. Rosengard, 44 N.J. 166, 172 (1965). See also Hardy v. Ruhnke, 47 N.J. 10, 24 (1966). The rational basis test used in Stothers was again applied in Wurtzel v. Falcey, 69 N.J. 401 (1976), to uphold age requirements for political candidates.
Now, with the most recent of these well-reasoned cases on the books a mere four years, the majority overrules them. By applying a more exacting test than the traditional rational basis test used in Stothers and Wurtzel, the majority disembowels these two cases. In place of the rational basis test the test generally applied to constitutional challenges to candidate eligibility requirements, L. Tribe, American Constitutional Law §§ 13-19 (1978) the majority resorts to an intermediate standard of review. The authority for this constitutional innovation is said to be found in Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972), and Bullock v. Carter, 405 U.S. 134, 92 S.Ct. 849, 31 L.Ed.2d 92 (1972).
*176 However, those cases do not furnish the support claimed for them. Dunn, which involved a challenge to durational residency requirements for the right to vote, is readily distinguishable on its facts. It is well established that while the right to vote is a fundamental right, the right to run for office is not as both the majority and dissenting opinions in Wurtzel, supra, took pains to emphasize. See 69 N.J. at 403 and id. at 407 (Pashman, J., dissenting). Bullock involved a filing fee requirement for political candidates. The Court found that the filing fee created "barriers to candidate access to the primary ballot, thereby tending to limit the field of candidates from which voters might choose." 405 U.S. at 143, 92 S.Ct. at 856, 31 L.Ed.2d at 100. Strict scrutiny was applied because of the requirement's direct relation to the resources of the voters. The fee requirement accorded unequal weight based on economic status and denied the voters the opportunity to vote for a candidate from their socio-economic group. In later cases the Court cites Bullock as an example of the type of case which calls for strict scrutiny because a legislative classification impermissibly interferes with the exercise of a fundamental right, Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 312 n. 3, 96 S.Ct. 2562, 2566 n. 3, 49 L.Ed.2d 520, 524 (1976), not as an example of an intermediate scrutiny case as the majority uses it here. The United States Supreme Court also describes Bullock as involving "filing fees that were so patently exclusionary as to violate traditional equal protection concepts." Lubin v. Panish, 415 U.S. 709, 715 n. 4, 94 S.Ct. 1315, 1319 n. 4, 39 L.Ed.2d 702, 708 (1974). In Lubin, a more recent case involving filing fees for political candidates, the Court distinguished Bullock on its facts and applied the rational basis test. Id. at 718, 94 S.Ct. at 1321, 39 L.Ed.2d at 710.
For the very reasons that the United States Supreme Court has refused to extend the reasoning of Bullock, I would not apply it to the facts here. Where legislative distinctions are not predicated on wealth or race and there is no substantial impact on the ability to exercise the fundamental right to vote, strict scrutiny is not applicable to election cases. McDonald v. Board *177 of Election, 394 U.S. 802, 89 S.Ct. 1404, 22 L.Ed.2d 739 (1969). See also Hill v. Stone, 421 U.S. 289, 297, 95 S.Ct. 1637, 1643, 44 L.Ed.2d 172, 179, reh. den., 422 U.S. 1029, 95 S.Ct. 2617, 45 L.Ed.2d 686 (1975).
In applying the rational basis test, I am satisfied that the imposition of a two year residency requirement as a prerequisite for holding elective office in a Walsh Act community is well within the legislative prerogative. As noted by the trial judge here,
the durational residency requirement insures that the prospective candidate has been exposed to the local government and its people and he is thereby familiar with and aware of the conditions, needs and problems of that government. It also gives the voters of the government an opportunity to gain by observation and personal contact some firsthand knowledge of the candidate for those local offices. Additionally, it serves to prevent frivolous candidacies by persons who had little previous exposure to the problems and desires of the local citizens. Residency requirements have always been thought to be a necessary means of achieving the goal of knowledgeable and qualified people in high public office as evidenced by the requirements for the various public offices in the U.S. and State Constitutions. Furthermore, durational residency requirements at least allows the prospective candidate to fulfill their obligation to become familiar with the wishes of their constituents.
Additionally, as pointed out by the intervenors-respondents, the substantive distinctions between the powers, duties and responsibilities of Walsh Act Commissioners and those of council members elected under the Optional Municipal Charter Law, N.J.S.A. 40:69A-1 to -210, known as the Faulkner Act, are sufficiently clear to support a legislative determination of the need for a durational residency requirement in a Walsh Act municipality. Walsh Act Commissioners have much greater executive and administrative powers and responsibilities, in addition to other legislative and judicial functions, than do Faulkner Act council members.[1] The Walsh Act contemplates the division of authority and imposition of individual responsibility in departmental work. Each commissioner is assigned the responsibility for a single department, N.J.S.A. 40:72-4, and is *178 accountable for its functioning. See Pashman v. Friedbauer, 1 N.J. Super. 616, 618 (Law Div.), aff'd, 4 N.J. Super. 123 (App.Div. 1949). See also Oliver v. Daly, 103 N.J.L. 52 (E. & A. 1926), for the types of problems to be encountered by the commissioners in the operation of their respective departments. Whereas in Faulkner Act communities council members make collective decisions, acting in a collegial fashion, the commissioners in Walsh Act municipalities are called upon to exercise individual decision-making functions.
Whether these individual responsibilities in turn are such as to require the conclusion that there is a concommitant necessity in Walsh Act communities for greater exposure to the conditions, needs and problems of the people and government of the municipality we need not decide. The question is simply whether the legislature might reasonably have reached that conclusion, whether we agree with it or not. It seems to me beyond argument that the legislature could have decided that the two year durational residence requirement of N.J.S.A. 40:72-1 ensures that the candidate for commissioner will have been present in the community for at least that period, thereby affording him the opportunity to learn of its conditions and needs and to become aware of any abuses and inefficiencies requiring correction. It could likewise have determined that at the same time the voters will be allowed to gain some first-hand knowledge of the candidate, the better to help decide whether he is competent to discharge the duties of a commissioner.
Accordingly, I would give effect to the statute[2] and affirm the trial court's judgment upholding the constitutionality of the two year durational residency requirement in Walsh Act communities.
Justice POLLOCK joins in this dissenting opinion.
*179 SULLIVAN, J., concurring in the result.
For reversal Chief Justice WILENTZ and Justices SULLIVAN, PASHMAN, SCHREIBER and HANDLER 5.
For affirmance Justices CLIFFORD and POLLOCK 2.
NOTES
[1] Having adopted the commission form of government under the Walsh Act, Atlantic City is governed by a board of five elected commissioners that has "all the executive, administrative, judicial and legislative powers" of municipal government. N.J.S.A. 40:72-1, -2. The commissioners all serve concurrent terms of four years, N.J.S.A. 40:75-2; candidates receiving the five highest totals of votes are elected, N.J.S.A. 40:75-19.
[2] Plaintiff also sought a declaration that N.J.S.A. 40:75-4 was unconstitutional if it imposed the same two-year residency requirement. That provision requires those signing a petition of nomination to certify that the candidate is "a qualified elector of the municipality." In the alternative, plaintiff asserted that the phrase "qualified elector" appearing in the petition did not create a separate residency or registration requirement, but merely stated the formal contents of a petition.
We find the appropriate significance to be given "qualified elector" is the common understanding of a person signing a petition containing such language. Thus, if the prescribed contents of the petition impliedly impose any requirement on a candidate, it is simply that he be registered to vote, for this is the common understanding of "qualified elector." Since Matthews was registered when he was preparing his petition, we may presume that he satisfied any requirement implicit in N.J.S.A. 40:75-4 without deciding whether one exists.
[3] In apparent response to an unpublished decision of the Superior Court, Law Division, holding N.J.S.A. 40:72-1 unconstitutional, Solomon v. Atlantic City, Docket No. L-32127-75 (Law Div. April 15, 1976), the city had imposed its own residency requirement of 40 days, which Matthews had satisfied. Since neither the State nor intervenors were parties to this earlier action, we have no occasion to consider whether the city would be bound by the former judgment under the doctrine of collateral estoppel. See United Rental Equip. Co. v. Aetna Life & Cas. Ins. Co., 74 N.J. 92 (1977).
[4] We also directed that the parties submit supplemental briefs to address the constitutionality of N.J.S.A. 40:72-1 under Gangemi v. Rosengard, 44 N.J. 166 (1965). See discussion infra at 171-173.
[5] Justice Powell stated in his concurring opinion:
As is evident from our opinions, the Court has had difficulty in agreeing upon a standard of equal protection analysis that can be applied consistently to the wide variety of legislative classifications. There are valid reasons for dissatisfaction with the "two-tier" approach that has been prominent in the Court's decisions in the past decade. Although viewed by many as a result-oriented substitute for more critical analysis, that approach with its narrowly limited "upper-tier" now has substantial precedential support. As has been true of Reed [v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971)] and its progeny, our decision today will be viewed by some as a "middle-tier" approach. While I would not endorse that characterization and would not welcome a further subdividing of equal protection analysis, candor compels the recognition that the relatively deferential "rational basis" standard of review normally applied takes on a sharper focus when we address a gender-based classification. So much is clear from our recent cases. For thoughtful discussions of equal protection analysis, see, e.g., Gunther, The Supreme Court, 1971 Term Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for a Newer Equal Protection, 86 Harv.L.Rev. 1 (1972); Wilkinson, The Supreme Court, the Equal Protection Clause, and the Three Faces of Constitutional Equality, 61 Va.L.Rev. 945 (1975).
Justice Brennan stated in Univ. of Cal. Regents v. Bakke, 438 U.S. 265, 357 n. 30, 98 S.Ct. 2733, 2782 n. 30, 57 L.Ed.2d 750, 813 n. 30 (1978) (concurring and dissenting): "We do not pause to debate whether our cases establish a `two-tier' analysis, a `sliding scale' analysis, or something else altogether."
[6] Compare Bullock v. Carter, supra, which required close scrutiny of the statute to determine whether the law was reasonably necessary to accomplish a legitimate state objective. See supra at 159.
[7] For the purposes of this discussion, we assume without deciding that this right includes intra-state as well as interstate travel, and that Matthews may therefore raise the right to travel claim. See King v. New Rochelle Municipal Housing Auth., 442 F.2d 646 (2d Cir.1971), cert. den., 404 U.S. 863, 92 S.Ct. 113, 30 L.Ed.2d 107 (1971); Eggert v. City of Seattle, 81 Wash.2d 840, 505 P.2d 801 (1973); see also Abrahams v. Civil Serv. Comm'n, 65 N.J. 61, 69 n. 3 (1974).
[8] In that case, we sustained the provision in our State Constitution setting a minimum age of 21 years for members of the Assembly and 30 years for State Senators, N.J. Const. (1947) Art. IV, § I, par. 2, as a "reasonable" means of promoting the "State's interest in maintaining the integrity of the ballot by ensuring competent candidates." 69 N.J. at 404. In contrast to the present case, there was not further classification issue raised because all voters in the State were treated the same.
[9] Eight municipalities have a "1923 Council-Manager" form of government under which there is a two-year residency requirement for councilmen in municipalities with a population of 1,000 or more and 90 days if the population is under 1,000. N.J.S.A. 40:81-1; see Fitzgerald, supra, at 891-904.
[10] See N.J.S.A. 40:87-1 to -14 (boroughs); 40:125-2 (towns); 40:145-2 (townships); 40:159-1 (villages).
N.J.S.A. 40:69A-167.1 requires that elected officers of cities of the first class with one of the Faulkner Act forms of government (Newark and Jersey City), be residents of the municipality for two years before election. This provision was not passed upon in Gangemi, supra, but was found unconstitutional on the basis of that decision in Cherrick v. Smith, 148 N.J. Super. 299 (App.Div. 1977).
We note that Senate Bill 1282, presently under consideration by the Legislature, would provide for a uniform one-year durational residency requirement for all local offices. It would also require that the candidate be "registered to vote in the local unit to which the office pertains."
[1] For an informative discussion of the development of the commission form of government culminating in the Walsh Act, see Grogan v. DeSapio, 11 N.J. 308 (1953).
[2] It is interesting to observe in passing that even if Senate Bill 1282, to which the Court makes reference, ante at 172 n. 10, were law and applicable to this case, Matthews would be ineligible to run for city commissioner in Atlantic City, inasmuch as he could not satisfy that bill's requirement of one year residency. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545552/ | 87 F.2d 64 (1936)
JORDON
v.
UNITED STATES.
No. 6686.
United States Court of Appeals for the District of Columbia.
Argued October 6, 1936.
Decided November 9, 1936.
Richard F. Bowman and W. B. O'Connell, both of Washington, D. C., for appellant.
Leslie C. Garnett, U. S. Atty., and Roger Robb, Asst. U. S. Atty., both of Washington, D. C., for the United States.
Before VAN ORSDEL, GRONER, and STEPHENS, JJ.
GRONER, J.
Appellant was convicted of murder in the first degree under an indictment charging that on April 3, 1931, he and Edith Dodsworth murdered Lizzie S. Jaynes.
Appellant was tried alone, the Dodsworth girl never having been apprehended.
The killing occurred in a restaurant in Columbia Road, N. W., in Washington City. On the night of April 3, about 11:30, two masked men with drawn pistols entered the restaurant. One of them was tall, the other short. The testimony of the eyewitnesses to the killing is that the tall man went half way back the length of the counter to where one of the women clerks was standing. The short man walked behind the end of the counter to the cashier's cage, some eight or ten feet from the door, where Mrs. Jaynes, the cashier, was seated on a high chair. While the short man was taking the money out of the cash register, the street door of the restaurant was opened (presumably to admit a customer) and almost instantaneously a shot was fired from the pistol in the hands of the short man, who then "was in very close proximity to Mrs. Jaynes, almost touching her." Mrs. Jaynes screamed, "Oh, God, I am shot"; after which the two men ran out. As they were leaving the restaurant, the tall man said to the short man, "Boy did you shoot her?" and the short man replied, "No; she isn't hurt." Mrs. Jaynes died two days later from the gunshot wound.
In August, 1931, appellant and Edith Dodsworth were arrested for questioning *65 in connection with the killing. Both made statements to the effect that they had at one time discussed robbing the restaurant but had abandoned the idea and that they were not there on the night of April 3 or at any other time. They were held in jail for several months, and an indictment charging them with conspiracy to commit robbery was submitted to the grand jury but no true bill was found. They were then released, and the murder and robbery continued a mystery until May 5, 1935, when appellant, who had moved to Mount Vernon, N. Y., wrote the United States attorney in Washington stating that he was contemplating marriage and wished to know if there was any possibility of another or further investigation in connection with the case. The letter being referred to the police department, a detective sergeant from Washington was sent to interview him. Appellant was brought to police headquarters in Mount Vernon and questioned. Late the same night (May 16, 1935) he made and signed a statement in which he said that he and Edith Dodsworth had planned to rob the restaurant; that on the night of April 3, 1931, he met Edith and a man whom he did not know and they drove up to the restaurant; that he and the unknown man, their faces covered with masks, and with pistols in their hands, entered the restaurant and "held it up," and that just as they were about to leave the premises and were backing out toward the front doorway the door opened and struck appellant's accomplice, whose pistol then discharged. Both then joined Edith Dodsworth and drove away, and later divided the money, which amounted to $101. Appellant was arrested and brought back to Washington, and during the railroad trip requested the officer who had him in charge to bring the husband of the murdered woman to the jail that he might talk with him. This was done, and Mr. Jaynes, who was called as a witness for the government in the trial, testified that appellant first said to him, "I am sorry about this matter"; that he then said that he and another man went into the restaurant and that he (appellant) remained at the front by the cash register and that the other man walked some distance down behind the counter; that, when the other man came back and was passing him, the shot was fired and that the pistol that was fired was then in his (appellant's) hand.
Subsequently appellant made another written confession to the local police in which he said, "As we went in [the restaurant] I pulled this .25 calibre automatic from my pocket. * * * There was a lady at the cash register. I said to her `this is a holdup' and she opened the drawer of the register and handed over the contents. The other man with me kept on to the rear of the Tea Shop, and stood there. The money was handed over to me by the lady at the register. I put the money in my pocket and then called `let's go' to him and I still had my gun on the woman who was at the cash register. When he [the accomplice] came to the front of the tea shop and as he came near I started to back away to the front door and just as I got close to the front door, either the door opened behind me or I got the jimjams and became excited and I fired one shot and this was an unintentional shot and I did not mean to fire at no one," etc.
Jean Beierholm, the young woman in Mount Vernon whom appellant hoped to marry, was called as a witness by the government and testified that during his courtship of her appellant had told her that he had something on his mind which kept him from sleeping at night and that he wished to tell her about it; that what he told her was that on the night of the killing he was broke and had told a girl whom he knew he would like to hold up a bank; that they went to the place of the killing and there was some trouble and a woman was shot; but that he had nothing to do with it and was innocent; and that she (witness) had said to him that if she (witness) were in his place, she would want to get a thing like that off her conscience; and that subsequently he told her he had written the letter to the District Attorney.
On the trial appellant denied that he had ever been in the restaurant or that he had any part in the killing. He repeated what he had formerly said to the officers on his first arrest, namely, that he had discussed the matter of robbing the restaurant with Edith Dodsworth, but that in thinking it over he had concluded that the risk was too great and had given it up.
The jury returned a verdict of first-degree murder, and on this appeal the errors assigned and urged are:
First, that the verdict was contrary to the weight of the evidence;
Second, that the jury was illegally constituted;
Third, that the jury misunderstood the instructions of the court through mistake;
*66 Fourth, that the verdict was not the intentional verdict of at least one of the jurors.
Enough has been said, we think, to show that appellant could neither have been charged with the murder nor convicted of the murder, except for his own statements. That these were voluntary and were made without coercion or promise, is admitted. In the last of them, and in his conversation with the husband of the deceased, he admitted taking part in the robbery and firing the fatal shot; and if the jury believed this, as they had every right and reason to do, there remained then only the question whether appellant was guilty of murder in the first or in the second degree. And this brings us to a consideration of the statute defining murder in the District of Columbia. It provides:
(Section 21, Title 6, D.C.Code 1929.) "Whoever, being of sound memory and discretion, purposely, and either of deliberate and premeditated malice or by means of poison, or in perpetrating or in attempting to perpetrate any offense punishable by imprisonment in the penitentiary, kills another, is guilty of murder in the first degree."
(Section 23.) "Whoever with malice aforethought, * * * kills another is guilty of murder in the second degree."
In many of the states a killing committed in an attempted burglary or robbery is murder in the first degree, and it has been held that under the statutes in those states the offense is complete even though there was no intent or desire to kill. People v. Smith (Sup.) 187 N.Y.S. 836, and State v. McNeal (Mo.Sup.) 237 S.W. 738, are typical of this class of cases.
But the statute in the District of Columbia includes the word "purposely," and, as we read it, makes it incumbent on the prosecution to show that an accused purposely, in perpetrating or attempting to perpetrate an offense punishable by imprisonment in the penitentiary, kills another. The word "purposely," we take to mean, with design or intentionally. The Supreme Court of Ohio, where the language of the statute is similar to that in the District of Columbia, has reached the same conclusion. Robbins v. State, 8 Ohio St. 131; Turk v. State, 48 Ohio App. 489, 194 N.E. 425; State v. Turk, 129 Ohio St. 245, 194 N.E. 453. The District Judge correctly instructed the jury in this respect. He said that, if the killing was done by appellant while perpetrating the crime of robbery, it was murder in the first degree if the killing was done purposely; if, on the other hand, in perpetrating the crime the killing was not done purposely but by accident or otherwise, appellant was not guilty of murder in the first degree. This purpose to kill, in the view we take of the statute, is a state of mind which must be proved as a fact before there may be a conviction of first-degree murder under the statute, but proof of purpose need not be direct; it may be inferred from the circumstances attending the killing. And this brings us, finally, to a consideration of the question whether the evidence was sufficient to sustain the verdict of the jury.
As we have seen, appellant in all his confessions admitted that he had gone into the restaurant for the purpose of committing robbery and that he did in fact commit robbery. He also admitted in his final confession that he fired the fatal shot, but he denied that he did it intentionally. In the statement to the Washington police he said, as we pointed out, that, after he had got the money and was backing toward the front door, either the door opened behind him or he got the "jimjams" and became excited and fired the shot unintentionally. If the jury believed his statement, he should not have been convicted of murder in the first degree; but it is evident the jury did not believe him. And in view of the different statements made by appellant at different times, this was a reasonable rather than an unreasonable attitude of mind on their part.
In this view the jury could have reached their verdict on part of the testimony of Mildred Colt, an eyewitness to the shooting, who said that the shot was fired simultaneously with the act of taking the money from the cash drawer, and that the man who fired was standing close to and almost touching his victim when the shot was fired. This, and the fact that appellant himself had admitted that during all of this time that is to say, from the demand for the money to his backward movement toward the door he still had the pistol leveled at the woman at the cash register, were enough, in our opinion, to justify the jury in concluding that either impatient at, the delivery of the money, or because of the possibility of interference from the outside, appellant had intentionally fired the shot. We think it cannot be doubted that, in the circumstances we have narrated, the jury were justifiable in rejecting *67 that part of appellant's statement in which he claimed he fired the shot unintentionally; and, having rejected that part of the statement, we are also of opinion that the jury could from the evidence have reached the conclusion that appellant fired the shot purposely. Undoubtedly they had a right to consider all the facts in the case and judge appellant's purpose from his acts.
Second. The assignment of error that the jury was illegally constituted grows out of the fact that after the jury had been impaneled, and after the case had been tried and the verdict rendered, it was ascertained that one of the jurors was a notary public for the District of Columbia; and it is now claimed that this was a constitutional disqualification under the doctrine laid down by us in Wood v. United States, 65 App.D.C. 330, 83 F.(2d) 587. But the answer to this is that the office of notary public does not in itself create a relationship to the federal government such as we held in Wood v. United States was sufficient to disqualify a juror.
Third. The third and fourth assignments may be discussed together. They are based upon a statement made by one of the jurors to the trial judge after the case had been tried and verdict rendered. The day after the trial a member of the jury sought an interview with the trial judge and stated to him, in the presence of counsel for the United States and the defendant, that the other eleven jurors had misunderstood the court's instructions and believed that they could only find a verdict of first-degree murder or a verdict of not guilty. The juror himself stated that he had understood the judge to charge that, if the fatal shooting was an accident, or if it was not purposely done, the jury should find a verdict of second-degree murder, but that the other jurors insisted to the contrary; and that, after laboring with them for 24 hours and suggesting that they ask additional instructions from the court which the foreman declined to request, he yielded to their view and voted with them for a first-degree verdict. None of the other jurors was examined, so that the statement of the juror that all the others misunderstood the court's instructions is wholly uncorroborated. In addition to this, the court's charge on this subject was clear and specific, and the jury were repeatedly told that if the killing was done in the perpetration of robbery, but not done purposely, it was murder in the second degree. It is difficult, under these circumstances, to reach the conclusion that the jury acted either ignorantly or willfully. And this was the view of the judge below who, after hearing the statement of the juror, declined to order a new trial on the ground of the misconduct of the jury.
Besides, the jury had the case under consideration 24 hours and when the verdict was read in the court, each juror was polled separately and each replied that the verdict as read was his verdict. To set aside the verdict now on the ground of mistake on the part of the jury would, we think, be improper, and, as is often said in like circumstances, to establish a practice replete with dangerous consequences. The universal rule in the federal courts is that the testimony of a juror may not be received to prove misconduct of himself or his colleagues in reaching a verdict. McDonald v. Pless, 238 U.S. 264, 35 S. Ct. 783, 59 L. Ed. 1300; Hyde v. United States, 225 U.S. 347, 32 S. Ct. 793, 56 L. Ed. 1114, Ann.Cas.1914A, 614; Davis v. United States (C.C.A.) 47 F.(2d) 1071, 1072; Lancaster v. United States (C.C.A.) 39 F. (2d) 30, 33; Ramsey v. United States (C. C.A.) 27 F.(2d) 502, 504; Hicks v. United States, etc. (D.C.) 14 F.(2d) 316, 317; Stewart v. United States (C.C.A.) 300 F. 769, 788. And, while we are unwilling to go to the extent of saying that this rule is inexorable, or that in a case involving as is true here the life of an accused, it would, without regard to the character of the irregular or improper or illegal acts of the jurors, be considered inflexible, we think the uncorroborated statement of the juror, coupled with the facts we have referred to, does not warrant an exception. And even more we are convinced that it would be improper to interfere with the verdict on the ground that it did not represent the true verdict of all 12 jurors. It is perfectly clear from the statement made by the complaining juror that he was under no misapprehension as to the law laid down by the court; and it is equally clear that, whatever doubts he may have had, he finally intended to render a verdict of first degree murder.
On the whole case, we think there can be no shadow of doubt that appellant committed the robbery, and, in the act of committing the robbery, fired the fatal shot. And, that we might have reached a different conclusion from that of the jury on the question whether he fired purposely *68 or not, will not, we think, justify us in substituting our own views on the weight of the evidence in this respect for that of the jury, since, as we have pointed out, there was evidence on which the jury's verdict can legally be rested. In these circumstances, we must affirm the judgment of the trial court.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545573/ | 342 B.R. 758 (2006)
UNITED STATES of America, Plaintiff,
v.
Marcella P. THOMAS, Defendant.
Bankruptcy No. H-04-37809. Civ.A. No. H-04-1723.
United States District Court, S.D. Texas.
November 25, 2005.
*759 M.H. Cersonsky, Alonso Cersonsky, Houston, TX, for Plaintiff.
Marcella P. Thomas, Houston, TX, pro se.
*760 Sonya J. Rogers-Blyden, Hall Law Firm PC, Houston, TX, for Defendant.
Opinion on Duty of Debtors
LYNN N. HUGHES, District Judge.
1. Introduction.
A debtor who does not correctly schedule creditors, who does not disclose related litigation, and who does not file suggestions of bankruptcy in other cases cannot have the benefits of the bankruptcy law. Although debtors may consciously or unconsciously omit information that the law and their lawyers require, once a lawyer discovers the facts, he must notify, amend, and otherwise formally correct effects of the omission in a civil case.
2. Background.
In 1985, Marcella P. Thomas borrowed $2,500 from Colonial Savings Association. As a student loan, her obligation was guaranteed by Northstar Guarantee, Inc., and reinsured by the Department of Education. Thomas defaulted on the loan in 1987. The bank held Northstar to its guaranty, and in 1993, Northstar assigned the loan to the government on its guaranty.
In 1989, the government hired private counselAlonso, Cersonsky & Garcia, P.C.to collect debt owed directly to the United States Department of Education. In April 1999, the Department of Education sent Thomas a letter, explaining that the collection of her loan had been referred to its private counsel. It told her that all correspondence should be directed to the lawyers.
Later that April, the government's firm sent Thomas a letter about her debt. She did not respond. In March 2004, the firm wrote Thomas again. This time she responded. She questioned whether she owed the debt, and she refused to furnish financial data or discuss a payment plan.
In April 2004the next monththe government through the firm sued Thomas on her promissory note. Thomas declined or evaded service in June and July. In September, the court allowed substituted service. Thomas then accepted service and returned the summons.
In October, with no answer or other pleading by Thomas, the court entered default judgement for the debtabout $8,0000. Later that month, counsel discoveredthrough a voice-message from the Hall Law Firmthat Thomas had filed for bankruptcy under the wage-earner chapter on June 6, 2004.
Although Thomas had scheduled the government debt, she listed it generally, omitting the address of the government's firm. Although this debt is nearly 20 years old, she had gotten the firm's informationfor the second timeno more than three months earlier. As a result of her falsification of the schedule, the government's counsel was never notified of the bankruptcy. This meant that it did not have the opportunity to file a proof of its claim, and that meant that it was not included among the creditors who were to be paid under the plan.
The initiation of the bankruptcy automatically stays creditors' enforcing their claims. The government moved to vacate the judgment that it had inadvertently obtained after the bankruptcy started.
The district court vacated the judgment, and then it withdrew its reference of the bankruptcy to the bankruptcy court. In November, the court ordered Thomas to pay the original judgment and attorney fees.
Parenthetically, Thomas had voluntarily filed a wage-earner petition in 1992; it was dismissed on the trustee's motion. In *761 1992, her schedules included the government debt.
3. Duties to the Court.
A debtor who has filed bankruptcy and is involved in other litigation must inform each court of the other matter. In re Clowser, 39 B.R. 883, 885 (Bankr. E.D.Va.1984). Thomas breached this duty. She was served with this lawsuit three months after she declared bankruptcy. Although she obviously was aware of both proceedings, Thomas never answered the lawsuit nor suggested to that court that she was in bankruptcy.
Her bankruptcy attorney should have filed the suggestion. She says that she did not only because Thomas did not tell her about the government's suit. Unfortunately, Thomas's lawyer did not file the suggestion of bankruptcy after she discovered this suit; instead she left a voice-mail message for the plaintiffs counsel. While it is likely that Thomas was not candid, it does not excuse counsel from investigating her client's affairs; for even a casual search would have revealed the suit. Because of this lack of disclosure, this court and the government spent considerable time and resources pursuing an unenforceable judgment.
4. Duties to Opposing Counsel.
Thomas also had a duty to tell the government's attorney about the bankruptcy proceeding. Id. at 885. The duty to notify a creditor's attorney arises where the debtor or her counsel knows of the lawyer's representation of the creditor. This is parallel to the duty to communicate through counsel once a party is represented. Being in bankruptcy does not alter the responsibilities that generally apply to work through counsel. This is true for debtors' lawyers and debtors representing themselves.
It has been said that the duty to communicate with a creditor's counsel arises only when
A. The debtor or her counsel knows of the lawyer's representation of the creditor;
B. Has been advised to deal with counsel; and
C. Communications before the bankruptcy were between the debtor and creditor's counsel and none was between the debtor and the creditor.
In re The Grand Union Company, 204 B.R. 864, 878 (Bankr.D.Del.1997).
This mutates gratuitously the general rule into a complicated inquiry. Opposing parties must communicate with represented parties through counsel. Rule 4.02(a), Texas Disciplinary Rules of Professional Conduct.
The complicated approach would apply here. The Department of Justice told Thomas that the private counsel was responsible for the loan. The firm then sent her two letters, tried to serve her on two occasions, and left notice of the suit at her home. When Thomas questioned the debt, she called private counselnot the Department of Education. There is no evidence to suggest she ever contacted the government directly.
Further, even if Thomas did not offer the names of private counsel, her bankruptcy attorney had a duty to fully inquire into the known creditors. See In re Matthews, 154 B.R. 673, 680 (Bankr. W.D.Tex.1993) Rule 4.02(a) of the Texas Disciplinary Rules of Professional Conduct states that, "a lawyer shall not communicate with a person, organization or entity of government that the lawyer knows to be represented by another lawyer regarding the subject [Emphasis added.]
*762 A reasonable inquiry by the Hall Law Firmsuch as merely looking at the complaint in this casewould have uncovered the government's private representation. The firm could have done a party search of this district's docket to uncover all pending litigation and those parties' counsel. The government was not obliged to investigate Thomascandid schedules and effective notice are the responsibility of the debtor, not the creditor.
5. New Duties for Debtors.
The recently passed revision of the bankruptcy code emphases the debtor's responsibility for omitted and false data. On April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted. Pub.L. No. 109-8, 119 Stat. 25. This legislation urges the modification of Federal Rules of Bankruptcy Procedure to require that debtors and their attorneys make a "reasonable inquiry to verify that the information in the document is (1) well grounded in fact; and (2) warranted by existing law or a good faith modification for the extension, modification, or reversal of existing law." Id. at Sec. 319. This makes the schedules meet the same standard as other pleadings. Fed.R.Civ.P. 11; Fed. R. Bank. P. 9011.
6. Conclusion.
Bankruptcy is a privilege offered to Americans who genuinely need the opportunity to start overit is not the right to avoid obligations, especially the obligations of the bankruptcy process itself. The opportunity for a fresh start whole or partialis conditioned on the faithful compliance with the orders, rules, and laws.
A suggestion of bankruptcy should have been filed to protect the integrity of this court and unnecessary action by the government's counsel. Thomas should have listed the private counsel on the bankruptcy schedules and mailing matrix separately from the government's usual agent for service.
The United States of America will take from Marcella P. Thomas, the Hall Law Firm, P.C., and Ernesto Garciajointly and severally$600.00. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545571/ | 174 N.J. Super. 499 (1980)
417 A.2d 46
MARIAN MATLAND, PLAINTIFF,
v.
UNITED SERVICES AUTOMOBILE ASSOCIATION AND HAROLD MATLAND, DEFENDANTS.
Superior Court of New Jersey, Law Division Middlesex County.
Decided April 22, 1980.
*502 Richard Schacter for plaintiff (Schacter, Wohl, Cohn & Tromadore, attorneys).
John R. Scott for defendant United Services Automobile Association.
Susan Hagerty for defendant Harold Matland.
KEEFE, J.S.C.
This action came on for trial before the court without a jury. The issue to be decided is one of first impression in this State. Simply stated the question is whether a husband, as the sole named insured under an automobile liability policy, may delete coverage for a motor vehicle insured under the policy but owned *503 and controlled by his separated spouse. For the reasons stated herein the court finds that the husband's amendment to the policy cancelling coverage for his wife's motor vehicle was void and without legal effect. Plaintiff therefore is entitled to coverage under the policy for liability, collision loss and personal injury protection benefits.
Plaintiff Marian Matland was the owner of a 1974 Pontiac she was operating on January 1, 1978 when it was involved in a motor vehicle accident. This accident resulted in personal injury to plaintiff, property damage to her vehicle and personal injury and property damage to the owner and/or occupant of another vehicle. About three weeks after the accident plaintiff was advised that coverage for her collision loss and personal injury protection benefits was being denied by defendant United Services Automobile Association (hereinafter USAA). Subsequent to that notification a liability suit was filed wherein Marian Matland was a named defendant, and USAA denied coverage in that litigation. As a result of the denial of coverage by USAA this suit was brought. The liability action of Lehman v. Matland and County of Middlesex has been stayed pending determination of coverage in this matter.
Plaintiff had been the registered owner of the 1974 Pontiac for about three years before the accident. She had been insured by USAA under the assigned risk program since 1976. Defendant Harold Matland had been involved in the sale of various kinds of insurance for about 16-17 years and, although not an agent for USAA, had been insured by them for about five years prior to the accident. The evidence indicates, through his testimony, that to be insured by USAA one must be or have been a commissioned officer in the military service. Thus, while he wrote the policy for plaintiff with USAA, he did so only under the assigned risk program.
In September or October 1978 there was a conversation between Mr. and Mrs. Matland in which the subject of Mrs. Matland's insurance was discussed. She contends that her husband suggested that she be placed under his insurance policy in order to save her money. He denies that the change was made at his suggestion. It is his position that Mrs. Matland requested that he place her vehicle under his policy for the purpose of *504 saving money. However, he did admit that he told her it would save her over $500 in premiums. The agreement was that she would pay her proportionate share of the premium on the policy. The resolution of this factual conflict is unimportant to the determination of the issue. Matland testified that he effected the policy change, adding Mrs. Matland's 1974 Pontiac as an insured vehicle to his policy on October 23, 1977.
In accordance with Mr. Matland's request, USAA issued an amended "Declarations" sheet effective as of October 23, 1977, but dated and apparently mailed on December 19, 1977. The declaration sheet is subdivided into six enumerated "items." Item 1 is entitled "Named insured and address." It contained the name of defendant Harold Matland and his address. Item 2 contained the policy period (October 23, 1977 to October 23, 1978) and a "Numerical designation of operators" which provided as follows:
01 Harold Matland
Lic. # N.J. M08243150001223
02 Marian L. Matland
Lic. # XX 999999
Item 3 contained a description of "owned automobile or trailer" and read in part as follows:
Veh. Year Trade Name Model
01 74 Honda Accord
02 74 Pontiac F/Bird Esp.
Item 5 dealt with coverages as to each vehicle and premium charges as to each vehicle and type of coverage. In the same item the insurer states that one of the reasons for the adjustment of premium is "added operator 02 added veh. 02." To further reflect the amendment, defendant USAA issued two insurance identification cards to plaintiff. One card read, "Marian L. Matland c/o Harold Matland, Lt. U.S.N. Ret., R.D. 2, Tullo Rd., Martinsville, N.J." The second card read simply, "Marian L. Matland, R.D. 2 Tullo Rd., Martinsville, N.J." Both cards referred to the same policy number, the same policy period, and the same 1974 Pontiac.
The policy itself is titled "Family Automobile Policy" and is divided into several parts. In "Part I Liability" coverage for *505 bodily injury and property damage is provided for "all sums which the insured shall become legally obligated to pay as damages...." An "insured" is defined as "a person or organization described under `Persons Insured.'"
The "Persons Insured" paragraph says in part:
(a) with respect to the owned automobile,
(1) the named insured and any resident of the same household,
(2) any other person using such automobile with permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission....
A "named insured" is defined as "the individual named in Item I of the declarations and also includes his spouse, if a resident of the same household." An "owned automobile" is defined as "a private passenger, farm or utility automobile described in this policy for which a specific premium charge indicates that coverage is afforded."
On November 10, 1977 Mrs. Matland left the marital home. She did not advise Mr. Matland of the location of her new residence at any time before the January 1 accident. However, he did know where she was employed.
On December 12, 1977, Matland called USAA because he was "curious" about coverage for Mrs. Matland since she had left his "household." In addition, he was upset because he had learned through undisclosed sources that she was permitting others to operate her vehicle. As a result of the conversation with a representative of USAA on that date, he contacted USAA on the following day and requested the deletion of Mrs. Matland's vehicle from the policy and also requested that Mrs. Matland be deleted as an operator under the policy.
To confirm the conversation between Matland and USAA, the latter issued a letter addressed only to Matland dated December 13, 1977. The letter stated:
Dear Lt. Matland:
This not will confirm our telephone conversation on December 12, 1977, in which I explained how marital separation affects your automobile insurance.
Our eligibility rules limit us to insuring only those vehicles owned and principally operated by our member, residents of the member's household, or bona fide dependents. Your wife is considered a named insured only as long as she is considered a member of your household.
An estranged wife (and dependent children in her custody), not a member of the named insured's immediate household, is considered only a permissive user. *506 In this capacity she may not lend the car and extend coverage, nor is she covered by your automobile insurance policy when riding in or operating a nonowned vehicle.
Because of the limited protection for Mrs. Matland and since questions about her coverage could arise, you might want to suggest that she obtain insurance in her own name at the earliest possible date. By insuring in her own name she will have protection that we cannot provide a non-member.
Your Association management feels that a car removed from the control of our member because of marital difficulty is no longer a subject for our insurance. We must enforce very rigid requirements as provided for under the Bylaws that preclude our continuing to insure indefinitely a car in the possession of an estranged or former spouse.
In addition, please remember that you, the eligible member, have the right to cancel coverage on the car in your estranged wife's possession at any time. However, this would remove all coverage, including the minimal protection for her as a permissive user. Therefore, we suggest that she make arrangements for replacement insurance immediately.
May we have your prompt cooperation in this matter?
Sincerely,
JOYCE FRIEDERICK
INSURANCE SPECIALIST
NEW JERSEY UNIT
A copy of this letter was sent by Matland's attorney to Mrs. Matland's attorney under date of December 22, 1977. The attorney's letter of enclosure states in part, "I strongly recommend that you advise Marian Matland to obtain her own car insurance." No mention was made of the fact that Matland, acting upon the information received in the call of December 12, 1977, amended his policy to delete Mrs. Matland as a designated operator and her vehicle as an insured vehicle. She did not receive the letter through her attorney until December 30, 1977, two days before her accident. At that time she was both surprised and confused. She felt that she had her own policy with USAA and claims that her husband had not told her of the switch-over from her assigned risk policy to the family policy. (Parenthetically, it should be noted that no bill was issued for the amended policy before January 1, 1978, so plaintiff would not have been required to make any payments toward the reduced premium before then.)
Subsequently, on January 9, 1978, USAA issued an amended declaration sheet effective December 13, 1977, deleting Mrs. *507 Matland as an operator and her vehicle as an "owned" automobile.
Defendant USAA contends that defendant Matland, as the named insured, had the sole right to delete coverage and amend the policy. It further contends that, since this is not a cancellation initiated by USAA, the notice provisions of N.J.S.A. 17:29C-6 are inapplicable. The policy provision dealing with this topic permits cancellation only by the "insured named in Item 1 of the declarations" or by "the company" under certain specified conditions. Since USAA argues that its conduct and that of the defendant Matland was not a cancellation, it must logically further concede that the provision of the policy dealing with "cancellation" cannot be the source of Matland's alleged right to delete or amend coverage. Therefore, the conduct of the party defendants must constitute "changes" for which paragraph 14 of the "Conditions" section applies. That paragraph in the portion applicable states:
... nor shall the terms of this policy be waived or changed, except by endorsements issued to form a part of this policy, signed by the attorney-in-fact.
The policy does not say, as defendants argue, that defendant Matland had the exclusive authority to delete or amend coverage as to a vehicle not owned by him. The policy is, in fact, silent on this issue and therefore cannot be resolved by interpretation of the insurance contract.
This case is both factually and legally distinguishable from those cases in which the named insured deletes coverage for children operators who are not owners of insured automobiles. In such cases the named insured owns the automobile and is merely indicating to the company that the child has left the household and no longer will be operating the insured vehicle. Thereafter, if the child is involved in an accident while operating a nonowned vehicle, the insurance for the vehicle would apply rather than the parent's policy. Such cases do not require notice to be given to the deleted drivers. However, generally speaking, no harm results to the general public unless the nonowned vehicle is uninsured. See State Farm v. Zurich American Ins. Co., 62 N.J. 155, 170 (1973), and USAA v. Mione, 34 Colo. App. 448, 528 P.2d 420 (Ct.App. 1974).
*508 However, under the facts of this case, the conduct of defendant Matland does not operate simply to effect a choice of coverage (whether it be primary, concurrent or excess), but rather operates to make the vehicle involved uninsured. To allow such an event to occur without notice to the owner of the insured vehicle is contrary to the public policy of this State which can be determined from various statutes and case law.
Clearly the terms of an automobile insurance policy, or accepted practice in accordance therewith, cannot prevail when such terms and/or practice are inconsistent with statutory policy or decisional law. N.J.S.A. 39:6-48. See Motor Club of America Ins. Co. v. Phillips, 66 N.J. 277, 286 (1974). Matits v. Nationwide Mut. Ins. Co., 33 N.J. 488, 495-496 (1960).
New Jersey statutory law requires every owner or registered owner of a motor vehicle in this State to maintain motor vehicle liability coverage, under provisions approved by the Commissioner of Insurance. N.J.S.A. 39:6B-1. Failure to do so may result in fine and/or imprisonment and forfeiture of driving privileges. N.J.S.A. 39:6B-2. With respect to this requirement, no automobile liability policy may issue to any motor vehicle registered in this State unless it includes certain minimum coverages for payment of bodily injury, property damage, uninsured motorist coverage and first party coverage. N.J.S.A. 39:6A-3; N.J.S.A. 17:28-1.1; N.J.S.A. 39:6A-4.
Plaintiff was the registered owner of the 1974 Pontiac. Both defendant Matland and defendant USAA knew this. The "Declarations" sheet of the policy indicated that she was the designated operator of the Pontiac and that she was going to use it for work five days a week. In addition, USAA issued two insurance cards in her name. Regulations promulgated by the Commissioner of Insurance require insurance companies to issue insurance identification cards and to place the name of the "name insured" on the front of the card. N.J.A.C. 11:3-6.1 and 6.2. This card is necessary for an operator and owner to prove compliance with N.J.S.A. 39:3-29 and N.J.S.A. 39:6B-1 and 2 when asked to do so by a law enforcement officer or municipal *509 court judge. Clearly, then, under New Jersey statutory law USAA cannot issue a policy to a registered owner without giving that owner all the rights of an insured under New Jersey law.
There is little doubt but that in normal insurance practice plaintiff would have been named on the policy as a coinsured. Indeed, in cases where the owner of a motor vehicle has not been designated as an insured but where the evidence showed an intention to be so insured, the policy issued has been reformed to comply with the intention of the parties. Hartigan v. Norwich Union Ind. Co., 188 Minn. 48, 246 N.W. 477 (Sup. 1933); Doyle v. Allstate Ins. Co., 4 Wis.2d 411, 90 N.W.2d 562 (Sup. 1958); Collins v. State Farm Mut. Ins. Co., 188 So.2d 460 (La. App. 1966). Aside from reformation for mutual mistake, an insurance policy may be reformed for the benefit of a claimant where the conduct of the insuror is issuing the policy amounts to unconscionable conduct. Heake v. Atlantic Cas. Ins. Co., 15 N.J. 475 (1954).
Plaintiff, having been a named insured under an assigned risk policy issued by USAA before, had every right to expect the same privileges under the amended policy issued to her husband. There is no evidence in the case which would indicate that either defendant advised plaintiff of the significance of the change except for a saving of premium. Certainly nothing done by USAA would tend to alert her to the contrary. The actual amendment to defendant Matland's policy designating plaintiff as an operator and adding her vehicle to the policy was not even issued until December 19, 1977, a month after plaintiff separated from her husband. The insurance cards plaintiff received would lead her to correctly conclude, both factually and legally, that she was an insured of USAA. N.J.A.C. 11:3-6.1 and 6.2(b)4.
USAA argues that its regulations and bylaws prevent it from designating other than a retired service person as a named insured. Such regulations are apparently an acceptable exclusionary basis for writing insurance in this State. N.J.A.C. 11:3-8.1(e)4(9). However, where such a carrier undertakes to *510 insure a nonmember's motor vehicle and issues an insurance card to a nonmember indicating that the cardholder is an insured, the insurer should be estopped from asserting its regulations and bylaws as a defense. To hold otherwise would bring about an unconscionable result to plaintiff and, for the reasons stated earlier, a clearly unintended result under the statutory and decisional law of this State. Cases such as Motor Club of America Ins. Co. v. Phillips, supra; Matits v. Nationwide Mut. Ins. Co., supra, and Peraglia v. Jones, 120 N.J. Super. 518 (App. Div. 1972), have reformed insurance policies to conform to statutory policy.
The policy is, therefore, reformed to add plaintiff as an insured as to the vehicle owned by her. As such, her husband may not delete coverage without her consent. Safeco Ins. Co. v. Green, 260 Md. 411, 272 A.2d 383 (Md. 1971). The existence of the marital relationship does not necessarily make one spouse the agent of the other spouse in cancelling insurance or deleting coverage. Kent v. Dairyland Mut. Ins. Co., 177 Neb. 709, 131 N.W.2d 146 (Sup. 1964); State Farm Mut. Auto. Ins. Co. v. Long, 16 Ariz. App. 222, 492 P.2d 718 (Ct.App. 1972). Not only did defendant Matland not have plaintiff's consent to modify the policy, USAA knew that Matland was acting without the knowledge of his wife. USAA's letter of December 13, 1977 is clear proof of this fact.
Quite aside from the foregoing decision to reform the insurance policy as indicated, there is some question whether the policy restriction insuring a spouse only "if a resident of the same household" is violative of New Jersey statutory law.
In 1972 the New Jersey Legislature passed an act known as the New Jersey Automobile Reparation Reform Act. N.J.S.A. 39:6A-1 et seq. The historical note accompanying the legislation is instructive:
This act shall take effect immediately and the required compulsory insurance, personal injury protection coverage benefits, and tort exemption provisions shall be mandatory on and after January 1, 1973.
Compulsory liability insurance requiring every "owner or registered owner" to maintain automobile liability insurance in specified *511 amounts is required in § 3 of the act. Personal injury protection coverage is provided in § 4, and uninsured motorist protection is provided in § 14. There is no doubt that the act constituted a comprehensive automobile insurance plan for this State. The sections of the statute dealing with the various compulsory coverages must be read in pari materia. See Brokenbaugh v. N.J. Manufacturers Ins. Co., 158 N.J. Super. 424 (App.Div. 1978).
The act defines a named insured as "a person or persons identified as the insured in the policy and, if an individual, his or her spouse." N.J.S.A. 39:6A-2(g).
The statute does not require the spouse to be a "resident of the same household." Personal injury protection coverage is afforded to the "named insured ... who sustained bodily injury as a result of an accident involving an automobile...." Any insurance policy inconsistent with the act is modified or reformed to comply with its provisions. It would appear that USAA's policy defining an eligible person for PIP benefits contravenes the statute and must be modified to conform. Plaintiff would, therefore, be entitled to PIP benefits regardless of whether she was a member of defendant Matland's household on the date of the accident. Lumbermans Mut. Cas. Co. v. Carriere, 170 N.J. Super. 437 (Law Div. 1979). A similar result would be dictated if the uninsured motorist coverage was applicable to the case since the provisions of PIP and UMI coverage are to be read in pari materia. Brokenbaugh v. N.J. Manufacturers Ins. Co., supra.
It would seem incongruous, then, to allow the liability insurance provision of the act to arrive at a contrary result simply because the policy contains a more restrictive definition than the statute. If plaintiff would be entitled to PIP benefits in spite of the policy definition of a "named insured" there is no valid reason why she would be denied liability coverage based upon the same policy definition.
Other jurisdictions have found similar definitions too restrictive and have afforded coverage. In Aetna Cas. & Sur. Co. v. *512 Miller, 276 F. Supp. 341 (D.Ct.Kan. 1971), a policy definition identical to the one in question was found violative of the policy found in the Kansas financial responsibility laws. The court said:
To ameliorate the harsh effects of uncompensated automobile accidents, the Kansas Legislature, in 1939, adopted, with a few changes, the Uniform Financial Responsibility Act ...
... As such, it is to the public interest of every user of the highway not to have to proceed at his peril because of a welter of technicalities whether factual or in law of the applicability of a particular driver's liability insurance policy.
One of the great shames of American society is the ever-increasing divorce rate and breakup of families which lead to increased crime, social and economic irresponsibility ... If it were necessary as a condition precedent to driving an automobile on a public highway under the protection of the Financial Responsibility law, to examine the martial status of every driver to find out whether he was married, divorced, or separated temporarily from his fireside, bed and spouse, by duty, business, or a family quarrel, no citizen using the highway could ever reasonably expect to be protected by the other motorists' compliance with the state laws requiring the carrying of automobile liability insurance.
This Court does not believe that an insurance company, doing business as a quasi-public institution, can or should be able to avoid liability under ambiguous provisions of a policy by attempting to require the spouse of the policy owner as an `insured' to remain under the same roof and in the same physical household during the legal existence of a marriage. Neither does this Court believe it is incumbent upon a user of the highways to conduct a `bed check' to see if another motorist is fully and safely insured by the fact that conjugal bliss is present in his home at the time. [at 348]
A result favoring coverage, but for different reasons, was arrived at in another case involving a similar policy definition. Hartford Ins. Group v. Winkler, 89 Nev. 131, 508 P.2d 8 (Sup. 1973). In that case the policy was issued on January 8, 1964, to the husband in his name only. The wife left the marital home in April 1965 and filed for divorce in May 1965. When the policy issued, an insurance card was delivered to the wife. She was involved in an accident on June 25, 1965, while driving a vehicle not covered in the policy. The court held that she was an insured within the meaning of the policy. It found that the wife clearly qualified as an insured on the date the policy issued. The policy was silent as to when the wife had to be a resident of the same household in order to be a named insured. (The policy in this case is also silent on the same issue.) In view of that fact *513 the court concluded that so long as the wife was a resident of the household when the policy issued, she qualified as a named insured and remained as such so long as she was married to the designated insured.
Although other arguments have been advanced by plaintiff in this matter, they need not be passed upon in view of the court's preceding analysis. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545647/ | 40 B.R. 657 (1984)
In re BOLTON HALL NURSING HOME, et al., Debtors.
Bankruptcy No. 76-1395-L.
United States Bankruptcy Court, D. Massachusetts.
May 15, 1984.
*658 *659 MEMORANDUM AND ORDER RE CASE CLOSINGS AND FINAL ALLOWANCES
THOMAS W. LAWLESS, Chief Judge.
These forty-eight (48) cases were commenced on May 26, 1976 with the filing of twenty-eight (28) voluntary petitions under Chapters XI and XII of the former Bankruptcy Act. Petitions by and against the remainder of the debtors were instituted in the following weeks. Because of the financial interrelationships among the debtors all of these cases were removed to this Court and jointly administered pursuant to Rules 117, 11-14 and 12-14.
Over $110,000,000 was administered during these proceedings and, although In re GHR Energy Corp., (D.Mass.1982) involves approximately $1,400,000,000, I am convinced that the complexities encountered in the cases at hand have rarely, if ever, been equalled.
The debtors were engaged in the ownership, development and operation of health care facilities. Although their activities were concentrated in the states of Massachusetts, Connecticut, and New York, there were properties or related operations in at least five other states. When the cases commenced several buildings were under construction and there were twenty-three (23) operating skilled nursing homes providing residential health care to about 3000 patients and employing another 3000.
The principal difficulty which had to be faced in the reorganization of these debtors was the composition of the debtors' creditor interests. Each of the properties owned by the debtors was separately financed. All of the debtors' operating assets were encumbered by separate layers of real estate mortgages and separate levels of personal property liens. Unlike other reorganization proceedings involving more debt dollars and more dispersed operations, there was no one class of creditors which could be dealt with through negotiations with one representative or committee or on the basis of one collection of financial information. Even some of the bank creditors who held mortgages upon more than one of the debtors' properties were partners with different participating banks in each loan and demanded separate consideration of each debtor's financial capacity.
When the debtors' motion for substantive consolidation was withdrawn in the face of nearly unanimous creditor opposition, the debtors were required to deal with their creditors in negotiations and litigation which focused upon the circumstances of each creditor and its debtor. All of these matters had to be addressed simultaneously and at the same time that the Trustees and Receivers appointed in these cases pursued a thorough investigation of the debtors' financial collapse which was ordered by this Court. In addition serious disputes often involving novel questions of law and complex accounting facts which developed between the debtors and various taxing authorities, public health regulatory agencies and Medicare and Medicaid rate setting authorities had to be addressed. One contract dispute with New York City alone required several days of trial and several written opinions by the Court before it was resolved by payment of $1.65 million to the debtors. See Fisher, et al., v. Smith, et al., 23 B.R. 295 and 23 B.R. 307 (Bkrtcy.D. Mass.1982).
The result of all of these activities has been a remarkable success. Millions of dollars have been paid to taxing authorities and other priority creditors all of whom have been paid in full, in cash. About seventy million dollars in secured claims have been paid, by way of settlement or litigation or rearranged on terms acceptable to the secured creditors. Plans of arrangement have been confirmed in forty (40) of these cases and substantial distributions paid to general creditors. Attached hereto as Schedule A is a summary listing of the final disposition of these cases.
An Order for Notice Regarding Orders of Dismissal and Orders of Confirmation, *660 Hearing Concerning Applications for Final Allowances and Final Accounts of Trustees and Receivers, Final Meeting of Creditors and All Other Matters Relating to Case Closing was entered in these cases on August 17, 1983. This notice was mailed to all creditors and parties in interest and was published in the Boston Globe and the Wall Street Journal newspapers. Among other matters this notice provided as follows:
Any interested party who wishes to object to the final allowances requested herein or to the final accounts of the Trustees and Receivers in these proceedings, or who wishes to raise any matter which should be disposed of before the conclusion of these cases must do so in writing on or before October 7, 1983 at 4:00 P.M. Any such writings shall be filed with the Clerk of the Court and served upon counsel to the Debtors and counsel to the Trustees at the addresses listed below. Failure to file and serve such written notice shall be conclusive evidence that any objection or any issue which might have been so raised is waived and any claim arising therefrom against the Debtors, the Trustees and Receivers, the successor entities created under the confirmed plans or any of them will be forever barred. (emphasis in original).
Pursuant to this notice a hearing was held on October 21, 1983. Prior to the hearing only three (3) objections were timely filed. One objection by a creditor was dismissed when, contrary to the assertions in the objection, the creditor could not produce evidence that it had timely filed proofs of claim. Cf. In re G.L. Miller & Co., 45 F.2d 115 (2d Cir.1930). The second objection by the New York State Health Department was resolved by agreement of the parties pursuant to stipulation. The final objection, also by New York State involving claims in the case of Rosewood Gardens Health Related Facility, was the subject of a pre-trial order pursuant to which the new entity created under this debtor's plan has assumed responsibility for the defense of this claim and assumed payment responsibility in the event of liability in excess of posted security.
In these circumstances, the consideration of final allowances, final accounts and other matters related to closing these cases is appropriate.
Final Allowances
The often tedious and sometime unpleasant task of fee determinations is made more enjoyable when the Court has the opportunity to both award for a job well done and close forty-eight (48) cases. In these cases, applications for final compensation totalling $6,754,364.32 have been filed by sixty (60) firms of attorneys, accountants, and appraisers. Of this amount, $4,810,493.31 was paid in interim allowances during the administration of these cases and $1,943,871.01 is sought in final awards. Three firms have requested an upward adjustment of their "lodestar" rates.
The factors which this Court must consider in establishing final allowances are well-established in this Circuit and are set forth in the case of Furtado v. Bishop, 635 F.2d 915 (1st Cir.1980). Although these standards evolved in the context of awards of attorneys fees in civil rights litigation, they have been regularly applied in this Circuit in proceedings under the Bankruptcy Act. See, e.g., In re Continental Investment Corporation, 28 B.R. 972 (D.C.D. Mass.1982); In re Idak Corporation, 26 B.R. 793 (Bkrtcy.D.Mass.1982).
Essentially, the Court is required to conduct a two-step analysis of fee requests. First it must determine an appropriate "lodestar" amount or base fee by multiplying the number of hours reasonably expended on the case by the customary hourly rate of compensation. The "lodestar" amount is determined by considering such factors as time and labor reasonably required, customary fees billed, awards in similar cases, the experience and skill of the personnel involved and whether, considering the difficulties presented, the level of commitment was appropriate.
*661 After the basic lodestar rate is established, increases or reductions of that rate have been considered by reference to the factors "which have not already been taken into account in computing the lodestar and which are shown to warrant the adjustment by the party proposing it." Miles v. Sampson, 675 F.2d 5, 8 (1st Cir.1982) (emphasis supplied), quoted in In re Casco Bay Lines, Inc. 25 B.R. 747, 756 (Bankr. 1st Cir.1982). Such factors may include, if they were not already taken into account when computing the lodestar, the contingent nature of success and the delay in receipt of payment. See Copeland v. Marshall, 641 F.2d 880, 892 (D.C.Cir.1980).
The lodestar can be further adjusted to reflect the "quality of representation." This adjustment is appropriate "only when the representation is unusually good or bad, taking into account the level of skill normally expected of an attorney commanding the hourly rate used to compute the `lodestar'." Id. (emphasis supplied). It is under the heading "quality of representation" that a bankruptcy court should particularly consider the results of the attorney's participation in the bankruptcy proceeding and the benefit to the estate to see if circumstances warrant adjustment of the lodestar amount. In re Casco Bay Lines, Inc., supra, at 756. See Copeland v. Marshall, supra, at 894. Where an attorney's services have produced particularly exceptional benefits for the estatetaking into account the hourly rate commanded and the number of hours expended an upward adjustment of the lodestar may be warranted to compensate for an hourly rate that turned out to be overly conservative. Similarly, if a high-priced attorney performs in a competent but undistinguished manner a decrease in the hourly rate would be warranted. Id.
While these fee applications were under advisement, the Supreme Court issued its opinion in Blum v. Stenson, ___ U.S. ___, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984). In that civil rights case, the Supreme Court held that an upward adjustment of the reasonable hourly rates was inappropriate in the particular circumstances of that case. In Blum, the Supreme Court held that the fee applicants did not carry their burden of putting forth evidence, by affidavit or otherwise, supporting an upward adjustment.
The burden of proving that such an adjustment is necessary to the determination of a reasonable fee is on the fee applicant. The record before us contains no evidence supporting an upward adjustment to fees calculated under the basic standard of reasonable rates times reasonable hours. The affidavits of respondent's attorneys do not claim, or even mention, entitlement to a bonus or upward revision.
Blum v. Stenson, ___ U.S. ___, ___, 104 S. Ct. 1541, 1548, 79 L. Ed. 2d 891 (1984).
The Supreme Court also found that the reasons offered by the District Court in Blum did not support an upward adjustment of the lodestar fee. In awarding the increase, the District Court had briefly referred to the complexity of the litigation, the novelty of the issues, the high quality of representation, the "great benefit" to the class, and the "riskiness" of the law suit. As to the first four factors cited by the District Court, the Supreme Court said these factors should not ordinarily provide independent bases for increasing the fee award because these factors are generally subsumed within those used to determine the lodestar amount. ___ U.S. at ___ - ___, 104 S.Ct. at 1548-49. The Supreme Court found that on the record before the District Court, its rationale for providing an upward adjustment is a clear example of "double counting." Id.
Blum has been cited as effecting a "fundamental change in the law governing the award of attorneys' fees in section 1983 cases" by "circumscribing very severely upward adjustment of the lodestar figure." May v. Cooperman, 582 F. Supp. 1458 (D.N.J.1984). I do not read Blum so broadly. Blum specifically recognizes that "quality of representation" may justify an upward adjustment "where the fee applicant offers specific evidence to show that *662 the quality of service rendered was superior to that one reasonably should expect in light of the hourly rates charged and that the success was `exceptional'." Blum v. Stenson, supra, ___ U.S. at ___, 104 S.Ct. at 1549, citing Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1984). In my opinion, besides articulating a succinct standard for determination of requested lodestar adjustments, Blum does not effectuate any major changes in the law governing fee allowances in bankruptcy cases in this Circuit. For example, it is well-established that the party proposing an adjustment to the lodestar has the burden of showing that it is warranted under the circumstances. Miles v. Sampson, supra, at 8. Second, adjustments to the lodestar are the exception and not the rule. Id. See also Furtado v. Bishop, 635 F.2d 915, 924 (1st Cir.1980). Third, the lodestar should not be adjusted upward or downward by factors that were already taken into account in determining the lodestar. Miles v. Sampson, supra, at 8. See also In re Casco Bay Lines, Inc., supra, at 756-757. Finally, the Supreme Court in Blum left open the question of whether the risk of nonpayment and other risk factors should be considered in making adjustments to the lodestar rate. Blum v. Stenson, supra, ___ U.S. at ___, n. 17, 104 S.Ct. at 1550, n. 17. Accordingly, the rule of law in the First Circuit that risk of nonpayment and other risk factors are appropriate adjustment factors continues to govern in these proceedings to the extent applicable. See Furtado v. Bishop, supra; Kennelly v. Lemoi, 529 F. Supp. 140 (D.RI 1981); See also Blum v. Stenson, supra, ___ U.S. at ___, 104 S.Ct. at 1550 (concurring opinion of J.J. Brennen and Marshall) (specifically supporting the position that the risk of not recovering attorney's fees is a proper basis on which to award an upward adjustment).
I have considered the standards set forth in Furtado with regard to each applicant. I am aware that although no objections to the applications for final awards were filed, the Court has an independent duty to examine the reasonableness of all fee requests. Because of the large number of applications to be considered, no useful purpose will be served by articulating in this memorandum a repetitive detailed analysis of the Furtado criteria with respect to each application. Instead, the Court will focus upon the major players in these proceedings and deal with applications for lesser amounts in less detailed fashion. With respect to applications for upward adjustments of the base rate, the Court will apply the Blum standard as set forth above.
Counsel to the Debtors
I believe that the great share of credit for the successful conclusion of these cases is due to the efforts of Attorney Barry Portnoy and the law firm of Sullivan & Worcester, counsel to the debtors. To say that achieving the final result required an incredible effort is to understate the task. This was not one case with myriad problems but rather the reorganization of forty-eight (48) separate debtors wherein the problems were multiplied geometrically.
During the first two and one-half years of these proceedings these cases demanded substantially all of Attorney Portnoy's professional time. My own observations during innumerable hearings throughout this period indicate that he maintained complete command of all phases of the numerous negotiations and complex litigation which were on-going at that time. Without his commitment, it is likely that all of the forces pulling in different directions may have resulted in adjudications of the debtors followed by secured creditor's foreclosures and serious economic losses to all interested parties. Because of his efforts, Plans of Arrangement were confirmed for the majority of the debtors by the end of 1978.
Mr. Portnoy and Sullivan & Worcester were primarily responsible for the negotiations and implementations of the confirmed plans of arrangement. Some of the more complicated litigation involving Medicaid rate-setting disputes which directly impacted *663 upon the financial feasibility of the plans were handled successfully by these attorneys. During the course of these cases numerous obstacles were presented and were overcome by creative solutions presented by these attorneys. For example, to effect confirmation of one plan, certain assets and liabilities had to be transferred to a new limited partnership which was born a debtor in these proceedings and whose plan was subsequently confirmed. Moreover, in order to comply with New York State laws regarding licensure and establishment of health care facilities, a post-confirmation trustee was appointed so that creditors could be paid while State administrative procedures proceeded.
A review of time records submitted by Sullivan & Worcester indicates that attorneys and paralegal assistants at this firm devoted a total of 16,040.75 hours to these cases from May 1976 to today. The weighted average hourly rates charged by these personnel during this period was $70.78. A first reading of the more recent time records indicates that comparatively too much effort by relatively senior, high priced lawyers as opposed to junior, lower priced lawyers may have been allocated to these cases by Sullivan & Worcester. Upon closer review, however, it is apparent that it would not have been cost efficient to educate junior lawyers to the facts of these cases as the stature and billing rates of the attorneys such as Mr. Portnoy who were handling the cases increased during the years since 1976. Considering these facts, I find the time expended and the lodestar rate charged by this Applicant to have been appropriate.
The sworn Application for final allowance of fees and expenses filed by Sullivan & Worcester and the Memorandum in Support of their application requests the following upward adjustment of the hourly rates of the four principal attorneys who worked on these cases:
Range of Hourly Weighted Avg. Requested
Rates During Proceeding Hourly Rate Adjusted
Attorney During Proceeding Hourly Rate
(1) Barry M. Portnoy $65-165 $83.36 $125
(2) J. Christopher Robinson $40-90 $45.44 $100
(3) Kerry R. Lyne $90-140 $98.48 $125
(4) Joseph H. Newberg $50-135 $58.76 $100
Total Request: $ 1,598,742.00
Lodestar Allowed: $ 1,049,913.39
Upward Adjustment Requested: $ 539,628.61
While I find that the quality of services rendered by Messrs. Robinson, Lyne and Newberg to have been highly competent, I do not find that the quality of service rendered was superior to that one reasonably should expect in light of the hourly rates charged. Accordingly, Sullivan & Worcester's request for an upward adjustment of these attorneys' hourly rates is denied.
With respect to Mr. Portnoy, however, an upward adjustment of the lodestar is appropriate. During the seven and one-half years of these proceedings Mr. Portnoy devoted 7,380 hours to these cases at an average hourly rate of $83.86. Of course, the amount of time expended is not itself justification for upward adjustment of the lodestar rate. On the contrary, a downward adjustment is probably just as often appropriate in such cases. Rather, in these cases it is the nature and quality of the services performed in light of the hourly rates charged that warrant an upward adjustment.
As is fully attested to in the affidavit submitted with Sullivan & Worcester's fee application, the services performed have required extraordinary legal skills in the *664 areas of corporate finance, real estate law, medical and public health law, commercial transactions, bankruptcy law, tax law and litigation. For example: questions of both fact and law concerning the interrelations of Medicare and Medicaid rate laws and regulations and the former Bankruptcy Act had to be addressed, usually on a first impression basis, in the context of litigation. Separate negotiations with each class of each debtor's creditors were required to take place in the context of the complex business structure of the debtors, which contained a difficult tangle of general partnerships, limited partnerships, corporations, business trusts and sole proprietorships. The panoply of often conflicting creditors' interests active in these proceedings created almost continuous litigation during the early years of the proceedings and made the development of plans for the operating entities and individual debtors particularly difficult.
In sum, the quality of legal services rendered by Mr. Portnoy as lead attorney with primary responsibility in these cases was clearly superior to that one would expect in light of his charged hourly rates and fully justify the requested adjustment.
The second requirement for an upward adjustment of the basic rate is that the applicant's services accomplished a result that can be considered "exceptional." See Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983). Although the gross amounts involved in these cases were not as great as the amounts involved in certain other recently concluded arrangement and reorganization proceedings in this District, a straight-line equation between the amount involved and the success achieved is not necessarily appropriate. The results achieved in these cases, viewed from the perspective of the prospects of these debtors and their creditors on the day of the bankruptcy filings and in light of the opposition encountered, cannot be characterized as anything other than exceptional. The efforts of the fee applicants in these proceedings have produced the following results:
(a) Reorganization of thirty-six (36) of the entity debtors into on-going businesses operating in three different states and providing employment for over 3,400 persons and high quality resident health care to approximately 3,000 patients;
(b) Payment of approximately $4,000,000 in pre-petition tax claims and of substantial post-petition tax claims to various municipal, state and federal taxing authorities;
(c) Payment or assumption of approximately $50,000,000 of indebtedness to various secured creditors in rearrangement and satisfaction of their claims;
(d) Settlement and payment of millions of dollars of unsecured claims on a case by case basis by plans of arrangement which sometimes paid 100% depending upon the circumstances of individual debtors;
(e) Collection and disbursement of approximately $110,000,000 during the administration of these cases; and
(f) Return of ownership and control of all but three (3) of the operating businesses to the individual debtors.
By any standard, from the point of view of debtors' counsel, such results must be considered "exceptional." Because Mr. Portnoy's efforts were primarily responsible for the results obtained, the lodestar adjustment may be accomplished by raising his hourly rate throughout these proceedings to $125/hour, a substantial premium, but a figure which is still well below his current usual billing rate.
For these reasons, including the extraordinary time commitment made by Mr. Portnoy in the first two and one-half years of these proceedings in the face of a very real risk of nonpayment, see Furtado v. Bishop, supra, Attorney Barry M. Portnoy and the law firm of Sullivan & Worcester are awarded a final fee of $1,442,667.49 of which amount $999,058.64 has been previously paid as interim allowances and $443,608.85 is to be paid. In addition, this applicant is allowed final reimbursement of expenses of $86,624.07 of which amount $68,991.11 *665 has been previously paid leaving a balance of $17,632.96 to be paid.
Counsel to the Trustees and Receivers
During these proceedings the trustees and receivers appointed for the various debtors have been ably represented by counsel. Several such counsel made major contributions to these proceedings and are deserving of special mention.
The firm of Goldstein & Manello was counsel to trustees/receivers Fisher, Langan and Maguire throughout these proceedings. At the commencement of these cases the laboring oar for work assigned to this firm was pulled by Attorney Daniel Glosband. Attorney Glosband is presently chairman of the Massachusetts Bar Association Committee on Reorganization and he is generally recognized as a young but leading practitioner of this area of the law in New England. See In re Continental Investment Corporation, supra, 28 B.R. at 984, n. 12. His services in these cases were diligently and efficiently performed. When Mr. Glosband was otherwise occupied during the past few years, the work assigned to this firm was performed largely by Attorney Robert Somma who, although less experienced than Mr. Glosband, was equally proficient.
Among other matters, Goldstein & Manello was primarily responsible for representing the trustee/receivers in litigation, negotiation and settlement with the federal, state and over two dozen local taxing authorities in connection with substantial priority and lien claims owed by the debtors. Such settlements produced tax savings to the debtors and their estates well in excess of $500,000 and materially contributed to the ultimate feasibility of the debtors' reorganization and their viable post-reorganization efforts.
Goldstein & Manello assisted and advised the trustees/receivers in their negotiation, litigation and settlement with both federal and state agencies regulating the management, operation and participation of the debtors' nursing homes and health care facilities in the federal Medicare program and the Medicaid programs of Massachusetts, Connecticut, the State of New York and the City of New York. A brief and partial listing of the matters involved includes successful resistance to federal and state attempts to effectuate improper offsets of pre-Proceedings claims against post-Proceedings revenues; successful collection of over $500,000 in accounts receivable from state agencies for nursing and health care services rendered to Medicaid patients; resolution of complicated disputes in respect of interim and final rates for such services; resolution of disputes regarding compliance by the debtors' nursing homes and health care facilities with federal and state regulations governing the safety and welfare of patients resident in such homes and facilities; and the successful collection of $1.65 million in breach of contract damages from the City and State of New York after a lengthy trial.
The time records submitted indicate that attorney and paralegal personnel at Goldstein & Manello devoted 7,585.3 hours to these cases at a weighted average hourly rate since 1976 of $62.15 per hour. Considering the tasks delineated above and the eight other major tasks performed by this applicant in these proceedings (as documented in Goldstein & Manello's verified fee application), I find the time expended and the lodestar rate to be justified.
In its sworn application for final allowances, Goldstein & Manello requests an increase of the firm's mixed hourly rate for its services herein from $62.15 to $75. The adjustment to the lodestar fee produced by application of the requested $75 mixed hourly rate is $97,502.63.
Under the circumstances, I disfavor any such across the board increase of the mixed hourly rate of the fourteen professionals who worked on these proceedings at Goldstein & Manello. I am unable to find from the submissions of this applicant or from my observations that the service rendered by each of these individuals who worked on these cases was superior to that one would expect in light of their charged hourly rates.
*666 As to Messrs. Glosband and Somma, however, my observation and review of the work performed and the fully detailed and extensive chronological narratives, related summaries and affidavits submitted by this applicant provide an evidentiary basis for an upward adjustment of these two attorneys' base hourly rates. The services rendered by these two attorneys played a major role in achieving the `exceptional' results previously documented herein and fully satisfy the "success" requirement of Blum.
Additionally, it is clear that a degree of innovation, novelty and deliberation far superior to their billed hourly rates was exhibited by Mr. Glosband and Mr. Somma in their work in these proceedings. For example, the innovative tax litigation/settlement procedure developed by Mr. Glosband produced substantial tax savings for these estates at a cost substantially less than that incurred if conventional techniques and tactics had been employed. Mr. Glosband's work in this area set standards that were followed in other major First Circuit reorganization cases and was clearly superior to that one would expect in light of his billed hourly rate. An adjustment of his lodestar hourly rate of $72.48 to $90.00 is justified under these circumstances.
As to Mr. Somma, the services rendered by him as the principal attorney in the contract litigation with New York City and New York State was also superior to that one would expect from his charged hourly rate. The legal analysis developed and employed by him, as well as his extraordinary commitment to detail, resulted in a full vindication of the rights asserted by the debtors and their estates. The appeal of the multi-million dollar judgment that was produced by Mr. Somma's efforts was ultimately compromised for an amount that preserved all but a fractional portion of the original judgment. Accordingly, Mr. Somma's hourly rate of $91.05 is hereby adjusted upward to $100.
In view of the above, the lodestar fee of Goldstein & Manello is adjusted upward by $48,405.90. Accordingly, final fees are awarded to the firm of Goldstein & Manello in the amount of $519,800.83 of which amount $412,518.85 has been previously paid and a balance of $107,281.98 is to be paid. In addition, final reimbursement in the amount of $26,473.68 is awarded to this applicant of which $23,976.70 has been paid and $2,496.88 is to be paid.
Attorney William F. Macauley and the law firm of Craig and Macauley served as counsel to the trustees, Joseph W. Bartlett and J. Joseph Maloney. Attorney Macauley was responsible for the Court ordered investigation of the allegations of improper conduct which were leveled against the debtors at the commencement of these cases. His findings were essential background for the Court and the creditors to proceed with plans which returned control of the debtors to their pre-filing owners. The combination of firmness and fairness which Mr. Macauley brought to this task was an essential underpinning for the successful financial rehabilitations achieved in these cases.
In addition to his investigative responsibilities, Attorney Macauley served as counsel to the trustee for four of the operating limited partnership debtors. When wrongdoing by the non-debtor general partners was established, his efforts established on a first impression basis the equitable principal that in appropriate circumstances a limited partner can assume control of reorganization efforts. See In re Brookhollow Associates, et al., 575 F.2d 1003 (1st Cir. 1978). His litigation success formed the basis upon which successful plans for the businesses operated by these partnerships were presented.
The time records submitted indicate that Mr. Macauley and members of his firm devoted a total of 4,473.6 hours to these cases which were billed at a weighted average hourly rate of $67.75/hr. Applying the Furtado standards, I find the time and rate appropriate.
In its sworn application for final allowances, Craig and Macauley requests an upward adjustment of the weighted average hourly rates of both attorney Macauley *667 (2,192.2 hours at $74.44/hr.) and attorney Craig (200.4 hours at $100/hr.) to $100/hr. and $110/hr., respectively. The adjustment to the lodestar fee produced by application of these requested hourly rates is $58,036.63. Craig and Macauley also requests the establishment of a flat $60 hourly rate for all associate time spent on these proceedings. The net adjustment to the lodestar fee produced by application of this $60 hourly rate to all associate time is an increase in the lodestar fee in the amount of $37,078.49.
The requests for upward adjustment of the billed hourly rates of both Attorney Craig and the various associates are denied because I do not find that the quality of services rendered by these applicants superior to that one would expect from their charged hourly rates. However, the quality of services rendered by Mr. Macauley and the exceptional results achieved from his services in light of the amount charged warrant upward adjustment of his lodestar rate.
This applicant's novel legal approach to the partnership issue enabled a reorganization of the four partnership debtors to take place in spite of the refusal of two of the three general partners to assent to the petitions under Chapter XII. The results obtained in the partnership proceedings were exceptional in light of the constant opposition to the filings, which required Attorney Macauley's successful participation in eleven appeals to the District Court and First Circuit. Further, at the time Mr. Macauley became involved, these four debtors had already been adjudicated and secured parties were claiming liens on all of the assets. Mr. Macauley was successful in converting these cases and in holding off the secured creditors long enough to amass funds to pay all secured and unsecured creditors. In sum, the services performed and the results achieved warrant the upward adjustment of Attorney Macauley's hourly rate from $74.44 to $100, an upward adjustment of Craig and Macauley's fee in the amount of $56,032.63.
Accordingly, this applicant is awarded a final fee of $345,606.63 of which $261,158.54 has been paid and $84,448.09 is to be paid. In addition, $9,254.35 in final reimbursement is awarded to this applicant of which amount $8,626.10 has been paid and $598.26 is to be paid.
Attorney Irving Widett served as senior counsel to the trustees and receivers throughout these proceedings. Attorney Widett has been a leader of Boston area insolvency and commercial law practitioners during the past forty years. Throughout this Court's regular observation of Mr. Widett's work during these years he has approached every case with enthusiasm and ingenuity. Whether he was representing a prominent citizen who was serving as a court appointed fiduciary or acting for an impecunious debtor with little hope of compensation, Attorney Widett has given every client dedicated high quality service. His service in these cases was marked by the same professionalism.
In these cases Mr. Widett and his firm were primarily charged with the day-to-day work of bankruptcy administration. It was his job to locate and recover preferences and fraudulent transfers, to review and dispute claims where appropriate, to keep creditors and other parties in interest advised of the progress of these cases, and to negotiate and implement the day-to-day compromises with suppliers which were essential to maintain the viability of the debtors' businesses. Lest these tasks sound mundane, it should be emphasized that millions of dollars were involved in reviewing claims in these cases and settlements with essential suppliers often raised life-threatening emergencies to the hundreds of patients who were dependent upon the debtors for residential health care.
At the time these cases commenced Mr. Widett was a senior partner of the law firm of Widett, Widett, Slater & Goldman. In 1979 he was the founding partner of Widett & Glazier. Widett, Widett, Slater & Goldman has been paid in full by interim awards in these cases and those payments ($348,756.86 in fees and $19,169.65 in reimbursement) *668 are hereby confirmed as final. A review of the fee applications submitted by Widett & Glazier indicate that Mr. Widett has billed his time devoted to these cases since 1980 at an average hourly rate of $162.30/hr., a rate which this Court considers appropriate for an attorney of his experience and standing in the community. These applications also reveal that other attorneys at this firm charged since September, 1979, the weighted average hourly rate of $80.75/hr. These other attorneys were quite junior and the type of work which they performed toward the conclusion of these cases was not particularly complicated or time sensitive. Therefore, I find that an appropriate lodestar hourly rate for attorneys at Widett & Glazier who worked on these cases since September, 1979 other than Mr. Widett was $50/hr. For the foregoing reason, Attorney Irving Widett and the firm of Widett & Glazier are awarded final compensation of $87,463.75 of which $46,800 has been paid leaving $40,663.75 as a balance to be paid, and final reimbursement of $1,918.40 of which $1,621.14 has been paid and $297.26 is to be paid.
The Trustees and Receivers
At the commencement of these cases it was apparent that the appointment of trustees and receivers was required to stabilize the debtors' operations and instill confidence in their viability among their patients, creditors and the affected public generally. Because of real and potential conflicts of interest among the jointly administered estates, because of the time commitments required and because of resignations during the seven and one-half years which these cases have been pending, several persons have served as trustees or receivers of the various debtors.
Frederick G. Fisher, Jr., was appointed a trustee and receiver of many of these debtors on June 4, 1976 and served in that capacity throughout these proceedings. Mr. Fisher is a senior partner of the Boston law firm of Hale & Dorr. He is a past president of the Massachusetts Bar Association and he is now and has been for several years a Massachusetts State Delegate to the House of Delegates of the American Bar Association. In the 1960's Mr. Fisher was the first prominent attorney in a major Boston law firm to regularly practice insolvency law. Today his firm has one of the largest insolvency practices in New England and Mr. Fisher has a national, and indeed international, reputation as an insolvency and commercial law expert.
James M. Langan also served as a trustee and receiver throughout these proceedings. Mr. Langan served as a Special Justice of the Massachusetts District Courts from 1947 until his retirement. Because of the ethical limitations created by his public service, Mr. Langan's law practice was particularly suited for fiduciary service and he has developed considerable expertise in bankruptcy administration over the years. This Court and others have frequently called upon Judge Langan when faced with the need to create an immediate perception of integrity such as was required in these cases.
Richard Maguire served as a trustee and receiver in certain of these cases until he resigned prior to his death in early 1983. Mr. Maguire was a founding partner of the Boston law firm of Maguire, Roach and Leen. In the early 1960's he served as Treasurer of the Democratic National Committee and played a prominent role in local and national public affairs. At the time of his appointment Mr. Maguire had largely retired from the active practice of law and he was able to devote considerable time to supervising the debtors' operations in the early, crucial years of these proceedings.
Joseph W. Bartlett served as a trustee in five of these cases from September, 1976 through December 1977. Mr. Bartlett was a law clerk to the late Chief Justice Earl Warren, he was general counsel to the United States Department of Commerce in the 1960's, he has served as President of the Boston Bar Association and is presently a prominent practitioner in both Boston and New York City. Mr. Bartlett supervised the investigatory work undertaken by attorney *669 William Macauley in these proceedings and added to its credibility and impact.
J. Joseph Maloney replaced Mr. Bartlett as a trustee in these cases in January, 1978 and served until the conclusion of these cases. Mr. Maloney had served as co-counsel to Mr. Bartlett prior to his resignation and his willingness to serve as trustee allowed an efficient transition. Besides maintaining a successful general practice of law with the firm of Maloney, Gallagher and Desmond, Mr. Maloney is a prominent member of the Boston business community and serves as chairman of a local savings bank. The Court has no doubt that Mr. Maloney's practical business advice was of considerable value in bringing the debtors and creditors together to formulate successful plans in those cases in which he served.
This Court believes that in applying the Furtado analysis to compensation to be paid trustees and receivers particular emphasis should be placed upon the responsibility assumed. The Court must recognize that it is in part employing the reputation of the individuals who accept its appointments. In the present cases the responsibilities assumed were enormous and the reputations for integrity and high ability which these individuals brought with them made material contributions to the successful conclusions of these cases.
On April 6, 7 and 12, 1977, the Court conducted evidentiary hearings on the first applications for interim allowances of compensation for Messrs. Fisher, Langan and Maguire. Hotly contested by the various mortgagees in these proceedings, the requests for interim allowances were ultimately allowed after considerable testimony and evidence regarding the value of comparable services in the marketplace. Richard D. Little, of the consulting firm of Arthur D. Little, Inc., testified that his firm would have charged approximately $250,000 to $275,000 for services analagous to the duties performed by the trustees and receivers in the first seven crucial months of these proceedings. At that time, I concluded that the interim requests were more than justified and the fairest measure of compensation for the heavy responsibilities assumed by these three individuals was most appropriately considered in the context of yearly salaries. The ultimate results achieved in these cases have more than justified the first interim awards and the several interim awards that have followed. However, at the same time, the Court recognizes that the burdens assumed by these trustees and receivers gradually lessened as these debtors emerged from these reorganization proceedings over the past several years. Accordingly, the Court establishes the following final rates of compensation for these applicants for the years in question:
TRUSTEES/RECEIVERS: COMPENSATION
------------------------------------------------------------------------------------------
| Period/Established Final Rates | F. Fisher | J. Langan | R. Maguire |
|--------------------------------------------|------------|-------------|----------------|
|(1) June 1, 1976 to May 31, 1977: | | | |
| $325,000/year | $108,333 | $108,333 | $108,334 |
|--------------------------------------------|------------|-------------|----------------|
|(2) June 1, 1977 to May 31, 1978: | | | |
| $300,000/year | 100,000 | 100,000 | 100,000 |
|--------------------------------------------|------------|-------------|----------------|
|(3) June 1, 1978 to May 31, 1979: | | | |
| $275,000/year | 91,666 | 91,667 | 91,666 |
|--------------------------------------------|------------|-------------|----------------|
|(4) June 1, 1979 to May 31, 1980: | | | |
| $225,000/year | 75,000 | 75,000 | 75,000 |
|--------------------------------------------|------------|-------------|----------------|
|(5) June 1, 1980 to May 31, 1981: | | | |
| $175,000/year | 58,334 | 58,333 | 58,333 |
|--------------------------------------------|------------|-------------|----------------|
|(6) June 1, 1981 to May 31, 1982: | | | |
| $125,000/year | 55,000 | 55,000 | 15,000[1]|
|--------------------------------------------|------------|-------------|----------------|
|(7) June 1, 1982 to May 31, 1983: | | | |
| $ 50,000/year | 25,000 | 25,000 | NONE |
------------------------------------------------------------------------------------------
*670
------------------------------------------------------------------------------------------
|(8) June 1, 1983 to Sept. 30, 1983: | | | |
| $50,000/year × 1/3 = 16,667 | 8,333 | 8,334 | NONE |
|--------------------------------------------|------------|-------------|----------------|
| Total | | | |
| Total Compensation Allowed: $1,491,676 | 521,666 | 521,667 | 448,343 |
| Interim Compensation Received: $1,251,618 | 417,206 | 417,206 | 417,206 |
| | | | |
| BALANCE DUE: $240,058 | $104,460 | $104,461 | $ 31,137 |
------------------------------------------------------------------------------------------
To Joseph W. Bartlett, the prior awards totalling $57,636 in fees and $2,873.81 in reimbursement are confirmed as final. In addition, Mr. Bartlett is awarded further final compensation of $7,500.
To J. Joseph Maloney, the prior awards totalling $46,700 in fees and $2,642.25 in reimbursement are confirmed as final, and he is hereby awarded a further final allowance of $7,500.
Other Applicants
The majority of the remaining Applicants for final allowances were paid in full in interim allowances for services rendered during the course of these proceedings and now seek only to have their prior awards confirmed as final. After reviewing all these prior applications and interim orders for compensation, all such awards listed on Exhibit B hereto are hereby confirmed as final.
Those remaining Applicants who are seeking additional final compensation and confirmation of prior interim awards may be divided into two categories: special counsel or accountants to the debtors or the trustees and receivers who were engaged for specific tasks; and creditors' attorneys who are seeking compensation for services which contributed to the successful conclusion of these cases.
In reviewing the applications by counsel to the various secured creditors, the Court has tried carefully to distinguish between services which were rendered in pursuit of the separate interests of individual secured creditors and should be paid for by such creditors and services which truly contributed to the successful plan confirmations achieved or the administration of these cases generally. See Rule 12-28(a). Similarly, with regard to co-counsel for the Unsecured Creditors' Committee, the Court is aware that their participation was essential for the final conclusion of these cases, but it is equally aware that from the beginning of these cases it was apparent that these cases would be primarily concerned with the rearrangement of secured indebtedness under Chapter XII of the Bankruptcy Act, formerly 11 U.S.C. Section 801 et seq.
Having these considerations in mind and after applying the Furtado-type analysis to each of these Applicants, the following final allowances are awarded:
To Herbert C. Kahn for services as counsel to the trustee, prior awards of $6,000 in fees and $25 in reimbursement are confirmed as final, and an additional final fee of $1,000 is awarded.
To Riemer & Braunstein for services as co-counsel to the Unsecured Creditors' Committee, prior awards of $55,717 in fees and $1645.89 in reimbursement are confirmed as final, and an additional $17,500 in final fees and $1,187.65 in reimbursement are awarded.
*671 To Silverman & Kudisch for services as co-counsel to the Unsecured Creditors' Committee, prior awards of $44,000 in fees and $1,682.88 in reimbursement are confirmed as final, and an additional $7,500 in final fees is awarded.
To Goodwin, Procter & Hoar for services as co-counsel to the Senior Mortgagees' Committee, prior awards of $29,600 in fees and $3,308.11 in reimbursement are confirmed as final and an additional $15,000 in final fees is awarded.
To Herrick & Smith for services as counsel to the Equipment Lenders' Committee, prior awards of $5,028 in fees and $1,156.06 in reimbursement are confirmed as final, and an additional $12,000 in final fees and $598.95 of reimbursement are awarded.
To Rackemann, Sawyer & Brewster for services as counsel to a secured creditor, prior awards of $21,000 in fees and $1,866.74 in reimbursement are confirmed as final, and an additional $5,000 in final fees is awarded.
To O'Connell & Aronowitz for services as special counsel to the debtors, prior awards of $6,000 in fees and $1,738.53 in reimbursement are confirmed as final, and an additional $6,000 in final fees to be paid by retention of a retainer is awarded.
To Segal, Roitman & Coleman for services as special counsel to the debtors, prior awards of $57,450 in fees and $829.20 in reimbursement are confirmed as final and an additional $1,500 in final fees is awarded.
To Whiteman, Osterman & Hanna for services as special counsel to the trustees, prior awards of $115,779 in fees and $7,679.49 in reimbursement are confirmed as final and an additional $9,474.87 in final fees and $266.61 in reimbursement are awarded.
To Kelleher & Co. for services as accountants to the trustees, prior awards of $144,273.25 in fees and $3,080.47 in reimbursement are confirmed as final and an additional $500 in final fees is awarded.
To Robert Bullard for services as disbursing agent, prior awards of $8,500 in fees and $1,610.46 in reimbursement are confirmed as final and an additional $1,500 in final fees is awarded.
Closing Matters
No objection was timely filed to the final accounts submitted by the trustees and receivers and they are allowed.
In accordance with the Order for Notice of August 17, 1983, all pending adversary proceedings and contested matters are dismissed with prejudice except only the pending dispute between the debtor Rosewood Gardens Health Related and New York State which is governed by the Pretrial Order of November 22, 1983. Any claim which could have been raised or asserted in these proceedings against the debtors, the trustees and receivers or the entities created pursuant to the confirmed plans of arrangement are forever barred and all creditors or other affected or concerned parties are forever permanently enjoined from pursuing such matters in this or any other court.
The final administration allowances awarded herein shall be paid from funds previously posted by the debtors and assembled in the disbursing agents' account for the debtor Medico Associates, Inc. The balance, if any, remaining in such account shall be disbursed to the successors to the debtors created under confirmed plans of arrangements in proportion to their respective contributions to this pooled account.
Except for jurisdiction retained under confirmed Plans of Arrangement, their respective orders of confirmation and pursuant to the Pretrial Order of November 22, 1983, concerning the dispute between Rosewood Gardens Health Related Facility and New York State, the jurisdiction of this Court over the debtors, their successors under confirmed plans, and their assets is hereby terminated and these cases are CLOSED.
It is so Ordered. *672
EXHIBIT A
RESULTS
CASE EFFECTIVE
NUMBER NAME OF DEBTOR CONCLUSION DATE
76-1395-L Bolton Hall Nursing Home Dismissal 11/ /83
76-1396-L Christian Hill Nursing Home Confirmed Plan 08/01/78
of Arrangement
76-1397-L Stevens Hall Long-Term Care Confirmed Plan 05/26/78
Facility. of Arrangement
76-1398-L Lenox Hill Trust Confirmed Plan 08/29/79
of Arrangement
76-1398-L New Lenox Hill Limited Partnership Confirmed Plan 08/29/79
of Arrangement
76-1399-L John Brennick Confirmed Plan 01/01/78
of Arrangement
76-1400-L Brook Wood Court Nursing Confirmed Plan 11/13/78
Home. of Arrangement
76-1401-L Forest Manor Long-Term Care Confirmed Plan 08/01/78
Facility. of Arrangement
78-1402-L Lewis Bay Convalescent Home. Confirmed Plan 08/01/78
of Arrangement
76-1403 Pioneer Valley Nursing Home Confirmed Plan 05/10/78
Limited Partnership of Arrangement
76-1404-L Charles Brennick Confirmed Plan 01/01/78
of Arrangement
76-1405-L MediCo Realty Trust Dismissal 12/13/78
76-1406-L Daniel A. Donovan Confirmed Plan 01/01/78
of Arrangement
76-1407-L Walter A. Margerison Confirmed Plan 01/01/78
of Arrangement
76-1408-L Brookside Manor Confirmed Plan 11/17/78
of Arrangement
76-1409-L Cedar Lane Nursing Home Confirmed Plan 09/15/78
of Arrangement
76-1410-L Forestville Nursing Home Confirmed Plan 09/15/78
of Arrangement
76-1411-L Golden Hill Realty Co. Confirmed Plan 07/19/78
of Arrangement
76-1412-L Fairview Realty Co. Confirmed Plan 05/12/78
of Arrangement
76-1413-L Whitewood Manor Nursing Confirmed Plan 09/11/78
Home. of Arrangement
76-1414-L MediCo Associates, Inc. Confirmed Plan 05/01/78
of Arrangement
76-1415-L Bayhaven Nursing Home, Inc. Confirmed Plan 04/29/83
of Arrangement
76-1416-L B & L Management Corporation Confirmed Plan 05/31/78
of Arrangement
*673
76-1417-L Woodhaven Nursing Home Confirmed Plan 04/29/83
of Arrangement
76-1418-L Data Comp, Inc. Dismissal 12/01/78
76-1419-L Golden Hill Realty Corporation Confirmed Plan 07/19/78
of Arrangement
76-1420-L Golden Hill Nursing Home Confirmed Plan 07/19/78
of Arrangement
76-1421-L Fairview Realty Corporation Confirmed Plan 05/12/78
of Arrangement
76-1422-L New Fairview Hall Convalescent Confirmed Plan 05/12/78
Home of Arrangement
76-1423-L Highgate Hall of Orange County, Dismissal 10/28/77
Inc.
76-1507-L Alpine Manor Nursing Home Confirmed Plan 08/12/77
of Arrangement
76-1508-L Heathwood Manor Confirmed Plan 10/02/79
of Arrangement
76-1509-L Hilltop Manor Dismissal 10/28/77
76-1576-L 165 South Union Road Construction, Confirmed Plan 03/01/79
Inc. of Arrangement
76-1613-L Highgate Hall of Erie County, Confirmed Plan 10/02/79
Inc. of Arrangement
76-1614-L Highgate Hall of Schenectady Dismissal 10/28/77
County, Inc.
76-1615-L Highgate Hall of Rensselaer Confirmed Plan 12/01/78
County, Inc. of Arrangement
76-1616-L Highgate Hall of Cortland Confirmed Plan 08/15/83
County, Inc. of Arrangement
76-1617-L Highgate Hall of Saratoga Dismissal 08/27/82
County, Inc.
76-1635-L Rosewood Gardens Health Related Confirmed Plan 10/01/82
Facility, Inc. of Arrangement
76-1671-L Sylvia Brennick Adjudicated 02/12/79
Bankruptcy and
Discharged.
76-1840-L Highgate Manor of Rensselaer Confirmed Plan 12/01/81
of Arrangement
76-1848-L Rosewood Gardens Health Related Confirmed Plan 10/01/82
Facility. of Arrangement
76-1849-L Highgate Manor of Cortland Confirmed Plan 08/15/83
of Arrangement
76-1933-L Brookhollow Associates Confirmed Plan 01/26/79
of Arrangement
76-1934-L Glen Associates Confirmed Plan 12/04/78
of Arrangement
76-1935-L Summit Associates Confirmed Plan 12/04/78
of Arrangement
76-1936-L Tri/Vest Associates Confirmed Plan 04/17/79
of Arrangement
*674
EXHIBIT B
Prior Interim Awards by Applicants
Not Seeking Additional Allowances
INTERIM FEE INTERIM
APPLICANT AWARDS REIMBURSEMENT
Herbert C. Kahn, Trustee $ 665.90 $ 0
Maloney, Gallagher & Desmond 59,911.25 815.64
Counsel to Trustee,
Joseph W. Bartlett.
Lyne, Woodward & Evarts 6,302.00 0
Counsel to Senior Mortgagees
Committee.
Richmond, Rosen & Crosson 15,000.00 0
Counsel to Junior Mortgagees
Committee
Cherwin & Glazier 15,000.00 0
Counsel to Junior Mortgagees
Committee
Joel I. Cherwin, Counsel 17,000.00 500.00
to Arthur Lang.
Kaye, Fialkow, Richmond & 12,750.00 0
Rothstein, Counsel to
various Secured Creditors.
Rich, May, Bilodeau & Flaherty 19,000.00 2,693.71
Counsel to a Secured Creditor.
Nixon, Hargraves, Devans & 15,000.00 0
Doyle, Counsel to various
Secured Creditors.
Ropes & Gray, Counsel to 6,000.00 0
a Secured Creditor.
Martin, Noonan, Hislop, 0 0
True & Shudt, Counsel to
a Secured Creditor
Henry Friedman, Secretary 300.00 0
to Junior Mortgagee Committee
Arnold Alexander and Frank H. 11,656.22 1,123.89
Shapiro, Secretaries to
Unsecured Creditors Committee.
Hilbrecht, Jones, Scheck & 2,888.00 0
Bybee, Special Counsel to
Trustee Joseph W. Bartlett.
Kaitz, Glickman & Kaitz 47,223.00 0
Special Counsel to the
Debtors.
Charles A. Stillman, Special 46,300.00 2,673.68
Counsel to Debtors.
Wiggin & Dana, Special 11,728.24 258.93
Counsel to Messrs. Fisher,
Langan, Maguire, Bartlett
and Maloney.
*675
Harvey & Harvey, Special $17,000.00 $556.40
Counsel to Debtors.
O'Brien, Fitzgerald, Taylor 138,083.86 0
& Keaveney, Accountants to
Messrs. Fisher, Langan and
Maguire.
Urbach, Kahn & Werlin, Special 33,263.87 0
Accountants to Messrs. Fisher,
Langan and Maguire.
Gladstone & Chain, Accountants 8,713.00 0
to Unsecured Creditors
Committee
Zoll, Hyman & Co., Accountants 113,985.00 0
to Debtors.
Max Zuckerman, Special 17,031.00 0
Accountant to Debtors.
John Quincy, Appraiser 14,010.00 0
John Quincy and William F. 22,500.00 0
Morrissey, Appraisers.
John Quincy, Jr., Appraiser. 250.00 0
Robert J. O'Hayre, Appraiser. 1,905.00 0
Edmund S. Balboni, Appraiser. 5,300.00 0
Archie J. Horne, Appraiser. 5,000.00 0
John S. Cullen, Appraiser. 5,000.00 0
John D. Moore, Appraiser. 1,100.00 0
Robert I. Foster 2,500.00 0
Francis A. McGregor, Appraiser. 16,125.87 0
Richard W. Partridge, Jr., 10,000.00 0
Appraiser.
Thomas J. Joyce, Appraiser. 1,300.00 0
Francis Caulfield, Appraiser. 2,500.00 0
David L. Cary, Appraiser. 12,500.00 0
Daniel L. Landry, Appraiser. 2,500.00 0
Edward E. Rasnick, Appraiser. 5,000.00 0
William J. O'Connor, Appraiser. 3,238.28 0
Reginald H. Gallagher 2,500.00 0
NOTES
[1] Mr. Maguire's performance of his duties during this period was severely
curtailed by illness that ultimately led to his resignation in 1982 and his death in
1983. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545641/ | 988 A.2d 1134 (2010)
190 Md. App. 463
Carole M. FAGNANI, et al.
v.
Jeffrey B. FISHER, et. al., Substitute Trustees.
No. 2285, September Term, 2008.
Court of Special Appeals of Maryland.
February 3, 2010.
*1136 Walter W. Green, College Park, for appellant.
Jeffrey B. Fisher (Martin S. Goldberg, Scott R. Robinson, Fisher Law Group, PLLC, on the brief), Upper Marlboro, for appellee.
Panel: MEREDITH, GRAEFF and RAYMOND G. THIEME, JR. (Retired, specially assigned), JJ.
RAYMOND G. THIEME, JR. J., Retired, Specially Assigned.
This case involves a foreclosure sale at which appellant Ricardo Fagnani's brother, Ronald Fagnani, bought the interest of appellant and his wife, appellant Carole Fagnani, in the house the two Fagnani brothers had owned with, and then inherited from, their mother. The Circuit Court for Montgomery County overruled appellants' exceptions to the sale and ratified it. The appellants appeal and pose five questions,[1] which we have consolidated into the following three questions:
1. Did the circuit court err when it ratified the foreclosure sale of only a partial interest in the subject property?
2. Did the circuit court err in ratifying a foreclosure sale which yielded a purchase price of only 40% of the alleged market value of the property, which was conducted after the posting of an advertisement containing inaccurate information, and which resulted in the purchase of the property by the substitute trustees?
3. Did the circuit court abuse its discretion by denying appellant's requests for a postponement of the hearing on appellants' exceptions and for reconsideration of its ratification order?
We conclude that the circuit court neither erred nor abused its discretion, and we therefore affirm the ratification of the sale.
FACTS AND PROCEEDINGS
From 1982 until her death in 1985, Pauline W. Fagnani jointly owned a house in Silver Spring ("the Property") with her two sons, Ricardo and Ronald Fagnani. *1137 Mrs. Fagnani left her interest in the Property to her sons, with the result that each then held a one-half interest as tenants in common. On February 13, 2003, the brothers retitled the Property to convert Ricardo's half-interest to a tenancy by the entireties with his wife, Carole Fagnani.
On November 10, 2003, Carole borrowed $85,000 from American Residential Mortgage in a loan secured by a deed of trust for the property. Only Carole entered into the note, which Ricardo signed for her as "her attorney in fact." The note incorporates the default provisions set forth in the deed of trust.
The deed of trust, recorded in Montgomery County, defines "Borrower" as "Carole Fagnani, a married woman," and the Property as "located in the County of Montgomery ... [and] recorded among the land records of Prince George's County...." Ricardo again signed for Carole "as her attorney in fact." Signatures also appear over the names of Ricardo and Ronald, as "borrowers." All three signatures were notarized. The signatories covenanted that "Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the property and that the Property is unencumbered, except for encumbrances of record." Both documents give the lender the right to disapprove, (or approve), the transfer of "any legal or beneficial interest in the [P]roperty...." The deed of trust provides that "Lender or its designee may purchase the [P]roperty at any sale."
The record contains Ronald's allegations in a verified complaint for declaratory judgment in another action that his signature on the note was forged. The record does not reflect the outcome of that litigation; the appellees' counsel stated that it was settled. The record also does not evidence that the original lender made the loan with knowledge of any fraud. In any event, the Note was assigned to Ronald.
Carole defaulted on the loan after not paying the monthly installment due on January 1, 2006. On February 16, 2008, Ronald appointed the substitute trustees ("trustees"), who are appellees here. On February 29, 2008, the trustees initiated foreclosure proceedings. In March, 2008, Ricardo filed a petition for bankruptcy. On May 8, 2008, the bankruptcy court modified its stay to permit the foreclosure of the property, and, on May 16, 23, and 30, 2008, the trustees advertised a public auction for the Property in the Washington Times. The advertisement bears a bold-face caption reading,
Foreclosure sale VALUABLE IMPROVED DWELLING 2617 Blue Ridge Avenue (Only as to Undivided ½ Interest of Ricardo and Carole Fagnani) Silver Spring, MD 20902
The advertisement further stated that the sale would be conducted "in enforcement of a Security Instrument granted by Carole M. Fagnani and Ricardo L. Fagnani aka Rick Fagnani and recorded among the Land Records of Montgomery County...." The Property was described as:
All that property described in said Security Instrument, being in the 13 Election District of Montgomery County, Maryland, and being improved by a dwelling bearing the street address of 2617 Blue Ridge Avenue (Only as to Undivided ½ interest of Ricardo and Carole Fagnani), Silver Spring, Maryland 20902. Subject to all covenants, restrictions and easements of record, if any.
The auction was conducted on June 2, 2008. Sharie Thompson, acting as agent for Ronald, submitted the only bid, and the Property was sold to her for $83,800. One of the trustees filed a report of the sale with the circuit court on that day. In that report, the trustee attested that "the [P]roperty was fairly sold and brought a *1138 fair price." The record also contains an illegibly-signed auctioneer's certification attesting that Thompson "was the high bidder and that the sale was fairly made"; a Montgomery County document reflecting the assessment of the Property at $327,730 for property tax purposes; and Ricardo's assertions in an affidavit that "the market value of the [P]roperty is valued near ... $400,000," and "[t]he Exceptants[']interest... is worth nearly ... $200,000...."
On June 18, 2008, the court issued a notice of proposed ratification and confirmation of the sale. The appellants filed exceptions and requested a hearing, which the court set for August 27, 2008. The trustees responded to the exceptions on August 21, 2008, and the parties appeared for the hearing on August 27. The court preliminarily denied appellants' request for a continuance in which to address the trustees' response to the exceptions. After hearing the parties' argument on the fairness of the sale of only a 50% interest in the Property and the effect of the alleged forgery on that question, the court ruled:
It appears in this case the Fagnanis did, in fact, sign the deed of trust, then default, and it was sold by the substitute trustees. The price received of $83,800 is not grossly inadequate. It was properly advertised as a one half interest.
It is a rather strange situation, but the only alternative the trustees had when it was in default is to protect the loan and to foreclose on the property and to foreclose against the people that signed the deed of trust.
I will deny the exception to the sale and enter final ratification.
The appellants filed a motion to alter or amend or for a new trial, which the court denied.
DISCUSSION
Standard of Review
In reviewing a court's ratification of a foreclosure sale, we disturb the circuit court's findings of fact only when they are clearly erroneous. Jones v. Rosenberg, 178 Md.App. 54, 68-69, 940 A.2d 1109 (2008). In reviewing the circuit court's findings of fact, we are mindful that the exceptant to a foreclosure sale bears the burden of proving that the sale was invalid. J. Ashley Corp. v. Burson, 131 Md. App. 576, 582, 750 A.2d 618 (2000) (citing Ten Hills Co. v. Ten Hills Corp., 176 Md. 444, 449, 5 A.2d 750 (1939)). The exceptant must also demonstrate that any irregularities caused "actual prejudice." J. Ashley Corp., supra, 131 Md.App. at 586, 750 A.2d 618; see also Harris v. David S. Harris, P.A., 310 Md. 310, 319, 529 A.2d 356 (1987) (stating, "In civil cases, it is well established that the burden of demonstrating both error and prejudice is on the complaining party"). We conduct our review on the basis of the evidence introduced into the record, and not on the basis of either the statements of counsel as to what occurred in other cases, Witt v. Zions, 194 Md. 186, 189, 70 A.2d 594 (1949), or proffers not accepted by the court as evidence. Cf. J. Ashley Corp., supra, 131 Md.App. at 582, 750 A.2d 618.
We review the court's legal determinations de novo. Jones, supra, 178 Md.App. at 68-69, 940 A.2d 1109 (citing Liddy v. Lamone, 398 Md. 233, 246-47, 919 A.2d 1276 (2007)).
I. Whether the trustees could foreclose on the appellants' share without also foreclosing on Ronald's share
According to the appellants, the trustees not only lacked the power to foreclose only on the appellants' one-half interest, but also breached their duty to appellants by not foreclosing on Ronald's *1139 interest at the same time. Appellants contend that the deed of trust did not confer upon the trustees the authority to sell the appellants' tenancy in common separately from Ronald's tenancy in common and that the separate sale significantly lowered the value of their interest. The trustees argue that appellants waived their objection to the sale of the half-interest by not raising it before the sale and, in any event, that appellants did not introduce evidence of the claimed effect on the value of their interest. The trustees additionally argue that the deed conveyed only the appellants' interest to them because, the trustees allege, Ronald's signature on the deed of trust was forged. Appellants reply that the trustees waived the issue of waiver by not raising it in the circuit court. Disclaiming any claim that the deed of trust is void,[2] appellants further reply that the trustees did not prove the alleged forgery.
We shall begin with the question of whether the appellants could wait until after the foreclosure sale to contest the trustees' foreclosure of only their half-interest. Initially, we hold that the trustees did not waive this issue; they argued in their response to appellants' exceptions that debtors "may file exceptions challenging only procedural irregularities" and at the hearing that no "procedural irregularities" had occurred that would allow the court to overturn the sale. However, in light of our recent decision in Bierman v. Hunter, 190 Md.App. 250, 988 A.2d 542 (2010), we shall reach appellants' arguments that the Property could only be sold as an entirety, that the trustees breached their duties by selling only a one-half interest, and that the sale of a separate interest in common harmed appellants. We shall begin with the question of whether, in light of the bundle of rights attached to the tenancies in common held by these parties, appellants met their burden, both as exceptants and appellants, to establish that the alleged conduct or error caused them harm.
A fundamental characteristic of a tenancy in common is the ability of each tenant to devise (or not devise) his or her separate interest separately. For example, in Cattail Associates v. Sass, 170 Md. App. 474, 907 A.2d 828 (2006), a developer which wished to buy a parcel of land from multiple tenants in common entered into a contract that was ineffective as to one cotenant. Id. at 487, 907 A.2d 828. We held that the contract was valid as to the other tenants and that its performance would simply convey to the developer an undivided share as a tenant in common with the non-signing tenant. Id. at 488, 907 A.2d 828. In Cook v. Boehl, 188 Md. 581, 53 A.2d 555 (1947), a tenant in common who leased the property to a third party conveyed only a leasehold interest in a tenancy in common of the undivided estate. Id. at 593, 53 A.2d 555. In Cooper v. Bikle, 334 Md. 608, 640 A.2d 1120 (1994), the Court of Appeals noted the ability of a tenant in common to devise his interest by will. Id. at 622, n. 3, 640 A.2d 1120. Under these same principles, the separate interest of a joint tenant, once severed and converted to a tenancy in common by the entry of a lien against that joint tenant, may be sold in execution of that lien. See, e.g., Helinski v. Harford Memorial Hospital, 376 Md. 606, 615-16, 831 A.2d 40 (2003).
Here, appellants only owned a tenancy in common, with the burdens attendant to that interest, such as the other owners' right to entry and possession. See Cook, *1140 supra, 188 Md. at 592, 53 A.2d 555 (stating that each tenant in common "has an equal right of entry and possession...."). Appellants thus never owned 50% of a wholly-owned property appraised for tax purposes at $327,730; they instead owned 100% of a 50% tenancy in common of that property, and they could not sell the Property clear of Ronald's right to entry and possession. Appellants introduced no proof that a sale of their co-tenancy interest to a purchaser other than Ronald would have yielded more than the price realized, and they thus did not establish the prejudice requisite to both their exceptions and their appeal to this Court. We nonetheless continue with the matter of the trustees' duties.
Trustees owe duties to the owners of the secured property not only to sell the property at a fair price, but also to sell no more of the property than necessary to achieve payment of the debt. Webster v. Archer, 176 Md. 245, 254, 4 A.2d 434 (1939). There, the Court of Appeals defined foreclosure trustees' duties as follows:
An assignee selling mortgaged property at a foreclosure sale is a trustee for the mortgagor and persons claiming under or through him [citations omitted], and is under a duty (1) to exercise the same degree of prudence, care, diligence and judgment, that a prudent man of ordinary business judgment and experience would exercise, in selling his own property, to see that the property is sold for the best price obtainable at such a sale [citations omitted], and (2) to sell no more of the property than is necessary to pay the mortgage debt, accrued interest, and costs of foreclosure, Wiltse on Mortgage Foreclosures, sec. 573.... For, as stated by Wiltse: "In a mortgage foreclosure the plaintiff is entitled to the sale of a sufficient amount of land to pay his claim and no more; and the sale should be made by the officer conducting it in such a manner to pay the just demands of the plaintiff without inflicting unnecessary loss upon the debtor, or interfering with the rights and interests of subsequent incumbrances."
Id. at 253-54, 4 A.2d 434. The circuit court correctly applied this law when it determined that the trustees could properly foreclose just the interest held by the defaulting parties.
With regard to the trustees' power to sell separate interests in the Property, neither the note nor the deed of trust alters the recorded ownership of the Property by appellants and Ronald as tenants in common. The separate tenancies could thus be foreclosed upon separately, and Ronald, as both holder of the note and as a tenant, could choose not to foreclose on his own interest. We need not reach the parties' contentions concerning whether Ronald's signature was forged, whether the original lender took subject to such a forgery, and, ultimately, whether the deed of trust conveyed Ronald's interest, because the result is the same either way.
II. Whether the trial court clearly erred in finding that the price received at the foreclosure auction was "not grossly inadequate," that the sale was properly advertised, and that the circumstances did not make the sale invalid
Appellants assert that the proceeds of the auction were "grossly inadequate," that the advertisement was misleading, and that the sale of the Property to Ronald's agent required the court to apply a heightened degree of scrutiny to the sale. We shall take each contention in turn.
Appellants contend that the winning bid of $83,800 of a partial interest in the Property, which was assessed at *1141 $327,730 for property tax purposes, apparently as if wholly owned, was "grossly inadequate," while the trustees argue that that sum does not "shock the conscience." A mortgagor excepting to a foreclosure sale on the grounds that the proceeds were inadequate bears the burden of proving the exception, J. Ashley Corp., supra, 131 Md.App. at 582, 750 A.2d 618, and, specifically, of proving that "`the price is so glaring and palpable as to indicate fraud or unfairness, or suggest that the trustee lacked the judgment and skill necessary to any adequate administration of the duties of his office.'" Id. at 584, 750 A.2d 618 (quoting Ten Hills, supra, 176 Md. at 449, 5 A.2d 830). As we have discussed in Section I, above, the record contains no evidence of the value of a one-half interest in this commonly-held Property. Given the lack of proof in the record of "actual prejudice," cf. J. Ashley Corp., supra, 131 Md.App. at 586, 750 A.2d 618, we perceive no clear error in the circuit court's denial of this exception. We turn next to appellants' contentions about the advertisement placed by the trustees.
Appellants contend that the advertisement was misleading because it referred to the recordation of the "Security Instrument," here the deed of trust, in the land records of Montgomery County, while the deed of trust refers to the recordation of the deed for the Property in the land records of Prince George's County. Appellants also contend that the advertisement of the sale of a partial interest was "not proper." With respect to appellants' first contention, we again refer to the requirement that an exceptant prove that the alleged irregularity has caused "actual harm." Id. The record shows only that the deed of trust was filed in Montgomery County, that it describes the Property as located in Montgomery County, and that the spousal transfer of Ricardo's interest to Carole as a tenant by the entireties was recorded in Montgomery County. Absent a showing by appellants that the error in the deed of trust prejudiced them or that the Property was, in fact, in Prince George's County and not subject to proceedings elsewhere, we conclude that the circuit court correctly denied this exception.
With respect to the appellants' contention that the advertisement of the sale of a partial interest was not "proper," the appellants have not identified a procedural irregularity in the advertisement, such as a variance between the interest advertised and the interest sold. As we explained in Section I, appellants' substantive complaint that the trustees sold only a partial interest does not provide grounds for reversal.
We proceed to appellants' argument that the circuit court did not sufficiently scrutinize the sale of the Property to the holder of the note. Quoting Southern Maryland Oil, Inc. v. Kaminetz, 260 Md. 443, 272 A.2d 641 (1971), appellants argue that the sale of a property at foreclosure to the foreclosing party is subject to heightened scrutiny and must be set aside "upon `slight evidence of partiality, unfairness or a want of the strictest good faith.'" Id. at 453, 272 A.2d 641 (quoting Heighe v. Evans, 164 Md. 259, 270, 164 A. 671 (1933)).
However, the Court of Appeals additionally instructed in Southern Maryland that the fact that the lender's assignee purchased the property at foreclosure is not in itself grounds for setting aside the sale, and, further, that the "motives of a mortgagee or of his assigns cannot be set up as a defense to a foreclosure of the mortgage." 260 Md. at 453, 272 A.2d 641. The Court stated that the exceptant there was required to "allege in its exceptions some impropriety in the conduct of the foreclosure sale or fraud by the mortgagor known to the purchaser which would render the sale invalid...." Id. To the same *1142 effect, in J. Ashley Corp., supra, 131 Md. App. 576, 750 A.2d 618, where the exceptant complained that the lender bought the foreclosed property, we stated that Maryland has "no blanket restriction ... bar[ring] a trustee from accepting a written bid on behalf of a lender." Id. at 587, 750 A.2d 618. After noting that the trustees had neither bid on their own behalf nor received personal benefit from the sale, we affirmed the ratification of the sale. Id. at 587-88, 750 A.2d 618.
Here, even had appellants proven prejudice from the sale of the Property to Ronald, the evidence was that the deed of trust permitted the lender to buy the Property and that the auctioneer conducted the sale properly and sold the Property to the highest and only bidder. Appellants' allegation in their exceptions that Ronald's purchase was the "culmination" of a "plan to convert the entire ownership of the Property to himself," even if it had been proven, merely alleged motive and, under Southern Maryland, 260 Md. at 453, 272 A.2d 641, did not state grounds for relief.
Because the appellants did not meet the exceptant's burden of proving either prejudice or fraud or impropriety in the sale, the circuit court correctly denied their exceptions.
III. Whether the circuit court abused its discretion when it denied the appellants' request for a continuance and denied their motion for a new trial or to alter or amend the judgment
Appellants contend that the circuit court abused its discretion by denying their request for a continuance so that appellants could respond to the trustees' allegations of forgery. Appellants additionally contend that the court denied them the opportunity to testify that the Property was actually partnership property on which the holder of the note could not foreclose. The trustees respond that appellants knew that Ronald disclaimed signing the deed of trust, because Ronald had filed a declaratory judgment action against them alleging that he did not sign, and was not bound by, the deed of trust. The trustees further argue that the court did not prevent appellants from submitting evidence.
We review the circuit court's denial of a continuance of a ratification hearing for abuse of discretion. Brooks v. Bast, 242 Md. 350, 354, 219 A.2d 84 (1966) (finding "no abuse of discretion" in the circuit court's denial of the exceptants' request for a continuance). Additionally, appellants bear the burden of establishing that they were prejudiced by the error of which they complain. Harris, supra, 310 Md. at 319, 529 A.2d 356 (stating, "the appellate courts of this State will not reverse a lower court judgment for harmless error: the complaining party must show prejudice as well as error").
With respect to the circuit court's denial of a continuance in which to permit appellants' new counsel time in which to prepare a response to the trustees' allegations that Ronald's signature was forged, the evidence before the court was that Ronald had asserted that allegation both in an undated declaratory judgment action filed in that court and in an April 4, 2008 filing in Ricardo's bankruptcy proceeding in the U.S. District Court. The bankruptcy court lifted the stay on the foreclosure on May 8, 2008; the trustees advertised the auction that month; the auction was held on June 2, 2008; appellants' counsel filed exceptions on July 18, 2008; and the hearing was held over five weeks later, on August 27, 2008. We held in Jones, supra, 178 Md.App. at 68, 940 A.2d 1109, that a two-week span between the entry of that counsel's appearance and the hearing provided *1143 counsel time in which to investigate a defense. Here, too, we hold that the circuit court did not abuse its discretion when it did not grant a continuance.
With respect to the appellants' argument that the circuit court prevented them from testifying that the Property was partnership property, not subject to foreclosure, we note that this proposed testimony raised neither a "procedural irregularity" properly raised by exception, cf. Jones, supra, 178 Md.App. at 70, 940 A.2d 1109, nor, in light of appellants' disclaimer in their reply brief in this Court, a challenge to the underlying mortgage. Cf. Bierman, supra, 190 Md.App. at 269-70, 988 A.2d 542. Whether appellants could raise this issue by way of a Rule 14-305(d) exception is therefore questionable. In any event, the transcript is devoid of any refusal by the court to admit evidence from either party. The transcript shows instead that Ricardo was present and that appellants' counsel stated that "there is no need to take evidence based [upon what was submitted by the substitute trustees]." Appellants' counsel requested that "if [the court were] inclined to take evidence on other issues in the exceptions, [counsel] would request ... holding off doing that so that [he could] investigate some of these other factual allegations that have been made by the mortgagee." We conclude that the court did not deny appellants the opportunity to prove their exceptions, did not abuse its discretion by proceeding with the hearing as scheduled, and, in any event, did not prejudice appellants by not hearing them on an issue not properly before the court.
We turn to appellants' motion to alter or amend, or, in the alternative, for a new trial. As we stated in Jones, supra, 178 Md.App. 54, 940 A.2d 1109, "[w]e review the circuit court's decision to deny a request to revise its final judgment under an abuse of discretion standard." Id. at 72, 940 A.2d 1109.
In their motion, appellants stated, "The Court did not allow either party to put on testimonial evidence...." Appellants further stated that counsel was not aware until the trustees opposed the exceptions less than four business days before the hearing that the declaratory judgment action had been filed in 2006. In light of Ricardo's status as a party to the declaratory judgment action, signer of the note as "attorney in fact" for Carole, and co-signer of the deed of trust, and in light of his availability to present his testimony at the hearing, we perceive no abuse of discretion in the court's determination that the trustees' opposition raised no procedural unfairness or new factual issues requiring the court's exercise of its revisory powers.
JUDGMENT AFFIRMED.
COSTS TO BE PAID BY APPELLANTS
NOTES
[1] Appellants posed these questions:
1. Did the lower court err in denying appellants' exceptions to the June 2, 2008 foreclosure sale?
2. Did the lower court err in ratifying the foreclosure sale of a partial interest in the property where the deed of trust did not contain a power of sale that authorized the sale of less than the entirety of the property and the property was not divisible?
3. Did the lower court err in allowing the enforcement of the power of sale provision in a deed of trust where the substitute trustees claimed that one of the signatures on the deed of trust was forged?
4. Did the substitute trustees breach their duty to appellants to sell the property at the best possible price?
5. Did the lower court abuse its discretion in denying appellants the opportunity to present testimonial evidence at the August 27, 2008 hearing and denying appellants' motion to alter or amend?
[2] In their reply brief, appellants state that they "do not claim that the Deed of Trust is void." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545480/ | 128 F.2d 542 (1942)
CLARKE
v.
FEDERAL TRADE COMMISSION.
No. 9948.
Circuit Court of Appeals, Ninth Circuit.
May 29, 1942.
Oliver O. Clark and Robert A. Smith, both of Los Angeles, Cal., for appellant.
W. T. Kelley, Chief Counsel, Federal Trade Commission, Martin A. Morrison, Asst. Chief Counsel, Joseph J. Smith, Jr., Asst. Chief Counsel, Merle P. Lyon and James W. Nichol, Sp. Attys., Federal Trade Commission, all of Washington, D. C., for appellee.
Before HANEY, STEPHENS, and HEALY, Circuit Judges.
HEALY, Circuit Judge.
The Federal Trade Commission issued a formal complaint charging appellant with unfair and deceptive practices in commerce[1] in the advertising of a drug called Boncquet Tablets. Appellant answered the complaint and appeared at the hearing in response to a subpoena, but declined to answer any questions put to him. Thereupon the Commission, proceeding under § 9 of the Federal Trade Commission Act, 15 U.S.C.A. § 49,[2] obtained from the district court an order requiring him to answer all relevant and material questions. Appellant appeared before the Commission's trial examiner in response to the order, but upon being questioned in that connection he refused to state the quantitative analysis or proportions of the various ingredients used in the manufacture of his tablets, contending that the information was a trade secret which he was not obliged to reveal.
Subsequently there was a contempt proceeding in the district court pursuant to an order to show cause; and after notice and hearing the court again directed appellant to appear as a witness in the proceeding and specifically to answer the question "What are the proportions of the different ingredients in the product Boncquet Tablets?" On the resumption of the hearing before the examiner, appellant appeared but declined to answer the question. Thereupon, on application of the Commission, the district court ordered appellant to show cause why he should not be adjudged in contempt; and after hearing he was held in contempt of the previous orders and was committed until he should purge himself *543 thereof. From this order adjudging him in contempt appellant prosecutes this appeal, alleging that the court was in error in requiring him to testify concerning the proportions of the ingredients used in his compound.
At the outset the query presents itself whether, upon this appeal from the order adjudging him in contempt, the appellant may question the propriety of the order requiring him to testify. If the latter order was itself appealable that is to say, if it was a "final decision" within the meaning of § 128 of the Judicial Code, 28 U.S.C.A. § 225[3] then it is reviewable only upon direct appeal. It may not be attacked collaterally for mere error or reviewed upon an appeal from the subsequent order adjudging the party in contempt. 5 C.J.S., Appeal and Error, § 1496, p. 153; 17 C.J.S., Contempt, § 14, p. 19; Howat v. Kansas, 258 U.S. 181, 189, 190, 42 S. Ct. 277, 66 L. Ed. 550; Brougham v. Oceanic Steam Navigation Co., 2 Cir., 205 F. 857, 860; Brotherhood of Railway & S. S. Clerks v. Texas N. O. R. Co., D.C.Tex., 24 F.2d 426, 427. Cf. Beauchamp v. United States, 9 Cir., 76 F.2d 663, 668. Of course, if the order directing appellant to answer the question was void, it could safely be disregarded and would be open to collateral attack. Ex parte Fisk, 113 U.S. 713, 5 S. Ct. 724, 28 L. Ed. 1117; Alemite Mfg. Corp. v. Staff, 2 Cir., 42 F.2d 832, 833; Beauchamp v. United States, supra. But the order was not void. At most it was erroneous. The Commission had jurisdiction of the subject matter of the investigation. The court had jurisdiction over appellant personally and had statutory authority to order him to testify in the proceeding before the Commission.
In judicial inquiries generally, it has been thought that an order directing a party or a witness to testify or to produce documents is interlocutory, hence not appealable. The party or the witness has no alternative but to obey or be held in contempt. Upon commitment for contempt a right of review for the first times arises. Alexander v. United States, 201 U.S. 117, 26 S. Ct. 356, 50 L. Ed. 686. Cf. Hale v. Henkel, 201 U.S. 43, 26 S. Ct. 370, 50 L. Ed. 652; Wilson v. United States, 221 U.S. 361, 31 S. Ct. 538, 55 L. Ed. 771, Ann.Cas.1912D, 558. This principle, or rule of policy as it may with propriety be called, is elaborately discussed in Cobbledick v. United States, 309 U.S. 323, 60 S. Ct. 540, 84 L. Ed. 783, where it was held that an order denying motions to quash subpoenas directing persons to appear and produce documents before a grand jury was not a final decision.
But in situations analogous to the present a different rule is applied. A number of cases have arisen under § 12 of the Interstate Commerce Act, 49 U.S.C.A. § 12, which, like § 9 of the Federal Trade Commission Act,[4] authorizes a proceeding in the district court to compel contumacious witnesses to make disclosures before the Commission. In this class of cases the order of the district court directing the witness to answer is final and reviewable. Interstate Commerce Commission v. Brimson, 154 U.S. 447, 14 S. Ct. 1125, 38 L. Ed. 1047; Harriman v. Interstate Commerce Commission, 211 U.S. 407, 29 S. Ct. 115, 53 L. Ed. 253; Ellis v. Interstate Commerce Commission, 237 U.S. 434, 35 S. Ct. 645, 59 L. Ed. 1036. In Cobbledick v. United States, supra, the court took note of these decisions, expressing the opinion that there is sufficient justification for treating them differently from those "arising out of court proceedings unrelated to any administrative agency." The court thought that a proceeding under a statute of this type may be likened to "an independent suit in equity in which appeal will lie from an injunction without the necessity of waiting for disobedience," Cobbledick v. United States, supra, at page 330 of 309 U.S., at page 543 of 60 S.Ct., 84 L. Ed. 783. It is, of course, settled law that the propriety of an injunction can not be tested by appeal from a subsequent judgment in contempt. Howat v. Kansas, supra; Brougham v. Oceanic Steam Navigation Co., supra; Brotherhood of Railway & S. S. Clerks v. Texas N. O. R. Co., D.C.Tex., 24 F.2d 426, 427.
Since the order requiring appellant to make the disclosure was a final decision, it may be reviewed only on direct appeal. "Errors must be corrected by appeal and not by disobedience," Brougham v. Oceanic Steam Navigation Co., 2 Cir., 205 F. 857, 860. Appellant confessedly refused to obey the order, so there was no error in holding him in contempt of it.
Affirmed.
NOTES
[1] 15 U.S.C.A. § 45.
[2] The pertinent part of the statute is as follows: "Any of the district courts of the United States within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpna issued to any corporation or other person, issue an order requiring such corporation or other person to appear before the commission, or to produce documentary evidence if so ordered, or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof."
[3] "The circuit courts of appeal shall have appellate jurisdiction to review by appeal final decisions * * *."
[4] The pertinent provisions of the two statutes are virtually identical. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545618/ | 988 A.2d 505 (2010)
John FOREMAN, Appellant,
v.
UNITED STATES, Appellee.
No. 07-CF-1130.
District of Columbia Court of Appeals.
Argued December 11, 2009.
Decided February 4, 2010.
*506 Christine A. Monta, Public Defender Service, with whom James Klein and Samia Fam, Public Defender Service, were on the brief, for appellant.
Sarah Chasson, Assistant United States Attorney, with whom Jeffrey A. Taylor, United States Attorney at the time the brief was filed, and Roy W. McLeese III, Frederic Gallun, and John Mannarino, Assistant United States Attorneys, were on the brief, for appellee.
Before BLACKBURNE-RIGSBY and THOMPSON, Associate Judges, and FARRELL, Senior Judge.
FARRELL, Senior Judge:
Appellant was charged with, among other things, armed robbery and possession of a firearm during a crime of violence, both arising from an incident in which, according to the indictment, he forcibly took an iPod from Marcus Curry while brandishing a handgun. The jury acquitted him of these charges but returned a guilty verdict on first-degree theft and hung on unarmed robbery, both of which had been submitted to it as lesser-included offenses of the armed robbery.[1]
We hold that the evidence was insufficient to permit appellant's conviction of first-degree theft, because the government presented no evidence from which a rational juror could infer that the combined value of the stolen iPod and its contents exceeded $250. See generally Jackson v. Virginia, 443 U.S. 307, 324, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). Although the proof requirement for theft in the first degree that "the value of the property obtained" was "$250 or more" appears in a penalty statute, § 22-3212(a), not in the definition of "theft," § 22-3211, our decisions leave no doubt that the issue of value distinguishing first degree (or felony) theft from second degree (or misdemeanor) theft, see id. § 22-3212(b), implicates an element of the offense and must be submitted to the trier of fact. See, e.g., Hebron v. United States, 837 A.2d 910 (D.C.2003) (en banc) (Hebron II) (passim; presupposing issue to be what evidence suffices to permit trier of fact to find "value" beyond a reasonable doubt). Our cases have further established that, "when the proof [at trial] indicates a value nearing [the] minimum" separating felony from *507 misdemeanor theft, "such proof may need to be offered with greater precision" than when the issue is not a close one. Id. at 913. "In that sense," we explained in Hebron II,
the use [by past decisions] of phrases like "strict rule" can be understood to have highlighted the need for the government in such circumstances to take special care in presenting proof beyond conjecture or speculation on an elementvalueintegral to the seriousness of the offense and potential punishment.
Id. at 913-14.
Here, the government's proof of value exceeding the statutory amount of $250 was insufficient to rule out a verdict based on "surmise or conjecture." Id. at 913 (quoting Zellers v. United States, 682 A.2d 1118, 1121 (D.C.1996)). Perhaps understandably, in a case where the parties disagreed most strongly on whether appellant had forcibly assaulted (i.e., robbed) Curry, and if so whether he had used a firearm, the evidence on the value of the iPod consisted of sparse testimony by Curry and his mother unelucidated by other evidence. Marcus Curry stated that his mother had bought the iPod for him in December 2006 as a Christmas gift (i.e., some four months before the April 12, 2007 theft), and that he believed she had paid $300 for it. But Mrs. Curry corrected this by stating that she had paid "about $250" for the iPod, though with "tax and shipping it came up to about $300." Marcus Curry further testified that he had "movies and pictures of [himself] and [his] friends and ... family" on the iPod, and had downloaded "about four hundred or more" songs onto the device. While he had "had to pay" to put the movies on the iPod, "some of [the] songs" were "free downloaded songs" and "some of them you had to pay for." That was the sum of the value evidence presented to the jury.
Value in this context means the "fair market value" of the property, Eldridge v. United States, 492 A.2d 879, 882 (D.C.1985), defined as the "price at which a willing seller and a willing buyer will trade." Williams v. United States, 376 A.2d 442, 444 (D.C.1977) (per curiam). Significantly, the determination of market value starts with the "base price" and excludes "ancillary" costs such as shipping and handling, Chappelle v. United States, 736 A.2d 212, 216 (D.C.1999), as well as taxes. See, e.g., Russell v. State, 367 Ark. 557, 242 S.W.3d 265, 268 (2006) ("[T]he jurisdictions that have considered the issue have generally concluded that a sales tax is not truly a component of the value of a good or service."); People v. Medjdoubi, 173 Misc.2d 259, 661 N.Y.S.2d 502, 506 (N.Y.Sup.Ct.1997). Thus, we set aside Mrs. Curry's mention of the amounts in excess of $250 that she paid for the iPod, which left the value of the device at the time of purchase at exactly the statutory dividing line. Our decisions have also made clear, however, that electronic products of this nature have a tendency to depreciate rapidly as technology changes and old versions are replaced. See Malloy v. United States, 483 A.2d 678, 680 n. 2 (D.C.1984) (describing television and radio as "items subject to fairly prompt depreciation"); Hebron v. United States, 804 A.2d 270, 272 (D.C.2002) (per curiam) (Hebron I) (describing stereo as "subject to prompt depreciation or obsolescence").[2] Thus, since no contrary evidence was presented that iPods retain the market value reflected in their purchase price, only speculation *508 allowed the jury to infer that Curry's device, by itself, was still worth $250 some four months after it was bought.
The government appears to agree up to this point, because it places nearly all of its reliance on the presumed market value of the movies and songs that Curry downloaded onto the iPod. The word "presumed" here is key, however, because Curry did not state or estimateas he was not askedhow much he had paid for the downloads, individually or altogether; he offered no opinion on what such items generally cost; and indeed, as to the "four hundred or more" songs, he did not say how many he had paid for at all rather than downloading them "free." The absence of independent proof of the usual cost of iPod downloads might not be fatal, since "[t]he market value of a chattel ... may be established by the testimony of its non-expert owner," Zellers, 682 A.2d at 1120 (citation omitted); but Curry's testimony merely that he had paid something for an undetermined portion of his songs and for his movies did not allow an inference beyond a reasonable doubt that the iPod and its contents were worth more than the depreciated value of the device alone, which had cost the bare statutory minimum when purchased.[3]
This conclusion does not change when we factor in a jury's acknowledged right to bring its own experiences to bear on the evaluation of evidence. See Criminal Jury Instruction for the District of Columbia No. 2.04 (4th ed. 2008) ("When you consider the evidence, you are permitted to draw, from the facts that you find have been proven, such reasonable inferences as you feel are justified in the light of your experience."). There may well be circumstances where the intrinsic value of an object (say, a new high-priced automobile) is so much a part of common knowledge that no further proof of value exceeding $250 is needed. But that is not this case, given Curry's admission that he had paid nothing for "some" of the songs. Permitting jurors here to rely on their own experience of what iPod downloads cost would not be a proper drawing of inferences "from the facts ... proven in light of [their] own experience"; rather, it would substitute for a failure of proof on the point.
Consequently, appellant's conviction for theft in the first degree must be vacated for insufficient evidence. He asks us to remand with directions for the trial court to enter judgment on the lesser included offense of theft in the second degree, but the record does not tell usnor could the parties at oral argumentwhether the charge of robbery on which the jury hung is still pending and so subject to retrial. We leave these matters to be determined on remand.
Reversed and remanded with directions to enter judgment of acquittal on theft in the first degree.
NOTES
[1] Appellant contends that it was plain error for the judge to instruct on first degree (or felony) theft (D.C.Code §§ 22-3211(b), -3212(a)), because that crime is not a lesser-included offense of armed robbery and he had not been indicted for it. The government, while agreeing "that felony theft is not a lesser-included offense of armed robbery" (Br. for Appellee at 10), counters, among other things, that this error could not have been "obvious" to the trial judge, see United States v. Olano, 507 U.S. 725, 734, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993), in light of decisions such as Norris v. United States, 585 A.2d 1372, 1373 (D.C.1991), and United States v. Dixon, 152 U.S.App. D.C. 200, 202, 469 F.2d 940, 942 (1972), so that appellant's claim fails the plain error test. Our disposition of the appeal makes it unnecessary to resolve that issue.
[2] Although the holdings of these cases were overturned by the decision in Hebron II cited in the text, no disapproval was expressed there about their commonsense observations regarding the tendency of electronic products to depreciate rapidly.
[3] Appellant points also to the fact that Curry did not identify the names or artists of any of the songs and movies on the iPod, relying on this court's observation in Zellers, 682 A.2d at 1121, that "the value of any ... musical recording depends in large part on what is recorded.... [A] CD containing a collection of arias sung by Enrico Caruso ... may be of greater value than an album of musical ephemera sung by yesterday's rock star du jour." Of course, depending on the relevant market place, the opposite of this conclusion may also be true, and because it is not obvious to us what an identification of Curry's songs would have contributed to the issue of value, we leave that point aside. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545914/ | 40 B.R. 769 (1984)
In re CORSICA ENTERPRISES, INC., Debtor.
UNITED NATIONAL BANK, Plaintiff,
v.
CORSICA ENTERPRISES, INC., and Rick A. Yarnall, Trustee, Defendants.
Bankruptcy No. 482-00287, Adv. No. 483-0246.
United States Bankruptcy Court, D. South Dakota.
June 8, 1984.
*770 John E. Burke, Sioux Falls, S.D., for plaintiff.
Clair R. Gerry, Stuart & Gerry, Sioux Falls, S.D., for defendant Corsica Enterprises, Inc.
Rick A. Yarnall, trustee pro se, Moore, Rasmussen, Sabers & Kading.
MEMORANDUM DECISION
PEDER K. ECKER, Bankruptcy Judge.
The facts of the instant matter are not in dispute. Corsica Enterprises, Inc. (debtor), executed a promissory note and security agreement in favor of the United National Bank (bank), Canistota Branch, in the amount of $237,000.00 on March 1, 1979. The bank filed a financing statement with the South Dakota Secretary of State covering "[a]ll contract rights, accounts receivable, inventories, machinery, equipment, furniture, fixtures, leaseholds, and all other property both tangible and intangible" on March 9, 1979. The debtor filed its chapter 11 petition in bankruptcy on October 15, 1982. The Court converted the case to a chapter 7 liquidation on June 20, 1983.
The bank filed a complaint on September 19, 1983, requesting the Court to determine that it had a perfected security interest in four trailer fertilizer spreaders heretofore used by the debtor and further praying for an order requiring the trustee in bankruptcy to abandon the spreaders. See 11 *771 U.S.C. § 554. The trustee's answer alleges the bank's failure to perfect its security interest by noting a lien on the spreaders' certificates of title. The trustee has sold the spreaders and holds their proceeds, $3,850.00, pending the Court's resolution of this controversy.
In essence, the instant matter is a struggle between creditors. The bank contends that it has a perfected security interest in the spreaders. The trustee, however, who represents the interests of all the unsecured creditors, insists that the bank's security interest in the spreaders is unperfected and, thus, inferior to the position of the trustee. The trustee derives his position from the so-called "strong arm clause" of 11 U.S.C. § 544(a), which reads as follows:
The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by
(1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained a judicial lien, whether or not such a creditor exists;
(2) a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists; and
(3) a bona fide purchaser of real property from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser at the time of the commencement of the case, whether or not such a purchaser exists.
Subparagraph 544(a)(1) is the provision that is particularly applicable to this controversy. Under section 544(a)(1), the trustee is given the position, as of the date the petition in bankruptcy is filed, of a judicial lienholder on all of the property of the debtor on which a creditor on a simple contract could have obtained a judicial lien, whether or not such a creditor actually exists and regardless of notice of any existing encumbrances. The strong arm clause gives the trustee a pervasive position, the power of which is ultimately defined by substantive state law. 4 Collier on Bankruptcy ¶ 544.02 (15th ed. 1979).
The Bankruptcy Code defines a "lien" as a "charge against or interest in property to secure payment of a debt or performance of an obligation." See 11 U.S.C. § 101(28). The Code further defines a "judicial lien" as a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." See 11 U.S.C. § 101(27). The status of the trustee as a lien creditor is recognized in South Dakota's version of Article Nine of the Uniform Commercial Code:[1]
A "lien creditor" means a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment. Unless all the creditors represented had knowledge of the security interest such a representative of creditors is a lien creditor without knowledge even though he personally has knowledge of the security interest.
S.D.C.L. § 57A-9-301(3) (1980).
In addition, S.D.C.L. § 57A-9-301(1)(b) *772 (1980)[2] provides that a lien creditor takes priority over an unperfected security interest in the same collateral if the lien creditor becomes a lien creditor without the knowledge of the competing security interest and before it is perfected. Furthermore, S.D.C.L. § 44-2-1 (1983) generally establishes a first in time rule for determining the priority of liens, all other things being equal.
Upon considering the position of the trustee as a judicial lienholder on the date of the bankruptcy petition and the trustee's superior position to the holder of an unperfected security interest, the question presented is clear: Whether the bank had a perfected security interest in the spreaders prior to October 15, 1982, the day the instant petition was filed.[3] If the bank had a perfected security interest in the spreaders prior to the date of the petition, the bank is entitled to the proceeds from the sale of the spreaders. The trustee, however, prevails under S.D.C.L. § 57A-9-301(1)(b) and (3) (1980) if the bank was unperfected on the date of the petition.
The bank presents four arguments in support of its claim to a perfected security interest in the spreaders. First, the bank insists that its security interest was automatically perfected without filing a financing statement by virtue of S.D.C.L. § 57A-9-302(1)(c) (1980). Second, the bank contends that it has a perfected security interest in the spreaders under S.D.C.L. § 57A-9-302(1)(c) (1980) because it has filed a financing statement on a motor vehicle required to be licensed. Third, the bank argues that the spreaders are exempt from certificate of title requirements pursuant to S.D.C.L. § 32-3-2.2 (1976), and, therefore, the bank's filing with the Secretary of State perfects its security interest in the spreaders. Finally, the bank insists that the debtor's failure to disclose the existence of the bank's liens to the Secretary of State when applying for a certificate of title for one of the spreaders, in accordance with S.D.C.L. § 32-3-18 (1976),[4] precludes the trustee from prevailing over the bank.
The trustee asserts two theories in support of his position that the bank was unperfected on the date of the bankruptcy petition. First, that the spreaders are within the purview of S.D.C.L. chapter 32-3 (1976) (addressing title registration liens and transfers), and, thus, the bank's failure to note its lien on the certificates of title renders its security interest in the spreaders unperfected. Second, if the spreaders are "farm vehicles" and thus within the exemption provided by S.D.C.L. § 32-3-2.2 (1976), the bank's central filing leaves it unperfected because S.D.C.L. § 57A-9-401(1)(a) (1980) required a local filing to perfect a security interest in farm equipment at the time the bank's security agreement attached.
The bank's first two arguments are not persuasive. An examination of the text of S.D.C.L. § 57A-9-302 (1980), which prescribes when a financing statement must be filed to perfect a security interest and to what security interests the filing provisions of Article Nine do not apply, is instructive:
*773 (1) A financing statement must be filed to perfect all security interests except the following:
(a) A security interest in collateral in possession of the secured party under § 57A-9-305;
(b) A security interest temporarily perfected in instruments or documents without delivery under § 57A-9-304 or in proceeds for a ten-day period under § 57A-9-306;
(c) A purchase money security interest in farm equipment having a purchase price not in excess of twenty-five hundred dollars; but filing is required for a fixture under § 57A-9-313 or for a motor vehicle required to be licensed;
(d) A purchase money security interest in consumer goods; but filing is required for a fixture under § 57A-9-313 or for a motor vehicle required to be licensed;
(e) An assignment of accounts or contract rights which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts or contract rights of the assignor;
(f) A security interest of a collecting bank (§ 57A-4-208) or arising under the chapter on sales (see § 57A-9-113) or covered in subsection (3) of this section.
(2) If a secured party assigns a perfected security interest, no filing under this chapter is required in order to continue the perfected status of the security interest against creditors of and transferees from the original debtor.
(3) The filing provisions of this chapter do not apply to a security interest in property subject to a statute
(a) Of the United States which provides for a national registration or filing of all security interests in such property; or
(b) Of this state which provides for central filing of, or which requires indication on a certificate of title of, such security interests in such property.
(4) A security interest in property covered by a statute described in subsection (3) can be perfected only by registration or filing under that statute or by indication of the security interest on a certificate of title or a duplicate thereof by a public official.
S.D.C.L. § 57A-9-302(1)(c) provides for the automatic perfection of purchase money security interests in farm equipment having a purchase price not in excess of $2,500.00. S.D.C.L. § 57A-9-107 (1980) defines a purchase money security interest as follows:
A security interest is a "purchase money security interest" to the extent that it is
(a) Taken or retained by the seller of the collateral to secure all or part of its price; or
(b) Taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used.
Nothing in the record before the Court indicates that the bank made the advances that enabled the debtor to purchase the spreaders. There is certainly no dispute that the bank did not sell the spreaders to the debtor. In fact, the best the Court can make of the situation is that the debtor owned the spreaders prior to March 1, 1979, when the bank first extended credit to the debtor. Consequently, even assuming that the spreaders had a purchase price of $2,500.00 or less, the bank was not entitled to automatic perfection because it was not a purchase money lender. Furthermore, the existence of future advance and antecedent debt clauses in the bank's security agreement destroys the "purchase money" character of its security interest in any event. See In re Simpson, 4 U.C.C. Rep.Serv. (Callaghan) 250, 254-55 (W.D. Mich.1966).
While it is true that S.D.C.L. § 57A-9-302(1)(c) (1980) states that a "filing is required for a . . . motor vehicle required to be licensed," this provision should not be read out of context with the remainder of the statute. S.D.C.L. § 57A-9-302(3) and (4) clearly indicate that the filing provisions *774 of Article Nine do not apply to a security interest covered by a statute which requires notation of the security interest on a certificate of title. S.D.C.L. § 32-3-41 (1976) essentially requires that a lien on a motor vehicle or trailer required to be licensed must be noted on the certificate of title if it is to be effective against the creditors of the debtor-owner. "Trailer" is defined in S.D.C.L. § 32-3-1(9) (1976) as: "`Trailer,' any vehicle without motive power designed for carrying property or passengers wholly on its own structure and for being drawn by a motor vehicle." Clearly, the spreaders are "trailers" under South Dakota law. S.D.C.L. § 32-3-5 (1976) requires a certificate of title for a trailer. Therefore, unless the bank can establish that the spreaders are exempt from S.D.C.L. chapter 32-3 (1976), a security interest in the spreaders could only be perfected by notation of the security interest on the certificate(s) of title. The case law supports this conclusion. Milwaukee Mack Sales, Inc. v. First Wisconsin Nat. Bank of Milwaukee, 93 Wis.2d 589, 287 N.W.2d 708, 28 U.C.C.Rep.Serv. (Callaghan) 540 (1980); In re Buckley, 5 B.R. 503, 29 U.C.C.Rep.Serv. (Callaghan) 1042 (D.Minn.1980); In re McKeon, 7 B.R. 10, 29 U.C.C.Rep.Serv. (Callaghan) 1445-46 (Bkrtcy.N.D.Fla.1980).
This raises the bank's third argument which alleges that the spreaders fall within the exemption from requirements of a certificate of title found in S.D.C.L. § 32-3-2.2 (1976):
Any farm vehicle designed and used primarily for tillage, for harvesting, or wagons and other implements of husbandry, drawn by another vehicle, if the use thereof is confined to agricultural purposes or to the conveyance of agricultural products and the transportation of farm property by or for the producers thereof, from farm to farm within his vicinity or from local community or market to farm or from farm to a local community or market, shall be exempt from the provisions of this chapter.
The Court finds little merit in the bank's attempt to bring the spreaders within the exemption contemplated by S.D.C.L. § 32-3-2.2 (1976). S.D.C.L. § 32-3-2.2 (1976) speaks to using trailers (wagons) for "agricultural purposes" and for "the conveyance of agricultural products and the transportation of farm property by or for the producers thereof." Farmers are not the producers of the fertilizer that was carried in the spreaders that are the center of this controversy. Moreover, this Court further concludes that the term, "agricultural purposes," must be narrowly construed to mean used by farmers themselves, not used by a commercial business. Thus, the Court must conclude that the spreaders as used by the debtor are not exempt from the certificate of title requirements of S.D.C.L. chapter 32-3 (1976) and, consequently, any lien on the spreaders must be noted on the certificates of title to be perfected in accordance with S.D.C.L. § 32-3-41 (1976).
The Court is aware of numerous decisions that define "farm equipment" and "equipment used in a farming operation" as the terms are used in S.D.C.L. § 57A-9-302(1)(c) (1980) and S.D.C.L. § 57A-9-401(1)(a) (1980), respectively. Sequoia Machinery, Inc. v. Jarrett, 410 F.2d 1116, 6 U.C.C.Rep.Serv. (Callaghan) 476 (10th Cir. 1969) (custom harvester's combines were "farm equipment" as drafters of the Uniform Commercial Code carefully avoided defining "equipment used in a farming operation" in terms of occupational status or contractual arrangements of debtor-user); Citizen's National Bank in Ennis v. Sperry Rand Corp., 7 U.C.C.Rep.Serv. (Callaghan) 961 (Tex.1970); In re Frazier, 16 B.R. 674, 33 U.C.C.Rep.Serv. (Callaghan) 1160-61 (Bkrtcy.M.D.Tenn.1981); In re Houts, 31 U.C.C.Rep.Serv. (Callaghan) 338 (N.D.N.Y.1981). Doubtless, if "farm vehicle . . . wagons and other implements of husbandry," as referred to in S.D.C.L. § 32-3-2.2 (1976), were given the same meaning as "farm equipment" under Article Nine, the spreaders as used by the debtor would be exempt from certificate of title requirements. It is important to realize, however, that, although the Article Nine *775 analogy may be interesting, it is not controlling. S.D.C.L. § 32-3-2.2 (1976) is not the product of uniform legislation, but, instead, a creation of the South Dakota Legislature. Motor vehicle statutes perform a different function than secured transactions law. This Court is unwilling to conclude that the South Dakota Legislature intended the exemption provided in S.D.C.L. § 32-3-2.2 (1976) to be as far-reaching as some courts have construed "farm equipment" under the Uniform Commercial Code.
Moreover, even if one assumed that the exemptions contemplated in S.D.C.L. § 32-3-2.2 (1976) should be interpreted along the lines of "farm equipment" under Article Nine, the bank would still be unperfected. This is true because S.D.C.L. § 57A-9-401(1)(a) (1980)[5] requires a local filing for farm equipment. The bank, by its own admission, has only filed centrally. Consequently, in any event, the bank is in a no-win situation.
Finally, the bank's contention that the debtor should not be allowed to profit from its own duplicity must be addressed. Although S.D.C.L. § 32-3-18 (1976) requires one who applies for a certificate of title to disclose any encumbrances on a trailer to be titled, only one of the four spreaders in question was licensed subsequent to the date of the bank's security interest. The bank did not request the three existing certificates of title so that encumbrances could be properly noted. The bank was evidently either unaware of the necessity of having liens noted on the titles or confident that its centrally filed financing statement perfected its security interest.
Regardless, the debtor will not and has not benefited from its failure to advise the Secretary of State about the existence of a lien against the spreader that was titled after the bank obtained its security interest. No competing liens obtained superior priority by being noted on the certificates. More likely than not, the debtor was merely attempting to stay in good graces with the State Highway Patrol. As was discussed earlier, the unsecured creditors will benefit from the bank's failure to perfect its security interest in the spreaders, not the debtor. Accordingly, this Court is unable to conclude that the debtor's apparently ignorant failure to disclose liens when applying for a certificate of title on one of the spreaders precludes the trustee from prevailing over the bank.
In conclusion, the trustee obtained a judicial lien on the spreaders on October 15, 1982, by virtue of 11 U.S.C. § 544(a)(1) and S.D.C.L. § 57A-9-301(1)(b) and (3) (1980). As of October 15, 1982, the date the bankruptcy petition was filed, the bank had an unperfected security interest in the spreaders as fully discussed in the foregoing analysis. Under S.D.C.L. § 57A-9-301(1)(b) and (3) (1980), the trustee in bankruptcy, as a lien creditor, has priority over the bank's unperfected security interest. Consequently, the trustee is entitled to the proceeds of the four spreaders.
All of the above constitutes the Court's Findings of Fact and Conclusions of Law in the above-entitled matter pursuant to Bankr.R.P. 7052 and F.R.Civ.P. 52. The trustee is directed to submit a proposed Order and Judgment, consistent with the Court's Findings of Fact and Conclusions of Law, in accordance with Bankr.R.P. 9021. The Order and Judgment must be submitted to the Clerk of this Court forthwith.
NOTES
[1] All citations to S.D.C.L. chapter 57A-9 and S.D.C.L. chapter 32-3 are to the statutes that existed and governed on March 1, 1979, the date the bank obtained a security interest in the spreaders.
[2]
"Except as otherwise provided in subsection (2), an unperfected security interest is subordinate to the rights of
. . . .
(b) A person who becomes a lien creditor without knowledge of the security interest and before it is perfected."
[3] Although this case was converted from a chapter 11 to a chapter 7, the trustee's position as judicial lien creditor arises on the date the chapter 11 was filed. See 11 U.S.C. § 348.
[4] Application for a certificate of title shall be made to the secretary of public safety upon a form prescribed by him, containing a full description of such vehicle with motor and serial numbers, if any, a statement of applicant's title and all liens and encumbrances thereon, the county in which the vehicle is to be kept, the names and addresses of the holders of all liens, title reservations and encumbrances thereon, and such other information as the secretary of public safety shall require, and shall be accompanied by a fee of two dollars. If a certificate of title has previously been issued for such motor vehicle, trailer or semitrailer in this state, it shall be accompanied by such certificate of title duly assigned, unless provided for in this chapter.
[5] The proper place to file in order to perfect a security interest is as follows:
(a) When the collateral is equipment used in farming operations or consumer goods, is in the office of the register of deeds in the county of the debtor's residence or if the debtor is not a resident of this state then in the office of the register of deeds in the county where the goods are kept. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2584342/ | 233 P.3d 744 (2010)
STATE
v.
LONG.
Nos. 102406, 102407.
Supreme Court of Kansas.
July 9, 2010.
Decision Without Published Opinion Affirmed in part and dismissed in part. | 01-03-2023 | 10-30-2013 |
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