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https://www.courtlistener.com/api/rest/v3/opinions/2407923/ | 671 F. Supp. 2d 840 (2009)
James E. BILLIOT, Petitioner
v.
Christopher B. EPPS, Commissioner, Mississippi Department of Corrections and Lawrence Kelly, Superintendent, Mississippi State Penitentiary, Respondents.
Civil Action No. 1:86CV549TSL.
United States District Court, S.D. Mississippi, Southern Division.
November 3, 2009.
John C. Henegan, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, MS, Joseph Margulies, Margulies & Richman, Steven T. Grimshaw, Crosby & Grimshaw, Ltd., Minneapolis, MN, L. Lee Tyner, Jr., University of Mississippi, University, MS, for Petitioner.
Marvin L. White, Jr., Office of the Attorney General, Jackson, MS, for Respondents.
*841 MEMORANDUM OPINION AND ORDER
TOM S. LEE, District Judge.
This matter comes before the court on the Motion of Petitioner to Determine Competency to be Executed while Being Treated with Anti-Psychotic Medication and Request for Ford/Panetti Competency Hearing Date. The court held a hearing on this Motion on June 25-26, 2009, at which the parties presented evidence and testimony regarding James Billiot's current mental state. Having heard the testimony and reviewed the exhibits and pleadings submitted by counsel, the court is of the opinion, for the reasons that are more fully set forth below, that Billiot has established that his mental condition has deteriorated to a point where he can not be executed under Eighth Amendment standards. Therefore, he is entitled to habeas relief on this issue.
HISTORY
James Billiot has been convicted of capital murder in the deaths of his mother, stepfather and half-sister, which occurred in November 1981. He has been sentenced to death. His initial Petition for Writ of Habeas Corpus was filed in this court in May 1986, claiming, among other things, that he was incompetent to be executed by reason of insanity. A month later, the United States Supreme Court issued its opinion in Ford v. Wainwright, 477 U.S. 399, 106 S. Ct. 2595, 91 L. Ed. 2d 335 (1986), holding that the Eighth Amendment prohibits execution of the insane. In light of Ford, this court held the petition in abeyance until Billiot could exhaust his insanity claim in state court. Billiot then sought post-conviction relief from the Mississippi Supreme Court on that claim.
That court granted Billiot's request for an evidentiary hearing on his competency allegations, citing both Ford and Miss. Code Ann. § 99-19-57(2)(1972 & Supp. 2008). Billiot v. State, 515 So. 2d 1234, 1235-36 (Miss.1987). The statute, as it existed at that time, stated, in pertinent part:
2(a) If it is believed that a convict under sentence of death has become insane since the judgment of the court, the following shall be the exclusive procedural and substantive procedure. The convict, or a person acting as his next friend, or the commissioner of corrections may file an appropriate application seeking post-conviction relief with the Mississippi Supreme Court. If it is found that the convict is insane, as defined in this subsection, the court shall suspend the execution of the sentence. The convict shall then be committed to the forensic unit of the Mississippi State Hospital at Whitfield. The order of commitment shall require that the convict be examined and a written report be furnished to the court at that time and every month thereafter, stating whether there is a substantial probability that the convict will become sane under this subsection within the foreseeable future and whether progress is being made toward that goal. If at any time during such commitment the appropriate official at the state hospital considers the convict is sane under this subsection, such official shall promptly notify the court to that effect in writing and place the offender in the custody of the commissioner of corrections. The court shall thereupon conduct a hearing on the sanity of the convict. The finding of the circuit court is a final order appealable under the terms and conditions of the Mississippi Uniform Post-Conviction Collateral Relief Act.
*842 (b) For the purposes of this subsection, a person shall be deemed to be insane if the court finds that the convict does not have sufficient intelligence to understand the nature of the proceedings against him, what he was tried for, the purpose of his punishment, the impending fate which awaits him, and a sufficient understanding to know any fact which might exist which would make his punishment unjust or unlawful and the intelligence requisite to convey that information to his attorneys or the court.
Id. at 1236. (With minor stylistic changes, this statute continues to apply to inmates under a sentence of death whose competence is in question.) The Circuit Court of Harrison County conducted an evidentiary hearing on November 14, 1988, and found that Billiot was competent, under existing law, to be executed.
Six experts testified during that hearing Dr. Robert McKinley, Dr. Michael Whelan and Dr. William Johnson for Billiot; and Dr. Henry Maggio, Dr. Donald C. Guild and Dr. Charlton Stanley for the State. In determining the framework for its analysis of that testimony, the trial court reviewed both the Mississippi statute and Ford, stating, "[T]he two tests or standards can be read together without doing violence to either and the Court applies this combined standard to the present case." Considering the experts' testimony, the court recognized that the majority of them believed Billiot to be suffering from paranoid schizophrenia, but it held that the diagnosis, alone, would not prevent Billiot from being competent to be executed. The court's ultimate conclusion on Billiot's competence follows:
The only expert to state that Billiot was not presently competent to be executed was Dr. William Johnson. Dr. McKinley offered no opinion. The other experts stated that Billiot was competent at the time they examined him. The fact that these examinations have taken place at differing times over several years and in each instance he has been competent forces the Court to the conclusion that Billiot is presently sane and competent to be executed under the Mississippi statute because the Court finds as fact that Billiot does possess sufficient intelligence to understand the nature of the proceedings against him, what he was tried for, the purpose of his punishment, the impending fate which awaits him, and has a sufficient understanding to know any fact which might exist which would make his punishment unjust or unlawful and the intelligence requisite to convey such information to his attorneys or this court. The Court further finds that Billiot is also sane under the criteria set forth in Ford v. Wainwright, supra, in that he is aware of the punishment he is about to suffer and why he is going to suffer the punishment of death.
Billiot v. State, No. 18-761; DP-38, Findings of Fact and Conclusions of Law 39-40 (Cir. Ct. of Harrison County, Miss. May 10, 1989).
This decision was appealed to the Mississippi Supreme Court, which approved the legal standard used by the trial court and held that the evidence presented there was sufficient to support that court's conclusion. Billiot v. State, 655 So. 2d 1, 12-15 (Miss.1995). The court rejected arguments attacking both the procedure by which the trial court reached its decision and its interpretation of the Mississippi statute. Id. at 16. The Mississippi Supreme Court also noted that Billiot had attacked the lower court's proceedings by arguing that he had been improperly medicated with anti-psychotic drugs prior to his competency evaluations. Id. at 16-17. *843 However, because Billiot had not objected to the medication at the hearing, but only in the proposed Findings of Fact and Conclusions of Law that were later submitted, the court held that the argument had been waived. Id.
After the Mississippi Supreme Court held that Billiot was competent to be executed, he returned to this court and amended his Petition for Writ of Habeas Corpus to include his claims relative to the state court's competency evaluation. Those claims have not yet been addressed by this court, although his remaining claims were considered. Most of those claims were rejected in a Memorandum Opinion and Order entered on March 19, 1997, in which this Court held that Billiot's case should be remanded to the Mississippi Supreme Court because the instruction given on the "heinous, atrocious and cruel" aggravating circumstance was constitutionally invalid. The State appealed that denial, and the Fifth Circuit reversed and remanded for a harmless error analysis. Billiot v. Puckett, 135 F.3d 311, 320 (5th Cir.1998). On August 14, 2003, this court denied relief on all issues but the Ford claim and certified that denial for interlocutory appeal. The Fifth Circuit refused to consider that appeal in an unpublished opinion. Billiot v. Epps, 107 Fed.Appx. 385 (5th Cir.2004). Therefore, resolution of the competency claim is properly before this Court.
PROCEDURAL STATUS
Billiot's Ford claim was stayed indefinitely in this court's 2003 Memorandum Opinion and Order. In its opinion denying an interlocutory appeal, the Fifth Circuit determined that the Ford claim "is the only obstacle to a final judgment. . . ." 107 Fed.Appx. at 387. A footnote in the opinion suggested that the Ford claim is premature because no execution date has been set. The court also suggested that the claim should be dismissed without prejudice, so that the requirements for an appeal could be satisfied. Id. at n. 1. However, this court has declined to dismiss that claim, reasoning that state law requires that an execution date be set as soon as any stay of execution granted by a state or federal court is lifted. Billiot v. Epps, No. Civ. A. 1:86cv549(L), 2005 WL 2877731 at *2 (S.D.Miss.2005). Thus, a finding by this Court that Billiot is competent would require that this Court's stay be lifted, and his execution would then be imminent. So that Billiot's remaining claim can be resolved and this case move forward toward a resolution, this court required the parties to prepare for a hearing on Billiot's mental status. Id.
At issue throughout the course of determining Billiot's competence is the effect of medication on his evaluations, which requires a balancing of the State's right to medicate him and his right to refuse such medication. In 1993, Billiot appeared before the Sunflower County Circuit Court for a hearing to determine the legality of the Mississippi Department of Corrections' forcing medication upon him, which resulted in the entry of a Consent Decree in early 1995. According to the Decree, the parties "agreed that Mr. Billiot suffers from a chronic schizophrenic disorder and it is medically appropriate and necessary to medicate Mr. Billiot with psychotropic medication." A procedure was agreed upon by which Billiot could be medicated. Later that year, apparently in accordance with this procedure, MDOC held a forced medication administrative hearing. During that hearing, prison medical officials testified that Billiot's condition was deteriorating and recommended that he be given anti-psychotic medication, even against his will.
*844 Medication issues continued to arise in the context of conducting Ford evaluations, which further delayed the resolution of Billiot's Ford claims. His attorneys argued that the evaluations should occur while Billiot was not medicated; however, the State argued that, given his condition while not medicated, failing to medicate Billiot might actually violate the Eighth Amendment's prohibition against cruel and unusual conditions of confinement. In an effort to proceed toward a resolution of this matter without requiring that Billiot's medication be taken away, this Court ordered that Billiot be evaluated while under his current medication regime, with all medical records provided to his counsel and the State ordered to report any change in his medication. In so doing, this Court reserved ruling on certain issues, as follows:
In making this ruling, the Court specifically declines to rule at this time whether it can, or should, order that Billiot's medication be stopped for the purpose of a competency evaluation. The Court likewise declines to decide whether Billiot is being medicated as part of a treatment program, or primarily for the purpose of impacting the determination of competency. The Court also withholds a ruling on whether Billiot is taking medication voluntarily. Should the Court determine that Billiot is incompetent to be executed even while medicated, then these more complex issues may be avoided.
To assist this court in making this determination, Billiot has been evaluated by four experts who interviewed him in late 2007 and early 2008. In June of this year, those experts and Mr. Billiot appeared before this court to give testimony and evidence on the sole issue of whether Billiot, while taking anti-psychotic medication, is currently incompetent to be executed under federal law.
STANDARD OF REVIEW
Respondents argue that this court should defer to the state court's 1989 finding that Billiot is competent to be executed and that, therefore, a further evidentiary hearing is improper. The Court rejects that contention, for several reasons. First, Billiot's original petition was filed in 1986, prior to the effective date of the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA"), Pub. L. 104-32, 110 Stat. 12144 (effective as of April 24, 1996). His Amended Petition was filed in August, 1996; however, this Court specifically held, in its Order permitting the amendment, that it was to be considered as part of the original petition. This is, therefore, a pre-AEDPA case, in which the more stringent standards of review in the amended version of 28 U.S.C. § 2254 do not apply. Lindh v. Murphy, 521 U.S. 320, 326-36, 117 S. Ct. 2059, 138 L. Ed. 2d 481 (1997).
While a presumption of correctness applies to the state court's findings of fact, under pre-AEDPA law, this Court may review questions of law or mixed questions of fact and law de novo, granting no deference to state court adjudications. Thompson v. Keohane, 516 U.S. 99, 111-12, 116 S. Ct. 457, 133 L. Ed. 2d 383 (1995). A competency determination made by a state court is a factual issue. See Demosthenes v. Baal, 495 U.S. 731, 110 S. Ct. 2223, 109 L. Ed. 2d 762 (1990). However, the standard by which competency is evaluated is a legal issue. See, e.g., Indiana v. Edwards, ___ U.S. ___, 128 S. Ct. 2379, 2387-88, 171 L. Ed. 2d 345 (2008) (establishing standard for judging competence to conduct own defense); Dusky v. United States, 362 U.S. 402, 80 S. Ct. 788, 4 L. Ed. 2d 824 (1960) (per curiam); Drope v. Missouri, 420 U.S. 162, 171, 95 S. Ct. 896, 43 L. Ed. 2d 103 (1975) (establishing standard *845 for judging competence to stand trial).
A compelling reason exists in this case to discount the state court's opinion. Specifically, given that the issue here is Billiot's present competence to be executed, this court is of the opinion that a presumption of correctness should not apply to a finding of competence made on the basis of medical testimony given twenty years ago. Respondents admitted as much at the beginning of the recent hearing, where, although arguing that a full and fair hearing occurred in state court, their counsel went on to state, "[W]e would say that we think that the inquiry here is a discrete inquiry of whether or not Mr. Billiot is presently competent to be executed, and not whether he was competent ten years ago, twenty years ago, or five years ago." (Transcript of June 25-26 hearing, p. 4)
Additionally, the court notes that one factor in the earlier finding of competency was the possibility that Billiot might be malingering, or exaggerating his symptoms. Dr. Guild, who testified at that hearing, specifically raised that possibility. Since then, numerous mental health professionals have examined Billiot, and none of them has offered that rationale for his behavior. Even the two experts who testified for Respondents during the hearing in this court believe that Billiot is not malingering. Moreover, the history of Billiot's mental disorder, which is documented for over thirty years, shows sustained, consistent behaviors that support a finding that Billiot's symptoms are not just real, but that they are becoming exacerbated with time. The experts who evaluated him for his earlier competency hearing obviously lacked this wealth of information. After consideration of all of these factors, this court has determined that the state court's 1989 findings will be considered only in a historical context, as part of the continuing course of Billiot's mental illness, which all of the experts have agreed is chronic. See, e.g., Thompson v. Bell, 580 F.3d 423, 436 (6th Cir.2009) (holding that, while the petitioner's documented history of mental illness was not dispositive of the question of incompetence, "it is at least probative of the seriousness of his illness and whether it is chronic") This court's inquiry, then, will be limited to a determination of whether Billiot is presently incompetent to be executed, based on the current law and the evidence and testimony presented to the court in the hearing held on June 25-26, 2009.
STANDARD FOR DETERMINING COMPETENCY
The prohibition against execution of the mentally ill is based on ancient traditions of English common law. When Ford v. Wainwright, 477 U.S. 399, 106 S. Ct. 2595, 91 L. Ed. 2d 335 (1986), was decided, no state permitted the execution of the insane. Id. at 408 n. 2, 106 S. Ct. 2595. Prior to Ford, however, the United States Constitution only provided procedural due process protection for the exemption from execution that was provided by state law. See, e.g., Phyle v. Duffy, 334 U.S. 431, 68 S. Ct. 1131, 92 L. Ed. 1494 (1948). Ford recognized that the Eighth Amendment also provides a restriction on a state's substantive power to execute the mentally incompetent.
Alvin Ford was convicted of murder and sentenced to death in the State of Florida. Well after his trial and sentencing, Ford began to exhibit bizarre behavior, based on his apparent belief in a wide-ranging conspiracy against him, which included the delusion that his family and friends had been taken hostage. His attorney ultimately invoked the procedures of Fla. Stat. § 922.07 (1985) to have Ford declared incompetent to be executed. In *846 accordance with that statute, which prohibited execution of a prisoner unless he had "the mental capacity to understand the nature of the death penalty and the reasons why it was imposed upon him," the Governor of Florida appointed three psychiatrists to examine Ford. Each of the psychiatrists concluded that Ford had a severe mental disorder, but all of them concluded that he was competent to be executed under Florida law. Based on those opinions, the Governor signed a death warrant for Ford's execution, without further explanation. Ford, 477 U.S. at 402-04, 106 S. Ct. 2595.
Two issues were before the Court in Ford: whether the Eighth Amendment prohibited the execution of the insane and whether the procedure employed by the Florida court to determine competency was constitutionally adequate. The Court's ultimate determination in Ford's favor on both issues was a plurality decision. Seven justices agreed that the Florida procedure was constitutionally inadequate; however, only four believed that a full evidentiary hearing was required. Justice Powell wrote separately to disapprove of Florida's procedure, but he would have held that any procedure that provided an impartial officer and an opportunity for the prisoner to be heard was adequate. On the substantive issue, five justices agreed with the general principle that the execution of the insane, as proscribed in the common law and statutorily prohibited in all states, violated the Eighth Amendment; however, Justice Powell wrote separately on the issue of the definition of insanity.
In his discussion of the historical context of the prohibition against executing the insane, Justice Marshall, writing for himself and three others, recognized several historical bases for the rule. He first cited Blackstone for the principle that a man who becomes insane after judgment, but before execution, should have his execution stayed, "[F]or peradventure, says the humanity of the English law, had the prisoner been of sound memory, he might have alleged something in stay of judgment or execution." Id. at 406, 106 S. Ct. 2595 (quoting 4 W. Blackstone, "Commentaries," 24-25). Other reasons were also offered in support of the common-law prohibition. The first was, "[T]he execution of an insane person simply offends humanity." 477 U.S. at 407, 106 S. Ct. 2595. Second, Marshall noted, "[I]t provides no example to others and thus contributes nothing to whatever deterrence value is intended to be served by capital punishment." Id. The third reason advanced was, "[I]t is uncharitable to dispatch an offender `into another world, when he is not of a capacity to fit himself for it.'" Id. (quoting Hawles, "Remarks on the Trial of Mr. Charles Bateman," 11 How. St. Tr. 474, 477 (1685)). He identified as a fourth rationale, that "execution serves no purpose in these cases because madness is its own punishment. . . ." 477 U.S. at 407, 106 S. Ct. 2595. Finally, Marshall recognized, "[T]he community's quest for `retribution' the need to offset a criminal act by a punishment of equivalent `moral quality' is not served by execution of an insane person, which has a `lesser value' than that of the crime for which he is to be punished." Id. at 408, 106 S. Ct. 2595. Justice Marshall found all of these reasons to have continued "logical, moral, and practical force. . . ." Id. at 409, 106 S. Ct. 2595. While not expressly adopting any of these rationales over another, Justice Marshall stated, "It is no less abhorrent today than it has been for centuries to exact in penance the life of one whose mental illness prevents him from comprehending the reasons for the penalty or its implications." Id. at 417, 106 S. Ct. 2595. He concluded, "Whether its aim be to protect *847 the condemned from fear and pain without comfort of understanding, or to protect the dignity of society itself from the barbarity of exacting mindless vengeance, the restriction finds enforcement in the Eighth Amendment." Id. at 410, 106 S. Ct. 2595.
As Justice Powell noted in his concurrence, the determination of a prisoner's sanity is not an issue that can be resolved by reference to historical facts. 477 U.S. at 426, 106 S. Ct. 2595. Instead, it is a "basically subjective judgment . . . [that] depends substantially on expert analysis in a discipline fraught with `subtleties and nuances.'" Id. (quoting Addington v. Texas, 441 U.S. 418, 430, 99 S. Ct. 1804, 60 L. Ed. 2d 323 (1979)). There is no "bright line"no calculation or discrete measurement for determining who is ineligible for execution. For this reason, the analysis is markedly different from that conducted in Roper v. Simmons, 543 U.S. 551, 125 S. Ct. 1183, 161 L. Ed. 2d 1 (2005) (prohibiting execution of individuals who were under eighteen when they committed the crime), or Atkins v. Virginia, 536 U.S. 304, 122 S. Ct. 2242, 153 L. Ed. 2d 335 (2002) (prohibiting execution of mentally retarded individuals). Believing that Justice Marshall's opinion had not set forth the meaning of insanity in this context, and that the historical arguments "do not provide a common answer when it comes to defining the mental awareness required by the Eighth Amendment as a prerequisite to a defendant's execution," Justice Powell wrote separately to address that issue. Id. at 418-19, 106 S. Ct. 2595.
Justice Powell specifically discounted one historical theory for the prohibition against execution of the insanethat an insane prisoner could not adequately assist counsel in making arguments against his execution. In Justice Powell's view, that justification has no force in modern practice, which provides far more extensive review of convictions and sentencesparticularly death sentencesthan did the common law, including not only direct appeal but ordinarily both state and federal collateral review, throughout all of which the defendant has access to counsel, and indeed, the right to effective assistance of counsel at trial and on appeal. Id. at 420, 106 S. Ct. 2595. Justice Powell thus considered it "unlikely indeed that a defendant today could go to his death with knowledge of undiscovered trial error that might set him free." Id.
Justice Powell agreed, however, that other rationales identified by Justice Marshall remained valid:
The more general concern of the common law-that executions of the insane are simply cruel-retains its vitality. It is as true today as when Coke lived that most men and women value the opportunity to prepare, mentally and spiritually, for their death. Moreover, today as at common law, one of the death penalty's critical justifications, its retributive force, depends on the defendant's awareness of the penalty's existence and purpose. Thus, it remains true that executions of the insane both impose a uniquely cruel penalty and are inconsistent with one of the chief purposes of executions generally. For precisely these reasons, Florida requires the Governor to stay executions of those who "d[o] not have the mental capacity to understand the nature of the death penalty and why it was imposed" on them. Fla.Stat. § 922.07 (1985 and Supp. 1986).
Id. at 422, 106 S. Ct. 2595. Justice Powell observed that, in fact, while some states (including Mississippi) had more rigorous standards, prohibiting the execution of a defendant who is unable to assist in his own defense, "none disputes the need to *848 require that those who are executed know the fact of their impending execution and the reason for it." Id. And in his view, this was all the Eight Amendment required:
Such a standard appropriately defines the kind of mental deficiency that should trigger the Eighth Amendment prohibition. If the defendant perceives the connection between his crime and his punishment, the retributive goal of the criminal law is satisfied. And only if the defendant is aware that his death is approaching can he prepare himself for his passing. Accordingly, I would hold that the Eighth Amendment forbids the execution only of those who are unaware of the punishment they are about to suffer and why they are to suffer it.
Id.
Subsequent opinions from lower courts assumed that Justice Powell's definition of competence was controlling without much reference to the other language in Ford. See, e.g., Scott v. Mitchell, 250 F.3d 1011, 1014 (6th Cir.2001); Massie v. Woodford, 244 F.3d 1192, 1195 n. 1 (9th Cir.2001); Coe v. Bell, 209 F.3d 815, 825-26 (6th Cir.2000); Fearance v. Scott, 56 F.3d 633, 640 (5th Cir.1995); Rector v. Clark, 923 F.2d 570, 572 (8th Cir.), cert. denied, Rector v. Bryant, 501 U.S. 1239, 111 S. Ct. 2872, 115 L. Ed. 2d 1038 (1991). In one case, Walton v. Johnson, 440 F.3d 160, 170 (4th Cir.2006), the court analyzed the effect of the plurality opinion by reference to the principle announced in Marks v. United States, 430 U.S. 188, 97 S. Ct. 990, 51 L. Ed. 2d 260 (1977). In Marks, the Court held, "When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, `the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds. . . .'" 430 U.S. at 194, 97 S. Ct. 990 (quoting Gregg v. Georgia, 428 U.S. 153, 169 n. 15, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976)).
The Walton court noted that the issue was not quite clear, since Justice Powell had specifically stated that the "Court's opinion does not address . . . the meaning of insanity." 440 F.3d at 170 n. 10 (quoting Ford, 477 U.S. at 418, 106 S. Ct. 2595). Additionally, the Walton opinion recognized that Justice Marshall, in a dissent from the denial of certiorari in another case, Rector v. Bryant, 501 U.S. 1239, 1241-42, 111 S. Ct. 2872, 115 L. Ed. 2d 1038 (1991) (Marshall, J., dissenting), argued forcefully that Ford left unsettled the parameters of mental disturbance that would prohibit execution. On the other hand, considering "the actual discussion of rationales and the overlapping agreement on one of the rationales in both the Ford plurality opinion and Justice Powell's concurrence" and in light of the Supreme Court's "acknowledgment of Justice Powell's proffered test (albeit in dicta) as the appropriate standard" in Penry v. Lynaugh, 492 U.S. 302, 109 S. Ct. 2934, 106 L. Ed. 2d 256 (1989) (holding that the Eighth Amendment did not prohibit the execution of a mentally retarded inmate), overruled on other grounds by Atkins v. Virginia, 536 U.S. 304, 122 S. Ct. 2242, 153 L. Ed. 2d 335 (2002), the Walton court concluded that the Ford Court effectively adopted Justice Powell's proffered two-part test as the constitutionally minimum standard for determining mental competence to be executed. 440 F.3d at 170.
This was the state of the law when Scott Panetti's case was decided. Panetti, who suffered from a fragmented personality, delusions and hallucinations, killed his estranged wife's parents in front of his wife and their daughter. His habeas attorneys produced evidence that, while Panetti claimed to understand that the state wanted *849 to execute him for the murders he committed, his mental illness had resulted in a delusion that the stated reason for his execution was a sham, and that the state actually intended to kill him to stop his preaching. Panetti v. Dretke, 401 F. Supp. 2d 702, 708 n. 3 (W.D.Tex.2004). This claim had been presented in state court, resulting in the appointment of two experts to examine him. Id. at 704. Those experts concluded that Panetti was competent, and the state court ruled against Panetti without giving him an opportunity to rebut those opinions. Id. The district court that considered his claim held, first, that the state court opinion was not entitled to deference under AEDPA, as the proceedings in state court were constitutionally inadequate. 401 F. Supp. 2d at 705-06.
The court then struggled with the question of whether Panetti was incompetent under the rationale of Ford. According to the district court, Justice Powell's opinion defined competence as perceiving the connection between the crime and the punishment, thereby satisfying the retributive goal of the death penalty. Id. at 709. In order to satisfy that goal, however, the prisoner's perception must include not just factual knowledge of the reason for execution, but also his understanding, or, as Justice Powell stated, "[T]he Eighth Amendment forbids the execution only of those who are unaware of the punishment they are about to suffer and why they are to suffer it." Id. at 709-10, quoting Ford, 477 U.S. at 422, 106 S. Ct. 2595 (emphasis added). The district court reviewed Fifth Circuit precedent on this issue, however, and concluded that the appellate court had not adopted Justice Powell's reasoning in its entirety, but only adopted his standard in a limited sense. "[T]he Fifth Circuit has, without any discussion of the potential broader import of the statement, apparently interpreted Justice Powell's use of the concept of `awareness why' to require no more than knowledge of the required factual predicate for an execution." Id. at 710 (citing Fearance v. Scott, 56 F.3d 633, 640 (5th Cir.1995); Barnard v. Collins, 13 F.3d 871, 876 n. 2 (5th Cir.1994); Garrett v. Collins, 951 F.2d 57, 59 (5th Cir.1992); Lowenfield v. Butler, 843 F.2d 183, 187 (5th Cir.1988)).
Panetti had argued that he would be held incompetent using Justice Powell's reasoning, but the district court's dissection of the Ford opinions compelled a conclusion that Justice Powell's concurrence was not controlling, in that the opinion of the other four justices in the majority "specifically declined to reach a holding on the question of what standard should be used to determine incompetency for the purposes of the Eighth Amendment." 401 F. Supp. 2d at 710. For this reason, the district court held, "[T]he Powell concurrence does not operate as binding Supreme Court precedent on what standard governs competency to be executed." Id. Examining Fifth Circuit precedent, the district court concluded that the "retributive goal" requirement of Justice Powell's concurrence had not been adopted. "Ultimately, the Fifth Circuit test for competency to be executed requires the petitioner know no more than the fact of his impending execution and the factual predicate for the execution." Id. at 711. Panetti was aware that he was convicted for the murders of his in-laws and that he was to be executed. Although there was evidence demonstrating that Panetti did not appreciate the connection between the murders and his execution, under controlling Fifth Circuit precedent, his lack of understanding did not exempt him from the death penalty. Id. at 709-12.
On appeal, the Fifth Circuit declined to rule on the issue of whether the state's procedure for reviewing Panetti's claim *850 was adequate and entitled to deference. Panetti v. Dretke, 448 F.3d 815, 817 (5th Cir.2006). However, on the issue of competence, the court reviewed its earlier decisions and concluded that the standard for competence to be executed in the Fifth Circuit required only that an inmate to be aware of his punishment and why he is to suffer it. Id. at 819-21. Holding that "awareness" was not synonymous with "rational understanding," the court found Panetti competent to be executed. Id.
The Supreme Court reversed. Panetti v. Quarterman, 551 U.S. 930, 127 S. Ct. 2842, 168 L. Ed. 2d 662 (2007). Addressing a jurisdictional issue, the Court held that Panetti's petition was not "second or successive," within the meaning of 28 U.S.C. § 2244, as it held that the statute did not apply to bar Ford claims "filed when the application is first ripe." Id. at 947, 127 S. Ct. 2842. Turning to the issue of whether Florida's procedure to determine competence was entitled to deference, the Court discussed the split of opinions in Ford as to what was constitutionally required in a state competency proceeding. Applying Marks, 430 U.S. at 193, 97 S. Ct. 990, the Court held that Justice Powell's opinion on that issue, which "offered a more limited holding," constituted clearly established law and set the minimum standard for such a proceeding. 551 U.S. at 949, 127 S. Ct. 2842. Even under Justice Powell's standard, however, the Texas procedure was constitutionally inadequate. Id. at 950-52, 127 S. Ct. 2842. The process having been inadequate under Ford, and Justice Powell's opinion constituting clearly established law, the state court's opinion was not entitled to deference under AEDPA. Id. at 953-54, 127 S. Ct. 2842
Then the Court considered whether Panetti's delusions made him incompetent to be executed under Ford. Although it recognized that the application of the Eighth Amendment to the issue of executing the insane resulted from a plurality opinion, the Court neither referenced Marks nor deferred to Justice Powell's concurrence. Id. at 957-59, 127 S. Ct. 2842. Instead, the Court acknowledged that Ford did not provide a precise standard for competency. "The four-Justice plurality discussed the substantive standard at a high level of generality; and Justice Powell wrote only for himself when he articulated more specific criteria." Id. at 957, 127 S. Ct. 2842. Characterizing Justice Marshall's opinion as "the opinion of the Court," the Panetti Court recited these reasons from Ford as the foundation for the constitutional prohibition against executing mentally incompetent prisoners:
[T]oday, no less than before, we may seriously question the retributive value of executing a person who has no comprehension of why he has been singled out and stripped of his fundamental right to life. . . . Similarly, the natural abhorrence civilized societies feel at killing one who has no capacity to come to grips with his own conscience or deity is still vivid today. And the intuition that such an execution simply offends humanity is evidently shared across this Nation. Faced with such widespread evidence of a restriction upon sovereign power, this Court is compelled to conclude that the Eighth Amendment prohibits a State from carrying out a sentence of death upon a prisoner who is insane.
Panetti, 551 U.S. at 957, 127 S. Ct. 2842 (quoting Ford, 477 U.S. at 409-10, 106 S. Ct. 2595).
According to the Court, the prohibition rested upon reasons recognized at common law and recited in "the controlling portion" of Justice Marshall's opinion in Ford. 551 U.S. at 958, 127 S. Ct. 2842. One of those reasons was the failure of such an execution *851 to serve any retributive purpose. Id. In most cases, imposition of the death penalty "has the potential to make the offender recognize at last the gravity of his crime and to allow the community as a whole . . . to affirm its own judgment that the culpability of the prisoner is so serious that the ultimate penalty must be sought and imposed." Id. This effect is questionable, however, "if the prisoner's mental state is so distorted by a mental illness that his awareness of the crime and punishment has little or no relation to the understanding of those concepts shared by the community as a whole." Id. at 958-59, 127 S. Ct. 2842.
Retribution was not the only rationale to be considered, however, as the Court went on to state, "[T]he other rationales set forth by Ford fail to align with the distinctions drawn by the Court of Appeals." Id. at 959, 127 S. Ct. 2842. Later in the opinion, the Court repeated that the "principles set forth in Ford are put at risk" by the Fifth Circuit's interpretation of the competence standard. Id. Likewise, the Court held, the Fifth Circuit's interpretation "find[s] no support elsewhere in Ford, including in its discussions of the common law and the state standards . . . ." Id. (emphasis added). Thus, it held, it was "error to derive from Ford, and the substantive standard for incompetency its opinions broadly identify, a strict test for competency that treats delusional beliefs as irrelevant once the prisoner is aware the State has identified the link between his crime and the punishment to be inflicted." Id.
This language indicates that the Court in Panetti intended to do more than to simply include a delusional state as a factor that could fit an accused within the narrow test enunciated by Justice Powell. Although Panetti held that a delusional state could prevent an inmate from having a rational understanding of his fate, the Court refused to adopt Justice Powell's definition or to enunciate "a rule governing all competency determinations." Id. at 960-61, 127 S. Ct. 2842. Instead, the opinion appears to open the analysis of competence to consideration of the other common law factors recognized by Justice Marshall as relevant to this issue.
A determination of mental illness is necessarily subjective, and the legal definition of competence is not precise. It is not surprising, therefore, that lower courts were left by the Panetti opinion without a specific measure of incompetence to be executed. They were not, however, left completely without guidance from the Supreme Court on how a competency analysis should be undertaken:
The underpinnings of petitioner's claims should be explained and evaluated in further detail on remand. The conclusions of physicians, psychiatrists, and other experts in the field will bear upon the proper analysis. Expert evidence may clarify the extent to which severe delusions may render a subject's perception of reality so distorted that he should be deemed incompetent. Cf. Brief for American Psychological Association, et al., as Amici Curieae 17-19 (discussing the ways in which mental health experts can inform competency determinations). And there is precedent to guide a court conducting Eighth Amendment analysis. See, e.g., Roper v. Simmons, 543 U.S. 551, 560-564, 125 S. Ct. 1183, 161 L. Ed. 2d 1 (2005); Atkins v. Virginia, 536 U.S. 304, 311-314, 122 S. Ct. 2242, 153 L. Ed. 2d 335 (2002); Ford, 477 U.S., at 406-410, 106 S. Ct. 2595.
Id. at 962, 127 S. Ct. 2842.
Although the Court in Panetti declined to set forth a specific definition of incompetence applicable in all cases, as the district *852 court observed on remand in Panetti, the Supreme Court made clear in its opinion in Panetti that, "in the Eighth Amendment context, `insanity' does have a baseline definition: the test for competence to be executed involves not only a prisoner's factual awareness of the crime, the impending execution, and the state's reason for executing the prisoner, but also some degree of `rational understanding' of the connection between the crime and the punishment." Panetti v. Quarterman, No. A-04-CA-042-SS, 2008 WL 2338498, *31 (W.D.Tex. March 26, 2008) (quoting Panetti, 127 S.Ct. at 2861). However, the Court's citations to Roper, Atkins and Ford suggest that Eighth Amendment analysis of a defendant's competence to be executed must include consideration of society's current perception of capital punishment and the effect of that perception on the determination of what constitutes cruel and unusual punishment in the context of competence to be executed. As the Court recognized in Atkins, "A claim that punishment is excessive is judged not by the standards that prevailed in 1685 when Lord Jeffreys presided over the `Bloody Assizes' or when the Bill of Rights was adopted, but rather by those that currently prevail." 536 U.S. at 311, 122 S. Ct. 2242. More recently, the Court reasoned that the Eighth Amendment's scope must continue to evolve, "because `[t]he standard of extreme cruelty is not merely descriptive, but necessarily embodies a moral judgment. The standard itself remains the same, but its applicability must change as the basic mores of society change.'" Kennedy v. Louisiana, ___ U.S. ___, 128 S. Ct. 2641, 2649, 171 L. Ed. 2d 525 (2008) (quoting Furman v. Georgia, 408 U.S. 238, 382, 92 S. Ct. 2726, 33 L. Ed. 2d 346 (1972) (Burger, C.J., dissenting)).
In Ford, the Court summarized the "ancestral legacy" against execution of the insane and concluded that it had "not outlived its time. Today, no State in the Union permits the execution of the insane." 477 U.S. at 408, 106 S. Ct. 2595. In Atkins, the Court reviewed recent legislation by the states to determine whether "evolving standards of decency" indicated a trend toward exempting mentally retarded offenders from execution. 536 U.S. at 312-13, 122 S. Ct. 2242. Similarly, in Roper, the Court looked at the evolution of the law prohibiting the execution of juveniles since the time that it earlier held such executions constitutional. 543 U.S. at 562-65, 125 S. Ct. 1183. In each of these cases, the Court decided that there was "objective indicia of consensus" sufficient to hold that the Eighth Amendment should be extended to exempt certain classes of offenders from punishment by death. On the whole, then, it can surely be said that there is a trend toward narrowing the class of inmates against whom the death penalty may be imposed consistent with the Eighth Amendment's prohibition against cruel and unusual punishment. As to whether this existence of this trend supports a conclusion that "evolving standards of decency" suggest a broader definition of incompetence than the baseline definition recognized in Panetti is another matter.
At the time Ford was decided, forty-one states had the death penalty or statutes governing execution procedure. Ford, 477 U.S. at 408 n. 2, 106 S. Ct. 2595. Since Ford, the number of death penalty states has dropped from forty-one to thirty-six states, of which two (New York and Illinois) have death penalty statutes, but are not permitting execution at this time.[1] Of *853 the remaining thirty-four states, sixteen have a definition of competence similar to Justice Powell's formulation that is either contained in legislation[2] or has been adopted by common law.[3] Five states have no statutory or common law definition of incompetence to be executed.[4] Two states require the accused to understand the reasons for his death sentence "and its implication."[5] Eleven other states mandate, by statute[6] or by common law,[7] that an inmate is competent to be executed only when he can communicate with counsel or assist in his defense.
In the court's opinion, these numbers do not reflect a broader definition of incompetence than that identified in Panetti. Obviously, the national debate over the death penalty now includes a discussion of whether it should be imposed, in addition to when it is justified (owing perhaps to financial considerations and advances in forensic science); and, society's perspective on execution appears to be moving more toward exclusivity, being reserved for those situations in which its punitive goals are best served. However, in the court's opinion, this trend does not suggest that society's perspective on the appropriate standard for gauging incompetence has changed, or "evolved", since Panetti was decided. Rather, the question remains whether the defendant has a rational understanding of his conviction, his impending execution, and the relationship between the two.
BILLIOT'S MEDICAL HISTORY
Although the parties agreed at the hearing that Billiot's previous diagnoses were not dispositive of the issue of whether his current mental state exempted him from execution, they also concurred that the earlier medical records provided a context *854 in which to examine his claim of current incompetence. Specifically, the Court is of the opinion that the records are important to evaluate whether Billiot's current manifestation of mental disorder is genuine, as well as providing insight into his long-term prognosis.
Billiot was born on June 10, 1961, and testimony at his 1983 murder trial revealed that his difficulties began early in life. His parents apparently divorced when he was very young, and, when he was about five years old, his mother began dating Wallace Croll. When Billiot was about seven, his mother and Croll married. Croll had three sons of his own, and he and Billiot's mother, Audrey, had a son and a daughter. According to his aunt, Helen Stevenson, Billiot's childhood was very unhappy, and his mother and stepfather both mistreated him. He often went from his mother's house to his aunt's or his grandparents' to stay. By the time that he was a teenager, Billiot was living on the streets.
Billiot displayed symptoms of mental disturbance in early adolescence, and, a few years before the murders, he told family members that he was Jesus Christ. The Honorable Walter Gex, currently a District Judge in this District, represented Billiot in an early commitment proceeding, and he later testified that he remembered some religious involvement on Billiot's partevidenced by Billiot's thinking that he was either Jesus Christ or the devil. Henry Cook, who was the master at that proceeding, recalled Audrey Croll's testifying that Billiot would appear in her room at night with a knife, saying that he was there to release the devil from his side. She also reported that he had written letters saying he was Jesus.
In 1975, Billiot was admitted to the East Louisiana State Hospital. In December, 1978, he was admitted to the East Mississippi State Hospital for treatment of substance abuse. No signs of psychosis or retardation were noted, although Billiot self-reported mental disturbances dating from the time he was fourteen or fifteen. In January, 1979, he was re-admitted to that hospital, where he was diagnosed with antisocial personality disorder and mixed substance dependence. In July of that year, Billiot was sent to the Mississippi State Hospital, after his mother reported that he had been having hallucinations and believed himself to be Jesus Christ. One doctor found no evidence of psychosis, and Billiot was discharged. However, a psychiatrist and a psychologist who examined him at that time believed that Billiot suffered from paranoid schizophrenia, with religious delusions and threats of combative behavior. They also believed that Billiot was a danger to himself or others and was in need of hospitalization.
By August 13, 1979, Billiot was again admitted to the East Mississippi State Hospital for drug treatment. Hospital records indicated that he had been admitted to Charity Hospital in New Orleans three months earlier, after stating that he had access to a gun and wanted to kill someone in self-defense. On August 15, he was again diagnosed as having antisocial personality disorder and multiple drug dependence; later that day, Billiot tried to hang himself. While the discharge report noted no signs of psychosis, the prognosis was extremely poor. Other than a follow-up visit to the Gulf Coast Mental Health Center in September, 1979, there are no other mental health records for Billiot before the murders on November 26, 1981.
After he was arrested, Billiot was returned to the Mississippi State Hospital for evaluation of an insanity defense and his competence to stand trial. In January, 1982, Dr. Henry Maggio and Dr. Leonard Ball interviewed him. At that time, Billiot *855 admitted to being at his parents' home at the time of the murders, but said that he saw the devil actually kill them, after which he took money from his mother and stepfather and drove away in their car. Dr. Maggio diagnosed Billiot as paranoid schizophrenic, without psychosis, although he was delusional. However, he found Billiot to be aware and goal directed and competent to stand trial. Dr. Ball was one of the physicians who had recommended, in 1979, that Billiot not be released, and his diagnosis of paranoid schizophrenia did not change after the 1982 evaluation.
Dr. A.G. Anderson, the Director of Forensic Psychiatry at the State Hospital, diagnosed Billiot with a schizophreniform disorder. It was his opinion that Billiot was not a paranoid psychotic person at the time of his examination, although Dr. Anderson believed that "he may have undergone a schizophreniform disorder type illness at or about the time of the crime. . . ." However, Dr. Anderson concluded that Billiot was responsible for his crime and competent to stand trial. He related that a vote had been taken among the mental health professionals who had dealt with Billiot at the State Hospital, and the majority agreed with him, although the vote was not unanimous.
Billiot was also given a psychological evaluation, performed by Dr. William Johnson. In addition to other tests, Johnson administered the MMPI. Dr. Johnson interpreted Billiot's results as follows:
On the MMPI, Mr. Billiot's profile was one of "faking good" based on elevations in the L and K scales. The interpretation of this response pattern is that he attempted to portray himself as being well adjusted. However, on the clinical scales Mr. Billiot scored highest on the Paranoid and Schizophrenia scales. This pattern of scores is most consistent with the diagnosis of paranoid schizophrenic by one who is trying to make himself appear well adjusted.
Johnson believed that Billiot was not criminally responsible, noting that, while Billiot could provide a detailed account of the events that occurred on the day of the murder, he "was operating under a delusional system" and could not conform his behavior to "conventional standards of right and wrong." He concluded that, on the day of the crime, "Mr. Billiot acted under an irresistible impulse as a result of his delusional system with a diminished capacity to appreciate the consequences of his actions." However, Johnson concluded that Billiot was competent to stand trial, so long as he was given "specific instructions regarding his courtroom behavior and how to assist his attorney. . . ." A deputy at the Harrison County Jail, where Billiot was confined prior to his conviction, said that he would refer to himself as different people, including Hitler and General Lafitte. Billiot also expressed a belief in werewolves.
Billiot's mental disturbances continued after his conviction and move to the Mississippi State Penitentiary at Parchman, where he was initially diagnosed as having an anti-social personality. After repeated requests for psychiatric evaluation, Billiot received a neuropsychological evaluation on March 16, 1984, by Dr. Michael Whelan. His impressions were that Billiot suffered from: (1) higher cortical dysfunction mild and bilateral; (2) mixed substance abuse (by history); and (3) schizophreniform disorder versus schizotypal personality disorder. Dr. Whelan saw Billiot again a few months later and noted that, while not psychotic, Billiot "does process very strange thought patterns." Those thoughts included the belief that he was engaged in spiritual warfare with the devil.
In January, 1987, Billiot asked Dr. Whelan to give him Mellaril, an anti-psychotic. *856 Dr. Whelan referred the request to Dr. Robert McKinley, a psychiatrist. Dr. McKinley agreed to prescribe the drug, stating, "Since he has requested Mellaril, an accepted drug for the treatment of schizophrenia, and he definitely has beyond the shadow of a doubt a chronic paranoid schizophrenic disorder, it seems to me both rational, ethical and responsible to prescribe Mellaril. . . ." Apparently, Billiot took Mellaril for only a short period of time before deciding that he did not like its effects. For several months thereafter, he demanded medication of his own choosing. In February, 1988, he was brought back to see Dr. McKinley, who recorded, "He obviously is schizophrenic." Billiot asked for anything but Mellaril, so Dr. McKinley prescribed Trilafon.
On July 24, 1988, Billiot was stabbed multiple times by another inmate. He was taken to the Bolivar County Hospital, where he arrived in guarded condition, due to puncture wounds in his lungs, stomach, liver, pancreas, spleen and right kidney, as well as superficial stab wounds to both shoulders. Billiot underwent surgery for his injuries and was later discharged to the Mississippi State Penitentiary Hospital for further recovery. Upon his discharge back to the Maximum Security Unit, he was given another prescription for Mellaril.
In November, 1988, the Circuit Court of Harrison County held the competency hearing for Billiot that was described earlier in this opinion. The conclusions of the experts who testified have already been summarized; however, some of the details of their testimony are relevant to understanding the course of Billiot's mental illness. Dr. McKinley, who had described Billiot as "obviously schizophrenic" in the medical records, reported that Billiot had bizarre delusions and disorganized thinking. He also testified that Billiot's condition was chronic, and "he's not likely to get well." Dr. Whelan reported that, in 1985, he reported that Billiot was "firmly entrenched in a delusional system which permits him to acknowledge the fact that he did indeed murder the Croll family, but which permits an absolution of his guilt." Despite his opinion at that hearing that Billiot was competent to be executed, Dr. Whelan admitted that his symptoms of schizophrenia could exacerbate to the point where he became "floridly psychotic" and incompetent. Dr. Whelan also read from his report of Billiot's stabbing by an inmate named Harper, which said, "[S]ecurity staff relate that James was constantly talking to demons and spirits throughout the night and because he wouldn't be quiet, Harper decided to silence him." Dr. Guild, who testified that Billiot was competent and believed that he was malingering, admitted that the testimony of the experts had raised the possibility in his mind that Billiot might actually have paranoid schizophrenia.
As discussed in an earlier section, the Circuit Court found Billiot competent to be executed, by an Order entered in May, 1989. After that point, Billiot's condition continued to deteriorate, such that the Department of Corrections felt it necessary to forcibly medicate him. He brought a lawsuit against department officials in state court, seeking an order preventing such medication and requesting damages for past administration of psychotropic drugs. A hearing was held in that case in the Circuit Court of Sunflower County in October, 1993. At that hearing, Dr. Stanley Russell testified on behalf of the Department of Corrections. Dr. Russell had first treated Billiot in 1989, shortly after the stabbing incident, and he described him as psychotic, stating, "He was hallucinating, delusional, was having difficulty sleeping at night, was keeping himself and other inmates on the tier awake, was rattling *857 the bars, and was complaining about demons hurting him. He was grossly out of contact with reality at the time." Billiot was non-compliant with his medication, and Dr. Russell and Dr. Whelan told him that he would be forcibly injected if he failed to take his pills orally. Billiot did not comply, and, in Dr. Russell's opinion, became a threat to himself, both because he self-inflicted wounds and because other inmates began to threaten him. During that time, Russell characterized Billiot as not being competent to make a decision about his medication. Russell remembered Billiot's saying that he could not be hurt because he had been around since the thirteenth century. Billiot cried out and complained that demons were getting in his cell and causing him trouble. He "looked like a hunted animal when you would see him in his cell."
The lawsuit was concluded by the entry of a Consent Judgment and Order in January, 1995. The Judgment recites that the parties agree that Billiot suffered from a chronic schizophrenic disorder, making it medically appropriate to treat him with psychotropic medication. The parties also agreed that it would be cruel and inhuman to refrain from medicating him, and Billiot waived his claim for damages. To prevent arbitrary forcible medication, the parties agreed that the Department of Corrections would institute a policy that must be followed before inmates were forcibly medicated, which included review by a Special Hearing Committee. Consonant with that policy, such a hearing was held for Billiot on April 28, 1995. The hearing transcript reflects that Billiot gave inappropriate answers to certain questions and laughed throughout the examination. After the interview, Dr. Whelan stated that Billiot was "in a very deteriorating condition, his cognitive processes are quite disturbed, his judgment is extremely impaired, his affect inappropriate, he is very incoherent to what would be expected in a normal discussion. He laughed throughout the evaluation, I think he is seriously mentally ill." The other members of the Committee concurred, and Dr. McKinley added, "His thought content is delusional and he doesn't seem to grasp or comprehend what we are talking about here." It was decided that Billiot would be forcibly medicated.
Billiot was given Haldol shortly after the evaluation. By May 15, 1995, Dr. McKinley reported some improvement. However, on May 19, Dr. Whelan reported on his visit with Billiot, as follows:
Initially, James refused to talk. He kept a sheet pulled over his head and was mute. It was apparent to this writer that his sheet was wet and his jump suit was wet also. I believe that he had soaked his sheet and his jump suit in the toilet and the smell of urine was strong, so I assume that he soaked his jump suit and the sheet to to [sic] toilet, when it was still at least, partially filled with urine and then he put the jump suit back on and covered himself up with the sheet.
By June 19, Dr. Whelan reported that Billiot was more intact cognitively, and his appearance had also improved. He continued to improve to the point where he was permitted to take his medication orally. By November 8, 1995, he was reported to be disheveled, and his room was dirty, suggesting that he had become non-compliant once more. On March 5, 1996, Dr. Russell visited Billiot and reported that Billiot talked to him, but Russell could not understand what he was saying. Apparently, Billiot was not taking his medication, and Russell stated, "whether he takes it or not is out of my control."
Medical records for the next few years indicate that Billiot's condition was unchanged. In September, 1998, a note *858 states that he "remains delusional and paranoid." A year later, he was observed scruffy and naked in his messy cell. On June 15, 2000, he was found naked and in a fetal position, unwilling or unable to talk. The next day, Dr. Clyde Glenn, a psychiatrist with the Department of Corrections, reported that Billiot was up and spoke with him, although he was non-coherent and markedly psychotic. Dr. Glenn believed that Billiot was responding to hallucinations, although Billiot would not admit it. A month later, he was described as too disorganized to carry on a conversation, and his mental status was described as progressively deteriorating. On August 3, he flooded his cell and was found naked on a mattress in the middle, stating that he was "surfing."
At this point, there was discussion between Parchman's medical staff and Billiot's counsel on whether he should be medicated, with prison officials advocating medication and his attorneys advising against it. Billiot was not given medication, and, in September of 2000, Dr. Glenn described his further deterioration and noted that he was becoming "less and less aware of his surroundings. . . ." On December 13, 2000, Billiot was admitted to the hospital at Parchman, after being observed throwing, eating, and smearing feces. Haldol was administered, and, by the 15th, although he was still considered delusional, his behavior had stabilized. Billiot received only two shots of Haldol, but, by February, 2001, his behavior and speech had improved somewhat, according to Dr. Glenn. However, Billiot arrived for his next examination with his pants on backwards and inside out. He asked for more medication, but was informed that it could not be given without a court order.
The effects of the Haldol were clearly wearing off by May of 2001, when Billiot appeared for an interview somewhat unkempt. Dr. Glenn reported that Billiot appeared to indicate that he was having hallucinations and had experienced them since childhood. Dr. Glenn concluded, "Mr. Billiot probably has had problems with psychotic symptoms such as hallucinations and delusional beliefs since a young lad." He again requested medication. Dr. Glenn saw Billiot in August and noted that his appearance was somewhat improved, although his speech was rambling and he acknowledged having seen vampires in the past. In October, Billiot was "adamant" about receiving medication, and he was told to communicate his request to his attorneys. A short visit by Dr. Glenn in March, 2002, was uneventful.
On August 8, 2002, Dr. Terry A. Kupers, a psychiatrist working with the ACLU's National Prison Project, toured death row at Parchman to review the conditions of mentally disturbed inmates. Dr. Kupers reported that Billiot was "obviously acutely psychotic in spite of being prescribed psychiatric medications," and further stated that he was told by other inmates that Billiot, along with two other inmates, fouled his cell and the tier and screamed and made noises all night. Although officers had forcibly showered him and cleaned his cell prior to Dr. Kupers's visit, his cell had a foul odor by that evening. On August 28, Dr. Glenn reported that Billiot was disheveled, his thoughts were bizarre, and his speech was, at times, completely unintelligible.
Billiot continued to be unmedicated, and he was seen by Dr. Williams on July 15, 2003. His hygiene was fair; his speech was loose and rambling. After about ten minutes, he became agitated, said he could kill the doctor, and asked, "Do you want to die?" He kicked a phone on the floor, after which officers were called to escort him from the cell. A month later, he was *859 calmer and asked for medication. In October he was described as "calm but hardly coherent. . . ." By December, a progress note states, "Patient is delusional; hears what he wants to hear." Later that month, he was doing better. On December 23, he turned in a sick call request for a psychiatric visit and one pound of marijuana.
On March, 2004, Billiot was calm, but his speech was loud and rambling. When he was seen in April, his ear canals were stuffed with paper, which he refused to discuss. He announced that he was Catholic and voted Republican and continued with other loose associations. A week later, he was described as "not in touch with conversation." On May 18, he was found lying in a fetal position in his cell, which had been stripped and recently cleaned, but still had a putrid odor and contained numerous small pieces of paper. Adjacent inmates reported a horrible stench that required cleaning with gas masks. By May 21, he was alert, responsive and clean. On June 7, he was talking non-stop "some coherent;" by July 6, he was calm, with "flashes of lucidity."
By August, 2004, he was much improved, and was reported to be keeping his cell clean and asking for daily showers, although in September, it was noted that his speech "almost always turns to spirits, etc.," and he was still tearing paper into small pieces. He was also beginning to become more disheveled, but, on a psychiatric visit in October, the notes reflect a "pleasant surprise," in that Billiot was taking a shower. At the end of that month, however, guards reported that he was "beginning to act up," and he was observed in a messy cell full of water, with an empty toilet. Billiot's deterioration lasted into November, where he was observed asleep in a fetal position in a messy, smelly cell. By the beginning of December, his cell floor had accumulated two to three inches of trash. A week later, he was seen in a clean cell and he appeared clean shaven, with no rambling speech.
When Billiot was seen in mid-January, 2005, his condition had worsened somewhat, paper covered the floor of his cell, and it smelled bad. On one occasion, he appeared naked at his cell door. His hygiene habits regressedboth with regard to himself and his cell. Additional information on Billiot's condition at that time has been taken from the deposition of Dr. Parveen Kumar, the chief psychiatrist for the Department of Corrections. Dr. Kumar was deposed in connection with the competency hearing before this Court, and the deposition was entered into evidence at the hearing. Dr. Kumar first visited Billiot in April, 2005, and described him as psychotic. Dr. Kumar reached the same conclusion after a February, 2006, visit. In July, 2005, Billiot began receiving Thorazine, which did not appear to make him more coherent, nor did it help with his hygiene issues. That medicine was discontinued in December, 2005, and Trilafon was substituted. He began to improve, and, by March, 2006, the dosage of Trilafon was doubled. By August, Dr. Kumar reported that Billiot was "much improved." Medical records substantiate this assessment. However, because Dr. Kumar believed that he could not reduce the dosage of Billiot's medication, he added Cogentin, which was intended to reduce the side effects. By November, Dr. Kumar continued to believe that Billiot was improving, but he noted that Billiot "remains delusional." He increased the dosage of both the anti-psychotic and the Cogentin. Dr. Kumar reported that, even after the increase in the medication level, Billiot was still delusional; however, he did sign a consent to treatment.
*860 Dr. Kumar admitted in his deposition that he had not reviewed Billiot's medical records from treatment that occurred prior to his incarceration, but he stated that the review was unnecessary because Billiot was so psychotic by the time he saw him that he had no doubt that Billiot was chronically mentally ill. By January, 2007, Dr. Kumar reported that Billiot was much better, and he decided to reduce the number of psychiatric visits. In June, however, Billiot refused to come to the office where he was to be examined. Dr. Kumar did examine him in July and found him to be stable and significantly improved. That improvement lasted through the next few months, as reported from interviews in September and October, and, by December, Dr. Kumar reported no evidence of psychosis.
In April, 2008, Billiot informed the medical staff that he would no longer take his medication, on the advice of counsel. At that time, he was described as alert, oriented, and much improved with regard to hygiene. His thought content seemed derailed, however, and, at time, his speech was incoherent. Despite his announced intention to quit taking his medicine, he appeared to continue taking it. In July, 2008, Dr. Kumar added Wellbutrin to Billiot's medications, at his request, to treat symptoms of depression. Ultimately, Dr. Kumar deviated from the prior diagnosis of schizophrenia and diagnosed Billiot as having schizoaffective, or bipolar, disorder. Some time between September 9 and October 3, 2008, Billiot's medication was changed, as well. Trilafon was discontinued, and he began receiving Wellbutrin, Tegretol and Benadryl.
Progress notes from an interview conducted on November 17, 2008, were included in the record, but are difficult to read. They appear to indicate that his mood was stable after the change in medication. Billiot was seen again on January 12, 2009. It was noted that his eye contact and hygiene were appropriate, but he was insistent on becoming a tier worker, and he was anxious to find out if that would be permitted. Notes from interviews in February and March, 2009, are similarly difficult to decipher. In February, it appears that Billiot talked excessively about jobs he had in New Orleans prior to his arrest and the places he lived. He had difficulty stopping talking so that he could hear the interviewer's questions. The notes from the March observation state that Billiot had become quiet and withdrawn over the preceding few weeks, paying little attention to his hygiene.
Those notes mark the end of the medical records relative to Billiot's mental status. This recitation would be incomplete, however, without an account of his appearance at the June 25-26 hearing. The Court had an opportunity to observe Billiot for a day and a half, as he sat in the courtroom listening to testimony and arguments. His appearance was unkempt, and he sat in a crouched, almost fetal position. At one point during the hearing, he began moaning incoherently, until one of his guards spoke to him. Billiot kept his head down most of the time, and he seemed to be almost oblivious to the proceedings that were so critical to his future. There was no indication that he was consulted by his counsel or provided any meaningful assistance to their efforts.
EXPERT TESTIMONY
To prepare for this hearing, Respondents selected two experts to examine BilliotDr. Gerald O'Brien, a clinical psychologist, and Dr. John Montgomery, a psychiatrist. Billiot's counsel also selected two expertsDr. Raquel Gur, a psychiatrist, and Dr. William Johnson, a psychologist. Dr. O'Brien has interviewed Billiot *861 on three occasions: July 20, 2001; May 28, 2003; and, jointly with Dr. Montgomery, on December 11, 2007. The first interview would have occurred, according to the history recited above, at a point where earlier shots of Haldol were reportedly wearing off.
Dr. Gerald O'Brien is a clinical and forensic psychologist in private practice, who also consults with state mental health facilities. He has been recognized numerous times as an expert in forensic psychology and has testified on many occasions. His assessment of Billiot's behavior during the 2001 examination follows:
He was generally alert and cooperative. His mood was euthymic and his affect ranged from intense stare to silly laughter at various times during the interview. His thinking was clearly tangential and disorganized at times, consistent with his history of psychological/psychiatric problems. He was able to focus on specific questions if encouraged to do so, but otherwise his responses tended to wander far and wide. He denied hallucinations.
Dr. O'Brien administered a test to evaluate the possibility of malingering and concluded that Billiot was not faking his symptoms. His ultimate opinion was that Billiot perceived the connection between his crime and his punishment, was aware that the punishment was the death penalty, and understood that the execution of the death penalty was approaching.
Dr. O'Brien's next meeting with Billiot occurred in May, 2003, at a time when he continued to be unmedicated and evidenced a deterioration in his condition. Because of technical problems in the recording, O'Brien re-interviewed Billiot in July. Although the records do not indicate any change in his medication status between the two visits, O'Brien noted that Billiot was much calmer and less angry during the second interview. In other respects, O'Brien found Billiot's behavior similar to earlier visits, in that he was talkative, easily distracted, and preferred to discuss his experiences prior to being incarcerated. O'Brien concluded once more that Billiot was competent to be executed.
As stated earlier, Dr. O'Brien and Dr. Montgomery met with Billiot again in December, 2007, at a time when Billiot was taking an anti-psychotic medication. That interview was also videotaped. In this video, Billiot appears neat and clean. He is alert and cooperative. After getting some preliminary information from Billiot, the experts asked him why he was in Parchman. Specifically, the relevant questioning follows:
Q.: So, you've been in Parchman 26 years; that's a long time? Why are you there? How did you get locked up?
A.: Well, that's just itcapital murder charges; three of them.
Q.: Capital murder chargestimes three?
A.: [Unintelligible]
Q.: So, in D building, death row, is that where you are?
A.: Yeah, the mental ward . . . .
. . . .
Q.: So you got convicted of three murders, and sentenced to what?
A.: Sentenced to death.
Q.: Has that changed at all? In twenty six years?
A.: Well, not that I know of, you know. My lawyer's working on itJohn Henegan. . . .
Q.: What's he trying to do?
*862 A.: He's trying to get me work out there, because I still suffer from mental problems.
. . . .
Q.: Is he trying to get you a job with a work detail?
A.: Yeah, yeah. . . . After you do so much stuff, like taking your medication, you can get off, you know? You can get out on the grounds and stuff more.
Here, Billiot was asked how long he had been taking medication, and he told them he had taken it since he was at Mandeville when he was thirteen. The question was posed again, asking whether there was a time since he had been at Parchman when he was not medicated, and Billiot said he had always taken it. Dr. O'Brien reminded him of his earlier interview and said that he believed Billiot was not taking medicine then, but Billiot denied that.
His regular medication schedule was a constant theme in this interview. When asked whether his pills hurt him in any way, Billiot replied, "No, and I always take them." He denied any mental complaints or hearing voices, but admitted that his nerves were bad, until he got his pills. According to Billiot, that condition did not often arise, because "I take my pills."
The experts then began to question Billiot about his daily routine, following which they administered some cognitive tests. When Billiot finally objected to the tests, they immediately stopped. He began fidgeting obviously, but the experts returned to the examination regarding his conviction and penalty:
Q.: What exactly did the court say you did when they convicted you?
A.: That was it; capital murder.
Q.: Okayone?
A.: Three.
Q.: Three? Did you have a jury trial?
A.: Yeah.
Q.: You said you received the death penalty as the result of that trial?
A.: Yeah, yeah.
. . . .
Q.: Now, you've been in Parchman a long time, on Unit 32. Do you have any idea how long you're going to be there?
A.: No, I'm counting on my lawyer to come up with [unintelligible] rehabilitation, get back in court.
Q.: Put your case back in court?
A.: What I want to do is go back to a mental institution, go to a mental institution and just settle my nerves down for a while by taking my medicine, and then get back on the grounds, like, like I done that before. Like I said, I've been in mental institutions since I was thirteen.
Q.: So, you'd like to get them to transfer you to some sort of mental facility away from Parchman, is that what you'd like?
A.: Yeah, until I can rehabilitate myself. But I do take my nerve pills.
. . . .
Q.: If you're given the death sentence, for capital murder, do you know what you're automatically entitled to after the conviction?
A.: No.
Q.: There's something called an appeal.
A.: Oh, well, yeah.
Q.: Tell me what your understanding of that is.
A.: I don't know; it just goes into different courts, until a court decides that I get rehabilitation, and, if they don't want to do it, you know, well, they decide against me.
*863 Q.: And what happens if they decide against you?
A.: Well, I guess they'll try to execute me one day.
Q.: Do you know what kind of execution [unintelligible]?
A.: Lethal injection.
Q.: And I assume that's not something you want to happen.
A.: No, no it's not.
Q.: So, if your appeals don't work, at some point, they will execute you. Presumably with lethal injection. That's your understanding, if your appeals fail.
A.: They can try to, yes. Mississippi.
Q.: What would happen to you, if you were executed? Given lethal injection?
A.: I really don't know, I'd have to appeal it.
Q.: Is that something that scares you?
A. No.
Q.: How do you feel about that?
A.: I guess, eventually, I'll be put in a mental institution, like I have before, and take my nerve pills for a while, then get back out to the free world, I guess. I don't know, get off my pills, I never have.
Q.: So, if you and your attorney win your appeal, what happens next?
A.: Well, then they'll probably put me in a mental institution, for a while, till. . . my nerve pills, then I feel better.
Q.: What would happen to your conviction then?
A.: Well, it won't be . . . they won't have none.
Q.: Do you think your conviction will just go away if you win your appeal?
A.: Yeah, yeah.
Q.: And then, what might happen then, if they drop . . .?
A.: Well, I told you because, because I been through it before, I'll go to Whitfield or East Mississippi State Mental Institution. After a while, I'll be rehabilitated, then you, you know, you get your privileges back, go out on the grounds and stuff, or go out to the free world.
Q.: So, if you win the appeal, they, if the court reverses the conviction and you go to Whitfield, what would happen with your charges?
A.: Well, they'll get rid of my charges then, I won't have no more.
Q.: Could they bring them back and retry you?
A.: I don't think so, not if I'm being rehabilitated.
Q.: They can, and they probably will.
A.: I really don't know. [Pause] I can only go so long, or else, I'm going to win one day one way or the other.
Q.: So. your understanding is if you win your appeal, you'll be free and go some place like Whitfield and get some treatment and some rehabilitation.
A.: Yeah, and finish off taking my pills for a while, you know, and I'll be able to get out. I don't really [unintelligible] too much, but I take my pills, my nerve pills.
Q.: But there's more than one way for them to, for your case to come out. If you won an appeal, there are two different things they could do. One would be, they could throw your case out altogether, for various reasons, [unintelligible]. The other thing is they could throw the sentence *864 out. In other words, you'd still be convicted, but they could change your sentence from the death penalty to something else. You understand that?
A.: Yeah, I understand that. This is, my best advice is, I'd like to go to the mental institution for a while is the best advice I can give you. . . .
Q.: Do you know what the other sentence might be, though, if they threw out your sentence?
A.: No.
Q.: It'd be, or the death penalty, or my understanding it would be life in prison.
A.: Yeah.
Q.: You might want to talk with your attorney about that, to clarify it, but that's my understanding of what might happen with your sentence.
A.: Well, I'm just trying to show you how to deal with mental . . . with a person that has mental problems. . . . I'm just another patient, and that's why I've always got to go to East . . ., to a mental institution to let them, to let my nerves get better, you know. Then I could be rehabilitation [sic]. They got all that stuff, like you got that diagram down there, but I told them I don't do too much of that. When I been figuring for a while, so, you know what I'm talking about.
Q.: Is there anything about your case that makes it more likely that you're going to win your appeal, compared to somebody else in the same situation?
A.: Having mental problems.
Q.: Care to elaborate on that; tell me more about that? How is that going to help, compared to anybody else in the same situation.
A.: Well, I gotta go to a mental institution.
Q.: Is there anything about you that's going to make, if you lose your appeal, will you be treated any differently from anybody else who loses his death row appeal?
A.: I don't know; I don't think so.
Q.: If you lose your appeal, and they execute you, is there anything about you that would make you respond differently to execution than somebody else on death row?
A.: No, all the same, I guess . . . . what did you say your name was?
Q.: Montgomery.
A.: Montgomery. You from Mississippi?
Q.: Yes, sir.
A.: Where'd you say you were from, Tennessee, right? (To O'Brien)
Q. Kentucky.
A.: Kentucky. I had a bet going on between Kentucky and Tennessee (talk turns to football).
After this exchange, O'Brien posed several "standard" questions to Billiot, apparently designed to detect malingering. Montgomery then asked Billiot questions regarding past delusions about Hitler and special religious powers, all of which Billiot denied, except for seeing spirits in old houses when he was young. Billiot raised the issue of his nationality, and told them that he was French, German, and Norwegian. When discussing disciplinary issues, Billiot stated that he had a bad bladder, and had been trying to "get it taken out," but it was getting better.
Billiot denied any depression or suicidal thoughts; in fact, he said that he was happy all the time. Later, when asked about his alleged victims, Billiot said they *865 were his mother, his stepfather and half-sister and that he was convicted for killing all three. As a final question, Billiot was asked:
Q.: If you only had two possibilities, either having your death sentence carried out or spending the rest of your life on the row, which of those two. . . .
A.: Pick the rest of my life on the row.
Q.: How come?
A.: I don't never want nobody to hurt me.
The day before the competency hearing was to begin, this Court ordered that Billiot be brought to the courthouse for a final evaluation by each of the expert witnesses. Petitioner's experts examined him first, each for half an hour, and their impressions will be discussed later. When Dr. Montgomery and Dr. O'Brien arrived, Billiot was upset at being asked "the same questions, over and over," and, although he was polite, he refused to speak with them.
After their 2007 interview, both Dr. O'Brien and Dr. Montgomery provided written opinions on Billiot's competency. O'Brien recognized that, based upon the M-FAST test he administered during the examination, Billiot was "accurately reporting his psychological difficulties." He assessed Billiot's understanding of his legal situation as follows:
When asked about his current legal status he said he was convicted of "capital murder" of three victims, which he identified as his "mother, step-father, and half-sister." When asked if he received a fair trial he said he did not want "to talk about that." He was able to link his crime and subsequent trial with a "death" sentence. He currently resides in "D" building of "Unit 32" in the "mental ward" at Parchman. He was able to name his lawyer, and explained that he is currently working with him "trying to put me to work" by getting him transferred to a prison psychiatric treatment unit, such as one in Meridian. He is aware that he has a pending appeal of his death sentence, which would be carried out by "lethal injection."
Thus, Dr. O'Brien concluded, Billiot has a factual and rational understanding of the reasons for his impending execution. He stated, "It is my opinion that Mr. Billiot, despite his long and well-documented history of psychological/psychiatric difficulties, is currently able to perceive the connection between his crime and his punishment, is aware that this punishment is the death penalty, and that execution of the death penalty is approaching."
At the hearing, Dr. O'Brien admitted that Billiot has a long history of schizophrenic symptoms, and he testified that he does not doubt that the accounts of Billiot's behavior in his medical records are generally accurate. He reported that Billiot has always had difficulty focusing, as well as disorganized thinking, and, from time to time, delusional beliefs. However, Dr. O'Brien said that the issue is not whether Billiot is schizophrenic or bipolar, but whether he meets the legal standard for competency to be executed. Noting that Billiot is able to talk about his specific case, but consciously seemed to avoid talking about his legal situation, O'Brien concluded that he was competent.
Dr. Montgomery is a psychiatrist at the Mississippi State Hospital, where he divides his time between forensic psychiatry and clinical duties. He also consults with several state agencies and has a private practice. Dr. Montgomery is board certified in both general and forensic psychiatry, and he has been accepted as an expert in forensic psychiatry approximately fifteen *866 times. Dr. Montgomery also wrote a report of the 2007 interview. He recognized that Billiot had a long history of mental illnessspecifically, schizophrenia that had been characterized by "disorganized speech and behavior, delusions, and poor self-care." He also admitted that Billiot's condition had deteriorated for many years. However, Dr. Montgomery believed that Billiot's medication regimen at the time of the interview had caused a remission of his schizophrenia. Dr. Montgomery concluded that Billiot was competent to be executed, noting that he was aware that he was on death row and that he had been sentenced to death for the murder of his family members. He also believed that Billiot had "the intellectual capacity and reasoning abilities to confer with his attorney, if he so chooses." Discussing Billiot's persistent assertion that he would be sent to a mental institution and ultimately released, Dr. Montgomery characterized as "an unrealistic degree of optimism about his appeals" that, while "misguided and irrational" was not the product of a delusion. At most, Dr. Montgomery believed that Billiot's psychotic disorder might prevent him from having a realistic understanding of what would happen if he won his appeal.
During cross-examination at the hearing, Dr. Montgomery was asked about the decision to interview Billiot together with Dr. O'Brien. He explained that the decision had to do with logisticsunlike the interviews with Drs. Gur and Johnson, both of which occurred at Parchman, the interview with Drs. O'Brien and Montgomery occurred at the Central Mississippi Correctional Facility in Rankin County. Because Billiot had to be transported to and from Parchman, there was limited time for the interview.
Billiot's attorneys questioned Montgomery at length about the amicus brief filed jointly in Panetti by the American Psychological Association, the American Psychiatric Association, and the National Alliance on Mental Illness. That brief referenced works recommending certain techniques for competency interviews that differed from those used by O'Brien and Montgomery. Specifically, one of the articles recommended informing the prisoner in advance of the nature and purpose of the interview. Montgomery thought that they had complied with the first suggestion; the tape of the interview reflects that they informed him that they had been asked to discuss his "legal case," in particular, his understanding of his current legal situation. They informed him that his participation was voluntary and that he could refuse to answer any question. They also told him that what they discussed would be written and submitted to the court. The article also recommended talking with family and friends, which Montgomery did not do. It recommended speaking with correctional officers; Montgomery testified that they spoke with the transporting officers. However, this cross-examination did nothing to alter Montgomery's conclusion that Billiot was competent.
Dr. William Johnson, who testified on Billiot's behalf, is a professor of clinical psychology at The Citadel. Prior to his employment there, he was employed in the Department of Psychiatry at the University of Mississippi Medical Center. He was also a consultant at the Mississippi State Hospital, and, in connection with that employment, Dr. Johnson interviewed Billiot on several occasions. The first interview was in 1981, when Billiot was evaluated for criminal responsibility and competence to stand trial at the State Hospital. At Billiot's original trial, Dr. Johnson testified that Billiot was not criminally responsible, although he believed that he was competent to stand trial if carefully instructed by his attorney on how to behave. Since the *867 state court competency proceedings, Johnson has interviewed Billiot in August, 2001; January, 2003; January, 2008; and on June 24, 2009. According to the medical records, the first visit occurred during a time when Billiot had not been medicated since the Haldol shots in December, 2000; however, Billiot told Dr. Johnson that he had received anti-psychotic medicine one to two months before. He appeared clean and neat and was cooperative and open. Johnson's assessment of Billiot's behavior follows:
He was oriented to person, place, and time although he displayed very frequesnt looseness of associations, flight of ideas, and a general inability to engage in meaningful, social discourse. There was little or no conventional logical connection while he was speaking. Furthermore, his responses were often tangential and circumstantial. The content of his thoughts ranged from being appropriate to very bizarre, irrational beliefs which he could not clarify. He was alert, yet could not engage in abstract thinking, and his cognitive processes are markedly impaired.
Dr. Johnson concluded that Billiot was not competent to be executed, noting:
He does objectively know that receiving the death penalty means that one will be executed but he cannot relate that to his own plightagain referring to the fact that it his word versus "theirs". His distortion of reality is readily apparent when he talks about resuming a life in New Orleans in the near future.
That opinion did not change after the 2003 interview, where Billiot's behavior had not improved, and, in fact, may have worsened in comparison with the earlier examination:
He spoke in a pressured, rambling manner, and his thoughts were very disorganized with no logical connection between ideas. Most of his responses to questions were irrelevant, and he had to be continually reoriented to the topic at hand. The content of his thoughts was very irrational and bizarre, and these thoughts were distinguished for their delusional quality as he engaged in irrelevant dialogue and claimed secretive, satanic powers. When pressed to clarify a bizarre thought, he would notbecoming defensive, refusing to elaborate, and frequently rambling on with incomprehensible musings. Mr. Billiot denied experiencing hallucinations, but he was very distractible. He was oriented to person, place, and month but not year. Mr. Billiot was alert on abstract tasks requiring a minimal degree of effort; however he refused to attempt tasks that required more concentration and directed thought. His immediate and remote memory appeared grossly intact, but they are compromised by his delusions. His insight and judgment were extraordinarily poor and non-apparent. Mr. Billiot has a general inability to engage in rational, meaningful social discourse. Throughout this evaluation, he engaged in a logic that is unique, idiosyncratic, and unintelligible.
Again, Dr. Johnson found him incompetent, concluding that Billiot "displayed a complete inability to understand the gravity of his legal situation and the fact that he has been given the death penalty pending his appeal."
Dr. Johnson's next interview with Billiot was in January, 2008, and the videotape has been reviewed by the Court. His appearance was not as neat as it had been with Drs. Montgomery and O'Brien. One of Billiot's initial statements to Dr. Johnson was that he was taking his medication every day. He denied earlier hallucinations and destructive behavior, including flooding. Billiot remembered being *868 stabbed by another inmate, but he did not know why he was attacked. He was reluctant to discuss his conviction, insisting that Johnson already knew the details. Billiot related that he had been found guilty and sentenced to death, but kept stating that he should have been sent to a mental institution. He did not remember anything about the murders except that they occurred on Thanksgiving. When Johnson attempted to talk to Billiot about his former destructive behavior, Billiot became very agitated, insisting that he never did anything like that. He also could not remember a time when he was not given his pills. In his report on this interview, Dr. Johnson again concluded that Billiot was not competent to be executed.
According to Dr. Johnson, Billiot attempts to control his symptoms, in the belief that, if he appears normal, he will be transferred to a state hospital for rehabilitation and release. However, that veneer of control is penetrable. Johnson interviewed Billiot a final time the day before the hearing in this Court. Johnson characterized Billiot as much more disturbed than in the previous interview. Although the first few minutes were cordial, when Dr. Johnson asked Billiot about his execution and what would happen, "[T]hat's when he became very excited, loud, boisterous, got up and paced, talked about his power, his invincibility, and so on." Asked what Billiot said about his power, Johnson said, "That it wouldn't happen, that he is very strong. . . . And then he brought in the stabbing and the fire[8] and so on as an illustration of his ability." Although Billiot was aware that the method of execution was lethal injection, "his concern was with the pain, and he is not going to be harmed, he is not going to get hurt, and it is not going to happen to him." He also knew that another inmate had recently been executed, but stated that the execution was not relevant to him because of his power. Finally, Dr. Johnson said, Billiot became highly disorganized with his thoughts and speech and began yelling obscenities "at me and my deceased parents and so on."
Based on these responses, as well as his earlier interviews, Dr. Johnson concluded that Billiot does not have a rational understanding of what will happen to him when he is executed. He also believes that Billiot does not have a rational understanding of the crime for which he was convicted. Dr. Johnson bases that opinion on Billiot's changing recollection of the crime. Immediately after the murders, he admitted that he committed them, but explained that the devil "had put an omen down," and there were witches in the household, so he had to kill them. A few years later, Billiot would only admit that "they say" that he committed the crimes. Johnson does not believe that this change in story is voluntary on Billiot's part, but that he is unable to personalize his actions to the murders.
As stated earlier, Dr. Johnson does believe that Billiot can control, to some extent, the reporting of his symptoms; therefore; he can answer cursory questions about his state by denying hallucinations or delusions. The truth of his condition can only be ascertained by asking penetrating or challenging questions, particularly if Billiot denies a symptom that has been well documented. Johnson believes that this sort of questioning is an appropriate evaluative technique, although it might not be helpful in a treatment situation, particularly in a volatile prison setting. The fact that Billiot's condition fluctuates and he appears less psychotic at some points in his history is likely attributable to external factors, such as stress *869 levels and medication. However, his condition is essentially unchanged, as is Dr. Johnson's opinion that he is incompetent to be executed.
Dr. Raquel Gur, a psychiatrist retained by Billiot's counsel, examined him in 2001, 2008, and the day before the hearing. Dr. Gur is the Director of the Schizophrenia Research Center in the Neuropsychiatry Division in the Department of Psychiatry, University of Pennsylvania, as well as the Vice-Chair for Research Development in the Department of Psychiatry, University of Pennsylvania School of Medicine. She provided a written report of her first two meetings with Billiot, and she testified at the competency hearing in this Court about the third. Her conclusions about Billiot's mental status after the first meeting, in 2001, follow:
It is my conclusion that Mr. Billiot can repeat what other people say, that he is "on death row" but he has no rational understanding of what that meansi.e., he does not think he will be executed, and or does not think he will die. Therefore, he fails to understand his impending execution and he does not grasp the fact that his execution means he will die. That is, he believes after he is "executed," he will go to Louisiana in the same form as he is in today. Based on my evaluation of his behavior during the course of three hours, and on my review of his records, I have no ground to suspect that Mr. Billiot is malingering, or that his fund of knowledge is so impoverished that he does not, in the abstract, understand the idea of death. Rather, it seems that his inability to grasp the fact that he will die is a feature of his pronounced thought disorder and grossly psychotic state. Notably, Mr. Billiot does not comprehend the reason for his impending execution. He does not seem able to grasp that he is responsible for the death of three family members. He knows that other people say he killed them, but he cannot understand what this means, since he is not at all sure what happened to the victims, and in fact, seems to doubt that they are dead.
Dr. Gur examined Billiot again in February, 2008. He was not as neat as in either of the previous interviews; his beard was somewhat scraggly. In contrast to Billiot's relatively relaxed demeanor at his interviews with Drs. O'Brien, Montgomery, and Johnson, he became angry, to the point of incoherence, during his interview with Dr. Gur, and ultimately demanded to be taken from the interview room. This event occurred well into the interview, after Dr. Gur had asked him some questions about his conviction and his incarceration on death row. As with the other interviewers, Billiot repeatedly stated that he takes his medication, and he denied any previous hallucinations or destructive acts. Specifically, when Gur asked him about his comments on Hitler and special powers, Billiot denied making them, saying "I never done nothing like that before. Must be somebody else; it's not me." He went on to say:
Somebody talking about Hitler, this is. . . this is the Confederate States that I live in, I'm proud of my heritage, you know, thirteen states underneath the Confederate States, this is the thirteen Confederate States . . . you know, they can still say it, since the Civil War. You know, all the rows back there are painted gray, you know, blue and gray, you know. Blue was the North, you know. But I, far as Hitler, I be German; I'll be German. But, like I was saying, you know, it ain't nothing, nothing than that, you know, you couldn't use that, good side also, you know, other than the bad side.
*870 Dr. Gur asked, "What do you mean?" Billiot replied, "Well, it's just, it would just be thirteen states. Used to be the South, the Confederate States, back in 18th Century. As far as Hitler, I was German, also, but I was born down south, in the Confederate States."
At that point, Dr. Gur returned to her questioning about his understanding of his legal situation, and the remainder of the interview follows:
Q.: So, if we go back to, you know, you're telling me that you don't want to talk about the details, but you are here for the death of your mother, stepfather, and stepsister, correct?
A.: Half-sister.
Q.: And stepyes, half sister; correct?
A.: Yeah.
Q.: Okay. And what's going to happen to you? You've been in prison now for
A.: I can't predict the future. I don't know, you know, I'm trying to get throughI'm trying to go further in my rehabilitationwhen I get back to the mental institution and go ahead and finish taking my medication and stuff, and just relax, you know, try to do some different types of work, you know, cause I used to work jobs when I was on the streets. I worked back in Louisiana. I like to see things. I likewhen I take my medication. After a while I drink coffee and smoke, you know, I like stuff like that and
Q.: Okay. Do you understand that you are on death row?
A.: Yes, yes.
Q.: What does it mean to be on death row?
A.: Well, that's where you're going off, you know, you was talking about that. Why do I understand that, why do you askwhy do [inaudible]. What was his name right there again?
Q.: Dr. Johnson?
A.: Johnson. Dr. Johnson, yeah.
Q.: Yes.
A.: Well, some type of [inaudible]why do you ask the same thing over again. Why, you know, do I understand that I am on death row. Well, this is the State of Mississippi, they prosecuted me.
Q.: Okay. I just
A.: I'm not from Mississippi originally. I'm not born here. I'm from Louisiana.
Q.: Okay. I understand, but it is important Dr. Johnson asked you some questions that are similar maybe to the questions that I ask you, but it is important that you
A.: But it don't seem like anything to me, because like I'm saying, you talk about the same thing, do I hear voices and Hitler and stuff. I said no. I'm not into nothing like that.
Q.: Okay.
A.: Back when I was on the streets and I was younger, I worked and stuff for a living.
Q.: Okay. Uh-huh.
A.: Done hard work.
Q.: Uh-huh. So you understand that you are on death row? What happens to people who are on death row?
A.: Well, a lot of things happen to them. They get out of here. They get off death row.
Q.: How?
A.: Not just in here but, they hear voices and stuff.
Q.: Okay. So you
A.: Or something is wrong.
Q.: Okay. So you say some people
*871 A.: A bad vibe, you know, a bad vibe. Some person that mentally ill they talk about them being schizophrenic or paranoid, and just different stuff like that.
Q.: So you say that some people who are on death row might get off because?
A.: I don't know. I'm notI can't predict the future, I don't know what they might do. Just like I'm saying, if they will take the medication. Medication will help.
Q.: But
A.: That's what I can say. Medication will help.
Q.: But you areyou are on death row?
A.: I just told you. If you take your medication, you might get out of here.
Q.: How will you get out of here?
A.: If you are feeling better. If you rehabilitate. It's all about feeling better. If somebody didn't take their medication, they might get mad and harm somebody.
Q.: Have you ever heard of somebody or you on death row, who has gotten out? You said there's a possibility. I want you to follow the possibility.
A.: I don't know. I would have to get back and study all of that. I'm not really in that mood right now.
Q.: Okay. You said sometimes people on death row get better?
A.: I am trying to get to a mental institute. It will be a better source of medication.
Q.: Do some people
A.: Just get better help. It's just a better source of medication. It's made into a liquid or something, you, know, Valium, so I can sleep at night.
Q.: Uh-huh.
A.: Something like that.
Q.: Some people on death row don't make it out of here. What happens to those who don't make it out of here? What do they
A.: I don't know. I'm notI can't predict what somebody else might do. The inmatehe has to make his own judgment, you know?
Q.: WhatWhat does it mean to be on death row? I'm going back to the question. What does it mean to be on death row?
A.: Well, they give you the death sentence in the State of Mississippi.
Q.: They give you the death sentence. Okay. What does it mean to have the death sentence?
A.: Well, we got an appeal, you know, going to the different courts and appeal and appeals might turn it over. The appeal might overturn our case.
Q.: Okay.
A.: You know, and give somebody just a life sentence.
Q.: What happens?
A.: Lots of things. Lots of things.
Q.: Okay. What happens when there's no appeal anymore?
A.: What?
Q.: What happens if there's no appeal anymore?
A.: Well, then there's an execution.
Q.: Okay. What does it mean to execute?
A.: Mississippi. Mississippi. State of Mississippi.
Q.: So what does it mean to execute?
A. The State of Mississippi to carry out justice.
Q.: To carry out. What does it mean? How to carry out the judgment?
A.: I can't go on for all of that. You're going too far. you're going a little too far.
*872 Q.: Well, what went way too far? I just want to make
A.: I don't know, you just
Q.: I want to make sure that you understand what are the possibilities that you
A.: Why do you want to know that? As long as I take my medication
Q. No
A.:I feel better myself. I don't feel like harming anyone. Like I said, I take my medication, and I'm all right.
Q.: But that's not the point.
A.: I'm not somebody else.
Q.: I understand, but that's not the point. The point is if you understand what might happen to you when you're executed.
A.: Yes, I understand that.
Q.: What will happen?
A.: I will be dead. That's all.
Q.: What does it mean to be dead?
A.: That's it, you know.
Q.: What happens to people when they die?
A.: I don't know. I can't go any further. You are going a little bit too far.
Q.: I understand. Try. You have to go far a little bit with me. What happens to people when they die?
A. I don't know. I can't go that far.
Q.: I know you
A.: I can just tell you that. I can't go any further.
Q.: Okay. One of the things that you were saying is that you are hoping that you will take the medication, you will rehabilitate, and you will be able to leave prison.
A.: Be free. Yes.
Q.: Do you know if you die, you will not be able to leave prison? Do you understand that?
A.: Well, I feel okay about myself, you know, as long as I take my medication I feel like I can get out of here. I'll get off.
Q.: And if not.
A.: That's me. That's my opinion.
Q.: Okay. But if I tell you that
A.: I wouldn't believe it. I wouldn't believe it if you told me, "No, I was wrong," because I had my chance my chance to take my medication and get out of here and feeling better. Somebody else, they believe I hear voices and Hitler and stuff and, you know, that's somebody else. That's not me.
Q.: I understand, but I want to make sure that you understand
A.: I take my medication. That's why I feel good.
Q.: You take the medication
A.: That's why I feel good. I feel good most of the time. I take my medication.
Q.: You take your medication because
A.: I take it once in the morning time. I drink coffee and stuff and sit back and drink a cup of coffee and relax and drink me a cup of coffee.
Q.: You take the medication because it makes you feel better, because without the medication you know the shaking, and you don't feel well. The medication helps you out to sleep better, you feel better, you just all the
A.: Wake up in the morning time I get my medication. I take one pill. I let it settle down about a half an hour. I get me a nice big cup of coffee in, and I eat breakfast, and I sit back and relax and drink coffee for a while.
Q.: But
A.: Might sip on it for about half an hour.
*873 Q.: Do you understand that when you take your medication then your nerves are better?
A.: Uh-huh.
Q.: You're better and then the State can judge to execute you because you're ready, you're better.
A.: Well, I can't worry about that. I can't think of my points like that. I don'tI think about getting better and, you know, you know, not being in any trouble. Yeah. That's the way I look at it.
Q.: I understand.
A.: Because I was free. I got to be free everyday from my medication.
Q.: I understand what you're telling me, and I'm trying to see if you can understand. I know it's difficult to do. I understand.
A.: If I didn't take my medication, that's when I wouldn't be cured. I might harm someone, might feel bad.
Q.: But you understand
A.: Once I take my medication then I feel good, and I'm all right after that, you know.
Q.: But if you're
A.: Bad things leave, you know, bad feelings might have been a thought or something bad I mightif I had a TVI don't have a TV. Watching the war, you know, they say a soldier got killed the other day or something like that. A bad feeling.
Q.: It's difficult.
A.: I believe that soldiers had a duty of going overseas. I believe they should have went overseas and duty of jacking somebody upattacking the United States and destroy something.
Q.: What do you mean? Who should have gone overseas?
A.: The soldiers.
Q.: What soldiers?
A.: The United States soldiers. Army
Q.: How did they come into the picture?
A.: I just told you I was watching something on TV. I don't have a TV right now, and there's something that was a bad feeling one time when they attacked the World Trade Center, like I said, I don't want to get up there and start hollering Hitler and hearing voices, you know, because a soldier went over there and checked that out to see if they were trying to do it on purpose, a bad feeling or something.
Q.: Uh-huh. The soldiers are trying to do what on purpose?
A.: Not the soldiers. The person that was doing. The soldiers went over there to try to prevent them from doing
Q.: Uh-huh. I'm trying to follow. I'm trying to follow. How did you get to what you are talking about with the World Trade Center to what we were talking about? You were talking about if you areI'm trying to follow you, to be with you, to understand. It's not easy. I understand that, appreciate that, but you were saying that you don't have a TV in your room and without the medication if you sit there, you will feel bad.
A.: Yeah. While I was watching TV, you know, I was saying I would probably feel bad if I heard a soldier wounded in battle or something.
Q.: Yeah.
A.: But I can't go off into all that.
Q.: I know.
A.: That's just another trip [inaudible] I don't like to feel bad. I take my medication to feel good.
Q.: But do you understand you're in a tough choice, because if you don't take your medication you will feel bad, but *874 if you take the medication you will feel better but you might be executed.
A.: Well, I have to take that chance.
Q.: You have to take that chance?
A.: Yes. If I quit get my medication, I will be feeling bad then, you know?
Q.: Uh-huh.
A.: I don't want to suffer. That's the way I believe. I believe I will stay on my medication, and I won't be executed.
Q.: What makes you believe this?
A.: Because that is my right.
Q.: What makes you believe?
A.: I take my medication. That's why I don't have bad feelings.
Q.: I understand.
A.: As far as Hitler and hearing voices, you will have to talk to somebody else about that.
Q.: Uh-huh. So you rather take the medication and die, then not take the medication?
A.: No, I don't believe in that right there. I believe in living afterwards. I believe if I take my medication
Q.: How will you live afterwards?
A.: Well, I just would.
Q.: How?
A.: Just live on.
Q.: How will you live on? How will you die and live on at the same time?
A.: I won't die. I won't die.
Q.: How do you know that?
A.: Are you about through?
THE WITNESS: Reggie, I can't go on?
A. You want to change this around. You know what I'm talking about. Like I'm saying.
Q.: Sit down. Sit. Sit.
A.: My medication is fine. If I don't take my medication
Q.: Okay. Sit. Sit.
A.:then I'm through.
Q.: Then sit. Sit. Wait. Wait. Wait. Wait.
A.: Get me out of here, because I am through.
Q.: Wait a minute. Wait a minute.
THE WITNESS: Are you going to do this or not, because I am through now.
Q.: Wait. Wait.
The WITNESS: Take it off. I am through. I'm through talking.
Q.: Can you sit?
THE WITNESS: Do you want to take me out or not?
Q.: Can you sit down for a minute?
A.: No. No. I can't talk anymore. I got to go. I have to go back to my cell.
Q.: Just relax. Relax.
THE WITNESS: Don't listen to her.
Q.: Okay. Okay. Well, you know I want to help
A.: Now, you're getting me angry right now. If you don't cooperate with whatme right now I go to go to the bathroom.
Q.: I don't want to get you angry.
A.: None of my business.
Q.: I don't want tookay.
THE BAILIFF: Let me get the transport.
THE WITNESS: Just take this off and take me on back.
THE BAILIFF: I need the van. I ain't got the van.
Q.: I want to talk about something else. I don't want to get you angry. Okay?
A.: Like I said
Q.: I want you to calm down and not get angry. Okay?
*875 A.: I'm through talking. Like I said, you know, I ain't got no more talk.
Q.: Okay. That's okay.
A.: You're going to have to find somebody else living in your world, you know, living in here hearing voices Hitler and stuff. I don't play those type of games.
Q.: Okay. Uh-huh. Uh-huh.
A.: I take my medication, and I'm fine. There's no way I'm getting off my medication.
Q.: I understand. I understand, and I respect that. It's a choice that you have made, and I understand.
A.: One day when you find your own reality, you can come back and talk to me in a nicer way. You don't come around sitting around with that nasty look. Like you out of it, you know, cause I don't mess around like that.
Q.: I understand.
A.: You better find somebody else. Be your own psychiatrist, like I'm saying, I feed myself. I work for a living back in Louisiana, and I don't mess with somebody.
Q.: Okay. I'm sorry.
A.: Like I said I am going back to Louisiana one day. I'm going to take my medication, and I'm going to go back to work down there. I ain't coming back here so you can mess around, like I'm saying.
Q.: Mr. Billiot, Mr. Billiot, listen to me. I am sorry. Okay. Have a seat. I am sorry.
A.: No, no, I have to go. I want to go back to my cell. I'm through talking today. Find somebody else to talk.
Q.: I don't want you to leave so upset. Okay?
THE WITNESS: Do you want to take these off?
Q.: I do apologize, and I don't want you to leave.
A.: You don't have to apologize, but like I'm saying, I'm fine. I just want to go back right now. Talking about all kind of stuff like this. Talking about Hitler and all stuff like this.
THE BAILIFF: Sit down. Let me get these off.
A.: You want and try and mess with me like that, no, no, you ain't going to mess with me like that.
Q.: Thank you. Bye.
A.: Okay. Okay.
In her post-interview report, Dr. Gur noted Billiot's improvement with anti-psychotic drugs; however, she believed he was not in remission:
Rather, he is able to maintain a thin façade of "well-being" because of the effects of the antipsychotic agent. This thin layer of composure cracked under discussion of his previous symptoms, and he decompensated when we attempted to discuss the real anticipated consequences of his situation. He manifested significant thought disorder similar in extent and content to what had previously been observed by several experts. His termination of the interview with me indicates that he is unable to assist an expert sent to him by his attorney.
She concluded:
While Mr. Billiot knows he is in prison, on death row, for the murder of three family members, he has no rational understanding of the consequences of the impending execution. Furthermore, while recognizing that he is mentally ill and that the medications help him with his "bad nerves," he denies all psychotic symptoms and makes an effort to present himself as doing well in the false belief that this will lead to his eventual *876 discharge. He is convinced and adamant that if he stays on the medication, everything will turn out well, and he will end up in a mental hospital before returning to the community.
What may be perceived as Mr. Billiot's "optimistic belief," as noted in Dr. Montgomery's report of December 26, 2007 (p. 8), is rather a known symptom of psychosis, which is denial to the point of a break from reality (i.e., anosognosia). He denies not only the severity but also the existence of any residual symptoms while on medication. He does not feign insanity; he feigns sanity. This denial prevents him from fully appreciating the circumstances of his execution.
Based on my evaluation of his behavior during the course of the most recent interview, and considering his medical history, I conclude that while Mr. Billiot appears clinically improved while taking an antipsychotic, I observed symptoms of a psychotic disorder when agitated. Based on my medical experience and the literature on the course of illness and treatment response of patients who suffer from severe schizophrenia, I believe that Mr. Billiot would decompensate and regress without antipsychotic medication. As manifested in his previous clinical presentation, when off antipsychotics, he was agitated, thought disordered to the degree of incoherence, with bizarre behavior including smearing feces, and catatonia.
When on medication, upon initial interaction he can maintain the appearance of a sane individual who can interact appropriately and respond to most factual questions. However, when confronted with questions pertaining to his previous symptoms or the finality of execution, his composure disintegrates, symptoms resurface, and he demonstrates lack of a rational understanding of his options. Further efforts to try and clarify his understanding of his treatment and legal options resulted in my dismissal. Thus, notwithstanding his current antipsychotic regimen, in my opinion Mr. Billiot is not competent to be executed.
As stated earlier, the experts for both Billiot and Respondents were given an opportunity to interview him on the day before the competency hearing. At that time, Billiot told Dr. Gur that he believed that the Louisiana and Mississippi police "have set him up to accuse him of the murder, and that the truth is going to come out, he is going to fight for it, and that's part of what the hearing is about." He also told her that he was Jesus Christ, and somebody was trying to take his power away. When she persisted in the interview, he became agitated and demonstrated new behaviors that she had not previously observedstomping his feet and making clicking sounds. He told her that he might be trained to sing, so that he could work in New Orleans, where he belonged. Dr. Gur thought that there was a more clear expression of some of his delusions in that interview.
To prepare for her testimony, Dr. Gur prepared a timeline of Billiot's reported behavior, along with his medication history for those periods. In reviewing the entirety of his medical history, she characterized his condition as deteriorating over time, although he had some periods of improvement. According to her, about a third of the people diagnosed with schizophrenia will show fluctuation and some improvement, although not to the level of pre-onset of the illness; about a third will remain stable with treatment; and about a third will continue to deteriorate. She believes that Billiot "is more among the third that shows continuous and progressive *877 impairment with some fluctuation. . . ." Later, during cross-examination she described his condition as "refractory," in that, despite treatment, he has been in a persistent psychotic state, such that his symptoms have not ameliorated enough for him to function better. Even with medication, she believes that his condition "has not dramatically changed over the years." Given the early onset of the condition and the consistency of his symptoms over many years, she felt that his prognosis was very poor.
In explaining her conclusion that Billiot is not competent to be executed, Dr. Gur recognized that he was able to relate that execution was the ultimate result of failing in his appeals and that being executed meant death. However, she does not believe that his ability to respond in that fashion to those questions indicates that he has a rational understanding that he will be put to death. Instead, she described Billiot's understanding of his future as follows:
[H]e believes that he has the power and ability to go beyond death, that death is not something that he understands will apply to him. In other words, that when a person is executed, what happens to a person, a person is executed, they die. What will happen to you when you're executed? I'm going to find a job in New Orleans. I take the medication, I'm able to work, and if I can do that, I will be going back to New Orleans. And at this stage, when trying to pursue further, what do you mean, you know, if you die, what will specifically happen to you, he becomes very psychotic, and he stopped the interview. The guards had to come in and took him to another room, and he was mumbling, and after a break he refused to continue. . . . His notion of death and penalty is very abstract and doesn't enable, doesn't provide information to me that he understands the consequences of what he did and what death means to him in person.
She also pointed out that it was not his illness that determined his competency, but the severity of his psychotic state, which prevented him from having the ability to rationally interpret and anticipate the outcome of his case.
In their reports and during their testimony, Respondents' experts gave their own opinions about Dr. Gur's interview and her conclusions. Dr. O'Brien, who testified for Respondents, explained the difference in Billiot's behavior between his interview and Dr. Gur's as caused by pressure from persistent questioning on the same issues. He reviewed the video of Dr. Gur's interview, and he interpreted Billiot's response as that of an individual who is powerless to quit talking to a persistent interviewer. Although O'Brien agreed that sometimes a mental health professional has to be persistent in asking questions, he believes that the interviewer risks getting information that is not relevant or pertinent. O'Brien realized that, by asking Billiot over and over about death and dying, each interviewer got different answers; however, in his opinion, none of those responses rose to the level of not having a rational understanding of crime and penalty and connection between them.
Dr. O'Brien further disagrees with Dr. Gur's use of what he characterized as a clinical approach to reaching her conclusion. For example, Dr. O'Brien would never ask some of the questions she asked, because they are more appropriate for a clinical setting than a forensic setting e.g., "What does death mean?" Because Billiot does not like talking about his execution, those questions cause him to become agitated. According to Dr. O'Brien:
Particularly, he doesn't like talking about dying, so there are two possible *878 approaches. One is to ask questions which pretty much cover the territory and not, shall we say, irritate him to the point where he will not longer talk, or the other method, as used by Dr. Gur and also by Dr. Johnson, which is to repeat the questions over and over again, which I don't find particularly useful, so I didn't do it that way.
Dr. Montgomery also disagreed with Dr. Gur's conclusion that Billiot's denial of psychotic symptoms prevented him from being competent to be executed. Nor did he believe that Billiot was delusional during the interview, because Billiot is normally overtly psychotic when he is delusional. Dr. Montgomery believed that Billiot's belief that he would be transferred to a mental hospital and ultimately released was not delusional, but was based on conversations with members of the Parchman treatment team, who had discussed with him the possibility of transferring to the East Mississippi Correctional Facility, which is the psychiatric facility for the Mississippi Department of Corrections.
As stated earlier, during Dr. Montgomery's cross-examination, Billiot's counsel asked several questions regarding recommendations made in an article cited in the amicus brief filed in Panetti. One of those recommendation was, "Ask questions about death from a number of different angles (e.g., meaning of death, specific understandings about death from execution), so as to facilitate a thorough evaluation of any irrational beliefs or ideas the offender may hold regarding death." Montgomery believed that he had done so when he asked Billiot what would happen to him if he was executed and whether he would prefer execution to life without parole. He testified, however, that he was trying "to ask questions around death, kind of dancing round the topic of death without scaring the person off. . . ." Montgomery admitted that his report states that, in response to being asked what he believed would be the ultimate outcome of his case, Billiot said, "Eventually, I will be put in a mental institution and get to the free world." Finally, Dr. Montgomery acknowledged that he did not question Billiot regarding his personal meaning of death. None of these admissions, however, changed his opinion that Billiot was competent to be executed. Thus, after conducting their own interviews and reviewing the interviews and reports of the other experts, Dr. Montgomery and Dr. O'Brien believe that Billiot is competent to be executed, while Dr. Gur and Dr. Johnson believe that he is not.
ANALYSIS
Panetti holds that, consistent with the Eighth Amendment, Billiot may not be executed unless he has, at a minimum, a rational understanding of his conviction, his impending execution and the relationship between the two. As an initial matter, the court, having observed the demeanor of the experts who testified and having examined their testimony, finds all of them to be well qualified, credible and sincere in their opinions. That being the case, it is not surprising that they agree on several points. In particular, they concur that Billiot suffers from severe, chronic schizophrenia, accompanied by delusions. However, their ultimate opinions on whether Billiot is competent to be executed differ; therefore, the court is compelled to credit one set of opinions over the other. To make this decision, the court has conducted its own review of Billiot's medical records and has considered its own observations of Billiot at the competency hearing. See Paul v. United States, 534 F.3d 832, 853 (8th Cir.2008) ("[I]t is not inappropriate for the court to consider its own observations of the petitioner, and even to *879 disagree with experts on mental functioning where warranted.") (citing Holmes v. Buss, 506 F.3d 576, 581 (7th Cir.2007)). The court has also compared the qualifications of the four experts who testified. See Comer v. Schriro, 480 F.3d 960, 970 (9th Cir.2007). Based on these factors, the court concludes that Dr. Gur, whose qualifications in the field of schizophrenia research are outstanding, offered an opinion most in accord with the Court's observations.
Dr. Gur specializes in research and treatment of schizophrenia, and she directs a federally funded schizophrenia research center at the University of Pennsylvania. In addition to her teaching duties, she runs a clinic and treats patients. She has been a Council Member of the National Advisory Mental Health Council, which advises the Secretary of Health and Human Services, the Director of the National Institutes of Health, and the Director of the National Institute of Mental Health. She is also on the Advisory Board for the International Congress on Schizophrenia Research. Following her testimony before this Court, Dr. Gur attended the Ninth World Congress of Biological Psychiatry in Paris, where she was Co-Chair of the International Scientific Programme Committee.
Dr. Gur concluded that Billiot knows he is in prison for killing three family members, but that he no rational understanding of the consequences of the impending execution. His unalterable belief is that, as long as he stays on his medication, he will sent to a mental hospital for further treatment and ultimately will be released. In order to demonstrate his improvement on medication, he denies past psychotic symptoms, feigning sanity in order to further his goal of returning to New Orleans to work. When pressed on his unrealistic beliefs, his composure disintegrates, and he becomes floridly psychotic. According to Dr. Gur, Billiot's medical history demonstrates that he is among the group of schizophrenic patients who shows continuous and progressive impairment, although with some fluctuations. This view is further supported by Billiot's demeanor when she interviewed him the day before the competency hearing, where he expressed his delusions even more clearly, telling her that someone was trying to take his powers away. In her opinion, Billiot does not believe that death will happen to him, and he was unable to assist the experts sent to him by his attorneys.
Dr. Johnson, who has more experience with Billiot than any of the other experts, concurs with Dr. Gur's opinion, based both upon his observation of her interviews and also on his own examinations of Billiot over the course of over twenty years. Although Billiot attempts to control his symptoms, so that he will be sent to a mental hospital, Dr. Johnson found his veneer of control to be penetrable. In the final interview, on the day before the hearing, Dr. Johnson asked Billiot about his execution and what would happen. At that point, Billiot became boisterous and announced that the execution would not occur because he was invincible, as he had demonstrated by surviving the jail fire and recovering from the earlier stabbing. Dr. Johnson believes that Billiot is unable to personalize his actions to the murders of his family, and he cannot rationally comprehend that he would be killed by lethal injection. Instead, he is more concerned about the pain of the shot.
The court has carefully considered the opinions of Dr. O'Brien and Dr. Montgomery, but is of the opinion that Dr. Gur's interview technique was the most appropriate for determining whether Billiot is competent to be executed. This belief is supported by the amicus brief filed in the *880 United States Supreme Court by the American Psychological Association, American Psychiatric Association, and the National Alliance on Mental Illness in support of the petitioner in Panetti v. Quarterman, 551 U.S. 930, 127 S. Ct. 2842, 168 L. Ed. 2d 662 (2007), 2007 WL 579235. That brief was recognized by the Supreme Court as providing a guideline for experts performing competency determinations. 551 U.S. at 962, 127 S. Ct. 2842. Citing several published resources, the brief provided the following suggestions:
In the context of competency to be executed, the interview would begin with general, factual questions such as: "Why are you in prison?" and "Why have you been sentenced to death" After establishing the factual framework, the interview could be expected to address the examinee's rational understanding with questions like: "Will you be executed?" and "What preparations have you made in anticipation of your execution?" To the expert forensic psychologist or psychiatrist, the answers to these questions reveal the subject's mental capacities, and clarifying follow-up questions can probe ambiguous replies. In addition, the clinician will consult collateral sources of information, including prison personnel, family members, and attorneys, as well as the individual's treatment records and mental health history.
Brief of Amicus Curiae, supra, 17-18.
The court is persuaded that Dr. Gur's interview technique, which probed the depth of Billiot's understanding of his situation, was in keeping with prevailing mental health standards for a competency review, as recognized by the Supreme Court in Panetti. Moreover, in-depth questioning is particularly appropriate where the inmate is schizophrenic, as pointed out in the amicus brief:
Psychotic disorders such as schizophrenia distort the mind in certain ways while leaving other functions generally intact. As noted above, an individual with paranoid schizophrenia may possess "a relative preservation of cognitive functioning." DSM-IV-TR 313. Yet such a person, plagued by a delusional psychotic disorder, may have no ability to apply his cognitive functions to test the veracity of the conclusions that he draws; while the process of a person's thinking appears normal, the content of the thoughts defies accepted reality.
. . . .
Schizophrenic patients may be highly intelligent, certainly not confused, and they may be painstaking in their abstractions and deductions. But their thought processes are strange and do not lead to conclusions based on reality or universal logic.
Brief of Amicus Curiae, supra, 10-11. The brief used as an example a person with paranoid schizophrenia who believes himself to be Michael Jordan. Such a person could persist in that belief, even while admitting that he has none of Jordan's physical or personal characteristics. Id. With particular reference to Scott Panetti, in particular, the brief concluded:
Thus, a person suffering from schizophrenia or schizoaffective disorder may know that he has committed a crime; that the death penalty is imposed on persons who commit such crimes; and that the State has asserted he will be put to death because he committed that crime; and yet be absolutely and unwaveringly certain that his execution is not in fact a response to his crime but is instead an effort to prevent him from preaching the Gospel.
Brief, 11-12.
Given Billiot's condition, it was not enough to "ask questions which pretty *881 much cover the territory" of his comprehension of his legal situation without irritating him, as was suggested by Respondents' experts. On the surface, Billiot can verbalize his understanding that he was convicted of the murders of his mother, stepfather and half-sister. He understands that he has been sentenced to death. Beyond that point, however, his cognitive functions break down, and that deficiency in reasoning might not have been readily apparent, but for Dr. Gur's interview. For example, when Dr. Gur asked Billiot about his understanding of execution, he was able to answer, in a general manner, that it meant, "The State of Mississippi to carry out justice." He could not, however, personalize his response to involve his own death. When Dr. Gur pressed him on an answer, his demeanor changed. His face reddened, his voice thickened, and he told her she was "going too far" and repeated, as he had several times, that he was taking his medication. Ultimately, she was able to extract from him that, when he was executed, "I will be dead. That's all."
It is tempting to conclude from that one sentence that Billiot understands that his execution is imminent. However, follow-up questioning on the effect of death produced more resistance from Billiot, who announced, "I can't go that far." When Dr. Gur questioned his belief that he will leave prison for a rehabilitation program if he takes his medicine, Billiot told her he would not believe that an alternative result is possible. He then launched into an explanation of his daily medication and coffee routine. Dr. Gur tried to pull him back to the realities of his situation, noting that taking his medication could have the effect of hastening his execution. Billiot denied that possibility, and, almost instantly, began discussing the effect on him of hearing about soldiers' deaths on television. Dr. Gur asked him what relationship that had on the subject they were discussing, and Billiot gave a nonsensical answer:
I just told you I was watching something on TV. I don't have a TV right now, and there's something that was a bad feeling one time when they attacked the World Trade Center, like I said, I don't want to get up there and start hollering Hitler and hearing voices, you know, because a soldier went over there and checked that out to see if they were trying to do it on purpose, a bad feeling or something.
Dr. Gur persisted, asking whether he understood that "if you take the medication you will feel better but you might be executed." Billiot argued with her, refusing to consider halting his medication. He said, "I believe I will stay on my medication, and I won't be executed." She responded, "So you rather take the medication and die then not take the medication?" Billiot told her that he "believed in living afterwards," that he would "just live on." At that point, Billiot's voice thickened again, and he appeared to be near crying. He insisted "I won't die. I won't die." Following that statement, Billiot became extremely agitated and demanded to leave the interview. Despite Dr. Gur's repeated attempts to calm him and continue the interview, Billiot refused, saying, "I take my medication, and I'm fine. There's no way I'm getting off my medication." Finally, he told her, "Like I said, I am going back to Louisiana one day. I'm going to take my medication, and I'm going to go back to work down there. I ain't coming back here so you can mess around, like I'm saying."
All of the experts believe that Billiot suffers from severe schizophrenia. Both Dr. Gur and Dr. Johnson believe that this condition does not prevent Billiot from interacting appropriately on a superficial level and responding to factual questions. He can repeat that he is on death row for *882 murdering three family members. However, his understanding of his impending execution is abstract. His actual, sincere belief is that he will be sent to a mental institution, rehabilitated, and ultimately set free as long as he takes his medication. This belief is evident even from his earlier interview with Respondents' experts. During that interview, almost any time Billiot was asked about the course of his case, leading to execution, he responded by saying that he takes his medicine. That belief is so entrenched that Billiot demonstrates marked emotional disturbance when it is challenged. Even in the interview with Dr. O'Brien and Dr. Montgomery, when asked how he would respond to being executed, he shifted the conversation to a discussion about football. Billiot simply cannot comprehend that he might be executed in spite of taking the medication, or even because of it.
Although there was not enough evidence for the court to accept that Billiot thinks himself invincible, due to his special powers, there was ample evidence that Billiot believes that showing behavioral improvement will result in his being moved to a mental facility and released. The court finds that this conviction is not a misunderstanding of a conversation with prison officials, but a firmly held delusion. This delusion has the effect of compelling Billiot to deny or underplay his mental illness, even though the denial enhances, rather than diminishes, his chances of being executed. He not only feigns wellness, he feigns happiness, denying any sadness or depression, which is completely at odds with his situation. Billiot can maintain this facade of wellness during superficial conversation; it is only after intensive questioning of his delusion that this front cracks, and his psychotic state becomes evident. Billiot simply does not have the rational understanding of his impending execution that would make him eligible for the death penalty under the standard enunciated in Panetti.
These findings are supported by Billiot's medical records, the testimony of prison doctors who testified at his 1995 forced medication hearing, and the 2007-08 interviews conducted by the experts who testified at the hearing in this court. Billiot's appearance at that hearing, and the reports of the interviews that occurred the day before, demonstrate that his condition has not improved since the interviews and, indeed, has deteriorated. Such a deterioration is consistent with Dr. Gur's opinion that Billiot's condition will likely to continue to worsen, and his prognosis is bleak.
In Ford, Justice Marshall gave several reasons for the prohibition against executing the insane, including the questionable retributive effect of executing a person who does not understand why he has been condemned, the disinclination to execute a prisoner who cannot make peace with his conscience or his God, and society's "intuition that such an execution simply offends humanity." 477 U.S. at 409, 106 S. Ct. 2595. All of these arguments are supported by Billiot's condition. He does not have a rational understanding that he will be executed; instead, he believes he will be released. Given his delusional state, the court is convinced that Billiot would go to the execution chamber believing that he would not die. Other societal concerns acknowledged in Panetti also militate against sanctioning Billiot's execution. It is clear from Billiot's demeanor during the interviews and at the hearing that he cannot assist the experts chosen by his attorneys, nor can he assist the attorneys themselves. It is equally clear that, believing that he will not be executed, Billiot cannot prepare himself in any spiritual sense for death. It would be, as earlier writers have said, "uncharitable to dispatch [Billiot] `into another world, when he is not of a *883 capacity to fit himself for it.'" Ford, 477 U.S. at 407, 106 S. Ct. 2595 (quoting Hawles 477). For all of these reasons, executing Billiot would not serve the retributive goal that justifies society's use of this punishment, and Billiot falls within the class of prisoners who should be excluded from the death penalty as incompetent.
CONCLUSION
For all of the reasons given in this opinion, the court finds that James Billiot is not competent, under the protection against cruel and unusual punishment provided by the Eighth Amendment, to be executed, and the court so holds. His Motion to Determine Competency to be Executed shall be granted. Having made this finding, however, the Court must determine the appropriate relief.
Federal court are authorized to dispose of habeas petitions "as law and justice require." 28 U.S.C. § 2243; Hilton v. Braunskill, 481 U.S. 770, 107 S. Ct. 2113, 95 L. Ed. 2d 724 (1987); Davis v. Reynolds, 890 F.2d 1105, 1112 (10th Cir.1989). The mandate of the statute "is broad with respect to the relief that may be granted." Carafas v. LaVallee, 391 U.S. 234, 88 S. Ct. 1556, 20 L. Ed. 2d 554 (1968). Thus, a district court may exercise its broad authority in habeas cases to grant any relief it deems necessary, including, but not necessarily demanding, the permanent discharge of a successful habeas petitioner. Burton v. Johnson, 975 F.2d 690, 693 (10th Cir.1992).
Under Mississippi law, the finding that a prisoner sentenced to death has become incompetent does not invalidate the sentence. Miss.Code Ann. § 99-19-57(2) (1972 & Supp.2008). Instead, the statute provides that the prisoner should be committed to the forensic unit of the Mississippi State Hospital at Whitfield. While at the State Hospital, he will be regularly examined to determine whether there is a substantial probability that he will become sane within the foreseeable future and whether progress is being made toward that goal. Further, if it is determined by the appropriate official at the State Hospital that the prisoner has regained his sanity, the prisoner would be returned to the custody of the commissioner of corrections, and another competency hearing would be held.
Under the unique circumstances of this case, it would be inappropriate, at this juncture, to issue a writ of habeas corpus discharging Billiot from imprisonment. Instead, the court will require the appropriate officials of the State of Mississippi to suspend Billiot's sentence and transfer him to the Mississippi State Hospital under the provisions of § 99-19-57. If this is not accomplished within sixty days of the entry of this Memorandum Opinion and Order, then a writ will issue for Billiot's immediate release.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the Petition for Writ of Habeas Corpus filed by James Billiot is hereby granted as to his claim that he is presently incompetent to be executed. A separate judgment will be entered, in accordance with Federal Rule of Civil Procedure 58.
IT IS FURTHER ORDERED that the appropriate officials of the State of Mississippi shall suspend Billiot's death sentence and transfer him to the Mississippi State Hospital under the provisions of § 97-19-57 within sixty days of the entry of this Memorandum Opinion and Order. Failure to do so will result in the issuance of a writ for Billiot's immediate release.
NOTES
[1] New York's death penalty statute has been declared unconstitutional, and it has not been rewritten by its legislature. See People v. Taylor, 9 N.Y.3d 129, 848 N.Y.S.2d 554, 878 N.E.2d 969 (2007); People v. LaValle, 3 N.Y.3d 88, 783 N.Y.S.2d 485, 817 N.E.2d 341 (2004). In Illinois, the moratorium on executions declared by then-Governor George Ryan in 2000 is apparently still in effect. Sanchez, Robert, State Moratorium on Executions10 Years and Counting, Chicago Daily Herald, July 28, 2009, available at http://www. dailyherald.com/story/print/?id=310033.
[2] Ariz.Rev.Stat. Ann. § 13-4021(b) (Westlaw 2009); Ark.Code Ann. § 16-90-506(d)(1) (Westlaw 2009); Col.Rev.Stat. Ann. § 18-1.3-1401(2) (Westlaw 2009); Fl. Stat. Ann. § 922.07(1) (Westlaw 2009); Ga.Code Ann. § 17-10-60 (Westlaw 2009); Ky.Rev.Stat. Ann. § 431.213(2) (Westlaw 2009); La.Rev. Stat. Ann. 15:567.1.B (Westlaw 2008); Md. Code Ann. § 3-904(a)(2) (Westlaw 2009); Ohio Rev.Code Ann. § 2949.28(A) (Westlaw 2009); S.D. Codified Laws § 23A-27A-22.1 (Westlaw 2009); Tex.Code Crim. Proc. Ann. art 46.05(h) (Westlaw 2009) (held unconstitutional insofar as it denied counsel and was construed without reference to rational understanding in Wood v. Quarterman, 572 F. Supp. 2d 814 (W.D.Tex.2008)); Utah Code Ann. § 77-19-201 (Westlaw 2009); Wy. Stat. Ann. § 7-13-901(a)(v) (Westlaw 2009).
[3] Sanders v. State, 585 A.2d 117, 138 (Del. 1990); Baird v. State, 833 N.E.2d 28, 30 (Ind. 2005); Van Tran v. State, 6 S.W.3d 257, 266 (Tenn.1999).
[4] California, Idaho, Kansas, New Hampshire and Virginia.
[5] Or.Rev.Stat. § 137.463(4) (Westlaw 2009); Commonwealth v. Jermyn, 539 Pa. 371, 376, 652 A.2d 821, 824 (1995).
[6] Conn. Gen.Stat. § 54-56d (1991) (Westlaw 2009); Miss.Code Ann. § 99-19-57(2)(b) (1972 & Supp.2009); Mo.Rev.Stat. § 552.060(1) (Westlaw 2009); Mont.Code Ann. §§ 46-19-201 & 46-14-103 (Westlaw 2007); Neb. Rev. St. § 29-2537 (Westlaw 2009); N.C. Gen.Stat. § 15A-1001(a) (Westlaw 2009).
[7] Magwood v. State, 689 So. 2d 959, 973 (Ala. Crim.App.1996); Fisher v. State, 845 P.2d 1272, 1276 n. 3 (Okla.Crim.App.1992); Singleton v. State, 313 S.C. 75, 84, 437 S.E.2d 53, 58 (1993); State v. Harris, 114 Wash.2d 419, 430, 789 P.2d 60, 66 (1990).
[8] In November, 1982, twenty-nine inmates were killed in a fire at the Harrison County Jail. Apparently, Billiot was being held in the jail at that time, awaiting trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545550/ | 87 F.2d 26 (1936)
LYMAN GUN SIGHT CORPORATION
v.
REDFIELD GUN SIGHT CORPORATION.
No. 1425.
Circuit Court of Appeals, Tenth Circuit.
December 29, 1936.
Rehearing Denied February 3, 1937.
Carle Whitehead, of Denver, Colo. (James S. Stewart, of Boston, Mass., and Albert L. Vogl and Frank A. Wachob, both of Denver, Colo., on the brief), for appellant.
Otto Friedrichs, of Denver, Colo., for appellee.
Before LEWIS, McDERMOTT, and BRATTON, Circuit Judges.
BRATTON, Circuit Judge.
The appeal in this case presents for determination the validity of patent No. 1,901,399 issued to plaintiff as assignee of the inventor. Application for the patent was filed February 25, 1930, and it was issued in March, 1933. Holding that there was lack of novelty and anticipation, the court dismissed the bill and plaintiff appealed.
The patent relates to a front sight of a rifle and is adapted to use in target shooting. Claims 1, 2, 3, 4, 7, 8, and 9 are involved. The device includes a combination of elements consisting of a hollow, cylindrical, metallic hood about an inch in length and about half an inch in diameter in which interchangeable reticules are inserted. The hood is provided with a dove-tail base which is forced into a dove-tail *27 slot positioned on the barrel of the rifle near the muzzle. It has a circumferentially directed internal seat or annular shoulder about midway its length and two horizontal slots extending from the rear end of the hood to the shoulder. It also has a hollow, threaded plug which screws into the rear end of the hood. A reticule is a thin circular piece of metal which fits closely inside the hood and has a sighting portion either in the form of an aperture or a post. It also has laterally directed ears or arms on opposite sides of the reticule. When the reticule is positioned in the hood, the ears or arms extend horizontally through the slots and beyond the periphery of the hood. Such extension makes it possible to grasp and hold the ears or arms with the fingers for placement or displacement of the reticule. Positioned in the hood, the reticule is firmly held there by tightening the plug which presses or clamps the reticule against the annular shoulder; and the plug also serves to close the slots and exclude light from the hood, except that which enters at the ends. The apertures and post arrangements differ in size, but all of them are so arranged that they coincide with the center of the circular edge of the reticule and thus give the proper concentric shooting position with respect to the hood and the rear sight, if there be one. Reticules may be changed rapidly without the use of tools thus providing the marksman with a plurality of sights for quick use on the field.
This combination of elements has its setting in a crowded art. Each element thus disclosed or its equivalent was taught in earlier patents or was in general use. A hollow hooded front sight with removable inserts or reticules was old. The Irion patent No. 1,387,987 taught a tubular hood and a circular reticule with crossed sight-wires. The Wanee patent No. 912,050 had a tubular hood, a threaded bushing, an annular recess and a transparent disc with a bead; but it did not have means either to prevent rotation of the disc or to lift it with the fingers. The Watson patent No. 830,868 was for a globe front sight with a V-shaped light-aperture, threaded bushing, and a circular sighting means set within the cylinder and held in position by screwing a hollow, threaded plug into the end of the cylinder, thus pressing the sighting means against an annular shoulder. The Maynard patent No. 318,999 disclosed a tubular hood sight with a transverse slot beginning at the top and extending halfway down the hood. Inserts with extended shoulders were dropped into the slot and the shoulders rested on the bottom of the slot. The insert was held in position with a turn-button. The Carlson patent No. 539,470 was for a tubular hood sight into which a ring with parallel cross-bars and with a bead at the center was inserted. The ring had projections on opposite sides which could be gripped with the fingers for the purpose of placing or displacing it. All of these patents were issued prior to the filing of the application for the patent in suit.
The Winchester Yoke Model was advertised in 1882, and has been in use since that time. It is a hollow, cylindrical hood with a transverse slot about midway its length extending from top to bottom, into which interchangeable reticules with sighting means are inserted. The reticule has a horizontal base which rests upon a flat surface below the hood and is held in position with a spring yoke on the outside of the hood. The insert extends slightly outside the hood and unless the spring is in gripped position it can easily be placed or removed with the fingers. The Winchester telescope sight was advertised in 1913. It includes a short tubular hood. A circular reticule is inserted horizontally into the hood through one end and is pushed forward against annular shoulder. The reticule has one ear which engages a horizontal slot and it is held in position by a hollow circular plug which is slipped in behind it, the plug being held in position by a screw through the slot. This is a rear sight, but experts gave convincing testimony that its transposition into a front sight could be readily achieved through means obvious to any skilled mechanic.
A union of selected old elements may constitute a patentable combination if by reciprocal or co-operative action on a common objective a new and useful result is effected or an old result is attained in a more facile, economical and efficient manner. Leeds & Catlin Co. v. Victor Talking Machine Co., 213 U.S. 301, 29 S. Ct. 495, 53 L. Ed. 805; Skinner Bros. Belting Co. v. Oil Well Improvements Co. (C.C. A.) 54 F.(2d) 896; Independent Oil Well Cementing Co. v. Halliburton (C.C.A.) 54 F.(2d) 900; Stearns-Roger Mfg. Co. v. Ruth (C.C.A.) 62 F.(2d) 442; Dow Chemical *28 Co. v. Williams Bros. Well Treating Corporation (C.C.A.) 81 F.(2d) 495. But the mere use of antecedent elements to produce an old result is not invention. Paramount Corporation v. Tri-Ergon Corporation, 294 U.S. 464, 55 S. Ct. 449, 79 L. Ed. 997. Neither does the production of a new device by the rearrangement or manipulation of known elements through application of ordinary mechanical skill constitute invention although it may have required study, effort, and experimentation. Concrete Appliances Co. v. Gomery, 269 U.S. 177, 46 S. Ct. 42, 70 L. Ed. 222; Saranac Automatic Machine Corp. v. Wirebounds Patents Co., 282 U.S. 704, 51 S. Ct. 232, 75 L. Ed. 634; Electric Cable Co. v. Edison Co., 292 U.S. 69, 54 S. Ct. 586, 78 L. Ed. 1131.
Where a patent includes a combination of elements, it is not necessary to establish anticipation that all of the elements be found in a single earlier patent or in a single device previously in general use. It is enough if the evidence, taken as a whole, discloses that all of the claimed elements are found in different prior patents in the art or in different devices previously in general use, and no new functional relationship arises from their combination. Busell Trimmer Co. v. Stevens, 137 U.S. 423, 11 S. Ct. 150, 34 L. Ed. 719; Linville v. Milberger (C.C.A.) 34 F.(2d) 386; Reflectolyte Co. v. Luminous Unit Co. (C.C.A.) 20 F.(2d) 607.
The Winchester yoke structure employed a vertical slot while the slots in plaintiff's patent are horizontal, but that is a minor feature of mechanical skill, not inventive genius. John Oster Manufacturing Co. v. Allover Mfg. Co., 86 F.(2d) 807. And, in departure from some of the earlier patents, the ears or arms here are made longer so that they extend beyond the hood and may be grasped in the fingers for placement and displacement which eliminates need to use a screw driver or other tool in making the change, but such extension for that purpose is likewise obvious mechanical skill as distinguished from inventive genius. The outstanding result which the device produced was that the change of reticules could be made quicker and easier. That was effected through a combination of old elements with changes and additions which one skilled in the calling would make in the natural development of the art. It was the product of mechanical skill, not a new result or an old result accomplished in a better and more facile way through inventive genius.
Commercial success of the invention is urged as strong evidence of novelty and utility. Where the claims and other facts and circumstances render the question of novelty fairly open to doubt, general use by those engaged in the industry with widespread displacement of other devices which had been used to perform the function may be taken into consideration. McClain v. Ortmayer, 141 U.S. 419, 12 S. Ct. 76, 35 L. Ed. 800; Paramount Corporation v. Tri-Ergon Corporation, supra; Dow Chemical Co. v. Williams Bros. Well Treating Corporation, supra. But it is only a circumstance of evidentiary potency and does not add controlling force to the assertion of invention if there is no substantial doubt respecting the question of novelty. Paramount Corporation v. Tri-Ergon Corporation, supra. Since that question is not attended with doubt here, the rule contended for has no application.
The decree is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545838/ | 77 F.2d 310 (1935)
In re MILBURNE.
MILBURNE
v.
UNITED STATES.
No. 299.
Circuit Court of Appeals, Second Circuit.
May 6, 1935.
Leonard Greenstone, of Brooklyn, N. Y., for appellant.
Leo J. Hickey, U. S. Atty., of Brooklyn, N. Y. (Vine H. Smith, Asst. U. S. Atty., of New York City, of counsel), for the United States.
Before MANTON, SWAN, and CHASE, Circuit Judges.
SWAN, Circuit Judge.
This appeal concerns the right of the appellant, Milburne, to suppress evidence and procure the return of property alleged to have been obtained by an illegal search and seizure made by police officers of New York City on May 7, 1934. On that date the appellant was lessee in possession of a two-story building in the borough of Brooklyn. He used the ground floor as a public garage and auto repair shop and had his living quarters in the second story. During a period of six days police officers had tapped the wires leading to a public toll telephone in the office of Milburne's garage and had overheard conversations from which they inferred that whisky was being sold and delivered from the premises. On the afternoon of May 7th they went there without a search warrant. In a room on the second floor they found whisky and some incriminating papers, which they seized and subsequently turned over to agents of the United States. This proceeding seeks to suppress use of the liquor and papers as evidence and to obtain the return of them to the appellant. It was begun, prior to the filing of any indictment or information against Milburne, by notice of motion and verified petition addressed to the United States Attorney and to John Flynn, Supervisor, Bureau of Internal Revenue, *311 Alcohol Tax Unit. Affidavits by two of the police officers were filed in opposition.
According to Milburne's affidavit the officers, after searching the garage, forced him to accompany them upstairs, took from his pocket a bunch of keys, and, over his protest, unlocked the door to his apartment and searched every room. In what he calls the "storeroom" they found some whisky which he kept for his own use, and in the closet of that room some books and papers which they also seized. They arrested him for a violation of the Liquor Taxing Act of 1934 (26 USCA § 267 et seq.). The story told by the officers' affidavits differs in material respects from that of the appellant. They say that they never entered the living quarters of Milburne; that having found no one in the garage they proceeded upstairs and along the hallway to a door on the right which was unlocked. They opened this door and stepped into a room where they found Milburne and two other men, with three barrels marked "Calvert Whiskey, Montreal," and all the paraphernalia of a cutting plant. On the window sill they found a list of places to which deliveries of whisky had been made in Brooklyn and Long Island, some of which places were not licensed to engage in the retail liquor business. Milburne admitted that the room was his but denied that the liquor was. One of the men telephoned to a man named Francis, who then came to the premises, and said that "the stuff" was his; he was placed under arrest.
The district judge stated in a memorandum that the opposing affidavits create a doubt whether the room searched was not in fact a cutting plant separate from but connected with Milburne's living quarters. He denied the petitioner's motion without prejudice to renewal upon the trial. The petitioner then moved for a reargument and for leave to examine the police officers orally under oath, supporting the motion by affidavits by himself, his wife, and his attorney. The district judge adhered to his view that "it is impossible to make an intelligent disposition of this motion until the trial, when all the facts and circumstances can be brought to light." He denied the motion for reargument, and on September 10, 1934, the order was entered from which this appeal is taken.
It appears from the affidavits that no indictment or information had been returned against the petitioner when his motion was before the District Court. His application for suppression of the evidence and return of the property was an independent proceeding, and denial of relief was a final and appealable order. Cogen v. United States, 278 U.S. 221, 225, 49 S. Ct. 118, 73 L. Ed. 275; Go-Bart Importing Co. v. United States, 282 U.S. 344, 356, 51 S. Ct. 153, 75 L. Ed. 374; Perlman v. United States, 247 U.S. 7, 13, 38 S. Ct. 417, 62 L. Ed. 950.
The argument has revolved chiefly about the question whether the room in which the liquor and other articles were found and seized was part of the appellant's dwelling house. If it was, concededly the search without a warrant was illegal. Agnello v. United States, 269 U.S. 20, 33, 46 S. Ct. 4, 70 L. Ed. 145, 51 A. L. R. 409. Even if it was not, the search and seizure without first procuring a warrant may well have been unreasonable, in view of the abundant opportunity the officers had to obtain one. Taylor v. United States, 286 U.S. 1, 6, 52 S. Ct. 466, 76 L. Ed. 951; Go-Bart Importing Co. v. United States, 282 U.S. 344, 358, 51 S. Ct. 153, 75 L. Ed. 374. But in the view we take it is unnecessary to pass upon this question. The federal government may avail itself of evidence procured by state officers through an illegal search and seizure, provided no federal officer or agent has participated therein. Byars v. United States, 273 U.S. 28, 33, 47 S. Ct. 248, 71 L. Ed. 520; Weeks v. United States, 232 U.S. 383, 398, 34 S. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177; Burdeau v. McDowell, 256 U.S. 465, 476, 41 S. Ct. 574, 65 L. Ed. 1048, 13 A. L. R. 1159. The affidavits assert that the telephone wires were tapped pursuant to the affiants' duties as police officers, and there is nothing in the record to indicate that in entering the premises and conducting their search they were acting under any authority excepting such as they derived from the local law, or were seeking evidence solely of a federal crime. Compare Gambino v. United States, 275 U.S. 310, 48 S. Ct. 137, 72 L. Ed. 293, 52 A. L. R. 1381. The state had an Alcohol Beverage Control Law (chapter 478, Laws N. Y. 1934 [Consol. Laws, c. 3-B]), it is admitted that there were present "possible violations" of it, and the statement in Officer Canavan's affidavit that some of the places, to which deliveries had been made according to the seized list, were not licensed to engage in a retail liquor business, indicates that the officers were directing their attention to state violations. It is true that after discovery *312 of the whisky the officers placed Milburne under arrest on a federal charge, but this does not establish that the search and seizure were made solely on behalf of the federal government. Miller v. United States, 50 F.(2d) 505, 507 (C. C. A. 3), certiorari denied 284 U.S. 651, 52 S. Ct. 31, 76 L. Ed. 552; Burkis v. United States, 60 F.(2d) 452, 454 (C. C. A. 3), certiorari denied 287 U.S. 655, 53 S. Ct. 117, 77 L. Ed. 566; Gowling v. United States, 64 F.(2d) 796, 799 (C. C. A. 6).
In the argument below it was conceded by the United States Attorney that the legality of the search was to be determined by the federal law. He no longer makes that concession. Even if he still made it, we should not be concluded from deciding the case upon the facts disclosed and the applicable law, since the court cannot be controlled by an agreement of counsel on a subsidiary question of law. Swift & Co. v. Hocking Valley Ry. Co., 243 U.S. 281, 289, 37 S. Ct. 287, 61 L. Ed. 722; Bear River Paper & Bag Co. v. City of Petoskey, 241 F. 53, 56 (C. C. A. 6). Accordingly we think the order must be sustained. Since the appellant's motion was denied without prejudice to renewal upon the trial, he may upon renewal of the motion be able to show that the search was conducted solely on behalf of the federal government. Affirmance of the present order upon the ground stated will not conclude him if different facts appear.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2584194/ | 172 P.3d 1286 (2007)
2007-NMCERT-010
BOSQUE ASSET CORP.
v.
URREA.
No. 30,693 (COA 27,541).
Supreme Court of New Mexico.
October 30, 2007.
Writ Granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545649/ | 988 A.2d 716 (2009)
COM.
v.
CHRISTIAN.
No. 354 MDA 2009.
Superior Court of Pennsylvania.
November 4, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545676/ | 87 F.2d 811 (1937)
COMMISSIONER OF INTERNAL REVENUE
v.
McKINNEY.
No. 1415.
Circuit Court of Appeals, Tenth Circuit.
January 14, 1937.
Maurice J. Mahoney, Sp. Asst. to the Atty. Gen. (Robert H. Jackson, Asst. Atty. Gen., and Sewall Key and Ellis N. Slack, Sp. Assts. to the Atty. Gen., on the brief), for petitioner.
Walter J. Carrico, of Tulsa, Okl., for respondent.
Before PHILLIPS, McDERMOTT, and BRATTON, Circuit Judges.
PHILLIPS, Circuit Judge.
This is a petition to review a decision of the Board of Tax Appeals redetermining the tax liability of respondent for the year 1927.
On May 23, 1924, respondent received possession of certain oil and gas leases under a decree of distribution, as residuary legatee of the estate of John E. McKinney, who died on November 13, 1922.
On May 23, 1924, respondent transferred such leases to Johneda Oil Company in exchange for all of its capital stock.
*812 The fair market value of the leases on November 13, 1922, adjusted by adding thereto the capital additions and deducting therefrom the depletion allowances during the period from November 13, 1922, to May 23, 1924, was:
Okesa ......................... $ 712.21
Preston ....................... 3,414.60
Shepherd ...................... 930.59
Osage Foster .................. 4,560.72
Collier ....................... 276.04
Buchanan ...................... 2,759.68
Elgin ......................... 11,714.28
Section 5, Osage Co. .......... 4,426.49
Sections 22 and 23, Osage Co. . 28,776.38
__________
Total ..................... $57,570.99
However, subsequently to the death of John E. McKinney and prior to the transfer of such leases, oil was discovered on the lease in Sections 22 and 23, Osage County. The fair market value of that lease on the date of the transfer was $247,500.00. The fair market value of the other leases on the date of the transfer was as above stated.
On May 23, 1924, the amount of oil reasonably expected to be recovered from the lease in Sections 22 and 23 was 300,344 barrels; and the production from such lease for the years 1924 to 1927 inclusive, was 83,232.77, 74,817.56, 30,828.22 and 15,472.51 barrels respectively.
At the time of the transfer of such leases to the corporation respondent paid to the corporation in cash $6,195.36. That amount plus the values of the leases, or an aggregate of $63,766.35, was the cost to respondent of the stock in the corporation.
In 1927, respondent received a distribution from the corporation of $165,519.20 of which amount $78,400.00 was included in her original income tax return for that year. The Commissioner determined that of the sum so distributed, $140,449.35 constituted dividends, and was taxable as such, and that the remainder, or $25,069.85, constituted a partial distribution of the capital of the corporation. In determining the amount of dividends, the Commissioner took as the basis for computing the depletion and depreciation reserve of the lease in Sections 22 and 23, the sum of $28,776.38. He gave no consideration to the fact that such lease on the date of its acquisition by the corporation had a fair market value of $247,500.00 and held that the aggregate value of $57,570.99 was the proper depletion and depreciation reserve for the purpose of computing earnings and profits distributed as dividends.
The Board held that in determining the depletion and depreciation reserve, the lease in Sections 22 and 23 should be valued at $247,500.00, and such reserve increased accordingly and computed the amount of dividends in such distribution to respondent, on that basis. It expunged the deficiency and found an overpayment of $14,766.83. See 32 B.T.A. 450.
The Commissioner has petitioned for review.
The question here presented is what part of the distribution should be considered as distribution of corporate earnings and profits and taxed to respondent as a dividend as defined in section 201 (a) of the Revenue Act of 1926 (44 Stat. 10), and what should be considered as a distribution of capital within the purview of section 201 (d) of the Revenue Act of 1926.
Under the provisions of section 203 of the Revenue Act of 1926 (44 Stat. 12) no gain or loss resulted to respondent when she exchanged the leases for all the stock in the corporation on May 23, 1924.[1] See, also, Darby-Lynde Co. v. Commissioner of Internal Revenue (C.C.A.10) 51 F.(2d) 32. By the enactment of section 203 (b) (4), Congress recognized that, notwithstanding in such transactions there is an exchange of property for stock, there is, in substance, no real gain or loss. It, therefore, excluded such a transaction from income taxation.
Under the Revenue Act of 1926 (44 Stat. 14) the basis for determining the gain or loss from the sale or other disposition of *813 property acquired after February 28, 1913, if the property was "acquired by bequest, devise, or inheritance" is "the fair market value of such property at the time of such acquisition."[2]
At common law, real property devised by will, passes to the devisees as of the date of the death of the testator. "The decree of distribution necessarily is later than, and has no definite relation to, the time when the real estate passes." Brewster v. Gage, 280 U.S. 327, 334, 50 S. Ct. 115, 117, 74 L. Ed. 457. The rule has not been changed by statute in Oklahoma, where the leases in question are located. In Oklahoma an oil and gas lease is an incorporeal hereditament or a profit à prendre. It is an interest in real property. Rich v. Doneghey, 71 Okl. 204, 177 P. 86, 89, 3 A.L.R. 352. It follows that respondent acquired the leases as of the date of the death of John E. McKinney.
Under the Revenue Act of 1926 (44 Stat. 14, 15) the basis for determining gain or loss from the sale or other disposition of property acquired after December 31, 1920, by a corporation in exchange for its stock in connection with a transaction described in section 203 (b) (4), Revenue Act of 1926, is the same as it would be in the hands of the transferor.[3]
Section 204 (c), of the Revenue Act of 1926 (44 Stat. 14, 16), provides that the basis upon which depletion and depreciation are to be allowed shall be the same as the basis for determining gain or loss from the sale or other disposition of the property.
It follows that the basis for determining gain or loss, in the event of a disposition of the leases by the corporation, would be the cost of such leases to the respondent, their fair market value at the date of their acquisition by her and not their fair market value at the date of their acquisition by the corporation. The cost to respondent is likewise the basis for determining depletion and depreciation allowances to the corporation. Furthermore, if the corporation disposed of such leases and liquidated and distributed its assets to respondent, she would realize as a profit, the difference between the amount received and the cost of such leases to her. Of course any part of such distribution that represented earnings of the corporation from operations would be excluded since they would be classified and taxed as dividends.
With these preliminary considerations disposed of, we turn now to the statute upon the construction of which, the solution of our problem primarily depends.
The applicable statute is section 201 of the Revenue Act of 1926 (44 Stat. 10).
Subdivision (a) thereof provides that the term dividends shall mean any distribution made by the corporation to its shareholders out of earnings and profits accumulated since February 28, 1913.
Subdivision (b) thereof provides that every distribution is made out of earnings and profits to the extent thereof and from those most recently accumulated. Subdivision (c) thereof relates to partial or complete liquidation.
Subdivision (d) provides as follows:
"(d) If any distribution (not in partial or complete liquidation) made by a corporation to its shareholders is not out of increase in value of property accrued before March 1, 1913, and is not out of earnings *814 or profits, then the amount of such distribution shall be applied against and reduce the basis of the stock provided in section 204, and if in excess of such basis, such excess shall be taxable in the same manner as a gain from the sale or exchange of property. The provisions of this paragraph shall also apply to distributions from depletion reserves based on the discovery value of mines."
The funds distributed by the corporation were realized in part from the sale of capital assets, oil from the leases. The difference between the amount received therefor, and the cost of the leases to the corporation, viz. their fair market value on the date the corporation acquired them less allowances for depletion and depreciation, was in fact a capital gain. To respondent it was a delayed capital gain because no gain was realized when she transferred the leases to the corporation. Only the remainder of the distribution was realized from true corporate earnings.
We are of the opinion Congress employed the phrase "earnings or profits" in section 201 (a), supra, in its ordinary sense; that it did not intend the phrase to embrace distributions made out of a depletion and depreciation reserves based on cost to the corporation, but intended that distributions from such reserves, which represent delayed capital gains to a shareholder, should be taxed under the provisions of section 201 (d). This construction produces a reasonable and just result when applied in the instant case. The exchange of the leases for stock in the corporation resulted in no gain or loss to respondent. Under section 201 (d), supra, the distribution to respondent here involved, to the extent it is not out of earnings or profits of the corporation, must be applied against and to reduce the cost basis of the stock to respondent; and part of such distribution not out of earnings or profits, to the extent it exceeds such basis, is taxable to respondent as a gain from the sale or exchange of property. If respondent should sell any part of the stock so acquired she would realize a taxable capital gain in the amount of the difference between the cost of such stock to her less any deductions on account of distributions not out of earnings or profits provided for in section 201 (d) of the Revenue Act of 1926, and the price received; and if the corporation should be dissolved and its assets distributed, respondent would realize a taxable gain on the stock retained by her in the amount of the difference between the cost of the stock to her and the amount distributed to her, less any part of the distribution realized from corporate earnings. Hence respondent will pay a tax on her delayed capital gain if and when she realizes it and the corporation in the meantime will pay income tax on the profits from the oil produced with depletion and depreciation allowances limited to the cost of the leases to respondent.
Furthermore, such construction conforms to Article 1546 of Treasury Regulation 69, the applicable regulation which reads in part as follows:
"Art. 1546. Distributions from depletion or depreciation reserves. A reserve set up out of gross income by a corporation and maintained for the purpose of making good any loss of capital assets on account of depletion or depreciation is not a part of surplus out of which ordinary dividends may be paid. A distribution made from a depletion or a depreciation reserve based upon the cost of the property will not be considered as having been paid out of earnings or profits, but the amount thereof shall be applied against and reduce the cost or other basis of the stock upon which declared for the purpose of determining the gain or loss from the subsequent sale of the stock. If such a distribution is in excess of the basis, the excess shall be taxed as a gain from the sale or other disposition of property. * * *"
The regulation first provides that a reserve created from gross income of a corporation and maintained for the purpose of making good any loss of capital assets on account of depletion or depreciation is not surplus out of which ordinary dividends may be paid. It then provides that a distribution which is made from a depletion or depreciation reserve based upon the cost of the property will not be considered as having been paid out of earnings or profits, but the amount thereof shall be applied against and reduce the cost or other basis of the stock for the purpose of determining the gain or loss from the subsequent sale of such stock. The word cost appears twice in a single sentence in the regulation. The first time it is used in connection with the corporation and the second in connection with the shareholder. In the former it is provided that a distribution made from a depletion or depreciation reserve based upon the cost of the property shall not constitute payment from earnings and profits. The corporation sets up the *815 reserve and makes the distribution. The position of the word in the context indicates that it has reference to the cost to the corporation, not its transferor. The second time the word appears is in connection with the shares in the hands of the distributee. It is provided that such a distribution shall be applied against and reduce the cost or other basis of the stock. The absence of the words "or other basis" following the word cost when used in connection with the corporation and their presence when used in connection with the shareholder, all appearing in the single sentence cannot be regarded as a casual difference with no intended significance. It indicates a deliberate purpose to construe the statute to mean that in the circumstances presented here, earnings or profits which are distributable as dividends shall be computed on the basis of cost of the property to the corporation.
That portion of the regulation here material has been continued in force without substantial change since 1926. Congress re-enacted section 201 (a) and (d), supra, in the Revenue Act of 1932, without material change other than the omission of the last sentence in section 201 (d). 47 Stat. 203, § 115(a, d), 26 U.S.C.A. § 115 and note. This is persuasive evidence that Congress approved the regulation and the administrative construction manifested therein. Brewster v. Gage, 280 U.S. 327, 337, 50 S. Ct. 115, 74 L. Ed. 457; Ramsey v. Commissioner (C.C.A.10) 66 F.(2d) 316, 318; Morrissey v. Commissioner, 296 U.S. 344, 355, 56 S. Ct. 289, 80 L. Ed. 263; Hartley v. Commissioner, 295 U.S. 216, 220, 55 S. Ct. 756, 79 L. Ed. 1399.
The case of Commissioner v. Sansome (C.C.A.2) 60 F.(2d) 931, is not to the contrary. There the taxpayer bought certain stock in a corporation on January 1, 1921. On April 1, 1921, the corporation sold all of its assets to a new corporation. The new corporation assumed all liabilities of the old and issued its shares to the shareholders of the old in the same proportion, although the number of shares was increased five times and they were without par value. The old corporation had earned a large surplus and undivided profits prior to January 1, 1921. They were carried as such in a stated amount on the books of the old corporation up to April 1, 1921. The new corporation carried them as such and in the same amount as the old corporation during 1921, but reduced them in 1922 because of losses sustained in that year. The new corporation was dissolved in 1923 without having made any profit. The taxpayer received payments during that year as liquidating dividends. The court held that the transaction between the two corporations was one of reorganization in which the shareholders were not subject to tax as gain or loss; that there was such corporate identity that the earnings of the old corporation continued to be such in the hands of the new and that when they were distributed by it they were taxable as dividends in the hands of the shareholders. Here no reorganization was involved. A new corporation was formed. It took the property and operated it. The payment made to the taxpayer was in part from a depletion and depreciation reserve within the purview of section 201 (d) and the regulation, supra, and in part from earnings of the corporation.
The Commissioner urges that such construction results in property in the hands of a corporation having two different bases one for the determination of gain or loss and depletion and depreciation in computing income tax of the corporation and another for determining depletion and depreciation reserve for the purpose of arriving at the character of distributions made to shareholders. That must of necessity be true since under the provisions of section 203 (b) (4) and section 201 (d), supra, the distribution results in a delayed capital gain to the shareholder.
The construction adopted by the Board is fair and equitable. It gives to the words earnings and profits their ordinary meaning. It results in true capital gain being taxed as such and true earnings being taxed as dividends. On the other hand the construction adopted by the Commissioner is not practicable. Suppose for example, prior to the distribution, the respondent had sold a portion of her stock for its actual value. Surely a distribution to respondent's purchaser, of the depletion and depreciation reserve, computed on the value of the leases at the date of their acquisition by the corporation, could not be regarded as a distribution of earnings. The purchaser would simply be getting back a portion of his capital investment. Either an injustice would have to be done the purchaser or the distribution treated as a dividend from earnings as to one stockholder and a distribution of capital as to another. This demonstrates that distributions by a corporation for the purposes of taxation should be characterized by their *816 source, not by the status of the stockholder to whom they are paid.
The cost of the leases to the corporation was the value of the stock less the cash paid in by respondent. The value of the stock is measured by the value of the leases received in exchange for the stock at the time of the transfer, or $276,304.61 plus the cash paid in by respondent. A distribution made from a reserve based on that cost is not a dividend from profits or earnings of the corporation. It is a distribution from a depletion and depreciation reserve based upon cost to the corporation and should be applied against and reduce the basis of the stock for the purpose of determining gain or loss to the stockholder. That, we think, is the plain intent of the statute and the regulation.
Affirmed.
NOTES
[1] Section 203 of the Revenue Act of 1926, in part reads:
"Sec. 203. (a) Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 202, shall be recognized, except as hereinafter provided in this section.
"(b) * * *
"(4) No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation, and immediately after the exchange such person or persons are in control of the corporation; but in the case of an exchange by two or more persons this paragraph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange."
[2] Section 204 (a) of the Revenue Act of 1926, in part reads:
"Sec. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that * * *
"(5) If the property was acquired by bequest, devise, or inheritance, the basis shall be the fair market value of such property at the time of such acquisition. The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision (c) or (e) of section 402 of the Revenue Act of 1921, or in subdivision (c) or (f) of section 302 of the Revenue Act of 1924, or in subdivision (c) or (f) of section 302 of this Act."
[3] Sec. 204 (a) (8) of the Revenue Act of 1926 reads:
"(8) If the property (other than stock or securities in a corporation a party to a reorganization) was acquired after December 31, 1920, by a corporation by the issuance of its stock or securities in connection with a transaction described in paragraph (4) of subdivision (b) of section 203 (including also, cases where part of the consideration for the transfer of such property to the corporation was property or money in addition to such stock or securities), then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law applicable to the year in which the transfer was made." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545759/ | 988 A.2d 509 (2010)
SKOLNICK
v.
U.S.
No. 08-CM-592.
District of Columbia Court of Appeals.
January 14, 2010.
Decision Without Published Opinion Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545763/ | 87 F.2d 663 (1937)
HELVERING
v.
GORDON.
No. 10697.
Circuit Court of Appeals, Eighth Circuit.
January 29, 1937.
*664 Joseph M. Jones, Sp. Asst. to Atty. Gen. (Robert H. Jackson, Asst. Atty. Gen., and J. Louis Monarch, Sp. Asst. to Atty. Gen., on the brief), for petitioner.
Edgar M. Morsman, Jr., of Omaha, Neb., for respondent.
Before GARDNER, SANBORN, and THOMAS, Circuit Judges.
THOMAS, Circuit Judge.
This case comes here on the petition of the Commissioner of Internal Revenue to review a decision of the United States Board of Tax Appeals, which redetermined an alleged deficiency in respondent's income tax for 1930.
The Commissioner determined a deficiency for that year in respondent's income tax in the amount of $2,096.38 for failure to include in his gross income alleged unreported dividend distributions of the Gordon Can Company, a corporation owned by respondent and his wife, Almyra B. Gordon.
The capital stock of the Gordon Can Company, a corporation engaged in manufacturing tin cans, consisted of 990 shares of which the respondent owned 790 shares and his wife 200 shares. Due to the fact that respondent was a close personal friend of C. S. Davis, of the firm of C. S. Davis & Co., from whom the Gordon Can Company purchased tin plate, the business of the company was very profitable. Because of this friendship, Gordon, as president of the Gordon Can Company, was able to purchase from C. S. Davis & Co. tin plate at a price considerably below the prevailing market price.
The Gordon Can Company is located in Omaha, Neb., where it had three large customers. It was believed that if they knew the amount of the corporation's profits they would insist upon a reduction in the prices paid by them for the tin cans manufactured by the company. By reason of a provision in the Revenue Act of 1924 (43 Stat. 293, § 257) making income tax returns open to the public it was possible for these three customers to ascertain the profits earned by the Gordon Can Company.
For the purpose, among other things, of concealing from such customers the large profits of the Gordon Can Company, the respondent and his wife in 1924 organized the Wallace Realty Company, a corporation with a capital stock of 100 shares, 50 of which were owned by respondent and 50 by his wife from the date of incorporation until July 1, 1925, on which date respondent transferred 45 shares to his wife. From then until November 5, 1927, respondent held 5 shares and his wife 95. On that date respondent's wife transferred 50 shares of the stock to the First Trust & Savings Company of Chicago, Ill., in trust for the benefit of herself, her husband, and others, her husband, the respondent, being named a cotrustee.
After the organization of the Wallace Realty Company, in accordance with an arrangement between Gordon and Davis, the difference between the price (approximately the market price) at which the tin plate was billed by C. S. Davis & Co. to the Gordon Can Company and the lower price for which it was actually purchased was rebated to the Wallace Realty Company. Before the organization of the Wallace Realty Company, the tin plate had been purchased directly for the lower price without any rebate, and the profits realized by the Gordon Company were disclosed in its income tax returns.
*665 On February 27, 1926, the day following the enactment of the Revenue Act of 1926 (44 Stat. 9), which repealed the provision of the 1924 Act making income tax returns open to the public the Gordon Can Company wrote to C. S. Davis & Co.:
"We wish to advise you that from now on we will appreciate very much if you will bill tinplate to the Gordon Can Company in the regular way as you used to do. We appreciate the trouble that you were put to in order to figure our commissions but the emergency which caused us to do this has now been repealed, so from now on you may bill the tinplate to us the regular way. We want you to know that we appreciated your cooperation with us."
These instructions were countermanded on November 15, 1926, when C. S. Davis & Co. was advised by the Gordon Can Company to bill the tin plate "on the same basis that you billed them a year ago, sending the commission check to the Wallace Realty Company."
The earnings, dividends paid, federal income taxes paid, organization expenses written off, and the surplus at the end of each taxable year from 1924 to 1929, inclusive, of the Wallace Realty Company were as follows:
-----------------------------------------------------------------------------------------
| | | | |
| Gross Earnings | | | |
| | | | |
|---------------------------| | | |
Year | Commissions | | | | |
| Received | | | | |
| From | | | | Federal | Surplus
| C. S. Davis | | Net | Dividends | Income | End
| & Company | Other | Income | Paid | Tax Paid | of Year
------|-------------|-------------|-------------|-------------|-------------|------------
1924 | $ 43,558.48 | ........ | $ 43,480.23 | ......... | ........ | $ 43,480.23
1925 | 49,422.51 | $ 5,123.39 | 54,268.34 | $ 10,000.00 | $ 5,435.03 | 82,313.54
1926 | 13,488.28 | 3,641.45 | 16,988.99 | 20,000.00 | 8,665.36 | 70,637.17
1927 | 19,006.85 | 5,329.77 | 24,149.00 | 40,000.00 | 2,921.47 | 51,864.70
1928 | 37,369.87 | 1,206.22 | 38,402.42 | 40,000.00 | 4,878.29 | 45,071.88
| | | | | (1) 316.95 |
1929 | ......... | (2)2,703.87 | 2,612.85 | 10,000.00 | ........ | 37,684.73
|-------------|-------------|-------------|-------------|-------------|------------
| 162,845.99 | 18,004.70 | 179,901.83 | 120,000.00 | 22,217.10 | $331,052.25
| | | | | |
----------------------------------------------------------------------------------
(1) Organization expense written off.
(2) Includes income tax refund of $2,565.93.
The aggregate expenses of the Wallace Realty Company for the same period were $948.86. The company had no earnings for 1930.
On December 12, 1930, the Wallace Realty Company distributed $20,000 as a dividend to its stockholders of record at that time, of which sum Gordon, the respondent, as owner of 5 shares of the capital stock, received $1,000, for which he accounted in his income tax return for that year. On the ground that the $1,000 is all of the total sum distributed received by respondent, the Board of Tax Appeals held that his return was correct. It is the contention of the Commissioner that he constructively received 790/990 of the $20,000 distributed; that is, that he should account for the $20,000 in his income tax return for 1930 on the basis of his stock holdings in the Gordon Can Company. This claim is based upon the ground that the $20,000 were the earnings of and owned by the Gordon Can Company; that the Wallace Realty Company was a mere agent of the Gordon Can Company to receive its profits and to disburse them as directed by the principal; that both corporations were owned, dominated, and directed by the respondent; and that the manipulation of the two corporations was *666 a device not only for concealing from the customers of the Gordon Can Company its very large profits, but that it was used at least, also, for evading federal income taxes by the respondent.
The question here for determination is, therefore, whether under the foregoing facts and circumstances the $20,000 distributed to its stockholders by the Wallace Realty Company in 1930 should under the law be taxed as income to the respondent on the basis of his stock holdings in the Gordon Can Company.
Section 22 of the Revenue Act of 1928, c. 852, 45 Stat. 791, 797 (26 U.S.C.A. § 22 and note), in effect at the time in question, defines "gross income" as including "gains, profits, and income derived from salaries, wages, or compensation for personal service, of whatever kind and in whatever form paid."
Section 115 of the same act (26 U.S.C. A. § 115 and note) provides that, "The term `dividend' when used in this title [chapter] * * * means any distribution made by a corporation to its shareholders, whether in money or in other property, out of its earnings or profits accumulated after February 28, 1913." (Italics supplied.)
The principle that substance and not form should control in the application of tax laws, United States v. Phellis, 257 U.S. 156, 42 S. Ct. 63, 66 L. Ed. 180; MacQueen Co. v. Commissioner (C.C.A.3) 67 F.(2d) 857, 858; Lonsdale v. Commissioner (C.C.A.8) 32 F.(2d) 537, 539, is pertinent in this case. Tax laws deal with realities and look at the entire transaction, Shoenberg v. Commissioner (C.C.A.8) 77 F.(2d) 446, 449; Helvering v. Security Savings & Commercial Bank (C.C.A.4) 72 F.(2d) 874; Ahles Realty Corporation v. Commissioner (C.C.A.2) 71 F.(2d) 150.
Looking through form to substance, therefore, as we must, apparently no motive for transferring the funds of the can company to the realty company existed after the repeal of the provision in the Revenue Act of 1924 making income tax returns open to the public, unless it was to evade taxation. The only motive suggested as existing prior to that date was to conceal the large profits of the can company from its customers. As we view the case, however, motive is immaterial. The decision must turn upon the effect of what was done. Simplicity characterized both the thing done and the result accomplished. The entire arrangement was made possible by the facts that Gordon, the respondent, and his wife owned all the stock, and thereby dominated and controlled both the can company and the realty company, and that they were on friendly terms with Davis of the Davis Company from which the can company purchased its raw material. With the co-operation of Davis, every time a payment was made to the Davis Company for tin plate there was added to the actual cost a further sum out of the earnings of the can company. Under Gordon's directions, Davis turned the added amount over to the realty company.
The arrangement so devised and executed was a mere device for siphoning the earnings of the can company out of its treasury and into the realty company, which served merely as a container to hold such earnings until Gordon and his wife should determine to distribute them. By this simple means more than $162,000 of money belonging to the can company was transferred to and held by the realty company for distribution. Transferring these funds through Davis and entering the payments in the books of the can company as cost of tin plate does not alter the situation. The result would be the same had the same amounts of money been deposited directly by the can company with the realty company. The whole plan for the disposition of the earnings belonging to the can company which were diverted to the realty company may very properly be characterized as one of those "anticipatory arrangements" referred to by Mr. Justice Holmes in Lucas v. Earl, 281 U.S. 111, 114, 50 S. Ct. 241, 74 L. Ed. 731, whereby "the fruits are attributed to a different tree from that on which they grew."
It is claimed, however, (1) that even had these earnings remained in the treasury of the Gordon Can Company that company might not have declared a dividend and paid it out in 1930 to its stockholders, and (2) that the earnings now claimed to be income to Gordon as dividends of the can company were never paid to him and that he cannot recover them from the present holders.
The first proposition is untenable because the money was actually disbursed in 1930. The formal declaration of a dividend *667 by a corporation is not essential under the tax laws. "Any distribution made by a corporation to its shareholders * * * out of its earnings or profits accumulated after February 28, 1913," is a dividend. Section 115, Revenue Act of 1928 (26 U.S.C.A. § 115 and note); Chattanooga Sav. Bank v. Brewer (C.C.A.6) 17 F.(2d) 79; Spencer v. Lowe (C.C.A.8) 198 F. 961.
The second proposition, that Gordon never received the money, because it was not paid to him by the realty company, is equally untenable. It is not essential under the income tax laws that a taxpayer actually receive money to which he is entitled before he is required to include it in his income tax returns. Whenever it is available to him and he is authorized to receive it or to direct its payment to some other party, it must be accounted for by him for income tax purposes. Webb v. Commissioner (C.C.A.2) 67 F.(2d) 859; Newman v. Commissioner (C.C.A.10) 41 F.(2d) 743; Dickey v. Burnet (C.C.A.8) 56 F.(2d) 917, 920; Corliss v. Bowers, 281 U.S. 376, 378, 50 S. Ct. 336, 337, 74 L. Ed. 916; Lucas v. Earl, 281 U.S. 111, 114, 50 S. Ct. 241, 74 L. Ed. 731. If having power and control over it during the taxing period he voluntarily places it beyond his reach, he cannot be heard to say that he did not receive it within the period. Mr. Justice Holmes, speaking for the Supreme Court in the Corliss Case, supra, said, "The income that is subject to a man's unfettered command and that he is free to enjoy at his own option may be taxed to him as his income, whether he sees fit to enjoy it or not." As said by Judge Phillips in the Newman Case, supra, "Taxation is an intensely practical matter." And it was said by Mr. Justice Stone in the case of Burnet v. Sanford & Brooks Co., 282 U.S. 359, 365, 51 S. Ct. 150, 152, 75 L. Ed. 383, that, "It is the essence of any system of taxation that it should produce revenue ascertainable, and payable to the government, at regular intervals. Only by such a system is it practicable to produce a regular flow of income and apply methods of accounting, assessment, and collection capable of practical operation." The government cannot be controlled by the manipulations of the taxpayer's accounts, nor by the shifting of funds from one personally dominated corporation to another, in the enforcement of the tax laws. It is the Commissioner's duty to look through forms to substance and to assess the earnings of corporations to their shareholders in the year such earnings are distributed.
It is further urged by counsel for respondent that the Wallace Realty Company had income other than the rebates or commissions received from the Davis Company; that during the years 1924 to 1929 the rebates totaled $162,845.99; that during the same years taxes paid amounted to $22,217.10 and dividends to $120,000, while income from other sources amounted to $18,004.70; and that surplus on December 21, 1929, was $37,684.73. From this it is argued that the $20,000 dividend paid by that company in 1930 may have included the $18,004.70 of the company's own money derived from sources other than the rebates belonging to the Gordon Can Company.
The argument, so advanced, does not bear analysis. It must be presumed at least that during the years preceding 1930 the Wallace Realty Company in paying out dividends amounting to $120,000 used its own earnings so far as possible and not the money of the Gordon Can Company. Article 622 of Treasury Regulations 74 provided:
"Source of distribution. For the purpose of income taxation every distribution made by a corporation is made out of earnings or profits to the extent thereof and from the most recently accumulated earnings or profits."
Following this rule, the Wallace Realty Company paid all its income from sources other than rebates out before 1930 and had none of the $18,004.70 on hand in 1930. It was stipulated that the Wallace Realty Company had no income in 1930. In 1925 its income from other sources was $5,123.39, which, under the rule, was necessarily included in the $10,000 dividend paid that year. In 1926 the other income was $3,641.45 and it paid a dividend of $20,000. In 1927 the other income was $5,329.77 and the dividend paid $40,000. Likewise in 1928 other income was $1,206.22 and the dividend $40,000. Assuming that dividends paid in any given year were earnings of the preceding year, the realty company had none of its own earnings on hand for the 1930 dividend.
Upon this record it cannot be said that the finding of the Commissioner, that the 1930 dividend was paid from income properly *668 attributable to the Gordon Can Company, was not sustained by the evidence. His finding must, therefore, be accepted.
The Board of Tax Appeals based its order on the finding that Gordon "is taxable only on the amounts received by him," and that since the Wallace Realty Company did not pay him on the basis of his stock holdings in the Gordon Can Company he "never received such amounts either actually or constructively." In this, we think the Board erred and the order appealed from is accordingly reversed.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545770/ | 988 A.2d 594 (2010)
412 N.J. Super. 1
KENT MOTOR CARS, INC., d/b/a Honda of Princeton, Sports and Specialist Cars, Inc. and Robert Burt, Plaintiffs-Appellants,
v.
REYNOLDS AND REYNOLDS CO., and Universal Underwriters Group, Defendants-Respondents, and
New Jersey Coalition of Automotive Retailers, Inc., and Automatic Data Processing, Inc., Defendants.
Docket No. A-5246-07T3
Superior Court of New Jersey, Appellate Division.
Argued October 6, 2009.
Decided February 9, 2010.
*596 Jeffrey M. Pollock, argued the cause for appellants (Fox Rothschild, attorneys; Mr. Pollock, of counsel and on the briefs; Joel M. Ferdinand, Lawrenceville, on the briefs).
Keena M. Hausmann, Newark, argued the cause for respondent Reynolds and Reynolds Co. (Latham & Watkins, attorneys; Mark Mester of the Illinois bar, admitted pro hac vice, of counsel; Ms. Hausmann, on the brief).
John S. Fetten, Bridgewater, argued the cause for respondent Universal Underwriters Group (Montgomery, Chapin & Fetten, attorneys; Mr. Fetten, on the brief).
Before Judges SKILLMAN, GILROY and SIMONELLI.
The opinion of the court was delivered by
SKILLMAN, P.J.A.D.
In 1998, the Supreme Court adopted a series of rule amendments that eliminated the former party joinder requirements of the entire controversy doctrine and instead imposed a new requirement that a party provide notice in its first pleading of the names of other potentially liable parties. See R. 4:5-1(b)(2); R. 4:29-1(b); R. 4:30A. If a party fails to comply with this notice requirement, one of the amended rules authorizes a court to impose an appropriate sanction, including dismissal of a subsequent action against a party whose existence was not disclosed. The primary issue presented by this appeal is whether the trial court properly invoked the sanction of dismissal under the circumstances of this case. This appeal also involves an insurance coverage issue, which is discussed in section III of the opinion.
I.
Plaintiffs Kent Motor Cars d/b/a Honda of Princeton (Honda of Princeton) and Sports and Specialist Cars (Sports) (hereinafter sometimes referred to collectively as the Burt companies) are automobile dealers. Plaintiff Robert Burt is the principal in both automobile dealerships. Defendant Reynolds and Reynolds sells business forms. In 2002, the Burt companies used forms printed by Reynolds in connection with their sale of cars.
On June 6, 2002, Henry Wilson signed a purchase order form printed by Reynolds for the purchase of a 2002 car from Honda of Princeton. This form provided for imposition of charges for registration and title and a "documentary fee" consisting of an "M.V. Messenger Service" charge, a "Clerical Fee," and an "Admin. Fee." Typed within a box at the bottom of the form were eight lines of small print, which included the following statement:
*597 YOU HAVE THE RIGHT TO A WRITTEN ITEMIZED PRICE FOR EACH SPECIFIC DOCUMENTARY AND PRE-DELIVERY SERVICE WHICH IS TO BE PERFORMED. THE AUTOMOTIVE DEALER MAY NOT CHARGE FOR PRE-DELIVERY SERVICES FOR WHICH THE AUTOMOTIVE DEALER IS REIMBURSED BY THE MANUFACTURER. ...
On July 25, 2003, Wilson filed a putative class action against Burt individually and the Burt companies. Wilson's complaint claimed that the Burt companies had violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, and the Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14 to -18, by overcharging for title and registration fees and charging "documentary fees" for services that were not performed. The Wilson complaint also claimed that the previously quoted statement at the bottom of the purchase order violated a subsection of the Automotive Sales Practice regulations adopted by the Division of Consumer Affairs, which prescribes a minimum ten-point font size for such provisions. N.J.A.C. 13:45A-26B.2(a)(2).
Although the purchase order form signed by Wilson indicated that it had been printed by Reynolds, Wilson did not join Reynolds as a defendant in the putative class action. The answer filed on behalf of the Burt companies also did not include a third-party complaint against Reynolds, and the Burt companies' accompanying case information statement indicated that they did not anticipate joining any additional parties.
In late 2003, after the Wilson action was filed, the sales manager at Honda of Princeton communicated with the New Jersey Coalition of Automotive Retailers (NJCAR), of which the Burt companies are members, regarding the Reynolds forms. In response, NJCAR informed the sales manager that the forms the Burt companies had been using contained language that was not in ten-point font, as required by the Automotive Sales Practice regulation. Based on this advice, the Burt companies began using a different purchase order form prepared by NJCAR that satisfies the ten-point font requirement.
The trial court certified the Wilson action as a class action, and in June 2005, the court granted plaintiffs' motion for a partial summary judgment on liability, which ruled that the Burt companies had overcharged members of the Wilson class for registration and title fees, in violation of the Consumer Fraud Act, and failed to provide required disclosures on purchase order forms in the ten-point font size required by N.J.A.C. 13:45A-26B.2(a)(2).
Shortly thereafter, the Burt companies substituted new counsel, who submitted a settlement proposal to counsel for the Wilson class on August 25, 2005. The issue of Reynolds's joinder in the action was raised for the first time in this settlement proposal, which stated in pertinent part:
Reynolds & Reynolds probably should have been imple[a]ded into this action and we intend upon doing so shortly. Our commitment to settling this matter in part hinges upon your commitment that plaintiffs will consent to our imple[a]ding Reynolds & Reynolds (although frankly, I'd rather litigate against them in an independent action but may be required to bring them in as a third-part[y] defendant as a result of whatever is left of the entire controversy doctrine.)
Counsel for the Wilson class responded to the Burt defendants' settlement proposal by a letter dated August 29, 2005, which included the following comments regarding *598 the possibility of the late joinder of Reynolds:
Frankly, consideration of the possibility of bringing Reynolds & Reynolds into this litigation should have been made a very long time ago. If you want to bring them into this litigation at this late stage of the game, that is your choice, but keep in mind that it drastically changes our position regarding settlement.... If by imple[a]ding Reynolds & Reynolds you would be seeking a cash contribution from them due to their error or omission regarding the Notice type size on the buyers['] orders your client purchased from them, we would seek that additional cash to be paid directly to class members. ...
In early September, the Wilson class and the Burt companies negotiated a settlement of the Wilson action without joinder of Reynolds.
While the documents to formalize the settlement of Wilson were being circulated, on September 16, 2005, the Burt companies filed this action against Reynolds asserting that Reynolds had sold them pre-printed order forms that did not comply with applicable consumer protection statutes and regulations and that, as a result, the Burt companies had incurred damages and defense costs in the Wilson class action, for which it sought indemnification or contribution.[1] This complaint included a Rule 4:5-1(b)(2) certification, which indicated that the "matter in controversy" was related to the then pending Wilson action.
By an amended complaint, the Burt companies joined Universal Underwriters Group, which provided insurance to the Burt companies, as a defendant to the action. In separate counts, the Burt companies claimed that Universal had breached its obligations under those policies for indemnification of the costs of defense of the Wilson class action and the amount paid in settlement of that action. Because the facts relevant to the Burt companies' claims against Universal are completely distinct from the facts relevant to their claims against Reynolds, we defer discussion of those facts to section III of this opinion.
On November 8, 2005, approximately two months after this action was filed, the Wilson plaintiffs and Burt companies completed execution of the documents required to formalize their settlement. On March 8, 2006, the trial court in the Wilson class action preliminarily approved the proposed settlement, and on June 12, 2006, the court entered final judgment.
The Burt companies' claims against Reynolds were brought before the trial court on a motion by Reynolds for summary judgment dismissing the complaint based on the Burt companies' failure in the Wilson action to comply with the notice requirements of Rule 4:5-1(b)(2) and a cross-motion by the Burt companies for partial summary judgment. The court granted Reynolds's motion to dismiss the parts of plaintiffs' complaint directed at Reynolds. In concluding that Reynolds had been "substantially prejudiced" by the Burt companies' failure to comply with the notice requirements of Rule 4:5-1(b)(2), which is a prerequisite for dismissal of a successive action based on such a failure, the trial court stated in part:
[B]y failing to comply with R. 4:5-1, the Dealerships effectively deprived Reynolds of a fair opportunity to be heard in motion practice in Wilson that resulted *599 in dispositive court decisions bearing directly on Reynolds' rights and obligations. In his bench decision of June 10, 2005, [the trial judge in the Wilson action] found that the notices in the Reynolds forms were printed in 7.5 as opposed to 10 point font, and were therefore legally deficient under N.J.A.C. 13:45A-26B.2(a)(2)(iii). ... As Reynolds was not a party to the Wilson matter, it did not have a reasonable opportunity to be heard on the latter issue. Reynolds must now contend with the precedential effect of [the trial judge's] decision [in that action]. ... It is impossible to know what effect participation by Reynolds might have had on those findings, or how a different disposition of the summary judgment motion in the Wilson matter might have altered the outcome of settlement negotiations.... As a consequence this court is satisfied that Reynolds has suffered substantial prejudice as a result of the Dealerships' noncompliance with R. 4:5-1 and that the aims of judicial finality and consistency will be undermined if the indemnification action is allowed to proceed.
II.
In Cogdell v. Hospital Center at Orange, 116 N.J. 7, 13-28, 560 A.2d 1169 (1989), the Supreme Court expanded the entire controversy doctrine, which formerly had required only the compulsory joinder of transactionally-related claims, to also require the compulsory joinder of all parties who have a material interest in a controversy. Following Cogdell, the Court struggled with determining the circumstances under which the party joinder requirement should apply, see, e.g., Harley Davidson Motor Co. v. Advance Die Casting, Inc., 150 N.J. 489, 496-503, 696 A.2d 666 (1997); Olds v. Donnelly, 150 N.J. 424, 435-43, 696 A.2d 633 (1997); Joel v. Morrocco, 147 N.J. 546, 553-56, 688 A.2d 1036 (1997); Mortgagelinq Corp. v. Commonwealth Land Title Ins. Co., 142 N.J. 336, 342-48, 662 A.2d 536 (1995); Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 289-303, 662 A.2d 509 (1995), and prominent legal scholars and leading civil litigators severely criticized this expansion of the entire controversy doctrine. See Symposium, Entire Controversy Doctrine, 28 Rutgers L.J. 1 (1996).
In Olds, supra, 150 N.J. at 444-49, 696 A.2d 633, the Court took note of these criticisms and directed the Civil Practice Committee to make recommendations regarding the continuation of the party joinder requirement of the entire controversy doctrine. The Committee responded by submission of a report that recommended elimination of the party joinder requirement and its replacement by an amendment to Rule 4:5-1(b)(2), which would expand a litigant's obligation to disclose the names of other potentially liable persons to the trial court and other parties to the action. 1998 Report of the Supreme Court Committee on Civil Practice 122-35 (hereafter Committee Report).
Most pertinent to this appeal, the Committee Report concluded that a trial court should be authorized to dismiss a subsequent action brought against a party whose name was not disclosed to the court and other parties as a remedy of last resort in extraordinary circumstances:
[T]he Committee concluded that to assure compliance with the notice obligations imposed by Rule 4:5-1(b)(2), trial courts should be authorized to impose sanctions for violations. However, consistent with the Court's view in Olds that "preclusion is a remedy of last resort," 150 N.J. at 446, 696 A.2d 633, the Subcommittee concluded that an action should be dismissed because of a party's *600 violation of Rule 4:5-1(b)(2) only if the violation was "egregious" and "the right of the unnamed party to defend the successive action has been substantially prejudiced by not having been joined in the prior action." Except in those extraordinary circumstances, a court should impose only a lesser sanction, such as "the imposition upon the defaulting party of litigation expenses which could have been avoided by compliance with this rule."
[Committee Report at 127-28.]
Except for a word change that is not relevant to this appeal,[2] the Court adopted the Committee's recommended rule amendment that requires notice of the names of other potentially liable parties to be given to the trial court and the other parties to the action and authorizes sanctions for any violation of this notice requirement.
Rule 4:5-1(b)(2), as amended in 1998, provides:
(b) Requirements for First Pleadings.
. . . .
(2) Notice of Other Actions and Potentially Liable Persons. Each party shall include with the first pleading a certification as to whether the matter in controversy is the subject of any other action pending in any court or of a pending arbitration proceeding, or whether any other action or arbitration proceeding is contemplated; and, if so, the certification shall identify such actions and all parties thereto. Further, each party shall disclose in the certification the names of any non-party who should be joined in the action pursuant to R. 4:28 or who is subject to joinder pursuant to R. 4:29-1(b) because of potential liability to any party on the basis of the same transactional facts. Each party shall have a continuing obligation during the course of the litigation to file and serve on all other parties and with the court an amended certification if there is a change in the facts stated in the original certification. The court may require notice of the action to be given to any non-party whose name is disclosed in accordance with this rule or may compel joinder pursuant to R. 4:29-1(b). If a party fails to comply with its obligations under this rule, the court may impose an appropriate sanction including dismissal of a successive action against a party whose existence was not disclosed or the imposition on the non-complying party of litigation expenses that could have been avoided by compliance with this rule. A successive action shall not, however, be dismissed for failure of compliance with this rule unless the failure of compliance was inexcusable *601 and the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action.
[Emphasis added.]
Thus, under the final sentence of Rule 4:5-1(b)(2), a court may not dismiss a subsequent action based on a party's failure to comply in a prior action with the notice requirements of the rule unless it finds that: (1) the action is a "successive action"; (2) the failure to provide notice of other potentially liable parties was "inexcusable"; and (3) the undisclosed party's right to defend the successive action has been "substantially prejudiced" by that failure.
The Burt companies argue that this is not a "successive action" because it was filed approximately nine months before final approval of the settlement in Wilson, during which time Reynolds had notice of Wilson and could have sought to intervene. In support of this argument, the Burt companies rely upon our holding in Kaselaan & D'Angelo Associates v. Soffian, 290 N.J.Super. 293, 675 A.2d 705 (App.Div. 1996), that "the entire controversy doctrine only precludes successive suits involving related claims. It does not require dismissal [of a second filed action] when multiple actions involving the same or related claims are pending simultaneously." Id. at 299, 675 A.2d 705 (citation omitted); accord Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883, 887-89 (3d Cir. 1997). However, we question whether a party who has failed to provide the notice of other potentially liable parties required by Rule 4:5-1(b)(2) should be totally absolved of any of the sanctions authorized by that rule simply because that party files an independent action against the undisclosed party before entry of final judgment in the first filed action. In any event, it is unnecessary for us to determine the meaning of "successive action" as used in Rule 4:5-1(b)(2) because we conclude that Reynolds has not shown that it was "substantially prejudiced" by the Burt companies' failure to give the required notice of other potentially liable parties.
Before discussing our reasons for reaching this conclusion, we note our agreement with Reynolds's argument that the Burt companies' failure to comply with the notice requirement of Rule 4:5-1(b)(2) was "inexcusable." The Burt companies knew or should have known by, at the latest, December 2003, when NJCAR informed the sales manager for Honda of Princeton that the Reynolds form did not comply with the ten-point font requirement of N.J.A.C. 13:45A-26B.2(a)(2), that they had potential indemnification or contribution claims against Reynolds. Therefore, they could and should have given the required Rule 4:5-1(b)(2) notice to the Wilson plaintiffs and the court at that time.
We turn now to the requirement that a party whose name was not disclosed in a prior action show "substantial prejudice" as a result of that failure to be entitled to dismissal of a successive action. See Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J.Super. 229, 242-44, 806 A.2d 810 (App.Div.), certif. denied, 175 N.J. 170, 814 A.2d 635 (2002); Mitchell v. Procini, 331 N.J.Super. 445, 453-56, 752 A.2d 349 (App.Div.2000). We note initially that Rule 4:5-1(b)(2) does not require notice of an action to be given to other potentially liable parties. The rule only requires such notice to the other named parties to the action and the trial court. The trial court then must decide whether to "require notice of the action to be given to any non-party whose name is disclosed in accordance with this rule or [to] compel joinder pursuant to R. 4:29-1(b)." R. 4:5-1(b)(2).
*602 We are unaware of any practice on the part of trial judges generally, or the trial judge in the Wilson action specifically, to require joinder of, or notice to, other potentially liable parties who are disclosed in a Rule 4:5-1(b)(2) certification. Consequently, it is conjectural whether the trial judge in Wilson would have joined or required notice of the action to be given to Reynolds if the Burt companies had provided timely notice of the name of this other potentially liable party.
It is also conjectural whether Reynolds would have moved to intervene in the action if it had received such notice or instead elected to stand on the sidelines in the hope that the Wilson plaintiffs' claims would be resolved in a manner that would not subject Reynolds to liability. We note in this respect that when Reynolds received notice of the Wilson action in September 2005 as a result of service of the complaint in this action, Reynolds did not move to intervene in Wilson or to consolidate this action with Wilson. We appreciate that Reynolds's strategic considerations in determining whether to seek intervention in Wilson may have been different during the period between September 2005 and June 2006 than would have been the case in December 2003. However, Reynolds's decision not to intervene in the Wilson action when it ultimately became aware of its pendency raises doubt whether it would have sought intervention even if it had received earlier notice.
Furthermore, Reynolds has not shown that it will be placed in any worse position defending the Burt companies' claims in this separate action than it would have been in defending those claims in the Wilson action. The Burt companies' claims are set forth in broad, scattergun form in their complaint and have not been briefed in this appeal. Therefore, we do not undertake to consider the merits of those claims. We only note that Reynolds would not be bound by the finding of the Wilson trial judge that the form Reynolds sold to the Burt companies violated N.J.A.C. 13:45A-26B.2(a)(2), because Reynolds was not a party to that action. See Brunetti v. Borough of New Milford, 68 N.J. 576, 587, 350 A.2d 19 (1975). We also note that the conformity of the Reynolds form with N.J.A.C. 13:45A-26B.2(a)(2) appears to be a fairly straightforward legal question.
Reynolds argues that it has been prejudiced by the Burt companies' destruction or loss of certain notes relevant to the apportionment of the settlement amount between the Wilson plaintiffs' claims predicated on the Reynolds form and their other claims. However, because the Burt companies would have the burden of proof on the apportionment issue, see Cent. Motor Parts Corp. v. E.I. duPont de Nemours & Co., 251 N.J.Super. 5, 12, 596 A.2d 759 (App.Div.1991), it would appear that the Burt companies would be more likely than Reynolds to be prejudiced by the loss of any such notes. In any event, if the trial court finds that the Burt companies destroyed or are otherwise responsible for the loss of notes relevant to the issue of apportionment, and that Reynolds has been prejudiced by the unavailability of this evidence, it may provide Reynolds with appropriate relief short of dismissal of the Burt companies' claims. See Rosenblit v. Zimmerman, 166 N.J. 391, 401-03, 766 A.2d 749 (2001).
Therefore, in view of the uncertainties as to whether the Burt companies' timely compliance with their notice obligations under Rule 4:5-1(b)(2) in Wilson would have resulted in Reynolds's joinder or intervention, and the lack of any basis for finding that Reynolds will be placed in a worse position defending the Burt companies' claims in this action than in Wilson, *603 we conclude that the record does not support a finding that Reynolds was "substantially prejudiced" by the Burt companies' failure to comply with the notice obligations under Rule 4:5-1(b)(2). Accordingly, we reverse the summary judgment dismissing the Burt companies' claims against Reynolds.
III.
We turn next to the Burt companies' insurance coverage claims. Universal issued separate policies to Honda of Princeton and Sports. Each policy provided coverage for "Statute and Title Errors and Omissions" (STEO). Each policy also provided coverage for "Customer Complaint Defense" (CCD). This latter coverage was limited to $25,000 for each dealership. Universal paid the full $50,000 of CCD coverage to Honda of Princeton and Sports. Thus, the Burt companies' appeal from the dismissal of their claims against Universal is limited to the STEO coverage.
The part of the policy provisions describing the scope of the STEO coverage states:
"STATUTE AND TITLE E & O" means any claim or SUIT filed against YOU, ... by or on behalf of:
(a) a customer arising out of GARAGE OPERATIONS, because of an alleged violation during the Coverage Part period, of any federal, state or local:
. . . .
(2) truth-in-lending or truth-in-leasing law....
Therefore, the question is whether the complaint in Wilson asserted any claim based on "an alleged violation ... of any federal, state or local ... truth-in-lending or truth-in-leasing law[.]"
The Wilson complaint was based on the Consumer Fraud Act, the Automotive Sales Practices regulations adopted by the Division of Consumer Affairs, and the Truth-in-Consumer Contract, Warranty and Notice Act. These are all general consumer protection laws rather than statutes and regulations directed specifically at truth-in-lending or leasing. Moreover, the allegations of the Wilson complaint were that the Burt companies had charged excessive title and registration fees as well as documentary fees for services that were not performed and that they had failed to inform their customers of their right to an itemized price for each documentary and predelivery service in the ten-point font mandated by N.J.A.C. 13:45A-26B.2(a)(2). None of the Wilson plaintiffs' allegations were directed at the manner in which the Burt companies leased cars or provided financing. Instead, their allegations were directed solely at the Burt companies' general sales practices. Although the plaintiff class in Wilson consisted of not only persons who purchased but also persons who leased cars, the reference in the complaint to persons who leased only constituted part of the definition of the class. Therefore, the trial court correctly concluded that the STEO coverage provided to the Burt companies for any alleged violation of a "truth-in-lending or truth-in-leasing law" did not provide coverage for the Wilson action.
The Burt companies assert, as an alternative ground for requiring Universal to indemnify them for the costs of the defense and settlement of the Wilson action, that Universal is estopped from denying coverage because it assumed control over the defense of the Wilson action without issuing a reservation of rights letter. Shortly after receiving service, a Burt company employee sent a copy of the Wilson complaint to Universal. In response, Universal sent the Burt companies a letter dated October 6, 2003, which specifically *604 stated that their coverage was limited to $25,000 CCD coverage for defense costs and that any additional defense costs as well as all "damages assessed against you" would be the Burt companies' responsibility:
Your attention is directed to the fact that the insurance coverage provided to you for the allegations made in this suit is under your Customer Complaint Defense as is limited to cost of defense only, to a maximum cost of Twenty Five Thousand (25,000). All court costs and damages assessed against you are your responsibility. Your insurance does not provide coverage for court costs or damages assessed. Any amount payable by the company for defense costs will be subjected to a deductible amount of Two Thousand Dollars ($2000.00). All defense costs above the limits set forth in the policy and the deductible amount are your responsibility.
The Burt companies did not question this express limitation upon Universal's undertaking to defend the Wilson action, and Universal did not send any additional communication to the Burt companies or take any other action that could be construed to change the position taken in the October 6, 2003 letter that its obligation was limited to providing up to $25,000 in defense costs (subsequently increased to $50,000 because the Burt companies had coverage under two separate Universal policies). Therefore, the October 6, 2003 letter constituted an express reservation of rights, to which the Burt companies implicitly agreed, which remained in effect throughout the period of Universal's defense of the Wilson action. See Merchs. Indem. Corp. v. Eggleston, 37 N.J. 114, 126, 179 A.2d 505 (1962).
Accordingly, we reverse the summary judgment in Reynolds's favor and remand the case for further proceedings on the Burt companies' claim against that defendant. We affirm the summary judgment dismissing the Burt companies' claims against Universal.
NOTES
[1] This complaint and an amended complaint also asserted similar claims against NJCAR and Automatic Data Processing, another provider of business forms, but these defendants were later dismissed from the action.
[2] The proposed amendment to Rule 4:5-1(b)(2) provided that a court could dismiss a successive action based on a party's failure to comply with the rule's notice requirements only if the failure was "egregious" and the undisclosed party's right to defend the successive action had been "substantially prejudiced." The Court substituted "inexcusable" for "egregious" in the Committee's rule proposal. Because we conclude that the Burt companies' failure to comply with the Rule 4:5-1(b)(2) notice requirements was "inexcusable," but that Reynolds failed to show it was "substantially prejudiced" by that failure, there is no need to consider the effect of the Court's substitution of "inexcusable" for "egregious."
The only other noteworthy change the Court made to the Committee's rule proposals relating to the entire controversy doctrine was adoption of a proposal by the Entire Controversy Doctrine Subcommittee, which the Civil Practice Committee as a whole had not endorsed, that Rule 4:29-1(b) be amended to authorize trial courts to compel joinder of parties disclosed in accordance with Rule 4:5-1(b)(2) "in exceptional circumstances." Committee Report at 127. This amendment, which is found at Rule 4:29-1(b), is not at issue in the present appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545974/ | 40 B.R. 206 (1984)
In re Samuel Preston GRAY a/k/a Samuel P. Gray, Debtor.
Bankruptcy No. 84 B 20243.
United States Bankruptcy Court, S.D. New York.
July 12, 1984.
*207 S. Simpson Gray, P.C., Mount Vernon, N.Y., for debtor.
Joseph A. Lichtenthal, White Plains, N.Y., for Adm'r of Veterans' Affairs.
DECISION ON MOTION TO LIFT/VACATE AUTOMATIC STAY
HOWARD SCHWARTZBERG, Bankruptcy Judge.
The Administrator of Veterans' Affairs has moved for an order dismissing this Chapter 13 case, or, in the alternative, vacating the automatic stay imposed under 11 U.S.C. § 362.
The debtor, Samuel P. Gray, originally filed with this court a petition for relief under Chapter 13 of the Bankruptcy Code on May 14, 1981. After filing five amended plans during the course of the case, the court entered an order on November 4, 1982, converting the case for liquidation under Chapter 7 of the Bankruptcy Code.
The Ninth Federal Savings & Loan Association, as mortgagee of real property owned and occupied by the debtor as his residence, had obtained an order from this court dated June 21, 1982, authorizing relief from the automatic stay for the purpose of foreclosing its mortgage. On August 3, 1982, a judgment of foreclosure and sale was entered against the debtor in the New York Supreme Court, Westchester County. The Veterans Administration was guarantor of the mortgage and the amount owed under the judgment of foreclosure, namely $36,327.70. The Veterans Administration paid the Ninth Federal Savings & Loan Association the amount due under the guarantee and then acquired title to the property in question in the name of the Administrator of Veterans' Affairs pursuant to a deed that was recorded on February 14, 1983.
In order to reduce losses, the Veterans Administration attempted to resell the property to the general public, with no requirement as to veteran status. However, the debtor continued to occupy the premises and would not remove voluntarily. The Veterans Administration obtained a Writ of Assistance from the New York Supreme Court, Westchester County, dated March 22, 1984, directing the Sheriff of Westchester County to remove the debtor from the premises in question. An order of eviction was issued on April 6, 1984, which the debtor appealed to the New York Appellate Division, Second Department. The debtor made a motion to the Appellate Division, Second Department, requesting a stay of the eviction pending the appeal dated April 17, 1984. The Appellate Division denied the stay on April 26, 1984.
On June 1, 1984, the debtor filed another petition for relief under Chapter 13 of the Bankruptcy Code. The debtor's counsel in his affirmation dated July 6, 1984, contends that the filing of the second Chapter 13 case automatically provides protection to the debtor and his property. Apparently the debtor desires to continue in possession *208 of the property, notwithstanding that title had previously been conveyed to the Veterans Administration. The mortgagee, Ninth Federal Savings & Loan Association, is the only creditor listed in the debtor's schedules.
DISCUSSION
The facts in this case do not implicate the rulings in In re Taddeo, 685 F.2d 24 (2d Cir.1982) and Grubbs v. Houston First American Savings Association, 730 F.2d 236 (5th Cir.1984), where it was held that Chapter 13 debtors may cure mortgage defaults and continue monthly mortgage payments despite the mortgagees' prebankruptcy acceleration of the mortgages. Here, the foreclosure was completed and title to the property in question was conveyed to the Administrator of Veterans' Affairs. The debtor no longer has any legal or equitable interest in the property. The former mortgage does not exist and may not be cured. Indeed, this court's ruling in the previous Chapter 13 case that the automatic stay should be lifted in order to allow the former mortgagee to foreclose is now res judicata. In re Bystrek, 17 B.R. 894, 896 (Bkrtcy.E.D.Pa.1982).
As this court stated in In re Butchman, 4 B.R. 379, 380-81 (Bkrtcy.S.D.N.Y.1980):
Since the Chapter 13 petition was filed solely to cure the existing mortgage default and to continue the mortgage in effect, such purpose was frustrated and made academic by the valid prepetition mortgage foreclosure sale. When a debtor's legal and equitable interests in property are terminated prior to the filing of the petition with the Bankruptcy Court that was intended to preserve the debtor's interest in such property, the Bankruptcy Court cannot then cultivate rights where none can grow. See GSVC Restaurant Corp., 3 B.R. 491, 6 Bankr. Ct.Dec. 134 (S.D.N.Y.1980) aff'd D.C.N.Y. April 18, 1980) Goettel, D.J.
Accordingly, there is no basis for continuing this Chapter 13 case when the only scheduled creditor, the Ninth Federal Savings & Loan Association, has been paid by the Veterans Administration as guarantor of the former mortgage, with the result that title to the property in question was conveyed to the Administrator of Veterans' Affairs following the foreclosure sale. In light of these facts, the Administrator is entitled to an order granting the motion to dismiss the debtor's Chapter 13 petition.
Submit order on notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545729/ | 87 F.2d 913 (1937)
WARNER PUBLICATION, Inc.,
v.
POPULAR PUBLICATIONS, Inc.
No. 168.
Circuit Court of Appeals, Second Circuit.
February 8, 1937.
Swiger, King & Chambers, of New York City (Edwin J. Harragan, of New York City, of counsel), for appellant.
Schultz Brothers, of New York City (Joseph Schultz and Henry Edward Schultz, both of New York City, of counsel), for appellee.
Before MANTON, SWAN, and CHASE, Circuit Judges.
SWAN, Circuit Judge.
The plaintiff, publisher of a magazine entitled "Ranch Romances," brought suit for an injunction and accounting against the defendant, publisher of a magazine entitled "Rangeland Romances." Both are within the so-called "pulp" magazine field. The bill of complaint charges, in a first count, infringement of a registered trademark, and, in a second count, unfair competition. Both parties are New York corporations. The bill was filed August 1, 1935, and was answered August 20th with general denials. No motion to obtain an injunction pendente lite was made until March 11, 1936. The motion then made was granted by an order, resettled on June 10, 1936, restraining the defendant from publishing or selling "a magazine or periodical bearing the title `Rangeland Romances' in any form, or bearing any other title which is in simulation or imitation of plaintiff's trade-mark and title `Ranch Romances.'"
The appellant contends that the words "Ranch Romances" do not constitute a valid registered trade-mark because they are descriptive of the nature and contents of the magazine upon which the plaintiff uses them as a title. The contention is well taken. By the terms of the statute, "No mark which consists * * * merely in words or devices which are descriptive of the goods with which they are *914 used, or of the character or quality of such goods * * * shall be registered under the terms of this Act [subdivision of this chapter]." 33 Stat. 726, 15 U.S.C.A. § 85 (b). The descriptive character of the title "Ranch Romances" is not only indicated by the subtitle "Love Stories Of The Real West," but is expressly stated in affidavits by the editor, who says that the magazine has always been "devoted to romantic stories of the West," and the stories published "have been action stories involving romantic interest set on ranges and ranches of the traditional West." We think the words "Ranch Romances" are no less descriptive than were other magazine titles which have been held invalid trade-marks, namely, "Photoplay Magazine," "College Humor," "Popular Mechanics." Photoplay Pub. Co. v. La Verne Pub. Co. (C.C.A.3) 269 F. 730; Collegiate World Pub. Co. v. Du Pont Pub. Co. (D.C.) 14 F.(2d) 158, affirmed (C.C.A.7) 25 F.(2d) 1018; Fawcett Publications v. Popular Mechanics Co. (C.C.A. 3), 80 F.(2d) 194, 196, dictum. The court below cited in support of its ruling Vogue Co. v. Brentano's (D.C.S.D.N.Y.) 261 F. 420 and New Metropolitan Fiction v. Dell Pub. Co., 57 App.D.C. 244, 19 F.(2d) 718. Both are distinguishable from the case at bar. Even if the title "Vogue" might be thought descriptive of those portions of the magazine devoted to fashions in women's dress, it could not be deemed descriptive of other portions, which dealt with architecture, art, the stage, and home decoration. As Judge Knox' opinion states, the plaintiff's use of the word was "arbitrary and somewhat fanciful" rather than descriptive. The other cited case did not involve the validity of a registered trade-mark composed of descriptive words, but merely whether registration of the title "Modern Marriage" was precluded by the prior registration of a too similar title. In so far as the injunction appealed from rests upon the plaintiff's registered title as a valid trade-mark, it cannot be sustained.
The injunction was also rested upon findings that the title had acquired a secondary meaning denoting the plaintiff's magazine and that the defendant was engaging in unfair competition. Although there was no diversity of citizenship, we think the court had jurisdiction to consider the charge of unfair competition under the doctrine of Hurn v. Oursler, 289 U.S. 238, 53 S. Ct. 586, 77 L. Ed. 1148. Where a substantial federal question is raised by the allegations, jurisdiction is established, whatever the decision on the merits may be, and the court retains jurisdiction to dispose of a nonfederal question inseparably connected with the federal ground of action. Here the two causes of action grow out of the same facts; though the bill of complaint is divided into two causes of action, they are inseparably connected within the doctrine of the Hurn Case. Indeed, the second count realleges every allegation of the first. We cannot accept the appellant's contention that, because pleaded separately instead of being commingled in a single count, jurisdiction of the nonfederal ground must fail on dismissal of the federal ground. See Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S. Ct. 367, 70 L. Ed. 750, 45 A.L.R. 1370. There federal jurisdiction was invoked under the federal anti-trust laws. The answer set up a counterclaim nonfederal in character but arising out of the same transaction. Although the bill was dismissed on the merits, jurisdiction remained to dispose of the counterclaim. The question whether the preliminary injunction can be sustained on the ground of unfair competition is properly before us.
"Ranch Romances" has been published by the plaintiff or its predecessors since 1924. The defendant entered the "pulp" magazine field in 1930 and is the publisher of some twenty periodicals besides the one under attack, the first issue of which appeared in April, 1934. The defendant's affidavit states that the title "Rangeland Romances" was chosen because it would describe the character of the stories to be published in its new magazine. We can find no evidence whatever to cast doubt on the defendant's good faith, or to justify imputing to it the alleged design to palm off its magazine as the plaintiff's. There is no evidence that confusion between the two has ever existed in the mind of any person. All that the plaintiff offers is the prediction of three of its officers that confusion "undoubtedly will result." If their opinion so expressed were supported by facts sufficient to establish a probability, a preliminary injunction might be justified, but no such facts are shown here. To the contrary, the magazines are widely unlike in external appearance. "Rangeland Romances" is printed straight across in yellow letters, narrowly edged with red, upon a dark background; *915 "Ranch Romances" is printed in letters wholly red upon a white background, the word "Romances" curving upward to the right, and above in prominent black lettering is the subtitle "Love Stories Of The Real West." To the eye there is not the slightest danger of deception; nor is there phonetically any similarity between the titles. In meaning only are the titles nearly alike; but in magazine titles, and particularly in the "pulp" magazine field, descriptive titles so crowd one another that resemblance in meaning is inevitable. The defendant has as good a right to a descriptive title as has the plaintiff. All that the plaintiff can demand is that defendant shall use its title in such a manner as to distinguish its magazine from the plaintiff's and thus prevent deception of the purchasing public. Fawcett Publications v. Popular Mechanics Co. (C.C.A.3) 80 F.(2d) 194, 199. So far as appears from the proofs offered on the motion for a preliminary injunction, it has done so.
Objection is made to the use of a title having two words beginning with the letter "R." The plaintiff's affidavits disclose that the plaintiff has fixed upon the letters "R R" as a symbol of its magazine and has distributed among its readers insignia bearing those initials. But it also appears that in another litigation against the publisher of a magazine entitled "Romance Range" the plaintiff disclaimed the exclusive use of the letters "R R" in the magazine field and consented to publication, if the title should be changed to "Romantic Range," which was done. Still another competitor publishes a pulp magazine under the title "Romance Round-Up." That the defendant's title is also composed of two words beginning with the letter "R" can scarcely be thought evidence of deceptive imitation. Nor do we think that the defendants are guilty of unfair imitation in choosing to use an "R" with a "tail." The plaintiff's letter is patently different, in that the elongated member, instead of slanting down over the background as does the defendant's curls sidewise and upward so that it encroaches upon the neighboring letter. Here again there is evidence neither of actual nor of probable confusion in the mind of purchasers.
For the foregoing reasons we think the preliminary injunction was improvidently granted. It is unnecessary to consider the appellant's further contention that the plaintiff's delay in applying for it was so great as to require a denial of the motion under the circumstances shown.
Order reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545728/ | 40 B.R. 614 (1984)
In re Joel S. MARKS, Debtor,
Ted FINE and Jeannette Fine, Plaintiffs,
v.
Joel S. MARKS, Defendant.
In re Samuel B. MARKS and Gertrude L. Marks, Debtors,
Ted FINE and Jeannette Fine, Plaintiffs,
v.
Samuel B. MARKS and Gertrude L. Marks, Defendants.
Bankruptcy Nos. 83-00693, 83-00694, C-83-0742, C-83-0743.
United States Bankruptcy Court, D. South Carolina.
April 10, 1984.
*615 Clay D. Brittain, III, Columbia, S.C., for plaintiffs.
Reid B. Smith, Columbia, S.C., for defendants.
*616 MEMORANDUM AND ORDER
J. BRATTON DAVIS, Bankruptcy Judge.
The matter before the court is the plaintiff's motion for summary judgment in an adversary proceeding in which they seek the determination of the dischargeability of a debt owed to them by the debtors.
The debt is based upon the judgment of a Florida state court which determined that the debtor "misled, concealed, misrepresented and/or fraudulently induced" plaintiffs to purchase two warehouses located in the State of Florida.
Plaintiffs have moved for summary judgment on the issue of nondischargeability contending that there is no genuine issue as to any material fact "regarding the plaintiffs' allegations that the debt, charges, costs, and interest owed to the plaintiffs by the defendants were obtained when the defendants misled, concealed, misrepresented and/or fraudulently induced the plaintiffs into the purchase of two warehouse properties, . . . ".
At the hearing on the Plaintiffs' Motion for Summary Judgment, the plaintiffs' attorney introduced a Request for Admission wherein the defendant admitted that "Exhibit A" of that Request for Admission was a true, accurate and correct copy of a final judgment entered against the debtors in the State of Florida.
Relying on this exhibit to establish that there are no genuine issues of material fact, plaintiffs seek summary judgment. The defendants also rely on this exhibit to rebut the plaintiffs' contention that they are entitled to summary judgment.
The plaintiffs, conceding that the doctrine of res judicata[1] does not apply here, contend that collateral estoppel does apply to the extent that the findings of fact of the state court have such preclusive effect as to mandate summary judgment.
ISSUE
The issue here is whether the Florida state court judgment based on that court's findings of fact of fraud or misrepresentation estops further litigation on those issues in a dischargeability case in the Bankruptcy Court for the District of South Carolina. We hold that it does not.
DISCUSSION
While F.R.Civ.P. 56 (Summary Judgment) is a useful tool for avoiding unnecessary trials, there are strict limitations on its use. The moving party must establish its right to judgment so clearly that it can be determined that the opposing party would not be entitled to relief under any circumstances. Robert Johnson Grain Co. v. Chemical Interchange Co., 541 F.2d 207 (8th Cir.1976). Summary judgment is inappropriate if there remains a genuine issue of material fact. Clark v. Volpe, 481 F.2d 634 (4th Cir.1973).
In an action for the denial of discharge on the basis of fraud, a finding made by a state court on the issue of fraud and/or misrepresentation does not necessarily preclude litigation in the bankruptcy court on the issue of dischargeability of a debt. Under appropriate facts, the Bankruptcy Court may not necessarily be precluded by collateral estoppel from relitigating issues decided by a judgment obtained against the debtor. See In re Pigge, 539 F.2d 369 (4th Cir.1976) and First National Bank v. Grainger (In re Grainger), 20 B.R. 7 (Bkrtcy.D.S.C.1981).
11 U.S.C. § 523 gives the Bankruptcy Court exclusive jurisdiction over actions to determine the dischargeability of a debt. 3 *617 Collier on Bankruptcy, ¶ 523.11, at 523-66 (15th Ed.1982); U.S. Life Title Insurance Co. v. Wade (In re Wade), 26 B.R. 477 (Bkrtcy.N.D.Ill.1983). Plaintiffs, however, contend that the Florida State Court judgment necessitates a finding by this Court that the debt is nondischargeable.
Whether a prior State Court judgment may be used in a dischargeability proceeding to establish facts by collateral estoppel has been addressed in several bankruptcy decisions. See, e.g., Berkfield v. Goodman (In re Goodman), 25 B.R. 932 (Bkrtcy.N.D. Ill.1982); Harb v. Toscano (In re Toscano), 23 B.R. 736 (Bkrtcy.D.Mass.1982); North Central Wool Marketing Corp. v. Carothers (In re Carothers), 9 B.C.D. 680, 22 B.R. 114 (Bkrtcy.D.Minn.1982); Revelle Motors, Inc. v. Spector (In re Spector), 22 B.R. 226 (Bkrtcy.N.D.N.Y.1982); Manning v. Iannelli (In re Iannelli), 12 B.R. 561 (Bkrtcy. S.D.N.Y.1981); First National Bank v. Grainger (In re Grainger), 20 B.R. 7 (Bkrtcy.D.S.C.1981); Long v. Trewyn (In re Trewyn), 12 B.R. 543 (Bkrtcy.W.D.Wis. 1981); also see Millhiser, Thomas McN. Res Judicata and Collateral Estoppel in Bankruptcy Discharge Proceedings. 37 W & L L.Rev. 281 (1980).
Collateral estoppel applies when:
1. the issue sought to be precluded is the same as that involved in the prior action;
2. the issue has been actually litigated;
3. the issue has been determined by a valid and final judgment; and
4. the determination was essential to the final judgment.
Carothers, 22 B.R. at 119; Ianelli, 12 B.R. at 563; Millhiser, at 282-3.
Although the issue in Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979) involved res judicata and the effect of a prior state court judgment in an action for denial of discharge, the court addressed the collateral estoppel issue, stating that "[i]f in the course of adjudicating a state law question, a state court should determine factual issues using standards identical to those of § 17, then collateral estoppel, in the absence of countervailing statutory policy, would bar relitigation of those issues in the bankruptcy court." (emphasis added). Id. at 139 N. 10, 99 S.Ct. at 2213 N. 10. Section 17 of the Bankruptcy Act is the predecessor of § 523 of the Bankruptcy Code.
This identity of standards test has not been met in the instant proceeding. The elements of fraud in a proceeding, under 11 U.S.C. § 523(a)(2)(A), to determine the dischargeability of a debt are comparable to the elements of common law fraud in the State of Florida; however, the standard of proof in a proceeding to determine, under 11 U.S.C. § 523(a)(2)(A), the dischargeability of a debt differs from the standard of proof in a fraud case under the common law of the State of Florida.
The rationale of Brown with its identity of standards test has been widely applied to 11 U.S.C. § 523(a)(2) cases. See e.g., In re Goodman, 25 B.R. at 938; In re Spector, 22 B.R. at 231; In re Supple, 14 B.R. 898 (Bkrtcy.D.Conn.1981). In Brown, the United States Supreme Court held that "the bankruptcy court is not confined to a review of the judgment and record in the prior state court proceeding when considering the dischargeability of [a] debt." See id. at 138-39, 99 S.Ct. at 2212-13.
A.
This court has held that all nine common law elements of fraud must be met in a denial of discharge action based on § 523(a)(2)(A).
In order to recover in this cause of action for fraud and deceit, the plaintiff must prove that the defendant made a material representation; that it was false; that when it was made the defendant knew it was false; that it was made with the intention that it should be acted upon by the plaintiff; that plaintiff was ignorant of its falsity; that he relied on its truth; that he had a right to rely thereon; and, that he thereby suffered injury.
Sylvester v. Stone (In re Stone), 11 B.R. 209, 212 (Bkrtcy.D.S.C.1981), citing Davis *618 v. Upton, 250 S.C. 288, 157 S.E.2d 567 (1967).
Amazon v. Davidson, 390 So. 2d 383 (Fla. App.1980) sets forth the Florida common law elements of fraud. These elements are: (1) a false statement concerning a specific material fact; (2) the representor's knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the other party acting in reliance on the representation.
Plaintiffs contend that although the elements of fraud, required by Florida law, are not identical to those set forth in Stone, they should be used to determine the issue of fraud as it relates to the dischargeability issue in the bankruptcy proceeding.
The debtors do not agree. They argue that the standards enunciated in Stone must be met in a § 523(a)(2)(A) dischargeability action in this court, when the basis of that action is fraud.
Even though four, five, or nine part tests are analytically helpful to courts and attorneys, this court is of the opinion that the elements of fraud need not be identical in number to be identical in nature. To hold that a finding of fraud based on five elements is less valid than one based on nine elements is to elevate form over substance and over-analyze the problem.
In this case the findings of the Florida court are sufficient to satisfy the requirements of this court as to fraud, as well as the identity of standards test of Brown.
B.
The standard of proof required for a determination of dischargeability under § 523 is that of clear and convincing proof. This standard has been clearly established by numerous cases deciding this issue. E.g., First National Bank of Glens Falls v. Bruce (In re Bruce), 18 B.R. 135 (Bkrtcy.D.Vt.1982), citing Oriel v. Russell, 278 U.S. 358, 49 S. Ct. 173, 73 L. Ed. 419 (1929); Sylvester v. Stone (In re Stone), 11 B.R. 209 (Bkrtcy.D.S.C.1981); Toscano, 23 B.R. at 739; Ianelli, 12 B.R. at 564; Trewyn, 12 B.R. at 545; Grainger, 20 B.R. at 10; Carothers, 22 B.R. at 120.
The reason for requiring a higher standard of proof when dishonesty or fraud is at issue is that one of the purposes of the bankruptcy laws is to relieve an honest debtor from the weight of oppressive indebtedness, In re Huff, 1 B.R. 354, 356 and 357 (Bkrtcy.N.D.Utah 1979), citing Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S. Ct. 695, 699, 78 L. Ed. 1230 (1934). Pursuant to a "fresh start" policy, exceptions to discharge should be construed in favor of the bankrupt. Huff, 1 B.R. at 357, citing Gleason v. Thaw, 236 U.S. 558, 35 S. Ct. 287, 59 L. Ed. 717 (1915).
The standard of proof required by the Florida court in the fraud action was "greater weight of the evidence." The Florida Court found that the plaintiff had proven its case by the "greater weight of the evidence". This standard is the same as "preponderance of the evidence." Black's Law Dictionary, 1344 (4th ed. 1968).
Since the standard of proof required by this court for determination of dischargeability under § 523(a)(2)(A) is different from the standard of proof applied by the Florida court in the common law fraud case, collateral estoppel is not appropriate because the standard of proof for dischargeability "must not only preponderate, it must be clear and convincing." Carothers, 22 B.R. at 120.
In In re Spector, 22 B.R. 226 (Bkrtcy.N. D.N.Y.1982), it was held that collateral estoppel was inapplicable to the issue of fraud because reasonable doubt existed as to whether the state court used the identical standard of proof for a finding of fraud as that required by the Bankruptcy Code.
In In re Goodman, 25 B.R. 932 (Bkrtcy. N.D.Ill.1982), a case involving the same issue as that presented here, the court held that none of the principles of full faith and credit, res judicata, or collateral estoppel required that a California default judgment determining the debtors' liability for fraud be given preclusive effect in a bankruptcy *619 dischargeability proceeding. The court stated that:
[t]he bankruptcy court as the forum court has an overriding policy to be the only court empowered to decide the issue of dischargeability. Moreover, the California judgment is not directly applicable to the proceeding herein because the California court decided only the issue of liability based on fraud, not the issue of the dischargeability of a debt.
Goodman, 25 B.R. at 937.
CONCLUSION
The plaintiffs, having the burden of proving the issue of fraud under 11 U.S.C. § 523(a)(2)(A) by clear and convincing evidence, Stone, 11 B.R. at 211, have not established that they were required by the Florida court to meet this standard of proof. Thus, the elements necessary for the application of collateral estoppel have not been met. The plaintiffs, therefore, are not entitled to judgment as a matter of law on the nondischargeability of the alleged debt.
ORDER
For the foregoing reasons, the plaintiffs' motion for summary judgment is denied.
NOTES
[1] The rules of res judicata, as the term is sometimes sweepingly used, actually comprise two doctrines concerning the preclusive effect of a prior adjudication. The first such doctrine is "claim preclusion", or true res judicata. * * * The second doctrine [is] collateral estoppel or "issue preclusion." Kaspar Wire Works, Inc. v. Leco Engr'g & Mach., Inc., 575 F.2d 530, 535-536 (5th Cir.1978). See also, Migra v. Warren City Sch. Dist. Bd. of Educ. ___ U.S. ___, n. 1, 104 S. Ct. 892, 79 L. Ed. 2d 56 (1984); and Restatement (Second) of Judgments, Introductory Note before Ch. 3 (1982). 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4402 (1981). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/455769/ | 767 F.2d 1018
247 U.S.App.D.C. 228
DISTRICT-REALTY TITLE INSURANCE CORPORATIONv.Rudolf ENSMANN, et al., Appellees,James S. Sollins, et al., Appellants.
No. 84-5475.
United States Court of Appeals,District of Columbia Circuit.
Argued Oct. 16, 1984.Decided July 23, 1985.
Appeal from the United States District Court for the District of Columbia (D.C.Civil Action No. 82-02929).
Reuben B. Robertson, III, Washington, D.C., with whom Richard H. Streeter and Dennis A. Davison, Washington, D.C., were on the brief, for appellants.
Kate A. Martin, Washington, D.C., with whom David N. Webster, Washington, D.C., were on the brief, for appellees.
Before TAMM, MIKVA and EDWARDS, Circuit Judges.
Opinion for the Court filed by Circuit Judge MIKVA.
MIKVA, Circuit Judge:
1
This statutory interpleader action, like the related case of Schneider v. Dumbarton Developers, Inc. 767 F.2d 1007, (also released today), derives from Ferd Schneider's unsuccessful efforts to sell the Clermont apartment building, located at 2106 F Street, N.W., in Washington. Dumbarton Developers, Clermont Corporation, James S. Sollins, Dianna Brochendorff, and a number of project creditors appeal here from the district court's entry of summary judgment in favor of appellees Rudolf Ensmann and 2106 F Street Associates. The district court found that the agreement between the parties unambiguously required return of all the interpleaded funds to Ensmann. The court refused to allow the introduction of extrinsic evidence to contradict the terms of the written contract and found the prevention doctrine inapplicable. We affirm.
2
The facts underlying this dispute are summarized in some detail in our related opinion and consequently we need repeat only the bare essentials here.
3
By a contract dated February 10, 1981, Schneider agreed to sell the Clermont to a partnership composed of two District of Columbia corporations: Dumbarton Developers, Inc. ("Dumbarton") and Clermont Tenants Association, Inc. ("CTA") t/a Clermont Partnership (collectively, the purchaser). After acceding to several requests on the part of the purchaser to postpone settlement, Schneider declared that unless settlement was made by May 17, 1982, he would terminate the agreement. Settlement was not made, and Schneider sued in district court for a declaratory judgment that the agreement was terminated. That lawsuit was settled under an "Agreement of Settlement and Release" dated August 4, 1982. The settlement gave purchaser another two months to complete the transaction but asserted that time was of the essence and that the time for settlement could not be extended beyond October 4, 1982, for "any reason whatsoever."
4
Unbeknownst to Schneider, Dumbarton had brought in West German investor Rudolf Ensmann as a financial backer. Subsequently, Dumbarton, CTA, and Ensmann had become embroiled in disputes over the respective rights and duties of the parties and, in particular, over which entity should take title to the property at the closing. When the crucial date--October 4--arrived, these disputes had still not been resolved. On the morning of the 4th, however, Ensmann finally persuaded CTA to assign its interests to Ensmann and to attempt to exercise its option to buy out Dumbarton's share of the partnership. But when Dumbarton learned of CTA's plan, Dumbarton objected and insisted that any purported exercise of the option would be invalid. The parties continued to wrangle with each other throughout the day and into the night. Several different sets of escrow instructions were delivered to the title company, District-Realty Title Insurance Corporation, none of which could be fully implemented. Ensmann's attorneys created appellee 2106 F Street Associates ("2106"), as a District of Columbia limited partnership 99% owned by Ensmann, with the intent that 2106 would ultimately take title to the property. They also transferred approximately $1,405,000 to the title company. Eventually, moreover, they obtained an assignment from Dumbarton. But, as of midnight, settlement had neither been made nor consummated. See Schneider, at 1010-1012, 1012-1015.
5
At about 2:50 P.M. on October 5, purchaser had still not made settlement. Schneider declared the Land Purchase Agreement terminated and requested that the title company return all documents submitted in connection with the transaction. In an apparent effort to salvage the situation, the would-be purchaser immediately arranged for the title company to issue Schneider a check for the adjusted purchase price and sent a new deed naming 2106 as grantee. Schneider was given a copy of the CTA assignment, but, for some reason, not the Dumbarton assignment. Schneider's attorney inquired as to whether a similar assignment could be obtained from Dumbarton and was told it could not. Ensmann's attorneys nonetheless encouraged Schneider to go through with the sale, offering to indemnify him in the event that he was sued for wrongful transfer. Schneider's attorney advised that such an indemnification would be inadequate to fully protect Schneider from resulting litigation. Consequently, on October 6, Schneider brought a second suit for declaratory judgment.
6
A few days later, Ensmann sought return of the money he had paid over to the title company. Aware of disputes among the parties and of the claims of various project creditors, the title company refused to comply with the request. Instead, on October 13, it filed an interpleader action pursuant to 28 U.S.C. Sec. 1335, naming Ensmann, Dumbarton, Clermont Corporation (Dumbarton's successor in interest), James S. Sollins and Dianna Brochendorff (principals of Dumbarton and Clermont), CTA, Schneider, one of the tenants of the apartment building, and a number of Dumbarton creditors who had performed work related to the property. The title company deposited $245,000, representing an approximation of the aggregate value of the claims, with the court. (The balance was disbursed in accordance with Ensmann's directions.)
7
The district court denied a motion to consolidate the two suits, but granted 2106's motion to intervene. It then stayed the interpleader action pending disposition of Schneider v. Dumbarton Developers. Following rendition of judgment in Schneider, the district court granted summary judgment in favor of movants Ensmann and 2106. The judge ruled that there were no genuine issues of material fact and that movant was entitled to judgment as a matter law. He found that the pertinent contractual provisions were unambiguous and contemplated return of all funds to Ensmann in the event of nonsettlement. The judge refused to allow the introduction of extrinsic evidence to vary what he found to be clear contractual terms. He found no evidence that Ensmann had frustrated the contract, but concluded that in any event, the contract allocated the risk of intentional frustration to the Dumbarton Group (which includes Dumbarton, Clermont Corporation, Sollins and Brochendorff). He found the prevention doctrine inapplicable and concluded that no waiver had occurred. The district court awarded Ensmann the funds less counsel fees and expenses awarded to District-Realty and $50,000 liquidated damages awarded to Schneider. The Dumbarton Group and a number of project creditors appeal. District-Realty was discharged of all responsibility or liability for the interpleaded funds by order of the district court. CTA has disclaimed any interest in the money. They and Schneider take no part in this appeal.
8
This appeal turns on the language of the Settlement Agreement between the Dumbarton Group and Ensmann. See Settlement Agreement, reprinted in Record Excerpts ("R.E.") at 38-46. There is no doubt that under the agreement, Ensmann assumed full responsibility for paying the project creditors and others if the deal went through. The dispute here is whether Ensmann assumed responsibility for the payments even if the deal failed. The district judge found that Ensmann did not. We agree.
9
Section 4(A) of the Settlement Agreement, R.E. at 41, spells out Ensmann's financial obligations, including the obligation to pay various project creditors. Section 4(B), however, provides that the
10
[r]elease of funds provided for in ... (A) to any party other than the Ensmann group is subject to the following conditions.
11
R.E. at 41 (emphasis added). The conditions are the delivery into escrow of the escrow documents, full performance by Schneider of his obligations as seller, and the occurrence of settlement under the Land Purchase Agreement. Section 4(C) states that
12
if settlement under the Purchase Agreement does not take place for any reason, all funds provided in subparagraph (B) above shall be paid by the Title Company to the order of the Ensmann group.
13
R.E. at 42 (emphasis added).
14
In addition, Section 9(C)(iii) mandates that
15
if settlement under the Purchase Agreement does not take place ... the Title Company shall mark the Escrow Documents "VOID" and deliver each of the Escrow Documents to the party or Group which executed and delivered same.
16
If the documents were voided and returned,
17
this Settlement Agreement shall be terminated, and no party hereto shall have any liability to the other parties by virtue of this Settlement Agreement.
18
R.E. at 44 (emphasis added).
19
Appellants claim that the contractual language is ambiguous and that, in light of extrinsic evidence, it should be construed to mean "for any reason not attributable to Ensmann." In our view, phrases such as "for any reason" and "no party hereto shall have any liability" could hardly be more clear cut and categorical. This language is reasonably susceptible of only one interpretation: the funds must be restored to Ensmann. Cf. Lee v. Flintkote, 593 F.2d 1275, 1282 (D.C.Cir.1979). Given that Ensmann was putting up all the money and that the settlement agreement was reached at the eleventh hour, when the danger that the deal would founder must have been apparent, Ensmann had every reason to bargain for nonliability in the event that settlement failed to occur.
20
Although the Appellants strenuously insist upon the contract's ambiguity, they have failed to identify wherein the ambiguity lies. Instead they seek to direct the court's attention to extrinsic circumstances which they believe support their claim that the parties intended something different from the words they wrote. The district judge correctly observed that the parol evidence rule bars the introduction of extrinsic evidence to vary the terms of an unambiguous contract. See Lee, 593 F.2d at 1280 n. 25 & 1281; Clayman v. Goodman Properties, Inc., 518 F.2d 1026, 1033-34 (D.C.Cir.1973); Vakas v. Manuel, 316 F.2d 369, 370 (D.C.Cir.1963). He also properly noted that the mere fact that parties disagree about the meaning of a contractual term does not establish ambiguity. See Clayman, 518 F.2d at 1034. Consequently, he refused to entertain Appellants' extrinsic evidence. There is no basis for disturbing the district judge's conclusions.
21
Even if there were ambiguity, the Appellants have failed to allege facts supporting their interpretation. The trial testimony of Ensmann's attorney so heavily relied upon by the Appellants as an "admission" is at best equivocal. Ms. Owen stated that Ensmann's main concern was avoiding liability for events outside his control, see R.E. at 160a-160b; such an assertion is insufficient to prove that he was eager to embrace liability for nonsettlement resulting from events within his whole or partial control. The testimony also fails to establish that the contract as finally written and signed was intended by both parties to relieve Ensmann of liability only if he were entirely free of fault for the nonsettlement. Apart from Ms. Owen's equivocal testimony, the Appellants have essentially no support for their interpretation except the singularly unpersuasive protest that the contract could not mean what it appears to mean because if it did they would never have signed it.
22
Supporting the interpretation adopted by the court, on the other hand, is not only the natural meaning of the words as written, but also the fact that an early draft contained the very provision which the Appellants now seek to read into the finished contract. See Draft Settlement Agreement 8(B)(i), reprinted in Supplemental R.E. at 11. The excision of a clause appearing in an early draft is strong circumstantial evidence that the parties made an affirmative decision to exclude it from their integrated agreement.
23
Finally even if we were to accept both the Appellants assertion of ambiguity and their flimsily supported interpretation, we would still be constrained to conclude that the contract required return of the funds to Ensmann. The Appellants have failed to allege facts that would allow a court to reasonably conclude that Ensmann intentionally frustrated the deal, and the district court's fact findings in the related case indicate that the blame should be spread a great deal more widely than Appellants suggest. There is no evidence that Ensmann intentionally sabotaged the deal. The evidence is to the contrary. It suggests that he devoted considerable energy to attempting to close, that even after the time for closing had elapsed, he continued to press Schneider to go through with the deal, that he offered to indemnify Schneider, and that subsequently he participated actively in litigation to force Schneider to go through with the sale. The one act to which Appellants point as arguably supporting their interpretation--the failure to give Schneider a copy of the Settlement Agreement--occurred after October 4. As explained in some detail in Schneider, settlement had to occur by October 4. Acts tending to show that Ensmann frustrated settlement after that date are unavailing.
24
The Appellants also urge us to apply the prevention doctrine. We agree with the district judge that the doctrine has no applicability to these facts. The prevention doctrine is an exception to the general rule that one has no duty to perform under a contract containing a condition precedent until the condition occurs. The doctrine excuses a condition precedent when a party wrongfully prevents the condition from occurring. The theory is that
25
[a]n express promise to perform on the happening of an event warrants implication of a promise to refrain from activity impeding its happening, and breach of the implied promise is legally as serious as the breach of the express.
26
R.A. Weaver & Associates, Inc. v. Haas & Haynie Corp., 663 F.2d 168, 176 (D.C.Cir.1980). The prevention doctrine is triggered when a promissor "completely forecloses occurrence of the condition" or "substantially hinders its occurrence." Id. (emphasis added).
27
The gist of Appellants' argument is that Ensmann intentionally prevented settlement from occurring under the Land Purchase Agreement and consequently should not be permitted to rely on the nonoccurrence of settlement to avoid liability.
28
What Appellants neglect to note, however, is that when a contract "authorizes" a party to prevent a condition from occurring, "there is no prevention." Shear v. National Rifle Association, 606 F.2d 1251, 1256 (D.C.Cir.1979); see also 5 Williston on Contracts Sec. 377A, at 235; 3A Corbin on Contracts Sec. 767, at 545. The essential inquiry is whether or not the contract allocated the risk of nonsettlement. By stating that the funds were to be returned to Ensmann if settlement did not occur "for any reason," the contract allocates to Dumbarton the risk of nonsettlement, regardless of cause. Consequently, there is no prevention.
29
Appellants further contend that Ensmann, by his conduct, waived the requirement that settlement occur under the Land Purchase Agreement. Although it is certainly true that "[w]aiver can occur by mutual agreement when the parties manifest an intent to be bound by a contract even when a stated condition precedent has not been satisfied," Molton, Allen & Williams, Inc. v. Harris, 613 F.2d 1176, 1179 (D.C.Cir.1980), no such mutual agreement is present here. Appellants concede that Ensmann never waived the condition in writing or even by express oral agreement. The acts to which Appellants point give no indication of waiver. Rather they show Ensmann's continuing efforts to bring about the settlement. They are consistent with other portions of the assignment agreement which require the parties to use their best efforts to bring about settlement and, if necessary, to join in suing Schneider for specific performance. Efforts to bring about a condition cannot be considered waiver of the condition.
30
Finally Appellants contend that the district court's entry of judgment was premature because issues of fact remain which should have been resolved at trial. None of the lingering factual disputes, however, is material to the resolution of this controversy. Questions such as "whether Ensmann's actions of October 5-7 substantially contributed to the ultimate demise of the deal" relate to conduct after the relevant date and to extrinsic matters, the consideration of which is barred by the parol evidence rule.
31
This case turns on the interpretation of an agreement between the Dumbarton Group and Ensmann. We conclude that the district court properly found the relevant contractual terms unambiguous and properly applied the parol evidence rule to bar the introduction of extrinsic evidence to vary the terms of the contract. We further conclude that the district judge was correct in rejecting Appellants' prevention and waiver arguments and in finding no genuine issues of material fact requiring a trial for resolution. Accordingly, we affirm.
32
It is so ordered. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/456173/ | 769 F.2d 13
54 USLW 2103, 12 Media L. Rep. 1041
FEDERAL ELECTION COMMISSION, Plaintiff, Appellant,v.MASSACHUSETTS CITIZENS FOR LIFE, INC., Defendant, Appellee.
No. 84-1719.
United States Court of Appeals,First Circuit.
Argued April 2, 1985.Decided July 31, 1985.
Richard B. Bader, Asst. Gen. Counsel, Washington, D.C., with whom Charles N. Steele, Gen. Counsel, Lisa E. Klein, Washington, D.C., and Carol A. Laham were on brief for appellant.
Francis H. Fox, Boston, Mass., with whom E. Susan Garsh, Alexandra Leake, Robin A. Driskel and Bingham, Dana & Gould, Boston, Mass., were on brief for appellee.
James O'Connell, Sally O'Connell & Fitch, Boston, Mass., Jack C. Landau, Jane E. Kirtley, Washington, D.C., Harry L. Baumann, Steven A. Bookshester, J. Laurent Scharff, Pierson, Ball & Dowd, Washington, D.C., Richard N. Winfield and Rogers & Wells, New York City, were on brief for The Reporters Committee for Freedom of the Press, Nat. Ass'n of Broadcasters, Radio-Television News Directors Ass'n and Associated Press Managing Editors, amici curiae.
James J. Featherstone and Santarelli & Bond, Washington, D.C., on brief for National Rifle Ass'n of America, amicus curiae.
Marjorie Heins, Boston, Mass., and Elaine Millar, on brief for the Civil Liberties Union of Massachusetts, amicus curiae.
Joseph D. Alviani and Marcia Drake Seeler, New England Legal Foundation, Boston, Mass., on brief for Home Builders Assn. of Massachusetts, amicus curiae.
Before BREYER, Circuit Judge, ROSENN,* Senior Circuit Judge, and TORRUELLA, Circuit Judge.
ROSENN, Circuit Judge.
1
In an effort to curb misuse of corporate funds and preserve integrity in the federal election process, Congress enacted a series of laws prohibiting corporate expenditures and contributions to political campaigns. This appeal presents the question of whether the current statute, codified at 2 U.S.C. Sec. 441b (1982), prohibits the publication by a non-profit ideological organization of a Special Election Edition containing the voting records of federal candidates on a particular issue of interest to the organization's members and whether such a prohibition may be constitutionally applied in the instant case. The United States District Court for the District of Massachusetts held that the publication was not covered by the statute, and that, in the alternative, prohibition of the publication would violate the organization's first amendment rights, 589 F.Supp. 646 (D.C.Mass.1984). The plaintiff Federal Election Commission (FEC) appealed. We affirm.
I.
2
The defendant Massachusetts Citizens for Life, Inc. (MCFL) is a Massachusetts non-profit, non-membership corporation, organized "[t]o foster respect for human life and to defend the right to life of all human beings, born and unborn, through education, political and other forms of activities."
3
Despite its legal status as a non-membership corporation, the organization claimed three classes of "members" in 1978: "dues paying members" who contributed $15.00 per year to the organization; "contributing members" who contributed money to the organization in amounts less than $15.00 per year; and "non-contributing members" who neither paid dues nor contributed money but who had indicated somehow their support for the organization's goals.
4
For several years, MCFL published a newsletter at somewhat irregular intervals.1 "Dues-paying and contributing members" automatically received the MCFL newsletter by mail, as did "non-contributing members" when funds were available. The May 1978 newsletter was mailed to 2,109 people; the mailing list for the October 1978 newsletter contained 3,119 names. The MCFL newsletter typically contained information about MCFL activities, solicitations for volunteers and contributions, material on political, administrative, judicial, and legislative developments, and appeals to members to contact legislators and express their support of the anti-abortion position.
5
In periods prior to elections, MCFL published "Special Election Editions." In September 1978 it printed 100,000 copies of a publication captioned "Special Election Edition" with headlines reading EVERYTHING YOU NEED TO VOTE PRO-LIFE. The publication contained no masthead identifying it as a special edition of the MCFL newsletter. The MCFL logo did appear at the top of the publication, and the words "Volume 5, No. 3, 1978" appear to have been handwritten in below the logo by someone on the copy supplied to the court by the FEC.
6
The publication contained the voting records on abortion-related issues of many candidates for federal and state offices. It included at least two exhortations to "vote pro-life" and the statement that "No pro-life candidate can win in November without your vote in September." The publication contained photographs only of those candidates who were considered "pro-life." At the back of the publication, beside the exhortation "Vote Pro-Life," MCFL printed a disclaimer stating "This special election edition does not represent an endorsement of any particular candidate."
7
Shortly thereafter, MCFL printed and distributed 20,000 copies of a Complimentary Partial Special Election Edition, apparently for the purpose of correcting minor errors in the earlier edition. This edition did not contain a volume and number designation below the MCFL logo.
8
Copies of the two Special Election Editions were distributed to 5,985 MCFL contributors and 50,674 non-contributors. MCFL also sent copies to local chapters, presumably for distribution to their members, and mailed copies to individuals who requested them. The FEC contends that the rest of the copies were left in public areas for general distribution.2
9
MCFL spent a total of $9,812.76 from its general treasury on the two publications. The FEC found probable cause to believe that MCFL violated 2 U.S.C. Sec. 441b(a) by printing the flyers and distributing them to the general public. When conciliation proved unsuccessful, the FEC filed a complaint pursuant to 2 U.S.C. Sec. 437g(a)(6)(A) (1982), seeking a civil penalty and such other relief as the court deemed appropriate.
10
The parties filed cross-motions for summary judgment, and the court granted summary judgment for MCFL, holding that the two publications did not fit within the meaning of "expenditure" as the term is used in 2 U.S.C. Sec. 441b(b)(2) (1982). It also held that the publications were exempted from the prohibition against expenditures by 2 U.S.C. Sec. 431(9)(B)(i) (1982), which exempts "any news story, commentary, or editorial distributed through the facilities of any ... newspaper, magazine, or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate."
11
The court also concluded that if section 441b were applied to prohibit MCFL's expenditures in connection with the publication in question, the statute would be unconstitutional, violating the organization's rights of freedom of speech, press, and association.
II.
Section 441b(a) provides in part:
12
Sec. 441b. Contributions or expenditures by national banks, corporations, or labor organizations.
13
(a) It is unlawful for any national bank, or any corporation organized by authority of any law of Congress, to make a contribution or expenditure in connection with any election to any political office, or in connection with any primary election or political convention or caucus held to select candidates for any political office ...
14
(Emphasis added.) Section 441b(b)(2) provides that the term "contribution or expenditure" shall include
15
any direct or indirect payment, distribution, loan, advance, deposit, or gift of money, or any services, or anything of value (except a loan of money by a national or State bank made in accordance with the applicable banking laws and regulations and in the ordinary course of business) to any candidate, campaign committee, or political party or organization, in connection with any election....
16
2 U.S.C. Sec. 441b(b)(2) (emphasis added). This section refers to election expenditures by corporations, which the Act prohibits, except if such expenditures are made from separate segregated funds.
17
The general definitions section of the Federal Election Campaign Act contains a broader definition of expenditure which "includes"
18
any purchase, payment, distribution, loan, advance, deposit, or gift of money or anything of value, made by any person for the purpose of influencing any election for Federal office....
19
2 U.S.C. Sec. 431(9)(A)(i) (1982) (emphasis added). This section would seem to apply to the entire Act, including the provisions relating to disclosure by political and campaign committees and to limitations on individual expenditures.
20
Before the district court and on appeal, the FEC contended that the broader definition set forth in section 431(9)(A)(i) should control in the instant case. Even if the section 441b definition only were to be applied, the FEC argues, the use of the word "include" indicates congressional intent that other activities besides payments to a candidate may be considered contributions or expenditures. The district court, however, concluded that the section 441b(b)(2) definition was intended to be exclusive, because in the court's view, the following provision amounted to an adoption in the general definition section solely of the section 441b(b)(2) definition:
21
(B) The term "expenditure" does not include--
22
(v) any payment made or obligation incurred by a corporation or a labor organization which, under section 441b(b) of this title, would not constitute an expenditure by such corporation or labor organization.
23
2 U.S.C. Sec. 431(9)(B)(v).
24
On appeal, the FEC contends that section 431 does not adopt the narrower section 441b definition and that the broader section 431 definition should apply to corporate expenditures.
25
The presence of the word "include" in section 441b leaves open the possibility that "contribution or expenditure" could encompass more than payments to a candidate, campaign committee, or business organization.
26
A term whose statutory definition declares what it "includes" is more susceptible to extension of meaning by construction than where the definition declares what a term "means." It has been said "the word 'includes' is usually a term of enlargement, and not of limitation.... It, therefore, conveys the conclusion that there are other items includable, though not specifically enumerated ...
27
2A N. Singer, Sutherland Statutes and Statutory Construction 133 (4th ed. 1984) (quoting Argosy Ltd. v. Hennigan, 404 F.2d 14, 20 (5th Cir.1968) ). See Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 99-100, 62 S.Ct. 1, 3-4, 86 L.Ed. 65 (1941), United States v. Mass. Bay Transportation Authority, 614 F.2d 27, 28 (1st Cir.1980) ("Includes is not a finite word of limitation....").
28
The presence of section 431(9)(B)(v) alone does not indicate that section 441b(b)(2) should be read as though it contained the word "means" instead of "includes." Section 431(9)(B)(v) provides only that the definition of "expenditure" with regard to individual contributions shall be no broader than the definition with regard to corporate contributions. Therefore, the plain language of the statute suggests that "expenditure" in both contexts includes but is not limited to contributions to candidates, campaign committees, or political organizations.3
29
Ordinarily, the starting point in every case involving statutory construction is the statute itself, Consumer Products Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980), but where the statute is ambiguous, legislative history should be consulted. See United States v. Donruss Co., 393 U.S. 297, 303, 89 S.Ct. 501, 504, 21 L.Ed.2d 495 (1969). Because the two statutory definitions of "expenditure" create some ambiguity, we turn to the legislative history for aid in determining the full scope of the definition of expenditure under section 441b.
30
2 U.S.C. Sec. 441b originated in the Tillman Act, Pub.L. No. 59-36, 34 Stat. 864, 865 (1907), which prohibited all corporations from making money contributions "in connection with" elections. The statute was codified at 18 U.S.C. Sec. 610 by the Federal Corrupt Practices Act, Pub.L. No. 68-506, Sec. 302, 43 Stat. 1070, 1071 (1925) (prohibiting corporate expenditures and contributions of "anything of value" to federal candidates) and extended to unions by the War Labor Disputes Act, Pub.L. No. 78-89, Sec. 9, 57 Stat. 163, 167 (1943). The statute as amended by the Taft-Hartley Act, Pub.L. No. 80-101, Sec. 304, 61 Stat. 136, 159 (1947), prohibited any corporation or labor organization from making "a contribution or expenditure in connection with any election ..." for federal office. Id., quoted in United States v. UAW, 352 U.S. 567, 568-69, 77 S.Ct. 529, 529-30, 1 L.Ed.2d 563 (1957) (emphasis added).
31
The legislative history of the Taft-Hartley Act includes the 1946 report of the House Special Committee to Investigate Campaign Expenditures, which stated:
32
The intent and purpose of the provision of the act prohibiting any corporation or labor organization making any contribution in connection with any election would be wholly defeated if it were assumed that the term "making any contribution" related only to the donating of money directly to a candidate, and excluded the vast expenditures of money in the activities herein shown to be engaged in extensively. Of what avail would a law be to prohibit the contributing direct to a candidate and yet permit the expenditure of large sums in his behalf?
33
H.R.Rep. No. 2739, 79th Cong., 2d Sess. 36-37 (1947), quoted in United States v. UAW, 352 U.S. at 581, 77 S.Ct. at 536. The committee recommended that the statute
34
be clarified so as to specifically provide that expenditures of money for salaries to organizers, purchase of radio time, and other expenditures by the prohibited organizations in connection with elections, constitute violations of the provisions of said section, whether or not said expenditures are with or without the knowledge or consent of the candidates.
35
Id. at 46 (italics omitted), quoted in United States v. UAW, 352 U.S. at 582, 77 S.Ct. at 536.
36
During congressional debate on the bill that was ultimately enacted, Senator Taft observed that the term "expenditure" would include any advertisement or newspaper published for political purposes by a union or corporation.
37
[W]e have long prohibited corporations from contributing money for political purposes, and it was always supposed that the law prevented a corporation from operating newspapers for that purpose or advertising in newspapers for that purpose, until labor organizations were included ... and then it was said that the law prohibited contributions, but that political advertisements and political pamphlets could be published by the union or corporation itself.
38
So what we are proposing to do is to subject labor organizations to exactly the same prohibition to which corporations have been subjected, and, so far as I know, including the things which I think the original law covered but regarding which doubt was raised by labor organizations.
39
93 Cong.Rec. 6436 (1947).
40
The following exchange clarifies Senator Taft's position:
41
Mr. Pepper.... Would the newspaper called Labor, which is published by the Railway Labor Executives, be permitted to put out a special edition of the paper, for example, in support of President Truman, if he should be the Democratic candidate for the presidency next year, and in opposition to the Senator from Ohio, if he should be the Republican nominee for the Presidency, stating that President Truman was a friend of labor and that Senator of Ohio was not friendly to labor? Would that be called a political expenditure on the part of the labor organization?
42
Mr. Taft. If it were supported by union funds contributed by union members as union dues it would be a violation of the law, yes. It is exactly as if a railroad itself, using stockholders' funds, published such an advertisement in the newspaper supporting one candidate as against another.... The prohibition is against a labor organization using its funds either as a contribution to a political campaign or as a direct expenditure of funds on its own behalf.
43
93 Cong.Rec. 6436-37 (1947).
44
The foregoing language of Senator Taft indicates his intent that a special election edition of a union or corporate newsletter constitutes a prohibited expenditure under the Act. The Supreme Court provided a gloss to the congressional debate with its comment in United States v. CIO, 335 U.S. 106, 121, 68 S.Ct. 1349, 1356, 92 L.Ed. 1849 (1948), noting:
45
If Sec. 313 were construed to prohibit the publication, by corporations and unions in the regular course of conducting their affairs, of periodicals advising their members, stockholders or customers of danger or advantage to their interests from the adoption of measures, or the election to office of men espousing such measures, the gravest doubt would arise in our minds as to its constitutionality.
46
(Footnote omitted.) The Court held that the statute did not prohibit the publication of an edition of the weekly CIO News which was published with union funds, distributed only to union members or purchasers of the issue, and carried a statement by the CIO president urging all members to vote for a certain congressional candidate.
47
The Court concluded that "[a]pparently 'expenditure' was added to eradicate the doubt that had been raised as to the reach of 'contribution,' not to extend greatly the coverage of the section," CIO, 335 U.S. at 122, 68 S.Ct. at 1357 (footnote omitted), and stated that "[i]t would require explicit words in an act to convince us that Congress intended to bar a trade journal, a house organ, or a newspaper, published by a corporation, from expressing views on candidates ... in the regular course of its publication." Id. at 123, 68 S.Ct. at 1357.
48
In United States v. UAW, 352 U.S. 567, 77 S.Ct. 529, 1 L.Ed.2d 563 (1957), the Supreme Court held that expenditure of union dues to sponsor political advertisements on commercial television violated the prohibition against corporate or labor organization expenditures in connection with an election for federal office. The Court examined extensively the legislative history of the Taft-Hartley Act, and concluded that Congress added the term "expenditure" to the statute precisely to embrace indirect campaign contributions such as union-sponsored political advertisements. UAW, 352 U.S. at 585, 77 S.Ct. at 538. The Court distinguished CIO on the ground that the CIO newspaper was distributed only to union members and newspaper purchasers, not to the general public. United States v. UAW, 352 U.S. at 589, 77 S.Ct. at 540. The evil at which Congress aimed, the Court observed, "is the use of corporation or union funds to influence the public at large to vote for a particular candidate or a particular party." Id.
49
In 1971, the Federal Election Campaign Act added the following language to the statute:
50
As used in this section, the phrase "contribution or expenditure" shall include any direct or indirect payment, distribution, loan, advance, deposit, or gift of money, or any services, or anything of value (except a loan of money by a national or State bank made in accordance with the applicable banking laws and regulations and in the ordinary course of business) to any candidate, campaign committee, or political party or organization, in connection with any election to any of the offices referred to in this section....
51
Pub.L. No. 92-225, Sec. 205, 86 Stat. 3, 10 (emphasis added) and provided for the establishment of separate segregated funds to be used for political purposes. Id. Representative Hansen, who sponsored the bill, explained that
52
The effect of this language is to carry out the basic intent of section 610, which is to prohibit the use of union or corporate funds for active electioneering directed at the general public on behalf of a candidate in a Federal election.
He added that
53
The net effect of the amendment, therefore, is to tighten and clarify the provisions of section 610 of title 18, United States Code, and to codify the case law.
54
117 Cong.Rec. H43379 (1971). Nothing in Representative Hansen's remarks indicates that the change in language from "in connection with any federal election" to "to any candidate ... in connection with any election" was meant to narrow the scope of section 610. See Pipefitters Local Union 562 v. United States, 407 U.S. 385, 410-411, 92 S.Ct. 2247, 2262-63, 33 L.Ed.2d 11 (1972).4 In short, nothing in the legislative history suggests that Congress meant to narrow the prohibition of expenditures "in connection with" a federal election by the 1971 addition of the phrase "to any candidate." We conclude that section 441b prohibits expenditures in connection with federal elections as well as expenditures made to candidates for federal office. Therefore, we hold that the expenditure in the instant case is embraced by the section 441b definition of expenditure.
III.
55
The district court opinion suggests that even if section 441b on its face were interpreted to preclude the expenditure in the instant case, the section 441b definition of expenditure should be read to incorporate the "express advocacy" requirement set forth in Buckley v. Valeo, 424 U.S. 1, 44, 96 S.Ct. 612, 646, 46 L.Ed.2d 659 (1972). The court concluded that the MCFL publications did not expressly advocate the election or defeat of any particular candidate, and therefore would not come within the scope of section 441b. We do not decide whether the section 441b definition of expenditure includes an "express advocacy" requirement, because we conclude, contrary to the district court, that the MCFL publication would fit within the definition of expenditure, even if an express advocacy requirement were incorporated into the definition.
56
The Buckley Court stated that "explicit words of advocacy of election or defeat of a candidate include 'vote for,' 'elect,' 'support,' 'Smith for Congress,' 'defeat,' 'reject,' etc." Buckley, 424 U.S. at 44, n. 52, 96 S.Ct. at 647, n. 52. The statement "Vote Pro-Life" does not fit within the Buckley definition of express advocacy because it does not advocate the election of particular candidates for particular offices, but urges support of a general position on a controversial issue. Compare the instant case with FEC v. Central Long Island Tax Reform Immediately Committee, 616 F.2d 45, 53 (2d Cir.1980). The MCFL Special Election Edition, however, explicitly advocated the election of particular candidates in the primary elections and presented photographs of those candidates only. It reminded the reader that "your vote in the primary will make the critical difference in electing pro-life candidates."5 Thus, the Special Election Edition expressly advocated the election of clearly identified candidates within the meaning of Buckley. Id.
IV.
57
The district court concluded that, even if the Special Edition amounted to express advocacy, it was exempt from Sec. 441b because it constituted a periodical publication. 2 U.S.C. Sec. 431(9)(B)(i) (1982) exempts from the reach of the statute "any news story, commentary, or editorial distributed through the facilities of any ... newspaper, magazine or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate."
58
The district court stated that the Special Election Editions were similar in newsprint, sheet form size and format to the MCFL Newsletter, which "typically filled 6-10 pages of newsprint and included explanations and endorsements of its opposition to abortion, reports of political developments and judicial rulings on abortion-related issues, announcements of social activities for members, and appeals for funds."
59
The court observed that the sparse legislative history of the exemption indicates that Congress intended the exemption to be interpreted broadly, coextensive with the First Amendment. Finally, the court noted that, according to the legislative history, the exemption was intended to codify existing law, presumably including dicta from United States v. CIO, 335 U.S. 106, 123, 68 S.Ct. 1349, 1357, 92 L.Ed. 1849 (1948), to the effect that "it would require explicit words in an act to convince us that Congress intended to bar a trade journal, a house organ, or a newspaper, published by a corporation, from expressing views on candidates or political proposals in the regular course of its publication."
60
We believe the Special Election Editions themselves do not constitute newspapers, magazines or periodical publications within the meaning of the statute. MCFL published these editions not periodically, but sporadically, and only during federal election campaigns. Moreover, at least 50,000 copies of the special editions were distributed at no cost to a large number of people; and the editions contained no printed volume or issue number nor any masthead designating them as newspapers or periodicals.6
61
Defendant argues, however, that the regular MCFL newsletter is a newspaper, magazine, or periodical publication, and that the Special Election Editions may be considered news stories, commentaries or editorials distributed through the newsletter's facilities. However, even assuming that the regular MCFL newsletters may be considered periodical publications, this argument must fail. The circulation of the Special Election Editions constituted approximately twenty times that of any edition of the regular newsletter. The Special Editions did not carry the masthead of the MCFL Newsletter; nor did they contain a printed volume and issue number. Although they bore some physical resemblance to the regular newsletters, nothing in the editions informed the reader that the editions were at all related to the MCFL newsletters. In fact, the editions were published by a staff that produced no previous or subsequent newsletters. Under the circumstances, the Special Editions may not be considered news stories, commentaries, or editorials because the editions were not distributed through the newsletter's facilities, were not published by the newsletter staff, did not contain the newsletter masthead, and were not limited to the usual MCFL newsletter circulation.
62
Neither may the publication of the Special Editions be considered one of the "normal functions of a press entity." FEC v. Phillips Publishing Co, 517 F.Supp. 1308, 1313 (D.D.C.1981). In Phillips Publishing, the court held that printing and distributing a letter soliciting subscriptions was a normal, legitimate press function and therefore was covered by the press exemption. Similarly, in Reader's Digest Association v. FEC, 509 F.Supp. 1210 (S.D.N.Y.1981), the court concluded that dissemination of a tape for the purposes of publicizing the magazine would fall within the press entity's legitimate function, and would be covered by the exemption. It is arguable that under certain circumstances publication of a special edition may be described as a normal function of a press entity. However, we do not consider distribution of a special edition at no cost to twenty times the customary circulation of the newspaper to be one of a newspaper's normal, legitimate functions--especially when the special edition does not carry the newspaper's masthead. We therefore hold that the Special Election Editions are not exempted from the reach of section 441b by the press exemption set forth in section 431(9)(B)(i).
V.
63
Because we conclude that the Special Election Edition falls within the ambit of section 441b, we turn to the question whether section 441b as applied to the Special Election Edition passes constitutional muster. The district court concluded that "if Sec. 441b were intended by Congress to prohibit MCFL's expenditures of printing and distributing the newsletters in question, it would be ... violative of MCFL's freedoms of speech, press, and association."
64
The FEC argues that section 441b as applied to the Special Election Edition did not affect MCFL's First Amendment rights, and that the government has a substantial interest in enforcing the statute.
65
The starting point of our analysis must be a classification of section 441b as a content-based restriction or a regulation of the time, place, or manner of expression. In the instant case, the statute prohibits the use of corporate funds to publish newsletters "in connection with" federal elections. The FEC has no quarrel with the time, place, or manner of expression of the MCFL Special Editions; it is the political content of the publications which runs afoul of the statute. Therefore, section 441b must be considered a content-based restriction of expression, and may be justified only by a showing of substantial government interest. See Police Department of Chicago v. Mosley, 408 U.S. 92, 92 S.Ct. 2286, 33 L.Ed.2d 212 (1972).
66
The FEC argues that section 441b does not affect MCFL's First Amendment rights because the Act does not absolutely prohibit corporations from engaging in political advocacy. Under the statute, MCFL would be permitted to use its corporate funds to establish a voluntary, segregated fund to be used for political purposes. 2 U.S.C. Sec. 441b(b)(2)(C) (1982). Had the Special Election Edition been produced with money from such a fund, the FEC argues, MCFL's freedom to engage in political advocacy would have been preserved. It does not appear to this court, however, that the availability of alternative methods of funding speech justifies eliminating the simplest method. Cf. Linmark Associates v. Willingboro, 431 U.S. 85, 93-94, 97 S.Ct. 1614, 1618-19, 52 L.Ed.2d 155 (1977); Spence v. Washington, 418 U.S. 405, 411 n. 4, 94 S.Ct. 2727, 2731 n. 4, 41 L.Ed.2d 842 (1974).7
67
The FEC contends that the regulation in the instant case is permissible because it is necessary to protect substantial government interests. The purposes of section 441b were set forth in FEC v. National Right to Work Committee, 459 U.S. 197, 207-08, 103 S.Ct. 552, 559-60, 74 L.Ed.2d 364 (1982):
68
to ensure that substantial aggregations of wealth amassed by the substantial advantages which go with the corporate form of organization should be converted into political "war chests" which could be used to incur political debts from legislators who are aided by the contributions.... The second purpose ... is to protect the individuals who have paid money into a corporation or union for purposes other than the support of candidates from having that money used to supprt political candidates to whom they may be opposed. (Citations omitted.)
The Court emphasized that:
69
the overriding concern behind the enactment of statutes such as the Federal Corrupt Practices Act was the problem of corruption of elected representatives through the creation of political debts. The importance of the governmental interest in preventing this occurrence has never been doubted. Likewise, in Buckley v. Valeo [424 U.S.] at 26-27 [96 S.Ct. at 638-39], we specifically affirmed the importance of preventing both the actual corruption threatened by large financial contributions and the eroding of public confidence in the electoral process through the appearance of corruption. These interests directly implicate "the integrity of our electoral process, and, not less, the responsibility of the individual citizen for the successful functioning of that process."
70
Id. at 208, 103 S.Ct. at 559 (additional citations omitted).
71
In the instant case, we must observe that the foregoing government interests do not seem to be substantially implicated by MCFL's expenditures. Because MCFL did not contribute directly to a political campaign, MCFL's expenditures did not incur any political debts from legislators. Moreover, contributors to MCFL need not be protected from having their money used for expenditures such as the Special Election Edition. Individuals who contribute to MCFL do so because they support MCFL's anti-abortion position and presumably would favor expenditures for a publication that informs contributors and others of the position of various candidates on the abortion issue. That would appear to be the very purpose of the organization and the contributions to it.
72
The FEC contends that the instant case is controlled by National Right to Work Committee, 459 U.S. 197, 103 S.Ct. 552, 74 L.Ed.2d 364. In that case, the Supreme Court upheld the prohibition of the use of corporate funds to distribute a letter soliciting contributions for the corporation's political action fund which, in turn, contributed directly to candidates. However, the instant case, unlike National Right to Work Committee, involves a corporation's indirect and uncoordinated expenditures in connection with a federal election, not a solicitation for direct contributions to candidates. See Federal Election Commission v. National Conservative Political Action Committee, --- U.S. ----, ----, 105 S.Ct. 1459, 1467, 84 L.Ed.2d 455 (1985). ("NRWC is consistent with this Court's earlier holding that a corporation's expenditures to propagate its views on issues of general public interest are of a different constitutional stature than corporate contributions to candidates.") The government has less interest in regulating independent expenditures than in regulating direct campaign contributions. As the Supreme Court stated in Buckley:
73
The absence of prearrangement and coordination of an expenditure with the candidate or his agent not only undermines the value of the expenditure to the candidate, but also alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate.
74
Buckley v. Valeo, 424 U.S. at 47, 96 S.Ct. at 648.
75
We must conclude that the FEC has offered no substantial government interest in prohibiting MCFL's expenditures for publication of its Special Election Editions. We therefore hold that the application of section 441b to indirect, uncoordinated expenditures by a non-profit ideological corporation expressing its views of political candidates violates the organization's First Amendment rights. On that basis, we affirm the judgment of the district court.
*
Of the Third Circuit, sitting by designation
1
The newsletter was published three times in 1973, five times in 1974, eight times in 1975, eight times in 1976, five times in 1977, and four times in 1978
2
The FEC submitted an affidavit from Jean Weinberg, not a member of MCFL, who certified that she obtained a copy of the Special Election Edition at a statewide conference of the National Organization of Women. Weinberg averred that she obtained her copy from a stack of about 200 which were available to the general public. MCFL states that it made no copies of the Special Election Edition available to the general public
3
In Reader's Digest Ass'n v. FEC, 509 F.Supp. 1210, 1213 n. 2 (S.D.N.Y.1981), which involved distribution of video tapes by the Reader's Digest to other media outlets, the court noted that Reader's Digest maintained that "the expenditures in question are not prohibited by the statute, since they were not made to any 'candidate, campaign or political party or organization.' " The court added, "However, the statute also covers indirect payments." Id
4
The statute was amended again in 1976, in response to Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1972). In Buckley, the Court construed the term "expenditure" as used in the individual expenditure limitation sections to mean express advocacy of the election or defeat of a particular candidate. 424 U.S. at 44, 96 S.Ct. at 646. This narrowing gloss was incorporated into the individual expenditure section of the statute in 1976 when the section prohibiting corporate and union expenditures was transferred from 18 U.S.C. Sec. 610 to 2 U.S.C. Sec. 441b by the Federal Election Campaign Act Amendments of 1976, Pub.L. No. 94-283, Sec. 321, 90 Stat. 475, 490
5
The disclaimer stating that "this special election edition does not represent an endorsement of any particular candidate" does not negate the expressions of advocacy in the publication
6
It is undisputed that MCFL printed 100,000 copies of the 1978 Special Election Edition and 20,000 copies of the Complimentary Partial Election Edition. In its answers to interrogatories, MCFL stated it had 5,633 "contributing and dues-paying members" in 1976, 5,148 in 1977, and 5,985 in 1978. During this period it published a total of seventeen newsletters. Apparently, only the election editions, published in 1976 and 1978, were distributed to persons who did not contribute financially to the organization
7
Moreover, establishment of a voluntary, segregated fund (political committee) requires disclosure of the names of contributors. 2 U.S.C. Sec. 432 (1982). Under certain circumstances, this requirement may deter political activity on the part of individuals and may chill political speech on the part of the corporation. See Buckley v. Valeo, 424 U.S. at 74, 96 S.Ct. at 661; FEC v. Hall-Tyner Election Campaign Committee, 678 F.2d 416, 423 (2d Cir.1982) (campaign disclosure provisions endanger First Amendment rights if an organization demonstrates a pattern of threats or the existence of specific manifestations of public hostility against the organization or its members). In addition, amicus curiae the Civil Liberties Union of Massachusetts (CLUM) contends that many issue-centered organizations would be prohibited by their own by-laws from registering as political committees because of a commitment to the principle of non-partisanship. Brief of CLUM at 21 | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1545765/ | 87 F.2d 253 (1937)
JAMERSON
v.
ALLIANCE INS. CO. OF PHILADELPHIA et al.
No. 5833.
Circuit Court of Appeals, Seventh Circuit.
January 8, 1937.
Rehearing Denied January 29, 1937.
*254 Bruce A. Campbell, R. E. Costello, and John M. Karns, all of East St. Louis, Ill., and P. H. Cullen, of St. Louis, Mo., for appellant.
George C. Willson and J. H. Cunningham, Jr., both of St. Louis, Mo., and Martin F. Oehmke, Harold G. Baker, and Ralph F. Lesemann, all of East St. Louis, Ill., for appellees.
Before EVANS and SPARKS, Circuit Judges, and BALTZELL, District Judge.
SPARKS, Circuit Judge.
Ten corporate fire insurance companies, non-residents of Illinois, instituted this action against appellant who was a citizen of Illinois. By it, appellees sought to enjoin appellant from prosecuting eleven separate pending suits in the city court of East St. Louis, Illinois, upon eleven separate policies of fire insurance issued to him by appellees upon a stock of merchandise subsequently destroyed by fire. Each appellee was a defendant in the state court in a separate suit on a separate policy, except the Star Insurance Company, which was a defendant in two suits, each upon a separate policy.
The bill inter alia alleged that each policy was a standard insurance contract and contained a provision that each insurer should not be liable for any more than its pro rata share of any total loss; that, although certain of the policies sued upon in the state court purported to constitute an individual liability of more than $3,000, yet each of the suits on those policies was brought for $2,999; that none of the appellees was liable on any of the policies because appellant fraudulently conspired with others to procure, and did procure all of the policies by false statements, *255 and did conspire to bring about the fire which destroyed the insured property for the purpose of defrauding appellees; that appellant was convicted in the United States Court on an indictment charging him with using the mails to promote that conspiracy. The bill alleged equity jurisdiction first, because of the language of the policies which required an accounting with respect to the total liability and the prorated liability, and second, because the equity proceeding would avoid a multiplicity of suits.
Appellees' prayer was for a temporary restraining order without notice, for a preliminary injunction after notice, and for a permanent injunction upon final hearing, against the prosecution of the suits in the state court. They further demanded a cancellation of the policies and offered to pay into court the premiums received by them; or, in the alternative, they asked the court to determine the liability of each insurer under the provisions of the policies.
Appellant resisted the application for injunction and filed his motion to dismiss the bill for want of jurisdiction or equity. The court granted a temporary restraining order, and also a temporary injunction after notice, and overruled the motion to dismiss the bill. The appellant elected to stand on his exception to the court's ruling in denying his motion to dismiss, and declined to plead further. Whereupon, final decree was entered cancelling the policies upon return of the premiums paid by appellant, and a permanent injunction was issued against prosecution of the suits in the state court.
It is first contended by appellant that the District Court had no jurisdiction because the requisite jurisdictional amount was not involved. In support of this contention, he relies mainly on Di Giovanni v. Camden Fire Ins. Ass'n, 296 U.S. 64, 56 S. Ct. 1, 80 L. Ed. 47; Walter v. Northeastern Railroad Co., 147 U.S. 370, 13 S. Ct. 348, 37 L. Ed. 206, and Georgia Power Co. v. Hudson (C.C.A.) 49 F.(2d) 66, 75 A.L.R. 1439. This contention was thoroughly discussed in a well considered opinion by the District Court in this case, in Alliance Ins. Co. v. Jamerson, 12 F. Supp. 957, in which the Di Giovanni Case was correctly distinguished in point of fact from the one at bar, and from the line of cases typified by McDaniel v. Traylor, 196 U.S. 415, 25 S. Ct. 369, 49 L. Ed. 533, and Woodmen of the World v. O'Neill, 266 U.S. 292, 45 S. Ct. 49, 51, 69 L. Ed. 293. In the latter case, it was held that, "A conspiracy to prosecute, by concert of action, numerous baseless claims against the same person for the wrongful purpose of harassing and ruining him, partakes of the nature of a fraudulent conspiracy; and in a suit to enjoin them from being separately prosecuted, it must likewise be deemed to tie together such several claims as one claim for jurisdictional purposes, making their aggregate amount the value of the matter in controversy." Conversely, we conceive of no reason why separate defendants in separate actions at law may not join their several claims for jurisdictional purposes, when, as here, their claims are identical and are the result of an unlawful and fraudulent conspiracy entered into by appellant and his co-conspirator against all of appellees. The District Court thus held, and we think the ruling was right under the decisions cited in that opinion. That court did not discuss the Georgia Power Company Case or the Walter Case. This may be due to the fact that they were not called to its attention. However, in neither of those cases was there such connection or community of interest between the claims, by reason of conspiracy or otherwise, as would authorize aggregation for the purpose of conferring jurisdiction under the ruling in the McDaniel and Woodmen Cases.
Furthermore, the amount in controversy with respect to the Star Insurance Company clearly exceeded the amount necessary to give jurisdiction over that appellee's claim. Provident Mut. Life Ins. Co. v. Parsons (C.C.A.) 70 F.(2d) 863; Mutual Life Ins. Co. v. Rose (D.C.) 294 F. 122. The motion to dismiss for lack of jurisdictional amount having been directed to the entire bill, it was properly overruled with respect to that basis for the motion. Grosjean v. American Press Co., 297 U.S. 233, 56 S. Ct. 444, 80 L. Ed. 660. But aside from this formal objection to the motion, we are convinced that the court's ruling was correct because the language of the policies established a community of interest among the appellees with respect to the subject matter involved which gave them a right to aggregate their claims or liabilities for jurisdictional purposes. Washington Market Co. v. Hoffman, 101 U.S. 112, 25 L. Ed. 782; First State Bank v. Chicago, R. I. & P. R. Co. (C.C.A.) 63 F.(2d) 585, 90 A.L.R. 544; Lovett v. Prentice (C.C.) *256 44 F. 459; American Central Ins. Co. v. Harmon Knitting Mills (C.C.A.) 39 F.(2d) 21; Milwaukee Mechanics' Ins. Co. v. Ciaccio (C.C.A.) 38 F.(2d) 153; Virginia-Carolina Chemical Co. v. Home Ins. Co. (C.C.A.) 113 F. 1.
It is further contended by appellant that the District Court was without equity jurisdiction first, because section 265 of the Judicial Code (28 U.S.C.A. § 379) provides that the writ of injunction shall not be granted by any court of the United States to stay proceedings in any state court, except where authorized by the Bankruptcy Act (11 U.S.C.A.); and second, because appellees had a full, adequate and complete remedy at law in the suits already instituted in the state court.
It is unnecessary to discuss at length the applicability of section 265 of the Judicial Code (28 U.S.C.A. § 379). The Supreme Court has held that it is not a jurisdictional statute, but one that merely goes to the equity presented by the bill. That court has further held that if the bill discloses a case appropriate for the exercise of equitable and injunctive powers of a federal court, an injunction of the character here involved may be issued. Smith v. Apple, 264 U.S. 274, 44 S. Ct. 311, 68 L. Ed. 678; Woodmen of the World v. O'Neill, supra. This question was fully discussed in the District Court's opinion, and we concur in the result reached therein.
It is axiomatic that equitable jurisdiction exists to cancel insurance policies, even after loss, where, because of special circumstances, the remedy at law is inadequate. Phnix Mutual Life Insurance Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501; Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S. Ct. 310, 79 L. Ed. 440; Di Giovanni v. Camden Fire Ins. Ass'n, supra. The controversy here is narrowed to whether the suggested remedy at law by way of defense to the separate legal actions in the state court was full, adequate and complete.
It can not be denied that the cancellation of the policies, the enjoining of the suits at law, and the fixing and apportionment of loss in the event of liability, are all of an equitable nature and are within the jurisdiction of equity. There are cases, however, which hold that equity's jurisdiction will be denied with reference to the relief of cancellation of policies of insurance for fraud in their procurement, when the same is sought after loss and after suits at law have been instituted in which the fraud is available as a defense. Generally, those cases have presented circumstances which were quite convincing that the legal remedy was adequate, and in such cases no violence was done to the well-established rule of equity. We find no Supreme Court decision which supports the doctrine that the loss and the institution of the legal action render the consideration of adequacy of remedy immaterial, and if there be other courts which have held otherwise, we feel constrained not to follow them.
On the question of adequacy of remedy by way of defense to the separate actions at law, the District Court considered and discussed the relevant subjects of the multiplicity and character of the suits at law, apportionment of loss, proportional liability, and accounting, and it held that the remedy at law was not adequate. That ruling is supported by the decisions of the Supreme Court of the United States, the Supreme Court of Illinois, and of this court, which the District Court discussed at length in its decision, and which it is not necessary here to repeat. We are in accord with that ruling.
It is further urged by appellant that appellees were guilty of laches which should deprive them of any right they might otherwise have had. This record discloses that the only delay of consequence in instituting this proceeding was occasioned by appellant's repeated promise that he would dismiss his actions at law in case he was convicted on the criminal charge. He was convicted. That judgment was affirmed by this court and he was denied certiorari by the Supreme Court. Under these circumstances, he is in no position to urge laches on the part of appellees. The bill was sufficient to support the decree, and the motion to dismiss was properly denied.
Other reasons are argued in support of the court's rulings, but we do not deem it necessary to discuss them.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545832/ | 40 B.R. 178 (1984)
In the Matter of Dennis L. ROSE, Diane Rose, Debtors.
HUNTINGTON NATIONAL BANK, Plaintiff,
v.
Dennis L. and Diane ROSE, Defendant.
Bankruptcy No. 3-83-02179(A).
United States Bankruptcy Court, S.D. Ohio, W.D.
June 25, 1984.
Lloyd D. Cohen, Dayton, Ohio, for debtors.
Lawrence T. Burick, Dayton, Ohio, for Huntington Nat. Bank.
George W. Ledford, Englewood, Ohio, Trustee.
DECISION AND ORDER
CHARLES A. ANDERSON, Bankruptcy Judge.
The Huntington National Bank [Huntington] objected on October 21, 1983, to the confirmation of the Chapter 13 debtors' proposed Plan, alleging that the Plan had not been proposed in good faith, as required by 11 U.S.C. § 1325(a)(3). Upon an Amended Complaint filed January 11, 1984 the matter was heard on March 13, 1984.
Huntington and debtors, Dennis L. Rose and Diane Rose, have been parties to several loan transactions, with the same loan officer representing Huntington throughout. It appears that all but the two most recent loans were repaid in full according to the loan agreements.
On March 11, 1983, Huntington lent debtors $1,054.27, to be repaid in 18 installments. This loan, secured by debtors' vehicle, appears to have been kept current until debtors filed their Chapter 13 petition on September 19, 1983, when $128.38 of the principal was due, according to Huntington's proof of claim.
On August 13, 1983, debtors arranged another loan from Huntington. This loan provides the basis for Huntington's instant complaint. The loan was unsecured and for the principal sum of $1,034.10 plus interest. Payments on it were to begin on September 13, 1983. None was made.
On September 15, 1983, after the loss of a second, parttime job by Dennis, debtors consulted with their attorney concerning their economic plight. This consultation resulted in the filing on September 19, *179 1983, of a voluntary Chapter 13 petition. Debtors listed $11,137 in secured debt and $6,920 in unsecured. Their combined monthly incomes were $1,090 and their monthly expenses were listed as $870. They propose to pay the $220 difference between income and expenses to the Chapter 13 Trustee monthly for three years. Under the Plan, unsecured claims are to be paid a 10% distribution.
The grounds for Huntington's bad faith objection to confirmation of the Plan are that the time proximity between obtaining the loan and filing in bankruptcy of just over one month with no payments made is too short and that debtors "puffed" their income on the loan application because on that application a second job was listed as providing $150 every two weeks but this income was not listed on the Chapter 13 petition. If the Court does approve the Plan, Huntington requests, in the alternative, that the Court require payment in full according to the terms of the August 13 loan agreement.
At the hearing, debtor Dennis testified that the second job was lost during the end of August because of scheduling conflicts and that this loss precipitated their filing in bankruptcy. He admitted to omitting $4500 in debts on the loan application because he "thought he could repay them." He added, though, that he dealt with the same loan officer who had approved his prior loans and that he told this officer that he had the same obligations as when he made his next-to-last application.[1] He further testified that after he obtained the loan, he purchased about $500 worth of carpeting. Debtors have since lost their mobile home.
DECISION
In numerous decisions, this Court has concluded that the issue of good faith in the filing of a Chapter 13 Plan is a question of fact, with the burden of proof assigned to the objector to the proposed Plan. Wright State University v. Novak, 25 B.R. 459, 460 (Bkrtcy., S.D.Ohio 1982) and citations therein; State of Ohio, Ohio Student Loan Commission v. Willis, 24 B.R. 293, 9 B.C.D. 1252 (Bkrtcy., S.D.Ohio 1982) ("Such determination of [good faith] intent . . . must be supported by evidence aliunde (though inclusive of the Court record itself) indicating that such bad faith subterfuge was indeed the Debtor's `primary purpose'." at 24 B.R. 295); Matter of Wright, 36 B.R. 663, 665 (Bkrtcy., S.D. Ohio 1984). This Court has repeatedly opined that there are no mathematical formulas to calculate good faith, and the amount of the contribution to a Chapter 13 Plan is merely one factor in determining good faith. See In re Wourms, 14 B.R. 169 (1981). See, also In re Hines, 723 F.2d 333, 9 C.B.C.2d 1099, 11 B.C.D. 682 (3d Cir.1983) holding that the Chapter 13 debtors did not have affirmative burden, beyond the showing made in the report of the standing trustee, to show that their reorganization plan, which provided for only nominal payments to unsecured creditors, was filed in good faith.
In Memphis Bank and Trust Co. v. Whitman, 692 F.2d 427, 9 B.C.D. 1140, B.L.D. ¶ 68901, 7 C.B.C.2d 727, (6th Cir. 1982), the Sixth Circuit indicated that bankruptcy courts have and must exercise considerable discretion to avoid apparent abuses of the Chapter 13 process. The legal standard enunciated in Whitman at 431-2 is "dishonest conduct" to deny confirmation, as follows:
"The `good faith' requirement is neither defined in the Bankruptcy Code nor discussed in the legislative history. The phrase should, therefore, be interpreted in light of the structure and general purpose of Chapter 13. Obviously the liberal provisions of the new Chapter 13 are *180 subject to abuse, and courts must look closely at the debtor's conduct before confirming a plan. We should not allow a debtor to obtain money, services or products from a seller by larceny, fraud or other forms of dishonesty and then keep his gain by filing a Chapter 13 petition within a few days of the wrong. To allow the debtor to profit from his own wrong in this way through the Chapter 13 process runs the risk of turning otherwise honest consumers and shopkeepers into knaves. The view that the Bankruptcy Court should not consider the debtor's pre-plan conduct in incurring the debt appears to give too narrow an interpretation to the good faith requirement. See, e.g., Matter of Kull, 12 B.R. 654, 659 (S.D.Ga.1981) (among the facts a court should consider to determine whether a debtor has acted in good faith are "the circumstances under which the debtor contracted his debts and his demonstrated bona fides, or lack of same in dealing with his creditors.")
"One way to refuse to sanction the use of the bankruptcy court to carry out a basically dishonest scheme under Chapter 13 is to deny confirmation to the proposed plan. When the debtor's conduct is dishonest, the plan simply should not be confirmed. Unless courts enforce this requirement, the debtor will be able to thwart the statutory policy denying discharge in Chapter 7 cases for dishonesty."
"Another way to deal with the problem when the conduct is questionable but is not shown to be dishonest, as the Bankruptcy Court found it to be in the instant case, is to require full payment in accordance with the contract."[2] [emphasis added.]
The Court notes that the $1034 loan in question from Huntington represents about 15% of debtors' total unsecured debts listed and about 6% of total debts listed. This loan, while not insignificant, does not then represent a substantial portion of total debts. Debtors propose to pay $220 every month for three years to the Chapter 13 Trustee for repayment of their debts. This amount represents 20% of their combined salaries and, more importantly, is the full excess of their salaries over their expenses. No more could be asked of them.
Huntington contends that debtors "puffed" their incomes on the loan application. But any discrepancy between the incomes listed on the loan application and on the Chapter 13 petition was explained by the loss of Debtor's second job. Huntington made no showing that this explanation was either inadequate or false.
The unexpected loss of the second job after obtaining the loan likewise explains the close time proximity of one month between making the loan and filing in bankruptcy. This unexpected occurrence distinguishes this case from this Court's opinion in First National Bank of Dayton, Ohio v. Robinson, 26 B.R. 377, B.L.D. (CCH) ¶ 69,141 (Bkrtcy., S.D. Ohio 1982), wherein the Court wrote, at 26 B.R. 379: "In essence, the Court does not tolerate the discharge of debt tactically incurred shortly before invocation of the Chapter 13 process when such debt would be nondischargeable under Chapter 7 because of apparent dishonesty or questionable conduct." (emphasis supplied.)
Huntington's objections as to puffed income and the close time proximity do not constitute dishonest conduct per se and Huntington did not, in its pleadings, raise the issue of the debtors' omission of $2900 in unsecured debts.
It is important to note that Huntington has not proven any conduct which would render its debt not dischargeable in bankruptcy.
Remaining for the Court to consider is the issue of whether debtors' conduct was "dishonest" or "questionable" so as to provide the basis for the Court requiring full *181 repayment of Huntington's last loan pursuant to the terms of the loan agreement.
While the Court is satisfied with debtors' explanations as to the alleged income puffing and the time proximity, thus rendering these acts neither dishonest nor questionable, there is, however, ample reason to pause over the omission of $2900, or about 40% of total unsecured debts when negotiating the loan. Although Huntington never properly raised this issue in the pleadings and did not sustain the burden of proof as to nondischargeability in a Chapter 7 case, it came to the Court's attention during the trial. Such significant omissions could easily raise the spectre of questionable conduct, under the broad Sixth Circuit rule, even considering the long-term business relationship between debtors and Huntington.
Although Huntington has not carried the burden of proof necessary to establish that the debt is not dischargeable, the evidence does establish that Huntington's claim rises higher than the other general unsecured claims. Debtors should not be enabled to profit by retaining equity in property and thereby profit from their conduct on the eve of filing by paying Huntington only 10% of its claim (on a parity with the other unsecured claims). By the same token, "good faith" does not equate to the impossible. An analysis of their income and budget for bare necessities demonstrates that there is no possibility of paying Huntington's entire claim. They should not be expected as a matter of good faith to pay more to a Chapter 13 plan than the liquidation value of their meagre assets.
IT IS HEREBY ORDERED that the proposed Plan treating Huntington in the same class as other unsecured creditors be not confirmed because of the rule in this Circuit which constrains the bankruptcy courts to refuse "to sanction the use of the bankruptcy court to carry out a basically dishonest scheme under Chapter 13."
IT IS FURTHER ORDERED, that Debtors are granted two weeks either to propose an Amended Plan or to convert the case to a liquidation case pursuant to Chapter 7 of the Bankruptcy Code.
NOTES
[1] As noted above, the next-to-last loan was made on March 11, 1983. According to the proofs of claims filed herein, at least $1600 of the omitted debts had been incurred prior to March 11. There is no evidence before the Court about whether these amounts had been listed on debtors' prior loan application(s). Since Huntington bears the burden of proof, the loan officer is imputed to have had knowledge of $1600 of the omitted debts. Thus, debtors omitted $2900 in unsecured debts from the loan application.
[2] This last sentence provides a basis for Huntington's request that the Court require full payment pursuant to the terms of the loan agreement. The corresponding standard to be found before ordering full payment is "questionable conduct." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545811/ | 988 A.2d 329 (2010)
119 Conn.App. 304
STATE of Connecticut
v.
Noel MENDOZA.
No. 29547.
Appellate Court of Connecticut.
Argued September 16, 2009.
Decided February 9, 2010.
*331 Andrew S. Liskov, special public defender, Bridgeport, for the appellant (defendant).
Leonard C. Boyle, deputy chief state's attorney, with whom, on the brief, were Michael Dearington, state's attorney, Marc G. Ramia, assistant state's attorney, and Melissa Patterson, deputy assistant state's attorney, for the appellee (state).
DiPENTIMA, GRUENDEL and LAVERY, Js.
GRUENDEL, J.
The defendant, Noel Mendoza, appeals from the judgment of conviction, rendered after a jury trial, of criminal possession of a firearm in violation of General Statutes § 53a-217 (a)(1).[1] He claims that the trial court abused its discretion in permitting the state to reopen its case-in-chief and improperly denied his motion for a judgment of acquittal. In addition, the defendant alleges a double jeopardy violation. We affirm the judgment of the trial court.
The following undisputed facts are relevant to our resolution of the present appeal. In the early hours of June 20, 2006, the defendant's girlfriend, Dianna DeJesus, sat on her front porch at 63 Arch Street in Meriden. At that time, a dispute arose between the defendant and another individual on the property, and the defendant brandished a handgun. Frightened, DeJesus fled inside her residence. She then heard two gunshots, which she reported to the police via a 911 call. Jason Smith, whose residence abuts that of DeJesus, similarly contacted the police after hearing gunshots and observing a man on the concrete retaining wall that separates the properties. Officers from the Meriden police department responded to the scene, where they found two nine millimeter shell casings on the steps leading to the rear porch of DeJesus' residence and a Kel-Tec P-11 nine millimeter semiautomatic pistol with live ammunition in the magazine in a doghouse at the rear of DeJesus' property.
The defendant thereafter was arrested and charged, by amended information dated September 12, 2007, with criminal possession of a firearm in violation of § 53a-217 (a)(1) and reckless endangerment in the first degree in violation of General Statutes § 53a-63 (a). The state further filed apart B information charging the defendant with being a persistent serious felony offender in light of two prior convictions for the sale of narcotics in violation of General Statutes § 21a-277 (a).
A jury trial commenced on September 18, 2007. As part of its case-in-chief, the state presented the testimony of the Meriden police officers who discovered the firearm and shell casings on the DeJesus property. The state also offered the testimony of Gerard Petillo, a forensic firearm examiner at the department of public safety. Petillo testified that testing confirmed that the recovered firearm was operable. In addition, both DeJesus and Smith testified, and the state introduced approximately two dozen exhibits into evidence. On *332 September 19, 2007, the state rested, and the defendant immediately moved for a judgment of acquittal, stating that the state had not presented "evidence sufficient to support [the case] going to the jurors." The state objected, and a bench conference followed. Immediately thereafter, the following colloquy ensued:
"The Court: All right. The court is going to reserve decision on the [motion for a judgment of acquittal]. I'm going to review my notes. In the meantime, [counsel], [I] just excused the jury and [the state] rested about five minutes ago. [The prosecutor] indicated there was the issue... which had been placed on the record earlier on, I forget what day, regarding [the] defendant's prior felony conviction with regard to the first count as a possible stipulation and you wish to be heard on that?
"[The Prosecutor]: Yes, Your Honor. I did approach counsel prior to the start of trial with regard to the element of count one[2] regarding the defendant previously being convicted of a felony. Subsequent to that ... the state indicated on the record, again, that the state was seeking a stipulation. Counsel indicated that he would consider that and discuss that with his client, and that issue was never broached again. So, if defense counsel's willing to stipulate, there won't be any issue at this point. If defense is not willing to stipulate, the state's going to make a motion to reopen its case so that it may satisfy that particular prong of count one.
"The Court: [Defense counsel], my recollection is ... that matter, I believe, was placed on the record. [The prosecutor] just noted that that matter has not been, apparently, resolved prior to the time [he] just rested, but it had been broached. It doesn't come as a surprise. What ... do you have to say?
"[Defense Counsel]: Well, Your Honor, the state is correct, Your Honor. They did... approach me in regards to my client's willingness to stipulate to that issue. I indicated to them ... I couldn't make that decision until I approached my client and consulted with him and gave him my opinion. Throughout the, I guess, preparations for trial and preparations for evidence, I neglected to talk to my client about that issue, Your Honor. If I could, Your Honor, speak to him over the course of this evening and get back to the court tomorrow morning and to [the prosecutor], I'm pretty sure we'd be able to resolve it.
"The Court: All right."
The court thus reserved its decision on the motion and dismissed the jury for the day.
The next morning, the court addressed the defendant's motion for a judgment of acquittal outside the presence of the jury. After hearing from the parties, the court granted the motion with respect to the reckless endangerment charge. The court then shifted its attention to the criminal possession of a firearm charge, noting that the state filed a motion "to reopen its casein-chief in order to offer evidence of the defendant's felony status" that morning. During argument thereon, the state maintained that it "inadvertently rested prior to providing any evidence of the defendant's convicted felon status" and emphasized that "the defendant did not alert the state to the evidentiary gap" concerning his prior felony convictions. The state opined that "the defendant's felony status really is not a contested issue," stating that it earlier had filed a part B information detailing his prior convictions and *333 "had ordered certified copies of conviction for the defendant's felony convictions...." In addition, the state averred that it had placed on the record the possibility of a stipulation regarding the defendant's prior convictions at the outset of trial.[3] In response, defense counsel conceded that "mere inadvertence" caused the evidentiary gap and further acknowledged that "if the state had not inadvertently forgotten... to introduce [that] evidence, there would be no prejudice [to the defendant]." Defense counsel nevertheless contended that the state's motion to reopen its case-in-chief should be denied. Relying on the decision of our Supreme Court in State v. Allen, 205 Conn. 370, 533 A.2d 559 (1987), counsel contended that "the defendant doesn't have to specifically state on the record what ... is lacking in the state's evidence, so long as he raises the motion for a judgment of acquittal ... and that becomes the trigger ... to alert the state... to the deficiency ... in their evidence...."
In considering the arguments of counsel, the court emphasized that when the state originally expressed its intention to seek to reopen the case to introduce evidence of the defendant's felony convictions, the defendant "did not indicate that [the felony status issue] had been a basis for your motion for a judgment of acquittal" and stated "for the record that ... this discussion regarding the failure of the state to introduce the felony conviction occurred within ... minutes of the state resting its case." Concluding that the defendant "did not specifically call the state's attention, nor the court's attention, to the evidentiary gap" regarding prior felony convictions, the court granted the motion to reopen "for the limited purpose of the issue of the felony convictions."
The state proceeded to offer the testimony of Virginia Hemming, a deputy clerk with the Superior Court. Hemming testified that the defendant had been convicted of a felony on January 17, 1992. The state then rested, and the defendant renewed his motion for a judgment of acquittal, which the court denied. The jury thereafter found the defendant guilty of criminal possession of a firearm. The court rendered judgment accordingly and sentenced the defendant to a total effective term of five years incarceration. From that judgment, the defendant appeals.
I
We first consider the defendant's contention that the court abused its discretion in permitting the state to reopen its case-in-chief. Relying principally on State v. Allen, supra, 205 Conn. at 370, 533 A.2d 559, the defendant maintains that the court improperly permitted the state to reopen its case to prove an essential element of the crime of criminal possession of a firearm. Careful examination of that precedent persuades us otherwise.
"[I]f a trial court feels that, by inadvertence or mistake, there has been a failure to introduce available evidence upon a material issue in the case of such a nature that in its absence there is a serious danger of a miscarriage of justice, it may properly permit that evidence to be introduced at any time before the case has been decided." (Internal quotation marks omitted.) State v. Zoravali, 34 Conn.App. 428, 441, 641 A.2d 796, cert. denied, 230 Conn. 906, 644 A.2d 921 (1994). "The decision *334 to reopen a criminal case to add further testimony lies within the sound discretion of the court, which should be exercised in conformity with the spirit of the law and in a manner to subserve and not to impede or defeat the ends of substantial justice.... The purpose ... is to preserve the fundamental integrity of the trial's truth-finding function." (Internal quotation marks omitted.) State v. Jones, 96 Conn.App. 634, 643, 902 A.2d 17, cert. denied, 280 Conn. 919, 908 A.2d 544 (2006). "The trial court's discretion will be reversed only upon manifest abuse of discretion or injustice." State v. Zoravali, supra, at 442, 641 A.2d 796.
That discretion is not without limit. In the seminal case of State v. Allen, supra, 205 Conn. at 370, 533 A.2d 559, our Supreme Court addressed an instance in which the defendant alerted the state to a specific evidential deficiency in its case-in-chief via a motion for a judgment of acquittal, and the state thereafter moved to reopen its case-in-chief in order to rectify that deficiency. That procedural posture presented two competing concerns. On one hand, to "permit the state to reopen its case-in-chief after the defendant has pointed out in his motion for judgment of acquittal the specific particulars why the state had failed to present a prima facie case rewards the state for its `laxity' and in practical effect turns the defendant's attorney into a prosecutorial arm of the state." Id., at 375, 533 A.2d 559. On the other hand, "a trial is not a game of technicalities, but one in which the facts and truth are sought." (Internal quotation marks omitted.) Id., at 375-76, 533 A.2d 559.
The Allen court recognized the "wide discretion enjoyed by the trial court to permit the reopening of a case after either side has rested." Id., at 380, 533 A.2d 559. It nevertheless observed that the "precise facts and procedural posture of this case are significantly different." Id., at 380-81, 533 A.2d 559. Expounding on that distinction, the court noted that the state in that case "conceded that the evidence presented in its case-in-chief was insufficient" and that the state "offered new evidence on reopening and did not merely offer cumulative evidence or clarify previous testimony." Id., at 383, 533 A.2d 559. The court also distinguished its earlier decision in State v. Watson, 165 Conn. 577, 345 A.2d 532 (1973), cert. denied, 416 U.S. 960, 94 S. Ct. 1977, 40 L. Ed. 2d 311 (1974), by explaining that the defendant in Watson "did not file a motion for judgment of acquittal and thus the defendant was not the one responsible for pointing out the potential evidentiary gap in the state's case." State v. Allen, supra, 205 Conn. at 382, 533 A.2d 559. Accordingly, the court reasoned that "allowing the state to reopen its case-in-chief after the defendant has identified its shortcomings was fundamentally unfair to the defendant and an abuse of the trial court's discretion." (Emphasis added.) Id., at 383-84, 533 A.2d 559.
In concluding, the court articulated its holding in plain terms: "Our holding in this case does not preclude a trial court from exercising its discretion to reopen a case. We only hold that when the state has failed to make out a prima facie case because insufficient evidence has been introduced concerning an essential element of a crime and the defendant has specifically identified this evidentiary gap in a motion for judgment of acquittal, it is an abuse of the trial court's discretion to permit a reopening of the case to supply the missing evidence." Id., at 385, 533 A.2d 559.
The defendant in the present case maintains that Allen supports his claim that the court abused its discretion in permitting the state to reopen its case-in-chief. Indeed, this case is similar in certain respects *335 to that decision. The state concedes that the evidence originally presented in its case-in-chief was insufficient as to the felony conviction element of the charged offense. In addition, the motion to reopen sought to introduce new evidence and "did not merely offer cumulative evidence or clarify previous testimony." Id., at 383, 533 A.2d 559. At the same time, the present case is materially different from Allen in that the defendant here failed to specifically identify the evidentiary gap in the state's case-in-chief in moving for a judgment of acquittal. The defendant seeks to minimize the significance of that critical distinction by arguing that such specificity is unnecessary. In his view, because "the very purpose and essence of a motion for a judgment of acquittal is to serve notice of an evidentiary insufficiency in the state's case," the mere act of moving for such a judgment itself alerts the state to an evidentiary deficiency in its case. Accordingly, the defendant insists that permitting the state to reopen its case after he moved for a judgment of acquittal on the ground that the state had not presented "evidence sufficient to support [the case] going to the jurors" amounted to an abuse of discretion.
For multiple reasons, we do not agree with the defendant. First and foremost, the plain language of Allen undermines his claim. The holding of Allen proscribing the reopening of the state's case-in-chief contained two prerequisites: (1) that the state failed to make out a prima facie case because insufficient evidence had been introduced concerning an essential element of a crime; and (2) that the defendant specifically identified this evidentiary gap in a motion for a judgment of acquittal. Id., at 385, 533 A.2d 559. It is undisputed that the defendant did not specifically identify the evidentiary gap regarding his felony status in his motion for a judgment of acquittal.
In addition, our Supreme Court has interpreted its precedent in Allen in a manner contrary to that advocated by the defendant in this appeal. In State v. Roman, 224 Conn. 63, 616 A.2d 266 (1992), cert. denied, 507 U.S. 1039, 113 S. Ct. 1868, 123 L. Ed. 2d 488 (1993), the court explained that "[u]nless the state's offer seeks to fill an evidentiary gap in its prima facie case that was specifically called to the state's attention by the defendant's motion for acquittal; see State v. Allen, supra, [205 Conn.] at 385, 533 A.2d 559; the trial court may permit additional evidence to be presented even though that evidence strengthens the case against the defendant." State v. Roman, supra, at 71, 616 A.2d 266; State v. Jones, supra, 96 Conn. App. at 643, 902 A.2d 17. The lesson of Allen and Roman is that unless the defendant specifically has identified an evidentiary gap in the state's prima facie case, the trial court retains discretion to permit the state to reopen its case-in-chief in response to a motion for a judgment of acquittal. We are bound by that precedent.[4]
*336 Furthermore, a practical problem abounds with the defendant's interpretation. If the mere act of moving for a judgment of acquittal necessarily alerts the state to its evidential insufficiency, as the defendant maintains, then the trial court never could exercise its discretion in such instances. The Supreme Court in Allen expressly held to the contrary, stating that "[w]e reach the result in this case without interfering with a trial court's discretion to permit a reopening under appropriate circumstances in a future case"; State v. Allen, supra, 205 Conn. at 381, 533 A.2d 559; and that "[o]ur holding in this case does not preclude a trial court from exercising its discretion to reopen a case." Id., at 385, 533 A.2d 559.
The defendant highlights the following language from Allen regarding a defendant's possible silence in the face of an evidentiary gap in the state's prima facie case: "[T]he state failed to introduce any evidence as to ... an essential element of the crime [charged].... As the state conceded at oral argument before us, had the defendant remained silent until after the verdict had been rendered, the omission of this evidence would have required a judgment of acquittal either in the trial court or on appeal." (Citation omitted.) Id., at 377, 533 A.2d 559. From that dictum, the defendant extrapolates that "in such circumstances ... wherein a prima facie case is lacking, it makes tactical sense for a defendant to first forgo moving for an acquittal after the state has rested and then decline to offer any evidence," which he describes as a beneficial trial strategy. Risky also describes that strategy, as it presumes that the state will decline to seek to reopen its case-in-chief at a later point pursuant to Practice Book § 42-35(3).[5] To suggest that the state would not have sought the court's permission to reopen its case to introduce evidence of the defendant's felon status prior to the entry of a verdict had the defendant not moved for a judgment of acquittal is to engage in sheer speculation and conjecture, which "have no place in appellate review." Narumanchi v. DeStefano, 89 Conn.App. 807, 815, 875 A.2d 71 (2005).
The defendant also makes much of the mention in Allen of People v. Belton, 23 Cal. 3d 516, 522, 591 P.2d 485, 153 Cal. Rptr. 195 (1979). Our Supreme Court stated: "The California Supreme Court has recognized that to require a defendant to state specific grounds in support of the motion for acquittal would place the burden upon him to point out to the prosecutor, as well as to the court, the gaps in the prosecution's case. Such a requirement would come perilously close to compelling a defendant to aid in his own prosecution and would lessen the prosecutor's burden to prove each and every element of the case beyond a reasonable doubt." (Internal quotation marks omitted.) State v. *337 Allen, supra, 205 Conn. at 380, 533 A.2d 559. The defendant posits that to specifically identify an evidentiary gap in the state's case would both aid his own prosecution and implicate his sixth amendment right to effective assistance of counsel. As he argues in his appellate brief, "[w]hen a defendant actually tells the state in its motion for a judgment of acquittal about evidentiary gaps in its casein-chief, the state will naturally know how to fill the gaps. It will then, as in the case at bar, seek to reopen its case to remedy the deficient proof." His argument misunderstands the holding of Allen. Under that precedent, a trial court is prohibited from granting a motion to reopen when a defendant specifically identifies in his motion for a judgment of acquittal an evidentiary gap in the state's case-in-chief concerning an essential element of a crime. Thus, Allen provides the very safeguard against the concerns articulated by the defendant.
The defendant's misunderstanding of Allen is further reflected in his argument that Practice Book § 42-40 does not require a defendant to specifically set forth the grounds for the motion for a judgment of acquittal. The proscription in Allen pertains not to whether the state ultimately will be permitted to reopen its case in certain circumstances but, rather, whether the trial court retains the discretion to make that determination. Allen plainly holds that "when the state has failed to make out a prima facie case because insufficient evidence has been introduced concerning an essential element of a crime and the defendant has specifically identified this evidentiary gap in a motion for judgment of acquittal," the trial court cannot permit the state to reopen its case to supply the missing evidence. State v. Allen, supra, 205 Conn. at 385, 533 A.2d 559. When such specific identification is lacking, the trial court exercises its discretion to preserve the fundamental integrity of the trial's truth-finding function; State v. Zoravali, supra, 34 Conn.App. at 442, 641 A.2d 796; in determining whether to grant a motion to reopen the state's case-in-chief. Thus, even absent a specific identification of the state's evidentiary gap in a motion for a judgment of acquittal, a defendant still may persuade a trial court that the motion to reopen should not be granted and, likewise, may still prevail on a motion for a judgment of acquittal. Indeed, the defendant so prevailed in the present case on the reckless endangerment charge.
Because the defendant did not specifically identify the state's evidentiary gap in his motion for a judgment of acquittal, the issue properly before us is whether the trial court abused its discretion in permitting the state to reopen its case-in-chief. On the particular facts of this case, we answer that query in the negative.
The record in the present case strongly suggests that, when the defendant moved for a judgment of acquittal, the issue of his status as a felon was not contemplated. It is undisputed that the defendant did not specifically identify that evidentiary issue in moving for a judgment of acquittal. Rather, the September 19, 2007 transcript indicates that the issue of the defendant's felony status was raised by the prosecutor. As it is particularly pertinent, we again note the following colloquy between counsel and the court:
"The Court: All right. The court is going to reserve decision on the [motion for a judgment of acquittal]. I'm going to review my notes. In the meantime, [counsel], [I] just excused the jury and [the state] rested about five minutes ago. [The prosecutor] indicated there was the issue... which had been placed on the record earlier on, I forget what day, regarding [the] defendant's prior felony conviction *338 with regard to the first count as a possible stipulation and you wish to be heard on that?
"[The Prosecutor]: Yes, Your Honor. I did approach counsel prior to the start of trial with regard to the element of count one regarding the defendant previously being convicted of a felony. Subsequent to that ... the state indicated on the record, again, that the state was seeking a stipulation. Counsel indicated that he would consider that and discuss that with his client, and that issue was never broached again. So, if defense counsel's willing to stipulate, there won't be any issue at this point. If defense is not willing to stipulate, the state's going to make a motion to reopen its case so that it may satisfy that particular prong of count one.
"The Court: [Defense counsel], my recollection is ... that matter, I believe, was placed on the record. [The prosecutor] just noted that that matter has not been, apparently, resolved prior to the time [he] just rested, but it had been broached. It doesn't come as a surprise. What ... do you have to say?
"[Defense Counsel]: Well, Your Honor, the state is correct, Your Honor. They did... approach me in regards to my client's willingness to stipulate to that issue. I indicated to them ... I couldn't make that decision until I approached my client and consulted with him and gave him my opinion. Throughout the, I guess, preparations for trial and preparations for evidence, I neglected to talk to my client about that issue, Your Honor. If I could, Your Honor, speak to him over the course of this evening and get back to the court tomorrow morning and to [the prosecutor], I'm pretty sure we'd be able to resolve it.
"The Court: All right."
Tellingly, at no time after the issue of the evidentiary gap regarding the defendant's felony status was raised by the state did the defendant ever indicate that that gap was a basis of his motion for a judgment of acquittal, as the court specifically found in ruling on the state's motion to reopen. To the contrary, counsel for the defendant requested time to speak with his client about the stipulation regarding his felony status and expressed optimism that the issue of proof of the defendant's felony status could be resolved. That record belies any claim, which we note that the defendant has not advanced, that his motion for a judgment of acquittal was predicated on evidential insufficiency concerning his status as a convicted felon.
Furthermore, it is significant that the state alleged, and the defendant conceded, at trial that the failure to offer evidence of the defendant's prior felony convictions was attributable to "mere inadvertence...." Coupled with that uncontested fact is the fact, which the court found, that the parties during trial discussed a possible stipulation on this point. Moreover, the state reminded the court that it earlier had filed a part B information detailing the defendant's prior convictions and "had ordered certified copies of conviction for the defendant's felony convictions...." See State v. Dunbar, 51 Conn.App. 313, 319, 721 A.2d 1229 (1998) (Allen distinguishable because state "was prepared to prove the essential element that is at issue"), cert. denied, 247 Conn. 962, 724 A.2d 1126 (1999). In such circumstances, the trial court in its discretion may permit the introduction of related evidence "at any time before the case has been decided." (Internal quotation marks omitted.) State v. Zoravali, supra, 34 Conn.App. at 441, 641 A.2d 796. In essence, the defendant, who neither apprised the court of the specific deficiency in the state's case nor voiced any objection when that deficiency was addressed by the state on September 19, 2007, now seeks the reversal of the trial *339 court's exercise of discretion on the basis of a deficiency beyond his contemplation at the time he moved for a judgment of acquittal. A trial, however, "is not a game of technicalities, but one in which the facts and truth are sought." (Internal quotation marks omitted.) State v. Allen, supra, 205 Conn. at 375-76, 533 A.2d 559.
We also note that the court expressly found that the defendant "did not specifically call the state's attention, nor the court's attention, to the evidentiary gap" regarding prior felony convictions. That factual finding is supported by the record before us. As we already have noted, the defendant did not specifically identify that evidentiary gap in moving for a judgment of acquittal. The September 19, 2007 transcript indicates that the state first raised that issue before the court. Moreover, even after the state raised the issue, the defendant did not claim that the evidentiary gap regarding his felony status was in any manner related to his motion for a judgment of acquittal. On that record, we cannot say that the court's finding was clearly erroneous.
In weighing the merits of the state's motion to reopen, the court was required to balance the defendant's interest in a fair proceeding with a trial's fundamental and ever present search for the truth. The record before us supports the court's finding that the defendant did not specifically call the state's attention, nor the court's attention, to the evidentiary gap regarding his prior felony convictions and strongly suggests that when he moved for a judgment of acquittal, the evidentiary gap as to his status as a felon was not contemplated. In addition, the defendant conceded that he had discussed a possible stipulation as to that evidentiary issue with the state at trial and further conceded that the state's failure to present evidence on that issue as part of its case-in-chief was due to mere inadvertence. At trial, the defendant acknowledged that "if the state had not inadvertently forgotten ... to introduce [that] evidence, there would be no prejudice [to the defendant]" but nevertheless insisted that the motion to reopen should be denied. In light of the foregoing, and mindful that our standard of review is a deferential one; see, e.g., State v. Perkins, 271 Conn. 218, 252, 856 A.2d 917 (2004); we conclude that the court did not abuse its discretion in permitting the state to reopen its case for the limited purpose of addressing the issue of the defendant's prior felony convictions.
II
We turn next to the defendant's claim that the court improperly denied his motion for a judgment of acquittal on the criminal possession of a firearm charge. "The standard of appellate review of a denial of a motion for a judgment of acquittal has been settled by judicial decision.... The issue to be determined is whether the jury could have reasonably concluded, from the facts established and the reasonable inferences which could be drawn from those facts, that the cumulative effect was to establish guilt beyond a reasonable doubt.... The facts and the reasonable inferences stemming from the facts must be given a construction most favorable to sustaining the jury's verdict.... It is established case law that when a defendant challenges the sufficiency of the evidence, we apply a twofold test. We first review the evidence ... in the light most favorable to sustaining the jury's verdict. We then determine whether, upon the facts thus established and the inferences reasonably drawn ... the jury could reasonably have concluded that the cumulative effect of the evidence established guilt beyond a reasonable doubt.... In this process of review, it does not diminish *340 the probative force of the evidence that it consists, in whole or in part, of evidence that is circumstantial rather than direct." (Citation omitted; internal quotation marks omitted.) State v. Hamlett, 105 Conn.App. 862, 866, 939 A.2d 1256, cert. denied, 287 Conn. 901, 947 A.2d 343 (2008).
At the outset, we note the following procedural history pertinent to the defendant's claim. After the defendant moved for a judgment of acquittal, the court reserved its decision thereon. The state then moved to reopen its case-in-chief, which, after argument, the court granted. At that point, the court did not decide the defendant's motion for a judgment of acquittal. Without objection by the defendant, the state proceeded to offer the testimony of Hemming, who testified that the defendant had been convicted of a felony on January 17, 1992. The state then rested, and the defendant renewed his motion for a judgment of acquittal, which the court denied.
On appeal, the defendant does not maintain that the evidence presented in the state's case-in-chief was insufficient to support a finding by the jury of his guilt beyond a reasonable doubt of criminal possession of a firearm. Instead, he argues that the evidence presented prior to the reopening of the state's case was insufficient and claims, for the first time on appeal, that the court improperly permitted the state to present Hemming's testimony before ruling on his motion for a judgment of acquittal in contravention of Practice Book § 42-41.[6] That claim never was raised before the trial court and, hence, is unpreserved. The defendant has not sought review of that unpreserved claim pursuant to either the plain error doctrine; Practice Book § 60-5; or State v. Golding, 213 Conn. 233, 239-40, 567 A.2d 823 (1989). To review a claim articulated for the first time on appeal and not raised before the trial court amounts to a trial by ambuscade of the trial judge. State v. Robinson, 227 Conn. 711, 741, 631 A.2d 288 (1993). We therefore decline to afford review on this unpreserved ground. Viewing the state's case-in-chief as a whole, the jury could have reasonably concluded, from the facts established and the reasonable inferences that could be drawn therefrom, that the cumulative effect was to establish the defendant's guilt beyond a reasonable doubt.
III
The defendant's final claim is that, in permitting the state to reopen its case and present additional evidence as to an essential element of the crime of criminal possession of a firearm, the court violated the prohibition against double jeopardy.[7] The defendant did not preserve this claim at trial and now seeks Golding review. We review the defendant's claim because the record is adequate for review and the claim is of constitutional magnitude. See State v. Chicano, 216 Conn. 699, 704-705, *341 584 A.2d 425 (1990), cert. denied, 501 U.S. 1254, 111 S. Ct. 2898, 115 L. Ed. 2d 1062 (1991).
The double jeopardy clause of the fifth amendment to the United States constitution provides that no person shall "be subject for the same offense to be twice put in jeopardy of life or limb." That constitutional provision is applicable to the states through the due process clause of the fourteenth amendment. Benton v. Maryland, 395 U.S. 784, 794, 89 S. Ct. 2056, 23 L. Ed. 2d 707 (1969). The double jeopardy prohibition "serves three separate functions: (1) It protects against a second prosecution for the same offense after acquittal. [2] It protects against a second prosecution for the same offense after conviction. [3] And it protects against multiple punishments for the same offense [in a single trial]." (Internal quotation marks omitted.) State v. Chicano, supra, 216 Conn. at 706, 584 A.2d 425.
In his brief analysis of this constitutional claim, the defendant argues simply that "since [his] motion [for a judgment of acquittal] should have been granted, allowing the state to present new evidence that established the missing element in its successive case-in-chief amounted to a successive prosecution for the same offense and violated the defendant's double jeopardy protections." That protection, however, "applies only if there has been some event, such as an acquittal, which terminates the original jeopardy." Richardson v. United States, 468 U.S. 317, 325, 104 S. Ct. 3081, 82 L. Ed. 2d 242 (1984). The jeopardy that attached upon commencement of the defendant's trial did not terminate when the court granted the state's motion to reopen its case-in-chief pursuant to Practice Book § 42-35(3).
The defendant's claim hinges on his allegation that the motion for acquittal was improperly denied. When it is found that a motion for a judgment of acquittal must be granted, be it by trial or appellate court, further prosecution is prohibited. See State v. Padua, 273 Conn. 138, 178, 869 A.2d 192 (2005) ("[p]ursuant to Burks v. United States, 437 U.S. 1, 18, 98 S. Ct. 2141, 57 L. Ed. 2d 1 [1978], a defendant is entitled to a judgment of acquittal and retrial is barred [under the double jeopardy clause] if an appellate court determines that the evidence is insufficient to support the conviction"). We already have concluded that the state in its case-in-chief presented sufficient evidence to support a finding by the jury of the defendant's guilt beyond a reasonable doubt of criminal possession of a firearm, and, thus, the court properly denied the defendant's motion for a judgment of acquittal. Accordingly, his double jeopardy claim fails under Golding's third prong.
The judgment is affirmed.
In this opinion DiPENTIMA, J., concurred.
LAVERY, J., dissenting in part.
Practice Book § 42-40 provides in relevant part that "[a]fter the close of the prosecution's case in chief ... upon motion of the defendant ... the judicial authority shall order the entry of a judgment of acquittal as to any principal offense charged and as to any lesser included offense for which the evidence would not reasonably permit a finding of guilty...." In this case, after the state rested, the defendant, Noel Mendoza, immediately moved for a judgment of acquittal, stating that the state had not presented "evidence sufficient to support [the case] going to the jurors." Because the state failed to offer any evidence in its case-in-chief regarding the defendant's convicted felon status, an essential element of the crime charged, and because the defendant complied with *342 applicable rules of practice, the trial court abused its discretion in granting the state's motion to reopen its case. Accordingly, I respectfully dissent from part I of the majority opinion.
Our Supreme Court has held that prejudice warranting the reversal of a trial court's decision to grant the state's motion to reopen has occurred "when the state was allowed to introduce further testimony in order to cure its failure to introduce, during its casein-chief, any evidence upon an essential element of the crime charged, a deficiency called to its attention by the defendant's motion for a directed judgment of acquittal." Wood v. Bridgeport, 216 Conn. 604, 606-607, 583 A.2d 124 (1990), citing State v. Allen, 205 Conn. 370, 533 A.2d 559 (1987). On the basis of this premise, and for the following reasons, I believe the court abused its discretion in granting the state's motion to reopen immediately following the defendant's motion for a judgment of acquittal.
In determining whether, in these circumstances, the court abused its discretion in allowing the state to reopen its case-in-chief, it is important to consider that the "state, which has the burden to prove every element of the crimes charged beyond a reasonable doubt, is required to present enough evidence so that a jury could reasonably find the defendant guilty; failing such an evidentiary showing, it risks a successful motion for judgment of acquittal.... In United States v. Hinderman, [625 F.2d 994, 996 (10th Cir.1980)] the court warned that the `government's case-in-chief should not be treated as an experiment that can be cured after the defendant has, by motion, identified the failures.' The California Supreme Court has recognized that `to require a defendant to state specific grounds in support of the motion for acquittal would place the burden upon him to point out to the prosecutor, as well as to the court, the gaps in the prosecution's case.[1] Such a requirement would come perilously close to compelling a defendant to aid in his own prosecution and would lessen the prosecutor's burden to prove each and every element of the case beyond a reasonable doubt.' People v. Belton, 23 Cal. 3d 516, 522, 591 P.2d 485, 153 Cal. Rptr. 195 (1979)." (Citation omitted.) State v. Allen, supra, 205 Conn. at 379-80, 533 A.2d 559.
In this case, the state in its case-in-chief offered the testimony of police officers, witnesses and a forensic firearm examiner, as well as two dozen exhibits into evidence. At no time during its case-in-chief, however, did the state offer any evidence regarding the defendant's convicted felon status. Only after the defendant filed a motion for a judgment of acquittal, and the court subsequently granted the state's motion to reopen, did the state then offer the new testimony of a deputy clerk of the Superior Court as evidence that the defendant had been convicted of a prior felony.
In State v. Allen, supra, 205 Conn. at 383, 533 A.2d 559, the state failed to offer any evidence on the length of the barrel of the pistol at issue, an essential element of the crime charged, and the defendant moved for a judgment of acquittal at the close of the state's case, claiming that the evidence was insufficient on that element. Subsequently, the state moved to reopen its case to present evidence on the length of the barrel of the firearm. After the court granted the state's motion to reopen, the state offered new evidence and did not merely offer cumulative evidence or clarify previous testimony. Those facts strengthened our Supreme Court's conclusion that *343 "allowing the state to reopen its case-in-chief after the defendant has identified its shortcomings was fundamentally unfair to the defendant and an abuse of the trial court's discretion." Id., at 383-84, 533 A.2d 559.
Although, as the majority points out, the holding in Allen is narrowthe court concluded that the trial court abused its discretion in permitting the state to reopen its case to supply missing evidence because the defendant had specifically identified the evidentiary gap in his motion for a judgment of acquittalthe law does not require such a specific evidentiary identification when a defendant moves for a judgment of acquittal. Id., at 385, 533 A.2d 559. Thus, I believe the state's offering of new evidence after the state rested and failed to make out a prima facie case, and after the defendant pointed out that the state had not presented "evidence sufficient to support [the case] going to the jurors," constitutes a fundamental unfairness to the defendant. Because I believe the defendant was substantially prejudiced by the court's granting of the state's motion to reopen, I find that the court abused its discretion.
The state had the burden to prove every element of the crime charged beyond a reasonable doubt and failed to do so. In fact, the state concedes that it failed to make out a prima facie case because it offered no evidence of the felony conviction element of the charged offense. Additionally, no stipulation was entered into regarding this evidentiary gap. In turn, after the state rested, the defendant followed the rules of practice and appropriately moved for a judgment of acquittal due to insufficient evidence.
Furthermore, had the defendant remained silent until after the verdict had been returned, the omission of this evidence would have required, under the constitution, a judgment of acquittal either in the trial court or on appeal. See id., at 377, 533 A.2d 559. Having brought to the attention of the state the fact that insufficient evidence existed, the defendant effectively was victimized by his own diligence, as the state used the reopening of its case to supply the missing element of the crime, thus assuring the defendant's conviction. See id., at 378, 533 A.2d 559.
After reviewing the relevant motion to reopen case law, the only case factually similar to the present matter is Allen. The facts in Allen are analogous except that in this case, after the state failed to establish a prima facie case, the defendant called the deficiency to the state's attention by stating that insufficient evidence exists to support the case going to the jury. Although the defendant did not specifically notify the state as to what essential element of the crime the state had failed to prove, such specificity, as mentioned previously, is not required. In my opinion, allowing the state to reopen its case-in-chief, after the defendant has identified its shortcomings and complied with the rules of practice and the law, fundamentally is unfair to the defendant. See id., at 383-84, 533 A.2d 559. The majority is permitting the defendant to be effectively victimized, as the state used the reopening of its case to supply evidence of an essential missing element of the crime. See id., at 378, 533 A.2d 559. Consequently, I believe the trial court abused its discretion in granting the state's motion to reopen.
Accordingly, I respectfully dissent from part I of the majority opinion, and I would reverse the judgment of conviction with respect to the charge of criminal possession of a firearm and remand the case to the trial court with direction to render *344 judgment of acquittal as to that charge. I concur in the remainder of the opinion.
NOTES
[1] General Statutes § 53a-217 (a)(1) provides: "A person is guilty of criminal possession of a firearm or electronic defense weapon when such person possesses a firearm or electronic defense weapon and (1) has been convicted of a felony...."
[2] Count one of the information charged the defendant with criminal possession of a firearm in violation of § 53a-217 (a)(1). See footnote 1 of this opinion.
[3] On appeal, the state concedes that the transcripts before us contain no mention of that possible stipulation. At the same time, defense counsel acknowledged that such a discussion had transpired.
[4] For clarity, we repeat that the defendant's primary argument in this appeal is that it is an abuse of discretion for a trial court ever to permit the state to reopen its case-in-chief when the defendant has moved for a judgment of acquittal on a general allegation of evidential insufficiency. In essence, the defendant asks us to rewrite the Allen standard so as to eliminate the specific identification of the evidentiary gap prong of that precedent.
Although the dissent champions that request, proper regard for this court's role as an intermediate appellate tribunal mandates that we decline the defendant's invitation. It is axiomatic that the Appellate Court is "bound by Supreme Court precedent and [is] unable to modify it.... [W]e are not at liberty to overrule or discard the decisions of our Supreme Court but are bound by them.... [I]t is not within our province to reevaluate or replace those decisions." (Citation omitted; internal quotation marks omitted.) State v. Smith, 107 Conn.App. 666, 684-85, 946 A.2d 319, cert. denied, 288 Conn. 902, 952 A.2d 811 (2008); see also, e.g., State v. Brown, 73 Conn.App. 751, 756, 809 A.2d 546 (2002) ("Our Supreme Court is the ultimate arbiter of the law in this state. We, as an intermediate appellate court, cannot reconsider the decisions of our highest court."); State v. Fuller, 56 Conn.App. 592, 609, 744 A.2d 931 ("[i]t is not within our function ... to overrule Supreme Court authority"), cert. denied, 252 Conn. 949, 748 A.2d 298, cert. denied, 531 U.S. 911, 121 S. Ct. 262, 148 L. Ed. 2d 190 (2000).
[5] Practice Book § 42-35(3) provides: "The prosecuting authority and the defendant may present rebuttal evidence in successive rebuttals, as required. The judicial authority for cause may permit a party to present evidence not of a rebuttal nature, and if the prosecuting authority is permitted to present further evidence in chief, the defendant may respond with further evidence in chief."
[6] Practice Book § 42-41 provides: "If the motion [for a judgment of acquittal] is made after the close of the prosecution's case in chief, the judicial authority shall either grant or deny the motion before calling upon the defendant to present the defendant's case in chief. If the motion is not granted, the defendant may offer evidence without having reserved the right to do so."
[7] Interestingly, the defendant in State v. Allen, supra, 205 Conn. at 370, 533 A.2d 559, originally raised a double jeopardy claim. As our Supreme Court observed: "Although the defendant claimed in his brief that the denial of his motion for judgment of acquittal implicated the prohibition against double jeopardy, he conceded at oral argument before us that the entire issue was better analyzed as a claim of an abuse of discretion." Id., at 375, 533 A.2d 559.
[1] It also is clear that the plain language of Practice Book § 42-40 does not require such specificity when the defendant makes a motion for a judgment of acquittal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545850/ | 40 B.R. 20 (1984)
In the Matter of Irlan Douglas BRANNAN, Debtor.
Bankruptcy No. 83-00308G.
United States Bankruptcy Court, N.D. Georgia.
March 23, 1984.
*21 Dennis M. Hall, Culbreth & Hall, Atlanta, Ga., for debtor.
David W. Porter and Nicholas Sears, Morris & Manning, Atlanta, Ga., for for-closing party.
OPINION
WILLIAM L. NORTON, Jr., Bankruptcy Judge.
Although inappropriately styled as a motion for a Temporary Restraining Order, this matter was heard on February 2, 1984. The debtor had filed a voluntary Chapter 7 petition on December 6, 1983. On February 1, 1984, almost two months thereafter and two days before foreclosure proceedings were scheduled on Alabama real property which had belonged to the debtor from 1980 to October 10, 1982, that real property was conveyed by deed to the debtor. The debtor sought the protection of the automatic stay for the Alabama real estate against the foreclosing creditor. The hearing and post-hearing briefs have addressed the issue of whether property conveyed to the Chapter 7 debtor after his bankruptcy petition had been filed was property of the estate within the terms of 11 U.S.C. § 541(a)(7). The consequences of so holding would be to provide the property with the protection of the automatic stay. After reviewing the testimony and documents submitted at the hearing along with the applicable statutory sections of the Code and decisional law, this court concludes that the property in question was conveyed to the debtor and not to the Chapter 7 estate. Therefore, the statutory language of § 541(a)(7), which provides: "any interest in property that the estate acquires after the commencement of the case" is not triggered, and the relief generally afforded by the automatic stay to property of the estate in a Chapter 7 case is not available.
FINDINGS OF FACT
1. Sometime in 1980, creditor Jimmy O'Connor ("O'Connor") conveyed certain real property located in Alabama to the debtor, Irlan Douglas Brannan ("Brannan");
2. The real property was divided into three different parcels;
3. On approximately October 10, 1982, the debtor conveyed his entire interest in certain of the property in question to the debtor's brother-in-law, Charles Dickens ("Dickens");
4. In the warranty deed of October 10, 1982, Dickens assumed and agreed to pay and carry out all obligations owing on the property;
5. On December 6, 1983, the debtor filed a Chapter 7 petition;
6. The debtor did not list the property in question as an asset in the Chapter 7 schedule originally filed;
*22 7. O'Connor was listed in the debtor's Chapter 7 schedules as an unsecured creditor for an unknown amount;
8. In December of 1983, O'Connor advertised a foreclosure sale to be held on February 3, 1984, on the property which the debtor had conveyed in the October 10, 1982 deed;
9. On February 1, 1984, Dickens conveyed to the debtor the identical property which he had received under the October 10, 1982 warranty deed;
10. Under the February 1, 1984 warranty deed, the debtor assumed and agreed to pay and carry out all obligations owing on the property;
11. The foreclosure sale was conditionally permitted to occur on February 3, 1984, subject to a later determination by this court of the within issue.
DISCUSSION
The debtor argues that the property conveyed to him on February 1, 1984, is property of the estate, acquired after the commencement of the case. As such, it comes within the definition of 11 U.S.C. § 541(a)(7) and, consequently, is protected under the automatic stay provisions. The statutory language of new subsection 7 assures automatic stay protection to interests in property not acquired until after the bankruptcy petition is filed. See statement of Representative DeConcini, 125 Cong. Rec. 17406 (Daily Ed. October 6, 1978). The one express stipulation which subsection (a)(7) imposes in exchange for the broad stay protection is that the interest in after acquired property must be acquired by "the estate."[1] The conclusion this court reaches is that the property conveyed on February 1, 1984 to the Chapter 7 debtor was conveyed to him personally and not to the Title 11 Chapter 7 estate. This conclusion is based on an analysis of the statutory language, principles of statutory construction and decisional law.
Statutory Language/Principles of Statutory Construction
The language of § 541(a)(7), when applied to any individual's Chapter 7 case, implies the existence of two separate estates. The Title 11 estate created at the time of the Title 11 filing and the debtor's own personal estate which has its inception also at that time.[2] This distinction, implicit *23 in subsection (a)(7), is not unique within the Code.[3] Other subsections of § 541(a) delineate the boundaries of the two estates. Subsections (a)(1), (2), (3) and (4), all refer to the Title 11 estate. The first two, (a)(1) and (2), use the date of the bankruptcy filing for creating the Title 11 estate from interest in property held by the debtor as of the date of filing. Subsections (a)(3) and (4) bring into the estate property not held by the debtor at the time of filing but subsequently recovered for the estate. Subsections (a)(5) and (6) both expressly refer to the Title 11 estate and the debtor's personal estate. Subsection (a)(5) permits the Title 11, Chapter 7 estate to remove from the debtor's post-petition personal estate three specific categories of interests, if acquired by the debtor within 180 days of the bankruptcy filing.[4]
To understand why Brannan's argument fails, it is particularly useful to compare (a)(5) and (a)(6) with (a)(7). If, in fact, any of the three categories listed in (a)(5) were applicable to the interest in question, the debtor would have the result he argues for as the conveyance was made within 180 days of filing. However, the conveyance in the instant circumstances does not come within any of the three defined categories. Moreover, because the three categories appear as exclusive exceptions, the maxim "expressio unius est exclusio alterius" has application.[5] While expressio unius est exclusio alterius is a principle of statutory construction only and not a rule of law, in the instant circumstances it supports the proposition that the debtor's attempt to have the real estate in question become property of the Chapter 7 estate fails because the debtor's acquisition by conveyance does not come within the enumerated exceptions. Additionally, the instant events more nearly parallel the conceptual *24 framework of (a)(5), e.g., it is the debtor Brannan who acquired the property, not the estate as (a)(7) requires. The debtor is prevented from forcing a non-applicable section of the Code to carry the debtor's post-petition property interest to the Chapter 7 estate and thus assure automatic stay protection when he is precluded from such a result by the exclusion under the relevant statutory section.
Subsection (a)(6) adds substance to both the Title 11 estate and the debtor's own personal estate. The latter shelters any earnings from services which the debtor has performed post-petition while the former receives "all derivatives of property of the estate," such as "proceeds, products, offspring, rents and profits." The property conveyed to Brannan does not come within either the personal estate or the Title 11 estate under the (a)(6) definition. Subsection (a)(6) is inapplicable in resolving the issue before this court, although it is indirectly useful because it helps establish the existence of both the Title 11 estate and the debtor's own personal estate. Thus, it emphasizes that (a)(7)'s reference is solely to the Title 11 estate.
Decisional Law
The debtor cites as support for his position the Eleventh Circuit decision In re Wilson, 694 F.2d 236 (CA11, 1982). The Eleventh Circuit, reversing both the Bankruptcy Court and the District Court, held that an attorney's fee paid by the debtor pre-petition was excessive, would be partially disallowed, and the disallowed portion would flow to the estate and be available for exemption by the debtor. The Eleventh Circuit concluded that the Title 11 estate received the property based on its analysis of § 541(a)(7). Agreeing with the District Court's statement "that § 541(a)(7) does not render every `interest in property that the estate acquires after the commencement of the case' available for the debtor's exemption claims," the Eleventh Circuit disagreed with the District Court's analysis of the operation of § 541(a)(7). The Circuit Court found that § 541(a)(7) does bring into the estate every such interest not covered by a specific statutory provision mandating some other treatment. Id. at 238.
The debtor urges this court to adopt both the Wilson rationale and result. The debtor contends that here, as in Wilson, there is no specific statutory provision mandating some other treatment for the debtor's post-petition property and, therefore, the property should flow into the Chapter 7 estate. The debtor misconstrues the Wilson holding by giving it an unreasonably broad reading. Wilson is limited to its facts. It stands for the proposition that pre-petition property which would have passed to the Title 11 Chapter 7 estate at the time the debtor filed his bankruptcy petition but for a transfer which occurred prior to the debtor's bankruptcy filing is to be returned to the estate if the transfer is later voided. The key to the Eleventh Circuit's interpretation of § 541(a)(7) is that the property in question in Wilson would have become part of the Title 11 estate created at the time of filing if the debtor had not made the pre-petition transfer. Upon disallowance of the pre-petition transfer, the property reverted to pre-petition property of the debtor and thus property of the Title 11 estate.
In contrast, the instant facts reveal that the debtor had had no pre-petition interest in the Alabama real estate for fourteen months preceding the Chapter 7 filing. The October 10, 1982 deed from the debtor discloses no reservation of interest in the property, but rather discloses that the debtor conveyed his entire estate. Nor is there any allegation that the October 10, 1982 transfer from the debtor to Dickens is subject to being disallowed. If § 541(a)(7) is read as the debtor urges to bring into the Title 11 Chapter 7 estate property which comes to the debtor post-petition and in which he had no pre-petition interest, bankruptcy law would seriously jeopardize debtor/creditor relations. Any individual choosing not to conform to the legal requirements of bankruptcy law might yet be free to shield a property interest under the automatic stay by conveying the property interest to an individual who had previously *25 filed a Chapter 7 petition.[6] Such a transaction would be an abuse of the bankruptcy process. Rehabilitation and a fresh start are equitable principles and are reserved only for those willing to submit themselves to prescribed procedures.
The failure of the debtor to be persuasive on the applicability of the Wilson decision to the instant circumstances results from another fundamental factual distinction. In Wilson, the property which the Eleventh Circuit ordered returned to the Chapter 7 estate came to the estate without obligation on the estate's part. Assuming Brannan's theory, that the property conveyed to the debtor after his bankruptcy filing flows to the estate under § 541(a)(7), the estate, without authorization by the court, would have become obligated for a substantial post-petition debt. The documents in evidence disclose that the October 10, 1982 deed not only conveyed the debtor's entire interest in the real estate, but removed all his obligation to make payments. When the property was conveyed from Dickens to the debtor, almost two months after the debtor's Chapter 7 filing, the debtor assumed the obligation for making payments. In order to hypothesize the assumption of that obligation by the Chapter 7 estate, court authorization, after notice and a hearing, would have been required.[7] No such authorization was requested or given.
When the consequences of a post-petition transfer to a Chapter 7 debtor are studied, it becomes evident that a post-petition transfer to the debtor cannot automatically flow into the Title 11 estate. Once a Chapter 7 debtor files for relief, he is entitled to a post-petition estate of his own, separate from the Chapter 7 estate being administered by the trustee. Into this fresh start, personal estate flows property he may exempt from the Chapter 7 estate, earnings from services performed post-petition and all other property received post-petition that does not come within the exception of § 541(a)(5).[8]
One final rationale for the debtor's attempted reliance on § 541(a)(7) remains to be addressed. The debtor made allusion to the applicability of trust law, e.g., because the debtor "participated in making payments on the property . . . the property may be considered to have been held in trust for the debtor." No authority, statutory or decisional, is cited. The debtor has not established the existence of a trust. Nor does it appear that any trust would govern the instant situation so as to shield this debtor from this creditor.
For the reasons set forth above, this court finds that the property conveyed to the Chapter 7 debtor following his bankruptcy petition filing does not come within the meaning of § 541(a)(7). The automatic stay, therefore, affords no protection to the property conveyed. The foreclosure sale, which occurred on February 3, 1984, is fully authorized with regard to any property interest in which the debtor lacked a pre-petition interest.
NOTES
[1] The type of interest contemplated by the new subsection was explained by Representative DeConcini: "For example, if the estate enters into a contract after the commencement of the case, such a contract would be property of the estate." 124 Cong.Rec. 17406 (Daily Ed. October 6, 1978). NORTON BANKRUPTCY LAW AND PRACTICE, Volume 4, pp. 425-426.
[2] The implication of § 541(a)(7) with regard to a case under either Chapter 7, Chapter 11 or Chapter 13 is not identical. Part of the symmetry is a product of the different purposes each of the chapters serves. When an individual debtor files a Chapter 7 case, all non-exempt property of the Chapter 7 estate is to be liquidated for the benefit of creditors. Because Congress has established a fresh-start policy for the debtor, a new post-petition estate belonging to the individual debtor is created simultaneously with the filing. Into this individual post-petition estate, the debtor may transfer any property he can exempt out of the Chapter 7 estate as well as post-petition earnings from services he has performed. Other property which the debtor receives, after filing and which is not governed by the exceptions in § 541(a)(5), would also be part of the debtor's fresh start estate.
In contrast to the establishment of two separate estates at the time of an individual debtor filing a Chapter 7 case, only one estate is established at the filing of a typical Chapter 11 case. The purpose of the Chapter 11 case is business reorganization. To this end, the debtor-in-possession submits a reorganization plan in order to rehabilitate and continue the operation of the business. All of the assets of the debtor, pre-petition and post-petition, are applied to the reorganization effort and must be dealt with in the plan for the benefit of creditors. Because the debtor is the business and success is measured by survival not liquidation, no individual or personal estate separate from the Title 11 Chapter 11 case is created at the time of filing. A Chapter 13 case is similar in purpose to a Chapter 11 case, i.e., rehabilitation, except that an individual debtor receives time to readjust the flow of incoming/outgoing money in order to pay the outstanding debt and achieve rehabilitation. To this end, at the time of filing, only one estate, the Title 11 Chapter 13 estate is created. The "property of the estate" in a Chapter 13 case is by positive, statutory definition far more extensive than the "property of the estate" in a Chapter 7 case. Property of the estate in a Chapter 13 case includes all of the property available to the Chapter 7 estate plus property, which includes income, the debtor acquires after filing:
§ 1306 Property of the estate
(a) Property of the estate includes, in addition to the property specified in § 541 of this title
(1) All property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under Chapter 7 or 11 of this title, whichever occurs first;
(2) Earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under Chapter 7 or 11 of this title whichever occurs first.
The reason all pre-petition and all post-petition property is brought into a single estate in a Chapter 13 case is twofold. First, although the estate is administered by a trustee, distribution by the trustee is made only in accordance with a Chapter 13 plan proposed by the debtor which must be confirmed by the court before becoming effective. Secondly, "except as provided for in a confirmed plan or order confirming plan, the debtor shall remain in possession of all property of the estate" and "the confirmation of a plan vests all of the property of the estate in the debtor." §§ 1306(b), 1327(b). There is no separation of "property of the estate" from property of the individual debtor at the time of filing, although with regard to certain property, generally income, e.g., the trustee, under the order of confirmation of the plan, and not the debtor, has control over such property.
Section 1306(a)(1) is especially significant in terms of Brannan's argument that the property conveyed to him after commencement of the case flows to the Chapter 7 estate. The language quoted above in § 1306(a)(1) would produce precisely the result for which Brannan argues if the property came to debtor prior to confirmation. That result is not reached in a Chapter 7 case, however, where at commencement of the case, the debtor's personal estate is separated from the Title 11, Chapter 7 estate.
[3] See 11 U.S.C. § 362(a). Subsection (a)(1), (5), and (6) refer to prohibited actions against the debtor's property. Subsection (a)(3) and (4) refer to prohibited actions against "property of the estate"; subsection (a)(2) refers to prohibited actions against both the debtor and property of the estate.
[4] 11 U.S.C. § 541(a) . . .
(5) An interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date
(A) by bequest, devise, or inheritance;
(B) as a result of a property settlement agreement with the debtor's spouse, or of an interlocutory or final divorce decree; or
(C) as a beneficiary of a life insurance policy or of a death benefit plan.
[5] Amjur 2d. § 211-212 (1974).
[6] Even if a post-petition transfer were to be direct "to the trustee" or "to the Chapter 7 estate," the trustee would have the authority to decline if the terms were not acceptable. 11 U.S.C. § 554.
[7] 11 U.S.C. §§ 363, 364.
[8] Unlike a Chapter 13 debtor, a Chapter 7 debtor is not required to request trustee approval to incur new debt within his personal estate. 11 U.S.C. § 1305. Marketplace economics and the prohibition against a Chapter 7 debtor filing a new bankruptcy petition earlier than six years from the discharge date may be the sole restraint. See fn. 2, supra. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545836/ | 40 B.R. 629 (1984)
In the Matter of Wilbur J. ROBERTS, JR., a/k/a J.R. Roberts, d/b/a Farming, Debtor.
Wilbur J. ROBERTS, Movant,
v.
JOHN DEERE COMPANY, Respondent.
Bankruptcy No. 83-02312-SJ.
United States Bankruptcy Court, W.D. Missouri, St. Joseph Division.
April 23, 1984.
*630 Mark G. Stingley, Utz, Litvak, Thackery, Utz & Taylor, St. Joseph, Mo., for debtor.
Thomas C. Capps, Law Offices of Timothy H. Bosler, Liberty, Mo., for respondent.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER DENYING MOTION FOR LIEN AVOIDANCE
DENNIS J. STEWART, Bankruptcy Judge.
In this case, the debtor seeks avoidance of liens on certain farm machinery which he characterizes as tools of his trade of a farmer and thus exempt to the extent of $4,000.00 under § 513.430(2) RSMo. He accordingly seeks to avoid under § 522(f)(2) of the Bankruptcy Code respondent John Deere's lien on so much of the value of these chattels as can be claimed as exempt. The respondent initially defended the motion for lien avoidance on the grounds that the security interest sought to be avoided was a purchase money security interest and thus, under the plain terms of § 522(f)(2), supra, not subject to avoidance. But the movant initially denied this allegation, thus seeming to the court to require a hearing of this matter.[1]
Accordingly, the court initially convened a hearing in the matter on January 20, 1984, in St. Joseph, Missouri. Counsel for the parties then appeared before the court and stated that the issue of the nonpurchase money character of the security interest was no longer before the court; that the issue to be resolved was that of the value of the chattels; and that they would propose to the court in writing a schedule for offering documentary evidence on this issue. Counsel, however, never made such a proposal, with the result that the court reset a hearing, by order entered on February 28, 1984, for March 9, 1984, in St. Joseph, Missouri.
Evidence was then adduced to the principal material effect that the debtor has some little equity currently in one of the chattels which is the subject of his motion;[2] that the debtor, however, made a substantial down payment at the time of their purchase, but otherwise the value for the remainder of the purchase price came from the respondent creditor; and that the chattels are tools of the debtor's trade within the meaning of the Missouri exemption statute.
It is the assertion of the movant, based upon these facts, that the respondent's security interest cannot be regarded as a purchase money security interest to the extent that he gave trade-in value to the respondent or made a down payment when the sale and credit transaction took place; that, accordingly, in the ratio that this equity interest bore to the total purchase price, the lien avoidance statute, § 522(f)(2), should be utilized to protect the same ratio of equity interest in the present value of the collateral; that, accordingly, inasmuch as the total down payment and trade in value given by the movant to respondent was 30% of the total purchase price, the respondent's security interest cannot be accorded effect as to more than the remaining 70% of the present value of the collateral; that any other rule would disproportionately place the risk of depreciation on the debtor; and that the issue thus presented *631 is one of first impression which has not previously been decided by the court.
This court formerly, however, in the cases of Miller v. Peoples Bank of Miller, 8 B.R. 43 (Bkrtcy.W.D.Mo.1980), and Matter of Drummond, 17 B.R. 494 (Bkrtcy.E. D.Ark.1981), recognized the principle that lien avoidance should be coextensive with a debtor's equity interest (in the sense of the amount by which value of the collateral exceeds the balance due to the creditor). The reasoning of the court in so holding was based on the unequivocal letter of the Bankruptcy Code and its legislative history, which this court analyzed to the following effect:
"[T]he precise letter of . . . [§ 522(f)] makes [lien] avoidance dependent upon the property's being exempt under § 522(b). That section, in turn, at subsection (b)(1) thereof, provides for the exemption of `property that is specified under subsection (d) of this section.' And, as applicable here, that section exempts only `[t]he debtor's interest' in the property there described.
"The court is aware that the debtor in the action at bar is claiming his exemptions pursuant to the applicable state law, rather than the provisions of §§ 522(b) and (d)(1), supra. See § 522(b)(2)(A), which permits him to make this election. But the state exemptions have not previously been regarded as effective under the bankruptcy law except insofar as the debtor had an equity in the property. See Karsznia v. Kelsey, 262 S.W.2d 844, 845 (Mo.1953), in which it was held that, with respect to the Missouri homestead exemption, a debtor might claim only his equity as exempt. `Defendants' land being subject to a deed of trust, they were entitled to a homestead exemption in what remained of the total value after deducting the indebtedness secured by the deed of trust.' Nor does this concept appear to have been at all changed by the provisions of the new Bankruptcy Code which conceive of the debtor's owning an equity in the property as the prerequisite to his having a pro tanto exemption in that property. [It is to be noted that the letter of § 522(f) itself limits avoidance to an "interest of the debtor" in the property with respect to which the lien is avoided.] [The necessity for an equity interest as the precondition of lien avoidance] is made clear by the legislative history under § 722 of the Code, which section provides for a debtor's redemption of certain personal property subject to a lien `by paying the holder the amount of the allowed secured claim of such holder that is secured by such lien.' That legislative history, as here pertinent, states as follows:
`The right to redeem extends to the whole of the property, not just the debtor's exempt interest in it. Thus, for example, if a debtor owned a $2,000 car, subject to a $1,200 lien, the debtor could exempt his $800 interest in the car. The debtor is permitted a $1,500 exemption in a car . . . 11 U.S.C. § 522(d)(2). This section permits him to pay the holder of the lien $1,200 and redeem the entire car, not just the remaining $700 of his exemption.' (Emphasis added.)
"This explicative material makes it clear that the debtor entitles himself to exemption from a lienholder's rights as a secured creditor . . . only to the extent that he has paid for, and thus has an equity interest in, that property. Further this court has, sitting en banc, in its prior decision on the constitutionality of § 522(f), supra, intimated that any other interpretation of the section may run afoul of the Fifth Amendment's prohibition of the taking of property without just compensation. [In re Baker, 5 B.R. 397 (W.D.Mo.Bkrtcy.1980).] . . . "
These principles appeared at the time to be at once consonant with the manifested Congressional intent, the general law of the States, and considerations of equity and fairness. The debtor's equity in the household goods or other chattels which constituted the collateral basis of a nonpurchase money security interest would thereby be preserved even after bankruptcy by means of pro tanto lien avoidance. This interpretation *632 would have prevented the placing of all the risk of depreciation on the debtor. Formerly, secured creditors, not bound by the claims of exemption made by a debtor against his trustee in bankruptcy,[3] might foreclose after bankruptcy and, by reason of interim depreciation or a low foreclosure price, wipe out the equity which had been established to exist as of the time of bankruptcy. But, under pro tanto lien avoidance, the equity claimed as exempt in bankruptcy proceedings would be preserved in any later foreclosure proceeding; whatever the foreclosure sale price, no proceeds could be paid over to the secured creditor until the equity interest of the debtor, as established in the bankruptcy proceedings, had been fully paid to that debtor. When it is settled that a debtor may claim only his equity as exempt in bankruptcy proceedings, as in state proceedings concerning exemptions,[4] this interpretation of the lien avoidance statute seemed fairly to fulfill its stated legislative purpose of making the debtor's exemptions meaningful. Further, it did so without unfairly depriving the secured creditor of any value which he may have in good faith extended to the debtor in reliance upon the security interest. And finally, this fair proportionment of rights and interests obviated the possibly yet substantial question of the lien avoidance statute's constitutionality in view of its otherwise effect in taking the property interest of one entity and summarily conferring it upon another.[5]
Nevertheless, the courts, in In re Lovett, 11 B.R. 123 (Bkrtcy.W.D.Mo.1981), and its progeny have clearly, uniformly and without dissent rejected any recognition of equity or other partial interests in collateral when the matter of lien avoidance is to be considered. In that case, it was held that the "interest" referred to in § 522(f)(2) was not equivalent to or inclusive of "equity" and that, accordingly, so long as a debtor had possession of a liened article, he might avoid the lien on it, not pro tanto, but wholly.[6] Thus, any question of proportioning lien avoidance to consider the debtor's or creditor's partial interests seems once and for all time to have been laid to rest. And, accordingly, because of a suspicion that some lenders do not give full or substantial value in return for taking a security interest in household goods, tools of trade, and the like, the prevailing interpretation is that the lien avoidance statute should not restrict the creditor's security interest to his proportionate share according to the value actually given by him, but should rather, in each and every case, result in his forfeiture of that value into the hands of the debtor.[7]
The principle that, without regard to any equity, the lien should be wholly avoided has led the courts which have adopted it to apply a corollary which would appear to result in lien avoidance without any limitation as to the amount of value of collateral which may be the subject of such avoidance. *633 For, if lien avoidance is not restricted to the value of collateral which represents the equity of the debtor, by what principle may it be restricted? The answer interposed by this line of cases is "none." Accordingly, they interpret a statement in the legislative history of § 522(f)(2) which seems to restrict claimable exemptions to a debtor's equity interest and lien avoidance, in turn, to the extent of claimable exemptions to mean that a debtor may have lien avoidance without reference to any exemption limitation when the property on which he seeks lien avoidance is property in which he has no equity.[8] So interpreted, the lien avoidance statute would operate without even the amount limitations which state (or federal) exemption statutes contain with respect to several types of exemptable property.[9] And, if those statutory limitations are to be applied against the backdrop of otherwise unrestricted lien avoidance, the unfair and incongruous result is achieved whereby debtors with equity interests will be benefitted to a lesser extent than those without any equity interests.[10]
It is difficult, in analytical retrospect and in the light of such inequities and incongruities, to believe that the courts adhering to these principles intended to reject proportionate lien avoidance in all situations. But time and again, they have inveighed against the principle, denouncing by name and rank those who have seen fit to mention it in a favorable light.[11] Nor, in view of the blanket denunciation of the principle can it now be employed in respect of a purchase money security interest solely because such employment would favor the debtor instead of the secured creditor. The effectuation of such a philosophy, even in bankruptcy proceedings, could only be a stultification of the basic principle of American law that legal principles should not be utilized to favor or disfavor any particular persons or groups of persons. Further, in Chambell v. Beneficial Finance Corp., 17 B.R. 597 (Bkrtcy.W.D.Mo.1982), this court attempted to apply the principle of proportion in respect to a purchase money security interest precisely on the basis which is now championed by the movant.[12] The district court expressly condemned the application of the concept for reasons which were left unstated, affirming this court's *634 decision on wholly other grounds.[13] It therefore appears that if a security interest is to any extent a purchase money security interest within the meaning of § 522(f)(2), it is not subject to lien avoidance. Any apportionment of value must await the time of foreclosure.[14] For the foregoing reasons, this court issued its order on March 27, 1984, directing the parties to show cause within 15 days why lien avoidance should not be denied. Although more than 15 days have since passed, no response to that order has been filed.[15] Accordingly, it is hereby
ORDERED that the within motion for lien avoidance be, and it is hereby denied.
NOTES
[1] In paragraph 10 of its response to the motion for lien avoidance, the respondent stated with particularity that it "is the holder of a perfected purchase money security interest in the three (3) pieces of equipment involved, namely the J.D. 4020 tractor, the J.D. 4400 combine with platoform, and the J.D. 443 Cornhead."
[2] This small equity exists according to the respondent's evidence, also.
[3] It is ordinarily held that exemptions in bankruptcy are claimed only against the trustee in bankruptcy; that, otherwise, with respect to general creditors, the debtor is left to his claims of exemption which arise solely under state law. But one of the purposes of the lien avoidance statute was to make the claims of exemption in household goods, tools of the trade and certain other categories of personal property effective beyond the bankruptcy proceedings.
[4] "Property may be exempted even if it is subject to a lien, but only the unencumbered portion of the property is to be counted in computing the `value' of the property for the purposes of exemption." S.Rep. No. 989, 95th Cong., 2d Sess. 76 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787.
[5] In upholding the constitutionality of such a "taking" of property rights, the decisions generally seem, in one way or another, to focus on the usually small and inconsequential value of household goods, tools of the trade, and other like categories of personal property. But a constitutional matter is one of principle which ordinarily has no regard for the monetary value of the right involved. The decisions seem to ignore that the "taking" in these cases is that whereby one's property right is taken, not for a public purpose, but to give directly to another entity. One shudders to think what would become of the traditional American regard for private property rights if it were employed on any scale.
[6] "While the equity is thus an `interest', it is not necessarily the only interest of the debtor in the property." 11 B.R. at 125.
[7] See note 5, supra.
[8] See note 4, supra. That provision, in In re Van Gorkom, 4 B.R. 689, 691 (Bkrtcy.D.S.D. 1980), to mean that "(i)t was the intent of Congress to allow a debtor exemptions in the property up to certain amounts. Only the unencumbered portion of the property, in other words any equity the debtor might have in the property, is to be used for the purpose of determining when a debtor has used up his exemptions. If a debtor claims an exemption in property in which he has no equity, there is no reduction in the amount of his exemptions." (Emphasis added.) Thus, by means of the artificial interpretation of "interest" without regard to "equity," a transformation in meaning of this passage from the legislative history results. Whereas the legislative history, as quoted in note 4, supra, limits the value of the exemption to the equity portion of it, the case authority holds that only that portion is to be counted in determining, not the extent of the exemption, but when the exemption has been "used up."
[9] If a debtor has absolutely no equity in the property, under this reasoning, he can exempt the whole value. There is none which counts against his exemption. Thus regardless of the value of the property, the limitation imposed by the exemption statute can never be reached.
[10] See note 9, supra. But if one, for instance, has an equity which equals or exceeds the exemption ceiling, he can exempt only that portion of it.
[11] See, e.g., Kursh v. Dial Finance Company of Missouri, 9 B.R. 801 (Bkrtcy.W.D.Mo.1981); In re Lovett, 11 B.R. 123, 124, 125 (W.D.Mo.1981).
[12] In that case, this court held that, because a later security arrangement was only a refinancing of an earlier one, the later agreement had the same character as the previous one and thus "related back" to the former one, except to the extent new money was advanced in connection with the later security arrangement. 17 B.R. at 599. But the district court impliedly disapproved this pro tanto characterization of the security interest and affirmed only on the ground that the later security agreement occurred before October 1, 1979, (in the "gap" period between November 6, 1978, and October 1, 1979) and was therefore unavoidable. In doing so, the district court ignored the appellate decisions on the issue of lien avoidance of a lien perfected during the "gap" period which were then in existence and which have uniformly been followed since that time. See In re Webber, 674 F.2d 796, 804 (9th Cir.1982) ("when Credithrift made the loans in July, 1979, it should have been fully aware that the exemption provisions of § 522 would become effective on October 1, 1979, and that any bankruptcy filed subsequent to that date would result in avoidance of their liens on the exempt property."); Cf. Chambell v. Beneficial Finance Co., Civil Action No. 82-5020-CV-SW-4 (W.D.Mo. Jul. 30, 1982) ("Congress specifically provided that the Bankruptcy Reform Act would not become effective until October 1, 1979. Nonpurchase-money security interest which vested in personal property during the `interim period,' therefore, did not impair any exemption to which a debtor was entitled until after those exemptions became effective on October 1, 1979.")
[13] See note 12, supra.
[14] But, in most cases, it appears that there may be no foreclosure. See notes 9 and 10, supra.
[15] This is not a case in which the purchase money character of a security interest has been wiped out by subsequent refinancing. See In re Matthews, 724 F.2d 798, 800 (9th Cir.1984). Otherwise, the all-or-nothing rule continues to be followed. See Matter of Schmidt, 36 B.R. 144 (Bkrtcy.N.D.Ohio 1983). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545851/ | 77 F.2d 304 (1935)
MAIBRUNN
v.
HAMBURG-AMERICAN S. S. CO.
No. 348.
Circuit Court of Appeals, Second Circuit.
May 6, 1935.
David M. Neuberger, of New York City (Silas B. Axtell, Adele I. Springer, and Murray Ratner, all of New York City, of counsel), for appellant.
Alfred W. Andrews, of New York City (Theodore H. Lord, of Brooklyn, N. Y., of counsel), for appellee.
Before MANTON, L. HAND, and AUGUSTUS N. HAND, Circuit Judges.
L. HAND, Circuit Judge.
The plaintiff appeals from a judgment entered upon a directed verdict dismissing his complaint at the close of the evidence in an action to recover for personal injuries, suffered while a passenger on the defendant's steamer Hamburg, bound from New York to Hamburg, Germany. Shortly after 9 o'clock on the morning of March 2d, some four or five days out from New York, the plaintiff was standing at the forward end of the promenade deck, on the starboard corner, looking out on the sea through a glass window which gave forward. A weather shield with glass windows, which ran thwartship across the forward end and aft on each side for a certain distance, inclosed the deck, and the deck itself extended two feet outboard of the skin of the ship on each side and was about thirty-five feet above the water line. The weather had been somewhat rough for a little over twelve hours, the log entries being as follows: March 1, four p. m. "Wind and seas increasingly heavy, ship pitches heavily in irregular swelling" (sic). Between nine and midnight: "Rough seas and swelling. Ship pitches and rolls. Shipped water over deck and hatches. Beginning at 11 o'clock storm oil is used on starboard." Just before the accident the storm had become perceptibly severer: "Wave oil and storm oil in use. Rough seas and swelling. Ship pitches very *305 heavily and ships many breakers over deck and hatches." The ship was going at about twelve to fifteen knots an hour against a fresh gale of about forty miles (Beaufort 8), taking the seas about four points on her starboard bow. She shipped a heavy one which struck the window, broke the glass, and dashed it upon the plaintiff, severely injuring him. The question is whether the carrier had failed in its duty to protect him; and his theory is that the front of the deck should have been roped off, and that there should have been no glass window at the forward corner of the shield.
The plaintiff either proved, or was prevented by the judge from proving, that it was the usual practice in steamers of the kind not to have glass windows at the very corners, and that this was especially true when the deck had an overhang. His experts also said, or again were prevented from saying, that in weather such as then prevailed the starboard corner of the deck should have been roped off. The steamer's witnesses, although admitting that the window had been broken before in a hurricane, declared that there was then no danger; that nothing of the kind had ever taken place before; that such a sea was not to be expected, and was a chance against which a carrier ought not to be required to fend. The judge took this view and dismissed the complaint.
On the whole we think that the dispute was one which only a jury could decide, little as it was qualified to pass on such questions. We are to remember that as passenger, the plaintiff was entitled to much more than the ordinary measure of care; the precise formula in which that measure has from time to time been cast is not important; it is enough that it is very high indeed. Pennsylvania Co. v. Roy, 102 U.S. 451, 26 L. Ed. 141. If it be true that it had become the customary construction for North Atlantic steamers not to have glass at the corners, the jury might find that glass was improper construction, at least in the case of an overhang. Again if experienced masters declared that in such weather as then was, the deck should be roped off, the jury might find that the defendant had failed in this duty as well. The disclaimers of the ship's officers were not final; indeed, the master himself had said that in heavy enough weather the deck should be roped. The defendant can scarcely escape a verdict upon an issue which turns so entirely upon a matter of degree. Nor do we understand why so much of the plaintiff's proof should have been ruled out. True, it was in the form of expert opinion, and it is wise always to keep that well in hand; but the issues were beyond the personal acquaintance of the jurors; and they had to rely upon experts for any relevant information at all. It was the experts who alone could judge what weather required roping, and whether steel, not glass, was necessary for safety at the corners of the deck. It is ordinarily more convenient to receive the testimony in the form of conclusions and to leave to cross-examination the test of their foundation.
The defendant also asserts as a defense that the plaintiff failed to serve it with the notice required by his contract. On the face of the ticket, but at one side of the printing and writing which formed the contract proper, so far as there was one, was a legend reading as follows: "Notice. The attention of passengers is especially directed to the terms and provisions of this contract printed on the reverse side, which must be signed by the passenger and the agent." On the back was a clause that written notice of any claim with full particulars must be served on the defendant within sixty days after termination of the voyage. The plaintiff never personally signed the ticket, and though it was signed by the "travel bureau" from which he bought it, this was certainly done, not as his agent, but as the defendant's. This abundantly appears from the fact that the "bureau" not only signed on the back as the defendant's agent, but was the only person signing the contract for the defendant on its face. Thus the question is whether the legend charged the plaintiff with what was on the back, merely because he accepted the ticket, though without knowledge, for he had not examined it. In Baer v. North German Lloyd, 69 F.(2d) 88 (C. C. A. 2), the form of the notice was so different that it does not help us to a conclusion here. But it seems to us that The Majestic, 166 U.S. 375, 17 S. Ct. 597, 41 L. Ed. 1039, rules and in the plaintiff's favor. While the form of that notice also was not the same, we understand the case to decide that, though a passenger is bound by all that is in the contract itself, in order to charge him with other stipulations they must be incorporated into the body of it, at least by reference. A mere notice on the front of the ticket, which is not part of the contract, *306 charges him only if he sees it in season. In Murray v. Cunard S. S. Co., 235 N.Y. 162, 139 N.E. 226, 26 A. L. R. 1371, as we understand it, the limitation was written into the body of the contract. True, once the doctrine is established that the passenger, by accepting such a contract of carriage, undertakes to abide by its terms, nice distinctions are sure to arise unless he is charged with all that appears at least on the front of the paper. Yet, as we understand it, just this distinction does exist; only the contract proper charges the passenger, and the contract is taken as those words which the carrier in some way authenticates by its own signature; notices and legends alongside are not part of it. How far a notice within the contract proper would be effective to incorporate by reference stipulations on the back we need not decide. It must be acknowledged that the result is not very satisfactory in theory, but perhaps there is something to be said practically for the compromise we have described. At least there is no hardship in holding that the limitations on the back of the ticket were no part of the contract at bar; the defendant had required them to be signed by the passenger and failed to get the plaintiff to do so. Had he read the notice he might well have supposed that by not insisting on his signing, they did not mean to stand upon the limitations. But we do not rest upon that; we hold that because not incorporated directly or by reference into the contract, they were no part of it.
Judgment reversed; new trial ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545845/ | 77 F.2d 98 (1935)
PROCTOR & GAMBLE CO.
v.
J. L. PRESCOTT CO.
Patent Appeal No. 3462.
Court of Customs and Patent Appeals.
April 29, 1935.
Rehearing Denied June 3, 1935.
*99 Allen & Allen, of Cincinnati, Ohio (Drury W. Cooper, of New York City, and Walter M. Shohl, Marston Allen, and E. S. Allen, all of Cincinnati, Ohio, of counsel), for appellant.
Joshua R. H. Potts, of Philadelphia, Pa. (Basel H. Brune, of Philadelphia, Pa., and Eugene Vincent Clarke, of Chicago, Ill., of counsel), for appellee.
Before GRAHAM, Presiding Judge, and BLAND, HATFIELD, GARRETT, and LENROOT, Associate Judges.
BLAND, Associate Judge.
This is an appeal from the decision of the Commissioner of Patents, affirming a decision of the Examiner of Trade-Mark Interferences, sustaining the petition of appellee for the cancellation of appellant's trade-mark "Chipso," both tribunals holding that said mark was confusingly similar to the registered trade-mark of appellee "CHASE-O," said marks being applied to goods of the same descriptive properties.
Appellant's mark "Chipso," printed at an oblique angle, was registered on April 12, 1921, upon an application filed October 22, 1920, under the Trade-Mark Act of February 20, 1905 (see 15 USCA § 81 et seq.). The application stated that the mark was used for soap chips. Appellee's mark "CHASE-O," printed at an oblique angle in a rectangle, was registered December 9, 1913, under said Trade-Mark Act of February 20, 1905.
It is conceded by appellant that through mesne assignments appellee is the owner of the mark "CHASE-O," and that the appellee's use and registration of the mark was prior to any use of the mark "Chipso" by the appellant.
Appellant's mark "Chipso" was registered for use for "soap chips," while appellee's mark "CHASE-O," according to the application, was "for a detergent preparation in crystal form for washing, cleansing, and the harmless bleaching of clothes." The goods of both parties are used for the washing of clothes, and unquestionably the goods are of the same descriptive properties.
Section 13 of the Trade-Mark Act of February 20, 1905 (15 USCA § 93), under the provisions of which application to cancel appellant's registration was made, reads as follows: "Sec. 13. Whenever any person shall deem himself injured by the registration of a trade-mark in the Patent Office he may at any time apply to the Commissioner of Patents to cancel the registration thereof. The commissioner shall refer such application to the examiner in charge of interferences, who is empowered to hear and determine this question and who shall give notice thereof to the registrant. If it appear after a hearing before the examiner that the registrant was not entitled to the use of the mark at the date of his application for registration thereof, or that the mark is not used by the registrant, or has been abandoned, and the examiner shall so decide, the commissioner shall cancel the registration. Appeal may be taken to the commissioner in person from the decision *100 of examiner of interferences." (Italics ours.)"
The only issues before us are whether the marks of the respective parties were confusingly similar at the time appellant's application for certificate of registration was filed, and whether appellee is, by its conduct, precluded from raising the question of appellant's right to use the mark at the time of application for registration. Both tribunals of the Patent Office held that the marks were confusingly similar and that appellee was not estopped from raising the issue.
Both sides took voluminous testimony. Appellee's testimony tends to establish that confusion actually existed between the two marks from 1924 or 1925 to the time that the testimony was taken in 1932. It is appellant's contention that there was no likelihood of confusion between the two marks at the time of appellant's registration of its mark in 1921, and that appellee is estopped by its own acts from claiming that there was confusing similarity between the two marks at the time of the registration of appellant's mark.
It appears from the testimony that at the time of the registration of appellant's mark it had no actual knowledge of any product being sold under the trade-mark "CHASE-O." (Appellant had caused an examination of registered marks to be made.) It further appears from the testimony that the use of appellant's mark on soap chips began in, and has continued since, 1920.
The first use of said mark by appellant was in Michigan. The colors of the front panel of the carton bearing the mark were, and have since continued to be, blue and orange a broad organge bar extended in a diagonal direction from about the center of the left side of the panel, as it presents itself to the eye, to the upper right-hand corner of the panel. In this orange bar the mark "Chipso" in blue letters is placed, the mark extending through said diagonal. The balance of the panel is blue, with certain descriptive words thereon which are not material here. Appellee contends that the first diagonal bar employed by appellant was yellow in color, and that in 1929 it changed the color on its granule cartons to orange. With respect to this contention of appellee, while there seems to be a slight difference in the shades of orange in appellant's diagonal bars, there is no greater difference than in the shades of orange in appellee's cartons, and we do not deem such differences in shades material here.
It further appears that appellant's product "Chipso" entered into the Philadelphia Baltimore territory in a small way in 1920, but in 1923 its sales in such territory amounted to over 60,000 cases of large-size "Chipso" packages, containing 36 packages to a case, and over 75,000 cases of smallsize "Chipso" packages containing 100 packages to a case. From 1920 to 1924, inclusive, appellant expended $1,562,043.22 in general advertising of its product "Chipso."
It appears from the record that the trade-mark "CHASE-O" originated in 1912 in Philadelphia. It was then applied to a product consisting of about 75 per centum soda ash and about 25 per centum bisodium, with sufficient blue to color it and to blue the water when the directions on the carton were followed. This product was manufactured by the Chase-O Manufacturing Company of Philadelphia. The packages retailed for 5 cents each. The front panel of the carton had a white background, with a blue diagonal bar extending from the lower left-hand corner to the upper right-hand corner of the panel. In this blue bar was placed the mark "CHASE-O," extending practically the entire length of the bar. Upon the white background there was printed certain descriptive matter not material here. It was this character of carton and product above described which was upon the market at the time of the registration of appellant's mark.
In March, 1924, appellee acquired said trade-mark and the business and good will in connection therewith from the A-1 Manufacturing Company, which latter company had acquired it from the Chase-O Manufacturing Company in 1918. In the fall of 1924 appellee placed upon the market a package of "CHASE-O" to retail for 10 cents. In this carton the color plan of the 5-cent package was not followed. Instead of the body of the front panel being white, as in the 5-cent package, it was made orange the same color, substantially, as the broad diagonal bar of appellant's "Chipso" carton. The diagonal bar of blue, with the mark "CHASE-O" in white, remained substantially the same as on the 5-cent carton, but the angle of said bar across the panel was more obtuse than in the 5-cent package. The change in color from white to orange made appellee's 10-cent package much more similar in general appearance to appellant's "Chipso" packages than was appellee's 5cent *101 package with the white background. Appellee continued to market the 5-cent package with its white background, as well as its new 10-cent package.
Early in 1924 appellee also changed the formula of its "CHASE-O" product, adding 15 per centum of soap and reducing the percentages of other constituents accordingly. The result of this change in formula was that the goods of appellee to which the mark "CHASE-O" was applied were more similar in character to appellant's product "Chipso" than they were at the time of the registration of appellant's mark.
Appellee's goods were marketed largely in the Philadelphia and Baltimore territory. It appears from the testimony that the sales of the product "CHASE-O" marketed by the Chase-O Manufacturing Company amounted to about $97,500 from the years 1913 to 1917, inclusive, and that during the years 1918 to 1931, inclusive, the sales by appellee and its predecessor, A-1 Manufacturing Company, of the product bearing the mark "CHASE-O" were as follows:
1918, $ 5,456.00.
1919, $47,009.04.
1920, $64,962.96.
1921, $89,740.20.
1922, $105,194.60.
1923, $100,632.75.
1924, $107,778.00.
1925, $114,919.68.
1926, $89,038.66.
1927, $73,283.66.
1928, $68,832.58.
1929, $39,915.67.
1930, $26,463.75.
1931, $16,487.98.
It is the contention of appellee that the sales of appellee's product "CHASE-O" rapidly declined from 1925 to 1931, due, it claims, to the confusion existing between its mark "CHASE-O" and appellant's mark "Chipso."
A great deal of testimony is contained in the record upon the subject of confusion, and we think it is fairly established that confusion to a certain extent did exist in the minds of purchasers between appellee's 10-cent package of "CHASE-O" and appellant's smaller package of "Chipso." However, there is no definite evidence of actual confusion existing prior to appellee's adoption of its 10-cent package, the front panel of which, as hereinbefore stated, much more nearly resembled appellant's front panel of its packages of "Chipso" than did appellee's 5-cent package of "CHASE-O." We do not think that actual confusion is established between appellee's 5-cent package of "CHASE-O" and appellant's packages of "Chipso."
We find no evidence in the record of the advertising expenditures of appellee with respect to its "CHASE-O" product, and to what extent its falling off of sales may have been due to confusion between the packages of the respective parties or between the trade-marks here involved, or to what extent such falling off may have been due to lessened advertising or other causes, we are unable to determine.
We do not deem it necessary to set out or to comment further upon the very voluminous testimony with respect to confusion between the respective marks of the parties.
Concerning the evidence of both parties regarding actual confusion with respect to the marks of the parties hereto, the Examiner of Trade-Mark Interferences said: "The testimony of both parties that has been properly presented which is directed to the question of confusion or lack of confusion between the marks here involved has been carefully considered. Testimony of this character as a rule, if not wholly biased, is inclined to be favorable to the side presenting it and, generally speaking, is found to be of little, if any, help in the determination of the question of confusing resemblances between marks, which, after all, is largely a matter of opinion of the tribunal whose duty it is to pass upon this question."
Such testimony, however, in this kind of case, is admissible and may have a bearing upon the likelihood of confusion between the two marks at the time of registration.
The Patent Office tribunals held, and properly so, that mere delay or laches was not a well-founded defense on the part of appellant in this action, and among the cited authorities supporting this view is Cluett, Peabody & Co., Inc., v. Samuel Hartogensis, 41 F.(2d) 94, 17 Cow. C. P. A. (Patents) 1166. Appellant concedes in this court that "mere laches" is not a good defense, but it argues that the conduct of appellee hereinbefore referred to is a matter for our consideration. It argues that appellee's delay, coupled with the affirmative acts of appellee in simulating appellant's packages both in appearance and size, and appellee's change of formula, and not the *102 use of the mark of appellant, has brought about such confusion as is shown; that the acts which brought about such confusion were intentionally performed with a view of profiting thereby; and that by reason of such wrongdoing, appellee is estopped from obtaining the relief it seeks. Equity cases involving the doctrine of unclean hands are cited and discussed by appellant in connection with this phase of the case.
It is our view that the trade-mark "Chipso," as registered, so nearly resembled the previously registered and previously used "CHASE-O" mark that there was likelihood of causing confusion and mistake in the mind of the public, and that because of this fact, the appellant was not entitled to the use of the mark at the time of its application for registration thereof, and the same should not have been registered. While the testimony of actual confusion in the use of the marks when applied to packages in the manner shown by the testimony may be some indication that the marks were confusingly similar at the time of registration, it is obvious that it is not always easy to determine to what extent such confusion is due in whole or in part to the similarity of the marks or to other considerations. No actual confusion need be proven. Patton Paint Co. v. Orr's Zinc White, Ltd., 48 Ohio App. D. C. 221; California Packing Corp. v. Tillman & Bendel, Inc., 40 F.(2d) 108, 17 Cow. C. P. A. (Patents) 1048, 1058; Sun-Maid Raisin Growers of California v. American Grocer Co., 40 F.(2d) 116, 17 Cow. C. P. A. (Patents) 1034, 1036; Apex Electrical Mfg. Co. v. Landers, Frary & Clark, 41 F.(2d) 99, 17 Cow. C. P. A. (Patents) 1184, 1187.
We agree with the decisions of the tribunals below that the marks at the time of registration so nearly resembled each other that likelihood of confusion would result. It is impossible to escape this conclusion, and while appellant has asserted that there was no confusing similarity between the marks at the time of registration, that phase of the case has not been pressed with much vigor, and certainly not convincingly, in this court. Appellant has relied chiefly upon its estoppel defenses.
Both marks have the same number of letters. The first two letters are the same and sound alike. The marks have the same terminal letter "o." The end of the word "CHASE-O" and that of the word "Chipso" have the same sound. There is much similarity in the general appearance and sound of the two words. While the registrations show some differences in the angle at which the marks are placed, both of them show that they are placed at an angle leaning to the right.
We have held the following marks to be confusingly similar: [1]"Epco" and "Esso"; [2]"Calcyanide" and "Calcium Cyanide"; [3]"Molo" and "Poro"; [4]"Hexol" and "Hexcide"; [5]"Tex" and "Lux"; [6]"Zip-On" and "Zipper"; [7]"Peroxogen" and "Dioxogen"; [8]"Air-O" and "Arrow"; [9]"Oxol" and "Oxydol"; [10]"Solvit-All" and "Solvite"; [11]"Zeno" and "Zanol"; [12]"Ammo-PhosKo" and "Nitrophoska"; [13]"Novite" and "Oakite"; and [14]"Z.B.T." and "T.Z.L.B."
As to whether the doctrine of unclean hands, arising from conduct happening subsequent to the registration of the newcomer's mark, in view of the particular provisions of the statute above quoted, may constitute *103 a defense in a Patent Office cancellation proceeding, we find it unnecessary to decide. We think it proper to say, however, that no authority has been cited and none has been found which holds that such a defense under such circumstances is well founded. It is our view that if such a defense could be properly interposed "the charge was not established by the evidence." The last-quoted language was used by the Court of Appeals of the District of Columbia in Krank v. Philippe, 295 F. 1001, 54 Ohio App. D. C. 180, an appeal involving a Patent Office cancellation proceeding.
Aside from the fact that when appellee enlarged the size of its package, its mark was placed in more of a horizontal position than that shown in the registration and more in the same position as that occupied by appellant's mark, we find nothing complained of that relates to the use of the mark itself. It is true that appellee changed the color of a portion of its package from white to orange. This portion of appellant's mark on appellant's package is blue. Appellee did somewhat change its formula and changed the size of its package from a 5-cent to a 10-cent package, but even then its package was little more than one-fourth as large as appellant's package. As far as concerns us in this particular case, appellee had the right to make the said change in its formula and adopt the color and the package which it did, since it was the owner of the mark. Being the owner of the mark, it had a right to rely upon the mark and its name upon the package to distinguish its goods from the goods of others. A. G. Morse Co. v. Lowney Co. (D. C.) 256 F. 935, 9 T. M. Rep. 341; Thum Co. v. Dickinson et al., 7 T. M. Rep. 496, reversed on other grounds, O. & W. Thum Co. v. Dickinson (C. C. A.) 245 F. 609; Oliver Chilled Plow Works v. Wm. J. Oliver Mfg. Co., 40 Ohio App. D. C. 125.
The question of simulating the size and color of packages is a subject-matter which belongs to the domain of unfair competition, and we are not concerned with it here. Oliver Chilled Plow Works v. Wm. J. Oliver Mfg. Co., supra; Scot Tissue Co. v. Interlake Tissue Mills Co., Ltd., 151 M. D. 145, 16 T. M. Rep. 200.
Appellant argues that the record fails to show any proof of confusion or damage at or near the time of registration. The mere fact that the record does not show confusion makes no difference if the marks, at the time of registration, so nearly resembled each other as to make confusion likely, and the injury contemplated by the section of the statute under consideration is sufficiently established when mere likelihood of confusion is shown. Patton Paint Co. v. Orr's Zinc White, Ltd., supra.
Appellant in this court has stressed with great persistence the hardships resulting from the ruling of the Patent Office tribunals. Any resulting hardships, of course, are regrettable; but such a situation, when brought about in the manner shown here, affords no justification for this court to hold that the two trade-marks at the time of registration did not so closely resemble each other as to make confusion likely. The trade-mark decisions of this court, involving this question, are, we think, characterized by great uniformity, not only in denying registration where confusion was likely, but doing so if the question were doubtful. To now hold, as we would be required to hold if the decision of the commissioner was reversed, that the two marks were not confusingly similar at the time of registration would, in our judgment, result in far more regrettable consequences than flow from our affirmance of the commissioner's decision.
Appellant states that the Patent Office has "seen fit to order cancellation of the mark `Chipso,' thus striking to the ground a trade property of inestimable value * * *." The registrability of the mark the right of appellant to assert exclusive ownership thereto which registration implies and not merely the right to use the mark, was the question before the Patent Office tribunals and is the question here.
This Patent Office cancellation proceeding is governed by the terms of the statute, and its terms are not indefinite. It is intended to afford a means of canceling certain registrations, among them registrations which should not have been allowed. Registration is based upon the right of the registrant to the exclusive use of the mark sought to be registered. Equity frequently permits more than one person to use the same mark, since the conduct of the parties may affect the exclusive right to use. We have frequently pointed out this difference between our jurisdiction and that of the court of equity. California Packing Corp. v. Tillman & Bendel, supra; B. F. Goodrich Co. v. Hockmeyer, 40 F.(2d) 99, 17 Cow. C. P. A. (Patents) 1068; Van Camp Sea Food Co. v. A. B. Stewart Organizations, 50 F.(2d) 976, 18 Cow. C. P. A. (Patents) 1415.
*104 Since we conclude that appellant "was not entitled to the use of the mark," "Chipso," within the meaning of the statute involved, at the time of the filing of the application for registration, and that appellee is not estopped from raising the question, we find no error in the decision of the commissioner, and the same is affirmed.
Affirmed.
GARRETT, Associate Judge, concurs in the conclusion.
LENROOT, Associate Judge, dissents.
NOTES
[1] Standard Oil Co. (New Jersey) v. Clarence W. Epley, 40 F.(2d) 997, 17 Cow. C. P. A. (Patents) 1224.
[2] California Cyanide Co. v. American Cyanamid Co., 40 F.(2d) 1003, 17 Cow. C. P. A. (Patents) 1198.
[3] Malone v. Horowitz, 41 F.(2d) 414, 17 Cow. C. P. A. (Patents) 1252.
[4] MacEachen v. Tar Products Corp., 41 F.(2d) 295, 17 Cow. C. P. A. (Patents) 1264.
[5] Lever Brothers Co. v. Riodela Chemical Co., 41 F.(2d) 408, 17 Cow. C. P. A. (Patents) 1272.
[6] B. F. Goodrich Co. v. Hockmeyer et al., 40 F.(2d) 99, 17 Cow. C. P. A. (Patents) 1068.
[7] Bookman v. Oakland Chemical Co., 40 F.(2d) 1006, 17 Cow. C. P. A. (Patents) 1213.
[8] Cluett, Peabody & Co., Inc., v. Denver M. Wright, 46 F.(2d) 711, 18 Cow. C. P. A. (Patents) 937.
[9] Proctor & Gamble Co. v. J. L. Prescott Co., 49 F.(2d) 959, 18 Cow. C. P. A. (Patents) 1433.
[10] Langfield v. Solvit-All Corp., 49 F. (2d) 480, 18 Cow. C. P. A. (Patents) 1313.
[11] American Products Co. v. F. A. Leonard, 53 F.(2d) 894, 19 Cow. C. P. A. (Patents) 742.
[12] American Cyanamid Co. v. Synthetic Nitrogen Products Corp., 58 F.(2d) 834, 19 Cow. C. P. A. (Patents) 1235.
[13] Buckeye Soda Co. v. Oakite Products, Inc., 56 F.(2d) 462, 19 Cow. C. P. A. (Patents) 1034.
[14] Crystal Corp. v. Manhattan Chemical Mfg. Co., 75 F.(2d) 506, 22 Cow. C. P. A. (Patents) ---. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919519/ | 660 So. 2d 1122 (1995)
LENNAR FLORIDA HOLDINGS, INC., etc., et al., Petitioner,
v.
FIRST FAMILY BANK, etc., et al., Respondent.
No. 95-361.
District Court of Appeal of Florida, Fifth District.
September 1, 1995.
Rehearing Denied October 3, 1995.
Walter S. McLin, III, and Phillip S. Smith of McLin, Burnsed, Morrison, Johnson & Robuck, P.A., Leesburg, and Norman A. Moscowitz of Rubin, Baum, Levin, Constant, Friedman & Bilzin, Miami, for petitioner.
Stephen H. Judson of Cummins, Mueller & Judson, P.A., Leesburg, for respondent.
THOMPSON, Judge.
Lennar Florida Holdings, Inc. ("Lennar"), seeks certiorari review of an order denying its motion to dissolve a notice of lis pendens or, in the alternative, to require the posting of a bond. Lennar has been sued by First Family Bank ("First Family") in Lake County, where the property affected by the lis pendens is located.
The underlying action is a second-amended complaint, alleging breach of contract and breach of trust, and seeking specific performance, a constructive trust, and a temporary and permanent injunction. In 1972 and 1973, First Family, which was then known as First Federal Savings and Loan Association of Eustis, entered into contracts referred to as participation agreements whereby it purchased an interest in two loans made by American Federal Savings and Loan Association of Orlando ("American Federal"). For contributing a percentage of the loan amount, First Family would share a percentage of the accumulated principal and interest. *1123 These loans were secured by mortgages on properties located in Lake and Orange Counties.[1] First Family contributed 34% of the $843,000 loan secured by the mortgage on the Lake County property. American Federal held the notes and mortgages for the benefit of all participants, and was authorized to deal with the loans as absolute owner. The participation agreements provided that American Federal would act as a prudent lender if the loans went into default, and if it breached or failed to perform its obligations the other participants could require on demand that their full participating interests in such loans be repurchased at par value. It was also provided that the terms and provisions of the participation agreements would be binding upon the successors and assigns of the participants.
American Federal later merged with AmeriFirst Federal Savings and Loan Association. In March 1991, the Resolution Trust Corporation ("RTC") took possession of AmeriFirst's assets, including the aforementioned notes, mortgages, and loan participation agreements.
While under the control of the RTC, the notes went into default and the RTC filed separate suits to foreclose against the mortgages on the Lake and Orange County properties. On July 25, 1991, the circuit court in Lake County entered a summary final judgment of foreclosure in favor of the RTC. Final judgment of foreclosure was also entered in Orange County.
The Lake County property was auctioned for sale on November 5, 1991. The RTC was the high bidder and a certificate of sale was entered on that date. First Family was not a party to the foreclosure proceedings. In 1992, Lennar received, as part of a large portfolio purchase from the RTC, assignments of the RTC's interest in the subject notes, mortgages, and summary final judgments of foreclosure relating to the Lake and Orange County properties. Pursuant to the assignments from the RTC, Lennar was issued a certificate of title on December 15, 1992, for the Lake County property.
The dispute in the present lawsuit stems from a contract Lennar entered into on May 25, 1994 to sell the Lake County property for $200,000, which allegedly is an amount below fair market value and below the total amount of the debt due on the loan which was the subject of the participation agreement. First Family alleges that, as a successor in interest to American Federal's obligations under the applicable participation agreement, Lennar breached its duty to exercise judgment as a prudent lender. First Family further alleges that Lennar refused to repurchase First Family's participation interest after breaching the participation agreement. First Family claims that its damages include unpaid principal and interest, and maintenance costs improperly charged to it. In addition to money damages, First Family seeks a constructive trust and judgment conveying to it a 34% fee simple ownership interest in the subject property.
On June 14, 1994, First Family filed in Lake County its second-amended complaint and amended notice of lis pendens. Lennar filed a motion to dissolve the notice of lis pendens, or in the alternative, to require First Family to post a bond. On December 9 and 14, 1994, an evidentiary hearing was held. By order dated January 10, 1995, the lower court denied the motion to dissolve the notice of lis pendens as to the Lake County property and did not require First Family to post a bond. It is from this order that Lennar seeks certiorari review.
One of the purposes of the doctrine of lis pendens is to give notice to future purchasers or lienors that a suit has been filed that could affect title to the property. A lis pendens exists as much to warn third parties of the dispute as to protect the plaintiff's interests. See Chiusolo v. Kennedy, 614 So. 2d 491 (Fla. 1993). A court may control or discharge a notice of lis pendens as it may grant or dissolve injunctions if the initial pleading does not show that the action is founded on a duly recorded instrument or mechanic's lien. See § 48.23(3), Fla. Stat. (1993); Mohican Valley, Inc. v. MacDonald, 443 So. 2d 479 (Fla. 5th DCA 1984).
Reference to the participation agreement in a recorded instrument would not give constructive *1124 notice of First Family's claimed interest in the property. The participation agreement is vague in many respects, but on its face appears to limit damages for breach to a repurchase of the party's participating interest.
The issue before us is whether the proponent of the lis pendens, First Family Bank, has shown that there is a sufficient nexus between its action and the property in question. See Chiusolo v. Kennedy, 614 So.2d at 492. Although First Family had a "participation" interest in the subject note and mortgage, that mortgage was foreclosed and the collateral property sold pursuant to the judgment. First Family did not intervene in the foreclosure action. Lennar acquired title to the property after the mortgage was discharged. First Family has not alleged that Lennar fraudulently obtained title to the Lake County property.
We hold that First Family has not demonstrated a sufficient nexus between its second amended complaint and the property described in the lis pendens. We, therefore, grant the petition for writ of certiorari and quash the order denying the motion to discharge the notice of lis pendens.
PETITION GRANTED; ORDER QUASHED.
HARRIS and GRIFFIN, JJ., concur.
NOTES
[1] The lis pendens described both the Lake County and Orange County parcels, but the trial court in its order limited the lis pendens to the Lake County property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919529/ | 660 So. 2d 919 (1995)
STATE of Louisiana
v.
Clarence WILLIAMS.
No. 94-KA-0622.
Court of Appeal of Louisiana, Fourth Circuit.
August 23, 1995.
Application Dismissed November 3, 1995.
*920 Rudy W. Gorrell, New Orleans, for defendant.
Harry F. Connick, District Attorney of Orleans Parish, Susan M. Erlanger, Assistant District Attorney of Orleans Parish, New Orleans, for the State.
Before BARRY, LOBRANO and PLOTKIN, JJ.
PLOTKIN, Judge.
Defendant, Clarence Williams, was charged by bill of information on August 15, 1984, with armed robbery, a violation of La. R.S. 14:64. He was arraigned August 27, 1984, and pled not guilty. On January 17, 1985, a twelve-member jury found him guilty as charged. On January 31, 1985, he was sentenced to sixty years at hard labor as a third offender under La.R.S. 15:529.1. He filed a motion for appeal with this Court. After an errors patent review, this Court affirmed his conviction and sentence, noting *921 that it would not correct an illegally lenient sentence that failed to deny the defendant eligibility for parole, probation, or suspension of sentence. State v. Williams, KA-4296 (La.App. 4th Cir. Apr. 11, 1986). The defendant moved to correct his sentence, and on October 25, 1990, the trial court corrected his sentence to deny the benefits. The defendant brought this out-of-time appeal pursuant to Lofton v. Whitley, 905 F.2d 885 (5th Cir.1990).
FACTS
On January 20, 1984, at approximately 7:40 a.m., Ramona Cahee arrived for her job as a teacher at Dunn Elementary School, located in the Desire Housing Project. As she stepped out of her car in the parking lot, a man approached her with a gun, threatened to shoot her, and took her purse, which contained a wallet, a checkbook, credit cards, and her husband's payroll check. On January 26, 1984, a man attempted to cash a payroll check at the Circle Food Store on St. Bernard Avenue in New Orleans. Because the cashier, Bonnie Marshall, recognized that the man had presented a phony identification card, she called the company shown as the drawer of the check and discovered that the check in question had been stolen. As Marshall attempted to notify her manager, the man who had attempted to cash the check fled the store. A computer check of the phony identification card bearing Ramona Cahee's husband's name, Alfred Screws, revealed that the social security number on the card belonged to the defendant.
Both Ramona Cahee and Bonnie Marshall identified the defendant out of a photographic lineup and at trial. Cahee identified the defendant as the man who robbed her on the morning of January 20, 1984, and Marshall identified the defendant as the man who attempted to cash the stolen payroll check on January 26, 1984.
ERRORS PATENT
Counsel complied with the procedures outlined by Anders v. California, 386 U.S. 738, 87 S. Ct. 1396, 18 L. Ed. 2d 493 (1967), as interpreted by this Court in State v. Benjamin, 573 So. 2d 528 (La.App. 4th Cir.1990). Counsel's detailed review of the procedural history of the case and the facts of the case indicate a thorough review of the record. Counsel has moved to withdraw because he believes, after a conscientious review of the record, that there are no non-frivolous issues to be raised on appeal. Counsel has reviewed all available transcripts and has found no trial court rulings that arguably support the appeal. The defendant has filed a pro se brief.
As required by State v. Benjamin, this Court has performed an independent, thorough review of all the pleadings filed in the district court, all minute entries of the district court proceedings, the bill of information, and all transcripts contained in the appeal record. The defendant was properly charged by bill of information with a violation of La.R.S. 14:64 and the bill of information was signed by an assistant district attorney. The defendant was present and represented by counsel at arraignment, all hearings, trial, and sentencing. The sentence of sixty years at hard labor without benefit of parole, probation, or suspension of sentence on its face is legal in all respects.[1] The State proved every element of armed robbery beyond a reasonable doubt. An independent review reveals no non-frivolous issues and a review of all transcripts contained in the appeal record reveals no trial court ruling that arguably supports an appeal.
Accordingly, counsel's motion to withdraw is granted.
PRO SE ASSIGNMENTS OF ERROR NUMBERS ONE AND THREE
The defendant argues he was denied a hearing on his motion to suppress the identification. A hearing was held September 26, 1984, and the motion was denied. Defendant also argues that he was prejudiced by a suggestive lineup.
After the foiled attempt to cash the payroll check, the Circle Food Store mailed Screws his check and the fake identification card the defendant used in attempting to cash the *922 check. Screws testified that he brought these to the police department without bringing them home or showing them to his wife. The defendant argues the wife must have seen the card with his picture on it such that her subsequent identification of him was tainted.
These assignments of error are without merit. All of the evidence adduced at trial establishes that Cahee did not see the card before she identified the defendant. Defendant's argument to the contrary is mere assertion and is not supported by any evidence. As such, we reject his claims that the lineup was suggestive and that the trial court erred in denying him a hearing on the motion to suppress the identification.
PRO SE ASSIGNMENT OF ERROR NUMBER TWO
The defendant argues the store manager, rather than the cashier, mailed the check to Screws. Essentially, defendant complains that the chain of custody was broken. We find this argument to be misplaced. Because the check and the identification card were susceptible of visual identification by both Screws and Marshall, there was no need to prove up the chain of custody. See, e.g., State v. Dukes, 609 So. 2d 1144, 1159 (La.App. 2d Cir.1992), writ denied, 618 So. 2d 402 (La.1993) ("Identification can be either by a witness who identifies the evidence in court, or by a chain of custody.") (emphasis added). Thus, the allegedly unresolved question of who mailed the check does not require that such evidence have been excluded at trial. Rather, any doubt as to how Screws received the check goes to the weight of the evidence, not to its admissibility. See State v. Tarver, 521 So. 2d 601, 606 (La.App. 1st Cir.), writ denied, 525 So. 2d 1056 (La.1988). This assignment of error is without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER FOUR
By this assignment of error, defendant argues the State should have given him a copy of the police report because Cahee's initial description of him, contained in the report, was not accurate. It is impossible to tell from the record whether the State gave the defendant the report, although initial police reports are routinely given to the defense. In any event, the supposed inconsistencies between Cahee's description in the report and the defendant's own description of himself in his pro se brief are insignificant and Cahee was confident in her identification of defendant as the person who robbed her. Her identification was corroborated by Marshall, who testified that defendant was the man who attempted to cash the stolen payroll check on January 26, 1984. As such, even assuming that defendant did not, in fact, obtain a copy of the police report, the description contained therein does not constitute exculpatory evidence, nor is there a reasonable possibility that the production of such evidence would have changed the trial's outcome. See State v. Duncan, 94-1045, p. 12 (La.App. 4th Cir. 12/28/94), 648 So. 2d 1090, 1099, writ denied, 95-0662 (La. 6/30/95), 657 So. 2d 1028. Thus, this assignment of error is without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER FIVE
The defendant argues the trial court should not have allowed evidence that he gave an alias to the arresting officer because it was impermissible evidence of other crimes, namely resisting arrest. As a prerequisite to the admissibility of evidence of other crimes, the State must within a reasonable time before trial furnish in writing to a defendant a statement of the acts or offenses it intends to offer, describing same with the general particularity required of an indictment or information. State v. Prieur, 277 So. 2d 126, 130 (La.1973). However in Prieur, the Louisiana Supreme Court expressly recognized that "res gestae" evidence is an exception to the prohibition of "other crimes" evidence. Res gestae events constituting other crimes evidence are deemed admissible because they are so nearly connected to the charged offense that the prosecution could not accurately present its case without reference to them. State v. Haarala, 398 So. 2d 1093, 1097 (La.1981). A close connexity in time and location is required between the charged offense and the other crimes evidence. Id. Often, evidence of other crimes that is relayed by a police *923 officer's narrative of the events that led up to the arrest is admitted as res gestae. See, e.g., State v. Granier, 592 So. 2d 883, 886 (La.App. 4th Cir.1991), writ denied 600 So. 2d 1334 (La.1992).
For example, in State v. McGuire, 577 So. 2d 1120, 1122-23 (La.App. 1st Cir.), writ denied, 581 So. 2d 704 (La.1991), the court held that evidence of the murder defendant's escape from prison in another state twelve to nineteen hours before meeting the victim was admissible as an integral part of the subsequent murder and robbery of the victim. Likewise, the defendant in State v. Edouard, 512 So. 2d 579, 581-83 (La.App. 3d Cir.1987), was charged with and convicted of burglary of an inhabited dwelling. The only items stolen were the victim's bank book and some bank documents. The defendant was apprehended two days after the burglary when he attempted to cash a check drawn on the victim's name. The defendant was found to be in possession of the bank documents. The court allowed the officers to testify about the facts of the defendant's apprehension, noting that the evidence constituted part of the res gestae of the crime. However, in State v. Jenkins, 573 So. 2d 1214, 1218-19 (La.App. 4th Cir.1991), the defendant was arrested one week after the crime in question had been committed at an apartment that was not his own. In the apartment were two handguns, neither of which was the gun that had been used in the murder, and drugs. This Court found evidence of the drugs admissible because it was introduced to impeach the defendant. However, the court found that the evidence of the guns did not constitute part of the res gestae. The court found that the error in admitting the evidence was harmless because the evidence clearly established that the apartment did not belong to the defendant.
In State v. Harris, 573 So. 2d 1195 (La. App. 4th Cir.1991), this Court found that evidence that the defendant was arrested because there was a warrant outstanding for his arrest was admissible because "[a]ssuming that this comment is specific enough to constitute reference to another crime, it was nonetheless admissible, because it was offered `to explain the sequence of events leading to the arrest of the defendant.'" Id. at 1198 (quoting State v. Granier, 563 So. 2d 1354 (La.App. 4th Cir.1990), writ granted in part, denied in part, 578 So. 2d 528 (La. 1991)). In addition, the court found that "[e]ven if the comment was improper, the error was harmless given the fact that the defendant himself acknowledged at trial that he had been convicted of at least two felonies." Id.
Here, even if the evidence that the defendant gave an alias was specific enough to constitute a reference to another crime, it explained the sequence of events leading to the arrest. As such, it comprises part of the res gestae and was therefore admissible. This assignment error is thus without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER SIX
The defendant argues the trial court improperly admitted evidence of another crime, attempted forgery. The Louisiana Supreme Court, however, has held such evidence is admissible. In State v. Donahue, 408 So. 2d 1262 (La.1982), the defendant armed robbed the victim and stole his wallet. The defendant was arrested later when he tried to use a credit card; the store employee became suspicious when the address and signature the defendant gave did not match the name and address on the card. The defendant was subsequently arrested and convicted. In affirming the conviction, the supreme court stated that "[e]vidence of the use of a stolen credit card is independently admissible to prove that the user of the card was a principal in the robbery in which the credit card was taken." Id. at 1265 (citing State v. Scott, 320 So. 2d 538 (La.1975)).
The evidence in this case did not rely on any exception to the prohibition on other crimes evidence. It was independently admissible to prove that defendant had committed the armed robbery of Cahee. This assignment of error is without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER SEVEN
The defendant argues the trial court erred when it refused to charge the jury on *924 the limited use of other crimes evidence.[2] In denying defense counsel's objection, the trial court observed that "there was no comment about crime, or about any other criminal activity. And I think to talk about other crimes, I think, may have been prejudicial to the defendant. And for that reason, I didn't do it." By this, the trial court was suggesting that the reference to other crimes, to the extent there was one, was not specific, and that a jury charge on the point might have actually drawn attention to the other crimes evidence, thereby prejudicing the jury. The trial court's inclination under the facts of the case appears correct in light of the fact that a reference to giving an alias does not constitute evidence that a jury would immediately connect to the crime of resisting arrest.
As to evidence of the attempted forgery, in Donahue, the defendant complained on appeal that the trial judge should have instructed the jury on the limited purposes for which other crimes evidence may be used as required by State v. Prieur. The court rejected the argument, stating as follows: "The requirements of Prieur apply when other crimes evidence is admitted under the exceptions outlined in LSA-R.S. 15:445 and 15:446. The other crimes evidence in this case that related to appellant's attempted use of the stolen credit card does not depend on those exceptions for its admissibility. It is independently admissible and therefore the instructions required by Prieur were not required to be given in this case." Id. (citations omitted). The same holds true in this case.
This assignment of error is without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER EIGHT
The defendant complains that the trial court erroneously instructed the jury on reasonable doubt. The transcript does not include the jury charges. However, the transcript does list defense counsel's objections to the jury charges and reveals that no objection was made to the reasonable doubt charge at the time the trial court delivered it.
In State v. Dobson, 578 So. 2d 533, 534 (La.App. 4th Cir.), writ denied, 588 So. 2d 1110 (La.1991), this Court held that a contemporaneous objection must be entered when the jury instruction is given in order to preserve any claim on appeal. See also La. C.Cr.P. art. 841; State v. Wolfe, 630 So. 2d 872 (La.App. 4th Cir.1993) (holding that Dobson is good law and that defendant is required to object to allegedly defective jury charge at the time it is given), writ denied, 94-0448 (La.10/28/94), 644 So. 2d 648. By failing to lodge an objection to the reasonable doubt instruction when it was given, the defendant thus waived this argument. Consequently, this assignment of error is without merit.
PRO SE ASSIGNMENT OF ERROR NUMBER NINE
Defendant asserts the trial court erred in failing to advise him of his constitutional rights before allowing him to plead guilty to the multiple bill. Specifically, defendant argues he was not advised of his right to remain silent.
At the time defendant was sentenced, Louisiana Revised Statute 15:529.1(D) provided as follows:
If, at any time, either after conviction or sentence, it shall appear that a person convicted of a felony has previously been convicted of a felony under the laws of this state, or has been convicted under the laws of any other state, or of the United States, or of any foreign government or country, of a crime, which, if committed in this state would be a felony, the district attorney of the parish in which subsequent conviction was had may file an information accusing the person of a previous conviction. Whereupon the court in which the subsequent conviction was had shall cause the person, whether confined in prison or otherwise, to be brought before it and shall *925 inform him of the allegation contained in the information and of his right to be tried as to the truth thereof according to law and shall require the offender to say whether the allegations are true. If he denies the allegation of the information or refuses to answer or remains silent, his plea or the fact of his silence shall be entered on the record and the judge shall fix a day to inquire whether the offender has been convicted of a prior felony or felonies, as set forth in the information.
The jurisprudence clearly recognizes that this section of the multiple offender statute requires that before allowing a defendant to plead guilty to a multiple bill, the sentencing court must advise the defendant of his right to a "formal hearing" at which the state must prove its case for the multiple offender status. Implicit in this requirement is the additional requirement that the defendant be advised of his constitutional right to remain silent. State v. Johnson, 432 So. 2d 815, 817 (La.1983); State v. Vincent, 439 So. 2d 1124, 1126-27 (La.App. 4th Cir.1983), writ denied, 472 So. 2d 913 (La.1985).
In this case, the trial court said that it understood that the defendant wanted to plead guilty to the multiple bill. It asked the defendant if he was aware of the potential sentence. It asked the defendant if he had been convicted of the prior offenses. It then sentenced the defendant. Thus, the record shows that defendant was not advised of his right to remain silent as required. Accordingly, the defendant's sentence as a multiple offender must be vacated and the case remanded for re-sentencing. State v. Desmond, 524 So. 2d 147, 148-50 (La.App. 4th Cir.1988); State v. Covington, 522 So. 2d 1168, 1170-71 (La.App. 4th Cir.1988).
PRO SE ASSIGNMENT OF ERROR NUMBER TEN
The defendant complains that when he was re-sentenced on October 25, 1990, he was illegally sentenced to a more severe sentence in that the new sentence denied him eligibility for parole, probation, or suspension of sentence. At that hearing, the trial court cautioned the defendant that if he persisted in his motion to correct an illegally lenient sentence, the trial court would correct the sentence to in fact give the defendant more time. The defendant stated that he in fact did want his sentence corrected. The trial court corrected relator's sentence to sixty years at hard labor without benefit of parole, probation, or suspension of sentence. Later, in writ 91-K-2286, defendant argued that the October 25, 1990, sentence should be vacated in light of the guidelines set forth in State v. Desdunes, 579 So. 2d 452 (La.1991), State ex rel. Jackson v. Smith, 578 So. 2d 1150 (La. 1991), and State v. Washington, 578 So. 2d 1150 (La.1991), which hold that if the intent of the sentencing judge at the original sentencing was to sentence the defendant without benefit of parole, probation, or suspension of sentence, then re-sentencing the defendant to the same sentence without parole, probation, or suspension of sentence is appropriate. On December 4, 1991, this Court issued an order to the trial court either to correct the October 25, 1990, minute entry to reflect compliance with Desdunes and its progeny or, if the guidelines were not followed, to vacate the sentence and resentence the relator in accordance with the guidelines. In writ 93-K-0865, defendant complained to this Court that the trial court failed to comply with this Court's order in writ 91-K-2286. On September 15, 1993, the trial court stated that its intent at defendant's original sentencing was to sentence the defendant without benefit of parole, probation, or suspension of sentence. Accordingly, the trial court complied with Desdunes and its progeny. This assignment of error is without merit.
CONCLUSION
For the foregoing reasons, we hereby affirm defendant's conviction. However, we reverse the multiple offender adjudication and remand the case for re-sentencing on the multiple bill. As noted earlier, counsel's motion to withdraw is granted; the trial court is hereby order to appoint new counsel to represent defendant during resentencing on the multiple bill.
CONVICTION AFFIRMED; SENTENCE REVERSED AND REMANDED.
NOTES
[1] We say the sentence is legal "on its face" because as we later note, the enhanced sentence is, in fact, improper because defendant was not informed of his right to remain silent during the multiple bill hearing.
[2] At the close of trial, the defense argued State v. Goza, 408 So. 2d 1349 (La.1982), to support its objection. That case is not applicable here. Goza held that evidence that the defendant was involved in narcotics transactions, that her husband found out about it, and that she killed him to silence him was offered by the State as evidence to prove motive to commit the crime. Because the evidence was so prejudicial to the defendant, the court held that the State should have given the defense notice prior to trial. Id. at 1353-54. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919540/ | 660 So. 2d 204 (1995)
Willie Faye MITCHELL, Plaintiff-Appellee,
v.
AT & T, Defendant-Appellant.
No. 27,290-CA.
Court of Appeal of Louisiana, Second Circuit.
August 28, 1995.
Rehearing Denied September 21, 1995.
*206 Blanchard, Walker, O'Quinn & Roberts by Robert W. Johnson, Shreveport, for appellant.
James E. Franklin, Jr., Shreveport, for appellee.
Before NORRIS and HIGHTOWER, JJ., and PRICE, J. Pro Tem.
NORRIS, Judge.
The employer, AT & T, appeals a judgment of the Office of Workers Compensation which declared the claimant, Willie Faye Mitchell, temporarily, totally disabled, and awarded weekly benefits; awarded additional medical expenses; and assessed penalties and attorney fees. By four assignments of error, AT & T urges that Ms. Mitchell did not meet the clear and convincing burden of proof now required for temporary, total disability, that AT & T's handling of the claim was not arbitrary and capricious, and alternatively that AT & T is entitled to credit for sick pay and disability retirement paid to Ms. Mitchell. For the reasons expressed, we reverse the award of disability benefits, amend by reducing the award of attorney fees, and render.
Factual background
Ms. Mitchell was employed as a Senior Operator Level 2, Warehouse at AT & T's Shreveport plant at the time of the accident in March 1992.[1] She earned $11.44 an hour. Her job was to receive merchandise that arrived at the warehouse. She generally entered information on a computer while another operator physically placed the merchandise with a fork lift. On March 8, 1992, Ms. Mitchell drove the fork lift and accidentally caught her right heel between a metal beam and the side of the fork lift. She was immediately taken to Willis-Knighton South where she received 22 sutures and was released to the care of Drs. Lewis Jones and James Lillich at Orthopedic Specialists of Louisiana. Although she described immediate pain and numbness upon impact, Dr. Jones diagnosed only a laceration of the heel with sprain of lateral and collateral ligaments of the right ankle, and in the ensuing weeks they noted what appeared to be normal healing. Ms. Mitchell, however, continued to complain of severe pain in her heel. Dr. Lillich nevertheless recommended in late May that she return to sedentary work.
Around this time AT & T also referred her to Dr. James Hill, a family practitioner under contract with AT & T and Willis-Knighton. Dr. Hill examined her by palpating or touching the injured area. When it was apparent that he was about to touch the injured area, she demonstrated excruciating pain. Curiously, when he distracted her to another location and secretly palpated the injured site as well, her reaction was not nearly so great. Dr. Hill obtained these results twice in April and May 1992.
Based on the information from Drs. Jones, Lillich and Hill, AT & T asked Ms. Mitchell to return to a modified form of her job in late May. Because she complained she still could *207 not place any weight on her right heel, the company accommodated her by bringing a wheelchair to her car and permitting her to use it at her computer. Although she was apparently not required to walk at all, she still complained that the pain in her foot was too great for her to work. She spent most of two four-hour shifts in AT & T's medical area, and has not returned to the plant since May 28.
After this, Ms. Mitchell's complaints continued; in fact, in a late June office visit Dr. Lillich found her so emotional and crying that he recommended psychiatric evaluation. In early July, Ms. Mitchell discovered a lump in her right breast; she had undergone surgery for breast cancer about five years earlier, and now underwent about two months of testing and treatment, ultimately finding the recent lump to be a benign cyst. While she was at Schumpert Medical Center in July, Dr. Edward Anglin, an orthopedist, suggested surgery to block the sympathetic nerves affecting her right foot, but she declined this treatment until her breast problem was resolved.
While undergoing breast treatment, however, she began seeing Dr. Shahidul Islam, a pain specialist, for her continued foot pain. He diagnosed post traumatic stress disorder secondary to her work-related injury, with chronic foot pain and pain disorder. Although Dr. Islam was not called to testify, his office reports show that he felt her symptoms were characteristic of sympathetically maintained pain. Because of her physical and psychological condition, he felt she was unable to work and should be considered disabled.
Also around this time, Ms. Mitchell had a bone scan at Willis-Knighton, which revealed an "increased uptake in both feet, compatible with clinical history of trauma" (emphasis added), but otherwise nothing abnormal. Dr. David Adams, an electromyographist, tested her in September and found "no electrodiagnostic evidence of neuropathy, myopathy, peroneal neuropathy, or tarsal tunnel syndrome" in her right foot.
In August 1992, after the breast problems were resolved, AT & T referred Ms. Mitchell to Dr. William Osborne, a specialist in occupational medicine, physical impairment and pain study. His staff at the Impairment and Disability Center conducted a battery of tests. He concluded that the injury left Ms. Mitchell with an 11% impairment of her right foot and a 4% whole body impairment, both permanent. He testified that she can perform "most any job sitting," and if she must stand or walk, it could not exceed 30 minutes to one hour, with 10 to 15 minutes of rest before standing or walking again. While he acknowledged that she has a "valid pain input" because of the injury, he cited psychological test results (MMPI, Millon Multi-axial, and others, administered by Dr. Thomas Staats) showing that she had a pre-existing personality disorder involving "gross psychological symptom magnification," and concluded that she could return to work under the restrictions.[2] He also testified that on the basis of an acetone test and measurements of her thighs and calves, Ms. Mitchell was not suffering from reflex sympathetic dystrophy[3] or muscle wasting.
The following month Ms. Mitchell went to Dr. Glenn Sholte Jr., an anesthesiologist who specializes in pain management, on referral from her breast doctor. He gave her a sympathetic block with local anesthesia, which yielded about 80% relief for 30 minutes or so. Later, in January 1993, he gave her a series of lumbar sympathetic nerve blocks, which decreased her pain and raised her skin temperature, but also were of short duration. He testified by deposition that trauma can cause sympathetic dystrophy, and he believed that Ms. Mitchell's was caused that way. He accepted her complaints of constant, sharp, needle-like pain, and said he did not believe she could engage in her old job at *208 AT & T. He stated, however, that he thought her job involved assembling telephone components on an assembly line. R.p. 374. He expressed no opinion as to whether she could work within the restrictions outlined by Dr. Osborne. He concluded that she had not reached maximum medical improvement, and felt that her only options for relief were either a sympathectomy (surgical removal of the sympathetic nerves), or implanting an epidural catheter (to administer pain-killing drugs at regular intervals). He recommended the epidural.
Ms. Mitchell's treating physician, Dr. Lillich, reported in October 1992 that there was "nothing more" he could do for this patient. While expressing the opinion that she could return to light duty work, he also felt that her severe pain and psychological problems would prevent her from doing so. He added that these problems would be best addressed by a psychiatrist, and reiterated, "I feel that she could have * * * perform[ed] that type of work."
Ms. Mitchell testified that on the date of the hearing, in September 1993, her foot was still swollen, in constant pain and occasionally numb. She doubted she could do any kind of work, as she claimed she could stand flatfooted only a minute or so, and is also very uncomfortable sitting down. She admitted, however, that despite the pain she drives regularly and does her own shopping for groceries and clothes. She also explained that she was unable to work not because her ankle was stiff, but simply because the pain was severe. R.p. 101.
Immediately after her accident in March 1992, AT & T (a self-insured employer) began paying her accident disability benefits of $457.60 per week, including $295 as required under the workers comp statute. In September 1992, on the strength of the reports from Drs. Jones, Lillich and Hill, AT & T determined that Ms. Mitchell's absence from work was no longer related to the accident but to another sickness; the company therefore converted her to sickness disability. This in effect terminated comp payments for the job-related injury.[4] She was eligible to receive sickness disability for 52 weeks at $457.60 per week after which, in September 1993, if she was still unable to work, she would be automatically converted to disability retirement at $840.70 per month for the rest of her life. At the time of the hearing, she had drawn $12,538.24 in accident disability and $24,252.80 in sickness disability. AT & T had paid all the medical expenses for Drs. Jones, Lillich, Hill, Anglin and Osborne, and the first few visits with Drs. Sholte and Islam. However, as early as June 1992, AT & T's adjuster declined to pay for open-end treatment proposed by Dr. Islam, and in March 1993 it also refused to pay for the epidural proposed by Dr. Sholte.
Ms. Mitchell filed this claim with the Office of Workers Compensation in March 1993, urging she had not reached maximum medical improvement and was still unable to work, and claiming supplemental earnings benefits. She also claimed as necessary medicals the epidural proposed by Dr. Sholte, as well as continued treatment with both Dr. Sholte and Dr. Islam. By pretrial statement Ms. Mitchell claimed penalties and attorney fees. AT & T also claimed credit for sick pay and disability retirement paid to Ms. Mitchell.
Action of the hearing officer
By judgment of July 1994 the hearing officer found that Ms. Mitchell sustained a crushing injury to her right heel while in the course and scope of her employment with AT & T.[5] She found Ms. Mitchell's testimony credible and consistent, "particularly with regard to her substantial pain and inability to work." She also found that Ms. Mitchell had not reached maximum medical improvement. She therefore found that Ms. Mitchell was *209 entitled to benefits for temporary, total disability from the date that AT & T had terminated them. The hearing officer also observed that the company's efforts at rehabilitation were "woefully inadequate in view of what the statute contemplates." Finally, citing the totality of the evidence, the hearing officer found that AT & T's actions in terminating Ms. Mitchell's benefits and refusing to authorize the treatment proposed by Dr. Sholte was arbitrary, capricious and without probable cause. The hearing officer therefore ordered reinstatement of temporary, total benefits from the date of termination until Ms. Mitchell reaches maximum medical improvement; medical expenses for past and future treatment by Dr. Sholte; statutory penalties; and attorney fees of $8,500.
Applicable law
Benefits for temporary, total disability are regulated by La.R.S. 23:1221(1), which provides in pertinent part:
(1) Temporary total.
(a) For any injury producing temporary total disability of an employee to engage in any self-employment or occupation for wages, whether or not the same or a similar occupation as that in which the employee at the time of the injury was particularly fitted by reason of education, training, or experience, sixty-six and two-thirds percent of wages during the period of such disability. * * *
(c) For purposes of Subparagraph (1)(a) of this Paragraph, whenever the employee is not engaged in any employment or self-employment * * *, compensation for temporary total disability shall be awarded only if the employee proves by clear and convincing evidence, unaided by any presumption of disability, that the employee is physically unable to engage in any employment or self-employment, regardless of the nature of the employment or self-employment, including but not limited to any and all odd-lot employment, sheltered employment, or employment while working in any pain, notwithstanding the location or availability of any such employment or self-employment.
(d) An award of benefits based on temporary total disability shall cease when the physical condition of the employee has resolved itself to the point that a reasonably reliable determination of the extent of disability of the employee may be made, and the employee's physical condition has improved to the point that continued, regular treatment by a physician is not required, or six months after the injury, whichever first occurs. * * * (emphasis added)
The provisions of § 1221(1)(c) requiring proof by clear and convincing evidence and excluding benefits for claimants who would work in pain were enacted in 1989 and apply to compensable injuries occurring after January 1, 1990. La.Acts 1989, No. 454, §§ 6, 13; Tanner v. International Maintenance Corp., 602 So. 2d 1133 (La.App. 1st Cir.1992). To prove a matter by clear and convincing evidence means to demonstrate that the existence of a disputed fact is highly probable, that is, much more probable than its nonexistence. Louisiana State Bar Ass'n v. Edwins, 329 So. 2d 437 (La.1976); Green v. Con Agra Broiler Co., 26,599 (La. App. 2d Cir. 3/1/95), 651 So. 2d 335.
For injuries that do not result in total disability, but rather leave the employee unable to earn 90% of her pre-injury wage, the statute authorizes Supplemental Earnings Benefits ("SEB"):
(3) Supplemental earnings benefits.
(a) For injury resulting in the employee's inability to earn wages equal to ninety percent or more of wages at the time of injury, supplemental earnings benefits equal to sixty-six and two-thirds percent of the difference between the average monthly wages at the time of injury and average monthly wages earned or average monthly wages the employee is able to earn in any month thereafter in any employment or self-employment, whether or not the same or a similar occupation as that in which the employee was customarily engaged when injured and whether or not an occupation for which the employee at the time of the injury was particularly fitted by reason of education, training, and experience[.] * * *
*210 (c)(i) * * * [I]f the employee is not engaged in any employment or self-employment * * *, the amount determined to be the wages the employee is able to earn in any month shall in no case be less than the sum the employee would have earned in any employment or self-employment * * * which he was physically able to perform, and (1) which he was offered or tendered by the employer or any other employer, or (2) which is proven available to the employee in the employee's or the employer's reasonable geographic region.
(ii) [I]f the employee establishes by clear and convincing evidence, unaided by any presumption of disability, that solely as a consequence of substantial pain, the employee cannot perform employment offered, tendered, or otherwise proven to be available to him, the employee shall be deemed incapable of performing such employment.
Under this subsection, the claimant's substantial pain is a factor, unlike in cases of TTD. Paul v. Gipson, 614 So. 2d 1275 (La. App. 2d Cir.1993); Lubom v. L.J. Earnest, Inc., 579 So. 2d 1174 (La.App. 2d Cir.1991).
The statute imposes penalties of 12% upon any employer or insurer who fails to pay comp benefits unless the employee's right to benefits has been "reasonably controverted by the employer or his insurer." La.R.S. 23:1201E. Section 1201.2 further imposes "all reasonable attorney fees" on any employer or insurer who fails to pay within 60 days of receipt of written notice, "when such failure is found to be arbitrary, capricious, or without probable cause." Whether the termination of benefits is arbitrary, capricious or without probable cause depends primarily on the facts known to the employer or insurer at the time of its action. Lee v. Smith, 248 La. 16, 176 So. 2d 413 (1965); Green v. Con Agra, supra. When the decision is based on competent medical evidence, the termination of benefits will not be found arbitrary, capricious or without probable cause. Martin v. H.B. Zachry Co., 424 So. 2d 1002 (La.1982); Green v. Con Agra, supra.
The hearing officer's factual findings are subject to the manifest error rule. Alexander v. Pellerin Marble & Granite, 93-1698 (La. 1/14/94), 630 So. 2d 706. Under this rule, the reviewing court does not decide whether the factual findings are right or wrong, but whether they are reasonable. Stobart v. State, Through Dept. of Transp. & Dev., 617 So. 2d 880 (La.1993). Reasonable inferences of fact should not be disturbed upon review where conflict exists in the testimony. Rosell v. ESCO, 549 So. 2d 840 (La. 1989). The manifest error rule does not insulate a hearing officer's findings when these are based on an incorrect analysis of the statute. Green v. Con Agra, supra at fn 3.
Discussion: Disability
By its first two assignments AT & T contests the hearing officer's award of temporary, total disability ("TTD") benefits. Specifically, AT & T argues that after a lapse of six months, Ms. Mitchell was no longer entitled to TTD benefits under R.S. 23:1221(1)(d), and that she failed to prove by clear and convincing evidence, unaided by any presumption of disability, that she was physically unable to engage in any employment whatsoever, R.S. 23:1221(1)(c). AT & T relies on the expert medical evidence of Drs. Osborne and Hill that Ms. Mitchell does not have any biomedical reason why she cannot work, and that her problems are primarily psychological. AT & T also argues that despite his recommendation of further surgical procedures for Ms. Mitchell, Dr. Sholte never said she could not work under the restrictions set forth by Dr. Osborne and in fact admitted that her fitness to work was beyond his expertise.
Ms. Mitchell counters that Drs. Hills and Osborne only evaluated her, without treating her, and that their opinions should be discounted accordingly.[6] She cites various reports *211 from Drs. Jones and Lillich advising her not to work, as well as Dr. Islam's report that because of her "physical and psychological condition" she is unable to work. She relies very heavily on Dr. Sholte's finding of sympathetic dystrophy, and AT & T's refusal to pay for his proposed treatment. All of this, she urges, is sufficient to support the hearing officer's findings as not manifestly erroneous. Rosell v. ESCO, supra.
The hearing officer did not enunciate the standard for finding TTD under R.S. 23:1221(1). In support of the finding of TTD, however, she made two factual findings. First, she found that Ms. Mitchell's testimony of "substantial pain and inability to work" was credible and consistent. The statute, however, excludes "working in any pain" as a ground for which TTD may be awarded. Sec. 1221(1)(c); Malone & Johnson, Workers' Compensation (13 La.Civ.Law Treatise), § 275. The hearing officer, therefore, was plainly wrong to apply this standard to the finding of TTD.
The hearing officer's second finding was that Ms. Mitchell had not yet reached maximum medical improvement. Since the 1989 amendment to § 1221(1)(d)11, however, maximum medical improvement has not been the standard for the termination of TTD benefits. Graham v. Georgia-Pacific Corp., 26,165 (La.App. 2d Cir. 9/23/94), 643 So. 2d 352, fn. 2. The hearing officer was plainly wrong to cite and rely upon this. Rather, TTD benefits cease when the physical condition of the employee has resolved itself to the point that a "reasonably reliable determination of the extent of disability" may be made and "continued, regular treatment by a physician is not required," or six months after the injury, whichever occurs first.
Without the findings that Ms. Mitchell would be working in pain and has not reached maximum medical improvement, we have reviewed the evidence to see if it will support the award of TTD benefits. Theriot v. Allstate Ins. Co., 625 So. 2d 1337 (La.1993). Under the proper standard, the claimant must prove by clear and convincing evidence, unaided by any presumption of disability, that she is physically unable to engage in any employment or self-employment, regardless of the nature of the employment or self-employment, including but not limited to any and all odd-lot employment, sheltered employment, or employment while working in pain, regardless of the location or availability of such employment or self-employment. The claimant's testimony that she does not think she could perform her old employment is obviously inadequate to meet the burden of proof. Green v. Con Agra, supra.
The evidence in support of the judgment includes Ms. Mitchell's own testimony, such as the admission that pain alone was preventing her from returning to work. This, of course, does not satisfy the statute. Green v. Con Agra, supra. Moreover, working in pain does not entitle the claimant to TTD benefits. Ms. Mitchell's treating physicians, Drs. Jones and Lillich, both reported at various times that she should not be working; however, their October 1992 letter proves they attributed her inability to work to pain and pre-existing psychological problems, and felt she was functionally able to work. Two other doctors, Drs. Islam and Sholte, reported that she could not work. Of these, Dr. Sholte was more expansive; however, he specifically deferred to "someone who does functional capacity evaluations," and he was misinformed as to the nature of Ms. Mitchell's work. R. pp. 387, 374. These admissions of necessity affect the proper weight to be assigned to his opinion. Dr. Sholte also recommended a surgical procedure which would hopefully alleviate her pain, but this does not appear to be "continued, regular treatment" as envisioned by the statute. Dr. Islam did not testify, but his office notes and letters to the Office of Disability Determinations indicate he considered her unable to work "because of [her] physical and psychological condition" (emphasis added). Like Dr. Sholte's testimony, this evidence corroborates that Ms. Mitchell is in some pain, but that finding does not justify an award of TTD benefits. Further, there is no indication in Dr. Islam's records that he was familiar with the demands of Ms. Mitchell's work or the restrictions imposed by Dr. Osborne.
*212 On the other side, the original treating physicians, Drs. Jones and Lillich, recommended in May 1992 that she attempt sedentary work; by October, however, they indicated that other problems were keeping her from working. Since the "other problems" apparently include recurrent lumps in the breast, the impact of this influence is easy to imagine. Dr. Osborne, who performed a thorough battery of tests, quantified her permanent disability and released her to work under certain restrictions. This meets the statutory requirement of a "reasonably reliable determination of the extent of disability." Dr. Hill also reported that she could work within restrictions. Ex. D-1-B. Finally, to some extent Ms. Mitchell's credibility was affected by Dr. Hill's distraction test results and the psychological findings of symptom magnification.
On this record, we are constrained to hold that Ms. Mitchell has not shown by clear and convincing evidence, or made it highly probable, that she is physically unable to engage in any employment or self-employment, including working in pain. Her own testimony shows that the only impediment to her working is pain, and the medical evidence from every expert who was familiar with the demands of her work established that she could indeed perform her old job within certain restrictions. Because the statute requires us to disregard her complaints of pain and her failure to reach maximum medical improvement, we have no alternative but to disqualify Ms. Mitchell from TTD benefits on the evidence presented. The judgment will be reversed.
On the instant record we are also unable to find that Ms. Mitchell is entitled to the alternative remedy of SEB. While substantial pain is a basis for SEB, and there is some evidence in support, this record is replete with psychological findings that cast serious doubt on the gravity of her subjective complaints. In the balance, we cannot conclude that her testimony and the expert evidence clearly and convincingly prove that Ms. Mitchell is unable to work solely as a consequence of substantial pain. R.S. 23:1221(3)(c)(ii).
For these reasons the judgment awarding disability benefits is reversed. Because of this conclusion, we pretermit the issue of reduction or credit advanced in AT & T's supplemental brief.
Penalties and attorney fees
By its fourth assignment AT & T urges the hearing officer erred in finding that its conduct in discontinuing Ms. Mitchell's benefits was arbitrary, capricious and without probable cause. It argues that several physicians cleared her to return to light-duty work, which the employer strove to provide. It further submits that the decision to terminate Ms. Mitchell's TTD benefits was prudent and reasonable. Ms. Mitchell argues that AT & T actually relied exclusively on Dr. Osborne's report, which she contends was not worthy of belief. She also urges the company disregarded the diagnosis of reflex sympathetic dystrophy from Drs. Sholte and Anglin, and the reports of disabling pain from Drs. Lillich and Islam.
AT & T's benefits specialist, Jim Crews, testified that in converting Ms. Mitchell from workers comp to sickness disability, he considered reports from Drs. Lillich (quoted above), Sholte (who diagnosed sympathetically maintained pain but whose nerve blocks had been postponed by Ms. Mitchell) and Osborne (whose report, including the psychological profile from Dr. Staats, was quoted extensively). While Ms. Mitchell has deprecated Dr. Osborne's findings, we find that his series of tests was comprehensive and apparently objective. This is competent medical evidence. Martin v. H.B. Zachry Co., supra. We also note that Dr. Lillich's letter was somewhat equivocal as to Ms. Mitchell's condition, and Dr. Sholte's, though declaring her unable to work, showed no familiarity with her job and did not consider the restrictions set by Dr. Osborne. Faced with some evidence that Ms. Mitchell could work, some that she could not because of pain, and psychological test results indicating that she tended to magnify symptoms, AT & T was entitled to terminate benefits. Spurrell v. Ivey, 25,359 (La.App. 2d Cir. 1/25/94), 630 So. 2d 1378. On the evidence available at the time, AT & T was not arbitrary, capricious or *213 without probable cause to discontinue Ms. Mitchell's TTD benefits. The hearing officer was plainly wrong to hold otherwise.
In one respect, however, the hearing officer was not plainly wrong. Dr. Sholte recommended an epidural to relieve Ms. Mitchell's persistent pain. Dr. Osborne did not agree with his diagnosis of reflex sympathetic dystrophy, but he did not deny that the procedure would be useful. The hearing officer found it a necessary medical expense under R.S. 23:1203A, and this conclusion is not manifestly erroneous. At any rate, AT & T has not seriously contested it. In light of the absence of evidence to contradict Ms. Mitchell's showing that the epidural qualified under § 1203A, the hearing officer was entitled to find in this regard only that AT & T's refusal to pay was arbitrary, capricious and without probable cause. A reasonable attorney fee of $2,000 will be assessed; the remainder of the attorney fee award is reversed.
Conclusion
For the reasons expressed, the judgment is reversed insofar as it finds Ms. Mitchell entitled to any disability benefits. The judgment is also amended to set attorney fees for the denial of necessary medical expenses at $2,000. Trial and appellate costs are assessed to Mr. Mitchell.
REVERSED IN PART; AMENDED IN PART AND RENDERED.
APPLICATION FOR REHEARING
Before MARVIN, NORRIS, HIGHTOWER and STEWART, JJ., and PRICE, J. Pro Tem.
Rehearing denied.
NOTES
[1] She had started on the assembly line and advanced to management but had been reclassified as an operator in 1985 because of a layoff.
[2] Dr. Hill, the family practitioner, also reported in December 1992 and May 1993 that Ms. Mitchell's only problem is psychological. See Exhibits D-1-A, D-1-B.
[3] Dr. Hill defined reflex sympathetic dystrophy as "a condition which complicates healing often in extremities, including * * * feet and hands, in which the process of healing is limited by vasopathic reactions of the peripheral arterials in the foot based on overdrive from the sympathetic nervous system." R. p. 138.
[4] Ms. Mitchell received a notice to this effect from the Office of Workers Compensation (LDOL Form 1003) in December 1992. Ex. P-9.
[5] The correct standard is actually personal injury by accident "arising out of and in the course of his employment[.]" La.R.S. 23:1031A. The tort concept of "course and scope of employment," which imposes vicarious liability under La.C.C. art. 2320, is closely related but should not be confused with the statutory comp standard. Malone & Johnson, Workers' Compensation (13 La. Civ.Law Treatise), § 144, fn. 1; but see Craig v. Fournet, 457 So. 2d 760 (La.App. 1st Cir.1984).
[6] Ms. Mitchell erroneously states in brief that Dr. Osborne "did not look at her foot." Br. 11. Dr. Osborne specifically called that statement incorrect. R. p. 219. Dr. Osborne admitted, however, that he mostly reviewed the clinical findings of his staff. The medical record shows that Dr. J.R. Bruner of the Impairment and Disability Center performed a thorough physical exam of Ms. Mitchell's foot. Ex. D-2, pp. 108-111. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919542/ | 660 So. 2d 782 (1995)
William ECHOLS, Appellant,
v.
STATE of Florida, Appellee.
No. 94-1938.
District Court of Appeal of Florida, Fourth District.
September 20, 1995.
*784 Richard L. Jorandby, Public Defender, and Cherry Grant, Assistant Public Defender, West Palm Beach, for appellant.
Robert A. Butterworth, Attorney General, Tallahassee, and Ettie Feistmann, Assistant Attorney General, West Palm Beach, for appellee.
DELL, Judge.
Appellant William Echols has abandoned his arguments concerning the revocation of his community control. He challenges only the sentence imposed after revocation. We hold that appellant has demonstrated error in the trial court's assessment of victim-injury points, scoring of both underlying offenses as "primary" offenses, calculation of credit for time served in county jail and forfeiture of accumulated gain time.
In 1988, the state filed an information charging appellant with sexual battery and lewd or lascivious act upon a child under the age of sixteen, offenses proscribed under section 800.04, Florida Statutes (1987). Appellant entered a plea of nolo contendere to both felony charges and agreed to be sentenced within the "recommended" range of the sentencing guidelines. The trial court sentenced appellant to two consecutive split sentences of five and one-half years imprisonment, with 148 days credit for time served, followed by nine and one-half years probation.
In January 1994, appellant's probation officer filed an affidavit of violation of probation. One month later, appellant admitted to the violation and received a sentence upon revocation of eighteen months community control. In June 1994, the trial court found appellant in violation of his community control, revoked his sentence and entered a new judgment of conviction for the underlying offenses, thereby sentencing him to a term of twelve years incarceration. The trial court credited the newly imposed sentence as follows:
Defendant is allowed credit for 161 DAYS county jail credit served between date of arrest as a violator and date of resentencing. The Department of Corrections shall apply original jail credit awarded and shall compute and apply credit for time served less gain time Case 88-867.
Appellant received the identical sentence for both the sexual battery and lewd and lascivious counts to be served concurrently.
The trial court calculated appellant's permitted sentence under a sentencing guideline scoresheet that became effective on January 1, 1991, despite appellant's conviction for the scored offenses occurring in 1988. The scoresheet reflects a score of 190 points for two primary offenses of sexual battery and lewd and lascivious act. The trial court added forty points for victim injuries described as "moderate or penetration" on the 1991 guideline scoresheet. The total score of 230 points resulted in a recommended sentence of four and one-half to five and one-half years imprisonment and a permitted sentence of three and one-half to seven years before taking into account a permissible two cell bump up for a second violation of probation or community control.
Appellant initially contends that the trial court improperly assessed forty victim-injury points on the guideline scoresheet prepared after his revocation of community control.[1] We first note that regardless of whether a trial court assessed victim-injury points at the original sentencing, the trial court upon revocation of probation or community control can impose any sentence which it might have originally imposed before placing the probationer or offender on probation or into community control. See § 948.06(1), Fla. Stat. (1987). Accordingly, the trial court is not precluded from scoring victim-injury points upon revocation where *785 the offenses so require, even where the original sentences did not reflect such assessment.
Next, we agree with appellant's argument that Karchesky v. State, 591 So. 2d 930 (Fla. 1992),[2] governs the scoring of the victim-injury points in this case. In Karchesky, the supreme court explained that Florida Rule of Criminal Procedure 3.701(d)(7) limits the scoring of victim-injury points to physical trauma and does not encompass any psychological injury to the victim. 591 So. 2d at 932-33. In 1992, a subsequent amendment to the sentencing laws, see section 921.001(8), Florida Statutes (Supp. 1992), provided that calculation of victim-injury points includes all sexual contact regardless of whether physical trauma results. However, that amendment does not apply retroactively to offenses committed before the effective date of the statute. Boland v. State, 613 So. 2d 72 (Fla. 4th DCA) (Warner, J., concurring), rev. denied, 624 So. 2d 268 (Fla. 1993). The applicable case law therefore confines our review to evidence of physical trauma experienced by the victims of the 1988 sexual offenses.
The state misplaces its reliance upon Boerstler v. State, 622 So. 2d 184 (Fla. 1st DCA 1993), as support for its argument that Karchesky does not apply where a defendant pleads guilty or nolo contendere to sexual offenses. In Harper v. State, 632 So. 2d 104 (Fla. 1st DCA 1994), the First District Court distinguished Boerstler by permitting challenges to this type of error where the defendant's plea is premised upon a guideline sentence, as opposed to entering an "open plea" or one not dependent upon sentencing within the guidelines, as had the defendant in Boerstler. See also Spring v. State, 647 So. 2d 974 (Fla. 1st DCA 1994). Here, appellant entered his plea of nolo contendere to the sexual offenses and agreed to a sentence within the recommended range of the sentencing guidelines. Furthermore, this court and other district courts have concluded that a sentence entered upon a plea of nolo contendere does not preclude correction of an illegal sentence arising from improper scoring of victim-injury points. See Boland; Walls v. State, 627 So. 2d 107 (Fla. 2d DCA 1993).
The scoring of victim-injury points depends upon resolution of facts proving "penetration or slight injury" as provided in the appropriate guideline scoresheet from 1988. The record on appeal shows that the state did not allege that penetration or slight injury occurred, and presumably because of entry of the plea agreement the state did not present evidence of victim injury at the original sentencing hearing. We therefore reverse appellant's sentence and remand to the trial court with leave to conduct a hearing to determine the extent of actual injury, if any, and to assess victim-injury points if supported by the evidence. Scott v. State, 642 So. 2d 838 (Fla. 4th DCA 1994); Arreola v. State, 620 So. 2d 1289 (Fla. 4th DCA 1993).
The trial court's failure to differentiate the scores for primary and additional offenses on the guideline scoresheet also requires correction. Pursuant to Florida Rule of Criminal Procedure 3.710(d)(3) and (4), the trial court must score the offense carrying the most severe sanction as the "primary offense" and score all other offenses pending at the same time as "additional offenses." In this instance, the trial court, utilizing rule 3.988(b) entitled "Category 2: Sexual Offenses," improperly scored 190 points for two counts of lewdness. A proper assessment under this rule results in 158 points scored for the primary sexual battery offense and sixteen points for the additional lewd and lascivious offense, for a total of 184 points. The resulting guideline sentence falls within a permitted range of up to three and one-half years incarceration. With the two cell bump up for the successive violations of probation and community control, appellant could receive a maximum permitted sentence of five and one-half years in prison after revocation, compared with the maximum penalty of twelve years incarceration currently imposed. See § 948.06(1); Bilyou v. State, 404 So. 2d 744 (Fla. 1981) (holding that when a defendant violates the terms of his probation on which he was placed pursuant to a plea bargain, the trial court may revoke the probation and sentence the defendant to a term in prison in excess of the provisions of the original bargain); State v. Parrish, 616 So. 2d 1135 (Fla. 3d DCA 1993).
*786 Appellant additionally asserts error in the trial court's award of 161 days credit for county jail time served "between the date of arrest as a violator and date of resentencing."[3] Appellant claims entitlement to 241 days of county jail time credit, representing 148 days he served before his 1988 sentence and ninety-three days served while awaiting hearing on both the violation of probation and violation of community control. It appears, however, that the trial court awarded appellant excessive credit. The record shows that appellant was detained, at most, ninety-three days in county jail from January 19, 1994 through February 28, 1994 and again from May 3, 1994 through June 23, 1994, the dates of execution of the arrest warrants and entry of the orders of revocation for the respective violations. No credit should be given for the 148 days of detention before his 1988 conviction because he received credit against his original five and one-half year prison term for that time served. See § 921.161, Fla. Stat. (1987). Hence, on resentencing the judgment of sentence should reflect an award of ninety-three days credit for time appellant served in county jail while awaiting disposition of the alleged violations.
Finally, the trial court erred when it forfeited the gain time earned by appellant while serving the underlying split sentences. The exercise of discretion to forfeit gain time earning a defendant early release is afforded a trial court under section 948.06, Florida Statutes, which became effective on October 1, 1989. This forfeiture provision does not apply to offenses, such as appellant's, committed before the effective date of the statute even where a violation of probation or community control occurs after the effective date. Bradley v. State, 631 So. 2d 1096 (Fla. 1994); Roff v. State, 644 So. 2d 166 (Fla. 4th DCA 1994); Webb v. State, 630 So. 2d 674 (Fla. 4th DCA 1994).
The application of State v. Green, 547 So. 2d 925 (Fla. 1989), controls disposition of gain time issues arising from offenses committed before the enactment of section 948.06(6). Webb, 630 So.2d at 675; Harrington v. State, 609 So. 2d 712 (Fla. 4th DCA 1992). The governing authority allows a defendant who violates probation following incarceration to receive credit against his new sentence, not only for time served, but also for earned gain time. Green, 547 So.2d at 927; Bradley, 631 So.2d at 1097. Thus, the trial court improperly applied section 948.06(6) retroactively and failed to credit appellant with gain time he earned while in prison in addition to time actually served for the 1988 sexual offenses.
Accordingly, we affirm the order of revocation, but reverse the judgment of sentence imposed after revocation and remand for proceedings consistent herewith.
AFFIRMED IN PART; REVERSED IN PART and REMANDED.
STONE and STEVENSON, JJ., concur.
NOTES
[1] We disagree with the state's argument that appellant did not preserve this sentencing error for appellate review. See Weckerle v. State, 626 So. 2d 1038, 1039 (Fla. 4th DCA 1993).
[2] Superseded by rule Fenelon v. State, 629 So. 2d 955 (Fla. 4th DCA 1993), and superseded by statute Griffith v. State, 654 So. 2d 936 (Fla. 4th DCA 1995).
[3] The state mistakenly argues that lack of preservation requires an affirmance of this sentencing error. The record reveals that appellant never had an opportunity to object in open court to the amount of days awarded as credit for time served; the trial court indicated at the sentencing hearing that it would give such credit, but did not announce the exact number of days until it entered the final judgment and sentence. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919544/ | 660 So. 2d 839 (1995)
In re Richard E. REDD.
No. 95-B-1472.
Supreme Court of Louisiana.
September 15, 1995.
*840 John T. Seale, New Orleans, Thomas W. Sanders, Lake Charles, William N. King, New Orleans, for applicant.
Richard E. Redd, David A. Hamilton, Baton Rouge, for respondent.
PER CURIAM[*].
This is an attorney disciplinary proceeding based on the conviction of a serious crime. La.Sup.Ct.R. XIX, § 19 B.
In September 1992, respondent was the legal advisor to the Baton Rouge Police Department. During an investigation of complaints against respondent, the police sent a wired confidential informant to respondent's office to apply for an exotic dancer's permit. After commenting on the female applicant's breasts, respondent requested and took photographs of her breasts. He also obtained her home telephone number and made references to oral sex. After the police arrested respondent, a search of his office yielded a camera and photographs of other nude or partially nude women. Respondent eventually pleaded guilty to a charge of simple battery involving the touching of the applicant's breasts.
The Hearing Committee noted that a suspension was the appropriate baseline discipline for the crime of which respondent was convicted. However, the Committee noted that respondent immediately sought treatment from a psychologist who diagnosed a "sexual addiction."[1] Respondent saw the psychologist weekly for two months and then entered Sex Addicts Anonymous, which he attends twice a week. Because of this emotional problem, and because of other penalties including forced resignation and loss of benefits, a majority of the Committee recommended a sixty-day suspension. The public member dissented and recommended a one-year suspension during which respondent would be required to undergo and successfully complete treatment by a court-appointed psychiatrist.
The Disciplinary Board recommended a-year-and-a-day suspension, with all but ninety days deferred, following by a two-year probationary period subject to several conditions. Both disciplinary counsel and respondent objected to the Board's recommendation.
Since respondent's conviction of the crime constitutes conclusive evidence of his guilt of the charged offense, the sole issue before us is whether discipline is warranted and, if so, the extent thereof. In re Huddleston, 595 So. 2d 1141, 1145 (La.1992). In fashioning the appropriate discipline, we must take into account the seriousness of the offense, any aggravating and mitigating circumstances, and the purpose of lawyer discipline proceedings. In re King, 94-0686 (La. 11/30/94); 646 So. 2d 326.
The primary purposes of lawyer discipline proceedings are maintaining appropriate standards of professional conduct, preserving the integrity of the legal profession, and deterring other attorneys from engaging in ethical violations. Such proceedings are not designed solely to punish the attorney. Respondent argues that given the length of time between his offense and the instant disciplinary proceedings, any further punishment at this time would be merely punitive and thus not serve the purpose of such proceedings. We disagree. While the delay in the instant disciplinary proceedings may be considered in mitigation of any sanction, we conclude that a sanction is still warranted in this case because of the extreme seriousness of the conduct underlying the conviction. As the Board noted, respondent used his position of authority, obtained because of his license to practice law, over persons whose livelihood depended on his approval of their applications. Such behavior revealed a serious flaw in respondent's fitness to practice law.
*841 Although respondent's offense did not involve his client directly, it involved betrayal of his client by misusing and taking advantage of his position as the department's legal advisor, which is as bad, if not worse, than an offense involving a client. "`[I]mproprieties that directly and intentionally harm others always are serious offenses in the eyes of this Court.'" People v. Lowery, 894 P.2d 758 (Colo.1995) (quoting Florida Bar v. Samaha, 557 So. 2d 1349, 1350 (Fla.1990)). Moreover, because of the significant adverse publicity following respondent's conviction, respondent's client, the Police Department, suffered substantial injury.
Despite the reprehensible nature of respondent's conduct, several factors besides the delay in these proceedings served to mitigate the severity of his conduct, including respondent's personal or emotional problems, full and free disclosure to the Disciplinary Board, a cooperative attitude towards the proceeding, good character and reputation, interim rehabilitation, imposition of other penalties, and remorse. Another mitigating circumstance is that he had no disciplinary violations or criminal charges against him during his extensive period of practice, although this mitigating circumstance is counterbalanced by the fact that respondent had substantial experience in the practice of law.
Aggravating circumstances included the victims' vulnerability, dishonest or selfish motive and pattern of misconduct.
Under similar aggravating and mitigating circumstances, the Colorado Supreme Court recently held that an attorney's sexual abusive conduct directed at non-clients (a receptionist, paralegal, and associate attorney in his law firm) warranted a-year-and-a-day suspension. People v. Lowery, 894 P.2d 758 (Colo.1995).
Considering the facts of this case and the purpose of lawyer discipline, we find that suspension of one year and one day, without the deferral of approximately three-fourths of the suspension as proposed by the Disciplinary Board, is appropriate in this case. Respondent's readmission will be conditioned upon his successfully completing evaluation and treatment by a psychiatrist or a board-certified psychologist, selected by the Disciplinary Board, for a period of one year prior to his application for readmission.
Accordingly, it is ordered that respondent, Richard E. Redd, be suspended from the practice of law for a period of one year and one day. Upon application for readmission, respondent must present evidence pertaining to the required psychiatric or psychological evaluation and treatment. All costs of this proceeding are assessed to respondent.
NOTES
[*] Judge Ned Doucet, Jr., Court of Appeal, Third Circuit, sitting by assignment in place of Justice James L. Dennis.
Calogero, C.J., not on panel. Rule IV, Part 2, § 3.
[1] While the psychologist could not point to a specific provision of DSM-III-R to use for his diagnostic criteria, he classified respondent under the category of "sexual disorder not otherwise specified," which provides no diagnostic criteria. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919546/ | 660 So. 2d 628 (1995)
AIRPORT RENT-A-CAR, INC., etc., Appellant,
v.
PREVOST CAR, INC., etc., Appellee.
No. 83586.
Supreme Court of Florida.
June 15, 1995.
Rehearing Denied September 19, 1995.
*629 Gary S. Maisel of Patterson & Maloney, Fort Lauderdale, for appellant.
Daniel M. Bachi and Bard D. Rockenbach of Sellars, Supran, Cole, Marion & Bachi, P.A., West Palm Beach, for appellee.
Lynn E. Wagner and Richard A. Solomon of Baker & Hostetler, Orlando, amicus curiae, for The Florida Concrete & Products Ass'n.
R. Benjamin Reid, Wendy F. Lumish and Paul L. Nettleton of Popham, Haik, Schnobrich & Kaufman, Ltd., Miami, amicus curiae, for Product Liability Advisory Council, Inc.
G. William Bissett of Hardy, Bissett & Lipton, P.A., Miami, amicus curiae, for Masonite Corp.
SHAW, Justice.
We have for review the following questions certified to this Court by the United States Court of Appeals for the Eleventh Circuit in Airport Rent-A-Car, Inc. v. Prevost Car, Inc., 18 F.3d 1555 (11th Cir.1994):
(1) WHETHER, UNDER FLORIDA LAW, THE ECONOMIC LOSS RULE APPLIES TO NEGLIGENCE CLAIMS FOR THE MANUFACTURE OF A DEFECTIVE PRODUCT WHERE THE ONLY DAMAGES CLAIMED ARE TO THE PRODUCT ITSELF AND WHERE THE PLAINTIFF CLAIMS TO HAVE NO ALTERNATIVE THEORY OF RECOVERY.
(2) WHETHER, UNDER FLORIDA LAW, A CAUSE OF ACTION OTHERWISE PRECLUDED BY THE ECONOMIC LOSS RULE MAY BE MAINTAINED IF THE DAMAGE TO THE PRODUCT IS CAUSED BY A SUDDEN CALAMITOUS EVENT.
(3) WHETHER, UNDER FLORIDA LAW, A CAUSE OF ACTION MAY EXIST OUTSIDE THE BAR OF THE ECONOMIC LOSS RULE WHERE THE PLAINTIFFS ALLEGE A DUTY TO WARN WHICH AROSE FROM FACTS WHICH CAME TO THE KNOWLEDGE OF THE COMPANY AFTER THE MANUFACTURING PROCESS AND AFTER THE CONTRACT.
Airport, 18 F.3d at 1559. We have jurisdiction. Art. V, § 3(b)(6). We answer the first certified question in the affirmative and the second and third questions in the negative.
The Eleventh Circuit found the following facts:
Rent-A-Car owned several buses manufactured by Prevost. Two of the buses caught fire and were destroyed while in transport. According to Rent-A-Car, one of the buses caught fire while transporting school children. Rent-A-Car did not purchase the buses directly from Prevost or from a distributor. Rather, Rent-A-Car purchased the buses from Associated Cab Company, Inc., ("Associated"), who was asserted not to be a supplier or distributor of the buses. Further, Rent-A-Car alleged that Associated was not a merchant within the definition under the Uniform Commercial Code; thus, no express or implied warranty claim against Associated was brought. Instead, Rent-A-Car brought claims against Prevost, the manufacturer and seller of the buses, alleging the buses when sold were defective and unreasonably dangerous.
In its first amended complaint, Rent-A-Car alleged in Counts I and II that Prevost was liable under a strict products liability theory because the bus purchased by Rent-A-Car was defective when it left the manufacturer and that the defect made it unreasonably dangerous. Rent-A-Car claimed damages for the loss in the value of the bus, damage resulting from the loss of use of the bus, and costs of litigation. Counts III and IV asserted Prevost's liability under a negligence theory and included a demand for damages. Counts V and VI were for breach of warranty. Prevost moved to dismiss the complaint.
The district court granted Prevost's motion to dismiss. The district held that the Economic Loss Rule applied, precluding recovery in tort for damages to the product itself, absent personal injury or damage to other property. Rent-A-Car urged the district court to apply two exceptions to that rule, namely, (1) "no alternate remedy", and (2) "sudden calamity". However, the district court concluded that neither *630 exception applied. The court also dismissed the breach of warranty counts for failure to allege privity.
Rent-A-Car subsequently filed its second amended complaint. The second amended complaint, essentially the same as the previously dismissed first amended complaint, alleged in addition that there was property lost in one of the bus fires that belonged to the passengers of the bus. Counts I and II consisted of negligent products liability claims, with Counts III and IV asserting claims of strict products liability claims. Rent-A-Car also added two other counts of negligence in Counts V and VI for Negligent Failure to Warn. Prevost moved to dismiss the second amended complaint for failure to state a claim.
The district court granted Prevost's motion to dismiss, reasoning that Rent-A-Car had failed to overcome the Economic Loss Rule. Because Rent-A-Car did not assert an ownership interest in the property belonging to the passengers, the district court concluded that such property did not constitute "other property" for purposes of removing Rent-A-Car's claims from the Economic Loss Rule. Rent-A-Car then brought this appeal.
18 F.3d at 1555-56 (citation omitted). The federal court opined that the issues raised were appropriate for resolution by this Court.
The First Certified Question[1]
This Court's opinion in Casa Clara Condominium Ass'n v. Charley Toppino and Sons, Inc., 620 So. 2d 1244 (Fla. 1993), is of particular importance in our answering the first certified question. In Casa Clara, Toppino supplied concrete used in building the Casa Clara condominiums and single-family homes. Allegedly, some of the concrete contained a high content of salt, thus causing it to crack and break apart. Casa Clara homeowners sued numerous defendants including Toppino for, inter alia, negligence and strict products liability. The circuit court dismissed all counts against Toppino, pursuant to its finding that the economic loss rule prohibits tort recovery when a product damages itself, thereby causing economic loss, but fails to cause personal injury or damage to property other than itself.[2] The district court affirmed and this Court approved the district court's decision. In so doing, we recognized that the law of contracts protects one's economic losses, whereas the law of torts protects society's interest in being free from harm. See Casa Clara, 620 So.2d at 1246-47. Finding no reason to burden society as a whole with the losses of one who has failed to bargain for adequate contractual remedies, we concluded that "`contract principles [are] more appropriate than tort principles for recovering economic loss without an accompanying physical injury or property damage.'" Casa Clara, 620 So.2d at 1247 (quoting Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899, 902 (Fla. 1987)). In light of this conclusion, we disapproved several conflicting cases, including Latite Roofing Co., Inc. v. Urbanek, 528 So. 2d 1381 (Fla. 4th DCA 1988), and limited A.R. Moyer, Inc. v. Graham, 285 So. 2d 397 (Fla. 1973), strictly to its facts. Casa Clara at 1248.[3]
Airport Rent-A-Car (Airport) proffers that the Latite and Moyer cases, in which the *631 parties lacked privity of contract, are indicative of the "no alternative theory of recovery" exception to the economic loss rule.[4] Airport insists that this exception permits tort recovery for purely economic losses when the plaintiff has no alternative remedy of recovery and that the absence of contractual privity between Prevost and itself places it within the exception. We acknowledge that the Latite and Moyer decisions sanctioned the "no alternative theory of recovery" exception; however, we disagree with Airport's assertion that it falls within the exception. As stated above, Casa Clara specifically disapproved Latite, and limited Moyer to its facts, facts which are dissimilar to the ones now under review. In Moyer, the third-party general contractor asserted that the supervisory architect's negligence caused the general contractor to suffer purely economic losses. We stated that
a third party general contractor, who may foreseeably be injured or sustained an economic loss proximately caused by the negligent performance of a contractual duty of an architect, has a cause of action against the alleged negligent architect, notwithstanding absence of privity.
Moyer, 285 So.2d at 402. Pivotal to our decision was the supervisory nature of the relationship between the architect and the general contractor. As we stated in AFM Corp. v. Southern Bell Tel. and Tel. Co., 515 So. 2d 180, 181 (Fla. 1987), "we based our decision [in Moyer] on the fact that the supervisory responsibilities vested in the architect carried with it a concurrent duty not to injure foreseeable parties not beneficiaries of the contract." The facts in this instance are void of supervisory responsibility; accordingly, Moyer is inapplicable.
Based on the above, we find that the economic loss rule cannot be circumvented by the no alternative theory of recovery exception, absent the required supervisory responsibilities as enunciated in Moyer. Accordingly, the first certified question is answered in the affirmative.
The Second Certified Question[5]
The second question requires us to determine if the economic loss rule can be circumvented when the property is damaged during a sudden calamitous event. When previously called upon to interpret Florida's economic loss rule we found guidance in East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S. Ct. 2295, 90 L. Ed. 2d 865 (1986), which expresses this country's majority view of the rule. See Casa Clara, 620 So.2d at 1247; AFM Corp., 515 So.2d at 181; Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899, 901 (Fla. 1987). Turning again to East River, we find the following words dispositive of the sudden calamitous event issue:
We realize that the damage may be qualitative, occurring through gradual deterioration or internal breakage. Or it may be calamitous. But either way, since by definition no person or other property is damaged, the resulting loss is purely economic. Even when the harm to the product itself occurs through an abrupt, accident-like event, the resulting loss due to repair costs, decreased value, and lost profits is essentially the failure of the purchaser to receive the benefit of its bargain traditionally the core concern of contract law.
476 U.S. at 870, 106 S. Ct. at 2302 (citations omitted). The key issue is whether there exists physical injury or other property damage; *632 if not, then remedies in tort generally do not lie. It is of no moment that damage occurred over a period of time or that it occurred suddenly. Accordingly, we answer the second certified question in the negative and find that a sudden calamitous event will not circumvent the economic loss rule.
The Third Certified Question[6]
Airport contends that subsequent to the manufacture of the buses, Prevost knew or should have known that they were defective and unreasonably dangerous and that Prevost failed to warn Airport of the danger. Airport argues that this failure created an independent tort exception to the economic loss rule which permits Airport to state a cause of action under the theory of negligent failure to warn. Airport cites as support for its position Interstate Securities Corp. v. Hayes Corp., 920 F.2d 769 (11th Cir.1991). Airport's reliance on Interstate Securities is misplaced. Interstate Securities is premised upon AFM Corp. v. Southern Bell Tel. and Tel. Co., 515 So. 2d 180 (Fla. 1987), wherein AFM sued Southern Bell, in contract and in tort, to recover an economic loss. AFM then withdrew its contract claims, specifically announcing that the tort claim would not rely upon any contractual agreement between Southern Bell and itself. See AFM Corp. v. Southern Bell Tel. and Tel. Co., 796 F.2d 1467 (11th Cir.1986). In short, AFM sought to recover economic loss, flowing from a contractual breach, under a tort theory. 515 So. 2d at 181. Finding that this case involved issues of unsettled Florida law, the United States Court of Appeals for the Eleventh Circuit certified the following question, as restated:
Does Florida permit a purchaser of services to recover economic losses in tort without a claim for personal injury or property damage?
Id. at 180; 796 F.2d at 1467.[7] This Court answered the question in the negative and held that "without some conduct resulting in personal injury or property damage, there can be no independent tort flowing from a contractual breach which would justify a tort claim solely for economic losses." 515 So. 2d at 181-82. AFM Corp. reaffirms that there can be no independent tort action for purely economic loss without an accompanying physical injury or other property damage.
As we have previously stated, the economic loss rule's focus is on whether there exists physical injury or other property damage. This distinction rests
on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. He can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety defined in terms of conditions that create unreasonable risks of harm. He cannot be held for the level of performance of his products in the consumer's business unless he agrees that the product was designed to meet the consumer's demands.
Casa Clara, 620 So.2d at 1245 (quoting Seely v. White Motor Co., 63 Cal. 2d 9, 45 Cal. Rptr. 17, 23, 403 P.2d 145, 151 (1965)). In sum, failure to warn, without the requisite harm, will not circumvent the economic loss rule to allow a cause of action where the plaintiffs allege a duty to warn which arose from facts which came to the knowledge of the company after the manufacturing process and after the contract. Accordingly, the third certified question is answered in the negative.
Having answered the questions certified by the United States Court of Appeals for the Eleventh Circuit, we remand for its disposition of this matter.
It is so ordered.
GRIMES, C.J., and OVERTON, HARDING and ANSTEAD, JJ., concur.
*633 WELLS, J., concurs in part and dissents in part with an opinion, in which KOGAN, J., concurs.
WELLS, Justice, concurring in part and dissenting in part.
I concur that this Court's decision in Casa Clara Condominium Ass'n, Inc. v. Charley Toppino & Sons Inc., 620 So. 2d 1244 (Fla. 1993), requires answering the first and second certified questions consistent with the answers given by the majority. However, if I had participated in Casa Clara, my opinion in that case would have been in accord with Justice Shaw's dissent.
I dissent here in the majority's expansion of the economic loss rule so as to require an answer to the third question in the negative. I believe that we should recognize the distinction between a manufacturer's negligence occurring as part of the manufacturing process and a manufacturer's negligent failure to warn of a defect in the product which becomes proven after the project is manufactured. This distinction has been recognized by the federal courts in Nicor Supply Ships Associates v. General Motors Corp., 876 F.2d 501 (5th Cir.1989), McConnell v. Caterpillar Tractor Co., 646 F. Supp. 1520 (D.N.J. 1986), and Miller Industries v. Caterpillar Tractor Co., 733 F.2d 813 (11th Cir.1984). These decisions recognize the salient fact that a manufacturer's negligence after manufacture has been completed goes not to the quality of the product that the buyer expects from the bargain in obtaining the product but to the type of conduct which tort law governs as a matter of social and public policy.
It is my opinion that in our state, our policy should be that a manufacturer does have a duty to warn of a defect known to it to exist in the product when that defect's existence becomes apparent to the manufacturer through the product's use by consumers. Our commitment to the economic loss rule should not be so total that we permit a manufacturer to proceed "ostrich like" while knowing that use of a product as it was intended is causing loss to the businesses, computer programs, homes, vehicles, or the like of those who use the product.
I would answer the third question in the affirmative.
KOGAN, J., concurs.
NOTES
[1] The question is: "WHETHER, UNDER FLORIDA LAW, THE ECONOMIC LOSS RULE APPLIES TO NEGLIGENCE CLAIMS FOR THE MANUFACTURE OF A DEFECTIVE PRODUCT WHERE THE ONLY DAMAGES CLAIMED ARE TO THE PRODUCT ITSELF AND WHERE THE PLAINTIFF CLAIMS TO HAVE NO ALTERNATIVE THEORY OF RECOVERY." 18 F.3d at 1559.
[2] Economic losses are "`disappointed economic expectations,' which are protected by contract law, rather than tort law." Casa Clara, 620 So.2d at 1246.
[3] The other cases disapproved were Adobe Building Centers, Inc. v. Reynolds, 403 So. 2d 1033 (Fla. 4th DCA), review dismissed, 411 So. 2d 380 (Fla. 1981), and Drexel Properties, Inc. v. Bay Colony Club Condominium, Inc., 406 So. 2d 515 (Fla. 4th DCA 1981), review denied, 417 So. 2d 328 (Fla. 1982). To the extent they conflicted with Casa Clara, the following decisions were disapproved: (1) Parliament Towers Condominium v. Parliament House Realty, Inc., 377 So. 2d 976 (Fla. 4th DCA 1979); (2) Navajo Circle, Inc. v. Development Concepts Corp., 373 So. 2d 689 (Fla. 2d DCA 1979); and (3) Simmons v. Owens, 363 So. 2d 142 (Fla. 1st DCA 1978). 620 So. 2d at 1248.
[4] Airport further asserts that in First American Title Ins. Co. v. First Title Service Co., 457 So. 2d 467 (Fla. 1984), recovery was allowed in a negligence action against an abstract company for purely economic losses. Recovery was allowed, however, because the plaintiff insurance company was the third-party beneficiary of the contract between the abstract company and the property owner. As such, "the abstracter's contractual duty to perform the service skillfully and diligently runs to the benefit of such known third parties." 457 So. 2d at 473. We specifically declined to adopt a policy that would make abstracters liable to any person who could foreseeably rely on a negligently prepared abstract to his or her detriment. Id. at 472. In this instance, Airport does not assert a third-party beneficiary cause of action; accordingly, we find First American inapplicable.
[5] The question is: "WHETHER, UNDER FLORIDA LAW, A CAUSE OF ACTION OTHERWISE PRECLUDED BY THE ECONOMIC LOSS RULE MAY BE MAINTAINED IF THE DAMAGE TO THE PRODUCT IS CAUSED BY A SUDDEN CALAMITOUS EVENT." 18 F.3d at 1559.
[6] The question is: "WHETHER, UNDER FLORIDA LAW, A CAUSE OF ACTION MAY EXIST OUTSIDE THE BAR OF THE ECONOMIC LOSS RULE WHERE THE PLAINTIFFS ALLEGE A DUTY TO WARN WHICH AROSE FROM FACTS WHICH CAME TO THE KNOWLEDGE OF THE COMPANY AFTER THE MANUFACTURING PROCESS AND AFTER THE CONTRACT." 18 F.3d at 1559.
[7] The federal court certified three questions, but this Court restated the questions as quoted above. 515 So. 2d at 180. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545960/ | 988 A.2d 727 (2009)
COM.
v.
QUEVI.
No. 1717 WDA 2008.
Superior Court of Pennsylvania.
November 25, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546113/ | 988 A.2d 738 (2009)
MURRAY
v.
MURRAY.
No. 2238 MDA 2008.
Superior Court of Pennsylvania.
November 12, 2009.
Vacated and Remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546007/ | 988 A.2d 734 (2009)
IN RE J.R.D.
No. 1067 MDA 2009.
Superior Court of Pennsylvania.
November 20, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546011/ | 77 F.2d 474 (1935)
WHEELOCK et ux.
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 7335.
Circuit Court of Appeals, Fifth Circuit.
May 9, 1935.
Harry C. Weeks, of Wichita Falls, Tex., for petitioners.
Frank J. Wideman, Asst. Atty. Gen., Norman D. Keller, Sewall Key, and J. P. Carr, Sp. Assts. to Atty. Gen., and Robert H. Jackson, Asst. Gen. Counsel, Bureau of Internal Revenue, and Frank B. Schlosser, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.
Before BRYAN, SIBLEY, and WALKER, Circuit Judges.
*475 WALKER, Circuit Judge.
By petition for review the petitioners, husband and wife, complain of the disallowance of a claimed deduction from their income in the year 1923 of an amount representing depreciation on equipment and appliances used by them in that year in their business of producing oil.
A summary of the material facts, as stipulated and found by the Board of Tax Appeals, follows: At all times material to the separate petitions for redetermination of income tax deficiencies, filed by the petitioners with the Board of Tax Appeals, petitioners were husband and wife, residing together and domiciled in the state of Texas. (Under the law of Texas the property and income involved in the cases belonged to the community comprised of petitioners.) In August, 1923, R. L. Wheelock acquired a 7/16 working interest in and to an oil and gas lease on a described tract of land, containing 38 acres, in Navarro county, Tex., pursuant to an agreement which provided for title to the property being in E. L. Smith Oil Company, Inc., and that that company was to have full charge of the operations of the lease, and in case of any production, pipe line checks to come to that company, and all bills to be paid by that company, R. L. Wheelock to be charged with one-half of the oil runs, and any difference to be settled promptly. Acting under that agreement, the E. L. Smith Oil Company proceeded to prospect for oil on said 38-acre lease, hereinafter referred to as the Wheelock-Smith lease. On October 21, 1923, the E. L. Smith Oil Company brought in its first well on the Wheelock-Smith lease. Thereafter, and before December 31, 1923, the property was fully developed by the drilling thereon of eight additional wells, all of which were completed prior to December 31, 1923. Between October 12, 1923, and December 31, 1923, the E. L. Smith Oil Company installed in the Wheelock-Smith lease well equipment, lease equipment, and other depreciable assets having an aggregate cost of $167,244.22, which equipment was used in the production of oil in 1923. The full amount of development, operation, and equipment costs were capitalized on the books of the E. L. Smith Oil Company, and, under date of December 31, 1923, the following charge was made to the running account of R. L. Wheelock on the books of the E. L. Smith Oil Company: "Dec. 31, 1923. ½ Equipment Wheelock Lease to Dec. 31, 1923, $83,622.11." During the calendar year 1923, there were produced and sold from petitioners' interest in the Wheelock-Smith lease, 237,766.57 barrels of oil, for which petitioners received through the E. L. Smith Oil Company within the taxable year the net sum of $210,940.14. In the computation of the deficiency which petitioners sought to have redetermined, the Commissioner determined that it was apparent at October 12, 1923, or within 30 days thereof; that petitioners' 7/16 of the oil reserves underlying the Wheelock-Smith lease totaled 552,037.71 barrels; that petitioners' capital sum with respect thereto recoverable through depletion was $308,028.28; that there were produced and sold from petitioners' 7/16 interest in the lease within the taxable year 1923, 219,905.50 barrels of oil; and that the depletion sustained as a result of the extraction and sale of said oil was the sum of $122,702.87, computed at the rate of 55.798 cents per barrel.
Petitioners' records for the year 1923 were kept on a cash receipts and disbursements basis, and petitioners' returns for that taxable year were made on a like basis.
On their books and in their income tax returns for the calendar year 1923, which returns were filed on March 15, 1924, petitioners claimed no deduction in any amount as and for depreciation sustained on their investment in lease equipment on the Wheelock-Smith lease, nor has the respondent ever allowed any deduction therefor. Petitioners' entire interest in and to the Wheelock-Smith lease, including the equipment thereon, was sold by the petitioners on or about March 18, 1924, for the sum of $250,000. In filing their income tax returns for the calendar year 1924, petitioners, in computing their gain from the sale, deducted from the sale price of the lease and equipment the full original cost of the lease equipment. Upon audit, this computation was approved by the respondent. Thereafter, petitioners' income tax liability for the taxable year 1924 was finally settled by an agreement, under date March 11, 1929, executed under the provisions of section 606 of the Revenue Act of 1928 (26 USCA § 2606).
Petitioners' net income from the Wheelock-Smith lease for 1923, exclusive of any allowance for depreciation of lease equipment, was the sum of $197,576.60, composed of selling price of oil, $210,940.14, less operating expenses of $13,363.54.
On February 29, 1928, notices were mailed to both petitioners advising them of *476 the deficiency in the income taxes of each of them for the year 1923 in the amount of $1746.35. Petitioners' original petitions for redetermination were filed with the Board of Tax Appeals on April 26, 1928, each of them filing an amended petition on May 10, 1932. The claimed right of the petitioners to a deduction for depreciation of lease equipment on the Wheelock-Smith lease for 1923 was first raised in the just-mentioned amended petitions.
Each of those amended petitions contained the following: "(c) During the year in question, the petitioner owned an undivided one-half (½) interest in the equipment and appliances located upon the Wheelock-Smith Lease above referred to, and used in the production of oil, and was entitled to deduct, with respect to said equipment, an allowance for depreciation in computing his income for that year, but the Respondent made no allowance for depreciation whatsoever. Petitioner says that the amount invested in said equipment should be depreciated on the unit of production basis; that her total investment in said equipment at the close of the year 1923 was $83,622.11; that the probable salvage value of said equipment was ten per cent of the amount thereof, so that the net amount subject to depreciation was $75,259.90. Petitioners' share of the recoverable reserves of oil from said property, as fixed by the Respondent, is 552,038 barrels. Petitioner is therefore entitled to use a depreciation unit of $0.13633 per barrel, which applied to his share of the oil produced, as above set forth, gives a depreciation allowance of $32,414.72."
By answer to each of the amended petitions, the respondent denied that he erred in failing to allow depreciation with respect to sums invested in oil equipment and used throughout the tax year in the production of oil; and in the alternative set up that the petitioner is now estopped to assert that deductable depreciation was sustained in 1923 on said equipment.
Pursuant to stipulation, the cases were consolidated for hearing before the Board of Tax Appeals, and for review by this court. The Board decided some of the issues in favor of petitioners, and held that the petitioners were estopped to claim deduction for depreciation of equipment in 1923, and disallowed that claim.
The right to claim a deduction, in determining income tax, is a statutory privilege. New Colonial Ice Co. v. Helvering, 292 U. S. 435, 54 S. Ct. 788, 78 L. Ed. 1348; Squier v. Commissioner (C. C. A.) 68 F. (2d) 25. The taxpayer may waive that privilege or by estoppel lose the right to exercise it. There was abundant support for the conclusions that the petitioners waived the privilege of deducting from their gross incomes in 1923 a sum representing depreciation of equipment on the Wheelock-Smith lease, and that they became estopped to claim such a deduction. It well might have been inferred that when the petitioners filed their income tax returns for 1923 on March 15, 1924, and when those returns were prepared for them, they gave no thought to the matter of deduction for depreciation of lease equipment, as was indicated by petitioner R. L. Wheelock's testimony, because at that time they contemplated the sale of their entire interest in the Wheelock-Smith lease, including equipment thereon, for $250,000, which sale was consummated on or about March 18, 1924, and realized that it would be to their advantage, in computing, in their income tax returns for the year 1924, their gain from the sale, to deduct from the sale price of the lease and equipment the full original cost of the lease equipment. By claiming that deduction in their income tax returns for 1924, the petitioners evidenced their election to recover in full the cost of the depreciable equipment by getting that deduction allowed, rather than to recover part of that cost by a deduction for depreciation of lease equipment from their gross incomes in 1923, leaving only the amount of the remainder of such cost to be deducted from their gross incomes in 1924. The acts of the petitioners in claiming in their income tax returns for 1924 that they were entitled to deduct from the sale price of the lease and equipment the full original cost of the lease equipment were inconsistent with their retaining the right to recover part of that cost by means of deductions from their gross incomes in 1923 for depreciation of the same lease equipment. It is not reasonably conceivable that the deductions in petitioners' returns for 1924 of the full original cost of the lease equipment would have been approved if the respondent had understood or believed that the petitioners retained the inconsistent right to deduct from their gross income in 1923 amounts representing depreciation of the same lease equipment. The conduct of the petitioners, their acts in taking deductions in their returns for 1924 which were inconsistent with their having or retaining the right to recover part of *477 their investment in lease equipment by depreciation deductions from their 1923 gross incomes, and their silence, at the time of the allowance of the mentioned deductions from their 1924 gross incomes, and throughout the proceedings before the respondent with reference to their income tax liability for the years 1923 and 1924, as to the matter of deductions for depreciation of lease equipment, warranted, not only the inference that the respondent was influenced in allowing the deductions taken in petitioners' returns for 1924 by the belief that petitioners had waived their right to deduct from their gross income in 1923 amounts for depreciation for the same lease equipment, but also the inference that petitioners actually had waived their right to take the last-mentioned deductions. One possessing a right, and knowing all the attendant facts, waives that right by claiming and procuring the enforcement of an inconsistent right; and that such waiver occurred may be inferred from his acquiescence or silence when asserting an inconsistent right, as well as from his express consent or agreement. Marine Iron Works v. Wiess (C. C. A.) 148 F. 145, 155. Nothing contained in the record indicates that the action of the respondent in allowing the deduction of the full cost of the lease equipment from petitioners' gross incomes in 1924 was modified in any respect prior to or at the time of the execution of the agreement finally settling petitioners' income tax liability for 1924. In view of the fact that the matter of deduction for depreciation of lease equipment was never mentioned in any of the proceedings before the respondent, it cannot reasonably be supposed that there was any diminution of the deductions of the full original cost of the lease equipment.
The petitioners, by conduct indicating their election to waive the right to deductions from their incomes in 1923 for depreciation of lease equipment, and by claiming and procuring the allowance of deductions from their incomes in 1924 of the full original cost of the lease equipment, lost the right to deductions from their incomes in 1923 for depreciation of lease equipment, because when that right was first asserted the right to diminish the allowed deductions from their incomes in 1924 covering the total cost of lease equipment was barred. Rose v. Grant (C. C. A.) 39 F.(2d) 340; Commissioner v. Moore (C. C. A.) 48 F. (2d) 526. It would be against the principles of equity and good conscience to allow the petitioners' deductions from their incomes in 1923 for depreciation of lease equipment, when by their silence as to the existence of such a right they induced the respondent to believe that that right did not exist or would not be exercised, and the latter rightfully acted on that belief, with the result of losing the right to reduce the allowed deductions from petitioners' gross incomes in 1924 of the total original cost of the lease equipment. In the circumstances disclosed, the petitioners were conclusively estopped from claiming the right to deductions from their gross incomes in 1923 for lease equipment. Stone v. Bank of Commerce, 174 U. S. 412, 19 S. Ct. 747, 43 L. Ed. 1028; Kirk v. Hamilton, 102 U. S. 68, 26 L. Ed. 79. Having by their own conduct brought about respondent's allowance of a claim inconsistent with the one now asserted, and a change of respondent's position whereby the latter is prevented from correcting the error in such allowance which would result from approving the deductions now claimed, the petitioners were precluded from enforcing their last asserted claims. Stearns v. United States, 291 U. S. 54, 60, 61, 54 S. Ct. 325, 78 L. Ed. 647; Swain v. Seamens, 9 Wall. 254, 274, 19 L. Ed. 554; U. S. v. Peck, 102 U. S. 64, 26 L. Ed. 46. It hardly would be contended that it is consistent with the principles of equity and good conscience for a taxpayer by his own conduct getting the advantage of being able to secure a double recovery of part of the cost of property acquired and sold by him.
Aside from the questions of waiver and estoppel, it does not appear that the claims asserted were supported by evidence required by the applicable statute and authorized regulations thereunder. Section 214 (a) (10) Revenue Act of 1921, 42 Stat. 227, 239; arts. 165, 169, Treasury Regulation 62. With reference to depreciation of lease equipment in 1923, the evidence went no farther than to show that between October 12, 1923, and December 31, 1923, lease equipment and other depreciable assets having a stated aggregate cost were installed on the Wheelock-Smith lease, and were used in the production of oil in that year; that under date December 31, 1923, petitioner R. L. Wheelock was charged on the books of E. L. Smith Oil Company with "½ equipment Wheelock lease to Dec. 31, 1923, $83,622.11," and to exhibit a written "schedule of equipment of Wheelock-Smith *478 lease at Dec. 31, 1923," setting out each item of equipment, the cost thereof, and the total cost of all the items. There was no showing as to the dates when the several items were installed or as to the periods during which those items severally were in use. The petitioners were claiming depreciation upon the unit basis (see art. 169, Treasury Regulation 62), what they claimed being the right to deduct, as the amount of depreciation sustained within the taxable year on a given item of equipment, the proportionate part of the cost that the number of barrels of oil produced from the property after the installation of such item bears to the total number of barrels of recoverable oil underlying their interest at the date the item was installed. The dates upon which such depreciable assets were placed in use are data essential to the determination of the depreciation, if any, sustained in the taxable year. Without such data, the determination of the amount of allowable deductions cannot be made as required by the regulation. A taxpayer claiming a deduction disallowed by the Commissioner has the burden of proving, not only that the Commissioner erred, but also of establishing his right to the deduction claimed and the amount thereof. Old Mission Portland Cement Co. v. Helvering, 293 U. S. 289, 55 S. Ct. 158, 79 L. Ed. ___; Helvering v. Taylor, 293 U. S. 507, 515, 55 S. Ct. 287, 79 L. Ed. ___. To say the least, the petitioners did not carry the burden of establishing by required evidence the amounts of the deductions allowable to them for depreciation in 1923.
The petition is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546016/ | 988 A.2d 351 (2010)
119 Conn.App. 423
DuBALDO ELECTRIC, LLC
v.
MONTAGNO CONSTRUCTION, INC., et al.
No. 30063.
Appellate Court of Connecticut.
Argued October 16, 2009.
Decided February 23, 2010.
*354 Robert J. O'Brien, Hartford, for the appellants-appellees (named defendant et al.).
Wayne Christopher Gerlt, South Windsor, for the appellee-appellant (plaintiff).
GRUENDEL, HARPER and SCHALLER, Js.
GRUENDEL, J.
The defendants, Montagno Construction, Inc. (Montagno), and Hanover Insurance *355 Company (Hanover),[1] appeal from the judgment rendered after a court trial, in favor of the plaintiff, DuBaldo Electric, LLC (DuBaldo). The defendants challenge as clearly erroneous the trial court's findings that (1) DuBaldo substantially performed its contractual obligations, (2) DuBaldo was entitled to $193,120.80 in damages, (3) DuBaldo suffered a 20 percent loss of efficiency and (4) judgment be rendered against Hanover. Additionally, DuBaldo cross appeals, contending that the court erred in denying its recovery for attorney's fees. We affirm the judgment of the trial court.
In its February 11, 2008 memorandum of decision, the court found the following facts. Burlington Coat Factory hired Montagno as the general contractor to renovate space that it leased in the Brass Mill Center Mall in Waterbury. Seeking to become the electrical subcontractor for that project, DuBaldo submitted to Montagno a bid of $243,600 and estimated that the job would take 3200 man hours to complete.[2] On June 21, 2004, DuBaldo received a letter from Montagno awarding it the electrical subcontract work for $250,450, which it signed and returned on June 25, 2004, and which Montagno received on July 1, 2004. Attached to that letter was a scope of work plan. That letter represented the contract between the parties.[3]
On June 28, 2004, DuBaldo applied for an electrical permit with the city of Waterbury. Issuance of the permit was delayed until July 14 as a result of deficiencies in Burlington Coat Factory's architectural design and understaffing at the Waterbury electrical inspector's office. Several times, Montagno communicated to Burlington Coat Factory the importance of obtaining certain architectural information necessary for the issuance of the permit. Those communications were without success. "The court [found] that DuBaldo properly attempted to secure the electrical permit... but was unable to do so for reasons beyond its control and within the control of the defendants. While on July 1 ... Montagno distributed a project time line, setting forth ten five day weeks, from ... June 21 through ... August 27 for the electrical work, Montagno failed to update that time line when, for the first two weeks of July, the electrical work was stalled by [the permit's delay]."
Unable to perform electrical work without a permit, DuBaldo fell approximately three weeks behind schedule. On August 14, to make up for time lost, Montagno authorized an acceleration in schedule in which DuBaldo agreed to work seven days a week with overtime. Burlington Coat Factory agreed to pay the overtime hours under that accelerated schedule. On August 30, Montagno hired Globe Electric, *356 LLC (Globe), to work alongside DuBaldo. Montagno informed DuBaldo that Globe had been hired to add electricians to the job. DuBaldo believed from its communications with Montagno that Globe's primary purpose was to address fire alarm deficiencies in Burlington Coat Factory's plans and, secondarily, to supplement DuBaldo on the original project. Globe joined the project pursuant to an oral agreement in which there was "no limit on hours to be worked, no bid, no limit on numbers of workers on the project and an hourly rate of $65 plus an addition of halftime with no cap on overtime hours billed."[4] Although Montagno deducted from DuBaldo's account the amount that it paid Globe for work performed within the scope of DuBaldo's contract, it never discussed with DuBaldo either the amount or mode of payment that Globe was to receive for its work.[5]
Despite Montagno's arrangement with Globe, Globe's work was subject to no oversight by Montagno. Indeed, Globe performed much of its work in the evening and on weekends when Montagno personnel was not present. Even more troubling, the bills that Globe submitted to Montagno did not detail what particular work Globe performed within the scope of DuBaldo's contract. Unlike DuBaldo, "Globe was timely paid in full, based upon a list of first names and hours worked...."[6] Additionally, Globe's chief executive officer, Lawrence Marotti, was on vacation in Cancun, Mexico, and unable to oversee crucial electrical work being performed and billed. Remarkably, Montagno did not attempt to check whether Globe's work related to the original contract between Montagno and DuBaldo or to work performed outside of Montagno's contract with DuBaldo. Essentially, "Globe not only had free rein to bill unreviewed manpower and hours on this project, Globe also was the final arbiter of what bills were backcharged to DuBaldo...."
In September, 2004, the relationship between DuBaldo's foreman, John Monaco, and Montagno's site superintendent, Richard Barzda, began to deteriorate. That negative interpersonal relationship resulted in the events culminating in DuBaldo's termination from the project. On September 27, 2004, DuBaldo intentionally disabled the fire alarm system one day before the city of Waterbury's scheduled inspection for the issuance of a temporary certificate of occupancy (certificate) for the upper level of the store. The court found that "[u]pon discovering [that] the fire alarm [was disabled], Globe was called in by Montagno, and ... within a few hours got the fire alarm system back up and running, and the [certificate] inspection *357 proceeded successfully and as scheduled." On September 28, 2004, the same day as the inspection, Montagno terminated DuBaldo via letter, citing as grounds for termination both the fire alarm incident and insufficient manning of the job. Thereafter, Globe completed DuBaldo's contractual obligations for which it was timely and fully compensated in the amount of $322,472. DuBaldo submitted change orders for costs of several jobs done outside the scope of its contract, and, at the time of trial, all agreed that between July 16 and September 28, 2004, DuBaldo performed $105,867 of work over and above the contract price of $250,450. DuBaldo was partially compensated by Montagno for contractual work prior to its termination but was not compensated for any approved change order work.
In its February 11, 2008 memorandum of decision, the court found that Montagno was in breach of contract for terminating DuBaldo and that DuBaldo had substantially performed its contractual obligations as of September 28, 2004, when it was precluded from continuing work. The court further found that Burlington Coat Factory's unreasonably early fixturing and merchandising of the upper level of the premises caused DuBaldo a 20 percent loss of efficiency. The court awarded DuBaldo damages totaling $145,535.30. In its June 6, 2008 memorandum of decision, the court modified that amount to $193,120.80, after determining that it had miscalculated the initial amount, and denied DuBaldo's requests for both attorney's fees and prejudgment interest. This appeal followed.
I
The defendants raise a multitude of claims concerning the court's finding that DuBaldo had substantially performed its contractual obligations prior to termination.
"The determination of [w]hether a building contract has been substantially performed is ordinarily a question of fact for the trier to determine.... We have long held that a finding of fact is reversed only when it is clearly erroneous. A factual finding is clearly erroneous when it is not supported by any evidence in the record or when there is evidence to support it, but the reviewing court is left with the definite and firm conviction that a mistake has been made.... Simply put, we give great deference to the findings of the trial court because of its function to weigh and interpret the evidence before it and to pass upon the credibility of witnesses." (Citations omitted; internal quotation marks omitted.) Pisani Construction, Inc. v. Krueger, 68 Conn.App. 361, 364, 791 A.2d 634 (2002). Moreover, "[t]he analysis necessarily involves an inquiry into the totality of facts and circumstances surrounding the performance of the contract." Miller v. Bourgoin, 28 Conn.App. 491, 496, 613 A.2d 292, cert. denied, 223 Conn. 927, 614 A.2d 825 (1992).
A
The defendants argue that the court's finding that DuBaldo had substantially performed its contractual obligations was clearly erroneous because there allegedly was no evidence before the court as to how many days might reasonably have been expected for the electrical permit to be issued. The defendants contend that the absence of such evidence is particularly significant in light of the court's reliance on the permit's delay as causing DuBaldo to fall behind schedule. We disagree.
Based upon our examination of the record, we conclude that the court had before it ample evidence to support its finding that the electrical permit's delay caused *358 DuBaldo to fall behind schedule.[7] Although the defendants contend that the absence of any evidence as to how many days might reasonably have been expected for the permit to be issued rendered the court's finding clearly erroneous, Montagno identified the lack of a permit as a problem just three days after DuBaldo had applied for it, on July 1, 2004, at the subcontract start-up meeting. At trial, Kurt Montagno, Montagno's principal, testified that "[h]e knew when [DuBaldo] didn't have a permit at the project['s] start... that there was going to be a schedule issue [be]cause the work just was not being hit full force. So, [he] got concerned right out of the box, basically, that there was going to be an issue." In an effort to remedy that scheduling issue, from July 2 through July 9, Kurt Montagno made several attempts to obtain architectural information from Burlington Coat Factory, which he understood as being crucial to the permit's issuance. In addition to Kurt Montagno's concerns, DuBaldo estimated that it would take approximately ten weeks to complete its electrical subcontract work and obtained the permit sixteen days after applying for it. It is undisputed that DuBaldo could not legally perform electrical work while waiting for the permit to be issued. By the time the permit was finally issued, DuBaldo was already three weeks into what had been estimated as a ten week job.[8] When the permit was issued, Montagno failed to update its original ten week schedule for DuBaldo to complete the job. Accordingly, we conclude that the court's finding was not clearly erroneous.
B
The defendants next present several arguments contending that the court's finding that DuBaldo had substantially performed its contractual obligations was clearly erroneous because DuBaldo's own actions, as opposed to the permit's delay, caused it to fall behind schedule.
1
The defendants first argue that the court's finding was clearly erroneous because the delay of the permit did not preclude DuBaldo from otherwise manning the job. Specifically, the defendants contend that while waiting for the permit to be issued, DuBaldo delivered equipment to the site, began running conduit, performed layout work and began to install the Unistrut hardware,[9] each of which it had to perform regardless of the permit's issuance.[10] Moreover, the defendants assert *359 that the court failed to indicate what other work DuBaldo could have performed had the permit been timely issued. We disagree.
The defendants' argument is without merit, as the record reveals the following facts. While waiting for the permit to be issued, DuBaldo could not perform electrical work. Robert DuBaldo, DuBaldo's principal, testified that the permit was delayed due to problems with Burlington Coat Factory's architectural drawings. He further testified that he had originally estimated that it would take five of his men ten weeks to complete the job. Limited to nonelectrical work without the permit, DuBaldo worked several days with between two and four men. Although the number of men working during that period was less than the five men that DuBaldo had originally estimated, Robert DuBaldo testified that had the permit been timely issued he would have been able to put more men on the job to perform electrical work. Significantly, in its memorandum of decision, the court found Robert DuBaldo "substantially credible...." Further, as previously noted, Kurt Montagno testified that the permit's delay prevented DuBaldo from fully performing its contractual obligations. Specifically, Kurt Montagno testified that "[h]e knew when [DuBaldo] didn't have a permit at the project['s] start ... that there was going to be a schedule issue [be]cause the work just was not being hit full force." (Emphasis added.) Thus, the court had ample evidence to conclude that had the permit been timely issued, DuBaldo would have been able to perform such electrical work requiring a permit as it was contractually obligated to complete. Unable to pass on the credibility of witnesses or the weight with which the court affords evidence, we find no reason to disturb the court's finding. See State v. Lawrence, 282 Conn. 141, 155, 920 A.2d 236 (2007) (appellate court must defer to trier of fact's credibility assessment).
2
The defendants next claim that the court's finding was clearly erroneous because certain evidence revealed that DuBaldo did not significantly increase its manpower from the time the permit was issued on July 14, 2004, until the middle of August to make up for time lost. Specifically, the defendants contend that it was not until August 18, 2004, that DuBaldo significantly increased its manpower. We disagree.
"It is well established that the appellant bears the burden of providing an appellate court with an adequate record for review.... It is, therefore, the responsibility of the appellant to move for an articulation or rectification of the record where the trial court has failed to state the basis of a decision.... Without an adequate record, [w]e ... are left to surmise or speculate as to the existence of a factual predicate for the trial court's rulings. Our role is not to guess at possibilities, but to review claims based on a complete factual record developed by the trial court.... Without the necessary factual and legal conclusions furnished by the trial court, either on its own or in response to a proper motion for articulation, any decision made by us ... would be entirely speculative." (Internal quotation marks omitted.) Jezierny v. Jezierny, 99 Conn. *360 App. 158, 160-61, 912 A.2d 1127 (2007). Nowhere in the court's memorandum of decision is there any mention of DuBaldo's alleged failure to increase its manpower significantly from that period asserted by the defendants, and the defendants failed to seek an articulation related to this issue. We, therefore, must conclude that the record is inadequate for review.
3
The defendants finally claim that the court's finding was clearly erroneous because DuBaldo allegedly continued to mismanage the job after the accelerated schedule was put into effect. We disagree.
In support of their claim that DuBaldo mismanaged the job after the acceleration in schedule, the defendants refer to the following. They first note that on several occasions just prior to and after the accelerated schedule came into effect, Montagno and Burlington Coat Factory expressed concern about DuBaldo's alleged lack of progress and the number of men it had on the job. Specifically, the defendants allege that between August 10 and August 18, 2004, Burlington Coat Factory representatives expressed concern over DuBaldo's progress. Additionally, the defendants rely on Marotti's testimony that after evaluating DuBaldo's progress, at the request of Burlington Coat Factory, he concluded that DuBaldo was in jeopardy of failing to complete its work on time. Finally, the defendants assert that there is certain evidence before the court allegedly indicating that DuBaldo's foreman, Monaco, was uncooperative, disobeyed orders and was unorganized.
The court made no reference in its memorandum of decision to either Marotti's evaluation of DuBaldo's progress or to Monaco's alleged failure to cooperate.[11] Although the court noted that Montagno, on August 18, faxed an "Action Required" notice to DuBaldo to comply with adequate levels of manpower, the court immediately thereafter noted that on August 18, DuBaldo had seven men on the job; on August 19, DuBaldo had eight men on the job; and on August 20, DuBaldo had ten men on the job. Those numbers exceeded the five men that DuBaldo originally estimated to work on the project. Nevertheless, the court did not make any finding as to whether those levels constituted adequate manpower, and the defendants failed to seek an articulation on any of those matters. Once again, we conclude that the record is inadequate for our review and refuse to speculate as to the court's legal conclusions.
C
The defendants also argue that the court's finding was clearly erroneous because DuBaldo intentionally breached its contract with Montagno by disabling the fire alarm system, thereby rendering the doctrine of substantial performance inapplicable. Alternatively, the defendants contend that even if the doctrine of substantial performance is applicable, the bad faith allegedly demonstrated by DuBaldo is one factor among several that the court should have considered in finding that DuBaldo failed to substantially perform its contractual obligations. We disagree.
The following additional facts are relevant for our resolution of the defendants' claim. On September 27, 2004, one day before Waterbury's scheduled inspection for the issuance of a certificate for the upper level of the subject premises, DuBaldo *361 instructed Monaco to disable the fire alarm system. Just hours after the fire alarm system was disabled, it was made operational with Globe's assistance, and the scheduled inspection went along successfully and as planned. At trial, Robert DuBaldo testified that he instructed Monaco to disable the system because he believed that he was at risk to lose his license for working without a fire alarm permit. The court also heard testimony that DuBaldo's disabling of the fire alarm system constituted tampering and vandalism. In assessing that testimony, the court stated that "despite hours of conflicting testimony as to the incident with the fire alarm, [it] was unable to find any one witness' rendition of this event totally credible." Moreover, the court found that "although [DuBaldo's] actions in disconnecting the fire alarm finalized the breakdown that led to [DuBaldo's] termination from the job, that incidental action does not negate a finding of substantial performance."
Relying on Vincenzi v. Cerro, 186 Conn. 612, 442 A.2d 1352 (1982), the defendants assert that the doctrine of substantial performance is inapplicable because DuBaldo intentionally breached its contract with Montagno. Contrary to the defendants' assertion, the court in Vincenzi underscored that although our Supreme Court has "in several cases approved the common statement that a contractor who is guilty of a `wilful' breach cannot maintain an action upon the contract . . . [t]he contemporary view . . . is that even a conscious and intentional departure from the contract specifications will not necessarily defeat recovery, but may be considered as one of the several factors involved in deciding whether there has been full performance." (Citations omitted.) Id., at 615-16, 442 A.2d 1352. The Vincenzi court further noted that "[t]he pertinent inquiry is not simply whether the breach was `wilful' but whether the behavior of the party in default `comports with standards of good faith and fair dealing.'" Id., at 616, 442 A.2d 1352. We, therefore, conclude that the doctrine of substantial performance is applicable in the present case.
Alternatively, the defendants contend that the court's finding of substantial performance was clearly erroneous because DuBaldo demonstrated bad faith in disabling the fire alarm system. We remind the defendants that it is axiomatic that, as the appellants in this matter, they bear the burden of providing this court with an adequate record for review when presenting a claim that is based on a question of fact. See Practice Book § 61-10; State v. Bonner, 290 Conn. 468, 493, 964 A.2d 73 (2009). In the present case, the court noted that "[it] must consider any such fault or lack of good faith or fair dealing in determining the question of substantial performance." Although the court found that DuBaldo had intentionally disabled the fire alarm system, it emphasized that it was unable to determine DuBaldo's true motivation in so doing. Specifically, the court did not find any witness' rendition of the incident totally credible and analogized the conflicting testimony to a "`riddle wrapped in a mystery inside an enigma. . . .'" Because the defendants have failed to satisfy their burden of providing this court with an adequate record for review, we refuse to entertain their claim.
D
The defendants finally argue that the court's finding was clearly erroneous because the facts found by the court indicate that DuBaldo fell short of achieving substantial performance of its contractual obligations under the legal standard *362 set forth in Pettit v. Hampton & Beech, Inc., 101 Conn.App. 502, 922 A.2d 300 (2007).[12] We disagree.
In Pettit, we found that the defendants were in substantial compliance with their contractual obligations, reasoning that their deficiencies in performance could be remedied for less than 5 percent of the amount sought in damages. Id., at 509, 922 A.2d 300. Here, the defendants argue that DuBaldo's incomplete work was not minor in nature, as were the deficiencies in Pettit, and, therefore, the court's finding was clearly erroneous. In support of their claim, the defendants assert that the court improperly calculated the total percentage of work completed by DuBaldo at 81 percent upon termination. Specifically, the defendants claim that the court relied on the allegedly unsubstantiated testimony of Robert DuBaldo and Monaco to calculate the percentage of completed work and disregarded Marotti's conflicting testimony. Had the court relied on Marotti's testimony, as the defendants contend it should have, the total percentage of work completed by DuBaldo is 66 percent.
It is first important to note that the defendants do not contend that the 19 percent deficiency in DuBaldo's performance, as found by the court, was minor in nature. Instead, the defendants assert that the court should have calculated DuBaldo's deficiency at 34 percent, a percentage the defendants claim was not minor. As such, the defendants concede that the 19 percent deficiency in DuBaldo's performance was minor and does not negate a finding of substantial performance. In its memorandum of decision, the court found Robert DuBaldo "substantially credible" and Marotti "only sporadically credible." Contrary to the defendants' contention that the court should have relied on Marotti's testimony, "[t]he sifting and weighing of evidence is peculiarly the function of the trier." (Internal quotation marks omitted.) Nanni v. Dino Corp., 117 Conn.App. 61, 68, 978 A.2d 531 (2009). Here, we abide by that principle and defer to the court's judgment.[13]
II
The defendants next claim that the amount of damages the court awarded DuBaldo was clearly erroneous. We disagree.
"We begin by setting forth our standard of review. [T]he trial court has broad discretion in determining damages.. . . The determination of damages involves a question of fact that will not be overturned unless it is clearly erroneous. . . . Damages are recoverable only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty. . . . Thus, [t]he court must have evidence by which it can calculate the damages, which is not merely subjective or speculative, but which allows for some objective ascertainment of the amount." (Citation omitted; internal quotation marks omitted.) Duplissie v. Devino, 96 Conn.App. 673, 699, *363 902 A.2d 30, cert. denied, 280 Conn. 916, 908 A.2d 536 (2006).
The following facts are necessary for our resolution of the defendants' claim. In awarding $193,120.80 in damages to DuBaldo, the court recognized a credit to the defendants in the amount of $68,235.50, a figure it explained as consisting of $20,650 paid by Montagno to Globe for work completed prior to DuBaldo's termination, and $47,585 for the cost to complete thereafter. At trial, Montagno introduced several invoices that it had received from Globe for its work on the project. Evidence revealed that many of those invoices failed to detail what particular work Globe performed within the scope of DuBaldo's contract and, often, included only a list of first names and hours worked. Additional evidence revealed that Globe generally worked with no supervision. Kurt Montagno testified that despite such uncertainties, no effort was made to determine which work performed by Globe was actually within the scope of DuBaldo's contract. As such, the court found that "the backcharging scheme entered into as between Montagno and Globe was without rigor and most obviously manipulated by Globe to its financial advantage. That is, no independent or objective evidence, testimonial or documentary, introduced at trial supports the amounts billed by Globe that were backcharged . . . to DuBaldo." After assessing testimony that it considered credible, the court found that DuBaldo had completed 81 percent of its contractual obligations prior to termination. From that calculation, the court arithmetically determined the cost to complete the job subsequent to DuBaldo's termination, which it charged back against DuBaldo's account.
The defendants argue that the court erred in estimating the amount to be charged back against DuBaldo's account because it failed to recognize both certain work performed by Globe allegedly within the scope of DuBaldo's contract and additional costs incurred to complete the job allegedly caused by DuBaldo. Specifically, the defendants first contend that "the court's approach in arriving at a percentage of completion by multiplying square footage by approximate percentages of completion prevented it from undertaking a careful analysis of the work performed and billed by Globe during September and thereafter. Once the court concluded that [DuBaldo] had completed 81 percent of its contractual scope, the value of the remaining 19 percent became a matter of a simple arithmetic exercise rather than an examination of what remained to be completed and corrected by Globe."[14] The defendants claim that evidence established that Montagno paid Globe $322,472.65,$201,945.62 of which they assert was within the scope of DuBaldo's contract and, thus, should be charged back against DuBaldo's account. In support of their claim, the defendants rely on certain invoices introduced at trial that the court either failed to apply or significantly discounted in its calculation. Next, the defendants allege that the court had before it evidence that Globe incurred additional costs totaling $26,435.85 in completing the job upon which it should have applied in its calculation. Such additional costs included payments for lift rentals, damage allegedly caused by DuBaldo to a sprinkler pipe, and premiums for the cost of a bond purchased by Montagno in substitution for DuBaldo's mechanic's lien. Essentially, the defendants ask that we retry the facts of this case. "As we have frequently stated, we *364 cannot, and do not, retry the facts." Fraulo v. Gabelli, 37 Conn.App. 708, 718, 657 A.2d 704 (1995), cert. denied, 239 Conn. 947, 686 A.2d 125 (1996). The defendants' claim, therefore, fails.
III
Next, the defendants raise two claims contending that the court's loss of efficiency award was clearly erroneous.
A
The defendants first argue that the court's finding of loss of efficiency was clearly erroneous because it improperly assumed that Burlington Coat Factory began fixturing as soon as DuBaldo commenced work in late June, 2004. We disagree.
The following additional facts are necessary for our resolution of the defendants' claim. Despite DuBaldo's delay in obtaining an electrical permit, Montagno failed to update its original ten week schedule and proceeded with fixturing of the upper level of the premises as originally scheduled.[15] Robert DuBaldo testified that the fixturing created difficulties in completing the job. Specifically, he testified that much of the work performed by his company required the use of man lifts and that Burlington Coat Factory's fixturing impeded the effectiveness of those lifts because he was forced to operate around the fixturing. Robert DuBaldo further testified that such difficulties caused him to expend at least 1000 additional man hours and resulted in a 30 percent loss of efficiency, costing an extra $25,000 to $30,000. Zachary Welburn, an independent electrical contractor hired by DuBaldo to work on the Burlington Coat Factory project for two weeks in September, and owner of Welburn Electrical Contractors, LLC, testified that store fixturing was taking place the entire time he was on the job. That fixturing, Welburn testified, was in his way and required that he put more time into the job than he would have otherwise because he had to work around it. Finally, despite Globe's long-standing relationship with Burlington Coat Factory, Marotti testified that fixturing of the store hampered his company's performance by 30 percent to 50 percent. That fixturing, Marotti testified, made it difficult to maneuver in the store to do work. Marotti further testified that "everything in the whole store that we did . . . was an issue because they were stocking the store. When you get 200 to 300 people in there and there's truckloads coming in with pallets all over the place, [it makes working there difficult]. . . ." Based upon the testimony of Robert DuBaldo, Welburn and Marotti, which it deemed credible, the court found that DuBaldo suffered a 20 percent loss of efficiency as a result of the fact that Burlington Coat Factory began fixturing unreasonably early.
"We review damages awards under a well settled standard. [T]he trial court has broad discretion in determining damages.. . . The determination of damages involves a question of fact that will not be overturned unless it is clearly erroneous." (Internal quotation marks omitted.) Russell v. Russell, 91 Conn.App. 619, 643, 882 A.2d 98, cert. denied, 276 Conn. 924, 925, 888 A.2d 92 (2005). The defendants contend that the court's 20 percent lost efficiency finding was clearly erroneous because it assumed that Burlington Coat Factory's fixturing of the upper level of the premises began the very first day that DuBaldo started work when, in fact, it *365 actually began in early September. As such, the defendants maintain that the court's method of multiplying the value of what it found DuBaldo to have completed by 20 percent was clearly erroneous.
On our review of the record, we conclude that the defendants' argument fails for the following reasons. The defendants raise this claim for the first time on appeal, have failed to request an articulation on this matter and have failed to seek review under the plain error doctrine. See Practice Book § 60-5. "To review claims articulated for the first time on appeal and not raised before the trial court would be nothing more than a trial by ambuscade of the trial judge." Baker v. Cordisco, 37 Conn.App. 515, 522, 657 A.2d 230, cert. denied, 234 Conn. 907, 659 A.2d 1207 (1995). Additionally, the defendants cite no authority in support of their claim but, rather, merely offer bold assertions. We refuse to entertain abstract assertions absent any analysis. See Commissioner of Environmental Protection v. Connecticut Building Wrecking Co., 227 Conn. 175, 181 n. 4, 629 A.2d 1116 (1993) (argument devoid of analysis constitutes inadequate briefing); State v. Adams, 117 Conn.App. 747, 753, 982 A.2d 187 (2009) (analysis, not mere abstract assertion, required to avoid abandoning issue for failure to brief issue properly). Finally, and perhaps most significantly, there is ample evidence in the record on which the court could rely in finding that DuBaldo suffered 20 percent lost efficiency as a result of Burlington Coat Factory's unreasonably early fixturing. In particular, the court considered credible the testimony of Robert DuBaldo, Welburn and Marotti. We reiterate that "[i]t is within the province of the trial court, when sitting as the fact finder, to weigh the evidence presented and determine the credibility and effect to be given the evidence." State v. Lawrence, supra, 282 Conn. at 155, 920 A.2d 236. For those reasons, the defendants' claim fails.
B
The defendants also argue that the evidence before the court was so lacking and speculative as to afford no basis to make any award for lost efficiency. We disagree.
We again note that "[t]he trial court has broad discretion in determining damages. . . . The determination of damages involves a question of fact that will not be overturned unless it is clearly erroneous." (Internal quotation marks omitted.) Russell v. Russell, supra, 91 Conn. App. at 643, 882 A.2d 98. "Speculative evidence is not sufficient evidence for the trier to make a fair and reasonable estimate of the plaintiff's damages . . . however, [m]athematical exactitude in the proof of damages is often impossible, but the plaintiff must nevertheless provide sufficient evidence for the trier to make a fair and reasonable estimate. . . . Evidence is considered speculative when there is no documentation or detail in support of it and when the party relies on subjective opinion." (Citations omitted; internal quotation marks omitted.) Viejas Band of Kumeyaay Indians v. Lorinsky, 116 Conn. App. 144, 163, 976 A.2d 723 (2009).
Initially, we address the defendants' assertion that this court should adopt the "measured mile" or "window method" standard of proof for loss of efficiency claims. Under that approach, lost efficiency is calculated by comparing actual productivity prior to disruption with productivity during periods of disruption. D. Rosengren, 13 Connecticut Practice Series: Construction Law (2005) § 4.9, p. 89. Once again, we remind the defendants of the requirement that "[the appellant] must raise in the trial court the issues that he intends to raise on appeal. . . . For us *366 [t]o review [a] claim, which has been articulated for the first time on appeal and not before the trial court, would result in a trial by ambuscade of the trial judge." (Internal quotation marks omitted.) Jarvis v. Lieder, 117 Conn.App. 129, 141, 978 A.2d 106 (2009). Notably, the defendants do not seek review of their unpreserved claim under the plain error doctrine. See Practice Book § 60-5. As such, the defendants have failed to preserve their claim that Connecticut should adopt the "measured mile" method.
The defendants also contend that the court's lost efficiency award was clearly erroneous because the evidence on which the court relied was so lacking in substance as to afford no basis for the court to make any award.[16] At oral argument before this court, the defendants decried the allegedly "appalling paucity of evidence" on which the court relied in finding DuBaldo to have suffered a 20 percent loss of efficiency. We dispose of that claim by again referring to the testimony of Robert DuBaldo, Welburn and Marotti, deemed credible by the court. Contrary to the defendants' contentions, the evidence before the court was sufficiently detailed and objective for the court reasonably to calculate DuBaldo's lost efficiency. We, therefore, conclude that the court's award for loss of efficiency was not clearly erroneous.
IV
The defendants' next claim is that there was no evidence introduced at trial on which the liability of Hanover could be found. We disagree.
We are guided by the well established standard of review set forth in part I of this opinion. In particular, "we must determine whether the facts set out in the memorandum of decision are supported by the evidence or whether, in light of the evidence and the pleadings in the whole records, those facts are clearly erroneous." (Internal quotation marks omitted.) Duplissie v. Devino, supra, 96 Conn.App. at 688, 902 A.2d 30.
The defendants contend that because no evidence was submitted to the court regarding the mechanic's lien and the bond, there existed no evidentiary basis to impose liability on Hanover.[17] Specifically, the defendants maintain that there is nothing in the record indicating that either DuBaldo's mechanic's lien or the bond furnished in substitution for it by Hanover were offered or admitted into evidence. The defendants also maintain that there is nothing in the record indicating that DuBaldo either requested the court to take notice of any pleadings or otherwise sought to introduce any pleadings into evidence.
We have observed that "[w]hile a complaint includes all exhibits attached thereto; Practice Book § 141 [now § 10-29]; Redmond v. Matthies, 149 Conn. 423, 425-26, 180 A.2d 639 (1962); this does not mean that such exhibits can be properly considered by the factfinder in lieu of evidence. Exhibits attached to a complaint *367 can be considered by the factfinder if the defendant, through his answer or other responsive pleading, admits to the factual allegations contained therein so that the pleading constitutes a judicial admission. . . . Any allegation that is denied by the defendant, however, must be proved by the plaintiff." (Citations omitted.) Streicher v. Resch, 20 Conn.App. 714, 716, 570 A.2d 230 (1990).
In its March 26, 2007 answer to DuBaldo's second revised complaint, Hanover admitted the following facts: (1) Montagno filed an application for dissolution of a mechanic's lien on or about June 28, 2005; (2) Hanover issued a bond in the amount of $293,316.00 in place of the mechanic's lien on or about July 25, 2005; (3) DuBaldo released the mechanic's lien in place of the bond on or about July 25, 2005; and (4) that bond was attached to the complaint as exhibit C. Accordingly, we conclude that the answers provided by Hanover in its March 26, 2007 answer constitute judicial admissions that the court properly could consider in rendering judgment against Hanover.
V
We last address DuBaldo's cross appeal. DuBaldo argues that the court improperly determined that it was not entitled to attorney's fees pursuant to General Statutes §§ 52-249(a) or 52-249a, which codified Public Acts 2007, No. 07-120 (P.A. 07-120). We disagree.
We consider first DuBaldo's claim regarding § 52-249(a). Although DuBaldo argued before the court that it was entitled to attorney's fees pursuant to § 52-249(a),[18] the court, in its June 6, 2008 memorandum of decision, considered only whether DuBaldo was entitled to attorney's fees pursuant to § 52-249a.[19] "It is well established that [i]t is the appellant's burden to provide an adequate record for review. . . . It is, therefore, the responsibility of the appellant to move for an articulation or rectification of the record where the trial court has failed to state the basis of a decision. . . ." (Internal quotation marks omitted.) Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 232, 828 A.2d 64 (2003); see Practice Book §§ 60-5 and 66-5. Here, DuBaldo failed to request an articulation concerning its entitlement to attorney's fees under § 52-249(a). We, therefore, conclude that the record is inadequate to review that claim. See Froom Development Corp. v. Developers Realty, Inc., 114 Conn.App. 618, 639, 972 A.2d 239 (court's failure to address plaintiff's motion for mistrial and plaintiff's failure to seek articulation on such provides inadequate record for review), cert. denied, 293 Conn. 922, 980 A.2d 909 (2009).
We next consider DuBaldo's claim that it is entitled to attorney's fees pursuant to § 52-249a. Specifically, DuBaldo contends that although § 52-249a was enacted after it filed its mechanic's lien and substituted a bond in lieu thereof, the statute must be given retrospective effect. According to DuBaldo, it is entitled to attorney's fees because § 52-249a did not affect substantive rights but merely provided *368 a procedural mechanism for the recovery of costs and attorney's fees by a successful applicant when a surety bond is substituted for a mechanic's lien. Furthermore, DuBaldo asserts that § 52-249a was enacted in response to judicial decision and, therefore, constitutes clarifying legislation.
"Whether to apply a statute retroactively or prospectively depends upon the intent of the legislature in enacting the statute. . . . In order to determine the legislative intent, we utilize well established rules of statutory construction. Our point of departure is General Statutes § 55-3, which states: No provision of the general statutes, not previously contained in the statutes of the state, which imposes any new obligation on any person or corporation, shall be construed to have retrospective effect. The obligations referred to in the statute are those of substantive law. . . . Thus, we have uniformly interpreted § 55-3 as a rule of presumed legislative intent that statutes affecting substantive rights shall apply prospectively only. . . . This presumption in favor of prospective applicability, however, may be rebutted when the legislature clearly and unequivocally expresses its intent that the legislation shall apply retrospectively. . . . Where an amendment is intended to clarify the original intent of an earlier statute, it necessarily has retroactive effect. . . . We generally look to the statutory language and the pertinent legislative history to ascertain whether the legislature intended that the amendment be given retrospective effect." (Emphasis added; internal quotation marks omitted.) Oxford Tire Supply, Inc. v. Commissioner of Revenue Services, 253 Conn. 683, 691-92, 755 A.2d 850 (2000). "While there is no precise definition of either [substantive or procedural law], it is generally agreed that a substantive law creates, defines and regulates rights while a procedural law prescribes the methods of enforcing such rights or obtaining redress. . . . Where the amendment is not substantive, i.e., not directed to the right itself, but rather to the remedy, it is generally considered a distinctly procedural matter." (Citations omitted; internal quotation marks omitted.) Davis v. Forman School, 54 Conn. App. 841, 854-55, 738 A.2d 697 (1999).
The statutory language of § 52-249a is silent as to whether it is intended to apply retrospectively. It provides: "A plaintiff who prevails in any action upon a bond which has been substituted for a mechanic's lien shall be allowed costs and a reasonable attorney's fee." General Statutes § 52-249a. Nor does P.A. 07-120 shed any additional light on the matter. It adds only that it is to be effective October 1, 2007. Similarly, the legislative history contains no clear and unequivocal express intent concerning the temporal application of § 52-249a.
We next consider whether the legislature intended § 52-249a to substantively change the law or to clarify its original intent of an earlier statute. "[A] factor [that] we have deemed to be significant in determining the clarifying character of legislation is that the legislation was enacted in direct response to a judicial decision that the legislature deemed incorrect." Oxford Tire Supply, Inc. v. Commissioner of Revenue Services, supra, 253 Conn. at 693, 755 A.2d 850; see also Middlebury v. Dept. of Environmental Protection, 283 Conn. 156, 172, 927 A.2d 793 (2007) (whether legislation enacted in direct response to judicial decision is factor to consider); Toise v. Rowe, 243 Conn. 623, 628, 707 A.2d 25 (1998) (reasonable to conclude prompt legislative response to controversy regarding interpretation of original act evinces legislative intent to clarify meaning of act); Reliance Ins. Co. v. American *369 Casualty Ins. Co. of Reading, Pennsylvania, 238 Conn. 285, 290, 679 A.2d 925 (1996) (legislation enacted soon after controversies arose regarded as legislative interpretation of original act); but see In re Michael S., 258 Conn. 621, 629, 784 A.2d 317 (2001) (legislature's change to language of statutory provision in response to judicial decision interpreting that provision insufficient to overcome presumption against retroactive applicability); Colonial Penn Ins. Co. v. Bryant, 245 Conn. 710, 720, 714 A.2d 1209 (1998) (same).
Admittedly, the legislative history surrounding § 52-249a is murky. Certain portions of the legislative history support the claims of each party. In support of DuBaldo's contention that § 52-249a was enacted in direct response to A & A Mason, LLC v. Montagno Construction, Inc., 49 Conn.Supp. 405, 889 A.2d 278 (2005), a case in which the court found that a right to attorney's fees in an action on a bond did not exist under § 52-249(a), are the comments of Representative Gerald M. Fox III. He stated: "There are certain situations where a mechanic's lien may be substituted with a bond, and there have been interpretations by the courts that when a bond is substituted that the provision allowing for costs and reasonable attorney's fees no longer applies. In order to clarify the way that that has been interpreted, this bill was presented to us." 50 H.R. Proc., Pt. 7, 2007 Sess., p. 2305. Representative Fox added: "What this bill did was to clarify the situation in that a plaintiff would also be allowed to recover costs and reasonable attorney's fees with respect to an action when a surety bond has been substituted."[20] 50 H.R. Proc., Pt. 16, 2007 Sess., p. 5199. Notwithstanding those statements, the legislative history supports the defendants' assertion that § 52-249a substantively changed the law. In particular, Senator Andrew J. McDonald's comments indicate that the legislature understood that it was creating a new right that did not previously exist. Senator McDonald noted: "[I]t's the case that you can bring an action to foreclose on a mechanic's lien, and when you do so, our statutes allow for a plaintiff to recover a reasonable attorney's fee. It's also the case that when you substitute a bond for a mechanic's lien, if you have to bring an action on the bond, it does not include any provision for the recovery of an attorney's fee. And this bill is intending to bring those two processes into consideration, or synch, I should say." 50 S. Proc., Pt. 9, 2007 Sess., pp. 2834-35. Based on the contradictory statements of Representative Fox and Senator McDonald, we are unable to conclude that § 52-249a was enacted to clarify the original intent of § 52-249(a). Cf. Oxford Tire Supply, Inc. v. Commissioner of Revenue Services, supra, 253 Conn. at 692, 755 A.2d 850 (finding persuasive direct, unequivocal statements concerning legislation's clarifying purpose absent contradictory legislative history); Toise v. Rowe, supra, 243 Conn. at 631, 707 A.2d 25 (same). The legislative history of § 52-249a plainly is not a clear and unequivocal expression of intent.
Relying on Davis v. Forman School, supra, 54 Conn.App. at 841, 738 A.2d 697, DuBaldo additionally contends that § 52-249a affects only matters of procedure and, thus, must apply retrospectively. More specifically, DuBaldo argues that § 52-249a did not affect substantive rights because the right to receive attorney's fees allegedly already existed in § 52-249(a). According to DuBaldo, the enactment of *370 § 52-249a was remedial legislation entitled to retroactive application. Further, DuBaldo asserts that § 52-249a clarified the legislature's original intent of § 52-249(a) that no hearing on the form of judgment or time of redemption is needed to trigger the entitlement to attorney's fees in an action on or a bond substituted for a mechanic's lien. Unlike the legislation at issue in Davis, § 52-249a effected a change in the substantive rights of the parties. Our courts consistently have found that § 52-249(a) does not allow recovery for attorney's fees when a bond is substituted for a mechanic's lien. See A & A Mason, LLC v. Montagno Construction, Inc., supra, 49 Conn.Supp. at 410, 889 A.2d 278. We agree with those portions of the legislative history and the court's finding that "[§]52-249a . . . was enacted separately to allow what § 52-249(a) would not," and, therefore, created a new substantive right. Unable to conclude that § 52-249a is to apply retrospectively, we must presume that the legislature intended only prospective application. See In re Daniel H., 237 Conn. 364, 372, 678 A.2d 462 (1996).
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] GGP Brass Mill, Inc., and Burlington Coat Factory were named as defendants but are not involved in this appeal. We therefore refer to Montagno and Hanover as the defendants.
[2] Initially, DuBaldo estimated that it would take 3600 man hours to complete the job. In subsequent conversations with Burlington Coat Factory, DuBaldo reduced that amount to 3200 man hours.
[3] In mid-August, Montagno sent DuBaldo "two (2) copies of [their] subcontract agreement covering the Burlington Coat Factory... project." (Internal quotation marks omitted.) DuBaldo refused to sign that alleged contract. The court found that "the parties' actions post the signing of [the June 25] documents evidence[d] their intention to contract with each other at this time, with [the June 25] documents." That finding was made despite language in the June 25 contract indicating that "[a] formal contract will be forwarded to [DuBaldo] with[in] [thirty] days...." (Internal quotation marks omitted.)
[4] The court found that "[Burlington Coat Factory] and Globe had historically enjoyed a close working relationship on prior and current projects and, unconcerned as to the conflict of interest, it was the position of Kurt Montagno, Montagno's principal, that `[he] trusted Globe to split the charges fairly between finishing DuBaldo's job, straight time and [Burlington Coat Factory's] change orders.... [He] was not concerned that Globe bulk billed with no backup and with no quotes for the jobs.'"
[5] DuBaldo hired electricians from Evolution Electric (Evolution), another electrical contracting company, to work on the project. DuBaldo paid Evolution's electricians between $35 and $45 per hour, as compared to Globe's rate of $65 per hour. Robert DuBaldo, DuBaldo's principal, testified that had he known about Globe's rate, he would instead have continued to employ Evolution's electricians.
[6] Even as late as August 11, 2004, DuBaldo had yet to be paid by Montagno for work that it had performed according to the terms of its June 25 contract.
[7] We acknowledge the defendants' claim that they are not to blame for the permit's delay because certain evidence allegedly indicates as much. The defendants, however, overlook significant evidence supporting the court's finding that the permit's delay was not the fault of DuBaldo and was within the control of the defendants. Essentially, the defendants invite us to retry the facts of the case. We refuse. See Malmberg v. Lopez, 208 Conn. 675, 679, 546 A.2d 264 (1988) (appellate court cannot retry facts of case).
[8] Undaunted by the court's finding to the contrary, the defendants argue that the court should have found that time was of the essence in the present matter. In finding that time was not of the essence, the court failed to elucidate its reasoning, and the defendants failed to request an articulation on that matter. On that basis, we conclude that the record is inadequate for our review. See Celini v. Celini, 115 Conn.App. 371, 380, 973 A.2d 664 (2009).
[9] On July 13, 2004, one day before the permit was issued, DuBaldo received permission from the Waterbury building inspector to install the Unistrut hardware.
[10] The defendants assert that there existed thirteen possible dates that DuBaldo could have worked while waiting for the permit's issuance on July 14, 2004. They further assert that DuBaldo worked 184 hours until the permit was issued, which was 648 hours fewer than originally estimated. The defendants base that calculation on DuBaldo's 3200 hour estimation to complete the job over a period of ten weeks, which, they contend, breaks down to 320 hours per week and sixty-four hours per day under a five day schedule. The permit's delay, which prevented DuBaldo from beginning electrical work, belies their claim.
[11] The court noted only that there was a personality clash between DuBaldo's foreman and Montagno's site superintendent.
[12] Preliminarily, we acknowledge the defendants' argument that the certificate issued by Waterbury should not be viewed as an endorsement that DuBaldo substantially completed its work. Nevertheless, we agree with DuBaldo that issuance of the certificate played no part in the court's analysis concerning substantial performance.
[13] To the extent that the defendants argue that DuBaldo should be precluded from recovery because it intentionally failed in strict performance of its contractual obligations; see Pettit v. Hampton & Beech, Inc., supra, 101 Conn.App. at 508, 922 A.2d 300; we conclude that the defendants have briefed that matter inadequately and decline to address it. See Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 83 n. 4, 612 A.2d 1130 (1992).
[14] Here, the defendants claim that the court should have relied on Marotti's testimony that 10 percent of the work completed by DuBaldo required correction by Globe.
[15] Marotti testified that fixturing includes shelving, gondolas, cabinetry, cash registers, woodworking, desks and chairs, merchandise and anything else that merchandise may go on.
[16] We acknowledge the defendants' reliance on Net Construction, Inc. v. C & C Rehab & Construction, Inc., 256 F.Supp.2d 350, 353 (E.D.Pa.2003), and Luria Bros. & Co. v. United States, 177 Ct.Cl. 676, 369 F.2d 701, 712 (1966). The facts of those cases, which constitute only persuasive authority, are not the facts of this case.
[17] In its June 6, 2008 memorandum of decision, the court found: "As to unpaid amounts that, pursuant to the court's opinion in this matter, may be owed to [DuBaldo] by Montagno. . . and derivatively by the surety under the bond referenced in [DuBaldo's] complaint and [Hanover's] answer, the court enters judgment against the surety defendant, Hanover Insurance Company."
[18] General Statutes § 52-249(a) provides: "The plaintiff in any action of foreclosure of a mortgage or lien, upon obtaining judgment of foreclosure, when there has been a hearing as to the form of judgment or the limitation of time for redemption, shall be allowed the same costs, including a reasonable attorney's fee, as if there had been a hearing on an issue of fact. The same costs and fees shall be recoverable as part of the judgment in any action upon a bond which has been substituted for a mechanic's lien."
[19] The court noted: "[DuBaldo] bases its claim for attorney's fees on . . . § 52-249a.. . ."
[20] The defendants concede that § 52-249a was enacted in response to the A & A Mason, LLC, case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546019/ | 77 F.2d 577 (1935)
SEYMOUR
v.
UNITED STATES.
No. 10113.
Circuit Court of Appeals, Eighth Circuit.
April 22, 1935.
*578 William C. Dorsey, of Omaha, Neb., and Thomas S. Allen, of Lincoln, Neb., for appellant.
Charles E. Sandall, U. S. Atty., of Omaha, Neb. (Ambrose C. Epperson, Asst. U. S. Atty., of Omaha, Neb., Barlow Nye, Asst. U. S. Atty., of Lincoln, Neb., and Frederick G. Hawxby, Asst. U. S. Atty., of Omaha, Neb., on the brief), for the United States.
William E. Shuman, of North Platte, Neb., amicus curiæ.
Before STONE, SANBORN, and FARIS, Circuit Judges.
STONE, Circuit Judge.
This is an appeal from a conviction for perjury in an investigation before a subcommittee of the Senate.
On April 10, 1930, the Senate passed Resolution 215 providing a special committee to investigate campaign expenses of candidates for the United States Senate. The resolution provided that hearings might be before the committee or any subcommittee appointed by it and at such times and places ("either in the District of Columbia or elsewhere") as the committee might deem proper. The resolution provided that the chairman of the committee or any member of a subcommittee might administer oaths to witnesses. The investigations were expressly directed as to all facts concerning such campaign expenditures or promises or uses of patronage as "would not only be of public interest but which would aid the Senate in enacting any remedial legislation or in deciding any contest which might be instituted involving the right to a seat in the United States Senate."
Acting under the above resolution, Senator Nye (as a subcommittee) held a hearing at Lincoln, Neb., on July 21, 1930, for the purpose of investigating such campaign expenditures in connection with the selection of a United States Senator in Nebraska. At that hearing, appellant was sworn as a witness by Senator Nye, and testified. Certain answers given by appellant in the course of this testimony are the bases of the eight counts in this indictment, each charging perjury.
At the conclusion of the testimony, the court directed a verdict for appellant upon three counts (5, 7, and 8) and, upon motion of appellant then made, dismissed those counts. The jury found appellant guilty on each of the remaining five counts, and the court imposed one general sentence of six months' imprisonment and a fine of $100. From such judgment, this appeal is brought by appellant who presents here five claimed errors.
*579 Adequacy of the Oath.
The first contention is that Senator Nye had no authority to administer the oath resulting in the testimony of appellant. The main argument favoring this contention is as follows: That the statute (USCA title 4, § 7) requires that "all offices attached to the seat of government shall be exercised in the District of Columbia, and not elsewhere, except as otherwise expressly provided by law"; that the Congress and its committees are within the above statutory expression "offices attached to the seat of government"; that a resolution of a single house of Congress is not a "law" as provided by the statute; that, therefore, no authority existed in the committee under Resolution 215 to act outside the District of Columbia, and hence the oath administered by Senator Nye to appellant at Lincoln was without authority.
Assuming, without examining or deciding, that the Congress and the committees of either or both houses are within the above statute, this contention is unsound because either house has the constitutional power to conduct separate investigations for proper purposes, and the Congress has no authority to limit the future exercise of that constitutional power. The power exists as "auxiliary" to its express powers, being "necessary and appropriate to make the express powers effective" (Sinclair v. United States, 279 U. S. 263, 291, 49 S. Ct. 268, 271, 73 L. Ed. 692; McGrain v. Dougherty, 273 U. S. 135, 160-176, 47 S. Ct. 319, 71 L. Ed. 580, 50 A. L. R. 1; In re Chapman, 166 U. S. 661, 671, 672, 17 S. Ct. 677, 41 L. Ed. 1154). The inability of Congress to limit the future exercise of such constitutional power is certain (Jurney v. MacCracken, 294 U. S. 125, 55 S. Ct. 375, 79 L. Ed. ___, decided Feb. 4, 1935; Reichelderfer v. Quinn, 287 U. S. 315, 318, 53 S. Ct. 177, 77 L. Ed. 331; Sinclair v. United States, 279 U. S. 263, 295, 49 S. Ct. 268, 73 L. Ed. 692; McGrain v. Daugherty, 273 U. S. 135, 172, 47 S. Ct. 319, 71 L. Ed. 580, 50 A. L. R. 1; Burton v. United States, 202 U. S. 344, 369, 26 S. Ct. 688, 50 L. Ed. 1057, 6 Ann. Cas. 362; In re Chapman, 166 U. S. 661, 671-672, 17 S. Ct. 677, 41 L. Ed. 1154, and see, for same principle applied to state Legislatures, Pierce Oil Corp. v. City of Hope, 248 U. S. 498, 501, 39 S. Ct. 172, 63 L. Ed. 381; Texas & N. O. R. R. Co. v. Miller, 221 U. S. 408, 414, 31 S. Ct. 534, 55 L. Ed. 789; Connecticut Mutual Life Ins. Co. v. Spratley, 172 U. S. 602, 621, 19 S. Ct. 308, 43 L. Ed. 569; Newton v. Mahoning County, 100 U. S. 548, 559, 25 L. Ed. 710). Resolution 215 was an appropriate method of exercising such power, and it expressly provided the methods of such exercise, one of which was that such hearings could be held outside the District of Columbia.
Materiality of the Subject of Inquiry.
The second contention is that the matter relied upon to prove appellant's answers untruthful was beyond the lawful scope of the committee's power of inquiry, and, therefore, not a "material matter" within the meaning of the perjury statute (USCA title 18, § 231) which requires that the false statement must be concerning a "material matter." The supporting argument is that the power of Congress or a committee thereof to investigate depends upon and flows from the power to legislate upon the subject investigated; that Congress has no constitutional power to legislate as to primary elections for nomination of United States Senators; and that the investigation here involved was solely concerning such a primary election. It is true that regulation of such primary elections has been declared beyond the national power under clause 1, § 4 of article 1 of the Constitution, which gives Congress control over "the times, Places and Manner of holding Elections for Senators * * *" (Newberry v. United States, 256 U. S. 232, 41 S. Ct. 469, 65 L. Ed. 913), and it is true that the inquiry here was concerned wholly with a primary election; that is, it may be conceded that Congress had no power to legislate for the purpose of regulating primary elections, such as involved in this inquiry. This leaves for inquiry that part of this contention which declares that Congress or its committees cannot investigate except as to matters which may be the subject of legislation by it. If by legislation is meant enactment of statutes, the statement is unsound (Barry v. United States ex rel. Cunningham, 279 U. S. 597, 613, 49 S. Ct. 452, 73 L. Ed. 867). The actual limitation is that congressional investigation must be confined to matters subject to action by Congress or by the house conducting the investigation. Congress and the separate houses have powers outside the enactment of statutes. Clause 5 of section 2 of article 1 clothes the House of Representatives with the "sole power of impeachment"; clause 6 of section 3 of article 1 gives the Senate "sole power to try all impeachments"; clause 1 of section 5 of article 1 makes each house the *580 judge of the elections, returns and qualifications of its own members, and gives power to compel attendance of members; clause 2 of the same section gives each house power to determine its rules of proceedings, to punish and to expel members; clause 1 of section 6 of article 1 protects freedom of attendance and of speech by members of either house; all of these powers may be and some of them must be exercised by a single house, which has no power alone to enact a statute. Where the exercise of any constitutional power of Congress or of either house is involved, investigation of matters germane to the proper and intelligent exercise thereof may be subjects of investigation by such house or committees thereof under its authority (Barry v. United States ex rel. Cunningham, 279 U. S. 597, 613, 616, 49 S. Ct. 452, 73 L. Ed. 867; Kilbourn v. Thompson, 103 U. S. 168, 190, 26 L. Ed. 377), and no concurrence nor aid is necessary from the other house or elsewhere (Reed v. County Commissioners, 277 U. S. 376, 388, 48 S. Ct. 531, 72 L. Ed. 924). The limitation of power of investigation is that it must be germane to some matter concerning which the house conducting the investigation has power to act (whether such action be enactment of statutes or something else), and not a mere inquisition into the private affairs of the citizen (Jurney v. MacCracken, 294 U. S. 125, 55 S. Ct. 375, 79 L. Ed. ___, decided Feb. 4, 1935; Sinclair v. United States, 279 U. S. 263, 291-294, 49 S. Ct. 268, 73 L. Ed. 692; McGrain v. Daugherty, 273 U. S. 135, 176-180, 47 S. Ct. 319, 71 L. Ed. 580, 50 A. L. R. 1; In re Chapman, 166 U. S. 661, 668-672, 17 S. Ct. 677, 41 L. Ed. 1154; Kilbourn v. Thompson, 103 U. S. 168, 194, 195, 26 L. Ed. 377).
Applying the above rules to the present case, it is necessary to ascertain if the investigation of this primary election was germane to the exercise of any constitutional power possessed by the Senate. The resolution states its objects to be ascertainment of facts which "would not only be of public interest but which would aid the Senate in enacting any remedial legislation or in deciding any contest which might be instituted involving the right to a seat in the United States Senate." Whatever lack of authority there may be to prosecute an investigation for the "public interest" or to aid the Senate "in enacting any remedial legislation" relating to primary elections, there can be no doubt of the power of the Senate to determine contests involving the right to seats in the Senate because it has an expressed constitutional authority to judge of the elections, returns, and qualifications of its own members. Article 1, § 5, cl. 1. The inquiry here concerning improper methods of securing nominations is certainly germane to the proper exercise of such power. That the Senate has and has exercised such power to deny seats to members who procured party nominations by what the Senate deemed improper means of expenditures is exemplified in the effective denial of seats to Senators Newberry of Michigan and Smith of Illinois. This is one effective method of preventing the purchase of seats in the Senate. Nor does the exercise of this power of investigation depend upon the existence of an actual contest or proceeding to deny a seat in the Senate. One of the broad purposes of the grant of the constitutional power was to protect the integrity of the membership of the Senate. This purpose is obviously served by investigations made closely connected in time and fact with the acts which might form a basis for senatorial action affecting the seating of a member.
Appellant urges, also, that the subject-matter of the immediate inquiries upon which the indictment is based were not germane because they related to expenditures for a man who never became a candidate at the primary. The immediate inquiry had to do with expenditures by W. M. Stebbins to and for the benefit of George W. Norris of Broken Bow, Neb., in order to induce Norris to become a candidate in the Republican primary for United States Senator, wherein Stebbins and Senator George W. Norris of McCook, Neb., were candidates. The obvious purpose of Stebbins was not merely to have a third candidate in the race, but it was to have a third candidate who had precisely the same name as his real opponent, Senator George W. Norris of McCook, Neb. This confusion of names would naturally have the effect of injuring Senator Norris, who was well known in Nebraska, by drawing mistaken votes to George W. Norris, who was a grocer's clerk at Broken Bow. Whether a man who would resort to such political trickery should, if successful, be accorded a seat in the Senate would be a matter for the Senate to determine. The fact that three days before this hearing the Supreme Court of Nebraska had disqualified Norris of Broken Bow from contesting in the Republican primary (because his filing therefor was too late under the state statute) bears upon the success of *581 the scheme but has no effect upon the character and methods of Stebbins who did all he could to promote it. The inquiry as to this transaction was germane to the investigation concerning expenditures in connection with that primary.
Joinder of Separate Counts in Indictment.
The next contention of appellant is that there was but one crime charged and that the prosecution should have put "all the questions and answers assigned as perjury into one count, and proof of one or more would have been sufficient, although proof as to others might have been insufficient or entirely lacking." This contention is not well grounded. The matters covered by the indictment related to various alleged false statements in answer to questions concerning different matters. The first count referred to statements that appellant made concerning his "contact with" the primary campaign and having conferences concerning such campaign. The second count covered statements that he knew of money being available for use in the campaign only from the newspapers, that he had spent no money in that connection, and that no money or credits had been placed at his disposal for such use. The third count concerned statements that he had no knowledge of contributions for or against any candidate. The fourth count concerned statements that he had had no part in encouraging the candidacy of George W. Norris of Broken Bow. The sixth count concerned statements that he had taken no part in any conferences relating to any political situation in Nebraska involving the candidates for Senator. In only one particular (having conferences concerning the primary), which appears both in counts 1 and 6, was there any duplication of subject-matter and, as to that, the government was compelled to elect the count upon which it would rely, and selected count six. Thus it appears that the statements covered by the several counts referred to different matters of inquiry. Neither the circumstances that all referred to the same general subject of inquiry or that all were made at the same hearing prevents each from being a separate and distinct crime punishable as such. The commission of perjury as to one matter does not absolve the witness or afford him immunity as to all other matters covered by his testimony at the same hearing. The obligation to testify truly and the penalty for false swearing is present as to every material answer given by him. While there is a sound discretion as to such matters in the trial court [Pointer v. United States, 151 U. S. 396, 14 S. Ct. 410, 38 L. Ed. 208; Morris v. United States, 161 F. 672 (C. C. A. 8)], it would seem there would have been more ground for attacking the indictment as duplicitous had all of these matters been joined in one count than there is to attack the statement in separate counts.
Another reason why this contention is unavailing is that there was but one sentence which was within what might have been imposed upon any one of the five counts upon which there was conviction. Powers v. United States, 223 U. S. 303, 312, 32 S. Ct. 281, 56 L. Ed. 448. The only prejudice alleged was in "giving the jury the impression that he was charged with six separate perjuries, when in fact he had committed, if any, only one." Actually, each count presented the charge of a separate perjury so that the jury received no false impression. If such impression had been erroneous, all possible harmful effect upon appellant was nullified by the sentence imposed.
Correction of Testimony.
Appellant testified as follows: That about a month after the hearing before Senator Nye, at Lincoln, he went to Denver to assist in conducting the Republican campaign for election of Senators in several Western States; that a few days later he read in the newspapers of another inquiry being made by Senator Nye, in Nebraska, which referred to testimony he had given at Lincoln; that he conceived a meaning was being attached to his testimony which he had not intended; that he called up Senator Nye and said his testimony was true as he understood it but if the committee was placing a different construction on it he wanted to appear before the committee and explain his testimony, and would go to Lincoln or Washington or anywhere else, but could not leave just then as he was alone at the Denver headquarters; that Senator Nye said he could do nothing for him, but suggested he put his request in a telegram; that he did so in a wire (sent September 24, 1930) as follows:
"Senator Gerald P. Nye, Cornhusker Hotel,
Lincoln, Nebraska.
"Am very much surprised to read in todays press reports of testimony before your Committee regards Primary Campaign in Nebraska stop In justice to the Committee and myself I will be glad to appear before *582 the Committee at Washington any time after the middle of November which may suit your convenience stop At present my time is fully occupied with duties requiring my personal presence here.
"Victor Seymour."
The court refused a request as follows: "The jury are instructed that a bona fide but incompleted attempt to correct false testimony may show absence of criminal intent essential to perjury."
It is the refusal of this request based upon the above evidence that appellant contends is error. The request was properly refused. We must take (as the trial court was compelled to) the request to mean just what it says. That meaning clearly is that if a good-faith attempt to correct false testimony is made, such attempt may show lack of intent to commit perjury. That is not true in fact or law. A perfectly serious attempt may be made to correct testimony knowingly falsely given. Such an attempt has no effect upon the existence of perjury in knowingly giving the false testimony. When false testimony concerning a material fact has been knowingly given, perjury has become and continues to be an accomplished and completed thing. This request may have been intended to present the situation of false testimony mistakenly given, but that is not its meaning. Had the court given the request, counsel would have had sufficient basis therein to have argued that even if appellant knowingly swore falsely before Senator Nye, yet a subsequent attempt to rectify his testimony might be considered as showing an absence of criminal intent.
The situation is that, if false material testimony was knowingly given, perjury had been committed and nothing thereafter done could alter that situation, while if such testimony was the result of an innocent mistake it was not perjury. That issue was clearly presented in the charge. Appellant's contention was that his answers were true in view of his understanding of the questions. The essence of the controversy was the intent of appellant, and that depended upon his understanding of the meaning of the questions. The court charged as follows: "Then there may be instances where the questions are very plain, easily understood, simple in language, definite in meaning, and the answers may be very simple, the meaning of which is unmistakable. Then there may be instances where the questions are involved, or are long, or where unusual words are used, where the relationship of phrase to phrase and clause to clause may be such that there may be difficulty in gathering the exact scope and meaning of the question, and in all cases the answer has to be considered under the circumstances in which it is given. So also, an answer itself, may be involved and difficult to put in words or hard to understand. And we are not all alike; some have the gift of expression and clarity and others have difficulty in expressing themselves on any occasion and might have more difficulty when under oath and trying to be exact. I am stating this in calling your attention to the statute which says that you are to consider, in effect, whether the testimony as given was believed to be true, because the belief must be considered in view of the circumstances under which the person made the statement. Of course it is proper to consider the intelligence, the experience, the education, the understanding of the person who given [gives] the testimony and his comprehension of the questions asked him and his knowledge of the meaning of the words which he uses in giving his answers. But after considering all the circumstances, the final and legal test is not what the words might ordinarily mean, not what some one else claims they mean, not what the jury thinks the words mean, and not even the meaning which the words have as definited [defined] in the dictionary, although the ordinary meaning of such words is proper for you to consider in ascertaining the meaning which was used by the one giving the testimony. But the test that you must consider and use, is whether or not the defendant believed the testimony as given was true at the time and in the sense that he understood the questions and in the sense he gave the answers constituting his testimony."
In another place in the charge and after calling attention to various words used in the questions, the court said: "In considering the meaning of the words as used you have a right to consider the common usage and meaning, or the various common meanings or usages of such words, and the more exact meaning as defined by the dictionary, but even after considering that, still the test for you is, as I have said, to find out the meaning in which the defendant who gave the testimony intended in his answers and understood in the questions where such words were used."
Again in regard to some particular expressions used in connection with the testimony covered by count 2, the court said: *583 "I am not undertaking to bring to your attention the meaning of all the words in all of these questions and answers or all the meanings of those which might be considered ambiguous or indefinite, but I am trying to call to your attention the fact that it is for you to determine the meaning of the language and that if there is an ambiguity or indefiniteness in the meaning of the words used, that it is for you to say the sense or meaning in which Mr. Seymour gave his testimony and the belief that he had as to the meaning of the words which were used in the questions and answers."
Sufficiency of Evidence.
Appellant attacks the sufficiency of the evidence to sustain a conviction upon any of the counts. Since the sentence was a single sentence and not upon separate counts, and since the extent of sentence was within a conviction for any one count, the judgment must be sustained if the evidence on any count was sufficient. This statement is made to avoid a fruitless discussion of the evidence as to each of the five counts upon which appellant was convicted, since the evidence is clearly sufficient as to the conviction under count 4. This count charged perjury in a statement that appellant had "had no part in encouraging the candidacy of one George W. Norris of Broken Bow, Nebraska, for the Republican nomination for United States Senator from Nebraska, at the Primary election held the twelfth day of August, in the year nineteen hundred thirty." The proof consisted in an answer and question as follows: "Q. 13. You had no part then, in view of what you have said, in encouraging the candidacy of George W. Norris, of Broken Bow? * * * A. Not a bit."
This testimony had been immediately preceded by inquiries concerning Norris of Broken Bow which had resulted in appellant testifying that he had never seen and never heard of Norris until he "saw his filing in the paper." The testimony, even by appellant, was: That as a representative of Stebbins he had gone to Kearney, Neb., for the purpose of "getting Norris of Broken Bow to become a candidate" for Senator in the Republican primary; that he had there met one Johnson and given him $50 for this purpose (this amount being later repaid appellant by Stebbins); that later he transmitted to Johnson $300 and a Liberty bond for $500 given appellant by Stebbins for that purpose; that these payments were "for campaign expenses of George W. Norris of Broken Bow." Obviously, the above evidence was ample to sustain a verdict that appellant knowingly swore falsely when, in answer to the question as to whether he had taken any part in "encouraging the candidacy" of said Norris, he had answered, "Not a bit."
Appellant argues that whether he had any part in encouraging the candidacy of Norris of Broken Bow was immaterial to the subject of the committee's inquiry. He contends that if there is any fault in a situation which leads to confusion of voters by the candidacy of men who have the same name it is the result of the primary law which permits such and it is not illegal. It may well be that such confusion is not illegal. It may be entirely proper and it is certainly permissible under the Nebraska primary election law for persons with identical names to file for the same office. It may not be illegal even for a candidate to create such confusion by inducing a person to enter the race who has the same name as an opponent and such action may be legal (not unlawful) even though done for the purpose of confusing the voters to the harm of such opponent and, therethrough, deriving a benefit to himself. Be this as it may, it remains that it is a tricky procedure repellent to any sense of fair play and, more important, that it interferes with and prevents expression of the real sentiment and wish of the voters. It is deceptive, is intended to be so, and would entirely fail in its purpose were it not so. Here, the sole interest of Stebbins in having Norris of Broken Bow come into the senatorial primary was to forward his own candidacy by weakening that of his opponent, Senator Norris. This was purposed to be accomplished solely by confusing voters who intended to vote for Senator Norris into voting for the other Norris because of the exact similarity of names upon the ballot. The extent of such deception would be impossible of proof and might result in the selection of Stebbins when in fact a majority of voters at the primary might have favored Senator Norris though many of them actually voted for the other Norris under the misapprehension, actively induced by Stebbins, that they were voting for Senator Norris. A selection so obtained would be the defeat of the real will of the voters through a smart trick based upon deception of the voters. It would be a fraud upon the voters and result in a fraudulently acquired nomination *584 and possibly election. The Senate is not confined to illegal actions as a basis for denying a seat in the Senate under the constitutional power to judge the "Elections, Returns, and Qualifications of its own Members" (article 1, § 5, cl. 1), and its action thereunder is "beyond the authority of any other tribunal to review." Barry v. United States ex rel. Cunningham, 279 U. S. 597, 613, 49 S. Ct. 452, 455, 73 L. Ed. 867. It is clear that any kind of fraud in procuring an election or a party nomination which might result in an election would properly be material to an inquiry for information in connection with the power of the Senate to judge the elections, returns, and qualifications of its own members.
Appellant argues that the word "encouraging" in the question was so uncertain that it called for "his opinion or construction as to its meaning" and that he construed it as meaning "whether he had come into personal contact with Norris [of Broken Bow] or brought his personal influence to bear to persuade him to become a candidate," which he had not done and so answered. It was certainly an open question for the jury to decide whether, after having just denied knowing or hearing of Norris, appellant (who had actively co-operated to get Norris into the primary) did or could have thought that the question of whether he "had no part * * * in encouraging the candidacy" of said Norris meant what he said he understood it to mean.
The judgment must be and is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546024/ | 40 B.R. 868 (1984)
In re Roger Dean STRAUSER and Grace Magdaline Strauser, Debtors.
Roger Dean STRAUSER and Grace Magdaline Strauser, Plaintiffs,
v.
VETERANS ADMINISTRATION, et al., Defendants.
Bankruptcy No. 82-02563, Adv. No. 83-0295.
United States Bankruptcy Court, N.D. Ohio, W.D.
June 26, 1984.
Randy L. Reeves, Thomas R. Kuhn, Lima, Ohio, for plaintiffs.
John F. Moul, St. Marys, Ohio, for Veterans Administration.
OPINION AND ORDER
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court upon the motion of the defendant Veterans Administration for summary judgment as against plaintiffs' complaint to avoid an allegedly fraudulent conveyance pursuant to 11 U.S.C. § 548(a)(2). The Court holding that the consideration received for the property at a non-collusive and regularly conducted judicial foreclosure sale was "reasonably equivalent value" under § 548(a)(2)(A) as a matter of law, plaintiffs' claim should be dismissed.
FINDINGS OF FACT
The facts underlying this controversy have been stipulated by the parties as follows:
*869 1. On August 14, 1977, Roger D. Strauser and Grace M. Strauser were the fee simple owners of Lot Number Ninety-five (95) in E.G. Atkinson's Addition to the Village of Waynesfield, Auglaize County, Ohio.
2. On August 4, 1977, Roger D. Strauser and Grace M. Strauser executed a Mortgage Note to the Columbus First Mortgage Company in the amount of $27,500.00.
3. On August 4, 1977, Roger D. Strauser and Grace M. Strauser executed a Mortgage Deed to the Columbus First Mortgage Company on Lot Number Ninety-five (95) in E.G. Atkinson's Addition to the Village of Waynesfield, Auglaize County, Ohio, to secure their Mortgage Note of even date.
4. The aforesaid Note and Mortgage were assigned to the First Family Mortgage Corporation.
5. On December 8, 1981, the First Family Mortgage Corporation filed its Complaint in the Auglaize County Common Pleas Court against Roger D. Strauser and Grace M. Strauser on the aforesaid Note and Mortgage seeking judgment in the amount of $26,664.53 as well as foreclosure of the Mortgage.
6. Judgment was rendered by the Auglaize County Common Pleas Court in favor of the First Family Mortgage Corporation against Roger D. Strauser and Grace M. Strauser, and the property secured under the aforesaid Mortgage was ordered sold.
7. The subject property was duly appraised, for $25,334.00, advertised for sale and sold by the Auglaize County Sheriff at public sale, all in accordance with Ohio law.
8. The subject property was sold on April 15, 1982, to the First Family Mortgage Corporation for $16,890.00, being at least two-thirds of the appraised value.
9. The sale was duly confirmed by the Auglaize County Common Pleas Court on May 13, 1982. On that same date, the First Family Mortgage corporation for consideration assigned its successful bid for the property to the Administrator of Veterans Affairs.
10. The Sheriff of Auglaize County subsequently delivered his Deed for the subject property to the Administrator of Veterans Affairs, and said Deed was recorded with the Auglaize County Recorder on October 7, 1982.
11. On December 7, 1982, Roger Dean Strauser and Grace Magdaline Strauser filed their Chapter 13 Petition in this court.
DISCUSSION
Plaintiffs allege that the foreclosure and sale of their property on May 13, 1982 for $16,890.00 when it was appraised at $25,334.00 rendered the sale voidable as a fraudulent transfer pursuant to 11 U.S.C. § 548(a)(2) which provides as follows:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor
. . . .
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(ii) was engaged in business, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or
(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.
In effect, plaintiffs assert that anytime property is sold at less than its appraised value at sheriff's sale it should be conclusively presumed that the debtor "received less than a reasonably equivalent value in exchange for such transfer" satisfying the test of § 548(a)(2)(A). Contrawise, defendant asserts that it should be conclusively presumed that the proceeds received from a non-collusive and regularly conducted *870 foreclosure sale are "reasonably equivalent value" under § 548(a)(2)(A). Lawyers Title Ins. Corp. v. Madrid (In re Madrid), 21 B.R. 424 (Bankr.App. 9th Cir.1982), aff'd on other grounds, 725 F.2d 1197 (9th Cir. 1984). This Court agrees with and follows the latter reasoning.
While plaintiffs have submitted no authority in support of their contention, the Court is aware that a somewhat similar view has found acceptance by the United States Court of Appeals for the Fifth Circuit in Durrett v. Washington Nat'l Ins. Co., 621 F.2d 201 (1980). See also, Abramson v. Lakewood Bank & Trust Co., 647 F.2d 547 (5th Cir.) (per curiam), cert. denied, 454 U.S. 1164, 102 S.Ct. 1038, 71 L.Ed.2d 320 (1981) (Durrett holding that a nonjudicial foreclosure sale was a transfer within the purview of § 67(d) of the Bankruptcy Act followed). In Durrett, the court held that a foreclosure sale, held nine days before the debtor's Chapter XI petition, of a deed of trust recorded seven years earlier should be set aside under section 67(d) of the former Bankruptcy Act because the price paid at the foreclosure sale, less than 70 percent of the fair market value of the property, was less than the "fair equivalent" for the transfer of the property. 621 F.2d at 203. Since § 548(a)(2)(A) is the successor to section 67(d) of the Act, tracking it in its essential respects, the question becomes whether the Durrett holding, that a price of less than 70 percent of fair market value is not "fair equivalent" for the transfer of property, should be similarly applied so that the price received in this case, which was two thirds of the appraised value of the property, should be conclusively presumed to be less than a "reasonably equivalent value" under § 548(a)(2)(A) of the Code. This Court holds that it should not.
In declining to follow the Durrett rule, the Ninth Circuit Panel in In re Madrid, supra, 21 B.R. at 427, noted the well-nigh universal rule, recognized by the courts of Nevada, that mere inadequacy of price alone does not justify the setting aside of an execution sale. See generally, Annot., 5 ALR 4th 794 (1981). Generally, there must be in addition proof of some element of fraud, unfairness, or oppression accounting for the inadequacy of price. In re Madrid, supra, 21 B.R. at 427. Accord, Ackerman v. Cornell, 23 Ohio Cir.Dec. 102, 14 Ohio C.C. (n.s.) 525 (1912). Cf., Ozias v. Renner, 78 Ohio App. 168, 64 N.E.2d 326 (1945) (Mere inadequacy of price unaccompanied by any other reasons or cause not sufficient cause for setting aside regularly conducted judicial sale unless such inadequacy raises a conviction that the property was unnecessarily sacrificed.) As the panel in Madrid noted, following the Durrett holding would radically alter these rules. Id. Finally, the panel in Madrid concluded:
The law of foreclosure should be harmonized with the law of fraudulent conveyances. Compatible results can be obtained by construing the reasonably equivalent value requirement of Code § 548(a)(2) to mean the same as the consideration received at a non-collusive and regularly conducted foreclosure sale. Thus, in the absence of defects, such foreclosure withstands avoidance as a fraudulent conveyance.
21 B.R. at 427. This Court agrees with and follows the reasoning of the Bankruptcy Appellate Panel in Madrid and holds that the consideration received at a non-collusive and regularly conducted foreclosure sale should be conclusively presumed to constitute "reasonably equivalent value" under § 548(a)(2)(A) and, therefore, defendant's motion for summary judgment should be granted.
In light of the foregoing, it is perhaps unnecessary to consider the further question of when the "transfer" occurred under § 548. The controlling precedent in the fifth circuit in Durrett v. Washington Nat'l Ins. Co., supra, 621 F.2d 201 and Abramson v. Lakewood Bank & Trust Co., supra, 647 F.2d 547, conflicts with that of the United States Court of Appeals for the Ninth Circuit in Madrid v. Lawyers Title Ins. Corp. (In re Madrid), 725 F.2d 1197 (1984), on this question however and, in view of potentially dispositive nature of the resolution of this issue in cases under *871 § 548, the Court feels constrained to address this question also.
Both Durrett and Abramson held that the day of the foreclosure sale was date of the "transfer" under section 67(d) and, therefore, notwithstanding the fact that the deeds of trust in those cases were taken and perfected more than one year before the date of the filing of a petition in bankruptcy, the transfers were held to be voidable. Durrett, supra, 621 F.2d at 204; Abramson, supra, 647 F.2d at 549. In Madrid however, the ninth circuit found that the time of the transfer was not the time of the foreclosure sale but when the creditor's security interest was perfected under Nevada state law. 725 F.2d at 1200. Since this occurred more than one year before the date of the filing of the petition, the transfer was outside the period stated in § 548.
As the court in Madrid noted, Durrett relied upon the extremely broad definition of transfer set out in section 1(30) of the Act and ignored the provisions of section 67(d)(5), the precursor to § 548(d)(1), which defines the time of the transfer. 725 F.2d at 1201. Section 548(d)(1) provides:
For the purposes of this section, a transfer is made when such transfer becomes so far perfected that a bona fide purchaser from the debtor against whom such transfer could have been perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer occurs immediately before the date of the filing of the petition.
Accordingly, under § 548(d)(1), the time of the transfer in Madrid was held to occur upon the proper execution and recordation of the deed of trust under Nevada state law. 725 F.2d at 1200. Accord, Alsop v. Alaska (In re Alsop), 22 B.R. 1017 (D.Ala. 1982). As the court in Madrid concluded, agreeing with the dissenting opinion of Justice Thomas A. Clark in Abramson, 647 F.2d at 549, a foreclosure sale is not a transfer by a debtor under former § 67(d) of the Act or § 548(a) of the Code, but an involuntary conveyance triggered by the debtor's failure to fulfill some obligation in the promissory note secured by a mortgage or deed of trust. 725 F.2d at 1201-1202. See generally, Coppel and Kann, Defanging Durrett: The Established Law of "Transfer", 100 Banking L.J. 676 (1983). This Court agrees with and follows the reasoning of the ninth circuit in Madrid and holds that the transfer under § 548(a) occurs when the parties have done everything required under applicable state law to perfect the transfer as against a bona fide purchaser of the debtor as provided in § 548(d)(1).
In the present case, the parties have failed to stipulate as to the date the mortgage deed granted to Defendant's assignor was recorded in the appropriate county recorder's office. Until so recorded, under the law of Ohio, the mortgage does not take effect as against third parties. Section 5301.25 Revised Code; Wayne Building & Loan Co. v. Yarborough, 11 Ohio St.2d 195, 228 N.E.2d 841 (1967). Presuming the mortgage deed was recorded, however, on or about August 4, 1977, the date of execution of the mortgage, the transfer in this case would be deemed to have occurred on that same date pursuant to § 548(d)(1). If this was the case, the transfer would have occurred more than one year before the date of the filing of the instant Chapter 13 petition on December 7, 1982, and the transfer would not be avoidable under § 548(a). It thus appears that, apart from the question of "reasonably equivalent value" under § 548(a)(2)(A), the transfer in this case may not be avoided as having occurred on or within one year before the date of the filing of the petition.
In light of the foregoing, it is hereby,
ORDERED that the Defendant's motion for summary judgment be, and hereby is, granted. It is further,
ORDERED that Plaintiffs' complaint be dismissed with prejudice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546471/ | 250 B.R. 862 (2000)
In re G. Ware TRAVELSTEAD, Debtor.
G. Ware Travelstead,
v.
Ray Velazquez, et al.
Bankruptcy No. 96-5-4979-ESD. Adversary No. 99-5735-ESD. Civil No. CCB-00-872.
United States District Court, D. Maryland.
July 20, 2000.
*863 Kenneth Oestreicher, Whiteford, Taylor and Preston, Baltimore, MD, for appellant.
Timothy F. McCormack, Jay A. Shulman, Gordon, Feinbalt, Rothman, Hoffberger & Hollander, LLC, Baltimore, MD, appellees.
MEMORANDUM
BLAKE, District Judge.
Defendants Ray Velazquez and Calypso Acquisition Corporation ("Calypso") filed a Motion for Leave to Appeal an Order entered by the Bankruptcy Court on March 15, 2000, denying the Defendants' Motion to Dismiss the Adversary Proceeding Complaint filed by Plaintiff, G. Ware Travelstead (the "Debtor"). No hearing is deemed necessary. See Local Rule 105.6. For the reasons articulated below, the Defendant's Motion for Leave to Appeal the Bankruptcy Court's Order Denying Defendants' Motion to Dismiss Complaint will be granted, and the March 15, 2000 Order of the Bankruptcy Court will be affirmed.
BACKGROUND
The Debtor filed a voluntary petition for relief under Title 11 of the United States Code on May 31, 1996. By an Order *864 entered December 31, 1997, the United States Bankruptcy Court for the District of Maryland approved Travelstead's Modified Fifth Amended Disclosure Statement and confirmed Travelstead's Third Modified Fourth Amended Plan of Reorganization. (Pl.'s Opp'n Exs. 4, 6) While the Debtor's litigation interest against the Defendants is included in his Disclosure Statement, the Plan makes no mention of it. (Id. Ex. 6 at 33-34) The Plan does, however, specify certain assets which are to be used to pay back creditors. (Id. Ex. 4 ¶¶ 5.4, 5.5, 5.6)
On October 20, 1999, the Debtor filed the instant action against Mr. Velazquez; he amended the complaint on January 7, 2000 to add Calypso as a Defendant. (Id. Ex. 1)
The amended complaint alleges that as of May 31, 1996, the Debtor owned 50% of Fepate SL, a Spanish company ("Fepate"). At that time, Fepate owned the franchise rights to develop and operate four Planet Hollywood restaurants in Spain. The franchise agreement between Fepate and Planet Hollywood, Inc. Specified the cities where Fepate could open restaurants and set forth a schedule for the opening of the Planet Hollywood restaurants in Spain. The Franchise Agreement provided that Fepate would forfeit any remaining franchise rights if it failed to meet the schedule for opening restaurants. Mr. Velazquez owned the remaining 50% interest in Fepate. (Id.)
The amended complaint alleges that in November 1995, the Debtor borrowed $570,000 from Timothy E. Wyman ("Wyman") to help finance the acquisition of certain real property on Maryland's Eastern Shore known as Cottingham Farm. The Debtor pledged his stock in Fepate, along with other property, to secure the debt. In March 1996, when the loan became due, Mr. Wyman entered a confession of judgment against the Debtor. This judgment became a lien against the Debtor's real property located at 4474 Boone Creek Road, Oxford, Maryland. (Id. at 4) On October 3, 1996, Mr. Wyman filed a motion in the Bankruptcy Court for relief from the automatic stay in order to foreclose on his judgment liens. (Id.)
Concerned that his investment in Fepate was at significant risk because his co-investor had filed for personal bankruptcy and mortgaged the Fepate stock, Mr. Velazquez formed a corporation named Calypso, through which he purchased Mr. Wyman's claim.[1] (Def.'s Mem. Supp. Mot. Leave App. at 6) According to the complaint, during the course of the negotiations regarding the motion to lift the stay, Mr. Velazquez concealed his ownership of Calypso and made numerous misrepresentations to the Debtor regarding the status of negotiations surrounding the opening of a second Planet Hollywood. (Pl.'s Opp'n at 5-6)
Relying on these alleged misrepresentations, the Debtor settled the lift stay litigation with Calypso and sold his 50% interest in Fepate to Calypso for $1,500,000, which was paid in a combination of credit against Calypso's claim and a cash payment from Calypso to the Debtor. (Def.'s Mem. Supp. Mot. Leave App. at 6) The settlement was presented to and approved by the Bankruptcy Court and Calypso obtained title to the one-half interest in Fepate owned and controlled by Travelstead. (Id.)
On October 20, 1999, the Debtor filed an adversary proceeding against Mr. Velazquez and Calypso. (Pl.'s Opp'n at 2) In the Amended Complaint, the Debtor brings claims of breach of fiduciary duty, civil conspiracy, fraud, and interference with a prospective business advantage against Mr. Velazquez and Calypso and seeks relief from the Bankruptcy Court's *865 Order approving the settlement with Calypso. (Id. Ex. 1)
The Defendants filed a motion to dismiss on January 24, 2000, claiming that the Bankruptcy Court lacked subject matter jurisdiction. Alternatively, they sought dismissal based on forum non conveniens. The Defendants claimed that as the Debtor's interest in litigation against them was not specifically mentioned in the Plan of Reorganization as a method of payment to the creditors, it reverted back to the Debtor pursuant to the plan's provision, which states: "Upon confirmation of the Plan, all of [the Debtor's] property shall revert in [the Debtor] free and clear of liens, claims and encumbrances, except as may be otherwise set forth herein." Accordingly, the Defendants argued that the Bankruptcy Court did not possess subject matter jurisdiction over the adversary proceeding, because the litigation interest is the Debtor's personal property, not that of the bankruptcy estate.
At a hearing on March 10, 2000, Bankruptcy Judge E. Stephen Derby issued an oral opinion denying the Defendants' Motion to Dismiss.[2] (Id. at 8; Ex. 9) Accordingly, Defendants filed this Motion for Leave to Appeal the Bankruptcy Court's Order.[3]
MOTION FOR LEAVE TO APPEAL
A. Standard of Review
The court has jurisdiction over appeals from the Bankruptcy Court in this district pursuant to 28 U.S.C. § 158. See In re Jackson, 190 B.R. 808, 810 (W.D.Va. 1995); In re Fraidin, 188 B.R. 529, 532 (D.Md.1995). While an order dismissing a bankruptcy case is a final order appealable by right, orders denying a motion to dismiss are interlocutory in nature and are only appealable by leave of the court. See In re Jackson, 190 B.R. at 810; In re Hebb, 53 B.R. 1003 (D.Md.1985). While § 158 offers no guidance at to how district courts should exercise their discretion in granting interlocutory appeals, most courts have analogized to the standards set forth in 28 U.S.C. § 1292(b), the statute governing discretionary appeals of interlocutory orders in non-bankruptcy cases. In re Hebb, 53 B.R. at 1006. The analysis concerns "(1) whether the order involves a controlling question of law as to which there is substantial ground for difference of opinion; and (2) whether immediate appeal would materially advance the termination of the litigation." Id.
B. Analysis
Defendants Mr. Velazquez and Calypso have moved for leave to appeal the Bankruptcy Court's Order denying their Motion to Dismiss. On June 27, 2000, pursuant to Local Rule 403.5, this court requested the Honorable E. Stephen Derby to submit a written certification stating whether, in his opinion, "the interlocutory order involves a controlling question of law as to which there is substantial ground for difference of opinion and whether an immediate appeal of it may materially advance the ultimate termination of the case." Judge Derby promptly certified, on June 30, 2000, that his March 15, 2000 Order did involve a controlling question of law as to which there is substantial ground for difference of opinion and an immediate appeal of it may materially advance the ultimate termination of this adversary proceeding. Accordingly, the court will briefly review the Defendants' request in light of these three issues. In re Swann Ltd. Partnership, 128 B.R. 138, 141 (D.Md. 1991).
1. Controlling Question of Law
An order involves a controlling question of law when either (1) reversal of *866 the bankruptcy court's order would terminate the action, or (2) determination of the issue on appeal would materially affect the outcome of the litigation. See Ovando v. City of Los Angeles, 92 F. Supp. 2d 1011, 1025 (C.D.Cal.2000); North Fork Bank v. Abelson, 207 B.R. 382, 389 (E.D.N.Y.1997). In the present case, reversal of the Bankruptcy Court's Order denying the dismissal of the suit for lack of subject matter jurisdiction would terminate the lawsuit. North Fork Bank, 207 B.R. at 390. The court agrees that the determination that the adversarial proceeding is unrelated to the bankruptcy proceeding would strip the Bankruptcy Court of subject matter jurisdiction. Accordingly, the court finds that the appeal from the Bankruptcy Order does involve a controlling question of law.
2. Substantial Grounds for Difference of Opinion
The controlling question of law here is whether the Bankruptcy Court has subject matter jurisdiction over the adversary proceeding filed by the Debtor against the Defendants. Section 1334 of Title 28 of the United States Code grants subject matter jurisdiction over all cases arising under the Bankruptcy Code, as well as "all civil proceedings under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a), (b). Section 157(a) further refers "all proceedings arising under title 11 or arising in or related to a case under title 11" to the Bankruptcy Court. § 157(a).
In A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir.1986), the Fourth Circuit defined "related to" jurisdiction under § 1334(b):
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.
Id. at 1002 n. 11 (internal quotation marks omitted) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)). Subsequent decisions have clarified that "related to" jurisdiction is to be broadly interpreted. See, e.g., In re Johnson, 960 F.2d 396, 403 (4th Cir.1992); In re A.H. Robins Co., 182 B.R. 128, 133 (Bankr.E.D.Va.1995) (holding that § 1334(b) is to be liberally construed "especially where the question at hand involves the interpretation" of a plan of reorganization), aff'd, 86 F.3d 364 (4th Cir.1996).
As Judge Derby said in his certification of the interlocutory appeal, "because the court's finding that it possesses `related to' jurisdiction was based on the interplay of various provisions of Debtor's confirmed plan and the plan confirmation order, the intended purpose of the plan, and contemporaneous representations of Debtor's counsel during the plan confirmation hearings, rather than a plan provision that expressly addressed the instant claim, there appears to be substantial ground for difference of opinion." (June 30, 2000 Order Certifying Controlling Question Raised by Interlocutory Appeal) Accordingly, the Defendants have proffered substantial grounds for difference of opinion.
3. Materially Advance the Ultimate Termination of the Litigation
Thirdly, to justify leave to file an interlocutory appeal, resolution of the disputed issue must materially advance the ultimate termination of the litigation. See Genentech, Inc. v. Novo Nordisk, A/S, 907 F. Supp. 97, 100 (S.D.N.Y.1995) ("For certification to be appropriate, the district court must be of the opinion that immediate appeal of an order will literally accelerate the action as a whole."). Such is the case here. Reversal of the Bankruptcy Court's Order would result in dismissal of the entire action. Accordingly, the third requirement is met.
The Defendants have met the three requirements to warrant leave to file an interlocutory appeal. Accordingly, the Defendant's Motion for Leave to Appeal the March 15, 2000 Order issued by the Bankruptcy *867 Court will be granted. Because both parties have fully briefed the merits of the issue, the court can move directly to disposition of the underlying issue.
APPEAL OF BANKRUPTCY COURT'S ORDER DENYING DEFENDANT'S MOTION TO DISMISS
A. Standard of Review
When considering an appeal from the bankruptcy court, the district court must accept the bankruptcy court's findings of fact unless they are clearly erroneous. See In re Johnson, 960 F.2d 396, 399 (4th Cir.1992). Bankruptcy court's conclusions of law, however, will be reviewed de novo. See id.
B. Analysis
As stated by the Bankruptcy Court at the March 10, 2000 hearing on the Defendant's Motion to Dismiss, "[T]he key to the issue in this case is whether or not this lawsuit as an asset of the debtor is treated under the debtor's Plan of Reorganization because if it is, then there is related to jurisdiction because it is related to the plan and to the implementation of the plan and to the carrying out of the plan that is confirmed." (Pl.'s Opp'n Ex. 9 at 3-4)
As discussed above, Section 1334 of Title 28 of the United States Code grants subject matter jurisdiction over all cases arising under the Bankruptcy Code, as well as "all civil proceedings under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a), (b). Section 157(a) further refers "all proceedings arising under title 11 or arising in or related to a case under title 11" to the Bankruptcy Court. § 157(a). See also A.H. Robins Co., 788 F.2d at 1002 n. 11 (noting that an action is "related to" a bankruptcy proceedings "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" (internal quotation marks omitted) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984))); In re A.H. Robins Co., 182 B.R. 128, 133 (Bankr. E.D.Va.1995) (holding that § 1334(b) is to be liberally construed "especially where the question at hand involves the interpretation" of a plan of reorganization), aff'd, 86 F.3d 364 (4th Cir.1996).
In their appeal, Defendants contend that the Bankruptcy Court's denial of their Motion to Dismiss is erroneous for two reasons. First, the Defendants claim that the Bankruptcy Court erred in finding the Plan ambiguous and consulting extrinsic evidence to ascertain the intent of the parties. According to the Defendants, the Plan unambiguously provided that all assets not specified as available for repayment to the creditors reverted to the Debtor upon confirmation of the Plan.
The Bankruptcy Court's determination that the Plan was ambiguous is a legal conclusion subject to de novo review. See Moore Brothers Co. v. Brown & Root, Inc., 207 F.3d 717, 726 (4th Cir.2000). A writing is ambiguous if it is "susceptible to two reasonable interpretations." Goodman v. Resolution Trust Corp., 7 F.3d 1123, 1126 (4th Cir.1993) (internal quotation marks omitted) (quoting American Fidelity & Casualty Co. v. London & Edinburgh Ins. Co., 354 F.2d 214, 216 (4th Cir.1965)).
While the Plan does provide that all assets of the estate are available for distribution to creditors,[4] it also lists specific assets that should be liquidated and used to pay creditors. (Pl.'s Opp'n Ex. 4 §§ 5.4, 5.5, 5.6). It is unclear whether the list of specific assets is meant to be an exhaustive list of the assets to be used for repayment, in which case those not mentioned, such as the claim against Calypso, *868 would revert to the Debtor upon confirmation of the Plan, or whether other property of the Debtor also is available for repayment. The relevance, of course, is that the former interpretation precludes the exercise of subject matter jurisdiction by the Bankruptcy Court, because the adversary proceeding would not be related to the disposition of the bankruptcy estate.
As the Bankruptcy Court found, and as this court agrees, the Plan is ambiguous; both interpretations discussed above are reasonable. See Calomiris v. Woods, 353 Md. 425, 727 A.2d 358, 363 (1999). Accordingly, the court rejects the Defendants' first argument.
Secondly, the Defendants argue that even if the Bankruptcy Court was correct in concluding the Plan was ambiguous, it erred in holding that its subject matter jurisdiction extended to the claim against Calypso. Because the Plan was ambiguous, it is appropriate to review the transcripts from the confirmation hearings to determine the parties' intent. See Gwynn v. Oursler, 122 Md.App. 493, 712 A.2d 1072, 1075 (1998) (permitting the examination of extrinsic evidence to discern the intent of the contracting parties).
The transcripts of the Bankruptcy Court's hearing on December 18, 1997 evidence Judge Derby's concern that certain assets of the Debtor might be shielded from liquidation for paying the creditors. Accordingly, the attorney for the Debtor, as well as the Debtor himself, emphasized that all the Debtor's assets were subject to the Plan. As Mr. Oestreicher, the Debtor's attorney, stated at the hearing, "there are no reserve assets. All of the assets of the debtor are now subject to the powers of the liquidating trustee." (Pl.'s Opp'n Ex. 7 at 88) In response to the Bankruptcy Court's question as to whether there is "an understanding as to what assets the liquidating agent is authorized to sell under the plan," the Debtor replied, "Any and all of them." (Id. Ex. 7 at 116)
Similarly, at the hearing on December 29, 1997, an attorney for the Debtor, in describing the Plan, stated:
However, no inference should be drawn from the inclusion of the details about assets, or listing of assets, that the plan is intended to hold back any assets from the liquidating agent. That's not the intent, that's not the purpose, and that's not why the specific language about assets is in there.
(Id. Ex. 8 at 8) The above passages evidence the intent of the parties to include all assets in the Plan; the mere fact that certain assets were specified to be used for repayment of specific creditors does not mean that the unmentioned assets were intended to revert to the possession of the Debtor upon confirmation. Rather, all of the assets are subject to liquidation by the trustee. (Id. Ex. 7 at 116)
The court agrees with Judge Derby's determination that the parties intended to include all named and unnamed assets as part of the bankruptcy estate. The Order approving the Plan confirms the court's understanding based on the representations of counsel at the hearing. The Order states that "the rights, duties, and obligations of the Liquidating Agent, as defined in the Plan, shall be applicable to all of the assets of the estate, whether known or unknown." (Id. Ex. 5 at 3) Therefore, the Debtor's interest in the instant litigation, which was mentioned in the Disclosure, but not the Plan, is included as an asset; the Bankruptcy Court has jurisdiction over the claim under § 1334(b). See A.H. Robins Co., 788 F.2d at 1001 n. 11 (holding that a claim which impacts the ultimate disposition of the bankruptcy estate is included in "related to" jurisdiction under § 1334(b)).
Accordingly, the Bankruptcy Court's March 15, 2000 Order denying the Defendants' Motion to Dismiss will be affirmed.
NOTES
[1] The exact sequence of events concerning Mr. Wyman's motion to lift the stay, Calypso's purchase of Mr. Wyman's interest, and the acts of Mr. Velazquez are disputed and the subject of the Debtor's action against Mr. Velazquez. For purposes of this motion, we will view the facts in the light most favorable to the non-moving party.
[2] A written Order was issued March 15, 2000. (Pl.'s Opp'n Ex. 3)
[3] The Debtor filed an opposition on April 17, 2000. Despite requesting and receiving an extension of time, the Defendants have not filed a reply.
[4] The Plan states: "The Plan shall be funded from the Net Proceeds of Sale and/or refinance of entities and/or assets in which the Debtor has an interest." (Pl.'s Opp'n Ex. 4 § 4.1) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545959/ | 77 F.2d 266 (1935)
RUBEN CONDENSER CO. et al.
v.
AEROVOX CORPORATION.
No. 337.
Circuit Court of Appeals, Second Circuit.
May 13, 1935.
*267 Morris Hirsch, Oscar W. Jeffery, and Dean, Fairbank, Hirsch & Foster, all of New York City, for appellant.
Watson, Bristol, Johnson & Leavenworth, of New York City (Charles P. Bauer, of New York City, Leon Robbin, of Washington, D. C., and Laurence Bristol, of New York City, of counsel), for appellees.
Before L. HAND, SWAN, and CHASE, Circuit Judges.
L. HAND, Circuit Judge.
The plaintiffs sued the defendant in Brooklyn upon patent No. 1,891,207; the defendant counterclaimed upon two patents, Nos. 1,815,768 and 1,789,949. The judge passed a decree holding the plaintiffs' patent valid and infringed and dismissing the counterclaim. The defendant appealed. We need discuss only the plaintiffs' patent, because we dispose of the counterclaim on other grounds. All the patents are for improvements in dry electrolytic condensers; the defendant's are the same as those concerned in a suit brought by it against the Concourse Electric Company and decided by this court in 65 F.(2d) 386; we may refer to what we said there by way of general background for our discussion. The plaintiffs' patent is for another electrolyte, the viscous compound with which the fabric is saturated which separates the anode and the cathode plates, and which serves to restore the film upon the anode if it is broken through. It does not too much simplify the facts to say that the invention consisted only in substituting glycol in the place of glycerin in the electrolyte; for the other ingredients, boric acid and ammonium borate, were concededly old in the art. Glycol has undoubtedly generally superseded glycerin since the plaintiffs introduced it and was an advance in the art; moreover, it was new in a dry electrolyte when Ruben filed his application on June 19, 1930. But it had been disclosed as part of the electrolyte of a wet condenser twice before; first, by Engle in patent No. 1,672,714, application for which was filed on August 29, 1927; and again by Fansteel, in a British patent No. 319,033 of 1929, the application for which was filed on May 15, 1928. Both disclosures mention glycol as an optional substitute for glycerin, obviously regarding the two as interchangeable and readily suggested alternatives. And indeed although the claims in suit prescribe glycol, other claims are for glycerin in its place, and the specifications make it plain that though glycol was preferred, glycerin would serve. Thus at page 1, lines 78-87: "In the invention the viscous material is not confined to ethylene glycol for glycerine and various other glycols or glycerols are applicable; after many tests, however, ethylene glycol was found to give the best results. Electrolyte compositions prepared with the use of glycerols in lieu of glycols, with the proportions of the ingredients remaining substantially the same, appear to be thicker, that is, to have a lower degree of flowability." It was apparently because of its greater "flowability" that Ruben preferred glycol. The substance had been known for long in laboratories, but its large-scale production only dates from about 1921, within a few years after which it began to arouse interest in its practical uses, as appears from several papers which were put in evidence describing its possibilities. It may be assumed to have become cheap enough for use in such arts as these not very long before Ruben filed his application, though the date does not definitely appear in the record. (The bills in evidence do not bear out the conclusion that there was a very substantial fall in its value after July, 1930.) We know just how Ruben came upon it. He was a very prolific inventor and he directed an assistant, Raines, to carry on a series of parallel experiments in electrolytes with glycerin and with glycol; Raines found that the glycol had a better "leakage characteristic," and the art has confirmed his conclusions.
In the light of all this it seems to us that the patent does not rest upon an authentic invention, but upon one of those steps in an art which demand *268 only patient experiment. Especially in chemistry it is possible to proceed by a system of trial and error, varying formulas by permutation and combination, and recording the results of each. Much that is valuable has been so discovered, and we will not say that the profitable survivals from such elimination can never be inventions; salvarsan for example, as its other name, "606," indicates, was hit upon by this method. Ordinarily invention demands more than that; some resumption of a line of experiment from which the art had looked away [E. I. Dupont De Nemours & Co. v. Glidden Co., 67 F.(2d) 392, 397 (C. C. A. 2)], some departure which required originality or independence of conception; something more than routine testing of obvious combinations. Here we can find nothing more. The defendant itself tried out glycol and abandoned the experiment, because uncertain of the merchantable quality available and because its customers were reasonably satisfied with glycerin. Indeed, Georgiev's own electrolyte patent No. 1,815,768 suggested glycol as a possible substitute six months later, and though he also included glucose which was not satisfactory, the suggestion shows that the mere conception was commonplace enough. Such invention as there was, lay in the verification. While it is always the safest course to test a putative invention by what went before and what came after, it is easy to be misled. Nothing is less reliable than uncritically to accept its welcome by the art, even though it displace what went before. If the machine or composition appears shortly after some obstacle to its creation, technical or economic, has been removed, we should scrutinize its success jealously; if at about the same time others begin the same experiments in the same or nearby fields, or if these come to fruition soon after the patentee's, the same is true. Such a race does not indicate invention. We should ask how old was the need; for how long could known materials and processes have filled it; how long others had unsuccessfully tried for an answer. If these conditions are fulfilled, success is a reliable touchstone; but success in the circumstances at bar proves nothing. The patent is invalid.
There remain the Aerovox patents on which we passed in the former case. Our disposition of these requires a statement of the earlier relations between the parties, and in a little detail. The plaintiffs sued the defendant on June 3, 1931, upon two other Ruben patents, each for electrolytic condensers. The parties came to an accommodation before trial and signed some papers on May 2, 1932. The defendant took a license under the two patents, and got an option for six months after its appearance upon any patent which might issue upon the then pending application for patent No. 1,891,207 that which we have just discussed. It never took up that option. Thus the defendant was safe from prosecution under all three of the plaintiffs' patents if it chose; but it must pay royalties. However, that was not all. The defendant then held the two Georgiev patents which are now the subject of the counterclaim, and some arrangement as to these also was desired; it took the form of an exchange of letters between it and the Mallory Company, by which the defendant promised not to sue "for infringement of any United States patent now owned or controlled by us, including specifically the Georgiev United States patents Nos. 1,789,948 and 1,815,768 * * * by reason of the manufacture, use or sale of condensers under the Ruben patents Nos. 1,710,073 and 1,714,191, in accordance with the practices followed by you or them at any time from January 1, 1929, to date in the manufacture of such condensers as you or they have sold in substantial quantities." The Mallory Company's letter was in the same terms, and protected the defendant against the Ruben patents then in suit. True, it does not appear that the defendant was at the time claiming infringement against the Mallory Company, but that makes no difference; the purpose was not to disturb that company in exploiting the Ruben patents already issued, so long as it confined itself to what it had been doing. The Mallory Company was in fact making condensers with the same electrolyte that the defendant now claims to be one of the infringements of the Georgiev electrolyte patent No. 1,815,768, and, as we understand it, it acknowledges the plaintiffs' immunity so far, though it somewhat faintly suggests that the same electrolyte when used in a new container is not protected. There is no merit in this; the letter gave immunity against any infringement of Georgiev's electrolyte patent and it was as much infringed by an electrolyte in a cardboard cover, as in an aluminum. However, the plaintiffs thereafter made two changes in the electrolyte; first, they decreased the percentage of boric acid, and, second, they reduced the boiling point. Their process *269 on May 2, 1932 the "A" solution had been to add thirty ounces of boric acid to 200 c.c. of ammonium hydroxide and 640 c.c. of ethylene glycol. Less than a minute after this had been slowly brought to a boil, eighteen more ounces of boric acid was added and the boiling continued until the boiling point was 125° C. In the "B" solution the addition of the second boric acid was omitted; the "C" solution was like the "B" except that the boiling point was 120°, instead of 125°. From no figures at hand can we say whether a reduction of three-eighths of the boric acid brought the solution nearer to the Georgiev proportions than before; we have not the specific gravity of the substances. But that is not necessary. The letter should be read with another agreement of even date giving to the Mallory Company a license whenever in its "opinion" it should adopt "a construction electrolyte or method which * * * comes within the scope of any of the claims" of the Georgiev patents. This made the company judge for that purpose of whether it infringed. That of course was not final on the issue of infringement; it might choose to stand suit rather than accept a license; but this latitude presupposed that the immunity given by the accompanying letter was not to be construed rigidly. Both documents were parts of a single compromise, and it was no doubt expected that the Mallory Company would take a license whenever it thought that it infringed by any change. The immunity would end where the license began, if the company lived up to its engagements fairly. It is unlikely that in such a settlement the purpose was to hold it to the very letter of its then practices, and the reduction of three-eighths in one element ought not to forfeit the protection so granted. So much for the "B" solution. The "C" was further from Georgiev's electrolyte because the boiling point was lower. His contribution, as the defendant insistently proclaims, lay not in the mix but in the boiling; and this indeed helps to confirm our conclusion as to the "B" solution also, in which the boiling point remained the same as in the "A." The infringements of this patent, if there were any, were and are excused.
The case as to the cover patent depends upon whether the Mallory Company had begun to sell aluminum condensers in "substantial quantities" on May 2, 1932. For the most part its condensers had been sheathed in cardboard which concededly did not, and could not, infringe; Georgiev's specifications only mentioned metal "cans" enclosing the condenser proper. On the other hand, it must be owned that the Mallory Company had not sold the aluminum can condenser in large quantities on May 2, 1932; its records show that it had sold only 2,007, and nearly 200,000 cardboard condensers had been sold during about the same period. The defendant makes a not very ingenuous effort further to reduce this number by showing that most of them may have been samples, but it is entirely apparent that the witness did not mean to say that the proportion of these was greater than in the case of other condensers. We recur to the obvious purpose underlying the whole compromise; the Mallory Company was to be allowed to exploit its own two patents without interference; the Aerovox Company its two patents. There were indeed limits to this; no departures from, and no innovations upon, what had gone before were to be allowed, but that was all. Just as this was not intended as a strait-jacket upon variations in factory practice, so it seems to us it did not demand extensive marketing. The "line" must have gone into real production; should have ceased to be merely experimental, but that was enough. This is especially true as applied to this patent, because unless 2007 was a "substantial quantity," the letter gave the Mallory Company no protection whatever against it, though it was expressly mentioned as one of the two which should cause it no trouble. This covers condenser No. 2 in the record; Nos. 4, 9, and 10 indeed appeared later, but as they were substantially the same except in size, they fall within the reasoning as to solutions "B" and "C."
We do not forget that in an earlier form the letters had read differently; the condensers to be protected were the "type" or "types" then being manufactured, a suggestion of the Mallory Company, not acceptable to the defendant. But we cannot agree that the rejected form necessarily covered more than that adopted. That might be true if the parties had changed from "type or types of condenser now being manufactured," to "condensers now being manufactured". They did not; they substituted a phrase which had little relation to either form, and which was as general as the first. The permitted "practices" included not only those then in use, but any which had been abandoned within three years. It was a *270 plan of substantial peace barring the pending application leaving each side free to carry on its business on existing lines. Such a plan cannot be realized in a niggardly spirit, by catching at minor variations of factory practice. Had such a power been meant to be held in reserve, the purpose ought to have been more clearly expressed. The decree dismissing the counterclaim is affirmed.
Decree reversed as to patent to Ruben, No. 1,891,207, and bill dismissed for invalidity; decree affirmed as to patents to Georgiev, Nos. 1,789,949 and 1,815,768, because the defendant had given the plaintiffs immunity as to all the alleged infringements. The costs will be divided. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2191991/ | 464 B.R. 867 (2012)
In re Richard Michael HEYL, and Jennifer Ann Heyl, Debtors.
Steven Conway, and LorCon, LLC # 1, Plaintiffs,
v.
Richard Michael Heyl, Defendant.
Bankruptcy No. 09-48593-705. Adversary No. 10-4384-659.
United States Bankruptcy Court, E.D. Missouri, Eastern Division.
February 13, 2012.
*868 Richard J. Magee, Eckenrode-Maupin, Attorneys at Law, St. Louis, MO, for Plaintiffs.
Spencer P. Desai, Desai Eggmann Mason LLC, St. Louis, MO, Thomas H. Riske, Desai Eggmann Mason LLC, Clayton, MO, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
KATHY A. SURRATT-STATES, Bankruptcy Judge.
The matter before the Court is Creditors Steve Conway and LorCon LLC # 1's Complaint for Determination Excepting Debt from Dischargeability-Transaction Induced by Fraud [11 U.S.C.A. § 523(a)(2)(A); Fed. R. Bankr.P. 4007], Answer, Plaintiffs' Trial Brief, Debtor's Trial Brief and Joint Stipulation of Uncontested Facts. A trial was held on the matter on September 27, 2011 at which Plaintiff Steve Conway appeared in person *869 and by counsel and Debtor Richard Heyl appeared in person and by counsel. The matter was taken under submission. Upon consideration of the record as a whole, the Court issues the following FINDINGS OF FACT:
Debtor Richard Michael Heyl (hereinafter "Debtor") and another individual named John J. Palczuk (hereinafter "Mr. Palczuk") formed a company called Johns Folly Ocean Villas, LLC (hereinafter "JFOV"). Debtor and Mr. Palczuk were the managing members of JFOV; they each had a 25% ownership interest. Jennifer A. Heyl held a 25% ownership interest and Karen E. Palczuk held a 25% ownership interest. JFOV was principally engaged in beach-front real estate development in St. John, U.S. Virgin Islands. Debtor was also involved in another company called Heyl Partners Station Plaza (hereinafter "HPSP") which primarily sought to complete the development of ten condominiums in Kirkwood, Missouri and then sell the condominiums at a profit.
Plaintiff Steve Conway (hereinafter "Mr. Conway") is an investor and part-time farmer. Mr. Conway testified that he sought to diversify his investment portfolio and was therefore introduced to Debtor by a mutual associate. Mr. Conway and his company, LorCon LLC # 1 (hereinafter "LorCon") acquired a 5% interest in HPSP in mid-2004 for an initial investment of $61,500.00. Debtor testified that he generally offers all of his investors the opportunity to be reimbursed their investment if the investor so chooses after one year. Debtor believes he offered Mr. Conway this opportunity regarding the HPSP investment.
Over dinner, Debtor informed Mr. Conway and his wife about JFOV and the opportunity to invest in JFOV. Mr. Conway went to St. John, U.S. Virgin Islands and inspected the JFOV property with Debtor. Mr. Conway thereafter decided to invest in JFOV on behalf of himself and LorCon. At that time, Debtor required a down payment by July 1, 2004 to become a charter member; charter membership included an annual one-week stay at the to-be-constructed villas free of charge and a guaranteed buy-back period as well. Mr. Conway made a down payment of $6,000.00 to secure the investment opportunity and charter membership.
Mr. Conway and LorCon ultimately acquired two points (2%) in JFOV at $30,000.00 per point. The points acquired by Mr. Conway and LorCon were assigned by Jennifer Heyl with the consent of both Debtor and Mr. Palczuk. These two points included a personal guarantee which indicated that "if a [chartered member] wishes to withdraw after January 1, 2008, the [managing members] will return the [chartered member]'s paid in capital to acquire their JFOV ownership share plus 15% (fifteen percent) of this amount and refund any cash call monies paid to JFOV. This onetime guaranteed refund is available from January 1, 2008 through May 31, 2008 and is not assignable." Pl. Ex. 18, ¶ 2.
HPSP began to encounter financial difficulties in part because the fire marshal stopped the development of the condominiums. Mr. Conway testified that Debtor approached Mr. Conway between February and April of 2007 about transferring Mr. Conway's investment in HPSP to another investment. On or about May of 2007, Debtor offered Mr. Conway to transfer one point (1%) in JFOV to LorCon and agreed to accept on behalf of JFOV the $61,500.00 invested in HPSP as payment. Debtor also offered Mr. Conway *870 a guaranteed buyback, including all capital call investments, to be reimbursed between January 2010 to May 2010. Mr. Conway further requested a 20% passive loss for the first six (6) months of 2007 in HPSP for both Mr. Conway and his wife, and Debtor agreed. See Pl. Ex. 58. Mr. Conway also asked Debtor why he would not receive two additional points in JFOV for the $61,500.00 already invested in HPSP given Mr. Conway and LorCon's previous investment of $60,000.00 for two points (2%). Debtor represented to Mr. Conway that an existing investor in JFOV, Mary Beth Kinsella (hereinafter "Ms. Kinsella"), had recently purchased an additional point for $60,000.00 and therefore Debtor could not give LorCon two points in JFOV for the $61,500.00 previously invested in HPSP. Mr. Conway testified that Debtor made this representation in May 2007. Mr. Conway also testified that Debtor purported to confirm Ms. Kinsella's investment in front of Mr. Conway while Mr. Conway was in Debtor's office when Debtor made a phone call to an unidentified person to confirm that Ms. Kinsella made an investment of $60,000.00 for one additional point. Mr. Conway testified that based on the representation concerning Ms. Kinsella's recent purchase, the 20% passive loss of HPSP, the guaranteed buy-back and Debtor's offer to use the already invested $61,500.00, Mr. Conway accepted one point (1%) in JFOV on behalf of LorCon. This agreement took place in May 2007 though execution of this agreement was back-dated to January 1, 2007 at the request of Debtor. Mr. Conway made an additional investment of $18,000.00 in capital calls; $8,000.00 in December of 2007 and $10,000.00 in the middle of 2008.
Debtor and Mr. Conway both testified that Debtor also offered Mr. Conway an alternative investment wherein Debtor would grant Mr. Conway a five percent (5%) interest in another venture called Madaford Gardens for which Debtor would also accept the funds previously invested in HPSP. Debtor testified that the Madaford Gardens investment opportunity has some value today.
Ms. Kinsella is a customer service representative and former employee of Debtor. Ms. Kinsella became an investor in JFOV on May 26, 2006 when she invested $68,000.00 for one point (1%). Ms. Kinsella testified that she began discussions with Debtor about purchasing a second point in JFOV in September or October of 2007 and that at that same time, she was told that the second point would require an investment of $65,000.00. Ms. Kinsella invested an additional $65,000.00 in JFOV on January 2, 2008 and acquired one point (1%). Pl. Ex. 74. Ms. Kinsella's 2007 Schedule K-1 indicates that she had a 1% ownership interest in JFOV throughout the entirety of 2007. Pl. Ex. 45. Ms. Kinsella's Amended 2008 Schedule K-1 indicates that at the beginning of 2008 she had a 1% ownership but at the close of 2008, she had a 2% ownership interest in JFOV. Mr. Conway, LorCon and Ms. Kinsella are among over one dozen investors in JFOV, excluding Debtor and Mr. Palczuk.
JFOV and development of the St. John, U.S. Virgin Islands property has failed. On August 31, 2009, Debtor filed a petition under Chapter 7 of the Bankruptcy Code. Mr. Conway now seeks a determination from this Court that Debtor owes Mr. Conway a nondischargeable debt for Mr. Conway's lost investment for the third point in JFOV and the related capital calls pursuant to Section 523(a)(2)(A). Mr. Conway argues that this debt should be *871 excepted from discharge because Mr. Conway reasonably relied on Debtor's representation that Debtor just sold a point to Ms. Kinsella for $60,000.00 prior to the date that Mr. Conway ultimately accepted additional ownership in JFOV, that Debtor would assign a 20% passive loss for HPSP which Debtor did not and that Mr. Conway's investment would be bought back by the managing members between January 1, 2010 and May 31, 2010.
Debtor argues first that the requirements of Section 523(a)(2)(A) cannot be met, particularly since the evidence shows that Ms. Kinsella did buy 2 points in JFOV for approximately $60,000.00 each. Second, Debtor argues that even if the requirements of section 523(a)(2)(A) can be met, Debtor gave Mr. Conway and LorCon the points in JFOV for no consideration and therefore Mr. Conway's damages are zero.
JURISDICTION
This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 151, 157 and 1334 (2010) and Local Rule 81-9.01(B) of the United States District Court for the Eastern District of Missouri. This is a core and related proceeding under 28 U.S.C. § 157(b)(2)(I) (2010). Venue is proper in this District under 28 U.S.C. § 1409(a) (2010).
CONCLUSIONS OF LAW
Under Section 523(a)(2)(A), a debtor cannot obtain a discharge from any debt "for money, property, services ... to the extent obtained byfalse pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition." 11 U.S.C. § 523(a)(2)(A) (2010). To establish fraud pursuant to Section 523(a)(2)(A), a creditor must prove the following elements by a preponderance of the evidence:
1. The debtor made a representation.
2. The debtor knew the representation was false at the time it was made.
3. The representation was deliberately made for the purpose of deceiving a creditor.
4. The creditor justifiably relied on the representation.
5. The creditor sustained the alleged loss as the proximate result of the representation having been made.
In re Maurer, 256 B.R. 495, 500 (8th Cir. BAP 2000) (citations omitted).
Mr. Conway contends that Debtor fraudulently induced him to acquire a third point in JFOV through Debtor's misrepresentation of the date Ms. Kinsella obtained her second point in JFOV, Debtor's promise to assign Mr. Conway and his wife a 20% passive loss for January through June of 2007 in HPSP and Debtor's promise of a guaranteed buyback of the third point in JFOV to be paid between January 1, 2010 and May 31, 2010. This Court concludes that Debtor made the alleged representations. Mr. Conway however has only established that Debtor's representation concerning the amount and timing of Ms. Kinsella's second investment in JFOV to have been false at the time it was made. Mr. Conway has not proven that Debtor's representations concerning the 20% passive loss or the guaranteed buy-back were false at the time that they were made though today it is evident that Debtor has not fulfilled these promises.
This Court further concludes that Debtor made the false representation concerning Ms. Kinsella for the deliberate purpose *872 of deceiving Mr. Conway. Debtor sought to convince Mr. Conway that the going rate of a point in JFOV had doubled since Mr. Conway's first investment and therefore Debtor could not give Mr. Conway two points for the $61,500.00 initially invested in HPSP.
This Court also concludes that Mr. Conway justifiably relied on the representation concerning Ms. Kinsella and thus accepted only one point (1%) for the $61,500.00 already invested in HPSP. Mr. Conway testified that Debtor confirmed Ms. Kinsella's purportedly recent purchase of a second point in May of 2007 in front of Mr. Conway by phone with an undisclosed person. Reliance on this representation was justifiable.
The only remaining issue is whether Mr. Conway sustained the alleged loss as the proximate result of the representation having been made. Mr. Conway alleges $79,500.00 in damages for the $61,500.00 invested first with HPSP and then accepted by Debtor as an investment in JFOV, plus $18,000.00 in capital calls. Mr. Conway contends that had he not been told that Ms. Kinsella recently purchased a point for $60,000.00, that Mr. Conway and his wife would be given a 20% passive loss for HPSP and that there was a guaranteed buyback of the point to be paid between January 1, 2010 and May 31, 2010, he would not have invested his funds in JFOV and would have instead sought other opportunities. Mr. Conway further argues that the personal guarantee of the managing members to return Mr. Conway's investment in the initial two points invested had not yet run, and Mr. Conway could have withdrawn his initial investment as early as January 1, 2008. See Pl. Ex. 18, ¶ 2.
The record indicates that Mr. Conway's interest in whether Ms. Kinsella recently obtained a second point for $60,000.00 principally concerned whether one point rather than two points was adequate for the $61,500.00 already invested in HPSP since Mr. Conway and LorCon initially acquired two points for $60,000.00. There is no indication that Mr. Conway's inquiry into Ms. Kinsella's investment timing would influence anything other than Mr. Conway's willingness to accept only one point in JFOV for the funds invested. Moreover, Ms. Kinsella's first point was purchased after Mr. Conway's initial investment, and her first point was purchased in 2006 for $65,000.00. This tends to indicate that any investments after 2006 were likely more than $30,000.00 per point. Moreover, Ms. Kinsella did ultimately acquire a second point in January 2008 for $68,000.00.
Like the other investors in JFOV, both Mr. Conway, LorCon and Ms. Kinsella's investments are today worthless. And, while the culmination of the representations made to Mr. Conway influenced him to increase his stake in JFOV, this Court above concluded that Mr. Conway has only proven that the representation concerning Ms. Kinsella was false at the time it was made. Mr. Conway has not met his burden of proof that Mr. Conway's investment in acquiring the third point in JFOV that is now worthless as a proximate result of Debtor's false representation concerning the timing and amount of Ms. Kinsella's second investment in JFOV. Likewise, there is no basis to conclude that had Debtor not made the above representations, Mr. Conway and LorCon's investment in JFOV would today have value.
There is also no basis to conclude that the false representation concerning Ms. Kinsella's investment is the proximate cause of Mr. Conway's loss in making the *873 capital calls. Moreover, at the time of the capital calls, Mr. Conway had the opportunity to exercise his right to withdraw his investment in the initial two points at a 15% interest, yet Mr. Conway opted to instead increase his investment by making $18,000.00 in capital calls. Further, at the time that Mr. Conway made the $18,000.00 in capital calls, Ms. Kinsella had already acquired her second point in JFOV.
This Court must consider all the arguments for damages presented. See In re Gilmartin, 459 B.R. 720, 724 (8th Cir. BAP 2011). An alternative argument for damages is that had Debtor not made the false representation concerning Ms. Kinsella, Mr. Conway would not have continued to invest with Debtor. Mr. Conway however has not presented this Court with any evidence which purports to show on what basis Mr. Conway could have recovered his initial investment in HPSP. To the contrary, the record indicates that Mr. Conway's initial investment in HPSP would have been lost in HPSP but for Debtor's suggestion to accept Mr. Conway's HPSP investment as consideration for an additional point in JFOV. Debtor testified that he generally gave his investors the opportunity to be reimbursed their investment after one year but there is no evidence that this opportunity was still available to Mr. Conway in May 2007. Further, there is no basis for this Court to conclude that had Debtor not made the false representation concerning Ms. Kinsella, Mr. Conway would have instead chosen the Madaford Gardens investment opportunity.
Mr. Conway sought an investment opportunity to diversify his portfolio. Debtor convinced Mr. Conway that investing in HPSP and JFOV were potentially lucrative opportunities and in so doing, Debtor made several representations. There is no dispute that Debtor's representation concerning the timing and amount of Ms. Kinsella's second investment was false at the time it was made, and that Debtor made this false representation, among other representations, to convince Debtor to increase his investment in JFOV. This false representation is insufficient to prove that Mr. Conway's loss is the proximate result of the false representation made by Debtor. So too, Mr. Conway has not met his burden of proof that but for this misrepresentation, he would not have increased his investment in JFOV and instead would have recovered the funds used to acquire the third point. Therefore, by separate order, judgment will be entered in favor of Debtor.
ORDER
The matter before the Court is Creditors Steve Conway and LorCon LLC # 1's Complaint for Determination Excepting Debt from DischargeabilityTransaction Induced by Fraud [11 U.S.C.A. § 523(a)(2)(A); Fed. R. Bankr. P. 4007]. Consistent with the Findings of Fact and Conclusions of Law entered separately in this matter,
IT IS ORDERED THAT the relief requested in Plaintiffs' Complaint is DENIED and judgment is entered in favor of Defendant Richard Michael Heyl and against Plaintiffs Steve Conway and LorCon LLC #1 in that the debt owed to Plaintiffs by Defendant is dischargeable in this Bankruptcy case; and this is the final judgment and Order of this Bankruptcy Court in this case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919605/ | 541 A.2d 1296 (1988)
STATE of Maine
v.
Gerry PELLETIER.
Supreme Judicial Court of Maine.
Submitted on Briefs May 13, 1988.
Decided June 1, 1988.
John D. McElwee, Dist. Atty., Larry D. Amberger, Asst. Dist. Atty., Caribou, for the State.
Peter S. Kelley, Caribou, John D. Pelletier, Augusta, for defendant.
Before McKUSICK, C.J., and ROBERTS, WATHEN, GLASSMAN, SCOLNIK and CLIFFORD, JJ.
McKUSICK, Chief Justice.
Defendant Gerry Pelletier appeals from a judgment of the Superior Court (Aroostook County) affirming the District Court (Madawaska) revocation of his probation. Pelletier also appeals from his conviction in the Superior Court of operating under the influence, 29 M.R.S.A. § 1312-B (Supp. 1987), and unlawful possession of drugs (Class D), 17-A M.R.S.A. § 1107 (1983), after the court's acceptance of his conditional guilty pleas. Both the revocation of probation and the criminal convictions were based on evidence obtained when a Van Buren police officer stopped Pelletier's motor vehicle after following him for four to five miles. The appeals were taken by a single notice of appeal and have been argued and considered together here. Since we conclude that the District Court judge correctly denied Pelletier's motion to suppress, *1297 we affirm the Superior Court judgments.
The motion judge's finding that the police officer had a reasonable and articulable suspicion sufficient to justify an investigatory stop was not clearly erroneous. See State v. Chapman, 495 A.2d 314, 317-18 (Me.1985). The police officer driving behind Pelletier's car observed him cross over the center line three times and drift onto the right shoulder one time. The officer clearly had "more than speculation or an unsubstantiated hunch" that the driver was operating under the influence. Cf. State v. Caron, 534 A.2d 978, 979 (Me.1987) (police officer observed only one instance of straddling the center line without any oncoming or passing traffic and no other erratic or unusual operation).
We find no merit in Pelletier's other contention that the police officer violated his Fourth Amendment right merely by following his car for a number of miles before pulling him over. The Fourth Amendment to the United States Constitution and article I, section 5 of the Maine Constitution protest against unreasonable searches and seizures by government officials. Police observation of an individual's activity can constitute an unreasonable search if an individual has a reasonable expectation of privacy in the activity observed by the police officer. The expectation of privacy is reasonable if the individual subjectively has an expectation of privacy in that activity and if society is willing to recognize the individual's expectation of privacy in the activity as objectively reasonable. Katz v. United States, 389 U.S. 347, 361, 88 S. Ct. 507, 516, 19 L. Ed. 2d 576 (1967) (Harlan, J., concurring). "A person traveling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another." United States v. Knotts, 460 U.S. 276, 281, 103 S. Ct. 1081, 1085, 75 L. Ed. 2d 55 (1983). Any alleged expectation of privacy that Pelletier may have had concerning his method of driving on a public road was not reasonable, and the officer's observations of Pelletier's driving did not constitute an unreasonable search. Neither did the officer's action of following Pelletier constitute a seizure under the Fourth Amendment. A person is seized if an "officer, by means of physical force or show of authority, has in some way restrained the liberty of a citizen." Terry v. Ohio, 392 U.S. 1, 19 n. 16, 88 S. Ct. 1868, 1879 n. 16, 20 L. Ed. 2d 889 (1968). Pelletier was not "seized" for Fourth Amendment purposes until the police officer stopped his car.
The entry is:
Judgment affirmed.
All concurring. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545999/ | 40 B.R. 335 (1984)
In re AIR VERMONT, INC., North Atlantic Airlines, Inc., Debtors.
Bankruptcy Nos. 84-00019, 84-00017.
United States Bankruptcy Court, D. Vermont.
May 11, 1984.
Kevin Truland of Gallagher & Gallagher, P.C., Boston, Mass., for Hansman McAvoy & Co., Inc.
Joseph C. Palmisano, Barre, Vt., for debtors.
Douglas J. Wolinsky, Burlington, Vt., for Gene R. Kazlow.
John S. Rodman, Boston, Mass., for Creditors' Committee.
MEMORANDUM AND ORDER ON MOTION OF HANSMAN McAVOY & CO., INC., FOR RELIEF FROM STAY
CHARLES J. MARRO, Bankruptcy Judge.
*336 The Motion of Hansman McAvoy & Co., Inc., for Relief from Stay came on for continued hearing, after notice, on April 13, 1984. In lieu of an evidentiary hearing, the Movant, Hansman McAvoy & Co., Inc., and the Debtors, through their attorneys, Kevin Truland, Esquire, and Joseph C. Palmisano, Esquire, stipulated as follows:
"1. Hansman McAvoy & Co., Inc., (hereinafter Hansman McAvoy) is a Massachusetts business corporation duly licensed as an insurance agency pursuant to Massachusetts General Laws c. 175 section 172 and is also a duly licensed premium finance agency (hereinafter Hansman d/b/a Lloyds Credit of Hingham) pursuant to Massachusetts General Laws c. 255C, section 1 et seq.
"2. Air Vermont, Inc., filed on January 30, 1984, a Petition in this Court seeking relief under Title 11, United States Code, Article 11.
"3. On or about September 29, 1983, Air Vermont, Inc. purchased Aircraft Fleet and Liability Insurance to be placed with Associated Aviation Underwriter's, Inc., (Associated Aviation). In connection therewith, Air Vermont, Inc., executed a Premium Finance Agreement by which it promised to pay to Hansman McAvoy the amount advanced or to be advanced under the agreement to Associated Aviation in payment of the premiums on said policies, all in accordance with Massachusetts General Laws, c. 255C. A copy of the Premium Finance Agreement is attached hereto.[1]
"4. In addition to the policies reflected in said Agreement endorsements were added to said policies at the request of Air Vermont, Inc., resulting in a premium change of $39,365 in addition to the amounts due under the Agreement. Prior to the filing of the within Petition, Air Vermont, Inc., defaulted on the Agreement and has not given adequate protection to Hansman McAvoy d/b/a Lloyds Credit of Hingham.
"5. Because of the financing reflected in the attached Agreement, Air Vermont, Inc., was enabled to obtain Aircraft Fleet and Liability Insurance with Associated Aviation as Hansman d/b/a Lloyds Credit of Hingham advanced to this insurer the premiums necessary to maintain the policies in force.
"6. As of the date of the filing of the Petition herein, the return premiums on said policies amounted to $147,801.50 exclusive of interest, penalties and costs."
DISCUSSION
The issue here is whether Hansman McAvoy is entitled to a termination of the automatic stay prescribed under § 362 of the Bankruptcy Code so that it may recover the premiums advanced to Associated Aviation in which it has a security interest under the aforesaid Premium Financing Agreement. Under § 362(d) of the Bankruptcy Code, the court may terminate the stay:
(1) for cause, including the lack of adequate protection of an interest in property by a party in interest; or
(2) with respect to a stay of an action against property if
(A) the debtor does not have any equity in such property; and
(B) such property is not necessary to an effective reorganization.
The stipulated facts recite that the Debtor has not given Hansman McAvoy adequate protection. Further, as of now, the Debtor has filed a Plan for Liquidation under Chapter 11 and, therefore, the premiums are not necessary for an effective reorganization. In addition, the Debtor does not have any equity in them.
The Premium Finance Agreement between the debtor whose address appears as Logan International Airport, Boston, Mass., and Hansman McAvoy and Company, Inc., a Massachusetts corporation, was executed at Logan International Airport, Boston, Mass., and, therefore, is a Massachusetts contract.
Paragraph "3" of the stipulated facts recites that the Agreement was executed "all in accordance with Massachusetts General Laws c. 255C."
*337 This indicates that the Debtor recognizes the Premium Finance Agreement as a Massachusetts contract.
Under Massachusetts General Laws c. 255C, Section 12, a filing of a premium financing agreement is not necessary to perfect the validity of such an agreement as a secured transaction. In view of this, the position of the Debtor that the security interest in the premiums is not perfected because of failure to file a financing statement in the State of Vermont is without merit.
Even if the Premium Financing Agreement were a Vermont contract and subject to the Uniform Commercial Code, the Debtor's position would still not be sustained. Under the Uniform Commercial Code as adopted in this state, a transfer of an interest or claim in or under any policy of insurance is excluded from Article 9 relating to SECURED TRANSACTIONS. See 9A V.S.A. § 9-104(g).
Case law also supports Hansman McAvoy. See In Re Auto-Train Corporation (Bankr. District of Columbia 1981), 9 B.R. 159, 164, in which the Court struck down the trustee's argument that the interest of the secured party in unearned insurance premiums was unperfected because of its failure to properly perfect its security interest by the filing of a financing statement. The Bankruptcy Court pointed out that all rights under a policy of insurance were excluded under Article 9 § 9-104(g). And in Premium Financing Specialists, Inc., v. Lindsey, 11 B.R. 135 (D.C.1981), 31 U.C.C.Rep.Ser. 674, the U.S. District Court on appeal from the Bankruptcy Court held that an insurance premium financing company had an enforceable security interest in unearned premiums upon the bankruptcy of the insured. It reasoned that the transaction was exempted from Article 9 coverage as "a transfer of an interest or claim in or under any policy of insurance" and since no other Arkansas law required filing in order to perfect a security interest, the failure to file did not mean that the security interest was not enforceable against the trustee in bankruptcy. The result is the same as to a debtor in possession under Chapter 11 who, under section 1107 of the Bankruptcy Code, has the same rights, powers and duties as a trustee.
It follows that Hansman McAvoy is entitled to termination of the stay and to the insurance premiums covered by its security interest.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED:
1. The automatic stay prescribed by § 362 of the Bankruptcy Code is terminated.
2. Hansman McAvoy & Co., Inc., is entitled to possession of the return premiums amounting to $147,801.50.
3. The insurance policies issued by Associated Aviation Underwriters, Inc., may be cancelled.
APPENDIX
*338
NOTES
[1] A copy of the Premium Finance Agreement is attached at the end of Memorandum. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546002/ | 40 B.R. 530 (1984)
In re Robert A. MOSCUFO, Jamie Moscufo, Debtors.
CENTURY EQUIPMENT LEASING CORP., Plaintiff,
v.
Robert A. MOSCUFO,[1] Defendant.
Bankruptcy No. 83-00717G, Adv. No. 83-1049G.
United States Bankruptcy Court, E.D. Pennsylvania.
July 26, 1984.
Barbara L. Farley, Philadelphia, Pa., for plaintiff, Century Equipment Leasing Corp.
J.V. Monaghan, III, Philadelphia, Pa., for debtor/defendant, Robert A. Moscufo.
Jonathan H. Ganz, Philadelphia, Pa., Trustee.
OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The issue in the matter at hand is whether we should grant a creditor's request for an exception to discharge for damages caused by the debtor's sale of property which was encumbered by the creditor's security interest. For the reasons expressed below we will enter an order excepting the debt from discharge.
The facts of this case are as follows:[2] Century Equipment Leasing Corporation ("Century") leased a Weaver Lift to R.A.M. Automotive Service, of which the debtor is the sole proprietor. During the term of the *531 lease, although a balance of $2,801.70 was still due, the debtor sold the lift without informing Century, in apparent violation of the lease agreement and a security agreement. The debtor's sale of the collateral was wilful and he offered no credible justification for his act. When Century confronted him on the issue of the disposition of the collateral, the debtor refused to name the vendee to whom it had been sold. The debtor then filed a petition for relief under chapter 7 of the Bankruptcy Code ("the Code") on February 7, 1983.
Under 11 U.S.C. § 523(a)(6) of the Code an individual who is a debtor under chapter 7 is not discharged from any debt "for wilful and malicious injury by the debtor to another entity or to the property of another entity." The bankruptcy courts have construed § 523(a)(6) to mean that a "wrongful act done intentionally without just cause or a lawful basis is sufficient" to except a debt from discharge under this provision. Citibank v. Friedenberg (In Re Friedenberg), 12 B.R. 901, 905 (Bankr.S.D. N.Y.1981).[3] More particularly, if a debtor sells encumbered property in derogation of a security agreement and deprives the owner of the proceeds of the sale without just cause, the debt is nondischargeable. Mileasing Co. v. Allavena (In Re Allavena), 18 B.R. 527 (Bankr.E.D.Pa.1982); Credithrift of America v. Auvenshine (In Re Auvenshine), 9 B.R. 772 (Bankr.W.D.Mich. 1981). The rule analogously applies if the debtor is the bailee of the goods rather than the owner. Pioneer Bank and Trust Co. v. Scotella (In Re Scotella), 18 B.R. 975 (Bankr.N.D.Ill.1982). This authority squarely applies to the case at bench and since the debtor has not argued that the extent of the exception should be other than the outstanding debt of $2,801.70, we will enter an order excepting the debt of that amount.
NOTES
[1] The plaintiff improperly denominated the defendant as "Robert A. Moscuffo."
[2] This opinion constitutes the findings of fact and conclusions of law required by Bankruptcy Rule 7052 (effective August 1, 1983).
[3] In discussing the precursor of § 523(a)(6), which is § 17a(2) of the Bankruptcy Act of 1898, the Supreme Court stated as follows:
[A] willful and malicious injury does not follow as of course from every act of conversion, without reference to the circumstance. There may be a conversion which "is innocent or technical, an unauthorized assumption of dominion without willfulness or malice. There may be an honest but mistaken belief, engendered by a course of dealing, that powers have been enlarged or incapacities removed. In these and like cases, what is done is a tort, but not a willful and malicious one. (Cites omitted).
Davis v. Aetna Acceptance Corp., 293 U.S. 328, 332, 55 S. Ct. 151, 153, 79 L. Ed. 393 (1934). For a thorough discussion of the point raised in Davis as well as numerous other issues arising under § 523(a)(6) see United Bank of Southgate v. Nelson, 35 B.R. 766, 767 (N.D.Ill.1983), on remand 35 B.R. 765 (Bankr.N.D.Ill.1983). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545938/ | 988 A.2d 807 (2010)
John POLIS, Petitioner
v.
WORKERS' COMPENSATION APPEAL BOARD (VERIZON PENNSYLVANIA, INC.), Respondent.
Verizon Pennsylvania, Inc., Petitioner
v.
Workers' Compensation Appeal Board (Polis), Respondent.
No. 1549 C.D. 2009
No. 1602 C.D. 2009
Commonwealth Court of Pennsylvania.
Submitted on Briefs January 8, 2010.
Decided February 5, 2010.
*808 Zachary M. Rubinich, Philadelphia, for designated petitioner, Verizon Pennsylvania, Inc.
Jerry M. Lehocky, Philadelphia, for respondent, John Polis.
BEFORE: PELLEGRINI, Judge, BUTLER, Judge, and KELLEY, Senior Judge.
OPINION BY Judge PELLEGRINI.
Verizon Pennsylvania, Inc. (Employer) appeals from an order of the Workers' Compensation Appeal Board (Board) affirming the decision of the Workers' Compensation Judge (WCJ) granting the reinstatement petition of John Polis (Claimant) because he proved that he was entitled to *809 temporary total disability benefits after his job was eliminated. Claimant has filed a cross-appeal arguing that the Board's decision regarding the dates it granted the reinstatement of benefits was erroneous.
Claimant injured his left knee on December 18, 2003, while in the course of his employment with Employer as a switchman. That position required constant lateral climbing and kneeling. He worked at modified-duty and eventually was transferred by his supervisor to a light-duty position because he could no longer perform his job. Claimant had knee surgery on April 1, 2005, and was released to return to work with some restrictions on climbing and kneeling. In September 2006, Employer informed Claimant that his light-duty job was being eliminated and offered claimant an Enhanced Income Security Plan (EISP) pursuant to his collective bargaining agreement. Because no other job was offered to Claimant, he elected to take the EISP.
On October 30, 2007, Claimant filed a reinstatement petition alleging a worsening of his condition as of September 15, 2006, and that his work injury caused him lost wages because he was laid off while working his modified-duty job. A hearing was held before a WCJ. Claimant's testimony was presented by deposition and no fact witnesses for Employer were presented for rebuttal.
Claimant testified that he was 64 years old as of the date of his testimony on April 9, 2008. He worked for Employer for 40 years full-time having been hired in 1963, which was Bell of Pennsylvania at the time. He explained about his injury and having to work on light-duty and that he continued working in 2006 after having surgery on his knee. Claimant stated that he did not decide to retire from his job with Employer but instead that his light-duty job was eliminated in September 2006. He said he was offered the EISP which was a contractual obligation they had when they eliminated a job and which was offered to someone in a working group when there was a "force of adjustment to the workplace" pursuant to the collective bargaining agreement. Claimant specified that because no job was offered to him that he was capable of performing within his restrictions and he had no other options, he had to sign the EISP form. He also stated that the EISP plan was offered to individuals starting August 9, 2006, and that it had to be accepted by September 7, 2006. Claimant stated that he had not returned to work for any employer since December 2007, but that he had been actively searching for employment. However, Verizon was the only employer that employed people in his type of work. He had looked on the internet for positions, but had not spoken with any prospective employers about available jobs. He also did not consider himself retired and if the job he was performing in September 2006 had not been eliminated, he would still be working there because it was a great job. Claimant admitted that he received unemployment benefits after leaving Employer from October 7, 2006, through March 31, 2007, with a gross benefit of $485 per week increased to $497 in January 2007.[1]
Claimant offered into evidence the EISP form, which indicated that he received a payment of $66,000 and an expense allowance of $3,750, and a voluntary termination bonus of $10,000. The form indicated that Claimant elected to take monthly payments *810 up to four years or 48 monthly payments of $1,375 gross per month. The form also indicated that his last day of work was September 15, 2006, with the checkmark in the "type of separation" box as retirement. He also offered his separation worksheet forms and exit interview forms completed by his supervisor Brian Egolf indicating that he retired from employment rather than his position was eliminated or that there was an involuntary separation.
The WCJ found Claimant to be credible, persuasive and unrebutted and determined that he was forced from his employment because Employer eliminated his job, which at the time, was modified-duty.[2] He also found Claimant's testimony credible that Claimant's supervisor, rather than Claimant, filled out the forms that indicated Claimant was retiring rather than involuntarily separating from employment or having his position eliminated. The WCJ noted that Employer did not provide any rebuttal testimony from Employer witnesses, including Claimant's supervisor. The WCJ relied on the EISP documents as well as the fact that Claimant applied for and received unemployment compensation benefits, he did not consider himself retired, and he was actively seeking employment, albeit unsuccessfully. The WCJ then ordered Employer to reinstate Claimant's temporary total disability compensation from September 16, 2010, the date which his 48 monthly payments of $1,375 benefits ends and ongoing into the future, until his disability changes within the meaning of the Workers' Compensation Act (Act).[3] The WCJ also ordered that Employer was entitled to a credit for unemployment compensation that was paid to claimant for 26 weeks beginning October 7, 2006, through March 21, 2007, at the rate of $85 per week from October 7, 2006, through January 7, 2007, and $497 per week from January 7, 2007, through March 21, 2007.
Both Employer and Claimant appealed to the Board. Employer argued that the WCJ should have granted a suspension of benefits pursuant to Pennsylvania State University v. Workers' Compensation Appeal Board (Hensal), 948 A.2d 907 (Pa. Cmwlth.2008). The Board disagreed, explaining that case was not relevant because the defendant in that case presented vocational testimony regarding earning power assessment and vacancies in the labor market for which the claimant was capable and qualified to perform and the claimant was receiving a disability pension.
Claimant argued that the WCJ erred in awarding the reinstatement from September 16, 2010, instead of from September 15, 2006. The Board pointed out that because Claimant was receiving $1,375 per month for four years, the WCJ found that four years from the date Claimant was laid off would be September 16, 2010. "Were Claimant to receive compensation benefits in conjunction with the monthly severance benefits, the amount would exceed the maximum compensation rate." (Board's July 16, 2006 decision at 5.) This appeal by Employer challenging the eventual reinstatement of benefits and cross-appeal by Claimant challenging the credit given for EISP severance followed. Both appeals have been consolidated for *811 our review.[4]
Addressing Employer's appeal first, it again argues that Hensal controls. In Hensal, the claimant suffered a work-related injury, and despite being offered work by his employer within his medical restrictions, refused to return to work and applied for a disability pension. The employer filed a petition to suspend the claimant's benefits arguing that because he retired, he had voluntarily withdrawn from the workforce. Because the WCJ had determined that the claimant had not voluntarily removed himself from the workforce as he had sought employment at various positions only two weeks before the WCJ's hearing and, therefore, he had only "temporarily" retired, the issue on appeal was whether the claimant had, in fact, voluntarily removed himself from the workforce because he had admitted that he had not actually sought any work.
This Court held that to establish a claimant's earning power, the employer had to first demonstrate that suitable employment was made available to the claimant. However, the employer was not required to offer suitable alternative employment when the claimant had voluntarily left the workforce having no intention of working. We held that where a claimant had accepted a pension, the claimant was presumed to have voluntarily left the workforce entitling the employer to a suspension of benefits unless the claimant established that 1) he was seeking employment or 2) the work-related injury forced him to retire. Southeastern Pennsylvania Transportation Authority v. Workmen's Compensation Appeal Board (Henderson), 543 Pa. 74, 669 A.2d 911 (1995).
Hensal, however, does not apply to this case for several reasons: the claimant in that case chose to leave the workplace even after being told that work was available within his medical restrictions, and he chose to apply for a disability pension. In this case, Claimant was forced to leave the workplace when Employer told him that his job was being eliminated and no other work was available within his medical restrictions. Claimant also did not receive a pension but a collective bargaining Enhanced Income Security Plan for being forced out of his job. The EISP form that was submitted into evidence stated: "This is to inform you that your job is in a work group that is subject to a force adjustment." (Emphasis added.) Nowhere in that document is the payout characterized as a pension and it never mentions the word "disability" in order to receive payment. The EISP is strictly for employees who accept a buy-out when work is unavailable. Essentially, it is consideration for the termination of their employment. Finally, given that the WCJ found that Claimant's supervisor filed the forms indicating that Claimant was retiring, not Claimant, there is no evidence that he had intended to retire.[5] Because Hensal does *812 not apply as Claimant was forced out of his employment and he did not receive a pension, Claimant was not required to prove that he sought employment.
More apropos is Vista International Hotel v. Workers' Compensation Appeal Board (Daniels), 560 Pa. 12, 742 A.2d 649 (2000), where our Supreme Court, citing Weber v. Workmen's Compensation Appeal Board (Shenango, Inc.), 729 A.2d 1249, 1252 (Pa.Cmwlth.1999), stated that:
[W]e have held that when a claimant returns to work under a suspension with restrictions attributable to a work-related injury (that is, the claimant returns to a modified position rather than his time of injury position), is subsequently laid off and then petitions for the reinstatement of benefits, the claimant is entitled to the presumption that his loss of earning power is causally related to the continuing work injury.
Because Claimant was on modified-duty at the time his job was eliminated, his reinstatement petition was properly granted.
As for Claimant's appeal, he argues that the WCJ miscalculated his benefits under the reinstatement petition because the WCJ only granted total ongoing workers' compensation benefits to begin on September 16, 2010, which is the day his severance benefits will end. Instead, Claimant argues that while Employer is entitled to credits for the unemployment compensation benefits and the severance pay he was awarded, those credits do not completely preclude workers' compensation benefits being paid to him, and he is entitled to workers' compensation benefits from September 15, 2006, to September 20, 2010.[6]
In Kelly v. Workers' Compensation Appeal Board (U.S. Airways Group, Inc.), 935 A.2d 68 (Pa.Cmwlth.2007), we stated that when "severance benefits" were paid to an employee who was separated from employment for any reason, under Section 204(a) of the Act, 77 P.S. § 71(a), "the severance benefits paid by the employer directly liable for the payment of compensation. . . which are received by an employe *813 shall also be credited against the amount of the award made under sections 108 and 306, except for benefits payable under 306(c)."
In this case, the WCJ and the Board recognized that Claimant received "severance benefits," and if he were to also receive workers' compensation benefits during the same time period that he received those severance benefits, he would be receiving more compensation than he was entitled to under the Act. That is why they refused to award him benefits until September 16, 2010, the date on which his EISP benefits will end. Consequently, the Board did not miscalculate Claimant's benefits under the reinstatement petition.
Accordingly, the order of the Board is affirmed.
ORDER
AND NOW, this 5th day of February, 2010, the order of the Workers' Compensation Appeal Board, dated July 16, 2009, at A08-2398, is affirmed.
NOTES
[1] Claimant affirmed that he completed a Bureau form entitled Employee's Report of Benefits LIBC Form 760 on December 4, 2007, indicating unemployment compensation gross $994 bi-weekly. He also indicated severance benefits of $1,375 per month beginning October 20, 2006, through September 20, 2010.
[2] The WCJ is the ultimate determiner of credibility in workers' compensation cases. Rissi v. Workers' Compensation Appeal Board (Tony DePaul & Son), 808 A.2d 274 (Pa.Cmwlth. 2002).
[3] Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2626.
[4] Our scope of review of the Board's decision is limited to determining whether constitutional rights have been violated, whether an error of law was committed, or whether findings of fact are supported by substantial evidence. Morella v. Workers' Compensation Appeal Board (Mayfield Foundry, Inc.), 935 A.2d 598 (Pa.Cmwlth.2007).
[5] Similarly, Mason v. Workers' Compensation Appeal Board (Joy Mining Machinery and AIG Claim Services), 944 A.2d 827 (Pa.Cmwlth. 2008), has no application to this matter. Mason involved an injured claimant who, after two knee replacement surgeries, was released to perform medium-duty work but his employer decided not to reinstate him or offer him other positions because he could not perform his medium-duty job. The claimant filed for a disability pension, which was granted. While still employed by his employer, the claimant met with a vocational rehabilitation counsel to discuss job openings available to him within his work restrictions. The claimant was referred to seven different jobs. After leaving his position with the employer and remaining unemployed eight months later, the employer filed a petition to suspend benefits alleging that the claimant had elected to remove himself from the workforce.
Claimant filed an answer denying that work was available to him within his physical restrictions. The question became whether he had retired from the workforce by failing to follow through with the job referrals in good faith or whether he had been refused to return to work for the employer. On appeal, citing Henderson, we determined that because the claimant had accepted a pension, he had to prove that he was seeking employment or that his work-related injury forced him to retire. Because his injury did not force him to retire, the claimant had to prove that he was seeking employment, and we remanded the matter for further findings on that issue.
[6] Claimant contends that he is entitled to the following benefits:
Total workers' compensation benefits from September 15, 2006, through October 7, 2006;
Partial workers' compensation benefits from October 8, 2006, through October 20, 2006 (with credit for the net unemployment compensation weekly benefits of $447 that he received during that time);
No workers' compensation benefits from October 21, 2006, through March 21, 2007 (his combined severance and unemployment benefits are higher than his workers' compensation rate);
Partial monthly workers' compensation benefits from March 22, 2007, through September 20, 2010 in the amount of $1,558.22 (his monthly compensation rate of $2,700 1,141.78, his net monthly severance pay = $1,558.22);
From September 21, 2010, and ongoing he is entitled to total workers' compensation benefits of $2,700 per month. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919588/ | 541 A.2d 604 (1988)
Willie A. HORTON, Appellant,
v.
UNITED STATES, Appellee.
No. 86-1235.
District of Columbia Court of Appeals.
Argued February 9, 1988.
Decided May 4, 1988.
*605 Richard K. Gilbert, Washington, D.C., appointed by this court, for appellant.
Elizabeth H. Danello, Asst. U.S. Atty., with whom Joseph E. diGenova, U.S. Atty. at the time the brief was filed, and Michael W. Farrell and J. Edward Agee, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellee.
Before FERREN, BELSON, and ROGERS, Associate Judges.
FERREN, Associate Judge:
Appellant Willie A. Horton was charged with three counts of assault with a pistol, D.C.Code § 22-502 (1981), three counts of assault with a shotgun, id., and one count of carrying a pistol without a license, D.C. Code § 22-3204 (1981). The trial court denied his pretrial motion to suppress a shotgun seized by police from the vicinity of the house in which he lived. A jury subsequently acquitted appellant of the shotgun charges but convicted him on all three counts of assault with a pistol and on the *606 single count of carrying a pistol without a license. He now appeals the denial of his motion to suppress the shotgun. He also challenges two of the three assault convictions on two grounds: the jury verdict was not clearly unanimous; alternatively, the two challenged convictions must merge. We agree, on the record before us, that jury unanimity is not clearly apparent with respect to appellant's convictions of assault with a pistol on Rickie Marsh and on Carlton Stewart; accordingly, we reverse appellant's convictions on those two charges. We also remand the case for a factual finding as to whether the police found the shotgun inside or outside the curtilage of appellant's home. If the trial court finds that the police took the shotgun from within the curtilage, the court shall order suppression of the shotgun and, as a consequence, shall order a new trial of the other counts, namely assault with a pistol against Marcell Marsh and carrying a pistol without a license. Should the trial court determine, however, that the shotgun was seized from outside the curtilage and was thus properly admitted into evidence, appellant's convictions on those counts shall stand.
I.
To understand the arguments raised on appeal, one must have a comprehensive understanding of the facts. The criminal charges at issue are attributable to a street altercation between two rival groups of friends in a northwest Washington, D.C., neighborhood. In the late evening of June 25, 1985, Marcell Marsh, his brother Rickie Marsh, and their friend Carlton Stewart encountered appellant, his friend Donald Hairston, a young man named Tony, and a young woman. The Marsh group had just purchased some beer and was walking east on the south side of W Street, N.W., toward Carlton Stewart's house. Stewart and Rickie Marsh were walking several yards ahead of Marcell Marsh, who had paused to speak with an acquaintance. The government's witnesses testified that, when Marcell Marsh encountered Donald Hairston[1] proceeding west on W, the two, who knew and disliked one another, each refused to yield and consequently bumped shoulders. Hairston and Marsh began to argue. Hearing the argument, Rickie Marsh and Stewart turned around. Stewart put the beer down in his front yard, and he and Rickie Marsh walked back toward where Marcell Marsh and Hairston stood.
Marcell Marsh testified that Hairston at that point pulled a black pistol from his waist and shot at him from a distance of approximately twenty feet. Undeterred by the shot, Marcell Marsh walked up to Hairston, ready to fight. Marsh testified that Hairston then walked into the street and fired at him again. Marsh further testified that when Hairston had fired the second shot, appellant had jumped onto the roof of a nearby parked car holding a sawed-off shotgun, which he had pointed in the direction of Rickie Marsh and Stewart. According to Marcell Marsh, appellant had encouraged Hairston to shoot. Appellant then had jumped down from the car, taken the pistol from Hairston, and, according to Marcell Marsh, had "started shooting at Carlton [Stewart] and my brother." Marsh testified that appellant had been standing approximately a yard to a yard-and-a-half from Rickie Marsh and Stewart when he fired. Appellant, Hairston, and their companions then ran into an alley.
The testimony of Carlton Stewart and of Rickie Marsh was much the same as that of Marcell Marsh. Stewart testified, however, that appellant had fired his first shot at Rickie Marsh alone, from a distance of approximately seven feet, while Stewart had stood near Rickie Marsh, approximately three feet away.[2] Rickie Marsh testified *607 that appellant had taken the gun from Hairston, "pointed it at me and fired." In addition, Stewart testified that appellant had fired a second shot "in our general direction" as appellant and his friends ran to the alley. Rickie Marsh related a similar version of the facts, stating that as appellant and his group had run into the alley, appellant turned and fired in the direction of Rickie Marsh, Marcell Marsh, and Stewart.
The government also presented the testimony of two witnesses who had observed the altercation from their homes nearby. Sherri Bryant testified that she had heard a shot and loud voices and looked out onto W Street where she had seen a group of young men arguing. Bryant had seen one man holding a shotgun but had been unable to tell for sure which man it was. Marie Gibbs also had heard "loud talking," heard a shot, and observed the flash from a pistol. Neither woman testified that she had heard more than one shot.
Finally, the government presented testimony from the officer who had recovered a disassembled shotgun from the rear of appellant's house. Officer Julius Cook had found the gun next to a set of steps leading into the alley, just outside the fence enclosing the yard. The gun had been enclosed in a yellow suitcase. The government's witnesses identified the shotgun at trial as being similar to the one they had seen the night of the altercation. The parties stipulated that the shotgun had been tested and found to be inoperable because of a faulty firing pin.
Donald Hairston testified for the defense. He said that the altercation between the two groups of friends had begun when Marcell Marsh intentionally bumped into him, saying it was a "stick up." Hairston then had seen Rickie Marsh and Carlton Stewart coming out of the alley with sticks and had seen Marcell Marsh pick up a "pickfork" (which Hairston later described as an ice pick) and a hammer. At that point, another person in Hairston's group, Andre Cook, had pulled out a starter pistol belonging to Hairston and given it to him. Hairston, knowing the pistol fired only blanks, had fired it into the air in an effort to scare off Stewart and the Marsh brothers. According to Hairston, however, the Marsh brothers apparently had known the pistol was not real and thus had not been frightened by it. Appellant had taken the pistol from Hairston and fired it into the air again, saying "it's a joke." Hairston denied that anyone in his group had carried a shotgun that night.
Appellant took the stand in his own behalf. Like Hairston, appellant described the Marsh group as the aggressor. Appellant testified that he had first become involved in the altercation when he heard one of the Marsh brothers arguing with Hairston. The person arguing with Hairston had had a hammer and a "big old fork" in his hands, and the other two in that group had held sticks. Appellant had heard a bang and had gone over to Hairston and the Marsh brother with whom Hairston was arguing, to see what was going on. He saw a small black pistol in Hairston's hand. Appellant took the pistol from Hairston and crossed to the north side of W Street. The Marsh group started coming at him, still holding sticks, a hammer, and the fork. Appellant then shot the pistol into the air in an effort to scare them. When they kept approaching, he ran away through the alley. Appellant, too, denied having a shotgun that night.
II.
Before trial, appellant moved to suppress the shotgun seized by Officer Cook from behind the house where appellant lived with his grandparents. The trial court denied the motion.[3] Although Officer *608 Cook had seized the shotgun without a warrant because of an anonymous tip to the police, the trial court found that appellant lacked standing[4] to assert a fourth amendment interest in the shotgun. Appellant now challenges the trial court's ruling, arguing that the suitcase and the shotgun lay within the protected curtilage of appellant's home and that the item searched and seizeda suitcasecomes within none of the exceptions to the presumptive fourth amendment protection against warrantless searches and seizures that the curtilage is understood to afford. We address each issue in turn.[5]
A.
It is well established that everyone has a reasonable expectation of privacy for fourth amendment purposes not only in one's home but also in the curtilage surrounding the home. Dow Chemical Co. v. United States, 476 U.S. 227, 235, 106 S.Ct. 1819, 1825, 90 L.Ed.2d 226 (1986). The concept of curtilage, however, evades concrete definition. It is a concept which originated at common law to extend protection under the law of burglary not only to the house but also to the area surrounding the house. United States v. Dunn, ___ U.S. ___, 107 S.Ct. 1134, 1139, 94 L.Ed.2d 326 (1987). Curtilage has been described in contemporary cases as the area "to which extends the intimate activity associated with the `sanctity of a man's home and the privacies of life.'" Oliver v. United States, 466 U.S. 170, 180, 104 S.Ct. 1735, 1742, 80 L.Ed.2d 214 (1984) (quoting Boyd v. United States, 116 U.S. 616, 630, 6 S.Ct. 524, 532, 29 L.Ed. 746 (1886)). More recently, the Supreme Court has suggested that the curtilage may be defined with reference to the following four factors:
[1] the proximity of the area claimed to be curtilage to the home, [2] whether the area is included within an enclosure surrounding the home, [3] the nature of the uses to which the area is put, [4] and the steps taken by the resident to protect the area from observation by people passing by.
Dunn, 107 S.Ct. at 1139 (barn fifty yards outside fence surrounding house, unprotected from view from adjacent open fields, held not to be within curtilage). The Court has added, however, that "these factors are useful analytical tools only to the degree that, in any given case, they bear upon the centrally relevant considerationwhether the area in question is so intimately tied to the home itself that it should be placed under the home's `umbrella' of Fourth Amendment protection." Id.
We believe that, as to cases concerning homes in the city, the factors in Dunn must be evaluated with reference to the obvious attributes of an urban environment. Proximity to the home, for example, may be virtually irrelevant if the area surrounding the house is quite small. Likewise, the absence of a fence or other means of excluding passersby from the area may be less significant in an urban than in a rural area, since the configuration of the streets and houses in many parts of the city may make it impossible, or at least highly impracticable, to screen one's home and yard from view. (On the other hand, because a fence may be unusual in some neighborhoods, a particular fence may be evidence tending to show a limit on one's privacy interest to the area enclosed.) In *609 any event, in an urban area, substantial weight may have to be accorded the uses to which one's real estate is put, for actual use of the yard and related property is likely to be the primary way in which one asserts an intimate tie to the home.
The trial court concluded that appellant, as a matter of law, lacked a fourth amendment interest in the suitcase and the shotgun because those items were taken from the area outside the fence surrounding his home, albeit still within the property line. Although the trial court's precise conclusions are somewhat difficult to discern from the court's oral ruling, the court noted that the suitcase was located outside the fence, near the alley, where any passerby could easily pick it up. The court then concluded that the location of the suitcase failed to manifest a reasonable expectation of privacy in the suitcase and its contents and, thus, that appellant lacked standing to challenge the officer's seizure and search. We understand from the trial court's ruling that the court did not consider whether the area outside the fence might have qualified as part of the protected curtilage surrounding the home. Instead, the trial court appears to have simply assumed that the curtilage necessarily ended at the fence. The definition of the curtilage for fourth amendment purposes, however, is not so mechanical. The Supreme Court has expressly rejected the notion that the curtilage may automatically be determined with reference to the fence around a property. Id. at 1139 n. 4 ("We decline the Government's invitation to adopt a `bright-line rule' that `the curtilage should extend no farther than the nearest fence surrounding a fenced house.'"). Accordingly, we conclude that a factual inquiry, leading to a Dunn-type analysis, is required. Here, however, because the trial court ruled that appellant lacked standing as a matter of law, the court declined to conduct an evidentiary hearing. Consequently, the record is devoid of the factual findings necessary to determine whether the area from which the suitcase and shotgun were seized was inside or outside the curtilage of appellant's home.
B.
Appellant concedes that, if the area from which the suitcase containing the shotgun was seized is outside the curtilage, he has no protected fourth amendment interest in the suitcase and its contents, since he has not asserted an ownership interest in the suitcase or in the shotgun. The government argues, however, that even if these items were taken from within the protected curtilage of his home, this does not necessarily mean he may assert a fourth amendment interest in them. The government contends that although the occupant of a home is deemed, presumptively, to have a reasonable expectation of privacy in the area within the curtilage, not every item within the curtilage is subject to fourth amendment protection. The government's argument misapprehends the curtilage doctrine.
While it is true that the Supreme Court has upheld certain types of police intrusions into the curtilage, see California v. Ciraolo, 476 U.S. 207, 106 S.Ct. 1809, 90 L.Ed.2d 210 (1986) (aerial observation of area within the curtilage permitted), no exception to the general rule protecting the area within the curtilage from warrantless search and seizure applies in this case. As the government correctly points out, Officer Cook was not precluded from observing the area in which the suitcase was found, even if within the curtilage, since the suitcase was in public view. It does not follow, however, that merely because the suitcase was visible, the police could properly enter the curtilage (assuming, again, that the suitcase was within the curtilage) without a warrant to seize the suitcase and search its contents. Indeed, the concept of the curtilage would be of little meaning if the police were permitted to enter the curtilage at will to reach and seize whatever tangible items might be located there. Accordingly, if on remand the trial court concludes that the suitcase was taken from within the curtilage, evidence of the suitcase and its contents must be suppressed, and appellant will be entitled to a new trial. See supra note 5.
*610 III.
Appellant also contends that the adverse jury verdicts on charges involving Carlton Stewart and Rickie Marsh were not clearly unanimous. We have held:
The constitutional right to a unanimous jury verdict, as set forth in the Sixth Amendment to the United States Constitution and Super.Ct.Crim.R. 31(a), "requires jurors to be in substantial agreement as to just what a defendant did as a step preliminary to determining whether that defendant is guilty of the crime charged."
Burrell v. United States, 455 A.2d 1373, 1379 (D.C.1983) (quoting Johnson v. United States, 398 A.2d 354, 369 (D.C.1979)). Here, the jury heard testimony from seven eyewitnesses, each of whom had seen the events somewhat differently. Their testimony, taken in various combinations, offered several possible scenarios under which the jury could have found appellant guilty of the assaults charged. The trial court and the parties recognized and resolved the unanimity issue with respect to the charge of assault with a pistol against Marcell Marsh. A similar unanimity issue existed, however, with respect to the charges of assault with a pistol against Carlton Stewart and against Rickie Marsh. Neither the parties nor the trial court recognized this second unanimity issue.
The government's complaining witnesses, Marcell Marsh, Rickie Marsh, and Carlton Stewart, each testified that appellant had fired the pistol twice: once immediately after he took the pistol from Hairston and again as he ran toward the alley. Appellant, to the contrary, testified that he had fired the pistol only once, in self-defense, as he ran away from the Marsh group. Donald Hairston also testified that appellant had fired only once. The government's neutral witnesses, who saw the altercation from their nearby homes, each testified about hearing a single shot.
Appellant suggests several possible scenarios upon which the jury may have relied, any one of which would have yielded guilty verdicts on the two charges of assault now challenged. First, the jury could have credited appellant's testimony that he had fired only once, but have discredited his claim of self-defense, yielding convictions of assault on both Rickie Marsh and Carlton Stewart based upon the evidence showing that appellant fired his shot in the direction of the entire Marsh group. Second, the jury could have believed the government's witnesses' testimony that appellant had fired twice, then concluded that the first shot constituted an assault on both Rickie Marsh and Carlton Stewart (since the two stood just a few feet apart at that point), but accepted appellant's claim of self-defense as to the second shot, fired as he ran toward the alley. Third, the jury could have believed that appellant fired twice, without justification, (a) assaulting Rickie Marsh with the first shot and both victims with the second shot or (b) assaulting both victims with both shots.[6] We may rule out a particular possibility if we conclude that no reasonable jury would have accepted it. Scarborough v. United States, 522 A.2d 869, 874-75 (D.C.1987) (en banc). Based on the record, however, we conclude that a reasonable jury could have accepted any of the several scenarios outlined above. Accordingly, we hold that the trial court erred in failing to give a special unanimity instruction on the Stewart and Ricky Marsh assaults.
Contrary to the government's assertion on appeal, the record reveals no single, consistent scenario from which the jury necessarily found appellant's guilt. In Scarborough, we were able to infer from the verdicts that the jury, despite the absence of a special unanimity instruction, could not reasonably have accepted one part of the defendant's testimony while disbelieving the other critical portion. Id. Therefore, we concluded, the challenged *611 verdict must have been unanimous and the error in failing specially to instruct the jury was harmless beyond a reasonable doubt. Likewise, we recently held in Shivers v. United States, 533 A.2d 258 (D.C.1987), that reversal was not required, although no special unanimity instruction had been given, since the challenged jury verdict "appear[ed] to reflect unanimous agreement as to at least one of the possible bases for the assault charge." Id. at 262. Here, in contrast, there is no evidence to which we can point that indicates unanimous agreement among the jurors; we cannot deduce from the record whether the jury must have agreed upon one particular set of facts.
The possibility of jury confusion, moreover, is all the greater than in Shivers because appellant presented "distinct and sharply different defenses," id. at 263, to the alleged gunshots, whereas Shivers offered consistent denials of the assaults charged.[7]
Finally, although the trial court gave the jury the standard general unanimity instruction,[8] the court did not instruct the jury that it must unanimously agree upon a single factual scenario underlying its verdicts of guilty. See Hack v. United States, 445 A.2d 634, 641 (D.C.1982).[9] Consequently, we cannot infer from the verdicts themselves that all the jurors were in agreement as to appellant's specific criminal acts.
Because appellant made no objection to the court's instructions at the time of trial, we may reverse only upon a showing of plain error, that is, error so clearly prejudicial to substantial rights of the defendant as to jeopardize the very fairness and integrity of the trial. Watts v. United States, 362 A.2d 706, 709 (1976) (en banc). The error complained of here was of constitutional magnitude, violating appellant's sixth amendment right to a unanimous jury verdict. Although not every error of constitutional magnitude may rise to the level of plain error, see Scarborough v. United States, 496 A.2d 277, 282 & n. 11 (D.C.1985) (per curiam) (Ferren, J., concurring); reheard en banc, Scarborough, 522 A.2d 869, supra, we conclude that the sixth amendment right to a unanimous jurya substantial rightwas so clearly prejudiced by the confusion inherent in the separate defenses to the alleged gunshots, unaided by a special unanimity instruction, that plain error occurred. Compare Barkley v. United States, 455 A.2d 412, 416 (D.C.1983) (Ferren, J., concurring in part and dissenting in part), with Scarborough, 522 A.2d at 874-75. Accordingly, appellant's convictions of assault with a pistol on *612 Rickie Marsh and Carlton Stewart must be reversed and remanded.[10]
IV.
In accordance with this opinion, we reverse appellant's convictions for assault with a pistol on Rickie Marsh and Carlton Stewart on the ground that the jury verdicts on those charges were not clearly unanimous, and thus we remand for a new trial. With respect to the remaining convictions of assault with a pistol on Marcell Marsh and of carrying a pistol without a license, we remand for an evidentiary hearing on whether the shotgun introduced at trial was seized by police outside or inside the curtilage of appellant's home. Should the trial court conclude that the shotgun was taken within the curtilage, the court shall order the shotgun suppressed and, as a consequence, shall vacate appellant's remaining convictions and order a new trial on those counts. Otherwise, those two convictions shall stand. The judgment of the trial court, therefore, is hereby
Reversed in part and remanded for further proceedings.
NOTES
[1] Donald Hairston, appellant's co-defendant, pled guilty to possession of a prohibited weapon on charges arising out of the same incident. At trial, he testified for the defense.
[2] Although Stewart testified on direct examination that appellant had "fired at Rickie Marsh," he later testified on cross-examination as follows:
Q. How far was, were you from Mr. Horton when you say he fired the pistol at Rickie Marsh?
A. I'd say
Q. I beg your pardon?
A. Probably about 7 feet, I don't know.
Q. And what did Mr. Horton do then?
A. I told you he fired the gun at Rick and I.
Q. Then what happened? Rickie jumped behind you, where did Mr. Horton go?
A. And Donald [Hairston] ran toward the alley where he turned around and fired again in our general direction.
(Emphasis added.)
[3] The trial court heard lengthy argument by both parties but took no evidence.
[4] We understand the trial court's ruling to mean that appellant "lacked standing" to challenge introduction into evidence of the shotgun confiscated by the police because he lacked a reasonable expectation of privacy in the area searched and the items seized. See Rakas v. Illinois, 439 U.S. 128, 140, 99 S.Ct. 421, 428, 58 L.Ed.2d 387 (1978); Moore v. United States, 468 A.2d 1342, 1345 & n. 11 (D.C.1983).
[5] The government urges us to conclude that the error, if any, in admitting the shotgun was harmless in light of the fact that appellant was acquitted on the shotgun charges. The shotgun, however, was an essential element in the testimony of each of the government's witnesses. The physical presence of the shotgun in the courtroom substantially undermined the credibility of the scenario presented by the defense. Without the shotgun, appellant's theory of self-defense might have persuaded the jury not only with respect to the shotgun charges but also with respect to the pistol charges. Accordingly, we conclude that if there was error in admitting the shotgun, that error cannot be deemed harmless.
[6] Appellant suggests this combination of facts as two separate scenarios. We treat the two together, however, since a finding that appellant assaulted both victims with both shots embraces the finding that the appellant, with the first shot, assaulted Rickie Marsh alone. The jury, therefore, could have disagreed as to whether the first shot constituted an assault on one or both, and still have rendered a unanimous verdict for sixth amendment purposes.
[7] In the present case, the government alleges two shots directed at various persons. Appellant contends, with respect to the first alleged shot, that no shot in fact was fired; with respect to the second shot, he argues self-defense. The potential for jury confusion inherent in his two separate defenses is obvious in the multiple factual scenarios that may be deduced from the evidence depending upon which, if any, of appellant's defenses the jury may have chosen to accept.
[8] Specifically, the trial court instructed the jury that in reaching its verdict,
The verdict must represent the considered judgment of each juror. In order to return a verdict, it is necessary that each juror agree to the verdict. Your verdicts must be unanimous.
(Emphasis added.)
[9] In Hack v. United States, 445 A.2d 634 (D.C. 1982), we held that where, on the facts of the case, a potential unanimity problem presents itself, a special unanimity instruction may be required.
The requirement for a unanimous verdict, as set forth in the Sixth Amendment to the United States Constitution and Super.Ct.Cr.R. 31(a), "required jurors to be in substantial agreement as to just what a defendant did as a step preliminary to determining whether that defendant is guilty of the crime charged." United States v. Gipson, 553 F.2d 453, 457-58 (5th Cir.1977), quoted in Johnson v. United States, [398 A.2d 354, 369 (D.C.1979)]. Because of the possibility of a nonunanimous verdict, when one charge encompasses two separate incidents, the judge must instruct the jury that if a guilty verdict is returned the jurors must be unanimous as to which incident or incidents they find the defendant guilty. Hawkins v. United States, 434 A.2d 446 (D.C.1981).
Id. at 641. Had such an instruction been given in this case, the outcome might have been different. In the absence of such an instruction, however, we may not presume that the jury reached unanimous agreement on the underlying facts.
[10] In view of our holding, we need not reach appellant's contention that the challenged assault convictions merge. We note, however, that in the event appellant is retried on those counts, any two convictions arising from the firing of a single shot would merge on the facts of this case. United States v. Alexander, 152 U.S. App.D.C. 371, 381, 471 F.2d 923, 933, cert. denied, 409 U.S. 1044, 93 S.Ct. 541, 34 L.Ed.2d 494 (1972) (single act, directed to a group, constitutes a single offense, although more than one person is put in fear); accord, Ladner v. United States, 358 U.S. 169, 79 S.Ct. 209, 3 L.Ed.2d 199 (1958). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545992/ | 40 B.R. 118 (1984)
In re WILSON FOODS CORPORATION, Williams Meat Co., Inc., Fischer Packing Company, Wilson Certified Express, Inc., Debtors.
Bankruptcy Nos. Bk-83-01034-A and Bk-83-01038-A-Bk-83-01040-A.
United States Bankruptcy Court, W.D. Oklahoma.
May 23, 1984.
*119 Reef C. Ivey, II, Gen. Counsel, Oklahoma City, Okl., for Wilson Foods Corp.
G. Blaine Schwabe III of Mock, Schwabe, Waldo, Elder, Reeves & Bryant, Oklahoma City, Okl., and Roy H. Carlin, of Reavis & McGrath, New York City, for debtors.
I. William Cohen of Hertzberg, Jacob & Weingarten, Detroit, Mich., for Unsecured Creditors' Committee.
MEMORANDUM OPINION AND ORDER
RICHARD L. BOHANON, Bankruptcy Judge.
After a hearing on interim compensation for professional persons in this matter, counsel for the Official Unsecured Creditors' Committee has made application for additional compensation. The regular interim applications for fees have been disposed of and the only question we address is the propriety of the present application[1] based on the facts of the case. The debtors have objected to the application essentially on the grounds that the Committee's counsel have had ample compensation and, therefore, consideration of an additional award should be foreclosed. A brief review of this case will serve to place the application and our opinion in perspective.
These debtors have operated their respective businesses as debtors in possession since filing voluntary petitions in April, 1983. On March 28, 1984, an order was entered confirming a plan of reorganization after nearly one year of hearings, meetings, negotiations and various other workouts. These matters consumed much of the Court's docket during that year and the Court had ample opportunity to observe all counsel. The confirmed plan called for a 100% payment plus interest to holders of unsecured claims represented by the Committee. This class comprises claims of a dollar sum in excess of $31 million.
Wilson Foods Corporation is the largest processor of pork in the United States and accounts for some 12.5% of the federally inspected slaughter of hogs. With respect to processors of all types of meats, the debtor ranks fifth in size. Information provided by the Examiner in this case show that the debtors' annual sales amounted to $2.2 billion in fiscal year 1982; the Company had assets of $284.8 million, and stockholders' equity was $83.3 million as of July, 1982. There has never been any controversy that the debtor entities were not solvent at the time their voluntary petitions were filed.
With this background we proceed to address the application for additional compensation and the objections raised by the debtors' counsel. Fee awards in bankruptcy proceedings must necessarily be governed by applicable provisions of the Bankruptcy Code. Section 330 provides that the *120 Court may allow "reasonable compensation for actual, necessary services rendered . . . based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title. . . ." (emphasis added) The concept of strict economy of administration under the former Act is no longer the rule. Compare In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir.1976) with In re Penn-Dixie Industries, Inc., 18 B.R. 834 (Bkrtcy.S.D.N.Y.1982), see also H.R.Rep. No. 595, 95th Cong., 1st Sess. 330 (1977) reprinted in 1978 U.S.Code Cong. & Admin. News, 5787, 6286. However, abandonment of the principle of economy does not imply that this concept is to be totally disregarded. Rather, the economy aspect merges with several other considerations in determining what is reasonable under the particular circumstances. The recognized factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), establish the objective basis in the overall determination.
At the outset we note that several other courts have allowed "additional" compensation in bankruptcy matters. See e.g., Rose Pass Mines, Inc. v. Howard, 615 F.2d 1088 (5th Cir.1980); In re Warrior Drilling & Engineering Co., Inc., 18 B.R. 684 (Bkrtcy. N.D.Ala.1981); In re Garland Corporation, 8 B.R. 826 (Bkrtcy.D.Mass.1981); In re Penn-Dixie Industries, Inc., supra; In re Nova Real Estate Investment Trust, 30 B.R. 347 (Bkrtcy.E.D.Va.1983); In re Werth, 32 B.R. 442 (Bkrtcy.D.Col.1983); In re Bishop, 32 B.R. 302 (Bkrtcy.D.R.I.1983). Indeed, even under the Act where much emphasis was placed on economy of administration a "premium" award was not unheard of. Matter of Aminex Corporation, 15 B.R. 356 (Bkrtcy.S.D.N.Y.1981).
The starting point for the calculation of fee awards is determining the number of hours reasonably spent multiplied by the hourly rate charged. Ramos v. Lamm, 713 F.2d 546 (10th Cir.1983). This calculation allows the court to arrive at what is sometimes called the "lodestar" determination. See Furtado v. Bishop, 635 F.2d 915 (1st Cir.1980); Lindy Brothers Builders, Inc. of Phila. v. American Radiator & Sanitary Corp., 487 F.2d 161 (3rd Cir. 1973); In re Bishop, supra. Upon a determination of the lodestar, the Bankruptcy Code then requires the Court to make a determination of "reasonableness" based on all the surrounding circumstances. 11 U.S.C. § 330. In this regard, the Court has authority to make upward or downward adjustment to include an additional award of compensation for exceptional services or for other reasons. In re Warrior Drilling and Engineering Company, Inc., supra; In re Casco Bay Lines, Inc., 25 B.R. 747 (Bkrtcy. 1st Cir.1982).
The decision as to what is reasonable compensation is left to the discretion of the Court, however, several factors have been suggested by case law. In non-bankruptcy cases the Court of Appeals for this Circuit has used the term "exceptional success" in justifying additional fees based on performance of counsel, victory under unusually difficult circumstances or with an extraordinary economy of time, results achieved, or the establishment of significant new law. Ramos v. Lamm, supra at 557. The Supreme Court has noted that "in some cases of exceptional success an enhanced award may be justified." Hensley v. Eckerhart, 461 U.S. 424, ___, 103 S. Ct. 1933, 1941, 76 L. Ed. 2d 40, 52 (1983). It is abundantly clear, however, that awards of fees in excess of the lodestar should occur only in rare cases. Hensley v. Eckerhart, supra; Ramos v. Lamm, supra. Equally as clear is the mandate that the Court provide concise and clear explanations of its reasons for the additional fee award, Hensley v. Eckerhart, and that the applicant carry the evidentiary burden necessary to justify entitlement to additional compensation. Blum v. Stenson, ___ U.S. ___, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984). This latter evidentiary point is noted with the caveat that request for fees "should not result in a second major litigation." See Blum v. Stenson, supra, ___ U.S. at *121 ___ n. 19, 104 S.Ct. at 1550 n. 19. (citing Hensley).
Wilson Foods Corporation is a large public company with stockholders exceeding 24,000 and involving some $31 million of unsecured debts. Counsel for the Unsecured Creditors' Committee is experienced in bankruptcy matters and the Court observes that their performance in these matters confirms their capabilities. At least partially as a result of their efforts this reorganization has moved swiftly and achieved 100% payment for creditors with the time value of their claims.[2] The time in which these debtors have reorganized has been a savings in itself for had the Committee caused delay the administrative expenses would continue to mount. Moreover, the special skills and experience of counsel for the Committee necessarily would be a time saving factor in novel and complex cases such as this. Consequently, the naked lodestar calculation may easily not be fully compensatory under such circumstances. See Copeland v. Marshall,[3] 641 F.2d 880, 893 (D.C.Cir.1980); In re Casco Bay Lines, Inc., supra, at 756.
At the hearing for additional compensation counsel for the Committee supported the request with documents and testimony from the Chairman of the Unsecured Creditors' Committee. The chairman represented the largest unsecured creditor on the Committee, and is himself an experienced trial lawyer. He outlined the various negotiations which were undertaken by counsel during the course of the case. His testimony included discussions of how counsel for the Committee had managed to keep the various creditors together when often there were competing interests. He noted counsel's ability to continually prevent the Committee from acting on individual interests rather than in their capacity as representatives of the entire class. He also noted that due to tough negotiations with the debtors, creditors have a serious potential of receiving their payments within 2 to 3 years. In conclusion he noted the additional compensation requested by the Committee's counsel was modest under the circumstances. We find that this record adequately satisfied the evidentiary burden of Blum v. Stenson, supra.
Section 330 of the Code directs us to find what compensation is "reasonable" based on the "time, the nature, the extent, and the value of such services." Clearly, what is "reasonable" must necessarily relate to the evidence presented. Matter of Permian Anchor Services, Inc., 649 F.2d 763, 768 (10th Cir.1981). Therefore, we turn to the language of § 330 to determine what is reasonable in light of the evidence which is before us.
The first component we examine is that of time. In a bankruptcy proceeding this factor takes on several characteristics including the traditional "lodestar" concept. It should also include the duration of the case and the attendant results where a plan has been brought to confirmation expeditiously. It may also include consideration of how long creditors are made to await payment of their claims and how the payment may have been facilitated or enhanced by efforts of counsel. In examining the time factor here, it becomes obvious that counsel has adequately presented points evidencing favorable time considerations. These points have already been noted and it serves no purpose to repeat them.
Next we are directed to examine the "nature" of the services provided. We take this term to relate both to the combination of qualities which represent the *122 counsel's abilities as well as reference to the specific tasks performed in the case. This determination must be weighed by the bankruptcy judge against his own knowledge, experience and expertise in similar matters. The testimony was that counsel provided invaluable services to the Committee and the actual services were performed in a highly competent manner. Having observed counsel during the course of these proceedings and in light of the testimony we are satisfied counsel is of unquestioned competence. The actual nature of the services have included legal questions and issues on extremely complex commercial, labor as well as bankruptcy matters. The unique posture of this case perhaps mandated a nature of services which may be described as comprehensive and intricate. These services required and demonstrated skill and judgment which only counsel experienced in this specialized area would possess.
The Code also asks that we consider the "extent" of the services which were provided. This is the most nebulous of the Code terms and therefore we understand it to take on a broad range of factors relating to the scope of services provided and the impact of those services on the ultimate results achieved. In this case counsel represented in our view the most important and necessary party which a debtor must work with in a reorganization case. The Creditors' Committee constituted aggregate debts of some $31 million and its influence impacted on every aspect of the case. Hardly any event or undertaking in this case was extraneous to this Committee's consideration and counsel must have remained abreast of all actions. Consequently, the extent of these services are difficult to measure, but certainly their importance cannot be denied.
The Code directs that we must weigh the "value of such services" in determining reasonableness. This is the most comprehensive of all the factors and properly is defined by those points outlined in Johnson v. Georgia Highway Express, Inc., supra. In light of the twelve Johnson factors the total value of these services are found to be quite reasonable.
Finally, the Code commands the Court to look to the cost of comparable services other than in bankruptcy proceedings. In light of the discussion which follows pertaining to the total fee request we do not find the award here to be incompatible with awards in anti-trust, tort, civil rights or other major commercial cases. Indeed, in many instances awards for such cases may be much higher under the appropriate circumstances. However, we note that such comparisons are extremely difficult since many of these non-bankruptcy cases relate to whether the party prevails at trial or other facts not present in bankruptcy cases.
These various terms in § 330 are undefined in the Code and our attempt here is not in the strict definitional sense, but to provide some context and parameters of judging "reasonableness" of fee applications. Also, although we have approached each term in isolation, the Code language indicates the inter-relationship of the terms and their employment in fee determination matters.
The Committee's counsel fee request amounts to $247,575 for 1,634.50 hours. This averages approximately $151 an hour for the services rendered. Counsel seeks additional fees in the amount of $37,500, approximately 15% over the lodestar amount.
By way of further comparison, the total fee request of counsel amounts to approximately 10% of the total fees to date for all counsel in this case. Moreover, this total fee award would be less than 1% of the debtors' assets and less than 1% of the Committees' claims which will be paid out at 100%.
We find this request to be reasonable and constitutes one of those rare instances where additional fees can be justified. We emphasize that additional compensation will not be granted routinely. Only in the most exceptional cases would it be proper for counsel to seek any additional compensation and only when the record and evidence *123 so warrant may the Court undertake to grant such awards.
Accordingly, for the reasons set forth it is ordered that the application for additional compensation be and hereby, is granted. The objections of the debtors are overruled and they are directed to pay the additional sum of $37,500 as reasonable compensation to counsel for the Official Unsecured Creditors' Committee.
NOTES
[1] Such awards have variously been described as an upward adjustment, Blum v. Stenson, ___ U.S. ___, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984); a "premium" Matter of Aminex Corporation, 15 B.R. 356 (Bkrtcy.S.D.N.Y.1981); a "reward" In re Yale Express Systems, Inc., 366 F. Supp. 1376 (D.S.D.N.Y.1973); a "bonus" Matter of TMT Trailer Ferry, 577 F.2d 1296 (5th Cir.1978); and "enhancement" Matter of Myers, 4 B.R. 343 (Bkrtcy.N.D.Fla.1980). However, the Bankruptcy Code provides only for "reasonable compensation" under § 330. Thus, absent a showing of reasonableness, these terms become inappropriate under the Code.
[2] We do not overly emphasize the fact that creditors here receive 100% payout under the confirmed plan as this happened as a matter of what could best be accomplished in the case. The correct focus for fee consideration is determine whether the maximum payout was achieved based on the totality of the circumstances. Consequently, a less than 100% payout would not automatically preclude the award of additional fees.
[3] We note that the emphasis on "prevailing" in civil rights or anti-trust cases does not become germane in bankruptcy cases for purposes of fee determination. Rather our focus is not on what party prevails but what is reasonable pursuant to § 330 of the Code. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546083/ | 77 F.2d 699 (1935)
FEWOX
v.
UNITED STATES.
No. 7644.
Circuit Court of Appeals, Fifth Circuit.
May 20, 1935.
W. K. Zewadski, Jr., and Wm. C. Pierce, both of Tampa, Fla., for appellant.
John W. Holland, U. S. Atty., of Jacksonville, Fla.
Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.
SIBLEY, Circuit Judge.
Fewox was convicted on November 27, 1934, of offenses against the internal revenue laws. An ordinary motion for new trial was made the next day. It was overruled, and he was sentenced on December 5th. On December 14th an extraordinary motion for new trial on the ground of newly discovered evidence was filed. This was heard and overruled on December 17th, and on the same day a notice of appeal was filed. On January 16, 1935, the District Court extended the time for settling the bill of exceptions until February 15th, and on February 7th a bill of exceptions was certified covering both the trial and the proceedings upon the extraordinary motion. The assignments of error run both to the rulings at the trial and to the judgment on this extraordinary motion. The United States moved to dismiss the appeal because not taken within five days from the entry of the judgment of conviction. Fewox contends that, since the appeal was taken within 5 days from the overruling of his extraordinary motion and since that motion was filed within 60 days from the verdict as allowed by the new rules, the appeal was good.
The controlling provisions read thus:
"Rule II. Motions. * * * (2) Save as provided in subdivision (3) of this rule, motions in arrest of judgment or for a new trial shall be made within three days after verdict or finding of guilt.
"(3) A motion for a new trial solely upon the ground of newly discovered evidence may be made within sixty days after *700 final judgment without regard to the expiration of the term at which judgment was rendered. * * *
"Rule III. Appeals. An appeal shall be taken within five days after entry of judgment of conviction except that where a motion for a new trial has been made within the time specified in subdivision (2) of Rule II the appeal may be taken within five days after entry of the order denying the motion."
A main purpose of the rules is to force early termination of criminal cases. Section 2 of the statute authorizing them, 48 Stat. 399 (28 USCA § 723a), preserves the former right of appeal, but permits regulation of the time and manner of asserting it. The time limits fixed by the rules are jurisdictional just as those formerly fixed by statute were. Rule II fixes 5 days from the entry of judgment of conviction or from the overruling of the ordinary motion for new trial which itself must be filed within 3 days after verdict. The present appeal, not having been taken in that time, is unavailable to bring under review the proceedings on the trial. Rule II(3) provides for an extraordinary motion on account of newly discovered evidence to be filed within 60 days from the final judgment, but no appeal from the overruling of it is mentioned. Such an extraordinary motion does not revive a right of general appeal previously barred. If it did, in every case the time for general appeal could be extended for 65 days from the entry of judgment by filing an extraordinary motion, no matter how frivolous. We hold ourselves without jurisdiction to review the rulings upon the trial. But, since section 2 of the statute above referred to preserves the right of appeal as formerly authorized, the overruling of the extraordinary motion may still in a proper case be itself reviewed. We find no abuse of discretion in overruling it. The alleged newly discovered evidence was that of neighbors touching the location of the distillery and the trail from it and the distance to the home of Fewox. There had been a committal trial in which the contentions of the government's witnesses about these things were fully developed, and the slightest diligence in preparing for trial would have enabled Fewox to obtain the evidence of these neighbors.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546049/ | 988 A.2d 968 (2010)
2010 ME 9
Bryan A. SMITH
v.
CENTRAL MAINE POWER CO.
Docket: Pen-09-94
Supreme Judicial Court of Maine.
Argued: September 16, 2009.
Decided: February 9, 2010.
Catherine R. Connors, Esq. (orally), Hallie F. Gilman, Esq., Pierce Atwood LLP, Portland, ME, for Central Maine Power Company.
Barry K. Mills, Esq. (orally), Hale & Hamlin, LLC, Ellsworth, ME, Lisa Cohen Lunn, Esq., Vafiades, Brountas & Kominsky, LLP, Bangor, ME, for Bryan A. Smith.
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.
SAUFLEY, C.J.
[¶ 1] Bryan A. Smith suffered severe electrical injuries while he was working for Devereux Marine, Inc., when a sailboat mast he was moving made contact with a Central Maine Power Company line along *969 Route 166 in the Town of Penobscot. Smith received workers' compensation benefits from Devereux and separately filed suit against CMP, alleging that CMP negligently caused his injuries by allowing its power lines to be strung too low. Following a bench trial, the Superior Court (Penobscot County, Murphy, J.) found that Smith's injuries resulted from CMP's negligence and awarded Smith damages in the amount of $4,890,631. CMP appeals, and we affirm the judgment.
I. FACTUAL FINDINGS AND PROCEDURAL HISTORY
[¶ 2] The following factual findings are supported by competent evidence in the record. See In re Beauchene, 2008 ME 110, ¶ 7, 951 A.2d 81, 84. Devereux Marine is a private marina whose customers are members of the public. Devereux rigs its customers' sailboats for launching and unrigs them for storage and repair at its three-acre boatyard in the Town of Penobscot. The 19.9-kV CMP power line involved in this accident runs along Route 166, which divides the boatyard into a two-acre western portion and a one-acre eastern portion. Smith's accident occurred on the western portion, which is bounded on the east by Route 166 and the power line, and on the west by Devereux's launching ramp and Penobscot Baya body of water of more than 2,000 acres.
[¶ 3] As of 1951, CMP had installed power lines along Route 166. These lines were, and remain, within a public right-of-way. In early 1989, one of the operators of Devereux went to a CMP office to discuss raising the line along Route 166 so that Devereux could move boats back and forth across the road. CMP represented that it would do the work only if Devereux paid the costs, which Devereux was unable to afford. Sometime later, the line along Route 166 was raised to enable a specialized boat lift to pass beneath it.
[¶ 4] In 1998, the backstay of a sail mast made contact with the power line while a boat was being backed from Devereux's launch toward Route 166. No one was injured; however, electrical service was disrupted, and CMP had to restore power.
[¶ 5] On October 31, 2002, Smith, a Devereux employee, was lowering a mast from a sailboat when the mast made contact with the power line, which was thirty feet off the ground. He was severely burned and suffered significant permanent injuries. Smith received workers' compensation benefits from Devereux[1] and sued CMP for negligence.
[¶ 6] After considering the evidence admitted during the trial of the negligence claim, and after conducting a view of the boatyard and power line, the court made extensive findings. The court found that Devereux was operating as a marina with an "[e]stablished boat ramp [] and associated rigging area []" and that the boatyard was an area that, by use, was "intended to be used by the public for rigging or launching sailboats." 9 C.M.R. 65 407 910-2, § 1(A) (2001); Inst. of Electrical and Electronics Engineers, Inc., National Electrical Safety Code C2-2002, Table 232-1(7), (8), at 77-78 (2002 ed. 2001) (NESC Table 232-1). Accordingly, the court found that Public Utilities Commission rules imposed a 45.5-foot vertical clearance requirement for the power lines along Route 166. See 9 C.M.R. 65 407 910-2, §§ 1-3 (2001); NESC Table 232-1(7), (8). The court further found that the accident would not have occurred if CMP had met the Commission's 45.5-foot vertical clearance requirement and that the *970 negligence of Devereux as Smith's employer was not the sole proximate cause of the accident. The court noted that "[i]f the law allowed these lines to have a vertical clearance of 30 feet, the Court might reach a different conclusion, but the law required the lines to have a 45.5 foot vertical clearance."
[¶ 7] The court also found that CMP's company policy is to make its employees responsible for the safety of all people near electrical lines, not just its own employees. CMP trained its employees regarding the Overhead High-voltage Line Safety Act's prohibition against performing work that would cause a person or certain equipment or items, including boat masts, to be brought within ten feet of a power line. See 35-A M.R.S. §§ 752(1), 754(1), (2) (2009). CMP did not, however, provide training on its internal vertical clearance standards for power lines in rigging areas, which tracked with the Commission's rules that required a 45.5-foot minimum vertical clearance. See 9 C.M.R. 65 407 910-2, §§ 1-3 (2001); NESC Table 232-1(7), (8). The CMP employees involved with the lines at issue were unaware of the CMP vertical clearance standards or the statutory and regulatory standards.
[¶ 8] The court concluded that CMP had breached its duty to exercise due care when it maintained only a thirty-foot vertical clearance for the power line despite its knowledge that (1) sailboat masts were being raised and lowered at the Devereux boatyard, (2) the backstay of another mast had made contact with the power line in 1998, and (3) the proximity of power lines to these boats was dangerous. The court found that CMP had also negligently deviated from its own safety policies, which required a 45.5-foot vertical clearance in an area "used for rigging and launching sailboats,"[2] and that it had failed to train its employees adequately on internal safety standards.
[¶ 9] The court awarded Smith damages of $783,108 for past and future medical rehabilitation; $1,107,523 for lost earnings; and $3,000,000 in general damages for a total of $4,890,631 in damages. Based on these findings and conclusions, the court entered its judgment on November 14, 2008.
[¶ 10] CMP timely moved for a new trial, for judgment as a matter of law, or to alter or amend the judgment pursuant to M.R. Civ. P. 50(d) and 59. The court denied CMP's motion. In its judgment on the motion, the court clarified that it had considered CMP's breach of statutory and regulatory duties in finding CMP negligent pursuant to common law negligence principles.[3] The court further found that it was foreseeable to CMP that Devereux employees might be working within ten feet of a power line in violation of the Overhead High-voltage Line Safety Act, 35-A M.R.S. §§ 752(1), 754(1), (2), in the area where the accident occurred because CMP employees had actual notice of the kind of work that went on at the boatyard near Route 166.
II. BASIS OF THE APPEAL
[¶ 11] The gravamen of Smith's complaint was that CMP's power lines were *971 strung too low given their proximity to a boatyard. Articulating the reasons for its conclusion that CMP was negligent, the court found that CMP breached its duty of care in at least three ways: (1) by failing to comply with the Commission's rules regarding vertical clearances for power lines, see 9 C.M.R. 65 407 910-2, §§ 1-3 (2001); (2) by failing to follow its own vertical clearance standards; and (3) by failing to respond to known dangers created by the vertical clearance of its lines in that area and failing to train its employees about the rules and standards when it had actual knowledge that sailboat masts at the Devereux boatyard were near power lines along Route 166.
[¶ 12] In its original entry of judgment, the court indicated that it might not have concluded that CMP was negligent had it not found that CMP violated the Commission's rules. It is, therefore, unclear whether, independent of the rule violation, the court's findings regarding the breach of the standard of care would support its negligence finding. The parties dispute whether the rule violation was essential to the court's conclusion that CMP was negligent.
[¶ 13] Because the second two findings related to CMP's breach of the standard of care are amply supported by the record and would support the court's negligence finding, our analysis would end here if we were to determine that the rule violation was not essential to the court's decision. However, after close review of the court's findings, we cannot be certain that the court intended its decision on negligence to stand in the absence of its finding regarding the rule violation. Thus, we assume for purposes of analysis that the court's finding of a rule violation was fundamental to its negligence finding, and we must determine whether, as CMP contends, the court erred in finding that violation.
[¶ 14] CMP argues that the Commission's rules regarding minimum vertical clearances for power lines in areas "intended to be used by the public for rigging or launching sailboats," 9 C.M.R. 65 407 910-2, §§ 1, 3 (2001), do not apply in this case and, therefore, the case should be remanded to determine whether CMP was negligent in the absence of any rule violation. Although CMP raises other challenges, they are not persuasive and we address only the contested rule violation.
III. STATUTORY AND REGULATORY BACKGROUND
[¶ 15] Transmission and distribution utilities, including CMP, are required to follow standards set forth by statutes, by the Commission's rules, and by the National Electrical Safety Code (NESC), in that order of priority. 35-A M.R.S. § 2305-A(1)(C), (2), (5) (2009). In chapter 910 of the Commission's rules, the Commission has set minimum vertical clearance standards for power lines in certain areas posted for launching or rigging sailboats. 9 C.M.R. 65 407 910-2, § 3 (2001). Chapter 910 defines the regulated areas as "any area that by signs, launching ramps, or other special facilities, land improvements or use indicates that the area is intended to be used by the public for rigging or launching sailboats." 9 C.M.R. 65 407 910-2 § 1(A) (2001) (emphasis added). According to chapter 910, power lines in such areas must comply with NESC provisions as modified by the Commission's rules:
VERTICAL CLEARANCE REQUIREMENTS
All overhead lines of an aerial utility crossing water areas suitable for sailing, or public or private land and water areas posted for rigging or launching sailboats, shall comply with the vertical clearance requirements of Section 232 of *972 the National Electrical Safety Code, Table 232-1, sections 7 and 8 thereof....
9 C.M.R. 65 407 910-2 § 3 (2001). For the type of power line involved in Smith's accident, NESC Table 232-1 requires a 45.5-foot minimum vertical clearance over "[e]stablished boat ramps and associated rigging areas," and "areas posted with sign(s) for rigging or launching sailboats" on water bodies over 2,000 acres in size. See NESC Table 232-1(7), (8).[4]
[¶ 16] If the power line at issue were not in such an identified rigging area, the minimum vertical clearance for the line running along a road or street within a right-of-way would be only 18.5 feet. NESC Table 232-1(9).[5] Here, the power line with which the sail mast made contact had a thirty-foot vertical clearance. The question presented to the trial court, therefore, was whether the area in which Smith was injured was one for which the Commission rules required a 45.5-foot minimum vertical clearance for power lines.
IV. ANALYSIS
[¶ 17] The determination of a rule violation involves both the interpretation of the rules, which we review de novo as a matter of law, see Nergaard v. Town of Westport Island, 2009 ME 56, ¶ 12, 973 A.2d 735, 739, and the finding of the facts that determine the applicability of the rules, which we review for clear error, see Windham Land Trust v. Jeffords, 2009 ME 29, ¶ 42, 967 A.2d 690, 702. We find no error in the court's factual findings, and we therefore look to the court's application of the regulations to those facts.
[¶ 18] To interpret a statute and its implementing regulations, we look first to the plain meaning of the language used. See FPL Energy Me. Hydro LLC v. Dep't of Envt'l Prot., 2007 ME 97, ¶ 25, 926 A.2d 1197, 1204, cert denied, 552 U.S. 1100, 128 S. Ct. 911, 169 L. Ed. 2d 730 (2008). When interpreting a technical statute or regulation, we generally defer to an administrative agency's own interpretation unless *973 the statute or regulation plainly compels a different interpretation. See Schwartz v. Unemployment Ins. Comm'n, 2006 ME 41, ¶ 9, 895 A.2d 965, 970.
[¶ 19] Based on the plain language of the Commission's rules at issue here, the court did not err in concluding that Devereux Marine is an area posted for rigging sailboatsthat is, an "area that by signs, launching ramps, or other special facilities, land improvements or use indicates that the area is intended to be used by the public for rigging or launching sailboats." 9 C.M.R. 65 407 910-2, § 1(A) (2001). Devereux is an established boatyard with signs and a long, visible history of use by the public for rigging and launching sailboats. Noting the use of the term "public" in chapter 910, CMP emphasizes that Devereux is a private operation; yet, there is no discernable rationale for the Commission to have intended for the noun "public" to mean anything other than its ordinary meaning: "the people as a whole: POPULACE, MASSES." Webster's Third New International Dictionary of the English Language Unabridged 1836 (2002). Like many other private companies, Devereux operates a facility that is open for use by the public at a price. Devereux's status as a private company does not diminish the applicability of the Commission's rules.
[¶ 20] The Commission's interpretations of these technical rules further support this conclusion. See Schwartz, 2006 ME 41, ¶ 9, 895 A.2d at 970. In 1988, the Commission entered an order commencing rulemaking on the matter of vertical clearance standards for lines crossing areas of water and adjacent rigging and launching areas. Order Commencing Rulemaking, No. 88-97 Order (Me.P.U.C. May 3, 1988). After holding a public hearing, the Commission adopted a set of rules that tracked the NESC but with some modifications. Order Adopting Rule and Statement of Factual and Policy Basis, No. 88-97 Order (Me.P.U.C. July 19, 1988). As one modification, the Commission provided that the clearances for line 8 of NESC Table 232-1 would apply to "public or private land and water areas posted for rigging or launching sailboats." Id. at 6 & attached rule (C.M.R. 407 91, § II(a) (effective Aug. 9, 1988)). On this topic, the Commission clarified its intention that the term "posted" be construed broadly:
[CMP and others] also raised the question of the definition of a rigging and launching area. By adopting Table 232-1 of the Code, section 8 defines such an area as "public or private land and water areas posted for rigging or launching sailboats." Although we adopt that definition, we point out that "posted" is not limited to having a sign on it. We adopt the definition set forth in the National Electrical Safety Code Handbook, 1984 edition, which specifies that "these requirements apply only to posted areas and, also intentionally, did not specify the form of postingit may be by signs, launching ramps, or other special facilities or land improvements or use which indicate that the area is intended for such use." We intend that within such definition would [be] all boat launching sites shown on the current public access inventory maintained by the Department of Conservation.
Id. at 6 (emphasis added).
[¶ 21] In 2001, the Commission opened rulemaking for the purpose of clarifying the continued effect of its 1988 modifications to the NESC. Order Adopting Amended Rule, No.2001-374 Order, at 2 (Me.P.U.C. Sept. 10, 2001); see 35-A M.R.S. § 2305-A(5) (stating that additional safety measures imposed by the Commission remain in effect for ten years unless repealed or reaffirmed by order). The Commission reaffirmed its definition of *974 "areas posted for rigging or launching sailboats," and stated:
Significantly, the Commission ... provided a broader definition of "areas posted for rigging or launching sailboats" in Chapter 91[6] than the definition provided by the 1987 Edition of the Code. Basing its definition on a definition formerly permitted by the 1984 Edition of the Code, the Commission clarified that "posting" in Chapter 91 would mean "posting by signs, launching ramps, or other special facilities or land improvements or use which indicates that the area is intended for such use" rather than by signs only. Docket No. 88-97, Order at 6. The 1997 Edition of the Code is silent on the definition of "areas posted for rigging and launching sailboats." Maintaining the broader definition originally provided in Chapter 91 does impose an additional safety measure beyond what the current Code requires.
Id. at 4 (footnote added).
[¶ 22] Based on the Commission's pronouncements, it is evident that the Commission intended for chapter 910 to cover rigging and launching facilities broadly. Rather than requiring specific signage to identify the facilities to which the chapter would apply, the Commission most recently stated that the vertical clearance standard applies in all areas "post[ed] by signs, launching ramps, or other special facilities or land improvements or use which indicate[] that the area is intended for such use rather than by signs only." Id. (quotation marks omitted). Although the Commission stated in 1998 that it intended to include within the definition all locations on the then "current public access inventory maintained by the Department of Conservation," the Commission did not state that the reach of its rules was limited to those inventoried facilities. See Order Adopting Rule and Statement of Factual and Policy Basis, No. 88-97 Order, at 6 (Me.P.U.C. July 19, 1988).
[¶ 23] In view of the language of the Commission's technical rules, see FPL Energy Me. Hydro LLC, 2007 ME 97, ¶ 25, 926 A.2d at 1204, and the Commission's interpretations of its rules, see Schwartz, 2006 ME 41, ¶ 9, 895 A.2d at 970, the trial court did not err as a matter of law in concluding that chapter 910 of the Commission's rules and its reference to line 8 of NESC Table 232-1 governed the minimum vertical clearance of the power line at issue.
[¶ 24] CMP also contends that chapter 910 of the Commission's rules only applies to power lines "crossing ... public or private land and water areas posted for rigging or launching sailboats." 9 C.M.R. 65 407 910-2 § 3 (2001) (emphasis added). It argues that the line in question does not cross an area "posted for rigging or launching sailboats" but rather runs along and within a public highway right-of-way. Route 166 and the right-of-way holding the power line bisect an active boatyard. The court conducted a view of the boatyard and the power line, and, based on its direct observations, other factual findings, and the Commission's rules, could reasonably have found that the power line crossed an area "posted for rigging or launching sailboats" even though it was within a public highway right-of-way.
[¶ 25] For the foregoing reasons, we affirm the court's conclusion, supported by competent evidence in the record, that CMP breached its standard of care when it *975 violated the Commission's rules that imposed the 45.5-foot vertical clearance requirement set forth in line 8 of Table 232-1. Accordingly, we affirm the decision of the trial court.
The entry is:
Judgment affirmed.
Vertical Clearance of Wires, Conductors, and Cables Above Ground, Roadway, Rail, or Water Surfaces
NOTES
[1] The Workers' Compensation Act provided Smith's exclusive remedy against his employer. The parties do not dispute that Smith had received $261,315.70 on his workers' compensation claim as of June 24, 2008.
[2] CMP's Distribution Construction Standard 305-11 (Waterway Clearances) was admitted as an exhibit. For 19.9-kV conductors, the Construction Standard requires a 45.5-foot minimum vertical clearance over "[a]reas used for rigging and launching sailboats."
[3] By statutes and by common law, violation of a safety statute or regulation may be evidence of negligence but does not constitute negligence per se. See 35-A M.R.S. §§ 1501, 2305-A(1)(C), (2), (5) (2009); Castine Energy Constr., Inc. v. T.T. Dunphy, Inc., 2004 ME 129, ¶ 10, 861 A.2d 671, 675; French v. Willman, 599 A.2d 1151, 1152 (Me.1991).
[4] The NESC Table 232-1 provides, in relevant part:
Vertical Clearance of Wires, Conductors, and Cables Above Ground, Roadway, Rail, or Water Surfaces
....
--------------------------------------------------------------------------------------------------------
Nature of surface underneath wires, conductors, Open supply conductors, over 750 V to 22 kV;
or cables ungrounded guys exposed to 750 V to 22 kV (ft)
--------------------------------------------------------------------------------------------------------
Where wires, conductors, or cables cross over or overhang
--------------------------------------------------------------------------------------------------------
....
--------------------------------------------------------------------------------------------------------
7. Water areas suitable for sailboating including
lakes, ponds, reservoirs, tidal waters, rivers,
streams, and canals with an unobstructed surface
area of
--------------------------------------------------------------------------------------------------------
..... ....
--------------------------------------------------------------------------------------------------------
d. Over 2000 acres 40.5
--------------------------------------------------------------------------------------------------------
8. Established boat ramps and associated rigging Clearance above ground shall be 5 ft greater than
areas; areas posted with sign(s) for rigging or in 7 above, for the type of water areas served by the
launching sail boats launching site
--------------------------------------------------------------------------------------------------------
Where wires, conductors, or cables run along and within the limits of highways or other road
rights-of-way but do not overhang the roadway
--------------------------------------------------------------------------------------------------------
9. Roads, streets, or alleys 18.5
--------------------------------------------------------------------------------------------------------
Inst. of Electrical and Electronics Engineers, National Electrical Safety Code C2-2002, Table 232-1(7), (8), at 77-78 (2002 ed. 2001) (NESC Table 232-1) (footnotes omitted).
[5] See NESC Table 232-1, supra note 4.
[6] The rule was previously numbered as chapter 91. As part of the 2001 rulemaking order, the Commission renumbered the rule as chapter 910 to conform to the practice of assigning three-digit numbers to rules. Order Adopting Amended Rule, No.2001-374 Order, at 1 n. 1 (Me.P.U.C. Sept. 10, 2001). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546095/ | 988 A.2d 726 (2009)
COM.
v.
ORTIZ-PEREZ.
No. 252 MDA 2008.
Superior Court of Pennsylvania.
November 18, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2459335/ | 265 F.Supp.2d 1239 (2003)
JDN DEVELOPMENT COMPANY, INC., Plaintiff,
v.
TERRA VENTURE, INC., Defendant.
No. CIV.A. 01-2605-CM.
United States District Court, D. Kansas.
June 3, 2003.
*1242 Leland H. Corley, Robert W. Tormohlen, Lewis, Rice & Fingersh, L.C., Kansas City, MO, William H. Meyer, Leawood, KS, for Plaintiff.
Michael W. Lerner, Law Office of Mick Lerner, P.A., Overland Park, KS, for Defendant.
MEMORANDUM AND ORDER
MURGUIA, District Judge.
Pending before the court are plaintiffs Motion for Summary Judgment (Doc. 57) and defendant's Motion for Summary Judgment (Doc. 61).
As set forth below, the court grants in part and denies in part plaintiffs Motion for Summary Judgment. The court denies defendant's Motion for Summary Judgment.
I. Background[1]
A. The Parties
Plaintiff JDN Development Company, Inc., is a publicly traded Delaware corporation that operates as a real estate investment trust, with its principal place of business in Atlanta, Georgia. Plaintiffs primary business is to acquire, develop, and own strip mall shopping centers. Defendant Terra Venture, Inc. is a privately held Kansas corporation. Defendant is engaged in the business of developing, leasing, and brokering commercial real estate. In its course of business, defendant does not acquire or own the property to be developed, but acts as a broker or has a financing partner or co-developer acquire the property. Gray Turner owns 65% of defendant's stock, John Sweeney owns 30%, and Jack Isley owns 5%.
B. Written Contracts
1. Sale Agreement Between Defendant and Ranch Mart
On July 27, 1999, defendant entered into a contract (hereinafter "Sale Agreement") with Ranch Mart, Inc. (hereinafter "Ranch Mart"), in which defendant agreed to purchase approximately 65 acres (hereinafter "the property") at the southeast corner of 135th Street and Antioch in Overland Park, Kansas. The Sale Agreement provided that defendant would deposit $50,000 in earnest money with Security Land Title Company as escrow agent (hereinafter "Escrow Agent"), that closing would take place within 120 days, and that defendant could extend the closing for an additional 90 days by depositing an additional $100,000 in earnest money with the Escrow Agent.
*1243 The Sale Agreement also provided that the obligations of defendant were subject to conditions including (A) that Ranch Mart's representations and warranties would be true and correct on the date of Closing and that Ranch Mart would perform its obligations prior to closing; (B) that Ranch Mart would convey marketable title at closing; and (C) that defendant would obtain, "at [defendant]'s expense, all requisite zoning and plan approvals for its intended development of the Land, together with binding commitments from the potential users of such Land." (Sale Agreement at 118). The Sale Agreement further stated that:
[I]n the event the conditions set forth above are not all satisfied, [defendant] shall notify [Ranch Mart] of the failure of such condition precedent to be satisfied, in which event [defendant] shall have the option of terminating this Agreement, whereupon the Earnest Money shall be returned to [defendant] and this Agreement deemed null and void, provided provisions to the contrary notwithstanding, in the event [defendant] exercises its option to extend the Closing for an additional one hundred twenty (120) days, as contemplated at paragraph 3, [defendant] may terminate this Agreement and receive a refund of the Earnest Money if and only if the conditions precedent set forth at subparagraphs A and B above are not fulfilled or satisfied. Notwithstanding anything contained herein to the contrary, [defendant] at any time or times on or before Closing, in order to close, at its sole election, may waive any of the conditions to its obligations hereunder.
(Id.). The Sale Agreement did not contain a provision addressing the procedure for termination.
In December 1999, Ranch Mart and defendant entered into an Amendment to Sale Agreement which extended the closing date to May 1, 2000, and provided, in part, that defendant would make an additional deposit of $100,000 in earnest money. The December Amendment also stated that:
[I]n the event the conditions precedent set forth at paragraph 8 of the Sale Agreement are not fulfilled to [defendant's satisfaction or waived by [defendant] on or before the Closing Date ... both the initial earnest money deposit of $50,000 and the additional earnest money deposit of $100,000 will be returned to [defendant] upon the earlier of the Closing Date or [defendant's written notice to [Ranch Mart] that such conditions precedent cannot be fulfilled to [defendant]^ satisfaction.
The closing date on the Sale Agreement was subsequently extended on several occasions by written amendments to the Sale Agreement, with a final closing date of June 30, 2001. However, the purchase of the property was never consummated. Ranch Mart has never asserted to plaintiff that either plaintiff or defendant breached the Sale Agreement by deciding not to close.
2. Assignment Agreement Between Plaintiff and Defendant
On August 5, 1999, plaintiff and defendant entered into an assignment agreement (hereinafter "Assignment Agreement") in which defendant assigned "all of [defendant's right, title and interest in and to the Sale Agreement" to plaintiff. The Assignment Agreement recited that defendant, as purchaser, entered into a Sale Agreement dated July 27, 1999, with respect to approximately sixty-five (65) acres at the southeast corner of 135th Street and Antioch in Overland Park. Further, it stated in the recital that defendant "has agreed, in consideration of the covenants herein contained, to assign unto [plaintiff], its successors and assigns, all of *1244 [defendant]'s right, title and interest in and to the Sale Agreement."
The Assignment Agreement states that the agreement was entered into "in consideration of the mutual covenants herein contained," and that the parties (1) "simultaneously with the execution of this Agreement... agree to execute and be bound by that certain Fee Agreement ... which... governs the development of the real estate which is the subject of the Sale Agreement;" (2) that, as set forth above, defendant assigned all of defendant's right, title and interest in the Sale Agreement to plaintiff; (3) that plaintiff agreed it would not make future assignments of its interest in the Sale Agreement without first obtaining the written consent of [Ranch Mart] under the Sale Agreement; and (4) plaintiff agreed that, "in the event any other entity acquired any interest in the Sale Agreement or the real estate which is the subject of the Sale Agreement ... it will require such entity to deliver to [defendant] an agreement whereby such entity agrees to assume and be liable for [plaintiffj's obligations under the Fee Agreement."
Mr. Turner stated that, at the time of the Assignment Agreement, defendant sought assurances that plaintiff had both the means and the intent to ultimately purchase the property once zoning changes had been obtained, and defendant received such assurance.
3. Fee Agreement Between Plaintiff and Defendant
Also on August 5, 1999, plaintiff and defendant entered into a fee agreement (hereinafter "Fee Agreement") under which defendant agreed to perform certain services in connection with the development of the property in exchange for a fee. The Fee Agreement designates plaintiff as "Owneir," and defendant as "Developer," and states, in a section entitled "Background Statement," that "[plaintiff] intends to purchase certain Property (as defined below). In connection with the ownership and development of the Property, [plaintiff] agrees that certain fees may be earned by [defendant] upon the terms and conditions set forth below, and [defendant] agrees to perform certain services in connection with the development of the Property."
Plaintiff has not paid defendant any fees under the Fee Agreement. Mr. Turner stated that, in reliance upon "that contract language"[2] and the assurances from plaintiff, defendant devoted over twenty months of time, energy and money to developing and marketing the property, on the assumption that plaintiff would meet its obligations to purchase the property and pay defendant the agreed-upon compensation. Plaintiff does not dispute defendant's statements of fact Indicating that plaintiff acted as if it would carry out the Sale Agreement; that plaintiff cooperated with zoning and plan approval processes, and other aspects of developing the property; and reassured defendant that it would close, with some of those assurances being made as recently as February 2001.
C. Alleged Oral Contracts
1. Summer 1999 Contract Between Plaintiff and Defendant
Mr. Turner stated that, at the time the three written agreements were entered into, agents of plaintiff orally stated that plaintiff would close on the Sale Agreement and purchase the 65 acres if the property was rezoned. Mr. Turner *1245 also stated that principals of plaintiff told him to purchase the property for plaintiff and to use the same form of document previously used with respect to the north parcel. Mr. Turner also stated that he believed plaintiff retained the right to approve the economics of leases and sales regarding the property.
2. Spring 2000 Contract Between Plaintiff and Defendant
Defendant sought authorization from the City of Overland Park to allow the property to be zoned for commercial and industrial use. At some point, however, Overland Park required that a portion of the 65 acres would be zoned for a business park as opposed to commercial zoning. Defendant asserts that plaintiff and defendant entered into an oral agreement in Spring 2000 (hereinafter "Spring 2000 Oral Contract"), whereby plaintiff agreed to close on the entire 65 acres and transfer the business park portion of the property to defendant. Defendant claims that the property was rezoned in October 2000. However, as discussed in the section regarding the Sale Agreement, plaintiff did not close on the property.
Defendant seeks to recover lost profits in the form of sales and brokerage commissions, a development fee, unearned market commissions, and an earnout fee relating to plaintiffs alleged breach of the two oral contracts.
D. Defendant's Development of North Part of Tract After Plaintiff Determined not to Purchase Property
On June 22, 2001, Terra Venture Investments LLC[3] entered into an agreement with Ranch Mart to purchase 28.23 acres at the southeast corner of 135th Street and Antioch, Overland Park, Kansas (hereinafter the "Subsequent Sale Agreement"). The 28.23 acres contemplated under the Subsequent Sale Agreement encompassed the northern portion of the 65 acres which were subject to the initial Sales Agreement and did not encompass the business park portion of the property. The Subsequent Sale Agreement had an original closing date of June 21, 2002, but contained a provision extending the closing date automatically for one year to June 21, 2003, if defendant did not purchase the property before June 21, 2002. When defendant did not close on the entire 28 acres before June 21, 2002, the closing was extended to June 21, 2003. The subsequent Sale Agreement also contained a provision that upon the closing of all or any part of the 28 acres, Ranch Mart would pay Terra Venture Realty Inc., a company affiliated with Terra Venture, a commission of 3% of the sales price.
E. Defendant's Development of the Business Park Located on the Southern Portion of the 65 Acre Tract after Plaintiff Decided not to Purchase the Property
On February 22, 2001, defendant entered into a Build to Suit Net Office Lease with Chrysler Financial Corporation that contemplated construction of an office building on the southern portion of the 65 acre tract. In June 2002, defendant assigned its rights under the Build to Suit Lease to an entity affiliated with Ranch Mart called 137th and Antioch LLC. On June 22, 2001, defendant entered into additional agreements with 137th and Antioch LLC and with Ranch Mart, which contemplated construction of a business park on the southern portion of the 65 acre tract.
*1246 F. Earnest Money
1. Escrow Agent Returns Earnest Money to Defendant
Plaintiff paid the initial $50,000 earnest money deposit required under the Sale Agreement and then paid the additional earnest money deposit of $100,000 that was required under the Amendment to the Sale Agreement. From August 1999 to June 30, 2001, plaintiff incurred and paid over $200,000 in expenses related to the property, in addition to the $150,000 total earnest money deposit. However, plaintiff ultimately did not close on the property, and the June 30, 2001 closing date passed.
After plaintiff did not close on the Sale Agreement, on August 23, 2001, Mr. Turner and Robert D. Regnier, president of Ranch Mart, sent a letter to the Escrow Agent (hereinafter "August 23 letter") requesting it to return all earnest money deposited with the Escrow Agent to defendant.[4] The Escrow Agent returned approximately $158,000 in earnest money to defendant, representing the earnest money plus interest (hereinafter "Earnest Money"). In an affidavit, Mr. Regnier stated that, in co-signing the August 23 letter, he "fully intended that [defendant] Terra Venture, Inc. receive any and all rights Ranch Mart, Inc. had to the earnest money being held by Security Land Title Company related to the Sale Agreement dated July 27, 1999, between Ranch Mart, Inc. and [defendant] Terra Venture, Inc."
Plaintiff subsequently demanded that defendant return the Earnest Money to plaintiff. However, defendant has refused to do so. Defendant contends that it is entitled to keep the Earnest Money because plaintiff was contractually obligated to close on the Sale Agreement, and that plaintiffs failure to do so damaged defendant. As set forth in greater detail below, defendant contends that plaintiff failed to comply with paragraph 8(C) of the Sale Agreement, and consequently forfeited the Earnest Money to defendant.
2. Plaintiff Alleges Failure of Conditions Precedent
The Sale Agreement provided three conditions precedent to the obligations of defendant and Ranch Mart, including "[defendant] obtaining, at [defendant's] expense, all requisite zoning and plan approvals for its intended development of the Land, together with binding commitments from the potential users of the Land." (PL's Ex. 4, at ¶ 8(C)). Paragraphs 8(A) and 8(B) of the Sale Agreement set forth two additional conditions precedent: that the representations and warranties made by Ranch Mart as the seller be true and correct and that Ranch Mart shall have performed all covenants and obligations required by the Agreement on or before closing; and that upon the closing, Ranch Mart shall own free, clear, and marketable fee simple title to the property, respectively.
The Sale Agreement further provided:
In the event the conditions set forth above are not all satisfied, [defendant] shall notify [Ranch Mart] of the failure of such condition precedent to be satisfied, in which event [defendant] shall have the option of terminating this Agreement, whereupon the Earnest Money shall be returned to [defendant] *1247 and this Agreement deemed null and void, provided provisions to the contrary notwithstanding, in the event [defendant] exercises its option to extend the Closing for an additional one hundred twenty (120) days, as contemplated at paragraph 3, [defendant] may terminate this Agreement and receive a refund of the Earnest Money if and only if the conditions precedent set forth at subparagraphs A and B above are not fulfilled or satisfied. Notwithstanding anything contained herein to the contrary, [defendant] at any time or times on or before Closing, in order to close, at its sole election, may waive any of the conditions to its obligations hereunder.
(Id. at ¶ 8).
Plaintiff asserts that defendant breached the Assignment Agreement by refusing to return the Earnest Money to plaintiff; that defendant would be unjustly enriched by being permitted to keep the Earnest Money; that the Earnest Money "belongs to plaintiff and was paid to defendant by mistake and in good conscience should be returned to plaintiff;" that defendant converted plaintiffs Earnest Money, and that defendant breached its fiduciary duties that it owed to plaintiff as a real estate broker by refusing to return the Earnest Money. Plaintiff also seeks punitive damages against defendant and seeks to recover its attorneys' fees, expert fees, and expenses incurred in defending against the counterclaim asserted by defendant.
Defendant, however, asserts that plaintiff waived its right to recover any Earnest Money by failing to provide written notice to Ranch Mart that conditions precedent set forth in the Sale Agreement had not been fulfilled. Defendant further claims that all of the conditions precedent set forth in the Sale Agreement were met, and that plaintiff therefore breached the Assignment Agreement and Fee Agreement. Defendant argues, in the alternative, that if the conditions precedent were not satisfied, that plaintiff intentionally interfered with them and prevented them from being met. Defendant states that plaintiffs claim for attorneys' fees should be denied on the additional basis that the dispute over escrow is not covered by the attorneys' fee provision in the Fee Agreement. In addition, defendant raises the affirmative defense that plaintiff waived any claim under the contracts by encouraging and misleading defendant to believe that the sale would be consummated, and that defendant spent approximately two years working on the developing and marketing of the property. Defendant further asserts that plaintiffs claim is barred by the doctrine of estoppel.
II. Legal Standard
Summary judgment is appropriate if "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" if it is "essential to the proper disposition of the claim." Adler v. Wcd-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). An issue of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Id. (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).
In considering a summary judgment motion, the court views the evidence in the light most favorable to the non-moving party. Wilson v. Meeks, 98 F.3d 1247, 1253 (10th Cir.1996). The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Adler, 144 F.3d at 670-71. A movant that does not bear the ultimate *1248 burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. Id, at 671 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
The burden then shifts to the non-moving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. 2505. The non-moving party, however, may not "rest on ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the mere hope that something will turn up at trial." Conaway v. Smith, 853 F.2d 789, 794 (10th Cir.1988). Instead, the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Anderson, All U.S. at 250, 106 S.Ct. 2505.
III. Defendant's Motion for Summary Judgment
Defendant seeks summary judgment on the grounds that plaintiff may not recover the Earnest Money due to plaintiffs failure to close on the Sale Agreement. According to defendant, plaintiff forfeited to Ranch Mart any of plaintiffs right to the Earnest Money in escrow.[5] Consequently, according to defendant, Ranch Mart was entitled to receipt of the Earnest Money. As such, the August 23 letter signed by Mr. Regnier of Ranch Mart and Mr. Turner of defendant addressed to the Escrow Agent validly conveyed the Earnest Money from Ranch Mart to defendant.
Plaintiff asserts it is entitled to a return of the Earnest Money based upon the following theories: (1) that defendant breached the Assignment Agreement by asserting ownership of the Earnest Money; (2) that payment of the Earnest Money to defendant unjustly enriched defendant; (3) under a "money had and received" theory, that plaintiff had paid the Earnest Money to Ranch Mart in the first place and that, therefore, in good conscience, the money should be returned to plaintiff; (4) conversion; and (5) that defendant breached its fiduciary duty owed to plaintiff, where defendant acted as a real estate broker for plaintiff. Defendant counters by arguing that plaintiffs obligation to close on the property was conditioned upon plaintiff receiving binding commitments from land users that met with plaintiffs approval, as set forth in paragraph 8(C) of the contract. Plaintiff argues that, because it did not obtain satisfactory commitments, a condition precedent to closing on the contract was not met and, consequently, plaintiff did not forfeit its right to receive the earnest money.
In response, defendant argues that (1) plaintiff waived its interest in return of the Earnest Money by failing to provide written notice to Ranch Mart of a failure of the condition precedent set forth in paragraph 8(C) of the Sale Agreement; thus, plaintiff forfeited any of its right in the Earnest Money to Ranch, Mart, and Ranch Mart's subsequent direction to the Escrow Agent to transfer the. Earnest Money to defendant was valid; (2) that because plaintiff concealed its intention never to close on the agreement, plaintiff is estopped from claiming it is entitled to a return of the Earnest Money; and (3) defendant is entitled to a setoff due to the counterclaims asserted by defendant and discussed later in the opinion.
*1249 A. Contract Interpretation Principles
First, the court notes that its primary function in construing a contract is "to determine the parties' intent from the four corners of the instrument by construing all provisions together and in harmony with each other rather than by critical analysis of a single or isolated provision." Metro. Life Ins. Co. v. Strnad, 255 Kan. 657, 671, 876 P.2d 1362, 1371 (1994) (citations omitted). Further, the court must apply this rule prior to considering any extrinsic evidence regarding the intent of the parties. Id. (citations omitted). "Where the language of the contract is clear and can be carried out as written, there is no room for construction or modification of the terms." Id.
B. Analysis
1. Breach of Assignment Agreement
Defendant argues that Ranch Mart, rather than plaintiff, was entitled to receive the Earnest Money, and that Ranch Mart's request to the Escrow Agent that the Escrow Agent pay the funds to defendant was therefore valid. The Assignment Agreement was executed on August 5, 1999. It is unclear from the record whether either Ranch Mart or the Escrow Agent knew or should have known of the assignment, though it is undisputed that plaintiff, rather than defendant, paid the Earnest Money to the Escrow Agent. As discussed above, on August 23, 2001, Mr. Turner, as President of defendant, and Mr. Regnier, as President of Ranch Mart, wrote to the Escrow Agent in a letter captioned "Re: Sale Agreement dated July 27, 1999 between Ranch Mart, Inc., as Seller and Terra Venture, Inc., as Purchaser." In the August 23 letter, Mr. Turner and Mr. Regnier stated, "the undersigned Seller and Purchaser hereby direct you to return to Purchaser all earnest money deposited with you with respect to the referenced Sale Agreement and the referenced title commitment file." The Escrow Agent subsequently paid the Earnest Money to defendant.
The court first examines the Assignment Agreement between plaintiff and defendant. As noted above, the Assignment Agreement stated that defendant assigned to plaintiff "all of [defendant]^ right, title and interest in and to the Sale Agreement." The parties do not seek to introduce any extrinsic evidence regarding the Assignment Agreement. In examining the plain language of the Assignment Agreement, the court determines that the parties' intention in using the broad terminology "all of [defendant's right, title and interest in and to the Sale Agreement," was to assign to plaintiff the entirety of the benefits to which defendant was entitled under the Sale Agreement. By assigning its rights under the Sale Agreement, defendant manifested its intention to transfer to plaintiff defendant's right to Ranch Mart's performance of the contract. See Restatement (Second) of Contracts § 317. Defendant concurrently extinguished its own right to Ranch Mart's performance and, consequently, to any return of Earnest Money as provided for in the Sale Agreement. Therefore, defendant assigned to plaintiff any right that defendant had as an original party to the Sale Agreement, including any right to a return of the Earnest Money.
Defendant argues that defendant did not breach the Assignment Agreement because plaintiff forfeited its rights in the Earnest Money to Ranch Mart under the Sale Agreement. Defendant does not, however, address plaintiffs argument that defendant breached the Assignment Agreement by asserting an interest in the Earnest Money and permitting the Escrow *1250 Agent to deliver the Earnest Money to defendant.
According to defendant, Ranch Mart was entitled to receive the Earnest Money. Therefore, Ranch Mart and defendant's letter directing the Escrow Agent to pay the Escrow Money to defendant represented a transfer of Ranch Mart's interest and was therefore valid. Defendant states plaintiff forfeited its rights to the Earnest Money by failing to provide notification of a failure of a condition precedent and that no condition precedent in fact was unsatisfied. Plaintiff, however, asserts that the condition precedent set forth in paragraph 8(C) of the Sale Agreement was never met and, therefore, that plaintiff was entitled to receive the Earnest Money. Paragraph 8(C) sets forth the condition precedent that defendant would obtain, "at [defendant]^ expense, all requisite zoning and plan approvals for its intended development of the Land, together with binding commitments from the potential users of such Land." The Sale Agreement was amended in December 1999 because plaintiff could not find a binding commitment from a potential user of the land. Thus, according to plaintiff, plaintiff became entitled to a return of the Earnest Money under paragraph 8 of the Sale Agreement.
As set forth in the fact section of this opinion, the parties extended the closing date through an amendment in December 1999. Defendant, in its reply, admits that the December 1999 amendment restored plaintiffs right to not close due to a failure of the condition precedent under paragraph 8(C) of the Sale Agreement, but only if the failure of the condition precedent occurred prior to the May 1, 2000 closing date, and notice of that failure was communicated to Ranch Mart prior to May 1, 2000.[6] Plaintiff admits that it did not notify Ranch Mart, of a failure of any condition precedent.
Plaintiff contends that, even though it did not provide notice of the failure of the condition precedent, it was entitled to a return of the Earnest Money on the May 1, 2000 closing date. The parties agree that plaintiff did not waive the conditions in paragraph 8. However, the parties dispute whether plaintiff, in good faith, failed to receive binding commitments from potential purchasers of the land.
Following the principles of contract construction set out above, the court finds that plaintiffs contention that it was entitled to a return of the Earnest Money on May 1, 2000, must be read in conjunction with the language that occurs earlier in Paragraph 8(C). That language limits plaintiffs right to a return of the Earnest Money to circumstances in the event that the conditions precedent set forth at paragraph 8 of the Sale Agreement are not fulfilled to plaintiff's satisfaction or waived by plaintiff. Moreover, the contract states plaintiff is entitled to a return of the money upon the earlier of the closing date or plaintiffs written notice to Ranch Mart of a failure of the conditions precedent. Consequently, the court finds that defendant's argument that plaintiff cannot recover the Earnest Money due to its failure to provide written notice is not dispositive. If, in fact, the condition precedent genuinely was not met to plaintiffs satisfaction, under the plain language of the December 1999 Amendment, the plaintiff would still be entitled to a return of the Earnest Money upon the Closing Date, regardless of whether plaintiff gave notice.
Under Kansas law, a party may not "escape liability" under a contract *1251 merely by claiming that a condition precedent was not met. Barbara Oil Co. v. Patrick Petroleum Co., 1 Kan.App.2d 437, 440, 566 P.2d 389, 393 (1977). Rather, the party seeking to avoid liability "must affirmatively show that (1) the condition precedent actually failed and (2) that because of such failure, the contract [would] not be performed." Id. Whether a party's refusal to perform a contract was "because of a genuine and good faith claim that a condition precedent failed is a question for the jury." Id.; see also Hill v. Perrone, 30 Kan.App.2d 432, 436, 42 P.3d 210, 214 (2002) (same). Accordingly, the court finds that plaintiffs contention that the conditions precedent set forth in paragraph 8(C) of the Sale Agreement, were not, in good faith, met to plaintiffs satisfaction, presents a genuine issue of material fact that must be determined by a jury. Defendant's motion for summary judgment is denied.
2. "Improper Party" Defense
Defendant also asserts that the court should not permit plaintiff to defend against defendant's counterclaims by asserting that only a licensed real estate broker can receive the commissions for which defendant seeks to recover damages. Plaintiff claims that, because defendant is not a licensed real estate broker, it could not receive such commissions. In its motion for summary judgment, defendant characterizes this defense as an "improper party" defense. Defendant requests the court to find that plaintiff is barred from presenting this argument due to plaintiffs failure to raise the defense prior to the deadline of March 25, 2002, which the court established in its March 6, 2002 Scheduling Order.
The Scheduling Order stated that any motions to dismiss for lack of personal jurisdiction, venue, propriety of the parties, or failure to state a claim upon which relief may be granted shall be filed by March 25, 2002.
The court finds that plaintiffs defense concerns defendant's entitlement to certain damages that defendant seeks. It is not an improper party defense, because plaintiff is not challenging defendant's status as a real party in interest or defendant's capacity to sue or be sued under Federal Rule of Civil Procedure 17. Rather, plaintiffs defense concerns the amount of damages that can be awarded to defendant as a required element of defendant's prima facie case. To the extent defendant's motion for summary judgment requests the court to find that plaintiff should be precluded from asserting this defense, defendant's motion is denied.
IV. Plaintiffs Motion for Summary Judgment
Defendant has raised the following counterclaims: (1) that plaintiff breached "the August 1999 contracts," i.e., the Assignment Agreement and Fee Agreement, by failing to close on the Sale Agreement, and by failing to pay defendant certain fees in connection with the property; (2) that plaintiff breached the Spring 2000 Contract to purchase a portion of the property from defendant; (3) that plaintiff breached a fiduciary duty owed to defendant by breaching the Assignment Agreement and Fee Agreement and failing to close on the Sale Agreement, and by failing to pay defendant certain fees in connection with the property; (4) that plaintiff breached a fiduciary duty owed to defendant by breaching the Spring 2000 Contract to purchase a portion of the property from defendant; (5) fraudulent inducement with regard to the August 1999 contracts; and (6) fraudulent inducement with regard to the Spring 2000 contract.
*1252 A. Breach of the Assignment Agreement and Fee Agreement
First, plaintiff argues that the written contracts do not grant defendant the contractual right to sue if plaintiff did not purchase the property from Ranch Mart. Specifically, plaintiff states that defendant may not sue plaintiff for a violation of the Sale Agreement, because no language in the Sale Agreement provides that plaintiff could be amenable to suit for its breach.
In addition, plaintiff contends that no operative language of the Assignment Agreement or Fee Agreement required plaintiff to purchase the property. According to plaintiff, the parties' obligations under these agreements were not conditioned upon plaintiffs purchase of the property.
The court finds that the parties have shown a genuine issue of material fact exists regarding the damages that can be recovered under the Assignment Agreement and the Fee Agreement. Whether plaintiffs conduct in failing to consummate the purchase of the property was wrongful must be determined by a jury. Further, the court finds that a genuine issue of material fact exists regarding whether plaintiffs purchase of the property was a condition precedent contemplated by the parties under the Assignment Agreement and Fee Agreement. Plaintiffs motion is denied.
B. Breach of Oral Contracts
Plaintiff moves the court for summary judgment in regard to defendant's contention that statements by representatives of plaintiff in Summer 1999 and Spring 2000 created contractual obligations between the parties. As set forth above, defendant claims agents of plaintiff orally stated that plaintiff would close on the Sale Agreement and purchase the 65 acres if the property was rezoned. Further, defendant states plaintiff agreed to close on the entire 65 acres and transfer the business park portion of the property to defendant. Plaintiff contends that, as a matter of law, the oral statements did not create valid contracts under the statute of frauds and the parol evidence rule.
The statute of frauds provides in relevant part that, "no action shall be brought... upon any contract for the sale of lands, tenements, or hereditaments, or any interest in or concerning them ... unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged." Kan. Stat. Ann. § 33-106. The Kansas Supreme Court has held that: "[a] memorandum, in order to be enforceable under the statute of frauds, may be any document or writing, formal or informal, signed by the party to be charged or by his lawfully authorized agent, which states with reasonable certainty (a) each party to the contract either by his own name, or by such a description as will serve to identify him, or by the name or description of his agent, (b) the land or other subject matter to which the contract relates, and (c) the terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made." Clark v. Larkin, 172 Kan. 284, 287, 239 P.2d 970, 973 (1952) (citing Restatement (First) of Contracts § 207).
Here, there is no writing in the record memorializing the terms of the alleged oral agreements. Because the alleged oral statements by plaintiff concern the purchase of property, they cannot constitute a valid contract under the statute of frauds. Moreover, defendant has not asserted that any exception to the statute of frauds applies in this case. Accordingly, the court grants plaintiffs motion for summary judgment as it relates to the alleged oral contracts.
*1253 C. Breach of Fiduciary Duty
Defendant states that plaintiff breached a fiduciary duty it owed to defendant by failing to pay defendant the monies set forth in the Fee Agreement and Assignment Agreement.
Under Kansas law, a fiduciary relationship is never presumed, but must be proved by clear and convincing evidence. Fiduciary obligations should be extended reluctantly to commercial or business transactions. There are two types of fiduciary relationships generally recognized in Kansas: "(1) those specifically created by contract such as principal and agent, attorney and client, and trustee cestui que trust, for example, and those created by formal legal proceedings such as guardian and/or conservator and ward, and executor and administrator of an estate, among others and (2) those implied in law due to the factual situation surrounding the involved transactions and the relationship of the parties to each other and to the questioned transactions."
Flight Concepts Ltd. P'ship v. Boeing Co., 819 F.Supp. 1535, 1545 (D.Kan.1993) (citations omitted). Conscious assumption of the alleged fiduciary duty is a mandatory element for the existence of a fiduciary duty. Id. To this end, "[m]ere concert of action without more, does not establish a fiduciary relationship.... Undoubtedly, parties may deal at arm's length for their mutual profit. It is only when, by their concerted action, they willingly and knowingly act for one another in a manner to impose mutual trust and confidence that a fiduciary relationship arises." Wolf v. Brungardt, 215 Kan. 272, 285, 524 P.2d 726, 736 (1974).
After having reviewed the record, the court finds plaintiff has demonstrated that no genuine issue of material fact remains as to whether a fiduciary relationship existed between the parties. There has been no showing that plaintiff consciously assumed the role of fiduciary. Furthermore, there are no facts that would justify a finding that defendant placed special trust or confidence in plaintiff. Accordingly, the court grants summary judgment as to defendant's breach of fiduciary duty counter-claims.
D. Fraudulent Misrepresentation
Defendant also argues that plaintiff misrepresented its intention to purchase the property at issue, and that defendant justifiably relied upon plaintiffs statements and was damaged. In support of this claim, defendant has put forth evidence which may indicate that, for the property in question, plaintiff departed from its standard procedure by not preparing a written pro forma regarding what plaintiffs estimated return on the investment would be.
Under Kansas law, "[w]hen alleged fraud relates to promises or statements concerning future events, the gravamen of such a claim is not the breach of the agreement to perform, but the fraudulent representation concerning a present, existing intention to perform when such intention is in fact nonexistent." Smith v. MCI Telecoms. Corp., 755 F.Supp. 354, 356-57 (D.Kan.1995) (citing K-B Trucking Co. v. Riss Int'l Corp., 763 F.2d 1148, 1156 (10th Cir.1985)). To succeed on this claim, defendant must prove that plaintiff never intended to perform upon its promises to purchase the property and to pay defendant under the Fee Agreement; that the promises were made with the intent to deceive and to induce defendant into entering into the Fee Agreement and Assignment Agreement; that defendant reasonably relied upon the promises; and that defendant sustained damages thereby. Id. (citing Mackey v. Burke, 751 F.2d 322, 328 (10th Cir.1984)).
*1254 Here, the court finds a genuine issue of material fact remains regarding whether plaintiff had an intent to perform the agreements. The court denies plaintiffs motion for summary judgment as to plaintiffs fraudulent inducement claim.
E. Uncertain Damages
Plaintiff claims that defendant's lost profit calculation for the alleged breach of the second oral contract is based upon speculation. Because the court has granted summary judgment as to that contract, the court finds this issue is moot.
F. Earnest Money Under Sale Agreement
Finally, plaintiff moves the court for summary judgment on the grounds that plaintiff is entitled to receive the $158,000 in Earnest Money. As set forth above, the court has found that genuine issues of material fact relating to this claim preclude entry of summary judgment. Plaintiffs motion is denied to the extent it seeks a judgment as to the Earnest Money.
V. Order
IT IS THEREFORE ORDERED THAT defendant's Motion for Summary Judgment (Doc. 61) is denied in its entirety.
IT IS FURTHER ORDERED THAT plaintiffs Motion for Summary Judgment (Doc. 57) is granted in part and denied in part. Plaintiffs motion is granted as to the defendant's counterclaims for breach of the oral contracts and breach of fiduciary duty. Plaintiffs motion is denied as to defendant's counterclaims for breach of the Assignment Agreement and Fee Agreement and for fraudulent inducement. Plaintiffs motion is also denied as to plaintiffs argument that defendant's damages are uncertain, and is further denied to the extent plaintiff asserts it is entitled to receive $158,000 in Earnest Money.
NOTES
[1] All facts are uncontroverted or viewed in the light most favorable to non-moving party pursuant to Federal Rule of Civil Procedure 56.
[2] Mr. Turner's affidavit does not state which contract to which Mr. Turner refers. The court infers from the context that it is the Sale Agreement, because that is the agreement Mr. Turner discusses most closely prior to the statement in question.
[3] There is no evidence in the record regarding the relationship between Terra Venture Investments LLC and defendant.
[4] The letter, which was signed after the Assignment Agreement, is designated as regarding the "Sale Agreement dated July 27, 1999 between Ranch Mart, Inc. as Seller and Terra Venture, Inc., as Purchaser." (Mem. in Supp. of Def.'s Mot. Summ. J. Ex. 5) The letter, signed by Mr. Turner on behalf of defendant and Mr. Regnier on behalf of Ranch Mart, also states, "[t]he undersigned Seller and Purchaser hereby direct you to return to Purchaser all earnest money deposited with you with respect to the referenced Sale Agreement." (Id.).
[5] Defendant asserts two bases upon which it contends plaintiff forfeited the Earnest Money to Ranch Mart: (1) the extension of the Sale Agreement closing date to July 27; and (2) the failure of plaintiff to notify Ranch Mart of any failure of a condition precedent, as required by the July 27 Sale Agreement.
[6] As noted above, the closing was eventually extended to June 30, 2001; however, the parties do not discuss the effect of any subsequent amendments after the December 1999 Amendment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2637472/ | 28 Kan. App. 2d 334 (1999)
17 P.3d 364
CRAIG E. HOGUE, Appellant,
v.
JEREMY JOHNSON, Appellee.
No. 80,950.[1]
Court of Appeals of Kansas.
Opinion filed July 30, 1999.
Timothy J. King, of Speth, King & Riedmiller, of Wichita, for the appellant.
Lyndon W. Vix, Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, for the appellee.
Before BRAZIL, C.J., PIERRON, J., and ROGG, S.J.
PIERRON, J.:
Craig E. Hogue appeals the district court's granting of summary judgment in favor of Jeremy Johnson. The court found *335 Hogue's claim was barred by the statute of limitations due to untimely service of process on Johnson.
On April 13, 1995, Hogue and Johnson were involved in a twocar automobile accident which caused slight damage to both vehicles. Hogue waited to file suit against Johnson until April 10, 1997, 3 days prior to the expiration of the 2-year statute of limitations in K.S.A. 1996 Supp. 60-513. Pursuant to K.S.A. 60-203(a), Hogue had 90 days in which to obtain service on Johnson in order to have the action commenced on the date of the filing of the petition. The 90-day time period ended on July 9, 1997.
On June 30, 1997, Hogue's counsel retained Kansas Investigative Services to locate and obtain service of process on Johnson. Hogue was unable to obtain service on Johnson within the 90-day time period. On July 1, 1997, Judge Lahey granted Hogue an additional 30 days from and after July 8, 1997, in which to obtain service upon Johnson. Hogue was still unable to serve Johnson. On August 6, 1997, Judge Lahey entered an order pursuant to K.S.A. 60-517 that the service of process upon Johnson would not expire so long as Johnson continued to conceal himself from service of process.
Hogue continued efforts to obtain service of process on Johnson. Hogue continued the use of a private investigator. He contacted Johnson's insurance carrier and the Kansas Department of Motor Vehicles for a possible change of address for Johnson. On October 2, 1997, Hogue attempted service on Johnson by serving his father, Larry Johnson, at his residence in Wichita.
Johnson answered the petition on November 12, 1997. He argued that Hogue's claim was barred by the statute of limitations, Hogue's noneconomic damages were barred by the Kansas Automobile Injury Reparations Act, and there was insufficiency of process and insufficiency of service of process. On February 9, 1998, Johnson filed a motion for summary judgment, contending the service on his father was invalid and, even if valid, was outside both the 90-day and 120-day time periods provided in K.S.A. 60-203(a). Johnson also argued that Hogue had provided no evidence at the previous hearings that Johnson had absconded or concealed himself from service of process.
*336 Judge Malone granted summary judgment to Johnson. Judge Malone found that Hogue had not obtained a private investigator until a few days before the expiration of the statute of limitations. He also found it troubling that Judge Lahey had issued an order extending the statute of limitations pursuant to K.S.A. 60-517, yet the order was obtained ex parteno motion was filed, no hearing was held, no evidence was presented. Judge Malone acknowledged Judge Lahey's order, but found it was not binding or controlling in the case. Judge Malone considered the evidence and determined that Johnson had never attempted to conceal himself. Judge Malone stated that just because Hogue was unable to serve Johnson did not constitute sufficient evidence that Johnson had tried to conceal himself. Judge Malone stated that the only evidence of any concealment-type activity was that Johnson's father had given the private investigator a wrong address for Johnson, which was not an affirmative action by Johnson and was insufficient under K.S.A. 60-517.
Hogue's only argument on appeal is that the district court erred in granting summary judgment because Judge Malone's finding that Johnson did not conceal himself from service of process was inconsistent and irreconcilable with Judge Lahey's earlier decision.
Since Hogue has not addressed the merits of Judge Malone's decision, instead only arguing that Judge Malone could not contradict Judge Lahey, we agree with Johnson that Hogue has waived that issue on appeal. An issue not raised on appeal is waived or abandoned. See Pope v. Ransdell, 251 Kan. 112, 119, 833 P.2d 965 (1992). However, the two issues are related in that we must consider the appropriateness of Judge Malone's actions. We find them well justified.
Summary judgment is appropriate when 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 judgment as a matter of law. Saliba v. Union Pacific R.R. Co., 264 Kan. 128, 131, 955 P.2d 1189 (1998).
Hogue obtained an ex parte order from Judge Lahey based merely on evidence that Hogue and/or his private investigator were *337 unable to obtain service of process on Johnson. The only evidence of this order in the record is an entry in the appearance docket. At the hearing on the motion for summary judgment, plaintiff's counsel explained that to obtain the ex parte order he had informed Judge Lahey of his efforts to serve Johnson and that it was plaintiff s counsel's "best belief and on good cause shown that [Johnson] was tryingwas concealing himself from service of process as evidenced by the fact even his own insurance company, who I was talking to, didn't know where he was."
The evidence presented at the ex parte hearing was not sufficient to support a finding that Johnson absconded or concealed himself from service of process. In Johnson v. Miller, 8 Kan. App. 2d 288, 655 P.2d 475 (1982), the court granted summary judgment to the defendant based on the expiration of the statute of limitations because the only evidence submitted by the plaintiff was that she was unable to locate the defendant after filing suit. The Johnson court stated: "The mere inability of a plaintiff to locate a defendant where there has been no attempt by defendant to conceal himself is not sufficient to establish concealment within the meaning of the tolling statute." 8 Kan. App. 2d at 290.
K.S.A. 60-517 does not contemplate a district court issuing an ex parte order tolling the statute of limitations until service of process can be obtained on a party. Rather, K.S.A. 60-517 contemplates that a plaintiff will at all times exercise due diligence to obtain service on a defendant. If service of process is obtained outside of the 90-day or 120-day time period provided for in K.S.A. 60-203(a), a defendant can raise the affirmative defense of expiration of the statute of limitations in the first pleading filed with the court. See K.S.A. 60-208(c). The defendant has the burden to prove this affirmative defense. See Slayden v. Sixta, 250 Kan. 23, 26, 825 P.2d 119 (1992). In response, a plaintiff can then oppose imposition of the affirmative defense by asserting that the statute of limitations was tolled pursuant to K.S.A. 60-517 based on presentation of evidence that the defendant either was out of the state or absconded or concealed from service of process. K.S.A. 60-517 provides:
*338 "If when a cause of action accrues against a person he or she be out of the state, or has absconded or concealed himself or herself, the period limited for the commencement of the action shall not begin to run until such person comes into the state, or while he or she is so absconded or concealed, and if after the cause of action accrues he or she depart from the state, or abscond or conceal himself or herself, the time of the absence or concealment shall not be computed as any part of the period within which the action must be brought."
The plaintiff has the burden to prove the existence of facts to toll the running of the statute of limitations. Slayden, 250 Kan. at 26.
Motions under K.S.A. 60-517 are not handled on an ex parte basis. The district court must weigh all the facts in determining whether the statute of limitations was tolled while plaintiff was unable to serve a defendant. Since a defendant must take some affirmative act to conceal himself or herself from service of process, a defendant's version of the facts is often essential for the court to make such a determination. We agree with Judge Malone's statement at the summary judgment hearing that if a plaintiff can come before the court prior to the expiration of the statute of limitations, present a self-serving set of facts with only an assumption of a defendant's affirmative concealment or absconding, and receive an order tolling the statute of limitations, then the statute of limitations is rendered meaningless.
With that background, Hogue's only real argument on appeal is that Judge Malone could not enter findings inconsistent and irreconcilable with those made by Judge Lahey. He cites two cases for authority. In State v. Meyer, 17 Kan. App. 2d 59, 832 P.2d 357 (1992), this court reversed a decision where the trial court, in a bench trial, acquitted the defendant on charges of forgery but found him guilty on charges of issuing or delivering a forged instrument. 17 Kan. App. 2d at 61, 70. In McDonnell v. The Music Stand, Inc., 20 Kan. App. 2d 287, 886 P.2d 895 (1994), rev. denied 256 Kan. 995 (1995), we applied Meyer in the civil context. There, we reversed where a trial court granted summary judgment in favor of a music store, finding the conduct of its hired collection agency was not outrageous. Then, a week later, the trial court entered judgment against the collection agency, finding the collection agency's conduct was outrageous. 20 Kan. App. 2d at 288, 294.
*339 Meyer and McDonnell are not applicable. In both cases, the trial court entered inconsistent rulings that simply could not stand. Here, we do not have inconsistent rulings, we have a judge changing a previous ruling in a case after additional evidence was heard. The ability of a trial judge to change a previous ruling is clearly within the judge's discretion. Furthermore, the appointment of a new judge does not alter this discretion. In Burrowwood Assocs., Inc. v. Safelite Glass Corp., 18 Kan. App. 2d 396, 398, 853 P.2d 1175 (1993), the court stated:
"It is axiomatic that a trial judge may reverse himself or herself during the course of an action if he or she believes an incorrect ruling has been made. Had Judge Buchanan, who heard the motion in the first place, presided over the trial, he could have, without question, reversed himself once he was satisfied of the probability that Burrowwood would prevail. Safelite would have us deny to Judge Anderson, the assigned trial judge, the same authority Judge Buchanan would have had. This we will not do."
It was not an abuse of discretion for Judge Malone to change Judge Lahey's order or find that it was not binding. We find Hogue's argument on inconsistent rulings to be unpersuasive. We also find the district court did not err in granting summary judgment to Johnson.
Affirmed.
NOTES
[1] REPORTER'S NOTE: Previously filed as an unpublished opinion, the Supreme Court granted a motion to publish by an order dated November 7, 2000, pursuant to Rule 7.04 (1999 Kan. Ct. R. Annot. 44). | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546360/ | 988 A.2d 1177 (2010)
201 N.J. 153
TOWNSHIP OF READINGTON
v.
SOLBERG AVIATION CO.
C-531 September Term 2009, 064821
Supreme Court of New Jersey.
January 21, 2010.
Petition for Certification Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3034538/ | FILED
NOT FOR PUBLICATION MAR 05 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 09-50172
Plaintiff - Appellee, D.C. No. 2:08-cr-01478-PA
v.
MEMORANDUM *
EDGAR GONZALEZ SERRANO,
Defendant - Appellant.
Appeal from the United States District Court
for the Central District of California
Percy Anderson, District Judge, Presiding
Submitted February 16, 2010 **
Before: FERNANDEZ, GOULD, and M. SMITH, Circuit Judges.
Edgar Gonzalez Serrano appeals from his guilty-plea conviction and 30-
month sentence for being an illegal alien found in the United States following
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
EF/Research
deportation, in violation of 8 U.S.C. § 1326. Pursuant to Anders v. California,
386 U.S. 738 (1967), Serrano’s counsel has filed a brief stating there are no
grounds for relief, along with a motion to withdraw as counsel of record. We have
provided the appellant with the opportunity to file a pro se supplemental brief. No
pro se supplemental brief has been filed, but the government has filed a motion for
summary affirmance.
Our independent review of the record pursuant to Penson v. Ohio, 488 U.S.
75, 80-81 (1988), discloses no arguable grounds for relief on direct appeal.
Accordingly, counsel’s motion to withdraw is GRANTED, and the district
court’s judgment is AFFIRMED. The government’s motion is DENIED.
EF/Research 2 09-50172 | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1546384/ | 172 F.2d 810 (1949)
C. L. DOWNEY CO.
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 13836.
United States Court of Appeals Eighth Circuit.
February 23, 1949.
Maurice Walk, of Chicago, Ill., for petitioner.
Morton K. Rothschild, Sp. Asst. to Atty. Gen., Theron Lamar Caudle, Asst. Atty. Gen., and Ellis N. Slack and A. F. Prescott, Sp. Assts. to Atty. Gen., for respondent.
Before SANBORN, WOODROUGH, and THOMAS, Circuit Judges.
THOMAS, Circuit Judge.
The Petitioner, C. L. Downey Company, is an Ohio corporation, having its principal place of business at Hannibal, Missouri. It seeks review of a decision of the Tax Court of the United States, 10 T.C. 837, involving its income and excess profits taxes for the taxable years 1942 and 1943.
The issues decided by the Tax Court and to be reviewed here, are: (1) Whether the Commissioner erroneously disallowed, as borrowed invested capital for each year, $28,000 representing a claimed loan to the *811 taxpayer by the Hannibal Chamber of Commerce; and (2) whether the Commissioner erred in eliminating from the depreciable base the sum of $25,000 made available by the Chamber of Commerce for use in the construction of its factory.
The facts are not in dispute.
On April 2, 1941, petitioner entered into a written Agreement with the Chamber of Commerce of Hannibal, Missouri. The construction and application of the Internal Revenue Code to the provisions of this agreement and its performance by the parties constitute the basis of this controversy.
The agreement recited that petitioner was located at Cincinnati, Ohio, and was desirous of changing its location, and that the Chamber of Commerce had for some time been endeavoring to have it locate its plant at Hannibal, Missouri.
It was stipulated in the agreement:
1. That the Chamber would cause to be conveyed to the petitioner land on which to construct a manufacturing plant.
2. That petitioner would construct a factory building thereon at a cost of approximately $50,000.
3. That the Chamber would procure for petitioner a loan of $25,000 to be evidenced by petitioner's note secured by a first deed of trust on the land.
4. That the Chamber would secure by popular subscription the sum of $28,000 within thirty days, $3,000 of which should be used for the purchase of the land and $25,000 to be applied to the cost of constructing the factory building.
5. It was then provided that petitioner should secure the $28,000 loan by the execution of a promissory note secured by a second deed of trust on the real estate and the improvements thereon, the note to be payable to the Chamber of Commerce and due eight years from the date of the agreement. The agreement then provided:
"Should the said Company (petitioner) pay out to its officers and employees engaged in its factory operated in Hannibal, Missouri, in wages, salaries and emoluments over a period of seven and one-half years, or a lesser time, beginning with the date of its operation in Hannibal, Missouri, the sum of $500,000, * * * then said note shall be cancelled and the second deed of trust shall be released of record."
The terms of the agreement were complied with by both parties. The petitioner's payroll between the date of the agreement and the close of the calendar year 1945 exceeded $500,000, and prior to the close of 1945 the note for $28,000 and the second deed of trust securing it were cancelled by the Chamber of Commerce and returned to petitioner.
Two deductions claimed by the petitioner in its income tax returns for the taxable years were not allowed by the Commissioner:
1. In the deficiency notice the Commissioner disallowed as equity invested capital the $28,000 evidenced by the second deed of trust and note and allowed no part thereof as borrowed capital.
2. The building erected by the petitioner pursuant to the terms of the agreement has an estimated life of 50 years from January, 1942. The petitioner in its income tax return for 1942 claimed depreciation on a cost of $47,451.07. The Commissioner in the deficiency notice disallowed depreciation on $25,000, which is that portion of the cost received from the Chamber of Commerce and secured by the second deed of trust which was cancelled in 1945 in accordance with the terms of the agreement for the reason that petitioner's payroll at that time exceeded $500,000.
The Tax Court affirmed.
First, did the $28,000 received by the petitioner from the Chamber of Commerce and secured by a second deed of trust on its property represent invested borrowed capital of the taxpayer within the meaning of the statute notwithstanding the secured note was subject to a condition subsequent resulting in its cancellation?
The petitioner argues that this question must be answered in the affirmative because (a) the cash was received on petitioner's unconditional promise to pay; (b) in case of default when due petitioner was liable to foreclosure and sale of the premises and to a deficiency judgment; and (c) cost consists in the exposure of the fund *812 raised on the note to the business risks of the enterprise.
The applicable provisions of the statute, 26 U.S.C.A. § 719, reads:
"Sec. 719. Borrowed invested capital
"(a) Borrowed capital. The borrowed capital for any day of any taxable year shall be determined as of the beginning of such day and shall be the sum of the following:
"(1) The amount of the outstanding indebtedness (not including interest) of the taxpayer which is evidenced by a bond, note, bill of exchange, debenture, certificate of indebtedness, mortgage, or deed of trust, plus, * * *
"(b) Borrowed invested capital. The borrowed invested capital for any day of any taxable year shall be determined as of the beginning of such day and shall be an amount equal to 50 per centum of the borrowed capital for such day."
The decisive question here is whether the note and deed of trust in question represented an "outstanding indebtedness" of the petitioner in 1942 and 1943 within the meaning of Sec. 719(a) (1). In the case of Gilman v. Commissioner, 8 Cir., 53 F.2d 47, 50, 80 A.L.R. 209, this court said: "The term `indebtedness' as used in the Revenue Act implies an unconditional obligation to pay. Any definition more flexible would only encourage subterfuge and deception." And, further, "While the sum of money may be payable upon a contingency, yet in such case it becomes a debt only when the contingency has happened, the term `debt' being opposed to `liability' when used in the sense of an inchoate or contingent debt." This definition has been approved and applied in Johnson v. Commissioner, 8 Cir., 108 F.2d 104; Commissioner v. Park, 3 Cir., 113 F.2d 352; Autenreith v. Commissioner, 3 Cir., 115 F.2d 856; Canister Co. v. Commissioner, 3 Cir., 164 F.2d 579. Compare, also, Consolidated Goldacres Co. v. Commissioner, 10 Cir., 165 F.2d 542; Frankel & Smith Beauty Department, Inc., v. Commissioner, 2 Cir., 167 F.2d 94. No doubt petitioner owed an obligation to the Chamber of Commerce, "But although an indebtedness is an obligation, an obligation is not necessarily an `indebtedness' within the meaning" of the Revenue Act. Deputy v. DuPont, 308 U.S. 488, 497, 60 S. Ct. 363, 368, 84 L. Ed. 416.
The note involved here provided that "Said note will be satisfied and considered paid by The C. L. Downey Company's compliance with the terms of the contract dated March 31, 1941 * * *." The deed of trust sets forth a copy of the note and provides that "This deed of trust and obligation is made in conformance with and pursuant to a contract between the parties dated March 31, 1941 * * *."
Although the so-called note and deed of trust represented an obligation of the petitioner they did not represent an "indebtedness" within the meaning of the Revenue Act because the obligation was contingent upon the failure of the petitioner to pay out in salaries and wages at its factory in Hannibal, Missouri, the sum of $500,000 within seven and one-half years. In fact the contingency did not occur, and the obligation was cancelled. It is an established principle that "* * * in order truly to reflect the income of a given year, all the events must occur in that year which fix the amount and the fact of the taxpayer's liability for items of indebtedness deducted though not paid * * *." Dixie Pine Products Co. v. Commissioner, 320 U.S. 516, 519, 64 S. Ct. 364, 365, 88 L. Ed. 420; Capital Warehouse Co., Inc., v. Commissioner, 8 Cir., 171 F.2d 395, 397.
Second, did the $25,000 of the $28,000 represented by the note in question represent an investment in the factory building for the purpose of depreciation within the meaning of the Revenue Act?
26 U.S.C.A. § 114 provides that the basis for depreciation shall be the adjusted basis provided in section 113(b) which refers to section 113(a) which provides that "The basis of property shall be the cost of such property," making specified adjustments which means "cost to the taxpayer." Detroit Edison Co. v. Commissioner, 319 U.S. 98, 102, 63 S. Ct. 902, 904, 87 L. Ed. 1286. In the cited case the court said, "Generally * * * the taxpayer's outlay is the measure of his recoupment through depreciation accruals." In Commissioner v. Arundel-Brooks Concrete Corp., 4 Cir., 152 F.2d *813 225, 162 A.L.R. 1200, the court, in reliance on the decision of the Supreme Court in the Detroit Edison Co. case, supra, held that the taxpayer was not entitled to depreciation on the total cost of its plant when another corporation had for business reasons contributed $20,000.00 to the cost thereof. Compare Commissioner v. Revere Land Co., 3 Cir., 169 F.2d 469, at pages 475 et seq.
That the $25,000 in question was not an investment of the taxpayer in the factory building but was a contribution by the Chamber of Commerce for the public interest which it represented is clear from the record. The Resolution adopted by the Chamber at a special meeting on March 17, 1941, called to consider the contract executed on March 31, 1941, stated:
"Whereas, the Hannibal Chamber of Commerce is authorized to encourage the establishment of manufacturing companies * * * in Hannibal, Missouri, and Whereas, the Industrial Committee has conferred with officials of the C. L. Downey Company * * * and come to a mutual understanding with said company regarding the matter of establishing the main plant of this company at Hannibal, Missouri"; and the contract having been reduced to writing was approved and its execution authorized.
Paragraph "4" of the contract was designed to assure the Chamber of Commerce that the money contributed would be applied to the cost of constructing the factory building. Paragraph 4 reads:
"4. That said Chamber of Commerce, at its own expense, will secure by popular subscription the sum of $28,000.00 within thirty (30) days from the date hereof, $3,000.00 of said sum to be used for the purchase of said lot and the sum of $25,000.00 to be deposited in some bank or banks in Hannibal, Missouri, in the name of some Trustee to be agreed upon between the parties hereto, said sum to be used and paid out to the general contractor, head-contractor, sub-contractors and material-men for the erection of said building, said sums to be paid out upon certificates from the engineer of the said The C. L. Downey Company, as the work progresses and the approval of the engineer of said Chamber. The C. L. Downey Company shall not assume any expense of said Trusteeship."
Likewise the provision of the contract requiring a note and deed of trust payable on condition that petitioner should fail to pay out $500,000 in salaries and wages during a period of seven and one-half years was intended to protect the Chamber against bad faith of the taxpayer because casualties over which the petitioner had no control were excepted.
For the reasons stated the decision of the Tax Court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546126/ | 77 F.2d 244 (1935)
KECK INV. CO.
v.
COMMISSIONER OF INTERNAL REVENUE.[*]
No. 7544.
Circuit Court of Appeals, Ninth Circuit.
May 6, 1935.
Thomas R. Dempsey and A. Calder Mackay, both of Los Angeles, Cal., for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, F. E. Youngman, and Andrew D. Sharpe, Jr., Sp. Assts. to Atty. Gen., for respondent.
Before WILBUR and GARRECHT, Circuit Judges, and CAVANAH, District Judge.
GARRECHT, Circuit Judge.
This petition involves a deficiency in federal income taxes in the amount of $19,805.58, determined against the petitioner for the calendar year 1923.
Petitioner was incorporated on November 17, 1922, under the laws of the state of California. On that date, in consideration of the issuance of 19,997 shares of its capital stock to William M. Keck and Alice B. Keck and the assumption by it of liabilities in the sum of $455,000, it acquired the following described property, which was entered in petitioner's books at the value stated, to wit:
625,000 shares of the capital
stock of Superior Oil Company $ 625,000.00
5,000 shares of the capital
stock of Star Petroleum
Company 70,000.00
999,980 shares of the capital
stock of Keck Drilling Corporation 500,000.00
321,275 shares of the par value
of $1.00 each of the capital
stock of Miley-Keck Oil
Company 1,285,100.00
_____________
$2,480,100.00
Petitioner at the same time acquired from Mr. and Mrs. Keck notes receivable in the sum of $150,000, and also $300, in cash, for which it issued three additional shares of its capital stock. The 19,997 shares of stock were issued in equal proportions to William M. Keck and Alice B. Keck.
As indicated, petitioner listed on its books the value of 321,275 shares of the capital stock of the Miley-Keck Company at $1,285,100, which petitioner now asserts was at the time of acquiring said stock of the value of $1,535,694.50.
In July, 1923, the petitioner exchanged these 321,275 shares of the stock of the Miley-Keck Oil Company for capital stock of the Pacific Oil Company, having a realizable market value of $1,285,100. This Pacific Oil Company stock so received by petitioner was likewise entered upon its books at $1,285,100, thus no gain or loss upon the exchange was reflected on petitioner's books. Petitioner *245 claims that the Miley-Keck Oil Company stock at the time it was acquired was of the fair market value of $1,535,694.50, and insists that it sustained a deductible loss during the year 1923 on account of the exchange of this stock for the stock of the Pacific Oil Company in the sum of $250,594.50.
The questions presented are: (a) Whether petitioner sustained a deductible loss of $250,594.50 in 1923 upon the exchange of stock as claimed; (b) whether petitioner was formed or availed of for the purpose of preventing the imposition of the surtax upon its stockholders, rendering it liable for the year 1923 for the additional tax imposed by section 220 of the Revenue Act of 1921; (c) if so, whether said section 220 is unconstitutional.
William M. Keck, president of petitioner, and president and manager of the Superior Oil Company and director and manager of the Miley-Keck Oil Company, testified that in his opinion the fair market value of the Miley-Keck Oil Company stock on November 17, 1922, the date acquired by petitioner, was at least $5 per share. John R. Roberts, an engineer revenue agent, who had been employed by the government since 1925, made a valuation report dated October 12, 1927, determining the fair market value on November 17, 1922, of certain leasehold interests owned by the Miley-Keck Oil Company at $5,141,670.91. Petitioner asserts that these witnesses were not contradicted, and that the Board of Tax Appeals was bound by the testimony, but this evidence was not sufficient to overcome the presumptions arising from the statements entered on the taxpayer's books of account, besides being otherwise unsatisfactory. In his cross-examination Keck admitted that he was giving his "present opinion of the then value of the stock." This valuation is discredited by the fact that the very offer made by Keck in the initial transaction states the value of the capital stock of the Miley-Keck Oil Company to be $1,285,000, which, according to the offer, was the price paid. As this valuation was consistently carried on the books of the petitioner at all times thereafter, there were no good grounds for the Board of Tax Appeals to change the figures thus arrived at by the interested party. As to the testimony of the Internal Revenue agent, the report he made in 1927, which was many years after the date of the acquisition of the stock in question, was itself introduced into evidence. We quote a portion thereof:
"This item of $5,141,670.91 is solely the value of the oil in the ground on the basic date and does not include other assets which are as per books less depreciation and other deductions sustained to basic date.
"The total net worth can only be determined as per books and by giving effect to the above value. The books are not available to this Engineer."
Further, the Board of Tax Appeals found the petitioner's books of account do not show that it sustained any loss in respect of the exchange transaction. The Commissioner was not bound to accept the retroactive testimony of these witnesses. J. C. Blair Co. v. Commissioner, 34 F.(2d) 861, 863 (C. C. A. 3).
The Board is only required to give such weight to the testimony as it seems to merit. The most that courts can do is to correct obvious abuses. We cannot say that the court was wrong in fixing the values. Patterson v. Commissioner, 42 F.(2d) 148 (C. C. A. 2).
The Board of Tax Appeals found that the petitioner was organized as a holding company for the purpose of holding certain of the investments of William M. Keck and Alice B. Keck, who were the owners of practically all of its stock. It was also found that had the Keck Investment Company not been formed these two principal stockholders would have been liable for surtax not only upon the net income shown upon its income tax return for 1923, but also for income tax upon $146,966.44 of dividends from domestic corporations. The Board found that the corporation was availed of for the purpose of preventing the imposition of the surtax upon its stockholders, and held that this case came within section 220 of the Revenue Act of 1921 (42 Stat. 247).
While these statements by the Board of Tax Appeals appear in the opinion, it has been repeatedly held that the written opinion may perform the function of a finding of fact. See Emerald Oil Co. v. Commissioner, 72 F.(2d) 681 (C. C. A. 10), and the cases cited therein at page 683.
Petitioner further insists that said section 220 of the Revenue Act of 1921 is unconstitutional and void. The constitutionality of this statute has heretofore been upheld in United Business Corp. v. Commissioner, 62 F.(2d) 754 (C. C. A. 2); also by *246 the Court of Claims in Williams Investment Co. v. U. S., 3 F. Supp. 225, where the validity of a corresponding provision of the Revenue Acts of 1924 and of 1926 (section 220, 26 USCA § 961 note) was attacked in each instance as being unconstitutional.
The decision of the Board of Tax Appeals is affirmed.
NOTES
[*] Rehearing denied Aug. 19, 1935. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546098/ | 77 F.2d 468 (1935)
LANGFORD INV. CO.
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 7422.
Circuit Court of Appeals, Fifth Circuit.
April 24, 1935.
*469 Harry C. Weeks, of Wichita Falls, Tex., for petitioner.
Frank J. Wideman, Asst. Atty. Gen., Jos. M. Jones, Sewall Key, J. Louis Monarch, and John MacC. Hudson, Sp. Assts. to Atty. Gen., and Robert H. Jackson, Asst. Gen. Counsel, Bureau of Internal Revenue, and Shelby S. Faulkner, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.
Before BRYAN, SIBLEY, and WALKER, Circuit Judges.
WALKER, Circuit Judge.
This case involves deficiency income tax assessments for the years 1924, 1925, 1926, 1928, and 1929, made against the petitioner, the successor trustee under an instrument executed by P. P. Langford and his wife on November 6, 1920. By that instrument, as appears therefrom, the grantors, "for and in consideration of the sum of ten dollars to us cash in hand paid by" the grantee, "and for the love and affection we bear to our children," conveyed to the grantee their undivided one-third interest in described properties. Other provisions of that instrument which are material to questions now presented are set out in the margin.[1] During the taxable years involved, the named beneficiaries were minors, and the trust property was held by the trustee. For the years 1924 and 1925, the income from the *470 trust property was reported on individual returns of the beneficiaries, each reporting one-third of the income for those years. For the years 1926, 1928, and 1929, fiduciary returns were filed, on which was reported the one-third interest of each beneficiary in the income, or loss, of the trust. No tax was paid by the trustee for any of those years. The Commissioner determined that the income from the properties included in the trust instrument should be taxed as that of one trust, and made deductions for the amounts distributed to the beneficiaries, various sums having been expended by the trustee from time to time for the separate use and benefit of the three named beneficiaries. Those amounts were unequal as between the three named beneficiaries. All such sums have been charged upon petitioner's books as advances to the beneficiaries for whose benefit, respectively, the sums were spent, to be adjusted and taken into consideration in determining the interest of each beneficiary upon termination of the trust. The Commissioner disallowed a deduction claim, which is hereinafter described and dealt with. The above-mentioned actions of the Commissioner were approved by the Board of Tax Appeals.
Applicable statutes impose a tax upon the income of estates or any kind of property held in trust, including income which in the discretion of the fiduciary is to be distributed to the beneficiaries or accumulated, the net income to be computed in the same manner and on the same basis as in the case of an individual, and the fiduciary is required to make an annual return for every estate or trust having net income of $1,500, or gross income of $5,000. Sections 219, 225, Revenue Acts of 1924 and 1926, 26 USCA §§ 960, note, 966 and note; sections 143, 161, 162, Revenue Act of 1928, 26 USCA §§ 2143, 2161, 2162. The determination of the Commissioner, approved by the Board of Tax Appeals, that the income from the property held under the trust instrument was taxable as that of one trust, is challenged on the ground that that instrument created a separate trust in favor of each of the three named beneficiaries, and that a proportionate amount of the income of all the properties was taxable against each of three trusts. An intention of the makers of the trust instrument to create more than one trust is nowhere disclosed or indicated. The beneficial interest conferred on each of the three named children of the settlors was an undivided interest in all the property conveyed, not sole beneficial ownership of a separate, segregated, and identified share or portion of that property allotted to the three children severally. Throughout the trust instrument what was intended to be created was referred to as a single trust. The conclusion that the settlors contemplated the creation of more than one trust is clearly negatived by the repeated use in the trust instrument of such language as "this trust," "the trust estate hereby created," and by the provision: "This trust estate shall cease and determine, as to each beneficiary interested therein, when said beneficiary and each of them, arrive at the age of twenty-five (25) years, and the Trustee, thereupon shall deliver to such beneficiary, who arrives at such age of twenty-five years, such beneficiary's interest or proportion of the Trust Estate hereby created, and from such time said beneficiary shall have full power and authority to dispose of said estate as they see fit." On the question whether the settlors created one or more trusts, their intention, disclosed in the instrument creating the trust, is controlling. Under the terms of the trust instrument now under consideration, each of the named beneficiaries, subject only to the contingencies of the beneficiary reaching the age of twenty-five years, and of a subsequently born child of the settlors becoming a beneficiary, acquired a beneficial interest, equivalent to a legal fee simple, in all the property held by the trustee, not a segregated, identified part of that property prior to the division and allotment provided for upon the beneficiary reaching the age of twenty-five years. The undivided interest conferred on each of the named beneficiaries was substantially the same as it would have been if the instrument had conveyed that property to the grantee, in trust for the benefit of those three persons. When a deed conveys property to a grantee, in trust for the benefit of two or more named persons, and the instrument is silent as to the interest *471 each beneficiary is to take, the presumption is that their interests are equal. Loring v. Palmer, 118 U.S. 321, 6 S. Ct. 1073, 30 L. Ed. 211. The terms of the instrument now in question show that the settlors intended to create one trust, and made certain that the interest conferred on each named beneficiary was an undivided one-third interest in all the property conveyed, not a right to a segregated, identified portion of that property prior to the beneficiary reaching the age of twenty-five years. State Sav. Loan & Trust Co. v. Commissioner (C. C. A.) 63 F.(2d) 482; Johnson v. United States, 65 Ct. Cl. 285. The ruling to the just stated effect was not erroneous.
The trustee's income tax return for the year 1928 claimed a deduction from the gross income of the trust estate, as a loss sustained, of the amount of the value, $836,089.94, of property held by the trustee which he surrendered during that year. A stipulation of the parties shows as follows: At the time the trust instrument was executed, P. P. Langford was, and for some time had been, a member of a partnership, the American Refining Company, and by reason of various indorsements and guaranties, then was liable for all of the partnership's debts aggregating several hundred thousand dollars, and, through indorsements and guaranties, he became liable for a large portion of the indebtedness of the American Refining Company, Inc., which was organized in 1921. The partnership and the corporation became heavily involved financially, and, in August, 1927, the property of the partnership and the corporation, and also the properties of the individuals who were members of the partnership and stockholders of the corporation, were placed in the hands of a receiver by court order. The receivership included the personal estates of P. P. Langford and his wife. The receiver, not finding sufficient assets in the personal estates to meet the claims of creditors threatened suit to set aside the above-mentioned trust deed, which conveyed P. P. Langford's interest in the partnership assets, and to subject the assets then held by the trust to the payment of claims of creditors. Following negotiations, the trustee submitted a proposition of settlement, and in March, 1928, the settlement was agreed upon, was approved by the court, and in pursuance thereof the trustee surrendered to the receiver assets the former held as trustee amounting to $836,089.94, and in consideration thereof the receiver released the trust estate from all obligations held by the creditors' committee, and agreed to dismiss the bankruptcy petition pending against P. P. Langford. Immediately preceding this settlement, the net worth of the trust, as shown by its books, was approximately, $1,500,000, the assets consisting principally of cash, notes, and accounts receivable, ranches, leases, and royalties, stocks, and bonds.
Other than what was disclosed by the above referred to part of the stipulation, there was no showing in support of the claim that the trust was entitled to the deduction in question. While the stipulation does not state the reason or ground for the surrender by the trustee of property which was held as part of the trust estate, as that surrender was made to a receiver representing creditors of a settlor, and followed threats of the receiver to have the trust deed declared invalid and to subject assets held by the trustee to the payment of claims against P. P. Langford, the surrender of assets indicated a recognition or admission by the trustee that the amount of assets surrendered was subject to be applied to the payment of indebtedness owing by a settlor of the trust.
The applicable statute, section 23 (e), Revenue Act of 1928, 45 Stat. 799, 26 US CA § 2023 (e), provides that in computing net income there shall be allowed deductions for losses sustained during the taxable year, (1) if incurred in trade or business, (2) if incurred in any transactions entered into for profit, though not connected with the trade or business, or (3) of property not connected with the trade or business, or if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. The deduction now in question being the amount of the value of certain assets held by the trustee which were surrendered in 1928 to the representative of creditors of the settlors in settlement of debts of the settlors existing at the time the trust was created, it is apparent that the deduction in question was not allowable under either class (1) or class (3) described in the statute, as nothing in the record indicates that the taxpayer, the trust, was engaged in any trade or business or that a loss was suffered in connection with any trade or business or arose from theft, or from fires, storms, shipwreck, or other casualty. The question then is: Was what was relied on to support the deduction in question, viz., the surrender by the trustee of property held as part of the trust estate, a loss incurred in a transaction entered into for profit?
*472 For a claimed deduction to be allowable, it must be authorized by statute, whether and to what extent deductions from gross income shall be allowed being dependent upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed. New Colonial Co. v. Helvering, 292 U.S. 435, 54 S. Ct. 788, 78 L. Ed. 1348. It is well settled that the determination of the Commissioner is prima facie correct, and the burden is upon the taxpayer claiming a deduction disallowed by the Commissioner not only to prove that the Commissioner erred, but also to establish his right to the deduction and the amount thereof. Old Mission Portland Cement Co. v. Helvering, 293 U.S. 289, 55 S. Ct. 158, 79 L. Ed. ___; Helvering v. Taylor, 293 U.S. 507, 515, 55 S. Ct. 287, 79 L. Ed. ___. The burden was on the taxpayer, the petitioner, to prove that what was relied on to sustain the deduction in question was a transaction entered into for profit, and that a loss was incurred in that transaction. Burnet v. Huff, 288 U.S. 156, 53 S. Ct. 330, 77 L. Ed. 670; United States v. S. S. White Dental Mfg. Co., 274 U.S. 398, 47 S. Ct. 598, 71 L. Ed. 1120. The substance of what was shown in the attempt to support the deduction claimed was that at the time the trust instrument was executed voluntarily or for a merely nominal consideration the settlor who up to that time owned the property conveyed was heavily indebted; that, upon the representative of creditors of the settlors asserting the claim that the trust instrument was invalid and threatening to subject assets held by the trustee to the payment of debts owing by the settlors to their creditors, the trustee surrendered to such representative assets the former held as trustee, of the value of the sum claimed as a deduction, and that the creditors, by their representative, in consideration of such surrender, released the trust estate from all obligations of the settlors to their creditors. What was shown included nothing having the semblance of a transaction entered into for profit. All that was shown by evidence or stipulation was consistent with a finding that what was so surrendered was only so much of the estate held by the trustee as, by reason of the trust instrument being void as to creditors of the settlors, was, at the time the trust was created, subject to be applied to the payment of debts of the settlors. Facts admitted required the conclusion that the trust instrument was void as against those to whom the settlors were indebted at the time that instrument was executed. A result was that the property conveyed by that instrument came to the grantee, the trustee, charged with the amount of debts owing by the settlors. It was not shown that the value of the assets of the trust estate surrendered by the trustee exceeded the amount of the debts to the satisfaction of which property conveyed by the trust instrument was subject to be applied. By the transaction shown a loss to the trust estate was not incurred if the value of what was surrendered was not more than the amount of debts to which the trust estate, at the time it was created, was subject to be applied. The trust estate came into the possession of the trustee charged with those debts. It was not proved that the part of the trust estate which at any time the trustee was entitled to retain or withhold from creditors of the settlors was diminished by the surrender of assets shown by the stipulation. A trust estate cannot properly be regarded as sustaining a loss by the trustee's surrender to creditors of the settlor of only so much, or less, of the property conveyed to him by the trust instrument as is subject to be applied to the payment of debts of the settlors to those creditors. The evidence fell short of proving that the transaction relied on to support the deduction in question was entered into for profit or that in that transaction the trust estate incurred a loss. The petitioner failed to carry the burden of proving that the action of the Commissioner in disallowing that deduction was incorrect. The petition is denied.
NOTES
[1] "This conveyance is made to the said Trustee for the use and benefit of the following named persons, and in the following proportions to each:
"An undivided one-third interest in said property in trust for Pierce P. Langford, Jr. An undivided one-third interest in said property in trust for Benjamin H. Langford. An undivided one-third interest in said property in trust for Sarah Elizabeth Langford and will vest in the Trustee, for the benefit of said beneficiaries each an undivided one-ninth interest in the whole of the above described properties.
"The Trustee herein named, and its successors or substitute in this Trust, are hereby given authority and power to sell and convey any or all of said trust estate above described, at any time said Trustee, or its successor or substitutes, sees fit, and upon such terms and conditions as the said Trustee, acting by and through its duly qualified officers, may seem just and proper, granting to the said Trustee full power and authority to make all contracts of any kind or character for the management and operation of said property, to mortgage said property, to reinvest the funds received from the sale of said property, and to do everything necessary or proper in the judgment and discretion of said Trustee, for the faithful management, sale, disposition and handling of said Trust Estate. * * *
"The Trustee herein shall have the power and authority at its discretion, to expend and use the income from said trust estate for the maintenance, education and support of said beneficiaries.
"This Trust Estate shall cease and determine, as to each beneficiary interested therein, when said beneficiary, and each of them, arrive at the age of twenty-five (25) years, and the Trustee, thereupon, shall deliver to such beneficiary, who arrives at such age of twenty-five (25) years, said beneficiaries interest or proportion of the Trust Estate hereby created, and from such time said beneficiary shall have full power and authority to dispose of said estate as they see fit. Upon the date of the arrival of said beneficiary, and each of them, at the age of twenty-five (25) years, and Trustee shall convey, assign, transfer and deliver to said beneficiary, and each of them, their respective proportions of said Trust Estate hereby created, which shall vest, however, in said beneficiary or beneficiaries at that time regardless of whether or not the transfer and delivery thereof is made. Provided, however, that in the discretion of the Trustee, it may deliver to said beneficiaries, or either of them, its or their respective proportions of the Trust Estate hereby created, at or after the time said beneficiary arrives at the age of twenty-one (21) years, but this provision is not mandatory upon the Trustee, but is solely upon its sound discretion but it is mandatory to deliver to said beneficiaries the trust estate hereby created at the time said beneficiaries, and each of them, arrive at the age of twenty-five (25) years.
"In the event of the death of either of the beneficiaries before they reach the age of twenty-one years said beneficiary's interest in said Estate shall vest in the surviving beneficiaries in equal proportion, but if only one survive, then the said estate shall, nevertheless, be held in trust for said beneficiary, or in the event of the death of all of said beneficiaries before the distribution of said Trust Estate, as hereinbefore provided, then the said Trust Estate shall pass and descend to the legal heirs of said beneficiaries, according to the laws of descent and distribution then in effect in this State. * * *
"Any children which may be born to the said P. P. Langford and wife, Lulu Langford, during their wedlock, shall share equally, share and share alike, under this trust, with the children named herein and upon the same terms. * * *" | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546142/ | 40 B.R. 985 (1984)
UNITED STATES DEPARTMENT OF THE INTERIOR, Appellant,
v.
James W. ELLIOTT, Jr., Trustee, Appellee.
Civ. A. No. 84-0037-B.
United States District Court, W.D. Virginia, Big Stone Gap Division.
May 31, 1984.
*986 Robert Moore, DOI, Knoxville, Tenn., John P. Alderman, U.S. Atty., Roanoke, Va., for appellant.
James W. Elliott, Jr., Bristol, Va., for appellee.
MEMORANDUM OPINION
GLEN M. WILLIAMS, District Judge.
The appellant, United States Department of the Interior, has appealed an Order of the United States Bankruptcy Court for the Western District of Virginia denying a motion to alter or amend its decision holding that the appellant was not entitled to an administrative expense. The issue presented to this court is whether post-petition civil penalties assessed against the debtor in possession for violations of the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. §§ 1201-1328 (Supp. II 1978) (hereinafter "the Surface Mining Act") are allowable as an administrative expense under Section 64(a)(1) of the Bankruptcy Act, former 11 U.S.C. § 104(a)(1) (1967). Jurisdiction over this matter is based upon Section 39(c) of the Bankruptcy Act, former 11 U.S.C. § 67(c) (1966). For the reasons stated below, the decision of the bankruptcy court is affirmed.
I. FACTS
On August 3, 1979 Elkins Energy Corporation (hereinafter "Elkins") filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. Subsequently, the bankruptcy court permitted Elkins to continue its mining operations as a debtor in possession pursuant to Section 343 of the Bankruptcy Act, former 11 U.S.C. § 743 (1938).
In the course of Elkins' mining operations, the Office of Surface Mining Reclamation and Enforcement in the United States Department of the Interior (hereinafter "OSM") cited the debtor in possession for several violations of the Surface Mining Act and implementing regulations, 30 C.F.R. §§ 700.1-950.20 (1982). On September 11, 1979 the OSM issued notice of violation 79-1-47-46 to Elkins under 30 U.S.C. § 1271(a)(3) for three violations. (Record at 30-33). Elkins corrected all three violations by October 3, 1979, and the OSM terminated the notice of violation. (Record at 34-35). However, on October 15, 1979 the OSM notified the debtor, pursuant to 30 U.S.C. § 1268(a), (c), that a civil penalty of $1,100 had been proposed for the notice of violation. (Record at 36-41). Then on February 28, 1980, the OSM issued notices of violation 80-1-18-4 and 80-1-18-5 to the debtor for several additional violations. Since four of the violations were not timely corrected, cessation order XX-X-XX-X was issued for Elkins' failure to abate violations (1) and (2) of notice of violation 80-1-18-4, and cessation order XX-X-XX-X issued for Elkins' failure to abate violations (3) and (4) of notice of violation 80-1-18-5. On May 3, 1980, the OSM terminated violation (1) of cessation order XX-X-XX-X (Record at 48), but the other three violations remain.
On February 13, 1981, the bankruptcy court confirmed the Elkins' plan of arrangement. Eleven months later, the OSM sent the debtor notices of proposed assessment for the cessation orders, pursuant to 30 U.S.C. § 1268(c), (h). (Record at 49-54). The OSM assessed the civil penalties at $1,100 for notice of violation 79-1-47-46, $23,250 for cessation order XX-X-XX-X, and *987 $45,000 for cessation order XX-X-XX-X on June 17, 1982, pursuant to 30 U.S.C. § 1268(b). (Record at 55-62). That same day, the bankruptcy court ordered the Elkins' case converted from Chapter XI to straight bankruptcy. Sometime during the pendency of bankruptcy, Elkins posted bonds to cover the cost of restoration; all the bonds, except one, have been used to pay the cost of restoration. (Brief for the Appellee at 1).
On October 6, 1982, the appellant filed a post-petition proof of claim for $69,350 in civil penalties. (Record at 17-19). The appellee objected to this claim on October 11, 1983, arguing that these civil penalties were not recoverable from the estate under Section 57(j) of the Bankruptcy Act, former 11 U.S.C. § 93(j) (1962). (Record at 20-21). After the appellant responded to the objection, contending that Section 57(j) was inapplicable to these post-petition penalties, the bankruptcy judge sustained the appellee's objection. Subsequently, the bankruptcy court denied the appellant's motion to amend or alter the order.
II. DISCUSSION
The appellant argues that the civil penalties are necessary costs and expenses of administration which are excluded from the prohibition against allowing penalties or forfeitures because the surface mining violations arose after the petition was filed. The appellee contends that the penalties shall not be allowed under Section 57(j) and that the case of Nicholas v. United States, 384 U.S. 678, 86 S. Ct. 1674, 16 L. Ed. 2d 853 (1966), is limited to cases that involve tax penalties and interest resulting from the trustee's failure to file a return for the operating business.
Section 64(a)(1) of the Bankruptcy Act, former 11 U.S.C. § 104(a)(1) (1967), provides in pertinent part:
The debts to have priority, in advance of the payment of dividends to creditors, . . ., shall be (1) the costs and expenses of administration, including the actual and necessary costs and expenses of preserving the estate subsequent to filing the petition;. . . .
Section 57(j), former 11 U.S.C. § 93(j) (1962), deals with the proof and allowance of claims; it provides in part:
Debts owing to the United States or to any State or any subdivision thereof as a penalty or forfeiture shall not be allowed, except for the amount of pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose,. . . .
Section 57(j) plainly states that penalties imposed by the federal government are not allowed; it excludes the bulk of fines, penalties and other financial sanctions which regulate human activity. The purpose of this provision is to protect the bankrupt's general creditors from a reduction of their dividend by allowing penalties or forfeitures. 3 Collier on Bankruptcy ¶ 57.22[1] at 381-82 (14th ed. 1977). The statute applies only to penalties incurred before bankruptcy due to the bankrupt's delinquency. "After bankruptcy, [section 57j] does not purport to exempt the trustee from the operation of state laws, or to relieve the estate from liability for the trustee's delinquencies." Boteler v. Ingels, 308 U.S. 57, 59-60, 60 S. Ct. 29, 31, 84 L. Ed. 78 (1939). In that case the Court sustained a penalty against a trustee in bankruptcy who had failed to pay a California automobile license tax on vehicles used in the bankrupt estate he was administering. Id. at 61, 60 S.Ct. at 32; see Annot., 1 A.L.R. Fed. 657, 662 (1969).
One exception to the statutory prohibition is explicitly provided in the statute: the government may recover the amount of pecuniary loss it suffered from a financial dissipation or loss of revenue source. This exception is inapplicable in this case because the United States does not present a claim for pecuniary loss. A second, judicially-created exception occurs in tax enforcement cases. Applying the rationale of the Boteler decision the Court has held that a trustee was liable for penalties arising from his failure to notify the United States of taxes that accrued during a Chapter XI arrangement. Nicholas v. United States, 384 U.S. 678, 695, 86 S. Ct. 1674, 1685-86, 16 L. Ed. 2d 853 (1966). In that *988 case, the trustee in bankruptcy failed to file federal tax returns or to pay federal income taxes, social security taxes and excise taxes for a corporate debtor incurred during an arrangement proceeding under Chapter XI of the Bankruptcy Act and due after the corporation went into straight bankruptcy. The Court premised its decision on three reasons. First, if the trustee were protected, the government would have the privilege to tax all businesses equally, but it "would be denied the traditional and almost universal method of enforcing prompt payment." Nicholas v. United States, 384 U.S. at 692, 86 S.Ct. at 1684, citing Boteler v. Ingels, 308 U.S. at 61, 60 S.Ct. at 32. A second, obvious reason is enforcement of the law. The penalties which the United States imposed upon the trustee of the Chapter XI arrangement is a means of enforcing prompt filing of the tax returns. Nicholas v. United States, 384 U.S. at 694, 86 S.Ct. at 1685. Furthermore, "[n]o legitimate interest would be served by permitting the trustee to escape the unburdensome responsibility of merely filing the returns. . . ." Id. at 695, 86 S.Ct. at 1685-86. Third, the liability of the trustee derived from his succession of the debtor in possession, and as an officer of the court, the trustee is subject to the federal taxes applicable to the business under 28 U.S.C. § 960. Id. at 693 n. 27, 86 S.Ct. at 1684 n. 27. See In re Samuel Chapman, Inc., 394 F.2d 340 (2d Cir.), cert. denied sub nom. New York Credit Men's Adjustment Bureau, Inc. v. United States, 393 U.S. 923, 89 S. Ct. 253, 21 L. Ed. 2d 258 (1968) (trustee held liable for federal income and social security taxes incurred during operation by debtor in possession of business under arrangement proceedings). Thus the courts have created an exception for the collection of penalties owed on delinquent taxes.
Conceding that there is no law on point, the appellant argues that the rationale of Nicholas and Boteler is applicable to the case sub judice. First, the appellant contends that these penalties which accrued after bankruptcy are allowable. Boteler v. Ingels, 308 U.S. at 59-60, 60 S.Ct. at 31; Gough Industries, Inc. v. Rothman, 446 F.2d 536, 540 (9th Cir.1971), cert. denied, 405 U.S. 916, 92 S. Ct. 933, 30 L. Ed. 2d 785 (1972); In re Los Angeles Lumber Products Co., 45 F. Supp. 77, 87 (S.D.Cal.1942) (allowing penalty on delinquent sales taxes and use taxes); In re Holiday Mart, Inc., 9 B.R. 99, 107 (Bankr.D. Hawaii 1981) (holding that section 57(j) of the Bankruptcy Act does not apply to charges or penalties that arise from an agreement between private parties). See generally Annot., 1 A.L.R. Fed. 657 (1969 & Supp.1983). "The provision [section 57j] applies only to claims against the bankrupt arising prior to bankruptcy. It does not propose to exonerate a trustee or receiver in bankruptcy from penalties which he incurs in the course of continuous operation of the bankrupt's business." 3 Collier on Bankruptcy ¶ 57.22[1] at 386 (14th ed. 1977) (emphasis in original; footnotes omitted). Second, the appellant asserts that the rationale of Nicholas should be expanded to apply in the instant case so that the provisions of the Surface Mining Act will be complied with promptly and the purposes of the Act will not be thwarted.[1] Relying upon Simonson v. Granquist, 369 U.S. 38, 82 S. Ct. 537, 7 L. Ed. 2d 557 (1962), the appellee argues that the rationale of Nicholas is limited *989 to tax cases. The issue presented to the Supreme Court in Simonson was whether the United States had a right to recover federal tax penalties ripened into statutory liens against the estate of a bankrupt for taxes incurred prior to bankruptcy. The Court held that the tax penalty, secured by the lien, was not an allowable claim.
[Section 57j] plainly manifests a congressional purpose to bar all claims of any kind against a bankrupt except those based on a "pecuniary" loss. So understood, this section, which has been a part of the Bankruptcy Act since its enactment in 1898, is in keeping with the broad aim of the Act to provide for the conservation of the estates of involvents to the end that there may be as equitable a distribution of assets as is consistent with the type of claims involved. Moreover, the prohibition of all tax penalties in bankruptcy is wholly consistent with the policy of the penalty provisions themselves. Tax penalties are imposed at least in part as punitive measures against persons who have been guilty of some default or wrong. Enforcement of penalties against the estates of bankrupts, however, would serve not to punish the delinquent taxpayers, but rather their entirely innocent creditors.
When we turn to the language of § 67b, we find nothing that indicates a purpose to require the general creditors of a bankrupt to suffer because of penalties designed to be inflicted upon the bankrupt himself. Indeed, there is not a single word in that section regarding penalties, and the plain purpose of the section is merely to prevent certain liens, including statutory tax liens, "arising or perfected . . . within four months prior to the filing of the [bankruptcy] petition," from being set aside and declared invalid under § 60 as preferential.
Id. at 40-41, 82 S.Ct. at 538-39 (footnotes omitted). In the minority opinion in Nicholas, Justice White argued that the broad policy rationale of conservation of the estates of insolvents was a weighty, persuasive reason for not placing the burden of tax penalties arising postpetition upon the estate's innocent creditors. Nicholas v. United States, 384 U.S. at 697-98, 86 S.Ct. at 1686-87. He also indicated that "[t]here might be some grounds for rejecting the general policy against allowing penalties against bankrupt estates if the filing of the return by the trustee performed some critical function or was at least something more than an empty formality." Id. at 699, 86 S.Ct. at 1688. The appellee contends that the strong public policy of protecting the assets for creditors overrides the necessity to enforce the provisions of the Surface Mining Act through the imposition of penalties.
The court is of the opinion that the holdings of Nicholas and Boteler should be limited to tax cases.[2] A necessarily heavy influence in that case was the civil liability that 28 U.S.C. § 960 places upon the trustee to pay the taxes. No similar provision exists for penalties arising from violation of criminal or regulatory statutes. Furthermore, other methods of affecting prompt compliance are provided in the Surface Mining Act. See, e.g., 30 U.S.C. § 1271 (mine inspector may issue cessation order, and Attorney General may institute a civil action for relief, including a permanent or temporary injunction). The penalties are assessed as punishment for belated action to abide with the Act, rather than interest on a sum due and owing, which is an aid to collection of taxes. The appellant's argument that the mining companies will seek the haven of bankruptcy to avoid paying these penalties is tenuous. Finally, the courts have held in non-tax cases that fines or charges for violation of criminal or regulatory provisions are penalties, except where actual pecuniary loss is shown. In a case decided by the Fifth Circuit Court of Appeals, Judge Fisher held that penalties assessed against bankrupts by the Commodity Credit Corporation pursuant to Section *990 346(a) of the Agricultural Adjustment Act, 7 U.S.C. § 1346(a), resulting from the production of cotton in excess of the farm allowment were penalties which section 57(j) precluded as allowable administrative expenses. United States v. Moore, 366 F.2d 243 (5th Cir.1966).
Accordingly, the court concludes that section 57(j) of the Bankruptcy Act prohibits the appellant from recovering the penalties assessed under the Surface Mining Act as administrative expenses because the rationale of Nicholas and Boteler is limited to tax cases, because the appellant has other methods to enforce the Surface Mining Act, and because the strong policy of protecting the innocent creditors outweighs the need to collect enforcement penalties.
III. CONCLUSION
For the reasons given above, this court affirms the decision of the bankruptcy court.
NOTES
[1] Congress found, among other things, that
many surface mining operations result in disturbances of surface areas that burden and adversely affect commerce and the public welfare by destroying or diminishing the utility of land for commercial, industrial, residential, recreational, agricultural, and forestry purposes, by causing erosion and landslides, by contributing to floods, by polluting the water, by destroying fish and wildlife habitats, by impairing natural beauty, by damaging the property of citizens, by creating hazards dangerous to life and property by degrading the quality of life in local communities, and by counteracting governmental programs and efforts to conserve soil, water, and other natural resources.
30 U.S.C. § 1201(c) (Supp. V 1981). Based upon this finding and others, Congress enacted the Surface Mining Act which has as one of its purposes to
assure that adequate procedures are undertaken to reclaim surface areas as contemporaneously as possible with the surface coal mining operations.
30 U.S.C. § 1202(e) (Supp. V 1981).
[2] Justice Stewart indicated that the rule in Boteler holding the trustee liable for nonpayment of the tax penalties may be open to some question as applied to the facts of that case, but he concluded that the rationale was stronger in the Nicholas case than in the Boteler decision. Nicholas v. United States, 384 U.S. at 694-95, 86 S.Ct. at 1685-86. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546164/ | 40 B.R. 429 (1984)
In re Elmer Joe GRAY and Doris A. Gray, Debtors.
Bankruptcy No. BK-83-00349-B.
United States Bankruptcy Court, W.D. Oklahoma.
May 24, 1984.
*430 Bruce McClelland, of McClelland, Collins, Bailey, Bailey & Manchester, Oklahoma City, Okl., for The Plaza Nat. Bank.
H.L. Heiple, Norman, Okl., for Norman Bank of Commerce.
MEMORANDUM DECISION AND ORDER
ROBERT L. BERRY, Bankruptcy Judge.
The issue presented in this matter is a narrow one and is most simply stated as follows: in order to perfect a security interest in a mobile home, is the proper method to employ the filing of a lien entry notation on the certificate of title or the filing of a financing statement in the office of the county clerk. The issue is one of first impression in this jurisdiction. The facts which follow provide the necessary background information.
Sometime in 1973 the debtors purchased the mobile home in question. When purchased the unit was a completely equipped mobile home, mounted on wheels. The unit was towed from its place of purchase to a mobile home park. The unit was still there at the time of the filing of this bankruptcy proceeding. The mobile home rests on the original wheels with which it was equipped when purchased. There are concrete blocks underneath the vehicle to keep the wheels from moving and to secure the same. It has been connected to the various requisite utilities, provided for by the mobile home park.
When they purchased the mobile home, the debtors received a certificate of title from the dealer. Debtors immediately purchased a tag for the mobile home, as required by 47 O.S.1981 § 22.5m.[1]
In May of 1982, the debtors approached Plaza National Bank for a loan with a view toward refurbishing the mobile home. At this time the debtors were living in Bartlesville, Oklahoma. The mobile home was, and has been, situated in the mobile home park located in Del City, Oklahoma. The loan was obtained and on May 18, 1982, the debtors signed a security agreement covering the mobile home wherein Plaza National Bank was listed as the secured party. The debtors surrendered the certificate of title to the Plaza National Bank and the same was forwarded with a lien entry form to the Oklahoma Tax Commission. On May 21, 1982, the Oklahoma Tax Commission noted the lien of Plaza National Bank on the face of the title. The title certificate was eventually returned to the debtors. Thenceforth, the title certificate showed on *431 its face that there was a lien covering said mobile home in favor of the Plaza National Bank.[2]
In November of 1982, the debtors approached Norman Bank of Commerce and negotiated a loan upon personal property, including amongst others, this same mobile home. Norman Bank was shown the certificate of title by the debtors, which reflected on its face the security interest of Plaza National. Norman Bank then forwarded the certificate of title and a lien entry form to the Oklahoma Tax Commission, which, on November 29, 1982, noted the lien of Norman Bank of Commerce on the certificate of title. Norman Bank took the additional step of filing a financing statement covering the mobile home with the county clerk of Oklahoma County in November of 1982.
It is the contention of Norman Bank that the perfection of the security interest is properly accomplished by way of filing a financing statement pursuant to 12A O.S. 1981 § 9-302. This statute is Oklahoma's version of the Uniform Commercial Code (hereinafter "U.C.C."), providing for the requirement of filing a financing statement in order to perfect a security interest, with certain exceptions. Nonetheless,
[t]he filing of a financing statement otherwise required by this article is not necessary or effective to perfect a security interest in property subject to:
. . . .
a certificate of title statute of another jurisdiction under the law of which delivery for or indication of a security interest on the certificate is required as a condition of perfection. (emphasis supplied).
12A O.S.1981 § 9-302(3)(c). Oklahoma has adopted the requirements of certificate of title pursuant to the Motor Vehicle License and Registration Act (hereinafter "the Act"). 47 O.S.1981 § 22 et seq. Section 23.2b of the Act provides in pertinent part that
[e]xcept for a security interest in vehicles held by a dealer for sale or lease . . ., a security interest, . . . in a vehicle as to which a certificate of title may be properly issued by the Tax Commission shall be perfected only when lien entry form, . . . and the existing certificate of title . . . are delivered to the Oklahoma Tax Commission or one of its motor license agents. (emphasis supplied).
The issue then crystalizes into whether a mobile home is a "vehicle" under § 23.1 of the Act. That section defines "vehicle" as "[e]very device, in, upon, or by which any person or property is or may be transported or drawn, except devices moved by human or animal power, when not used upon stationary rails or tracts." While at one time it may have been true that the key to the analysis was that a motor vehicle license and registration act was geared toward public safety, public liability and revenue, with Article 9 of the U.C.C. concerned with credit transactions and the interests of the parties and others affected by such transactions, such is now no longer the case given § 23.2b of the Act. If a certificate of title is required, perfection of a security interest in the item covered by the certificate of title must appear by way of a lien entry on the face of the certificate. The problem herein is attributable to the Jekyll-Hyde nature of a mobile home: whether a mobile home is more mobile than it is a home or more of a home than it is mobile. It is designed as a house; yet, unlike a house, it is also capable of being relatively easily transported.
The recent case of In re Sewell, 32 B.R. 116 (Bkrtcy.N.D.Ala.1983), reprinted in 37 U.C.C.Rep.Serv. (Callaghan) 303, dealt with the issue of whether a financing statement must be filed in order to perfect a purchase money security interest in a mobile home. While holding that a mobile home is a "motor vehicle" required to be licensed and that a financing statement must be filed in order to perfect a purchase money security *432 interest in the mobile home, the Court acknowledged that mobile homes by statute were exempt from the requirements of the title certificate provisions of the Alabama statutes, Ala.Code § 32-8-31(9) (1975), which statutes provide for perfection of security interests in affected motor vehicles by application for a lien notation on the certificate of title for the vehicle. 32 B.R. at 124. For the proposition that a mobile home is a "vehicle", see generally, In re Radny, 12 U.C.C.Rep.Serv. (Callaghan) 583 (W.D.Mich.1973); In re Merrill, 9 U.C.C. Rep. Serv. (West) 755 (D.Neb.1971); Newell v. National Bank of Alaska, 646 P.2d 224 (Alaska 1982). Query whether the opinion would have been otherwise had mobile homes not been exempt from the requirements of title certificate provisions of the statutes of Alabama.
The Court of Appeals of New York in Albany Discount Corp. v. Mohawk National Bank, 28 N.Y.2d 222, 321 N.Y.S.2d 94, 269 N.E.2d 809 (1971) held that a mobile home is a "motor vehicle" for purposes of the U.C.C. provision relating to the necessity of filing a financing statement in order to perfect a security interest in a motor vehicle required to be licensed or registered in the state. This requirement was in the 1958 official text of subsection (1) of 9-302 of the U.C.C., never adopted in the state of Oklahoma. While New York has adopted certificate of title requirements, Albany is still valid law for in New York, mobile homes are excluded from the certificate of title requirements, which include lien notations on the title certificate. N.Y.Veh. & Traf.Law § 2102(b) (McKinney 1972). But see Wilcox Trailer Sales, Inc. v. Miller, 200 Kan. 315, 436 P.2d 860 (1968) (owner of a mobile home required to obtain a certificate of title to the vehicle; any lien of encumbrances thereon must be indicated on certificate in order to perfect security interest. K.S.A. §§ 8-127; 8-135 (1968)). Cf. Matter of Kerr, 598 F.2d 1206 (10th Cir. 1979); In re Swearingen, 27 B.R. 379 (Bkrtcy.D.Kan.1983). Wilcox involved a purchase money security interest, as did Kerr; however, Swearingen did not involve such an interest. See also First Nat. Bank of Denver v. Turley, 705 F.2d 1024 (8th Cir.1983) (law of South Dakota, S.D. Codified Laws Ann. § 32-3-3.1 (1976), provides that a mobile home shall have a certificate of title upon sale; § 32-3-41 provides that perfection of a security interest may be realized only by the filing of the notation of lien on the certificate of title); In re Easy Living, Inc., 407 F.2d 142 (6th Cir.1969) (Circuit Court affirming District Court order compelling trustee in bankruptcy to cause certificate of title to be issued for mobile home pursuant to laws of Ohio) (mobile home addition unit is a "motor vehicle", as such must be titled pursuant to provision of Ohio Certificate of Motor Vehicle Title Law, Ohio Rev.Code Ann. § 4505.01 (Page 1982) with perfection of a security interest accomplished by notation of lien on title per § 4505.13. Ohio Att'y Gen. No. 79-098 (1979)); Matter of Dann, 2 B.R. 107 (Bkrtcy.M.D.Fla.1979) (purchase money security interest in a mobile home perfected by causing the recordation of lien on title certificate issued by Department of Motor Vehicles of Florida).
In a case involving the priority as between a secured claimant and the trustee in bankruptcy, the Seventh Circuit in Matter of Keidel, 613 F.2d 172 (7th Cir.1980), in construing the law of Illinois, Ill.Ann.Stat. chap. 95½, § 3-202 (Smith-Hurd 1980), held that a security interest in a mobile home was subordinate to the lien of the trustee in bankruptcy where the holder of the security interest did not perfect it by filing a certificate of title with the name and address of the lienholder noted thereon until after the filing of the petition in bankruptcy. Finally, in In re Frontier Mobile Home Sales, Inc., 635 F.2d 726 (8th Cir. 1980), aff'd on other grounds, the Circuit Court stated that under Arkansas law, a notation of a lien on the certificate of title for a mobile home was the correct means of perfecting a security interest in the mobile home. Ark.Stat.Ann. §§ 75-102, 132.1, 160, 161 (1979).
In contraposition to the above line of cases, there exist those which may be entitled "fixture cases". Cases of this ilk have *433 held that a mobile home does not possess a "mobile" nature and, given certain specific circumstances, becomes affixed to the realty on which it rests. (As one bankruptcy court has recognized, the presence of wheels are a notorious encitement to mobility. In re Haning, 35 B.R. 242 (Bkrtcy.N. D.Okla.1983)). The dispute in this regard most frequently occurs when determining whether the mobile home is a chattel that requires perfection by filing pursuant to 9-302 of the U.C.C. or a fixture attached to realty that requires filing in accordance with 9-313 and 9-401 of the U.C.C. In Oklahoma, "[a] thing is deemed to be affixed to land when it is attached to it by roots, as in the case of trees, vines or shrubs, or imbedded in it, as in the case of walls, or permanently resting upon it, as in the case of buildings, or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts or screws." 60 O.S.1981 § 7 (emphasis supplied). It is the contention of Norman Bank of Commerce that Title 47 of the Oklahoma statutes does not govern the perfection of a security interest in a stationary mobile home; that in fact, the mobile home in question had become affixed to the land on which it now rests. As a corollary proposition, Norman Bank of Commerce argues that the Oklahoma certificate of title requirements apply solely to motor vehicles.
The Seventh Circuit, in George v. Commercial Credit Corp., 440 F.2d 551 (7th Cir.1971), held that the section of the Wisconsin Motor Vehicle Code which provided for perfection of a security interest in a vehicle by lien notation on the certificate of title did not apply to a mobile home which had become a fixture. The Court noted the three tests for determining if facilities are to be considered part of the realty: 1) actual physical annexation to the realty; 2) application or adaptation to the use or purpose to which the realty is devoted; and 3) intention of the person making annexation to make a permanent accession to the freehold. See also United Benefit Life Ins. Co. v. Norman Lumber Co., 484 P.2d 527 (Okl.1971); Hartford Fire Ins. Co. v. Balch, 350 P.2d 514 (Okl.1960). In affirming the District Court the Circuit Court noted that the debtor's actual intention pointed definitely toward affixing the mobile home to the land as a permanent residence. Indicia of such intention were the following: application for a building permit (which, by law, required that a concrete slab as a permanent foundation be erected within one year), the purchase of a homeowner's insurance policy, and requests made to the seller to have the wheels of the home removed. Furthermore, the home rested on a five acre plot owned by the debtor. Finally, the debtor had never applied for a certificate of title from the Wisconsin Motor Vehicle Department. In concluding, the Circuit Court stated that "[t]he law of fixtures may . . . be applied to mobile homes. . . ." 440 F.2d at 554 (emphasis supplied).
The Court in Commercial Tp. v. Block 136, Lot 2, 179 N.J.Super. 307, 431 A.2d 862 (1981), reprinted in 34 U.C.C.Rep. Serv. (Callaghan) 760, recognized that prior to 1979, a mobile home was not considered a fixture; thus, in order to perfect an interest in a mobile home, the only recourse of the secured party was to record the interest on the certificate of title issued by the Department of Motor Vehicles. However, the Court noted that since that time mobile homes in New Jersey are to be treated as fixtures with the requirements for perfecting security interests therein pursuant to 9-401 of the U.C.C., which provides that the proper place to file in order to perfect a security interest in goods which at the time the security interest attaches are or are to become fixtures, is in the office where a mortgage on the real estate concerned would be filed or recorded.
In Hartford National Bank & Trust Co. v. Godin, 137 Vt. 39, 398 A.2d 286 (1979), reprinted in 26 U.C.C.Rep.Serv. (Callaghan) 221, the Supreme Court of Vermont addressed the question of when does a mobile home become a fixture. In finding the requisite intent the Vermont Court noted the mobile home possessed a concrete block foundation, attached steps and encasement *434 of the foundation in aluminum foundation siding. As in George v. Commercial Credit Corp., supra, and Commercial Tp. v. Block 36, Lot 2, supra, the debtor in Hartford owned the land on which the mobile home rested.
In Matter of Fink, 4 B.R. 741 (Bkrtcy.W. D.N.Y.1980), the Court found that the mobile home became affixed to the realty when the following had occurred: a foundation was excavated, the foundation was poured and the home rested on it. The Court further noted that from pictures in evidence the home looked like any other ranch house. In Oklahoma presumption of lack of intent to permanently annex an article to realty is created when removal of an item can be done without material injury to the realty. In re Tri-State Fabricators, Inc., 32 B.R. 260 (Bkrtcy.W.D.Okl.1983); Hedges v. First National Bank, 170 Okl. 175, 39 P.2d 57 (1934).
With this rather extensive background in mind we now proceed to examine the mobile home in dispute.
We have no doubt that a mobile home is subject to Oklahoma's Motor Vehicle License and Registration Act. We first note that a mobile home is listed in the definitional section of the Act. 47 O.S.1981 § 22.1(9). Further, a mobile home is subject to an annual license fee pursuant to § 22.5m of the Act. Finally, contrary to Norman Bank's contention, the certificate of title requirements do not apply solely to motor vehicles. Section 22.1 of the Act clearly delineates between vehicles and motor vehicles. In fact, Norman Bank noted its lien on the certificate of title of the mobile home in question. It should not now be heard to complain that the title certificate requirements are inapplicable.
This does not, however, end our discussion for we still have before us the issue of whether the mobile home in question had become affixed to the land on which it rests. Recognizing the rather nebulous nature of a mobile home and the problems it may present to the courts, especially when it is the subject of commercial credit transactions, we are hard pressed to find that the mobile home at issue had become affixed to the realty. We note initially that, unlike the debtors in the previously cited "fixture cases", the debtors in the instant case do not own the land on which the mobile home rests, rather they are renting space in a mobile home park.[3] Nor was there evident any demonstrable fixation to the realty. There was no additional construction which would hinder future mobility. There was no permanent foundation on which the mobile home rests. In fact, not even the wheels were removed, the frame merely rested on concrete blocks. The fact that the home was connected to utility services, without more, is insufficient for a finding of fixation. Accordingly, the proper means by which to perfect a security interest in the mobile home at issue was by means of lien notation on the certificate of title pursuant to 47 O.S.1981 § 23.2b. Therefore, the lien of Plaza National Bank, having been recorded prior in time to that of Norman Bank of Commerce, has priority.[4]
In conclusion, Plaza National Bank has a properly perfected security interest in the mobile home in question. Norman Bank of Commerce has a properly perfected security *435 interest also; however, the security interest is junior to that of Plaza National.
Pursuant to B.R. 7052, this memorandum constitutes our findings of fact and conclusions of law. Judgment to be entered accordingly.
NOTES
[1] This section involves the licensing and registration of manufactured homes, which by statutory definition apply to mobile homes. See 47 O.S.1981 § 22.1.
[2] Clearly, this was not a purchase money security interest. If such were the case, we believe our opinion would be that much more apposite.
[3] Albeit mere rental of the realty on which a mobile home rests does not per se foreclose the mobile home from becoming a fixture.
[4] We hasten to add that due to the dual nature of the mobile home, our opinion could just have easily been entirely different. That is, at some point, a mobile home may become affixed to the realty with any discussion of mobility rendered absurd. (Questions may be raised as to whether mobile homes constructed and intended at inception to be attached to realty, should not be financed in the same manner as conventional homes.) Accordingly, in order to be properly perfected, lien notation on the certificate of title may prove ineffective. The burden unfortunately shifts to the unwary lender who would be well advised to inspect the future security with an eye toward questions of proper perfection. We merely hold today that, given the facts, the security interest in the mobile home at issue was properly perfected pursuant to title certificate requirements. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546208/ | 988 A.2d 390 (2010)
119 Conn.App. 519
Joseph B. MARION'S APPEAL FROM PROBATE.
No. 30874.
Appellate Court of Connecticut.
Submitted on Briefs December 10, 2009.
Decided February 23, 2010.
*391 Joseph B. Marion, pro se, the appellant (plaintiff), filed a brief.
FLYNN, C.J., and GRUENDEL and STOUGHTON, Js.
PER CURIAM.
This case concerns an appeal from the judgment of the Probate Court for the district of Putnam, which was dismissed for failure to prosecute with reasonable diligence. The pro se plaintiff, Joseph B. Marion, appeals from the judgment of the Superior Court, arguing that the court abused its discretion in denying his motion to open the judgment of dismissal. We affirm the judgment of the Superior Court.
The relevant facts are as follows. In October, 2003, the plaintiff filed with the Probate Court a motion to appoint an administrator for the estate of Lawrence J. Marion, Sr., who died on October 31, 2001. That motion was predicated on his claim of entitlement to certain funds that, he alleged, the decedent and certain defendants wrongfully had withheld.[1] The Probate Court denied that motion on May 19, 2004.
On November 8, 2004, the plaintiff appealed from that judgment to the Superior Court. Years later, on August 13, 2007, the court issued an order that "if the case is not concluded by [December 31, 2007], then it will be dismissed, unless there is a contest with any defendant pending." Due to subsequent noncompliance with that order, the court dismissed the plaintiff's appeal. *392 The court provided notice of that judgment on July 1, 2008. The plaintiff thereafter filed a motion to open the judgment of dismissal on December 12, 2008. By memorandum of decision filed February 5, 2009, the court denied that motion in light of the plaintiff's untimely filing thereof, and this appeal followed.[2]
Although the plaintiff's brief asserts four distinct claims, the only one properly before us is whether the court abused its discretion in denying his motion to open the judgment. As we previously have explained, "[i]t is well established in our jurisprudence that [w]here an appeal has been taken from the denial of a motion to open, but the appeal period has run with respect to the underlying judgment, we have refused to entertain issues relating to the merits of the underlying case and have limited our consideration to whether the denial of the motion to open was proper. . . . When a motion to open is filed more than twenty days after the judgment, the appeal from the denial of that motion can test only whether the trial court abused its discretion in failing to open the judgment and not the propriety of the merits of the underlying judgment. . . . This is so because otherwise the same issues that could have been resolved if timely raised would nevertheless be resolved, which would, in effect, extend the time to appeal." (Internal quotation marks omitted.) Langewisch v. New England Residential Services, 113 Conn.App. 290, 293, 966 A.2d 318 (2009). The plaintiff's failure to file his motion to open the judgment within twenty days of the notice of judgment precludes review of his other claims in this appeal.
Confined to the question of whether the court properly denied the plaintiff's motion to open, we first note the applicable standard of review. "A motion to open and vacate a judgment . . . is addressed to the [trial] court's discretion, and the action of the trial court will not be disturbed on appeal unless it acted unreasonably and in clear abuse of its discretion. . . . In determining whether the trial court abused its discretion, this court must make every reasonable presumption in favor of its action. . . . The manner in which [this] discretion is exercised will not be disturbed so long as the court could reasonably conclude as it did." (Citations omitted; internal quotation marks omitted.) Walton v. New Hartford, 223 Conn. 155, 169-70, 612 A.2d 1153 (1992).
Applying those principles, we cannot say that the court abused its discretion in the present case. Under Connecticut law, "[u]nless otherwise provided by law and except in such cases in which the court has continuing jurisdiction, a civil judgment or decree rendered in the Superior Court may not be opened or set aside unless a motion to open or set aside is filed within four months following the date on which it was rendered or passed." General Statutes § 52-212a; see also Practice Book § 17-4. Our Supreme Court has construed § 52-212a as "a limitation on the trial court's general authority to grant relief from a judgment. . . ." Kim v. Magnotta, 249 Conn. 94, 102, 733 A.2d 809 (1999). That statute "operates as a constraint, not on the trial court's jurisdictional authority, but on its substantive authority to adjudicate the merits of the case before it." Id., at 104, 733 A.2d 809. Because the plaintiff's motion to open was filed more than five months after notice of *393 the court's judgment issued, the court had little choice but to deny the motion. As such, we cannot conclude that the court's determination reflected an abuse of discretion.
The judgment is affirmed.
NOTES
[1] Named as defendants in the plaintiff's action were Marjorie F. Marion, Lawrence J. Marion, Jr., Robert P. Marion, John P. Marion, Francis E. Marion, Margaret L. Marion, and William E. Marion, as well as the Putnam Probate Court.
[2] Oral argument on this appeal was scheduled for December 10, 2009. On that date, the plaintiff did not appear. We therefore consider the matter on the basis of the record and briefs before us. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546228/ | 988 A.2d 104 (2010)
411 N.J. Super. 521
STATE of New Jersey, Plaintiff-Respondent,
v.
Dashawn MILLER, aka Darrel T. Miller, Defendant-Appellant.
No. A-3094-08T4.
Superior Court of New Jersey, Appellate Division.
Submitted January 5, 2010.
Decided February 9, 2010.
*107 Yvonne Smith Segars, Public Defender, attorney for appellant (Stephen A. Caruso, Assistant Deputy Public Defender, of counsel and on the brief).
Paula T. Dow, Essex County Prosecutor, attorney for respondent (Sara A. Friedman, Assistant Prosecutor, of counsel and on the brief).
Before Judges WEFING, GRALL and LeWINN.
The opinion of the court was delivered by
GRALL, J.A.D.
A jury found defendant Dashawn Miller guilty of conspiracy to commit robbery, N.J.S.A. 2C:5-2 and N.J.S.A. 2C:15-1, two counts of first-degree robbery, N.J.S.A. 2C:15-1, second-degree burglary, N.J.S.A. 2C:18-2, third-degree unlawful possession of a sawed-off shotgun, N.J.S.A. 2C:39-3b, second-degree possession of a firearm, the sawed-off shotgun, with the purpose to use it unlawfully, N.J.S.A. 2C:39-4a, and fourth-degree resisting arrest, N.J.S.A. 2C:29-2a. Defendant's convictions for conspiracy and possession of a firearm with an unlawful purpose were merged with his convictions for first-degree robbery.[1] The judge sentenced *108 defendant to an aggregate term of twenty-eight years, subject to periods of parole ineligibility and parole supervision mandated by the No Early Release Act (NERA), N.J.S.A. 2C:43-7.2. The aggregate sentence includes consecutive fourteen-year terms for the first-degree robberies and concurrent terms within the statutory range for burglary, possession of a sawed-off shotgun and resisting arrest. The mandatory fines, penalties and assessments were imposed.
We affirm defendant's convictions and sentence but remand for correction of the judgment of conviction, which erroneously reports defendant's conviction for second-degree burglary as a conviction for second-degree robbery and misstates the aggregate sentence and the NERA parole term on one count of first-degree robbery.
On the afternoon of October 9, 2007, Benjamin Pichaya, Milton Dominquez and Alfredo Cortez were installing hardwood flooring in a new multi-family residence in Irvington. Defendant and a juvenile entered the room in which they were working. Defendant, the heavier set of the two intruders, pointed a gun at the workmen and directed them to put up their hands. While defendant held the gun, the juvenile took sixty dollars from Pichaya and forty dollars from Dominquez. Cortez was also searched, but he did not have any money. The juvenile handed the money he retrieved to defendant. Both of the intruders were wearing white t-shirts and red hats.
The intruders left the house. Pichaya and Dominquez called the police, but the call was disconnected. They used a cell phone to contact their boss; he stayed on the line while Pichaya and Dominquez followed the intruders and described their location. When police cars arrived, the workers returned to their job site.
Officer Kelly, who had received a report of a robbery involving a gun committed by two men wearing white t-shirts and red hats, spotted defendant and his companion. Defendant was also wearing a white jacket. Officer Kelly stopped the police car, jumped out and ordered the men to get on the ground. The juvenile put his hands up, but defendant ran. Officer Kelly restrained the juvenile and noticed that defendant was holding something under his jacket. As defendant ran north on 20th Street, Officer Kelly saw him take off his jacket and throw something in a bush beneath a tree. Defendant then ran east, through "yards" and toward 19th Street.
Officer Love arrived while Officer Kelly was handcuffing the juvenile. He left to look for defendant on 19th Street. He noticed a man wearing a white t-shirt and red hat stooped over in a yard with tall bushes and grass. Officer Love arrested him.
Officer Kelly retrieved the gun, and Officer Marino, who came to assist Kelly, retrieved the white jacket. At the time of their arrest, defendant and the juvenile had about twenty-three dollars in cash. Although the officers looked, they did not find additional cash in the area.
Officer Zepeda, who had gone to the scene of the crime to interview the victims, took Pichaya and Dominquez to the spot where the suspects were detained. They identified defendant and the juvenile. Neither of the victims was able to identify defendant at the time of trial, but both acknowledged their out-of-court identifications *109 and both identified the shotgun recovered by Officer Kelly.
Sergeant Gaines, a ballistics expert employed by the Essex County Sheriff's Office, tested the shotgun and determined that it was operable. The barrel of the shotgun is seven and three-quarters inches long and the gun's total length is fourteen and one-half inches, sufficiently short to qualify the firearm as a "sawed-off shotgun," N.J.S.A. 2C:39-1o.
Defendant elected not to testify or present any witnesses.
During deliberations, the jury requested "a read back or playback of Pichaya's testimony." Because the courtroom is equipped with a video-recording system, the judge determined that it was appropriate to respond to the request by playing the portion of the videotape that contained Pichaya's testimony. The judge arranged for the jurors to see and hear the video in the courtroom and in the presence of the judge, the prosecutor, defense counsel and defendant. In making that ruling, the judge noted that the videotape was the official court record. He also determined that because the defendant had not presented any witnesses, there was no risk that the replaying of the testimony the jurors asked to hear would undercut conflicting testimony offered by the defense. Defense counsel did not ask the judge to replay the testimony of any other witness.
Defendant raises three issues on appeal:
I. THE COURT BELOW COMMITTED REVERSIBLE ERROR IN PLAYING BACK TO THE DELIBERATING JURY THE VIDEOTAPE OF THE ENTIRE TESTIMONY OF THE STATE'S KEY WITNESS.
II. THE INSTRUCTION ON DEFENDANT'S EXERCISE OF HIS RIGHT TO REMAIN SILENT SUGGESTED THAT HE HAD AN OBLIGATION TO TESTIFY AND THUS VIOLATED HIS STATE AND FEDERAL RIGHTS TO REMAIN SILENT. (Not Raised Below).
III. THE SENTENCE IMPOSED WAS MANIFESTLY EXCESSIVE, UNDULY PUNITIVE AND NOT IN CONFORMANCE WITH THE CODE OF CRIMINAL JUSTICE.
The judge did not err by allowing the deliberating jurors to view the videotape of Pichaya's testimony. As a general rule, a deliberating jury's request to hear testimony should be granted. State v. Wilkerson, 60 N.J. 452, 460, 291 A.2d 8 (1972). The same rule applies when the court's record is memorialized in an audio recording, which must be replayed for the jurors when there is no stenographic record to permit a conventional "read back." State v. Middleton, 299 N.J.Super. 22, 30-31, 690 A.2d 623 (App.Div.1997). The decision is one committed to the sound exercise of the trial court's discretion, and this judge's response was not an abuse of that discretion. See State v. Burr, 195 N.J. 119, 133, 948 A.2d 627 (2008) (noting that "the replay, at the jury's request, of videotaped testimony, in its entirety and in open court, is not per se prejudicial and must be subject to judicial discretion").
Defendant's claim of abuse of discretion resulting in prejudicial error is based upon general observations about the different impact of conventional "read backs" and the playing of videotaped testimony. That discussion is found in this court's opinion in State v. Michaels, 264 N.J.Super. 579, 625 A.2d 489 (App.Div.1993), aff'd on other grounds, 136 N.J. 299, 642 A.2d 1372 (1994), and reiterated in Burr, supra, 195 N.J. at 132-34, 948 A.2d 627. Defendant's *110 reliance on the distinction between "read backs" and replay of videotaped testimony and his reliance on Michaels and Burr are misplaced.
Trial judges' decisions about the appropriate response to questions from deliberating jurors for a repetition of trial testimony are considered in the context of the available options and the relative risk of prejudice they entail. See, e.g., id. at 132-33, 948 A.2d 627 (discussing the circumstances and risk of prejudice in Michaels). In Michaels, the jurors asked to see videotaped testimony given by the children who were the alleged victims. 264 N.J.Super. at 642, 625 A.2d 489. A transcript of their testimony was available. Ibid. Nonetheless, the trial judge permitted the jurors to view the videotapes of each child's testimony. Ibid. In that context, the panel in Michaels cautioned "against routine replaying of such testimony." Id. at 644, 625 A.2d 489. The panel directed, that the "trial judge should first seek to satisfy a jury request for playback of videotaped testimony by offering a reading of the transcript of the testimony." Ibid. In the circumstances of Michaels, where a "read back" of testimony was possible, we discussed the risk of prejudice that could have been avoided if a "read back" had been ordered. The panel reasoned:
It is clear that videotaped testimony provides more than [a] conventional ["read back" of] transcribed testimony. The witness' actual image, available in a video replay, presents much more information than does a transcript reading. In essence, the witness is brought before the jury a second time, after completion of the defense case, to repeat exactly what was testified to in the State's case. The witness' words and all of the animation, passion, or sympathy originally conveyed are again presented to the jury.
[Id. at 644, 625 A.2d 489.]
The critical distinction between Michaels and this case is that a "read back" was not an option available to this judge. The trial was conducted in a courtroom in which the proceedings are videotaped rather than memorialized by a stenographer. Thus, a "read back" would not have been possible without an adjournment of sufficient duration to permit preparation of either a transcript or stenographic record of the testimony from the recording.
The fact that a "read back" is not feasible changes the analysis. In evaluating the potential prejudice, the comparison is no longer between the relative impact of hearing an "impartial" reading of the testimony and a reappearance of the witness via videotape. Id. at 644-45, 625 A.2d 489. Assuming that there is an option to replay only the audio portion of the videotape, the comparison is the potential impact of hearing the testimony again in the cadence, tone and voice of the witness and hearing that testimony while also seeing the witness's gestures, body language and facial expressions for a second time. In this context, the additional prejudice inherent in the opportunity to observe the witness a second time is not as apparent as it is when compared with a conventional "read back."
The direction provided in Michaels, which was extended to the replaying of out-of-court-statements that have been videotaped in Burr, supra, 195 N.J. at 134-35, 948 A.2d 627, is that the trial judge should consider whether to satisfy a jury's request for a "playback of videotaped testimony by offering a reading of the transcript of the testimony." 264 N.J.Super. at 644, 625 A.2d 489. On that reasoning, the trial judge may also consider, *111 especially if there is a request for a special procedure, whether the circumstances of a particular case warrant a replay that permits the jurors to hear but not see the witness's testimony. In either event, as Michaels and Burr clearly indicate, the replay is not "prejudicial per se," and the trial judge retains "wide discretion" in determining how to respond to the jury's request. Ibid.
In the trial court, defendant did not ask the court to arrange for a replay of the audio without displaying the video and did not present any argument about prejudice specific to this case. On appeal, his argument is limited to one that rests on a false premise that the judge had the option of directing a "read back." Given the arguments raised and the options available to the judge, we cannot conclude that the judge chose an unjust course by arranging for the jurors to view the videotape of the testimony they asked to hear again in open court and in the presence of defendant, his attorney, the prosecutor and the judge.
Defendant's objection to the jury instruction on his decision to remain silent lacks sufficient merit to warrant more than brief comment. R. 2:11-3(e)(2). Defendant elected not to testify and to have the judge give the jury direction on his right to remain silent. Because he did not object to the instruction when it was given, he is not entitled to relief unless "`[l]egal impropriety in the charge prejudicially affect[ed his] substantial rights'" and had the "`clear capacity to bring about an unjust result.'" State v. Burns, 192 N.J. 312, 341, 929 A.2d 1041 (2007) (quoting State v. Jordan, 147 N.J. 409, 422, 688 A.2d 97 (1997)); see R. 2:10-2. In determining whether an instruction had that capacity, "portions of a charge alleged to be erroneous cannot be dealt with in isolation but the charge should be examined as a whole to determine its overall effect." State v. Wilbely, 63 N.J. 420, 422, 307 A.2d 608 (1973); accord State v. Adams, 194 N.J. 186, 207, 943 A.2d 851 (2008); State v. Gartland, 149 N.J. 456, 473, 694 A.2d 564 (1997).
The portion of the jury charge defendant finds objectionable is as follows:
As you know, ladies and gentlemen, the defendant did not testify in this case. The defendant elected not to testify at this trial. It is his constitutional right to remain silent. You may not consider for any purpose or in any manner in arriving at your verdict that [sic] the fact that the defendant did not testify. That fact should not enter into your deliberations or discussions in any manner or at any time. The defendant is entitled to have the jury consider all evidence presented at trial. He is presumed innocent even if he chooses not to testify.
We have no doubt that a jury hearing this clear description could not be confused by use of the word "even" and led to conclude that defendant had an obligation to testify. We recognize that the last sentence of the relevant Model Jury Instruction was revised after defendant's trial and that it now explains that the defendant "is presumed innocent whether or not [he] chooses to testify." Model Jury Charge (Criminal), "Defendant's Election not to Testify" (revised May 4, 2009). Nonetheless, we are persuaded that the charge given in this case, read as a whole, had no capacity to lead the jurors astray. The jurors were clearly directed that they could not consider defendant's decision to leave the State to its proofs in any manner and were not permitted to allow the fact that he did not testify to enter into their deliberations or decision-making at any time.
We turn to consider defendant's objections to the sentence imposed. Defendant *112 was nineteen years old at the time of sentencing. Although he had never been convicted of a crime before, he had an extensive history of juvenile adjudications and was first involved with the juvenile justice system when he was thirteen years old. The crimes at issue here were committed within ten months of the date on which defendant completed service of a parole term imposed as a consequence of a juvenile adjudication.
Defense counsel urged the court to reject the prosecutor's suggestion that defendant's continued insistence upon his innocence demonstrated a lack of remorse favoring a longer sentence of incarceration. In addition, defense counsel asked the judge to consider defendant's age as a factor militating in favor of a sentence at the lower end of the range.
The judge made specific findings relevant to the statutory aggravating and mitigating factors. N.J.S.A. 2C:44-1a-b. He did not rely on defendant's continued assertion of innocence. Rather, focusing on defendant's extensive juvenile record and continued involvement in criminal conduct despite periods of supervision in the community and at Jamesburg, the judge found three aggravating factors the risk that defendant will commit another crime, N.J.S.A. 2C:44-1a(3); the extent of his prior criminal record and the seriousness of the offenses, N.J.S.A. 2C:44-1a(6); and the need to deter, N.J.S.A. 2C:44-1a(9).
The judge found no mitigating factors. The judge noted the extensive opportunities for rehabilitation afforded to defendant as a juvenile. On that ground, he concluded that concerns about the safety of the community, not defendant's rehabilitation, were now paramount.
"An appellate court is not to substitute its assessment of aggravating and mitigating factors for that of the trial court." State v. Bieniek, 200 N.J. 601, 608, 985 A.2d 1251 (2010). There are additional limitations on this court's appellate review of sentencing. When a judge's findings and reasons for rejecting a mitigating factor are not explicit but can be "deduce[d] from the sentencing transcript," it is inappropriate to remand for clarification of what can be "discern[ed]." Id. at 608, 985 A.2d 1251.
Applying these standards, we see no basis for disturbing the judge's findings on aggravating and mitigating factors. The judge's discussion of defendant's opportunities for rehabilitation in the juvenile justice system and the present importance of protecting the public given defendant's response to those efforts are readily understood as the judge's explanation for concluding that defendant's age is not a mitigating factor. See id. at 610 n. 11, 985 A.2d 1251. Moreover, the aggravating factors found by the judge are supported by the record. State v. Cassady, 198 N.J. 165, 180-81, 966 A.2d 473 (2009).
In contrast to the judge's explanation of his reasons for the duration of sentence, where he applied the statutory aggravating factors to the facts he found, the judge discussed facts relevant to consecutive sentences without mentioning the standards governing that discretionary determination. Those standards are set forth in State v. Yarbough, 100 N.J. 627, 498 A.2d 1239 (1985), cert. denied, 475 U.S. 1014, 106 S.Ct. 1193, 89 L.Ed.2d 308 (1986). The judge noted:
[Defendant] entered the private home in Irvington in possession of a sawed off shotgun and while armed committed a robbery against two separate individuals.
Indeed, during the course of the trial it came out that they attempted to rob a third individual, but he had nothing on *113 his person and, therefore, took nothing of his person. For reasons which are unknown to me he was never charged with attempted robbery, which would have been a third offense.
There was no express mention of the Yarbough criteria warranting consecutive sentences for the two robberies and concurrent sentences for the other convictions.
Nonetheless, the judge's factual findings implicitly address two factors identified in Yarbough that militate in favor of consecutive sentences for the robberies. Those factors are that "there can be no free crimes in a system for which the punishment shall fit the crime" and that "the crimes involved multiple victims." Id. at 643-44, 498 A.2d 1239.
We recognize that on this record, the court could also have found facts in support of Yarbough factors that militate in favor of concurrent sentences. One could conclude that these robberies: involved one threat rather than "separate ... threats of violence"; had "objectives" that were not "predominantly independent of each other"; and were not "committed at different times or separate places" but were related so "closely in time and place as to indicate a single period of aberrant behavior." Id. at 644, 498 A.2d 1239.
As we understand the collective guidance provided in Bieniek and Cassady, if this court can "discern" that the judge considered governing principles that support the sentence, then "there is no basis upon which to upend [the judge's] reasoning." Cassady, supra, 198 N.J. at 182, 966 A.2d 473; see Bieniek, supra, 200 N.J. at 608-10, 985 A.2d 1251. Thus, a remand to clarify that the judge has considered all relevant factors is improper if the reviewing court can infer that the judge did so.
In this case, consecutive sentences for defendant's two robberies would be permissible if the judge concluded that defendant's use of a sawed-off shotgun to threaten two victims to surrender cash was of greater significance than the fact that the crimes were committed at the same time and place and not "predominately independent." While the judge did not articulate the balance he struck, it can be inferred from what the judge said. On that basis, we follow our understanding of the direction provided by the Court in Bieniek and Cassady, and affirm.
It is important to stress, however, that deference to the trial judge should not lead reviewing courts to resort to speculation in an effort to identify facts and reasons not articulated or clearly implied by the trial court that permit affirmance of a sentence. This court must not only avoid substituting its judgment for that of the trial judge but also avoid usurping the "solemn and serious" responsibility that is vested in the trial judge. Cassady, supra, 198 N.J. at 180, 966 A.2d 473 (quoting State v. Roth, 95 N.J. 334, 365, 471 A.2d 370 (1984)).
Respect for the role and importance of the trial judge and for this court's obligation to review the exercise of sentencing discretion to ensure adherence to the legal principles governing its exercise not some unstated disagreement with the sentence imposed is what leads this court to remand when reasons are not stated or clearly implied by the trial judge at the time of sentencing. It is well-settled that judicial discretion is arbitrarily exercised when the guiding legal principles are not considered. State v. Madan, 366 N.J.Super. 98, 110, 840 A.2d 874 (App.Div.2004).
Because it is our obligation to review a sentence for adherence to legal principles, not to decide the matter in the first instance, this court must avoid guessing *114 about whether the trial court considered the legal standards that limit its discretion. There is a difference between remanding to avoid guessing about whether the judge would impose the same sentence if the legal principles implicated by the facts had been addressed and second-guessing the sentence imposed. Any effort by a reviewing court to supply findings and reasons, not expressly stated by the trial judge, carries a risk the risk of crossing the line that separates review of the trial judge's decision from an unwarranted and unacknowledged exercise of original jurisdiction to make a sentencing decision entrusted to the trial judge. See R. 2:10-5.
In this case, the judge's factual findings supporting the imposition of consecutive sentences are sufficiently implicit in his statement of reasons to permit us to infer that this discretionary decision is a product of a conscientious application of the controlling legal principles to the relevant facts. Accordingly, we can defer. There is no deviation from the legal principles that is sufficiently apparent to provide a principled basis for concluding that this sentence is shocking to the judicial conscience.
Defendant's convictions and sentence are affirmed. A remand is required to permit the trial court to acknowledge in the judgment its decision to rectify the erroneous ruling on merger of defendant's conviction for possession of the firearm with an unlawful purpose that is reflected on the sentencing transcript. State v. Murray, 338 N.J.Super. 80, 91, 768 A.2d 221 (App.Div.), certif. denied, 169 N.J. 608, 782 A.2d 426 (2001). In addition, the judge is directed to correct the judgment so it reflects a conviction for second-degree burglary, rather than second-degree robbery, and so that it accurately states the duration of the NERA parole supervision term on count three.
Affirmed but remanded for correction of the judgment.
NOTES
[1] In pronouncing sentence, the judge did not merge defendant's conviction for possession of a firearm with an unlawful purpose, but the judgment reflects that merger. The merger is required by law where, as here, the jury instruction did not require the jurors to find a purpose independent of the robberies or burglary. See State v. Diaz, 144 N.J. 628, 677 A.2d 1120 (1996). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546241/ | 988 A.2d 733 (2009)
COM.
v.
ZIMMERMAN, J.
No. 829 MDA 2009.
Superior Court of Pennsylvania.
November 23, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546521/ | 250 B.R. 39 (2000)
In re VALERINO CONSTRUCTION, INC., Debtors.
Warren H. Heilbronner, Trustee, Plaintiffs,
v.
Carole Nicosia, Defendants.
Warren H. Heilbronner, Trustee, Plaintiffs,
v.
J.I. Case Credit Corporation, Defendants.
Bankruptcy No. 97-20881. Adversary Nos. 99-2153, 99-2155.
United States Bankruptcy Court, W.D. New York.
June 23, 2000.
*40 *41 Warren H. Heilbronner, Rochester, NY, for plaintiff/trustee.
Richard P. Vullo, Rochester, NY, for Nicosia.
Joseph Allen, Jaeckle, Fleischmann & Mugel, Buffalo, NY, for Case Credit.
DECISION & ORDER
JOHN C. NINFO, II, Chief Judge.
BACKGROUND
On March 13, 1997, five creditors filed an involuntary Chapter 7 petition initiating a case against Valerino Construction, Inc. (the "Debtor"). On April 2, 1997, upon the written consent of the Debtor, an Order for Relief was entered. Thereafter, Warren H. Heilbronner was appointed as the Chapter 7 Trustee (the "Trustee").
On March 26, 1999, the Trustee commenced an Adversary Proceeding (the "Nicosia Adversary Proceeding") against Carole Nicosia ("Nicosia"), the mother of Robert A. Valerino ("Valerino"), the sole shareholder and president of the Debtor.
The Complaint in the Nicosia Adversary Proceeding alleged that on or about January 16, 1997 the Debtor transferred $30,000.00 to Nicosia in payment of an antecedent debt, and that the Trustee could avoid the transfer as preferential pursuant to Section 547(b).[1]
*42 On May 18, 1999, Nicosia interposed an Answer to the Complaint which did not dispute the existence of the five elements necessary to establish a preferential transfer, as set forth in Section 547(b), but asserted that the $30,000.00 transferred to Nicosia was not property in which the Debtor had an interest. Nicosia alleged that the monies transferred to her were trust funds as defined under Article 3-A of the New York Lien Law (the "Lien Law"), and, therefore, would not have been property of the Debtor's estate if they had not been transferred pre-petition.
On April 18, 2000, Nicosia filed a Motion for Summary Judgment which asserted that the Trustee's Complaint in the Nicosia Adversary Proceeding should be dismissed, as a matter of law, because the property transferred to her was not property in which the Debtor had an interest for purposes of Section 547(b).
On March 26, 1999, the Trustee commenced an Adversary Proceeding (the "Case Credit Adversary Proceeding") against J.I. Case Credit Corporation ("Case Credit"). The Trustee's Amended Complaint in the Case Credit Adversary Proceeding alleged that: (1) on or about January 16, 1997 the Debtor transferred the sums of $21,589.52 and $19,997.18 to Case Credit in payment of the amounts due from Valco, Inc. of Rochester, a corporation also owned by Robert A. Valerino, in connection with Case Credit's financing of two Case 580 Backhoes; (2) if Case Credit was a creditor of the Debtor, those transfers were avoidable as preferential transfers pursuant to Section 547(b); and (3) if Case Credit was not a creditor of the Debtor, those transfers were avoidable as fraudulent conveyances pursuant to Section 548(a)(2)(B)(1).[2]
Thereafter, Case Credit interposed an Answer to the Amended Complaint and filed a Motion for Summary Judgment (the "Case Credit Motion for Summary Judgment") which asserted that the transfers to it were not avoidable by the Trustee because the monies it received were trust funds under Article 3-A of the Lien Law, and, therefore, were not property in which the Debtor had an interest for purposes of either Section 547 or Section 548.
It has been agreed by the Trustee, Nicosia and Case Credit, that: (1) the monies paid to Nicosia and Case Credit by the Debtor had been paid to it in connection with the improvement of various parcels of real property on which it was a contractor so that they were trust funds under Article 3-A of the Lien Law; and (2) neither Nicosia nor Case Credit was a subcontractor on those particular improvement projects nor did they otherwise provide any work, labor or services in connection with the projects.
DISCUSSION
I Case Law
We know from the decision of the United States Supreme Court in Begier v. Internal Revenue Service, 496 U.S. 53, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990) *43 ("Begier") that: (1) for a trustee to avoid a transfer of an interest of the debtor in property under Section 547(b), the property transferred must be property that would have been part of the bankruptcy estate had it not been transferred prepetition; and (2) since a debtor that holds property in trust for another does not possess an equitable interest in the property, the property is not property of the estate under Section 541 and is not property in which the debtor has an interest for purposes of Section 547(b).
We also know from the decision of the United States Bankruptcy Court for the Western District of New York in In re Building Dynamics, Inc., 134 B.R. 715 (Bankr.W.D.N.Y.1992) ("Building Dynamics"), and the cases cited therein, that: (1) the Lien Law creates a statutory trust which requires the funds received by a general contractor for the improvement of real property to be held in trust for the benefit of the subcontractors, architects, engineers, surveyors, laborers and materialmen who contributed to the improvement; and (2) when such trust funds are paid to a subcontractor who is a beneficiary of the statutory trust under the Lien Law, the payment is not of property of the debtor as required by Section 547(b) and the decision of the United States Supreme Court in Begier.
We further know that New York State Courts which have interpreted the Lien Law have held that a bankruptcy trustee may not stand in the position of the bankrupt as a contractor or subcontractor trustee under Article 3-A of the Lien Law and proceed directly against a transferee of diverted trust funds. See Beckerman v. Tummolo, 63 A.D.2d 818, 406 N.Y.S.2d 398 (N.Y.App.Div.1978).
In Building Dynamics and numerous other cases where the courts have held that trust funds received in connection with the improvement of real property were not property in which the debtor has an interest for purposes of Section 547(b),[3] trustees were seeking to recover funds from one of the trust fund beneficiaries who had contributed to the particular improvement. Courts deciding the issue frequently pointed out that if a trustee were successful in avoiding the transfers, because of the preservation and distribution scheme set forth in the Bankruptcy Code,[4] the avoidance and subsequent redistribution would have benefitted not only other unpaid trust fund beneficiaries, but also non-trust fund beneficiary creditors. This itself would result in a further impermissible diversion of the trust funds.
In the pending adversary proceedings, neither defendant is a trust fund beneficiary of the Article 3-A trust funds paid to them, and the Trustee has suggested and agreed that if the Court determines that he can avoid the transfers to Nicosia and Case Credit, he will distribute the funds recovered only to any unpaid trust fund beneficiaries of the particular improvements in question.[5]
II The Lien Law
The New York State Legislature, like the legislatures of many states, has addressed the rights and remedies of trust *44 fund beneficiaries who have contributed to the improvement of real property in a comprehensive manner to insure that they receive their contracted for compensation in connection with such improvements. As a result, these real property improvement trust fund beneficiary creditors, when compared to most other commercial creditors, are an extraordinarily favored class of creditors.
Any owner, contractor or subcontractor, or responsible individual who breaches the trust by diverting trust funds to a non-trust fund beneficiary: (1) can be charged with and be found guilty of the crime of larceny; (2) is subject to personal civil liability[6]; and (3) may have the indebtedness resulting from such a diversion determined to be nondischargeable under Section 523(a)(4) in the event of a bankruptcy.[7] In addition, a trust fund beneficiary can file a mechanics lien against the improvement in order to increase its chances of payment, and it can maintain an action, on behalf of all proper unpaid trust fund beneficiaries, to enforce the trust against a non-trust fund beneficiary transferee when there has been a diversion.[8]
Although the statute of limitations that applies to a diversion of trust funds action is relatively short, the later of one year from the completion of the project or the last date on which the trust fund beneficiary was to be paid in full, there is New York State and Federal case law which holds that if a contractor or subcontractor has abandoned the project, such as the Debtor arguably did in this case, completion has not occurred for purposes of the one year statute of limitations, and a longer six-year contractual statute of limitations applies.[9] In addition, the Lien Law and case law is clear that until all trust fund beneficiaries are paid in full, the trust continues even in diverted funds and it remains intact regardless of the applicable statute of limitations.[10]
Furthermore, because trust fund beneficiaries are generally aware of the comprehensive rights and remedies provided for them under Article 3-A of the Lien Law, and have the ability to file mechanics liens against the improvement, these creditors for the most part are very knowledgeable about the status of the improvement and the flow of funds between the owners, contractors and subcontractors, and are usually in an excellent position to take advantage of their various rights and remedies.
III General
I agree with Nicosia and Case Credit that: (1) the monies transferred to *45 them by the Debtor were trust funds under Article 3-A of the Lien Law and not property in which the Debtor had an interest for purposes of either Section 547 or Section 548; and (2) it makes no difference that they were not proper trust fund beneficiaries, the funds were trust funds when transferred to them and, as provided for in Section 70(3) of the Lien Law, the funds continue to be trust funds.
Although it may seem unjust and inequitable for a Bankruptcy Court to allow a non-trust fund beneficiary to retain diverted Article 3-A trust funds and not allow the trustee to employ every possible avoidance power provided for by the Bankruptcy Code, including the ability to avoid preferential transfers, to recover the diverted trust funds, at least for the benefit of proper trust fund beneficiary creditors, the case law and language of Sections 547 and 548 are clear, and this Court does not believe that a trustee can use the avoiding powers under the Bankruptcy Code for this purpose.
As for equitable considerations, this favored class, trust fund beneficiary creditors, does not need either the avoiding powers provided for in the Bankruptcy Code or the bankruptcy system in order to fully protect it. As discussed above, there are adequate state law rights and remedies if these creditors are diligent and fully exercise those rights and remedies. Although diversions like those to Nicosia and Case Credit are not expected, they are certainly provided for in Article 3-A, and as a practical matter are common.
IV Existing Rights and Remedies
If the trust funds transferred to Nicosia and Case Credit are not and were not property of the bankruptcy estate, it appears that proper trust fund beneficiaries may even now be able to pursue Nicosia and Case Credit directly to enforce the trust pursuant to Lien Law Section 77.[11] If this is precluded by any applicable state law statute of limitations, that is the fault of the trust fund beneficiaries for not exercising their rights in a timely manner.
What is important to note, is that neither this Court nor the bankruptcy system has in any way delayed or interfered with the ability of proper trust fund beneficiaries to exercise their rights to pursue the trust funds diverted to Nicosia and Case Credit, and they will not in any future similar case.[12]
In addition to their rights under Section 77 of the Lien Law, since under this Decision & Order a bankruptcy trustee has no ability to avoid the fraudulent transfer of Article 3-A trust funds, proper trust fund beneficiaries may continue to have state law causes of action to avoid those fraudulent conveyances under Article 10 of the New York Debtor and Creditor Law. Furthermore, the existence of the Debtor's bankruptcy case does not prohibit the commencement of those actions within any applicable New York statute of limitations, since any such actions would not compete with the powers, rights or duties of any bankruptcy trustee or with the interests of the bankruptcy estate and the general creditors of the estate.[13]
The rights and remedies of trust fund beneficiaries under Article 3-A of the Lien Law to pursue diverted trust funds in the *46 hands of a non-bankrupt non-trust fund beneficiary are not affected by a bankruptcy of the diverter. However, those trust fund beneficiaries must be diligent.
CONCLUSION
The Motions for Summary Judgment brought by Nicosia and Case Credit are in all respects granted. The Trustee's Adversary Proceedings against Nicosia and Case Credit are dismissed on the merits with prejudice and without costs to either party.
IT IS SO ORDERED.
NOTES
[1] Section 547(b) provides that:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b) (1998).
[2] Section 548(a)(2)(B)(i) provides that:
(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily (2)(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation[.]
11 U.S.C. § 548(a)(2)(B)(i) (1998).
[3] Although Begier and Building Dynamics involved trustees attempting to avoid preferential rather than intentionally or constructively fraudulent transfers, the requirement that to be avoidable the transfer must involve an interest of the debtor in property is identical in Section 548, and Courts have recognized this in circumstances which involved trust funds other than Article 3-A Lien Law trust funds. See Jenkins v. Chase Home Mortgage Co. (In re Maple Mortgage, Inc.), 81 F.3d 592 (5th Cir.1996).
[4] See Section 551 and Section 726.
[5] The Trustee's offer is understandable in view of the decision of the United States District Court for the Eastern District of New York in Albert Pick Co., Inc. v. Travis, 6 F.Supp 486 (E.D.N.Y.1933) which held that trust funds recovered by a trustee or otherwise coming into the trustee's possession can only be distributed to the trust fund beneficiaries of the improvements in question.
[6] See Lien Law Section 77 Action to Enforce Trust; and Lien Law Section 79-A Misappropriation of Funds of Trust (Constitutes Larceny).
[7] See In re Kawczynski, 442 F.Supp. 413 (W.D.N.Y.1977); In re Phipps, 217 B.R. 427 (Bankr.W.D.N.Y.1998); and In re Oot, 112 B.R. 497 (Bankr.N.D.N.Y.1989).
[8] Lien Law Section 77.1 provides:
1. A trust arising under this article may be enforced by the holder of any trust claim, including any person surrogated to the right of a beneficiary of the trust holding a trust claim, in a representative action brought for the benefit of all beneficiaries of the trust. An action to enforce the trust may also be maintained by the trustee. In any such action, except as otherwise provided in this article, the practice, pleadings, forms and procedure shall conform as nearly as may be to the practice, pleadings, forms and procedure in a class action. Lien Law Section 77.3(a)(i) provides:
(a) The relief granted in any such action may include any or all of the following:
(i) Relief to compel an interim or final accounting by the trustee; to identify and recover trust assets in the hands of any person; to set aside as a diversion any unauthorized payment, assignment or other transfer, whether voluntary or involuntary; to enjoin a diversion; to recover damages for breach of trust or participation therein[.]
[9] See Putnins Contracting Corp. v. Winston Woods at Dix Hills, Inc., 72 Misc.2d 987, 340 N.Y.S.2d 317 (N.Y.Sup.Ct.1973); and In re Grosso, 9 B.R. 815 (Bankr.N.D.N.Y.1981).
[10] See Lien Law Section 70(3) and In re Tripp, 189 B.R. 29 (Bankr.N.D.N.Y.1995).
[11] Based upon this Decision & Order, proper Article 3-A unpaid trust fund beneficiaries would not be required to request relief from the automatic stay to proceed against transferees of diverted Article 3-A trust funds, even if they must add the debtor as a named defendant. However, any excess trust funds received after the payment of all proper trust fund beneficiaries must be turned over to the trustee.
[12] A bankruptcy proceeding may in some cases actually assist trust fund beneficiary creditors by affording them the ability to: (1) obtain important information from a debtor's schedules and other pleadings in the case; and (2) conduct relevant Section 2004 examinations.
[13] Since in this case the Debtor is a corporation, its debts are not discharged. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/858901/ | NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 12-2640
_____________
DENNIS OBADO,
Appellant
v.
UMDNJ, Behavioral Health Center;
ANTHONY THOMAS;
ANTHONY TOBIAS;
NYDIA SANTOS;
JOHN DOE (A-Z);
TRINITAS REGIONAL MEDICAL CENTER;
AWAIS SETHI;
JANE DOE (A-Z)
___________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-09-cv-01344)
District Judge: Honorable Dickinson R. Debevoise
___________
Submitted Under Third Circuit L.A.R. 34.1(a)
March 8, 2013
Before: RENDELL, AMBRO, and VANASKIE, Circuit Judges.
(Filed: April 23, 2013)
___________
OPINION
___________
VANASKIE, Circuit Judge.
At issue in this appeal is whether mental healthcare professionals violated
Appellant Dennis Obado‟s substantive due process rights by recommending that he be
involuntarily committed to a mental health treatment facility and be cajoled into taking
certain medication. Also at issue is whether Mr. Obado presented sufficient evidence to
support his claim that his involuntary commitment violated the Americans with
Disabilities Act (“ADA”), 42 U.S.C. § 12132, and Section 504 of the Rehabilitation Act
(“Section 504”), 29 U.S.C. § 794. Because we conclude that the healthcare
professionals‟ decision to recommend involuntary commitment did not “shock the
conscience” and Mr. Obado failed to present evidence that his involuntary commitment
was the result of discriminatory animus, we will affirm the District Court‟s decision to
grant summary judgment in favor of the Appellees.
I.
Since we write principally for the parties, we set forth only the facts essential to
our analysis.
On March 28, 2007, Mr. Obado, who has a history of mental illness, went to the
Robert Wood Johnson Medical Center with a complaint of neck pain. After concluding
that Mr. Obado had no neck problems, but recognizing symptoms of mental illness, the
staff referred him to Defendant University of Medicine and Dentistry of New Jersey—
2
University Behavioral Healthcare (“UMDNJ”), where staff conducted a screening under
N.J. Stat. Ann. § 30:4-27.5.1
At UMDNJ, Defendant Nydia Santos, a certified mental health screener, and
Defendant Dr. Anthony Tobia,2 a physician, concluded that Mr. Obado posed a danger to
himself and others, and Dr. Tobia certified him for involuntary commitment. Mr.
Obado‟s medical records reveal that the certification was based on the following
undisputed facts:
Mr. Obado was suffering from paranoid delusions that Hispanic gang members
were intent on killing him.
Mr. Obado had stopped leaving his home over the past several months and would
crawl on the floor in an effort to avoid being seen through windows.
Mr. Obado had inquired of his brother about acquiring a gun.
As a result, Mr. Obado was transferred the following day, March 29, 2007, to
Defendant Trinitas Hospital. There, Defendant Dr. Awais Sethi, a psychiatrist at Trinitas,
conducted a psychiatric evaluation of Mr. Obado and similarly found that Mr. Obado
1
New Jersey law provides for screening of patients thought to require involuntary
commitment for mental health treatment. N.J. Stat. Ann. § 30:4-27.5(a). If a psychiatrist
or other designated physician concludes that involuntary commitment is necessary and
that the patient is dangerous, he or she may complete a screening certificate indicating
that inpatient treatment is required at a short-term care or psychiatric facility. Id. § 30:4-
27.5(b), (e). If a psychiatrist at the short-term care or psychiatric facility determines that
the patient requires further involuntary commitment, he or she may submit a clinical
certificate and the screening certificate to the state court, which may order temporary
authorization for the continued involuntary commitment upon finding probable cause that
such commitment is required pending a final hearing. Id. § 30:4-27.10(a)(1), (g).
2
The official caption refers to this Defendant as Anthony Tobias, but the parties
refer to his surname as Tobia.
3
posed a danger to himself and others. Accordingly, Dr. Sethi completed a clinical
certificate for involuntary commitment. Based on the screening and clinical certificates,
the New Jersey Superior Court granted a petition for a temporary order for involuntary
commitment pending a hearing to be held within twenty days.
Mr. Obado was treated for his mental health issues at Trinitas from March 29,
2007, until April 5, 2007. Initially, Mr. Obado refused to take medication prescribed by
Dr. Sethi. After Dr. Sethi informed him that the staff could force him to take the
medication, Mr. Obado relented.
On April 5, 2007, Dr. Sethi discharged Mr. Obado. The decision to discharge Mr.
Obado was based upon progress made during the hospitalization and Mr. Obado‟s
willingness to receive outpatient therapy, which he declined to consider when Dr. Sethi
conducted his initial evaluation.
Mr. Obado brought this action two years later, on March 24, 2009. He asserts that
Ms. Santos, Dr. Tobia, and Dr. Sethi violated his substantive due process rights by (1)
involuntarily committing him or facilitating his commitment when he was not dangerous,
and (2) using inaccurate assessment tools to evaluate the risk of danger and making
stereotypic assumptions about him. Mr. Obado further claims that Dr. Sethi violated his
substantive due process rights by threatening to administer medication over his objection,
thereby forcing him to take the medication. In addition, he alleges that UMDNJ violated
4
the ADA and Trinitas violated Section 504 by making stereotypic assumptions about his
dangerousness based on his status as an individual with mental illness.3
Following discovery, Defendants moved for summary judgment. The District
Court found that the individual Defendants were entitled to qualified immunity and that
there was no evidence that UMDNJ or Trinitas made decisions about Mr. Obado based
on stereotypic assumptions, thereby precluding his claims under the ADA and Section
504. Accordingly, summary judgment was entered against Mr. Obado. This timely
appeal followed.
II.
The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1343(a)(3), and
we have appellate jurisdiction under 28 U.S.C. § 1291. We review a district court‟s
decision to grant summary judgment de novo. Haybarger v. Lawrence Cnty. Adult Prob.
& Parole, 667 F.3d 408, 412 (3d Cir. 2012). Summary judgment is appropriate when
“the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
A. Qualified Immunity and the Substantive Due Process Claim4
3
The Third Amended Complaint also included several state law claims that Mr.
Obado withdrew at the summary judgment stage.
4
Where, as here, qualified immunity is asserted, we ask two questions: (1) did the
defendant‟s conduct violate a constitutional or statutory right; and (2) if so, was that right
so clearly established at the time of the defendant‟s actions that he or she would have
reason to know that his or her conduct was wrongful? See Pearson v. Callahan, 552 U.S.
223, 232 (2009). With respect to the second question, a defendant is protected from
liability if he or she acts on the basis of a reasonable mistake of fact or law. Id. at 231.
As explained in Pearson, “[q]ualified immunity balances two important interests—the
need to hold public officials accountable when they exercise power irresponsibly and the
5
In Benn v. Universal Health System, Inc., 371 F.3d 165 (3d Cir. 2004), we held
that the appropriate test for assessing liability in the context of involuntary commitment
decisions is the “shocks the conscience” standard announced in County of Sacramento v.
Lewis, 523 U.S. 833 (1998). Benn, 371 F.3d at 174.5 Writing for our Court, then-Judge
Alito observed that “[w]hether an incident „shocks the conscience‟ is a matter of law for
the courts to decide.” Benn, 371 F.3d at 174. Applying this standard in Benn, we found
that medical decisions to commit the plaintiff, which the plaintiff characterized as
reflecting “„total incompetenc[e],‟” were nonetheless not conscience-shocking given the
need to shield officials from harassment, distraction, and liability when they perform their
duties reasonably.” Id. The District Court in this case found that, even though Mr.
Obado had alleged sufficient facts to sustain a violation of his right to due process, the
individual defendants had acted reasonably, and thus were entitled to qualified immunity.
We agree that the individual defendants are entitled to qualified immunity, not only
because they acted reasonably, but also because their actions did not violate Mr. Obado‟s
rights. In this regard, we may correct a district court‟s erroneous conclusion at the first
step of the qualified immunity inquiry. See Ashcroft v. al-Kidd, 131 S.Ct. 2074, 2080
(2011).
5
The District Court found that, “at worst,” the individual healthcare professionals
had made reasonable mistakes in concluding that Mr. Obado posed a danger to himself
and others. In a footnote, however, the District Court suggested that Mr. Obado would
not have to show that the individual Defendants‟ conduct shocked the conscience in order
to establish a substantive due process violation because “involuntary commitment
infringes on an individual‟s right to liberty, which is a fundamental right.” (App. 17
n.11.) As indicated above, in accordance with our decision in Benn, the proper standard
by which to analyze a substantive due process claim for involuntary commitment by
healthcare professionals is the “shocks the conscience” standard. See Benn, 371 F.3d at
174. Indeed, the Second Circuit, on whose jurisprudence Mr. Obado relies to support his
substantive due process claim, has concluded that the “shocks the conscience” standard
applies to civil commitment proceedings. See Bolmer v. Oliveira, 594 F.3d 134, 144 (2d
Cir. 2010) (holding that a “substantial departure” from accepted clinical standards and
requirements is sufficient to “shock the conscience” in a civil commitment context
(emphasis added)).
6
totality of the circumstances presented. Id. at 175. Consideration of the facts and
circumstances here yields the same conclusion.
The underlying facts are not in dispute. Mr. Obado‟s medical records show that he
had a history of paranoid delusions. He stated that a Hispanic gang was harassing and
following him and that they were shining headlights into his room. He obsessively
checked entrances to his home and crawled on the floor to avoid detection. Indeed, Mr.
Obado had not left his house for two months out of fear. Importantly, his records also
contain the following notation that:
PT‟S [Patient‟s] BROTHER REPORTS THAT THE MAJOR
PRECIPITANT IN THE PT BEING REFERRED TO APS
[Adult Protective Services] FOR PSYCH [psychiatric] EVAL
[evaluation] TODAY WAS THE PT ASKING HIS
BROTHER TO HELP HIM ACQUIRE A GUN FOR
PROTECTIVE PURPOSES.
(App. 242.) At his initial evaluation, Mr. Obado refused to consent to voluntary
outpatient treatment and would not allow healthcare professionals to consult his family
members. Under these circumstances, the decision to recommend Mr. Obado for
involuntary civil commitment is certainly not conscience-shocking.
Mr. Obado‟s reliance on an affidavit by Dr. Kenneth Selig is unavailing. In his
affidavit, Dr. Selig attested that Mr. Obado did not pose a danger to himself or others
when he was hospitalized at UMDNJ and Trinitas and that it was unreasonable for Dr.
Sethi to conclude otherwise. Dr. Selig cited as a “critical mitigating factor that lowered
the risk of harm that Mr. Obado posed” the fact that Mr. Obado lived with “concerned
and supportive family members” who were not worried about Mr. Obado‟s potential
7
dangerousness and who could have intervened if he did become dangerous. (App. 867.)
In addition, Dr. Selig opined that “basic clinical standards” demanded that Dr. Sethi
should have questioned Mr. Obado about his attempt to acquire a gun or at least have
spoken to his brother before relying upon that fact in concluding that Mr. Obado posed a
danger. (Id. at 868.)
Dr. Selig‟s emphasis on the failure of Dr. Sethi to communicate with Mr. Obado‟s
family in evaluating Mr. Obado ignores the fact that Mr. Obado did not consent to having
Dr. Sethi speak with his family until April 3. Two days after being granted this
permission, Dr. Sethi discharged Mr. Obado. Furthermore, the failure to conduct a more
detailed inquiry concerning Mr. Obado‟s expressed desire to obtain a gun for protection
does not render Dr. Sethi‟s decision conscience-shocking. In short, Dr. Selig‟s affidavit
does not preclude us from deciding, as a matter of law, that the decision to recommend
Mr. Obado for involuntary civil commitment does not shock the conscience. See Benn,
371 F.3d at 176 (expert affidavit opining that mental healthcare professionals acted with
gross negligence in recommending involuntary civil commitment did not preclude court
from deciding, as a matter of law, that no reasonable jury could find that the doctors were
grossly negligent).6
6
Even if the shocks the conscience standard did not apply in this context, we agree
with the District Court that, “at worst,” the healthcare professionals‟ decisions in this case
were the product of the kind of reasonable mistakes in judgment covered by the doctrine
of qualified immunity. See Pearson, 555 U.S. at 231 (“[Q]ualified immunity covers mere
mistakes in judgment, whether the mistake is one of fact or one of law.” (internal
quotation marks omitted)).
8
We also conclude that Dr. Sethi did not shock the conscience by informing Mr.
Obado that hospital staff would administer medication over his objection if he did not
voluntarily take it. As we stated in Benn, “authorities may administer antipsychotic drugs
over a patient‟s objection „where the decision is a product of the authorities‟ professional
judgment.‟” Benn, 371 F.3d at 175 (quoting White v. Napoleon, 897 F.2d 103, 112 (3d
Cir. 1990)). Here, it is evident that Dr. Sethi‟s encouragement of Mr. Obado to take the
medication or else it would be administered over his objection was within his
professional judgment and therefore did not shock the conscience.7
B. ADA and Section 504 Claims
Mr. Obado also argues that the staff at UMDNJ and Trinitas “ignored well-
accepted clinical tenets of risk assessment and made unfounded, stereotypic assumptions
about Mr. Obado simply because he was paranoid and manifest[ed] other symptoms of
mental illness.” (Appellant‟s Br. 30.) As a result, Mr. Obado claims that UMDNJ and
Trinitas violated the ADA and Section 504, respectively.
Title II of the ADA provides that “no qualified individual with a disability shall,
by reason of such disability, be excluded from participation in or be denied the benefits of
the services, programs, or activities of a public entity, or be subjected to discrimination
by any such entity.” 42 U.S.C. § 12132. Similarly, Section 504 provides that “[n]o
otherwise qualified individual with a disability . . . shall, solely by reason of her or his
7
Because we hold that the individual Defendants did not violate Mr. Obado‟s
constitutional rights and that they nevertheless would be entitled to qualified immunity,
we need not address the District Court‟s conclusion that those Defendants were acting
under the color of state law for purposes of § 1983.
9
disability, be excluded from the participation in, be denied the benefits of, or be subjected
to discrimination under any program or activity receiving Federal financial assistance.”
29 U.S.C. § 794(a).
Some courts have recognized that plaintiffs may bring claims of disability
discrimination based on stereotypic assumptions about individuals with mental illness.
See Bolmer, 594 F.3d at 149 (declining to conclude as a matter of law that involuntary
commitment based upon stereotyped views of the mentally ill did not violate the ADA).
We, however, need not decide whether claims of disability discrimination under the ADA
or Section 504 based on stereotypic assumptions are viable because we agree with the
District Court that Mr. Obado presented no evidence of discriminatory animus on the part
of UMDNJ or Trinitas. Mr. Obado points to no discriminatory policies,
contemporaneous statements, or any circumstantial evidence suggesting UMDNJ or
Trinitas acted under the assumption that all individuals with mental illness exhibiting
paranoid delusions require involuntary commitment. Absent such evidence, no genuine
dispute as to any material fact exists relating to Mr. Obado‟s ADA and Section 504
claims, and UMDNJ and Trinitas are entitled to summary judgment.
III.
For the foregoing reasons, we will affirm the judgment of the District Court.
10 | 01-03-2023 | 04-23-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546527/ | 988 A.2d 712 (2009)
AMADA
v.
SALEM HARBOUR ASSOC.
No. 46 EDA 2009.
Superior Court of Pennsylvania.
November 4, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2301753/ | 41 A.3d 163 (2012)
IN RE: LAYING OUT AND OPENING OF PRIVATE ROAD IN HAZLE TOWNSHIP.
Appeal of: Stephen Perchak, James Perchak, Michael Perchak, Josephine Perchak and Donald E. Walp.
No. 326 C.D. 2011
Commonwealth Court of Pennsylvania.
Argued September 16, 2011.
Decided January 27, 2012.
*164 Thomas L. Kennedy, Hazleton, for petitioners Stephen Perchak, James Perchak, Michael Perchak and Josephine Perchak.
John M. Gallagher, Hazleton, for respondents Leonard Brenner and Paul Brenner.
BEFORE: COHN JUBELIRER, Judge, and LEAVITT, Judge, and BROBSON, Judge (P.).
OPINION BY Judge COHN JUBELIRER.
Stephen Perchak, James Perchak, Michael Perchak, Josephine Perchak (collectively, Perchaks) and Donald E. Walp (Walp) (together with Perchaks, Neighbors) appeal from the Order of the Court of Common Pleas of Luzerne County (trial court) that granted the exceptions of Paul Brenner and Leonard Brenner (together, Brenners) from the Report of the Board of Viewers (Board), which denied Brenners' petition to open a private road across Perchaks' property (Petition).[1] Neighbors argue that the trial court erred in: (1) reversing the Board because it correctly considered the possibility of access to Brenners' property (the Property) by an implied easement over a different neighboring property; and (2) considering only what access was strictly necessary to reach the Property, rather than the access necessary to develop the Property for its highest and best use.
Brenners purchased the Property, which comprises two parcels totaling approximately 34.57 acres, from Mt. Laurel Memorial Park, Inc. (Mt. Laurel Park). The transfer left the Property without connection to a public road or highway. Around the time of the transfer, Brenners contracted with Perchaks for an easement over Perchaks' property to a private right-of-way on Perchaks' property known as Transportation Drive, which connects to PA Route 309 and services Perchaks' trucking business and a business owned by Walp. This easement was conditioned on the use of the Property as a scrap yard. The Property is located in a B1 zoning district, where a scrap yard is not a use permitted as of right. Brenners sought a variance from the Hazle Township Zoning Authority (Authority) to operate a scrap yard on the Property. The Authority denied the variance and this Court affirmed the Authority's decision.
Thereafter, on October 16, 2009, Brenners petitioned the trial court to appoint the Board pursuant to the Act commonly known as the Private Road Act[2] (the Act). The trial court appointed the Board, which *165 held three hearings on Brenners' Petition. The Board received evidence, including the Engineering Evaluation of Alternate Routes From S.R. 309 to Lands Owned by Leonard and Paul Brenner prepared by Schumacher Engineering, Inc. (Schumacher Report), which Brenners offered into evidence, and the Engineering Report for Easement Routes A and B From S.R. 309 to Lands Owned Now [or] Formerly by Leonard and Paul Brenner, prepared by J.T.B. Surveying and Engineering, which Neighbors offered into evidence. The parties also entered a number of deeds into evidence. While there appears to have been testimony before the Board, this testimony was not transcribed.
The Board issued its Report and determined that the private road sought by Brenners "is not for purposes of merely gaining access to their clearly landlocked land, but is designed to permit them to develop the [Property] in conformity with the B1 zoning classification assigned to the area in which their land is located." (Board Report at 2.) The Board stated that the testimony of John G. Synoski, P.E., who prepared the Schumacher Report, indicates that Brenners contemplated a road that would comply with the standards set by Hazle Township and the Department of Transportation, not merely a road that would meet the bare necessity of accessing the Property. (Board Report at 2-3.) The Board stated that, under the circumstances of the case, Brenners were not entitled to a private road under the Act that would facilitate the highest and best use of the land when it appeared that an easement by necessity should be available through the property of Mt. Laurel Park, which contributed to the landlocked nature of the Property in its conveyance. (Board Report at 3.) The Board, therefore, denied Brenners' Petition.
Brenners filed exceptions to the Board's Report. The trial court granted Brenners' exceptions and remanded the matter to the Board to determine the precise placement of and compensation for the private road. The trial court determined that it was not within the Board's power to "determine whether implied easements exist" and that "the sole purpose of the Board, once it determines that Petitioner is landlocked, is to lay out the road in the place petitioned, making any adjustments necessary." (Trial Ct. Order at 1-2 (emphasis added).) Neighbors now appeal to this Court.[3]
We first address Neighbors' argument that the trial court erred in holding that the Board should disregard the potential implied easement by necessity over the property of Mt. Laurel Park in determining that a private road over Perchaks' property was necessary under the Act. Section 11 of the Act provides:
[t]he several courts of quarter sessions shall, in open court as aforesaid, upon the petition of one or more persons, associations, partnerships, stock companies, or corporations, for a road from their respective lands or leaseholds to a highway or place of necessary public resort, or to any private way leading to a highway . . . direct a view to be had of the place where such road is requested, and a report thereof to be made.
36 P.S. § 2731. Section 12 of the Act provides that:
[i]f it shall appear by the report of viewers to the court directing the view, that such road is necessary, the said court shall direct what breadth the road so reported shall be opened, and the *166 proceedings in such cases shall be entered on record, as before directed, and thenceforth such road shall be deemed and taken to be a lawful private road.
36 P.S. § 2732. "When reviewing a request to open a private road under the Act, we are cognizant that `the Act is in the nature of eminent domain and, therefore, must be strictly construed.'" Soska v. Bishop, 19 A.3d 1181, 1188 (Pa.Cmwlth. 2011) (quoting Graff v. Scanlan, 673 A.2d 1028, 1031 (Pa.Cmwlth.1996)). The term "necessary" in Section 12 is key to the entire Act and "`must likewise be given a strict interpretation.' As such, our courts from early in the history of the Act have construed it as requiring the `strictest necessity.'" In re Private Road in Speers Boro, II, 608 Pa. 302, 308, 11 A.3d 902, 906 (2011) (quoting Graff, 673 A.2d at 1031).
In Graff, this Court considered a trial court's order denying the exceptions to a report of a board of viewers where the neighboring landowners objected to the opening of a private road over their properties on the bases that an implied easement by necessity existed over land previously conveyed by the landlocked landowners and the landowners had caused the landlocked status of their property. This Court considered the factors necessary to create an easement by necessity, discussed below, and determined that one existed. Graff, 673 A.2d at 1032-33. This Court, therefore, determined that the board of viewers in that case erred in not considering the implied easement by necessity. Id. at 1033. Rather than remand to the board of viewers, however, this Court held that the landowners in Graff had caused their land to become landlocked and "that landowners who voluntarily create their own hardship are precluded from condemning a private road over the land of others pursuant to the provisions of the Act." Id. (emphasis in original).
Here, unlike the board of viewers in Graff, the Board did consider whether an implied easement by necessity existed, determined that one did, and took this into consideration in making its Report. While the Board does not have the power to quiet title and make a determination binding on the affected landowners as to whether an easement by necessity exists, it is not error for a board of viewers to consider whether it appears likely that an easement by necessity exists. The potential existence of such an easement is relevant to the question of whether a private road is strictly necessary.
In order to establish an easement by necessity, a party must show that: (1) the titles to the allegedly dominant and servient properties were held by one person; (2) this unity of title was severed when one of the properties was conveyed; and (3) the easement is necessary for the owner of the dominant property to use his land, with such necessity "existing both at the time of the severance of the title and at the time of the exercise of the easement." Graff, 673 A.2d at 1032 (quoting 11 Am.Jur. Proof of Facts 3d 601, Way of Necessity § 3.) In this case, it appears[4] that these elements are satisfied with respect to the Property and the property of Mt. Laurel Park.
With respect to the first element, the deeds conveying the parcels composing the Property from Mt. Laurel Park to Brenners and Joseph Brenner[5] indicate that *167 the Property was once held by Mt. Laurel Park. (Indenture, October 31, 1991, at 1, R.R. at 56a; Indenture, December 26, 1990, at 1, R.R. at 58a.) Likewise, with respect to the second prong, these deeds make clear that they sever title between the Property and Mt. Laurel Park's remaining property. With regard to the third prong, there is no dispute that the Property is currently landlocked and without access to a public road or highway; therefore, necessity currently exists for an easement by necessity over Mt. Laurel Park's lands. Brenners make no argument that such necessity did not exist at the time the Property was conveyed. Therefore, it appears that there may be an easement by necessity available to Brenners over Mt. Laurel Park's property.
Brenners argue that:
[w]hile the Brenners may have the right to seek and obtain by judicial means, an easement by necessity somewhere over the common parcel [owned or previously owned by Mt. Laurel Park], they do not currently have one in place, and there is no way to know that even if Brenners would petition the [trial court] for such an easement, it would be granted.
(Brenners' Br. at 6.) While it is true that an easement by necessity has not been judicially declared, it does appear, as noted above, that Brenners would likely be successful if they sought one. There is no dispute that Brenners made no attempt to secure such an easement before seeking to proceed under the Act. As in Graff, the issue of whether an easement by necessity may exist, even if not yet judicially established, is relevant to the issue of whether a private road is strictly necessary. Graff, 673 A.2d at 1033. Therefore, we hold that the Board did not err in considering whether the possible easement of necessity rendered the proposed private road over Perchaks' land not strictly necessary.
Because the private road requested by Brenners may not be strictly necessary, we hold that the Board did not err in denying Brenners' Petition. This Court, therefore, reverses the Order of the trial court.[6]
ORDER
NOW, January 27, 2012, the Order of the Court of Common Pleas of Luzerne County in the above-captioned matter is hereby REVERSED.
NOTES
[1] This Court granted Neighbors permission to appeal by Order dated April 1, 2011, pursuant to Neighbors. Petition for Permission to Appeal filed with this Court on March 1, 2011.
[2] Act of June 13, 1836, P.L. 551, as amended, 36 P.S. §§ 2731-2891.
[3] This Court's review of the Board's decision "is limited to ascertaining the validity of the Board's jurisdiction, the regularity of proceedings, questions of law and whether the Board abused its discretion." In re Packard, 926 A.2d 557, 559 n. 2 (Pa.Cmwlth.2007).
[4] The issue of whether there is, in fact and as a matter of law, an easement by necessity over the property of Mt. Laurel Park is not before this Court. Mt. Laurel Park is not a party to this action.
[5] Joseph Brenner conveyed his interest in the Property to Brenners by deed dated September 1, 1993. (Deed, September 1, 1993, R.R. at 62a.)
[6] Due to our holding on this issue, we do not reach the issue of whether Brenners would have been entitled to a private road that would allow the highest and best use of the Property. We would note that, as discussed above, strict necessity is the key to obtaining the opening of a private road under the Act. Speers, 608 Pa. at 308, 11 A.3d at 906. Courts have held that access to a property may be so adequate as to negate strict necessity, even if that access is not ideal or least costly. See, e.g., Speers (holding that the Monongahela River might be adequate access to a property zoned for heavy industry); Soska (holding that a driveway granting access to a residential property provided adequate access despite being steeply graded in places and difficult to traverse). The Schumacher Report only discusses the right-of-way necessary to construct a road for a mixed commercial/retail development. Brenners presented no evidence to the Board regarding what sort of access might be adequate for a less intense use of the Property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919559/ | 225 N.J. Super. 1 (1988)
541 A.2d 700
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
EDWARD DAVIDSON, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued February 8, 1988.
Decided May 5, 1988.
*4 Before Judges J.H. COLEMAN and STERN.
Andrew M. Epstein, Springfield, argued the cause for appellant (Epstein, Epstein, Brown & Bosek, attorneys; Andrew M. Epstein on the brief).
Janet Flanagan, Deputy Attorney General, argued the cause for respondent (W. Cary Edwards, Attorney General of New Jersey, attorney for respondent (Janet Flanagan, of counsel and on the brief).
The opinion of the court was delivered by STERN, J.A.D.
Defendant was indicted for fourth-degree criminal mischief, N.J.S.A. 2C:17-3a(1) (count one), third-degree putting others in fear of bodily violence, N.J.S.A. 2C:33-10 (count two), and fourth-degree causing damage to property, N.J.S.A. 2C:33-11 (count three). After his motion for a non-jury trial was denied, defendant was convicted by a jury on all counts. His motion for judgment of acquittal or new trial was denied, and defendant was sentenced on counts two and three to concurrent terms of five years probation. As a condition of his probation, defendant was directed to serve 364 days in jail, to perform 200 hours of community service "removing graffiti," as assigned by the probation department, to make restitution to the victims in the amount of $1,200, and to pay a $1,000 fine. Count one was merged into count three. Separate penalties were imposed for the benefit of the Violent Crimes Compensation Board.
On this appeal, defendant argues:
POINT I THE JUDGMENT OF CONVICTION SHOULD BE REVERSED BECAUSE OF THE LOWER COURT'S ERROR IN NOT GRANTING DEFENDANT'S APPLICATION FOR A NON-JURY TRIAL.
*5 POINT II THE JUDGMENT OF CONVICTION SHOULD BE REVERSED BECAUSE OF THE LOWER COURT'S ERROR IN ALLOWING INTO EVIDENCE LISA KOGER'S TESTIMONY THAT DEFENDANT ADMITTED POURING RICE INTO THE PIERRES' GAS TANKS.
POINT III THE JUDGMENT OF CONVICTION SHOULD BE REVERSED BECAUSE OF THE LOWER COURT'S ERROR IN PERMITTING THE STATE TO CROSS-EXAMINE DEFENDANT AND DEFENSE WITNESS NELSON ABOUT RACIALLY DISPARAGING REMARKS MADE BY DEFENDANT.
POINT IV THE JUDGMENT OF CONVICTION SHOULD BE REVERSED BECAUSE OF THE IMPROPER AND INFLAMMATORY REFERENCE BY THE STATE IN SUMMATION TO DEFENDANT'S PRIOR RACIALLY DEROGATORY EXPRESSIONS.
POINT V THE LOWER COURT ERRED IN NOT GRANTING DEFENDANT'S MOTION FOR JUDGMENT OF ACQUITTAL OR FOR A NEW TRIAL.
POINT VI THE LOWER COURT ABUSED ITS DISCRETION IN IMPOSING A PRISON TERM ON DEFENDANT AS A CONDITION OF PROBATION, AND THIS COURT SHOULD CORRECT THAT ERROR BY DELETING THE PROVISION FOR IMPRISONMENT FROM DEFENDANT'S SENTENCE.
Our careful review of the record convinces us that, except as noted below, these contentions are clearly without merit and do not warrant extended discussion. R. 2:11-3(e)(2).
A.
In January 1983 the Pierre family Jean, Marie and their seven-year-old daughter who are black, bought and moved into a house in a predominately white neighborhood in Maplewood. In July someone poured rice or sugar into the gas tanks of the Pierres' two cars. A month later, during the night of August 12, 1983, someone spray-painted graffiti in large red letters (about three feet in size) on the Pierres' white house. Jean Pierre recalled observing the phrase "Move Out Soon House For Sale Cheap." Marie Pierre recalled seeing the phrases "Back to East Orange, Move Out, Nigger" and "Moving Soon, For Sale Cheap."
The police officer who responded to the scene of the spray-painted Pierre house, Officer Peter DeCicco, noted in his report that there were words painted on three sides of the house, *6 including "For Sale Cheap, Moving Soon." He considered them to be racial slurs.
The Pierres were afraid and terrified, and considered themselves "in danger." They considered the act to constitute a racial threat. Eventually, the Pierres moved out because they never felt safe in their home again.
In response to the incident, the Pierres called a painter, Ted Duda, who painted primer over the spray paint. Duda recalled the words "Moving Soon" and observed graffiti on three sides of the house. Despite Duda's efforts, the words still showed through. The Pierres therefore called another painter, James Osmun, to paint the house. Osmun characterized the graffiti as containing "racial slurs," including "Move Out," "Nigger," "KKK," "House for Sale, Moving Soon," and "Back to East Orange."
During the night of September 2, 1983 or early morning of September 3, 1983, the Pierre house was spray-painted a second time in similar fashion and with similar phrases.
Lisa Koger, defendant's friend and neighbor for about 13 years, testified for the State. Ms. Koger lived three houses away from defendant on the same street as the Pierres. Koger testified that while the spray-painted words were still visible, she participated in a friendly game of nerf touch football in the street not far from the Pierre house. During the game, defendant pointed to the house and asked, "Do you see that?" According to Koger, when she answered "[Y]es," defendant said, "I did that" and laughed. Koger recalled seeing only two of the three sides of the house spray-painted and the words, "House For Sale Cheap" and "Moving Soon."
Koger also testified that, about a month before the spray-painting incident, she was walking down Midland Boulevard with defendant when he told her to stop and wait for him. She watched defendant walk down the Pierres' driveway. Defendant came back out of the driveway running and told Koger to *7 run, too. A couple of days later defendant told Koger he had put rice in their cars' gas tanks.
Another of defendant's friends, Catherine Ann Zuzoro, also testified that, during the nerf touch football game in the street, defendant pointed to the Pierres' house and bragged to her that he "did that the other night." On her way home that day Ms. Zuzoro walked by the house for a closer look and saw that the graffiti was being painted over. However, she was able to see the letters "KKK" on the right side of the house.
Defendant testified. He denied putting any foreign substance in the gas tanks of the Pierres' cars or spray-painting their house. He denied telling Koger or Zuzoro that he put rice in the tanks or that he spray-painted the house. He could not recall his specific whereabouts on the evening of August 12. He denied playing football in the street on August 13 or 14, saying that on the 13th he had visited his grandmother with his parents and that on the 14th he and two friends left for the shore at about 2:00 p.m. Defendant claimed to have been home on the night of September 2, packing the car to leave for college the next morning. He could not explain why Zuzoro and Koger would lie about him and claimed that he did not see Ms. Koger much that summer because she was pregnant and was "hiding from us."
Defendant's parents recalled that defendant was at home during the nights of August 12 and September 2, and that defendant went with them to visit his grandmother on August 13, 1983.
Defendant was indicted for the events related to the spray painting and graffiti on the Pierre residence "on or about August 12, 1983."
B.
Defendant contends that the trial judge erred in denying his pretrial motion for a non-jury trial. Defendant sought a non-jury trial because he believed that a jury could not separate *8 the "emotional issue" of racial bigotry from the factual issues relating to defendant's guilt or innocence. Defendant argued that he could not obtain a fair jury trial.[1] The assistant prosecutor opposed defendant's motion, arguing that the controversial nature of this racial terrorism case demanded that the factual findings be made by a jury. In a letter opinion, the trial judge denied defendant's request for a non-jury trial. She was confident that a jury could "render a just and fair verdict without being prejudiced or swayed by extraneous matters," and thus refused to deny defendant the "fairest mode [of trial] possible" "a jury of one's peers." Moreover, the judge observed that if the verdict ultimately appeared to be the product of passion and prejudice, she could set it aside pursuant to the court rules.
R. 1:8-1(a) provides in pertinent part:
Criminal actions required to be tried by a jury shall be so tried unless the defendant, in writing and with the approval of the court, after notice to the prosecuting attorney and his opportunity to be heard, waives a jury trial.
An accused charged with a crime has a constitutional right to a jury trial. Singer v. United States, 380 U.S. 24, 35-36, 85 S.Ct. 783, 790-91, 13 L.Ed.2d 630 (1965); Patton v. United States, 281 U.S. 276, 312, 50 S.Ct. 253, 263, 74 L.Ed. 854 (1930); U.S. Const., Amend. VI; N.J. Const. (1947), Art. I, par. 9, 10; N.J.S.A. 2C:1-4a. There is no correlative constitutional right to trial by a judge alone. Singer v. United States, supra, 380 U.S. at 26, 35, 85 S.Ct. at 785, 790, 13 L.Ed.2d at 633, 638. Thus, there is no constitutional infirmity in denying a defendant's request to waive trial by jury. Singer v. United States, supra, 380 U.S. at 36, 85 S.Ct. at 790-91, 13 L.Ed.2d at 638; State v. Belton, 60 N.J. 103, 110 (1972) (capital case). Whether *9 to permit waiver of the right to jury trial must be decided by the trial judge by the exercise of:
sound and advised discretion, with an eye to avoid unreasonable or undue departures from the mode of trial or from any of the essential elements thereof, and with a caution increasing in degree as the offenses dealt with increase in gravity. [Patton v. United States, supra, 281 U.S. at 312-313, 50 S.Ct. at 263, 74 L.Ed. at 870].
Thus the discretion related to the required "approval" of the waiver must be exercised after an evaluation of the totality of circumstances, including recognition of the fact that jury trials are, as the trial judge here stated, "the preferred mode of fact-finding in criminal cases." See Singer v. United States, supra, 380 U.S. at 38, 85 S.Ct. at 791, 13 L.Ed.2d at 638; see also Patton v. United States, supra, 281 U.S. at 312, 50 S.Ct. at 263, 74 L.Ed. at 870; State v. Belton, supra, 60 N.J. at 110.
It may be, as defendant suggests, that by its very nature, a trial on charges of racial violence will be highly emotional. But our courts have consistently held that there are mechanisms, such as thorough voir dire, for assuring that a juror can be fair and impartial and able to decide the case based exclusively on the evidence against the defendant in the particular case involved. Most recently our Supreme Court made clear that a penetrating voir dire might be required when "racial overtones" are involved. See State v. Ramseur, 106 N.J. 123, 246 (1987). There, the court recognized that, as a matter of federal constitutional law, such questions are not required except in a capital case involving an interracial crime. See 106 N.J. at 245. See also Turner v. Murray, 476 U.S. 28, 106 S.Ct. 1683, 90 L.Ed.2d 27 (1986). However, the court, speaking through Chief Justice Wilentz, noted that there could be cases, unlike Ramseur, in which there would be "convincing justification ... requiring a more specific voir dire dealing with racial bias under state law." 106 N.J. at 246. The court quoted, with approval, from State v. Long, 137 N.J. Super. 124 (App.Div. 1975), certif. den. 70 N.J. 143 (1976):
*10 [w]here a defendant does request a voir dire inquiry as to potential prejudice because of color or other physical characteristics, it is better practice for a judge to accede to the request and pose simple and direct questions pointed to the specific element of prejudice involved. [137 N.J. Super. at 131].
As also stated by the Supreme Court in State v. Williams, 93 N.J. 39, 68-69 (1983):
Another important, indeed critical, means for dealing with potential and latent bias is the voir dire. The court should consider the efficacy of more exhaustive and searching voir dire examinations. The court in conducting the voir dire should be particularly responsive to the requests of counsel regarding the examination of prospective jurors as to potential bias. The court should consider whether there should be a greater willingness to resolve doubts in favor of the defendant in excusing jurors for cause. Particularly in capital cases, trial judges should exercise extraordinary care in the voir dire of potential jurors. [93 N.J. at 68-69 (footnotes omitted)].
The same principle should apply in a case like this where defendant is expressly charged with violating N.J.S.A. 2C:33-10 and 2C:33-11, which proscribes ethnic terrorism.
Defendant challenges the denial of his motion for a bench trial. But he does not attack the jury selection process, claim that the voir dire was inadequate or point to any fact to support the assertion that he was actually denied a fair trial before an impartial jury. In fact, defendant has not produced a transcript of the jury selection process, and he endeavored to make no record reflecting the composition of the jury as empaneled. In any event, we cannot find that the trial judge abused her discretion in not "approving" defendant's request to waive his right to a jury trial. Moreover, we are more than satisfied that the jury rendered its verdict based on the evidence, and not on collateral or extraneous matters not apparent or developed on the record.
C.
At the conclusion of an Evid.R. 8 hearing, the trial judge held that the State could admit evidence to show that, approximately a month before the spray-painting incident, defendant had poured rice or sugar into the gas tanks of the Pierres' two cars. The judge ruled that the evidence was admissible pursuant *11 to Evid.R. 55 to show defendant's intent and state of mind, a fact she deemed to be in issue. Furthermore, the judge rejected its exclusion under Evid.R. 4.
At the Evid.R. 8 hearing, Marie Pierre testified that, on the morning of July 12, 1983, she, her husband and daughter were driving to the shore and stopped at a gas station to get gas. The gas station attendant told them that someone had put sugar in their tank, pointing out to them the presence of sugar around the tank opening, on the cap and down the side of the car. When the Pierres returned home that evening they saw someone had also poured a substance in the gas tank of their other car. The police were called, and the incident was reported.
Defendant's friend, Lisa Koger, also testified at the Evid.R. 8 hearing. As she subsequently noted at trial, Koger testified that she and defendant were walking by the Pierre house one night when suddenly defendant told her, "Wait here," while he entered their driveway. Koger could not see what defendant did, but a short while later, defendant exited the driveway and told Koger to "run." Two days later, defendant told Koger that he had put rice in the Pierres' gas tank.
Defendant testified at the hearing as well. He denied pouring sugar, rice or any foreign substance into the Pierres' gas tanks, or telling Koger that he had done so. However, he could not recall where he was on the evening in question. He could not explain why Koger would lie about his involvement, other than to say, "[s]he has a history of doing this."
Before us defendant complains that the State failed to provide "clear and convincing evidence that defendant had committed the gas tank caper." However, the trial judge found "clear and convincing proof" based on Ms. Koger's testimony that the prior incident occurred and that it was admissible and relevant to "his intent and state of mind." We agree.
Defendant next complains that this "`other crimes' evidence" was not relevant to a fact in issue. Specifically, defendant *12 argues that there was no proof that the other crime evidence was related to "the racially motivated spray-painting act which produced the indictment."
However, as the trial judge concluded (and as she expressly instructed the jury at the time of admission and in her general instructions), this other crime evidence had some bearing on defendant's motive, intent, plan and state of mind, and was admissible only on that basis. N.J.S.A. 2C:33-10 requires the State to prove, beyond a reasonable doubt, that defendant acted "purposely, knowingly or recklessly," and N.J.S.A. 2C:33-11 requires purposeful conduct.[2] In prosecuting defendant under N.J.S.A. 2C:33-10, the State obligated to prove, as alleged in the indictment, that defendant acted "purposely, knowingly or recklessly" to put the Pierres in fear of bodily violence, by placing graffiti on their house, which graffiti exposed the family to threats of violence, contempt or hatred because of their race or color. N.J.S.A. 2C:33-10. The prosecution under N.J.S.A. 2C:33-11 required the State to prove that defendant purposely defaced or damaged their property "by placing thereon graffiti that exposed [them] to threat of violence, contempt *13 or hatred on the basis of race [or] color." N.J.S.A. 2C:33-11. Clearly, evidence that defendant, just a month before, had damaged the Pierres' property in another way, by putting a substance in their cars' gas tanks, tended to show that defendant had targeted the Pierres as victims of a campaign of terror. State v. Kent, 173 N.J. Super. 215, 220 (App.Div. 1980).
D.
Defendant contends that the trial judge committed reversible error in allowing the assistant prosecutor, over objection, to cross-examine defendant and defense witness Nelson concerning certain statements uttered by defendant about blacks. Specifically, on cross-examination the prosecutor asked defendant, "[A]re you prejudiced against black people?" When defendant answered in the negative, the prosecutor questioned whether he had ever spoken or written about black people in a derogatory manner. Defendant admitted that he had, but "[i]n a joking fashion, with [his] friends." The prosecutor elicited admissions from defendant that he had referred to blacks as "niggers," "spear chuckers" and "jigaboos," and that he had drawn pictures of a burning cross and hooded "KKK" people bearing the letters "KKK." Defendant insisted that he made these statements as jokes for his friends.[3]
The following day, the prosecutor was permitted, again over objection, to cross-examine defense witness Nelson about two statements he had made to F.B.I. agents regarding certain statements by defendant about black people. Nelson had told the F.B.I. that defendant had complained to him about "niggers moving into the area and causing property values to go down" *14 and "niggers hav[ing] no [car] insurance." Nelson, too, maintained that defendant was only joking and was not "malicious."
On appeal defendant complains that this testimony constituted "bad character" evidence that was inadmissible under Evid. R. 47. However, in denying defendant's motion for new trial, the judge stated that she had deemed the testimony relevant to defendant's state of mind which was an element the state had to prove. The judge was persuaded that an accused's state of mind towards blacks was an issue implicated under N.J.S.A. 2C:33-10 and -11, crimes that require a specific intent to threaten harm against another because of his race. We conclude, given the specific charges before the court, that the evidence was admissible and that the judge did not abuse her discretion in permitting it. In the absence of any specific issue addressed thereto, we do not comment on the need for limiting instructions to be given in this type of situation. We see no basis for reversal.
Defendant also argues, as he did before the trial judge, that the prosecutor's summation exceeded the bounds of fair play and appealed to the prejudice of the jurors. Specifically, defendant complains that the prosecutor's references to defendant's "racially derogatory statements" towards black people were improper and caused the jury to convict defendant because he was a "bigot," a term used by the prosecutor referring to the evidence, rather than because he was guilty of the crimes charged. This claim, rejected by the judge on timely objection, has no merit.
The prosecutor's references to defendant's derogatory remarks and statements about blacks constituted permissible comment on the evidence. See State v. Farrell, 61 N.J. 99, 102 (1972). Defendant had admitted making these remarks and statements. Defense counsel, in his summation, had referred to defendant's derogatory remarks about blacks in an effort to minimize their impact and to point out that defendant credibly admitted saying these things while denying the acts charged. Beyond this, the prosecutor did not urge the jury to convict *15 defendant because he was a bigot; rather, he argued that the State produced sufficient proof of the requisite state of mind or actual intent to harm the Pierres because of his race. While personal attitudes about race generally have no place in the courtroom and comments regarding them should generally be prohibited, the defendant's purpose or intent was relevant to the elements charged in this case.[4]
E.
Defendant contends that his sentence, particularly the 364-day county-jail term, is "so unreasonable as to be shocking."
Defendant was sentenced for a third-degree and a fourth-degree crime. Because he had no prior convictions, a presumption of non-imprisonment applied. N.J.S.A. 2C:44-1e. However, the trial judge found that the presumption was "overcome by the facts of this case" and determined that imprisonment was necessary for the protection of the public. In State v. Hartye, 105 N.J. 411 (1987), decided after defendant's sentencing, the Supreme Court held that the presumption need not be overcome to sentence a first offender to jail as a condition of probation and that where the presumption against imprisonment is overcome, "a defendant's sentence must fall within the presumptive range" for the offense, in this case three to five years for the third degree crime. Id. at 420.
It may well be that the trial judge believed at the time that the presumption against imprisonment had to be overcome in order to impose the custodial aspect of probation. At the time of sentencing in this case, there was authority for that proposition. See State v. Gardner, 215 N.J. Super. 84, 92-93 (App.Div. 1987), certif. granted, 108 N.J. 213 (1987); State v. Hess, 198 N.J. Super. 322 (App.Div. 1984); but see State v. *16 Hartye, 208 N.J. Super. 319 (App.Div. 1986), aff'd 105 N.J. 411 (1987); cf. State v. Whidby, 204 N.J. Super. 312 (App.Div. 1985). We need not speculate as to whether the trial judge would have found the presumption overcome if she realized that the custodial aspect of probation could have been imposed without doing so. In any event, the State cannot appeal from a lenient (but lawful) sentence imposed on a third or fourth degree crime, and the State has neither appealed the sentence nor argued that it is "illegal," notwithstanding that the presumption was overcome.[5]
Finally, while the presumption against imprisonment exists notwithstanding that deterrence is a statutory aggravating factor, N.J.S.A. 2C:44-1a(9) which may be applicable in most cases, a case involving racial or ethnic violence may today involve a particular need for general deterrence.
Affirmed.
NOTES
[1] Defendant's concern about the admissibility of a "highly inflamatory" letter "seized from the defendant's dormitory room which included derogatory statements about Blacks and Jews" was mooted by the judge's ruling before trial that the letter was inadmissible. She stated, among other things, "[i]t is inflammatory, and there is a great potential for prejudice that would deprive this defendant of a fair trial."
[2] N.J.S.A. 2C:33-10 reads:
A person is guilty of [a] crime of the third degree if he purposely, knowingly or recklessly puts or attempts to put another in fear of bodily violence by placing on public or private property a symbol, an object, a characterization, an appellation or graffiti that exposes another to threats of violence, contempt or hatred on the basis of race, color, creed or religion, including, but not limited to a burning cross or Nazi swastika. A person shall not be guilty of an attempt unless his actions cause a serious and imminent likelihood of causing fear of unlawful bodily violence.
N.J.S.A. 2C:33-11 reads:
A person is guilty of a crime of the fourth degree if he purposely defaces or damages, without authorization of the owner or tenant, any private premises or property primarily used for religious, educational, residential, memorial, charitable, or cemetery purposes, or for assembly by persons of a particular race, color, creed or religion by placing thereon a symbol, an object, a characterization, an appellation, or graffiti that exposes another to threat of violence, contempt or hatred on the basis of race, color, creed or religion, including, but not limited to, a burning cross or Nazi swastika.
[3] Following this testimony, the prosecutor sought to admit into evidence a letter that defendant had written and that apparently contained severely derogatory comments about blacks and other ethnic groups. The prosecutor argued it was admissible as a prior inconsistent statement. The trial judge had previously ruled that this letter was inadmissible. See fn. 1, supra. The judge maintained that ruling and refused to allow the prosecutor to admit the letter as a prior inconsistent statement.
[4] We do not approve of some of the prosecutor's comments directed to American values and patriotism, but we find that no comment individually or in the aggregate warrants reversal.
[5] This opinion should not be interpreted as suggesting that the sentence is illegal. See State v. Hartye, supra; State v. Gardner, supra, now on appeal to the Supreme Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919572/ | 312 Md. 560 (1988)
541 A.2d 637
SIGISMUND NATHANIEL SANGSTER
v.
STATE OF MARYLAND.
No. 70, September Term, 1987.
Court of Appeals of Maryland.
May 27, 1988.
Arthur A. DeLano, Jr., Asst. Public Defender (Alan H. Murrell, Public Defender, on the brief), Baltimore, for appellant.
Richard B. Rosenblatt, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for appellee.
Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.
RODOWSKY, Judge.
This case involves the procedure by which a trial court determines the competency of an accused to stand trial. The issue is whether a trial judge may, over objection by the accused, consider in written report form the opinions as to the accused's competency expressed by psychiatrists who examined the accused pursuant to Md.Code (1982, 1987 Cum.Supp.), § 12-104 of the Health-General Article (H-G). At the pretrial competency hearing in the instant matter the petitioner presented expert testimony that he was not competent to be tried. Under these circumstances the petitioner contends that H-G § 12-103(a) and constitutional procedural due process each bar trial court consideration of the written reports unless the State also produces the opining physicians in person as witnesses subject to cross-examination.
In May of 1985 a team of Prince George's County police officers executed a search warrant for marijuana at an apartment occupied by the petitioner, Sigismund Nathaniel Sangster (Sangster), who barricaded himself in the apartment's rear bedroom. Through the closed bedroom door Sangster fired shots which wounded two of the officers. The police responded by shooting through the door, thereby wounding Sangster. After approximately five hours Sangster emerged from the bedroom, was disarmed and taken into custody.
He was indicted on twenty-one counts, including four counts of assault with intent to murder. Defense counsel moved for a determination of whether Sangster was incompetent to stand trial.[1] Sangster also, through counsel, pleaded that when the alleged crimes were committed he was not criminally responsible by reason of insanity.[2] The circuit court ordered that Sangster be sent to Clifton T. Perkins Hospital Center (Perkins) for competency and responsibility determinations. Sangster was admitted to Perkins on January 23, 1986. According to a forensic conference note dictated February 3, 1986, each of four psychiatrists concluded that Sangster was competent and responsible. That forensic conference note, signed by one of the participating staff psychiatrists, was sent under cover of a letter dated February 4, 1986, signed by the Superintendent of Perkins and by that same staff psychiatrist, to the circuit judge who had ordered the examination. The letter and conference note were filed on February 19, 1986, in the court clerk's file of original papers in this case.[3]
The trial on the merits of this case was set for February 24, 1986. Prior to that morning's proceedings on the record defense counsel had advised the court that he intended to produce expert testimony as to Sangster's incompetency. On the morning of trial a competency hearing was held at which a psychiatrist called by Sangster testified that the accused was incompetent. Sangster then took the stand and testified on direct and cross-examination.
After the defense indicated that it had no further witnesses, the court asked the State if it had any witnesses. Thereupon the following exchange occurred which comprises the ruling under review in this appeal:
[STATE'S ATTORNEY]: No, Your Honor, I don't have.
If you have a copy of the report from Clifton T. Perkins
THE COURT: I have it. It says that they are unanimously convinced that he understands the nature and the object of these proceedings, and he's able to assist in his own defense.
MR. SLATKIN: Your Honor, I'm going to object to the Court's notice and reading of their evaluation. All we have is a one or two page conclusionary statement made by the doctors with no basis in facts. I certainly believe that an opportunity to cross-examine their conclusions is more than warranted in this case.
THE COURT: All right. Anything else?
MR. SLATKIN: No, sir.
THE COURT: I'm convinced beyond a reasonable doubt that he does understand the nature and the object of these proceedings. And I and he's able to assist in his own defense.
In a jury trial Sangster was found guilty on a number of the charges against him and was also found to be responsible. The various consecutive sentences imposed on Sangster total 111 years.
The Court of Special Appeals affirmed. Sangster v. State, 70 Md. App. 456, 521 A.2d 811 (1987). On that appeal Sangster contended that the trial court had violated the mandate of H-G § 12-103(a) which provides:
(a) Hearing. If, before or during a trial, the defendant in a criminal case appears to the court to be incompetent to stand trial or the defendant alleges incompetence to stand trial, the court shall determine, on evidence presented on the record, whether the defendant is incompetent to stand trial.[[4]]
Sangster's point was that the report was not "evidence presented on the record." Sangster further argued that, under Jones v. State, 280 Md. 282, 372 A.2d 1064 (1977), the report from Perkins could not be considered by the trial judge in making his determination.[5] Absent that foundation, he contended, the finding of competency was not supported by sufficient evidence.[6]
The Court of Special Appeals viewed Sangster's argument as claiming a denial of the right of confrontation and held that that right did not attach because a competency hearing "is not a prosecutorial proceeding as contemplated by the State and Federal constitutions." 70 Md. App. at 469, 521 A.2d at 817. That court further held that, even if the right to confrontation had attached
appellant did not act to preserve those rights. If appellant wanted to cross-examine the physicians concerning the opinions they expressed in the hospital report, he should have called them as witnesses. Having failed to do so, he waived his right to cross-examine them at the competency hearing. [Id. at 470, 521 A.2d at 817-18.]
Sangster petitioned for certiorari which we issued. The petition presents the single question: "Did the trial judge fail to determine competency upon evidence presented on the record?" In his petition, in his brief and at oral argument Sangster eschews relying on a constitutional right of confrontation but he does submit that due process gave him a right to confront and cross-examine the physicians from Perkins.
In light of the way in which the objection arose at the competency hearing, the issue before us is a narrow one. Sangster objected to consideration of the content of the report from Perkins without an opportunity for the accused to cross-examine the opining experts. Consequently, the issue is whether the State is obliged to have the examining physicians available at a competency hearing in order to satisfy either a statutory or constitutional predicate for the court's use of the report in evaluating and ruling on competency. We shall consider the nonconstitutional issue first.
I
Determining the meaning of "evidence presented on the record" in H-G § 12-103(a) requires consideration, in addition, of H-G § 12-104 which deals with the examination as to competence. The latter section, in relevant part, provides:
(a) Examination authorized. (1) For good cause and after giving the defendant an opportunity to be heard, the court may order the Department [of Health and Mental Hygiene] to examine the defendant to determine whether the defendant is incompetent to stand trial.
(2) The court shall set and may change the conditions under which the examination is to be made.
....
(d) Report on examination. (1) If a court orders an examination under this section, the Department shall:
(i) Examine the defendant; and
(ii) Send a complete report of its findings:
1. To the court;
2. To the State's Attorney;
and
3. To the defense counsel.
(2) Unless there is a plea that the defendant was not criminally responsible under § 12-108 of this title, the defendant is entitled to have the report within 7 days after the court orders the examination. However, failure of the Department to send the complete report within that time is not, of itself, grounds for dismissal of the charges. On good cause shown, the court may extend the time for examination.
(3) If the Department reports that, in its opinion, the defendant is incompetent to stand trial, the report shall state, in a complete supplementary opinion, whether, because of mental retardation or mental disorder, the defendant would be a danger to self or the person or property of another, if released.
The General Assembly by statute can modify the common law hearsay rule and permit the introduction at competency proceedings of reports from the Department without requiring a testimonial foundation similar to that required for business records. If the court orders an examination by the Department, the Department sends the report directly to the court which ordered the examination. Thus, authenticity and reliability are as well ensured as in the admissibility of business records. Cf. Md.Code (1974, 1984 Repl.Vol.), § 10-101 of the Courts and Judicial Proceedings Article.
The obvious purpose of the statutory scheme is to make available to a requesting court the expertise of the Department. The statute directs that the findings resulting from the application of that expertise are to be embodied in a report. To achieve the legislative purpose the court must read the report.
Further, H-G § 12-104(d) requires that the Department submit the report concerning competency to (1) the court, (2) the State's Attorney and (3) the defense counsel. That was done in this case. Thus the statute itself ensures that the arbiter and the adversaries are equally informed of the report's content. In this way the statute makes the report "evidence on the record" for consideration at the competency hearing to the same extent as if the report were formally offered and marked as an exhibit at the hearing.[7]
That the report, as a report, is "evidence on the record" is supported by decisions of the Court of Special Appeals under predecessor statutes. To demonstrate the pertinency of those decisions requires that we trace the history of the current statutory provision.
Present H-G § 12-103 is part of a revision of Title 12 of the Health-General Article resulting from the work of The Governor's Task Force to Review the Defense of Insanity. That revision was enacted by Ch. 501 of the Acts of 1984. The task force comment to § 12-103 reflects that it replaces Md.Code (1982), H-G § 12-102 without substantive change.
Code (1982), H-G § 12-102(a), which likewise spoke of "evidence presented on the record," was part of the new Health-General Article enacted by Ch. 21 of the Acts of 1982. The Revisor's Note to Code (1982), H-G § 12-102 states that "[t]his section is new language derived without substantive change from the first, eighth, and ninth sentences of former Article 59, § 23." That note also advises that "[i]n subsections (a) and (b) of this section, the former references to `testimony' are deleted as unnecessary in light of the broad references to `evidence'."
Former Art. 59, § 23 in relevant part provided:
Whenever prior to or during the trial, any person charged with the commission of any crime shall appear to the court, or be alleged to be incompetent to stand trial, by the defendant himself, the court shall determine upon testimony and evidence presented on the record whether such person is [incompetent]. .. . Whenever any defendant shall be referred to the Department of Mental Hygiene for an examination of his competency to stand trial under this section, he shall be examined and a full and complete report of findings shall be forwarded to the court having jurisdiction over the defendant, to the State's attorney and to counsel for the defendant within the time specified ... below. If the court after receiving testimony and evidence determines that the defendant is competent ... the trial shall commence as soon as practicable or, if already commenced, shall continue. [Md.Code (1957, 1979 Repl.Vol.), Art. 59, § 23.]
The above-quoted language was enacted by Ch. 709 of the Acts of 1967 which substantially revised provisions of Art. 59 when it was entitled "Lunatics and Insane."
Colbert v. State, 18 Md. App. 632, 308 A.2d 726, cert. denied, 269 Md. 756 (1973) involved a competency issue which arose under the procedure enacted in 1967. Psychiatrists at Perkins had reported the accused to be competent. Before trial began defense counsel filed two motions, one asking for an "independent" psychiatric examination and the other asking the court to conduct a hearing to ascertain competency. 18 Md. App. at 636-37, 308 A.2d at 729. These motions were supported by the report of an evaluation of the accused done by two Ph.D. psychologists. The trial court considered the written reports from Perkins and from the defense psychologists and denied both motions. The Court of Special Appeals affirmed. In answer to a contention that there had been no "hearing" on competency, that court said:
The statute requires that the determination be made "upon testimony and evidence presented on the record", but it does not require that such testimony and evidence be presented in a separate hearing, as appellant contends. We said in Strawderman [v. State, 4 Md. App. 689, 695, 244 A.2d 888, 891 (1968), cert. denied, 252 Md. 733 (1969)], "Of course, in a jury trial, evidence with regard to it should be received out of the presence of the jury", but we did not say, nor do we now say, that a judge with no jury present is required to use any magic words to designate as a separate hearing the presentation to him of testimony and evidence for his determination of the competency of the accused to stand trial. It is sufficient if the testimony and evidence are on the record. [Id. at 640-41, 308 A.2d at 731.]
In Rozzell v. State, 5 Md. App. 167, 174, 245 A.2d 917, 920-21 (1968), cert. denied, 252 Md. 732 (1969), the Court of Special Appeals, after stating that the trial court had followed the statutory procedure, reviewed in detail the procedure utilized in that case. It included consideration of the report, as such, of the chief clinical psychologist at Perkins who had examined the accused. In Rozzell, however, the Perkins psychiatrist who had examined the defendant was produced by the State and testified about competency. 5 Md. App. at 174-75, 295 A.2d at 921.
Inasmuch as the procedure for determining competency has remained essentially unchanged since 1967, the legislative history of the 1967 enactment is also material to interpreting "evidence on the record" in present H-G § 12-103. Chapter 709 of the Acts of 1967 placed the provisions relevant here in former Art. 59, § 7. After providing for copies of the report to be forwarded to the court, to the prosecutor and to defense counsel, Ch. 709 in introductory bill form read in part:
If the court after receiving any other testimony and evidence determines that the defendant is competent to stand trial ... the trial shall commence....
In the course of passage the words "any other" were stricken. In its introductory form the bill would clearly have been read to mean that the report constituted testimony and evidence and that the court could receive any other testimony and evidence. The striking of "any other" does not alter this meaning. After providing by statute for a court ordered examination, a full and complete report of that examination and copies of the report to be furnished to the court and the parties, it is redundant to refer back to the report as evidence to be considered at a competency hearing.
The proposed revisions which resulted in Ch. 709 of the Acts of 1967 had been submitted to the Legislative Council by the then Commission on Criminal Law. See Legislative Council of Maryland, Report to the General Assembly of 1967, 135-39; State of Maryland Commission on Criminal Law, Report and Part I of Proposed Criminal Code, vi-vii (1972). Files of the reporter to the Criminal Law Commission indicate that the deletion of "any other" was intended to eliminate any implication that the receipt of a report from the Department was a condition precedent or jurisdictional prerequisite for the circuit court to proceed to trial on the merits. That implication was contrary to Hazel v. State, 226 Md. 254, 263, 173 A.2d 187, 191 (1961), cert. denied, 368 U.S. 1004, 82 S. Ct. 638, 7 L. Ed. 2d 542 (1962). Thus today, under H-G § 12-103(a), if the defendant alleges incompetency, the court "shall" determine the issue, but under H-G § 12-104 the court "may" order an examination and report.
Viewed solely from the textual standpoint, another possible interpretation of the striking of "any other" is that the deletion was intended to prevent considering the report at the hearing, absent compliance with the strict rules of evidence. This position is the precise one advocated by Sangster in the instant matter. The legislative history, however, clearly demonstrates that that position could have been adopted by the General Assembly in 1967, but was not.
The 1967 revisions to former Art. 59 were intended to eliminate the confusion in earlier statutes which had been revealed in Rowe v. State, 234 Md. 295, 199 A.2d 785, cert. denied, 379 U.S. 924, 85 S. Ct. 281, 13 L. Ed. 2d 336 (1964). In a dissent by Judge Henderson, joined by Chief Judge Brune and Judge Hammond, the General Assembly was urged to take corrective action. 234 Md. at 322-23, 199 A.2d at 801.
Responding to that request the Commission on Criminal Law and the Legislative Council considered the Model Penal Code, the Official Draft of which had been adopted by the American Law Institute on May 24, 1962. The bill proposed by the Legislative Council used the Model Penal Code tests for responsibility and competency.[8]
The standard for competency proposed in Model Penal Code § 4.04 is the standard now found in H-G § 12-101(d).[9] In § 4.05 the Model Penal Code provides for a psychiatric examination and report to the court and to counsel for the parties.
Section 4.06 of the Model Penal Code deals with the competency hearing. In relevant part it provides:
(1) When the defendant's fitness to proceed is drawn in question, the issue shall be determined by the Court. If neither the prosecuting attorney nor counsel for the defendant contests the finding of the report filed pursuant to Section 4.05, the Court may make the determination on the basis of such report. If the finding is contested, the Court shall hold a hearing on the issue. If the report is received in evidence upon such hearing, the party who contests the finding thereof shall have the right to summon and to cross-examine the psychiarists who joined in the report and to offer evidence upon the issue. [Emphasis added.]
The General Assembly chose not to adopt the procedure so clearly spelled out in the Model Penal Code. The result is that, if the court orders a report, that report, as a report, may be considered at the competency hearing as "evidence on the record" within the meaning of H-G § 12-103(a) without the person reporting being present.
II
Sangster also contends that due process guarantees him the right to exclude the Perkins report unless one, or perhaps all four, of that institution's examining physicians are made available by the State for cross-examination. The aspect of due process invoked here is the right to a fair trial. The failure of a state to observe procedures adequate to protect a defendant's right not to be tried or convicted while incompetent to stand trial deprives a defendant of due process. See Drope v. Missouri, 420 U.S. 162, 95 S. Ct. 896, 43 L. Ed. 2d 103 (1975); Pate v. Robinson, 383 U.S. 375, 86 S. Ct. 836, 15 L. Ed. 2d 815 (1966).
That the procedure employed here was adequate to protect Sangster's right not to be tried while incompetent may be demonstrated by comparison to the procedure employed in federal courts to deal with the competency issue.
By the Act of September 7, 1949, ch. 535, § 1, 63 Stat. 686 Congress enacted, inter alia, former Title 18 U.S.C. § 4244. "[T]he bill was proposed by the Judicial Conference of the United States after long study by a conspicuously able committee, followed by consultation with federal district and circuit judges." Greenwood v. United States, 350 U.S. 366, 373, 76 S. Ct. 410, 414, 100 L. Ed. 412, 418 (1956). That section in part provided that, upon a motion by the United States Attorney for a judicial determination of competency to stand trial
or upon a similar motion in behalf of the accused, or upon its own motion, the court shall cause the accused ... to be examined as to his mental condition by at least one qualified psychiatrist, who shall report to the court.... If the report of the psychiatrist indicates a state of present insanity or such mental incompetency in the accused, the court shall hold a hearing, upon due notice, at which evidence as to the mental condition of the accused may be submitted, including that of the reporting psychiatrist, and make a finding with respect thereto.
The statute did not specify the procedure to be followed when the psychiatrist reported to the court that the accused was competent.
Federal courts generally held that no hearing at all was required by 18 U.S.C. § 4244 if the accused were reported to be competent. See, e.g., United States v. Williams, 819 F.2d 605 (5th Cir.1987), cert. denied, ___ U.S. ___, 108 S. Ct. 726, 98 L. Ed. 2d 675 (1988); United States v. Percy, 765 F.2d 1199 (4th Cir.1985); United States v. Veatch, 674 F.2d 1217 (9th Cir.1981), cert. denied, 456 U.S. 946, 102 S. Ct. 2013, 72 L. Ed. 2d 469 (1982); United States v. Dunn, 594 F.2d 1367 (10th Cir.), cert. denied, 444 U.S. 852, 100 S. Ct. 106, 62 L. Ed. 2d 69 (1979); United States v. Winn, 577 F.2d 86 (9th Cir.1978); United States v. Shepard, 538 F.2d 107 (6th Cir.1976) (as to the scope of the "qualified psychiatrist" requirement); United States v. Stern, 519 F.2d 521 (9th Cir.), cert. denied, 423 U.S. 1033, 96 S. Ct. 565, 46 L. Ed. 2d 407 (1975); Cheely v. United States, 367 F.2d 547 (5th Cir.1966), cert. denied, 387 U.S. 923, 87 S. Ct. 2039, 18 L. Ed. 2d 978 (1967); United States v. Bell, 57 F.R.D. 31 (E.D.Tenn. 1972); United States v. Everett, 146 F. Supp. 54 (D.Kan. 1956). And see 1 C. Wright, Federal Practice and Procedure § 196, at 727 (1982) ("If the psychiatrist reports that the defendant is mentally competent to stand trial, no hearing is required...." (footnote omitted)). In the Veatch, Dunn, and Stern cases, supra, there were other psychiatric opinions before the court indicating that the accused was not competent to stand trial.
The federal statutes, including former § 4244, were amended by the Act of October 12, 1984, 98 Stat. 2057 et seq. Present Title 18, § 4241(a) provides that the court shall grant a motion for a hearing to determine competency "if there is reasonable cause to believe that the defendant may presently be ... incompetent[.]" The court may order a prehearing psychiatric examination. § 4241(b). The report of the examination is filed with the court and copies are provided to counsel for the person examined and to the attorney for the Government. § 4247(c). Subsection (d) of § 4247 addresses the hearing and in part provides that the person whose mental condition is the subject of the hearing "shall be afforded an opportunity to testify, to present evidence, to subpoena witnesses on his behalf, and to confront and cross-examine witnesses who appear at the hearing." [Emphasis added.]
The procedure under the 1984 federal statute was involved in United States v. Williams, supra, where the defendant's pretrial competency proceeding was governed by the old statute but a post-sentencing competency determination was governed by the new statute. At resentencing the defendant asked for a competency hearing but was denied his request. The defendant then submitted records and reports from a federal psychiatric facility to which he had been committed for evaluation to support his request for a competency hearing. The trial court read those records to reflect that the defendant either previously or presently had "mental problems" but concluded that there was no showing of reasonable cause to believe that the defendant did not understand the proceedings or was unable to assist counsel. The Fifth Circuit rejected the prisoner's post-conviction relief contention that the refusal to hold a hearing had violated procedural due process where the district court's factual finding based on the reports was not clearly erroneous.
The United States Supreme Court has also recognized, in effect, that an evidentiary hearing is not a per se due process requirement for a finding of competency. In Maggio v. Fulford, 462 U.S. 111, 103 S. Ct. 2261, 76 L. Ed. 2d 794 (1983), a Louisiana prisoner contended in a federal habeas corpus proceeding that he had been denied rights recognized in Pate v. Robinson, supra, when the trial court refused to order a state financed competency inquiry despite the opinion of incompetency expressed by a psychiatrist who had interviewed the defendant for one hour on the day before the trial date. The trial court had based its conclusion of competency on its own observations of the accused, on its rejection of the principal factual predicate for the defense psychiatrist's opinion and on its belief that the request for a competency hearing was a subterfuge to obtain a last-minute postponement. The Supreme Court held, per curiam, that the conclusions of the Louisiana trial judge were fairly supported by the record and reversed the Fifth Circuit's holding that it could not "with the certitude befitting a federal court, affirm that Fulford possessed the mental competency to participate meaningfully in his trial." Fulford v. Maggio, 692 F.2d 354, 361 (5th Cir.1982) (footnote omitted).
In the case sub judice the trial court heard the testimony of Sangster's psychiatrist. The court was able to evaluate his opinion not only in the light of Sangster's testimony and observed conduct, but also in light of the opinions expressed by the examining physicians at Perkins in their report. Sangster's counsel had been furnished a copy of the report. The defense could have subpoenaed one or more of the reporting physicians and cross-examined them concerning their conclusion that Sangster was competent. As the federal cases make plain, the fact that the trial court considered the opinions of the Perkins staff in report form does not, of itself, render the procedure inadequate to protect Sangster's right not to be tried while incompetent.
Minimum due process guarantees are "largely a function of the circumstances and the interests at stake." Ford v. Wainwright, 477 U.S. 399, 411, 106 S. Ct. 2595, 2603, 91 L. Ed. 2d 335, 347 (1986) (opinion announcing judgment). Sangster's interest in not standing trial while incompetent affects only the timing of Sangster's trial, not the question of guilt or innocence. Even if a trial judge errs in a pretrial finding of competency, the error is not beyond correction. Under H-G § 12-103(c) a court may reconsider the issue of incompetency "[a]t any time during the trial and before verdict...."
The State is interested, both as a matter of justice and of economy, in not conducting criminal trials of incompetent persons. The State also has an interest in competency determinations not being wasteful to the taxpayers. Under Sangster's contention consideration by a court of written psychiatric reports requires, as a condition precedent, that the State have the reporting experts personally present in court in all cases in which there is no prior waiver of the claimed due process right. Nothing in the present Maryland statutes prevents one in Sangster's position from subpoenaing and cross-examining the reporting experts. Constitutional due process does not require more.
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED.
COSTS TO BE PAID BY THE PETITIONER.
COLE, Judge, dissenting.
The real issue in this case is whether in a competency hearing a court may base its ultimate ruling on evidence which does not comply with the statute.
The majority opinion holds that a cursory, one page "conference note" prepared by a team of doctors from the Clifton T. Perkins Hospital Center constituted sufficient evidence on the record, in and of itself, to find the defendant competent to stand trial. Because I believe that the Perkins "report" did not meet the minimum evidentiary requirements set by statute, I dissent.
The inadequacy of this report and its failure to comply with the statute were the basis of Sangster's objection. At the hearing, his counsel stated:
Your Honor, I'm going to object to the Court's notice and reading of their evaluation. All we have is a one or two page conclusionary [sic] statement made by the doctors with no basis in facts. I certainly believe that an opportunity to cross-examine their conclusions is more than warranted in this case.
The majority is wrong in summarily dismissing the issue of whether Sangster's competency should have been determined on the basis of this particular report. The Court brushes aside this issue and focuses on whether the defense should have been allowed to cross-examine the Perkins doctors.
As I see it, the majority misses Sangster's point that the trial judge failed to determine competency upon "evidence presented on the record," as required by Md.Code (1982, 1987 Cum.Supp.) Health-General Article § 12-104.[1] Unfortunately, the Court fails to grasp the import of that section, which requires filing of a complete report following the competency examination. This was not done and, consequently, Sangster's competency determination was not based upon "evidence presented on the record."
The majority relies heavily upon cases applying former Title 18 U.S.C. § 4244 to "demonstrate[] by comparison" that Sangster's right not to be tried while incompetent was adequately protected. However, unlike Health-General § 12-104, which calls for the court to be provided a complete competency examination report, § 4244 included no such specific mandate. The majority fails to discern this crucial distinction.
Apparently desiring to avoid any substantive discussion of whether the statute has been complied with, the majority asserts in footnote three that no issue is presented as to whether the report constituted a "complete report" within the meaning of § 12-104(d). The majority's rationale suffers from internal inconsistency. On the one hand, it recognizes the importance of compliance with § 12-104 in determining what qualifies as "evidence presented on the record." On the other hand, it contends that whether the Perkins report was "complete" within the meaning of § 12-104(d) is a non-issue. I believe that such an issue is presented and that its proper resolution is central to this case.
After recognizing that compliance with § 12-104 is a prerequisite to qualifying a proffered exhibit as "evidence presented on the record," the majority contends that § 12-104(d) was complied with because the so-called report was forwarded to the trial court, the State's Attorney, and the defense counsel. The majority disregards § 12-104(d)'s requirement that the report be "complete." In my view, the Perkins report was far from a "complete report" and, consequently, § 12-104(d) was not complied with. The word "complete" is not merely adjectival but is a statutory requirement. In fact, as the legislative history makes clear, the General Assembly's intent was to require a "full and complete report."[2]
We discussed the rationale behind such a requirement in Raithel v. State, 280 Md. 291, 372 A.2d 1069 (1977). There we criticized the practice, in determining a defendant's competency to stand trial, of placing
a premium on a conclusory [psychiatric] opinion, which contributes little to the resolution of the difficult task confronting the trial judge. `To the extent that psychiatric testimony is utilized, ... it should be descriptive of the defendant's condition rather than conclusory.' (Citation omitted).
Id. at 303, 372 A.2d 1069.
The Perkins synopsis considered by the trial court at Sangster's competency hearing suffered from the same shortcoming that we disapproved in Raithel. Following a superficial description of the defendant, the report set forth as follows a series of purely conclusory "forensic opinions":
FORENSIC OPINIONS:
Dr. O'Brien: Passive-Dependent Personality Disorder. Cannabis Abuse, by history. Competent and responsible.
Dr. Mokhtari: Passive-Dependent Personality Disorder. Cannabis Abuse, by history. Competent and responsible.
Dr. Fitzpatrick: Passive-Dependent Personality Disorder. Cannabis Abuse, by history. Competent and responsible.
Dr. Rojas: Schizophrenic Disorder, Residual. Passive-Dependent Personality Disorder. Cannabis Abuse, by history. Competent and responsible.
FINAL OPINIONS: (1) Passive-Dependent Personality Disorder. (unanimous)
(2) Cannabis Abuse, by history. (unanimous)
(3) Schizophrenic Disorder, Residual. (minority)
The report concluded, without elaboration, that Sangster was able to understand the nature and object of the proceedings against him and to assist in his own defense. In the absence of any explanation or foundation for the above opinions, such as specific observations made and evaluative methods used, the report's bare-bones conclusions were of dubious value in determining competency. Lacking such information, the report failed in its essential purpose as a fact-finding tool.
The Perkins report stood in stark contrast to the testimony offered by Sangster's expert witness, Dr. Richard Epstein. Dr. Epstein testified on direct and cross-examination as to his medical training and experience in the psychiatric field, and provided a detailed factual foundation for his conclusion that the defendant was incompetent to stand trial. On the other hand, the Perkins report offered no such foundation for its bald assertions; moreover, it failed to set forth any particular training or experience which qualified these doctors to render expert opinions. Nevertheless, the majority gives its nod of approval to the trial court's consideration of the report merely because the judge requested the report's preparation and because it was filed with the clerk.
In summary, the Perkins memorandum did not constitute a "complete report" as required by statute. To the contrary, they were statements before the court unsupported by any case history information, psychiatric examination results, or analysis of any kind giving rise to the conclusions offered. Consequently, it did not qualify as "evidence presented on the record" and should not have been regarded by the trial judge as sufficient to support a finding of competence. In addition, given the Court's view that a competency report may be considered as evidence on the record even though the examining doctors are not made available for cross-examination, strict compliance with the statutory requirement of a full and complete report as an evidentiary prerequisite becomes all the more imperative. I believe the majority makes a grievous error in placing its imprimatur on such a slipshod response to a statutory procedure.
ADKINS, J., has authorized me to say that he joins in this dissenting opinion.
NOTES
[1] H-G § 12-101(d) provides:
"Incompetent to stand trial" means not able:
(1) To understand the nature or object of the proceeding; or
(2) To assist in one's defense.
In this opinion we shall use "incompetent" and "incompetency" to describe an accused and the state of being of an accused who conforms with the foregoing test.
[2] H-G § 12-108(a) provides the following test for criminal responsibility for criminal conduct:
A defendant is not criminally responsible for criminal conduct if, at the time of that conduct, the defendant, because of a mental disorder or mental retardation, lacks substantial capacity:
(1) To appreciate the criminality of that conduct; or
(2) To conform that conduct to the requirements of law.
In this opinion "responsible" and "responsibility" will be used to describe an accused and the state of being of an accused who conforms with the foregoing test.
[3] No issue is presented here as to whether the letter and conference note constituted a "complete report of ... findings" within the meaning of H-G § 12-104(d)(1)(ii).
[4] The balance of H-G § 12-103 reads:
(b) Court action if defendant competent. If, after receiving evidence, the court finds that the defendant is competent to stand trial, the trial shall begin as soon as practicable or, if already begun, shall continue.
(c) Reconsideration of competency. At any time during the trial and before verdict, the court may reconsider the question of whether the defendant is incompetent to stand trial.
[5] The problem presented in Jones v. State is not presented here. In Jones the trial court had considered certain psychological evaluations of the accused which were made while the accused was under the jurisdiction of juvenile authorities, some nine months prior to the competency determination. The trial court in Jones considered those reports in camera. They were never introduced into evidence nor were they filed in the court clerk's file of original papers. The evaluations in Jones were not presented to the court through the procedure specified in H-G Title 12 concerning a referral by the court of an accused for a competency evaluation and report back to the court.
[6] Because we shall hold, infra, that the report was "evidence presented on the record" we have no occasion to consider the sufficiency of the evidence of competency without the report.
[7] The better practice is to mark the report as an exhibit at the hearing.
[8] The explanation by the Legislative Council accompanying the bill in relevant part reads as follows:
This bill recommended by the Legislative Council is a result of the joint work of the Crimes Subcommittee of the Council and a Subcommittee of the Governor's Study Commission on Criminal Laws. The bill defines the tests for the criminal defenses of both insanity at the time of the commission of an offense and insanity at the time of trial. It also specifies certain procedures in connection with the defenses. .. . The test prepared by the bill is similar to the Model Penal Code Test as prepared by the American Law Institute. [Report to the General Assembly of 1967, at 135 (italics omitted).]
[9] Section 4.04 of the Model Penal Code reads:
No person who as a result of mental disease or defect lacks capacity to understand the proceedings against him or to assist in his own defense shall be tried, convicted or sentenced for the commission of an offense so long as such incapacity endures.
[1] Section 12-104 provides in pertinent part:
(d) Report on examination. (1) If a court orders an examination under this section, the Department shall:
(i) Examine the defendant; and
(ii) Send a complete report of its findings:
1. To the court;
2. To the State's Attorney; and
3. To the defense counsel.
[2] The Task Force Comment to § 12-104 indicates that it replaced Md.Code (1982) H-G § 12-103 without pertinent substantive change. The Revisor's Note to former § 12-103 states that "[t]his section is new language derived without substantive change from the third through the seventh sentences of former Article 59, § 23...."
Md.Code (1957, 1979 Repl.Vol.) Article 59, § 23 in relevant part provided:
.... Whenever any defendant shall be referred to the Department of Mental Hygiene for an examination of his competency to stand trial under this section, he shall be examined and a full and complete report of findings shall be forwarded to the court.... (Emphasis supplied). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546355/ | 988 A.2d 730 (2009)
COM.
v.
SCHOFF.
No. 1802 MDA 2008.
Superior Court of Pennsylvania.
November 20, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546347/ | 172 F.2d 213 (1949)
HOWELL
v.
UNITED STATES.
No. 5824.
United States Court of Appeals Fourth Circuit.
January 24, 1949.
*214 J. Raymond Gordon, of Charleston, W. Va., for appellant.
A. Garnett Thompson, Asst. U. S. Atty., of Charleston, W. Va. (Leslie E. Given, U. S. Atty., of Charleston, W. Va., on the brief), for appellee.
Before PARKER, Chief Judge, DOBIE, Circuit Judge, and HENDERSON, District Judge.
PARKER, Chief Judge.
In December 1940, the appellant Howell was tried and convicted in the court below of the crime of bank robbery and was sentenced to a term of twenty years imprisonment to commence at the end of another sentence he was then serving in the federal penitentiary at Leavenworth, Kansas. He was represented by counsel of his own choosing at this trial; but on June 24, 1948, the sentence imposed upon him was held void by the United States District Judge for the District of Kansas in a habeas corpus proceeding, on the ground that counsel were not present when sentence was pronounced. An order was entered that he be delivered to the marshal of the court below to the end that further proceedings might be had in his case; and the judge below resentenced him to a term of twenty years in prison, subject to credit for the time already served upon the original sentence. From that judgment he has appealed to this court.
Three questions are presented by the appeal: (1) whether all the proceedings of the original trial were rendered void by reason of the invalidity of the sentence so that the court below was without power to enter the sentence appealed from; (2) whether the original trial was a nullity because of a denial of due process; and (3) whether the judge below erred in denying appellant's motion for a new trial on the ground of newly discovered evidence. We think that all these questions should be answered in the negative.
On the first question, it is clear that appellant was represented by counsel *215 of his own choosing and employment throughout the trial before the jury and also at the hearing of a motion made to set aside the verdict and grant a new trial. The judge in the habeas corpus proceeding so found; and he found also that there was no denial of due process in the trial. He held the sentence void solely on the ground that counsel for defendant were not present when sentence was pronounced. Assuming without deciding that this was correct as a matter of fact and furnished sufficient ground for holding the sentence void, it is perfectly clear that it could not have affected the proceedings prior to sentence, and that, a verdict of guilty having been rendered against appellant and his motion to set aside the verdict and grant a new trial having been denied, there was no reason why the court should not proceed to judgment and pronounce sentence. Absence of counsel might invalidate the proceedings had in their absence, but certainly not proceedings had and made a matter of record while they were present and participating. A void sentence does not invalidate a prior adjudication of guilt properly had; but, on the contrary, such adjudication furnishes a basis for the imposition of a valid sentence when the invalidity of the sentence imposed is called to the attention of the court. 15 Am.Jur. 132; De Benque v. United States, 66 App. D.C. 36, 85 F.2d 202, 106 A.L.R. 839; Ruben v. Welch, 4 Cir., 159 F.2d 493, 494. In the case last cited we held void an indeterminate sentence imposed in the District of Columbia and directed that the prisoner be returned to the sentencing court in order that a valid sentence might be imposed upon him, saying:
"The law in effect at the time of the commission of the crime for which the appellant was sentenced provided for the imposition of a definite sentence. The sentence imposed is accordingly void; but this does not mean that appellant is entitled to be released on habeas corpus. He should be held and remanded to the custody of the United States Marshal for the District of Columbia to be returned to the court by which he was tried in order that proper sentence may be imposed upon him. De Benque v. United States, 66 App.D.C. 36, 85 F.2d 202, 106 A.L.R. 839."
There is nothing in the record before us to warrant a holding that appellant was denied due process in the trial which resulted in his conviction. The matter was fully considered by Judge Mellott in the habeas corpus proceeding and nothing in the record there and nothing called to our attention here tends to show that appellant was denied upon his trial the rights guaranteed him by the Constitution. He complains that he was not given process for the production of documents and that a woman prisoner in Alderson was not produced under a writ of habeas corpus ad testificandum which he had issued. No complaint on this score was made at the trial, however, and it is shown conclusively that the woman prisoner was not produced only because appellant's counsel so directed. Furthermore, all of appellant's complaints relate to matters which, if based upon fact, should have been called to the attention of the court at the trial and made the subject of timely appeal from its judgment, not raised by habeas corpus or by a motion questioning collaterally the validity of the proceedings leading to conviction. It is elementary that neither habeas corpus nor motion in the nature of application for writ of error coram nobis can be availed of in lieu of writ of error or appeal, to correct errors committed in the course of a trial, even though such errors relate to constitutional rights. It is only when there has been the denial of the substance of a fair trial that the validity of the proceedings may be thus collaterally attacked or questioned by motion in the nature of petition for writ of error coram nobis or under 28 U.S.C.A. 2255. Birtch v. United States, 4 Cir., 164 F.2d 880; Pifer v. United States, 4 Cir., 158 F.2d 867; Eury v. Huff, 4 Cir., 141 F.2d 554; Sanderlin v. Smyth, 4 Cir., 138 F.2d 729; United States v. Brady, 4 Cir., 133 F.2d 476, 481.
The motion for new trial on the ground of newly discovered evidence cannot avail appellant. In the first place, it was not made in time. Under the old *216 practice it was required that such motion be made before the expiration of the term of court at which the trial was had. United States v. Mayer, 235 U.S. 55, 35 S. Ct. 16, 59 L. Ed. 129; Horne v. United States, 4 Cir., 51 F.2d 66. Under the Criminal Rules it must be made "only before or within two years after final judgment". Rules of Criminal Procedure, rule 33, 18 U.S.C. A. Final judgment was entered in the case in December 1940 and the motion was not made until after that judgment had been held void in the habeas corpus proceeding, more than seven years later. It is argued that, since the original judgment was held void, the time limit applies only with respect to the new judgment and sentence; but we do not think that the intention of the rule was to extend the time for making the motion because of a defect in the judgment. A void judgment equally with a valid one would meet the purpose of the rule, which was to fix the time after trial within which the motion should be made; and there would be no sense in permitting the motion after the time so fixed merely because the sentence as entered was technically invalid. This conclusion is strengthened by the fact that, as originally proposed, the rule permitted the motion to be made at any time and that a similar motion, likewise without time limit was provided for alleged deprivation of constitutional rights. The Supreme Court eliminated the latter motion altogether from the rule and prescribed the two year limitation for the motion grounded on newly discovered evidence. See New York University of Law, Institute Proceedings, pp. 206, 230. This not only shows a deliberate intention to limit to two years the time within which a new trial may be asked on the ground of newly discovered evidence, but also negatives any intention to equate this procedure with that having relation to relief for the deprivation of constitutional rights, which if it amounted to a denial of due process might be made the subject of motion in the nature of application for writ of error coram nobis at any time. See Roberts v. United States, 4 Cir., 158 F.2d 150.
In the second place, the motion for new trial was one addressed to the sound discretion of the District Judge, and his action thereon is not subject to review except in case of abuse. Rakes v. United States, 4 Cir., 163 F.2d 771; United States v. Prettyman, 4 Cir., 142 F.2d 891; Fairmont Glass Works v. Cub Fork Coal Co., 287 U.S. 474, 53 S. Ct. 252, 77 L. Ed. 439; 39 Am.Jur. 164-165; 2 Am.Jur. 907-911. The District Judge, being of opinion that he had power to entertain the motion even at this late day, went into the matter very fully and carefully appraised the newly discovered evidence upon which appellant relies. We agree with him that it furnishes no basis for granting a new trial. At the best it was nothing more than flimsy cumulative evidence in support of the alibi upon which appellant relied at the trial. It could not have affected the result in view of the positive identification of appellant by a number of witnesses who saw him engaged in the robbery.
This case affords another example of the abuse of habeas corpus which section 2255 of Revised Title 28 of the Judicial Code, 28 U.S.C.A., is intended to prevent. That section, which did not become effective until after the habeas corpus proceedings before Judge Mellott were had, requires that attacks on the validity of a sentence ordinarily be made, not through habeas corpus proceedings in the district where the prisoner may happen to be imprisoned, but by motion in the trial court, where the circumstances of the trial are known and can be adequately established of record. Had that procedure been followed in this case and the facts been developed as they were in the court below, it would have appeared that there was no sufficient basis for holding that counsel for appellant were not present when sentence was pronounced. Certainly the presumption of regularity attaching to the proceedings of the court could not be held to have been overcome by the oath of a convicted felon supported by what amounts to no more than a denial of recollection by his lawyers as to the sentencing of their client in their absence, a most unusual thing which, if it had occurred, they would most certainly have remembered. As it is, the time of the Kansas court as well as the time of the court below and this court has been wasted *217 and a prisoner convicted of crime of the most serious character has been allowed a vacation of several months from the service of his sentence in the penitentiary.
The judgment and sentence appealed from will be affirmed.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2081869/ | 882 A.2d 934 (2005)
164 Md. App. 153
Jon Patrick WARREN
v.
STATE of Maryland.
No. 476, Sept. Term, 2004.
Court of Special Appeals of Maryland.
September 8, 2005.
*936 Julia Doyle Bernhardt (Nancy S. Forster, Public Defender, on brief), for Appellant.
Gregory D'Alesandro (J. Joseph Curran, Jr., Atty. Gen., on brief), for Appellee.
Panel EYLER, JAMES R., KRAUSER, BARBERA, JJ.
BARBERA, J.
This appeal requires us to interpret Maryland Code (1977, 2002 Repl.Vol.), § 21-801 of the Transportation Article.[1] We focus our attention in particular upon subsection (a) of § 21-801, which provides that "[a] person may not drive a vehicle on a highway at a speed that, with regard to the actual and potential dangers existing, is more than that which is reasonable and prudent under the conditions."
A jury in the Circuit Court for Montgomery County convicted appellant, Jon Patrick Warren, of violating § 21-801(a), and of driving while impaired ("DWI"), in violation of § 21-902(b). The State sought to prove that appellant had violated § 21-801(a) by establishing that he drove 55 miles per hour ("mph") in a 40-mph zone. The State sought to prove that appellant drove while impaired by relying on the lay opinion testimony of three police officers that he was "drunk," "driving under the influence of alcohol," and "highly impaired by alcohol."
Appellant attacks his conviction under § 21-801(a), arguing that excessive speed does not come within the purview of that section, and that the State provided no evidence of the conduct that § 21-801(a) does cover, i.e., failure to drive at a speed that is reasonable and prudent in light of existing conditions that create "actual and potential dangers." Appellant attacks his DWI conviction on the ground that the court should not have permitted the officers' lay opinion testimony.
Because we agree with appellant that the evidence was legally insufficient to establish a violation of § 21-801(a), we shall reverse that conviction. We shall affirm appellant's DWI conviction, finding no merit in his argument that the officers' opinion testimony was inadmissible.
FACTS
At approximately 10:30 p.m. on May 5, 2003, Officer John Kennedy, a ten-year veteran of the Montgomery County Police Department, was sitting in his marked patrol vehicle in the parking lot of the "On the Border" restaurant on Rockville Pike. The officer saw a man, later identified as appellant, approximately twenty yards away, walking away from the officer and heading toward a Ford Thunderbird. Officer Kennedy described appellant as "staggering across the parking lot with his shoulders slouched over, swaying, wobbly knees, you know, just very unsteady on his feet[.]" Although he fumbled with the keys, appellant eventually unlocked the driver's side door. He got into the car, sat in the driver's seat for about ten minutes, and repeatedly looked over at Officer Kennedy. Appellant then got out of the car and "staggered, stumbling . . . back into the bar[.]"
*937 Officer Kennedy left the area to perform his "regular patrol duties." When he returned to the parking lot about two hours later, he noticed that the Thunderbird was still parked where he had last seen it. Because he thought that appellant had not looked "like he was in any condition ... to drive," and had seemed "very intoxicated," Officer Kennedy set up surveillance about 100 yards away from the car, on the opposite side of the street.
Shortly thereafter, Officer Kennedy saw appellant drive the Thunderbird onto Rockville Pike. Officer Kennedy followed the car and a second officer, Officer Craig Cupiello, followed behind him.
Appellant made "a very wide turn" off of Rockville Pike onto Edmonston Drive, a two-lane road with parking on each side. He drove a little more than one-tenth of a mile "using the full width of the road[,] ... going from side to side, up the road." Appellant then turned right onto Veirs Mill Road and rapidly accelerated, still drifting between lanes. Officer Kennedy "paced" appellant for approximately two-tenths of a mile, and determined that he was traveling 55 mph in a 40-mph zone. The officer activated his emergency lights, and appellant stopped his car.
Officer Kennedy approached the driver's side door of the car, and "detected a strong odor of an alcoholic beverage." The officer also noticed that appellant's eyes were watery and bloodshot. When the officer asked appellant for his driver's license, appellant removed his wallet from his pocket and fumbled through it, passing over the license several times. Appellant was mumbling and his speech was so "extremely slurred" that the officer could not understand what he was saying.
At that time, Officer Kennedy told appellant to turn off the ignition and exit the car. Appellant did not respond to the officer's request. The officer asked him three more times and, each time, appellant failed to respond. Officer Kennedy testified that he feared for the safety of the citizens present in the area should appellant drive off. He therefore took out his Taser, pointed it at appellant, and told him that if he did not get out of the car, he was going to "get stunned." Appellant still did not respond. The officer then pushed his Taser, set to stun, against appellant's shoulder.[2]
Appellant released his grip on the steering wheel and Officer Kennedy "help[ed] him get out of the car." Because appellant was very wobbly and unsteady on his feet, the officer leaned him against the car. The officer asked appellant to perform field sobriety tests, but appellant refused. Officer Kennedy placed appellant under arrest and transported him to the Rockville District station for processing.
Appellant collapsed while walking up the steps of the station. Sergeant Tim Falcinelli assisted Officer Kennedy in taking appellant the rest of the way to the processing room. Once they arrived, the officers asked appellant to take a breath test to determine his blood alcohol level, but appellant refused. After sitting at the processing table for about fifteen minutes, appellant "vomited all over the processing [room] floor." Officer Kennedy opined, based on his training and personal experience, that appellant was "highly impaired by alcohol."
Officer Cupiello testified that after Officer Kennedy stopped appellant's vehicle, he, Officer Cupiello, walked to the passenger's *938 side of appellant's car. When appellant finally exited the vehicle, Officer Cupiello saw that appellant had "bloodshot, watery eyes," and "an odor of an alcoholic beverage." The officer observed that appellant seemed confused and incoherent. He opined that appellant was "driving under the influence of alcohol."
Sergeant Falcinelli testified that appellant was "drunk" when he came into the station house. Appellant could not walk, "reeked" of alcohol, slurred his words, had "watery, red, [bloodshot] eyes," and acted confused. He opined that appellant was "under the influence of alcohol."
Appellant testified in his defense. He said that he was on his way home from work when he stopped at a restaurant with two friends. He had one beer at the bar. He was not feeling well, so he went outside to get some fresh air. He was not walking normally because of a foot injury. He testified that he sat in his car "[t]o get away from all the crowd, the noise, the smoke[, and] ... to clear [his] head a little bit." After about ten minutes, he returned to the bar and attempted to have a second drink, but was not feeling well enough to finish it.
Appellant testified that his driving on the evening in question was not inhibited by alcohol or otherwise inappropriate. According to appellant, when Officer Kennedy stopped and approached his car, the officer immediately asked him to get out of it. Appellant asked the officer several times whether he wanted to see appellant's license and registration, but the officer simply repeated "a couple of" times his request for appellant to get out of the car. The officer then used his Taser without warning. Appellant explained that his subsequent behavior was the result of the Taser stun.
The jury convicted appellant of driving while impaired and driving in excess of a reasonable and prudent speed, and acquitted him of the charge of driving under the influence of alcohol.[3] The court sentenced appellant to 60 days' imprisonment for driving while impaired, suspending all but 30 days, with 18 months' supervised probation upon release. The court imposed a $75.00 fine for appellant's conviction for driving in excess of a reasonable and prudent speed.
Appellant noted this timely appeal, presenting the following questions for our review:
I. Was the evidence sufficient to sustain appellant's conviction for driving in excess of a reasonable and prudent speed?
II. Did the trial court abuse its discretion in admitting lay opinion testimony that appellant was "drunk," "under the influence of alcohol," and "highly impaired by alcohol"?
DISCUSSION
I.
Appellant argues that there was insufficient evidence to sustain his conviction, under § 21-801(a), for driving in excess of a reasonable and prudent speed. He acknowledges that there was evidence that he exceeded the posted speed limit, a violation of § 21-801.1.[4] He insists, however, there was no evidence of any "special danger" on the road, which, he maintains, is necessary to sustain his conviction under § 21-801(a). We agree with appellant, and hold that, because the State presented *939 no evidence of "actual and potential dangers" requiring him to reduce his speed to a reasonable and prudent level, the conviction under § 21-801(a) must be reversed.
Section 21-801, entitled "Basic rule," provides:
(a) Reasonableness and prudence required. A person may not drive a vehicle on a highway at a speed that, with regard to the actual and potential dangers existing, is more than that which is reasonable and prudent under the conditions.
(b) Driver to control speed. At all times, the driver of a vehicle on a highway shall control the speed of the vehicle as necessary to avoid colliding with any person or any vehicle or other conveyance that, in compliance with legal requirements and the duty of all persons to use due care, is on or entering the highway.
(c) Drivers to reduce speed in certain circumstances. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when approaching and crossing an intersection at which cross traffic is not required to stop by a traffic control device.
(d) Approaching and crossing railroad grade crossings. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when approaching and crossing a railroad grade crossing.
(e) Approaching and going around curves. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when approaching and going around a curve.
(f) Approaching crests of grades. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when approaching the crest of a grade.
(g) Traveling on narrow or winding roadways. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when traveling on any narrow or winding roadway.
(h) Special dangers as to pedestrians or other traffic. Consistent with the requirements of this section, the driver of a vehicle shall drive at an appropriate, reduced speed when any special danger exists as to pedestrians or other traffic or because of weather or highway conditions.
The primary rule of statutory interpretation is to ascertain and effectuate legislative intent. See, e.g., Pete v. State, 384 Md. 47, 57, 862 A.2d 419 (2004). We begin the analysis by examining the plain language of the statute, "for the legislative intent of a statute primarily reveals itself through the statute's very, words." Price v. State, 378 Md. 378, 387, 835 A.2d 1221 (2003) (citations omitted). We are cautioned not to add or delete language in a way that indicates an intent not reflected by the plain and unambiguous language of the statute. Pete, 384 Md. at 57, 862 A.2d 419. "[N]or may [we] construe the statute with forced or subtle interpretations that limit or extend its application." Id. "Statutes on the same subject are to be read together and harmonized to the extent possible[.]" Id. at 65, 862 A.2d 419 (citations and quotation marks omitted). "If the words of a statute are clear and unambiguous, our inquiry ordinarily ends and we need investigate no further, but simply apply the statute as it reads." Gillespie v. State, 370 Md. 219, 222, 804 A.2d 426 (2002).
Section 21-801 is located in subtitle 8 of the Transportation Article and is entitled *940 "Speed Restrictions." Subsection (a) of § 21-801 prohibits driving at a speed that is "more than that which is reasonable and prudent" under the prevailing circumstances. (Emphasis added.) What is "reasonable and prudent" is dictated by existing "conditions." Subsections (c) through (h) set forth specific conditions requiring a reduced speed: when there is special danger to pedestrians or other traffic, poor weather conditions, and when approaching any of the following: an intersection at which traffic is not controlled by a traffic control device; a railroad crossing; a curve; a crest of a hill; or when traveling on a narrow or winding road.
Subsections (a) and (b) are more general. Nonetheless, both of those subsections apply only when certain driving conditions prevail. Subsection (a) refers to "actual and potential dangers" and prohibits driving under those "conditions" at a speed that is unreasonable or imprudent. Subsection (b) requires the driver to control the vehicle's speed when a collision with a person or vehicle might occur. Read in its entirety, § 21-801 plainly requires drivers to reduce speed, from what otherwise would be a lawful maximum speed, to that which is reasonable or prudent in light of existing conditions that present an "actual or potential danger."
This construction of § 21-801 makes sense in light of, and is in harmony with, § 21-801.1. The latter section prohibits speed over a specified maximum speed limit. The specified speed is governed by highway type (divided or undivided) and location (business, residential, or "other locations").[5] Section 21-801.1(a) includes *941 the caveat that the statutory maximum designated speed pertains, "[u]nless there is a special danger that requires a lower speed to comply with § 21-801[.]"
The State argues that this quoted language from § 21-801.1(a) applies to subsections (c)-(h) of § 21-801, but not to subsections (a) and (b). We disagree. Nothing in § 21-801.1(a) suggests such a limited reading of it. Moreover, the narrow interpretation advanced by the State does not make common sense. And, if indeed the Maryland General Assembly intended the language in § 21-801.1(a) to apply only to § 21-801(c)-(h), it certainly knew how to make that clear.
The State argues that excessive speed (in this case, driving 55 mph in a 40-mph zone) can create the "actual or potential danger" under § 21-801(a). Though excessive speed certainly may be an actual or potential danger, we disagree that excessive speed is a "condition" of the sort envisioned by the Legislature when it enacted § 21-801. As we have said, § 21-801 addresses circumstances under which speed must be reduced. Further, the plain language of the section suggests that the conditions requiring a reduced speed under § 21-801 are not those created by driving behavior, but rather are those external conditions to which a driver must react.
The State also argues that evidence of appellant's erratic driving (making a wide right turn and weaving in and out of lanes), created an actual or potential danger sufficient to sustain his conviction under § 21-801(a). Again, the State is only half right. Driving erratically, like speeding, can create an actual or potential danger. But § 21-801(a), like subsections (b) through (h), addresses speed, not driving behaviors unrelated to speed.
Finally, we are not persuaded by the State's argument that the darkness that attends nightfall is a condition contemplated by § 21-801(a). In outlining specific conditions that may require a person to drive at less than the posted speed limit in subsections (c) through (h), the General Assembly anticipated specific conditions that may require a slower rate of speed. Certain of these conditions may occur with great frequency; others, with less frequency. None of these conditions, however, is as certain to occur as nightfall. Considering that the Legislature envisioned and included in § 21-801 less common potential dangers on Maryland roadways, we conclude that the omission of darkness was deliberate.
Moreover, if the State were correct that darkness, without more, requires reduced speed on the roadways, then every driver who drives at the speed limit at nighttime would be in violation of § 21-801(a). We do not believe the General Assembly intended such a result. See State v. Glass, 386 Md. 401, 410, 872 A.2d 729 (2005) (stating that reviewing courts should avoid constructions that lead to results that do not comport with common sense); Price, 378 Md. at 387, 835 A.2d 1221 (stating that reviewing courts should not "construe the statute with forced or subtle interpretations that ... extend its application").
In sum, we hold that § 21-801(a) requires drivers to reduce speed to a reasonable *942 and prudent level to account for existing conditionsexternal to driving behavior itselfthat create "actual and potential dangers." Because the State failed to show that appellant's speed was unreasonable and imprudent in light of a condition that created an "actual and potential" danger, there was insufficient evidence to support his conviction for violating § 21-801(a). Accordingly, we reverse that conviction.
II.
Appellant argues that the trial court abused its discretion in permitting the three police officers to testify that he was "drunk," "under the influence of alcohol," and "highly impaired by alcohol." He maintains that this improperly admitted lay opinion testimony requires reversal of his DWI conviction. We disagree.
The decision to admit lay opinion testimony is vested within the sound discretion of the trial judge. Bey v. State, 140 Md.App. 607, 623, 781 A.2d 952 (2001), cert. denied, 368 Md. 526, 796 A.2d 695 (2002). The officers were not admitted as experts; therefore, Maryland Rule 5-701, addressing the admissibility of opinion testimony by lay witnesses, applies.
Rule 5-701 provides:
If the witness is not testifying as an expert, the witness's testimony in the form of opinions or inferences is limited to those opinions or inferences which are (1) rationally based on the perception of the witness and (2) helpful to a clear understanding of the witness's testimony or the determination of a fact in issue.
See also Ragland v. State, 385 Md. 706, 717, 870 A.2d 609 (2005) (stating that "[l]ay opinion testimony is testimony that is rationally based on the perception of the witness"); Bruce v. State, 328 Md. 594, 630, 616 A.2d 392 (1992) (stating that "lay opinions which are derived from first-hand knowledge, are rationally based, and are helpful to the trier of fact are admissible"), cert. denied, 508 U.S. 963, 113 S. Ct. 2936, 124 L. Ed. 2d 686 (1993); Rosenberg v. State, 129 Md.App. 221, 255, 741 A.2d 533 (1999) (same), cert. denied, 358 Md. 382, 749 A.2d 173 (2000); LYNN MCLAIN, MARYLAND EVIDENCE § 701:1a (2001) (same). "It has been suggested as the overriding principle that `opinions of laymen should be rejected only when they are superfluous in the sense that they will be of no value to the jury.'" Bruce, 328 Md. at 630, 616 A.2d 392 (citation omitted).
In Ragland, the Court of Appeals set forth "a helpful explanation of lay opinion testimony":
"The prototypical example of the type of evidence contemplated by the adoption of [Federal Rule of Evidence] 701 relates to the appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences.... Other examples of this type of quintessential Rule 701 testimony include identification of an individual, the speed of a vehicle, the mental state or responsibility of another, whether another was healthy, [and] the value of one's property."
Ragland, 385 Md. at 718, 870 A.2d 609 quoting Asplundh Mfg. Div. v. Benton Harbor Eng'g, 57 F.3d 1190, 1196-98 (3rd Cir.1995) (alteration in original).
The Ragland Court made clear, however, that expert opinion testimony may not be offered in the guise of lay opinion testimony. "[Maryland] Rules 5-701 and 5-702 prohibit the admission as `lay opinion' of testimony based upon specialized knowledge, skill, experience, training *943 or education."[6] 385 Md. at 725, 870 A.2d 609.
Perceiving whether someone is intoxicated does not require specialized knowledge, because "the condition of intoxication and its common accompaniments are ... a matter of general knowledge." State v. Magaha, 182 Md. 122, 130, 32 A.2d 477 (1943). Accord Crampton v. State, 71 Md. App. 375, 388, 525 A.2d 1087 (1987), aff'd on other grounds, 314 Md. 265, 550 A.2d 693 (1988); see also Cumberland & Westernport Transit Co. v. Metz, 158 Md. 424, 450, 149 A. 565 (noting that "intoxication is a fact which any one may observe"), appeal dismissed sub nom, 282 U.S. 801, 51 S. Ct. 40, 75 L. Ed. 720 (1930); Md. & Pa. R.R. Co. v. Tucker, 115 Md. 43, 51, 80 A. 688 (1911) (quoting with approval State v. Pike, 49 N.H. 399 (1870), and stating: "`Intoxication is a fact open to the observation of any one, and requiring no skill or learning to discern it'"); JOSEPH F. MURPHY, JR., MARYLAND EVIDENCE HANDBOOK § 603(C) (3d ed.1999) (explaining that a lay witness may opine, inter alia, that someone was under the influence of alcohol because "these are the kind of observations we make on a daily basis"); MCLAIN, supra, 701:le. at 707-08 (stating that "[a] lay witness with first-hand knowledge may testify," inter alia, that someone was "drunk or sober").
The rule of admissibility of lay opinion testimony is no different when, as in this case, the lay opinion is offered by a police officer. See, e.g., State v. Rich, 132 N.C.App. 440, 512 S.E.2d 441, 448 (1999) (holding that "the trial court was correct in allowing [a non-expert police officer] to offer his opinion" that the defendant was "appreciably impaired and unable to operate a vehicle"), aff'd, 351 N.C. 386, 527 S.E.2d 299, 306 (2000); New v. State, 254 Ind. 307, 259 N.E.2d 696, 699 (1970) (holding that the trial court properly admitted testimony offered by a non-expert police officer that the defendant was intoxicated); Mozley v. State, 163 Tex. Crim. 250, 290 S.W.2d 518, 520 (1956) (holding that the trial court did not err in permitting the officer who arrested the defendant to testify that the defendant was drunk, because "[a] non-expert witness may express his opinion as to intoxication when such opinion is based upon his observation of the appearance, acts and conduct of an accused").
We hold that the trial court did not abuse its discretion in permitting the police officers to express their lay opinion that appellant was "drunk," "under the influence of alcohol," and "highly impaired by alcohol." Each officer's testimony was rationally based on his perception of appellant's condition. And each officer's testimony included not only his opinion concerning appellant's alcohol impairment, but also a description of his actual observations of appellant. See 31A Am.Jur. 2D Expert and Opinion Evidence § 198 (2005) (noting that it is "preferable" that a person offering a lay opinion preface that opinion with testimony about the individual's "actions and conduct"). The officers' opinion testimony, moreover, was relevant to the issues in this case, helpful to the jury, and not unfairly prejudicial.
Wilson v. State, 124 Md.App. 543, 723 A.2d 494 (1999), upon which appellant relies, does not compel a different conclusion. In Wilson, the State trooper who stopped the defendant testified as an expert witness *944 in administering and evaluating the results of a horizontal gaze nystagmus ("HGN") test. Id. at 545-46, 723 A.2d 494. Over objection, the trooper was permitted to opine that, based on the results of the HGN test, the defendant was driving while intoxicated and that his blood alcohol content ("BAC") was probably 0.10 or higher. Id. at 549, 723 A.2d 494. We held that the trooper should not have been permitted to offer testimony on the defendant's BAC. Id. at 553, 723 A.2d 494. We explained:
In our view, the court erred in permitting Trooper Redmond to testify that, based on the HGN test results, he believed appellant's blood alcohol content was "probably point one zero or higher." Although the trooper was qualified to administer the HGN test and, to that extent, was properly received as an expert, HGN testing may not be used to establish a specific blood alcohol level. Indeed, as the lengthy colloquy that we quoted earlier makes plain, the State never sought to establish that the trooper's expertise in administering the HGN test included the ability to determine specific blood alcohol content based on the HGN test results. The HGN test is a type of field sobriety test, but it is not the equivalent of laboratory chemical analysis of blood, breath, or urine.
Id. (emphasis added).
Wilson is inapposite to the present case. The officers in this case did not offer an opinionlay or expertconcerning appellant's BAC. Appellant nonetheless argues that, by testifying that he was "drunk," "under the influence," and "highly impaired by alcohol," the police officers were attempting to quantify his BAC. We disagree with this argument, finding no support in the record for it.
In sum, we are persuaded that the court did not abuse its discretion in permitting the State to elicit the police officers' lay opinion testimony that appellant was "highly impaired by alcohol," "under the influence of alcohol," and "drunk."
JUDGMENT OF CONVICTION FOR DRIVING IN EXCESS OF A REASONABLE AND PRUDENT SPEED REVERSED; JUDGMENT OF CONVICTION FOR DRIVING WHILE IMPAIRED BY ALCOHOL AFFIRMED.
COSTS TO BE DIVIDED EQUALLY BETWEEN APPELLANT AND MONTGOMERY COUNTY.
NOTES
[1] Hereinafter, any reference to the Maryland Code will be to this article and version, which was in effect on May 5, 2003, the date of the offense.
[2] The officer testified that his Taser delivers 50,000 volts of electricity. In stun mode, the electricity only affects the area of the body the Taser touches. "Tase" mode, on the other hand, affects the entire muscular system.
[3] The trial court granted appellant's motion for judgment of acquittal on a charge of negligent driving.
[4] It is not clear why appellant was not charged with violating § 21-801.1.
[5] Section 21-801.1, entitled "Maximum limits," provides:
(a) General rule. Unless there is a special danger that requires a lower speed to comply with § 21-801 of this subtitle, the limits specified in this section or otherwise established under this subtitle are maximum lawful speeds. A person may not drive a vehicle on a highway at a speed that exceeds these limits.
(b) Specific limits. Except as otherwise provided in this section, the maximum speed limits are:
(1) 30 miles an hour on:
(i) All highways in a business district; and
(ii) Undivided highways in a residential district;
(2) 35 miles an hour on divided highways in a residential district;
(3) 50 miles an hour on undivided highways in other locations; and
(4) 55 miles an hour on divided highways in other locations.
(c) Continuation of certain prior limits. Except as provided in subsection (e) of this section, a posted maximum speed limit lawfully in effect on December 31, 1974, is a maximum lawful speed even if it differs from a limit specified in subsection (b) of this section.
(d) Alteration of limits. Except as provided in subsection (e) of this section, a maximum speed limit specified in subsection (b) of this section or in effect under subsection (c) of this section may be altered as provided in this subtitle.
(e) Limits may not exceed 55 or 65 miles an hour. (1) Notwithstanding any other provision of this subtitle, a maximum speed limit of more than 55 miles an hour may not be established or continued on any highway in this State that:
(i) Is not an interstate highway or an expressway; or
(ii) Would subject the State to federal funding sanctions under 23 United States Code § 154.
(2) Subject to the provisions of paragraph (1) of, this subsection, a maximum speed limit of more than 65 miles an hour may not be established on any highway in the State.
(f) St. Mary's County. (1) Unless otherwise posted on a public road in a residential subdivision, in residential subdivisions in St. Mary's County, a posted speed limit on a main access road applies to all public roads in the residential subdivision, even if the posted speed limit on the main access road is less than 30 miles per hour.
(2) The provisions of paragraph (1) of this subsection do not apply when a through road traverses a residential subdivision. The maximum speed limit applicable to the subdivision shall be posted on each road exiting off the through road and into the subdivision, along with the posting on the main access road.
(3) A maximum speed limit established under this subsection in a residential subdivision shall be based on the subdivision's road design, motor vehicle traffic, and pedestrian safety.
[6] Appellant does not argue that the officers' opinions in this case were expert opinions improperly admitted as lay opinions. Consequently, we do not address whether the officers relied, at all or in part, on their special expertise and training in rendering their opinions. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546477/ | 250 B.R. 848 (2000)
In re John P. McNINCH, Debtor.
John P. McNinch, Plaintiff,
v.
Mortgage America, Inc., Harris Trust Savings Bank as Trustee for the Cityscape Home Equity Loan Trust 1996-2, and Cityscape Home Equity Loan Trust 1996-2, Defendant.
Bankruptcy No. 99-22610. Adversary No. 99-2276.
United States Bankruptcy Court, W.D. Pennsylvania.
July 24, 2000.
*849 *850 Gary W. Short, Pittsburgh, PA, for Debtor.
David Ziegler, Pittsburgh, PA, for Harris Trust Savings Bank.
MEMORANDUM OPINION[1]
JUDITH K. FITZGERALD, Chief Bankruptcy Judge.
Issues Presented
This adversary action is before the court in the posture of a motion to dismiss. A default judgment currently stands against assignor of the mortgage and note, Mortgage America. Plaintiff, John P. McNinch, originally asserted claims under the Pennsylvania Unfair and Deceptive Practices Act, as well as The Truth in Lending Act, against the remaining defendant, Harris Trust Savings Bank as Trustee for Cityscape Home Equity Loan Trust ("Harris Trust"). However, McNinch agreed at oral argument that the Pennsylvania Unfair and Deceptive Practices Act claim should be dismissed so that all that remains at issue is the Truth in Lending Act claim.
In the Harris Trust Savings Bank Memorandum of Law in Support of Harris Trust Savings Bank Motion to Dismiss at pages three and four, the defense supplies a concise description of the premise of the complaint:
The basic issue in this case is whether the lender complied with the provisions of the Truth in Lending Act, 15 U.S.C. § 1601 [sic § 1601], et seq. ("TILA"); and Regulation Z, 12 C.F.R. § 226.1, et seq. Briefly stated, TILA and Regulation Z require certain disclosures and allow at least a three business day opportunity for a borrower to rescind a nonpurchase-money residential mortgage transaction[].
Plaintiff appears to argue that it may rescind its loan, years after closing, (i) because the initial TILA disclosures provided to the McNinches were inaccurate, thus extending the three business day period to three years, and (ii) because the loan transaction was not consummated until after delivery of the Corrected Note, thus rendering the Rescission Notice inaccurate.
Ultimately, the alleged TILA violations lead to two basic questions:
1. What is the legal effect of the First TILA Disclosure statement?
2. Was the loan agreement between McNinch and Mortgage America consummated on March 5, 1996, the date of the closing, or on March 13, 1996, the day the substituted page of the note, which included the prepayment penalty provision, was received by the McNinches?
To answer these questions, we will have to analyze the purpose of TILA. At page 6 in Plaintiff's Brief in Opposition to Defendant's *851 Motion to Dismiss, Plaintiff, John P. McNinch, asserts: "The [Truth in Lending] Act's purpose is `to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him . . .' 15 U.S.C. § 1601."
Harris Trust Savings Bank has moved to dismiss the action arguing that TILA is incorrectly applied by the plaintiff in the present case:
Plaintiff is attempting to confuse TILA with breach of contract principles. Plaintiff actually seems to be complaining that the terms of the loan changed between the time of his first contract with Mortgage America and the closing. If Mortgage America made promises that it did not fulfill, or acted in bad faith, Plaintiff might have a common law claim, but he does not have claim under TILA. TILA is designed to ensure that he understands the terms of the loan actually made, and has an opportunity to rescind that loan.
(Harris Trust Savings Bank Reply to Debtor's Resp. to Mot. to Dismiss at 4.) Because the claim may ultimately suffer dismissal based on whether or not the Truth in Lending Act is applicable to the facts of this case, we examine a greater portion of § 1601, as quoted by Plaintiff. 15 U.S.C. § 1601(a) provides:
The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.
Considering the posture of this case, with consideration of a motion to dismiss before the court, all reasonable inferences must be drawn in favor of the non-moving party, the plaintiff McNinch. See Graves v. Lowery, 117 F.3d 723, 726 (3d Cir.1997). Yet, the court is permitted to scrutinize McNinch's assertions. "[I]f the evidence [supplied by the non-movant] is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2510-11, 91 L. Ed. 2d 202 (1986) (citations removed). Harris Trust argues that McNinch is muddying the waters, that when the dust settles it will be clear that the plaintiff's claim is invalid.
After careful consideration of the pleadings and arguments, we find in favor of defendant Harris Trust.
Facts
In February 1996, plaintiff John McNinch and his non-debtor spouse, Deanna McNinch, applied for a loan, to be secured by a non-purchase money mortgage on their residence, from Mortgage America. Mortgage America, on February 5, 1995, provided the McNinches with a first estimated Truth in Lending disclosure statement and an estimate of settlement costs. On March 5, 1996, Mortgage America and the McNinches met to close the loan. At the closing, Mortgage America provided the McNinches with various loan documents including a second Truth in Lending disclosure statement, a two page promissory note, and a Truth in Lending Rescission Notice listing March 8, 1996 as the rescission deadline.
The figures in the second TILA disclosure provided to the McNinches, and the terms of the note, differed from the first estimated TILA disclosure. For example, the interest rate was changed from 9.990 to 13.5, the amount of the loan was decreased from $318,510.00 to $310,500.00, and the payment term was changed from 30 years to 15 years. The second TILA *852 disclosure statement accurately reflected the ultimate legal obligations of the parties. On March 11, 1996 the proceeds of the loan were disbursed to the McNinches and various creditors to whom the McNinches were indebted. On March 13, 1996, the McNinches received an amended page to be substituted for one page of the original note. The amended page included the prepayment penalty that was not listed on the original note. The McNinches subsequently defaulted on the Note. On August 27, 1998 Harris Trust Savings Bank, as trustee for assignee of the Note, Cityscape Home Equity Loan 1996-2 Trust, brought a mortgage foreclosure action against the McNinches and obtained judgment of foreclosure against the residence. On December 11, 1998, the McNinches faxed and mailed notices of their rescission of the loan to Mortgage America and the servicing agent. John McNinch filed a Chapter 13 Bankruptcy petition on April 8, 1999, and this adversary proceeding seeking to avoid the Mortgage requesting damages on July 15, 1999.
TILA Statute of Limitations
Preliminarily, Harris Trust asserts that this complaint is barred by the statute of limitations. Seeking to avoid dismissal of the complaint due to the statute of limitations, McNinch argues:
The one year Statute of Limitations to assert a damages claim runs from the date of the "violation" not the date of the "transaction" and does not bar 1.) the [sic] a damages claim for failure to honor the McNinches['] Rescission or 2.) "disclosure violations", asserted defensively, in Recoupment[.]
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 18.) McNinch correctly argues that "[t]he statute of limitations period runs, not from the date of the `transaction', but from the `date of the occurrence of the violation.' 15 U.S.C. § 1640(e)." (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 18.) The "violation" asserted by McNinch is Harris Trust's failure to rescind after notice sent by McNinch on December 11, 1998. Because Harris Trust simply failed to act, any Harris Trust violation that might have occurred pursuant to 15 U.S.C. § 1635(b), for failure to properly respond to the McNinch rescission notice, occurred twenty days after the December 11, 1998 rescission notice:
Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.
15 U.S.C. § 1635(b). The McNinch complaint was filed on July 15, 1999, within the one year statute of limitations. Therefore, the McNinch claim against Harris Trust for failure to respond to the McNinch rescission notice survives the statute of limitations.
Concerning the claim for damages due to TILA disclosure violations, McNinch argues that:
[a]lthough TILA contains a one year statute of limitations to assert a claim for damages, if a creditor files a proof of claim in a consumer's bankruptcy action, the consumer may respond with a lawsuit against the creditor and may assert a Truth in Lending claim in recoupment, even though the action is filed more than one year after the alleged Truth in Lending violation.
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 18.) The alleged TILA disclosure violations occurred on the date of the closing, March 5, 1996, when the allegedly incorrect date of right of rescission expiration was supplied, a date more than one year prior to the filing of the complaint. However, McNinch is correct that the one year statute of limitations does not apply to TILA violations asserted in recoupment in response to an action by a creditor to collect a debt. 15 U.S.C. § 1640(e) states in relevant part:
*853 Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. This subsection does not bar a person from asserting a violation of this title [15 U.S.C. § 1601 et seq.] in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law.
Pennsylvania law does not prohibit recoupment claims. See In re DiCianno, 58 B.R. 810 (Bankr.E.D.Pa.1986). The McNinch claims do indeed survive the TILA statutes of limitation.
Significance of the Estimated TILA Disclosure
Defending the rescission of the loan more than three days following the closing McNinch asserts:
The Debtor's rescission three years after consummation was timely because Mortgage America[] did not provide the Debtor with accurate, "material disclosures" required by the Truth in Lending Act. Mortgage America's Second disclosure was ineffective because it was not a result of "subsequent events", events beyond Mortgage America's control.
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 5.) TILA typically provides for a rescission period of three days following consummation of the loan agreement, delivery of rescission notice or delivery of material disclosures. 12 C.F.R. § 226.23(a)(3). But, "If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first." Id.
On December 11, 1998, McNinch faxed and mailed notices of rescission of the loan agreement. (See Pl.'s Ex. K.) McNinch argues that the rescission was timely, despite not falling within the three day limit, because the first TILA disclosure, supplied by Mortgage America, (Pl.'s Ex. A), did not match the ultimate terms of the loan.
McNinch acknowledges receipt of a second disclosure statement. (Pl.'s Ex. F.) McNinch claims that the second disclosure statement "accurately reflected the legal obligations of the parties, except the amended note's `prepayment penalty' provision," (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 9), but argues that TILA permits correction of a inaccurate disclosure only as a result of subsequent events "not caused by the creditor." (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 10.) Examination of the second TILA disclosure statement belies plaintiff's assertion; the second disclosure statement actually did include notice of a prepayment penalty provision. It states "PREPAYMENT: If you pay off early, you will have to pay a penalty." (See Pl.'s Ex. F.) (It was the note itself that did not state the prepayment penalty on the date of closing.)
Moreover, TILA does permit correction of early disclosures. 12 C.F.R. § 226.17(f) states:
Early disclosures. If disclosures required by this subpart are given before the date of the consummation of a transaction and a subsequent event makes them inaccurate, the creditor shall disclose before consummation:
(1) any changed term unless the term was based on an estimate in accordance with § 226.17(c)(2) and was labeled an estimate;
(2) all changed terms, if the annual percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more than 1/8 of 1 percentage point in a regular transaction, or by more than ¼ of 1 percentage point in an irregular transaction, as defined in § 226.22(a).
The first TILA disclosure statement was clearly labeled as an estimate, and all *854 terms changed from the first disclosure statement were disclosed in the second disclosure statement.
McNinch argues that the changes between the initial disclosure statement and the ultimate loan were not the result of TILA "subsequent events," but bad faith on the part of Mortgage America.[2] (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 10.) The argument continues that bad faith lender activity does not constitute a "subsequent event," pursuant to § 226.17(f), and so correction of the first disclosure is a violation of TILA. McNinch, at oral argument, alleged that the difference between the first TILA disclosure statement and the terms provided at closing was the result of bait and switch tactics by Mortgage America, that Mortgage America never intended to provide the loan described in the first disclosure statement. Plaintiff concludes that the difference between the figures provided in the first estimated TILA disclosure and the ultimate terms of the loan constitute a violation of TILA. As noted earlier, default judgment has been entered against Mortgage America. Even were Harris Trust the entity that made the initial disclosure, which it is not, in analogous contexts, courts of the Eastern District of Pennsylvania have ruled that plaintiffs "cannot legitimately draw an inference from the discrepancies between the [TILA] estimates and the settlement statement that the defendants' estimates were not made in good faith." Brophy v. Chase Manhattan Mortg. Co., 947 F. Supp. 879 (E.D.Pa. 1996). The Brophy Court granted summary judgment in favor of defendants on claims of TILA violations evidenced only by differences between TILA estimates and actual disclosures.
The Brophy ruling did include dictum that could be construed to suggest that in non-"residential mortgage transactions" all disclosures are final, even clearly marked estimates provided to consumers well before consummation. Accurately noting that "TILA is a strict liability statute liberally construed in favor of consumers," id. at 885, the Court hypothesized that "except in the residential mortgage context, any discrepancy between an actual disclosure and what a borrower is later charged ordinarily constitutes a violation under the Act." Id. at 866. The dictum must not be misconstrued to apply to the facts of the present case which involves (a) a non-residential mortgage and (b) a change in terms from a clearly labeled estimated TILA disclosure statement and the actual one presented at closing. The Brophy ruling arose out of disputed TILA disclosures under a "residential mortgage transaction." The parties agree that the instant case involves a non-"residential mortgage transaction." (See Pl.'s Brief in Opp'n to Def.'s Mot. to Dismiss n. 7.) TILA provides explicitly for correction of early disclosures and estimates. The Brophy court did not consider early TILA disclosure estimates in non-residential mortgage transactions.
The significance of Brophy for this case is its non-dictum holding that a simple difference in the disclosed loan figures between the first, (i.e."estimated"), TILA disclosure and the second, (i.e."actual"), TILA disclosure does not, in and of itself, give rise to an inference of bad faith dealings. McNinch's unfounded claims of bad faith and bait and switch tactics by Mortgage America do not constitute material questions of fact when they are evidenced only by "substantial variance" between the initial estimated TILA disclosure, and the ultimate terms of the Loan. As Judge Brody noted in Brophy, "I cannot draw the inference that the defendants' estimates were not made in good faith solely because *855 the estimates vary from the settlement disclosures." Id. at 885 (emphasis added). While the Brophy ruling applied in the context of "residential mortgage transactions," which is different from the McNinch loan, the reasoning of the Court is analogous and applicable to the present case. Moreover, the pending action is against an assignee who was not involved in the TILA disclosure process at all.
Seeking to capitalize on the proffered significance of his only evidence, plaintiff argues that the differences between the first TILA disclosure and the second TILA disclosure, and note, have the effect of extension of the right of rescission to
three years after consummation, because:
If the required . . . disclosures are not delivered, the right to rescind shall expire 3 year[s] after consummation, upon transfer of the consumer's interest in that property or upon sale of the property, whichever occurs first. . . .
(Pl.'s Brief in Opp'n to Def.'s Mot. to Dismiss at 12) at 12 (quoting 12 C.F.R. § 226.23(a)(3).)
This initial argument by plaintiff sets the stage for analysis of the first question: What is the legal effect of the first TILA disclosure statement? McNinch concedes receipt of the second TILA disclosure statement, which he alleges "accurately reflected the legal obligations of the parties, except the Amended note's `pre-payment penalty' provision." (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 9.) The second statement was provided at closing of the loan. Inasmuch as the second statement was provided before the signing of the loan, what is the significance of the initial statement?
Plaintiff argues implicitly that the initial disclosure has a permanence to it, that the terms provided by Mortgage America in the first statement cannot change except for "subsequent events" which are construed by McNinch to mean events "not caused by the creditor." (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 10.) Thus, we must decide whether the first disclosure statement constituted an irrevocable offer to contract under the listed terms. As already noted, 12 C.F.R. § 226.17(f) provides for correction of early, estimated disclosures.
At the top of the first TILA disclosure statement is a caveat: "Truth in Lending Disclosure Statement, This is Neither a Contract nor a Commitment to Lend, All Terms and Conditions Herein are Estimated and May Vary for Final Closing Documents." (Pl.'s Ex. A.) This warning confounds plaintiff's suggestion of the permanence and significance of the first disclosure statement. Rather, the First TILA disclosure provided by Mortgage America was an estimate that matches the provisions of 12 C.F.R. § 226.17(c)(2)(I), authorizing estimated disclosures.
Plaintiff correctly asserts that "The [Truth in Lending] Act's purpose is `to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him . . .' 15 U.S.C. § 1601." (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 6.) By being provided with a lender's estimates, the consumer acquires general information for comparison with terms available from other lenders and remains free to borrow elsewhere.
McNinch, at closing, when offered a loan that was different from that specified in the first estimated TILA disclosure statement, accepted the loan, despite the substantial variance from the terms listed in the first disclosure statement. McNinch argues that:
The McNinches detrimentally relied on Mortgage America's misrepresentations and bad faith conduct. If Mortgage America had disclosed the true credit terms on February 5, 1996, the McNinches would have sought and obtained a loan from another lender on more favorable terms.
(Id. at 3).
Assuming without deciding that McNinch could prove his assertions that *856 another lender would have provided him with a better deal, he can prove no facts to show that his reliance was justified, considering the explicit warning that the first disclosure statement was a non-binding estimate. McNinch was free to explore other opportunities upon receiving this estimate. Moreover, such blind reliance on explicitly marked estimates is misplaced so long as TILA provides for re-disclosure of early estimates through provisions such as 12 C.F.R. § 226.17(f). Arguably, the goal of TILA "to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him . . ." is met when the consumer is supplied with disclosure of the correct, significant terms of the actual loan prior to closing. The second disclosure statement given to McNinch at closing satisfies that goal and TILA's requirements.
Interestingly, TILA requires early disclosure of terms in certain types of loans. In the complaint on page 7 at ¶ 34, McNinch quotes 12 C.F.R. § 226.19(a)(1):
The TILA and Regulation Z impose special disclosure requirements for residential mortgage transactions covered by RESPA. Regulation Z Provides:
Residential mortgage transactions subject to REPSPA. (1) Time of disclosures. In a residential mortgage transaction subject to the Real Estate Settlement Procedures Act . . . the creditor shall make good faith estimates of the disclosures required by § 226.18 before consumption, or shall deliver or place them in the mail not later than three business days after the creditor receives the consumer's written application, whichever is earlier.
(Emphasis added.) If the loan was a "residential mortgage transaction" the initial disclosure was required. In Count I of the Complaint, at ¶ 33, McNinch states: "The loan received by the McNinches from Mortgage America is a residential mortgage transaction as defined in the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq." (Emphasis added.) Yet, McNinch changed the factual contention in subsequent filings. According to footnote 7 (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 6 (emphasis added)):
A "residential mortgage transaction" under TILA is a "purchase money" residential mortgage ("a consensual security interest . . . against a consumer dwelling to finance acquisition or initial construction . . ."). 15 U.S.C. § 1602(w). McNinches' loan is not a "purchase money" mortgage. Complaint, Exhibit "G."
In this case, the initial TILA disclosure was not required by TILA. The McNinch loan was not a "purchase money" mortgage subject to RESPA. The fact that TILA provides for early disclosure, in particular circumstances, see 12 C.F.R. § 226.17(b), is evidence that early disclosure, and its benefits, were contemplated by Congress at drafting. Despite the purpose of TILA, "to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him," the Act requires early disclosure not in all cases, but for "residential mortgage transactions" as defined in 15 U.S.C. § 1602(w). Thus, despite adoption of early disclosure in certain areas, Congress felt that the Act's purpose could be fulfilled without early disclosures, in circumstances such as those in the present case.
Considering the TILA requirement of early disclosure in certain contexts, the TILA provisions providing for correction of early disclosures, and the Brophy ruling that variance between estimates and terms of actual loans is not per se evidence of TILA violations, the McNinch claim that the second disclosure was ineffective cannot stand and is insufficient to defeat this motion to dismiss.
Consummation
Invoking an issue of contract law, the plaintiff argues:
*857 Mortgage America's Rescission Notice was defective because it did not clearly list the rescission deadline as three business days after "Consummation", the date the legal obligations of the parties were established, which occurred on March 13, 1996 when the McNinches "accepted" the Amended note. Since a defective Rescission Notice extends the rescission period to three years after Consummation, the McNinches' December 11, 1998 Rescission was timely.
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 12.) Creditor disclosure of the rescission deadline to the consumer is required by TILA under 12 C.F.R. § 226.23(b)(1). The life of the consumer's right of rescission is controlled by 12 C.F.R. § 226.23(a)(3):
The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first.
(Emphasis added.) McNinch's argument is that the rescission deadline was incorrectly listed on the rescission deadline disclosure, thereby extending the right of rescission to three years, rather than three days following consummation of the loan. The Right of Rescission notice, (Pl.'s Ex. H), as required by TILA, was provided by Mortgage America at the March 5, 1996 closing. Harris Trust asserts that "[t]he loan agreement was consummated on March 5, 1996," (Mot. to Dismiss at 2, see also Pl.'s Brief in Opp. To Def.'s Mot. to Dismiss at 13), pursuant to 12 C.F.R. § 226.23(a)(3), and that listing the rescission deadline as March 8, 1996, the third day following the closing, was proper.
Conversely, McNinch argues that consummation did not occur on March 5, 1996, at the closing. McNinch claims that consummation occurred when the McNinches accepted the amended note, which occurred on or after March 13, 1996. McNinch argues that March 13 is the first day that there was a writing which expressed the "meeting of the minds" of the parties.
Because plaintiff argues that the expiration of right of rescission was incorrectly listed on the TILA Right of Rescission Notice, it would follow that "[i]f notice is defective, the creditor did not deliver the `required notice' listing the correct `date the rescission period expires.'" (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 15.) As a result of this alleged error, "the right to rescind is extended" for three years after consummation. Id. Therefore, plaintiff asserts, the December 11, 1998 rescission was valid under TILA.
The issue turns on an interpretation of contract law. Defense asserts, and McNinch concurs, (see Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 14), that:
The official comments to Regulation Z, 12 C.F.R. § 226.2(a)(13) explain that "consummation" [for the purposes of 12 C.F.R. § 226.23(a)(3)] occurs when a contractual obligation on the consumer's part is created as a matter of applicable state law. . . . Under Pennsylvania law, a contract is complete when both parties have agreed on all essential terms. . . .
(Mot. to Dismiss at 2, 3.) McNinch argues that the parties had not agreed to all of the essential terms on March 5, 1996; that by sending an amended note, Mortgage America indicated that it would not be bound by the terms of the first note. (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 14.)
The question of whether there was a contractual "meeting of the minds" at consummation is centered on the absence of the "prepayment penalty provision" in the original note. Although the second disclosure statement, presented at closing, contained *858 notice of the prepayment penalty, McNinch argues that the absence of this provision in the note means that consummation did not occur, as there was no meeting of the minds or manifestation of intent by Mortgage America to be bound by the terms of the first note.
Yet, despite the prepayment penalty provision's failure to appear on the original note, the second disclosure, also provided at the closing, stated: "Prepayment: If you pay off early, you will have to pay a penalty." (Pl.'s Ex. F.) The first disclosure statement also provided for a prepayment penalty. McNinch argues that "[b]oth Mortgage America and McNinch agreed that the loan agreement would be reduced to a promissory note which contained a prepayment provision." (Compl. at 9 ¶ 44). The documents establish that the parties agreed, when they entered into a contract at closing, that a prepayment penalty provision was to be incorporated. Yet, McNinch posits that the parties "agreed the loan agreement would be reduced to a [written] promissory note which contained a prepayment provision." (Id. (emphasis added)). In other words, McNinch insists that the parties agreed only to agree at a later date; i.e., that the loan was not effective until a completed, master note that incorporated the prepayment penalty provision was written. In support of this contention, McNinch argues that,
[w]hile the Complaint doesn't state that one or both of the parties intended that the agreement was not complete before it was reduced to writing with all of the terms of the agreement in that writing, it is a reasonable inference that both parties had this intention, from the surrounding circumstances. If they did, there was no agreement until March 13, 1996.
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 15 n. 22) (citations removed.) The Court cannot conclude, on the facts of this case, that any such inference is "reasonable." The facts, as pleaded, show that, at closing, the parties agreed to all the material terms of the loan. The note, which evidenced the loan, was supplemented at closing by the oral agreement of the parties. The oral modification was confirmed in writing shortly thereafter by the amended note with the prepayment penalty added.
McNinch argues that because the parties contemplated that their agreement could not be complete before it was reduced to a writing, no contact existed before the writing. Krause v. Great Lakes Holdings, Inc., 387 Pa.Super. 56, 64, 563 A.2d 1182, 1186 (1989), provides:
If the parties agree on essential terms and intend them to be binding, a contract is formed even though the parties intend to adopt a formal document with additional terms at a later date. Johnston v. Johnston, 346 Pa.Super. 427, 499 A.2d 1074 (1985). However, where the parties contemplate that their agreement cannot be considered complete before it is reduced to writing, no contract exists until the execution of the writing. Essner v. Shoemaker, 393 Pa. 422, 143 A.2d 364 (1958). The intent of the parties is a question of fact to be determined by the factfinder. Johnston v. Johnston, 346 Pa.Super. at 431, 499 A.2d at 1076.
Under Krause, it is for the finder of facts to determine whether McNinch and Mortgage America intended that their loan agreement was incomplete before it was reduced to a writing that incorporated the agreed upon prepayment penalty provision. Generally, evidence of disputed intent requires testimony. However, in this case, neither party disputes that the contract was formed and included the prepayment penalty. The only dispute concerns on what date the contract was formed.
In this case, evidence of the parties' understanding of the contract can be derived from their performance. In asking whether the contract was consummated at closing, their actions with respect to *859 the agreement are decisive. In the Harris Trust Savings Bank Reply to Debtor's Response to Motion to Dismiss at page four, the defense argues: "Clearly, when Plaintiff signed a note, gave a mortgage, and even obtained and spent the proceeds of his loan, he incurred a contractual obligation to the lender." Indeed, in Pennsylvania, it is "well-established that `an offer may be accepted by conduct and what the parties d[o] pursuant to th[e] offer' is germane to show whether the offer is accepted." Schreiber v. Olan Mills, 426 Pa.Super. 537, 541 627 A.2d 806, 808 (1993) (quoting Accu-Weather, Inc. v. Thomas Broadcasting Co., 425 Pa.Super. 335, 625 A.2d 75 (1993)). Acceptance came on March 5.[3] Although disbursement of the loans funds occurred on March 11, after the March 5 closing and the expiration of the three day TILA rescission period, there is no dispute in this case that McNinch accepted the loan proceeds and agreed to repay the loan, with its prepayment penalty intact, at closing.
The facts show that at the March 5, 1996 closing McNinch received, inter alia, a mortgage, a closing settlement statement, an accurate Truth in Lending disclosure statement, and a two-page promissory note. Despite the absence of a prepayment penalty in the note, the parties agreed that it would be included as a term of the loan, (see Compl. at 9 ¶ 44), and the TILA disclosure statement provided for such a penalty. The TILA statement provided at closing correctly reflected the nature of the loan between McNinch and Mortgage America.
McNinch and his wife signed the loan documents fully aware of the terms of the loan including the prepayment penalty provision. McNinch also received a TILA Rescission Notice providing a three day rescission grace period. The three days passed with no rescission or legal action by McNinch.
On March 11, 1996, the proceeds of the loan were disbursed and accepted by McNinch and his creditors. On or about March 13, 1996, McNinch received an amended page to the note supplied at closing that included the prepayment penalty agreed upon at closing. After defaulting, McNinch attempted to rescind the loan on December 11, 1998.
McNinch's activity at and after closing evidences acceptance of all essential terms of the loan. Arguments to the contrary are founded on nothing other than the fact that Mortgage America mailed a corrected amended note that was in accord with the parties' expressed intention and agreement. At closing McNinch didn't rescind or pursue action against Mortgage America. He did accept the loan proceeds and apply them to satisfy other debts. He did make payments. (Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 14.) Accordingly, we find that for purposes of 12 C.F.R. § 226.23(a)(3), "consummation" occurred at the March 5 closing.
Assignee Liability
Insisting on the liability of Harris Trust, McNinch states:
Harris Trust [as assignee of Mortgage America] can be liable for 1.) TILA violations apparent on the face of loan documents and 2.) a failure to properly respond to McNinch's Rescission[.]
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 16.) McNinch argues that "[w]hen Harris Trust compared the first disclosure to the Amended Note (and the second disclosure), the substantial variance between the terms of the two documents (particularly the 35% + jump in interest rate) showed there was a `disclosure' violation." (Id.)
15 U.S.C. § 1641(a) states:
. . . any civil action for a violation of this title . . . which may be brought against a *860 creditor may be maintained against any assignee of such creditor only if the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement, . . . For the purpose of this section, a violation apparent on the face of the disclosure statement includes, but is not limited to (1) a disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents assigned, or (2) a disclosure which does not use the terms required to be used by this title.
By arguing that assignee Harris Trust is liable for TILA violations apparent from the loan documents, McNinch begs the question of whether the initial disclosure statement had the legal significance and effect that McNinch proposes. Harris Trust argues compellingly that it was entitled to rely on the correct second disclosure statement, and its consistency with the amended note. The amended note was sent to the McNinches on or about March 13, and contained the prepayment penalty provision that, although absent from the original note, was agreed upon by the parties, (see Complaint at 9 ¶ 44), at the March 5 closing.
The Loan Documents were assigned to Harris Trust in August 1997. [See Pl.'s Ex. J.] When Harris Trust received the documents, the Note already incorporated the allegedly substituted page. Therefore, there were no violations on the face of the Disclosure Statement apparent to Movant because that disclosure matched the terms of the Note and the other Loan Documents.
(Harris Trust Savings Bank Reply to Debtor's Resp. to Mot. to Dismiss at 6.) This point is not contested by McNinch. The second disclosure statement was an accurate representation of the legal rights and duties of each party.
McNinch asserts that Harris Trust should have known about the alleged TILA violations by comparing all of the disclosure statements with the loan documents. We disagree. The Brophy court ruled that variation between estimated and final disclosure statements is not per se evidence of TILA violations. Also, courts have construed TILA assignee liability restrictively. In Jordan v. Chrysler Credit Corp., 73 F. Supp. 2d 469 (D.N.J.1999), despite plaintiff's arguments that assignees should have known of TILA violations by comparing certain financial records, the district court held that assignees are not liable for TILA violations apparent through examination of extra-TILA-disclosure documents. Quoting the Eleventh Circuit opinion, Ellis v. General Motors Acceptance Corp., 160 F.3d 703, 709-710 (11th Cir.1998), the Jordan court noted:
Under the [plaintiff's] own argument, . . . we would need to resort to evidence or documents extraneous to the disclosure statement. The plain language of the statute forbids us to do so. As the Seventh Circuit noted, such an interpretation of TILA would: impose a duty of inquiry on financial institutions that serve as assignees. Yet this is the very kind of duty that the statute precludes, by limiting the required inquiry to defects that can be ascertained from the face of the documents themselves.
Jordan, supra, 73 F.Supp.2d at 475. The Jordan court dismissed the plaintiff's claim because there was no TILA violation apparent on the disclosure documents. We note that McNinch's claim against assignee Harris Trust is different from Jordan because of the existence of the initial estimated disclosure statement; in Jordan there was only one set of TILA disclosures. However, the analysis holds true.
Assuming that Mortgage America violated TILA, the question becomes: Was Harris Trust required by TILA to examine the initial disclosure statement and to compare it with the actual loan? A correct and proper second disclosure statement was included in the loan documents. Considering the restrictive construction of TILA assignee liability, Harris Trust's duty was simply to ensure that the loan had a *861 matching accurate TILA statement paired with it, and nothing more. Therefore, Harris Trust, as assignee, is not liable itself for any of Mortgage America's violations associated with the first disclosure.
McNinch also asserts that Harris Trust can be liable for a failure to properly respond to the McNinch rescission. 15 U.S.C. § 1641(c) states: "Any consumer who has the right to rescind a transaction under section 125 [15 U.S.C. § 1635] may rescind the transaction as against any assignee of the obligation."
According to the McNinch argument:
McNinch faxed a notice of rescission to Harris Trust's loan servicer, Ocwen Federal Bank on December 18, 1998. Complaint, para. 29, Exhibit "K". At that time, Harris Trust was under an obligation to honor the rescission.
(Pl.'s Br. in Opp'n to Def.'s Mot. to Dismiss at 17.) If, as assignee, Harris Trust failed to honor a properly tendered rescission it would be liable for damages.
Except as otherwise provided in this section, any creditor [or assignee pursuant to 15 U.S.C. § 1641(c)] who fails to comply with any requirement imposed under this chapter [15 U.S.C. § 1631 et seq.], including any requirement under section 125 [15 U.S.C. § 1635], or chapter 4 or 5 of this title [15 U.S.C. § 1666 et. seq. or § 1667 et. seq.] with respect to any person is liable to such person . . .
15 U.S.C. § 1640(a). Although assignees can be liable for failure to honor a rescission, the rescission notice tendered by McNinch was not within the three-day rescission period provided by TILA. Assuming that the McNinch rescission was provided for by TILA, it was through the extension of the rescission deadline due to alleged Mortgage America TILA violations. We have already rejected that theory. There is no evidence McNinch can produce that will show a TILA violation "apparent on the face of the disclosure statement." 15 U.S.C. § 1641(a). Here, the second disclosure statement matched the actual loan terms. The operative TILA statement was the second disclosure, which properly reflected the legal obligations of the parties.
Conclusion
In conclusion, consideration of all of the relevant facts has provided a basis to answer the two questions with which we began. First, what is the legal effect of the first TILA disclosure statement? Considering 1.) the caveat at the top of the form that it was an estimate and not a binding contract, 2.) the fact that TILA provides for mandatory early disclosure in other contexts and permits changes to estimated early disclosure in this context, and 3.) the correct and accurate second disclosure provided before the closing, the first estimate disclosure cannot have the significance that McNinch attributes. The first disclosure statement was not an offer to contract, nor does TILA contemplate its irrevocability.
The second question is: Was the loan agreement between McNinch and Mortgage America consummated on March 5, 1996, the date of the closing, or on March 13, 1996, the day the substituted page of the note, which included the prepayment penalty provision, was received by the McNinches? The loan was consummated on the date of the closing, March 5, so the TILA rescission notice provided by Mortgage America was accurate and valid. At closing, the McNinches were aware of the cost of their credit.
Despite McNinch's argument that the parties agreed that the contract would not exist prior to a written master document, the parties' undisputed conduct belies the assertion. McNinch's argument is based solely on the absence of the prepayment penalty provision in the original note. Yet, both TILA disclosure statements provided for a prepayment penalty, and McNinch admits having knowledge of, and agreeing to, the provision at closing. McNinch fails on this point as well.
*862 Thus, there is no construction of the facts, drawing all reasonable inferences in favor of the plaintiff, upon which relief can be granted. Even though this complaint falls within the applicable statute of limitations, the motion to dismiss the complaint will be granted. An appropriate order will be entered.
NOTES
[1] The court's jurisdiction was not at issue. This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law.
[2] We note, however, that the initial disclosure here was clearly labeled as a non-binding estimate. Thus, applicability of the "subsequent event" language of 12 C.F.R. § 226.17(f) is of questionable relevance. Section 226.17(f)(1) specifically authorizes estimates such as that at bar and anticipates changes in terms provided by estimates and in the actual disclosure.
[3] Examination of the calendar for 1996 reveals that March 5 was a Tuesday, March 8 was a Friday, and March 11 was a Monday. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546449/ | 988 A.2d 511 (2010)
190 Md. App. 217
JOHN CRANE, INC.
v.
John LINKUS, Personal Representative of the Estate of George J. Linkus, Sr.
No. 959, September Term, 2008.
Court of Special Appeals of Maryland.
February 1, 2010.
*513 Michael A. Pollard (John H. Ebner, Baker & McKenzie, LLP on the brief, of Chicago, Illinois and Peter A. Woolson, Danielle G. Marcus, P.A. Woolson PA on the brief, of Baltimore), for appellant.
Edward J. Lilly (Andrew Cantor, Jennifer Lilly, Law Offices of Peter G. Angelos PC on the brief), Baltimore, for appellee.
Panel: JAMES R. EYLER, MEREDITH, CHARLES E. MOYLAN, JR. (Retired, specially assigned), JJ.
EYLER, JAMES R., J.
John Crane, Inc., defendant below and appellant herein, appeals from a judgment entered in the Circuit Court for Baltimore City in this asbestos related disease case, in favor of George J. Linkus, Sr, plaintiff. On May 7, 2009, during the pendency of this appeal, Mr. Linkus died, and John Linkus, personal representative of the estate of George J. Linkus, Sr., appellee, has been substituted as a party. We shall use the designation "appellee" to refer to both Mr. Linkus and his personal representative, regardless of the context. Appellant contends the court erred in (1) denying its motion for judgment and judgment notwithstanding the verdict on the ground that expert testimony that its products released asbestos fibers was required to establish causation; (2) denying its motion for new trial and not ordering a remittitur on the ground that the verdict was excessive; and, (3) granting appellee's motion to enter judgment without crediting settlement amounts received from several bankrupt defendants. We shall affirm.
Relevant Procedural History In This Case
The decedent was a shipyard worker. In 1988, counsel for numerous shipyard workers filed a master complaint in circuit court, to be followed by a short form complaint by each plaintiff. On April 4, 2005, appellee was diagnosed with pleural mesothelioma, which is cancer of the lining of the lung, and on April 29, 2005, appellee filed a short form complaint,[1] naming appellant *514 and 63 other entities as defendants. The short form complaint contained counts in strict liability, breach of warranty, negligence, fraud, conspiracy, and market share liability. In the short form complaint, appellee alleged that he was employed at the Key Highway shipyard as a machinist and that he was exposed to asbestos containing products from 1952 through the 1970's.
During the period leading up to trial, the period of exposure was narrowed, and the number of defendants was narrowed. In January and February, 2008, the case was tried with appellant as the sole defendant and four entities who had settled with appellee as cross defendants. The jury returned a verdict in favor of appellee, on counts of strict liability and negligence, in the amount of $335,274.00 in medical expenses and $15,000,000.00 in noneconomic loss, for a total of $15,335,274.00. The jury also found that cross-defendants, Owens-Illinois (OI) and Foster Wheeler, were liable, but also found that other cross defendants, who were on the verdict sheet, were not liable.
The jury was asked to determine (1) whether appellee developed mesothelioma and, if so (2) whether it was caused by asbestos exposure, if so (3) whether appellee was exposed to asbestos containing products manufactured or sold by appellant, if so (4) whether appellee's exposure to appellant's products was a substantial contributing factor in the development of appellee's mesothelioma, if so (5) whether appellant was negligent in the manufacture and sale of its products (6) whether appellant was strictly liable for the manufacture and sale of its products and (7) if applicable, the amount of compensatory damages. The jury was also asked to answer questions relating to causation, negligence, and strict liability as to the cross defendants.
In opening statements, in pertinent part, counsel for the parties stated the following. Appellee's counsel advised the court that he was proceeding on a failure to warn theory. He also advised that appellant's products involved were rope and wicking[2] and that, while there might be evidence of the presence of graphited gasket material, appellee was not making a claim with respect to that material. Appellee's counsel advised that testimony would show that "... any exposure above background or the ambient air contributes to the total dose, contributes to the disease and becomes a substantial contributing factor." Needless to say, it was appellee's position that he was exposed to asbestos from appellant's products, which was a substantial contributing factor in the development of his mesothelioma.
In opening statement, appellant's counsel agreed that appellee has mesothelioma and that it was caused by asbestos exposure but stated that the evidence would show that appellant's products were not a contributing cause. In essence, counsel advised that appellant's products did not emit significant amounts of asbestos fibers; the type of asbestos fiber, chrysotile, was the least potent; and the size of the fibers minimized the danger. In contrast, appellant's counsel advised that appellee was exposed to products manufactured by others that did emit large quantities of dangerous, respirable asbestos fibers.
The causation question, therefore, was whether appellant's products were capable of emitting respirable asbestos fibers in sufficient quantities to be a substantial contributing cause of appellee's mesothelioma.
During trial, appellant filed a motion for judgment on the ground that expert testimony was required to create a jury question *515 as to whether exposure to its products, without expert testimony as to fiber release, was a substantial contributing factor to appellee's disease, and no such expert testimony was offered.
After trial, appellant filed a motion for judgment notwithstanding the verdict on the same ground. After verdict, appellant filed a motion for new trial on the ground that the verdict was excessive and requested that the court grant a new trial or, in the alternative, order a remittitur, and if remittitur was refused, grant a new trial. The court denied the motion.
Also after verdict, appellee filed a motion to enter judgment in the amount of $5,086,321.00, which reflected a pro rata reduction based on the liability of two cross defendants and the payment of settlement monies by certain bankrupt entities. Appellant opposed it on the ground that it should receive additional credits for payments made by other bankrupt entities. The court granted appellee's motion and entered judgment in the amount requested. Appellant noted an appeal to this Court.
General Background
Before addressing the causation issue in this case, it may be helpful to place it into context, given the long history of asbestos related litigation. The earliest plaintiffs tended to be insulators or other tradesmen who worked with asbestos containing products. The products tended to be insulation products, such as pipe covering, block, and cement, which contained and emitted significant amounts of respirable asbestos fibers, particularly when handled. The manufacturers and sellers of those products asserted various defenses, including defenses related to their knowledge or lack thereof at relevant points in time with respect to the dangers of asbestos exposure, but generally did not contest the assertion that their products emitted respirable fibers in quantities sufficient to cause disease, assuming adequate exposure to the relevant products.
As the litigation progressed, many of the plaintiffs were tradesmen who did not work directly with asbestos containing products but were in proximity to those who were, and also plaintiffs who did not work in proximity to those who worked with asbestos containing products but claimed second hand exposure from those who did. The defendants sought a strict "but for" test for causation, while plaintiffs sought a less stringent rule, in terms of nature and extent of exposure.
Some plaintiffs could not prove that they frequently had been in proximity to asbestos containing products, and argued that asbestos fibers could migrate and that such proof should not be required. Maryland rejected both the "but for" test and the "fiber drift" theory and, as explained below, adopted the substantial factor test. That test required proof that the claimant was frequently in an area where respirable asbestos fibers existed as opposed to permitting an inference that fibers proved to exist in one area drifted to another area, where the claimant was located. It also required proof that the exposure was a substantial factor in causing the disease.
As the litigation continued to progress, and the manufacturers of insulation products filed bankruptcy petitions, plaintiffs paid more attention to manufacturers and sellers of asbestos containing products containing lesser amounts of asbestos or treated asbestos. Those manufacturers and sellers began to assert as a defense that their products did not emit respirable asbestos fibers in sufficient quantities to cause disease or, in some cases, the disease in question, even when handled, despite proof that the plaintiff frequently worked in proximity to their products. In *516 other words, the emphasis for those manufacturers and sellers shifted from exposure to products to exposure to asbestos fibers released from those products. It is this aspect of the causation issue that is involved in the case before us.
We recognize that, because the early cases generally involved products that emitted substantial quantities of respirable asbestos fibers, courts frequently spoke in terms of exposure to products without commenting on the quantity, size, or nature of fibers emitted from each product.
With respect to asbestos litigation in this State, it is worthy of note that there were two lengthy trials of consolidated cases in Maryland, each involving a large number of cases tried on common issues, and each involving a small number of cases tried on all issues. Each consolidated proceeding was appealed. See ACandS, Inc. v. Godwin, 340 Md. 334, 667 A.2d 116 (1995) (sometimes referred to as Abate I) and ACandS, Inc. v. Abate, 121 Md.App. 590, 710 A.2d 944 (1998) (sometimes referred to as Abate II). The consolidated cases tried on common issues were or will be the subject of mini trials on case specific issues. As distinguished from the cases tried on common issues, the case before us was tried on all issues.
Relevant Evidence In This Case
Appellee testified to the following. At age 18, in 1952, he began working at the Bethlehem Steel Key Highway shipyard and worked there until 1959. For 6 to 8 months, appellee worked on board ships as a helper, removing valves from engine and boiler rooms to be taken to a machine shop to be reconditioned. When removing the valves, appellee removed insulation which created lots of dust. Appellee frequently was in the area when new insulation (pipe covering and cement) was applied by others, and that created dust. After that 6 to 8 month period, appellee worked in the inside machine shop as a helper, cleaning up debris and taking it to a dumpster. Ultimately, appellee became a specialist on overhauling valves. Appellee removed old insulation from the valves which created dust and put new "wicking or rope" packing in the valves. Appellee stated that the wicking and rope came from boxes with appellant's name on them. He described the wicking and rope as "dry," "white," and "powdery." He also stated that, when handled or cut, it produced "quite a bit of dust" which "would get ... all over you. You would breathe it, get it over your clothes and all over your hands and everything."
Appellee identified exhibits reflecting that, between 1952 and 1959, he was exposed to asbestos containing products manufactured by 9 entities other than appellant.
In November, 2004, appellee "started getting short on breath." In early 2005, appellee had fluid removed from his lungs on two occasions and had biopsies taken from his lungs. In March or April, appellee was diagnosed with mesothelioma and underwent surgery. Appellee underwent chemotherapy treatments until September, 2005 and again from July through September, 2006. Appellee was advised that his condition was terminal. Appellee described the difficulties associated with the chemotherapy treatments and his deteriorating health generally.
John Floyd Nichols testified to the following on behalf of appellee. Mr. Nichols worked at the Key Highway shipyard and machine shop from 1940 until 1975. Mr. Nichols observed appellee work with appellant's asbestos rope and wicking on a daily basis. When handled, the rope and wicking produced visible dust. Appellee also worked with another type of packing material that came out of boxes marked *517 with appellant's name that was "graphited." That material did not produce as much dust as the "dry" rope and wicking. Mr. Linkus also worked with sheet gasket material that came out of boxes marked with appellant's name, and that produced "some" dust.
The parties stipulated that appellant's rope and wicking material was obtained from another manufacturer and that the manufacturer took the position that its product contained a "maximum asbestos percentage of 90 percent." Appellant produced evidence at trial that the percentage of asbestos in the product was approximately 60 percent.
Dr. Samuel Hammar, a pathologist, testified on behalf of appellee as follows. He was accepted as an expert in the diagnosis and cause of asbestos related diseases; the types of fibers which cause such diseases; anatomic, clinical and experimental pathology; microscopy; immunohistochemistry; and carcinogenesis. He testified that asbestos fibers are "incredibly tiny" and cannot be seen with the naked eye. He explained that "if you saw a dust cloud of asbestos fiber, there would be billions and billions, probably trillions of fibers in that dust cloud." The witness opined that invisible amounts of asbestos fibers can cause asbestos related diseases. The witness discussed the different types of asbestos fibers, the disease causing process, and the disease of mesothelioma. In doing so, he testified that mesothelioma is a dose-related disease, meaning the higher the dose of an agent, the higher the risk of developing a disease caused by that agent (the dose-response relationship). He opined that all exposures to asbestos above background levels contribute to the development of mesothelioma.
Dr. Edward S. Gabrielson testified on behalf of appellee. Dr. Gabrielson was a professor in the departments of pathology and oncology at The Johns Hopkins Hospital. Dr. Gabrielson testified as an expert in anatomic and clinical pathology, the diagnosis of asbestos related diseases, and carcinogenesis. Dr. Gabrielson opined that appellee was suffering from mesothelioma caused by asbestos exposure. He was asked to opine whether there was any safe level of exposure to asbestos below which mesothelioma would not develop. He replied:
Well, there is no recognized threshold below which there are no mesotheliomas whatsoever. The Occupational Health Safety Administration, OSHA, has set some levels whereby they believe that below that level there is reasonable safety.
In other words, there may be occasional mesotheliomas if an individual is exposed below those levels, but probably very few, and in practical terms, that's a level that can be achieved and provides a reasonable level of safety, but there is no absolute-no level where it is absolutely safe that nobody will ever get a mesothelioma.
Dr. Gabrielson also opined, in response to a hypothetical question, that assuming appellee worked with appellant's rope and wicking in the 1950's and "assuming that he breathed asbestos dust as a result of working with this product," the exposure contributed to the mesothelioma. He also opined that exposure to asbestos containing products manufactured by others also contributed to his mesothelioma.
The following exchange is pertinent:
Q. Do you need to test the air to determine whether or not Mr. Linkus had an occupational exposure to asbestos?
A. No, sir. In Mr. Linkus's case, there is pretty good evidence that-from apparently what workers verified that *518 he worked with these products and that he broke the products and it is quite common for looking back retrospectively that measurements were never made. In fact, measurements were rarely made in the workplaces in the 1950's and 60's.
Individuals inhaled asbestos dust. They were working with asbestos. They typically didn't wear appropriate protective materials and no measurements were made.
One can't use that as a standard to say that the person was or wasn't exposed to asbestos fibers that they inhaled.
Q. And, Doctor, do you need to test the air to determine whether or not a product is a substantial contributing factor, assuming he had an individualthe individual had an occupational exposure to the material?
A. No, sir. Again, we have to go with the best evidence available. And assuming that the available evidence is consistent with Mr. Linkus having inhaled asbestos fibers from a particular exposure, even if no measurements were made and, of course, in most situations they were not then, but even though no measurements were made, we can come to a reasonable conclusion that more likely than not the inhalation of those asbestos fibers contributed to the development of the cancer.
Q. And, Doctor, assuming whatever the background level may be in the air,.1 or whatever it may be, does the use of an asbestos-containing product which releases fibers into the air increase the level of asbestos in the air above background?
A. Yes, sir.
On cross examination, the witness testified that mesothelioma is caused by respirable asbestos fibers and can occur without any known exposure to asbestos fibers other than those contained in the ambient air. He stated that the cause in those cases is unknown. He also stated that the ambient air level often may be measured at 0.1 to 0.2 fibers per cubic centimeter, but it frequently it is higher in urban areas and sometimes lower in other areas. He also acknowledged that the human eye is not able to look at visible dust and determine whether the particles are asbestos. He explained that, to determine with "absolute certainty" whether dust contains respirable asbestos fibers, is "best determined" by an industrial hygienist or a person with similar experience. The following exchange occurred:
Q. Okay, now, respirable asbestos fibers are those fibers that can be breathed in and retained in the lung; is that not right?
A. Yes, sir.
Q. And those are fibers of a particular size?
A. Yes, sir. Certain sizes and shapes of certain particles are more likely to be breathed in and retained.
Other sizes and shapes of particles are either filtered out by the nose or upper respiratory tract or they can be inhaled and exhaled without ever lodging in the lungs.
So respirable fibers refer to fibers of the right size and shape that they tend to be inhaled and deposited in the lungs.
Q. So if a fiber is too small, it goes in and goes back out?
A. Tends to go in and out, yes, sir.
Q. And if a fiber is too large, it doesn't get in there.
A. You could say it is too large or it is better if it is that size, yes, sir.
Q. All right. Or if a fiber is, say, attached to another material such as it becomes too large to come in and get back out; can that happen?
*519 A. Yes. sir, it can happen.
Q. Now, when there is visible dust, the human eye is not seeing asbestos, is it? I mean, it is seeing dust?
A. What the human eye will see, of course, is simply a refraction of the light. The human eye is not able to look at individual particles and say this is asbestos or some other type of particles.
The human eye can just appreciate that there are particles in the air and it changes the way the light comes to them.
Q. Do you know whether any particular dust contains those respirable asbestos fibers, those ones we talked about that can go in and be retained, that dust has to be tested, doesn't it?
A. Yes, sir. It is best determined by an industrial hygienist or somebody who is experienced at looking at the dust itself and determining what types of particles are present.
Q. And so I guess to know the amount of respirable asbestos fiber in any particular dust, if any, those tests have to be done?
A. To know with absolute certainty, yes, sir. One needs to have some type of testing to know whether or not the fibers that are in a dust are of a respirable nature.
Q. And just to be clear now, it is the respirable asbestos fibers that cause the disease, correct?
A. Yes, sir.
Q. If you don't breathe in and retain the respirable-sized fibers, no disease is caused?
A. No disease can be caused by fibers that are not inhaled. So if there are other fibers, other fibers can cause a disease, but fibers that are not inhaled, fibers that are not respirable cannot cause mesothelioma.
Dr. Arnold R. Brody, the holder of a Ph.D degree in cell biology, testified on behalf of appellee as an expert in cell biology, anatomical pathology, and effects of asbestos fibers in the human body. Dr. Brody described how respirable asbestos fibers cause cancer. He testified that for mesothelioma there is no known level that is safe. On cross examination, he acknowledged that all persons living in urban areas are exposed to asbestos in the ambient air and probably have millions of asbestos fibers in their lungs. He stated that he did not know if a study had been done to determine if exposure to levels of asbestos no higher than 0.1 fibers per cubic centimeter caused asbestos related diseases.
Dr. Lanta Christine Oliver, an expert in the areas of internal and occupational medicine and the diagnosis of asbestos related diseases, testified on behalf of appellee. The witness examined appellee and reviewed his medical records and deposition. Dr. Oliver described appellee's medical treatment and opined that he had mesothelioma caused by asbestos exposure and that it was terminal. Dr. Oliver also opined that, assuming that appellee handled non-graphite rope and non-graphite wicking manufactured by appellant which emitted respirable asbestos fibers, the exposure was a contributing cause of his disease, and if he had other exposures to such fibers, they would be contributing causes. The witness also opined that there was no known level of exposure to asbestos below which there is no risk of mesothelioma. Finally, the witness acknowledged that asbestos fibers are present in the ambient air.
Dr. John Dement, an industrial hygienist and epidemiologist, testified on behalf of appellee. He was accepted as an expert in the areas of "industrial hygiene, including air sampling, epidemiology, the health hazards of asbestos, the history of knowledge *520 of the health hazards of asbestos, the history of knowledge of the health hazards of asbestos exposure, the knowledge of the different types of asbestos and their ability to cause the various asbestos-related diseases, and epidemiology regarding asbestos exposure, including the ambient air...." The witness testified that asbestos fibers are small and individual fibers cannot be seen with the naked eye. He explained that when one sees a dust cloud, it is because light is reflected off the cloud so the concentration has to be high enough to produce that effect. He opined that asbestos containing dust becomes visible to the naked eye when concentration is in the area of fifteen to twenty billion particles per cubic foot, or 45 to 90 million fibers per cubic meter. The witness discussed the state of general knowledge at various times with respect to the relationship between asbestos exposure and disease, including mesothelioma. He opined that there is no level of exposure below which there is no increased risk of disease.
On cross examination, the following exchange occurred.
Q. If using a product, manipulating a product such as asbestos-containing rope, results in measured fiber per cc levels of between 1.3 and 1.6, would you expect that to be visible?
A. Not necessarily. I mean, what you may see, if you are manipulating the product, you may see an instantaneous visible dust cloud. It disperses out and it is no longer visible. So the period of time that you actually see the visible dust is going to be short.
So it disperses out and you cut your sample, you generally have to cut samples to measure it over a longer period of time, you will see that you may have been high at first but it integrates over that time. So you will see that number one to two fibers per cc.
Q. One to two fibers per cc, will that make you look like a snowman?
A. Not you, but again if you are using it and getting it on your clothes, you can get it on your clothes and yourself from direct contact, not just the airborne dust.
Q. Well, you testified on direct that it takes between 45 to 90 fibers per cc in the air before it is visible and let's assume in the situation I've got a prior release of 1.3 to 1.6, and I actually see something, and that person is also working with thermal insulation.
Would you expect the thermal insulation product to also contribute to that dust?
A. Absolutely.
Dr. James Douglas Crapo testified on behalf of appellant as an expert in the areas of pulmonary medicine, "the propensity of different types of asbestos fibers to cause disease, dose response and the effect of low-dose exposures on animals and humans." Dr. Crapo testified that there is a dose response relationship between exposure to any substance and its effect, meaning that a very low exposure causes no injury and a higher exposure causes injury and a still higher exposure causes greater injury. Dr. Crapo stated that the relationship exists for asbestos exposure; thus, there is a threshold for the development of mesothelioma from exposure to asbestos. He explained that ambient air contains asbestos fibers and the concentration varies by region, but there is no correlation between mesothelioma risk and the concentration in the ambient air. Thus, there is a safe threshold of exposure.
On cross examination, appellee's counsel asked Dr. Crapo whether he had ever reviewed a study showing the level of fiber release from the use of appellant's dry, unencapsulated rope. He replied that he *521 had seen studies done by the United States Consumer Products Safety Commission on similar rope. He did not know the identity of the manufacturer(s) of the rope but believed it was the "same class and type of product."
On redirect examination, the witness testified that he reviewed a test performed on asbestos containing rope by the Consumer Products Safety Commission and recalled that the result from cutting and manipulating the rope was the release of 0.0006 asbestos fibers per cubic centimeter.
On recross examination, the witness testified that he "believe[d]" the product tested was nonlubricated but also stated "there may have been some silicone as part of the rope because they used some binding materials to put the rope together." There was no testimony as to the effect of silicone, assuming it was present.
Discussion
A. Denial of motion for judgment and motion for judgment notwithstanding the verdict
Appellant contends that its motions should have been granted because appellee's evidence was legally insufficient to prove causation in that expert testimony was required to establish that appellant's rope and wicking emitted respirable asbestos fibers in sufficient quantities to cause mesothelioma. Appellant observes correctly that for an injured plaintiff to prevail against a particular manufacturer or seller of asbestos containing products the plaintiff must prove that exposure to the products made or sold by that defendant was a substantial factor in causing the injury. Eagle-Picher Indus., Inc. v. Balbos, 326 Md. 179, 210, 604 A.2d 445 (1992). In Balbos, the Court adopted a multiple factor test for asbestos exposure, which had been utilized by other courts, and in its various iterations from jurisdiction to jurisdiction, is generally known as the "frequency, proximity, and regularity" test. Id. at 210-213, 604 A.2d 445. Relevant factors include the nature of the product, the plaintiff's proximity to the product, and the frequency and regularity of plaintiff's exposure to respirable asbestos fibers. Id. The analysis, which is case specific, includes the evidence of medical causation admitted in a given case. Id.
It is clear, however, that substantial factor causation does not turn on comparative faults. The question is whether each contributing cause, standing alone, is a substantial factor. ACandS, Inc. v. Asner, 344 Md. 155, 174-75, 686 A.2d 250 (1996). Nevertheless, an exposure cannot be a substantial factor in causing a disease if it had no effect on the person or had a negligible effect on the person. Id. at 176, 686 A.2d 250. In Asner, in the context of deciding whether a defendant is permitted to introduce evidence that a plaintiff was exposed to asbestos containing products manufactured or sold by non-parties, the Court stated:
A factual defense may be based on the negligible effect of a claimant's exposure to the defendant's product, or on the negligible effect of the asbestos content of a defendant's product, or both. In such a case the degree of exposure to a non-party's product and the extent of the asbestos content of the non-party's product may be relevant to demonstrating the non-substantial nature of the exposure to, or of the asbestos content of, the defendant's product.4[3] But, a *522 defendant would not ordinarily generate a jury issue on lack of substantial factor causation only by showing the dangerousness of a non-party's product to which the claimant was exposed. Ordinarily a defendant would have to follow up the evidence of exposure to the products of non-parties with evidence tending to prove that the defendant's product was not unreasonably dangerous or was not a substantial causal factor. Under these circumstances the proposition that the defendant's product is not a substantial factor may be made more probable by evidence tending to prove that the claimant's disease was caused by the products of one or more nonparties.
Appellant also observes correctly that expert testimony is required to establish causation when the "subject of the inference is so particularly related to some science or profession that it is beyond the ken of the average layman." Wood v. Toyota Motor Corp., 134 Md.App. 512, 518, 760 A.2d 315 (2000) (quoting Hartford Accident & Indemnity Co. v. Scarlett Harbor Assoc. Ltd. Partnership, 109 Md.App. 217, 674 A.2d 106 (1996), aff'd, 346 Md. 122, 695 A.2d 153 (1997)).
Appellant points out that, during pretrial discovery, appellee identified experts who he could have called to testify that appellant's products emitted respirable fibers in sufficient quantities to cause mesothelioma but failed to call them. Appellant relies on the testimony of appellee's experts, Drs. Hammar and Gabrielson, for the proposition that asbestos fibers must be inhaled to initiate a carcinogenic process. Appellant argues that the distinction between high dose and low dose cases is critical, citing ACandS v. Asner, 344 Md. 155, 176-77, 686 A.2d 250 (1996), and that this is a "low dose" case. Appellant further argues that the product in question is not like pipe insulation, block insulation, and cement, products which clearly release respirable asbestos fibers. Appellant explains that plaintiffs have heretofore used expert witnesses to establish fiber release in cases against appellant but here appellee "employed an audacious trial strategy they had never before attempted in any case tried against [appellant] in the State of Maryland...."
Appellant points to the testimony by Drs. Gabrielson, Hammar, and Dement for the proposition that respirable asbestos fibers are not visible to the naked eye; thus, one cannot determine the composition of dust without testing. Moreover, according to appellant, its position is bolstered by the fact that the only expert testimony on the issue of fiber release, the testimony by Dr. Crapo, was that a test performed on rope similar to appellant's product showed a release of 0.0006 fibers per cubic centimeter of air, a level below levels in the ambient air.
Finally, appellant argues that recently, courts have recognized that "generalized expert opinions declaring that any exposure to asbestos, however minimal, is a substantial factor in the development of asbestos disease, are insufficient to establish causation." Appellant cites several cases in support of this proposition, which we shall discuss below.
Appellee, to state the obvious, disagrees. Appellee distinguishes the cases cited by appellant and relies on Abate II, 121 Md.App. at 671, 710 A.2d 944, for the proposition that expert testimony is not required to prove fiber release. Appellee argues that, unlike prior cases against appellant in which the relevant products were gaskets and packing that were encapsulated or lubricated and the defense was that respirable asbestos fibers could not be released from the product for that reason, this is the first case tried in Maryland, *523 against appellant, in which appellant's product was dry and untreated rope and wicking. Appellee argues that fiber release in sufficient quantities can be inferred circumstantially from the lay testimony by appellee and Mr. Nichols, supported by appellee's expert witnesses, who together established that appellee met the frequency, proximity, and regularity test with respect to exposure to appellant's product and that the exposure was a substantial contributing cause of appellee's mesothelioma.
Appellant responds that the issue presented here was not before this Court in Abate II because the plaintiffs produced expert testimony of respirable fiber release by products similar to appellant's, and thus, language supporting appellee's position was unsupported dicta.
Analysis
The issue before us is narrow. Appellee did produce experts who testified on various matters; appellant admits that its rope and wicking contained asbestos and that the products emitted dust when handled. Appellant contends that expert testimony was required to establish that the number of asbestos fibers released exceeded ambient air levels, a level necessary to support a finding of causation, particularly in light of appellee's exposure to asbestos containing products manufactured by others, most of which released high quantities of fibers. Appellee does not dispute that he needed to prove that appellant's products emitted asbestos fibers in excess of ambient air levels but contends that the circumstantial evidence was sufficient to sustain the finding.
The narrow question is whether there was sufficient evidence to permit the jury to infer that appellant's products emitted asbestos fibers in quantities which exceeded ambient air levels. Appellee introduced evidence that was typical in a traditional case involving products known to be capable of emitting fibers in relatively large quantities which, according to experts, were sufficient to substantially contribute to an asbestos related disease. Appellee explains that in prior cases in which a plaintiff produced expert testimony that appellant's products were capable of fiber release, the products were encapsulated gaskets and packing.[4]
Appellant has taken the position in cases in addition to this one that fibers in certain of its products were encapsulated and not capable of being emitted in sufficient quantities to be a substantial contributing cause to a disease. In those other cases, the plaintiffs typically produced expert testimony that such products, when cut or otherwise altered, did emit fibers in sufficient quantities. We are unaware of a reported decision in this State, ruling on the causation question, in which appellant took that position with respect to unencapsulated products and the plaintiffs did not produce expert testimony of fiber release.
We conclude that lay testimony describing the amount of dust created by handling the products in question, coupled with expert testimony describing the dose response relationship and the lack of a safe threshold of exposure (above ambient air levels), was sufficient to create a jury question. There was lay testimony that appellee worked with appellant's products regularly and frequently and the products produced considerable visible dust. Given the testimony as to the relatively high asbestos content of appellant's rope and *524 wicking, and the fact that it was unencapsulated or otherwise treated, the jury could reasonably infer that the products emitted asbestos fibers in sufficient quantities to cause mesothelioma. Appellee produced expert testimony that, assuming that appellee worked with appellant's products, and assuming that the products emitted respirable fibers, the exposure was a substantial factor, not dependent on a comparative analysis of other products.
Appellant was free to put on evidence of lack of regular and frequent exposure to its products, and/or that a particular product did not release fibers even though it contained asbestos and, therefore, even though exposure may have been frequent, fibers released, if any, were within a safe level of exposure and were not a contributing cause of a disease. The jury properly was permitted to resolve the issue.[5]
The parties herein argue Abate II. In that case, common issues were tried in consolidated cases, and all issues were tried in five individual cases. 121 Md.App. at 603, 710 A.2d 944. A jury returned a verdict in favor of the plaintiffs. Id. at 606, 710 A.2d 944. The defendants argued that Abate I, the first common issues trial of consolidated cases, involved traditional asbestos containing insulation products and that Abate II involved more diverse products. Therefore, according to the defendants, some of the adverse rulings in Abate I were distinguishable and not applicable to certain products in Abate II. Id. at 618, 710 A.2d 944. For example, as to the common issues, the defendants argued that the circuit court erred in listing product types on the verdict sheet as opposed to brand names. We concluded the court did not err. Id. at 630, 710 A.2d 944.
In reaching that conclusion, we noted the following. The plaintiffs presented lay evidence that appellant's products emitted visible dust when handled. Dr. Dement testified that the presence of visible dust indicated excessive exposure because the fact that it was visible meant it was at a dangerous level. Id. at 629-30, 710 A.2d 944. The defendants argued that the form of the verdict sheet prevented the jury from considering that products differed in the amounts of asbestos contained and in the amount of fiber release. Id. In concluding that evidence supported not differing by brand on the verdict sheet, we noted the absence of evidence indicating that visible dust from a product did not imply a dangerous level of asbestos. Id. We further explained that in future mini trials, plaintiffs would have to prove actual exposure to dust and injury caused by the exposure. Id.
We acknowledged that although a
"product containing fully encapsulated asbestos will not ordinarily produce dust and, therefore, will not ordinarily cause harm, there is no dispute that such a product can be altered by sawing, cutting, or grinding, for example and that asbestos fibers in the form of dust can then be released. In order to prevail in a claim involving an encapsulated product, future mini-trial plaintiffs will have *525 to prove sufficient exposure to such dust."
Id. at 630, 710 A.2d 944.
In a footnote, we stated:
We do not suggest that there is no chance that a specific product exists that cannot possibly emit respirable asbestos fibers but which is nevertheless included in a product category that has been found to be defective. We merely indicate that we know of no such product and that the appellants have not directed us to any evidence in the record regarding any such product. It does not appear that any such product is implicated in this appeal.
Id. at 631 n. 27, 710 A.2d 944. We concluded that the form of the verdict sheet, which permitted the jury to determine whether a defendant could be strictly liable for that defendant's products of a particular type, was not error. While recognizing that asbestos containing products may differ in degree of potential harm, we were
"satisfied that where evidence is presented to the effect that exposure to visible dust from any asbestos-containing product constitutes exposure to an excessive amount of asbestos, and that evidence is not controverted, asbestos-containing products that create visible dust may be `lumped together.'"
Id. at 631 n. 28, 710 A.2d 944. To repeat, the context of the discussion was the fact that the products involved contained different amounts of asbestos, and the question was the effect of those differences on causation. There was expert testimony that the encapsulated products involved were capable of emitting fibers and contributing to the visible dust when the products were handled. Appellant did not assert that the evidence as to the amount of fibers released could not be found to be in excess of background levels. We concluded that there was no basis on which to differentiate between products based on the amount of asbestos content. Id. at 630, 710 A.2d 944
In Abate II, appellant's products at issue were gaskets and packing.[6] The jury found appellant's packing was defective and that appellant was negligent but found that appellant was not liable with respect to its gaskets. Id. at 638, 710 A.2d 944. It also found appellant was liable to two of the individual all issue plaintiffs. Id. In addressing issues raised by individual defendants in Abate II, we addressed appellant's argument that the plaintiffs "failed to present expert testimony that Crane products, in particular, emitted respirable asbestos fibers." Id. at 670, 710 A.2d 944. In other words, appellant argued that, while there was expert testimony that handling encapsulated products would produce asbestos fibers, there was no such testimony relating to appellant's products. We stated that "[w]e shall not hold that a plaintiff in any asbestos case must present expert testimony as to the amount of respirable asbestos fibers emitted by a particular product." Id. at 671, 710 A.2d 944. Again, that was in the context of an underlying assumption that fibers were emitted from each product in some minimal amount sufficient to be a cause, and we were merely stating that comparative analysis is not required. We pointed to testimony by Dr. Millette to the effect that gaskets and packing, while not generally friable, become so when cut and otherwise altered and the testimony by Dr. Dement that visible dust is a health hazard.
Appellant points out that there was no such expert testimony presented by appellee in this case, and that it was required. *526 We see no basis, however, on which to differentiate appellant's rope and wicking from other forms of unencapsulated, untreated asbestos containing products. Appellee testified that he worked with and around appellant's rope and wicking and that it emitted visible dust. Mr. Nichols testified to the same effect. The rope and wicking contained 60 to 90 % asbestos. The evidence was sufficient for the jury to reasonably infer that the visible dust contained asbestos fibers in quantities above background levels. There is nothing in the evidence to establish that such fibers were by virtue of some unique characteristic not respirable. Thus, expert testimony that handling of the rope and wicking produced fibers in sufficient quantities to cause disease was not required.
With respect to appellant's argument on its motion for judgment notwithstanding the verdict, premised on Dr. Crapo's testimony, we are not persuaded that the court erred. First, the jury could have disbelieved his testimony. In addition, as set forth above, his testimony did not relate to appellant's products specifically and it was vague as to the similarity of the products involved. It appears that the products involved in the referenced study were or may have been encapsulated or treated. The products in the case before us were not encapsulated or treated. Thus, the question of causation was properly left to the jury.
Appellant's final argument is that "courts are increasingly rejecting sloppy reliance upon generalized expert opinions based on an `every fiber counts' theory of causation ....," and cites several cases.
Before discussing the cases, we note that appellee's position is not that every fiber counts, however; it is that every fiber above a minimum level counts, i.e., above ambient air levels. The cases relied upon by appellant do not advance its cause. In Bartel v. John Crane, Inc., 316 F. Supp. 2d 603 (D.Ohio 2004), the court tried the case non-jury. The products were encapsulated gaskets and packing. Id. at 605. The court found as a fact that the plaintiff had failed to prove that more than ambient air levels of asbestos was released when working on gaskets and packing. Id. at 604, 608.
In Gregg v. V-J Auto Parts Company, 596 Pa. 274, 943 A.2d 216 (2007), as a result of a complicated procedural history, the issue in the Supreme Court was a very narrow one, specifically, whether the frequency, regularity, and proximity test applied if there was any direct, as distinguished from circumstantial, evidence of exposure to asbestos. The plaintiff's decedent claimed that he worked with asbestos containing products in his occupations over a 47 year period. Id. at 277, 943 A.2d 216. He also claimed that the decedent, from time to time and not as part of his occupation, worked with asbestos containing brake linings and clutches, sold by the defendant. Id. Much of the discussion in this case related to the frequency, regularity, and proximity test and whether the test applied if there was any direct evidence of exposure. There was direct evidence that the decedent was non-occupationally exposed on two or three occasions to products sold by the defendant. Id. at 289, 943 A.2d 216. The court held that the direct evidence of exposure was de minimus and insufficient but remanded for a determination as to whether there was sufficient evidence to show frequency, regularity, and proximity to products sold by the defendant. Id. at 292, 943 A.2d 216.
In In Re W.R. Grace & Co., 355 B.R. 462 (D.Del.2006), the court had before it cross motions for summary judgment by W.R. Grace & Co, debtor, and a group of property damage claimants regarding whether the presence of asbestos containing *527 insulation in attics presented an unreasonable risk of harm. Id. at 464-465. The court found that the product did emit a small quantity of asbestos fibers when disturbed but otherwise did not release fibers into the living area at a medically significant level. Id. at 467, 476-77. The court held that the mere presence of asbestos containing insulation in the attic, without epidemiological or risk assessment evidence did not establish an unreasonable risk of harm. Id. at 493. The evidence established that the risk of exposure from the attic insulation was "less than that of dying in a bicycle accident, by drowning, or from food poisoning." Id.
Borg-Warner Corporation v. Flores, 232 S.W.3d 765 (Tex.2007), involved occupational exposure to brake linings containing embedded asbestos fibers. Id. at 773-774. Noting that there must be evidence that the exposure was sufficient to exceed some threshold, referencing the ambient air level but without adopting it as the threshold, the court held as a matter of law that the evidence was insufficient to establish causation because it failed to demonstrate that the exposure to asbestos fibers emitted by the defendant's products was more than de minimus. Id.[7]
As can be seen from the above, the cases do not support the proposition that a plaintiff is required to produce expert testimony that an unencapsulated asbestos containing product emits asbestos fibers when handled, and that it can not be proved by other evidence, assuming adequate exposure to the product is otherwise shown.
B. Denial of Motion for New Trial and Remittitur
Appellant contends the court erred in not ordering a remittitur or granting a new trial on the ground that the verdict was excessive. Appellant points out that the jury awarded $335,274.00 in past medical expenses and the remainder was for pain and suffering. There were no claims for lost wages, loss of consortium, or punitive damages.
Appellant acknowledges that the court's ruling was not only discretionary but was within an area in which the discretion is "virtually boundless." Crane v. Puller, 169 Md.App. 1, 52, 899 A.2d 879 (2006). See Buck v. Cam's Rugs, 328 Md. 51, 59, 612 A.2d 1294 (1992) ("Because the exercise of discretion under these circumstances depends so heavily upon the unique opportunity the trial judge has to closely observe the entire trial, complete with nuances, inflections, and impressions never to be gained from a cold record, it is a discretion that will rarely, if ever, be disturbed on appeal."). Appellant argues that the court had to admonish the jurors to keep their eyes open and not to sleep and that the jurors spent only 34 minutes deliberating before reaching their verdict. Appellant concludes that the jury must have based its award on "passion and prejudice," and the amount was "punitive."
Because of the breadth of a trial court's discretion when ruling on the issues presented, based on the fact the trial judge was present and in the best position to assess the factors argued, we shall quote at length from the court's comments.
With respect to the question ... that... the noneconomic damages award in this case, 15 million dollars was excessive and shocks the conscience, I would certainly say I have a concern that the jury was out for 34 minutes, but I have *528 no evidence as to what that means. I have only from the defense speculation is that they weren't careful and considerate from the plaintiff's point of view in addressing the issues, the many uncontested issues in this case by implication. There was not a whole lot for them to have sorted through as to many of the uncontested issues.
You know, perhaps there was something untoward or inappropriate, but honestly, I don't have really any insight into this. I do have a concern. This case lasted for several weeks of trial and 34 minutes was somewhat surprising, but considering the amount and the nature of evidence and considering the fact that they apparently were able to distinguish the issues on the cross-claims as to who of the various defendants were liable with respect to negligence or strict liability and such they may have thrown darts at a board for all I know but it appears that they did make distinctions and one hopes that that was on some reasonable basis.
As to the admonishing the jury about sleeping, let me say, you know, one of my concerns always in presiding over any trial, and particularly one that has any length and duration, relates to the fact that we are not a generation or a society that sits quietly for long periods of time without a lot of movement and without a lot of stimulation.... But, you know, it's pretty, pretty slow-moving stuff and here, it's pretty ponderous stuff. So I don't think the defense can take a great deal of consolation out of my admonitions to the jury because I perceive it to be my responsibility.
If I see them starting, one of them alone starting to nod off or to close eyes, to make the comments that I do. I try to be somewhat gentle and suggest things. If your eyes are closed, you know, I can't tell if you're deep in thought or you're sleeping.
And even in a shorter, simpler case, it frequently is necessary to give such admonitions to make sure that as best you can, all the important information that's being presented and the arguments and points that are being made by the lawyers are at least fairly aired and due process insofar as it involves an opportunity to be heard that there is actually a hearing of what you people are saying and doing.
So I don't, I certainly have had cases where I thought it appropriate to dismiss jurors because of their inattention or their, you know, sleeping so loudly that the only thing that would awaken them was their own snoring. That didn't happen in this case so I'm not particularly concerned about that aspect.
As to the 15 million dollars, I haven't done an exhaustive study of what the jury verdicts have been in all of the many asbestos cases. Counsel have talked about the various ones. I do-it's my best understanding, however, is at least with respect to the remittiturs that have been granted, they have occurred in those situations involving the consortium claims. There are no such here because Mrs. Linkus had predeceased her husband, according to the evidence presented.
And I certainly wasn't there and I don't know all of the evidence that was presented in any or all of those other cases. What I do know is that Mr. Linkus is a living mesothelioma plaintiff who has already endured much longer than anyone would have expected given what is the likely progression of this disease from the point of diagnosis. What I know is that he himself testified about all that he has been through and described that in enough detail and I *529 think even in the somewhat understated fashion, quite honestly, he's a big, strapping guy. You know, he seemed like a, you know, here's an incredibly sexist comment, but many men are, you know, reluctant to talk completely openly, but I think he was sufficiently detailed even in his way of characterizing things to show what he has been through and what he is going to go through.
I think that the various procedures that he had to undergo, as [appellee's counsel] commented, the thoracentesis, which, as I understand it, he's had those twice and involves putting, you know, a hypodermic type needle that looks like it ought to be used on an elephant or a race horse than a human being and withdrawing fluid. It's a very painful process. He had the thoracostomy. I'm sure I've got that pronounced correctly. He's had part of his lung removed. He has had disease, a literally kind of stripping process, taking away as much as can be removed from his, from the pleura.
He's been through the procedures where talc is inserted in the area to try and bind the fluid. He's been through two extensive rounds of chemotherapy, six months each, and 20-some treatments. He's a big guy here in court. I would, you know, judge his height, he's probably about six-foot-five, big, strapping fellow who lost 50 pounds and was so weak, according to his testimony, and after going through at least the first round, as [appellee's counsel] commented, he did find out there were additional nodules, four so, and had to go back through and get another round of these chemotherapy treatments.
He talked about the, I guess the impact and residual effects that all of that has on you. The kidney issues, the severe constipation issues and others. He's a man who has persisted. Whatever the balance of his life will be, he will be affected by the shortness of breath. There's a constant anxiety, borrowed time. He clearly was concerned. Part of his, I guess, anguish and pain and suffering was evident with respect to his concerns for his family and his granddaughters, I believe, were here. His son was here.
But I think that certainly he gave an enormous amount of detail about how this has affected him. He also knows that he's going to die. He also knows that he is going to die a very slow and painful death. He knows that his life expectancy was, again, as anyone would know, an average that has been appreciably reduced. He knows how long he's lived with mesothelioma at the point of trial. You know, three years or so. And taking all of that into account as to his particular circumstances and how this has affected him and the fact that he has survived, you know, for-perhaps treatments are improving. I don't know.
Perhaps he is someone who has, you know, his particular constitution is such that he's been able to endure longer. I don't know. But what I do know is that once the final stages begin for him as the medical experts have explained, there's not a whole lot more that can be done and he will endure considerable, considerable chest pain. He will be, go through this cataxia, the general wasting, et cetera.
So I think that there is, was significant and really compelling testimony to explain the noneconomic damages aspect of this case for this particular individual and while the amount is substantial, particularly in today's economy, I'm not shocked by the amount of the verdict considering all of the particulars as to Mr. Linkus.
*530 There was evidence that appellee's mesothelioma produced considerable physical and mental pain and suffering, that it would continue to produce pain and suffering for an undetermined period of time, and that it would cause appellee's death. While we, had we been sitting as the trial court, might have granted a new trial or ordered a remittitur, we cannot second guess the trial court, given its very wide discretion. We also point out that, as a function of that wide discretion, we would have affirmed a ruling to the contrary, were the issue before us.
C. Denial of Motion to Reduce Judgment by Amount of Payments by Bankrupt Entities
Appellant contends that the circuit court improperly refused to credit the judgment with amounts received by appellee from several bankrupt entities. The court credited monies received from the bankrupt entities Manville Personal Injury Settlement Trust, Celotex Asbestos Settlement Trust, and the H.K. Porter Co. Inc. Asbestos Settlement Trust but did not credit monies received from or on behalf of Eagle Picher, Keene, UNR, National Gypsum, Babcock & Wilcox, Halliburton/Harbison Walker, and USG.
With respect to the trusts which the court credited, the trust documents provide that a judgment defendant is entitled to a reduction equal to the amount paid by the trust. Appellant points to no evidence that the documents pertaining to the trusts in question contain similar language, and it points to no evidence of any other basis on which to determine that the entities in question are or should be treated as tortfeasors. Absent such proof, such as an adjudication of tortfeasor status, a default judgment against the entity in question, some other form of court acceptance of tortfeasor status, or a settlement agreement in which the parties agree that the entity is or shall be treated as a tortfeasor, we perceive no legal basis on which to grant appellant's request. See the Uniform Contribution Among Joint Tort-Feasors Act, Maryland Code (1974, 2006 Repl. Vol.), § 3-1401 et seq. of the Courts and Judicial Proceedings Article ("CJP"). Joint tortfeasors are "two or more persons jointly or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them." CJP § 3-1401(c). We recently discussed this credit for settlement monies issue in Scapa Dryer Fabrics, Inc. v. Saville, ___ Md. App. ___, ___ A.2d ___, 2010 WL 348257 No. 540, Sept. Term, 2008 (filed Feb. 2, 2010), and we see no need to repeat that discussion here in full.
JUDGMENT AFFIRMED. APPELLANT TO PAY THE COSTS.
NOTES
[1] Helen I. Linkus, the decedent's spouse, was a plaintiff, but she died in March, 2006.
[2] We understand that both products are string-like, but wicking is thinner than rope.
[3] By "demonstrating" we refer to defense trial tactics and not to the plaintiff's burden of producing evidence and persuading the jury that particular defendant's product, in a multiple, concurrent, substantial causes case, is one of the concurrent substantial causes.
[4] Appellee does not concede and we do not address whether such expert testimony was required in those cases.
[5] In closing argument, appellant argued that its products did not release respirable asbestos fibers in sufficient quantities to cause appellee's mesothelioma, and in addition, if they did release fibers, the size of the fibers and the nature of the fibers, i.e., chrysotile, minimized the danger. This argument was made both in the context of causation and the state of the art, i.e., what appellant knew or should have known of the dangers of asbestos exposure during the relevant time periods. On appeal, appellant's argument as to causation turns on whether there was evidence that its products emitted sufficient fibers to cause disease. Appellant does not argue that, because of the nature and size of the fibers, they could not have caused mesothelioma.
[6] It appears that components in these products were lubricated and/or encapsulated.
[7] The court noted that it had not adopted the frequency, regularity, and proximity test to determine substantial factor causation, and did not state how it differed, if at all, from Texas law, but appeared to conclude that the result would be the same under either that test or Texas law. Id. at 770, 773-774. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546467/ | 172 F.2d 402 (1949)
GARDELLA
v.
CHANDLER.
No. 98, Docket 21133.
United States Court of Appeals Second Circuit.
February 9, 1949.
Frederic A. Johnson, of New York City (Frederic A. Johnson, Edward H. Beck, Jr., both of New York City, of counsel), for appellant.
Willkie, Owen, Farr, Gallagher & Walton, of New York City, for appellees.
Baker, Hostetler & Patterson, of Cleveland, Ohio, for appellee William Harridge, individually and as President of The American League of Professional Baseball Clubs, a voluntary unincorporated association.
Hedges, Hoover & Tingley, of Columbus, Ohio, for appellee George M. Trautman, individually and as President of The National Association of Professional Baseball Leagues, described in the complaint herein as "The National Association of Baseball Leagues."
Edgar P. Feeley, of New York City, Raymond Jackson, of Cleveland, Ohio, and Mark F. Hughes, of New York City, for appellee National Exhibition Co.
Before L. HAND, Chief Judge, and CHASE and FRANK, Circuit Judges.
*403 CHASE, Circuit Judge.
The appellant brought this suit to recover treble damages under Secs. 1, 2 and 3 of the Sherman Act, 26 Stat. 209, 15 U.S.C.A. §§ 1, 2 and 3, and under, as stated in the complaint, Secs. 2 and 3 of the Clayton Act, 15 U.S.C.A. §§ 13 and 14. Apparently he relies upon Sec. 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C.A. § 15, and we shall so treat his complaint.
He is a professional baseball player who, while under contract to play exclusively with the ball club popularly called the New York Giants which is owned and operated by one of the appellees, the National Exhibition Company, a New York corporation, violated the terms of the hereafter mentioned reserve clause of that contract by playing professional baseball in Mexico. He was consequently barred for a period of years from playing with baseball clubs in what is known as "organized baseball" in accordance with the provisions of his contract with the National Exhibition Company and thus deprived pro tanto of his means of livelihood. This suit followed and the first issue presented by this appeal is whether the district court had jurisdiction of the cause of action under the Sherman and Clayton Acts. The complaint was dismissed solely on the ground that the court had no such jurisdiction and no other is claimed now. D.C., 79 F. Supp. 260.
The appellant undertook to allege three causes of action against the appellees who are Albert B. Chandler, individually and as the Commissioner of Baseball; Ford C. Frick, individually and as President of the National League of Professional Baseball Clubs, an unincorporated association; William Harridge, individually and as president of the American League of Professional Baseball Clubs, an unincorporated association; George M. Trautman, individually and as president of The National Association of Professional Baseball Leagues, an unincorporated association; and National Exhibition Company, before mentioned.
He alleged generally in support of each cause of action that "organized baseball" comprised two so-called major leagues known respectively as the National and the American and the so-called minor leagues made up of clubs composing leagues of eight grades based upon the respective abilities of the players in the several clubs in each of such leagues. There are eight clubs in each of the major leagues and each club plays during a season games at its home grounds and games at the home grounds of each of the others until each club has played approximately one hundred and fifty games. The winning club in each major league plays a series of games with the winning club in the other at the close of the season for what is called the world championship, and during the season selected players from the clubs in each league perform as a team in playing a similarly selected team in what is called an "all stars" game. The clubs in the National League are located in the following places where each owns or leases a baseball park where games are played. Boston, Mass.; New York, N. Y.; Brooklyn, N. Y.; Philadelphia, Pa.; Pittsburgh, Pa.; Cincinnati, Ohio; Chicago, Ill., and St. Louis, Mo. The clubs of the American League own or lease parks where games are played in the following places. Boston, Mass.; New York, N. Y.; Philadelphia, Pa.; Washington, D. C.; Cleveland, Ohio; Detroit, Mich.; Chicago, Ill.; and St. Louis, Mo. The individual clubs are owned by corporations organized under the laws of the respective states in which their parks are located. The minor leagues are composed of clubs in a similar way and these clubs play games in various cities in this country and Canada.
These leagues and the clubs comprising them have entered into agreements, designed to control the manner in which "organized baseball" shall be conducted, which require players to be bound to their respective clubs by what is known as the standard contract. The so-called major league agreement, among other things, gives to appellee Chandler supervisory and disciplinary power over the major leagues, their clubs and their players. The so-called major-minor league agreement gives him similar powers over the minor leagues, their clubs and their players. The standard player contract includes what is known as a reserve clause which requires *404 a player who is under contract to play with any club to refrain, at the expiration of the period of his employment, from contracting to play for, or playing for, any other club other than the one to which he has been under contract or its assignee. Thus, and in other particulars which need not be presently described, the agreements in "organized baseball" have created a closely knit organization which was intended to, and does, dominate and control to a large extent the playing of professional baseball in this country, Canada, Cuba, Puerto Rico and Mexico.
In playing their games the teams of the various clubs perform in the ball parks already referred to and each game is ended in the park where it is begun. But in order to get to the park where the game is played some or all of the players, managers, coaches, and employees have to travel across state or foreign boundaries; and the equipment necessary for the traveling club, consisting of uniforms, bats, gloves, mitts, masks, chest protectors, shin guards, baseballs and the like is similarly transported.
The club owners charge admission fees for all games played and divide them with the other contesting clubs as agreed. They, or most of them, also sell for valuable consideration the right to broadcast play-by-play descriptions of the games over the radio and thus across state lines, and some of them sell the right to broadcast the games by television. Some of those to whom these broadcast rights are sold get, and use, the opportunity so provided to advertise goods, articles and commodities which are sold and distributed nationally and internationally.
Since my brothers agree that the judgment should be reversed I will now state what are but my own reasons for believing that it should be affirmed; (1) because a controlling decision of the Supreme Court requires it and (2) because, even if that decision is distinguishable, the allegations in the complaint fail to state a cause of action over which the district court had jurisdiction.
The issues here presented are, as the district judge recognized, decidedly not of first impression. This record is with the possible exception of the allegations as to the sale of broadcasting rights for radio and television, not different in any essential from that before the Supreme Court in Federal Base Ball Club v. National League, 259 U.S. 200, 42 S. Ct. 465, 66 L. Ed. 898, 26 A.L.R. 357 in which it was held that major league ball clubs were not engaged in interstate trade or commerce within the scope of the antitrust laws. Even the possible exception just mentioned exists only if the sale of these radio and television broadcast rights differs in some material way from the sale of the exclusive right to send "play-by-play" descriptions of the games interstate over telegraph wires, for that feature was present in the previous case before the Supreme Court. In each instance by what is called the sale of rights the appellees made it possible for others to transmit information interstate. The playing of baseball games then created the subject matter concerning which information was sent by symbols carried by telegraph wires and translated into words just as such play now creates the subject matter concerning which information is sent through the air by impulses which are transformed either into words or pictures. So far as I can perceive, the difference in the method of transmission is without significance.
These appellees do not themselves broadcast anything nor do they do anything more by way of production of what is broadcast than was shown to have been done in the former case to "produce" what was described. Since the sellers of the rights to broadcast through the air do only what the sellers of the rights to send descriptions over telegraph wires did in the former case I can find no sound basis on the facts for distinguishing that case from this. It seems to me to have decided the precise question here presented and that it controls our decision.
It has never been expressly overuled, and I do not think it has been overruled by necessary implication by United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S. Ct. 1162, 88 L. Ed. 1440, which reflected a trend in decision not apparent in Hooper v. People of State *405 of California, 155 U.S. 648, 15 S. Ct. 207, 39 L. Ed. 297, on which the court relied somewhat in deciding Federal Base Ball Club v. National League, supra. That decisions like Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122, and Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S. Ct. 996 show a wide reach of Congressional power under the Commerce Clause when Congress chooses to exert it cannot be gainsaid. And United States v. South-Eastern Underwriters Ass'n, supra, reiterates that Congress intended to put within the coverage of the Anti-Trust Acts everything which was interstate or foreign trade or commerce. But in none of these decisions mentioned nor in any others of the Supreme Court of which I am aware, save only Federal Base Ball Club v. National League, supra, has there been a definite holding that "organized baseball" is, or is not, trade or commerce within the meaning of those words in the Sherman and Clayton Acts. Moreover, the rule there stated has since been applied by analogy in another field. Hart v. B. F. Keith Vaudeville Exchange, 2 Cir., 12 F.2d 341, certiorari denied, 273 U.S. 704, 47 S. Ct. 98, 71 L. Ed. 849; Neugen v. Associated Chautauqua Co., 10 Cir., 70 F.2d 605. Furthermore, the case was recently cited and disinguished in North American Co. v. S. E. C., 327 U.S. 686, 694, 66 S. Ct. 785, 90 L. Ed. 945. See Sears v. Hassett, 1 Cir., 111 F.2d 961, 965; cf. Perkins v. Endicott Johnson Corp., 2 Cir., 128 F.2d 208, 218.
Under these circumstances it seems to me that our duty as a subordinate court is to follow the Federal Base Ball Club case. I find no necessary implication among the cases to which I have previously alluded or in any others that it has been overruled. All of them relate to activities quite unlike organized baseball and, though general language can be found in the opinions to indicate changes in methods of approach to decision, there is no actual decision so incompatible with that in Federal Base Ball Club v. National League, supra, as to displace the latter by mere weight of its authority. The interpretation of the anti-trust laws has hitherto been accomplished in a case by case manner which has given due effect to the particular facts and circumstances shown. I cannot find any authoritative definition of the words "trade or commerce" or "affecting trade or commerce" as used in the cases which is so comprehensive that this method can be dispensed with. The intricate nature of the various questions involved makes it apparently impossible to devise a formula which will automatically, so to speak, put any and all situations either within or without the coverage of the acts.
In dealing with such a unique aggregate as organized baseball and with a decision in respect to it which seems to be directly in point on the facts, we should not be astute in seeking to anticipate that the court which has the power to do so will change that decision. To do so would not only be an unwarranted attempt to usurp the authority of that court but would make its task in general much more difficult since it would lead to a constant alteration in the lower courts of its decisions on specific fact situations in the light of what would appear to be differing rules stated in the course of deciding later cases on different facts. We relied on Federal Base Ball Club v. National League, supra, in our recent decision in Conley v. San Carlo Opera Co., 2 Cir., 163 F.2d 310, and until, and unless, we are advised by competent authority that it is no longer the law we should continue to abide by it.
On the second point, it seems to me that cases which involve more that the regulation of trade and commerce per se, and rest upon the explicit control by Congress in other statutes of the production of goods for commerce or the control of labor relations, furnish but very slippery ground on which to base decision here. What those statutes have in common with the anti-trust acts which is now material, as I see it, is only that all were within the power of Congress to enact under the Commerce Clause. Const. art. 1, § 8. When it is said that Congess has exerted all the power it possessed in the anti-trust acts, Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 435, 52 S. Ct. 607, 76 L. Ed. 1204, it is meant only *406 that within the field there dealt with Congress meant to act fully, leaving other phases of its power under the Commerce Clause outside their scope.
The field covered was "restraint of trade" which had a well known meaning at common law and the words "or commerce between the several states" were added to put the restraints prohibited within constitutional limitations on Congressional power. The Supreme Court has never, so far as I know, applied the Sherman Act in any case unless it was of the opinion that there was some form of restraint upon commercial competition in the marketing of goods and services in interstate commerce which was within the category of restraints which were illegal at common law, though expressions may be found in opinions which seem to make adherence to this concept somewhat elastic. In any event, as recently as Apex Hosiery Co. v. Leader, 310 U.S. 469, 500, 501, 60 S. Ct. 982, 996, 84 L. Ed. 1311, 128 A.L.R. 1044, Mr. Justice Stone said, in speaking for the majority of the court, "In the cases considered by this Court since the Standard Oil case in 1911 some form of restraint of commercial competition has been the sine qua non to the condemnation of contracts, combinations or conspiracies under the Sherman Act, and in general restraints upon competition have been condemned only when their purpose or effect was to raise or fix the market price.[1] It is in this sense that it is said that the restraint, actual or intended, prohibited by the Sherman Act, are only those which are so substantial as to affect market prices. Restraints on competition or on the course of trade in the merchandising of articles moving in interstate commerce is not enough, unless the restraint is shown to have or is intended to have an effect upon prices in the market or otherwise to deprive purchasers or consumers of the advantages which they derive from free competition. Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S. Ct. 242, 243, 62 L. Ed. 683; United States v. United States Steel Co., 251 U.S. 417, 40 S. Ct. 293, 64 L. Ed. 343, 8 A.L.R. 1121; Cement Manufacturers Protective Ass'n. v. United States, 268 U.S. 588, 45 S. Ct. 586, 69 L. Ed. 1104; United States v. International Harvester Co., 274 U.S. 693, 47 S. Ct. 748, 71 L. Ed. 1302; Appalachian Coals v. United States, 288 U.S. 344, 375 et seq., 53 S. Ct. 471, 479 et seq., 77 L. Ed. 825."
In the Mandeville case, supra, the Court was dealing with a situation which did have a substantial effect upon the prices of goods in the market and did deprive purchasers or consumers of advantages which would have been theirs under free competition. While the test of indirectness of effect was somewhat muted, and perhaps discarded, the substance or the so-called "rule of reason" was not. Whatever the activity and how it may be conducted, it is not within the prohibition of the anti-trust laws unless in some substantial way the prices of goods in interstate commerce are controlled to the detriment of the purchaser or consumer.
The complaint in this case shoots wide of that mark. The wrong alleged as the end result of the monopoly, or conspiracy to create a monopoly, in restraint of trade or commerce is the deprivation of the appellant of the opportunity to play baseball as a means of earning his livelihood. His services, or ability to work, are not subjects of trade or commerce within the anti-trust acts. Indeed, in Sec. 6 of the Clayton Act, 15 U.S.C.A. § 17, it is stated that, "The labor of a human being is not a commodity or article of commerce." Although this, to be sure, was inserted for a purpose not here germane it shows nevertheless that Congress did not intend in the anti-trust acts to cover restraints upon employment. Moreover, Congress has expressly dealt with that subject in other statutes like the National Labor Relations Act, 29 U.S.C.A. § 151 et seq., and the Fair Labor Standards Act, 29 U.S. C.A. § 201 et seq.
Nor are there any allegations as to any monopoly to control, or any conspiracy *407 to create one to control, the prices at which the rights to send descriptions of the games, visually or otherwise, are sold; and as much is true as to the advertising by the purchasers of those rights. Nor as to what effect, if any, such by-products of the games have upon the prices at which goods are sold in commerce or upon the purchasers and consumers of those goods. Nor that what is done in respect to broadcasting or telecasting the games has any causal connection with the damage the appellant alleges. See K. & K. Co. v. Special Site Sign Co., 9 Cir., 85 F.2d 742, certiorari denied, 299 U.S. 613, 57 S. Ct. 315, 81 L. Ed. 452.
I would affirm the judgment but as my brothers hold otherwise it is, for the reasons stated in their separate opinions, reversed and the cause is remanded for trial.
L. HAND, Circuit Judge.
The complaint alleges that the defendants make contracts with broadcasting and television companies by which these companies send across state lines play-by-play narratives, or moving pictures, of the games; and, although in Federal Baseball Club v. National League,[1] the record contained evidence that it was the custom to broadcast accounts of the games by telegraph, that was an incident of so little importance that the Court of Appeals merely mentioned it without comment and the Supreme Court did not even allude to it. Besides, the difference between the telegraphing of that time and present-day radio or television, even though it were no more than a difference of degree which it is not would be so great as for practical purposes to make a difference in kind. I shall not labor the argument that the transmission of these narratives and moving pictures is itself interstate commerce; the only debatable question is whether the defendants' connection with these activities makes them a part of their business, and enough a part of it to color the whole. As I understand it, they enter into contracts with broadcasting and television companies, by which for large payments they allow the companies to install suitable apparatus in the "ball-parks," by means of which the companies transmit the narratives and pictures to the outside public. It is not necessary to say whether one, who sells goods indifferently to all comers, is pro tanto engaged in interstate commerce, because a part of his customers come from another state and carry their purchases home. In such cases the seller's indifference to the destination of the goods may isolate him from their eventual destination; at least he cannot be said to have joined with the buyers in the interstate part of their purposes. True, the sale is a condition sine qua non of the buyers' ability to carry the goods out of the state; but, if that be enough, there is no apparent reason to end the regression of causes with the sale. Whether every department store is engaged in interstate commerce is a question I shall not undertake to answer; and this I may do, because the defendants' relation to broadcasting and television is quite different. The contracts with the companies are mutual arrangements in which each contributes its share to a common venture; the defendants furnish the spectacle and give the companies leave to enter and set up their apparatus on the grounds, by means of which they transform for transmission the air and light waves, which come from the playing-grounds and the players, or from the narrator who reports the game; and the transformed waves they send abroad either in a form for direct reception or otherwise. This interposition is of course necessary, when the auditory is at a distance; but for our purposes the result seems no different from direct transmission; and the situation appears to me the same as that which would exist at a "ball-park" where a state line ran between the diamond and the grandstand. Nor can the arrangements between the defendants and the companies be set down as merely incidents of the business, as were the interstate features in Federal Baseball Club v. National League, supra.[1] On the contrary, they are part of the business itself, for that consists in *408 giving public entertainments; the players are the actors, the radio listeners and the television spectators are the audiences; together they form as indivisible a unit as do actors and spectators in a theatre. I am therefore in accord with my brother Frank that the defendants are pro tanto engaged in interstate commerce.
On the other hand, I cannot go along with his opinion, if I understand it, that these features of the business, no matter how insignificant they may prove, necessarily subject it as a whole to the Anti-Trust Acts. The plaintiff is asking damages for excluding him from his calling; and to succeed he must show that the defendants' conduct, by which he was injured, was itself subject to the law that he invokes. I do not mean that he must show that he was injured by the broadcasting and television; but he must show that those activities together with any other interstate activities mark the business as a whole. Certainly that was implied in Federal Baseball v. National League, supra,[1] itself; nobody questioned that many interstate activities were in fact involved in professional baseball; the Court merely thought them not important enough to fix the business at large with an interstate character. I can find nothing in the books since then, which leads me to think otherwise. Mabee v. White Plains Publishing Co.[2] did indeed hold that, quoad those newspapers which crossed a state line, the publisher was engaged in the "production of goods for commerce"; and it may be that employees concerned in the production of even so small a part of a total output are within the Fair Labor Standards Act. However that may be, I cannot believe that that decision was intended to overrule the repeated decisions that the Anti-Trust Acts do not cover all persons who engage to any degree whatever in interstate commerce. If so, we are wasting our time over the Baseball case for it was overruled sub silentio. When the case goes back for trial assuming that it does so upon our opinions it will be necessary, as I view it, to determine whether all the interstate activities of the defendants those, which were thought insufficient before, in conjunction with broadcasting and television together form a large enough part of the business to impress upon it an interstate character. I do not know how to put it in more definite terms.
As I understand my brother Chase, he thinks that, even though the defendants' business be in general subject to the Anti-Trust Acts, the "reserve clause" is not in violation of them. For this he relies principally upon Apex Hosiery Co. v. Leader,[3] a case in which the Court found it unnecessary to decide whether labor unions were within the Acts. The Court thought that, although the strike in question might well have had an effect upon the price of stockings which passed into interstate commerce, the purpose of the strikers was not that, and the result, if any, was only an incident. Be that as it may, whatever other conduct the Acts may forbid, they certainly forbid all restraints of trade which were unlawful at common-law, and one of the oldest and best established of these is a contract which unreasonably forbids any one to practice his calling. I do not think that at this stage of the action we should pass upon the "reserve clause"; and therefore I do not join in my brother Frank's present disposition of it, although I do not mean that I dissent from him. All that I wish now to decide is that the complaint avers enough to present an issue upon a trial. I think that the judgment should be reversed and the cause should be remanded for trial.
FRANK, Circuit Judge.
1. No one can treat as frivolous the argument that the Supreme Court's recent decisions have completely destroyed the vitality of Federal Baseball Club v. National League, 259 U.S. 200, 42 S. Ct. 465, 66 L. Ed. 898, 26 A.L.R. 357, decided twenty-seven years ago, and have left that *409 case but an impotent zombi. Nevertheless, it seems best that this court should not so hold.[1] However, in Ring v. Spina, 148 F.2d 647, 651, 160 A.L.R. 371, referring to that case and another similar case,[2] this court said that, because of "the steadily expanding content of the phrase `interstate commerce' in recent years; * * * there is no longer occasion for applying these earlier cases beyond their exact facts." For reasons stated later, I think that, on its facts, we can properly distinguish the suit now before us from the Federal Baseball case.
I think it should be so distinguished, if possible, because (assuming, as we must, at this stage of the litigation, the truth of the statements in the complaint) we have here a monopoly which, in its effect on ball-players like the plaintiff, possesses characteristics shockingly repugnant to moral principles that, at least since the War Between the States, have been basic in America, as shown by the Thirteenth Amendment to the Constitution, condemning "involuntary servitude," and by subsequent Congressional enactments on that subject.[3] For the "reserve clause," and has been observed, results in something resembling peonage of the baseball player. By accepting the "reserve clause" and all players in organized baseball must "accept" it a player binds himself not to sign a contract with, or play for, any *410 club other than the club which originally employs him or its assignee. Although many courts have refused to enforce the "reserve" clause,[4] yet severe and practically efficacious extra-legal penalties are imposed for violation. The most extreme of these penalties is the blacklisting of the player so that no club in organized baseball will hire him. In effect, this clause prevents a player from ever playing with any team other than his original employer, unless that employer consents. Since the right to play with organized baseball is indispensable to the career of a professional baseball player, violations of the clause by such players are infrequent. The violator may perhaps become a judge (with a less exciting and often less remunerative occupation) or a bartender or a street-sweeper, but his chances of ever again playing baseball are exceedingly slim.
As one court, perhaps a bit exaggeratedly, has put it,[5] "While the services of these baseball players are ostensibly secured by voluntary contracts a study of the system as * * * practiced under the plan of the National Agreement, reveals the involuntary character of the servitude which is imposed upon players by the strength of the combination controlling the labor of practically all of the players in the country. * * * There is no difference in principle between the system of servitude built up by the operation of this National Agreement, which * * * provides for the purchase, sale barter, and exchange of the services of baseball players skilled laborers without their consent, and the system of peonage brought into the United States from Mexico and thereafter existing for a time within the territory of New Mexico. * * * The system created by `organized baseball' in recent years presents the question of the establishment of a scheme by which the personal freedom, the right to contract for their labor wherever they will, of 10,000 skilled laborers, is placed under the dominion of a benevolent despotism through the operation of the monopoly established by the National Agreement." I may add that, if the players be regarded as quasi-peons, it is of no moment that they are well paid; only the totalitarian-minded will believe that high pay excuses virtual slavery.
In what I have said about the nature of the contracts made with the players, I am not to be understood as implying that they violate the Thirteenth Amendment or the statutes enacted pursuant thereto. I mean simply to suggest that those contracts are so opposed to the public policy of the United States[5a] that, if possible, they should be deemed within the prohibitions of the Sherman Act 15 U.S. C.A. §§ 1-7, 15 note.
2. On a motion to dismiss, the complaint must be liberally construed in plaintiff's favor. So construing this complaint, I think that the facts of the instant case significantly differ from those in the Federal Baseball case, because here the defendants have lucratively contracted for the interstate communication, by radio and television, of the playings of the games.[5b] In that earlier case, the Court held that the traveling across state lines was but an incidental means of enabling games to be played locally i.e., within particular states and therefore insufficient to constitute interstate commerce.[5c] Here, *411 although the playing of the games is essential to both defendants' intra-state and interstate activities, the interstate communication by radio and television is in no way a means, incidental or otherwise, of performing the intra-state activities (the local playings of the games).
True, in the Federal Baseball Club case, there was present in the record the fact that the defendants had sold the exclusive right to send "play-by-play" descriptions of the games over interstate telegraph wires. But the brief of the plaintiff filed in the Supreme Court in that case did not contend that that interstate communication was interstate commerce; it merely called attention to the telegraph service as one of several factors tending to show the popularity and national character of "organized Baseball." Moreover, the Supreme Court in its opinion in that case did not note the fact concerning the telegraph service; and it has often been held that a decision is not to be regarded as a precedent concerning a question clearly not considered by the Court, because "to make it so, there must have been an application of the judicial mind to the precise question, * * *".[5d]
Accordingly, as the Court in the Federal Baseball case, in deciding that interstate features were absent, discussed nothing but the traveling of the teams and their paraphernalia between states, as a means to the local playing of the games, I think that decision, as above indicated, should be deemed to hold no more than that such traveling does not give rise to interstate commerce for Sherman Act purposes. That such was the ruling appears from the way in which the Supreme Court there dealt with the facts: "A summary statement of the nature of the business involved will be enough to present the point. The clubs composing the Leagues are in different cities and for the most part in different States. The end of the elaborate organizations and sub-organizations that are described in the pleadings and evidence is that these clubs shall play against one another in public exhibitions for money, one or the other club crossing a state line in order to make the meeting possible. When as the result of these contests one club has won the pennant of its League and another club has won the pennant of the other League, there is a final competition for the World's championship between these two. Of course the scheme requires constantly repeated travelling on the part of the clubs, which is provided for, controlled and disciplined by the organizations, and this it is said means commerce among the States. But we are of opinion that the Court of Appeals was right. The business is giving exhibitions of baseball, which are purely state affairs. It is true that in order to attain for these exhibitions the great popularity that they have achieved, competitions must be arranged between clubs from different cities and States. But the fact that in order to give the exhibitions the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business. According to the distinction insisted upon in Hooper v. [People of State of] California, 155 U.S. 648, 655, 15 S. Ct. 207, 39 L. Ed. 297, the transport is a mere incident, not the essential thing."
I think the foregoing will serve alone to distinguish the incidental-means rationale of the Federal Baseball case: There the traveling was but a means to the end of playing games which themselves took place intra-state; here the games themselves, because of the radio and television, are, so to speak, played interstate as well as intrastate.
*412 There is, however, another important distinction on which I think we might rely, were another distinction necessary: In that earlier case, persons in other states received, via the telegraph, mere accounts of the games as told by others, while here we have the very substantially different fact of instant and direct interstate transmission, via television, of the games as they are being played, so that audiences in other states have the experience of being virtually present at these games. That degree of difference, known to any one who has ever sat at the receiving end of a television set, is so great as to constitute a difference in kind. To be sure, no one can draw a sharp line between differences of "degree" and "kind." However, to the question whether the difference between a difference of kind and difference of degree is itself a difference of degree or of kind, the sage answer has been given that it is a difference of degree, but a "violent" one.[6] "Courts of justice," said an English judge some sixty years ago, "ought not to be puzzled by such old scholastic questions as to where a horse's tail begins and where it ceases. You are obliged to say, `This is a horse's tail,' at some time."[7]
In the Federal Baseball case, the Court assigned as a further ground of its decision that the playing of the games, although for profit, involved services, and that services were not "trade or commerce" as those words were used in the Sherman Act. But I think that such a restricted interpretation of those words has been undeniably repudiated in later Supreme Court decisions concerning medical services[7a] and motion pictures.[7b] I believe, therefore, that we will not trespass on the Supreme Court's domain if we hold that the rationale of the Federal Baseball case is now confined to the insufficiency of traveling, when employed as a means of accomplishing local activities, to establish the existence of interstate commerce.[7c]
I conclude, then, that here there is substantial interstate commerce of a sort not considered by the Court in the Federal Baseball case. These questions remain: (a) May Congress constitutionally regulate the interstate portion of such a business as that done by defendants? (b) If so, has Congress in the Sherman Act sufficiently exercised its constitutional power to include that portion of that business? I shall consider those questions in turn.
3. Supreme Court decisions relative to the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., leave little doubt that the Constitutional power of Congress, under the commerce clause, extends to such a situation. In Roland Elec. Co. v. Walling, *413 326 U.S. 657, 66 S. Ct. 413, 416, 90 L. Ed. 383, an action to enjoin an alleged violation of that Act, the defendant was engaged in commercial and industrial wiring, electrical contracting, and dealing in electrical motors and generators. One of its customers was admittedly engaged in interstate telephony, others in the repair of ships intended for movement in interstate commerce, or in the production of goods for commerce. This the Court said (in an opinion by Justice Burton) brought the defendant within the Act, which "does not require the employee to be directly `engaged in commerce'" or even "employed * * * in the production of an article which itself becomes the subject of commerce * * *. It is enough that the employee be employed, for example, in an occupation which is necessary to the production of a part of any other `articles or subjects of commerce of any character' which are produced for trade, commerce or transportation among the several states." Roland Elec. Co. v. Walling was followed in Martino v. Michigan Window Cleaning Co., 327 U.S. 173, 66 S. Ct. 379, 380, 90 L. Ed. 603, where the employer was an independent contractor engaged in washing windows, painting and similar maintenance work entirely within the State of Michigan on premises used in the production of goods for commerce. This the Court said constituted "the production of goods for commerce", under the Fair Labor Standards Act. Several Circuit courts, including this court, have in like manner widely interpreted Congress' constitutional power under the commerce clause. See N.L.R.B. v. Cleveland Cliffs Iron Co., 6 Cir., 133 F.2d 295; Culver v. Bell & Loffland, 9 Cir., 146 F.2d 29; Walling v. Connecticut Co., 2 Cir., 154 F.2d 552; Consumers Power Co. v. N.L. R.B., 6 Cir., 113 F.2d 38; N.L.R.B. v. Gulf Public Service Co., 5 Cir., 116 F.2d 852.
Nor is Congressional exercise of the commerce power barred with respect to a particular business enterprise because its activities in or affecting interstate commerce constitute but a small percentage of its total activities. Thus in Mabee v. White Plains Pub. Co., 327 U.S. 178, 66 S. Ct. 511, 90 L. Ed. 607, the Court held within the Fair Labor Standards Act a publisher of a daily newspaper only ½ of 1% of whose circulation (about 45 daily copies of the paper out of a total of 10,000) was regularly out-of-state. So here: The complaint, liberally construed, imports that the radio and television contracts yield defendants a substantial, not a trifling, sum. On that basis, I think the defendants and the ballplayers are engaged in interstate commerce, regardless of whether or not that sum is but a small percentage of defendants' total earnings.
It seems to me, therefore, that Congress had the Constitutional power to include defendants' interstate business in the Sherman Act. I turn now to the question whether Congress there exercised that power.
4. The Supreme Court has said that (with an exception as to labor unions not relevant here) Congress in the Sherman Act intended to use all the constitutional power conferred on it by the commerce clause. The Court (per Sutherland, J.) so stated for the first time in Atlantic Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 435, 52 S. Ct. 607, 76 L. Ed. 1204. The Court, per Stone, J., repeated that statement in Apex Hosiery Co. v. Leader, 310 U.S. 469, 496, adding, at page 498, 60 S. Ct. 982, 995, 84 L. Ed. 1311, 128 A.L.R. 1044, that the Sherman Act is aimed at restraints "comparable to restraints deemed illegal at common law, although accomplished by means other than contract and which, for constitutional reasons, are confined to transactions in or which affect interstate commerce." This idea was repeated in United States v. Frankfort Distilleries, 324 U.S. 293, 294, 297, 65 S. Ct. 661, 664, 89 L. Ed. 951: "And with reference to commercial trade restraints such as these, Congress, in passing the Sherman Act, left no area of its constitutional power unoccupied; it `exercised "all the power it possessed."'"
The most striking statement, however, is in the Southeastern case, 322 U.S. 533, 64 S. Ct. 1162, 1176, 88 L. Ed. 1440, where the argument was pressed that although the Constitutional commerce power empowered it to do so, Congress in the Sherman Act did not intend to cover insurance. The Court found that "all the acceptable *414 evidence points the other way. That Congress wanted to go to the utmost extent of its Constitutional power in restraining trust and monopoly agreements such as the indictment here charges admits of little, if any, doubt. The purpose was to use that power to make of ours, so far as Congress could under our dual system, a competitive business economy."
The comprehensive sweep of the Sherman Act is also shown by the Supreme Court's reliance, in several Sherman Act cases, upon cases construing the National Labor Relations Act and other statutes. For instance, in the Associated Press case, Associated Press v. United States, 326 U.S. 1, 14, 65 S. Ct. 1416, 1421, 89 L. Ed. 2013, the Court disposed, in one sentence, of the argument that that enterprise was not subject to the Sherman Act: "We need not again pass upon the contention that trade in news carried on among the states is not interstate commerce, Associated Press v. Labor Board, 301 U.S. 103, 57 S. Ct. 650, 81 L. Ed. 953". Justice Frankfurter, concurring, agreed, saying, 326 U.S. at page 27, 65 S.Ct. at page 1428, 89 L. Ed. 2013: "Since the Associated Press is an enterprise engaged in interstate commerce, Associated Press v. Labor Board, supra, these plainly are agreements in restraint of that commerce."
In the more recent case of Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 236, 68 S. Ct. 996, the Court discussed the scope of the Sherman Act and of the Constitutional commerce power as if they were identical, citing United States v. Darby, 312 U.S. 100, 61 S. Ct. 451, 85 L. Ed. 609, 132 A.L.R. 1430, a Fair Labor Standards Act case, Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 59 S. Ct. 206, 83 L. Ed. 126, a National Labor Relations Act case, and United States v. Walsh, 331 U.S. 432, 67 S. Ct. 1283, 91 L. Ed. 1585, a Food and Drug Act case. Moreover, the discussion in the Mandeville opinion of the effect of the Shreveport Rate Cases, 234 U.S. 342, 34 S. Ct. 833, 58 L. Ed. 1341, goes to show that, as the Court has come to construe the commerce clause more widely in connection with the coverage of other statutes, such as the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq., it has equivalently interpreted the Sherman Act's coverage.[8] And certainly the Mandeville opinion demonstrates that the Sherman Act covers activities wholly within a state but which affect interstate commerce.
5. In the light of my previous discussion, and having particularly in mind Mabee v. White Plains Pub. Co., 327 U.S. 178, 66 S. Ct. 511, 90 L. Ed. 607, I think we must, for purposes of deciding the applicability of the Sherman Act, consider this case as if the only audiences for whom the games are played consist of those persons who, in other states, see, hear, or hear about, the games via television and radio. The question here is, then, I think, the same as that which we would face if a similar alleged monopoly related to the production of stage-plays in radio and television studios. I believe the producers of such plays would clearly come within the Fair Labor Standards *415 Acts.[8a] If so, they would be within the Sherman Act. And I would so hold concerning the defendants, if their conduct is as plaintiff describes it.
As the playing of the games is essential both to defendants' interstate and intrastate activities, the players' contracts relate to both. But that, as a consequence, necessary relief with respect to the interstate activities will thus unavoidably affect those which are intrastate does not preclude the granting of such relief.[9] Nor, I venture to repeat, do I think such relief is dependent upon a showing that the illegally monopolized interstate activities, if more than trifling, represent a substantial proportion of defendants' total activities.[9a] See Mabee v. White Plains Pub Co., 327 U.S. 178, 66 S. Ct. 511, 90 L. Ed. 607; cf. Apex Hosiery Co. v. Leader, 310 U.S. 469, 485, 60 S. Ct. 982, 84 L. Ed. 1311, 128 A.L.R. 1044; United States v. Yellow Cab Co., 332 U.S. 218, 225, 67 S. Ct. 1560, 91 L. Ed. 2010. In United States v. Socony Vacuum Oil Co., 310 U.S. 150, 224 note 59, 60 S. Ct. 811, 845, 84 L. Ed. 1129, the Court said that "the amount of interstate * * * trade involved is not material", citing with approval Montague & Co. v. Lowry, 193 U.S. 38, 24 S. Ct. 307, 48 L. Ed. 608; Steers v. United States, 6 Cir., 222 F. 1, 5; Patterson v. United States, 6 Cir., 222 F. 599, 618, 619. I consider adequate the allegations concerning damages.[10]
6. Defendants suggest that "organized baseball," which supplies millions of Americans with desirable diversion, will be unable to exist without the "reserve clause." Whether that is true, no court can predict. In any event, the answer is that the public's pleasure does not authorize the courts to condone illegality, and that no court should strive ingeniously to legalize a private (even if benevolent) dictatorship.
I think we should reverse and remand.
NOTES
[1] See e.g. Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 60 S. Ct. 618, 84 L. Ed. 852; United States v. Socony-Vacuum Oil Co., 310 U.S. at page 150, especially Note 59, 60 S. Ct. 811, 84 L. Ed. 1129 and cases cited.
[1] 259 U.S. 200, 42 S. Ct. 465, 66 L. Ed. 898, 26 A.L.R. 357.
[2] 327 U.S. 178, 66 S. Ct. 511, 90 L. Ed. 607.
[3] 310 U.S. 469, 60 S. Ct. 982, 84 L. Ed. 1311, 128 A.L.R. 1044.
[1] I reach that conclusion somewhat hesitantly. For, while the Supreme Court has never explicitly overruled the Federal Baseball Club case, it has overruled the precedents upon which that decision was based; and the concept of commerce has changed enough in the last two decades so that, if that case were before the Supreme Court de novo, it seems very likely that the Court would decide the other way. This court cannot, of course, tell the Supreme Court that it was once wrong. But "one should not wait for formal retraction in the face of changes plainly foreshadowed;" this court's duty is "to divine, as best it can, what would be the event of the appeal in the case before it." L. Hand, C. J., dissenting in Spector Motor Service Co. v. Walsh, 2 Cir., 139 F.2d 809, 823. In Perkins v. Endicott Johnson Corp., 2 Cir., 128 F.2d 208, 217, 218, we said: "Legal doctrines, as first enunciated, often prove to be inadequate under the impact of ensuing experience in their practical application. And when a lower court perceives a pronounced new doctrinal trend in Supreme Court decisions, it is its duty, cautiously to be sure, to follow not to resist it." In Picard v. United Aircraft Corp., 2 Cir., 128 F.2d 632, 636, we said per L. Hand, J.; "In this we recognize `a pronounced new doctrinal trend' which it is our `duty, cautiously to be sure, to follow not to resist.'"
In Barnette v. West Virginia State Board of Education, D.C., 47 F. Supp. 251, 252, 253 Judge Parker, sitting in a three-judge court, said: "Ordinarily we would feel constrained to follow an unreversed decision of the Supreme Court of the United States, whether we agreed with it or not. * * * The developments with respect to the Gobitis case, [Minersville School Dist. v. Gobitis, 310 U.S. 586, 60 S. Ct. 1010, 84 L. Ed. 1375, 127 A.L.R. 1493], however, are such that we do not feel that it is incumbent upon us to accept it as binding authority. Of the seven justices now members of the Supreme Court who participated in that decision, four have given public expression to the view that it is unsound, the present Chief Justice in his dissenting opinion rendered therein and three other justices in a special dissenting opinion in Jones v. City of Opelika, 316 U.S. 584, 62 S. Ct. 1231, 1251, 86 L. Ed. 1691, [141 A.L.R. 514]. The majority of the court in Jones v. City of Opelika, moreover, thought it worth while to distinguish the decision in the Gobitis case, instead of relying upon it as supporting authority. Under such circumstances and believing, as we do, that the flag salute here required is violative of religious liberty when required of persons holding the religious views of plaintiffs, we feel that we would be recreant to our duty as judges, if through a blind following of a decision which the Supreme Court itself has thus impaired as an authority, we should deny protection to rights which we regard as among the most sacred of those protected by constitutional guaranties."
[2] Hart v. B. F. Keith Vaudeville Exchange, 2 Cir., 12 F.2d 341, 47 A.L.R. 775.
[3] 8 U.S.C.A. § 56 and 18 U.S.C.A. § 1581; see United States v. Reynolds, 235 U.S. 133, 35 S. Ct. 86, 59 L. Ed. 162; Bailey v. Alabama, 219 U.S. 219, 31 S. Ct. 145, 55 L. Ed. 191; Clyatt v. United States, 197 U.S. 207, 25 S. Ct. 429, 49 L. Ed. 726; Taylor v. State of Georgia, 315 U.S. 25, 62 S. Ct. 415, 86 L. Ed. 615; Pollock v. Williams, 322 U.S. 4, 62 S. Ct. 415 86 L. Ed. 615.
[4] Allegheny Baseball Club v. Bennett, C.C.W.D.Pa., 14 F. 257; Metropolitan Exhibition Co. v. Ewing, C.C.S.D.N.Y., 42 F. 198, 7 L.R.A. 381; Brooklyn Baseball Club v. McGuire, C.C.E.D.Pa., 116 F. 782; Weegham v. Killefer, 6 Cir., 215 F. 289, L.R.A.1915A, 820; American League Baseball Club v. Chase, 86 Misc. 441, 149 N.Y.S. 6; Cincinnati Exhibition Co. v. Johnson, 190 Ill.App. 630; Metropolitan Exhibition Co. v. Ward, 9 N. Y.S. 779.
[5] American League Baseball Club v. Chase, 86 Misc. 441, 465, 466, 149 N.Y.S. 6, 19.
[5a] Cf. Hurd v. Hodge, 334 U.S. 24, 34, 68 S. Ct. 847.
[5b] That the defendants' radio contracts are lucrative, see, Pittsburgh Athletic Co. v. KQV Broadcasting Co., D.C., 24 F. Supp. 490; Mutual Broadcasting System, Inc. v. Muzak Corp., 177 Misc. 489, 30 N.Y.S.2d 419.
[5c] In passing, I note that that ruling is difficult to reconcile with the Mann Act cases; 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; Mortensen v. United States, 322 U.S. 369, 375, 64 S. Ct. 1037, 88 L. Ed. 1331; City of Cleveland v. United States, 329 U.S. 14, 19, 20, 67 S. Ct. 13, 91 L. Ed. 12.
[5d] St. Louis V. & T. H. R. v. Terre Haute R. Co., 145 U.S. 393, 403, 404, 12 S. Ct. 953, 956, 36 L. Ed. 748; Webster v. Fall, 266 U.S. 507, 511, 45 S. Ct. 148, 69 L. Ed. 411; KVOS, Inc. v. Associated Press, 299 U.S. 269, 279, 57 S. Ct. 197, 81 L. Ed. 183; Tefft, Weller & Co. v. Munsuri, 222 U.S. 114, 119, 120, 32 S. Ct. 67, 56 L. Ed. 118; United States v. Mitchell, 271 U.S. 9, 14, 46 S. Ct. 418, 70 L. Ed. 799; United States v. More, 3 Cranch 159, 172, 2 L. Ed. 397; The Edward, 1 Wheat. 261, 275, 276, 4 L. Ed. 86; Mutual Benefit Health & Accident Association v. Bowman, 8 Cir., 99 F.2d 856, 858; United States v. Dunbar, 9 Cir., 154 F.2d 889, 891.
[6] Williams, Language and The Law, 61 Law.Q.Rev. (1945) 179, 184.
[7] Chitty, J., in Lavery v. Pursell (1888) 39 Ch.D. at 517.
Holmes, J., often discussed this matter of line-drawing. Holmes, The Common Law (1881) 68, 110, 127; Holmes, Law in Science Science in Law, 12 Harv. L.Rev. (1899) 443, reprinted in Holmes, Collected Legal Papers (1920) 210, 232-233; Hudson County Water Co. v. McCarter, 209 U.S. 349, 355, 28 S. Ct. 529, 52 L. Ed. 828, 14 Ann.Cas. 560; Irwin v. Gavit, 268 U.S. 161, 168, 45 S. Ct. 475, 69 L. Ed. 897; Superior Oil Co. v. State of Mississippi, 280 U.S. 390, 50 S. Ct. 169, 74 L. Ed. 504; Empire Trust Co. v. Cahan, 274 U.S. 473, 478, 47 S. Ct. 661, 71 L. Ed. 1158, 57 A.L.R. 921; Haddock v. Haddock, 201 U.S. 562, 631, 732, 26 S. Ct. 525, 50 L. Ed. 867, 5 Ann.Cas. 1; Schlesinger v. State of Wisconsin, 279 U.S. 230, 241, 46 S. Ct. 260, 70 L. Ed. 557, 43 A.L.R. 1224; Louisville Gas & Elec. Co. v. Coleman, 277 U.S. 32, 41, 48 S. Ct. 423, 72 L. Ed. 770; Quaker City Cab Co. v. Commonwealth of Pennsylvania, 277 U.S. 389, 403, 48 S. Ct. 553, 72 L. Ed. 927; Nash v. United States, 229 U.S. 373, 376, 33 S. Ct. 780, 57 L. Ed. 1232; Bullen v. State of Wisconsin, 240 U.S. 625, 630, 631, 36 S. Ct. 473, 60 L. Ed. 830.
[7a] American Medical Association v. United States, 317 U.S. 519, 63 S. Ct. 326, 87 L. Ed. 434; cf. the reference to that case in United States v. Southeastern Underwriters Association, 322 U.S. 533, 546 and note 25, 64 S. Ct. 1162, 88 L. Ed. 1440.
[7b] Binderup v. Pathe Exchange, Inc., 263 U.S. 291, 44 S. Ct. 96, 68 L. Ed. 308; Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S. Ct. 42, 75 L. Ed. 145; United States v. First Natl. Pictures, 282 U.S. 44, 51 S. Ct. 42, 75 L. Ed. 151; Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S. Ct. 467, 83 L. Ed. 610; Bigelow v. R. K. O. Radio Pictures, 327 U.S. 251, 66 S. Ct. 574, 90 L. Ed. 652.
[7c] Cf. North American Co. v. S. E. C., 327 U.S. 686, 694, 66 S. Ct. 785, 90 L. Ed. 945.
[8] The Mandeville opinion explains that, in United States v. E. C. Knight Co., 156 U.S. 1, 15 S. Ct. 249, 39 L. Ed. 325; the Court had decided that manufacturing was not commerce; the Sherman Act thereby became a "dead letter," and was not finally reborn until 1911 "with the decisions in Standard Oil Co. v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A., N.S., 834, Ann.Cas. 1912D, 734, and United States v. American Tobacco Co., 221 U.S. 106, 31 S. Ct. 632, 55 L. Ed. 663", 334 U.S. 219, 68 S. Ct. 1003; it was the doctrine of the Shreveport Rate Cases, 234 U.S. 342, 34 S. Ct. 833, 58 L. Ed. 1341, (i.e., that activities within a state may be federally regulated if they affect interstate commerce) as extended by later decisions, which made it no longer necessary "to search for some sharp point or line where interstate commerce ends and intrastate commerce begins * * *." As late as the 1930's (the Court continued in the Mandeville opinion) the old ideas persisted in specific applications, but a growing number of decisions had rejected the idea that manufacturing was purely local simply because that phase of a combination restraining trade was carried on within a single state. It "is the effect upon that commerce, not the moment when its cause arises, which the doctrine [of the Shreveport cases] was fashioned to reach."
[8a] Cf., as to the National Labor Relations Act, Marcus Loew Booking Agency, Inc., 3 N.L.R.B. 380; Los Angeles Broadcasting Co., 4 N.L.R.B. 443; KMOX Broadcasting Station, 10 N.L.R.B. 479; Louis G. Baltimore, 57 N.L.R.B. 1611; Miami Valley Broadcasting Corp., 70 N. L.R.B. 1015.
In Fisher's Blend Station v. Tax Commission, 297 U.S. 650, 655, 56 S. Ct. 608, 610, 80 L. Ed. 956, the Court said: "By its very nature broadcasting transcends state lines and is national in its scope and importance characteristics which bring it within the purpose and protection, and subject it to the control, of the commerce clause."
[9] Minnesota Rate Cases, 230 U.S. 352, 399, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R.A.,N.S., 1151, Ann.Cas.1916A, 18; Shreveport Rate Cases, 234 U.S. 342, 34 S. Ct. 833, 58 L. Ed. 1341; United States v. New York Central R. Co., 272 U.S. 457, 47 S. Ct. 130, 71 L. Ed. 350; Currin v. Wallace, 306 U.S. 1, 59 S. Ct. 379, 83 L. Ed. 441; Mandeville Farms v. American Crystal Sugar Co., 334 U.S. 219, 236, 68 S. Ct. 996; United States v. Wright-wood Dairy Co., 315 U.S. 110, 119, 62 S. Ct. 523, 86 L. Ed. 726; Santa Cruz Fruit Packing Co. v. Labor Board, 303 U.S. 453, 466, 58 S. Ct. 656, 82 L. Ed. 954; United States v. Darby, 312 U.S. 100, 118-123, 61 S. Ct. 451, 85 L. Ed. 609, 132 A.L.R. 1430; Wickard v. Filburn, 317 U.S. 111, 122-124, 63 S. Ct. 82, 87 L. Ed. 122.
[9a] If proportions were important, the following would be pertinent: Presumably with little increased expense to the defendants, earnings from the radio and television contracts are something added to what defendants theretofore earned net, so that these added earnings are "velvet" which therefore may (in the Sherman Act context) be regarded as contributing entirely, or almost entirely, to defendants' net profits. Accordingly, in determining proportions, the radio and television net profits should be compared with defendants' other net, not their gross, profits.
[10] Package Closure Corp. v. Sealright, 2 Cir., 141 F.2d 972; Bigelow v. RKO Pictures, 327 U.S. 251, 66 S. Ct. 574, 90 L. Ed. 652. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546243/ | 250 B.R. 136 (2000)
In re OLYMPIA HOLDING CORPORATION, a/k/a P*I*E* Nationwide, Inc., et al., Debtors.
Bankruptcy Nos. 90-4195-3P7, 90-4223-3P7.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
May 16, 2000.
*137 Gardner F. Davis, Jacksonville, FL, for plaintiff.
Michael G. Neri, Philadelphia, PA, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
GEORGE L. PROCTOR, Chief Judge.
This case came before the Court upon the Objection of Lloyd T. Whitaker (the "Trustee") to the administrative claims of the Teamsters Pension Trust Fund of Philadelphia and Vicinity and the Teamsters Health and Welfare Fund of Philadelphia and Vicinity (collectively, the "Funds"). The parties stipulated to the following facts. (See Doc. 20680.)
1. The Funds are employee benefit plans which provide pension, medical and related benefits to their participants and beneficiaries.
2. Debtor was signatory to various collective bargaining agreements which required Debtor to make monthly contributions to the Funds on behalf of certain of Debtor's employees.
3. On October 16, 1990 (the "Petition date") Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Debtor owed the Funds $111,829.38 for unpaid, pre-petition contributions, the amount and status of which are no longer in dispute.
*138 4. By letter dated November 26, 1990, Debtor informed the Funds that their post-petition contributions would be paid in the ordinary course of business. The Funds had actual knowledge of Debtor's Chapter 11 case.
5. Debtor failed to make the contributions due the Funds after the Petition date. The total amount of unpaid, postpetition payments was $49,841.89. The Funds had actual knowledge of Debtor's failure to make the required post-petition payments to the Funds.
6. Debtor ceased operating during the Chapter 11 period and terminated the employment of all employees covered by the Funds. The Funds had actual knowledge that the covered employees had been terminated by Debtor and that Debtor had ceased operations.
7. On March 11, 1991 Debtor's Chapter 11 case was converted to a case under Chapter 7 of the Bankruptcy Code. The Order Converting Case to Chapter 7 and Fixing Time for Filing Claims (the "Order") and the Notice by the Clerk of Meeting of Creditors and Appointment of Trustee (the "Clerk's Notice") were the only mailings sent to all creditors in either the Chapter 11 or the Chapter 7 case notifying them of deadlines within which to file claims against Debtor. The Order and Clerk's Notice were not mailed to the Funds' proper address and the Funds did not receive them.
8. On June 20, 1991 the Trustee filed his Chapter 11 Trustee's Final Report, and Account and Schedule of Unpaid Obligations Incurred During Pendency of Chapter 11 Proceeding (the "Report").
9. On August 21, 1992 the Funds filed two proofs of claim asserting general unsecured and pre-petition priority claims against Debtor for unpaid pre-petition contributions and for withdrawal liability. The Funds' proof of claim did not seek post-petition administrative expenses. As of August 21, 1992 the Funds knew the case had been converted to Chapter 7.
10. In May 1998, the Trustee's counsel contacted the Funds' counsel regarding the calculation and support for the two proofs of claim. During that telephone conversation the Funds' counsel inquired regarding administrative expense claims.
11. In July, 1998, the Funds' counsel provided the Trustee's counsel with a copy of an audit performed by the Funds which indicated that Debtor owed the Funds a total of $49,841.88 for unpaid contributions earned during the post-petition, pre-conversion period.
12. On November 5, 1999 the Trustee objected to the Funds' two Proofs of Claim (Claim No. 11650, which asserted a prepetition § 507(a)(4) priority claim in the amount of $54,448.61, and Claim No. 11651, which asserted a pre-petition § 507(a)(4) priority claim in the amount of $57,380.77) as well as the Funds' potential Chapter 11 administrative expense claims on the ground that they were untimely.
13. On December 3, 1999 the Funds filed a response to the Trustee's Objections, together with a Request for Immediate Payment of their post-petition, preconversion claims with interest pursuant to which the Funds seek payment of their Chapter 11 administrative expense claims.
14. The Trustee subsequently withdrew his objections to the Funds' two proofs of claim for pre-petition expense, but continued to object to the potential allowance of administrative expense claims because of the delay in filing.
15. For purposes of the March 9, 2000 hearing the Trustee does not dispute that the estate failed to make post-petition payments of $49,841.89 to the Funds which were required pursuant to the collective bargaining agreement.
CONCLUSIONS OF LAW
The Trustee objects to the Funds' post-petition, pre-conversion administrative claims on the basis that they were untimely filed. The Trustee contends that *139 the Order of Conversion set a July 24, 1991 bar date for administrative expense applications. The Trustee argues that § 503[1] of the Bankruptcy Code governs the allowance of administrative expenses and "is the start and finish of the Court's analysis." (Trustee Mem. at 5.) The Trustee frames the issue as whether or not cause exists to permit the Funds to tardily file their request for payment of administrative expenses.[2] Although the Trustee concedes that the Funds did not receive the Conversion Order, he contends that as of August 21, 1992 the Funds were aware the case had been converted from Chapter 7 to Chapter 11 and are therefore unable to show cause beyond that date for their failure to file an administrative expense application.
The Funds argue that even if a bar date for post-petition, pre-conversion administrative expenses was set in the case, its claims are allowable pursuant to 11 U.S.C. § 726(a)(1). The Trustee counters that the cases cited by the Funds in support of their argument that late filed administrative expense claims are entitled to § 726(a)(1) distribution apply only to late filed pre-petition priority claims, not tardy administrative expense applications, and that such a distinction renders § 726(a)(1) irrelevant to the Court's analysis.
I. Entitlement of Late Filed Administrative Expense Claims to § 726(a)(1) Priority Distribution
Contrary to the Trustee's assertion, § 726, not § 503 is the starting point of the Court's analysis. Section 726 provides the order in which property of the estate is to be distributed. The version of § 726 applicable to this case provides in relevant part:
(a) Except as provided in section 510 of this title, property of the estate shall be distributed
(1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title;
(2) second, in payment of any allowed unsecured claim, other than a claim of a kind specified in paragraph (1), (3), or (4) of this subsection, proof of which is
(A) timely filed under section 501(a) of this title;
(B) timely filed under section 501(b) or 501(c) of this title; or
(C) tardily filed under section 501(a) of this title, if
(i) the creditor that holds such claim did not have notice or actual knowledge of the case in time for timely filing of such claim under section 501(a) of this title
(ii) proof of such claim is filed in time to permit payment of such claim;
(3) third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title, other than a claim of the kind specified in paragraph 2(c) of this subsection; . . .
11 U.S.C. § 726 (West 1991).
*140 In the absence of a subordination agreement or equitable subordination by the court pursuant to § 510, § 507 claims are paid first. Section 507 sets forth the order of priority expenses and claims and provides that administrative expenses that are allowed under § 503(b) have first priority. See 11 U.S.C. § 507 (West 1991).
Prior to the Reform Act, § 726(a)(1) made no distinction between the payment of timely and tardily filed priority claims. The circuit courts that have addressed the issue, including the Eleventh Circuit Court of Appeals, have concluded that, based upon the plain language of § 726(a)(1), priority claims are entitled to first priority status in a Chapter 7 distribution whether or not they are timely filed. See Cooper v. IRS (In re Cooper), 167 F.3d 857, 859 (4th Cir.1999); IRS v. Davis (In re Davis), 81 F.3d 134, 135 (11th Cir.1996); In re Pacific Atl. Trading Co., 33 F.3d 1064, 1067 (9th Cir.1994) (stating "[t]he contrast in the three subsections' treatment of late and timely claims indicates Congress intended priority claims to receive first distribution regardless of whether proof of the claim was filed timely or late."); In re Vecchio, 20 F.3d 555, 559-560 (2d Cir.1994); United States v. Cardinal Mine Supply, 916 F.2d 1087, 1091 (6th Cir.1990). But see United States v. Waindel (In re Waindel) 65 F.3d 1307, 1311-1312 (5th Cir.1995) ("allowing" tardily filed priority claim in a Chapter 13 case but refusing to accord it first tier priority status). Cf. In re Cole, 172 B.R. 287, 292 (Bankr.W.D.Mo.1994) ("allowing" IRS' tardily filed priority claim but equitably subordinating it to the claims of general unsecured creditors); In re Sea Air Shuttle, 168 B.R. 501, 505-506 (Bankr. D.P.R.1994) (relegating tardily filed administrative expense claim in converted case to § 726(a)(2) status); In re Brennan, 167 B.R. 316, 317 (Bankr.D.Mass.1993) (holding that 11 U.S.C. § 726(a)(3) can be read to encompass both general non-priority claims and tardily filed § 507 priority claims and relegating IRS' tardily filed priority claim to § 726(a)(3) status).
The Trustee's attempted distinction between late filed priority claims and late filed administrative expense applications is no distinction at all. Vecchio, upon which the Eleventh Circuit in Davis relied, addressed a similar argument. See 20 F.3d at 558. In Vecchio the trustee objected to a late filed § 507(a)(7) tax claim on the basis that it was tardily filed. See id. The trustee argued that for a claim to be allowed pursuant to § 507, it must have been timely filed pursuant to Rule 3002. See id. The Court rejected the Trustee's argument stating "[n]owhere does the trustee account for the language in subsections (a)(2) and (a)(3) of § 726 which expressly refers to `allowed' claims that are `tardily filed' and, indeed, orders their payment. Plainly, the scheme set forth in § 726(a) imposes no threshold requirement of timely filing for a claim to be `allowed' and thus eligible for payment." See Id.
In the case at bar, the Trustee's implicit argument that an administrative expense claim must be timely filed pursuant to § 503 so that it falls within the ambit of § 507(a)(1), and only then is entitled to § 726(a)(1) distribution, must fail for the same reason. The line of authority that holds that late filed priority proofs of claim for pre-petition taxes are entitled to first tier distribution pursuant to § 726(a)(1) applies with equal force to late filed administrative expense claims. The Funds failure to timely file a claim for administrative expenses is of no consequence to its status as a § 726(a)(1) priority claimant. As mandated by the Eleventh Circuit in Davis, the Funds' administrative expense claims are entitled to § 726(a)(1) priority status. See 81 F.3d at 135. In light of the Court's holding that tardily filed priority claims, including administrative expense claims, are entitled to first priority status in a Chapter 7 distribution, the Court need not address the Funds' remaining arguments.[3]
*141 II. Allowance of Interest on the Funds' Administrative Expense Claims
Having determined that the Funds' administrative expense claims are entitled to § 726(a)(1) distribution, the Court must determine whether the Funds are entitled to interest on their claims and if so, the priority to which it is entitled. The Funds seek interest on their administrative claims from the date the unpaid contributions became due until they are paid. Initially the Funds assert that they are so entitled because "the Trustee concedes that the Funds are either contractually or statutorily entitled to interest since he does not otherwise argue in his Memorandum." (Funds Br. at 27.) The Court is unimpressed with this argument and summarily disposes of it. Additionally, the Funds contend that the Trustee did not object to the merits of the Funds' administrative expense claims. Finally, the Funds contend that "[i]t has been established in this Circuit that interest must be paid on outstanding administrative claims." (Funds Br. at 28.)
The Trustee contends that in order for a claim to be granted administrative priority the expense must have bestowed a concrete benefit to the estate and that the interest on the Funds' administrative expense provided no benefit to the estate. The Trustee also argues that the allowance of interest would be inequitable because the Funds did not submit its request for payment of administrative expense until December 1999. Finally, the Trustee argues that a holding that interest accruing on all administrative expense claims until the date of payment is entitled to priority status would endanger the payment of the Funds pre-petition § 507(a)(4) priority claims.
A. Post-Petition, Pre-Conversion Interest on Administrative Expense Claims
Although the general rule is that interest on post-petition debts is not available in bankruptcy, it is well settled that post-petition, pre-conversion interest on administrative taxes is entitled to administrative priority pursuant to § 726(a)(1). See In re Flo-Lizer, Inc., 916 F.2d 363, 366-367 (6th Cir.1990); In re Mark Anthony Constr., 886 F.2d 1101, 1109 (9th Cir. 1989); Allied Mechanical Servs., Inc., 885 F.2d 837, 839 (11th Cir.1989); United States v. Friendship College, Inc. (In re Friendship College), 737 F.2d 430, 432-433 (4th Cir.1984); In re Rocky Mountain Refractories, 208 B.R. 709, 714 (10th Cir. BAP 1997) (stating "the administrative expense claim, including interest incurred during the Chapter 11 case is paid as the claim under § 726(a)(1)."). Cf. In re Varsity Carpet Servs. v. Richardson (In re Colortex Indus.), 19 F.3d 1371, 1384 (holding that interest accruing on trade debts incurred as administrative expenses during Chapter 11 entitled to same priority as trade debt itself). But see In re Hospitality Assocs. of Laurel, 212 B.R. 188, 200 (Bankr.D.N.H.1997) (lamenting courts' failure to apply § 726(a)(5) and holding that interest on administrative tax claims accruing during pendency of Chapter 11 case payable only as fifth priority). Cf. In re Fred Swain, Inc., 97 B.R. 660, 662 (Bankr.S.D.Fla.1989) (holding that interest on post-petition pension payments was allowable only as a general unsecured claim). Clearly, the interest accruing on the Funds' administrative expense while the case was in Chapter 11 is entitled to § 726(a)(1) priority status.
*142 B. Post-Conversion Interest on Administrative Expense Claims
Few Courts have specifically addressed the priority status of interest accruing on administrative expense claims after a case's conversion from Chapter 11 to Chapter 7. However, the Eleventh Circuit in Colortex held that interest on trade debts incurred as administrative expenses during a Chapter 11 is entitled to the same priority as the administrative expense itself, but that upon conversion to Chapter 7, the interest accruing thereafter enjoys only the fifth priority pursuant to § 726(a)(5). See 19 F.3d at 1384. (Emphasis supplied.) The Funds' Memorandum fails to acknowledge Colortex's unambiguous distinction between interest accruing on administrative claims during the pendency of a Chapter 11 case and interest accruing on administrative claims subsequent to the conversion of a case to Chapter 7. The Funds incorrectly contend that Colortex overruled Fred Swain, cited by the Trustee for the proposition that interest on administrative claims is not allowable as a priority claim. Colortex overruled Fred Swain only to the extent that Fred Swain held that interest accruing on administrative claims during the pendency of a Chapter 11 is not an administrative priority claim, but did not change Fred Swain's holding that post-conversion interest on administrative expenses is payable only as a general unsecured claim.
The Funds also contend that disallowance of the post-conversion interest as a priority claim would unjustly enrich the estate. "The principal purpose of according administrative priority to claims for benefit to the estate is to prevent unjust enrichment of the debtor's estate, rather than simply to compensate the claimant." Colortex, 19 F.3d at 1383. Colortex's discussion of unjust enrichment lent support to its holding that post-petition, pre-conversion interest on administrative expense trade debts is entitled to administrative priority status, but clearly does not support the Funds' argument that post conversion interest on administrative expenses is similarly entitled.
III. Sanctions against the Trustee and the Trustee's Attorney
The Funds request the imposition of sanctions and an award of attorney's fees and costs against the Trustee and the Trustee's Attorney pursuant to Rule 9011, Federal Rule of Bankruptcy Procedure[4] based upon the following:
1. The Trustee's objections to the Funds' claims could not have been well grounded in fact because: (a) The Trustee scheduled the Funds' claims in the schedule of unpaid debts; and (b) The Trustee concedes the Funds were denied fundamental due process because they were never served with the Order, the Clerk's Notice, or a Rule 1019(7) notice;[5]
2. In light of Davis, the Trustee's objections to the Funds' administrative expense claims were not warranted by existing law;
*143 3. The Trustee attempts to mislead the Court by citing sections of the Bankruptcy Code that do not apply to cases commenced before October 22, 1994; and
4. The Trustee's objection to the administrative expense claim was for the sole purpose of harassing the Funds into making an unfair settlement and/or obtaining disallowance of the Funds claims altogether.
A court considering the imposition of sanctions pursuant to Rule 9011 must determine: 1) whether, based on the facts and law available to the signer at the time the document was filed or served, the attorney or signing party made a reasonable inquiry to determine the factual and legal legitimacy of the document; and 2) whether the attorney or signing party interposed the document for any improper purpose. See In re Olympia Corp., 189 B.R. 846, 851 (Bankr.M.D.Fla.1995) (citing In re Mroz, 65 F.3d 1567, 1572 (11th Cir. 1995)). The Court must apply an objective standard. Id. (citing In re Kearney, 121 B.R. 642, 646 (Bankr.M.D.Fla.1990)); In re Jerrels, 133 B.R. 161, 164 (Bankr.M.D.Fla. 1991). Such a standard requires the Court to "go beyond the mere assertions of good faith and determine instead whether a reasonable person would have taken the actions taken by the attorney in a particular case." In re Malmen, 140 B.R. 819, 824 (Bankr.M.D.Fla.1992).
The Trustee's scheduling of the Funds' unpaid administrative claims on the schedule of unpaid debts is of no consequence to the Trustee's contention that the administrative expense claims were tardily filed. The premise of the Trustee's argument is not that Debtor did not owe the Funds for unpaid contributions, but rather that the Funds' failure to file timely claims should result in their denial. The Funds' request for sanctions based on the Trustee's "concession" that the Funds were denied fundamental due process must fail for the same reason. The Funds next argue that pursuant to § 726(a)(1) and Davis, the Trustee's Objection to the Funds Request for Administrative Expenses was not warranted by existing law as required by Rule 9011. Although the Court declined to adopt the Trustee's arguments that § 503 imposed a timeliness requirement for administrative expenses and that a distinction exists between the treatment of late filed pre-petition, priority claims and late filed post-petition, pre-conversion administrative expenses vis-à-vis § 726(a)(1), the Court is unable to conclude that the Trustee objected to the Funds' claims for any improper purpose or that the actions of the Trustee and his counsel were unreasonable.
Finally, the Funds argue that the Trustee blatantly attempts to mislead the Court by citing current and thus inapplicable versions of § 503(a)[6] and § 726(a)(1) in his memorandum. The Court attributes the Trustee's citation of the current version of § 726(a)(1) to sloppiness rather than a blatant attempt to mislead.[7] The Funds' contention that the Trustee objected to the Funds' administrative expense claim for the sole purpose of harassing the Funds into making an unfair settlement and/or obtaining disallowance of the Funds claims altogether is pure speculation, in which the Court will not indulge. As such, sanctions against the Trustee and his counsel pursuant to Rule 9011 are not warranted. The Court will also deny the Funds' request for attorney's fees and costs and immediate payment of their priority and administrative expense claims.
*144 CONCLUSION
The Court will overrule in part and sustain in part the Trustee's Objection to the Funds administrative expense claims. The post-petition payments of $49,841.89 which the Funds were required to pay pursuant to the collective bargaining agreement will be paid as a priority claim pursuant to § 726(a)(1). The post-petition, pre-conversion interest on the Funds' administrative expense claims will also be paid as a priority claim pursuant to § 726(a)(1). The interest accruing on the Funds' administrative expense claims from the date of conversion of the case until the date of payment is entitled to payment pursuant to § 726(a)(5). Sanctions against the Trustee and his Counsel are not warranted and will not be imposed. The Court will deny the Funds' request for attorney's fees and costs and immediate payment of their priority and administrative expense claims.
NOTES
[1] The version of § 503 applicable to this case provides in pertinent part:
Allowance of administrative expenses
(a) An entity may file a request for payment of an administrative expense.
(b) After notice and a hearing, there shall be allowed, administrative expenses, . . . including
(1)(A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case; . . .
11 U.S.C. § 503 (West 1991).
[2] The Trustee's contention that the Court must decide whether cause exists to permit the Funds to tardily file their request for payment of administrative expenses is erroneous. Prior to the Bankruptcy Reform Act of 1994 ("Reform Act"), § 503 did not contain a timeliness requirement. See supra note 1. The Reform Act added the words "timely" and "may tardily file such a request if permitted by the court for cause." The Trustee acknowledges the amendment but argues that cause is an implicit requirement when a court considers an application for administrative expenses filed after the bar date. The Court disagrees.
[3] The Funds also argue:
a. Because they were pre-petition creditors and post-petition claimants known to Debtor and the Trustee, their post-petition, pre-conversion claims can not be barred because they did not receive actual notice of the bar date.
b. The Order of Conversion by its terms did not set a bar date for post-petition, preconversion claimants other than professionals retained in the Chapter 11 cases.
c. No bar date for post-petition, pre-conversion claimants other than professionals retained in the Chapter 11 case was established because the Notice required by Federal Rule of Bankruptcy Procedure 1019(7) was never given in the case.
[4] Rule 9011 provides in relevant part:
(b) Representations to the court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.
FED.R.BANKR. P. 9011(b)(2),(3).
[5] Rule 9011 was amended in 1997 to conform to the 1993 amendment to Federal Rule of Civil Procedure 11. The Funds' memorandum quotes and relies on the outdated version of the Rule. "Well grounded in fact" is no longer part of the Court's analysis. The Funds' reliance on the outdated version of the rule is ironic given the Funds' repeated argument that the Trustee relied on versions of the Bankruptcy Code not applicable to cases commenced before October 22, 1994 and that the Court should impose sanctions for such.
[6] Although the Trustee cited the current version of § 503(a) in the text of his memorandum, he acknowledged in a footnote that the word "timely" and the phrase "may tardily file such a request if permitted by the court for cause" were added by the Reform Act. See Trustee's Brief at 3 n. 1.
[7] Indeed, the Funds cited an incorrect version of Rule 9011. See supra note 5. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546269/ | 250 B.R. 83 (2000)
In re QUANALYZE OIL & GAS CORP., Debtor.
No. 00-51001-C.
United States Bankruptcy Court, W.D. Texas, San Antonio Division.
June 8, 2000.
*84 *85 Danna Ciomperlik, pro se.
DECISION ON MOTION TO RECONSIDER ORDER OF SALE AND MOTION FOR STAY OF SALE ORDER
LEIF M. CLARK, Bankruptcy Judge.
This case involves the implications of recent changes made the bankruptcy rules regarding § 363 sales of bankruptcy estate assets. In the past, an order authorizing a sale became final and effective immediately, and parties could close immediately unless an objecting party got a court order staying the sale. Now, thanks to changes to Rules 6004, 7062, and 9014, sale orders are stayed for 10 days meaning that sales that close before that ten days expires could conceivably be unwound. This is a dramatic change in practice and procedure that may well have gone unnoticed by bench and bar, and its implications deserve examination. This case demonstrates some of the issues that might be expected to arise from this change in practice and procedure.
Danna Ciomperlik, a/k/a Danna de la Garza, has filed a motion to reconsider this court's order authorizing the sale of certain property of the estate, which this court entered on June 1, 2000. The motion to reconsider was filed June 2, 2000, the same day as the closing of the sale authorized by this court's order. Ms. Ciomperlik has also filed a motion to stay sale order on June 6, 2000, shortly after this court announced on the record on June 5, 2000 its intention to deny the motion to reconsider. The motion to reconsider came up on the record during the course of a hearing on the U.S. Trustee's motion to convert this case. An attorney representing another equity investor advised the court that the motion had been filed the previous Friday, suggesting the court should not convert the case until it first ruled on the motion to reconsider the sale.
Background
To better understand this somewhat convoluted matter, we need to retrace a little history. This is the second chapter 11 filing by Quanalyze Oil & Gas Corporation within a year. The previous case was dismissed, but the new case was filed in just a few months. In this new case, creditors quickly moved for relief from stay or the appointment of a trustee, while the debtor just as quickly sought to sell various real estate holdings. In response to one motion for relief from stay, the debtor reached an agreement to market a 32 acre tract in Boerne, Texas, and to complete the sale before June 6, 2000. If the sale were not completed, then the creditor would be permitted to proceed to foreclose its mortgage on the property. Other creditors sought similar relief, and at a hearing on one of those motions, the court learned that the debtor's principal, James de la Garza, was the target of an arrest warrant, and that he was a convicted felon on parole. The court also learned of certain irregularities in one of the sales that had earlier been approved in this case, as well as discrepancies between the schedules filed in this case and in the previous case (assets had evidently been omitted from the schedules in the previous case). It also came out that an earlier sale authorized by the court involved part of a 1.5 acre tract that was in fact contiguous with the 32 acre tract, and integral to its value. The earlier sale thus impaired the saleability and value of the 32 acre tract. Fortunately, however, this sale had not yet closed. The debtor's principal had failed to disclose these facts to the court when it filed its motion to sell a part of this 1.5 acre tract. With all of these issues laid out on the record, it became obvious that immediate action needed to be taken to prevent abuse and preserve estate value. *86 Rising to the occasion, the U.S. Trustee orally moved for the appointment of a chapter 11 trustee, and the court granted that motion on the spot. After hurried consultation with all parties, the U.S. Trustee appointed John Patrick Lowe as Chapter 11 Trustee.
The chapter 11 trustee promptly filed a motion to set aside the order authorizing the sale of the portion of the 1.5 acre tract (it had not closed), and the court granted that motion. The chapter 11 trustee then sought to include the 1.5 acre tract at the same time as the 32 acre tract was to be sold. This request too was granted, and the court moved back the sale date for both tracts to give the chapter 11 trustee time to get up to speed, as well as to give other third parties a little more time to put together competing bids. In all events, the motions to sell still had to be considered before the first Tuesday in June, because the properties were scheduled for foreclosure as the result of earlier orders entered granting relief from stay to certain lenders.
The sale motion was heard on May 24, 2000, with full notice to all. Only one bidder came forward, and the chapter 11 trustee recommended that the sale be approved. The court determined that the sale was an arm's length transaction, and was being pursued in good faith. The sale was approved at that time. However, an order was not prepared and tendered for signature until June 1, 2000. The order was signed and docketed that very day. The following day, the seller and the chapter 11 trustee closed the sale. That same day (it is unclear whether it was before or after the closing), a motion to reconsider the sale was filed by one Danna Ciomperlik, alleged to be one of the debtor's equity security holders (though the schedules did not reflect her as an owner or equity interest holder). The motion was filed pro se.
The motion to reconsider was taken up on the record on June 5, 2000, at a hearing on the motion of the United States Trustee to dismiss or convert this case. Gershon Cohen entered an appearance on behalf of James de la Garza, the debtor's principal (the one being pursued on an arrest warrant) and an equity interest owner, advising the court of the pendency of the motion to reconsider. Mr. Cohen argued that the motion ought to be considered and ruled on before entertaining the U.S. Trustee's motion to dismiss or convert. According to Mr. Cohen, Ms. Ciomperlik was an equity interest holder of the debtor, and had a buyer ready, willing and able to purchase the estate property in question for a price in excess of the purchase price which the court had accepted at the hearing on the motion to sell the property.[1] Mr. Cohen suggested the court continue the hearing on the motion to convert because, if this "better offer" was accepted, the debtor might actually be able to reorganize and pay it creditors in full.
The trustee and the United States Trustee both opposed the request, stating that the sale had in fact already been consummated, that no stay of the sale had been sought, and that the purchaser could have, but did not, bid at the time of the hearing on sale. The court agreed, adding that, in its view, the failure to obtain a stay pending reconsideration of the motion was fatal. The consummation of the sale rendered the motion to reconsider moot, in the view of the court, and the court announced from the bench its intention to *87 deny the motion to reconsider.[2] The court then granted the motion of the United States Trustee to convert the case to chapter 7.
The following day, Ms. Ciomperlik filed a motion to stay order of sale, and requested that the court consider her motion in open court. The court placed the matter on the docket sua sponte, and considered the arguments of Ms. Ciomperlik. This motion disclosed (for the first time) that Ms. Ciomperlik is actually Danna de la Garza, formerly known as Danna Ciomperlik. She told the court that she was James de la Garza's wife.[3] She told the court that she filed the motion for stay after learning of this court's ruling (evidently from Mr. Cohen). She begged the court to reconsider the sale because she believed that this new offer would pay all creditors in full and allow her and her husband to preserve their equity interests[4] in the company. She said she had a cashier's check for $150,000 with her, and that the purchaser had lined up financing with Wells Fargo Bank.
After considering Ms. Ciomperlik's presentation, and after further review of the applicable law, the court concludes that it erred as a matter of law with regard to the stay issue, but did not err in its initial determination that the sale should not be reconsidered.
Analysis
A. WHETHER THE SALE ORDER WAS STAYED
The order authorizing sale was entered on the docket on June 1, 2000. Until December 1, 1999, the Federal Rules of Bankruptcy Procedure provided that
Rule 62 F.R.Civ.P. applies in adversary proceedings. An order . . . authorizing . . . the use, sale or lease of property of the estate under § 363 . . . shall be additional [an] exception[] to Rule 62(a).
FED.R.BANKR.P. 7062 (pre-1999 version). Federal Rule 62(a) states that
Except as stated herein, no execution shall issue upon a judgment nor shall proceedings be taken for its enforcement until the expiration of 10 days after its entry.
FED.R.CIV.P. 62(a). Rule 7062 was made applicable to contested matters by Rule 9014. Taken together, the rules operated to assure that a sale could be consummated by the parties immediately, and could only be forestalled by obtaining a very prompt stay from the bankruptcy judge. The rules mirrored the similar policy expressed *88 in the statute itself, which states that a notice of appeal will not stay consummation of a sale unless a stay pending appeal is obtained. 11 U.S.C. § 363(m). If a party did not get a stay before the sale closed, either a reconsideration or an appeal would be rendered moot, because sale orders were excluded from the general rule that orders in contested matters are stayed for 10 days after their entry.
All of that changed on December 1, 1999, with an amendment to the bankruptcy rules that deleted all but the very first sentence of Rule 7062 (thereby deleting the "exception" to Rule 62(a) for, inter alia, sale orders), deleted reference to Rule 7062 in Rule 9014, and added a new paragraph to Rule 6004 (the rule governing asset sales). New subparagraph (g) now states that
An order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 10 days after the entry of the order, unless the court orders otherwise.
FED.R.BANKR.P. 6004(g). The Advisory Committee Note to this rule states that this new paragraph was added "to provide sufficient time for a party to request a stay pending appeal of an order authorizing the use, sale, or lease of property under § 363(b) of the Code before the order is implemented." Advisory Committee Note (1999), FED.R.BANKR.P. 6004 (Norton Bankr.Rules Pamphl. 1999-2000 Edition page 325). The Advisory Committee Note to Rule 7062 explains that
[t]he additional exceptions to Rule 62(a) consist of orders that are issued in contested matters. These exceptions are deleted from this rule because of the amendment to Rule 9014 that renders this rule inapplicable in contested matters unless the court orders otherwise.
Advisory Committee Note (1999), RULE 7062, FED.R.BANKR.P. (Norton Bankr.Rules Pamphl 1999-2000 Edition, page 496). The Advisory Committee Note then adverts to specific amendments to other rules, including Rule 6004 (previously referenced), that "delay the implementation of certain types of orders for a period of 10 days unless the court otherwise directs." Id.
The bankruptcy rules have thus exactly reversed the procedures regarding the 10 day automatic stay of orders in contested matters. The general rule used to be that orders in contested matters were automatically stayed for 10 days because Rule 9014 made Rule 7062 applicable to contested matters, and Rule 7062 in turn incorporated Rule 62(a) of the Federal Rules of Civil Procedure, which sets out the automatic 10 day stay for judgments and other orders. The exception language in Rule 7062 then operated to exclude sale orders, lift stay orders, orders that authorized post-petition financing, and orders authorizing assumption and assignment of leases and executory contracts from the general "automatic 10 day stay" rule. Now, though, there is no automatic stay of any order in a contested matter as a general rule, an exact reversal of prior policy.
The prior policy on sale orders has also been reversed. Under the former rules, a sale order was not stayed for 10 days. Now, by virtue of the 1999 amendments, a sale order is expressly stayed for 10 days. The Advisory Committee Note says that Rule 6004(g) is designed to facilitate an objecting party's ability to obtain a stay pending appeal, thereby eliminating what had been the somewhat unseemly practice of chapter 11 debtors or bankruptcy trustees rushing to close a sale before an anticipated objecting party could get a court to enter a stay order. The language of the rule itself, however, is not limited by its terms to appeals. The rule now says that sale orders are stayed for 10 days, period (unless the court orders otherwise). See FED.R.BANKR.P. 6004(g).
What this means in this case, then, is that the estate and the buyer proceeded to a closing at their peril. The order upon which they relied was not yet final. No stay order was needed, because the sale *89 order was automatically stayed by operation of new Rule 6004(g) of the Federal Rules of Bankruptcy Procedure. The court can indeed entertain the motion to reconsider, and should it grant that motion within the ten day window afforded by Rule 6004(g), the sale order can be set aside and with it the sale itself! No end of litigation could then be instigated, involving an angry buyer, a frustrated lender or two, a nervous chapter 11 trustee (and his bonding company), and a skittish title company.
In any event, Ms. Ciomperlik did not need to file her motion to stay sale order, because it was already stayed as a matter of law. Her motion for stay was only filed to make sure that her motion to reconsider could be ruled on before the sale became irrevocable. By this decision, the court is in fact ruling on the motion to reconsider, so her motion for stay is unnecessary. It will be dismissed as moot.
B. THE MOTION TO RECONSIDER
The court noted on the record during the course of entertaining the oral motion for continuance urged by Mr. Cohen that it did not believe the motion to reconsider was well taken in any event, wholly apart from the stay issue. Nothing in the court's more searching examination of the motion, or Ms. Ciomperlik's statements to the court, have changed this court's mind. Indeed, if anything, the court is even more convinced that granting the motion to reconsider would be ill-considered, and would set a dangerous precedent for future bankruptcy sales.
Ms. Ciomperlik's motion faces a daunting challenge at the outset. For before even reaching the merits of the motion, the court is obligated to satisfy itself that she even has standing to urge the motion. In re Cult Awareness Network, Inc., 151 F.3d 605, 607 (7th Cir.1998). Standing is always important, going as it does to the court's subject matter jurisdiction, but it is especially important that only parties with standing be able to object to bankruptcy sales, for few things could more thoroughly undermine the sale process in bankruptcy than the prospect of strangers to the transaction having the ability to file papers to interfere or frustrate the sales process.[5]
A competing bidder normally lacks standing to even challenge a sale, much less seek reconsideration of an order approving sale. In re HST Gathering Co., 125 B.R. 466, 468 (W.D.Tex.1991).[6] In this case, it is not actually the bidder seeking to challenge the sale, but a purported equity interest owner, advancing the interests of that bidder. Yet here too, standing can be a problem, for equity interest owners must demonstrate that they have a pecuniary interest in the outcome of the matter to have standing, and that usually means making at least a prima facie showing that there is enough value in the estate to pay all creditors in full and have enough left *90 over to pay a dividend to owners. See In re Cult Awareness Network, Inc., supra. "If the debtor [or equity interest owner] can show a reasonable possibility of a surplus after satisfying all debts, then the [equity interest holder] has shown a pecuniary interest and has standing to object to a bankruptcy [sale] order." Id., at 608, citing In re Andreuccetti, 975 F.2d 413, 417 (7th Cir.1992). In this case, the movant contends that she has an offer in hand that, if accepted, would pay creditors in full, a representation that is probably sufficient to satisfy the solvency aspect of the burden.[7]
What the movant failed to do, however, was to establish the basis for her claim to in fact be an equity interest owner of the debtor. To hold an actual pecuniary interest, she must first hold an interest. No proof of interest was ever filed reflecting her alleged ownership interest. The bankruptcy schedules do not show her to be an owner either. At the hearing on the motion for stay of sale order, Ms. Ciomperlik represented that her equity interest in the estate derived from her status as spouse of James de la Garza entitling her (she said) to a one-half community interest in the company. She added that, according to her husband (who is currently incarcerated in a Corpus Christi jail) stock certificates were "to be issued" memorializing her interest, but that had not yet been done. Clearly the burden was on Ms. Ciomperlik to prove her status as owner, and this she failed to do. The business records of the company were not furnished, nor were any resolutions to memorialize her alleged equity interest. No stock certificates were presented. Moreover, her statements were inconsistent with what the bankruptcy schedules showed, casting considerable doubt on her representations. The court is inclined to conclude that the motion to reconsider fails for lack of standing on the part of Ms. Ciomperlik.
Even if she did have standing, however, the motion should still not be granted. Whether this motion is construed to be a motion to alter or amend judgment under Rule 9023 or motions to set aside judgments under Rule 9024, see In re El Paso Refinery, L.P., 244 B.R. 613, 618 (Bankr.W.D.Tex.2000), it is entirely inappropriate, under the circumstances of this case, to disturb an order authorizing sale solely on the grounds that a "better offer" has since materialized.
Rule 9023 makes Rule 59 applicable in bankruptcy cases. That rule permits a court to revisit a judgment or other final order entered in a matter tried to the court "for any of the reasons for which rehearings have heretofore been granted in suits in equity in the courts of the United States." FED.R.CIV.P. 59(a). Those grounds are normally considered to be newly discovered evidence or manifest errors of law or fact. See Matter of Aguilar, 861 F.2d 873, 875 (5th Cir.1988); see also In re Kellogg, 197 F.3d 1116, 1119 (11th Cir.1999). There is a three-prong test generally employed for determining whether "newly discovered evidence" furnishes grounds for a new trial: (1) the probability that the evidence would have changed the outcome of the trial; (2) whether the evidence could have been discovered earlier through the moving party's due diligence; and (3) whether the evidence is merely cumulative or impeaching. See Farm Credit Bank v. Guidry, 110 F.3d 1147, 1155 (5th Cir.1997); Diaz v. Methodist Hosp., 46 F.3d 492, 495 (5th Cir.1995). Here, Ms. Ciomperlik acknowledged that, *91 in fact, there was present in court on the day of the hearing a person who could have come forward to advise the court of the existence of this competing bid, but who failed to do so. The evidence of a competing bid was thus available earlier and could have been "discovered" through the moving party's due diligence.[8]See In re Investors Florida Aggressive Growth Fund, Ltd., 168 B.R. 760, 768 (Bankr. N.D.Fla.1994). The moving party has thus failed to satisfy one of the three necessary prongs for obtaining a new trial on grounds of newly discovered evidence.
Nor can the court discern any other error in fact or law in the court's decision to proceed with the sale in the manner it did. The court set a deadline for bidders to come forward, and creditors had ample opportunity to seek out interested bidders to participate in the process. If a sale was not completed before the end of May, the estate would lose the property to foreclosure by secured lenders. Notice was given to all creditors and parties in interest, including Mr. de la Garza (who, it must be remembered, initiated the sale process months before a chapter 11 trustee was appointed). At the hearing, the court went out of its way to ask whether there were competing bids unaware at the time that, in fact, the agents of the entity with the "better offer" were in court, keeping silent (evidently because they did not have any earnest money with them). No one came forward, the court confirmed that the proposed buyer was unrelated to the debtor or any other party in the case, asked for the recommendation of the chapter 11 trustee, then concluded that the sale should be approved. No error is apparent in the process employed by the court, and none is suggested by the movant here.
Indeed, the only basis urged for setting aside the sale offer is the representation that there is now after the fact a "better offer" that has since materialized. The court concludes that this is an insufficient ground to justify granting a new trial of a motion to sell estate assets. If such sales are to have any finality at all (and if bidders are to be encouraged to participate in sales), the procedure employed must be both transparent and reliable. Were parties permitted to run in bids after the close of sale hearings, then bidders themselves would quickly realize that they were being used as a stalking horse, while other bidders waited for the stalking horse to set the price range, before committing themselves to a bid. Of course, such bidders would not bid what they think the property is worth they would only bid a little more than what someone else thinks the property is worth. They would thus take advantage of both other bidders and the bankruptcy estate, waiting until after the close of the sale to then come in with another higher bid but only a little bit higher.[9] Far from being in the estate's best interests, that would be in the estate's worst interests.
What would a court be expected to do were it to grant a motion to alter or amend based on an untimely "better offer?" Would it revoke the order of sale and enter an amended order, awarding the property to the competing bidder? Would it set aside the sale entirely and reset the motion to sell? Would it ask for further bid solicitation? What if the second bidder *92 then melted away? Would the court be able to go back to the first bidder? Could the first bidder be compelled to complete the sale? These questions are their own answer finality in bankruptcy sales is second in importance only to fairness in such sales. A lack of finality in sale procedures will lead ineluctibly to fewer successful sales and greater difficulty in attracting real buyers. A lack of finality also invites collusive bidding activity and insider maneuverings. Public policy militates against granting new trials of sale motions based solely on new bids that appear after the close of the sale procedure.[10]
The other basis for setting aside an order might be Rule 9024, which incorporates Rule 60(b) of the Federal Rules of Civil Procedure. See FED.R.BANKR.P. 9024. This rule provides even less support for reexamination of the order approving sale than does Rule 9023. There are six grounds offered in Rule 60(b) for relief from a judgment or order, and none are implicated here. The motion does not allege mistake, inadvertence, suprise or excusable neglect. It does not disclose new evidence "which by due diligence could not have been discovered in time to move for a new trial under Rule 59." See FED. R.Civ.P. 60(b). It does not accuse anyone of fraud or other misconduct. It does not suggest that the order is for any reason void. The grounds described in Rule 60(b)(5) do not even apply to sale orders. Finally, the catchall "any other reason justifying relief from the operation of the judgment" runs directly into the teeth of the public policy that militates against disturbing final sale orders especially when the ground for doing so is an alleged "better offer." Rule 9024 thus gives no stronger basis for setting aside the sale order than did Rule 9023 and we have already found that the sale order should not be set aside pursuant to Rule 9023.[11]
Conclusion
The court readily acknowledges that it misstated the current state of the law on the record when it considered the motion to dismiss or convert this case. There was, in fact, no requirement that a party seeking reconsideration of a sale order first obtain a stay, to prevent the sale from being consummated and rendering the motion moot. The bankruptcy rules now provide that sale orders are automatically stayed for 10 days. See FED.R.BANKR.P. 6004(g). This is an exact reversal of prior law, and applies regardless whether an objecting party is seeking to appeal a sale order or is seeking instead a reconsideration *93 of the sale order by the trial court. The motion for entry of stay is moot, because as a matter of law, it was unnecessary in the first place. The sale order is, to date, stayed by operation of Rule 6004(g), and the motion to reconsider is thus not moot.
However, the fact that the sale order is still amenable to reconsideration makes no real difference in this case, because the court has concluded that the appearance post-hearing (and post entry of order) of a "better offer" does not constitute grounds for reconsidering a sale order under either Rule 9023 or 9024. The motion to reconsider is denied.
Rule 6004(g) does provide that a court may in its discretion shorten or even eliminate the ten day stay. Given that the sale in this case has already been consummated, and further given this court's disinclination to entertain reconsideration of the order that approved that sale, the right thing to do in this case is to terminate the stay. That is what shall be done here.
Orders will be entered consistent with this decision.
NOTES
[1] The motion to sell was heard on May 24, 2000. At that time, a bidder presented a bid for $1,335,000. No other bidders came forward. The motion to reconsider states that Rathole Drilling, Inc. is ready, willing and able to pay $1,445,000 for the same properties. The motion further states that this sale offer is supported by earnest money in the amount of $150,000, and that the purchase price will be enough to pay all creditors in full. Rathole Drilling, Inc. did not present their offer to purchase on May 24, 2000, though a representative or agent of Rathole Drilling, Inc. was evidently in the courtroom at the time this according to Ms. Ciomperlik.
[2] The court elaborated other reasons for its decision as well. The court noted that the tardy offer for sale would not furnish independent grounds for reconsideration anyway, because the bidder could have made its offer at the time of the sale hearing, but did not. Neither Rule 9023 nor 9024 afford a legal basis for setting aside an order authorizing sale when the competing bidder was not prevented from presenting its bid at the time of the sale. No new evidence that was not in fact available at time of hearing was alleged to be presented in the motion to reconsider. No fraud or other impropriety in the sale process was suggested in the motion. Thus, no independent grounds were urged that would have justified reconsideration. The court also adverted to the salutary policy of finality with respect to sales of estate assets, noting that promises of "a better offer" just around the corner often fail to materialize, and that such offers seldom afford grounds in equity for delaying asset sales. Indeed, entertaining such tardy offers on routine basis can actually have a deleterious affect on estate administration the court that entertains such offers may cause the estate to lose the original buyer, only to have the tardy buyer never to show up with the cash so that the asset has to be re-advertized, often resulting in a much lower sale price the second time around.
[3] The court is surprised that Mr. Cohen, counsel for Mr. de la Garza, did not disclose this relevant piece of information to the court at the hearing on June 5, 2000. He seems to have misrepresented, by careful omission, the true state of affairs. That failure may have violated Rule 3.03 of the Texas Rules of Professional Conduct. See Texas State Bar Rules, art. 10, § 9, Rule 3.03(a)(1) and Comment 2, reprinted in Texas Rules of Court, at p. 400-01 (West pamphl. ed.2000).
[4] The court addressed the question whether, in fact, Ms. Ciomperlik had an equity interest in the debtor. See discussion infra.
[5] "Strangers" might include frustrated competing bidders, competitors of either the successful bidder or the bankruptcy debtor, or insiders or family members bent on derailing the process in order to exploit an advantage. All such persons would love nothing better than the leverage that can come from litigation delay and expense, so barring such parties from being able to upset sales with frivolous pleadings designed to obtain such leverage is essential. See In re NEPSCO, Inc., 36 B.R. 25 (Bankr.D.Me.1983) (purpose of the statutes authorizing sale of bankruptcy estate assets would be hindered not furthered by permitting a stranger to the estate to object to the sale).
[6] The court observed that bidders are not within the "zone of interests intended to be protected" under the bankruptcy statutes. Id., citing In re Planned Systems, Inc., 82 B.R. 919, 922 (Bankr.S.D.Ohio 1988); Big Shanty Land Corp. v. Comer Properties, Inc., 61 B.R. 272, 277 (Bankr.N.D.Ga.1985). There are narrow exceptions, primarily designed to afford a fair opportunity for the courts to police the integrity of the sale process. See, e.g., Kabro Assoc. of West Islip, LLC v. Colony Hill Assoc. (In re Colony Hill Assoc.), 111 F.3d 269 (2nd Cir.1997) (unsuccessful bidder accorded standing, in order to expose collusion that undermined the intrinsic fairness of the sale transaction).
[7] We say "probably" because in fact no evidence was taken on the motion to reconsider. Ms. Ciomperlik was present in open court, and made this representation on the record, but there was no one to cross examine her on this point (the stay motion was heard by the court sua sponte without notice to other interested parties), and she furnished the court with no independent corrobative evidence. The motion, however, recited that $1.445 million would be sufficient to pay all creditors in full, and that representation must pass muster under Rule 9011. The court has elected to give the movant the benefit of the doubt on this point.
[8] The equity interest owners certainly had a vested interest in bringing competing bidders to the table by the deadline set by the court and had plenty of advance warning. They cannot miss the deadline for bringing a qualified bidder to the table, then claim that their competing bid is "newly discovered evidence." That is not "due diligence" in the context of a sale motion.
[9] Indeed that appears to be what has taken place here. The motion to reconsider represents that the property in question is actually worth $2.5 million. The new bid offered as grounds for reconsideration comes nowhere near that mark, however. Instead, it exceeds the bid the court accepted at the sale hearing by exactly $100,000 just enough to be significantly more. One suspects that Rathole Drilling, Inc. elected to wait to make sure that no other bidders materialized, and then waited for the order to be entered approving the sale. It then (this court suspects) set its bid based on the only other bid outstanding.
[10] The Advisory Committee does not address the issue directly, but its comments do suggest that it was never the intention of the Judicial Conference, in drafting new Rule 6004(g), to open the door to post-hearing bidding. The stated purpose of affording the 10 day stay with respect to sale motions was to give objecting parties enough time to approach the court for a stay pending appeal, in order to attack a sale on appeal. We already know that, by statute, an appeal of a sale order will normally only lie if the sale procedure itself was fraudulent. See 11 U.S.C. § 363(m). A party seeking to obtain appellate review of just such a sale should not find its efforts frustrated by a "quick closing" that renders an appeal moot. The Advisory Committee's solution for one sort of abuse should not be read to have created an opportunity for another sort of abuse.
[11] The motion to reconsider does not raise any suggestion that the underlying sale hearing was in any way flawed. The motion had been on file for nearly 60 days. Every creditor was aware of it. The equity interest owner or owners were certainly aware of the motion because it was originally filed at their behest in response to a motion for relief from stay by a lender. The owner or owners are (or were) also the officers of the company, who acted on its behalf and who were the primary contact persons with the estate's chapter 11 lawyer. At the sale hearing itself, the court specifically asked in open court whether there were any competing bids, waited some minutes for a response, and expressed surprise that there were not competing bids. The party complaining is the wife of the one person who was in the best position to bring in other bidders. The circumstances strongly suggest that, in fact, it was Mr. de la Garza who found the competing bidder and who may well have advised him to lay in the weeds until after the sale hearing was closed, hoping perhaps to further delay the ultimate disposition of the property by dangling a "tempting carrot" before the judge's nose. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546273/ | 988 A.2d 530 (2010)
190 Md. App. 250
Howard N. BIERMAN, et al.
v.
Gary S. HUNTER, et al.
No. 1362, September Term, 2008.
Court of Special Appeals of Maryland.
February 1, 2010.
*532 Charles S. Hirsch (Ballard, Spahr, Andrews & Ingersoll, LLP on the brief), Baltimore, for appellant.
ProSe/no brief filed.
Panel: MEREDITH, WOODWARD, MOYLAN, and CHARLES E., JR., (Retired, Specially Assigned), JJ.
WOODWARD, J.
The present dispute arises out of a foreclosure sale of residential real estate co-owned by Maria Hunter ("Maria"), appellee, and her husband, Gary S. Hunter ("Gary"), located at 719 Reservoir Street, Baltimore, Maryland ("the property"). On October 20, 2006, appellants, Howard N. Bierman, Jacob Geesing, Carey M. Ward, and Ralph DiPietro, substitute trustees on behalf of Countrywide Mortgage, initiated a foreclosure action by an Order to Docket suit. After the foreclosure sale, Maria filed exceptions raising the defense of fraud. A hearing was held on June 4, 2007, after which the Circuit Court for Baltimore City (Pierson, J.) sustained the exceptions and set aside the sale. Appellants then filed a Motion to Alter or Amend And/Or Revise Judgment, stating that the court failed to address appellants' equitable subrogation argument at the June 4 hearing. A hearing on the issue of equitable subrogation was held on December 21, 2007. In an order dated July 22, 2008, the circuit court ordered that the property was "subjected to an equitable lien in the amount of $170,284.30 in favor of" appellants.
On appeal, appellants present two questions for our review, which we have rephrased:
I. Did the circuit court err in sustaining Maria's exceptions to the foreclosure sale of the property?
II. Did the circuit court err in not subjecting the property to an equitable lien in the full amount sought by appellants?
For the reasons set forth herein, we shall affirm the judgment of the circuit court.
BACKGROUND
Exceptions to Foreclosure
Maria and Gary were married when they purchased the property in September of 2002, but Maria filed for divorce in January of 2006. Maria continues to reside at the property with their three minor children, and Gary, having moved out of the property on February 1, 2006, currently lives in Brazil.
Gary refinanced the property in June of 2003 and again in January of 2004 by obtaining Maria's signature on the refinance deeds of trusts. Maria testified that the signatures on the refinance deeds of trust were hers. On January 29, 2005, Gary took out a home equity line of credit on the property with Irwin Home Equity Corporation ("Irwin Home Equity loan") in both his and Maria's names for $70,000.00. Although Maria's signature *533 appeared on the credit line deed of trust, Maria testified that the signature on that deed of trust "[d]efinitely" was not hers.
On April 20, 2006, several months after Maria and Gary had separated, Gary executed an application for a cash-out debt consolidation loan on the property ("consolidation loan") in the amount of $320,00.00, of which $170,284.30 was to be used to pay off the pre-existing deed of trust to BB & T Mortgage and $77,356.56 to pay off of the Irwin Home Equity loan. On May 22, 2006, Gary's son (by a previous marriage) completed the transaction, which included executing a deed of trust securing the consolidation loan under the authority of two Specific Powers of Attorney, one signed by Gary and the other purportedly signed by Maria. A joint check for $30,286.73 was issued to Maria and Gary upon closing on the consolidation loan.
Maria testified that she received "no money at all" from the consolidation loan, and that she first learned about that loan on June 24, 2006, when she received copies of the settlement papers. This was also the first time she learned about the Irwin Home Equity loan. Maria further testified that she did not sign the Specific Power of Attorney giving Gary's son authority to execute the deed of trust for the consolidation loan, and thus her signature was forged. Upon receiving the settlement papers for the consolidation loan, Maria contacted her attorney as well as the mortgage company. Soon after the settlement on the consolidation loan, Gary stopped making the loan payments.
In September of 2006, after a pendente lite hearing in Maria and Gary's divorce case, the circuit court ordered, inter alia, that, "effective July 1, 2006[,] [Gary] shall pay the monthly mortgage, escrow and late fees, if any, due" on the consolidation loan. Gary, however, failed to make any payment on the consolidation loan, and appellants instituted a foreclosure proceeding by an Order to Docket suit filed on October 20, 2006. Maria was given notice of the foreclosure sale on October 27, 2006. The sale was held, and a report of sale was filed with the court on November 22, 2006.
Thereafter, Maria filed timely exceptions to the foreclosure sale arguing, inter alia, that the court should "deny [appellants'] request to ratify the Report of Sale," because the consolidation loan was the product of a fraudulent transaction. Appellants filed an opposition to Maria's exceptions asserting that Maryland Rule 14-209 required Maria to raise her claim in a request for injunctive relief prior to the foreclosure sale and that "under any circumstances, [appellants were] entitled to a lien for the amount used to pay off the deeds of trust ($247,640.86) by virtue of equitable subrogation."
A hearing was held on June 4, 2007. In a Memorandum and Order dated August 15, 2007, the circuit court "found, based on the uncontroverted evidence produced at the hearing, that [Maria] did not in fact sign the special power of attorney." The court also ruled that Maria was "not barred from raising her defense to the foreclosure by reason of her failure to apply for an injunction before the sale." Accordingly, the court sustained Maria's exceptions and set aside the foreclosure sale of the property.
Equitable Subrogation
The circuit court, however, did not rule on appellants' request for equitable subrogation. As a result, on October 18, 2007, appellants filed a Motion to Alter or Amend And/Or Revise Judgment[1] requesting *534 that the court "modify its Memorandum and Order to establish an equitable mortgage on the [p]roperty ... in favor of [appellants] in the amount of the mortgage paid by the refinancing at issue," which included the BB & T mortgage ($170,284.30), the Irwin Home Equity loan ($77,356.56), and the "equity paid to [Gary] and [Maria] at the time of the closing [($30,286.73)]." In total, appellants requested equitable subrogation in the amount of $277,927.59.
The circuit court held a hearing on appellants' motion to alter or amend on December 21, 2007. Although Maria did not file an opposition to the motion, she represented to the court during the hearing that she opposed only the amount of equitable subrogation being sought. The court did not rule on the motion, but instead stated:
[T]he Rules require that any party who opposes a motion file an opposition. I direct that [Maria] supply to me, file with the Clerk and supply a courtesy copy to chambers, of any opposition that you have to this motion not later than next Friday, that is December 28, 2007.
* * *
... [Appellants], I will give you one week that is until January 4, to file a reply. At that time I will determine whether a hearing is necessary upon the Motion to Alter or Amend or whether I can decide it based upon the papers.
Maria mailed an opposition to appellants' motion to alter or amend on December 28, 2007, which was received by the court on December 31, 2007. In her opposition, Maria argued that equitable subrogation should apply to the BB & T Mortgage in the amount of $170,284.30, but not to the Irwin Home Equity loan or the check to her and Gary from the consolidation loan. In particular, Maria contended that "she did not apply for the $77,356.56 line of credit with Irwin Home Equity that was taken out on the property on January 29, 2005 and she was not aware of its existence until June 2006." Maria also disputed ever receiving "any benefit from the line of credit after it was issued," or "any of the proceeds from the $30,286.73 joint check that was issued to [Gary and Maria] at the time of closing" on the consolidation loan.
On January 4, 2008, appellants responded to Maria's opposition, arguing, among other things, that Maria clearly received a benefit from the Irwin Home Equity loan, because it was made on January 29, 2005, a year before Maria separated from Gary and filed for divorce, and Gary paid all of the bills out of their joint bank account until shortly after the settlement on the consolidation loan in May of 2006. Appellants also claimed that Maria received the benefit of the Irwin Home Equity loan by continuing to reside in the property and to receive $475.00 per month from the rental of an apartment in the property.
Appellants argued that equity demanded that a lien be imposed on the property for the amount of the closing check, $30,386.73, explaining that Maria benefitted from the check, because the circuit court in the divorce action "expressly relied upon" the "fact that [Gary] profited from refinancing the [p]roperty," when fashioning Maria's award of child support, alimony, personal property, and attorneys' fees.
*535 The court resolved the issue of equitable subrogation in a Memorandum and Order issued on July 22, 2008. The court first cited to the following principle of law: "[O]ne who lends money upon the security of a mortgage that is in fact ineffective because the person executing it had no authority to do so is entitled to be subrogated to the rights of the mortgagee under a prior valid mortgage discharged with the proceeds of the invalid one." Accordingly, the court ruled that appellants were entitled to equitable subrogation "with respect to the BB & T deed of trust."
Turning to the closing check, the court found that
the subrogation does not extend to the $30,286.73. First, because these funds are not the subject of a prior lien, there is no lien to which [appellants] can be subrogated. Second, [Maria] testified at the hearing of June 4, 2007 that she did not receive any portion of the proceeds of this check. Although the court does not credit all of her testimony, there was no contradiction of this testimony. [Appellants'] argument that [Maria] received the benefit of these funds because they were taken into account by [the divorce court] in fashioning relief in the divorce proceeding ... does not alter the court's conclusion that there is no basis to grant [appellants] a lien for this item.
With respect to the Irwin Home Equity loan, the court ruled:
The more difficult issue involves the Irwin Home Equity loan. This transaction occurred while [Gary and Maria] were still living together. The instrument contains an acknowledgment for both grantors. However, [Maria] testified that she did not sign the instrument in question. There was no contradiction of this testimony. As recited above, subrogation permits a party to accede to the rights attendant upon a "valid" mortgage. This places upon [appellants] the burden to demonstrate that the prior lien was valid. A valid grant of an interest in real property, including a security interest, requires that the instrument be executed by the grantor. [Appellants] have not offered any evidence to contradict [Maria's] testimony that she did not execute the instrument, or any other argument to validate this instrument. Therefore, the court must conclude that [appellants] have failed to sustain their burden to demonstrate entitlement to equitable subrogation as to this portion of their claim.
Therefore, the court imposed an equitable lien in the amount of $170,284.30 in favor of appellants.
This timely appeal followed.
DISCUSSION
I.
Did the circuit court err in sustaining Maria's exceptions to the foreclosure sale of the property?
Appellants contend that Greenbriar Cond., Phase I Council of Unit Owners, Inc. v. Brooks, 387 Md. 683, 878 A.2d 528 (2005), and Jones v. Rosenberg, 178 Md. App. 54, 940 A.2d 1109, cert. denied, 405 Md. 64, 949 A.2d 652 (2008), stand for the proposition "that exceptions filed after a foreclosure sale can only raise procedural irregularities to the sale itself, such as insufficient advertisement or notice of the sale," and that "in order to raise the type of substantive challenge asserted here by [Maria], a debtor is required to file a pre-sale injunction pursuant to [Rule] 14-209." Appellants thus conclude that, because Maria did not seek injunctive relief prior to the foreclosure sale, the court, "as a matter of law," was required to overrule *536 Maria's exceptions. We disagree and explain.
This Court in Jones articulated the standard of review for exceptions to a foreclosure sale:
In ruling on exceptions to a foreclosure sale and whether to ratify the sale, trial courts may consider both questions of fact and law. In reviewing a trial court's finding of fact, we do "not substitute our judgment for that of the lower court unless it was clearly erroneous" and give due consideration to the trial court's "opportunity to observe the demeanor of the witnesses, to judge their credibility and to pass upon the weight to be given their testimony." Questions of law decided by the trial court are subject to a de novo standard of review.
178 Md.App. at 68, 940 A.2d 1109 (citations omitted).
Maryland's foreclosure procedure is set forth in Title 14 of the Maryland Rules, "Sales of Property."[2] Rule 14-202(a) authorizes the lender, under power of sale or assent to decree, to initiate foreclosure on real or personal property upon default without the necessity of a prior court order. Like the instant case, "[a]n action to foreclose a lien pursuant to a power of sale shall be commenced by filing an order to docket." Rule 14-204(a). Rule 14-204(c) provides: "In an action to foreclose a lien pursuant to a power of sale ..., including a foreclosure on residential property, it is not necessary that process issue or that a hearing be held prior to sale." In other words, a foreclosure action under a power of sale does not begin with the filing of a complaint and the opportunity for the defendant to respond by answer.
The court becomes involved in a foreclosure action only after the sale is completed. Rule 14-305, entitled "Procedure following sale," provides in paragraph (a): "As soon as practicable, but not more than 30 days after a sale, the person authorized to make the sale shall file with the court a complete report of the sale and an affidavit of the fairness of the sale and the truth of the report." Upon the filing of the report of sale with the court, the clerk issues a notice with a description of the property "stating that the sale will be ratified unless cause to the contrary is shown within the 30 days after the date of the notice." Rule 14-305(c).
Within this 30 day period, a party may file exceptions to the ratification of the sale.[3] "Any matter not specifically set forth in the exceptions is waived...." Rule 14-305(d)(1). After the filing of exceptions, the court then determines if a hearing is necessary, but "it may not set aside a sale without a hearing," and must hold a hearing if one is requested and the exceptions "clearly show a need to take evidence." Rule 14-305(d)(2). A court will ratify the sale if the time for filing exceptions "has expired and exceptions to the report either were not filed or were filed but overruled, and ... the court is satisfied that the sale was fairly and properly made." Rule 14-305(e).
The historical context of exceptions to a foreclosure sale is necessary to understand its scope. Rule 14-305 is derived from former Rule BR6,[4] also entitled "Procedure *537 Following Sale," which must be read together with former Rule W74 e, entitled "Procedure Following Sale Report Ratification Audit."[5] Former Rule W74 e, and by extension former Rule BR6, supplanted Article 66, § 9 of the Maryland Code, which governed the enforcement of mortgages. Wilson Brothers v. Cooey, 251 Md. 350, 360, 247 A.2d 395 (1968).
In Albert v. Hamilton, 76 Md. 304, 25 A. 341 (1892), the Court of Appeals discussed the importance of exceptions to a foreclosure sale under Article 66, § 9:
The Court, sitting in equity, had jurisdiction of the questions arising under the proceedings to enforce the mortgage. By the ninth section of Article 66, of the Code, it is enacted that it should have full power to hear and determine any objections against the sale of the land which might be filed by any person interested in the property, and that it might confirm or set aside the sale; and by the eleventh section it is provided that when the sale is confirmed by the Court, it shall pass all title which the mortgagors had at the time of the recording of the mortgage. Until the sale is reported by the mortgagee all the proceedings are ex parte; but when the report is made, an opportunity is afforded to all parties interested to make their objections to the sale. As the ratification of the sale will pass all the title of the mortgagors, it must follow that they have a right in objecting to the ratification, to show, if they can, that their title ought not to pass. If this were not the case, their title would, under the terms of the Act, be taken from them without a hearing. If the mortgage under which lands are sold is void for any cause, undoubtedly this is a most sufficient reason why the sale should not be ratified which takes away the title of the mortgagor. The statute says, that the Court "shall have full power to hear and determine any objections which may be filed against the sale;" not merely objections to the regularity of the mode in which the sale was conducted. The object was to enable mortgagors and others to prevent the ratification of a sale which would unjustly deprive them of their property. The purpose of this legislation was to provide a more expeditious and less expensive method of enforcing mortgages than the former proceeding by formal bill in equity; but not, by any means, to impair or defeat the right of the mortgagor to be heard in defense of his property. And in enabling him to make any objections against a sale, which would take away his title, the statute has preserved to him his unquestionable right to show that the mortgage was invalid, and therefore did not justify a sale of his property.
Id. at 307-08, 25 A. 341 (emphasis added) (italicization in original).
Albert, like the instant case, dealt with allegations of a mortgage procured by "false and fraudulent representations." Id. at 305, 25 A. 341. In Albert, the appellants filed exceptions to a foreclosure sale, but did not allege therein that the mortgage was fraudulent or invalid for any other reason. Id. at 306, 25 A. 341. The exceptions were overruled and the sale *538 was ratified by the circuit court. Id. Subsequently, the appellants "filed a bill in equity ... in the same Court ... in which they charged that the said mortgage was obtained by fraud." Id. at 305-06, 25 A. 341. Relying on Article 66, § 9, the Court of Appeals explained that the validity of the mortgage was "determined under exceptions to the ratification of the sales," and that the question of fraud "ought at that time to have been presented to the court for decision." Id. at 309, 25 A. 341. Accordingly, the Court held: "It is not in the power of a party to split up a subject of litigation into portions, and bring them before a Court of justice for adjudication in successive suits." Id. at 309, 25 A. 341.
In Wilson Brothers, the Court of Appeals explained that, although former Rule 74e supplanted Article 66, § 9, "the scope of the hearing ha[d] not been narrowed." 251 Md. at 360, 247 A.2d 395. In stating this, Wilson Brothers discussed Albert, and reinforced the proposition that
the equity court, ... with "full power to hear and determine any objections which may be filed against the sale[,]" had power to hear objections not only going to the manner in which the sale was conducted, but reasons why the mortgagor's title should not pass, which would naturally include an attack on the validity of the mortgage.
Wilson Bros., 251 Md. at 360, 247 A.2d 395 (emphasis added).
The rule upon which appellants base their argument, Rule 14-209(b), entitled "Injunction to stay foreclosure," is also traceable to Article 66 of the Maryland Code. The Rule was derived from former Rule W76b, also entitled "Injunction to Stay Foreclosure," which evolved from Article 66, § § 16-18. Consequently, the injunction to stay foreclosure and exceptions to sale have always co-existed as two available forms of relief, the difference being that Rule 14-209(b) limits the court's authority to grant an injunction, stating, in relevant part:
The motion shall not be granted unless the motion is supported by affidavit as to all facts asserted and contains: (1) a statement as to whether the moving party admits any amount of the debt to be due and payable as of the date the motion is filed, (2) if an amount is admitted, a statement that the moving party has paid the amount into court with the filing of the motion, and (3) a detailed statement of facts, showing that: (A) the debt and all interest due thereon have been fully paid, or (B) there is no default, or (C) fraud was used by the secured party, or with the secured party's knowledge, in obtaining the lien.[6]
See also W76b; Article 66, § 16. On the other hand, in ruling on exceptions, the court has the broad authority to determine "that the sale was fairly and properly made," see Rule 14-305(e); BR6b; Article 66, § 9.
In fact, the presence of these two separate forms of relief was explained by the U.S. District Court in Fisher v. Federal National Mortgage Association, 360 F.Supp. 207 (D.Md.1973). The court in Fisher stated that "[u]nder Maryland foreclosure procedures" an interested party has "two separate opportunities" to challenge "the legality of the foreclosure" in state court. Id. at 211.
First, under Rule W76b, plaintiffs may move prior to sale to enjoin the foreclosure. Secondly, after the sale but before *539 ratification, plaintiffs have the opportunity to file objections to the sale. Rules W74e and BR6b[]. The equity court has full power to hear and determine all objections which may be filed against the sale. Wilson Bros. v. Cooey, 251 Md. 350, 360, 247 A.2d 395 (1968). When an equity court has once assumed jurisdiction, it will retain its jurisdiction in order to settle all questions which might arise out of the subject in controversy.
Id. (emphasis added).
Appellant's argument in the case sub judice that Maria needed to file for a pre-sale injunction to raise the substantive challenge of fraud ignores the above historical context of Maryland's foreclosure rules and the cases interpreting those rules. Maria's ability to attack the validity of the deed of trust securing the consolidation loan was not limited to a motion to stay the foreclosure sale under Rule 14-209(b). See Fisher, 360 F.Supp. at 211. She could, and did, raise this issue as an exception to the ratification of the foreclosure sale under Rule 14-305. See id. As an equity court, the trial court had full power to hear and determine all objections to the foreclosure sale, "which would naturally include an attack on the validity of the mortgage." Wilson Bros., 251 Md. at 360, 247 A.2d 395; see Albert, 76 Md. at 307-08, 25 A. 341. Accordingly, the trial court did not err in sustaining Maria's exceptions to the foreclosure sale on the ground that the deed of trust securing the consolidation loan was invalid.
Appellant's reliance on Greenbriar and Jones is misplaced. Greenbriar involved a foreclosure on the appellant's condominium for failure to pay monthly assessments "on fifty or more occasions, spread over five or more years." 387 Md. at 716, 878 A.2d 528 (emphasis omitted). The appellant challenged the foreclosure by filing exceptions to the sale after the sale was held, id. at 703, 878 A.2d 528, arguing that, "by demanding such a high payoff amount, [the condominium association] had effectively denied his right of redemption." Id. at 716, 878 A.2d 528. The circuit court "ultimately [] sustained the exceptions and apparently overturned the foreclosure sale." Id. at 706, 878 A.2d 528. This Court affirmed the invalidation of the foreclosure. Id. at 714-15, 878 A.2d 528. The Court of Appeals granted certiorari to address, inter alia, "[a]t what point [] the debtor [must] formally file his objections to the holding of a foreclosure sale[.]" Id. at 688, 878 A.2d 528. The Court of Appeals initially stated:
We hold that prior to the sale, the debtor may seek to enjoin the foreclosure sale from proceeding by filing a motion to enjoin as provided in Maryland Rule 14-209. Should a sale occur, however, the debtor's later filing of exceptions to the sale may challenge only procedural irregularities at the sale or the debtor may challenge the statement of indebtedness by filing exceptions to the auditor's statement of account.
Id.
Later on in the opinion, however, the Court of Appeals explained its holding in the context of the appellant's argument that the condominium association denied his right of redemption. Quoting Butler v. Daum, 245 Md. 447, 453, 226 A.2d 261 (1967), the Court said:
"The final claim of the appellants that they had a right to redeem the property at any time prior to the ratification of the sale is also without merit inasmuch as the right of redemption was divested by the valid foreclosure sale. Although the jurisdiction of equity does not become complete until the filing of the report of sale, nevertheless the sale in effect foreclosed the mortgage and divested *540 the mortgagors of all right of redemption, and unless satisfactory proof is shown before final ratification that the sale should be set aside, which was not done in this case, all rights of the mortgagors in the land are deemed to have ceased to exist as of the date of the sale."
Greenbriar, 387 Md. at 735, 878 A.2d 528 (emphasis in original).
The Court concluded that, once the appellant's property was sold at the foreclosure sale, his right of redemption terminated. Id. The Court then reasoned that the right of redemption was not the appellant's "sole means by which to halt the foreclosure sale.... He should have filed an injunction prior to the foreclosure sale in order to seek to halt the sale." Id. at 736, 878 A.2d 528 (emphasis in original). Accordingly, the Court held that
a debtor who seeks to forestall a foreclosure sale by redemption must either proffer to pay the stated outstanding debt, or must file a motion to enjoin the sale, on issues relating to tender, prior to the sale's occurrence. When a dispute over the sum due exists, although it is conceded that some sum is due and in default, the proper procedure to stay or stop the sale itself on issues relating to tender and redemption, is a motion seeking to enjoin the sale prior to the sale. After the sale, redemption is foreclosed and the issues over sums due, or not due, are addressed at the audit stage, not the ratification stage. A debtor may challenge irregularities in the foreclosure sale's procedure by filing post-sale exceptions at the time of ratification and seek to overturn the sale on those bases. Likewise, a debtor may challenge the statement of indebtedness as to amounts by filing exceptions to the auditor's statement of account.
A creditor's refusal to accept a debtor's good faith, but insufficient, tender or a debtor's proffer of an incorrect amount does not insulate a debtor's right of redemption from the sale because injunctive relief via Maryland Rule 14-209 is the proper means available to a debtor prior to a foreclosure sale to bring such issues to the attention of the Circuit Court. The foreclosure sale extinguishes the right of redemption.
Id. at 746-47, 878 A.2d 528 (emphasis added). Therefore, the holding in Greenbriar is a narrow one, focusing on the debtor's right of redemption when there is a dispute over the sum due and it is conceded that some sum is due and in default.
Jones dealt with a foreclosure sale on a subprime mortgage. 178 Md.App. at 60, 940 A.2d 1109. In Jones, the appellees sent appellants notice "that the foreclosure action had been filed and that an auction sale of the property would occur on November 29, 2006." Id. at 61, 940 A.2d 1109. On November 20, 2006, the appellants filed a motion for an emergency injunction to stop the foreclosure sale and to quash service, but did not attach a supporting affidavit. Id. The court never ruled on the motion and the foreclosure sale was held. Id. The appellees filed a report of sale with the court on December 6, 2006, and the court "issued a notice that the sale would be ratified on January 5, 2007." Id.
On December 21, 2006, before the ratification of the sale the appellants "filed a second motion for an emergency injunction to stop the foreclosure sale or, in the alternative, to stop the ratification of the sale." Id. The motion also stated exceptions to the foreclosure sale, and set forth therein numerous objections, including "lack of an opportunity to cure the default;" "lack of notice of the foreclosure sale by registered *541 mail;" and "that appellants had filed suit against appellees in [federal court] on November 17, 2006, alleging that the deed of trust violated federal mortgage laws." Id. A hearing on the motion occurred on February 27, 2007, at which time the "appellants requested discovery of the original loan documents, including the original deed of trust, in order to determine whether the mortgage was usurious and improper, as well as discovery of whether appellants received actual notice of the foreclosure sale." Id. at 63, 940 A.2d 1109. The court "granted [the] appellees' motion to quash [the] appellants' requested discovery, overruled [the] appellants' exceptions to the foreclosure sale, ratified the sale, and ordered that the matter be referred to the court auditor for an accounting."[7]Id.
The appellants next filed a motion to alter or amend the judgment of ratification of the foreclosure sale pursuant to Rule 2-535, alleging fraud or irregularity in "that the foreclosure action was improper because appellees had violated the Truth In Lending Act (TILA), 15 U.S.C. § 1601, et seq., and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq., and that, with additional discovery, appellants could prove the violations." Id. This motion was also denied. Id. at 64, 940 A.2d 1109.
On appeal, this Court held that the appellants' first motion for an injunction to stop the foreclosure sale did not comply with the requirements in Rule 14-209(b), and that their second motion for an injunction "was filed after the foreclosure sale and, therefore, was untimely for purposes of halting the foreclosure sale." Id. at 65-66, 940 A.2d 1109. "Having failed to file a proper pre-sale injunction to the foreclosure sale under [] Rule 14-209(b), [the] appellants' next recourse was to file exceptions to the sale under Rule 14-305(d)." Id. at 68, 940 A.2d 1109.
In discussing the appellants' exceptions, we explained that "[a]fter a foreclosure sale, a debtor's right to redemption ends [and] a debtor may file exceptions challenging only procedural irregularities in the foreclosure sale under Rule 14-305(d)." Id. at 69, 940 A.2d 1109 (citation omitted). We then reasoned that "[t]he only challenge relating to procedural irregularities in the foreclosure sale ... was that [the] appellees failed to send notice by registered or certified mail." Id. Concluding that the appellants had proper notice of the sale, we held that the trial court "did not err in overruling appellants' exceptions to the foreclosure sale and ratifying the foreclosure sale." Id. at 70-71, 940 A.2d 1109.
Regarding the appellants' argument that they "made a showing of fraud or irregularity" in support of their motion to alter or amend, we stated that such motions are only granted upon a showing of extrinsic fraud, i.e., fraud that prevents an adversarial trial. Id. at 72-73, 940 A.2d 1109. We held that the appellants' motion "contained no probative evidence showing extrinsic fraud," and thus affirmed the judgment of the circuit court. Id. at 74, 940 A.2d 1109.
Unlike the instant case, neither Greenbriar nor Jones addressed a situation where the the exception to the foreclosure sale attacked the underlying validity of the mortgage. Greenbriar set forth the *542 appropriate procedure to forestall a foreclosure sale where the debtor admitted liability but disputed the amount claimed by the creditor. 387 Md. at 746-47, 878 A.2d 528. In Jones, the appellants' complaint in federal court, which alleged that the deed of trust violated federal mortgage laws, never asserted that such alleged violations rendered the deed of trust invalid. 178 Md. at 82-83, 11 A.2d 466. Indeed, in the complaint in federal court appellants sought only monetary damages as relief for the alleged violations of federal mortgage laws. Id. at 79, 82-83, 11 A.2d 466. Additionally, appellants' fraud allegation, which was also based on alleged violations of federal mortgage laws, was raised in the context of a motion to alter or amend the judgment ratifying the foreclosure sale under Rule 2-535, not as an exception to the foreclosure sale. Most importantly, neither Greenbriar nor Jones referenced, and thus did not overrule or reject, the line of cases discussed above, see Albert, 76 Md. 304, 25 A. 341; Wilson Bros., 251 Md. 350, 247 A.2d 395; Fisher, 360 F.Supp. 207, that permit a mortgagor to challenge the underlying validity of a mortgage by filing exceptions to foreclosure sale pursuant to Rule 14-305. Accordingly, those cases remain good law.
II.
Did the circuit court err in not subjecting the property to an equitable lien in the full amount sought by appellants?
Appellants contend that the "circuit court's failure to grant equitable subrogation with respect to the Irwin Home Equity deed of trust and the cash paid at closing was error." According to appellants, whether or not Maria signed the Irwin Home Equity loan is "legally irrelevant," because "she received the benefit of that loan." Appellants argue that the Irwin Home Equity loan was signed the year before Maria filed for divorce and that Gary used the proceeds from the loan to pay the mortgage on the property from January of 2005 until May of 2006. Appellants conclude that Maria received the benefit of residing in the property and renting out the property for income, and that "equity demands that a lien be imposed in the amount of the Irwin Home Equity loan."
Appellants also argue that the divorce court took into consideration the benefit Gary received from refinancing the property, which included the Irwin Home Equity loan as well as the closing check, "in rendering its decision and award [to Maria] in the divorce hearing." Appellants acknowledge that the closing check is "not the subject of a prior lien to which [a]ppellants could be subrogated," but argue that a "court of equity has broad powers concerning subrogation" to prevent unjust enrichment. According to appellants, appellees "would be unjustly enriched if they were not required to repay the funds paid at closing." In sum, appellants urge this Court to reverse the decision of the circuit court and, in addition to the $170,284.30 for the BB & T loan, impose equitable subrogation in the amount of $77,356.56 for the Irwin Home Equity loan and $30,286.73 for the closing check. This we will not do.
Maryland recognizes three categories of subrogation: legal subrogation, conventional subrogation, and statutory subrogation. Hill v. Cross Country Settlements, LLC, 402 Md. 281, 311, 936 A.2d 343 (2007). Legal subrogation is the category at issue in the instant case, and "arises by operation of law when there is a debt or obligation owed by one person which another person, who is neither a volunteer nor an intermeddler, pays or discharges under such circumstances as in equity entitle him to reimbursement to *543 prevent unjust enrichment." Id. at 311-12, 936 A.2d 343 (internal quotations omitted). Subrogation thus involves the "`substitution of one person to the position of another, an obligee, whose claim he has satisfied.'" Id. at 312, 936 A.2d 343 (quoting G.E. Capital Mortgage Servs. v. Levenson, 338 Md. 227, 231, 657 A.2d 1170 (1995)). The substituted person, however, "can exercise no right not possessed by his predecessor, and can only exercise such right under the same conditions and limitations as were binding on his predecessor." Id. at 313, 936 A.2d 343 (emphasis added) (internal quotations omitted). Accordingly, subrogation "requires an underlying and independent legal basis upon which [a party] may assert its claims." Id. at 314, 936 A.2d 343.
Most of the Maryland case law involving equitable subrogation addresses priorities among lienholders, and thus is not applicable to the facts in the instant case.[8] We find Serial Building, Loan & Savings Inst. v. Ehrhardt, 95 N.J. Eq. 607, 124 A. 56 (N.J.Ch.1924), to be instructive on this issue. Ehrhardt involved a mortgage obtained by fraud sought to be foreclosed by the appellant. Id. at 56. In Ehrhardt, the appellees, husband and wife, secured a second mortgage on their home for $3000 that paid off a prior mortgage of $1,351.73. Id. The wife argued that, because "[t]he mortgage for $3,000 (the second one in point of time) was not signed by [her]" and was forged, "there should be no decree against her as to the $3,000 mortgage." Id. The appellant argued that it should "be subrogated to the rights it had under the prior mortgage which it canceled upon receiving the mortgage that it concede[d] to be defective." Id. at 57. The New Jersey Court of Chancery held:
In the case in hand, [the wife] does not deny the validity of the prior mortgage by which she was bound. To restore the complainant to its rights under that mortgage will cause her no loss that she would not have been liable to sustain had the defective later mortgage never been made. Under no circumstances appearing in this case could she escape liability to the extent of $ 1,351.73.... It was she who set up the earlier mortgage in her answer and astonished the complainant by pleading a forgery in the later mortgage, and, under the replication of the complainant she has been afforded full opportunity to litigate any defense she might have been able to prove against the mortgage upon which $1,351.73 was due when the complainant paid it. The [appellant] was not a volunteer, a mere intermeddler. It had a right to protect its interest in seeing that the earlier mortgage was paid off.
Id. at 57-58.
Ehrhardt thus stands for the same principle set forth by the Court of Appeals in Hill: a substituted person "can exercise no right not possessed by his predecessor, and can only exercise such right under the same conditions and limitations as were binding on his predecessor." 402 Md. at 313, 936 A.2d 343; see also Annot, Remedy of Mortgage in Forged or Unauthorized Mortgage Where Proceeds Are Used to Discharge Valid Lien, 43 A.L.R. 1393 (1926) (stating that the general standard applied by the majority of courts is that "one lending money upon the security of a mortgage in fact ineffective because the *544 person executing it had no authority to do so, is entitled to be subrogated to the rights of the mortgagee under a prior valid mortgage discharged with the proceeds of an invalid one").
In the case sub judice, Maria testified at trial that the signature on the Irwin Home Equity loan was not hers and that she did not find out about the loan until June of 2006, a year after its execution. Appellants did not offer any evidence to dispute Maria's testimony. The circuit court thus found that "[t]here was no contradiction of this testimony."[9] The court then correctly concluded that appellants failed to sustain their burden of proving that the deed of trust for the Irwin Home Equity loan was a valid lien, because a "valid grant of an interest in real property, including a security interest, requires that the instrument be executed by the grantor." Consequently, we hold that appellants are not entitled to an equitable lien on the property for the Irwin Home Equity loan, because such loan, as an invalid lien, could not be enforced against Maria by either appellants or by the original mortgagee. See Hill, 402 Md. at 313, 936 A.2d 343 (stating that the substituted person "can exercise no right not possessed by his predecessor." (Internal quotations omitted)).
Appellants' argument regarding the closing check, in the amount of $30,286.73, does not fare any better. Appellants are not entitled to subrogation for the simple reason that the check was neither a debt nor an obligation owed by Maria that appellants paid for or discharged. The closing check was the balance of the proceeds of the consolidation loan whose deed of trust is the subject of this appeal.
Finally, appellants do not prevail on their equitable benefit argument, namely, that Maria received a benefit from the Irwin Home Equity loan and the closing check. Regarding the closing check, Maria testified that she did not receive any portion of the proceeds of the check. Appellants did not introduce any evidence contradicting that testimony. Nevertheless, appellants claim that Maria received a benefit from the proceeds of the check, because "the circuit court took this fact into account in rendering its decision and award in the divorce hearing." Our review of the circuit court's oral opinion in the divorce case reveals that the trial judge made no mention of proceeds of the closing check. Instead, the court referred to the "profit" Gary made on three properties and the use of his IRA account for another investment in Brazil. More importantly, this reference was made in the context of the court's discussion of the parties' respective financial status in determining an appropriate award of custody of the minor children. The court did not grant Maria a monetary award, and an award of child support is based on the parties' income, not assets. Md.Code (1984, 2006 Repl. Vol.), Fam. Law. Art. § 12-204.[10]
*545 Appellants assert that Maria benefitted from the Irwin Home Equity loan because that loan was made about one year prior to Maria and Gary's separation, and prior to the separation, Maria and Gary "maintained a joint checking account and that [Gary] paid all the bills, including the mortgage." Appellants apparently are arguing that the proceeds of the Irwin Home Equity loan were placed in Gary and Maria's joint account, from which the mortgage payments were made. Appellants, however, adduced no evidence regarding the use of the proceeds of the Irwin Home Equity loan. There is nothing in the record to indicate what amounts were withdrawn on the loan, when they were withdrawn, where the money was placed, and how the money was ultimately spent. To say that the proceeds of the Irwin Home Equity loan were used to make the mortgage payments on the property is pure speculation.
Appellants also contend that Maria benefited from the Irwin Home Equity loan by continuing to reside in the property and collecting rent from a tenant who leased a part of the property. This argument begs the question. Maria's continued residence in the property and exercise of her ownership rights over the property could have been a benefit of the Irwin Home Equity loan only if the proceeds of the loan, which were not used to purchase the property, were used at her direction, on her behalf, or to her benefit. There was no such evidence.
Lastly, appellants contend that Maria benefitted from the Irwin Home Equity loan because that loan was considered by the circuit court in Maria and Gary's divorce proceeding. A review of the record again reveals no specific reference to the Irwin Home Equity loan. Indeed, in their reply to Maria's opposition to appellants' motion to alter or amend the trial court's ruling on the equitable subrogation issue, appellants state unequivocally that "[t]here was no mention of the Irwin Home Equity loan during the Divorce Hearing." Appellants explained further in a footnote: "The undersigned did not have time to obtain a written transcript of the Divorce Hearing, but did obtain a copy of the Court's recording of the Divorce Hearing. There was no evidence or argument concerning the Irwin Home Equity loan." (Emphasis added).
For all of the reasons discussed above, we hold that the circuit court did not err in finding that appellants were not entitled to equitable subrogation as to the Irwin Home Equity loan or to the closing check.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY AFFIRMED; APPELLANTS TO PAY COSTS.
NOTES
[1] The circuit court signed the Memorandum and Order on August 15, 2007. Thereafter, the court was advised of an error in the description of the property and modified the Memorandum and Order on October 3, 2007, which were entered on October 10, 2007. Accordingly, appellants' Motion to Alter or Amend And/Or Revise Judgment was timely filed on October 18, 2007.
[2] Chapter 200 of Title 14 of the Maryland rules governing foreclosures was substantially amended, effective May 1, 2009.
[3] If notice is not issued, a party has 30 days to file exceptions after the filing of the report of sale. Rule 14-305(d)(1).
[4] Former Rule BR6b provided, in pertinent part:
A final order of ratification of a sale shall be passed by the court after the time for responding to any order issued pursuant to subsection 2 of this section has expired, if the court is satisfied that the sale was fairly and properly made, and exceptions are not filed to the report of sale, or if exceptions are filed but overruled.
[5] Former Rule W74e provided: "The procedure following a sale made pursuant to this Subtitle shall be as provided in Rule BR5 (Real Property Recording) and Rule BR6 (Procedure Following Sale) of Subtitle BR (Sales Judicial), except that an audit is mandatory."
[6] Jones v. Rosenberg, 178 Md.App. 54, 65-66, 940 A.2d 1109, cert. denied, 405 Md. 64, 949 A.2d 652 (2008) confirms the limitations Rule 14-209 places on the court to grant injunctive relief, holding that "[a]ppellants' motion did not comply with any of the [Rule 14-209] requirements, and the court did not err in failing to grant relief."
[7] Appellants' complaint in federal court regarding the alleged violations of federal mortgage laws was dismissed on February 5, 2007, 22 days prior to the hearing on appellants' motion and exceptions. Jones, 178 Md.App. at 61 n. 2, 940 A.2d 1109. Appellants thereafter appealed, but the United States Court of Appeals for the Fourth Circuit affirmed the dismissal on October 24, 2007. Id.
[8] In G.E. Capital Mortgage Services v. Levenson, 338 Md. 227, 237-38, 657 A.2d 1170 (1995), the Court of Appeals explained that equitable subrogation in the context of priorities among lienholders is when "one who pays the mortgage of another and takes a new mortgage as security will be subrogated to the rights of the first mortgagee as against any intervening lienholder."
[9] Appellants assert that whether Maria signed the deed of trust for the Irwin Home Equity loan is "legally irrelevant," because she did not object to that loan in her exceptions and thus her claim is waived. Appellants' argument is without merit for the simple reason that the trial court expressly directed Maria to respond to the equitable subrogation issue raised by appellants in their response to Maria's exceptions, thereby finding that "justice requires" a consideration of this issue, notwithstanding Maria's failure to raise it in her exceptions. See Md. Rule 14-305(d) (stating that "[a]ny matter not specifically set forth in the exceptions is waived unless the court finds that justice requires otherwise.").
[10] The circuit court also awarded Maria rehabilitative alimony of $1,000 per month for five years. In making that award, however, the court did not mention the proceeds of the closing check. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2061397/ | 111 N.H. 265 (1971)
JOHN F. MCLAUGHLIN
v.
SEARS, ROEBUCK & COMPANY.
SAME
v.
WHITE METAL ROLLING & STAMPING CORPORATION.
No. 6114.
Supreme Court of New Hampshire.
July 29, 1971.
*266 Stebbins & Bradley (Mr. David H. Bradley orally) for the plaintiff.
Devine, Millimet, McDonough, Stahl & Branch (Mr. Shane Devine orally) for the defendants.
GRIFFITH, J.
Plaintiff John F. McLaughlin sustained injuries as a result of the collapse of a ladder which was manufactured by the defendant White Metal and sold to the plaintiff by the defendant Sears. The Trial Court (Perkins, J.) granted the defendants' motion for a nonsuit at the close of the plaintiff's evidence and reserved and transferred the plaintiff's exception.
The plaintiff testified that he purchased the ladder in the case at the Sears, Roebuck store in Claremont, New Hampshire in August of 1964. The ladder was aluminum and could be used as a seven foot step-ladder or opened up for use as an extension ladder. In 1964 the plaintiff was the general manufacturing manager of the Cone Automatic Company in Windsor, Vermont and had just purchased a new home in Hanover, New Hampshire.
The ladder was loaded into the trunk of plaintiff's car with the help of Sears' employees and taken to Hanover where it was placed on its side in the living room of the new house. It remained there for several months while plaintiff carried out certain land-scaping and other finishing work on his house. During this period plaintiff carried the ladder outside and set it up in the extended position but not liking its appearance in this position returned it to the living room without using it. Plaintiff had testified that he *267 had used ladders extensively since he had worked as a painter while attending college but that he was not particularly familiar with metal ladders.
On November 5, 1964 plaintiff used the ladder as a stepladder to do some painting in areas that he could reach by standing on the first step of the ladder. When he completed his painting for the day the entire house was painted except for a stairwell area leading up to the third level of the house and down to the first level. In order to determine how much of an extension would be required on a paint roller to reach the ceiling in the area with the help of the stepladder, he set the ladder up. It was set up facing the living room about six inches from the wall on the left with the stairs going down on the right and up in the rear.
Plaintiff testified he went three or four steps up the ladder when it suddenly gave way to the right and he threw himself to the left, fell and sustained the "injuries complained of." After the accident the two legs of the ladder under the steps were bent sharply to the left.
An expert for the plaintiff testified that the ladder would support a weight of 800 pounds under ideal conditions but that when a person mounted the ladder his weight initially fell primarily on the two legs under the bottom step. If the ladder were set up with one of these legs off the floor by as little as a sixteenth of an inch or if the leg were bent by three-quarters of an inch rocking onto this leg could cause it to collapse as it did in the accident. He testified that the right leg probably collapsed inward followed by the left leg collapsing outward. He gave as his opinion that a leg could be bent three-quarter of an inch out of line by a horizontal push of fifty pounds or by its being struck against another object. He agreed that the accident would not have happened unless the leg had been bent before its last use or set up with one leg slightly off the floor.
Our adoption of the rule of strict liability in actions against manufacturers and sellers of products (Buttrick v. Lessard, 110 N.H. 36, 260 A.2d 111 (1969)) included the fundamental requirement that the plaintiff must establish that the accident was caused by a defect present in the product at time of purchase. Id. at 39, 260 A.2d at 113; Elliott v. Lachance, 109 N.H. 481, 484-85, 256 A.2d 153, 155-56 (1969); Restatement (Second) of Torts, Comment 9 (1965). The plaintiff in this case testified he examined the ladder and set it up carefully before climbing it. *268 However, the testimony of the plaintiff's expert established that the legs would not have collapsed in the absence of distortion of a leg or failure to set the ladder with all legs level with the floor.
The plaintiff's right to recover would be barred if distortion of the leg or failure to set the ladder up level constituted misuse or abnormal use of the product. Restatement (Second) of Torts s. 402A, comment h (1965); Noel, Products Liability: Bystanders, Contributory Fault and Unusual Uses, 50 F.R.D. 321, 332 (1970). The duty of the manufacturer or supplier is limited to foreseeing the probable results of the normal use of the product or a use that can reasonably be anticipated. Prosser, Torts 667 (3d ed. 1964); see Phillips v. Ogle Aluminum Furniture, Inc., 106 Cal. App. 2d 650, 654, 235 P.2d 857, 859 (1951) (holding standing on a chair is anticipated use). Clearly there is no duty to furnish a product that will not wear out. 1 Frumer and Friedman, Products Liability s. 11:03 (1968); 1 Hursh, American Law of Products Liability s. 2:4 (1961); Jakubowski v. Minnesota Mining & Mfg., 42 N.J. 177, 199 A.2d 826 (1964). If the cause of the accident is a misuse of the product rather than a defect then the plaintiff may not recover. Gilbride v. James Leffel & Co., 37 Ohio L. Abs. 457, 47 N.E.2d 1015 (Ct. App. 1942). On the other hand a manufacturer or supplier has distributed a defective product when it is so fragile that its anticipated use is likely to create a dangerous condition. A defect not apparent when the product is brand new and being used under ideal conditions is nevertheless a defect if under ordinary usage the product becomes dangerous. Dunham v. Vaughan & Bushnell Mfg. Co., 42 Ill. 2d 339, 247 N.E.2d 401 (1969).
The evidence viewed most favorably to the plaintiff (Keeney v. Avery, 109 N.H. 561, 260 A.2d 564 (1969)) did not permit a ruling as a matter of law that the accident resulted from the plaintiff's abnormal use or misuse of the ladder. Johnson v. Standard Brands Paint Co., 274 Cal. App. 2d 331, 79 Cal. Rptr. 194 (1969); Dunham v. Vaughan & Bushnell Mfg. Co. supra; Annot., 13 A.L.R.3d 1057 (1967). The issue was one of fact for a jury to determine whether the ladder was defective because under normal usage the ladder would collapse if a slight deformity of the leg should occur or the ladder should be set up slightly off level. It was for the jury to say whether the accident resulted from normal rather than abnormal use or misuse of the ladder. See Murray v. Bullard Company, 110 N.H. 220, 265 A.2d *269 309 (1970); Brown v. Montgomery Ward Co., 109 N.H. 377, 254 A.2d 840 (1969).
Plaintiff's exception sustained; new trial.
All concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546484/ | 988 A.2d 49 (2010)
190 Md. App. 146
COLLINS/SNOOPS ASSOCIATES, INC.
v.
CJF, LLC, et. al.
No. 2273, September Term, 2007.
Court of Special Appeals of Maryland.
January 27, 2010.
*50 Jeffrey L. Forman (Bruce E. Kauffman, Kauffman and Forman, on brief), Towson, for Appellant.
Joseph C. Kovars (Jeffrey A. Regner, Ober, Kaler, Grimes & Shriver, on brief), Baltimore, for Appellee.
Panel: HOLLANDER, MEREDITH, RAYMOND G. THIEME, JR., (Retired, specially assigned), JJ.
MEREDITH, J.
This appeal presents the question of whether a judge who hears a bench trial in a case in which two parties each claim the *51 other breached a contract may deny both claims on the ground that neither party carried its burden of persuading the court that the other party breached the contract. Under the peculiar circumstances of this case, we shall affirm a judgment that denied relief to both the plaintiff and the counterplaintiff.
The case arose from a dispute between a contractor and its subcontractor on a project that involved renovations to three Baltimore County school buildings. The general contractor that won the bid for the project was CJF, LLC (hereinafter "Contractor"), the appellee/cross-appellant. It engaged Collins/Snoops Associates, Inc. (hereinafter "Subcontractor"), appellant/cross-appellee, as a subcontractor to perform over $2.69 million worth of plumbing, heating and air conditioning mechanical work as part of the renovations. After Subcontractor had completed only a portion of the specified mechanical work, Contractor asserted that Subcontractor was not making acceptable progress in order to meet the strict deadlines required by the County. Contractor terminated Subcontractor and engaged a replacement firm to take over the mechanical work on the schools. Subsequently, Contractor itself was terminated by the County because the County was not satisfied with Contractor's progress.
Subcontractor sued Contractor, its president, and its bonding company, in the Circuit Court for Baltimore County, claiming that Subcontractor was owed $409,720 for the work and materials it had provided prior to the time it was terminated. Contractor filed a counterclaim against Subcontractor, claiming damages that Contractor alleged it had incurred as a consequence of Subcontractor's failure to properly perform the obligations under the subcontract. After a bench trial on the merits, the trial court filed a written opinion in which it stated that "the court finds itself in equipoise as to each party's claim for breach of contract against the other." The trial court continued: "In brief, this court concludes that neither has [Contractor] proved by a preponderance of the evidence that [Subcontractor] failed to perform nor has [Subcontractor] proved by a preponderance of the evidence that it was wrongfully terminated from the school renovation project by [Contractor]." Accordingly, the trial court granted judgment in favor of the defendants i.e., Contractor, its president, and its bonding company "for all claims brought against [them] by [Subcontractor]," and the court granted judgment in favor of the counterdefendant, the Subcontractor, "for all claims brought against it by [Contractor]."
Subcontractor and Contractor have both appealed, each seeking to overturn the trial court's denial of their respective claims for damages. As appellant, Subcontractor raises the following questions:
I. Having found that [Subcontractor] provided $409,720 in labor and materials to [Contractor] on the County project, and having further found that [Subcontractor] had not "failed to perform," was it error for the trial judge not to have awarded [Subcontractor] at least the $409,720 for the labor and materials it provided?
II. Having found that [Contractor] did not prove [Subcontractor] had failed to perform, did the trial judge impermissibly shift the burden to [Subcontractor] to show that its termination was "wrongful"?
III. Having found that [Contractor] did not prove [Subcontractor] had failed to perform, was it error for the trial judge not to have awarded [Subcontractor] its lost profits on the job?
As appellee, Contractor rephrases the appellant's questions as one issue:
*52 Whether the trial court sitting as finder of fact correctly held that [Subcontractor] failed to meet its burden of proving breach of contract where the court found the evidence to be in equipoise.
Additionally, as cross-appellee, Contractor raises the following issue:
Whether the trial court erred in finding that [Contractor] failed to prove its damages.
We conclude that the trial court did not err in entering judgment for the respective defendants as to all claims and counterclaims. Accordingly, we shall affirm the judgments entered by the circuit court.
FACTS AND PROCEDURAL HISTORY
In 2001, the County entered into a contract with Contractor to renovate three public elementary schools: Chase, Victory Villa, and Hawthorne Elementary. Appellee Carolina Casualty Insurance Company ("Carolina") issued a payment bond to guarantee that Contractor's subcontractors would be paid in the event Contractor wrongfully failed to pay amounts due the subcontractors for supplying labor and materials on the project.
Contractor engaged Subcontractor to perform plumbing and mechanical work on the heating and air-conditioning systems at the three schools. Contractor asked Subcontractor to sign Contractor's "standard" form subcontract agreement, but Subcontractor refused to sign. Nevertheless, the trial court found that Subcontractor, by its conduct, adopted or assented to the terms in the document that it refused to sign. Citing Porter v. General Boiler Casing Co., 284 Md. 402, 410-12, 396 A.2d 1090 (1979), the trial court concluded that the Contractor's form subcontract agreement "constitutes the contract between [Contractor] and [Subcontractor]," despite not being signed by Subcontractor. That finding is not challenged by either party on appeal.
The subcontract agreement contains numerous references to the Contractor's need for timely performance, including a statement that "[i]t is UNDERSTOOD AND AGREED by and between the parties that time is and shall be considered the essence of the contract on the part of the said Sub-contractor. . . ." The subcontract further required Subcontractor to "promptly begin said work" and "complete said work as rapidly as said Contractor may judge that the progress of the structure will permit." Similarly, the subcontract called for diligent and uninterrupted performance by Subcontractor:
The Subcontractor agrees to cooperate with the Contractor and with other Subcontractors in the diligent performance of the work and to prosecute regularly, diligently and uninterruptedly at such rate of progress in such a manner as to enable the Contractor to complete the entire structure within the time specified.
The subcontract called for Contractor to compensate Subcontractor as follows:
IN CONSIDERATION WHEREOF, the said Contractor agrees that he will pay to the said Sub-contractor, in monthly payments, the sum of TWO MILLION SIX HUNDRED NINETY SIX THOUSAND EIGHT HUNDRED SIXTY DOLLARS. PRICE FIRM NOT SUBJECT TO ESCALATION
$2,696,860.00 DOLLARS for said materials and work, said amount to be paid as follows: Ninety per cent. (90%) of all labor and materials which has been placed in position and for which payment has been made by [the County] to said Contractor, to be paid on or about the 7th (approx. 5 weeks) of the following month, except the last payment, *53 which the said Contractor shall pay to said Sub-contractor immediately after said materials and labor installed by said Sub-contractor have been completed and approved by the said Architect. It is specifically understood and agreed that the payment to the Subcontractor is dependent, as a condition precedent, upon the Contractor receiving contract payments, including retainer, from the Owner. Subcontractor will only receive retainage after completion of all outstanding punch list items and having furnished warranties and as-built required by the Contract Documents.
On April 30, 2001, Contractor instructed Subcontractor to begin work the next day. From the beginning, Subcontractor's progress was characterized by delays. The cause of Subcontractor's delays was the major point of contention at trial. There was evidence that Subcontractor was slowed because the County failed to timely reply to Subcontractor's requests for information, that the County hindered Subcontractor's work by allowing public access to the schools during potential work hours, and that the Subcontractor's unexpected discovery of asbestos in the school required Subcontractor to suspend work until the asbestos was abated.
On the other hand, there was evidence that Subcontractor itself was unduly slow in performing its work, largely because it failed to provide enough qualified manpower and to secure necessary equipment and materials. Furthermore, Subcontractor's subcontractors caused several mishaps at the work site.
On May 22, 2001, Subcontractor sent Contractor a payment application for work Subcontractor had completed at Hawthorne. On June 22, 2001, Subcontractor sent a second payment application for work done at Hawthorne in the previous month, as well as first payment applications for work done so far at Victory Villa and Chase.
In July 2001, representatives of the County met with principals of Contractor and Subcontractor and threatened to terminate Contractor if progress on the project did not pick up. On July 24, 2001, Contractor sent a termination letter to Subcontractor, stating: "By reason of your persistent failure to properly man the projects and your failure to progress with the work . . . your right to proceed under the Subcontract Agreement is terminated" effective that day.
The next day, Subcontractor sent to Contractor three payment applications (one for each school), requesting payment for all of its work through July 24, 2001. In those applications for payment, Subcontractor claimed to have performed 20% of the work at Hawthorne, 10% of the work at Victory Villa, and 15% of the work at Chase. The total claimed for all three schools was $409,820. The Contractor refused to pay any of the claims.
Contractor replaced Subcontractor with subcontractor M. Nelson Barnes, a mechanical contractor that provided substantially greater manpower to the project. Nevertheless, on September 11, 2001, the County terminated Contractor for failing to perform the work on schedule. On September 14, 2001, the County made its only payment i.e., the only payment prior to a negotiated settlement of subsequent litigation to Contractor in the amount of $695,697, for work performed by all subcontractors at all three schools. Contractor's vice president, John Higgins, testified at trial that the money received was devoted solely to paying M. Nelson Barnes and the suppliers of materials Subcontractor had ordered.
Contractor sued the County for wrongful termination, and, in the course of that *54 litigation, Contractor took the position that the County itself was the source of the delays. Contractor and the County ultimately settled the suit, and Contractor was paid an additional $875,000. Contractor claims to have incurred additional costs in excess of that amount during its efforts to complete the project after terminating Subcontractor.
After the settlement between County and Contractor, Subcontractor filed the complaint that is the subject of this appeal on April 13, 2006. Each of the four counts in the complaint claimed damages in the amount of $409,720.[1] The first count of the complaint alleged that Contractor breached the contract with Subcontractor by failing to pay the sums owed. The second count, labeled as an "alternative count," prayed that, "[i]n the event that [the circuit court] finds that there was no express contract between [Subcontractor] and [Contractor,] then in the alternative," Contractor "has been unjustly enriched by its receipt of labor and materials on the three Baltimore County Elementary School projects. . . ." The third count named Carolina as a defendant, and asserted a claim under the payment bond. The fourth and final count named as a defendant C.J. Frank, the founder and president of Contractor, and asserted a claim that he was personally liable to Subcontractor under the Maryland Construction Trust Statute, Maryland Code (1974, 2003 Repl.Vol.), § 9-202 of the Real Property Article ("RP"). Subcontractor later amended its complaint to add to the first and third counts claims for lost profits in the amount of $358,357. At the beginning of the trial, Subcontractor added a claim for attorney fees pursuant to RP § 9-303.
Contractor filed a counterclaim against Subcontractor, asserting that Subcontractor had breached its contract by performing in a manner that "was significantly deficient in terms of quality, productivity, progress and manpower." Contractor asserted that Subcontractor
breached its agreement with [Contractor] by failing to perform its work in accordance with plans and specifications for the Project, failing to meet time frames established by its own progress schedule, failing to achieve the required quality standards of the project, failing to attain productivity requirements, failing to accomplish any meaningful progress in the prosecution of the work, and failing to appropriately and adequately man the Project.
In four counts, all based upon the premise that Subcontractor had breached its agreement, Contractor sought damages for the additional cost of engaging a replacement subcontractor to try to complete the project on time, the profit Contractor lost as a consequence of being terminated by the County for untimely performance, and other consequential costs caused by the County's termination of Contractor.
After the trial, the court issued a written opinion. The court made numerous findings of "proven facts," including the following:
7. [Subcontractor] performed in accordance with the drawings listed in the Subcontract Agreement.
* * *
13. The mechanical work comprised approximately 50% of the entire scope of work on the three schools; therefore, [Subcontractor] was the lead subcontractor.
*55 14. The electrical work for the three schools comprised 22% of the overall work. The electrical subcontractor, GPI, worked in the same areas as [Subcontractor].
15. By the end of July 2001, GPI invoiced from 14 to 78% work completed on the three schools and the County paid those invoices.
* * *
24. Through May 31, 2001, [Subcontractor] billed less than 3% complete at Hawthorne Elementary School.
25. Through May 31, 2001, [Subcontractor] did not bill any completed work at Victory Villa Elementary School or Chase Elementary School.
26. On June 14, 2001, [Subcontractor's] subcontractor cut through a natural gas line while demolishing toilets in Hawthorne Elementary School.
27. The use of an acetylene torch on an active gas pipe was an unsafe practice.
* * *
30. On June 27, 2001, employees of [Subcontractor's] subcontractor, Tri-Source, set fire to fiberglass insulation materials while continuing to demolish equipment in the boiler room at Hawthorne Elementary.
* * *
36. On July 18, 2001, Mr. Higgins [a vice president of Contractor], Mr. Frank and Mr. Snoops [principal of Subcontractor] met with County representatives to discuss the progress of the school renovation project.
37. County representatives indicated that [Contractor] would be terminated if improvement in the progress and performance of the work on the three schools did not occur.
38. [Subcontractor] performed the work at Chase, Victory Villa, and Hawthorne Elementary Schools as described in Plaintiff's Exhibits 11, 17 and 14.
39. [Subcontractor] completed 15% of the contract work at Chase Elementary, not including demolition work.
40. Through June 30, 2001, [Subcontractor] billed 9.5% complete at Hawthorne Elementary; 2.5% complete at Victory Villa Elementary; and 1% complete at Chase Elementary.
41. When M. Nelson Barnes arrived at the site, valves and strainers that should have been delivered to the site by [Subcontractor] were not available.
42. William Gough III [the project manager for M. Nelson Barnes] testified that as soon as M. Nelson Barnes began work it attempted to confirm releases and deliveries of equipment and specialties from suppliers and subcontractors, but learned that material and equipment critical for scheduling had not been released by [Subcontractor].
43. Tyco pumps, necessary to perform heating system work, had not been released by [Subcontractor] prior to its termination by [Contractor].
44. [Subcontractor] failed to have roof curbs and fans, balancing fittings, and circuits [sic] setting valves delivered prior to its termination by [Contractor].
45. Prior to its termination, [Subcontractor] had failed to perform hole cutting necessary for fan installation.
*56 43. [Subcontractor] did not purchase louvers or wall boxes associated with the HVAC equipment for any of the three schools; nor had the cutting necessary for the installation of the louvers and wall boxes been performed by [Subcontractor].
47. Prior to its termination, [Subcontractor] had failed to purchase heat timer boiler controls for Chase and Victory Villa.
* * *
54. [Contractor] sent numerous letters to [Subcontractor], demanding that [Subcontractor] provide sufficient manpower to all three schools.
55. [Subcontractor] did not respond to said letters.
56. County officials advised that staffing levels for electrical and mechanical activities were inadequate.
* * *
61. M. Nelson Barnes provided substantially greater manpower for plumbing and mechanical work than had [Subcontractor].
The trial court's opinion noted that there was evidence in the record that would support Subcontractor's contention that the delays were caused by factors beyond its control, and there was evidence in the record to support Contractor's claim that Subcontractor failed to provide sufficient manpower to make satisfactory progress on the project, as demonstrated by the fact that progress accelerated after a replacement subcontractor was engaged. The court then stated that it was not persuaded that either Contractor or Subcontractor had proven that the other breached the contract:
Having carefully weighed all the evidence, the court finds itself in equipoise as to each party's claim for breach of contract against the other. [Contractor's] evidence supports its contention that [Subcontractor] failed to put sufficient numbers of qualified mechanics at the three schools, and used subcontractors who were barred from the job by the County for performing in a substandard manner. On the other hand, the record contains substantial evidence that the County caused much of the delay for which [Contractor] seeks to hold [Subcontractor] responsible in this lawsuit. Not the least of that evidence are the accusations made by [Contractor] in its litigation with the County. In brief, this court concludes that neither has [Contractor] proved by a preponderance of the evidence that [Subcontractor] failed to perform nor has [Subcontractor] proved by a preponderance of the evidence that it was wrongfully terminated from the school renovation project by [Contractor].
* * *
[Contractor's] claim against [Subcontractor] must also fail for a failure to prove damages.
* * *
This Court does not find that [Contractor] acted in bad faith in failing to pay [Subcontractor] for its work on a school renovation project. Accordingly, [Subcontractor's] claim against [Contractor] under the Maryland Prompt Payment Statute fails as well.
For the reasons above stated, this Court grants Judgment in favor of [Contractor] et al[.] for all claims brought against [the defendants] by [Subcontractor] and grants Judgment in favor of [Subcontractor] for all claims brought against it by [Contractor].
Subcontractor has appealed, and Contractor has cross-appealed. Both of those parties argue that the trial court *57 erred, as a matter of law, in failing to rule in their favor respectively.[2]
DISCUSSION
Under Maryland Rule 8-131(c), on appeal from a bench trial conducted in a circuit court,
[w]e review the factual findings of the Circuit Court for clear error, observing due regard to the opportunity of the trial court to judge the credibility of the witnesses. If any competent material evidence exists in support of the trial court's factual findings, those findings cannot be held to be clearly erroneous.
Figgins v. Cochrane, 403 Md. 392, 409, 942 A.2d 736 (2008) (quotation marks and citations omitted). However, we review de novo the circuit court's conclusions of law. Bender v. Schwartz, 172 Md.App. 648, 664, 917 A.2d 142 (2007).
1. Countervailing Claims of Breach of Contract
Subcontractor argues that the trial court should have found Contractor liable for a breach of contract by wrongfully terminating Subcontractor on July 24, 2001. In essence, it argues that Subcontractor satisfactorily provided labor and materials valued at $409,820 prior to the time when Contractor gave notice of termination, and Contractor breached its contractual obligation to pay the agreed value of the labor and materials. Subcontractor also claimed its lost profits. On the other side of this controversy, Contractor argues that Subcontractor's failure to prosecute the work in a diligent manner put the project so far behind schedule that Subcontractor made it impossible for Contractor to meet the deadline for completion, and that such deficient progress on the part of the Subcontractor was a material default of the Subcontractor's obligations.
The trial judge declared a stalemate, stating: "Having carefully weighed all the evidence, the court finds itself in equipoise as to each party's claim for breach of contract against the other." Because each party bore the burden of persuasion for the respective claims for damages, the trial judge declared that neither had proved enough to persuade the court that the opposing party had breached the contract. The court "conclude[d] that neither has [Contractor] proved by a preponderance of the evidence that [Subcontractor] failed to perform nor has [Subcontractor] proved by a preponderance of the evidence that it was wrongfully terminated from the school renovation project by [Contractor]."
On a claim for breach of contract, the plaintiff (or counterplaintiff) asserting the claim for damages bears the burden of proving all elements of the cause of action, including plaintiff's own performance of all material contractual obligations. Johnson & Higgins v. Simpson, 163 Md. 574, 581, 163 A. 832 (1933) ("[O]ne who sues for the breach of a contract which requires him to perform certain acts before he becomes *58 entitled to demand that for which he sues, must allege and prove performance on his part."); Hubler Rentals, Inc. v. Roadway Exp., Inc., 637 F.2d 257, 260-61 (4th Cir. 1981) ("We think it certain that under Maryland law, a party suing on the contract must first prove his own performance, or an excuse for nonperformance, in order to recover for any breach by the opposing party."). Therefore, on Subcontractor's claim for breach of contract, Subcontractor had the burden of persuading the court that the lack of progress and delay was not attributable to any default in the Subcontractor's contractual obligations, whereas, on Contractor's counterclaim, it was Contractor's burden to persuade the court that Subcontractor was at fault for the delay. The court found that each party failed to meet this burden of persuasion.
In Eidelman v. Walker & Dunlop, 265 Md. 538, 545, 290 A.2d 780 (1972), the Court of Appeals observed that, if the trier of fact's state of mind on an issue is in equipoise, then the judgment or verdict must be against the party that had the burden of persuasion on that issue. The Court stated:
For many years juries have been instructed at the request of defense counsel to the effect that if the evidence on a given proposition left their minds in a state of even balance or equipoise, then their verdict should be for the defendant because the plaintiff had not met his burden of proof. . . . A judge sitting as a trier of fact is not expected to go further in reaching a conclusion from the evidence before him than a jury.
Similarly, in Metropolitan Mtg. Fd., v. Basiliko, 44 Md.App. 158, 167, 407 A.2d 773 (1979), this Court said with respect to a ruling by a judge that a party had not met its burden of proof:
The situation, here, is similar to that in which an issue is submitted to a jury and the jury is unable to reach a decision as to the truth of the issue. This obviously is the traditional case in which the trier of fact has reached a state of evidential equipoise and the defendant is entitled to a verdict because the plaintiff has failed to meet his burden of proof. Under these circumstances, the verdict of the trial judge is not only not clearly erroneous but eminently correct.
In the present case, the same principle applies to the judge's judgment in favor of all defendants and the counterdefendant.
Subcontractor argues that the trial court's findings No. 7 and No. 38, quoted above, establish as a matter of law that Subcontractor was entitled to compensation for the work it did perform. But, in addition to the findings that confirmed that Subcontractor did perform some work on the project, the trial court also found that Subcontractor performed at a much slower pace than the electrical subcontractor. The court noted: "During the same periods that [Subcontractor] claimed it could not work because of interference by school activities, the electrical contractor on the job was able to complete 78% of its work at Victory Villa, 58% at Hawthorne and 37% at Chase." In contrast, Subcontractor is claiming it completed 15.2% of total work under its subcontract as of the July 24, 2001. See also findings Nos. 14, 15, 39, 40. The trial court found that the County considered Subcontractor's rate of progress unsatisfactory (findings Nos. 36, 37, 54, 56), and "County officials advised that staffing levels for . . . mechanical activities were inadequate." Delay in prosecuting Subcontractor's work was not an insignificant matter; to the contrary, the County was so dissatisfied with the lack of progress that the County terminated Contractor by letter dated September 11, 2001.
*59 In our view, in order to recover for breach of contract, Subcontractor was obligated to prove not only that it did work in accordance with the plans and specifications, but also that it complied with the provisions of the contract regarding timely performance. The subcontract agreement not only stated that time was of the essence, but also provided that Subcontractor would "prosecute [its work] regularly, diligently and uninterruptedly at such rate of progress in such a manner as to enable the Contractor to complete the entire structure within the time specified." (Emphasis added.)
In Cambridge Tech. v. Argyle, 146 Md. App. 415, 434, 807 A.2d 125 (2002), this Court held that a trial judge was clearly erroneous in finding that a supplier had "substantially performed" its obligations under a contract where the evidence reflected that the supplier had not delivered the products in compliance with the time requirements set forth in the contract. We quoted, id. at 431-32, 807 A.2d 125, from 15 RICHARD A. LORD, WILLISTON ON CONTRACTS, § 44.53 at 224-25 (4th ed.2000), to support our conclusion that the trial court in that case erred in finding substantial performance:
"A typical example of a clause requiring strict compliance is one making time of the essence of the contract; substantial, although late, performance, is not generally sufficient to permit the party who has not performed in a timely manner to bring an action on the contract."
Given the trial court's findings about the lack of timely progress by Subcontractor, which was at least partially attributable to the manner in which Subcontractor staffed the job, there was no clear legal error in the trial court's conclusion that Subcontractor had not proven by a preponderance of the evidence that Subcontractor had performed all of its material obligations under the contract. Cf. K & G Construction Co. v. Harris, 223 Md. 305, 315, 164 A.2d 451 (1960) (subcontractor's negligent damage to contractor's wall was a material breach of subcontractor's promise to perform in a workmanlike manner).
Subcontractor did not base its claim against Contractor upon a theory of quantum meruit, and was not entitled to compensation on that basis. And its claim in Count Two, based upon a theory of unjust enrichment, was to be considered "[i]n the event that [the circuit court] finds that there was no express contract between [Subcontractor] and [Contractor]." But the trial court did find that there was an express contract, the terms of which were set forth in Contractor's form subcontract that Subcontractor refused to sign but nevertheless adopted by conduct. Consequently, it was not error for the trial court to decline to make any award based upon unjust enrichment. See Caroline County v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 101, 747 A.2d 600 (2000) ("We hold that, generally, quasi-contract claims such as quantum meruit and unjust enrichment cannot be asserted when an express contract defining the rights and remedies of the parties exists.").
With respect to the counterclaim, Contractor relies upon the trial court's Proven Fact No. 52 to support its argument that the trial court found facts that compel the legal conclusion that Contractor did prove Subcontractor's liability. Proven Fact No. 52 reads as follows: "On July 24, 2001, [Contractor] terminated [Subcontractor], `By reason of your persistent failure to properly man the projects and your failure to progress with the work. . . [.]'" The use of quotation marks and the court's clearly stated legal conclusion that Contractor failed to prove Subcontractor's liability make clear that Proven *60 Fact No. 52 merely recites Contractor's purported reason for terminating Subcontractor; it does not constitute the court's finding that the reason was correct, and does not contradict the trial court's overall finding that the Contractor failed to persuade the court that Subcontractor breached the contract.
2. Prompt Payment Statute
Subcontractor argues, in the alternative, that, under the Prompt Payment statute, RP § 9-302, Contractor owes the full $409,820 for the work Subcontractor performed. That statute states, in relevant part:
(a) In general; exception. . . . [A] contractor or subcontractor who does work or furnishes material under a contract shall be entitled to prompt payment under subsection (b) of this section.
(b) Time for payments.
* * *
(3) If the contract is not with an owner, the contractor or subcontractor shall pay undisputed amounts owed to its subcontractors within 7 days after receipt by the contractor or subcontractor of each payment received for its subcontractors' work or materials.
This issue is not preserved for appeal. Subcontractor never raised RP § 9-302 in its complaint. Subcontractor did raise the statute and its companion, RP § 9-303 ("Remedies") at trial, but only for the purpose of claiming entitlement to attorney fees.[3] Subcontractor never cited the Prompt Payment Statute at trial as an independent reason to find Contractor liable, and, under Md. Rule 8-131(a), Subcontractor could not assert such a claim for the first time on appeal even if there were a meritorious basis for arguing that Contractor failed to promptly pay "undisputed amounts owed to" Subcontractor.
3. Construction Trust Statute
Subcontractor brought a claim against Mr. Frank, president of Contractor, under the Construction Trust Statute, RP § 9-202. That statute states:
Any officer, director, or managing agent of any contractor or subcontractor, who knowingly retains or uses the moneys held in trust under § 9-201 of this subtitle, or any part thereof, for any purpose other than to pay those subcontractors for whom the moneys are held in trust, shall be personally liable to any person damaged by the action.
RP § 9-201 states, in relevant part:
(b) Moneys to be held in trust.
(1) Any moneys paid under a contract by an owner to a contractor, or by the owner or contractor to a subcontractor for work done or materials furnished, or both, for or about a building by any subcontractor, shall be held in trust by the contractor or subcontractor, as trustee, for those subcontractors who did work or furnished materials, or both, for or about the building, for purposes of paying those subcontractors.
(2) An officer, director, or managing agent of a contractor or subcontractor who has direction over or control of money held in trust by a contractor or subcontractor under paragraph (1) of this subsection is a trustee for the purpose of paying the money to the subcontractors who are entitled to it.
*61 In its opinion, the trial court did not expressly explain its ruling on Subcontractor's Construction Trust claim. We infer that the trial court's analysis was that Subcontractor failed to persuade the court that Contractor owed any money to Subcontractor, and therefore, Contractor's president could not have personal liability under the Construction Trust statute for failing to pay Subcontractor's unfounded applications for payment. We agree that personal liability of an officer under the Construction Trust statute is predicated upon the existence of an unpaid debt owing to a subcontractor. Accordingly, the court did not err in entering judgment in favor of Mr. Frank.
Furthermore, the Construction Trust claim against Mr. Frank must fail because Subcontractor failed to present evidence to prove that any funds were "held in trust" on Subcontractor's behalf, under the relevant statutes. As we held in Selby v. Williams Construction, 180 Md. App. 53, 64-65, 948 A.2d 132 (2008):
Where funds paid by [an owner] to [a contractor] are earmarked for payment to a specific payee, but payment is not made, and those funds can be tracked, personal liability may be imposed. However, the mere insufficiency of funds to pay all down-the-chain subcontractors or suppliers is not a basis for the imposition of personal liability on the managing agent of the debtor contractor corporation.
In this case, prior to settlement of litigation, the County made a single payment of $695,697 to Contractor on September 14, 2001, for work performed at all three schools. The record does not indicate that this money was specifically earmarked for Subcontractor, and Contractor's vice-president, Higgins, testified that all of this money was devoted to paying other construction costs namely, for the services of Subcontractor's replacement, M. Nelson Barnes, and for the materials Subcontractor had ordered. Because the mere insufficiency of funds cannot support a Construction Trust claim, Selby, supra, 180 Md.App. at 64-65, 948 A.2d 132, the trial court was correct to find Frank not personally liable in any event.
4. Contractor's Cross-Appeal
Contractor challenges the trial court's alternative finding that Contractor failed to prove its damages with reasonable certainty. But we decline to consider this issue; it is a moot point because we have upheld the trial court's ruling that neither party established a breach of contract by the other party to the transaction. In the absence of an established breach by Subcontractor, there is no need for us to consider the adequacy of Contractor's proof of its alleged damages.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY AFFIRMED. COSTS TO BE DIVIDED EQUALLY BETWEEN APPELLANT AND CROSS APPELLANT.
NOTES
[1] Subcontractor explains in its reply brief that this figure is the result of a math error, and should have been $409,820.
[2] Under Maryland Rule 2-601(a), to qualify as a final judgment appealable pursuant to Md. Code (1971, 2006 Repl.Vol.), Courts and Judicial Proceedings Article, § 12-301, a circuit court's order must be set out in its own, separate document, apart from any opinion that explains the order. Allstate v. State Farm, 363 Md. 106, 117 n. 1, 767 A.2d 831 (2001). In this case, it appears that the trial court simply added "So ORDERED" at the conclusion of its opinion, and such an order does not satisfy the separate document requirement of Rule 2-601(a). Nevertheless, because it is clear from the court's written decision and the docket entries that the Memorandum and Order was intended as a full and final disposition of all issues, and because neither party has objected to the absence of a separate document, we may and do treat this procedural requirement as waived. See Suburban Hosp. v. Kirson, 362 Md. 140, 156, 763 A.2d 185 (2000).
[3] RP § 9-303(b) states: "If a court determines that an owner, contractor, or subcontractor has acted in bad faith by failing to pay any undisputed amounts owed as required under § 9-302 of this subtitle, the court may award to the prevailing party reasonable attorney's fees." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546554/ | 250 B.R. 366 (2000)
Dennis E. CARLSON, Defendant-Appellant,
v.
William A. BRANDT, Jr., Trustee, Plaintiff-Appellee.
No. 99 C 6021.
United States District Court, N.D. Illinois, Eastern Division.
June 29, 2000.
*367 *368 Dennis E. Carlson, Chicago, IL, pro se.
William E. Hourigan, Chicago, IL, for appellant.
Andrew Joseph Maxwell, Steven Shaw Potts, Law Offices of Andrew J. Maxwell, Chicago, IL, for appellee.
MEMORANDUM OPINION AND ORDER
ASPEN, Chief Judge.
Defendant-Appellant Dennis Carlson (the debtor) voluntarily filed a petition for bankruptcy relief under Chapter 11 on April 16, 1996. Two months later, he converted his bankruptcy petition to one for relief under Chapter 7, at which point plaintiff-appellee William Brandt, Jr. was appointed to serve as the Trustee in the case. Brandt filed a three-count adversary complaint against Carlson in the bankruptcy court, arguing that the debtor should be denied a discharge because he: *369 1) concealed and transferred property in violation of § 727(a)(2) of the Bankruptcy Code; 2) failed to keep books and records sufficient to enable the Trustee to determine his financial condition with reasonable certainty, in violation of § 727(a)(3); and 3) made false oaths in violation of § 727(a)(4). The bankruptcy court held a bench trial, after which it issued findings of fact and conclusions of law in a published opinion which ruled against Carlson on all counts and denied him a discharge. See In re Carlson, 231 B.R. 640 (Bankr. N.D.Ill.1999). Carlson now appeals all of the bankruptcy court's determinations.
Background
First we briefly address Carlson's jurisdictional challenge. As far as this Court is concerned, trustee Brandt submitted a proper motion to vacate the 12/28/99 judgment in favor of debtor Carlson. We granted that motion and set a briefing schedule on the appeal before us now. Even though Brandt technically brought his motion to vacate under Federal Rule of Civil Procedure 60(b) instead of Federal Rule of Bankruptcy Procedure 8015, the U.S. Trustee's brief in support of Brandt's motion cleared up the confusion and Brandt filed his motion within the ten-day time period proscribed by Rule 8015, so we decided to treat it as such. And this Court is confident that it has the discretion, within a reasonable period of time, to correct or vacate judgments mistakenly made, which is precisely what happened when we granted judgment for Carlson in open court in Brandt's absence. We conclude that jurisdiction over this appeal is proper, and proceed now to the merits.
In a bankruptcy appeal, we examine findings of fact for clear error, accepting the bankruptcy court's version of the facts unless, "`although there is evidence to support [the findings, we are] left with the definite and firm conviction that a mistake has been committed.'" In the Matter of Sheridan, 57 F.3d 627, 633 (7th Cir.1995) (internal citations omitted). To be clearly erroneous, "`a decision must strike us as more than just maybe or probably wrong; it must ... strike us as wrong with the force of a five-week old, unrefrigerated dead fish.'" Piraino v. Int'l Orientation Resources, Inc., 137 F.3d 987, 990 (7th Cir.1998) (quoting Parts and Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir.1988)). Furthermore, we give due regard to the trial judge's assessment of the credibility of the witnesses observed. Piraino, 137 F.3d at 990. We review all questions of law de novo. See Sheridan, 57 F.3d at 633.
After reviewing the common law record as well as the bankruptcy trial transcripts, we find Judge Schmetterer's factual conclusions to be reasonable in light of the evidence presented, so we will not second-guess them. Those findings are laid out in detail in the bankruptcy court's memorandum opinion and order, see Carlson, 231 B.R. at 643-51, so we will not recite the facts in their entirety here. We will, however, summarize them for background purposes.
Debtor Carlson is an Illinois attorney who, prior to filing for bankruptcy, primarily represented personal injury plaintiffs on a contingency fee basis. On December 27, 1995, three and a half months before Carlson filed his bankruptcy petition, he and William Hourigan a friend and colleague of Carlson's who represents Carlson in this appeal executed what they call a "Practice Merger Agreement" (PMA).[1] The agreement purported to merge the practices of Carlson and Hourigan (after a certain date they were to share an office), apparently so that Hourigan could help Carlson manage his caseload. The PMA did not explain how each attorney's pending cases would be treated or clarify whether all of each attorney's cases would *370 be covered by it. Rather, the PMA stated that "Carlson is an independent licensed attorney and an independent contractor ... [who] is free to handle cases assigned to him in the manner he sees fit," and "it is agreed that William E. Hourigan will be available to consult and advise, but when, where and how cases which are assigned to Dennis E. Carlson are handled is strictly up to him." Carlson and Hourigan testified at trial that the PMA did not create a partnership or professional corporation, and that neither was an employee of the other. When the PMA was signed, not only did Carlson lack sufficient assets to pay his debts, but he knew that he was facing disciplinary action that would likely cause him further financial distress. Hourigan was aware too that Carlson was facing possible disciplinary action as well as large claims for personal sanctions he incurred while litigating, and the PMA itself acknowledged that at the time of signing Carlson's license to practice law was in jeopardy.
Although Carlson and Hourigan eventually testified that they never expected the PMA to cover all of Carlson's cases, the parties did not create any list indicating which of Carlson's pending cases would be included under the PMA until the bankruptcy court ordered Carlson to do so in September 1996. At trial, Hourigan testified that only complex cases were intended to be included, while Carlson testified that only contingency fee cases were intended to be included, and the PMA is silent on the matter. The PMA lacks any contractual language of assignment, yet both Carlson and Hourigan testified at trial that they intended for Carlson's cases and fees to belong to Hourigan as of the PMA's effective date. Though the agreement did not so specify, Carlson testified that he understood it to create a contractual obligation to hand over all of his fees to Hourigan, but that he did not consider it to constitute an "assignment" of his cases or fees. None of Carlson's clients consented in writing to a division or sharing of legal fees between Carlson and Hourigan; indeed it appears that his clients were not even notified of the merger.
The agreement set up a complicated schedule regarding "compensation" for Carlson. We will not provide all of the details here, but notably, under the payment scheme, any fees from cases in progress that were resolved during January or February 1996 would belong only to Carlson "regardless of when the check arrives," and beginning in March, Carlson would be paid $5,000 a month so long as he had generated $8,000 in fees in advance. If Carlson were to generate and collect more than $8,000 in fees for three months in a row and it appeared that he would generate over $100,000 of fees for the year, "then he [would] receive 30% of the excess fees based upon the estimation in the fourth month and each month thereafter, to be adjusted on a monthly basis." Hourigan was to cover all case expenses incurred after the effective date of the PMA, but "any uncollected case related expense incurred by [Carlson] on cases which he had in his office prior to the merger will remain his liability." There was no mention of how cases would be "assigned" to Carlson, leaving open the question whether he would only work on the cases of his own clients.
Several years earlier, in 1991, Carlson filed a personal injury lawsuit in the Circuit Court of Cook County on behalf of his client Carmen Gonzalez, individually and as mother and guardian of Anthony Gonzalez, a minor. Carlson's fee agreement with Gonzalez provided that Carlson would be entitled to receive one-third of any amount recovered on Gonzalez's behalf, plus reimbursement for expenses. In January or February 1996, shortly after the signing of the PMA but before Carlson filed for bankruptcy, the Gonzalez defendant agreed to pay Gonzalez $58,000 to settle the matter. On March 1, 1996, Carlson filed a "Petition to Confirm Settlement of Minor's Claim or Reinstate" in the Law Division of the Circuit Court of Cook *371 County, and on March 27, Carlson appeared before that court and obtained entry of an order approving the settlement. Just the day before, on March 26, the Illinois Supreme Court suspended Carlson's license to practice law for 60 days because of ARDC charges brought against him. So Hourigan stood in and obtained probate court approval of the minor's settlement since Carlson was not able to do so.
On April 16, 1996, when Carlson filed his Chapter 11 petition, the Gonzalez settlement proceeds had not yet been disbursed. Within a few days of Carlson's bankruptcy filing, Hourigan got the $58,000 check and, after paying the client's share, deposited the remainder in a bank account in his own name. Over the next few months, Hourigan paid Carlson the equivalent of almost all of Carlson's fees and expenses for the Gonzalez case, and followed Carlson's directions to give certain amounts to Carlson's ex-wife Loraine.[2] Hourigan also paid himself $1500 as compensation for the probate work he did, although the reasonable value of that work was only $500 plus $85 that he advanced in expenses. Hourigan ended up giving some of the $1500 back to Carlson, as the total amount that he paid out to Dennis and Loraine (through August 1996, well after the case had been converted to one under Chapter 7 of the bankruptcy code) exceeded the amount originally deposited from the Gonzalez settlement proceeds.
Judge Schmetterer found that Carlson and Hourigan continuously ignored the provisions of the PMA following its execution on December 27, 1995. For example, although the PMA did not expressly exclude any of Carlson's cases, between January 1, 1996 and March 31, 1996, Carlson directly received more than $16,000 in fee payments that he did not pay to Hourigan nor deposit into a joint account. He kept some of that money for his own needs and gave some to his former wife Loraine. In fact, the only fees that Carlson and Hourigan treated as included under the PMA were those for Carlson's pre-bankruptcy work on the Gonzalez case that were received one or two days after Carlson filed for bankruptcy. Carlson did not disclose the Gonzalez fees due in his bankruptcy statements and schedules (nor did he include Gonzalez on the list of cases intended to be covered by the PMA that he prepared in response to the bankruptcy court's order); it was only after the Trustee's work uncovered the payments that Carlson asserted the view that the fees and expenses for the Gonzalez case belonged to Hourigan, not to the bankruptcy estate.
Discussion
We now turn to the bankruptcy court's conclusions of law. Carlson first argues that Judge Schmetterer incorrectly applied Illinois law in determining that Carlson's interest in contingent attorney's fees from the Gonzalez case constitutes an asset of his bankruptcy estate and thus had to be turned over to the trustee. Carlson relies on an Illinois Supreme Court holding that an attorney's potential contingent fees do not constitute part of the marital estate subject to valuation and division between divorcing parties. In re Marriage of Zells, 143 Ill. 2d 251, 157 Ill. Dec. 480, 572 N.E.2d 944, 945 (1991). The Zells court based its conclusion on the nature of contingent fees: whether or not they will be received and if so what the amount will be remains highly speculative during the pendency of the divorce case. See id. Therefore, such fees are best treated as part of a divorcing attorney's income and considered in the context of support and maintenance determinations. See id. The Court also recognized that ordering division of contingent fees as a marital asset would run afoul of the Illinois Rule of Professional Conduct 5.4 which *372 prohibits lawyers from sharing fees with non-lawyers except in certain circumstances. See id.
This case is distinguishable from Zells in a number of ways. First, this is not a divorce case, and we are not dividing marital assets. Second, the fee disputed in this case is not speculative as was the fee in Zells. Carlson filed his bankruptcy petition on April 16, 1996. The parties to the Gonzalez case agreed to settle for the exact amount of $58,000 as early as January or February 1996, and Carlson's fee agreement provided that he would be entitled to receive one-third of any amount recovered plus reimbursement for expenses. The Circuit Court of Cook County approved and confirmed the $58,000 settlement amount on March 27, 1996. Although the check for the proceeds had not been disbursed by the time Carlson filed for bankruptcy, all of the work that Carlson did on the case and even the probate court approval obtained by Hourigan once Carlson's license to practice law was suspended on March 26 was done pre-petition. A check for $58,000 was delivered to Hourigan just a day or two after Carlson filed for bankruptcy. Because Carlson's interest more closely resembled an "account receivable" than a still-speculative contingency fee, including it in his bankruptcy estate was proper. See In re Marriage of Tietz, 238 Ill.App.3d 965, 178 Ill. Dec. 876, 605 N.E.2d 670, 679 (1992) (finding Zells inapplicable to accounts receivable, which are assets already earned with a known value but not yet collected).
Furthermore, the Bankruptcy Code specifies that the estate encompasses "all legal and equitable interests in property held by the debtor at the time of filing," see 11 U.S.C. § 541(a), and this includes all "[p]roceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case." Id. at § 541(a)(6) (emphasis added). A number of courts have held that under this definition, contingency fees owed to a debtor-attorney at the time of the bankruptcy filing for legal services performed before the petition was filed are a part of the debtor's estate. See, e.g., Turner v. Avery, 947 F.2d 772, 774 (5th Cir.1991) (fees earned pursuant to contingency fee contracts prior to bankruptcy filing fall into estate); In re Bagen, 186 B.R. 824, 829 (Bankr.S.D.N.Y.1995), aff'd, 201 B.R. 642, 643-44 (S.D.N.Y.1996) ("Under the new Bankruptcy Code, Congress intended property of the estate to include ... [the attorney-] debtor's contingent contract right to future payments"). While the Seventh Circuit has not reached this question directly, it has repeatedly found § 541 of the Bankruptcy Code to define "property of the estate" broadly and has observed that "`an interest is not outside its reach because it is novel or contingent or because enjoyment must be postponed.' ... In fact, every conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of § 541." In the Matter of Yonikus, 996 F.2d 866, 869 (7th Cir.1993) (internal citations omitted). See also Carlson v. Brandt, No. 97 C 2165, 1997 WL 534500, at *7 (N.D.Ill. Aug. 22, 1997) (Grady, J.) (citing In the Matter of Carousel Int'l Corp., 89 F.3d 359, 362 (7th Cir.1996), among others).[3] Even though the money *373 was collected a day or two after Carlson filed his petition, the estate includes the entire Gonzalez fee less the reasonable value of Hourigan's efforts to obtain probate court authorization of the deal. See In re Jess, 169 F.3d 1204, 1207 (9th Cir. 1999) ("[debtor-attorney's] estate is entitled to recover the portion of post-petition payments attributable to pre-petition services"); see also Watts v. Williams, 154 B.R. 56, 58 (S.D.Tex.1993) (value of debtor-attorney's pre-petition services on contingent fee contracts is bankruptcy estate property); In re Paul A. Nelson, P.A., 203 B.R. 756, 761 (Bankr.M.D.Fla.1996) (value of contingent fee agreement to bankruptcy estate can be determined on quantum meruit basis).[4]
Carlson maintains that the Gonzalez fees and reimbursed expenses were not part of the bankruptcy estate because he was bound to turn them over to Hourigan pursuant to the Practice Merger Agreement, but we conclude, as did the bankruptcy court, that the PMA is unenforceable. Without even reaching the question whether the PMA gave Carlson ample consideration in exchange for Carlson's assignment to Hourigan of his rights to legal fees in certain cases (one of Judge Schmetterer's grounds for rejecting it), we find the agreement void because it violates Rule 1.5 of the Illinois Rules of Professional Conduct (IRPC). Under Rule 1.5(f):
a lawyer shall not divide a fee for legal services with another lawyer who is not in the same firm, unless the client consents to employment of the other lawyer by signing a writing which discloses: (1) that a division of fees will be made; (2) the basis upon which the division will be made, including the economic benefit to be received by the other lawyer as a result of the division; and (3) the responsibility to be assumed by the other lawyer for performance of the legal services in question.
Rule 1.5 reflects the state's concern that clients be guaranteed the right to representation of their own choosing, "the most recent expression of the long-standing policy of this state" prioritizing clients' rights over lawyers' remedies. See Albert Brooks Friedman, Ltd. v. Malevitis, 304 Ill.App.3d 979, 238 Ill. Dec. 46, 710 N.E.2d 843, 847 (1999). Carlson presented no evidence that any of his clients executed written consent to his sharing of fees with Hourigan. With respect to the Gonzalez case specifically, the first case to which Carlson and Hourigan applied the PMA, Carlson admitted at trial that Mrs. Gonzalez did not sign anything consenting to the fee-splitting, and Hourigan admitted the same in his testimony. Carlson claims that Mrs. Gonzalez consented orally "on the record" at a state probate court hearing attended by both Hourigan and Carlson, but he did not produce any transcript or other evidence of such oral consent, and only a written consent document would prove that the disclosures required by Rule 1.5(f) were made to the client. Contracts between lawyers that constitute fee-splitting in violation of Rule 1.5(f) are illegal, see Albert Brooks Friedman, 238 Ill. Dec. 46, 710 N.E.2d at 846-47 (Illinois Supreme Court rules have the force of law and are indicative of public policy in the area of attorney conduct), and illegal contracts are void and unenforceable under Illinois law. See U.S. Nursing Corp. v. Saint Joseph Med. Ctr., 39 F.3d 790, 792 (7th Cir.1994).
Carlson and Hourigan contend that the PMA does not violate Rule 1.5(f) of the IRPC because the rule only prohibits fee-splitting among lawyers who are not in the same law firm, while the effect of the PMA was to create one firm of which both Carlson and Hourigan were a part. *374 But we are not persuaded by this argument, because the terms of the PMA do not support it. First, as we observed earlier, both Carlson and Hourigan testified that they did not understand the agreement to create a partnership or professional corporation, and they did not intend for Carlson to be Hourigan's "employee."[5] The agreement specifically considered Carlson to be "an independent contractor," emphasizing that "he is free to handle cases assigned to him in the manner he sees fit," and that although Hourigan would "be available to consult and advise," it would be entirely up to Carlson to decide when, where and how his cases would be handled. While Hourigan testified that the payment to Carlson provided for by the PMA was intended to be in the nature of wages or salary, the language of the agreement suggests otherwise. Instead of giving Carlson a set salary to compensate him for hours worked or services performed for Hourigan's "firm," the agreement entitles Carlson to a percentage of the fees brought in by his own cases ($5000 a month provided that he generates $8000 in fees in advance, and 30% of any excess fees if over $8000 is collected for three months in a row and if it appears that Carlson will generate over $100,000 in fees that year), and the remaining fees go to Hourigan. This constitutes "fee-splitting," whether or not the parties call it "payment" or "compensation." The policy concern underlying Rule 1.5(f) the protection of clients' rights to the representation of their choosing is directly implicated by the PMA's arrangement that "[i]n the event of termination [by either party], it is agreed that the cases transferred by Dennis E. Carlson shall remain with William E. Hourigan," since no informed consent to that effect was executed.
We turn now to the counts brought against Carlson by the trustee. The bankruptcy court denied Carlson a discharge based on its finding that Carlson violated § 727(a)(2) of the Bankruptcy Code, under which a discharge should be denied if
the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed
(A) property of the debtor, within one year before the date of the filing of the petition; or
(B) property of the estate, after the date of the filing of the petition.
11 U.S.C. § 727(a)(2). The court's findings support the conclusion that Carlson transferred or concealed property of the bankruptcy estate both within one year before the filing of his petition and after the petition was filed. The Seventh Circuit has explained that "[a] concealment ... need not be literally concealed. The transfer of title with attendant circumstances indicating that the bankrupt continues to use the property as his own is sufficient to constitute a concealment." In the Matter of Kauffman, 675 F.2d 127, 128 (7th Cir.1981). Here, the bankruptcy court found that Carlson concealed the Gonzalez fees which, as we explained above, are part of the bankruptcy estate by causing and permitting the fees to be transferred to Hourigan (under the guise of the PMA) while ultimately receiving a total of $19,100 of those fees, some directly from Hourigan and some indirectly through payments to Loraine.[6] Not only did Carlson fail to disclose these fees on his bankruptcy schedules, but he did not *375 name the Gonzalez case on the list of cases covered under the PMA that the bankruptcy court ordered him to file during the pendency of his proceedings, even though he later testified at his Rule 2004 examination that he had disclosed all of the cases called for by the court's order. Carlson also received two checks for pre-bankruptcy work from his clients Jerry and Shirley Meyer in August and September 1996 that he did not disclose on his bankruptcy schedules nor turn over to the trustee. Rather, he did what he had done with several checks that he got from clients between the signing of the PMA and his bankruptcy filing (while failing to disclose those payments in his statement of financial affairs and falsely stating that he had no income from January 1, 1996 through the date of his filing in April 1996): he endorsed the checks over to Loraine and instructed her to return some of the money to him in cash and to keep the rest (although, as we observed earlier, he did not mention any child support or maintenance debts in his bankruptcy filings). Given the evidence presented, the bankruptcy judge's conclusion that Carlson transferred and concealed assets was far from clearly erroneous.
The final prong of the § 727(a)(2) inquiry the question whether Carlson had the requisite intent to hinder, delay, or defraud the trustee during the course of this conduct is one of fact. See Yonikus, 996 F.2d at 872-73. A finding of actual intent may be based on circumstantial evidence or on inferences drawn from a course of conduct, since a debtor is not likely to testify that his or her intent was fraudulent. See In the Matter of Krehl, 86 F.3d 737, 743 (7th Cir.1996). Indeed, "[t]he intent determination often will depend upon a bankruptcy court's assessment of the debtor's credibility, making deference to the court's finding particularly appropriate." Id. at 743-44; Fed. R. Bankr.P. 8013. We will not second-guess the bankruptcy judge's choice between the rational conclusions that could be drawn from the evidence before him, let alone find it to have been "clearly erroneous." Krehl, 86 F.3d at 744. Judge Schmetterer found the cumulative pattern of Carlson's wrongful conduct and omissions to be indicative of his bad faith intent "to hide the fact that most of such funds were funneled through Hourigan for return to Carlson to use for his needs and purposes in a way unlikely to be traced." Carlson, 231 B.R. at 654. Carlson claims in his appeal briefs as he did on the stand at the trial that he was confused and distressed about filing for bankruptcy and thus merely made mistakes, but Judge Schmetterer found his testimony not to be credible or convincing, and Carlson's "protest of innocent misunderstanding is insufficient to overturn such clear factual analysis by the bankruptcy court." Yonikus, 996 F.2d at 873.
The court also found the denial of Carlson's discharge to be warranted under paragraphs (a)(3) and (a)(4) of 11 U.S.C. § 727. Under § 727(a)(3), a discharge may be denied if
the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case.
Section 727(a)(4) calls for the denial of a discharge to the debtor who "knowingly and fraudulently, in or in connection with the case made a false oath or account," which may be a false statement or omission in the debtor's schedules or a false statement by the debtor at an examination during the course of the bankruptcy proceedings. See, e.g., Yonikus, 996 F.2d at 871. Our review of both the bankruptcy court's findings and the relevant law satisfies us that the evidence supports the court's conclusions that Carlson violated §§ 727(a)(3) and (a)(4), but we need not reach these questions definitively nor address the violations in detail because we *376 have already found the denial of a discharge appropriate due to Carlson's violation of § 727(a)(2), and the other provisions of § 727(a) are merely alternative grounds for denying a discharge. See Krehl, 86 F.3d at 744 (quoting Farouki v. Emirates Bank Int'l, Ltd., 14 F.3d 244, 250 (4th Cir.1994)) ("`A party objecting to discharge need prove only one of the grounds for non-dischargeability under § 727(a) because the provisions of § 727(a) are phrased in the disjunctive. Proof of conduct satisfying any one of the sub-sections is enough to justify a denial of a debtor's request for a discharge'").
Conclusion
For the foregoing reasons, we affirm the decision of the bankruptcy court denying Dennis E. Carlson a discharge from debts.[7] It is so ordered.
NOTES
[1] The full text of the PMA can be found in the bankruptcy court's opinion, In re Carlson, 231 B.R. 640, 644-45 (Bankr.N.D.Ill.1999).
[2] Carlson testified at trial that these payments to Loraine were for back child support and maintenance, but he did not list any debt to Loraine in his schedule of debts and he did not disclose several pre-petition transfers to her in his statement of financial affairs.
[3] Carlson's assertion that allowing the trustee to include the Gonzalez fees in the bankruptcy estate would require Carlson to engage in illegal fee-splitting with a non-attorney is misguided. Carlson is not being asked to share his fees with trustee Brandt in his individual capacity; even though Brandt does stand to receive a small percentage of the total estate assets as compensation for his services, the trustee has the official job of identifying and valuing the assets of the debtor's estate in order to satisfy creditors' claims, and it is in this capacity that Brandt seeks access to the fees. Were we to credit Carlson's argument, all attorneys who file for bankruptcy would be able to exclude from their bankruptcy estates any fees owed for pre-petition work they did, which could not have been the intent of the Bankruptcy Code given the language of 11 U.S.C. § 541(a)(6).
[4] Contrary to Carlson's contention, Illinois law does not limit quantum meruit awards to cases where an attorney hired by a contingent fee contract is discharged by his or her client; rather, such valuation of legal services rendered can be made even in cases of attorney withdrawal, so long as the withdrawal is for good cause. See Kannewurf v. Johns, 260 Ill.App.3d 66, 198 Ill. Dec. 381, 632 N.E.2d 711, 715-16 (1994).
[5] Hourigan testified more specifically that he would not feel responsible if Carlson were to practice law negligently (although he thought the law would hold him responsible anyway), and that he did not withhold any taxes or take any other deductions when he paid Carlson. Tr. at 28-29.
[6] Carlson received $4,295 of the fees after converting his case under Chapter 7.
[7] We find reprehensible Carlson's argument that "he is being hung out to dry" and denied a discharge simply because he is an attorney who was pro se and made errors before the bankruptcy court. Equally offensive is his suggestion that he was denied due process and fundamental fairness because Judge Schmetterer who was absent from the bench for a long period post-trial due to his wife's unfortunate illness issued the opinion eleven months after the trial "with only his notes to rely on" and thus must have forgotten his earlier rulings regarding the precise nature and scope of the claims. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/872138/ | Electronically Filed
Intermediate Court of Appeals
30566
16-JUN-2011
09:07 AM | 01-03-2023 | 05-25-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546819/ | 377 B.R. 413 (2007)
In re. Raymond. T. BEZARES, Marci J. Bezares, Debtor(s).
No. 9:07-bk-06636-ALP.
United States Bankruptcy Court, M.D. Florida, Fort Myers Division.
October 23, 2007.
ORDER ON TRUSTEE'S OBJECTION TO CLAIM OF EXEMPTION
(Doc. No. 8)
ALEXANDER L. PASKAY, Bankruptcy Judge.
The Florida Legislature in its last session passed Senate Bill 2118 modifying and *414 codifying Section 222.25 of the Florida Statutes.
The relevant Florida Statute § 222.25(4) provides:
222.25 Other individual property of natural persons exempt from legal process. The following property is exempt from attachment, garnishment, or other legal process:
. . . .
(4) A debtor's interest in personal property, not to exceed $4,000, if the debtor does not claim or receive the benefits of a homestead exemption under s. 4, Art. X of the State Constitution. This exemption does not apply to a debt owed for child support or spousal support.
It took no time to raise the issue as to the scope of this amendment. That is, whether the increase is limited to $4,000 or if it is in addition to the existing current $1,000 exemption provided for by Article X, Section 4(a)(2) of the Florida Constitution, thus increasing the total amount to $5,000. This is precisely the issue presented for this Court's consideration in this case of Raymond. T. Bezares and Marci J. Bezares (Debtors).
Mr. Bezares claimed $5,000 as personal property exemption. Not surprisingly, Ms. Jensen, the Trustee in this Chapter 7 case, challenged this claim contending, that, by virtue of the amendment to FLA. STAT. § 222.25 (2007), the maximum allowable personal property exemption claim is $4,000. She argued that the personal property exemption provided for in the amendment is not in addition to the existing $1,000, making the total $5,000. Rather, it is an increased exemption that provides additional benefit (an additional $3,000) for those not claiming a homestead exemption. Neither counsel for the parties nor the Court has been able to locate any relevant interpretation of this change and the scope of the amendment in any case in the State of Florida.
The Trustee, in support of her objection, relies on the legislative history of FLA. STAT. § 222.25 which, according to the Trustee, leaves no doubt that the legislature intended that the amendment fix the maximum personal property exemption at $4,000 which includes the previous $1,000 exemption provided by the Florida Constitution.
Counsel for the Debtor had no authority to cite in support of his position, but relies on the well-established principle that the legislature has no power to abrogate, alter or amend any provisions of the Constitution. Notwithstanding, this Court initially opined that while recognizing the validity of the principle, it was not applicable to the current situation and proceeded to consider the text of the amendment and its legislative history.
A plain reading of the legislative history supports the initial conclusion urged by the Trustee that the amendment intended to fix the maximum allowable exemption on personal property to $4,000.
As stated in the Florida Senate Professional Staff Analysis and Economic Impact Statement:
. . . .
III. Effect of Proposed Changes:
. . . The bill also increases the amount of personal property exempt from creditor claims, which is owned by persons without homestead property. . . .
Property Exempt from Creditor Claims
The bill amends s. 222.25, F.S., to increase to $4,000 from $1,000 the amount of personal property exempt from creditor claims for persons who do not own homestead property. The exemption for persons with homestead *415 property will remain at $1,000 as provided in the Florida Constitution. . . .
Fla. S. Prof'l Staff Analysis and Econ. Impact Statement CS/SB 2118(2007).
A cursory reading of this Section indicates that the Debtor's interest in personal property claimed as exempt cannot exceed $4,000 if a debtor does not claim or receive the benefits of a homestead exemption as provided in the Florida Constitution.
However, upon reflection, this Court is now satisfied that while the amendment as written would warrant the conclusion that the amount stated is a cap which includes indirectly the previous personal property exemption of $1,000, it must recognize the principle contended by the Debtor in its entirety. That is, that the legislature has no power to amend or alter a constitutional provision. The only method by which the Florida Constitution can be altered or amended is by virtue of Article XI, Section 5 of the Florida Constitution. Therefore, it is the judgment of this Court that the statutory amendment of the exemption as urged by the Trustee would in fact be a violation of the Constitution of the State of Florida which prohibits its amendment except by the method as provided for by the Florida Constitution pursuant to Article XI, Section 5.
Based on the foregoing, this Court is satisfied that the Debtor's position is correct and the amendment to FLA. STAT. § 222.25 added $4,000 to the previous $1,000 making a total of $5,000 as the allowable amount of the personal property exemption available to a person who does not own homestead property or claim a homestead exemption.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Trustee's Objection to Claim of Exemption (Doc. No. 8) be, and the same is hereby, overruled and the Debtor's $5,000 personal property exemption is allowed as claimed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546617/ | 38 F.2d 755 (1930)
HUGHES
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 144.
Circuit Court of Appeals, Tenth Circuit.
February 5, 1930.
*756 Gerald Hughes, of Denver, Colo. (C. C. Dorsey and Berrien Hughes, both of Denver, Colo., on the brief), for petitioner.
Prew Savoy, Sp. Atty., Bureau of Internal Revenue, of Washington, D. C. (Sewall Key, and Randolph C. Shaw, Sp. Assts. to the Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for respondent.
Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.
McDERMOTT, Circuit Judge.
The petitioner claimed a credit, in his 1922 income tax return, for a loss of $32,493.19 carried over from 1921 under the provisions of section 204 of the Revenue Act of 1921 (42 Stat. 231). The Commissioner figured the allowable credit to be $2,029.88, and notified the petitioner of a deficiency assessment in the sum of $11,799.97. The Board of Tax Appeals sustained the Commissioner, and the case is here for review.
The facts are found by the Board, and are not in dispute. During the year 1921, the petitioner was engaged in four pursuits for the purpose of a profit. They were:
(1) Member of law firm of Hughes & Dorsey, to which he devoted 50 per cent. of his time; profit in 1921, $36,672.94.
(2) Personal investments, to which he devoted 26 per cent. of his time; loss in 1921, $57,551.50.
(3) Member of firm of Boettcher, Porter & Co., investment banking, to which he devoted 20 per cent. of his time; loss in 1921, $48,091.20.
(4) Member of executive committee of two banks, to which he devoted 4 per cent. of his time; salaries during 1921, $3,958.32.
In addition, he received interest and dividends, from the investment firm and his personal investments, of $36,523.39.
The petitioner considered that the only "trade or business" he was engaged in was the investment banking business, and computed the "net loss" that could be carried over into 1922 as prescribed by the formula in that section, as follows:
Deductions allowed
by 214-a (consisting
of losses
in his personal
business, interest
paid, taxes and
contributions) ................... $61,828.14
From this sum he took
away
(a) His gross income
(the excess
of his salaries,
law income, dividends
and interest,
over his loss
in the investment
banking
business) ............. $29,063.45
(b) Certain tax
free interest ......... 271.50
(c) The excess of
the losses he suffered
in his unrelated
personal
business (excluding
taxes,
contributions and
interest) over
his income from
his unrelated
law business, salaries
and dividends ......... None 29,334.95
_______________
Leaving a net loss to be
carried over of $32,493.19
*757 The Commissioner's computation differed only in that in (c) above, the Commissioner treated the income from the law firm and the salaries from the banks, as profits derived from a "trade or business." This resulted in a deduction under (c) above, of $30,463.31, the taxation of which amount is the controversy between the parties.
It is therefore apparent that the Commissioner has ruled that the income from three of the petitioner's four pursuits (from his law practice, his partnership investment business, and the salaries from the banks) grew out of a "trade or business," while the losses suffered by him from the fourth, his personal investments, were not incurred in "trade or business." The petitioner contends he was engaged in but one "trade or business," that of investment banking; but, in any event, if the income from his law practice and his salaries is so classified, then the losses he suffered in his personal investments should be similarly classified, which would result in about the same loss as he claimed.
The Board of Tax Appeals held that the question of what was or was not a trade or business was immaterial, upon the authority of its prior decision in Re H. J. Schlesinger, 5 B. T. A. 943, and denied the petitioner relief. But, as we read the Schlesinger decision, if it were applied to the case at bar, the petitioner would have been entitled to practically all the relief he asks. The respondent disclaims any reliance upon the decision of the Board in the instant case, so it need not be further discussed. Neither does the respondent now rely upon the computation of the Commissioner; but counsel for the respondent now states that, by a correct application of the formula of section 204, it is found that the petitioner's profits from the law business and salaries were $40,631.26; his net loss in the investment banking was $38,656.00; the loss in personal investments is disregarded, with a result that counsel claims no loss should have been carried over. We are not asked, on this account, to increase the deficiency assessment, but we are asked to apply the statute to the undisputed facts, without reference to the theories of the Commissioner or the Board. The petitioner likewise, by a general assignment of error, brings before us the case as a whole. The statute requires us "to affirm, or, if the decision of the board is not in accordance with law, to modify or reverse the decision of the board, with or without remanding the case for a rehearing, as justice may require." USCA tit. 26, § 1226; Old Colony Trust Co. v. Com'r Int. Rev., 279 U. S. 716, 49 S. Ct. 499, 73 L. Ed. 918. Section 269 of the Judicial Code (USCA tit. 28, § 391) likewise directs that judgment shall be entered "after an examination of the entire record before the court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties." Or, as stated by counsel for the government, "The correct amount of the deficiency, however, is the controlling question, and not the method of arriving at it." Atlanta Casket Co. v. Rose (5 C. C. A.) 22 F. (2d) 800; Anderson v. Farmers' Loan & Trust Co. (2 C. C. A.) 241 F. 322; Lewis-Hall Iron Works v. Blair, 57 App. D. C. 364, 23 F.(2d) 972.
The underlying question in the case is the meaning of the phrase "trade or business" as used in section 204(a) of the Revenue Act of 1921 (42 Stat. 231), which reads as follows:
"That as used in this section the term `net loss' means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer (including losses sustained from the sale or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business); and when so resulting means the excess of the deductions allowed by section 214 or 234, as the case may be, over the sum of the following: (1) the gross income of the taxpayer for the taxable year, (2) the amount by which the interest received free from taxation under this title exceeds so much of the interest paid or accrued within the taxable year on indebtedness as is not permitted to be deducted by paragraph (2) of subdivision (a) of section 214, or by paragraph (2) of subdivision (a) of section 234, (3) the amount by which the deductible losses not sustained in such trade or business exceed the taxable gains or profits not derived from such trade or business, (4) amounts received as dividends and allowed as a deduction under paragraph (6) of subdivision (a) of section 234, and (5) so much of the depletion deduction allowed with respect to any mine, oil or gas well as is based upon discovery value in lieu of cost."
We are here concerned only with the meaning of this phrase as used in this section. The same phrase, in other statutes, or in other sections, in a different context, and for a different purpose, may or may not be helpful. The intent of Congress, in enacting the section in question, is the goal of the inquiry; if doubt exists, courts should look *758 to the situation that confronted Congress, and the mischief the statute was designed to undo. Ozawa v. United States, 260 U. S. 178, 195, 43 S. Ct. 65, 67 L. Ed. 199; Holy Trinity Church v. United States, 143 U. S. 457, 12 S. Ct. 511, 36 L. Ed. 226; Harper v. Victor (8 C. C. A.) 212 F. 903; United States v. Ninety-Nine Diamonds (8 C. C. A.) 139 F. 961, 2 L. R. A. (N. S.) 185, and authorities therein cited by Judge Sanborn.
This section, in somewhat different language, was first enacted in 1918. The mischief it was aimed at is a matter of common knowledge. Merchants and manufacturers, and other taxpayers employing capital in their pursuits, had paid large taxes in preceding years on paper profits. Their shelves and warehouses bulged with inventories whose values had increased fabulously during the inflation period. The war had ended; deflation was forecast; war trade was at an end. A class of taxpayers had paid taxes on incomes reflected by inventories, an income not in fact realized. There was no one to recoup them the losses caused by the shrink in the value of their assets. This section was designed to permit such taxpayers to carry over such losses into the two succeeding years. In the report of the 1918 law to the Senate, the Committee, speaking of this section, said:
"One of the most important provisions inserted by the committee is quite new to our tax laws. At the present time no recognition is given to net losses; that is, if in any year the losses and expenses of a taxpayer exceed his gross income the excess (or in other words, the net loss) cannot be carried over into the next year. For purposes of taxation the settlement must be made upon the basis of each year's business by itself. The chief merit of the present plan is its simplicity of administration. But it does not adequately recognize the exigencies of business, and, under our present high rates of taxation, may often result in grave injustice."
Montgomery, in his work on Income Tax Procedure (1922 Ed.), at page 1021, says of this section:
"The radical changes expected in business conditions as a result of the cessation of the war made it seem imperative that losses arising from readjustments of inventories, which might occur within a few months thereafter should be spaced over a longer period of time. Similar conditions existed in case of losses arising from sales or depreciation of plant and equipment acquired for war purposes. To meet those difficulties the 1918 law provided certain relief measures designed to assist in the re-establishment of normal conditions."
So much for the purpose back of the law. Turning now to the statute itself, the first thing noticed is an evident purpose of Congress to restrict its application to a certain class of net losses. If Congress had intended the section to apply to all the losses of taxpayers, the statute could have been materially shortened by simply providing that "* * * `net loss' means the excess of the deductions allowed by section 214 or 234 (42 Stat. 239, 254) as the case may be, over the sum of the following: * * *" proceeding with the formula. But the statute in fact reads:
"That as used in this section the term `net loss' means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer (including losses sustained from the sale or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business); and when so resulting means the excess of the deductions allowed by section 214 or 234, as the case may be, over the sum of the following."
The italicized words clearly restrict the application of the statute to the class of net losses defined by the italicized words, and such restriction may not be ignored.
The government construes "trade or business" in this section, to mean the same as the word "business" as interpreted by the Supreme Court in considering what sort of corporations were engaged in business under the Corporation Excise Tax law; that definition is:
"It remains to consider whether these corporations are engaged in business. `Business' is a very comprehensive term and embraces everything about which a person can be employed. Black's Law Dict. 158, citing People v. Commissioners of Taxes, 23 N. Y. 242, 244. `That which occupies the time, attention, and labor of men for the purpose of a livelihood or profit.' 1 Bouvier's Law Dict. p. 273." Flint v. Stone Tracy Co., 220 U. S. 107, 171, 31 S. Ct. 342, 357, 55 L. Ed. 389, Ann. Cas. 1912B, 1312.
That definition, appropriate in that and many other sections, is broad enough to cover nearly all taxpayers. If that definition be adopted as to the section in question, the intent of Congress to restrict the privilege of carrying over losses is thwarted, and the italicized words in the above quotation pass *759 out of the statute. The words "trade or business" have many shades of meaning, and are subject to colloquial abuses. Definitions, taken from other cases dealing with other situations and in other settings, are of little help. For example, in the following cases, the words "trade or business" were construed so as to exclude a profession: United States v. American Tobacco Co. (C. C.) 164 F. 700, 708; Pocono Spring Water Ice Co. v. American Ice Co., 214 Pa. 640, 64 A. 398, 400; Easterbrook v. Hebrew Ladies' Orphan Society, 85 Conn. 289, 295, 82 A. 561, 563, 41 L. R. A. (N. S.) 615; Bohnsack v. McDonald, 26 Misc. Rep. 493, 56 N. Y. S. 347; Iselin v. Flynn, 90 Misc. Rep. 164, 154 N. Y. S. 133. In other revenue acts, Congress deemed a statutory definition necessary in order to embrace "professions and occupations" within the meaning of trade or business. Revenue Act of 1917, § 200 (40 Stat. 302). But our task is to find out, if we can, what Congress intended by using the words in this section.
Considering the manifest intention of Congress to restrict the application of the section, and the evident purpose of the law, it is our opinion that the section has no application to wage-earners, salaried or professional men. Wage-earners and salaried men may be out of work, and subject to no tax. But, employing no capital in their "trade or business regularly carried on," they suffer no net losses that should be carried over to other years. Collections may be poor for doctors and lawyers; but the sick must be treated in good times and bad; the services of lawyers are sought in bankruptcy and receiverships and litigation in hard times, as they are sought in other matters in times of prosperity. The capital of doctors and lawyers is limited to instruments and libraries, which are not for barter or sale, and the market value of which is not ordinarily reflected in income tax returns. There may exist large firms, with heavy overheads, which actually show a net loss for some years. But certainly "net losses" of salaried or professional men were not of enough public concern to command the solicitude of Congress. The petitioner is therefore right, in considering his income from his profession, and the salaries he received from the banks, as "gains or profits not derived from such trade or business," under 204(a) (3). Such income was unrelated to his business of investment banking, and he was entitled to deduct this unrelated profit from his likewise unrelated losses, in arriving at his net loss.
But, if we are wrong in this, we still do not see how the deficiency assessment can be sustained. The words "trade or business" must be defined either narrowly or broadly. If the government's definition (above quoted) is accepted, respondent finds itself in but little better stead. For, if "trade or business" includes everything "which occupies the time, attention, and labor of men for the purpose of a livelihood or profit," then the pursuit of petitioner which occupied 26 per cent. of his time, for the purpose of a profit which, if made, would be taxable his personal investment business must be thrown into the equation. The Board of Tax Appeals apparently so thought; but if the profits and losses from all pursuits be considered, we find the petitioner sustained a net loss in 1921 of approximately that claimed. Aside from contributions and taxes, the situation on this theory would be:
Profits
From the practice
of law ............... $36,672.94
Salaries ............... 3,958.32
Interest ............... 6,736.84
Dividends .............. 20,351.35
Interest from
partnership .......... 1,502.02
Dividends from
partnership .......... 7,933.18 $ 77,154.65
_______________________
Losses
In partnership
business ............. $48,091.20
In personal business ... 57,551.50
Interest paid .......... 1,895.52 $107,538.22
_______________________
Net Loss ............... $ 30,383.57
While the result is essentially the same under either definition, we are of the opinion that the petitioner's interpretation of the statute is correct. But, in any event, the position of the government would appear to be untenable. The government must and does take the position that it may select three out of the four gainful pursuits of the petitioner, and classify them as "trade or business" and otherwise classify the fourth. With this we cannot agree.
The decision of the Board is therefore reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546622/ | 38 F.2d 972 (1930)
BANK SAV. LIFE INS. CO.
v.
BUTLER.[*]
No. 8671.
Circuit Court of Appeals, Eighth Circuit.
February 24, 1930.
E. R. Sloan, of Topeka, Kan., and G. W. Humphrey and James W. Broaddus, both of Kansas City, Mo., for appellant.
Fred A. Boxley and Thomas E. Walsh, both of Kansas City, Mo., for appellee.
Before STONE and GARDNER, Circuit Judges, and MILLER, District Judge.
GARDNER, Circuit Judge.
This action is based on an insurance policy issued by the appellant, defendant in the lower court, on the life of Sylvester Butler, husband of plaintiff. The policy contains the following, among other, provisions: "This policy, if not previously surrendered, may be reinstated at any time after date of default, upon written application therefor accompanied by evidence of insurability satisfactory to the company, and upon the payment of all arrears of premiums with interest thereon." The policy bears date September 22, 1925. It is in the sum of $5,000, and plaintiff is named as beneficiary therein. The first premium was paid, but the second premium, which fell due September 22, 1926, was not paid, and the policy, by its terms, lapsed. On December 5, 1926, the insured became ill with what was diagnosed at that time by his *973 attending physician as appendicitis. On the evening of December 7th, he was removed to a hospital, where he underwent a surgical operation which disclosed that his trouble was not appendicitis as diagnosed, but an intestinal ulcer which had perforated the intestines, causing general peritonitis. Plaintiff was present at the hospital prior to, at the time of, and immediately following the operation, and was advised by the attending surgeon that her husband was dangerously ill but that there was a chance for his recovery.
On December 9th, the plaintiff went to the office to get her husband's mail, and, among the letters, was one from the insurance company containing what is referred to in the record as a "danger signal," saying that Mr. Butler's insurance had lapsed. She then went to the office of the company's general agent in Kansas City with a friend of Mr. Butler's by the name of August Eyssell, a pharmacist, who had heard some talk about Mr. Butler's insurance. Mr. Butler had been working for the Globe Tire Company, which concern occupied a room at 617 Grand avenue, rented from Mr. Eyssell.
Plaintiff testifies: That she inquired of this agent whether she could have Mr. Butler's insurance policy reinstated, that he was sick and in the hospital. That the agent asked whether or not Mr. Butler was sick at the time the policy lapsed. That she informed him that he was a well man until Tuesday, December 7th, to which he replied, "All right," went into another office, got a reinstatement blank, sat down and filled it out himself without asking plaintiff any further questions, presented it to her for her signature, suggesting that she had better sign her husband's name together with her own, and that, without reading the application, she signed the name of her husband, as well as her own, thereto. That Mr. Eyssell handed the agent a check for $90.95 covering the premium for reinstatement of the policy, whereupon the agent handed her a receipt.
Mr. Eyssell testifies that he offered to pay the premium if the policy could be renewed, and that he went with Mrs. Butler to call upon the company's agent. He says:
"I introduced myself to Mr. Ashbrook (the agent) and told him that Mrs. Butler had a policy of Mr. Butler's with that company which had lapsed and we wanted to find out whether it could be renewed, that Mr. Butler was sick right now and at the hospital, had been operated on.
"Q. Did you say that to this man? A. I told him that, yes. He says, `However, in a case of that kind we reinstate,' and then he went in this other little office and got the blank. He says, `We have a regular form on that' and came out with that blank and sat down there, started to fill out, and I said `Now, before you start filling that out, we want you to understand that Mr. Butler is a sick man, he is at the hospital and has been operated on.' `Well, was he sick at the time the policy lapsed?'
"Q. How is that? A. He asked Mrs. Butler whether he was sick at the time the policy lapsed; Mrs. Butler says, `No, he wasn't sick then.' `Well, that is all right, then, just so he wasn't sick when the policy lapsed; a person can always get well when they are sick at the hospital, always have a chance.' So he filled out the blank, without asking any questions; and we had told him before, warned him
"Q. After he filled out the blank then did he ask Mrs. Butler to sign it? A. He just handed it over to her right there at the desk, he says, `Now, you sign Mr. Butler's name there and by you, and that is all that is necessary.'"
The application contains the following: "I hereby make application for the reinstatement of said policy and warrant as follows: That since the day of my examination for the above numbered policy I have had no sickness or ailment whatever, except as follows: None, nor have I suffered any injury of any kind, except as follows: None, and that I have not been attended, nor prescribed for, by any physician, except as follows: None. I further agree * * * that if any of the statements or warranties contained herein shall prove to be incomplete and untrue, then the reinstatement shall be ipso facto null and void."
It should be stated that the testimony of the plaintiff and the witness Eyssell is denied by defendant's agent, in so far as it relates to the disclosures made to him, but, in the view we take of the case this is not a material consideration.
The insured died December 12, 1926. Proper proofs of death were made and presented to the defendant company, and, liability being denied, this suit was brought. At the close of plaintiff's testimony the defendant moved for a directed verdict on the ground of insufficiency of the evidence. This motion was denied, whereupon the defendant offered its testimony, and at the close of all the testimony motion to direct a verdict was renewed by the defendant and denied by the court.
*974 On this appeal it is urged (1) that the court erred in refusing to direct a verdict for the defendant at the close of plaintiff's testimony; (2) that the court erred in refusing to direct a verdict for the defendant at the close of all the testimony; and (3) that the court erred in its charge to the jury. As to the first assignment of error, it need only be said that, as the defendant on the denial of its motion made at the close of plaintiff's case, introduced testimony in support of its defense, this constituted a waiver of the exception.
It is strenuously urged that the court should have directed a verdict in favor of the defendant at the close of all the testimony. By section 6143, Revised Statutes of Missouri, it is provided that: "Any person who shall solicit an application for insurance upon the life of another shall, in any controversy between the assured or his beneficiary and the company issuing any policy upon such application, be regarded as the agent of the company and not the agent of the assured." It is claimed that the reinstatement of the policy was secured through false representations made by the plaintiff in the application for reinstatement as above set forth, and hence the policy was avoided. It is, however, contended on behalf of the plaintiff that no misrepresentations were made to the company, but that the facts were fully and in good faith disclosed to the general agent of the company, and that, with full knowledge of these facts, he accepted the premium on the policy and caused it to be reinstated.
In view of the verdict of the jury, we must accept plaintiff's version as to the facts. However great the suspicion that the jury may have, through prejudice or sympathy, or both, disregarded the weight or preponderance of the evidence, this court is without power to weigh the evidence, but can only determine whether the verdict is sustained by substantial evidence. The remedy for relief from a verdict which is claimed not to be sustained by the weight of the evidence is in the hands of the trial court, and it appears in this case that the trial court, on motion for a new trial, set aside a prior verdict. Of course, if the defendant knew all the facts, then it could not have been misled by statements which were embodied in the application by its own general agent.
The author of the article on "Insurance" in 32 C. J. 1333, states the following general rule: "Where the facts have been truthfully stated to its agent but by his fraud, negligence, or mistake are misstated in the application, the company cannot, according to the generally accepted rule, after accepting the premium and issuing the policy, set up such misstatement in the application in avoidance of its liability, where the agent is acting within his real or apparent authority, and there is no fraud or collusion upon the part of the insured. Among the reasons given for this rule are: That the company assumes to draft the papers so as to meet its own views as to their requirements; that the agent is the agent of the company; that his knowledge will be imputed to the company; that the statements in the application are in fact his statements; that the company is estopped from controverting their truth; and that the evidence does not constitute an attempt to vary a written contract by parol, although there is some authority to the contrary based on the theory that in making the application, the solicitor is acting as agent of the applicant, or that the introduction of evidence to show the fact would violate the rule excluding parol evidence to alter a written contract."
The same rule is stated by the author of the article on "Insurance" in 14 R. C. L. p. 1174, where it is said: "It is the genral rule that an insurance agent in making out an application for insurance acts as the agent of the insurer and not of the insured, and if the insured makes proper answers to the questions propounded the insurer cannot take advantage of a false answer inserted by its agent, contrary to the facts as stated by the applicant."
In the article on "Life Insurance," 37 C. J. 502, the rule is specifically applied to applications for reinstatement of a lapsed policy. It is there said: "In the absence of fraud on the part of the insured, insurer cannot avoid the reinstatement because of false answers to questions inserted in the application by its agent where insured had given the correct information to the agent." To the same effect, see Union Mutual Life Ins. Co. v. Wilkinson, 13 Wall. 222, 20 L. Ed. 617; Am. Life Ins. Co. v. Mahone, 21 Wall. 152, 22 L. Ed. 593; Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304, 10 S. Ct. 87, 89, 33 L. Ed. 341; McMaster v. New York Life Ins. Co., 183 U. S. 25, 22 S. Ct. 10, 46 L. Ed. 64; Stipcich v. Insurance Co., 277 U. S. 311, 48 S. Ct. 512, 515, 72 L. Ed. 895; State ex rel. Ins. Ass'n v. Bland, 316 Mo. 559, 291 S. W. 499; Den Hartog v. Home Mut. Ins. Ass'n, 197 Iowa, 143, 196 N. W. 944; Busboom v. Capital Fire Ins. Co., 111 Neb. 855, 197 N. W. 957; Schmitt v. Mass. Protective Ass'n, 170 Minn. 60, 212 N. W. 5.
The Missouri statute above quoted specifically provides, not only that the person *975 soliciting an application for insurance shall not be regarded as the agent of the insured, but that he shall be regarded as the agent of the company. In view of the provisions of this statute, there were no limitations on the authority of the company's agent, Ashbrook, affecting the subject-matter of this controversy.
A similar statute was considered by the United States Supreme Court in Continental Life Insurance Co. v. Chamberlain, supra, where it is said: "This statute was in force at the time the application for the policy in suit was taken, and therefore governs the present case. * * * In his capacity as agent of the insurance company, he filled up the application something that he was not bound to do, but which service, if he chose to render it, was within the scope of his authority as agent. * * * His act in writing the answer, which is alleged to be untrue, was, under the circumstances, the act of the company."
In the case of Stipcich v. Insurance Co., supra, evidence was offered to the effect that the plaintiff had communicated to the insurance company's agent information as to an ailment developing after the application for the insurance had been made, but before delivery of the policy. This proffered testimony was excluded and a verdict directed for the defendant. A statute of Oregon (Or. L. § 6435), where the case arose, provided that "any person who shall solicit and procure an application for life insurance shall, in all matters relating to such application for insurance and the policy issued in consequence thereof, be regarded as the agent of the company issuing the policy and not the agent of the insured, and all provisions in the application and policy to the contrary are void and of no effect whatever."
The court held that provisions of this statute were controlling when inconsistent with the terms of the policy, and pointed out that the statute not only provided that the soliciting agent did not represent the insured, but that he did represent the company. It is there said: "Here the statute in terms defines the scope of his agency to the extent that he is stated to represent the company `in all matters relating to such application * * * and the policy issued in consequence' of it. We need not inquire what are the outer limits of that authority, but we think this language plainly makes him the representative of the company in connection with all those matters which, in the usual course of effecting insurance are incidental to the application and the delivery of the policy. * * * To say that under this statute the company's agent to solicit and receive the application and deliver the policy is not its agent also to receive disclosures which supplement the application and which vitally affect the validity of the insurance if not disclosed, is to disregard its language and ignore the obvious purpose of such legislation to require the company to provide some agency within the state with which the insured may safely deal in matters relating to his application. See Continental Life Insurance Co. v. Chamberlain, supra."
The proof in the instant case is to the effect that Ashbrook was the general agent of the company, and it seems inevitably to follow that his knowledge was the knowledge of the company.
Great reliance is placed by counsel for defendant on what is said in the opinion in New York Life Insurance Co. v. Fletcher, 117 U. S. 519, 6 S. Ct. 837, 843, 29 L. Ed. 934, but that case ultimately turns on the limitation of the authority of the agent. In the course of the opinion it is said: "The present case is very different from Insurance Co. v. Wilkinson, 13 Wall. 222 [20 L. Ed. 617], and from Insurance Co. v. Mahone, 21 Wall. 152 [22 L. Ed. 593]. In neither of these cases was any limitation upon the power of the agent brought to the notice of the assured. * * * Where such agents, not limited in their authority, undertake to prepare applications, and take down answers, they will be deemed as acting for the companies. In such cases it may well be held that the description of the risk, though nominally proceeding from the assured, should be regarded as the act of the company."
The case of Mutual Life Insurance Co. v. Hilton-Green, 241 U. S. 613, 36 S. Ct. 676, 60 L. Ed. 1202, is also urged as an authority by counsel for defendant. This case is readily distinguished from the instant case. As said in the opinion by Mr. Justice Stone, in Stipcich v. Insurance Co., supra: "Much reliance is placed by respondent on Mutual Life Insurance Co. v. Hilton-Green, 241 U. S. 613, 36 S. Ct. 676, 60 L. Ed. 1202, where a somewhat similar statute was involved. But there answers known by the insured and the agent to be false were written into the signed application by the agent. Such fraudulent representations known and participated in by the insured obviously could not have estopped the company, but there is nothing in the present case to suggest that the insured was a party to or intended any concealment from the company."
It must be borne in mind that there is no claim in this case that the agent of the defendant *976 acted in collusion with the plaintiff, and, in view of the verdict of the jury, we must assume that the plaintiff did not know that the application for reinstatement did not reflect the facts as she had related them to the agent. In arguing that the insurance company was not bound by the knowledge of its agent, counsel say: "Was the agent clothed with authority to perpetrate a fraud on the company?" The defense in this action is bottomed on a charge of misrepresentation, and no fraud on the part of the agent is charged, nor, indeed, does the evidence warrant a conclusion that he was guilty of fraud. It appears that it was his view that, if the insured was in good health at the time the policy lapsed, the policy could properly be reinstated, notwithstanding the subsequent bad health of the insured. In other words, he took the controlling date to be that on which the policy lapsed and not that on which the application for reinstatement was made.
The plaintiff, responding to this charge of misrepresentation, offered testimony to show that she fully disclosed the facts to the defendant's agent, and such disclosure, in our opinion, estops the insurance company to dispute its liability upon the policy under the circumstances disclosed in this case.
By the third assignment of error one of the instructions given by the court is challenged. The questions involved in defendant's contention with reference to this instruction have already been considered and decided adversely to defendant's contention in connection with our consideration of the assignment challenging the sufficiency of the evidence. It is therefore unnecessary to give them further consideration.
There was, in our opinion, no error either in the ruling of the court denying defendant's motion for an instructed verdict, or in the instruction complained of, and the judgment of the lower court must therefore be affirmed.
NOTES
[*] Rehearing denied May 17, 1930. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2497511/ | 66 So.3d 942 (2011)
GEDEON
v.
FLORIDA UNEMPLOYMENT APPEALS COM'N.
No. 1D11-1845.
District Court of Appeal of Florida, First District.
August 4, 2011.
DECISION WITHOUT PUBLISHED OPINION
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1642800/ | 395 N.W.2d 844 (1986)
Walter A. CROSS, Appellant,
v.
LIGHTOLIER INCORPORATED, Appellee.
No. 84-1273.
Supreme Court of Iowa.
November 12, 1986.
*846 Thomas E. Leahy of Grefe & Sidney, Des Moines, for appellant.
Keith E. Uhl and Ann Fitzgibbons of Scalise, Scism, Sandre & Uhl, Des Moines, for appellee.
Considered by REYNOLDSON, C.J., and HARRIS, LARSON, SCHULTZ and CARTER, JJ.
SCHULTZ, Justice.
The question here is whether, in an employment contract action, the Iowa District Court acquired personal jurisdiction over a nonresident corporation by service made pursuant to Iowa Code section 617.3 (1983). Ultimately, the issue is whether jurisdiction is acquired when the proof is inadequate to show that the contract is to be performed in part or whole in Iowa, but does show that the corporation was doing business in Iowa.
Plaintiff Walter A. Cross is a resident of Iowa and maintains that he was offered and accepted employment by defendant Lightolier Incorporated; the employment contract was terminated before he actually began work. Although plaintiff alleges defendant does business in Iowa, plaintiff mailed notice pursuant to section 617.3 to defendant's office in New Jersey and does not deny that defendant is a New York corporation.
Defendant by special appearance challenged the jurisdiction of the Iowa courts, generally claiming its status as a foreign corporation not licensed to do business in Iowa. Specifically, defendant claimed that it engaged in no activity subjecting it to service of process in this case, and that it did not have minimum contacts with the state of Iowa sufficient to meet the requirements of due process under the fourteenth amendment to the United States Constitution. The matter was set for hearing and the affidavits and briefs of both parties were presented to the court. The trial court sustained the special appearance, reasoning that "the parties did not enter into a contract to be performed in whole or in part in the state of Iowa."
We first examine the applicable procedural principles. When a defendant by a special appearance makes a direct attack on the jurisdiction of the court, the burden is on the plaintiff to sustain the requisite jurisdiction by showing an adequate service and compliance with any applicable statute. LaRose v. Curoe, 343 N.W.2d 153, 157 (Iowa 1983). Once a prima facie showing has been made, the burden of going forward with the evidence shifts to defendant to overcome or rebut the showing, if possible. Id. We accept as true the allegations in the petition and the contents of uncontroverted affidavits. E & M Machine Tool Corp. v. Continental Machine Products, Inc. 316 N.W.2d 900, 904 (Iowa 1982).
In our review the trial court's findings of fact have the effect of a jury verdict and are subject to challenge only *847 when not supported by substantial evidence in the record; we are not bound by the trial court's application of legal principles or its conclusions of law. Svendsen v. Questor Corp., 304 N.W.2d 428, 429 (Iowa 1981).
In review of jurisdictional challenges under section 617.3, we have consistently posed two questions in analyzing the validity of a special appearance: (1) whether there is a basis for the exercise of jurisdiction of the court under section 617.3; and (2) whether the exercise of jurisdiction offends due process. Smalley v. Dewberry, 379 N.W.2d 922, 924 (Iowa 1986); State ex rel. Miller v. Internal Energy Management Corp., 324 N.W.2d 707, 710 (Iowa 1982); Svendsen, 304 N.W.2d at 429-30; Barrett v. Bryant, 290 N.W.2d 917, 921-23 (Iowa 1980); Kagin's Numismatic Auctions, Inc. v. Criswell, 284 N.W.2d 224, 226-28 (Iowa 1979); Gravelie v. TBS Pacific, Inc., 256 N.W.2d 230, 232 (Iowa 1977); Douglas Machine & Engineering Co. v. Hyflow Blanking Press Corp., 229 N.W.2d 784, 788-89 (Iowa 1975); Creative Communication Consultants, Inc. v. Byers Transportation Co., 229 N.W.2d 266, 268 (Iowa 1975). To determine the basis for the exercise of jurisdiction in this case, we must first examine compliance with the procedural requirements of section 617.3, which must be strictly construed, and decide whether under the facts present this section authorized service. See Creative Communication Consultants, Inc., 229 N.W.2d at 268.
In the jurisdictional challenge the trial court was initially faced with defendant's assertions challenging the applicability of section 617.3. Defendant, however, did not claim that the manner of service was improper, but rather focused on the claim that as a foreign corporation it was not engaged in activity subjecting it to service of process in the instant lawsuit. Defendant additionally maintained that if the court attempted to exercise jurisdiction it would violate both the federal and state constitutions. We need only consider these constitutional claims if we determine there is a basis under section 617.3 for obtaining jurisdiction over the defendant.
The pertinent portion of section 617.3 is as follows:
... If a foreign corporation makes a contract with a resident of Iowa to be performed in whole or in part by either party in Iowa, ... such acts shall be deemed to be doing business in Iowa by such foreign corporation for the purpose of service of process or original notice on such foreign corporation under this section, and, if the corporation does not have a registered agent or agents in the state of Iowa, shall be deemed to constitute the appointment of the secretary of the state of Iowa to be its true and lawful attorney upon whom may be served all lawful process or original notice in actions or proceedings arising from or growing out of such contract....
The basis for jurisdiction in a contract action under this section is proof that the employment contract is "to be performed in whole or in part by either party in Iowa." Creative Communication Consultants, Inc., 229 N.W.2d at 268.
The facts before us are taken from the pleadings and uncontroverted affidavits of the parties. Plaintiff in his petition alleges that he was employed to serve as defendant's sales representative in the state of Missouri, and that he made the necessary arrangements to comply with defendant's directions by terminating his employment in Iowa and placing his residence for sale. He then maintains that he was terminated before he could take over his position with the defendant. The allegations in plaintiff's pleadings fall short of showing a contract to be performed in whole or in part within this state.
Turning next to the affidavits of the parties submitted in support of their respective positions, we find contradictory evidence on whether the contract was to be performed in whole or part in Iowa. Defendant's affidavit unequivocably states that "no contract was made with the plaintiff in the state of Iowa, nor was any contract to be performed either in whole or *848 in part in the state of Iowa." In resistance, plaintiff's affidavit claims that, as a part of the contract to be performed in the state of Iowa, he resigned his employment, sold his Iowa home, purchased an automobile, made preliminary contacts with individuals engaged in the business, advised his friends and relatives of his employment with the defendant, and placed phone calls from Iowa to defendant's regional office when he was advised that his employment was terminated. Thus, the affidavits are in conflict concerning where the contract was to be performed.
The trial court ruled that the plaintiff did not meet his burden of showing jurisdiction by service under section 617.3, describing plaintiff's actions concerning his employment and home as "unilateral actions of the plaintiff and not the acts of the defendant." Our review is not de novo; the findings of the trial court have the force and effect of a jury verdict. Creative Communication Consultants, 229 N.W.2d at 268. As the evidence is controverted, we are bound by the trial court's findings.
Additionally, the plaintiff's affidavit states that defendant was conducting business in the state of Iowa, had a full-time employee in Iowa, and sold approximately $500,000 of its products within the state of Iowa on an annual basis. Plaintiff claims that our courts have jurisdiction over a foreign corporation when the corporation is doing business within the state, regardless of where the contract is to be performed. We rejected that contention in Creative Communication Consultants, Inc., 229 N.W.2d at 267-68. We stated:
Plaintiff insists defendant is subject to the jurisdiction of the courts of this state because it was doing business in Iowa at the time the contract was made. This is the basis, too, for the trial court's order overruling the special appearance. While this may have been true prior to the enactment of present section 617.3, that statute created a new method for obtaining jurisdiction over foreign corporations where ordinary modes of service are not available.... Jurisdiction over defendant depends upon compliance with the terms of section 617.3. We have consistently held such statutes must be strictly construed.
...
To sustain jurisdiction plaintiff must show that the contract sued on was to be performed in whole or in part by either party in this state.
Id. (Citations omitted.) We believe this holding is still valid and do not abandon it. We note, however, that plaintiff here relies solely upon service under section 617.3 and did not attempt service under Iowa Rule of Civil Procedure 56.2.
Plaintiff urges that we follow the lead of the court of appeals in determining that the trial court should reconsider its findings and specifically address the issue of the defendant doing sufficient business within the state of Iowa to satisfy minimum contact requirements. Citing Davenport Machine & Foundry Co. v. Adolph Coors Co., 314 N.W.2d 432, 434-35 (Iowa 1982), the court of appeals indicated that the requirements of section 617.3 "can also be satisfied when a corporation engages in systematic and continuous activities in the forum state even though the cause of action is unrelated to the contacts used to establish personal jurisdiction." In Davenport Machine the foreign corporation entered a special appearance challenging the jurisdiction of Iowa courts on the basis that the corporation lacked the minimum contacts with Iowa essential for jurisdiction. Id. at 433. No challenge was made on the ground that the contract was not to be performed in whole or in part in Iowa. In Davenport Machine the discussion concerning minimum contacts in Iowa related to the constitutional limitations upon the state's ability to assert in personam jurisdiction over a foreign defendant as outlined in International Shoe Co. v. Washington, 326 U.S. 310, 316-17, 66 S.Ct. 154, 158-59, 90 L.Ed. 95, 102-03 (1945). The matter of whether the contract was to be performed in Iowa was not an issue in Davenport Machine as it is in this case. Consequently, the holding in Davenport Machine does *849 not compel the result urged by plaintiff and we decline to remand on that basis.
Before moving on to the next contention, we find it necessary to address the problem arising from the inclusion of an unsigned affidavit in the appendix. Following the district court's ruling, plaintiff filed a motion for reconsideration which was denied by the court. The unsigned affidavit, which was dated July 3, 1984 (the same date as the hearing on the motion for reconsideration), but was not file-stamped, speaks more specifically to events leading up to plaintiff's employment and to the conditions allegedly imposed by the defendant, which were to be performed by plaintiff in Iowa before his move to Missouri. While we do not believe that this latter affidavit does more than controvert defendant's affidavit stating that any contract was not to be performed in Iowa, we have not considered the unsigned affidavit in reaching our holding. The record does not include a showing that such affidavit was filed with the trial court, either in the transcript of proceedings or in any other manner. See Iowa R.App.P. 10(a). When no report of a piece of evidence has been included in the record, a party may cause such record to be submitted after trial but before the appellate appendix is compiled. Thus, the evidence would become part of the record on appeal. See Iowa R.App.P. 10(c). In this case, however, plaintiff neglected to follow this procedure, thus precluding this court from considering the unsigned and unfiled affidavit.
We agree with plaintiff's next argument that jurisdiction over a foreign corporation is appropriate under section 617.3 when the foreign corporation commits a tortious act in whole or in part in Iowa causing damage or injury to a resident of the jurisdiction. Plaintiff has not convinced us, however, that he alleged a tortious act.
In division IV of his petition, plaintiff repeats his allegations concerning an oral contract of employment without term and additionally alleges that defendant terminated the contract in bad faith, with malicious indifference and in retaliation for plaintiff's exercise of his constitutional rights. Plaintiff has not revealed the nature of these rights in the petition or in his resistance to defendant's special appearance.
Ordinarily, a breach of contract is not a tort, although a contract may establish some duty, violation of which may be tortious. M & W Farm Service Co. v. Callison, 285 N.W.2d 271, 276 (Iowa 1979). Plaintiff did not allege, nor does he now claim, the violation of an independent duty arising from the contract. Rather, it appears he relies solely on the breach of the contract as the violation of duty that supports his cause of action. We believe the gravamen of plaintiff's cause of action is a breach of contract rather than breach of a duty arising out of the contract. The additional allegations of malice, bad faith and retaliation serve as a vehicle to support a claim for punitive damages.
We also point out that, while plaintiff claims that division IV is a tort action, he cites no authority for this proposition. We recognize that jurisdictions are split on whether an action for wrongful discharge under a mandate of public policy is a contract or tort action. See Annot., 12 A.L.R. 4th 544, 552-58 (1982). We stated recently, "Employment at will ... cannot be used as a basis for an action for wrongful discharge or breach of employment contract." Haldeman v. Total Petroleum, Inc., 376 N.W.2d 98, 105 (Iowa 1985). We are not convinced that the trial court was wrong in considering this action to be in contract rather than in tort.
In summary, we believe that the trial court correctly sustained defendant's special appearance. The question involved is whether the service is proper under section 617.3. This is not the same question as whether taking jurisdiction is constitutional and therefore may be proper under other statutory options for service. See Universal Cooperatives, Inc. v. Tasco, Inc., 300 N.W.2d 139, 142-43 (Iowa 1981). We note here that, as in Tasco, a party may make *850 more than one attempt at service. We need not pass on this issue, however, nor decide whether the action need be commenced anew. We vacate the decision of the court of appeals and affirm the decision of the district court.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2192235/ | 445 B.R. 376 (2011)
In re DGI RESOLUTIONS, INC., Debtor.
DGI Liquidating Trust, by and through Walker, Truesdell, Roth & Associates, in its capacity as Liquidating Trustee, Plaintiff,
v.
William Gallagher Associates Insurance Brokers, Inc., Defendant.
Bankruptcy No. 09-14063 (PJW). Adversary No. 10-55355 (PJW).
United States Bankruptcy Court, D. Delaware.
February 17, 2011.
*377 Christopher P. Simon, David G. Holmes, Cross & Simon, LLC, Wilmington, DE, Nancy D. Adams, Kevin J. Walsh, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, MA, for Defendant William Gallagher Associates Insurance Brokers, Inc.
Pauline K. Morgan, Ryan M. Bartley, Michael S. Neiburg, Justin H. Rucki, Young Conaway Stargatt & Taylor, LLP, Wilmington, DE, for Plaintiff DGI Liquidating Trust, by and through Walker, Truesdell, Roth & Associates, in its capacity as Liquidating Trustee.
MEMORANDUM OPINION
PETER J. WALSH, Bankruptcy Judge.
This opinion is with respect to the motion to dismiss the Complaint. (Doc. # 4.) The motion to dismiss is filed by William Gallagher Associates Insurance Brokers, Inc. ("WGA"), pursuant to Federal Rule of Civil Procedure 12(b)(6). The three-count Complaint, filed by DGI Liquidating Trust, by and through its liquidating trustee Walker, Truesdell, Roth & Associates ("Trustee"), seeks to recover a $75,000 broker services fee from WGA. For the reasons discussed below, I will grant the motion to dismiss as to Counts I and II, but will deny as to Count III.
Background
DGI Resolution, Inc., f/k/a deCode genetics, Inc., ("Debtor") filed a petition for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., on November 16, 2009. Debtor immediately moved for authority to continue its current insurance and brokerage agreements and to "revise, extend, renew, supplement or change" insurance policies and agreements, as needed (the "Insurance Motion"). (Case No. 09-14063, Doc. # 7.)
The Insurance Motion states that "in the ordinary course of business, the Debtor maintains a number of insurance policies that provide coverage for, among other things, . . . directors' and officers' liability." (Id., ¶ 16.) The Insurance Motion further states that "in the ordinary course of business, the Debtor engages William Gallagher Associates Insurance Brokers, Inc. (`WGA') and Carpenter Moore Insurance Services Ltd. (`Carpenter Moore,' and together with WGA, the `Brokers') to act as its insurance brokers in placing its annual insurance program." (Id., ¶ 26.) The Motion sought authority, inter alia, to
(b) continue insurance coverage entered prepetition and revise, extend, renew, supplement or change such coverage as needed,
* * *
*378 and (d) maintain prepetition insurance brokerage agreements and revise, extend, renew, supplement or change such insurance brokerage agreements as needed, or enter into a new post petition brokerage agreement or agreements, as needed.
(Id., ¶ 27.)
The Court granted that motion, first on an interim basis and then in a final order (the "Final Insurance Order"), entered on December 9, 2009. (Case No. 09-14063, Doc. # 84.)
On January 21, 2010, Debtor sold substantially all of its assets to Saga Investment, LLC ("Saga"). Following this asset sale, Debtor proceeded to liquidate its remaining assets under chapter 11.
During these wind down proceedings, Debtor decided to extend its directors' and officers' liability insurance policies (the "D & O Policies") by entering into a tail policy which would provide coverage for an extended claims reporting period. Debtor engaged WGA to procure that tail policy. On May 13, 2010, Debtor entered into a Broker Services Agreement with WGA (the "Agreement"), whereby WGA agreed to provide the following three services in exchange for a $75,000 brokerage fee (the "Broker Services Fee"):
WGA will develop, coordinate, recommend, negotiate, and secure Directors & Officers Liability (extended reporting period (aka "tail")) coverage with an appropriate and acceptable insurance carrier.
WGA will assist deCode in the gathering and preparation of all of the underwriting information that is necessary for the completion of the insurance specifications.
WGA will represent deCode's interest in claim settlement negotiations and follow up on open claims to assure proper handling.
(Doc. # 1, ex. A.)
The Agreement provided that WGA would provide these services "for a 72 month period from April 5, 2010 or until termination, whichever occurs first," and that "[e]ither party shall have the right to terminate this agreement upon 30 days prior written notice to the other." (Id.) Upon an early termination, WGA agreed to "return the pro-rata share of the fee effective from the date of termination to the original closing date of the agreement." (Id.)
WGA brokered a tail policy (the "Tail Policy") with XL Specialty Insurance Company ("XL"), whereby XL would provide $2 million in coverage for a reporting period of 6 years. The premium for the Tail Policy was $140,000.
At the May 14, 2010 confirmation hearing concerning Debtor's first amended plan of liquidation (the "Plan"), Debtor informed the Court that the official committee of unsecured creditors ("Committee") objected to the Tail Policy purchase. Debtor's counsel reported that this was the lone issue remaining between Debtor and Committee and that he would file the confirmation order under certification of counsel once the dispute had been resolved. On May 26, 2010, Debtor's counsel filed a certification stating that "[t]he Debtor is now submitting the Final Proposed Order, a copy of which is attached hereto as Exhibit A. There have been no further revisions to the Final Proposed Order." (Case No. 09-14063, Doc. # 322.) The certification did not refer to Committee's Tail Policy objection, but the only logical conclusion is that this issue had been resolved as between Debtor and Committee.
The Court confirmed Debtor's Plan, which provided for the transfer of all remaining *379 assets to the DGI Liquidating Trust (the "Trust") as of the effective date of June 10, 2010.
Despite the apparent agreement between Debtor and Committee, on June 4, 2010, Committee sent a letter to Debtor's counsel advising (i) that it opposed the Tail Policy and (ii) that it believed Debtor lacked authority to purchase the Tail Policy. (Doc. # 9, ex. 1.) Debtor proceeded to purchase the Tail Policy by transferring $215,000 to WGA, which sum included $75,000 for WGA's Broker Services Fee and $140,000 for the Tail Policy premium payment to XL.
In August 2010, Trustee notified the relevant parties that he intended to recover the XL premium payment and the Broker Services Fee on behalf of the Trust. Trustee mailed WGA its written intent to terminate the Agreement and requested WGA to return the pro rata portion of the Broker Services Fee. (Doc. #1, ex. B.)
Saga subsequently purchased the Tail Policy from the Trust for $60,000, with Trustee in return agreeing to forego the Trust's claim to recover the premium payment. Trustee, however, reserved the right to continue to seek recovery of the Broker Services Fee. Trustee wrote another letter to WGA demanding the return of the pro rata portion of the Broker Services Fee, which Trustee asserted was $69,589.04 as calculated on a cost-per-day basis. (Doc. # 1, ex. C.)
WGA refused to return any of the fee, and Trustee commenced this adversary proceeding. Trustee seeks to recover the Broker Services Fee under three causes of action. Counts I and II of the Complaint seek to avoid the entire Broker Services Fee as an unauthorized post-petition transfer under § 549. Count III, alternatively, seeks to recover the pro-rata share of the Broker Services Fee.
WGA has moved to dismiss the Complaint in this action on four grounds. First, it contends that relief under § 549 is unavailable because the Final Insurance Order authorized the Agreement and the transfer of the Broker Services Fee. Second, WGA argues that, as an agent or representative of Debtor, it is shielded from liability as a "Protected Party" under the exculpation provision in Debtor's Plan. Third, WGA argues that Trustee cannot terminate the Agreement without the express consent of its intended beneficiaries. And fourth, WGA argues that, even if Trustee can terminate the Agreement, Trustee has overstated the pro-rata fee refund amount, as WGA has substantially completed its obligations under the Agreement.
Discussion
Standard of Review
In considering this motion to dismiss, I must accept all factual allegations as true, construe the Complaint in the light most favorable to Trustee, and determine whether, under any reasonable reading of the Complaint, Trustee may be entitled to relief. Rea v. Federated Investors, 627 F.3d 937, 940 (3d Cir.2010).
Avoiding Post-Petition Transaction
Counts I and II of the Complaint seek to recover the Broker Services Fee from WGA under § 549. Section 549 provides, in relevant part, that
(a) [T]he trustee may avoid a transfer of property of the estate
(1) that occurs after commencement of the case; and
(2) (A) that is authorized only under section 303(f) or 542(c) of this title; or
(B) that is not authorized under this title or by the court.
*380 The Broker Services Fee satisfies § 549(a)(1) as a transfer that occurred after commencement of the case. The question presented here is whether it satisfies subsection (a)(2)(B) as an unauthorized transfer, and this question turns on the interpretation of the Final Insurance Order. If the Final Insurance Order authorized Debtor to enter the Agreement and to pay the Broker Services Fee, then Trustee may not recover the $75,000 under § 549. See Vision Metals, Inc. v. SMS Demag, Inc. (In re Vision Metals, Inc., et al.), 325 B.R. 138, 143 (transfers made pursuant to court authorization are not voidable under § 549).
WGA contends that "the payment of the service fee to WGA was authorized by the Court as an ordinary course business transaction pursuant to the Insurance Motion and the [Final] Insurance Order." (Doc. # 5, p. 13.)
Trustee's counterargument focuses on the Final Insurance Order's "in the ordinary course" language. Trustee asserts that the Agreement was not made in the ordinary course "given the material and substantive differences between (i) the D & O Insurance that the Debtor maintained at the time the Insurance Motion was filed and the Final Insurance Order was entered and (ii) the Tail Policy. The D & O Insurance subject to the Final Insurance Order provided current coverage for current directors and officers while the purpose and scope of the Tail Policy is to provide insurance coverage to former directors and officers for a period of six years." (Doc. # 9, p. 13.)
I am persuaded that the Agreement and the payment of the Broker Services Fee were authorized by the Final Insurance Order. The Final Insurance Order authorized Debtor to "revise, extend, renew, supplement or change" its current insurance policies and broker agreements that are "in the ordinary course of business as set forth in the Motion." (Case No. 09-14063, Doc. # 85.) The Motion describes the Debtor's ordinary course of business as purchasing D & O policies and as including entering broker agreements with WGA to procure its policies. Here, the Tail Policy provided coverage for an extended claims reporting period for Debtor's D & O policies. The Tail Policy, thereby, revised, extended, supplemented and/or changed Debtor's D & O policies, bringing the Tail Policy within the scope of the Final Insurance Order. Because Debtor had authority to purchase the Tail Policy, it also had authority to enter the Agreement with WGA to procure the Tail Policy and to pay WGA for those services. Consequently, Trustee cannot recover the Broker Services Fee under § 549.
Furthermore, because the Final Insurance Order authorized Debtor to engage WGA as its insurance broker, WGA was a "Protected Party," as defined in the exculpation provision of the Plan. The Plan defines "Protected Party" as including Debtor's officers and directors and their "advisors, attorneys, representatives, professionals and other agents." (Case No. 09-14063, Doc. # 322, Ex. A, p. 13.) As a Protected Party, the Plan provides that WGA shall not "have or incur any liability for . . . Causes of Action[1] . . . that are based in whole or in part upon any act, omission, transaction, agreement, event or occurrence taking place after the Petition *381 Date but on or prior to the Effective Date... in connection with, arising from or relating to the Chapter 11 Case." (Id., p. 50.)
The Agreement and the payment of the Broker Services Fee were an "agreement" and a "transaction" that occurred after the petition date but on or before the effective date, and they were made "in connection with, arising from or relating to the Chapter 11 Case." Therefore, as a Protected Party, WGA is shielded from Trustee's § 549 claim.
Termination of the Agreement
Even though Trustee cannot seek to recover the Broker Services Fee under § 549, he may be able to recover the pro-rata portion of that fee under Count III of the Complaint as a breach of the Agreement.[2]
WGA advances two arguments in its motion to dismiss the breach of contract action in Count III of the Complaint. The first argument is that Trustee cannot terminate the Agreement without the consent of the Tail Policy's intended beneficiaries. WGA contends that "[u]nder general principles of third-party beneficiary law, the parties to a contract cannot modify or rescind the contract after the beneficiary's rights vest. This is because a rescission or modification after a change in position by a third-party beneficiary deprives that third-party of its expectations under the contract." (Doc. #5, p. 17) (internal citations and quotation marks omitted.) Here, the Agreement specifically allows for early termination; therefore, the directors and officers could not have had an expectation that the Agreement would endure its full 72 months. Accordingly, this argument must fail because early termination could not deprive the directors and officers of their expectations.
WGA's second argument is that Trustee has improperly calculated the pro rata share of the Broker Services Fee that must be returned. Trustee contends that the pro-rata share should be calculated on a cost-per-day basis. WGA argues that it should be calculated on a cost-per-services rate, as the Agreement included three different services to be provided by WGA. This question requires factual determinations and is, therefore, not suitable for disposition in a motion to dismiss. Accordingly, I will deny WGA's motion to dismiss as to Count III.
Conclusion
For the foregoing reasons, I will grant WGA's motion to dismiss as to Counts I and II, but I will deny the motion as to Count III.
ORDER
For the reasons set forth in the Court's memorandum opinion of this date, the motion of Defendant William Gallagher Associates Insurance Brokers, Inc. to dismiss the Complaint (Doc. #4) is granted as to Counts I and II and denied as to Count III.
NOTES
[1] The Plan defines "Causes of Action" as "all claims as defined under section 101(5) of the Bankruptcy Code, causes of action, third-party claims, counterclaims and crossclaims (including, but not limited to, any and all alter ego or derivative claims and any Causes of Action described in the Disclosure Statement) of the Debtor and/or its estate that are pending on the Effective Date or may be instituted after the Effective Date against any person."
[2] WGA's status as a Protected Party does not shield it from the breach of contract action. Even if this cause of action were "in connection with, arising from or relating to the Chapter 11 Case," it would not fall within the scope of the Plan's exculpation provisions because it occurred after the Plan's effective date. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2453031/ | 257 P.3d 1021 (2011)
244 Or. App. 136
HENKES
v.
EMPLOYMENT DEPT.
A147552
Court of Appeals of Oregon.
June 29, 2011.
Affirmed Without Opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546590/ | 988 A.2d 478 (2010)
Dewand SUTTON, Appellant,
v.
UNITED STATES, Appellee.
No. 06-CF-852.
District of Columbia Court of Appeals.
Argued December 1, 2009.
Decided February 4, 2010.
*480 Judith A. Lovelace, appointed by the court, for appellant.
Sarah Chasson, Assistant United States Attorney, with whom Roy W. McLeese III, Chrisellen Kolb, and Matthew Cohen, Assistant United States Attorneys, were on the brief, for appellee.
Before REID and OBERLY, Associate Judges, and FERREN, Senior Judge.
*481 FERREN, Senior Judge:
Dewand Sutton appeals his convictions for carjacking while armed,[1] receiving stolen property (RSP),[2] and unauthorized use of a vehicle (UUV).[3] He argues that the evidence of armed carjacking was insufficient for conviction; that also as to armed carjacking, the jury instruction on aiding and abetting was reversible error; and that the RSP and UUV convictions merge. We reject the sufficiency claim, find no plain error in the aiding and abetting instruction, and conclude that the RSP and UUV convictions do not merge. Accordingly, we affirm.
I. Proceedings and Evidence
At Sutton's jury trial, the government put on the following evidence: On November 16, 2003, Lamont Wright, Rodney Smith, and appellant Sutton got out of a parked car to accost Dwayne Cox as he walked away from his parked Mitsubishi Spyder. By the time the trio confronted Cox, he had walked about three car lengths from the Spyder toward the home of an acquaintance, where he was going to watch a sporting event on television. Cox was told to lie on the ground, where Sutton held him at gunpoint as the assailants robbed him of his car keys, a telephone, and approximately $18 in cash. The men told Cox not to move or he would be shot. At that point, in the words of Sutton's brief,
two of the men [Sutton and Smith] got back into their own car, started it up and began to drive off; Mr. Cox got up from the ground and jumped over the fence behind the friend's house; then the [Sutton and Smith] car stopped, and the two men in the car said they were going to start shooting at him; then, at the same time, [Cox] heard his own car start up and pull off [driven by Wright].
According to the government's evidence, two days later, on November 18, at the instance of Sutton, he and Smith robbed Fred Cooper and Kirk Little of cash and other pocket items at gunpoint. Then Smith drove away in Cooper's Chevrolet Caprice, and Sutton drove off in Little's Ford Taurus. On November 20, police apprehended Smith in Cox's Spyder and found a loaded, cocked pistol under a car seat. Later that day, in the same vicinity, the police saw Wright driving the Taurus. That evening, the police saw the Taurus again, this time driven by Sutton, who led them on a high-speed chase that ended in a crash from which Sutton fled, discarding the telephone stolen four days earlier from Cox. Sutton was apprehended, and his fingerprints were found on the door of the Taurus, as well as on a compact disc from the Spyder.
The jury found Sutton guilty on one count each of armed carjacking, armed robbery, PFCV, RSP, UUV, destroying property, and possession with intent to distribute cocaine. The carjacking conviction was attributable to the incident involving Cox and his Spyder, whereas the RSP and UUV convictions arose out of the theft two days later of the Taurus. For the convictions at issue here, Sutton was sentenced to fifteen years in prison for armed carjacking and, consecutively to the carjacking, concurrent sentences of twenty months of incarceration for RSP and thirty-two *482 months for UUV. This appeal followed.
II. Sufficiency of the Evidence
A. Alleged Waiver of the Sufficiency Challenge
We consider, first, sufficiency of the evidence for armed carjacking. Before addressing the merits, however, there is a threshold issue raised by the government. Although the defense moved for a judgment of acquittal (which was denied) at the end of the government's case, that motion was not renewed after the defense had presented three witnesses.[4] Therefore, contends the government, Sutton has waived any challenge to evidentiary sufficiency. We cannot agree.
"[A]lthough the failure to renew a motion for acquittal at the close of the entire case would waive review of that motion, it `[w]ould not foreclose review of the sufficiency of the evidence. It simply requires that the scope of review be expanded to include all of the evidence.'" Wheeler v. United States, 494 A.2d 170, 171-72 (D.C. 1985) (emphasis in original) (quoting Washington v. United States, 475 A.2d 1127, 1129 (D.C.1984)).[5] Accordingly, although Sutton did not renew his motion for judgment of acquittal at the close of all the evidence, his challenge is not waived, and we review all the evidence for its sufficiency on the charge of armed carjacking.
B. Elements of Carjacking While Armed
When an appellant contends that the evidence was insufficient for conviction, we inquire only into whether the government presented "at least some probative evidence" as to each element of the crime, viewing the evidence in the light most favorable to the government and recognizing that it is the fact-finder's province to weigh evidence, assess credibility, and draw reasonable inferences. Downing v. United States, 929 A.2d 848, 857 (D.C. 2007) (internal citations omitted). This court, however, reviews de novo the elements of the crime which the prosecution must prove and against which sufficiency of the evidence is assessed. See, e.g., Wilson-Bey v. United States, 903 A.2d 818, 827 (D.C.2006) (en banc).
Now to the merits. "Carjacking" is committed when a person [1] "knowingly or recklessly" [2] uses "force or violence" to [3] "take from another person immediate actual possession of [4] a person's motor vehicle," or when someone "attempts to do so." D.C.Code § 22-2803(a)(1).[6] If convicted of carjacking "while armed," moreover, the defendant shall be imprisoned for a "mandatory-minimum term of *483 not less than 15 years" (with a maximum of forty years). Id. §§ 22-2803(b)(1) & (2); see Allen v. United States, 697 A.2d 1, 2 (D.C.1997) (specifying elements of carjacking). Sutton only challenges sufficiency of the evidence to support the second and third elements of carjacking, and he does not question sufficiency of the evidence that he was armed.
In describing the "Background and Need" for the carjacking statute at the time of enactment, the Council of the District of Columbia Committee on the Judiciary emphasized the "especially traumatic experience" of the victim, whose "zone of privacy" is invaded "in a way that perhaps is similar only to burglary" and whose "mobility" and "means of earning a living" are taken from him.[7] Thus, the Council likened a carjacking to intrusion into the home, perceived as more seriousmore invasive of one's private, protected environmentthan, say, a robbery on the street. In fact, by imposing a fifteen-year mandatory minimum sentence for an armed carjacking, the Council put the offense at issue here at a noticeably more serious level of concern than that reflected in the statutes imposing five-year mandatory minimums for first-degree burglary and first-time armed robbery.[8] With such a severe difference at stake in the respective minimum sentences for armed robbery and armed carjacking, the concepts of "force or violence" and "immediate actual possession," as applied in a carjacking prosecution, must be addressed with considerable care.
C. "Force or Violence"
Sutton contends that although the keys to Cox's car were taken by force and violence, the car itself was not. Although he does not challenge the court's jury instruction,[9] Sutton argues that the armed robbery of Cox's person (including the taking of his keys) and the theft of the car were discrete events, such that the use of force to accomplish the first cannot, as a matter of law, figure in analysis of the second. In support, he observes that Cox began to flee after ceding his keys but before his car was driven away.
We cannot agree with Sutton's argument on the facts. Although Cox managed to run from his captors, he was still within their purview, under immediate threat of death,[10] at the time the car was taken. This is demonstrable from the sequence of events presented in Sutton's own brief on appeal, as quoted above in Part I. After the keys were taken from Cox and as Sutton and Smith began to drive off in their own car, "Cox got up from the ground and jumped over the fence behind the friend's house," at which point Sutton and Smith stopped their car and "said they were going to start shooting at him"a statement from Sutton's own brief implying that Cox's assailants were in a position to do so. "[A]t the same time," according to Sutton's brief, and supported by the trial transcript, Cox "heard his own car start up and pull off." (Emphasis added.) This recitation effectively concedes that the violence against Cox continued until the moment his car was stolen.
*484 D. "Immediate Actual Possession"
Given the requisite force or violence, therefore, Sutton's "sufficiency" contention turns on the third statutory element: whether Dwayne Cox's car was in his "immediate actual possession" at the time it was taken. The jury was instructed verbatim without objectionfrom standard instruction 4.51:[11] "A motor vehicle is in the immediate actual possession of the complainant if it is located close enough that one could reasonably expect the complainant to exercise physical control over it." We deemed the jury "properly instructed" with that instruction in Winstead v. United States, 809 A.2d 607, 610 n. 4 (D.C.2002), where we affirmed a conviction for carjacking by a defendant who had assaulted the victim, initially, in the security-guard booth where she was working, and then appropriated her car "only a few feet away" from the booth. Id. at 611. That was "near enough," we said, for the car "to be in [the victim's] `immediate actual possession' then and there." Id. Winstead, therefore, confirms carjacking when a defendant assaults someone several feet from her car and then straightaway takes the vehicle.[12]
In the present case, however, among the factual distinctions from Winstead and the other carjacking cases we have decided,[13] Cox was three car lengths, or forty-five to fifty feet, from his carand continuing to walk awaywhen accosted by Sutton and his cohorts. The question thus becomes whether, at that distance under the circumstances, the government meets the "close enough" or "near enough" test required for a finding of "immediate actual possession."
Application to Carjacking of "Immediate Actual Possession" under the Robbery Statute
This case, more than any other we have decided, see supra note 13, forces us to consider how far away a car must be from the victim before we can say, as a matter of law, that it is far enough to deprive the victim of "immediate actual possession," and thus too far away to turn a car thief into a carjacker. Our analysis is informed by the fact that, as explained in Winstead, the Council of the District of Columbia "borrowed the term `immediate actual possession' from the robbery statute." 809 A.2d at 610. Thus, armed carjacking is, conceptually, a subset of armed *485 robbery: the armed theft of a motor vehicle from the "immediate actual possession" of another person.[14]
In this court's decision in Rouse v. United States, 402 A.2d 1218 (D.C.1979), we defined "immediate actual possession" under the robbery statute by adopting the following language from the U.S. Court of Appeals for the District of Columbia Circuit:
[A] thing is within one's "immediate actual possession" so long as it is within such range that he could, if not deterred by violence or fear, retain actual physical control over it. That construction is harmonious with holdings elsewhere that the invasion of personal possession essential to robbery sufficiently appears where the property is so far under the personal protection of the victim that violence or intimidation is necessary to sever his control. (Emphasis added.) [United States v. Dixon, 152 U.S.App. D.C. 200, 204, 469 F.2d 940, 944 (1972)].
Rouse, 402 A.2d at 1220.
A few years later, however, we said more simply, without reference to deterrence "by violence or fear": "Immediate actual possession refers to the area within which the victim can reasonably be expected to exercise some physical control over the property." Head v. United States, 451 A.2d 615, 624 (D.C.1982). Head's formulation is derived from a D.C. Circuit case decided before Dixon[15] and is reflected in the standard jury instruction, No. 4.51, see supra note 9, quoted above and approved in Winstead.
As the Rouse and Head formulations make clear, "immediate actual possession" has an elastic quality, reaching somewhere beyond "actual possession" at common law[16] into the realm of "constructive possession."[17] Accordingly, we confront this question: how far beyond literal actual possession is this elastic definition intended to go before particular facts trigger its snapping point?
When this court decided Winstead, approving standard jury instruction 4.51 reflecting Head, we also adopted language from Gilliam, see supra note 13, that incorporated *486 the federal circuit court's earlier ruling in Dixon and our corresponding formulation in Rouse. More specifically, to evaluate evidentiary sufficiency, we held, "in agreement with the D.C. Circuit, that under the [District of Columbia] carjacking statute, immediate actual possession `is retained if the car is within such range that the victim could, if not deterred by violence or fear, retain actual physical control over it.'" Winstead, 809 A.2d at 610 (quoting Gilliam, 167 F.3d at 639-40) (emphasis added). In sum, in Winstead we approved leaving the "violence or fear" language out of the standard jury instruction, No. 4.51, while incorporating those words into the rule announced to govern sufficiency analysis.
Comparison of the Jury Instruction with the Sufficiency Test
Although there appears to be a possible disconnect between the jury instruction and the sufficiency test, Sutton does not question the instruction. And, although one would expect the jury instruction to track the sufficiency formula more completely than it does here, we cannot find a difference between instruction 4.51 and Winstead's sufficiency language that is significant enough to warrant a finding of material prejudice to Sutton.[18] For purposes of this appeal, the two formulations are close enough. Under both Head (instruction 4.51) and Dixon/Rouse (evidentiary sufficiency), the scope or range of property within one's immediate actual possession is effectively the same, namely, an area delimited by how far away one can be from the property and yet reasonably[19] be expected to exercise physical control over it.
It would appear, in any event, that the words added to Winstead's sufficiency formula "if not deterred by violence or fear"were not intended to limit or circumscribe the area in which the victim could reasonably be expected to exercise that physical control. Rather, deterrence of the victim by violence or fearthe reason why the victim stays in placewould seem to be no more than the explanation for why a victim cannot reasonably be expected to retain or reestablish literal, actual possession, and thus the reason why the elastic definition of "immediate actual possession" is appropriate.
When, however, a juror looks carefully at instruction 4.51 limiting "immediate actual possession" to a vehicle located "close enough that one could reasonably expect the complainant to exercise physical control over it," that juror may ask, "Close enough to control for what purpose?" Presumably the instruction would mean closer than, say, merely close enough to *487 retrieve the car without delay after a party in the neighborhood. But, what else? Does the case law add clarification to the statutory meaning?
Relevance of Federal Case Law
The federal courts were faced with interpreting language in the federal carjacking statute (take "from the person or presence of another")[20] that is the functional equivalent of the third element of the District's carjacking statute ("take from another person immediate actual possession"). In United States v. Perez-Garcia, 56 F.3d 1, 3 (1st Cir.1995), the court observed that the federal "carjacking statute does not define `from the person or presence,' and neither do the robbery statutes upon which § 2119 was based." However, in United States v. Lake, 150 F.3d 269, 272 (3d Cir.1998), the court explained that "[t]he carjacking statute's requirement that the vehicle be taken `from the person or presence of [another]' `tracks the language used in other federal robbery statutes'" (citations omitted). Under these statutes, "property is in the presence of a person if it is so within his reach, observation or control, that he could if not overcome by violence or prevented by fear, retain his possession of it." United States v. Burns, 701 F.2d 840, 843 (9th Cir.1983), cert. denied, 462 U.S. 1137, 103 S. Ct. 3123, 77 L. Ed. 2d 1375 (1983) (internal quotation marks omitted); accord United States v. W.T.T., 800 F.2d 780, 782 (8th Cir.1986) (quoting Burns); LAFAVE & SCOTT, SUBSTANTIVE CRIMINAL LAW § 8.11, at 443 (1986) ("property taken in the robbery must be close enough to the victim and sufficiently under his control that, had the latter not been subjected to violence or intimidation by the robber he could have prevented the taking"). The Third Circuit, in Lake, accordingly imported into the federal carjacking statute the test for "presence," as formulated in Burns and the cited treatise, 150 F.3d at 272, and within a year the Eleventh Circuit had followed suit. See United States v. Kimble, 178 F.3d 1163, 1167, 1167-68 (11th Cir.1999) (car must be "close enough for the victims to have prevented its taking had fear or violence not caused them to hesitate").[21]
The Lake/Kimble formulation, therefore, does not merely require proximity to the car sufficient for the victim to retain actual physical control over it in the abstract. It also creates a visual imageto be applied to the evidencethat the victim must be close enough that, if nothing violent had stood in the way, the victim would have been able to reach the car in time for a confrontation when the would-be carjacker attempted to take possession.[22]
*488 This Lake/Kimble formulation has also been adopted by other federal circuits.[23] And, important for our purposes, it is an elaboration wholly consistent with, and supportive of, this court's proximity requirement in Winstead. We conclude, accordingly, that the Lake/Kimble formulation enhances our understanding of what "close enough" should mean under our local jury instruction and what is within the "range" for sufficiency purposes under the District's carjacking statute.[24]
E. The Jury's Finding of "Immediate Actual Possession"
We turn now to the facts. We have shown that instruction 4.51, without reference to the "force or violence" language in Winstead, cannot be found prejudicial to Sutton. Furthermore, we perceive no basis for questioning sufficiency of the evidence of "immediate actual possession" because of a failure to include the federal Lake/Kimble refinement in that instruction. In contemplating whether the victim was "close enough to exercise physical control" over his car, the juror who asks, "Close enough to control for what purpose?", is more likely than not to answer intuitively and logically: "close enough to stop the thief." Therefore, absent objection by Sutton, we are not troubled by omission of Lake/Kimble language from Instruction 4.51. Accordingly, we undertake our factual analysis by applying the instructional language used by the jury.
Too loosely construed, of course, instruction 4.51 could be meaningless, for literally anyone with a car key in the pocket could be said to be "close enough" to "exercise physical control" over a vehicle parked blocks away, even at one's home. But the instruction,[25] in requiring such proximity that one could "reasonably expect the complainant" to exercise physical control over the vehicle, surely means close enough to exercise control at the time of the alleged taking of the car. In context, no other meaning would make sense. Thus, a victim's physical control over the key does not in itself suggest that the victim was close enough to the car, wherever located, to trigger the carjacking statute. It follows that, even if one could *489 say that the assailants, including Sutton, took "a person's motor vehicle" when they stole Cox's car keys (thereby satisfying the fourth element of carjacking), this would not mean that they took the vehicle from Cox's "immediate actual possession." The focus, then, must be on the victim's Cox'sproximity to the vehicle itself: what was "close enough"?
As noted earlier, we initiate that inquiry in a context new to this court's jurisprudence: uncontradicted evidence demonstrating that Cox, the victim here, had left his parked car for an evening with friendsindeed, he was three car lengths (or roughly forty-five to fifty feet) away from it and intending to walk further when Sutton and the others accosted him. Sutton accordingly argues that, because Cox had parked the vehicle, intending to leave it unused as he walked to a social gathering some distance away, that scenario indicated an intent to relinquish possession for a while and thus limited the scenethe scope of the assaultto the vicinity of the holdup and robbery of his person after he had left the car. There is nothing in the statute, however, that would serve to constrict the "immediate actual possession" requirement by reference to the victim's intent upon leaving the vehicle. Clearly, the legal test governing a sufficiency inquiry, set forth both in instruction 4.51 and in Winstead is an objective one: immediate actual possession is retained if the car is "close enough" or "within such range that the victim could"not would have retained "actual physical control" over the car. 809 A.2d at 610. (Emphasis added.)
We cannot say as a matter of law that the three car lengthsthe forty-five to fifty feetat issue here, in contrast with the very short distances at issue in Winstead and our other decisions, see supra note 13, take this case outside the carjacking statute. On the facts of record, and in light of relevant federal case law, see supra note 23, we must conclude that the jury reasonably could have found that at the time Sutton's cohort, Wright, drove away in Cox's Spyder, the Spyder was in Cox's "immediate actual possession" because the car was "close enough that one could reasonably expect [Cox] to exercise physical control over it." Instruction 4.51, supra note 9. We accordingly can say that, at the time the Spyder was taken, it was "within such range that [Cox] could, if not deterred by violence or fear, [have] retain[ed] actual physical control over it." Winstead, 809 A.2d at 610. And, finally, lest there remain any question about what it means to have exercised or retained actual physical control, we are satisfied that, but for the violence against Cox indeed, a threat of death pending throughout the time period until Wright drove Cox's Spyder awayCox remained close enough to the vehicle to have "prevented its taking." Kimble, 178 F.3d at 1168.[26]
To conclude: the evidence is sufficient for conviction of carjacking; the record supports the jury's finding that the victim, Cox, was in "immediate actual possession" of his vehicle at the time Sutton and the others took it away from him.
III. The Aiding and Abetting Instruction
Sutton contends that, assuming sufficiency of the evidence, he is entitled *490 nonetheless to reversal and remand for a new trial because the aiding and abetting instruction given for carjacking did not satisfy this court's decision in Wilson-Bey, 903 A.2d 818. There, we held that the trial court erred when instructing the jury that it could convict the defendant of first-degree murder on an aiding and abetting theory without requiring a finding that he had formed the specific intent to murder required to convict a principal; the instruction had permitted conviction merely if the acts of the principal were "the natural and probable consequences of the crime or criminal venture in which [the defendant] intentionally participated." Id. at 826 (italics omitted). In this case, the trial court instructed the jury that it could find Sutton guilty of carjacking, as an aider and abettor, under that same formulation. In short, this instruction authorized conviction based on a negligence standard when conviction of a principal required knowing, or at least reckless, behavior. D.C. Code § 22-2803(a)(1) (2001); Pixley v. United States, 692 A.2d 438, 439-40 (D.C.1997).
Citing Kitt v. United States, 904 A.2d 348, 356 (D.C.2006), the government contends that the "reasoning and holding" of Wilson-Bey is limited to "specific intent crimes." Next, citing Pixley, the government argues that carjacking is a "general intent" crime. Id. Finally, quoting Lampkins v. United States, 973 A.2d 171, 174 (D.C.2009) (per curiam), the government maintains that "this court has not extended its holdings in Wilson-Bey and Kitt to include general intent crimes." Accordingly, says the government, the trial court did not err in giving the "natural and probable consequences" instruction for aiding and abetting.
After our decision in Lampkins, however, this court issued its decision in Wheeler v. United States, 977 A.2d 973 (D.C.2009), in which we concluded that "Wilson-Bey is not limited to specific intent crimes." Id. at 986 n. 34. We relied substantially on Coleman v. United States, 948 A.2d 534 (D.C.2008) (vacating conviction for second-degree murdernot a specific intent crimeunder "natural and probable consequences" formulation for aiding and abetting), which preceded Lampkins in time and thus took precedence under the rule of M.A.P. v. Ryan, cited in Thomas, supra note 5. After Wheeler, the Lampkins division, in an order denying a motion filed by amicus Public Defender Service to withdraw publicationand thus the precedential authorityof Lampkins, concluded: "We agree with and accept the position in Wheeler that the Wilson-Bey ruling is not automatically inapplicable to every general intent crime." Lampkins, 973 A.2d at 171 (order denying motion to withdraw publication). In the meantime, the government had filed a petition for rehearing and rehearing en banc in Wheeler. That petition was denied by the en banc court but granted by the division that heard the case,[27] in a way that reinforces the Wheeler decision.
We need not explore the Wilson-Bey instructional issue much further, however, for we note that Sutton did not object to the aiding and abetting instruction, and thus on plain error review he cannot prevail. We acknowledge that, if applicable to carjacking, our decision in Wilson-Bey, the law at the time of this appeal, would govern and the error would be "plain," even though Wilson-Bey was decided after Sutton's trial. See Johnson v. United States, 520 U.S. 461, 468, 117 S.Ct. *491 1544, 137 L. Ed. 2d 718 (1997). However, we cannot say that the error, if any, affected Sutton's "substantial rights" or "seriously affected the fairness, integrity or public reputation of judicial proceedings." Id. at 467, 117 S. Ct. 1544 (quoting United States v. Olano, 507 U.S. 725, 732, 113 S. Ct. 1770, 123 L. Ed. 2d 508 (1993)). After all, there is no dispute that, at the outset of the encounter that led to Wright's driving Cox's Spyder away, Sutton knew that Wright was going to do so and held the gun to Cox's head to facilitate that result. On this evidence, therefore, Sutton unquestionably demonstrated the intentthe required knowledge or recklessnessto pursue a carjacking; the jury could not have reasonably perceived his actions as those of a mere aider and abettor, intending no more than the natural and probable consequences of what his cohorts in crime were initiating.
IV. The Claimed Merger of UUV and RSP
Finally, Sutton contends that his UUV and RSP convictions, based on his taking the Taurus on November 20, should merge. In applying the Fifth Amendment's prohibition against multiple punishments for a single offense, we merge two offenses unless each requires proof of a fact that the other does not. E.g., Scott v. United States, 953 A.2d 1082, 1095 (D.C.2008). To convict Sutton of UUV but not RSP, the government had to prove that he had "take[n], used[d], operate[d], or remove[d] or cause[d] to be taken, used, operated, or removed, a motor vehicle." D.C.Code § 22-3215(b) (2001); see also § 22-3232 (2001). To obtain conviction for RSP but not for UUV, the government had to prove that Sutton knowingly "b[ought], receive[d], possesse[d], or obtain[ed] control" of stolen property "with intent to deprive another of the right to use the property or a benefit of the property." D.C.Code § 22-3232(a); see also § 22-3215(b). Because each offense contains an element that the other does not, merger is not constitutionally required.
Sutton, however, attempts to rely on Byrd v. United States, 598 A.2d 386, 391, 393 (D.C.1991), in which we held that, because D.C.Code § 22-3203(2) (2001)[28] bars consecutive sentences for theft and UUV, and because RSP is at least the "functional equivalent" of theft, consecutive UUV and RSP sentences may not be imposed for the same conduct. Although Byrd analyzes constitutional merger requirements, it ultimately turns on interpretation of § 22-3203; thus in any event, under Byrd, only consecutive sentences for UUV and RSP are barred. See Byrd, 598 A.2d at 394. Because Sutton received concurrent sentences for these two convictions, his Byrd argument has no merit.
* * * * * *
For the foregoing reasons, as to all claimed bases for reversal, we find no error. Accordingly, the convictions for carjacking while armed, receiving stolen property, and unauthorized use of a vehicle are affirmed.
So ordered.
OBERLY, Associate Judge, concurring.
I join the judgment of the court but write separately to explain my understanding of the "immediate actual possession" element of the carjacking statute. D.C.Code § 22-2803(a)(1) (2001).
The phrase "immediate actual possession" in the carjacking statute is borrowed from the District's robbery statute. Winstead v. United States, 809 A.2d 607, 610 *492 n. 3 (D.C.2002) ("`Whoever by force or violence... shall take from the person or immediate actual possession of another anything of value, is guilty of robbery.'") (quoting D.C.Code § 22-2801). The seminal case on the meaning of "immediate actual possession" in the robbery statute, in turn, is Spencer v. United States, 116 F.2d 801, 802 (D.C.Cir.1940), which held that "immediate actual possession" refers "at least [to] an area within which the victim could reasonably be expected to exercise some physical control over his property." We have repeatedly treated Spencer as authoritative on the meaning of "immediate actual possession." See Beaner v. United States, 845 A.2d 525, 533, n. 7 (D.C.2004); Leak v. United States, 757 A.2d 739, 743 (D.C.2000); Rouse v. United States, 402 A.2d 1218, 1220 (D.C.1979); see also United States v. Gilliam, 167 F.3d 628, 640 (D.C.Cir.1999). Therefore, in Winstead, we concluded that for the purposes of the carjacking statute, a car is within a victim's immediate actual possession if "`the car is within such range that the victim could, if not deterred by violence or fear, retain actual physical control over it.'" Winstead, 809 A.2d at 610 (quoting Gilliam, 167 F.3d at 639-40).
Under this settled law, a rational jury could have found that Cox was in immediate actual possession of his car. It is true that in other cases affirming carjacking convictions, the victim was closer to his car than Cox was to his Spyder, see Winstead, 809 A.2d at 611 (victim was a "few feet" away from his car); Beaner, 845 A.2d at 533 (same), or, unlike Cox, had evinced an intent to return to his car. E.g., Gilliam, 167 F.3d at 632 ("bank manager ... was opening the bank's parking lot gate so that he could park his car, which was nearby with the driver's door open and the engine running"); Beaner, 845 A.2d at 533 (similar). Having said that, nothing in our case law establishes that a person who is more than a few feet away from his car cannot, as a matter of law, be in immediate actual possession of his car. Nor do our decisions require the prosecution to prove that the victim intended to return to his car at the moment he was attackedindeed, nothing on the face of the carjacking statute requires that the victim even know that his car is being stolen. Cf. Leak, 757 A.2d at 742 ("the District of Columbia's statutory definition of robbery includes the stealthy snatching of an item, even if the victim is not actually holding, or otherwise attached to the object, or indeed is unaware of the taking"). In short, a jury easily could have concluded that at a distance of three car lengths, Cox could have regained control over his car had he not been deterred by his gun-wielding assailants. Sutton does not explain why the jury's assessment of the facts was so out of bounds as to warrant reversal.[1]
*493 Although Sutton challenges only the sufficiency of the evidence, the majority also examinesand criticizesthe carjacking instruction's definition of "immediate actual possession," as approved in Winstead, 809 A.2d at 610 n. 4. According to the majority, the instruction is flawed because it does not contain the words "violence or fear." It is far from clear to me that the criticism is warranted. The "violence or fear" concept, after all, is present elsewhere in the instruction, albeit not in the definition of "immediate actual possession." Specifically, the instruction says that to commit carjacking, the defendant must "knowingly use[ ] force or violence to take the motor vehicle," explains that "putting the complainant in fear" is sufficient to meet the force-or-violence requirement, and emphasizes that "[t]o establish a carjacking, it is not sufficient that the defendant took the motor vehicle; s/he must have taken it using force or violence." Instruction No. 4.51, "Carjacking," in the CRIMINAL JURY INSTRUCTIONS FOR THE DISTRICT OF COLUMBIA (4th ed. 1993). I am not convinced, therefore, that it is necessary or advisable to revise the definition of "immediate actual possession" to also include the words "violence or fear." I doubt that any juror listening to the instruction would fail to appreciate that the government must prove that the victim was deterred by violence or fear from retaining control over his car, and certainly no credible argument can be made in this case that Cox was not so deterred. Even if I shared the majority's doubts about the instruction, however, I would leave resolution of those doubts to a case where the instruction has been challenged and the issue briefed.
With these observations, I concur in the judgment of the court.
NOTES
[1] D.C.Code § 22-2803 (2001).
[2] D.C.Code §§ 22-3232(a), (c) (2001).
[3] D.C.Code § 22-3215 (2001). Sutton does not appeal convictions arising from the same events for armed robbery, possession of a firearm during a crime of violence or dangerous offense (PFCV), destroying property, and possession with intent to distribute cocaine.
[4] In his defense, Sutton presented the testimony of two police officers to show, respectively, that Little had been unable to identify his assailants and had made contradictory statements about the cause of an injury to his hand on November 18. Sutton also called a third officer to testify about a particular description of a man named "Sam."
[5] Although we have held in other cases that the failure to renew a motion for a judgment of acquittal precludes review of evidentiary sufficiency on appeal, see, e.g., Noaks v. United States, 486 A.2d 1177, 1178-79 (D.C.1985), we held in Wheeler that, "[t]o the extent, if any, that Noaks is inconsistent with ... Washington[,] ... Washington controls." Wheeler, 494 A.2d at 172; see, e.g., Thomas v. United States, 731 A.2d 415, 420 n. 6 (D.C.1999) ("Where a division of this court fails to adhere to earlier controlling authority, we are required to follow the earlier decision rather than the later one.") (citing M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C.1971)).
[6] We understand the third and fourth elements, taken together, to mean: "take [4] a person's motor vehicle [3] from that person's immediate actual possession."
[7] COUNCIL OF THE DISTRICT OF COLUMBIA, COMMITTEE ON THE JUDICIARY, REPORT ON BILL 10-16, "The Carjacking Prevention Amendment Act of 1993," at 2 (Feb. 10, 1993).
[8] See D.C.Code §§ 22-801(a) (burglary), -2801 (robbery), -4502(a)(1) (2001) (armed offenses).
[9] See Instruction No. 4.51, "Carjacking," in the CRIMINAL JURY INSTRUCTIONS FOR THE DISTRICT OF COLUMBIA (4th ed. 1993).
[10] The statute defines "force and violence" broadly to include "putting in fear," as well as "sudden or stealthy seizure or snatching," in addition to overt force or violence. D.C.Code § 22-2803(a)(1).
[11] See supra note 9.
[12] Apparently not essential to decision, this court reinforced its conclusion by adding that the defendant had "removed any doubt" about satisfying the "immediate actual possession" requirement by forcing the victim into her car and holding a gun on her as she drove away under his direction. Winstead, 809 A.2d at 611. Alternatively, it would appear, the Winstead court could have decided the possession question more narrowly by deeming the owner's immediate actual possession to have arisen at the point when the assailant forced the victim into her car and ordered her to drive away with himas though he had come upon her while she was still at the wheel.
[13] In addition to Winstead, we have upheld other carjacking convictions where victims have been outside the car but quite close to it. See Beaner v. United States, 845 A.2d 525, 529, 532-34 (D.C.2004) ("immediate actual possession" satisfied where victim had left car idling while he talked on pay telephone three feet away); Downing, 929 A.2d at 857 ("immediate actual possession" satisfied where victim was walking toward car with keys in hand). Moreover, in Winstead, 809 A.2d at 610, we expressly agreed with the D.C. Circuit's ruling in United States v. Gilliam, 167 F.3d 628, 639-40 (D.C.Cir.1999) ("immediate actual possession" under D.C. statute satisfied where carjacker confronted victim after he had stepped out of car to unlock parking lot gate).
[14] See supra note 7.
[15] United States v. Spears, 449 F.2d 946, 955 (D.C.Cir.1971) (quoting Spencer v. United States, 116 F.2d 801, 802 (D.C.Cir.1940)) (Rutledge, J.).
[16] "Actual possession," in the robbery context, does "not depend upon the niceties of property law but means nothing more than custody or control." Spears, supra note 15, 449 F.2d at 955. Indeed, this court has "consistently and for many years given a broad meaning to the term `immediate actual possession' in the robbery statute." Leak v. United States, 757 A.2d 739, 742 (D.C.2000) (affirming conviction for bicycle robbery). We have noted, accordingly, that "the government need only demonstrate the actual physical taking of the property from the person of another even though without his knowledge and consent, and though the property be unattached to his person." Id. at 742 (quoting Johnson v. United States, 756 A.2d 458, 462 (D.C.2000) (emphasis added)). This reach of the robbery statute to "unattached" property within the scope of "immediate actual possession" is traceable to Spencer, supra note 15, 116 F.2d at 802 (sustaining robbery conviction for taking wallet from trousers on chair belonging to victim across room in bed with prostitute) (discussed in Leak, 757 A.2d at 743).
[17] When the law focuses not on the victim but on a defendant charged with a crime defined by reference to possession (illegal drugs, for example), and the contraband is found not on the person but nearbysay across the room we have not adopted an expansive definition of actual possession but relied instead on the property law concept of "constructive possession" to justify guilt of the possessory offense. See, e.g., Perkins v. United States, 936 A.2d 303, 306 (D.C.2007); Blackmon v. United States, 835 A.2d 1070, 1075 (D.C.2003).
[18] Ordinarily, given no objectioneither at trial or on appealto the jury instruction on "immediate actual possession," we would expect to analyze sufficiency of the evidence under that instruction rather than apply a somewhat different formulation for sufficiency announced in the decisional law. In this case, however, we must apply this court's decision in Winstead, which approves a jury instruction and announces a sufficiency test that appear to be in tension with one another. For purposes of clarity in this case and those that follow, therefore, we address the relationship between these two formulations.
[19] Winstead's sufficiency language, for "immediate actual possession," specifies the range within which "the victim could ... retain actual physical control over" the vehicle, whereas the standard jury instruction, No. 4.51, requires that the vehicle be "located close enough that one could reasonably expect the complainant to exercise physical control over it." (Emphasis added.) There is no material difference here. Winstead undoubtedly announced an objective standard, such that its proper interpretation, as reflected in instruction 4.51, would mean the range within which "the victim could reasonably be expected to ... retain actual control over" the vehicle.
[20] 18 U.S.C. § 2119 (1996).
[21] In construing the reach of "presence," the Kimble court elaborated: "Presence ... requires a significant degree of nearness without mandating that the property be within easy touch.... Just as with other types of robbery, the victim's proximity to the property is a predicate of the crime. Under this interpretation, the victim must be sufficiently near to the vehicle for it to be within reach, inspection, or control and, absent threat or intimidation, to be able to maintain control of it. For a car to be within one's reach or control, it must be accessible." 178 F.3d at 1167-68.
[22] Lake and Kimble reflect the analysis applied by the U.S. Court of Appeals in the District of Columbia to "immediate actual possession" under the District's robbery statute, namely, that the victim must be close enough to the property to have fought off the thief had the victim not been prevented from doing so. In case of a "stealthy seizure," for example, the court approved an instruction that the property must be within such "reach" of the victim that, if he knew the theft was taking place, "such knowledge would likely result in physical violence or a struggle for possession of the property." Spencer, supra note 15, 116 F.2d at 802 (citation omitted). And, in a case of the theft of a dropped envelope, the court acknowledged that the property must be "so far under the personal control of the victim that violence or intimidation is necessary to sever his control." Dixon, 469 F.2d at 944.
[23] The "presence" element under 18 U.S.C. § 2119 has been satisfied, for example, when the victim had parked his car and walked approximately fifteen feet away when the assailant demanded the keys at gunpoint and drove away in the car, United Stated v. Edwards, 231 F.3d 933 (5th Cir.2000); when the assailant took keys from the victim in a bank and drove her car away from the bank parking lot, United States v. Moore, 198 F.3d 793 (10th Cir.1999); when a victim indoors, whose car was parked outside the restaurant where he worked, was robbed of keys then used to steal the car, United States v. Kimble, 178 F.3d 1163, 1168 (11th Cir.1999); and even when a victim was robbed of keys that were then used to steal a car that was up a steep hill, out of sight of the robbery scene, United States v. Lake, 150 F.3d 269 (3d Cir. 1998) (Alito, J.); see also United States v. Savarese, 385 F.3d 15, 19 (1st Cir.2004) (applying same test to enhancement for carjacking under federal sentencing guidelines); United States v. Boucha, 236 F.3d 768, 775 (6th Cir.2001).
[24] In stating that we enhance this court's understanding of Winstead by embracing the Lake/Kimble formulation, we are not stating any view on the outcome of particular federal cases. It is always for the trial judge, or for this court on appeal, to determine whether the facts permit a prosecution for carjacking to go to the jury, judging whether the evidence was sufficient to permit a reasonable jury to find "immediate actual possession."
[25] See supra note 9.
[26] Instruction 4.51, see supra note 9, would more accurately track the law, and convey it more precisely to the jury, if it were augmented to read as follows: "A motor vehicle is in the immediate actual possession of the complainant if it is located close enough that one could reasonably expect the complainant to exercise physical control over it, and thereby prevent its taking, if not deterred by violence or fear."
[27] Wheeler v. United States, Nos. 05-CF-716 & 07-CO-637, 987 A.2d 431, Order on Appellee's Petition for Rehearing, Jan. 4, 2010 (augmenting Wheeler v. United States, 977 A.2d 973, 986 n. 34).
[28] Then § 22-3803 (1981).
[1] Significantly, the federal courts of appeal have affirmed carjacking convictions in cases where the victim's control over his car was far more attenuated than in this case. E.g., United States v. Lake, 150 F.3d 269, 271 (3d Cir.1998) (Alito, J.) (affirming conviction where victim was robbed of keys and car was up a steep hill, "out of sight" of where the taking occurred); United States v. Kimble, 178 F.3d 1163, 1165 (11th Cir.1999) (affirming conviction where robbers took keys from victim inside restaurant and took victim's car that was parked outside). To be sure, the federal carjacking statute requires that the car be taken from the victim's "person or presence," 18 U.S.C. § 2119, not from the victim's "immediate actual possession." Notwithstanding this difference, the federal cases are persuasive authority because under our case law the phrase "immediate actual possession" has no appreciable difference in meaning from the phrase "person or presence" in the federal cases. Compare Lake, 150 F.3d at 271 (under federal carjacking statute, a car "is in the presence of a person if it is so within his reach, observation or control, that he could if not overcome by violence or prevented by fear, retain his possession of it") (quotation marks omitted), with Winstead, 809 A.2d at 610 (under District carjacking statute, a car is within victim's immediate actual possession "if the car is within such range that the victim could, if not deterred by violence or fear, retain actual physical control over it") (quotation marks omitted). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546667/ | 988 A.2d 714 (2009)
COM.
v.
BREKNE.
No. 3258 EDA 2008.
Superior Court of Pennsylvania.
November 20, 2009.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546808/ | 377 B.R. 32 (2007)
In re FRANKLIN INDUSTRIAL COMPLEX, INC., Debtor.
In re Christine Falls Of New York, Inc., Debtor.
In re Trafalgar Power, Inc., Debtor.
Christine Falls of New York, Inc. and Trafalgar Power, Inc., Plaintiffs,
v.
Algonquin Power Corporation, Inc., Algonquin Power U.S. Holdings, Inc., Algonquin Power Fund (Canada), Inc. and Algonquin Power Systems, Inc. Defendants.
Bankruptcy Nos. 01-67457 to 01-67459, Adversary No. 06-80302.
United States Bankruptcy Court, N.D. New York.
October 30, 2007.
Menter, Rudin & Trivelpiece, P.C. (Jeffrey A. Dove, Esq. of Counsel), Syracuse, NY, for Algonquin Entities/Defendants.
Harris Beach PLLC (David M. Capriotti, Esq. of Counsel), Syracuse, NY, for Debtors.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
STEPHEN D. GERLING, Chief Judge.
Before the Court are two motions related to the December 28, 2006 complaint ("Complaint") filed by Christine Falls of New York, Inc. ("CFC") and Trafalgar Power, Inc. ("TPI") (collectively referred to as "Plaintiffs") against Algonquin Power Corp, Inc. ("Power"), Algonquin Power U.S. Holdings, Inc. ("Power U.S."), Algonquin Power Income Fund ("APIF"), Algonquin *33 Power Fund (Canada) Inc. ("Canada"), and Algonquin Power Systems Inc. ("Systems") (collectively referred to as "Algonquin" or "Defendants"). The Complaint seeks an order declaring as a matter of law that Algonquin does not have a security interest in the escrowed proceeds of a judgment obtained by Plaintiffs against the engineering firm of Stetson-Harza Corp. (See Fact section, infra).
The first is a motion filed by Plaintiffs on April 9, 2007 seeking summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.") and Rule 7056 of the Federal Rules of Bankruptcy Procedure ("Fed.R.Bankr.P."). The second is a motion filed on May 7, 2007 by Defendants also pursuant to Fed. R.Civ.P. 56 and Fed.R.Bankr.P. 7056, seeking an order denying Plaintiffs' motion for summary judgment, and granting Defendants' motion for summary judgment.
Plaintiffs' motion was originally scheduled for oral argument on April 24, 2007, but an adjournment was granted in order to allow the Defendants time to file their own `summary judgment motion and to allow both motions to be argued on the same day. Both motions were subsequently scheduled for oral argument on May 22, 2007, but the parties sought and received another adjournment to allow for additional time to file responses. The Court ultimately heard oral argument on both motions at its regular motion term in Utica, New York on June 26, 2007. Upon the conclusion of the June 26th hearing, the Court indicated that it would take both motions under submission on that date.
JURISDICTION
The Court has jurisdiction over the parties and subject matter of this adversary proceeding pursuant to 28 U.S.C. §§ 1334, 157(a), (b)(1), (b)(2)(A), (K) and (M).
FACTS
The Court will assume familiarity with the facts as set forth in certain related actions in the U.S. District Court for the Northern District of New York, including those set forth in the Report, Recommendation and Order of U.S. Magistrate Judge David E. Peebles dated November 8, 2000, in Civil Action No. 5-CV-1246 (Plaintiffs' Exhibit J).
By way of background, in the latter half of 1988 Aetna Life Insurance Co. ("Aetna") financed TPI's construction of seven hydroelectric plants located in New York State with a $22,500,000 loan (the "Aetna Loan").[1] That loan was restructured on January 15, 1996 and the parties entered into an Extension and Modification Agreement ("Modification Agreement") (Plaintiffs' Ex. P), as well as an Amended and Restated Collateral Trust Indenture ("Revised Indenture") (Plaintiffs' Ex. C and Defendants' Exhibit 10).
In the interim, in 1989, TPI had commenced an action against Stetson-Harza and the engineer employed by Stetson-Harza, Neal Dunlevy ("Dunlevy"),[2] who designed the power plants (Case No. 89-CV-1027). *34 This suit alleged that Stetson-Harza/Dunlevy committed engineering malpractice with respect to the design of the plants regarding the amount of power (and income) projected to _be generated by the plants. A jury trial was held from March 22, 1999 through April 14, 1999. TPI succeeded in obtaining a $7.6 million judgment against Stetson-Harza/Dunlevy (the "Stetson-Harza Judgment"). See Hydro Investors v. Trafalgar Power, Inc., 63 F.Supp.2d. 225. The Second Circuit Court of Appeals increased the damages awarded by the lower court by ruling that interest be added to the amount. TPI and Stetson-Harza subsequently entered into a stipulation setting the judgment amount at $11,100,000, which Stetson-Harza paid in January 2001. An Order issued by Magistrate Judge Peebles on February 2, 2001, required $9,975,726.61 of these proceeds to be deposited in an escrow account.
The Complaint, which is the subject of, the two summary judgment motions currently before the Court, has its genesis in an action commenced by Algonquin on August 15, 2000 in the U.S. District Court, N.D.N.Y.(Case No. 00-CV-1246) against TPI, CFC, Pine Run Virginia, Inc. ("Pine Run"), and American Casualty ("Preliminary Injunction Action"). That action was commenced in response to TPI's filing of an assignment of the Stetson-Harza Judgment to its affiliate Pine Run. Algonquin sought, inter alia, a preliminary injunction and/or order of attachment precluding TPI from assigning the Stetson-Harza Judgment to Pine Run, which Algonquin alleged would prevent it from obtaining those funds to satisfy any judgment it might receive in another action pending in the District Court (Case No. 99-CV-1238).[3]
The Preliminary Injunction Action was referred to Magistrate Judge Peebles by Order of Senior U.S. District Judge Neal P. McCurn on August 21, 2000 for the issuance of proposed findings of fact and recommendation, which were issued on November 8, 2000. In that report, Magistrate Judge Peebles recommended that the District Court grant Algonquin's motion for a preliminary injunction but deny its motion for an order of attachment.
After the parties filed several objections to Magistrate Judge Peebles' Report, the District Court undertook a de novo review of the Report.[4] Judge McCurn, inter alia, adopted the recommendations of Magistrate Judge, Peebles' Report, although for different reasons, denying Algonquin's request for an order of attachment but granting Algonquin's motion for a preliminary injunction preventing TPI from assigning or otherwise disposing of the Stetson-Harza Judgment proceeds. See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. 341 (N.D.N.Y. 2001) ("Judge McCurn's Decision I").
Plaintiffs filed Chapter 11 petitions on August 27, 2001 with the U.S. Bankruptcy Court for the Eastern District of North Carolina. These cases were transferred to this Court by Order of the North Carolina Bankruptcy Court on December 13, 2001.
ARGUMENTS
Plaintiffs
Preclusive Effect
Plaintiffs first argue that Judge McCurn's Decision I granting Algonquin *35 the preliminary injunction while finding that Algonquin did not have a security interest in the Stetson-Harza Judgment precludes Algonquin from re-litigating that issue in this proceeding. Plaintiffs acknowledge that the general rule is that "findings of fact and conclusions of law made in a preliminary injunction proceeding, such as the one in which Judge McCurn issued his decision, do not necessarily preclude reexamination of the merits at a subsequent trial." See Irish Lesbian and Gay Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir.1998). As Judge McCurn's Decision I was made in a preliminary injunction proceeding, the preclusive effect of collateral estoppel would not seem to be relevant in this context.
Plaintiffs point out, however, that case law does make an exception to the general rule and allows for preclusive effect for such decisions where "the party seeking to avoid such a ruling chose the initial forum, instituted the preliminary relief application, and therefore had a full and fair opportunity to present all crucial evidence and witnesses.". See Plaintiffs' Amended Memorandum of Law, p. 3, citing Don King Prods., Inc. v. Douglas, 742" F.Supp. 741, 755 (S.D.N.Y.1990).
Plaintiffs' second argument is that Algonquin has no security interest in the proceeds of the Stetson-Harza Judgment under the Connecticut Uniform Commercial Code ("UCC"). The Indenture[5] is governed by Connecticut law. Connecticut's UCC, in effect when the Indenture was executed and the bankruptcy proceeding commenced, "exempts tort claims from its scope." See Plaintiffs' Amended Memorandum of Law, pp. 7-8. The Plaintiffs also cite to Connecticut case law holding that a creditor cannot assert an Article 9 security interest in a tort claim or the proceeds thereof. See In re Ore Cargo, 544 F.2d 80, 81-82 (2d Cir.1976).
The Plaintiffs' third argument is that the Revised Indenture did not assign the Stetson-Harza Judgment, or the preceding tort claim, to Algonquin. Plaintiffs contend that to create a security interest by assignment, the security agreement must "clearly express the intent to create a secured interest in specific property." See Plaintiffs' Amended Memorandum of Law, p. 9 (citing Evergreen Bank v. St. Onge (In re Onge), No. 94-CV-1441, 1996 WL 77389, at *3 (N.D.N.Y. Feb.21, 1996)).
Plaintiffs contend that "[a]lthough the Indenture provides that the Property assigned is `without limitation,' the general language of the Revised Indenture does not demonstrate an intent to assign the tort claim or judgment against Stetson-Harza. Nor does it identify that claim or the judgment with `particularity' as is required to constitute an assignment." See Plaintiffs' Amended Memorandum of Law, p. 11 (citations omitted). Plaintiffs assert that there is no mention in the Indenture or the annexes thereto ("Annexes") of a tort claim or judgment, despite the fact that Aetna, which drafted the Indenture, was "well aware of TPI's claim against Stetson-Harza at the time the Revised Indenture was executed." See id. Plaintiffs assert that without the Indenture specifically referencing the tort claim or the Stetson-Harza contract, the Indenture did *36 not assign, and Defendants do not have a security interest in the tort claim, the Stetson-Harza Judgment or the proceeds of these under Connecticut law, which governs the Indenture. To bolster this argument, Plaintiffs again cite to In re Ore Cargo, this time for the proposition that a security agreement does not assign a tort claim when that agreement does not reference such a claim.
Defendants
Defendants assert that Judge McCurn's Decision I is not entitled to res judicata or collateral estoppel effect because that decision was issued in a preliminary injunction proceeding, which "do[es] not preclude reexamination of the merits at a subsequent trial." See Defendants' Memorandum in Opposition, p. 5 (citing University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981)).
Defendants acknowledge that in certain circumstances decisions issued in preliminary injunction proceedings may have res judicata or collateral estoppel effect, but argue that those circumstances are not present here. In support of their contention that Judge McCurn's Decision I was not "rendered practically final," as required in some cases holding that a preliminary injunction decision may have collateral estoppel or res judicata effect. See, e.g., Lummus Co. v. Commonwealth Oil Ref Co., 297 F.2d 80, 89 (2d Cir.1961), Defendants contend that
1) Judge McCurn conducted no evidentiary hearings;
2) there was no trial on the merits;
3) evidence submitted was based on affidavits of attorneys lacking personal knowledge; and
4) the decision was not upheld on appeal. (Algonquin did not appeal it because it was granted the injunction it sought. Defendants also assert that the decision itself was not subject to appeal.)
As further evidence that Judge McCurn's Decision I was not final for purposes of collateral estoppel and res judicata, Defendants quote Judge McCurn's statement that ". . . Algonquin cannot at this time demonstrate a probability of success on the merits." See Trafalgar Power, Inc. v. Aetna Life Ins.Co., 131 F.Supp.2d. at 348 (emphasis added). To the same end, Defendants also cite to Judge McCurn's language in a subsequent Memorandum-Decision and Order, in which (in the decision's background section) he indicated that "[t]he proceeds from the malpractice action were ultimately placed in an escrow account pending a determination on the merits on [sic] the parties' various claims." See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 146 F.Supp.2d 155, 157 (N.D.N.Y.2001) ("Judge McCurn's Decision II")(emphasis added).
To buttress their argument that "the record was not fully developed and that a full hearing on the issues was not conducted," Defendants cite Judge McCurn's statement that it "is undisputed that the Trust Indenture does not specifically identify TPI's $7.6 million judgment even though the parties knew of the judgment when entering into that agreement." See Defendants' Memorandum in Opposition, p. 7, quoting Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348. Defendants correctly note that Judge McCurn misstated the facts because the judgment was not entered until three years after the Revised. Indenture was executed.
Defendants contend that Judge McCurn did not address Algonquin's claim to an interest in the tort claim pursuant to either Connecticut common law, or Algonquin's rights under the Consolidation, Extension Spreader and Modification Agreement, dated December 15, 1988 *37 (Defendants' Ex. 5) ("Consolidation Agreement").[6] Defendants claim it was not necessary for Judge McCurn to consider these issues because the primary purpose of the preliminary injunction proceeding was to determine Algonquin's right to have TPI enjoined from transferring the judgment to Pine Run, not to determine Algonquin's interest in the tort claim.
Defendants also assert that the findings in both of Judge McCurn's Memorandum-Decisions and Orders "were rendered moot when the parties to the litigation entered into a stipulation and order on February 1, 2001 providing for exactly the same relief granted by Judge McCurn's Memorandum Decision and Order." See Defendants' Supplemental Memorandum in Opposition, June 19, 2007, p. 5.
Algonquin's Purported Security Interest
Defendants argue that Algonquin's rights in the Indenture Estate emanate not only from the Indenture but also from other documents such as a series of mortgages and two stock agreements. Defendants contend that as a result, these documents must be examined in order to determine whether, under Connecticut or New York common law, Algonquin has a valid security interest in the tort judgment proceeds.
In order to support their argument that the Indenture grants Algonquin a security interest in the tort judgment, Defendants quote extensively from that document, which grants Algonquin a security interest in
. . . all Property, rights and privileges of the Companies, now owned or hereafter acquired, including (without limitation):
(1) the Property described in Annex 2
. . .
(2) all cash now or in the future delivered to the Security Trustee in accordance with the provisions of the Indenture or any of the Assigned Agreements; and
(3) all of the right, title and interest, powers, privileges and other benefits of each of the Companies under each and every one of the leases, contracts, permits, licenses, franchises, certificates, insurance policies, warranties, bonds and other agreements (the "assigned Agreements") to which it is a party or pursuant to which it has been granted rights, including, without limitation, those Assigned Agreements described in Annex 3
In each case, together with all proceeds thereof and any replacements, additions, accessions or substitutions thereof or thereto, all after-acquired Property, and all accounts and proceeds arising from the sale and disposition thereof . . .
Defendants' Memorandum in Opposition, p. 9, citing Granting Clause A, Collateral Trust Indenture, p. 2, July 1, 1988 (Defendants' Ex. 2). also:
It is further agreed that the Security Trustee shall hold any and all other Property and any and all rights, interests, privileges and positions granted to it in accordance with the provisions hereof, the provisions of the Note Purchase Agreement, the Consolidation Agreement, and the provisions of any other document contemplated hereby or thereby, as security trustee for the holders, from time to time, of the Notes, as security for, or as additional sources of payment of, the Indenture Indebtedness, *38 and for the uses and purposes and subject to the terms and provisions set forth in this Indenture.
Defendants' Memorandum in Opposition, p. 10, citing Indenture, Granting Clause B, p. 3, July 1, 1988 (Defendants' Ex. 2).
Defendants next refer to the Consolidation Agreement, which they maintain grants Algonquin a security interest in
. . . all estate, right, title and interest of [TPI] in and to all awards, settlements and other compensation, and interest thereon, hereafter made in connection with any condemnation, eminent domain or similar proceeding or for, or in lieu of, any taking under the power of eminent domain of any of the property . . . or any part thereof, including without limitation, any awards and compensation for change of grade of streets or any other injury to or decrease in the value of such property, all of which awards and other compensation are hereby assigned to Mortgagee, which is hereby authorized and appointed attorney in fact for [TPI] to . . . receive the proceeds of such awards and other compensation. . . .
See Defendants' Memorandum in Opposition, p. 10, quoting the Consolidation Agreement, Defendants' Ex. 5, at pp. 7-8.
The "decrease in the value of such property" language is important to Defendants because they assert that the Stetson-Harza Judgment was based in part on a decrease in value in the plants caused by Stetson-Harza's engineering malpractice. Defendants contend that although Connecticut common law bars the assignment of a personal injury tort claim, contract claims are assignable under Connecticut law. Defendants acknowledge, however, that Connecticut law has not addressed whether tort claims for property damage or engineering malpractice claims can be assigned. On this point, Defendants interpret conflicting case law in such a way as to conclude that under Connecticut common law the issue of assignability of tort claims for property damage depends on public policy, and that there is no policy consideration which would prohibit the assignment of the instant tort claim or the judgment proceeding from it. Moreover, Defendants contend that any possible bar to assignment of a tort claim under Connecticut law disappeared when the tort claim became a judgment on April 15, 1999.
As for New York common law, Defendants cite to RTC Mortgage Trust 1994 N-1 v. Fidelity Nat'l Title Ins. Co., 16 F.Supp.2d. 557, 564 (D.N.J.1998) for the proposition that there are no "magic words" necessary to assign a tort claim, and that language in an assignment agreement which reflects an "unambiguous intent . . . to transfer everything that it owned" (Id.) constitutes an assignment. Defendants argue that the intent of the language quoted above from the Granting Clauses of the Indenture Agreement, as well as the Consolidation Agreement, clearly evince such an unambiguous intent.
Defendants acknowledge that New York Article 9 UCC law in effect at the time of the Indenture did not apply to the assignment of commercial tort claims. They contend, however, that when the Revised UCC Article 9, which does provide for the assignment of commercial tort claims, went into effect in New York on July 1, 2001, Algonquin's security interests granted under the mortgages automatically attached to the commercial tort claim and its proceeds and became perfected on that date. In support of this contention Defendants cite Rev. N.Y. UCC § 9-702(a), which states that "Revised Article 9 applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before Revised Article *39 9 takes effect." Additionally, Defendants argue that because the instant action itself was commenced after the July 2001 effective date ("Effective Date") of the Revised Article 9 in New York, that Revised Article applies to this case.
Once Defendants have argued that Revised N.Y. Article 9 applies, they go on to quote from the Official Comments to Rev. N.Y. UCC § 9-109 to the effect that "once a claim arising in tort has been settled and reduced to a contractual obligation to pay, the right to payment becomes a payment intangible and ceases to be a claim arising in tort." See Defendants' Memorandum in Opposition, p. 19, quoting Official Comment 15 to Rev. N.Y. UCC § 9-109. Defendants contend that since Algonquin has a valid security interest in general intangibles, under Revised Article 9 Algonquin has a valid security interest in the escrowed funds. See Defendants' Memorandum in Opposition, p. 19; Defendants' Supplemental Memorandum in Opposition, p. 9.
Defendants also cite to In re Vienna Park Properties, 976 F.2d 106 (2d Cir. 1992) for the proposition that "a contingent right to payment [such as an escrow account] constitutes a general intangible." See Defendants' Memorandum in Opposition, p. 20. Defendants argue that, consequently, even if Algonquin did not have a security interest in the tort claim or judgment, when the funds were deposited into the escrow account, Defendants then had an interest in the funds. This is so, Defendants contend, because TPI's ability to control the funds was restricted first by the preliminary injunction, and then by the escrow agreement. As a result, TPI had only a contingent interest in the funds. And because a contingent right to payment is a general intangible, Algonquin has a security interest in the escrow account because both the Indenture Agreement and the Consolidation Agreement grant Algonquin a security interest in general intangibles.
Defendants also disagree with TPI's reliance on In re Ore Cargo, 544 F.2d at 82 because that case dealt with a security agreement which, unlike the instant case, limited itself to an interest granted under the UCC. Such a case would have nothing to say, Defendants contend, regarding the language in the financing documents being sufficient to constitute a common law assignment of the interest in question.
DISCUSSION
Summary Judgment Standard
The standard for summary judgment is well settled. See 325 Bleecker, Inc. v. Local Union No. 747, 500 F.Supp.2d 110, 118 (N.D.N.Y.2007). Summary judgment is appropriate pursuant to Fed.R.Civ.P. 56, made applicable to this proceeding by Fed. R.Bankr.P. 7056, when the evidence demonstrates that "there is no genuine issue of any material fact and the moving party is entitled to judgment as a matter of law." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In reviewing the pleadings, affidavits and depositions, the Court must "resolve all ambiguities and draw all inferences in favor of the non-moving party." See Chan v. Gantner, 464 F.3d 289, 292 (2d Cir.2006).
Preclusive Effect
Judge McCurn's Decision I was indeed issued pursuant to a request for a preliminary injunction. Absent an exception, this would prevent it from having preclusive effect in a later proceeding. Both parties admit as much.
The exception to this general rule is articulated in Commodity Futures Trading v. Bd. of Trade, 701 F.2d 653, 657 (7th Cir.1983); Miller Brewing Co. v. Joseph *40 Schlitz Brewing Co., 605 F.2d 990 (7th Cir.1979); Zdanok v. Glidden Co., 327 F.2d 944, 955 (2d Cir.1964); Lummus Co. v. Commonwealth Oil Ref.Co., 297 F.2d at 89; Don King Prods., Inc. v. Douglas, 742 F.Supp. at 747; State of New York v. Mayer, No. 90-CV-176, 1990 W.L. 164686, at *2 (N.D.N.Y. Oct. 19, 1990); B.N.E. Swedbank, S.A. v. Banker, 791 F.Supp. 1002, 1004 (S.D.N.Y.1992). The relevant criteria for the exception contained in these cases can be quoted briefly: the exceptions arise "in circumstances where a ruling is rendered `practically' final owing to factors demonstrating `that it was not avowedly tentative [], the adequacy of the hearing, and the opportunity for review.'" Don King Prods., Inc., v. Douglas, 742 F.Supp. at 754, quoting Lummus Co. v. Commonwealth Oil Ref Co., 297 F.2d at 89; see also Zdanok v. Glidden Co., 327 F.2d at 956 (also quoting Lummus Co. for the view that "`finality in the context here relevant may mean little more than that the litigation of a particular issue has reached such a stage that a court sees no really good reason for permitting it to be litigated again"').
Algonquin's Arguments Against Preclusive Effect
Before examining the extent to which the instant case falls within the exception to the general rule that the disposition of a request for a preliminary injunction will not be afforded preclusive effect, the Court will first examine some of Algonquin's arguments against Judge McCurn's Decision I being accorded preclusive effect.
"At this time"
First, Algonquin stresses the use of the phrase "at this time" in Judge McCurn's Decision I, confirming Magistrate Judge Peeble's proposed findings of fact and recommendation (Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348). See, e.g., Defendants' Memorandum in Opposition, May 7, 2007, p. 7; Defendants' Supplemental Memorandum in Opposition, June 19, 2007, p. 4; Defendants' Oral Argument before this Court on June 26, 2007. As discussed supra, this decision found that Algonquin was entitled to a preliminary injunction freezing the proceeds of the $7.6 million tort judgment TPI obtained in its professional malpractice action against Stetson-Harza Corp.
Judge McCurn's use of the phrase "at this time" is important because Defendants refer to it repeatedly to counter Plaintiffs' argument that Judge McCurn's ruling that Algonquin did not have a security interest in the $7.6 million tort judgment was "`practically' final owing to factors demonstrating `that it was not avowedly tentative . . ." See Don King Prods., Inc. v. Douglas, 742 F.Supp. at 754.
As a result, an examination of Judge McCurn's exact use of the phrase "at this time" is in order:[7]
In light of the court's de novo determination that Algonquin cannot show a probability of success on the merits of its conversion claim, and that its section 273 and 276 claims do not support an order of attachment under CPLR § 6201 at this time, it is unnecessary to review the Magistrate Judge's additional findings . . .
Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 349 (emphasis added).
A review of the exact language and punctuation of this paragraph reveals that Judge McCurn was addressing two separate *41 items: 1) the probability of success on the merits of Algonquin's conversion claim, and 2) that Algonquin's §§ 273 and 276 claims do not support an order of attachment . . . at this time.[8] The phrase "at this time" modifies only the second of the two items: that Algonquin's §§ 273 and 276 claims do not support an order of attachment. What leads the Court to this conclusion is, in large part, Judge McCurn's placement of a comma after the word "claim" and before "and", as well as the lack of a comma before the phrase "at this time."[9]
However, the Court need not rely solely on Judge McCurn's careful attention to proper punctuation in order to arrive at the conclusion that the phrase "at this time" modifies only the court's finding that Algonquin's §§ 273 and 276 claims do not support an order of attachment, and not the finding that Algonquin's conversion/security interest claim "lacks merit." See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348. The reasoning and language of the decision itself dictate this conclusion. Earlier in the same decision we read that "Algonquin asserts that the assignment[10] is an unlawful conversion based upon language in the Trust Indenture and, further, that the assignment violates sections 273 and 276 of the New York Debtor and Creditor Law." Id. at 345 (emphasis added). These are clearly two separate assertions, and Judge McCurn treats and analyzes them as such.
In analyzing Algonquin's conversion claim, Judge McCurn states that:
Algonquin contends that it has a superior right of possession to specific money because the Trust Indenture grants it a security interest in TPI's $7.6 million judgment. This contention lacks merit. [Algonquin] . . . cannot demonstrate a superior right of possession to TPI's tort judgment. It is undisputed that the Trust Indenture does not specifically identify TPI's $7.6 million judgment even though the parties knew of the judgment when entering into that agreement. More importantly, article 9 of the [Connecticut] Uniform Commercial Code specifically exempts the transfer of a tort claim from security interests. Algonquin cannot show an immediate right of possession to TPI's tort judgment and, thus, fails to show a probability of success on the merits of its conversion claim.
Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348.
There are no limiting temporal references in this analysis. There is nothing to lead the reader to believe that Judge McCurn's finding that Algonquin's assertion that it had a specific interest in the tort judgment "lacks merit" was only a preliminary or temporary holding, subject to further litigation or developments.[11]*42 However, when Judge McCurn turns to his analysis of Algonquin's §§ 273 and 276 claims, he opines that "[w]hether Algonquin's section 273 and 276 claims independently support an order of attachment under CPLR § 6201 at this stage in the litigation is doubtful." Id. at 349 (emphasis added). Here the origin and purpose of Judge McCurn's phrase "at this time" becomes clear. It is limiting language meant to parallel and reinforce his earlier finding that Algonquin's §§ 273 and 276 claims did not support an order of attachment at that stage of the litigation.[12] Accordingly, the Court reads Judge McCurn's Decision I to limit his use of the phrase "at this time" exclusively to his finding regarding Algonquin's New York Debtor and Creditor Law §§ 273 and 276 claims, and not to his finding that Algonquin's conversion/security interest claim "lacks merit."[13]
Despite this reading, both parties seem to believe that Judge McCurn meant for the phrase "at this time" to modify his finding that Algonquin's claim regarding its purported security interest in the tort judgment "lacks merit." Counsel for Defendants commenced his oral argument on June 26, 2007 in this Court by stating that Judge McCurn had found that Plaintiffs "could not at this time demonstrate a superior right to the tort claim under Connecticut UCC." Surprisingly, even counsel for Plaintiffs, at the same oral argument, stated that Judge McCurn had found that Plaintiffs could not "demonstrate a superior right or security interest at that time."
This Court finds that because Judge McCurn did not temporally limit his finding that Algonquin's assertion that it had a security interest "lack[ed] merit," Defendants cannot cite Judge McCurn's use of the phrase "at this time" in support of their argument that his holding regarding Algonquin's lack of a security interest in the Stetson-Harza Judgment was not "practically final."
No Evidentiary Hearings
Secondly, Defendants assert that Judge McCurn's Decision I was not final for purposes of collateral estoppel because the judge conducted no evidentiary hearings. However, Defendants acknowledged in open court on June 26, 2007 that there are no material issues of fact in this litigation. Defendants fail to point out what purpose an evidentiary hearing would have served in this case and fail to point out why they did not request one.
No Trial on the Merits
Thirdly, Algonquin contends, as further evidence that the decision was not final, *43 that "the action in which the decision was issued sought the return of a fraudulently transferred judgment, [and] that there was no trial on the merits . . ." Defendants' Memorandum in Opposition, p. 6. Here the Court is reminded of the cautionary remarks of the late Judge Philip W. Tone of the Court of Appeals of the Seventh Circuit in Schlitz, a case cited by Defendants:
Whatever the litigation strategy that motivated [the] decision to seek a preliminary injunction . . ., that decision entailed the risk, familiar to any experienced litigation lawyer, that the decision on the preliminary injunction might have the effect of determining the merits, either legally, through the law of the case, or as a practical matter.
Miller Brewing Co. v. Jos. Schlitz Co., 605 F.2d at 993."
The only real distinguishing factor between Jos. Schlitz Co. and the instant case is that in Jos. Schlitz Co., the party seeking to have the denial of a preliminary injunction in a related case, namely Miller Brewing Co. v. G. Heileman, Brewing Co., 561 F.2d 75 (7th Cir.1977), given preclusive effect was the defendant, Joseph Schlitz Brewing Co. In G. Heileman Brewing Co., the district court had granted Miller Brewing Co. a preliminary injunction. On appeal, however, the Seventh Circuit Court of Appeals reversed the holding of the district court based on the finding that probability of success could not be established by Miller Brewing. In the Jos. Schlitz Brewing Co. case, the defendant, Joseph Schlitz Brewing Co., sought summary judgment based on the preclusive effect of the prior holding in the Heileman Brewing Co. case, despite the fact that the Miller Brewing Co. had not sought a preliminary injunction against the Joseph Schlitz Brewing Co. The district court granted summary judgment, giving no credence to Miller's argument that it had not had an opportunity to litigate the issue concerning whether the word "light" or "LITE" as applied to beer is generic in the prior case in which it had ultimately been denied a preliminary injunction. See Miller Brewing Co. v. Jos. Schlitz Brewing Co., 605 F.2d at 992. The Seventh Circuit affirmed the application of collateral estoppel on that issue and the granting of summary judgment.
In Judge McCurn's Decision I, Algonquin was granted a preliminary injunction from which no appeal was taken. Based on the analysis in Jos. Schlitz Brewing Co., this Court must conclude that Judge McCurn's Decision I should be given preclusive effect in the adversary proceeding pending in this Court, despite the fact that there was no trial on the merits.
Decision Not Appealed
As noted above, the Defendants did not appeal Judge McCurn's Decision I, granting them injunctive relief. Defendants offer several justifications for not having appealed the decision. First, according to the Defendants, "no appeal was necessary as the court granted the preliminary injunction." See Defendants' Memorandum in Opposition, pp. 6-7. Secondly, Defendants contend that Judge McCurn's Decision I was not subject to appeal because courts "review judgments, not statements in opinions." See Defendants' Supplemental Memorandum in Opposition, p. 5. Thirdly, Defendants cite Elkin v. Metro. Prop. & Cas. Ins. Co. (In re Shkolnikov), 470 F.3d 22, 24 (1st Cir.2006) for the proposition that "a party cannot prosecute an appeal from a judgment in its favor." See Defendants' Supplemental Memorandum in Opposition, p. 5 (quoting In re Shkolnikov).
The Second Circuit Court of Appeals has recently visited this issue and acknowledged that "[a] party who receives all that he has sought generally is not aggrieved *44 by the judgment affording the relief and cannot appeal from it." See Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc. v. Love Funding Corp., Nod. 07-2050-cv, 07-1285-cv, 2007 U.S.App. LEXIS 18237, at *5 (2d Cir. Aug. 1, 2007) (quoting Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. 326, 333, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980)). However, the Second Circuit Court of Appeals, as well as the Supreme Court in Deposit Guaranty, also held that "in an appropriate case, a party who has prevailed on the merits may appeal from an adverse ruling collateral to the judgment on the merits . . . so long as that party retains a stake in the appeal satisfying the requirements of Art. III." Love Funding Corp., 2007 U.S.App. LEXIS 18237, at *5 (citing Deposit Guaranty Nat'l Bank v. Roper, 445 U.S. at 333, 100 S.Ct. 1166) (quotation marks omitted). This Court believes that Judge McCurn's ruling on whether Algonquin held a security interest in the tort judgment proceeds constituted such an adverse ruling collateral to the granting of the preliminary injunction, and that Algonquin had every right to appeal that ruling. Defendants' other arguments regarding the futility of appealing Judge McCurn's ruling likewise fail.
Affidavits by Attorneys Lacking Personal Knowledge
Defendants' contention that the requisite finality was lacking due to the fact that the evidence submitted to the Trafalgar court was based on affidavits of attorneys without personal knowledge does not merit significant discussion or analysis. The record before Judge McCurn contained sufficient affidavits from the parties themselves.[14]
Defendants also cite to Judge McCurn's statement that it "is undisputed that the . . . Indenture does not specifically identify TPI's $7.6 million judgment even though the parties knew of the judgment when entering into that agreement." See Defendants' Memorandum in Opposition, p. 7, quoting Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348. This, Defendants argue, demonstrates that "the record was not fully developed and that a full hearing on the issues was not conducted because it is beyond dispute that the tort judgment was not entered against . . . Stetson-Harza until 1999, or some three years after the [Revised Indenture] was executed." See Defendants' Memorandum in Opposition, p. 7. The Court acknowledges that Judge McCurn's statement may be technically incorrect. However, it is easy to see that the point Judge McCurn was making was that at the time the Indenture was drafted the parties were aware of the tort claim.
Defendants do not dispute that the tort claim existed when the parties executed the Indenture. The substitution of the word "judgment" for "claim" does not, in this Court's opinion, indicate that the record was not fully developed and that a hearing was necessary. Consequently, each of the five reasons Defendants argue that Judge McCurn's Decision I was not final for purposes of res judicata or collateral estoppel fails.
Exception to Rule that Preliminary Injunction will not be Given Preclusive Effect
Based on the above conclusions, the Court must examine whether the instant *45 case falls within the exception to the general rule that a preliminary injunction will not have preclusive effect. Here it is worth quoting the language of U.S. District Judge Robert W. Sweet of the Southern District of New York in the Don King Prods., Inc. v. Douglas decision in some detail:
There are exceptions to the general rule [that findings in a preliminary injunction proceeding are seldom considered sufficiently final to be given preclusive effect], arising in circumstances where a ruling is rendered "practically" final owing to factors demonstrating that it was not avowedly tentative [], the adequacy of the hearing, and the opportunity for review. Thus, estoppel on occasion has been based upon preliminary injunction findings made after extensive hearing and briefing consolidated with trial on the merits . . . or where it was fair to regard findings as practically final because the party seeking to avoid the preclusive effect of a preliminary injunction ruling, affirmed on appeal, had been the ones [sic] that chose the original litigation forum, instituted the preliminary relief application, and had, therefore, a full opportunity to present all crucial evidence and witnesses.
Don King Prods., Inc. v. Douglas, 742 F.Supp. at 754-55 (citations and quotation marks omitted).
Algonquin, the party seeking to avoid the preclusive effect of Judge McCurn's ruling, was the party which chose the original litigation forum, instituted the preliminary relief application, and, in the Court's opinion, had a full and fair opportunity to make its case. The only possible variance between these finality factors, as set forth in Don King Prods., and those in the instant case is that Judge McCurn's ruling was not affirmed on appeal. As discussed supra, Algonquin had a clear opportunity to appeal Judge McCurn's Decision I as to its ruling on the purported security interest in the tort judgment proceeds. Moreover, the Second Circuit Court of Appeals, while addressing the issue of finality in the context of the preclusive effect of a preliminary injunction proceeding, has held that "[f]inality in the context here relevant may mean little more than that the litigation of a particular issue has' reached such a stage that a court sees no really good reason for permitting it to be litigated again." Lummus Co. v. Commonwealth Oil Ref. Co., 297 F.2d at 89.
Based on the foregoing analysis, the Court believes that Judge McCurn's finding in Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d 341 (N.D.N.Y. 2001), that Defendants did not have a valid security interest in the tort claim or Stetson-Harza Judgment, should be afforded preclusive effect.
Defendants Arguments concerning their alleged Security Interest in the Stetson Harza Judgment
In spite of the finding that Judge McCurn's Decision I precludes Defendants' litigating this point again, an analysis of Defendants' substantive claims regarding their purported security interest in the Stetson-Harza Judgment would not be out of place here. As such, the remainder of this Decision addresses the several arguments Defendants make in support of their position.
Algonguin's Purported Security Interest
There are several problems with Defendants' argument that under Connecticut common law the Indenture grants Algonquin a security interest in the tort judgment. The first is that, by Defendants' own admission, "[w]hat has not been directly addressed in Connecticut common law is whether tort claims for . . . engineering malpractice claims can be assigned." See Defendants' Memorandum in *46 Opposition, p. 12. Nevertheless, this admitted lack of relevant precedent fails to deter Defendants. Their memorandum goes on to engage in a facial analysis of several Connecticut cases, from which the strongest support Defendants can distill is that one case "suggested" that an earlier case, namely Gurski v. Rosenblum & Filan LLC, 276 Conn. 257, 885 A.2d 163, 168 (2005), which even the Defendants admit did not rule on the issue of assignability of tort claims for property damage, held that the issue of the assignability of tort claims for property damage depended on public policy. See Defendants' Memorandum in Opposition, p. 14, citing Esposito v. CPM Ins. Sens., Inc., 922 A.2d 343, 350 (Conn.Super.2006). Defendants then infer that because there is no policy consideration militating against the assignment of the Stetson-Harza claim or judgment, the Stetson-Harza claim is assignable under Connecticut common law.
This argument is unavailing in several respects. First, the premise that the Stetson-Harza claim or judgment is one for property damage, rather than engineering malpractice, is false: in his decision, Judge Hurd found that the proper measure of damages "should be . . . the difference in value between the, plants as constructed and if properly constructed." See Hydro Investors, 63 F.Supp.2d. at 229 (emphasis added). Judge Hurd noted, however, that "[t]he difficulty with this measure of damages is that there was no allegation of improper construction. Moreover, the plants cannot be properly constructed . . . because of the physical limitations at the sites." Id. Judge Hurd went on to agree with TPI's use of the revenue lost (as a direct result of Stetson-Harza's engineering malpractice) during the 1988-2000 duration of the Niagara Mohawk contract as the proper measure of damages. This measure of lost revenues for the 1988-2000 period, according to Judge Hurd, "represents the difference in value of the power plants as constructed and the value of the power plants properly constructed so as to produce the projected energy and revenue levels." Id. at 229-30. This is not a tort claim for property damage. It is a claim for engineering malpractice in which, as a measure of damages, the court relied on an analysis of revenue lost by the plaintiff during a specific period of time.
Second, even if the engineering malpractice claim were a tort claim for property damage, the case law cited does not support Defendants' contention that the tort claim is assignable. As noted above, the best case Defendants could muster merely suggested that an earlier case held that the issue of the assignability of tort claims for property damage depended on public policy.
Third, Defendants do not even attempt to address how the assignment of an engineering malpractice claim, or the Stetson-Harza claim in particular, would or would not fall within the ambit of public policy. The entire argument collapses in on itself.
Even more troubling is that this is the logical threshold Defendants must cross in order to make their argument that the Indenture and/or the Consolidation Agreement (governed by Connecticut law) does in fact assign Algonquin a security interest in the Stetson-Harza claim. Although the Court has just found that Defendants have not demonstrated that an engineering malpractice claim may be assigned under Connecticut common law, Defendants' argument that those documents do assign such an interest will be treated next.
Connecticut Common Law
Defendants contend that the Indenture grants Algonquin an interest in "each and every one of the . . . contracts . . . and other agreements . . . including, without limitation, these assigned agreements described *47 in Annex 3 . . ." Defendants' Memorandum in Opposition, p. 9, quoting Indenture, Clause A, pp. 2-3 (emphasis added). Defendants argue that the words "without limitation" compel the result that the Indenture grants Algonquin an interest in the Stetson-Harza claim or judgment, despite the lack of any reference whatsoever to any tort claim in the extensive litany of "leases, contracts, permits, licenses, franchises, certificates, insurance policies, warranties, bonds and other agreements" which comprises Annex 3.
Defendants also rely on Clause A of the Indenture because it grants Algonquin an interest in "all Property . . . of the companies . . ." See Defendants' Memorandum in Opposition, p. 9 quoting Indenture at Clause A, p: 2-3. However, Defendants' assertion that the Indenture's definition of Property is all inclusive pursuant to Connecticut common law runs aground. In Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 828 A.2d 64 (2003), the Connecticut Supreme Court held that "`to constitute an assignment there must be a purpose to assign or transfer the whole or part of some particular thing, debt, or chose in action, and the subject matter of the assignment must be described with such particularity as to render it capable of identification.'" Id. at 79, quoting Dysart Corp. v. Seaboard Surety Co., 240 Conn. 10, 17, 688 A.2d 306 (1997) (emphasis added). The Indenture's failure to mention any tort claim at all, much less the Stetson-Harza tort claim with any level of "particularity as to render it capable of identification" is fatal to Defendants' contention that the Indenture assigns Algonquin an interest in that claim. This is especially so given the fact that Defendants' predecessor in interest, Aetna, was well aware of the tort claim when the Revised/Amended Indenture was drafted. If the Defendants' interpretation of the word "property" were to prevail, the drafters of such Indentures could conclude their drafting of the granting clauses with the words "all property." There would be no reason or need for the detailed descriptions of property and collateral contained in the Indenture itself and its appendices. The actual drafting and interpretation of security agreements is not so simple as to treat a phrase such as "all property" as a comprehensive and all-encompassing legal term-of-art.[15]
New York Common Law
Defendants' next claim that the Consolidation Agreement is governed by the law of New York. The Defendants correctly point out that this agreement was amended by the Modification Agreement executed on January 15, 1996 (Plaintiff s Ex. P). This document expressly provides that it "shall be governed by, and construed and enforced in accordance with, the internal law of the state of Connecticut." Id. at p. 6. Defendants, however, do *48 not concede even this point, and maintain that, as with the original Consolidation Agreement, New York law still applies because of the Modification Agreement's provision that "[a]ll of the terms and conditions of the Existing Mortgage and the collateral security provided thereby are hereby ratified and confirmed in all respects and shall remain in full force and effect." See Defendants' Supplemental Memorandum in Opposition, p. 7, quoting the Extension and Modification Agreement of January 15, 1996 (Plaintiffs' Ex. P) at p. 6. However, Defendants fail to cite the very next sentence in the Modification Agreement, which states that the Consolidation Agreement has not been modified or amended "[e]xcept as expressly provided herein . . ." Id. The Court reads the Modification Agreement's provision that the law of Connecticut shall apply to be an express modification of the Consolidation Agreement. As a result, the same conclusion reached supra holds in this instance; that under Connecticut common law, assignment requires, inter alia, a description of the subject matter being transferred or assigned "with such particularity as to render it capable of identification." See Schoonmaker v. Lawrence Brunoli, Inc., 828 A.2d at 79. Thus, both the Consolidation Agreement and the Modification Agreement's failure to mention a tort claim at all is fatal to Defendants' argument that either of those Agreements assigns an interest in the tort claim to Algonquin under Connecticut common law.
Even accepting Defendants' premise as correct, that New York law does apply, Defendants' argument still fails. This is because Defendants base their contention that the Consolidation Agreement assigns an interest in the tort claim on the Consolidation Agreement's reference to interests which include any recovery relating to a reduction in value of the Indenture Estate. See Defendants' Memorandum in Opposition, p. 16, citing Consolidation Agreement at p. 7-8, specifically ¶¶ 10, 12 and 14. As discussed supra, the Stetson-Harza Judgment is not a tort claim for property dam age. It is a claim for engineering malpractice in which, as a measure of damages, the court relied on an analysis of revenue lost during a specific time period. The award by Judge Hurd was not based on condemnation or eminent domain proceedings, as referenced in ¶ 10,[16] or refunds of taxes, assessments, etc. as referenced in ¶ 12. Instead, Judge Hurd opined that the damages awarded TPI were based on "[t]he loss of revenue for the thirteen year period from 1988-2000 represent[ing] the difference in value of the power plants as constructed and the value of power plants properly constructed so as to produce the projected energy and revenue levels." See Hydro Investors, 63 F.Supp.2d at 230. However, it is not possible to deduce `from this statement that the damages represent an award for the "decrease in the value of such property . . ." as specified in the Consolidation Agreement. This is so because Judge Hurd made a point of noting that the damages "[do] not provide compensation for losses after the end of the Niagara Mohawk contract in 2000 nor for continuing to be the owner of power plants which, because of the low power outputs, are not economically feasible." Hydro Investors, *49 63 F.Supp.2d. at 230 (emphasis added). In fact, Judge Hurd acknowledged that the property "cannot be properly constructed . . . because of the physical limitation at the sites." Id. at 229. The damages awarded in the Hydro tort action were for engineering malpractice, based on a loss of revenue for the period 1988 to 2000 due to the underperformance of the plants as constructed, and not for any actual "decrease in value of the property."
Change in Type of Collateral
Defendants argue that even if Connecticut law acted as a bar to the Indenture or Consolidation Agreement's ability to assign an interest in the tort claim, that bar disappeared when the Stetson Harza Judgment was rendered. Defendants also contend that the tort claim changed collateral type again when Stetson Harza appealed and posted a bond, making the collateral a claim against a bond, then a claim under a contract, then a fund in a restricted escrow account. Defendants maintain that the Indenture grants Algonquin a security interest, under the Connecticut UCC, in each of these types of collateral (judgment, claim against a bond, claim under a contract, and a fund under a restricted escrow account). The Court finds such arguments completely unavailing. It is sufficient only to review the case law. Defendants cite in `support of this argument.
In Fleet Bank, N.A. v. Coffin, No. H-90-204, 1992 WL 81984, at *6, 1992 U.S. Dist. LEXIS 6614, at *19-20 (D.Conn. April 10, 1992) the debtor executed a written document granting Virginia National Bank a security interest in and to any proceeds to specified litigation. The Coffin court held that the bank's security interest did not attach until the property, the proceeds of the litigation, came into existence. However, in Coffin the debtor had expressly granted the bank a security interest in the litigation proceeds. This is more than enough to distinguish the case, as well as In re Stone, 52 B.R. 305 (Bankr. W.D.Ky.1985).
Defendants believe Stone to be relevant because in that case the court found that a creditor's interest in cattle included proceeds from the settlement of a tort claim against the cattle's veterinarian for negligence which led to the death of 300 cattle. However, the Stone court's holding is actually much narrower than a cursory glance reveals. The court actually held only that "monies received in settlement of a tort claim for the tortious damage or destruction of secured collateral are proceeds under the provisions of [the Kentucky U.C.C.]." See id. at 308. There was clearly no tortious damage to, or destruction of, collateral in the instant case.
Defendants cite In re Vienna Park Properties, 976 F.2d 106 for the proposition that a fund in a restricted escrow account is a general intangible. From that limited finding, Defendants (as they did with the Coffin case, supra) attempt to bootstrap themselves into the position that a security interest in general intangibles, which they assert both the Indenture and Consolidation Agreement granted to Algonquin, attaches to a fund in a restricted escrow account. However, the parties to the escrow account in Vienna Park had expressly assigned their interests in the escrow agreement to a third party in a valid security agreement. The Vienna Park court had to reach only the narrow issue as to whether the escrow account was an intangible in order to determine the correct perfection procedure.[17] If one *50 assumes that the Indenture or the Consolidation Agreement expressly assigned a security interest in the tort claim or its proceeds in the escrow account, it becomes much easier to find relevant case law. In reality, however, neither the Indenture nor the Consolidation Agreement contains such an express grant or assignment of a security interest. It is difficult not to sense a pronounced lack of actual support for Defendants' position in light of the fact that their nearly exhaustive memoranda fail to cite one case (or secondary authority) which holds that a security agreement granting a security interest in general intangibles (as opposed to an express grant of an interest in the account itself) attaches to the funds in an escrow account.
The Stone, Coffin and Vienna Park cases provide no support for Defendants' argument that a change in the status of the purported collateral (from a claim to a judgment to a "claim against a bond" to a "claim under a contract" to a "fund in a restricted escrow account") results in the Indenture or Consolidation Agreement granting an interest in the proceeds. If the security agreement does not expressly grant a security interest in the underlying tort claim or its proceeds, no subsequent transformation will magically result in an automatic attachment of those proceeds.
Revised New. York Article 9 Applies
Defendants next make the argument that Revised Article 9, which is applicable to grants of security interests in commercial tort claims and became effective on July 1, 2001, applies in this case. Defendants contend that, as a result, the security, interests granted under the Consolidation Agreement automatically attached and became perfected as of July 1, 2001. To support their contention that Revised Article 9 applies even though the relevant underlying documents were all executed well before Revised Article 9's effective date, Defendants, paraphrasing Rev. N.Y. UCC § 9-702(a), maintain that "Revised Article 9 applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before Revised Article 9 takes effect." See Defendants' Memorandum in Opposition, p. 19. However, Defendants' contention that Revised Article 9 applies to this particular pre-effective date transaction fails on more than one front.
First, Rev. N.Y. UCC § 9-702(b)(1) and (2) set out the rules for a transaction which was specifically not covered by pre-Revised UCC law, but would have been covered had the transaction occurred after the effective date of the Revised UCC. Both parties admit that commercial tort claims fall into this category. For these types of transactions, the Revised Code gives the parties an option: these pre-effective date transactions may be "terminated, completed, consummated, and enforced under this article. However, these transactions also may be terminated, completed, consummated, and enforced by the law that otherwise would apply had this article not taken effect.". See Rev. N.Y. UCC § 9-702, Official Comment 1. See also Ingrid Michelsen Hillinger and Michael G. Hillinger, 2001: A Code Odyssey (New Dawn for the Article 9 Secured Creditor), 106 Corn. L.J. 105, 154-55 (2001).
Because there is absolutely no indication that the parties took any affirmative action whatsoever to either terminate or consummate the existing Indenture or Consolidation Agreements pursuant to Official Comment 1 of Rev. N.Y. UCC § 9-702, the *51 Court finds that the pre-Revised UCC, which specifically excluded commercial tort claims from its scope, is the relevant law.
Second, Rev. N.Y. UCC § 9-702(c) makes an exception for' certain pre-effective date transactions, effectively preventing Revised Article 9 from applying in "an action, case, or proceeding commenced before [Revised Article 9] takes effect." See Rev. N.Y. UCC § 9-702(c). In the instant case, as the Defendants' own Statement of Material Facts demonstrates, Algonquin commenced an action in August 2000 alleging that TPI's assignment of the Stetson-Harza Judgment to Pine Run was a fraudulent transfer and/or conversion, followed by its application for a preliminary injunction and/or an order of attachment regarding the proceeds of that judgment. See Defendants' Fed.R.Bankr.P. 7056 Statement of Material Facts, ¶¶ 40-42. In fact, and as discussed supra, Judge McCurn's Decision I specifically addresses Algonquin's claim that the Indenture granted it a security interest in the judgment. See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348.
Defendants effectively counter, however, that the instant adversary proceeding, as well as the Plaintiffs' bankruptcy cases, were commenced after the Effective Date of Revised UCC. The Court does not need to reach the issue as to which commencement date (Plaintiffs' bankruptcy, Defendants' 2000 action or the instant Adversary Proceeding) would be relevant to the proper interpretation of Rev. N.Y. UCC § 9-702(c). The Court's determination that pursuant to Rev. N.Y. UCC § 9-702(b)(1) and (2) the Revised UCC does not apply is sufficient.
However, as with several of Defendants' arguments, even if Defendants' contention that Revised Article 9 applies is accepted, it still avails them nothing. In this instance, if Revised Article 9 were to apply, Defendants might seem to be closer to their goal because Revised Article 9 does include commercial tort claims within its scope. However, Revised Article 9 provides some guidance as to what will suffice in order for attachment of a tort claim to occur. Official Comment 15 to Rev. N.Y. UCC § 9-109 states that "a description of collateral in a security agreement' as `all tort claims' is insufficient to meet the requirement for attachment."[18] (emphasis added). Neither the Revised Indenture nor the Consolidation Agreement contain language even remotely as specific as "all tort claims." This Court finds that if the words "all tort claims" in a security agreement are insufficiently specific to effect attachment of a commercial tort claim in the opinion of the drafters of Revised Article 9, the even less descriptive language upon which Defendants are attempting to rely is clearly not sufficiently specific either.
CONCLUSION
The Court concludes that Judge McCurn's finding that Defendants' claim to have been granted a security interest in the Stetson-Harza Judgment "lacks merit" was, by the standards contained in Don King Prods., Inc. v. Douglas, 742 F.Supp. at 754-55 and Lummus Co. v. Commonwealth Oil Ref. Co., 297 F.2d at 89, sufficiently final as to be accorded preclusive effect. Each of Defendants' arguments to the contrary are addressed in the discussion section of this Decision, and found unavailing.
*52 In the alternative, the Court's analysis of the substantive arguments for and against Algonquin's having been granted an interest in the tort claim, Stetson-Harza Judgment and any of its subsequent iterations, reveals no basis upon which to credit Defendants' contention that it has a valid interest in those funds under New York or Connecticut statutes or common law.
Based on the foregoing, it is hereby
ORDERED that Plaintiffs' motion for Summary Judgment is GRANTED; and it is further
ORDERED that Defendants' motion for Summary Judgment is DENIED.
NOTES
[1] TPI defaulted on this debt, and in negotiations with Aetna the Aetna Loan was replaced by an "A" note ($6,700,000) and a "B" note ($15,800,000). Algonquin completed its purchase of the "B" note on March 27, 1997. The "A" note was also later sold to Algonquin.
[2] "Dunlevy who also performed engineering services for TPI as an independent individual and, as the principal of Hydro Investors, entered into a partnership/joint venture agreement with TPI regarding the development and future management of the projects. Dunlevy left the employ of Stetson-Harza in 1987." Hydro Investors, Inc. v. Trafalgar Power, Inc., 63 F.Supp.2d. 225, 227 (N.D.N.Y.1999), aff'd in part, vacated & remanded in part, 227 F.3d 8 (2d Cir.2000).
[3] Case No. 99-CV-1238 is TPI's 1999 breach of contract action against Algonquin and Aetna regarding Aetna's sale of the "A" and "B" notes to Algonquin. In that action Algonquin counterclaimed seeking a declaration that it is the rightful owner of the Notes, as well as money damages as a result of TPI's alleged breach of the Revised Indenture with respect to the "B" Note.
[4] Pursuant to 28 U.S.C. § 636(b)(1)(c).
[5] The Indenture is the July 1, 1988 agreement between TPI and Connecticut Bank and Trust Co., which granted Connecticut Bank and Trust Co. (as security trustee) security for the $22,500,000 in notes held by Aetna. (Defendants Ex. 2). The Indenture was amended and restated on January 15, 1996 ("Revised Indenture") (Plaintiffs' Ex. C and Defendants' Ex. 10), but both parties agree that for the purposes of this matter there is no material difference between the Indenture and Revised Indenture. The rights granted in the collateral by the Indenture are referred to as the "Indenture Estate."
[6] The Consolidation Agreement, between the same parties as the Indenture Agreement, merely grants to the security trustee (and hence, any subsequent holder of the related notes) an interest in the consolidated mortgages related to the financed facilities. It is contained in Defendants' Ex. 5.
[7] The Court agrees with, and takes seriously, Plaintiffs' contention that "resolution of this issue is more an exercise in reading comprehension than legal analysis." See Plaintiffs' Amended Memorandum of Law, p. 5.
[8] And as we shall see infra, it is in its conversion claim, not its §§ 273 and 276 claims, that Algonquin contends that it has a security interest in the $7.6 million tort judgment.
[9] Those who would minimize the importance of comma placement are reminded of Justice Blackmun's analysis in United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989).
[10] The assignment referred to is TPI's attempted assignment of the tort judgment to Pine Run.
[11] This interpretation is further bolstered by a later sentence in the decision, which (unlike Judge McCurn's finding regarding the §§ 273 and 276 claims) also lacks any type of limiting language: "As already discussed above, Algonquin cannot show an immediate superior right of possession in TPI's tort judgment and, as a result, does not demonstrate a likelihood of success on the merits of its conversion claim." See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 352.
[12] The reason Judge McCurn found that Algonquin's §§, 273 and 276 claims did not support an order of attachment "at [that] stage in the litigation" is because in order to be entitled to an order of attachment, a claimant must demand a money judgment and possess a matured claim. In the action before Judge McCurn, however, Algonquin sought equitable relief rather than a money judgment, and its claim was unmatured because "TPI's" debt to Algonquin [was] premised upon Algonquin's success in 99-CV-1238 [TPI's 1999 breach of contract action against Algonquin and Aetna regarding Aetna's sale of the A and B notes to Algonquin]." See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 349 n. 9.
[13] The only other place in Judge McCurn's Decision I where the phrase "at this time" appears is in the sentence "[a]nd although Algonquin satisfies the first element for an order of attachment, i.e., that a claim for a money judgment exists, Algonquin cannot at this time demonstrate a probability of success on the merits." See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d. at 348. Here again, Algonquin's request for an order of attachment is based upon the §§ 273 and 276 claims, which do not involve the security interest issue.
[14] If Defendants mean to argue that because the appraisals of TPI's facilities were not accompanied by affidavits from parties with personal knowledge Judge McCurn's ruling was not final (see Defendants' Memorandum in Opposition, p. 6), they fail to support this contention with any case law of reasoned argument. The Court sees no reason why this would render Judge McCurn's Decision I less than final.
[15] It is true that Revised UCC § 9-504 does allow for supergeneric terms such as "all assets" in financing statements. This section reads, in relevant part: "A financing statement sufficiently indicates the collateral that it covers if the financing statement provides: . . . an indication that the financing statement covers all assets or all personal property." C.G.S.A. § 42a9-504 and N.Y. UCC § 9-504. This does not apply to security agreements, however. Revised UCC § 9-203(b)(3)(A) still requires that a security interest will be enforceable and attach only when, inter alia, "the debtor has authenticated a security agreement that provides a description of the collateral . . ." C.G.S.A. § 42a-9-203(b)(3)(A) and N.Y. UCC § 9-203(b)(3)(A) (emphasis added). In a security agreement, "a description as `all the debtor's assets' or `all the debtor's personal property' . . . does not reasonably identify the collateral." C.G.S.A. § 42a-9-108(c). See also N.Y. UCC § 9-108(c) (stating that "[s]upergeneric description [is] not sufficient. A description of collateral as `all the debtor's assets' . . . does not reasonably identify the collateral.")
[16] The Consolidation Agreement language cited by Defendants ("decrease in the value of such property") in ¶ 10 applies only to "condemnation, eminent domain or similar proceeding[s] . . ." See Consolidation Agreement, pp. 7-8; Plaintiff's Supplemental Memorandum, pp. 11-12. This fact becomes clear only when the relevant paragraph is read in toto, and the Agreement describes the mortgagee's authorization to settle, compromise or litigate "all proceeding[s] in connection with any such taking . . ." Id. (emphasis added). The tort claim at issue is not in any way related to a taking of any kind.
[17] And even on this point the Second Circuit Court of Appeals held that the district court was only "likely correct" in classifying the escrow account as a general intangible. In fact, as that finding was not necessary to the Court of Appeals' holding in Vienna Park, even that limited finding is merely dicta.
[18] Defendants do not refer to this Official Comment in their papers. Defendants' counsel did mention it at oral argument, however, asserting correctly (but to little purpose) that Revised Article 9 does not require any specific "magic words" which would meet the attachment requirement. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546809/ | 988 A.2d 209 (2010)
294 Conn. 785
TOWN OF BRANFORD
v.
Thomas SANTA BARBARA, Jr., et al.
New England Estates, LLC
v.
Town of Branford.
Nos. 18089, 18091.
Supreme Court of Connecticut.
Argued May 26, 2009.
Decided February 16, 2010.
*211 Wesley W. Horton, Hartford, with whom were William H. Clendenen, Jr., New Haven, Kimberly A. Knox, Hartford and, on the brief, Kevin C. Shea, New Haven, Kenneth J. Bartschi, David A. Reif, Matthew A. Weiner, Hartford and Jonathan M. Freiman, New Haven, for the appellant (defendant town of Branford).
Timothy S. Hollister, with whom were Sheila A. Huddleston and, on the brief, Jill O'Toole, Hartford, for the appellee (plaintiff New England Estates, LLC).
Linda L. Morkan, with whom, on the brief, were Steven R. Humphrey, Brian R. Smith and Jeffrey J. White, Hartford, for the appellees (plaintiffs Thomas Santa Barbara, Jr., et al.).
NORCOTT, KATZ, PALMER, ZARELLA and McLACHLAN, Js.[*]
McLACHLAN, J.
These two consolidated appeals,[1] as well as the two companion cases also decided today; see Branford v. Santa Barbara, 294 Conn. 803, 988 A.2d 221, 2010 WL 432352 (2010); New England Estates, LLC v. Branford, 294 Conn. 817, 988 A.2d 229, 2010 WL 432363 (2010); arise from the exercise of eminent domain by the defendant town of Branford (town), with respect to an approximately seventy-seven acre parcel of land, known as 48-86 Tabor Drive, in the south central area of town. The town appeals from the judgments of the trial court in favor of the plaintiffs, Thomas Santa Barbara, Jr., and Frank Perrotti, Jr., the owners of the subject property at the time of the taking (owners), and the plaintiff, New England Estates, LLC (New England Estates), a developer that had entered into an option contract with the owners to purchase the property.[2] The town claims that the trial *212 court improperly concluded that the highest and best use of the property was for residential development. The town bases this claim primarily on the contention that, in order for the trial court to so conclude, it first must have concluded that New England Estates would have prevailed in an appeal pursuant to General Statutes § 8-30g from the decision of the town planning and zoning commission (zoning commission) denying its application for site plan approval, and that such a conclusion would have been improper.[3] Additionally, the town claims that the trial court improperly allowed New England Estates' expert witness to testify regarding his opinion that on appeal the trial court would have reversed the denial of New England Estates' affordable housing application. We affirm the judgments of the trial court.
The trial court found the following relevant facts. The property consists of 76.91 acres, and residential development is the predominant use of the land surrounding the property. The property is bordered on the west by Tabor Drive, along which are residences, a church, a cemetery, salt marshes and small industrial sites. The property is bordered on the north by an active railroad line, which separates the property from residential neighborhoods to the north. The northeastern corner of the property abuts Pine Orchard Road. A landfill borders the property on the southwest, and land owned by the Branford Land Trust makes up the remainder of the southern border of the property. To the east are a dog kennel, a veterinary clinic and more residential neighborhoods. The property is about one mile southeast of the town center and is southeast of the Branford River. Long Island Sound is about three quarters of a mile to the south of the property.
Because the site formerly had been mined for sand and gravel, much of the topsoil has been removed. Wetlands comprise 7.35 acres of the property, including a 4.7 acre pond. Although the northwest portion of the site is within a flood plain, according to a flood insurance rate map dated June 16, 1992, and November 18, *213 1983, a majority of that portion of the property is located in an area of minimal flooding. Dirt and gravel roads run through the site, and sewer, water, electricity and telephone service are available to the property. At the time of the taking in January, 2004, most of the site was zoned IG-2 industrial, and a small portion was zoned R-3 residential.[4] There also was a special development area[5] overlay zone over the entire site. The property previously had been designated a planned development district, but the town had eliminated that designation for the property in 2002 pursuant to § 35.11 of the town zoning regulations.[6]
In 1988, notwithstanding the zoning classification of the property as IG-2 industrial, the town had approved a site plan application for the construction of a development on the property consisting of 298 residential condominiums, a community building and a nine hole golf course. In the early 1990's, the owners purchased the property at a foreclosure auction for $2.11 million, and in 2001, entered into an option agreement with New England Estates for a purchase price of $4.75 million. New England Estates, which had been formed for the purpose of purchasing and developing the property, agreed to pay $10,000 per month for the option to purchase, as well as the costs of testing, engineering, site designs, and town approvals for the proposed residential development, including legal fees associated with the approval process. The contract allowed for renewal periods at higher monthly rates, and subsequent amendments allowed New England Estates to extend the term of the *214 option agreement. The contract provided for an additional payment at closing of $100,000, plus $45,000 per revised renewal period.
After entering into the option agreement, New England Estates began its efforts to secure site plan approval for a residential development on the property. Initially intending to resurrect the 1988 plan, it hired the same engineering, planning and landscaping firm that had prepared that plan. Ultimately, New England Estates submitted a plan for a 268 unit development with a golf course. The town's inland wetlands commission and the United States Army Corps of Engineers both granted permits for the site plan, in May, 2002, and March, 2003, respectively. The zoning commission, however, denied New England Estates' application seeking a new planned development district designation for the property.[7]
In May, 2003, New England Estates submitted a new plan, this time under the affordable housing statute. See General Statutes § 8-30g. The plan called for 354 units, but did not include a golf course. At the same time, New England Estates sought a modification to the permit it had received from the inland wetlands commission in 2002, for the 268 unit proposed development. In June, 2003, New England Estates once again submitted a site plan application for a 354 unit affordable housing development, this time including a golf course. In August, 2003, the inland wetlands commission informed New England Estates that it would not consider a modification of the 2002 inland wetlands permit, and that an application for a new permit was required.[8]
In July, 2003, the representative town meeting, the town's legislative body, voted to take the property by eminent domain, and on December 18, 2003, the town filed a notice of condemnation and statement of compensation in the amount of $1,167,800. That sum was deposited with the clerk of the court. In the meantime, the zoning commission conducted public hearings on New England Estates' June, 2003 proposed site plan and § 8-30g application. The town acquired the site by eminent domain on January 5, 2004, and subsequently denied New England Estates' § 8-30g application. In separate actions, the owners and New England Estates each filed appeals and applications for review of the statement of compensation. The two actions were consolidated and transferred to the complex litigation docket in the judicial district of Waterbury, where they were tried together before the court.[9] The judgments in those cases give rise to these appeals.
The trial court heard the testimony of two appraisers on behalf of the owners and New England Estates, R. Bruce Hunter and Richard A. Michaud, and one appraiser on behalf of the town, Albert W. Franke III. Hunter and Michaud, both of whom testified that it was reasonably probable that New England Estates' would obtain *215 approval for residential development of the property, began with the premise that the highest and best use of the land was residential, while Franke, who concluded that such approval was "highly speculative at best," began with the assumption that the highest and best use was for the land to remain vacant and undeveloped.[10] Hunter, relying on the sales comparison approach,[11] determined that the market value of the land was $6.1 million based on the 354 unit affordable housing development proposal, and $6.2 million based on the 268 unit market rate housing development proposal. Michaud relied on both the sales comparison approach and the development approach,[12] and arrived at a valuation of $6.9 million under the sales comparison approach and a valuation of approximately $6.4 million under the development approach. Giving slightly greater weight to the development approach, Michaud arrived at a final valuation of $6.5 million. Franke relied on the sales comparison approach to arrive at a valuation of $770,000.
The trial court found that the highest and best use of the land was residential, and, accordingly, rejected Franke's opinion. The court relied on the appraisals of Hunter and Michaud, as well as all of the testimony presented during the trial and the court's visual inspection of the property, to arrive at a valuation of $4.6 million.[13] In arriving at its conclusion, the court specifically found that the town had presented no credible evidence of environmental contamination of the site. These appeals followed.
I
The town first claims that the trial court improperly determined that the highest and best use of the property was for residential development. The town argues that because the property was zoned industrial *216 at the time of the taking, New England Estates could not have secured approval for a residential development without a zone change. Because it was not reasonably probable that New England Estates would have been successful in obtaining a zone change, the town argues, the trial court's conclusion that the highest and best use of the property was residential was improper. We disagree that the appeal turns on whether New England Estates successfully would have obtained a zone change. Instead, because there were sufficient facts in the record independent of that issue to support the trial court's finding that the highest and best use of the land is residential, we conclude that the court's determination was not clearly erroneous.
"The owner of land taken by condemnation is entitled to be paid just compensation. Conn. Const., art. I, § 11." Lynch v. West Hartford, 167 Conn. 67, 73, 355 A.2d 42 (1974). "[T]he amount that constitutes just compensation is the market value of the condemned property when put to its highest and best use at the time of the taking." (Internal quotation marks omitted.) Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, 256 Conn. 813, 828, 776 A.2d 1068 (2001). "Generally speaking, market value is the price that would in all probabilitythe probability being based upon the evidence in the caseresult from fair negotiations, where the seller is willing to sell and the buyer desires to buy." (Internal quotation marks omitted.) Budney v. Ives, 156 Conn. 83, 88, 239 A.2d 482 (1968). "The highest and best use concept, chiefly employed as a starting point in estimating the value of real estate by appraisers, has to do with the use which will most likely produce the highest market value, greatest financial return, or the most profit from the use of a particular piece of real estate.... In determining its highest and best use, the [trier] must consider whether there was a reasonable probability that the subject property would be put to that use in the reasonably near future, and what effect such a prospective use may have had on the property's market value at the time of the taking." (Citations omitted; internal quotation marks omitted.) Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, supra, at 829, 776 A.2d 1068.
"Because a change in zoning restrictions obviously could affect the price of real property, where such a change is reasonably probable and not merely a remote or speculative possibility, the probability may properly be considered in the determination of the fair value of the property." (Internal quotation marks omitted.) Greene v. Burns, 221 Conn. 736, 745, 607 A.2d 402 (1992). In determining the market value of a property in light of a reasonably probable zone change, "the true issue is ... the value of the property as zoned at the time of the taking as it is affected by the probability of a change." Budney v. Ives, supra, 156 Conn. at 89, 239 A.2d 482. The questions of the highest and best use of the property and the reasonable probability of a zone change are questions of fact, and a trial court's determination of these issues will not be disturbed unless clearly erroneous. Bristol v. Tilcon Minerals, Inc., 284 Conn. 55, 65, 931 A.2d 237 (2007); Transportation Plaza Associates v. Powers, 203 Conn. 364, 375, 525 A.2d 68 (1987).
In reviewing the factual findings of the trial court under the highly deferential, clearly erroneous standard of review, "[w]e do not examine the record to determine whether the trier of fact could have reached a conclusion other than the one reached. Rather, we focus on the conclusion of the trial court, as well as the method by which it arrived at that conclusion, *217 to determine whether it is legally correct and factually supported.... A finding of fact is clearly erroneous when there is no evidence to support it ... or when although there is evidence in the record to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." (Citation omitted; internal quotation marks omitted.) St. Joseph's Living Center, Inc. v. Windham, 290 Conn. 695, 706-707, 966 A.2d 188 (2009).
Implicit in the trial court's finding that the highest and best use of the land is residential is the finding that it was reasonably probable that New England Estates would succeed in obtaining approval to use the land for residential development under at least one of the proposed development planseither the 354 unit affordable housing development or the 268 unit market rate developmentand that it was also reasonably probable that New England Estates successfully would obtain any necessary zone changes.[14] The trial court had more than sufficient evidence before it to support those implicit factual findings. The court's memorandum of decision recognizes that at the time of the taking, the property was zoned as IG-2 industrial under the town's zoning regulations. The court noted, however, that in 1988, when the property also was zoned as IG-2 industrial, the town approved a proposal for a 298 unit condominium development that would have included a community building and a nine hole golf course.[15] The court considered the following additional facts: *218 The property was located within a special development area, and previously had been designated a planned development district. As part of the town's plan of conservation and development, adopted in 1997, the town's future land use map designated most of the property for use as moderate to high density residential development. In May, 2002, New England Estates received a permit from the town's inland wetlands commission for its proposal for a 268 unit condominium development with a nine hole golf course. In March, 2003, in connection with the same proposed development, New England Estates received a permit under 33 U.S.C. § 1344 from the United States Army Corps of Engineers.[16]
The court also found that the property's location is an "ideal setting for residential use," located close to both Long Island Sound and the town center, with considerable frontage on the existing streets of Tabor Drive and Pine Orchard Road. There are residential neighborhoods to the north, east and west of the property. The property has easy access to utilities, including a sanitary sewer line and a municipal water line. Two of the three experts who testified at trial stated their opinion that it was reasonably probable that New England Estates would be successful in obtaining approval for a residential development on the property.[17] New England Estates had entered into an option *219 agreement with the owners, which the trial court recounted in great detail. That agreement established a purchase price of $4.75 million, required New England Estates to pay tens of thousands of dollars monthly for the option, and also required that New England Estates pay the costs of obtaining the necessary approvals for the development. New England Estates diligently sought such approval, filing three separate site plan applications for residential development of the property. The court also relied on its own visual inspection of the property. Finally, the court found that there was no credible evidence to support the primary reason proffered by the townthat the property was environmentally contaminatedfor rejecting the development plan submitted by New England Estates.[18]
The evidence amply supports the trial court's express determination that the highest and best use of the property was residential, and its implicit determination that it was reasonably probable that New England Estates would obtain the necessary approvals for a residential development, including any necessary zoning changes. We find particularly significant the prior approvals by both the town inland wetlands commission and the zoning commission of a similar development plan in 1988, prepared by the same engineering, planning and landscaping firm, under the same applicable zoning restrictions. Those prior, 1988 approvals, coupled with the designation of the property on the future land use map as intended for moderate to high density residential use, the 2002 inland wetlands commission approval, the 2003 approval by the United States Army Corps of Engineers, the opinions of the two experts relied upon by the court, the fact that the property's location is ideally suited for residential development, and the fact that the trial court did not find credible the town's proffered reason for denial of approval for the June, 2003 development planthat the property was environmentally contaminatedall combine to provide more than enough support for the trial court's findings. We conclude, therefore, that the court's determination that the highest and best use of the land was for residential development, and its underlying, implicit determination that New England Estates would have obtained the necessary approvals and any necessary zoning changes were not clearly erroneous.
The town argues that, in order to affirm the trial court, we must conclude that New England Estates would have prevailed in an appeal pursuant to § 8-30g of the zoning commission's denial of New England Estates' site plan application for the affordable housing development. We disagree. Put most simply, the trial court did not address this issue, and, because there was sufficient, other evidence to support the trial court's finding, it did not need to resolve the question in order to decide the case.
As we have stated, in reviewing the court's findings for clear error, "we focus *220 on the conclusion of the trial court, as well as the method by which it arrived at that conclusion, to determine whether it is legally correct and factually supported." (Emphasis added; internal quotation marks omitted.) St. Joseph's Living Center, Inc. v. Windham, supra, 290 Conn. at 707, 966 A.2d 188. It is unnecessary to consider whether a method not relied upon by the trial courtnamely, a determination of whether New England Estates would have prevailed in an appeal pursuant to § 8-30gwould have had merit. In concluding that it was reasonably probable that New England Estates would have obtained approval for residential development of the property, the court relied on the testimony of experts, evidence of a previous similar approval, the characteristics of the property that render it suitable for residential development, the town's development plan and its own visual inspection of the land. In resolving these appeals, we are required to decide whether the trial court's determination was clearly erroneous based on the record presented. The trial court did not rely, in arriving at its determination of highest and best use, on a conclusion that New England Estates would have been required to prevail in an appeal pursuant to § 8-30g, and would have so prevailed. Moreover, the court did not base its valuation on a specific finding that the property would be developed as an affordable housing development. Rather, it based its valuation at least in part on the testimony of Hunter, who appraised the property based both on the 268 unit market rate development and the 354 unit affordable housing development. Because the record is devoid of evidence that the court based its decision on an evaluation of the merits of an appeal by New England Estates pursuant to § 8-30g, and because there is ample evidence to support the court's determination, it is unnecessary for us to determine whether New England Estates would have prevailed in a § 8-30g appeal.
II
The town next claims that the trial court improperly allowed Mark K. Branse, an attorney who testified as New England Estates' zoning law expert witness, to offer his opinion that the trial court would have reversed the denial of New England Estates' affordable housing application. We disagree.
Branse testified that it was his opinion that the reasons offered by the zoning commission in denying New England Estates' application would have been insufficient to withstand a challenge in the Superior Court pursuant to § 8-30g. The town objected that the testimony was inappropriate because it constituted an interpretation of the law, and was testimony as to the ultimate issue in the case. The court overruled the objection. Because we already have concluded in this opinion that the question of whether New England Estates would have prevailed in an appeal of the decision of the zoning commission pursuant to § 8-30g is irrelevant to the resolution of this appeal, it hardly can be said that Branse offered testimony as to the ultimate issue in the case. Similarly, even if the testimony was improperly admitted on the basis that it constituted impermissible legal opinion because the record is devoid of evidence that the court grounded its decision on the likelihood of a successful appeal pursuant to § 8-30g, any error was harmless.
The judgments are affirmed.
In this opinion the other justices concurred.
NOTES
[*] This case was argued prior to the implementation of the policy of this court to hear all cases en banc.
[1] On August 16, 2007, the town of Branford filed two separate appeals from the judgments of the trial court to the Appellate Court. Subsequently, we transferred the appeals to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1, and granted a motion by Thomas Santa Barbara, Jr., Frank Perrotti, Jr., and New England Estates, LLC, to consolidate the appeals.
[2] In the first case, the town filed a certificate of taking and the owners subsequently sought review of the statement of compensation. In addition to the owners, the first case also included the following parties: National Railroad Passenger Corporation, Adelbert Mautte, Dorothy Mautte, Dennis Butler, Barbara Butler, Barbara Kennedy, the town sewer authority, Edward Parzyck and Mary Brown.
In the second case, New England Estates sought review of the statement of compensation filed by the town. Thereafter, the trial court consolidated the appeals challenging the statement of compensation. Although the first case is captioned Town of Branford v. Thomas Santa Barbara, Jr., et al., because the town filed the certificate of taking, "[t]his court has recognized that the filing of a statement of compensation does not originate a civil action. Simmons v. State, 160 Conn. 492, 494 n. 1, 280 A.2d 351 (1971)." Branford v. Santa Barbara, supra, 294 Conn. at 811 n. 10, 988 A.2d 221. Consequently, we recognize the town as the defendant and New England Estates and the owners as the plaintiffs in these appeals. We refer to these parties by name, however, rather than by party status, in order to avoid any confusion that may result from any contrary identification by the parties in certain pleadings at the trial level.
[3] The town also argues that, because neither the owners nor New England Estates appealed from the zoning commission's denial of the application for site plan approval to develop the property as affordable housing, each of them waived their right to argue that they would have prevailed in such an appeal. Because we conclude that the question of whether New England Estates would have prevailed in an appeal pursuant to § 8-30g is not necessary to the resolution of the present appeals, it is unnecessary for us to resolve whether either of them waived their right to argue that they would have prevailed in an appeal from the denial of the application for site plan approval. Moreover, the town's taking of the land rendered any such appeals moot.
[4] Chapter II, § 23.12, of the Branford zoning regulations defines IG-2, or "[g]eneral [i]ndustrial [d]istrict # 2" as follows: "These districts consist of areas intended to be used for heavy commercial and industrial development on a less intensive basis than the [general industrial district # 1] [d]istricts. They are designed for occupancy on somewhat larger sites with more spacious setbacks, in order to assure a high quality of development within the [d]istrict and an agreeable relationship to adjacent districts. Further development of retail, business and residential uses in these districts will be inconsistent with their purpose and the purpose of the districts. Any residential construction would occur under conditions unfavorable for residential occupancy."
Chapter II, § 23.4, of the Branford zoning regulations defines a "[r]esidence R-3 [d]istrict" as follows: "These districts are designed to consist of single family houses on lots of sufficient size to support private sewage disposal systems pending extension of sewers. Institutions and similar uses will be necessary and appropriate in these districts but only as special uses upon a finding that development will be compatible with the character of the district."
[5] Chapter II, § 23.15, of the Branford zoning regulations defines "[s]pecial [d]evelopment [a]rea" as an overlay zoning district that is "in addition to and overlap[ping] one or more other districts for the purpose of defining that area of [t]own in which other districts, including [p]lanned [d]evelopment [d]istricts, may be established and coordinated in accordance with overall plans for development of the area."
[6] Chapter III, § 35, of the Branford zoning regulations governs planned development districts, which may be established only within the special development area designated on the town zoning map. Once a planned development district is authorized by the zoning commission, "[t]he development authorized by the [c]ommission shall be completed within five ... years from the effective date of the [d]istrict, except that the [c]ommission may extend the time for completion for one ... year periods after public hearing for good cause demonstrated to the satisfaction of the [c]ommission; otherwise the [c]ommission shall be deemed authorized by the owner or owners of land within the [d]istrict to amend these [r]egulations and the [z]oning [m]ap, deleting the [p]lanned [d]evelopment [d]istrict and establishing for such land the provisions of another zoning district." Branford Zoning Regs., c. III, § 35.11.
[7] New England Estates appealed the denial to the Superior Court, but later withdrew the appeal.
[8] New England Estates appealed the decision of the inland wetlands commission, but later withdrew the appeal.
[9] Prior to trial, the owners filed an offer of judgment pursuant to General Statutes § 52-192a, for the amount of $3,967,800. The town objected to the offer of judgment, contending that § 52-192a is inapplicable to condemnation cases. In a memorandum of decision issued on September 20, 2005, the trial court, Blue, J., agreed with the town and sustained the objection. The owners have appealed that decision in Branford v. Santa Barbara, supra, 294 Conn. at 806, 988 A.2d 221, which was released on the same date as this opinion.
[10] Franke agreed with the other experts that the property was not suited, despite its IG-2 zoning classification, for industrial use, stating that there is a weak market for industrial development of parcels of this size, and that the property had poor accessibility for truck traffic.
[11] The sales comparison approach, also known as the market data approach or the comparable sales approach, "is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probable sales price of the property being appraised.... After identifying comparable sales, the appraiser makes adjustments to the sales prices based on elements of comparison." (Internal quotation marks omitted.) Abington, LLC v. Avon, 101 Conn.App. 709, 711-12 n. 4, 922 A.2d 1148 (2007).
[12] The development approach is a type of income capitalization approach for appraising property, specifically adapted to the valuation of "multiple unimproved lots in a subdivision or potential subdivision as a unit." Lehigh-Northampton Airport Authority v. Fuller, 862 A.2d 159, 167 (Pa.Commw.2004), cert. denied, 2005 Pa. Lexis 3158 (December 29, 2005). "The income capitalization approach consists of the following seven steps: (1) estimate gross income; (2) estimate vacancy and collection loss; (3) calculate effective gross income (i.e., deduct vacancy and collection loss from estimated gross income); (4) estimate fixed and operating expenses and reserves for replacement of short-lived items; (5) estimate net income (i.e., deduct expenses from effective gross income); (6) select an applicable capitalization rate; and (7) apply the capitalization rate to net income to arrive at an indication of the market value of the property being appraised.... The process is based on the principle that the amount of net income a property can produce is related to its market value." (Internal quotation marks omitted.) Housing Authority v. CB Alexander Real Estate, LLC, 107 Conn.App. 167, 170 n. 6, 944 A.2d 1010 (2008).
[13] The court also awarded the owners and New England Estates interest of 4 percent per annum on $3,432,200, the amount by which the award exceeded the amount that the town had deposited with the clerk of the court when it filed its statement of compensation.
[14] New England Estates contends that a zone change would not be necessary in order for the property to be approved for use as a residential development because: (1) the town's zoning regulations allow some residential uses in an IG-2 industrial zone; see footnote 4 of this opinion; (2) the special development area overlay applicable to the property would permit the designation of a planned development district pursuant to chapter III, § 35.1, of the Branford zoning regulations, which in turn would allow the land to be used for residential development without any zone change; and (3) the prior, 1988 approval was accomplished without a zone change. The town contends that the town's zoning regulations prohibit residential development in an IG-2 industrial zone. The town also points to the fact that New England Estates' site plan application sought the creation of a new "[h]ousing [o]pportunity [d]istrict," in the town's zoning regulations, and the designation of the property as a housing opportunity district. Lastly, in response to New England Estates' contention that the creation of a planned development district would not require a zone change, the town points out that the creation of a planned development district results in the modification of the zoning regulations. See Branford Zoning Regs., c. III, § 35.6 (upon establishment of planned development district, "these [z]oning [r]egulations and the [z]oning [m]ap shall be considered to be modified to permit the establishment of the development as approved").
We need not decide whether a zone change was required to develop the land residentially. Instead, we read the trial court's memorandum of decision to include an implicit determination that, if a zone change was required, it was reasonably probable that New England Estates would have obtained one.
[15] We recognize that on July 24, 2003, the zoning commission voted to amend the town zoning regulations, amending the town's plan of conservation and development to remove from the future land use map the designation of the property as intended for moderate/high density residential use to office/industrial use and amending the IG-2 classification by changing the letting of rooms within that classification from a permitted use to a prohibited use. New England Estates' application, however, was filed in June, 2003. Accordingly, the zoning regulations that were in effect at the date of the application apply. See General Statutes § 8-2h(a) ("[a]n application filed with a zoning commission, planning and zoning commission, zoning board of appeals or agency exercising zoning authority of a town, city or borough which is in conformance with the applicable zoning regulations as of the time of filing shall not be required to comply with, nor shall it be disapproved for the reason that it does not comply with, any change in the zoning regulations or the boundaries of zoning districts of such town, city or borough taking effect after the filing of such application").
Although the town correctly states that land is valued as it is zoned at the time of the taking; see Budney v. Ives, supra, 156 Conn. at 89, 239 A.2d 482; the factual circumstances of the present caseparticularly the timing of the changes to the zoning regulations in relation to New England Estates' June, 2003 site plan application for an affordable housing development and in relation to the date of the takingpersuade us that the property should be valued as it was zoned at the time of the June, 2003 application. See New England Estates, LLC v. Branford, supra, 294 Conn. at 824-28, 988 A.2d 229.
[16] Section 1344(a) of title 33 of the United States Code, known as the Clean Water Act, authorizes the secretary of the army, acting through the army chief of engineers, to issue permits "for the discharge of dredged or fill material into the navigable waters at specified disposal sites...."
[17] The town contends that the testimony of the two expertsHunter and Michaudis not probative, and instead constitutes mere conjecture. The town cites to Tandet v. Urban Redevelopment Commission, 179 Conn. 293, 299, 426 A.2d 280 (1979), for the proposition that: "Where in the opinion of the appraiser the property is not, on the date of taking, being put to its highest and best use, it is incumbent upon the appraiser to provide the trier with sufficient evidence from which it could conclude that it is reasonably probable that the land to be taken would, but for the taking, be devoted to the proposed use by a prudent investor in the near future." First, we note that we did not state in Tandet that the evidence testified to by the experts must in isolation support a trial court's determination that there is a reasonable probability that a property would be put to its highest and best use. On the contrary, the court was entitled to consider the testimony of Hunter and Michaud in the context of all the evidence presented at trial relevant to the proposed use of the property, and, as we have explained in this opinion, there was sufficient evidence in the record to support the conclusion that there was a reasonable probability that the property would have been put to residential use but for the taking. Second, we note that both experts testified as to the basis for their conclusion that it was reasonably probable that New England Estates would obtain the necessary approvals. Specifically, Hunter testified that it was a reasonable assumption that either of the proposed developments both the 268 unit market rate development and the 354 unit affordable housing developmentwould have been approved. He based his opinion primarily on the 1988 approval of the 298 unit development proposal, which, he observed, went through with no change in the zoning regulations. Michaud had based his appraisal only on the 354 unit affordable housing development proposal, and testified that, based on his general knowledge of affordable housing applications, it was a reasonable assumption that the development ultimately would be approved. The trial court properly could consider the testimony of the experts as to the probability that the property would be put to use as residential, and evaluate the credibility of that testimony in light of the basis for those opinions, in the context of all of the relevant evidence.
[18] In making this finding, the court noted that it had precluded the testimony of the town's expert on the issue of environmental contamination on the basis of the town's failure to disclose the expert within a reasonable time prior to trial. See Practice Book § 13-4. The town does not challenge in these appeals the court's decision to preclude the expert testimony. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547021/ | 13 F.2d 999 (1926)
WESSEL et al.
v.
SEMINOLE PHOSPHATE CO.
No. 2428.
Circuit Court of Appeals, Fourth Circuit.
June 8, 1926.
*1000 *1001 *1002 Edward R. Baird, Jr., of Norfolk, Va. (Baird, White & Lanning, of Norfolk, Va., H. G. Connor, Jr., of Wilson, N. C., and R. Clarence Dozier, of Norfolk, Va., on the brief), for plaintiffs in error.
Kenneth C. Royall, of Goldsboro, N. C., for defendant in error.
Before WADDILL, ROSE, and PARKER, Circuit Judges.
PARKER, Circuit Judge (after stating the facts as above).
The plaintiffs contend that the District Judge erred in holding that their action in failing to ship the nitrate when requested upon 30 days' terms amounted to a cancellation of the contract. Defendant contends that this holding was correct, as the exclusive remedy of the plaintiffs, upon refusal of defendant to pay in advance or furnish satisfactory security, was to cancel the contract. As additional grounds for sustaining the judgment of the court, the defendant contends that the contract sued on was void for lack of mutuality and that there was no finding by the court of a breach on the part of defendant.
We think that the learned District Judge erred in holding that the mere failure on the part of plaintiffs to ship the nitrate on 30 days' terms amounted to a cancellation of the contract. If it were true, as contended by defendant, that the exclusive remedy of plaintiffs, in case of defendant's failure to pay in advance or furnish satisfactory security, was to cancel the contract, then defendant would be justified in treating a failure to ship on terms after a demand for cash in advance as such cancellation. But, as we interpret the contract, cancellation was not the exclusive remedy of plaintiffs in such case.
In the absence of contrary provision in a contract of sale, it is the duty of the buyer to pay cash on delivery. Inner Shoe Tire Co. v. Treadway (C. C. A. 5th) 286 F. 838. It was provided in the body of this contract that payment should be made 30 days from average date of delivery, but upon the margin was printed the condition that, if the financial responsibility of the buyer should become impaired or unsatisfactory to sellers, they should have the right to require payment in advance or satisfactory security. The effect of this provision was merely to preserve to the sellers the right to demand, as a condition of performance on their part, what they would have had a right to demand at law, in the absence of the 30 day provision. In other words, the effect of the condition in the margin was to confer upon the sellers the right to eliminate the provision as to the 30 days' terms, if the credit of buyer should become impaired. Immediately after the sentence in the margin setting forth this condition, there followed another sentence providing that, if the buyer should fail to comply with the terms of payment, or any other terms of sale, sellers should have the right to cancel unfilled portions of the contract, buyer remaining liable for unpaid accounts. It is argued in behalf of defendant that this sentence prescribes the exclusive remedy of the seller upon the buyer's failure to pay cash in advance or provide security, but we do not so interpret it. The right to cancel is given, not upon failure to pay cash or furnish security, but upon failure "to comply with terms of payment," which, in case payment in advance is not demanded on account of impaired credit, would mean failure to pay within 30 days of the average date of delivery of any lot of nitrate delivered under the contract. The right to cancel was also given by the provision in question upon failure of buyer to comply with any other term of the contract, which clearly indicates that it was not the intention of the parties that the right of cancellation should be limited to the breach of conditions contained in the preceding sentence, and certainly not that it should furnish the sole remedy of the sellers upon such breach.
To give the language the interpretation contended for by defendant would lead to the absurd result that upon the buyer's credit becoming impaired coincident with a decline in the market, the sellers would be faced with the alternative of shipping the nitrate on 30 days' time and taking the risk of loss through failure of the buyer, or of canceling the contract and taking the loss resulting from the decline in the market. Certainly no such result was contemplated by the parties. The obvious purpose of the sentences printed on *1003 the margin was to provide additional and independent safeguards for the sellers: First, the right to demand cash or security upon the buyer's credit becoming impaired; and, second, the right to cancel upon the buyer's failure to comply with payment or any other term of the contract. It was clearly not their purpose to diminish the safeguards of the seller, or to provide that he must cancel and accept the loss due to decline in the market, if unwilling to extend terms because of the impairment of buyer's credit. Such an interpretation would virtually give to the buyer the option of canceling the contract upon the impairment of his own credit.
Since, therefore, cancellation was not the exclusive remedy of plaintiffs, their failure to make shipments on 30 days' terms could not, of itself, be construed as a cancellation of the contract, and the court erred in so holding.
This brings us to the second point relied on by defendant, viz., that the contract was void for lack of mutuality, and that the judgment in favor of defendant ought to be upheld on that account, whatever be the holding as to cancellation. This point cannot be sustained. There was a definite agreement on the part of plaintiffs to sell, and on the part of defendant to purchase, a certain quantity of nitrate of soda at a fixed price. The only ground of the contention of lack of mutuality is that the contract, which provided for importation from South America, contained the clause "no arrival no sale," and allowed cancellation at option of sellers if vessels should be lost, damaged, commandeered, diverted by government order, seized, captured, or delayed. The clause, "no arrival no sale" has a well-understood meaning, viz., that, if the goods do not arrive at destination, the buyer acquires no property in them and does not become liable to the sellers for the price. Harrison v. Fortlage, 161 U. S. 57, 16 S. Ct. 488, 40 L. Ed. 616; Moore v. W. R. Grace & Co. (C. C. A. 4th) 287 F. 103. The provision allowing cancellation by the sellers if vessels should be lost, damaged, etc., was clearly intended to apply to losses and delays beyond the control of sellers; and it is settled that such a provision does not render the contract void for lack of mutuality. Peck v. Stafford Flour Mills Co. (C. C. A. 8th) 289 F. 43; W. H. Goff Co. v. Lamborn & Co. (C. C. A. 5th) 281 F. 613.
This brings us to the third and last point upon which defendant relies, that there is no finding that the defendant breached the contract sued on. We agree with defendant that there is no finding of breach of contract on its part; but we do not agree that this is sufficient to sustain the judgment in its favor. The court found certain evidentiary facts and concluded from these that there was a cancellation of the contract on the part of plaintiffs by failure to ship on 30 days' terms. As we have seen, this conclusion was erroneous as a matter of law. The court did not attempt to pass upon the question as to which party breached the contract, assuming that it was not canceled by failure to ship on 30 days' terms, nor as to whether there was a rescission by mutual consent; and the facts found are not sufficient for the determination of these matters. It is found that the defendant did not furnish security and took the position that plaintiffs had canceled the contract; but it is not found that plaintiffs offered or were ready and willing to perform the contract on their part, or that defendant refused to pay cash or furnish security or accept delivery under the contract. It is found that, when plaintiffs wired defendants that they were instructing their agents to ship 25 tons and to draw against bills of lading, defendant merely protested that this was not in accordance with terms of contract, but not that defendant refused to accept the goods or honor the draft. It is found that plaintiffs telegraphed in reply to this protest calling attention to their right to demand cash or security in advance, stating that they must have cash or satisfactory security and requesting advice of defendant, but this telegram does not show that plaintiffs demanded that defendant accept delivery under the contract. The plaintiffs state in their reply brief that thereafter "nothing further was done by either party." These findings relate to evidentiary matters and not the ultimate facts. Before it can be determined whether defendant did or did not breach the contract, it must be ascertained whether plaintiffs were ready, able, and willing to perform the contract on their part and tendered performance thereunder, or whether, plaintiffs being ready, able, and willing to perform, defendant refused to accept performance and thereby waived tender on the part of plaintiffs and breached the contract on its part, or whether there was a rescission of the contract by mutual consent. Florence Mining Co. v. Brown, 124 U. S. 385, 8 S. Ct. 531, 31 L. Ed. 424. These are the ultimate facts upon which the case turns, and there has been no sufficient finding with respect to them to justify the court in declaring as a matter of law that there has or has not been a breach or a rescission by mutual consent. Special findings by the trial judge in an action at law, where a jury trial has been waived pursuant to statute, have the same effect *1004 as a special verdict of a jury, and must embrace a finding on every material issue joined in the case. Where the ultimate facts in issue are not covered by the findings, this court cannot supply them from evidentiary matters found, but must remand the cause for a new trial. Suydam v. Williamson, 61 U. S. (20 How.) 427, 441, 15 L. Ed. 978; Towle v. First Nat. Bank of Boston (C. C. A. 8th) 153 F. 566, 82 C. C. A. 520; Evans v. Kister (C. C. A. 6th) 92 F. 828, 35 C. C. A. 28; Packer v. Whittier (C. C. A. 1st) 91 F. 511, 33 C. C. A. 658.
For the error stated, the judgment of the District Court is reversed, and the cause is remanded for a new trial.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547051/ | 13 F.2d 136 (1926)
UNITED STATES
v.
LAY FISH CO., Inc., et al.
No. 1113.
District Court, S. D. New York.
January 4, 1926.
Emory R. Buckner, U. S. Atty., of New York City (Alexander B. Royce, William D. Whitney, and Israel B. Oseas, Sp. Asst. U. S. Attys., all of New York City, of counsel), for the United States.
Goldstein & Goldstein, of New York City (Jonah J. Goldstein and Aiken A. Pope, both of New York City, of counsel), for defendants Cohen, Maibach, and Rice.
Rothwell, Harper & Matthews, of New York City (Harold Harper, of New York City, of counsel), for defendants Begloff and Pini.
AUGUSTUS N. HAND, District Judge.
An indictment has been found against the Lay Fish Company, Inc., and other corporations, and the defendants Begloff, Cohen, Maibach, Pini, and Rice, for violation of the Sherman Anti-Trust Act (Comp. St. § 8820 et seq.). The individual defendants Begloff, Cohen, Maibach, and Pini appeared before the grand jury, in response to subpnas duces tecum addressed to the corporations of which they were respectively officers, were sworn, protested against the validity of the subpnas, stated the office which each held, produced a list of the documents submitted, testified that the books and papers were those of the corporations called for by the subpnas, and were then excused. No one of them claimed any personal immunity flowing from his appearance. Rice was likewise called before the grand jury in response to a subpna addressed to himself, was sworn, and gave testimony, but made no claim of immunity.
The foregoing five defendants have filed special pleas in bar, based upon the following immunity provisions in the Act of February 25, 1903 (Comp. St. § 8578): "No person shall be prosecuted or be subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he may testify or produce evidence, documentary or otherwise, in any proceeding, *137 suit, or prosecution under said acts, * * *" and the amendment of June 30, 1906, to the foregoing act: "Immunity shall extend only to a natural person who, in obedience to a subpna, gives testimony under oath or produces evidence, documentary or otherwise, under oath." Comp. St. § 8580.
To the pleas in bar the government demurs. I think the pleas of the defendants Begloff, Cohen, Maibach, and Pini are without merit. The corporations had to produce their books and papers in answer to subpnas (Wilson v. United States, 221 U. S. 361, 31 S. Ct. 538, 55 L. Ed. 771, Ann. Cas. 1912D, 558), and the testimony amounted to no more than an identification of the books by a responsible officer. This was a step in obtaining the production of the books, was ex necessitate rei a matter of corporate record, accessible at least by subpna to the government, and was no more a subject of personal immunity, because the disclosure might possibly injure the individual officers, than were the contents of the books, because they might have a like effect. Indeed, I can see little difference between testimony of the character given and a production of the books under a subpna without it. Such production would seem to amount to an admission both by the producing officer and the corporation that the documents were those of the corporation.
Judge Lacombe seems to have taken this view in Heike v. United States, 192 F. 88, 112 C. C. A. 620, when he said of the officer who there produced the books of the American Sugar Refining Company: "He testified, of course, that he was the person to whom the subpnas were addressed, secretary of the New York corporation, and secretary and treasurer of the New Jersey corporation. That circumstance was well known when the subpnas were prepared and addressed to him; he held these offices for many years; his official position was matter of record. To interpret the statute as securing immunity to an officer of a company for offenses committed while such officer, merely because he has stated under oath on some prior investigation that he was an officer, seems to us preposterous." This decision was affirmed by the Supreme Court in Heike v. United States, 227 U. S. 131, 33 S. Ct. 226, 57 L. Ed. 450, Ann. Cas. 1914C, 128.
It is true that the immunity claimed was by reason of testimony before the Interstate Commerce Commission, as to which there was an immunity statute similar to the one under discussion. It is also true that the Supreme Court held that the evidence elicited before the Commission did not furnish any basis for the criminal prosecution of Heike, yet the discussion of that case in both courts renders it highly improbable that the defendants Begloff, Cohen, Maibach, and Pini obtained immunity by anything set forth in their pleas in bar. Moreover, none of the defendants who have filed pleas in bar claimed immunity when appearing before the grand jury. They might have testified voluntarily, and if they did not, and wished to claim their privilege, they should have said so.
It is true that they would have been obliged to testify anyway, if the government chose to compel them to do this, and was content to have the statutory immunity conferred as an incident to the compulsion. But, as Justice Holmes says, in Heike v. U. S., 227 U. S. at page 142, 33 S. Ct. 227 (57 L. Ed. 450, Ann. Cas. 1914C, 128): "The obvious purpose of the statute is to make evidence available and compulsory that otherwise could not be got. We see no reason for supposing that the act offered a gratuity to crime. It should be construed, so far as its words fairly allow the construction, as coterminous with what otherwise would have been the privilege of the person concerned."
The privilege under the Fifth Amendment against self-incrimination must be insisted upon, and the government thereby informed that the witness is testifying under compulsion, if he seeks immunity in return for his testimony. In other words, the immunity statute is not self-operative, but no broader than the constitutional privilege.
It is said that a defendant may be unfairly misled by such a strict construction of the immunity statute. But ever since the New Haven litigation the law of this district has been, I believe, as I have stated, and any defendant who knew of the Immunity Act was in position to know how it must be applied. It can as justly be argued that the government proceeded with its examination, relying upon the failure to claim privilege, and with no intention of conferring immunity, as that the defendants were put in any false position by testifying as they did. There is the same reason for saying, where there is no immunity statute, that a defendant who ignorantly testifies without insisting upon his privilege should not lose it for failure to observe the letter of the law as there is here.
The interesting opinion of Judge Grubb in U. S. v. Skinner (D. C.) 218 F. 870, followed by Judge Hunt in United States v. Elton (D. C.) 222 F. 428, has settled the law *138 in this district. The Circuit Court of Appeals of the Fourth Circuit reached the same conclusion in Johnson v. United States, 5 F. (2d) at page 477. See, also, United States v. Lee (D. C.) 290 F. 517. Judge Hutcheson, in United States v. Pardue (D. C.) 294 F. 543, has differed with these views; but the weight of judicial decisions, as well as the authoritative opinion of Professor Wigmore, is to the contrary. Wigmore on Evidence (2d Ed.) § 2282.
For the foregoing reasons, the demurrer to the pleas in bar are sustained. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547057/ | 13 F.2d 259 (1926)
UNITED STATES
v.
COSTANZO et al.
District Court, W. D. New York.
February 8, 1926.
Samuel M. Fleischman, of Buffalo, N. Y., for the motion.
Richard H. Templeton, U. S. Atty., of Buffalo, N. Y. (Percy R. Smith, Asst. U. S. *260 Atty., of Buffalo, N. Y., of counsel), opposed.
HAZEL, District Judge.
There was no offense committed in the presence of the police officers entering the dwelling house of the defendant. They had no search warrant, and defendant was not legally arrested; indeed, no facts and circumstances existed affording reasonable grounds for believing that the accused was violating the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10138¼ et seq.). Seizure of articles under the Fourth Amendment to the Constitution that might be evidence of unlawful manufacture or possession of intoxicating liquors was unreasonable, if it is true, as contended by defendant, that the officers making the arrest and seizure were acting under instructions of the local prohibition agent.
The government, however, urges that the search was not instigated by any federal officer. But is this contention supported by the evidence? I think not. Although the Fourth Amendment does not protect citizens against unreasonable searches by the local police, yet, when it is shown that they acted under the supervision or direction of federal agency, or pursuant to an understanding with the prohibition agent that private homes should be entered and searched without due process, and property seized, a different question is presented. In this case the record shows beyond serious question that such an understanding existed. The police officer in charge of the raid swore that he had instructions from his superior officer and from the local prohibition agent to enforce the Prohibition Law and work in connection with the latter; that when seizures were made he customarily telephoned the prohibition agent, and had done so on numerous occasions. Prohibition Agent Bartlett testified, not only that he knew that he would have to have proof of sale of liquor in order to enter a private dwelling, and that he was forbidden to enter a private dwelling without a search warrant, and that he had never done so, except in connection with police officers; but he also testified that he arranged to "get into private houses" in connection with police officers, and that he had made a great many cases in that way.
It is difficult to escape the conclusion from this showing, that the federal agent, to avoid section 6 of the act supplemental to the National Prohibition Act (Comp. St. Supp. 1925, § 10184a), which barred him from entering private dwellings without a search warrant on penalty of fine and imprisonment, instigated the police to do what he was forbidden to do. Certainly the officers understood that they were to make entry of defendant's house without a search warrant, and they apparently relied upon the existing understanding to which reference has been made.
The law of the case is controlled by Flagg v. U. S., 233 F. 481, 147 C. C. A. 367, wherein Judge Coxe quoted from the address of Lord Chatham as follows: "The poorest man may in his cottage bid defiance to all the forces of the crown; it may be frail, its roof may shake, the wind may blow through it. The storm may enter; the rain may enter; but the king of England cannot enter. All his forces dare not cross the threshold of the ruined tenement."
And paraphrasing the comments of Judge Coxe in the Flagg Case, it may be repeated that it is of small significance what becomes of the defendant as a result of the raid upon the privacy of his home, compared with the right of the people of the United States to be protected from unlawful search. See, also, In re Schuetze (D. C.) 299 F. 827, wherein this court passed upon a somewhat similar seizure by the police, pursuant to an understanding with the superintendent of police that searches be made without search warrants.
A search of defendant's private dwelling, even with a search warrant, would have been unlawful without evidence of sale. Staker v. U. S. (C. C. A.) 5 F.(2d) 312. And that in consequence of the unlawful raid intoxicating liquor was discovered was insufficient ground for the arrest and search and seizure. The adjudications cited by the government do not apply, since in those cases the court was convinced that the police or peace officers acted upon their own initiative and independently of federal agency. Such, however, as heretofore stated, was not this case.
The search and seizure was illegal, and the motion to suppress the evidence of liquor seized must be granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547062/ | 13 F.2d 126 (1926)
APT et al.
v.
UNITED STATES.[*]
No. 7070.
Circuit Court of Appeals, Eighth Circuit.
May 5, 1926.
*127 Walter W. Calvin, of Kansas City, Mo., (Paul S. Conwell, Clarence Wofford, and Bert S. Kimbrell, all of Kansas City, Mo., on the brief), for plaintiffs in error.
R. R. Brewster, Sp. Asst. to Atty. Gen.
Before SANBORN, Circuit Judge, and MUNGER and JOHNSON, District Judges.
JOHNSON, District Judge.
Plaintiffs in error from October, 1922, to May, 1924, were prohibition agents engaged in the enforcement of the national prohibition Act, with headquarters at Kansas City, Mo. In May, 1924, an indictment was returned in the court below, in which plaintiffs in error, with others, were charged with having entered into a conspiracy to extort money under cover of their employment from persons found violating the Prohibition Act. At the trial plaintiffs in error were convicted, and each of them was fined $2,000 and sentenced to two years' imprisonment at Leavenworth. The case is in this court for review.
In the assignment of errors filed in the court below, plaintiffs in error assigned seven alleged errors as occurring at the trial and relied upon to secure a reversal of the judgment. The first, second, fifth, and sixth of these alleged errors have not been argued in the brief and will not be considered.
The seventh assignment is based upon the refusal of the trial court to give a directed verdict in his favor, as requested by each defendant. That the conspiracy was formed, and that the defendants Apt, Curran, and Wilcox were parties to it, may not be fairly questioned. Evidence showing the conspiracy and connecting these defendants with it was overwhelming, and after thoughtful consideration we are satisfied that the evidence made a case for the jury against the defendant Storms also. It is argued under this assignment that the evidence was insufficient to establish any one of the overt acts alleged in the indictment. This contention is without merit, particularly in respect to the fourth and fifth of the overt acts alleged in the indictment.
The third and fourth assignments are based upon alleged improper cross-examinations by government counsel of the defendants Apt and Wilcox, who testified as witnesses at the trial. The defendant Wilcox was cross-examined about a purchase of furniture he had made at the store of one Max Ranin, concerning which he had not been examined in chief. It is very doubtful whether the direct examination was broad enough to make this cross-examination proper, under the rule stated by this court in Tucker v. United States, 5 F.(2d) 818; but the proof of the connection of the defendant Wilcox with the conspiracy charged was so direct and positive, and proven by so many witnesses, that it would be unreasonable to suppose the verdict of the jury was to the slightest extent influenced by this cross-examination, or because they learned by it that the witness Wilcox had at one time purchased a bed at the store of Max Ranin.
The cross-examination of the defendant Apt by government counsel was after the most approved police court methods. Of the 14 pages of the record containing the cross-examination of the defendant Apt, 8 are devoted to the association of the witness with a woman impliedly of bad character. As an example of the style of cross-examination indulged in by government counsel we quote: "Q. You lived with this woman, didn't you, and used to get drunk and beat her up? A. No, sir." The question was objected to and exception taken. If it were probable the cross-examination had prejudiced the jury against the defendant to the extent of influencing their verdict, it would be the duty of the court to reverse the verdict in the interest of justice. But this cross-examination, though improper, could not have been prejudicial. The connection of the defendant Apt with the conspiracy charged in the indictment was so clearly shown, and the verdict of the jury such a righteous one, that it would *128 be a miscarriage of justice to reverse it on account of this indefensible cross-examination.
Many alleged errors, not assigned as errors, are discussed in the brief of defendants. As there has been no miscarriage of justice in this case, no reason exists for their consideration. Ray v. United States (C. C. A.) 13 F.(2d) 126.
The judgment of the court below as to each of the defendants will be affirmed; and it is so ordered.
NOTES
[*] Rehearing denied October 11, 1926. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1547077/ | 13 F.2d 147 (1926)
In re AMDUR SHOE CO., Inc.
No. 35806.
District Court, D. Massachusetts.
May 19, 1926.
*148 Joseph Bearak, of Boston, Mass., for receiver.
Alfred A. Silton, of Boston, Mass., for alleged bankrupt.
BREWSTER, District Judge.
I have for review on certificate an order of the referee, entered in the above-entitled proceeding in bankruptcy, allowing the Thayer-Osborne Shoe Company to prove a claim for $45,000.
The facts appearing in the certificate, briefly stated, are these:
One Levine, the president, treasurer, and principal stockholder of the bankrupt corporation, borrowed of the creditor $50,000 on notes in various sums. These notes were also signed by Levine's wife and secured by shares in the bankrupt corporation. On June 25, 1925, four of these notes, aggregating $25,000, had fallen due and been dishonored. The remaining note for $25,000 was due July 1, 1925. About this time the bankrupt was in need of financial assistance, and a Mr. Thayer, of the Thayer-Osborne Shoe Company, undertook to assist the bankrupt in obtaining a substantial loan at a national bank. An agreement was entered into between the bankrupt corporation and Mr. Thayer, by virtue of which the bankrupt agreed, in consideration of Thayer's undertaking to procure a loan to the bankrupt corporation, that it would indorse, waiving demand and notice, the notes given by Levine and his wife to the Thayer-Osborne Shoe Company. The agreement was reduced to writing and submitted at a meeting of the directors of the bankrupt corporation. The directors had already been authorized to arrange for the borrowing and for the indorsement of Levine's notes. All the stockholders were present at the stockholders' meeting; but Levine, who held the majority stock interest, did not vote, nor did he record any objection. Arrangements were concluded for a loan of $40,000, which was obtained on two notes of the bankrupt, one for $25,000, and one for $15,000, and the bankrupt indorsed the outstanding Levine notes held by the Thayer-Osborne Shoe Company.
The Levine notes, to the amount of $45,000, being unpaid, the creditor seeks to prove his claim against the bankrupt as indorser thereon. The claim is objected to on several grounds:
First, that, the liability being contingent, it is not a provable claim;
Second, that there was no consideration given for the indorsement;
Third, that the act of the corporation in indorsing the notes was ultra vires.
The principles of law applicable to a situation such as is disclosed above are fairly well established. The indorsee of negotiable paper may prove a claim on the indorsement if the liability of the indorser is fixed by default of the maker; demand and notice being waived. In re Smith (D. C.) 17 Am. Bankr. Rep. 112, 146 F. 923; Moch v. Market St. Nat. Bk., 6 Am. Bankr. Rep. 11, 107 F. 897, 47 C. C. A. 49; In re Gerson (D. C.) 5 Am. Bankr. Rep. 89, 105 F. 891.
If a corporation by indorsement becomes contingently liable on obligations of another, and that indorsement is given for a valuable consideration, it will be binding upon the corporation. In re Prospect Worsted Mills (D. C.) 11 Am. Bankr. Rep. 502, 126 F. 1011.
A private corporation will be liable on an indorsement for accommodation, if all stockholders consent, and if the rights of creditors are not thereby injured. Murphy v. Arkansas L. Land & Improvement Co. (C. C.) 97 F. 723; Cook on Corporations (5th Ed.) §§ 3, 774. I find difficulties, however, in applying these rules in the present case, owing to the failure of the certificate to disclose facts which, in my opinion, are controlling. The referee states that Thayer either indorsed bankrupt's notes to the bank, from which it obtained the $40,000 loan, or had them indorsed by the Thayer-Osborne Shoe Company. What indorsement these notes bore is a fact easily susceptible of proof, and, if the Thayer-Osborne Shoe Company indorsed one or both of the notes, then we have a consideration moving from that corporation to the bankrupt, which would constitute a valuable consideration for the indorsements of the bankrupt on notes of Levine held by the Thayer-Osborne Shoe Company.
*149 If, on the other hand, the bankrupt's notes were indorsed by Thayer individually, I do not think it could be said that the Thayer-Osborne Shoe Company gave any consideration for the bankrupt's indorsements. They would, in that event, be purely accommodation indorsements.
It will be noted that the agreement to assist the bankrupt in the obtaining of additional funds was made by Thayer individually, and not by the Thayer-Osborne Shoe Company. This agreement to provide funds, or to enable the corporation to secure them, while it may well have been an inducement to the bankrupt, was not a consideration upon which the Thayer-Osborne Shoe Company could base a claim under the indorsement. A valuable consideration could be found, however, if the Thayer-Osborne Shoe Company became contingently liable on notes given by the bankrupt to the bank. This petition for review, therefore, should go back to the referee for additional findings as to whether the notes, or either of them, given by the bankrupt to the First National Bank, were indorsed by the Thayer-Osborne Shoe Company. If they were so indorsed, the order of the referee allowing the claim should stand. If it should appear that they were not so indorsed, then we have to deal with accommodation indorsements, and the claim cannot be proved, unless it appears that the indorsement was authorized by all of the shareholders, and that the rights of creditors were not impaired thereby.
From the referee's certificate, it appears that there was a stockholders' meeting duly held for the purpose of authorizing the directors to indorse the Levine notes. At this meeting all the stock was represented. Levine, the principal stockholder, was present at the meeting, but did not vote upon the resolution. He did not, however, record his dissent, and, as the transaction was admittedly for his benefit, it is reasonable to conclude that the vote met with the approval of all of the stockholders; at least, none is in a position to object now on the ground that the act was ultra vires.
The question still remains whether the indorsement prejudiced the rights of creditors. On this point the certificate is not clear. The referee states that the proceeds of the Levine notes were used for the benefit of the Amdur Shoe Company, Inc. It was suggested during the argument that Levine borrowed $50,000 from the Thayer-Osborne Shoe Company and used that sum in acquiring certain shares of stock in the bankrupt corporation; in other words, that it was cash which he borrowed to be used by him in paying in certain increase of capital stock authorized by the corporation. If this is a fact, it could not be said that at the time of the indorsement by the bankrupt of the Levine notes the bankrupt was under any obligation to pay Levine the $50,000. If, on the other hand, as the referee's certificate would indicate, Levine personally borrowed this money, and in turn loaned it to the corporation, or borrowed it on behalf of the bankrupt, so that an obligation existed to pay Levine or the Thayer-Osborne Shoe Company that amount, then creditors would not be prejudiced by reason of the fact that the bankrupt saw fit to become contingently liable for a sum for which it was already directly liable. Whether the creditors were injured by the indorsements depends upon the nature of the transaction. This, also, is a fact susceptible of proof, and the petition for review should be remanded, for further findings as to the details of the transaction. If it should appear that the indorsement was an accommodation indorsement, without consideration, and that at the time of the indorsement the bankrupt was under no legal obligation to repay the $50,000, which Levine had paid in to the corporation, then it would follow, in my opinion, that the indorsements would be accommodation indorsements, prejudicial to creditors, and would not be binding upon the indorser; at least, the Thayer-Osborne Shoe Company would have no claim provable in bankruptcy over the objection of creditors or those representing them.
This petition for review, therefore, will be remanded to the referee, for further action not inconsistent with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546649/ | 988 A.2d 914 (2010)
119 Conn.App. 653
Frankie TRIMMER
v.
COMMISSIONER OF CORRECTION.
No. 29539.
Appellate Court of Connecticut.
Argued December 1, 2009.
Decided March 2, 2010.
*915 Mark M. Rembish, special public defender, New Britain, for the appellant (petitioner).
Raheem L. Mullins, assistant state's attorney, with whom, on the brief, were Gail P. Hardy, state's attorney, Courtney Gates-Graceson, assistant state's attorney, and Michael E. O'Hare, supervisory assistant state's attorney, for the appellee (respondent).
HARPER, LAVINE and PELLEGRINO, Js.
PELLEGRINO, J.
The petitioner, Frankie Trimmer, appeals from the judgment of the habeas court denying his amended petition for a writ of habeas corpus. The petitioner claims that the court improperly concluded that his trial counsel provided effective assistance. We reject the petitioner's claim and affirm the judgment of the habeas court.
The petitioner was charged with various offenses in multiple dockets, including attempt to commit murder in violation of General Statutes §§ 53a-54a and 53a-49 (a)(2), assault in the first degree with a deadly weapon in violation of General Statutes §§ 53a-59 (a)(1) and 53-202k, criminal possession of a pistol or revolver in violation of General Statutes § 53a-217c(a)(1), violation of probation pursuant to General Statutes § 53a32, two counts of tampering with a witness in violation of General Statutes § 53a-151 and two counts of witness bribery in violation of General Statutes § 53a-149.
The following facts and procedural history are relevant to our disposition of the petitioner's appeal. On March 11, 2001, at approximately 4:55 p.m. in the city of Hartford, the petitioner and his friend, Alvin Wilson, were arguing on a street corner when the victim, Wayne Tripp, came upon the scene. The victim said something to the petitioner, who then approached Tripp and, at close range, shot the victim in the leg, fracturing his femur and causing serious injuries.
The petitioner elected to have a trial by jury, and trial commenced on June 7, 2002. He was represented by attorney M. Fred DeCaprio throughout the criminal proceedings. On the second day of trial, the state produced evidence that the petitioner had conspired to prevent the victim from testifying. The evidence included two letters and three audiotapes containing conversations between the petitioner and Kendall Bozeman, among others. In the letters and tapes, the petitioner indicated his desire to keep the victim from testifying and his willingness to pay the victim to keep quiet. At trial, the state used this evidence to demonstrate the petitioner's consciousness of guilt.
After introducing this evidence, the state rested its case and offered the petitioner a plea deal that required him to plead guilty to assault in the first degree, criminal possession of a firearm and violation of probation, and to agree to plead guilty to the forthcoming charges of witness tampering and attempted witness bribery. In exchange, the state offered the petitioner a total effective sentence on all charges of fifteen years incarceration, with eight years of special parole.[1]
According to DeCaprio, the petitioner's trial was proceeding well until the state produced the consciousness of guilt evidence. DeCaprio informed the petitioner that the evidence would have a serious impact on his chance of receiving a positive outcome at trial and advised the petitioner to accept the state's plea offer, which included a resolution of the tampering *916 charges.[2] DeCaprio also discussed the development in the case with the petitioner's mother, who in turn spoke to the petitioner.
On June 12, 2002, the petitioner pleaded guilty to assault in the first degree, criminal possession of a pistol or firearm and violation of probation. On September 6, 2002, the petitioner pleaded guilty to conspiracy to tamper with a witness, tampering with a witness and conspiracy to commit bribery. Pursuant to the plea agreement, the trial court imposed a total effective sentence of fifteen years incarceration to be followed by eight years of special parole. The petitioner did not move to withdraw his guilty pleas or file a direct appeal.
On July 8, 2005, the petitioner filed a petition for a writ of habeas corpus, which was followed by an evidentiary hearing.[3] The petitioner asserted that he had told DeCaprio that Alvin Wilson shot Tripp. According to the petitioner, an eyewitness named Germaine Syms would have verified this claim, but DeCaprio decided not to call Syms as a witness because Syms had told DeCaprio's investigator that he did not see anything during the incident. At the habeas trial, Syms testified that he had spoken to an investigator about the shooting but that he did not give the investigator any information. In his testimony at the hearing, however, he confirmed the petitioner's claim that Tripp was shot by Wilson and stated that he did not see the petitioner with a gun at any point during the incident. In its memorandum of decision, the court specifically stated that it did not find Syms' testimony entirely credible. The petitioner also claimed that DeCaprio did not adequately attempt to find Bozeman in order to have him testify to rebut the state's consciousness of guilt evidence.
On December 14, 2007, the court issued its memorandum of decision rejecting the petitioner's claims. The court reasoned that "[b]ased on the evidence presented, there is absolutely no indication that DeCaprio provided ineffective assistance to the petitioner. It is clear that the petitioner was actively involved in his defense. At the criminal trial, DeCaprio conducted an effective cross-examination of the victim's testimony. DeCaprio investigated Syms and Bozeman as potential witnesses for the defense; however, Syms proved to be unhelpful to the petitioner's case and Bozeman could not be located. Moreover, DeCaprio's advice to plead guilty was entirely reasonable due to the likely effect of the consciousness of guilt evidence. The petitioner ended up with a rather good deal overall. Had the petitioner proceeded to trial, he faced a total exposure of forty-nine years incarceration." After the court granted the petitioner's petition for certification to appeal, this appeal followed.
We begin by setting forth our standard of review. "In a habeas appeal, this court cannot disturb the underlying facts found by the habeas court unless they are clearly erroneous, but our review of whether the facts as found by the habeas court constituted a violation of the petitioner's constitutional right to effective assistance of counsel is plenary." (Internal quotation marks omitted.) Mock v. Commissioner of Correction, 115 Conn.App. 99, 103-104, 971 A.2d 802, cert. denied, 293 Conn. 918, 979 A.2d 490 (2009).
*917 "A habeas petitioner can prevail on a constitutional claim of ineffective assistance of counsel [only if he can] establish both (1) deficient performance, and (2) actual prejudice. . . . For ineffectiveness claims resulting from guilty verdicts, we apply the two-pronged standard set forth in Strickland v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); Levine v. Manson, 195 Conn. 636, 639-40, 490 A.2d 82 (1985). For ineffectiveness claims resulting from guilty pleas, we apply the standard set forth in Hill v. Lockhart, 474 U.S. 52, 59, 106 S. Ct. 366, 88 L. Ed. 2d 203 (1985), which modified Strickland's prejudice prong." (Citations omitted; internal quotation marks omitted.) Baillargeon v. Commissioner of Correction, 67 Conn.App. 716, 721, 789 A.2d 1046 (2002). Therefore, because the petitioner accepted his trial counsel's advice to plead guilty, to prevail on the ineffective assistance of counsel claim, the petitioner had the burden of (1) demonstrating that the advice was not within the range of competence demanded of attorneys in criminal cases and (2) showing "a reasonable probability that, but for counsel's errors, he would not have pleaded guilty and would have insisted on going to trial." (Internal quotation marks omitted.) Id., at 722, 789 A.2d 1046.
"To satisfy the performance prong, the petitioner must show that counsel's representation fell below an objective standard of reasonableness. . . . A petitioner who accepts counsel's advice to plead guilty has the burden of demonstrating on habeas appeal that the advice was not within the range of competence demanded of attorneys in criminal cases. . . . The range of competence demanded is reasonably competent, or within the range of competence displayed by lawyers with ordinary training and skill in the criminal law. . . . Reasonably competent attorneys may advise their clients to plead guilty even if defenses exist. . . . A reviewing court must view counsel's conduct with a strong presumption that it falls within the wide range of reasonable professional assistance and that a tactic that appears ineffective in hindsight may have been sound trial strategy at the time." (Citations omitted; internal quotation marks omitted.) Id., at 721-22, 789 A.2d 1046. In light of the damaging evidence of witness tampering and bribery, and with the exposure to a forty-nine year sentence, we conclude, as did the habeas court, that DeCaprio's advice to accept the plea agreement was "entirely reasonable. . . ."
The petitioner also alleges that DeCaprio's representation was ineffective in a number of other ways.[4] After considering the parties' written and oral arguments to this court, and our own review of the record and transcript, we conclude that there is no indication in the record that DeCaprio's performance was deficient; to the contrary, all indications are that he provided the petitioner with a careful and competent defense. We agree with the factual findings contained within the habeas court's thoughtful and detailed memorandum of decision. The court found that DeCaprio adequately investigated the shooting and considered all potential witnesses, including Bozeman,[5] provided the petitioner with the necessary materials to allow him to participate in his own defense *918 and acted reasonably in advocating to the petitioner that the plea offer was a good one. The court appropriately canvassed the petitioner to ensure that his pleas were voluntary, and there is nothing in the record to suggest that DeCaprio coaxed the petitioner's mother to pressure him into pleading guilty. The facts found by the habeas court were not clearly erroneous, and the petitioner failed to satisfy his burden that his attorney's performance was ineffective. See Mock v. Commissioner of Correction, supra, 115 Conn.App. at 103-104, 971 A.2d 802.
Because the petitioner has failed to satisfy the first prong of the Strickland test for ineffective assistance of counsel, we need not analyze whether counsel's performance unfairly prejudiced the petitioner.[6] We conclude that the court properly denied the petitioner's petition for a writ of habeas corpus.[7]
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The record does not indicate whether the state put a time limit on its plea offer.
[2] The petitioner's maximum exposure on all the charges to which he pleaded guilty was forty-nine years.
[3] The petitioner claimed that counsel failed (1) to investigate adequately, (2) to give the petitioner copies of police reports, (3) to call two witnesses for the defense, (4) to prepare for trial adequately and (5) to allow the petitioner to make a decision about his plea free from undue pressure.
[4] On appeal, the petitioner claims that DeCaprio failed (1) to investigate adequately the shooting of Tripp, (2) to provide the petitioner with police reports and other materials, (3) to locate and to subpoena Bozeman, (4) to prepare the petitioner's criminal witness tampering case adequately and (5) to allow the petitioner to make a voluntary decision about whether to plead guilty by enlisting the petitioner's mother to pressure him.
[5] The petitioner did not attempt to call Bozeman as a witness at the habeas trial.
[6] Despite this, the habeas court determined that the petitioner's claim also failed to satisfy the prejudice prong of the Strickland test. See Strickland v. Washington, supra, 466 U.S. at 687, 104 S. Ct. 2052.
[7] Although it was not discussed in either party's brief, the issue of procedural default, addressed in the court's memorandum of decision, arose on appeal during oral argument. We do not reach this issue. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546795/ | 38 F.2d 462 (1930)
ANDRESEN
v.
KAERCHER (two cases).
Nos. 8684, 8685.
Circuit Court of Appeals, Eighth Circuit.
February 12, 1930.
Charles E. Chrisman, of Ortonville, Minn. (J. J. Purcell, of Ortonville, Minn., on the brief), for appellant.
Carl J. Eastvold, of Ortonville, Minn. (F. W. Murphy, of Wheaton, Minn., on the brief), for appellees.
Before VAN VALKENBURGH and GARDNER, Circuit Judges, and MUNGER, District Judge.
VAN VALKENBURGH, Circuit Judge.
Appellees John M. Kaercher and Ross C. Kaercher are the sons of A. B. Kaercher, deceased. They had two brothers, C. E. Kaercher and L. A. Kaercher. The family lived at Ortonville, Minn. In 1924 the estate of A. B. Kaercher was indebted to the Citizens' National Bank of Ortonville, Minn., as also were his four sons above named. This indebtedness aggregated approximately $10,500. In December, 1924, the bank, being desirous of adjusting this indebtedness, entered into negotiations with the Kaerchers, which were conducted largely by Ross C. Kaercher on the one side, and by the president, cashier, and two of the larger stockholders of the bank on the other. These negotiations resulted in an agreement which appears in the record as Exhibit X, and is in the words and figures following:
"This agreement, made and entered into this 22 day of Dec., 1924, by and between the Citizens National Bank of Ortonville, Minnesota, a corporation, party of the first part and John M. Kaercher, Cecil E. Kaercher, R. C. Kaercher and L. A. Kaercher, parties of the second part:
"Whereas, the party of the first part is the owner of certain judgments filed against the estate of A. B. Kaercher in the Probate Court of Big Stone County, Minnesota, in the following amounts, to-wit:
*463 "$1,845.50 $875.00 $722.50 $3,000. $192.81 $327.50 $719.05 and interest accrued.
"Whereas, said claims have been assigned, transferred and sold to the parties of the second part in consideration Ten thousand Six hundred six & 96/100 Dollars by deeding to the party of the first part, the following described lands situate in the County of Big Stone, State of Minnesota, described as the West half (W½) of the Northwest Quarter (NW¼) and the Southwest quarter (SW¼) of section thirty-six (36), and East half (E½) and the Southeast quarter (SE¼) of the Southwest quarter (SW¼) of section thirty-five (35), Township one hundred twenty-four (124), Range forty-five (45), and Whereas, Party of the first part as a banking corporation does not wish to carry the said land above described as an asset in their bank.
"Now, therefore, for the consideration hereinbefore mentioned and other valuable consideration, the parties of the second part hereby agree and do make their promissory notes in the following amounts:
John M. Kaercher ........ 2,950.00
R.C. Kaercher ........... 3,050.00
L.A. Kaercher ........... 2,403.20
C.E. Kaercher ........... 2,203.76
as accommodation notes, which accommodation notes, parties of the second part agree to renew from time to time as the first party may request and to keep said notes in good standing for a period of 5 years, but in any event said accommodation notes shall be cancelled and returned if said party of the first part before said 5 years transfers or sells said above described premises, it being expressly understood that at the end of 5 years, the said party of the first part is to give up and cancel said accommodation notes.
"It is further agreed, by the party of the first part that said accommodation notes are not to be transferred or sold and that the party of the first part agrees that it will at all times defend the parties of the second part in any action, claim or lien that might be brought in which said notes are in any way involved.
"It is further agreed and expressly assented to by the party of the first part that said notes are given only as accommodation notes and have no other purpose.
"In Testimony Whereof, Said parties hereto affix their and its names and seals the day and year above written.
"Citizens National Bank of Ortonville, Minnesota, a corporation, By H. F. Thompson, Its Pres., By W. Kelly, Its Cashier, Party of the first part.
"John M. Kaercher, Cecil E. Kaercher, R. C. Kaercher, L. A. Kaercher, Parties of the second part."
The notes above described were renewed on or about December 10, 1925. December 23, 1926, the Citizens' National Bank was declared insolvent by the Comptroller of the Currency, and one William Ryder was duly appointed receiver. The appellant in these cases is his successor. October 18, 1928, the receiver brought suits against John M. and Ross C. Kaercher upon their notes so renewed. The defense tendered was that said notes were purely accommodation notes, were without consideration, and void. The cases were consolidated for trial, and, at the close of all the testimony, the trial judge directed a verdict in favor of appellees.
In the testimony it appears that the Kaercher brothers procured from the estate of one Geenty and wife the land, consisting of six hundred acres, described in Exhibit X. This land was stated, without contradiction, to be worth $75 per acre during 1924, the year when the agreement between the bank and the Kaerchers was made. The latter mortgaged it to the Ætna Life Insurance Company for $24,000; there was also a second mortgage of $2,600. This left an equity in the land of something more than $18,000. Pursuant to the terms of the said agreement, the Kaerchers, at the request of the officers of the bank, deeded the land to Kelly, the cashier; he in turn made a deed, the name of the grantee being left blank. It is clear from the evidence that it was the purpose to dispose of this real estate and that the name of the grantee was left blank in order that the transfer might be made directly to the purchaser. Cashier Kelly testifies:
"The deed was shown to the Comptroller in reports to him and the examiner was shown the title in the bank with the deed to me. I executed a deed to that land in blank and that was in the bank to be used when the bank sold the land. It was executed shortly after the bank got the deed from Kaerchers."
The bank kept a book entitled "Other Real Estate," which contained a description apparently of real estate held permanently *464 by the bank apart from, if not including, the bank building itself, or the immediate premises upon which the banking business was conducted. The cashier further testifies as follows:
"A. We had another book in the bank with a list of every farm the bank had and this Geenty farm was included in it, the White farm, the Jackson farm, the Geenty farm and the Pullis farm.
"Q. Where was that book kept? A. In the vault.
"Q. And this Geenty farm was listed in that book? A. Yes, sir.
"Q. Was it listed in your report as other real estate? A. No, sir, it was not. It was not carried as other real estate."
It is evident that this land was not carried in the general land account of the bank for the reason that it was intended to be disposed of and not kept permanently, as is a bank building and real estate of that character. It was taken in settlement of the Kaercher indebtedness, and apparently was intended to be disposed of and its value realized as soon as practicable.
The first three assignments of error challenge the action of the court in directing verdicts for appellees. To this action no exception was taken. The question is therefore not properly preserved for review. If, however, we consider the merits, we must arrive at the same conclusion reached by the trial court. Counsel for appellant seek to invest the receiver with powers and rights exceeding those of the bank itself, challenge the power of its president and cashier to enter into the agreement made, and accuse the appellees of bad faith in that the notes in question are conceived to have been used to deceive examiners and Comptroller as to the exact financial condition of the bank. To these contentions there are many convincing answers. The receiver of an insolvent bank stands in no better position than the bank stood as a going concern. Rankin, Receiver, v. City National Bank, 208 U.S. 541, 28 S. Ct. 346, 52 L. Ed. 610; Peterson v. Tillinghast (C. C. A. 6) 192 F. 287; Yates Center Nat. Bank v. Lauber (D. C.) 240 F. 237; Cutler v. Fry (D. C.) 240 F. 238; Yates Center Nat. Bank v. Schaede (D. C.) 240 F. 240; Id. (C. C. A. 8) 240 F. 241.
Conceding that appellees were indorsers for accommodation merely, it cannot be contended that the Citizens' National Bank, while a going concern, could have maintained actions against them to recover on the notes. Cherry v. City Nat. Bank (C. C. A. 8) 144 F. 587, 591.
It is probable, although not convincingly shown by the record, that the bank presented these notes to examiner and Comptroller as assets of the bank. The possession of the Geenty land, and the connection in which it was acquired, were not concealed. There is nothing to show that appellees knew of, or participated in, any purpose of deceit on the bank's part if it existed. But, be this as it may, the result is not affected, because the court will not lend its assistance in any way towards carrying out an illegal contract, nor will it enforce any alleged rights directly springing from such a contract. McMullen v. Hoffman, 174 U.S. 639, 19 S. Ct. 839, 43 L. Ed. 1117. In this view the bank itself could not have collected, nor is the receiver more advantageously situated. Yates Center Nat. Bank v. Lauber; Cutler v. Fry, and Yates Center Nat. Bank v. Schaede, supra.
Furthermore, it is to be remembered that the bank continued to be a going concern for two years after Exhibit X was entered into and the terms of that agreement were executed. Its solvency at that time must be presumed, and there is no showing to the contrary. As a going concern it had full power to collect its debts, and its officers were empowered to act for it, and to employ means and methods best adapted to the desired end without special authority from the board of directors. Undoubtedly they could take real estate for this purpose, and the uncontradicted evidence is that the reasonable equity in the land over incumbrances was nearly double the debt of the Kaercher family. First Nat. Bank v. Nat. Exchange Bank, 92 U.S. 122, 127, 23 L. Ed. 679; People's Bank v. Manufacturers' National Bank, 101 U.S. 181, 25 L. Ed. 907; Martin v. Webb, 110 U.S. 7, 3 S. Ct. 428, 28 L. Ed. 49; Auten v. United States Nat. Bank, 174 U.S. 125, 19 S. Ct. 628, 43 L. Ed. 920; Cherry v. City Nat. Bank (C. C. A. 8) 144 F. 587; Lucey Mfg. Corporation v. Morlan (C. C. A. 9) 14 F.(2d) 920.
Notes executed to a bank without consideration and solely for accommodation cannot be enforced if remaining in the hands of the bank. Rankin v. City National Bank, and Peterson v. Tillinghast, supra; Grisim v. Live Stock State Bank, 167 Minn. 93, 208 N.W. 805; First Nat. Bank v. Felt, 100 Iowa, 680, 69 N.W. 1057; City Nat. Bank v. Dwyer, 47 S. D. 567, 200 N.W. 109.
*465 The contract of December 22, 1924, is conclusive to the effect that the notes sued on were given solely for accommodation and were clearly without consideration. The bank in terms accepted the land conveyed to it through its cashier in full settlement of the Kaercher indebtedness to it. There is in the record neither direct nor substantial circumstantial evidence to the contrary.
"Where the facts are admitted or are undisputed, and are such that reasonable men can draw but one conclusion from them, it is the duty of the court to declare that conclusion to the jury." Northwestern Fuel Co. v. Danielson (C. C. A. 8) 57 F. 915, 916.
So also where the situation is such that, if a contrary verdict were reached, the court would be compelled to set the same aside. The rule announced is so universal in both federal and state jurisdictions that further citation of authority is unnecessary.
The fourth assignment is to the action of the court in admitting the testimony of appellees as to the value of the Geenty land and the want of consideration for the notes sued on. In addition to the fact that this testimony was competent, it is to be noted that it was received without objection or exception.
The remaining assignments have been carefully considered. They embody the contentions of appellant which have been hereinabove stated and found to be without merit. The pleadings framed no issue embracing these contentions.
It follows that the judgments below must be and are affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1546799/ | 13 F.2d 384 (1926)
DENISON et al.
v.
KECK et al.
No. 7157.
Circuit Court of Appeals, Eighth Circuit.
April 28, 1926.
Rehearing Denied July 26, 1926.
*385 H. M. Sinclair, of Kearney, Neb., and Forrest C. Donnell, of St. Louis, Mo. (N. P. McDonald and Ed. P. McDermott, both of Kearney, Neb., on the brief), for appellants.
Harold A. Prince, of Grand Island, Neb. (W. A. Prince, of Grand Island, Neb., and Elmer B. Jones, of Seattle, Wash., on the brief), for appellees.
Before STONE, KENYON, and BOOTH, Circuit Judges.
KENYON, Circuit Judge.
Appellees (hereafter designated as complainants) brought action in April, 1923, in the District Court of the United States for the District of Nebraska, against appellants (hereafter called defendants), claiming ownership in fee simple, and the right to immediate possession, of lot 89 of the southwest quarter of School Section addition to the city of Kearney, Neb., and alleging that defendants claimed some right, title, and interest to said real estate, and were in the possession thereof. They asked to have their title quieted as against defendants Lincoln A. Denison and Corine A. Denison (his wife), and that the mortgage of John G. Lowe on said premises given by said Denisons May 17, 1922, be canceled; also asked an accounting for rents and profits from August 5, 1922, and for such equitable relief as to the court should seem proper.
The case was tried in equity, and on April 4, 1925, the court found for complainants and decreed they were the owners absolute in title fee simple of said lot 89, and quieted the title to said premises in them. All claims of defendants Lincoln A. Denison and Corine A. Denison were by said decree barred. The mortgage given by the Denisons to defendant Lowe was canceled and held for naught as to said real estate. It was further decreed that complainants became entitled to the possession of said premises on August 5, 1922, and defendants were ordered to deliver possession to them. Complainants were also awarded the sum of $1,239.25 for rents and profits.
The facts are complicated. We set forth a brief résumé thereof:
Samantha Keck, the owner in fee of said lot 89, conveyed it to W. A. Goodwin, trustee, on the 13th day of June, 1889. Goodwin, on the 28th day of June, 1889, reconveyed said lot to Samantha Keck for her lifetime, remainder to the children of herself and husband. Complainants are the children of Samantha Keck. May 31, 1893, Samantha Keck conveyed lot 89 by warranty deed to the Kearney Produce Company, which company in March, 1895, conveyed the same to Nelson Perin, of Baltimore, Md. Samantha Keck and husband, on August 20, 1891, executed a mortgage on said lot and other lots to the Omaha Loan & Trust Company of Omaha, Neb., to secure the sum of $15,000. This mortgage was subsequently foreclosed, and deed issued to the Omaha Loan & Trust Company for the life estate of Mrs. Keck in lot 89. July 8, 1902, the receiver of the Omaha Loan & Trust Company conveyed all the interest of said company in said lot to W. Edwin Thorp, executor of the estate of James F. Carlisle, deceased. In September, 1903, Thorp entered into an agreement to sell the same to C. Maude Scoutt. January 3, 1899, the county treasurer of Buffalo county sold the property for delinquent taxes for the years 1895, 1896, and 1897; this delinquency occurring during the time that Perin held the title.
July 27, 1905, an action was brought in the state court to foreclose the tax lien evidenced by the certificate of purchase. Complainants were made parties defendant in that suit. H. C. Andrews had secured an assignment of the tax certificate issued to Pettibone & Nixon, and he prosecuted the tax foreclosure action. A decree was entered in this action in September, 1905, foreclosing the tax lien. Sale was had under said decree in June, 1906, and Andrews purchased the property. The sale was confirmed by the court July 24, 1906, and on the 18th day of January, 1907, the sheriff executed and delivered a deed of lot 89 to said Andrews. January 19, 1907, Andrews executed a deed of the same to defendant, Lincoln A. Denison. December 29, 1906, the Thorp contract was assigned to Denison by C. Maude Scout. This sale was finally consummated about January 1, 1907; deed being made to Denison by Thorp, executor. Denison claims to have bought the property for the sum of $24,000, and as a part of the purchase price he was to take care of the last installment of the Thorp contract. Shortly after the deed from Andrews, Denison took possession of the lot, and since said time has been in the peaceful, exclusive, and notorious possession thereof, improving it and paying *386 the taxes thereon, and claiming to be the owner thereof by virtue of his deeds.
In the consideration of this case our attention is challenged by a question not raised in argument or in any way presented, but which we deem important, and that is whether this action is not an attempt in equity to ascertain and establish rights properly cognizable at law. The distinction between legal and equitable actions is preserved in the federal courts. It is not a trifling distinction, to be brushed aside at the whim or desire of litigants, but is a fundamental and constitutional one, arising under the Seventh Amendment to the Constitution. Section 267 of the Judicial Code (Comp. St § 1244), providing, "Suits in equity shall not be sustained in any court of the United States in any case where a plain, adequate, and complete remedy may be had at law," is merely declaratory of long-established equity principles.
We turn to the pleadings to ascertain the nature of the action. The so-called bill in equity alleges that complainants are the owners in fee simple of said lot 89, and entitled to the immediate possession thereof. Their chain of title is set forth, as is also the claimed title of defendants Lincoln A. Denison and Corine A. Denison, which is based on a tax title and a deed from W. Edwin Thorp, executor, as before pointed out. An accounting for rents and profits is asked. It is also alleged that defendant Lowe has a mortgage upon said premises given by the other defendants, and refuses to cancel the same, and it is asked that the mortgage be canceled and the interests of all the defendants in the real estate be barred and that the title be quieted in complainants.
It is apparent that the complainant states two causes of action one to quiet title, and the other to cancel the Lowe mortgage. The cancellation of the mortgage is properly a matter of equitable cognizance, reference to which will hereafter be made. There is nothing in any theory of a trust to sustain equity jurisdiction; the complaint stating that, while the Denisons did hold the premises in trust, "the trust has expired." We therefore have a situation presented of complainants (not in possession of the real estate), claiming the legal title thereto, bringing an action in equity to remove a cloud on the title and quiet the same in them, and to award them possession of the property as against defendants (claiming legal title and in actual possession thereof).
There is a complete and adequate remedy at law applicable to this state of affairs, and therefore the equitable action to quiet title cannot be maintained in the federal courts under the allegations of this complaint. An action for the recovery of possession of real property and damages for withholding it is one at law. Naylor et al. v. Foreman-Blades Lumber Co. et al. (D. C.) 230 F. 658; Hipp et al. v. Babin et al., 19 How. 271, 15 L. Ed. 633; United States v. Wilson, 118 U.S. 86, 6 S. Ct. 991, 30 L. Ed. 110; Whitehead v. Shattuck, 138 U.S. 146, 11 S. Ct. 276, 34 L. Ed. 873. This court frequently and in no uncertain language has announced its position on this subject.
In Stuart et al. v. Union Pac. R. Co., 178 F. 753, 756, 103 Cow. C. A. 89, 92, it said: "It is true, generally speaking, that in the courts of the United States a suit to quiet title cannot be maintained by a complainant who is not in possession against a defendant who is in possession, and this is so because there is a plain, complete, and adequate remedy at law." And it also said that in exceptional cases, where there is no such remedy at law, the general rule does not apply.
In Childs v. Missouri, K. & T. Ry. Co., 221 F. 219, 221, 136 Cow. C. A. 629, 631: "It appears from the face of the bill that plaintiff is not in possession of the premises, and that the defendant is. In such a case a bill in equity to remove a cloud on the title to property does not lie in a national court, even if under the laws of the state where the lands are situated such an action may be maintained."
In Scott v. First Nat. Bank of Morris (C. C. A.) 285 F. 832, 834: "As this right to the trial of its title and right of possession rests upon the Constitution and statutes of the United States, the legislation of the state of Oklahoma cannot deprive the defendant of its right in the federal courts, and the rule and practice that a plaintiff out of possession cannot maintain in the federal courts a suit in equity against a defendant in possession of real estate to quiet the title or right of possession thereto has become established and settled beyond controversy."
Again, in Twist v. Prairie Oil & Gas Co. (C. C. A.) 6 F.(2d) 347, 349: "The equitable cause of action, though perhaps maintainable in the state court (Compiled Oklahoma Statutes 1921, c. 3, art. 14), could not be entertained in the federal court, since there was an adequate remedy at law; the plaintiffs being out of possession and defendant being in possession of the land in question." See, also, Investors' Guaranty Corporation v. Luikart (C. C. A.) 5 F.(2d) 793; McLaughlin v. St. Louis Southwestern Ry. Co., 232 F. 579, 146 Cow. C. A. 537.
*387 Referring to an action to dissipate a cloud on title, the Supreme Court of the United States, in Frost v. Spitley, 121 U.S. 552, 556, 7 S. Ct. 1129, 1131 (30 L. Ed. 1010), said: "A person out of possession cannot maintain such a bill, whether his title is legal or equitable; for, if his title is legal, his remedy at law, by action of ejectment, is plain, adequate, and complete; and, if his title is equitable, he must acquire the legal title, and then bring ejectment."
In Holland v. Challen, 110 U.S. 15, 3 S. Ct. 495, 28 L. Ed. 52, a bill was filed to quiet title under a statute of Nebraska. That statute provided such action could be brought by any person, whether in possession or not, against any person claiming an adverse interest therein. Incidentally, it may be noted that is the theory of the present action; it being a Nebraska case. The Holland Case is one in which defendant was not in possession, and the Supreme Court said that, if suit were brought in the federal court under the Nebraska statute against a party in possession, "there would be force in the objection that a legal controversy was withdrawn from a court of law"; so that case is no authority for a party not in possession bringing an action to quiet title against one in possession.
In United States v. Wilson, 118 U.S. 86, 6 S. Ct. 991, 30 L. Ed. 110, the question arose on a bill quia timet to remove a cloud from a legal title. The United States claimed to own the legal title, but were kept out of possession by defendants holding adversely. It was held that the remedy of the United States was at law to recover possession and not by a bill in equity. The court (page 89 [6 S. Ct. 992]) said: "Equity in such cases has no jurisdiction, unless its aid is required to remove obstacles which prevent a successful resort to an action of ejectment, or when, after repeated actions at law, its jurisdiction is invoked to prevent a multiplicity of suits, or there are other specific equitable grounds for relief. Bills quia timet, such as this is, to remove a cloud from a legal title, cannot be brought by one not in possession of the real estate in controversy, because the law gives a remedy by ejectment, which is plain, adequate and complete."
In Whitehead v. Shattuck, 138 U.S. 146, 11 S. Ct. 276, 34 L. Ed. 873, where the Supreme Court of the state of Iowa had construed the state statute as authorizing a suit in equity to recover possession of real estate from the occupant, it was held that it did not enlarge the equity jurisdiction of the federal courts in that state, and, there being a plain, adequate, and complete remedy at law, the bill could not be maintained in the federal court. This rule of the federal court is not set aside by state statutes or state decisions. The general doctrine, however, is so well settled and so familiar that it is needless to burden this opinion with further extracts from the decisions of the courts. See San Juan Fruit Co. v. Carrillo et al. (C. C. A.) 7 F (2d) 106; Pusey & Jones v. Hanssen, 261 U.S. 491, 43 S. Ct. 454, 67 L. Ed. 763; Lancaster v. Kathleen Oil Co., 241 U.S. 551, 36 S. Ct. 711, 60 L. Ed. 1161; Boston, etc., Mining Co. v. Montana Ore Co., 188 U.S. 632, 23 S. Ct. 434, 47 L. Ed. 626; Buzard v. Houston, 119 U.S. 347, 7 S. Ct. 249, 30 L. Ed. 451; Hayward v. Andrews, 106 U.S. 672, 1 S. Ct. 544, 27 L. Ed. 271.
It might be suggested that, inasmuch as the relief demanded by cancellation of the mortgage was clearly of equitable cognizance, a court of equity having jurisdiction thereof could grant all the relief essential to complete justice, which would include passing on the questions of legal title and possession as incidental thereto. The situation presented, however, is exactly the opposite. The main questions relate to the legal title and right to possession. Cancellation of the mortgage is incidental thereto and dependent thereon, and can be determined in an equity action after the other questions are adjudicated at law. Buzard v. Houston, 119 U.S. 347, 7 S. Ct. 249, 30 L. Ed. 451. There is no authority in federal procedure for the joining or blending of these actions. The aid sought should be in separate proceedings. Fletcher v. Burt, 126 F. 619, 63 Cow. C. A. 201; Twist v. Prairie Oil & Gas Co. (C. C. A.) 6 F.(2d) 347; Thompson v. Railroad Companies, 73 U. S. (6 Wall.) 134, 18 L. Ed. 765; Hurt v. Hollingsworth, 100 U.S. 100, 25 L. Ed. 569; Buzard v. Houston, 119 U.S. 347, 7 S. Ct. 249, 30 L. Ed. 451; Cherokee Nation v. Southern Kansas Ry. Co., 135 U.S. 641, 10 S. Ct. 965, 34 L. Ed. 295; Scott v. Neely, 140 U.S. 106, 11 S. Ct. 712, 35 L. Ed. 358.
That a defendant may waive the question of an adequate remedy at law where a bill in equity is brought against him is settled. Reynes v. Dumont, 130 U.S. 354, 9 S. Ct. 486, 32 L. Ed. 934; Perego v. Dodge, 163 U.S. 160, 16 S. Ct. 971, 41 L. Ed. 113; McGowan v. Parish, 237 U.S. 285, 35 S. Ct. 543, 59 L. Ed. 955; American Mills Co. v. American Surety Co. of New York, 260 U.S. 360, 43 S. Ct. 149, 67 L. Ed. 306; Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 43 S. Ct. 454, 67 L. Ed. 763.
In Perego v. Dodge, 163 U.S. 160, 166, 16 S. Ct. 971, 974 (41 L. Ed. 113) the court *388 said: "Even if the action should have been an action at law, still the court had jurisdiction, and a defective exercise of its power would only amount to an irregularity, capable of being waived by the parties, and susceptible of correction as any other mere errors are corrected."
In Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 500, 43 S. Ct. 454, 457 (67 L. Ed. 763), the court said: "The objection that the bill does not make a case properly cognizable in a court of equity does not go to its jurisdiction as a federal court. Smith v. McKay, 161 U.S. 355 [16 S. Ct. 490, 40 L. Ed. 731]; Blythe v. Hinckley, 173 U.S. 501 [19 S. Ct. 497, 43 L. Ed. 783]. The objection may, as pointed out in Reynes v. Dumont, 130 U.S. 354, 395 [9 S. Ct. 486, 32 L. Ed. 934], be taken by the court of its own motion. But, unlike lack of jurisdiction as a federal court (Mansfield, Coldwater & Lake Michigan Ry. Co. v. Swan, 111 U.S. 379, 382 [4 S. Ct. 510, 28 L. Ed. 462]), lack of equity jurisdiction (if not objected to by a defendant) may be ignored by the court, in cases where the subject-matter of the suit is of a class of which a court of equity has jurisdiction. And where the defendant has expressly consented to action by the court, or has failed to object seasonably, the objections will be treated as waived."
No objection was raised by defendants to the jurisdiction of the court as a court of equity, and as far as they are concerned such objection was waived. The matter, therefore, reduces itself to this: Should the appellate court raise the question sua sponte?
That the parties could waive a jury trial if the case had been properly brought at law, and hence no apparent harm has resulted from the wrong procedure, is not sufficient answer to the question inherent in this proceeding, nor does it satisfy the duty of the court to recognize and preserve as far as it can the constitutional difference between law and equity actions.
As far back as Wright v. Ellison, 1 Wall. 16, 22 (16 L. Ed. 555), the Supreme Court of the United States said: "But this is a suit in equity. The rules of equity are as fixed as those of law, and this court can no more depart from the former than the latter. Unless the complainant has shown a right to relief in equity, however clear his rights at law, he can have no redress in this proceeding. In such cases, the adverse party has a constitutional right to a trial by jury. The objection is one, which though not raised by the pleadings nor suggested by counsel, this court is bound to recognize and enforce."
In Oelrichs v. Spain, 15 Wall. 211, 21 L. Ed. 43, it was urged that the bill must be dismissed because there was a complete remedy at law. The court said that this objection must be regarded as jurisdictional, "and may be enforced by the court sua sponte, though not raised by the pleadings nor suggested by counsel."
In Lewis v. Cocks, 23 Wall. 466, 23 L. Ed. 70, the court held that, even though the objection was not made in the pleadings nor suggested by counsel, if it clearly existed, it was the duty of the court sua sponte to recognize it and give it effect.
In Reynes v. Dumont, 130 U.S. 354, 394, 9 S. Ct. 486, 32 L. Ed. 934, the court referred to the necessity of preventing matters cognizable at law from being drawn into chancery at the pleasure of the parties interested, although the court held there was a discretion in the appellate court as to whether it would consider the matter, objection not having been previously made, and held in that particular case that the objection came too late, though stating it would have been worthy of attention if taken in limine.
In Southern Pacific R. Co. v. United States, 200 U.S. 341, 26 S. Ct. 296, 50 L. Ed. 507, no objection was made to the equity jurisdiction of the court before the hearing, and the court held that it might be raised, even in the appellate court, and, if not suggested by counsel, could be enforced by the court on its own motion.
In Singer Sewing Mach. Co. v. Benedict, 229 U.S. 481, 484, 33 S. Ct. 942, 57 L. Ed. 1288, it said: "In the courts of the United States it is a guiding rule that a bill in equity does not lie in any case where a plain, adequate, and complete remedy may be had at law. The statute so declares (Rev. Stat. § 723 [now Comp. St. § 1244]), and the decisions enforcing it are without number. If it be quite obvious that there is such a remedy, it is the duty of the court to interpose the objection sua sponte, and in other cases it is treated as waived, if not presented by the defendant in limine."
In South Penn Oil Co. v. Miller et al., 175 F. 729, 99 Cow. C. A. 305, the Circuit Court of Appeals of the Fifth Circuit held that actions for the recovery of specific property, either real or personal, and damages in connection with its detention, could be prosecuted only on the law side and that where the suit was instituted on the equity side of the federal courts and no objection was made thereto by demurrer, plea, or answer, nor suggested by counsel, the court should on its own motion, in the discharge of a duty imposed on it, dismiss the action. See, also, Thompson v. Railroad *389 Companies, 73 U. S. (6 Wall.) 134, 18 L. Ed. 765; New Jersey & N. C. Land & Lumber Co. et al. v. Gardner-Lacy Lumber Co. et al., 178 F. 772, 102 Cow. C. A. 220; Hayward v. Andrews, 106 U.S. 672, 1 S. Ct. 544, 27 L. Ed. 271; New York Guaranty Co. v. Memphis Water Co., 107 U.S. 205, 2 S. Ct. 279, 27 L. Ed. 484; Allen v. Pullman's Palace Car Co., 139 U.S. 658, 11 S. Ct. 682, 35 L. Ed. 303.
If an objection to equitable jurisdiction in this case had been made before hearing, it would certainly have been good, and, while there is authority that the appellate court is not obliged sua sponte to raise the question, yet we think it will not be denied that it has such right, and when it is "quite obvious," as stated in Singer Sewing Mach. Co. v. Benedict, 229 U.S. 481, 33 S. Ct. 942, 57 L. Ed. 1288, that there is a plain, speedy, and adequate remedy at law, it is its duty so to do, thereby giving effect to section 267, Judicial Code. That, we think, is the situation here.
The real controversy in this case revolves around the questions of legal title and the right to possession of the real estate involved, which are questions at law. Other questions are merely incidental thereto. The character of the complaint, it is obvious, is an attempt to determine these matters by quieting title in complainants, who are not in possession, against defendants, who are. The court, sitting as a court of equity, tried an action at law. There is no reason why in the trial court the pleadings cannot be reformed and redrawn, so as to conform to federal practice, and the cause of action at law be removed to the law side of the court, and the law questions there determined; the equity questions to be determined upon the equity side.
The decree entered by the trial court is set aside, and the case remanded, with instructions to permit the pleadings to be redrawn, so that they do not blend equitable and legal matters, and so as to permit the transfer of the law questions to the legal side of the docket.
Reversed and remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919603/ | 224 N.J. Super. 619 (1988)
541 A.2d 237
CLAUDETTE REBISH F/K/A CLAUDETTE MALOOLY, ON BEHALF OF HERSELF AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
GREAT GORGE, A NEW JERSEY CORPORATION; THRIFT CREDIT CORP., A NEW YORK CORPORATION; "JOHN DOE" (BEING FICTITIOUS NAME, INDIVIDUALLY AND COLLECTIVELY FOR OFFICERS AND DIRECTORS OF GREAT GORGE); "RICHARD ROE" (BEING A FICTITIOUS NAME, INDIVIDUALLY AND COLLECTIVELY FOR OFFICERS AND DIRECTORS OF THRIFT CREDIT CORP.), DEFENDANTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Argued March 29, 1988.
Decided April 27, 1988.
*620 Before Judges PRESSLER, MUIR, Jr., and SKILLMAN.
L. Steven Pessin argued the cause for appellant.
John J. Petriello argued the cause for respondents Great Gorge and Thrift Credit Corp. (Levy & Ehrlich, attorneys; John J. Petriello on the brief).
The opinion of the court was delivered by MUIR, Jr., J.A.D.
*621 The issues raised here are whether the trial court properly denied plaintiff's application for class certification and properly dismissed Counts Two, Three, Four and Five of plaintiff's amended complaint.[1] Plaintiff alleges error in the denial and the dismissals. We conclude the trial court properly denied the class certification application and properly dismissed Counts Four and Five, but should not have dismissed Counts Two and Three.
The facts relevant to the application for class certification are generally undisputed. Sometime around 1965, defendant Great Gorge sold 5% debenture bonds at $1000 each to 330 New Jersey residents. The bonds had a due date of July 1, 1980, but interest was payable each year commencing July 1, 1966. They contained a clause subordinating bond principal and interest payments to any present or future senior indebtedness or secured obligations of Great Gorge. They further contained provisions limiting interest payable to the amount of net earnings of the company in the prior year. As an alternative to receiving interest, bondholders could elect to receive free skiing and preferred lift lines at the local skiing facility until October 1970 or until the bond was redeemed, whichever later occurred.
At about the same time, defendant sold 5% debenture bonds at $1500 each to 500 New Jersey residents. These bonds had a due date of July 1, 1983, with interest payable annually commencing July 1, 1969, and every September 1 thereafter. These bonds contained the same provisions as the $1000 bonds.
In 1983, plaintiff's trial counsel,[2] on behalf of another client, sought payment on two $1500 bonds with accrued interest. On *622 August 5, 1983, counsel for Great Gorge responded by letter indicating the company was in default on its senior indebtedness and that it had no funds to satisfy the bonds. He further stated that bankruptcy, the only alternative if bondholders demanded payment, would, due to the size of the senior indebtedness, wipe out all bondholders. The letter requested bondholder restraint in seeking redemption.
Trial counsel then filed a complaint, venued in Bergen County, on behalf of Rudolph Zika seeking payment of principal and interest on the two bonds. Following a trial court denial, without prejudice, of plaintiff's motion for class certification and an interlocutory appeal in which we found a class action available under R. 4:32-1(b)(3), Judge Ciolino, on January 17, 1986, granted plaintiff leave to file an amended complaint and to maintain a class action on behalf of all $1000 and $1500 bondholders. Subsequently, on January 27, 1986, the originally scheduled trial date, Zika appeared in court and advised Judge Ciolino that he had discharged trial counsel orally on December 18, 1985, and confirmed the discharge by a letter trial counsel admitted receiving on January 1, 1986. The letter identified trial counsel's "persistent efforts to convert his complaint into a class action suit" as one ground for the discharge.
Thereafter, on March 3, 1986, counsel for defendant and trial counsel, who represented himself as "attorney for the proposed class," appeared before Judge Ciolino. At that time, the Judge ordered the class certification vacated ab initio. In doing so, he cited the Rule of Professional Conduct 1.16(a) requiring a lawyer to withdraw from representation if the client discharges him. Judge Ciolino characterized trial counsel's action as offensive. At the hearing, trial counsel repeatedly asserted that he should be permitted to continue the class action despite Zika's discharge of him.
On August 4, 1986, trial counsel filed the amended complaint in this action, venued in Morris County. Almost identical in content to the proposed amended complaint in the Zika proceeding, *623 it alleged, in Count I, the sale of the $1000 and $1500 bonds and sought $1,080,000 in damages on behalf of all bond owners.
Thereafter, trial counsel, on behalf of plaintiff, filed a motion seeking class certification. Trial counsel's affidavit in support of the motion made no reference to the Zika proceedings. Counsel for defendant, by affidavit, provided the trial judge with information on the Zika matter.
The trial judge, relying upon R. 4:32-1(a)(4), and after noting trial counsel's conduct in the Zika matter, concluded trial counsel would be "unlikely to adequately represent the individuals within the class as evidenced by his failure to abide by" Rule of Professional Conduct 1.2(a) (abiding by client's decisions concerning the objectives of representation).
After the trial judge denied the class certification application and granted defendant's motion to dismiss Counts Two through Five of the complaint, the parties settled plaintiff's claim under Count One. The settlement, embodied in a consent order, required plaintiff to sign over her bond to defendant Great Gorge in exchange for $2727.25 (all principal and interest due on the bond) plus per diem interest to date of payment. In the order, plaintiff reserved her rights to appeal any prior court orders.
I.
There are four prerequisites which an action must satisfy before it can be certified as a class action: numerosity, commonality, typicality and adequate representation. R. 4:32-1(a)(1), (2), (3) and (4); In re Cadillac V8-6-4 Class Action, 93 N.J. 412, 424-425 (1983). These prerequisites are identical to those required by R. 23(a) and (b) of the Federal Rules of Civil Procedure.
Our concern here is only with adequate representation. The rule requires representative parties to protect fairly and adequately the interests of the class. R. 4:32-1(a)(4). In determining whether such representation will exist, our inquiry is *624 directed to both the adequacy of the representative and the adequacy of her counsel. 3B Moore's Federal Practice, ¶ 23.07[1] at 23-187 (1987). After review of the record, we conclude that plaintiff and her trial counsel,[3] given the totality of the circumstances, would not provide the requisite adequate representation.
The traditional approach for evaluating adequacy of the representative is to determine whether that person's interest is co-extensive with that of the members of the class and whether antagonistic interests are absent.[4] 3B Moore's Federal Practice, supra, ¶ 23.07[1] at 23-188. Here, the settlement gave plaintiff full satisfaction of her bond claim. That full satisfaction not only changed the co-extensiveness of interest but fostered a potential antagonism if Great Gorge's alleged inadequate financial situation becomes a reality in that the settlement provided her personal financial interests with priority to those of the other bondholders. See Quirke v. St. Louis-San Francisco Railway Company, 277 F.2d 705, 708 (8 Cir.1960), cert. denied 363 U.S. 845, 80 S.Ct. 1615, 4 L.Ed.2d 1728, rehearing den. 364 U.S. 855, 81 S.Ct. 35, 5 L.Ed.2d 80 (1960). The settlement amounted to a divergence in the claims. It focused plaintiff's concern on Counts Two through Five to the extent they survive this appeal, while a predominant concern of the other class members remains with Count One. Thus, one simple example of lack of co-extensiveness and potential for antagonism is if defendant Great Gorge offers to settle by paying all or significant amounts due on the bonds in exchange for dismissal of the remaining counts. It is difficult to perceive *625 in such circumstances that plaintiff would champion other class member interests to the exclusion of her interests.[5]
The traditional approach for evaluating counsel's potential for representing the interests of undesignated class members is best done on a retrospective assessment of performance. See 3B Moore's Federal Practice, supra, ¶ 23.07[1.-1] at 23-194. A retrospective assessment here suggests counsel had an overwhelming zeal to represent the class as opposed to the named plaintiff's interest in the Zika case. While such conduct would not necessarily prevent counsel from adequately representing the class, it engenders significant doubt. Judge Ciolino characterized the conduct as offensive. That offensiveness, the trial judge here indicated, had a pervasive carryover effect. Such an overwhelming zeal also suggests, at least, the appearance of motivation for a large fee. While that motivation is not always a negative factor in evaluating counsel representation, it can be a source of potential abuse, In re Cadillac V8-6-4 Class Action, supra, at 424, by placing the interest of the class above the interest of the class representative. Furthermore, since representation must be dominated by his devotion to the primary client, counsel's ability to represent the class is burdened by the yoke of the primary client's loss of her co-extensive interest and her potential antagonism.
Defendant argues it is inappropriate to consider trial counsel's conduct as a disqualifying factor on the issue of representation because it has the effect of punishing the innocent members of the class. The argument overlooks potential for harm to the class members evidenced by that conduct. Our concern is of an equitable nature. Governed by such concern, trial counsel's conduct here, in concert with the other facts, *626 projects an adverse effect on the interests of the non-participating class members.
In sum, plaintiff does not possess the co-extensiveness of interest and freedom from antagonism required to adequately protect the interest of all the unnamed bondholders. When those conditions are combined with the apparently conflicting professional fealty involved, we conclude the trial judge properly denied plaintiff's class certification application. In so holding, we are mindful of the relevant considerations favoring class actions, In re Cadillac V8-6-4 Class Action, supra, at 435-436, and the available alternative of selecting another class representative in lieu of dismissing the complaint.[6]
II.
Plaintiff also challenges the dismissal of Counts Two through Five of the complaint. The judge granted the dismissal on grounds the counts failed to state a cause of action and failed to comply with R. 4:5-8. Plaintiff argues the trial judge ignored the premise that pleadings should be indulgently read to support a cause for action. She also contends the trial judge should have given her an opportunity to amend, rather than dismiss.
R. 4:6-2 authorizes a motion to dismiss a pleading where there is a failure to state a claim upon which relief can be granted. R. 4:5-8 requires pleadings alleging fraud to particularize the wrong with dates and items to an extent practicable. In Grobart v. Society for Establishing Useful Mfrs., 2 N.J. 136, 152 (1949), the late Chief Justice Vanderbilt defined the essential character of the court rules on pleadings when he wrote "... our procedure has been made to serve the ends of substantial justice, not by abandoning stating the essentials of a cause of action ..., but by doing so in `simple, concise and *627 direct terms.'" Thus, while we read all complaints indulgently on a motion to dismiss, Spring Motors Distributors, Inc. v. Ford Motor Co., 191 N.J. Super. 22, 29-30 (App.Div. 1983), rev'd on other grounds 98 N.J. 555 (1985), a pleading cannot be devoid of the essential elements of the cause of action.
Consequently, we agree with plaintiff's contentions as to the right to amend the second and third counts. The essential elements are not missing in Counts Two and Three, but those counts simply fail to particularize, as R. 4:5-8 requires. Under such circumstances, the trial judge should have afforded plaintiff the opportunity to comply with the dictates of the rule. See Muniz v. United Hsps. Med. Ctr. Pres. Hsp., 153 N.J. Super. 79, 81-82 (App.Div. 1977).
However, we do not agree with plaintiff's contentions as to the fourth and fifth counts. Plaintiff's racketeering allegation in the fourth count is devoid of essential elements. It refers to N.J.S.A. 2C:41-1 which designates 21 types of racketeering activity, but never refers to any pattern of racketeering which is a fundamental criterion for any remedy under N.J.S.A. 2C:41-4. Additionally, the complaint fails to distinguish whether a person or enterprise carried out the alleged activity. Such a distinction would appear essential. See Petro-Tech, Inc., v. Western Co. of North America, 824 F.2d 1349, 1358-1359 (3 Cir.1987) (construction of comparable federal RICO statute).
Plaintiff's fifth count exemplifies the need for R. 4:6-2(e). That count is an amorphous request with no foundation in law. It does not state a cause of action for which relief can be granted. Even plaintiff in her brief on appeal does not correlate the claim to any cognizable cause of action. Instead, she weakly suggests the trial judge should have allowed her to amend her pleading. We find no basis for reversal of the trial judge's dismissal of that count. Cf. Chavis v. Nickerson, 183 N.J. Super. 458 (App.Div. 1982), aff'd 93 N.J. 103 (1983).
The orders of the trial court are accordingly affirmed except as to the dismissal of Counts Two and Three which we reverse *628 and remand. Plaintiff shall have 60 days from the date of this opinion to move to amend her pleadings on those counts so as to comply with R. 4:5-8. In the event she fails to do so, the trial judge shall enter an order of dismissal of those counts.
NOTES
[1] The record on appeal did not provide a copy of the original complaint. Consequently, we have construed plaintiff's claims as being entirely set forth in the amended complaint.
[2] All reference hereafter to trial counsel indicates plaintiff's counsel during trial court proceedings. Plaintiff was represented by other counsel on appeal.
[3] Although a different attorney represented plaintiff on appeal, there is nothing in the record to suggest that trial counsel will not remain as plaintiff's trial counsel on remand.
[4] An issue not raised and therefore not addressed is whether the holder of a $1000 bond could adequately represent both $1000 and $1500 bondholders. We note, however, disparate sub-classes would require their own representatives.
[5] As to potential issues created by pre-certification settlement not required to be resolved here, see Part I Moore's Federal Practice. Rules Pamphlet, ¶ 23.12 at 237 (1986).
[6] It is apparently conceded, based on counsel's comments at oral argument, a new class action would not be time barred in any way. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919615/ | 116 Pa. Commw. 177 (1988)
541 A.2d 417
John W. Rosselli, Sr., Petitioner
v.
Reading Housing Authority, Respondent.
No. 1359 C.D. 1987.
Commonwealth Court of Pennsylvania.
Argued April 18, 1988.
May 13, 1988.
*178 Argued April 18, 1988, before Judges CRAIG and COLINS, and Senior Judge KALISH, sitting as a panel of three.
Barbara H. Guenther, for petitioner.
Raymond C. Schlegel, with him, Nedric L. Nissly, Roland & Schlegel, P.C., for respondent.
OPINION BY JUDGE COLINS, May 13, 1988:
John W. Rosselli, Sr. (petitioner) petitions for review of an order of the State Civil Service Commission (Commission) which upheld the decision of the Reading Housing Authority (respondent) to dismiss petitioner from his position as a Section 8 Housing Inspector.[1] We affirm.
*179 Petitioner was responsible for determining if housing units met the quality standards of the Department of Housing and Urban Development (HUD) for inclusion in the Section 8 program. While employed by the respondent, petitioner was also a licensed real estate agent, affiliated with the Bione Agency (Agency), a real estate office in the Reading area which listed Section 8 properties. Respondent entered into a contract with HUD whereby he would administer the Section 8 program in the Reading area. The contract entered into between the respondent and HUD contained the following provision applicable to potential conflicts of interest:
15. Conflict of Interest Provision.
No present or former member or officer of the PHA (except tenant commissioners), no employee of the PHA who formulates policy or influences decisions with respect to the Section 8 program, and no public official or member of a governing body or State or local legislator who exercises functions or responsibilities with respect to the Section 8 program shall have any direct or indirect interest, during this person's tenure or for one year thereafter, in this Contract or in any proceeds or benefits arising from the Contract. This provision may be waived by HUD for good cause.
Beginning in the fall of 1984, petitioner was informed three times that his association with the Agency might be a conflict of interest. In June of 1986, as a result of reading in a newspaper a record of a real estate transaction in which petitioner had purchased a house from HUD, respondent's executive director, Mr. William Willis, informed petitioner that his personal real estate dealings might be in conflict with the HUD agreement. Mr. Willis also requested that petitioner obtain a waiver from HUD in accordance with the *180 above-quoted provision. Petitioner responded to Mr. Willis by stating that he would not be involved in any sales in which a conflict of interest might arise and that if any such conflict existed, he would contact the director to remedy the situation. Mr. Willis then informed petitioner that his response was inadequate and again requested that petitioner obtain a waiver from HUD. Petitioner again failed to apply for the waiver.
By letter of July 22, 1986, Mr. Willis notified petitioner that respondent continued to consider petitioner's association with the Bione Agency to be a conflict of interest and gave him thirty (30) days to obtain the necessary waiver. Petitioner responded this time by stating to Mr. Willis that he had been informed by his attorney that the recent purchase did not constitute a conflict of interest and that any additional questions concerning his real estate dealings should be directed to his attorney. Petitioner also informed the respondent that he had transferred his license to the Miller Agency, an agency that does not list Section 8 properties.
The respondent held a board meeting on September 21, 1986, and decided to terminate petitioner. Petitioner was notified of his termination by letters dated September 25th and September 30, 1986.
On October 21, 1986, petitioner filed an appeal with the Commission and a public hearing was held on January 12, 1987. The Commission, on May 20, 1987, issued a decision stating that petitioner had been properly removed for "just cause" by respondent under Section 807 of the Civil Service Act (Act).[2] It is the appeal from the May 20, 1987, order of the Commission that is before this Court.
Initially, we note that our scope of review of the Commission's conclusion that an employee was discharged *181 for just cause is limited to a determination of whether constitutional rights were violated, an error of law was committed, or necessary findings of fact are supported by substantial evidence. Brengle v. Lancaster County Board of Assistance, 81 Pa. Commw. 584, 474 A.2d 352 (1984). Furthermore, the appointing authority has the burden of proving just cause for the removal of an employee. Murphy v. Department of Public Welfare, 85 Pa. Commw. 23, 480 A.2d 382 (1984).
Petitioner argues that his conduct does not amount to just cause for his removal because during the seven years he had worked for respondent he had received outstanding job reviews and his holding a real estate license in no way reflected on his ability to perform his job. The criteria for determining just cause must be based on merit; that is, the criteria must be job-related and in some rational and logical manner touch upon competency and ability. McCain v. East Stroudsburg State College, 71 Pa. Commw. 165, 454 A.2d 667 (1983). In Stone v. State Correctional Institution at Graterford, 55 Pa. Commw. 188, 422 A.2d 1227 (1980), we held that the possession of marijuana by a prison guard cast doubt on his competency and ability to execute his duties and, therefore, was sufficient to warrant his removal for just cause. So, too, we believe that the Commission was correct in the matter sub judice where a housing inspector was associated with a real estate agency that listed the types of homes that petitioner was charged with inspecting. "The appearance of wrongdoing by an employee in a sensitive position reflects unsatisfactorily on the employee's ability to perform his duties and supports his dismissal for just cause." Id. at 190, 422 A.2d at 1228. See also Andrejco v. Pennsylvania Public Utility Commission, 109 Pa. Commw. 389, 531 A.2d 115 (1987) (stating *182 that a Public Utility Commission enforcement officer's part-time employment with a carrier he was under a statutory duty to regulate created a conflict of interest).
There is ample evidence on the record to support the Commission's finding that petitioner was dismissed for just cause. Petitioner received numerous letters from his employer that his present situation constituted an apparent conflict of interest. Petitioner met with his superiors three times in the fall of 1984 to discuss this situation. Additionally, petitioner was given ample opportunity to submit a waiver form as provided for in Paragraph 15 but failed to do so.
Petitioner was well aware of the fact that respondent was concerned that his real estate dealings might be in conflict with his position with the respondent but chose not to rectify this situation. "`We have held that failure to follow the instructions of a supervisor is an example of behavior which goes to the merits [of one's position] and is just cause for dismissal. An employer is entitled to expect that the employees will cooperate and that they will obey his reasonable instructions.'" Stone at 191, 422 A.2d at 1228 (citation omitted). We do not feel that the respondent's repeated request to obtain a waiver from HUD was unreasonable due to the fact that petitioner was in a position to influence the types of decisions covered in Paragraph 15 of the Housing Assistance Payment Contracts.
Petitioner further argues that since he transferred his license to a different agency, he satisfied the respondent's concerns. The respondent never requested the petitioner to transfer his license to a different real estate agency but, instead, requested that he obtain a necessary waiver from HUD. This petitioner did not do.
The record contains relevant evidence that a reasonable mind without weighing or substituting its judgment for that of the Commission might accept as adequate *183 to support the conclusion reached. Glover v. Norristown State Hospital, 90 Pa. Commw. 58, 494 A.2d 39 (1985). Therefore, the Commission was justified in upholding petitioner's dismissal.
Accordingly, the order of the Commission is affirmed.
ORDER
AND NOW, this 13th day of May, 1988, the order of the State Civil Service Commission in the above-captioned matter is hereby affirmed.
NOTES
[1] Section 8 is a program run by the Department of Housing and Urban Development which helps eligible families obtain private, subsidized housing as an alternative to public housing.
[2] Act of August 5, 1941, P.L. 752, as amended, 71 P.S. §741.807. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919617/ | 312 Md. 609 (1988)
541 A.2d 969
FABIO K. BANEGURA
v.
NACOLE V. TAYLOR.
No. 42, September Term, 1986.
Court of Appeals of Maryland.
June 3, 1988.
Joyce Seunarine (Law Office of Benjamin L. Cardin, on the brief), Baltimore, for appellant.
Jonathan Schochor (Philip C. Federico, Kerry D. Staton and Schochor, Federico & Station, P.A., on the brief), Baltimore, for appellee.
Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, COUCH[*] and McAULIFFE, JJ., and SMITH, (retired, Specially Assigned).
McAULIFFE, Judge.
This case involves a claim for damages for rape brought by a baby-sitter against her employer, and the effect upon this appeal of a claim for damages brought by the employer against his attorney.
I Facts
Nacole V. Taylor complained to the Baltimore City Police that she was raped by Fabio K. Banegura while babysitting in his home on November 20, 1983. Criminal charges of rape and assault were brought against Banegura, and he retained Norman Burke, a Maryland attorney, to represent him. Acting upon the advice of Burke, Banegura entered an Alford[1] plea of guilty to the charge of assault and was given a sentence of four years imprisonment, the execution of which was suspended upon condition that Banegura successfully complete three years of probation.
Taylor then filed a civil action against Banegura, claiming damages for the alleged rape. Banegura was served with original process and he forwarded the pleadings and papers to Burke, with a request that Burke represent him in the case. When no answer or other pleading was filed within the time specified in the summons, an order of default was entered. Notice of the default was promptly sent to Banegura by the Clerk of the Circuit Court for Baltimore City and Banegura delivered that notice to Burke. Nothing was filed by or on behalf of Banegura within thirty days from the entry of the order of default, and Taylor requested that the court enter a judgment of default. That "judgment" was entered, without proof of damages, and the case was scheduled for a jury trial to determine the damages. On the day scheduled for trial, Banegura appeared but Burke did not. At the request of Banegura, Judge Joseph Pines held the matter over until the afternoon and, when informed that Burke still could not be found, continued the trial for two weeks, to February 14, 1985. Three days later, Burke filed a motion to strike the default. That motion was heard and denied by Judge Pines on February 11, and on February 14 the case was called for trial on the issue of damages before Judge Philip M. Fairbanks.[2] Prior to the commencement of trial, Burke again requested that the order of default be vacated, but Judge Fairbanks denied the request. Burke then conferred with Banegura, and during a chambers conference at which Banegura was not present Burke informed Judge Fairbanks that his client had elected not to participate in the trial, but would observe the proceedings from the spectators section of the courtroom. Trial took place that day and the next, and resulted in a judgment in favor of Taylor in the total amount of four million dollars.[3] Timely filed motions for a new trial or for a remittitur were heard and denied by Judge Fairbanks, after which Banegura filed an appeal to the Court of Special Appeals. In an unreported per curiam opinion, that Court dismissed the appeal as to the judgment by default, finding it untimely, and affirmed the judgment as to damages. We granted Banegura's petition for a writ of certiorari.
While his appeal was pending before the Court of Special Appeals, Banegura filed a civil action for damages against Burke in the Circuit Court for Baltimore City, alleging malpractice, breach of contract, and fraud. Burke was served, but did not answer, and after an ex parte trial before Judge Milton Allen, judgment was entered in favor of Banegura for four million dollars compensatory damages and three million dollars punitive damages. No appeal was taken from that judgment. Taylor included in her brief, filed with this Court, a motion to dismiss, contending that Banegura's prosecution to judgment of the claim against Burke precludes the further prosecution of this appeal.
II The Motion to Dismiss
Taylor's motion to dismiss the appeal is based upon the well-settled principle that "[t]he right to appeal may be lost by acquiescence in, or recognition of, the validity of the decision below from which the appeal is taken or by otherwise taking a position which is inconsistent with the right of appeal." Rocks v. Brosius, 241 Md. 612, 630, 217 A.2d 531 (1966). As we pointed out in Franzen v. Dubinok, 290 Md. 65, 68-69, 427 A.2d 1002 (1981), this rule of preclusion has been variously characterized as grounded upon notions of estoppel, waiver, acquiescence, acceptance of benefits, or mootness. However we may view the underpinnings of the rule, it is clear that "a voluntary act of a party which is inconsistent with the assignment of errors on appeal normally precludes that party from obtaining appellate review." Id. at 69, 427 A.2d 1002.
Taylor argues that Banegura sued Burke for, among other things, allowing a four million dollar judgment to be entered against him. By so doing, she says, and by obtaining a judgment against Burke that includes the amount of the judgment Taylor obtained against Banegura, Banegura acquiesced in and relied upon the judgment he now seeks to attack. Her contention does not survive close inspection.
Banegura's action against Burke sought damages for substandard representation in the criminal case, as well as in the civil case brought by Taylor. Banegura contended that he was innocent of the criminal charges, and that his decision to plead guilty was made as a result of inadequate and incomplete advice given by Burke. Although Banegura alleged that a judgment had been entered against him in the civil case, he also complained that he had suffered damage as a result of the publicity that had resulted from the verdict in that case. Banegura specifically claimed damages for: payment of the judgment of four million dollars, attorney's fees to prosecute an appeal in the civil case, "irreparable" damage to his medical practice, loss of reputation, and the public scorn, ridicule, and abuse to which he claimed to have been subjected.
Banegura's claim against Burke for damages thus fell into two categories. One involved the existence of a four million dollar judgment against him a potential financial liability that he made clear in his complaint he was attempting to avoid by prosecuting an appeal. The other category involved irreversible damages to his reputation and livelihood, as well as expenditures made and certain to be made. We need not decide the correctness of Taylor's contention that Banegura's recovery of a judgment that included damages in the first category would preclude the further prosecution of this appeal, because the combination of the amount of the award for compensatory damages and the explanation of damages provided by Judge Allen's written opinion leaves no doubt that the four million dollar Taylor judgment was not included in the award of damages in Banegura's action against Burke. Judge Allen said:
In assessing damages, the Court has considered the unnecessary public scorn and ridicule the Plaintiff has suffered. The Court is aware that the Plaintiff has received national news coverage as a result of the Defendant's actions. Accordingly, the Plaintiff's medical practice has suffered greatly with an approximate 75% reduction in his yearly earnings. Moreover, Dr. Banegura has lost hospital privileges at several local hospitals. Additionally, Dr. Banegura's right to practice medicine in Maryland is now threatened as a result of negative public opinion. The Court has no way of calculating the other less tangible personal sufferings but thinks these too are great. Accordingly, this Court feels compelled to award a judgment that seeks as best it can to compensate for all these damages. In addition because of the reckless nature of the Defendant's actions the Court chooses to award punitive damages in this case.
We do not know whether Banegura, in the course of proceedings before Judge Allen, abandoned his claim for damages based on the amount of the judgment against him, or whether Judge Allen decided he should not include that amount because Banegura was actively seeking to reverse the judgment on appeal. In either event, we are satisfied that the judgment obtained by Banegura against Burke did not include the amount of the judgment in the case before us, and that Banegura is therefore not precluded from the further prosecution of this appeal.
III Motion to Strike Default
Petitioner contends that Judge Joseph Pines erred in denying his motion to strike the default "judgment." Respondent answers with alternative contentions: 1) that no timely appeal was taken from the denial of the motion to strike; and 2) that, in any event, the denial of the motion was proper.
The following chronology of events is relevant to the question of the timeliness of the appeal:
10/24/84 Action filed.
10/26/84 Banegura served.
11/29/84 Order of default entered.
11/30/84 Notice of default sent by clerk.
1/ 4/85 Order of judgment by default entered.
2/ 4/85 Motion to strike filed.
2/11/85 Hearing on motion, and entry of order denying motion.
2/14/&
2/15/85 Jury trial on damages.
2/22/85 Motions for new trial filed.
3/22/85 Entry of order denying post-trial motions.
4/19/85 Appeal filed.
Respondent argues that the order of January 4, 1985, was a final judgment on the issue of liability, and that the time for appeal expired thirty days after its entry. Furthermore, she says, the filing of the motion to strike thirty days later did not extend the time for taking an appeal.
If petitioner were correct concerning the nature of the January 4 order, her analysis of the effect of the later motion to strike would be sound. Unnamed Atty. v. Attorney Griev. Comm'n, 303 Md. 473, 486, 494 A.2d 940 (1985). She is wrong, however, in treating the order of January 4 as a judgment. It was not a judgment indeed it served no function at all and must be considered a nullity. Respondent in seeking that order, and the court in granting it, were adhering to a default procedure that existed under former Maryland Rule 310, but which was changed by the adoption of Rule 2-613, effective July 1, 1984. Under the former procedure, a default judgment could be entered for failure of a defendant to plead, and when entered, became a final and appealable judgment as to liability. Himes v. Day, 254 Md. 197, 254 A.2d 181 (1969).
Under the current procedure, which was in effect when Banegura defaulted, the order of default was correctly entered, but a judgment should not have been entered until there had been satisfactory proof of damages. Rule 2-613(e). The amendment to the rule was specifically designed to avoid piecemeal appeals, and no appeal may be taken from the entry of an order of default. Adams v. Mallory, 308 Md. 453, 459-60, 520 A.2d 453 (1987); O'Connor v. Moten, 307 Md. 644, 647 n. 2, 516 A.2d 593 (1986). Likewise, an immediate appeal could not have been taken from the denial of Banegura's motion to strike the default order. That order was interlocutory, because it did not dispose of the entire claim. Rule 2-602. As an interlocutory order, it was subject to revision within the general discretion of the trial court until a final judgment was entered on the claim. Henley v. Prince George's County, 305 Md. 320, 328, 503 A.2d 1333 (1986).
Banegura's motion to strike, filed more than thirty days after the entry of the order of default, must be viewed as a request that the trial court invoke its authority to revise an order intended to be final in nature, but which was, in fact, interlocutory. A trial judge possesses very broad discretion to modify an interlocutory order where that action is in the interest of justice. Henley v. Prince George's County, supra, 305 Md. at 328, 503 A.2d 1333. See also Zimzores v. Veterans Admin., 778 F.2d 264, 266 (5th Cir.1985); Greene v. Union Mut. Life Ins. Co. of America, 764 F.2d 19, 22-23 (1st Cir.1985).
With respect to the entry of the order of default, there was no error. Banegura was personally served on October 26, 1984, a fact he readily acknowledged. He did not respond within thirty days, and the order of default was therefore properly entered. Notice of the default was received by Banegura, yet Banegura took no action to have the default set aside within the thirty days permitted by Rule 2-613(c). His motion to strike was not filed until sixty-seven days after the entry of the default order.
With respect to the later refusal of the court to modify the order denying the motion to strike, we find nothing about the circumstances of this case that would justify appellate interference with the discretion exercised by Judge Pines. Banegura and Burke offered two different explanations for this failure to file an answer to the complaint or a timely motion to strike the default. Banegura said he had turned over all the papers to Burke, as he received them, and that Burke had agreed to represent him. Burke, on the other hand, said that although he had represented Banegura for a number of years, and had received the suit papers and notice of default, he had not been "retained" by Banegura until February 4, 1985.[4] Neither Burke nor Banegura set forth a legal or a factual basis for a defense to Taylor's claim, or generally alleged that any defense existed. We conclude that under these circumstances Judge Pines would have been justified in refusing to strike the default order even if Banegura's motion had been filed within thirty days after the entry of the default. Banegura's motion did not comply with the requirement of Rule 2-613(c), which provides that "[t]he motion shall state the reasons for the failure to plead and the legal and factual basis for the defense to the claim." As Chief Judge Murphy recently pointed out for the Court in Carter v. Harris, 312 Md. 371, 378, 539 A.2d 1127 (1988), failure to comply with the mandate of this rule may not deprive the trial judge of the right to grant the motion, but it may furnish justification for the denial of it. Moreover, there was little in either version of the facts given by Banegura and Burke to suggest to Judge Pines that it would be equitable to excuse the failure to plead. If Burke correctly stated the facts, Banegura had no one to blame but himself for his failure to retain an attorney. If Banegura was correct, as now seems more likely, there is no apparent excuse for Burke having failed to file a timely plea. See Link v. Wabash Railroad Co., 370 U.S. 626, 633-36, 82 S. Ct. 1386, 1390-91, 8 L. Ed. 2d 734 (1962). We do not suggest that Judge Pines could not have granted the motion rather, we make clear that it was well within his discretion to deny it even if it had been timely filed.
If Banegura cannot succeed in his challenge to the trial judge's exercise of discretion in a situation where that discretion would be somewhat circumscribed by rule, he obviously cannot succeed in his appeal from an action over which the trial judge had very wide discretion.
IV Motion for New Trial
Within ten days after the jury trial on damages, two motions for new trial were filed on behalf of Banegura one by Burke, and one by Banegura. Both motions alleged error in the refusal to set aside the default, and in the conduct of the trial. Additionally, Banegura's pro se motion sought revision of the judgment pursuant to Maryland Rule 2-535, or, in the alternative, a remittitur. The motions were heard and denied by Judge Philip Fairbanks, who presided at the trial.
By the specific terms of Rule 2-613(f), the default adjudication of liability was not subject to the general revisory power under Rule 2-535(a). Banegura contended, however, that Rule 2-535(b) was applicable, and that the default should have been set aside because it was the product of an "irregularity" within the meaning of that rule's "fraud, mistake or irregularity" standard. The irregularity suggested by Banegura was the discrepancy that existed between his version of why Burke did not file an answer or timely motion, and the version given by Burke. This is clearly not the type of irregularity contemplated by Rule 2-535(b), and Judge Fairbanks did not abuse his discretion in refusing to revise the judgment.
Banegura's final assault on the default aspect of the judgment was his contention that Judge Fairbanks had erred in refusing to set aside the default pursuant to a request made by Burke just prior to the commencement of the trial on damages, and that the error should be corrected by the granting of a new trial. This argument is similarly without merit. As we pointed out in part III of this opinion, the interlocutory order of default was subject to revision at any time before the entry of judgment, and thus, Judge Fairbanks had the power to set aside the default. However, this request was made to Judge Fairbanks when the ink was barely dry on the order of denial that had been entered by Judge Pines, and Judge Fairbanks was not under any obligation to reopen that matter. In any event, just as Judge Pines was justified in refusing to set aside the default, so also was Judge Fairbanks.
One of Banegura's arguments in support of a new trial on the issue of damages had a bit more substance, however, and was considered at length by Judge Fairbanks. At the hearing of the motion, Banegura was represented by new counsel. Burke did not appear, although apparently he had promised Banegura's new attorney that he would be present. For the first time at this hearing, Banegura argued that Burke had practiced a fraud upon him and upon the court. Specifically, Banegura said that when he appeared on February 14 for the trial on damages, Burke told him that the default order prevented him from participating in the trial. At the same time, he says, Burke was telling Judge Fairbanks that Banegura had elected not to participate in the trial, but rather would observe it from the spectators area. At the hearing on the motion for new trial, Dr. Banegura was allowed to argue this point, along with his attorney, and he put it this way:
Your honor, I think we are requesting a new trial because of fraudulent misrepresentation. You did see me at the Court on the 14th and on the 15th. Before the Court started, we did have a brief conversation with Mr. Burke. He said I could not participate.
The record of the chambers conference held on February 14, just prior to the commencement of trial, shows the following:
THE COURT: The case is here today for trial. Representing the defendant is Mr.?
MR. BURKE: Norman E. Burke.
THE COURT: And he wishes to put something on the record. Mr. Burke.
MR. BURKE: After conferring with my client, Dr. Banegura has decided not to further participate in this inquisition and damages today. He has, however, asked me to remain as an observer and observe the progress of the trial in that regard.
It is clear that Banegura and his wife were present in the courthouse and had conferred with Burke, but that Banegura was not present during the conference in chambers. Banegura and his wife did remain in the courtroom, in the spectators area, throughout the trial of the case.
Banegura argued that Burke had perpetrated a fraud upon the court by falsely telling Judge Fairbanks that Banegura had elected not to participate in the trial, and that this fraud had prevented a fair trial on the issue of damages. After careful consideration of the issue, Judge Fairbanks denied the motion for a new trial, reasoning that even if Burke had misstated the position of his client, a new trial was neither required nor appropriate. We hold that this decision was well within the broad discretion of the trial judge. Whether the problem between Banegura and Burke was one of miscommunication, or involved an intentional deception by Burke, the fact remains that the genesis of the misunderstanding lay entirely with the two of them, and there was no suggestion that the plaintiff had participated in, or been aware of, any fraud upon the court. Under those circumstances, the decision of the trial judge to leave Banegura with whatever remedy he might have against Burke cannot be faulted.
Petitioner's final argument concerns his request for a remittitur. Claiming that the award of two million dollars compensatory damages and two million dollars punitive damages was clearly excessive, Banegura requested in his motion that Judge Fairbanks grant a new trial unless Taylor would accept a remitted amount. Although the greater part of the memorandum filed by Banegura in support of his motion addressed the issue of a remittitur, the oral argument of the motion was devoted almost exclusively to questions involving the default and involving Banegura's participation in the trial on damages. Understandably, the parties first argued those issues that might result in the unqualified grant of a new trial. When those issues were resolved adversely to the petitioner, he sought to argue his request for a remittitur. The trial judge was not disposed to hear argument on that aspect of the motion, opining that he entertained some doubt concerning petitioner's standing to request a remittitur when he had not participated in the trial, and indicating also his reluctance to take any action that might result in a new trial when he had already ruled that Banegura was not entitled to a new trial.
A trial judge, upon finding a verdict excessive, may order a new trial unless the plaintiff will agree to accept a lesser sum fixed by the court. Conklin v. Schillinger, 255 Md. 50, 257 A.2d 187 (1969); 2 Poe, Pleading and Practice at Law, Pr. § 347 (4th ed. 1969). The standard to be applied by a trial judge in determining whether a new trial should be granted on the ground of excessiveness of the verdict has been variously stated as whether the verdict is "grossly excessive," or "shocks the conscience of the court," or is "inordinate" or "outrageously excessive," or even simply "excessive." Conklin v. Schillinger, supra, 255 Md. at 69, 257 A.2d 187; Dagnello v. Long Island Railroad Co., 289 F.2d 797, 802 (2d Cir.1961). The granting or refusal of a remittitur is largely within the discretion of the trial court. Conklin v. Schillinger, supra, 255 Md. at 68, 257 A.2d 187; State, Use of Shipley v. Walker, 230 Md. 133, 137, 186 A.2d 472 (1962). We have said that an abuse of that discretion may be reviewed by an appellate court "under extraordinary circumstances," State, Use of Shipley v. Walker, supra, 230 Md. at 137, 186 A.2d 472, but that "[w]e know of no case where this Court has ever disturbed the exercise of the lower court's discretion in denying a motion for new trial because of the inadequacy or excessiveness of damages." Kirkpatrick v. Zimmerman, 257 Md. 215, 218, 262 A.2d 531 (1970). Were we satisfied that the trial judge had considered the claim of excessiveness on its merits, we would affirm. We are concerned, however, that the trial judge may not have evaluated the claim of excessiveness, either because of his concern that petitioner lacked standing to move for a new trial on this ground, or because he was uncomfortable with the prospect of Banegura obtaining a new trial by what he considered to be an indirect route. Neither concern is valid. The purpose of granting a new trial is to avoid injustice, and we do not believe that the level of a party's participation in the proceedings should dictate whether that party may suggest that an injustice would result if an excessive verdict were allowed to stand.
Although Banegura's failure to object to rulings, instructions, and arguments during the course of the trial may be taken as a waiver of error, precluding the assertion of those issues in a motion for new trial, that principle is not applicable in the case of an excessive verdict. There, the first opportunity to object is through the motion for a new trial. We hold that Banegura had not waived his right to request a remittitur.
The second concern of the trial judge, that through the use of a remittitur procedure the defendant might indirectly achieve a result to which the judge had determined he was not otherwise entitled, should not have been considered. A trial judge must consider a claim of excessiveness of the verdict on its own merits, and if he finds the verdict so excessive that relief should be granted, he should enter the remittitur without regard to whether the plaintiff is likely to accept it or whether a new trial will result.
Because we are unable to say from this record that the trial judge did exercise his discretion to consider the claim of excessiveness of the verdict, we shall direct that this case be remanded to permit consideration of that single issue.
JUDGMENT OF THE COURT OF SPECIAL APPEALS VACATED; CASE REMANDED TO THAT COURT WITH DIRECTIONS TO REMAND THE CASE TO THE CIRCUIT COURT FOR BALTIMORE CITY FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION; COSTS TO BE PAID BY PETITIONER.
NOTES
[*] Couch, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A, he also participated in the decision and adoption of this opinion.
[1] An Alford plea is one in which the defendant knowingly and voluntarily enters a plea of guilty, but does not admit to having committed the crime. In North Carolina v. Alford, 400 U.S. 25, 91 S. Ct. 160, 27 L. Ed. 2d 162 (1970), the United States Supreme Court held there is no constitutional impediment to the acceptance of such a plea, provided the record discloses a strong factual basis indicative of guilt. Maryland permits acceptance of an Alford plea. Hudson v. State, 286 Md. 569, 598-99, 409 A.2d 692 (1979), cert. denied, 449 U.S. 845, 101 S. Ct. 128, 66 L. Ed. 2d 53 (1980).
[2] Judge Fairbanks was a judge of the Circuit Court for Montgomery County, sitting in the Circuit Court for Baltimore City by designation of the Chief Judge of this Court.
[3] The jury returned a verdict of two million dollars compensatory damages and three million dollars punitive damages. Judge Fairbanks directed the entry of judgment in the amount of two million dollars compensatory and two million dollars punitive, to conform the judgment to the relief claimed in the complaint.
[4] Correspondence filed at a later time discloses that Burke received the suit papers from Banegura at a meeting of October 29, 1984; that Burke thereafter determined that Banegura's insurance policy did not cover the claim; and that on November 12, 1984, Burke wrote Banegura to advise him of that fact and to suggest that "you call me upon receipt of this letter so we may get together and plan our strategy." It seems clear that Burke had undertaken Banegura's representation in connection with this action well within the time required for the filing of an answer. See Central Cab Co. v. Clarke, 259 Md. 542, 270 A.2d 662 (1970). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857918/ | CONLIN V. STATE FARM
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-329-CV
PATRICIA ANNE CONLIN,
APPELLANT
vs.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 146TH JUDICIAL DISTRICT
NO. 130,174-B, HONORABLE RICK MORRIS, JUDGE
This case presents the question of the validity of an "owned-but-unscheduled-vehicle" exclusion contained in the uninsured/underinsured-motorist section of an automobile
insurance policy. Patricia Anne Conlin, appellant, brought suit against State Farm Mutual
Automobile Insurance Company (State Farm) pursuant to the Uniform Declaratory Judgments Act,
Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (1986), for a declaration of State Farm's legal
obligations under the uninsured/underinsured-motorist coverage of her policy. State Farm
defended on the basis of an owned-but-unscheduled-vehicle exclusion in Conlin's policy. The trial
court ruled that the exclusion was valid and rendered a take-nothing judgment. Conlin perfected
this appeal. We will affirm.
BACKGROUND
The parties stipulated to the relevant facts. On August 31, 1987, State Farm issued
an automobile insurance policy to Conlin; the only vehicle listed on the declaration page of the
policy was a 1985 Mercury that Conlin had leased for her personal use. Two months later State
Farm issued an automobile insurance policy to Conlin's eighteen-year-old daughter, Shauna; the
only vehicle listed on that policy was a 1979 American Motors "Concord" that Conlin had
purchased for her daughter's personal use. Conlin considered the Concord to be Shauna's because
Shauna was purchasing the car from her by making periodic payments.
On December 25, 1987, Shauna was killed in an accident while riding as a
passenger in her Concord. Robert Machado, Jr., who was driving the Concord with Shauna's
permission at the time of the accident, was an underinsured motorist.
On behalf of Shauna's estate, Conlin made a claim for and recovered underinsured
motorist benefits under Shauna's policy in the sum of $45,000. She also recovered $25,000 under
the liability portion of Shauna's policy and $25,000 under the liability portion of Machado's
policy. Conlin subsequently made a claim for underinsured motorist benefits under her own
policy. Although Shauna was not a named insured on her mother's policy, she was a "covered
person" as that term was defined in the insurance contract for purposes of underinsured-motorist
benefits. Therefore, Shauna's estate was entitled to recover underinsured-motorist benefits under
Conlin's policy unless precluded by a valid exclusion.
State Farm denied Conlin's claim on the basis of the following exclusion contained
in her policy:
A. We do not provide Uninsured\Underinsured Motorists Coverage for any
person:
1. For bodily injury sustained while occupying, or when struck by,
any motor vehicle or trailer of any type owned by you or any family
member which is not insured for this coverage under this policy.
Conlin filed a declaratory judgment action seeking a judicial declaration that she was entitled to
recover under the policy. The trial court rendered a take-nothing judgment against Conlin.
The stipulated facts show that Shauna was fatally injured while riding as a passenger in
a car owned by Conlin or a family member. Further, there is no question that Shauna's car was
not insured for uninsured\underinsured-motorist coverage under Conlin's policy; the only car
listed on Conlin's policy was the leased 1985 Mercury. Therefore, the above policy exclusion,
if valid, precludes Shauna's estate from recovering underinsured-motorist benefits under Conlin's
insurance policy. In two points of error, Conlin argues that the exclusion is an invalid restriction
of coverage and operates to deprive an insured of protection required by Tex. Ins. Code Ann. art.
5.06-1 (1981).
DISCUSSION
Article 5.06-1 of the Insurance Code provides:
No automobile liability insurance . . . covering liability arising out
of the ownership, maintenance, or use of any motor vehicle shall be delivered or
issued for delivery in this state unless coverage is provided therein or supplemental
thereto . . . for the protection of persons insured thereunder who are legally
entitled to recover damages from owners or operators of uninsured or underinsured
motor vehicles because of bodily injury, sickness, or disease, including death, or
property damage resulting therefrom.
Tex. Ins. Code Ann. art. 5.06-1 (1981).
In construing the scope and meaning of this statute in the context of the exclusion
at issue here, we start with the 1974 Texas Supreme Court decision in Westchester Fire Insurance
Co. v. Tucker, 512 S.W.2d 679 (Tex. 1974). In Westchester the insured claimed benefits under
his uninsured-motorist insurance coverage for injuries sustained in an owned and scheduled
vehicle. Nevertheless, the supreme court stated in dictum that "the policy exclusion of injuries
sustained by an insured while occupying an owned but unscheduled vehicle is ineffectual to the
extent that it deprives a person of coverage required by Article 5.06-1 of the Insurance Code,
V.A.T.S." Id. at 686 (emphasis added). Therefore, at least in dictum, the supreme court seemed
to cast serious doubt on the validity of owned-but-unscheduled-vehicle exclusions.
The following year, the United States Court of Appeals for the Fifth Circuit was
presented with the task of predicting how the Texas Supreme Court would rule on the validity of
such an exclusion if squarely presented with the issue. In Stephens v. State Farm Mutual
Automobile Insurance Co., 508 F.2d 1363 (5th Cir. 1975), Mr. and Mrs. Stephens, while riding
in a car owned and driven by Mrs. Stephens, were involved in an accident caused by an uninsured
motorist. As a result of the accident, Mrs. Stephens was killed and Mr. Stephens severely
injured. At the time of the accident, the car in which they were riding, Mrs. Stephens's car, was
insured by Royal Indemnity Company. The policy, procured by Mrs. Stephens in her maiden
name, was a standard Texas automobile insurance policy carrying an uninsured-motorist
endorsement. Mr. Stephens also owned a car, which was insured by a State Farm Mutual
Automobile Insurance Company policy carrying the same uninsured-motorist endorsement.
Therefore, the only car listed on the Royal policy was Mrs. Stephens's car, the car in which the
accident occurred. The only car listed on the State Farm policy was Mr. Stephens's car. See id.
at 1364-65.
Mr. Stephens, individually and as the personal representative of Mrs. Stephens,
settled with Royal Indemnity Company, the company insuring his wife's car. State Farm,
however, refused to pay uninsured-motorist benefits based on the following exclusion in Mr.
Stephens's insurance policy:
This policy does not apply under Part IV:
(a) to bodily injury to an insured while occupying an automobile (other than an
insured automobile) owned by the named insured or a relative, or through
being struck by such an automobile.
Id. at 1367. There was no question that both Mr. and Mrs. Stephens suffered bodily injury while
occupying an automobile owned by a relative of the named insured and that was not listed as an
insured vehicle under the State Farm policy. Therefore, the Stephens court concluded that, if
valid, the above provision would preclude recovery by the Stephens. The court held, however,
that under Texas law the provision was an invalid restriction of coverage required by article 5.06-1. Id. In so holding, the court relied primarily on the supreme court's dictum in Westchester.
Id. at 1367-68.
Following Westchester and Stephens, the Texarkana Court of Civil Appeals was
asked to determine the validity of a similar exclusion in the context of personal-injury-protection
(PIP) coverage required by Tex. Ins. Code Ann. art. 5.06-3 (1981). (1) In Western Alliance
Insurance Co. v. Dennis, 529 S.W.2d 838 (Tex. Civ. App. 1975, no writ), the insurance company
had issued an automobile liability insurance policy to Dennis that contained a PIP endorsement.
The only vehicle listed on the policy was a 1968 Buick. Subsequently, Dennis's two minor sons
were injured when the motorcycle they were riding was struck by a truck. The motorcycle was
owned by one of the sons, but was not listed as an "insured vehicle" under Dennis's policy.
When Western Alliance refused to pay PIP benefits on the basis of the exclusion, Dennis
challenged its validity as being an unauthorized limitation of protection required by article 5.06-3.
Relying exclusively on the supreme court's dictum in Westchester, the court of civil appeals held
that the exclusion was invalid. Id. at 839-40.
Were this the state of the law today, we might be inclined to hold the present
exclusion invalid; however, that is not the case. In 1978 the Dallas Court of Civil Appeals was
asked to determine the validity of such an exclusion in the context of article 5.06-3. In Holyfield
v. Members Mutual Insurance Co., 566 S.W.2d 28 (Tex. Civ. App.), writ ref'd n.r.e., 572
S.W.2d 672 (Tex. 1978), Holyfield's son was injured while riding a motorcycle owned by
Holyfield. Members Mutual had issued an automobile insurance policy to Holyfield that listed
two of his automobiles as "insured vehicles" but failed to list the motorcycle that his son was
riding when injured. PIP premiums were paid for the two automobiles, but no premiums were
paid regarding the motorcycle. Therefore, Members Mutual refused to pay PIP benefits based
on the exclusion in Holyfield's policy. Holyfield argued that the exclusion was an invalid
restriction of coverage required by article 5.06-3. Id. at 29.
In concluding that the exclusion was valid, the Holyfield court first noted that the
supreme court's statement in Westchester, relied on by the courts in Stephens and Western
Alliance, was dictum and, therefore, not controlling. Id. The court then disagreed with the
Texarkana court's holding that providing coverage only for scheduled vehicles denies coverage
mandated by article 5.06-3:
While we agree that Article 5.06-3 dictates the type of coverage which must be
provided, it does not, by its terms, dictate which vehicles the policy must cover or
prevent the insurer and insured from agreeing that only certain vehicles will be
covered. An insurer is entitled to accurately reflect in the policy the risks being
insured and to charge premiums based upon those risks. See Vaughn v. Atlantic
Insurance Company, 397 S.W.2d 874 (Tex. Civ. App.--Tyler 1966, writ ref'd
n.r.e.) quoting Lumbermens Mutual Casualty Co. v. Pulsifer, 41 F. Supp. 249
(D.C.Me. 1941) (purpose of policy exclusion of nonscheduled vehicles is to allow
premiums to be based upon known risks, thereby protecting insurer from increased
liability occasioned by risks of which it might not be aware). This right would be
frustrated if, as Holyfield argues, an insured who owns more than one vehicle
could insure and pay premiums based solely on the risk attendant to that vehicle,
and thereby render the insurer liable for injuries sustained in or because of other
vehicles owned by him. We cannot presume that such a result was intended.
Holyfield, 566 S.W.2d at 29-30 (emphasis in original).
In a per curiam opinion refusing Holyfield's application for writ of error, the
supreme court expressly disapproved of the Western Alliance court's construction of the Insurance
Code and its interpretation of Westchester. Holyfield v. Members Mut. Ins. Co., 572 S.W.2d 672
(Tex. 1978).
Shortly thereafter, this Court followed Holyfield in holding an owned-but-unscheduled-vehicle exclusion valid as to PIP coverage. See Springfield v. Aetna Cas. & Sur. Ins.
Co., 612 S.W.2d 285 (Tex. Civ. App.), writ ref'd n.r.e., 620 S.W.2d 557 (Tex. 1981). In
refusing the application for writ of error in Springfield, the supreme court stated that the plaintiff's
claim that the exclusion was invalid "was correctly denied by the courts below by reason of this
court's decision in Holyfield v. Members Mutual Insurance Co., 572 S.W.2d 672 (Tex. 1978)."
Springfield, 620 S.W.2d at 558.
In 1981 the Dallas Court of Civil Appeals was again asked to determine the validity
of an owned-but-unscheduled-vehicle exclusion, this time in the context of article 5.06-1. In
Equitable General Insurance Co. v. Williams, 620 S.W.2d 608 (Tex. Civ. App. 1981, writ ref'd
n.r.e.), Williams purchased a standard family automobile policy from Equitable General that
contained an uninsured-motorist endorsement, for which Williams paid a premium of $8.00. The
only vehicle listed on the policy was a 1974 Chevrolet automobile. Williams was injured while
riding a motorcycle that he owned; however, the motorcycle was not listed as an insured vehicle
under the policy. When Equitable General refused to pay uninsured-motorist benefits based on
the exclusion in his policy, Williams argued that the exclusion was an invalid restriction of
coverage required by article 5.06-1. Id. at 609. Relying on its opinion in Holyfield and the
supreme court's express disapproval of Western Alliance, the Dallas court rejected Williams's
argument and held that the exclusionary clause in the uninsured-motorist endorsement was valid.
Id. at 610-11.
Since the Dallas court's decision in Equitable General, at least six appellate
decisions have upheld the validity of such an exclusion in the context either of article 5.06-1 or
of article 5.06-3 of the Insurance Code. See Texas Farmers Ins. Co. v. McKinnon, No.
9-90-233-CV (Tex. App.--Beaumont, Dec. 19, 1991, writ requested); Moore v. State Farm Mut.
Auto. Ins. Co., 792 S.W.2d 818 (Tex. App. 1990, no writ); Harwell v. State Farm Mut. Auto.
Ins. Co., 782 S.W.2d 518 (Tex. App. 1989, no writ); Berry v. Texas Farm Bureau Mut. Ins. Co.,
782 S.W.2d 246 (Tex. App. 1989, writ denied); Beaupre v. Standard Fire Ins. Co., 736 S.W.2d
237 (Tex. App. 1987, writ denied); Broach v. Members Ins. Co., 647 S.W.2d 374 (Tex. App.
1983, no writ). Despite this plethora of case law against her position, Conlin argues that the
exclusion in her policy is an invalid restriction on coverage required by article 5.06-1.
In support of her argument, Conlin relies in part on the Stephens case decided by
the Fifth Circuit. See 508 F.2d at 1363. The Stephens court, however, relied primarily on the
supreme court's dictum in Westchester for the proposition that owned-but-unscheduled-vehicle
exclusions are invalid. Id. at 1367-68. As discussed above, the supreme court has expressly
disapproved of such an interpretation of Westchester. See Holyfield, 572 S.W.2d at 673.
Therefore, Stephens does not represent current Texas law on this issue.
Conlin also points us to three Texas Supreme Court opinions as support for her
argument: Stracener v. United Serv. Auto. Ass'n, 777 S.W.2d 378 (Tex. 1989); American
Motorists Ins. Co. v. Briggs, 514 S.W.2d 233 (Tex. 1974); and American Liberty Ins. Co. v.
Ranzau, 481 S.W.2d 793 (Tex. 1972). All three cases are distinguishable. None of the three
involved an owned-but-unscheduled-vehicle exclusion. Indeed, none involved an exclusionary
provision at all. Further, the supreme court has had several opportunities to correct any
misstatement of the law as set out by the intermediate appellate courts of this state, yet has not
done so.
Conlin also relies on a recent case decided by the San Antonio Court of Appeals.
In Briones v. State Farm Mutual Automobile Insurance Co., 790 S.W.2d 70 (Tex. App. 1990,
writ denied), Briones was injured in a one-vehicle automobile accident while riding as a passenger
in the sleeping compartment of a tractor-trailer truck owned by his employer. The truck in
question was only one of five that Briones's employer could assign him to drive, but the evidence
was that Briones had driven it regularly for four years. Briones sought to recover under the
uninsured-motorist clause of his family automobile insurance policy issued by State Farm. A
provision in Briones's policy defined "uninsured motor vehicle" to exclude any vehicle "furnished
or available for the regular use of you or any family member." On the basis of this language,
State Farm refused to pay uninsured-motorist benefits on the ground that the tractor-trailer was
a vehicle regularly furnished by Briones's employer for his use. The appellate court concluded
that the tractor-trailer was indeed furnished for the regular use of Briones; however, relying
primarily on Stracener, the court held that the exclusion was an invalid restriction on coverage
required by article 5.06-1 of the Insurance Code. Id. at 72-74.
We conclude that Briones, too, is distinguishable from the present case. Briones
involved a vehicle owned by his employer, not by Briones or a family member. In those
circumstances, Briones could not be expected to insure every vehicle that his employer chose to
assign him to drive; indeed, as stated by the Briones court, it is doubtful that Briones anticipated
that he would be unprotected if involved in an accident while a passenger in an uninsured vehicle
owned by his employer. 790 S.W.2d at 73.
In the present case, however, Conlin's policy clearly excluded recovery for injuries
sustained while riding in Shauna's car unless Shauna's car was listed on Conlin's policy and a
premium paid for such coverage. Further, Conlin had the opportunity to include Shauna's car on
her policy as an insured vehicle and pay a premium for that coverage, but she apparently chose
not to do so. We agree with the Holyfield court that an insurer is entitled to have a policy
accurately reflect the risks being insured against and to charge premiums based on those risks.
The public policy of this state, as embodied in article 5.06-1 of the Insurance Code, does not
require that a person be allowed to insure and pay premiums based solely on the risks attendant
to one vehicle, and then recover from the insurer for injuries sustained in or because of a
different, unscheduled vehicle owned by the insured or a family member. See Harwell, 782
S.W.2d at 518; Beaupre, 736 S.W.2d at 237; see generally 8C J. Appleman & J. Appleman,
Insurance Law and Practice § 5078.35 (1982).
CONCLUSION
Based on our foregoing discussion, we conclude that the owned-but-unscheduled-vehicle exclusion in Conlin's automobile liability insurance policy is valid and enforceable.
Therefore, we affirm the trial court's judgment.
J. Woodfin Jones, Justice
[Before Chief Justice Carroll, Justices Jones and Kidd]
Affirmed
Filed: April 8, 1992
[Publish]
1. We note that articles 5.06-1 and 5.06-3 are almost identical in their wording. Article
5.06-1 makes it mandatory that uninsured/underinsured-motorist protection be offered to the
insured on any automobile liability policy issued in Texas, while article 5.06-3 contains a
similar requirement for PIP coverage. Both coverages may be rejected by the insured.
Charges may be made for both coverages. We see no reason why the rationale used by courts
in determining the validity of an owned-but-unscheduled-vehicle exclusion should not be the
same whether in the context of article 5.06-1 or article 5.06-3. | 01-03-2023 | 09-05-2015 |
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